UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
(Mark
One)
|
[X]
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
|
|
|
For
the quarterly period ended:
|
March
30, 2008
|
|
or
|
|
[ ]
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
|
|
|
For
the transition period from ________________________________ to
_______________________________
|
|
|
|
Commission
file number:
|
1-9824
|
|
(Exact
name of registrant as specified in its
charter)
|
Delaware
|
|
52-2080478
|
(State
or other jurisdiction of incorporation or organization)
|
|
(I.R.S.
Employer Identification No.)
|
2100
"Q" Street, Sacramento, CA
|
|
95816
|
(Address
of principal executive offices)
|
|
(Zip
Code)
|
916-321-1846
|
Registrant's
telephone number, including area
code
|
Indicate by check mark whether the
registrant (1) has filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90
days. [ X ]
Yes [ ] No
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
Large
accelerated filer [X] Accelerated
filer [ ]
Non-accelerated
filer [ ] (Do not check if smaller reporting
company)
Smaller
reporting company [ ]
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12-b
of the Exchange Act).
As of May
6, 2008, the registrant had shares of common stock as listed below
outstanding:
|
Class
A Common Stock
|
57,266,620
|
|
Class
B Common Stock
|
25,050,962
|
THE
McCLATCHY COMPANY
INDEX
TO FORM 10-Q
Part
I - FINANCIAL INFORMATION
|
Page
|
|
|
Item
1 - Financial Statements (unaudited):
|
|
|
|
|
|
Consolidated
Balance Sheet – March 30, 2008 and December 30, 2007
|
1
|
|
|
|
Consolidated
Statement of Income for the three months ended March 30, 2008 and
April 1, 2007
|
3
|
|
|
|
Consolidated
Statement of Cash Flows for the three months ended March 30, 2008 and
April 1, 2007
|
4
|
|
|
|
Consolidated
Statement of Stockholders' Equity for the period December 30, 2007 to
March 30, 2008
|
5
|
|
|
|
Notes
to Consolidated Financial Statements
|
6
|
|
|
Item
2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
|
15
|
|
|
Item
3 - Quantitative and Qualitative Disclosures About Market
Risk
|
22
|
|
|
Item
4 - Controls and Procedures
|
23
|
|
|
Part
II - OTHER INFORMATION
|
|
|
|
Item
1A - Risk Factors
|
23
|
|
|
Item
6 - Exhibits
|
24
|
|
|
Signatures
|
25
|
|
|
Index
of Exhibits
|
26
|
PART I - FINANCIAL
INFORMATION
Item
1 - FINANCIAL STATEMENTS
THE
McCLATCHY COMPANY
|
|
CONSOLIDATED
BALANCE SHEET (UNAUDITED)
|
|
(In
thousands, except share amounts)
|
|
|
|
|
|
|
|
|
ASSETS
|
|
March
30,
|
|
|
December
30,
|
|
CURRENT
ASSETS:
|
|
2008
|
|
|
2007
|
|
Cash
and cash equivalents
|
|
$ |
12,325 |
|
|
$ |
25,816 |
|
Trade
receivables – (less allowance of
$11,718
in 2008 and $11,416 in 2007)
|
|
|
236,725 |
|
|
|
289,550 |
|
Other
receivables
|
|
|
23,462 |
|
|
|
19,677 |
|
Newsprint,
ink and other inventories
|
|
|
44,849 |
|
|
|
36,230 |
|
Deferred
income taxes
|
|
|
27,077 |
|
|
|
27,077 |
|
Prepaid
income taxes
|
|
|
31,485 |
|
|
|
60,758 |
|
Income
tax refund
|
|
|
185,059 |
|
|
|
185,059 |
|
Land
and other assets held for sale
|
|
|
177,536 |
|
|
|
177,436 |
|
Other
current assets
|
|
|
21,986 |
|
|
|
20,636 |
|
|
|
|
760,504 |
|
|
|
842,239 |
|
PROPERTY,
PLANT AND EQUIPMENT:
|
|
|
|
|
|
|
|
|
Land
|
|
|
205,091 |
|
|
|
205,080 |
|
Building
and improvements
|
|
|
396,315 |
|
|
|
395,553 |
|
Equipment
|
|
|
845,608 |
|
|
|
846,664 |
|
Construction
in progress
|
|
|
17,476 |
|
|
|
17,183 |
|
|
|
|
1,464,490 |
|
|
|
1,464,480 |
|
Less
accumulated depreciation
|
|
|
(538,262 |
) |
|
|
(522,388 |
) |
|
|
|
926,228 |
|
|
|
942,092 |
|
INTANGIBLE
ASSETS:
|
|
|
|
|
|
|
|
|
Identifiable
intangibles - net
|
|
|
876,218 |
|
|
|
891,591 |
|
Goodwill
|
|
|
1,042,880 |
|
|
|
1,042,880 |
|
|
|
|
1,919,098 |
|
|
|
1,934,471 |
|
|
|
|
|
|
|
|
|
|
INVESTMENTS
AND OTHER ASSETS:
|
|
|
|
|
|
|
|
|
Investments
in unconsolidated companies
|
|
|
383,396 |
|
|
|
401,274 |
|
Other
assets
|
|
|
16,844 |
|
|
|
17,843 |
|
|
|
|
400,240 |
|
|
|
419,117 |
|
TOTAL
ASSETS
|
|
$ |
4,006,070 |
|
|
$ |
4,137,919 |
|
|
|
|
|
|
|
|
|
|
See
notes to consolidated financial statements.
