The parent company of the Kansas City Star and the Wichita Eagle may not have enough money to pay its bills come 2020. In a press release, McClatchy, the parent company of both papers, announced it was exploring all options after the IRS rejected the newspaper chain’s application for a three-year waiver on its pension obligations.
McClatchy owes pension payments totaling more than $120 million in 2020 but reported finishing the third quarter with only $11.4 million of cash on hand. Its principal outstanding debt total totals $708.5 million for a net debt of $697.1 million. The chain’s pension plan was underfunded by $535 million as of the end of March 2019.
“The amount due greatly exceeds the company’s anticipated cash balances and cash flow…” the press release reads.
The company is seeking a legislative solution to its “liquidity challenges,” working with members of Congress to enact legislation to “mitigate the burden of minimum required contributions.” McClatchy officials are also negotiating with the Pension Benefit Guaranty Cooperation to attempt to have the government takeover its pension obligations.
A media business analyst and reporter at Poynter, Rick Edmonds, suggests the most likely first step in exploring all options is a sale, though he notes the directors of the publicly-traded company, “to date, have fiercely resisted seeking bankruptcy protection or selling.”
Craig Foreman, McClatchy President and CEO, noted that the company has more than 24,000 pensioners, and that its current workforce of 2,800 represents a small percentage of them.
“Those who joined the company in the last 10 years do not participate in a plan they are working to support, one that was frozen to new participants in 2009,” Foreman said in the release.
The company reported that total revenues were $167.4 million, down 12.4% compared to the third quarter last year. Advertising revenues was $76.8 million, down 19.3%. Audience revenues – subscriptions- was $78.3 million and declined 6.8%.
The outlook for the fourth quarter is also gloomy, according to McClatchy’s press release. In 2018, the fourth quarter was bolstered by an uptick in political advertising leading up to the 2018 midterms. However, company management promised to be “steadfast in reducing operating expenses” to keep them in line with expenses and “revenue performance.”
Buried in paragraph 12 of the lengthy release, the company provides a small hint of how it intends to control some costs. Earlier this year, McClatchy eliminated Saturday print editions in several of its markets, including Wichita. It will stop the Saturday presses in the remaining 18 markets, including Kansas City, next year.