The Associated Press hired the worst CEO in the newspaper industry as its 13th chief executive. Its board of directors should be ashamed, as should anyone who works at the news company. Gary Pruitt, the head of McClatchy (NYSE: MNI), will move to the AP after destroying the newspaper chain he has run. He will move on with his former firm still in tatters.
Pruitt became the CEO of McClatchy in 1996. The chain took on about $2 billion in debt, a great deal of it to buy rival Knight Ridder for $4.6 billion in 2006. In 2009, it teetered close to bankruptcy. A restructuring of obligations saved it, for a while at least. McClatchy is in financial trouble again. Pruitt leaves for the AP just in time to avoid leading McClatchy as it heads toward a new crisis.
McClatchy suffered the fate of many other chains. Its revenue, adjusted for the KR deal and the sale of one of its large papers, was almost $2.6 billion in 2007. Last year, the figure fell to just over $1.3 billion. The company had a tiny profit of $54 million in 2011. But the interest expense on its long-term debt load was $139 million. McClatchy’s long-term debt is still nearly $1.6 billion. Among the firm’s risk factors, according to its 10-K, is this: “This level of debt increases the Company’s vulnerability to general adverse economic and industry conditions.”
All newspaper stocks have fallen over the past five years as the industry has struggled with costs and a decline in print advertising. That drop has not been offset by a rise in digital revenue. But the market has been more disappointed with management at McClatchy than at other large chains. Its shares are down much more sharply than those of The New York Times (NYSE: NYT) or Gannett (NYSE: GCI). Pruitt’s poor decisions have badly hurt shareholders.
The biggest surprise about Pruitt’s appointment is that the AP board should be more aware of his shortcomings than anyone else. The board includes Michael Golden of the New York Times, Katharine Weymouth of the Washington Post (NYSE: WPO) and Craig A. Dubow of Gannett.
Pruitt has decided to leave his company, and its shareholders, at a time when they are in great peril, again. After his AP appointment, Pruitt said, “The Associated Press is the most important news organization in the world and an essential force in democracy.’ That it true. As such, it deserves a better leader.
Douglas A. McIntyre