|
|
|
|
|
|
|
|
|
THE
McCLATCHY COMPANY
|
|
CONSOLIDATED
BALANCE SHEET (UNAUDITED) - Continued
|
|
(In
thousands, except share amounts)
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
March
30,
|
|
|
December
30,
|
|
CURRENT
LIABILITIES:
|
|
2008
|
|
|
2007
|
|
Accounts
payable
|
|
$ |
74,236 |
|
|
$ |
93,626 |
|
Accrued
compensation
|
|
|
92,614 |
|
|
|
104,892 |
|
Income
taxes payable
|
|
|
4,539 |
|
|
|
20,861 |
|
Unearned
revenue
|
|
|
85,584 |
|
|
|
82,461 |
|
Accrued
interest
|
|
|
30,805 |
|
|
|
28,246 |
|
Accrued
dividends
|
|
|
14,800 |
|
|
|
14,788 |
|
Other
accrued liabilities
|
|
|
42,775 |
|
|
|
44,642 |
|
|
|
|
345,353 |
|
|
|
389,516 |
|
|
|
|
|
|
|
|
|
|
NON-CURRENT
LIABILITIES:
|
|
|
|
|
|
|
|
|
Long-term
debt
|
|
|
2,396,370 |
|
|
|
2,471,827 |
|
Deferred
income taxes
|
|
|
554,017 |
|
|
|
555,887 |
|
Pension
and postretirement obligations
|
|
|
205,091 |
|
|
|
200,318 |
|
Other
long-term obligations
|
|
|
95,935 |
|
|
|
94,831 |
|
|
|
|
3,251,413 |
|
|
|
3,322,863 |
|
COMMITMENTS
AND CONTINGENCIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS'
EQUITY:
|
|
|
|
|
|
|
|
|
Common
stock $.01 par value:
|
|
|
|
|
|
|
|
|
Class
A - authorized 200,000,000 shares, issued
|
|
|
|
|
|
|
|
|
57,180,022
in 2008 and 57,105,279 in 2007
|
|
|
572 |
|
|
|
571 |
|
Class
B - authorized 60,000,000 shares,
|
|
|
|
|
|
|
|
|
issued
25,050,962 in 2008 and 2007
|
|
|
251 |
|
|
|
251 |
|
Additional
paid-in capital
|
|
|
2,199,204 |
|
|
|
2,197,041 |
|
Accumulated
deficit
|
|
|
(1,796,947 |
) |
|
|
(1,781,298 |
) |
Treasury
stock, 5,264 shares in 2008 and 3,029 shares in 2007 at
cost
|
|
|
(144 |
) |
|
|
(122 |
) |
Accumulated
other comprehensive income
|
|
|
6,368 |
|
|
|
9,097 |
|
|
|
|
409,304 |
|
|
|
425,540 |
|
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
$ |
4,006,070 |
|
|
$ |
4,137,919
$ |
|
|
|
|
|
|
|
|
|
|
See
notes to consolidated financial statements.
|
|
|
|
|
|
|
|
|
THE
McCLATCHY COMPANY
|
|
CONSOLIDATED
STATEMENT OF INCOME (UNAUDITED)
(In
thousands, except per share amounts)
|
|
|
|
Three
Months Ended
|
|
|
|
March
30,
|
|
|
April
1,
|
|
|
|
2008
|
|
|
2007
|
|
REVENUES
- NET:
|
|
|
|
|
|
|
Advertising
|
|
$ |
404,023 |
|
|
$ |
477,023 |
|
Circulation
|
|
|
67,864 |
|
|
|
71,880 |
|
Other
|
|
|
16,396 |
|
|
|
17,655 |
|
|
|
|
488,283 |
|
|
|
566,558 |
|
OPERATING
EXPENSES:
|
|
|
|
|
|
|
|
|
Compensation
|
|
|
218,853 |
|
|
|
236,324 |
|
Newsprint
and supplements
|
|
|
60,458 |
|
|
|
75,417 |
|
Depreciation
and amortization
|
|
|
36,382 |
|
|
|
37,833 |
|
Other
operating expenses
|
|
|
115,856 |
|
|
|
129,596 |
|
|
|
|
431,549 |
|
|
|
479,170 |
|
|
|
|
|
|
|
|
|
|
OPERATING
INCOME
|
|
|
56,734 |
|
|
|
87,388 |
|
|
|
|
|
|
|
|
|
|
NON-OPERATING
(EXPENSES) INCOME:
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
(45,277 |
) |
|
|
(53,785 |
) |
Interest
income
|
|
|
96 |
|
|
|
64 |
|
Equity
losses in unconsolidated companies - net
|
|
|
(13,124 |
) |
|
|
(9,749 |
) |
Other
- net
|
|
|
914 |
|
|
|
(48 |
) |
|
|
|
(57,391 |
) |
|
|
(63,518 |
) |
INCOME
(LOSS) FROM CONTINUING OPERATIONS
|
|
|
|
|
|
|
|
|
BEFORE
INCOME TAXES
|
|
|
(657 |
) |
|
|
23,870 |
|
|
|
|
|
|
|
|
|
|
INCOME
TAX PROVISION
|
|
|
336 |
|
|
|
9,357 |
|
|
|
|
|
|
|
|
|
|
INCOME
(LOSS) FROM CONTINUING OPERATIONS
|
|
|
(993 |
) |
|
|
14,513 |
|
|
|
|
|
|
|
|
|
|
INCOME
(LOSS) FROM DISCONTINUED OPERATIONS,
|
|
|
|
|
|
|
|
|
NET
OF INCOME TAXES
|
|
|
144 |
|
|
|
(5,483 |
) |
|
|
|
|
|
|
|
|
|
NET
INCOME (LOSS)
|
|
$ |
(849 |
) |
|
$ |
9,030 |
|
|
|
|
|
|
|
|
|
|
NET
INCOME (LOSS) PER COMMON SHARE:
|
|
|
|
|
|
|
|
|
Basic:
|
|
|
|
|
|
|
|
|
Income
(loss) from continuing operations
|
|
$ |
(0.01 |
) |
|
$ |
0.18 |
|
Income
(loss) from discontinued operations
|
|
|
- |
|
|
|
(0.07 |
) |
Net
income (loss) per share
|
|
$ |
(0.01 |
) |
|
$ |
0.11 |
|
|
|
|
|
|
|
|
|
|
Diluted:
|
|
|
|
|
|
|
|
|
Income
(loss) from continuing operations
|
|
$ |
(0.01 |
) |
|
$ |
0.18 |
|
Income
(loss) from discontinued operations
|
|
|
- |
|
|
|
(0.07 |
) |
Net
income (loss) per share
|
|
$ |
(0.01 |
) |
|
$ |
0.11 |
|
|
|
|
|
|
|
|
|
|
WEIGHTED
AVERAGE NUMBER OF COMMON SHARES:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
82,177 |
|
|
|
81,885 |
|
Diluted
|
|
|
82,177 |
|
|
|
81,982 |
|
|
|
|
|
|
|
|
|
|
See
notes to consolidated financial statements.
|
|
|
|
|
|
|
|
|
THE
McCLATCHY COMPANY
|
|
CONSOLIDATED
STATEMENT OF CASH FLOWS (UNAUDITED)
|
|
(In
thousands)
|
|
|
|
Three
Months Ended
|
|
|
|
March
30,
|
|
|
April
1,
|
|
|
|
2008
|
|
|
2007
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
Income
(loss) from continuing operations
|
|
$ |
(993 |
) |
|
$ |
14,513 |
|
Reconciliation
to net cash provided by continuing operations:
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
36,382 |
|
|
|
37,833 |
|
Employee
benefit expense
|
|
|
6,097 |
|
|
|
9,249 |
|
Stock
compensation expense
|
|
|
1,345 |
|
|
|
2,182 |
|
Equity
loss in unconsolidated companies
|
|
|
13,124 |
|
|
|
9,749 |
|
Write-off
of deferred financing costs
|
|
|
3,383 |
|
|
|
- |
|
Other
|
|
|
1,734 |
|
|
|
1,210 |
|
Changes
in certain assets and liabilities:
|
|
|
|
|
|
|
|
|
Trade
receivables
|
|
|
52,825 |
|
|
|
40,761 |
|
Inventories
|
|
|
(8,619 |
) |
|
|
8,677 |
|
Other
assets
|
|
|
(4,409 |
) |
|
|
876 |
|
Accounts
payable
|
|
|
(20,080 |
) |
|
|
(42,911 |
) |
Accrued
compensation
|
|
|
(12,278 |
) |
|
|
(25,991 |
) |
Income
taxes
|
|
|
12,951 |
|
|
|
(38,032 |
) |
Other
liabilities
|
|
|
4,078 |
|
|
|
(2,779 |
) |
|
|
|
|
|
|
|
|
|
Net
cash provided by operating activities of continuing
operations
|
|
|
85,540 |
|
|
|
15,337 |
|
Net
cash provided (used) by operating activities of discontinued
operations
|
|
|
(186 |
) |
|
|
2,501 |
|
Net
cash provided by operating activities
|
|
|
85,354 |
|
|
|
17,838 |
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Purchases
of property, plant and equipment
|
|
|
(4,754 |
) |
|
|
(12,815 |
) |
Equity
investments
|
|
|
(735 |
) |
|
|
(1,200 |
) |
Other
- net
|
|
|
34 |
|
|
|
162 |
|
Net
cash used by investing activities of continuing operations
|
|
|
(5,455 |
) |
|
|
(13,853 |
) |
Proceeds
from sale of newspaper, net of transaction costs
|
|
|
- |
|
|
|
522,922 |
|
Other
|
|
|
- |
|
|
|
(4,837 |
) |
Net
cash provided by investing activities of discontinued
operations
|
|
|
- |
|
|
|
518,085 |
|
Net
cash provided (used) by investing activities
|
|
|
(5,455 |
) |
|
|
504,232 |
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Repayments
of term bank debt
|
|
|
- |
|
|
|
(350,000 |
) |
Net
repayments of revolving bank debt
|
|
|
(76,052 |
) |
|
|
(170,599 |
) |
Payment
of financing costs
|
|
|
(3,346 |
) |
|
|
- |
|
Payment
of cash dividends
|
|
|
(14,789 |
) |
|
|
(14,739 |
) |
Other
- principally stock issuances
|
|
|
797 |
|
|
|
3,832 |
|
Net
cash used by financing activities
|
|
|
(93,390 |
) |
|
|
(531,506 |
) |
|
|
|
|
|
|
|
|
|
NET
CHANGE IN CASH AND CASH EQUIVALENTS
|
|
|
(13,491 |
) |
|
|
(9,436 |
) |
CASH
AND CASH EQUIVALENTS, BEGINNING OF YEAR
|
|
|
25,816 |
|
|
|
19,581 |
|
|
|
|
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS, END OF PERIOD
|
|
$ |
12,325 |
|
|
$ |
10,145 |
|
|
|
|
|
|
|
|
|
|
OTHER
CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
Cash
paid (received) during the period for:
|
|
|
|
|
|
|
|
|
Income
taxes (net of refunds)
|
|
$ |
(13,143 |
) |
|
$ |
46,656 |
|
Interest
(net of capitalized interest)
|
|
$ |
35,809 |
|
|
$ |
51,786 |
|
|
|
|
|
|
|
|
|
|
See
notes to consolidated financial statements. |
|
|
|
|
|
|
|
|
THE
McCLATCHY COMPANY
|
|
CONSOLIDATED
STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED)
|
|
(In
thousands, except share and per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
Par
Value
|
|
|
Paid-In
|
|
|
Accumulated
|
|
|
Comprehensive
|
|
|
Treasury
|
|
|
|
|
|
|
Class
A
|
|
|
Class
B
|
|
|
Capital
|
|
|
Deficit
|
|
|
Income
|
|
|
Stock
|
|
|
Total
|
|
BALANCES,
DECEMBER 30, 2007
|
|
$ |
571 |
|
|
$ |
251 |
|
|
$ |
2,197,041 |
|
|
$ |
(1,781,298 |
) |
|
$ |
9,097 |
|
|
$ |
(122 |
) |
|
$ |
425,540 |
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(849 |
) |
|
|
|
|
|
|
|
|
|
|
(849 |
) |
Other
comprehensive income (loss), net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
and postretirement plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unamortized
gain/prior service credit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
91 |
|
|
|
|
|
|
|
91 |
|
Other
comprehensive loss related to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
investments
in unconsolidated companies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,820 |
) |
|
|
|
|
|
|
(2,820 |
) |
Other
comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,729 |
) |
Total
comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,578 |
) |
Dividends
declared ($.18 per share)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(14,800 |
) |
|
|
|
|
|
|
|
|
|
|
(14,800 |
) |
Issuance
of 76,978 Class A shares under stock plans
|
|
|
1 |
|
|
|
|
|
|
|
818 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
819 |
|
Stock
compensation expense
|
|
|
|
|
|
|
|
|
|
|
1,345 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,345 |
|
Purchase
of 2,235 shares of treasury stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(22 |
) |
|
|
(22 |
) |
BALANCES,
MARCH 30, 2008
|
|
$ |
572 |
|
|
$ |
251 |
|
|
$ |
2,199,204 |
|
|
$ |
(1,796,947 |
) |
|
$ |
6,368 |
|
|
$ |
(144 |
) |
|
$ |
409,304 |
|
|
|
See
notes to consolidated financial statements.
|
|
THE
McCLATCHY COMPANY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE
1. SIGNIFICANT
ACCOUNTING POLICIES
|
|
The
McClatchy Company (the Company) is the third largest newspaper company in the
United States based upon daily circulation, with 30 daily newspapers and
approximately 50 non-dailies in 29 markets across the country. McClatchy
also operates leading local websites and direct marketing operations in each of
its markets which complement its newspapers and extend its audience reach in
each market. The Company’s newspapers include, among others, The Miami Herald, The Sacramento Bee, The (Fort Worth) Star-Telegram, The Kansas City Star, The Charlotte Observer, and The (Raleigh) News &
Observer.
McClatchy
also owns a portfolio of premium digital assets, including 14.4% of
CareerBuilder LLC, the nation’s largest online job site, and 25.6% of Classified
Ventures LLC, a newspaper industry partnership that offers classified websites
such as: the auto website, cars.com: and the rental site, apartments.com.
McClatchy is listed on the New York Stock Exchange under the symbol
MNI.
The
consolidated financial statements include the Company and its
subsidiaries. Significant intercompany items and transactions are
eliminated. In preparing the financial statements, management makes
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
In the
opinion of management, the accompanying unaudited consolidated financial
statements contain all adjustments necessary (consisting of normal recurring
items) to present fairly the Company's financial position, results of
operations, and cash flows for the interim periods presented. The
financial statements contained in this report are not necessarily indicative of
the results to be expected for the full year. These financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto included in the Company’s Annual Report on Form
10-K for the period ended December 30, 2007.
Stock-based compensation - All
share-based payments to employees, including grants of employee stock options,
stock appreciation rights and restricted stock under equity incentive plans and
purchases under the employee stock purchase plan, are recognized in the
financial statements based on their fair values. At March 30, 2008,
the Company had six stock-based compensation plans. Total stock-based
compensation expense from continuing operations was $1.3 million and $2.1
million for the first fiscal quarter of 2008 and 2007,
respectively.
Income Taxes - The Company
accounts for income taxes using the liability method. Under this
method, deferred tax assets and liabilities are determined based on differences
between the financial reporting and tax bases of assets and liabilities and are
measured using the enacted tax rates and laws that are expected to be in effect
when the differences are expected to reverse.
FASB
Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income
Taxes – an interpretation of FASB Statement 109 clarifies the accounting
for uncertainty in income taxes and prescribes a recognition threshold and
measurement of a tax position taken or expected to be taken in an enterprise’s
tax returns. The Company recognizes interest accrued related to
unrecognized tax benefits in interest expense. Penalties, if
incurred, are recognized as a component of income tax expense. There
have been no significant changes to the Company’s unrecognized tax benefits in
the first quarter of 2008.
Comprehensive income (loss) -
The Company records changes in its net assets from non-owner sources in its
Statement of Stockholders’ Equity. The following table summarizes the
composition of total comprehensive income (loss) (in thousands):
|
|
For
the Three
Months
Ended
|
|
|
|
March
30,
2008
|
|
|
April
1,
2007
|
|
Net
income (loss)
|
|
$ |
(849 |
) |
|
$ |
9,030 |
|
Pension
amortization from other comprehensive income, net of tax
|
|
|
91 |
|
|
|
- |
|
Other
comprehensive loss related to equity investments
|
|
|
(2,820 |
) |
|
|
- |
|
Total
comprehensive income (loss)
|
|
$ |
(3,578 |
) |
|
$ |
9,030 |
|
Earnings per share (EPS) -
Basic EPS excludes dilution from common stock equivalents and reflects income
divided by the weighted average number of common shares outstanding for the
period. Diluted EPS is based upon the weighted average number of
outstanding shares of common stock and dilutive common stock equivalents in the
period. Common stock equivalents arise from dilutive stock options
and restricted stock and are computed using the treasury stock
method. The weighted average anti-dilutive common stock equivalents
that could potentially dilute basic EPS in the future, but were not included in
the weighted average share calculation for first fiscal quarter of 2008 and 2007
were 5,066,965 and 3,837,225, respectively.
New Accounting
Pronouncements
Fair
Value Option for Financial Assets and Financial Liabilities
In
February 2007, the FASB issued Statement No. 159 (SFAS 159), The Fair Value Option for Financial
Assets and Financial Liabilities-Including an Amendment of FASB Statement No.
115. SFAS 159 allows entities to voluntarily choose to measure
certain financial assets and liabilities at fair value. The fair
value option may be elected on an instrument-by-instrument basis and is
irrevocable, unless a new election date occurs. If the fair value
option is elected for an instrument, SFAS 159 specifies that unrealized gains
and losses for that instrument be reported in earnings at each subsequent
reporting date. SFAS 159 was effective for the Company on December
31, 2007. The Company did not apply the fair value option to any of
the Company’s outstanding instruments and, therefore, SFAS 159 did not have an
impact on the Company’s financial position or result of operations.
Fair
Value Measurements
In September 2006, the FASB issued
Statement No. 157 (SFAS 157), Fair Value Measurements,
which defines fair value, establishes a framework for measuring fair value in
accordance with generally accepted accounting principles, and expands
disclosures about fair value measurements. SFAS 157 was effective for
the Company on December 31, 2007 for all financial assets and liabilities and
for nonfinancial assets and liabilities recognized or disclosed at fair value in
our Consolidated Financial Statements on a recurring basis (at least
annually). For all other nonfinancial assets and liabilities, SFAS
157 is effective for the Company on December 29, 2008. As it relates
to the Company’s financial assets and liabilities and for nonfinancial assets
and liabilities recognized or disclosed at fair value in the Consolidated
Financial Statements on a recurring basis (at least annually), the adoption of
SFAS 157 did not have a material impact on the Company’s Consolidated Financial
Statements. Management does not expect the adoption of SFAS 157 for
nonfinancial assets and liabilities not valued on a recurring basis (at least
annually) to have a material impact to the Company’s financial position or
result of operations.
Business
Combinations
In December 2007, the FASB issued
Statement No. 141 (revised 2007) (SFAS 141(R)), Business
Combinations. SFAS 141(R) established principles and
requirements for how an entity which obtains control of one or more businesses
(1) recognizes and measures the identifiable assets acquired, the liabilities
assumed and any noncontrolling interest in the acquiree, (2) recognizes and
measures the goodwill acquired in the business combination and (3) determines
what information to disclose regarding business combinations. SFAS
141(R) applies prospectively to business combinations for which the acquisition
date is on or after the beginning of the first annual report period beginning on
or after December 15, 2008. Management does not expect the adoption
of SFAS 141(R) to have a material impact to the Company’s financial position or
results of operations.
Noncontrolling Interests in
Consolidated Financial Statements
In December 2007, the FASB issued
Statement No. 160 (SFAS 160), Noncontrolling Interests in
Consolidated Financial Statements – an amendment of ARB No.
51. SFAS 160 establishes accounting and reporting standards
for the noncontrolling interest in a subsidiary and for the deconsolidation of a
subsidiary. It clarifies that a noncontrolling interest in a
subsidiary is an ownership interest in the consolidated entity that should be
reported as equity in the consolidated financial
statements. Additionally, SFAS 160 requires expanded disclosures in
the consolidated financial statements. SFAS 160 is effective for
fiscal years beginning on or after December 15, 2008. Management has
not completed its analysis of the impact SFAS 160 will have, if any, on its
consolidated financial statements.
Disclosures about Derivative
Instruments and Hedging Activities
In
March 2008, the FASB issued Statement No. 161 (SFAS 161), Disclosures about Derivative
Instruments and Hedging Activities, an amendment of FASB Statement
No. 133, Accounting for
Derivative Instruments and Hedging Activities. This Statement amends and
expands disclosures about an entity’s derivative and hedging activities with the
intent to provide users of financial statements with an enhanced understanding
of a) how and why an entity uses derivative instruments, b) how derivative
instruments and related hedged items are accounted for under Statement 133 and
its related interpretations, and c) how derivative instruments and related
hedged items affect an entity’s financial position, financial performance and
cash flows. SFAS 161 is effective for financial statements issued for fiscal
years and interim periods beginning after November 15, 2008, with early
application encouraged. This Statement encourages, but does not require,
comparative disclosures. The Company expects to adopt SFAS 161 on December 29,
2008. Management has not completed its analysis of the impact SFAS 161 will
have, if any, on its consolidated financial statements.
NOTE
2. DIVESTITURES
On March
5, 2007, the Company sold the (Minneapolis) Star Tribune newspaper and
other publications and websites related to the newspaper for $530
million. The Company received an income tax benefit of approximately
$200 million related to the sale. Approximately $15 million was
recouped through reductions to income taxes payable and $185 million was
recorded as a current income tax refund receivable on the Consolidated Balance
Sheet as of March 30, 2008. The Company received the refund in April 2008 and
used it to reduce debt.
The
results of Star
Tribune's operations, including interest on debt incurred to purchase it,
have been recorded as discontinued operations in all periods
presented.
Revenues and loss from discontinued operations, net of income taxes,
for the three months ended March 30, 2008 and April 1, 2007 were as follows (in
thousands):
|
|
Three
Months Ended
|
|
|
|
March
30, 2008
|
|
|
April
1,
2007
|
|
Revenues
|
|
$ |
- |
|
|
$ |
52,903 |
|
|
|
|
|
|
|
|
|
|
Income
(loss) from discontinued operations before income taxes
(1)
|
|
|
247 |
|
|
|
(4,783 |
) |
Income
tax expense
|
|
|
103 |
|
|
|
700 |
|
Income
(loss) from discontinued operations
|
|
$ |
144 |
|
|
$ |
(5,483 |
) |
|
|
(1) Includes
interest expense allocated to discontinued operations of $1.2 million for
the three months ended April 1, 2007. |
|
NOTE
3. INVESTMENTS IN UNCONSOLIDATED COMPANIES
The
following is the Company's ownership interest and carrying value of investments
in unconsolidated companies and joint ventures (dollars in
thousands):
Company
|
|
%
Ownership Interest
|
|
|
March
30,
2008
|
|
|
December
30,
2007
|
|
CareerBuilder,
LLC
|
|
|
14.4 |
|
|
$ |
220,054 |
|
|
$ |
224,699 |
|
Classified
Ventures, LLC
|
|
|
25.6 |
|
|
|
97,207 |
|
|
|
99,313 |
|
Ponderay
Newsprint Company (general partnership)
|
|
|
27.0 |
|
|
|
15,918 |
|
|
|
16,221 |
|
SP
Newsprint Company (general partnership)
|
|
|
33.3 |
|
|
|
15,888 |
|
|
|
19,455 |
|
Seattle
Times Company (C-Corporation)
|
|
|
49.5 |
|
|
|
12,061 |
|
|
|
19,310 |
|
ShopLocal,
LLC
|
|
|
15.0 |
|
|
|
11,136 |
|
|
|
10,907 |
|
Topix,
LLC
|
|
|
11.3 |
|
|
|
8,827 |
|
|
|
9,074 |
|
McClatchy
Tribune Information Services (joint venture)
|
|
|
50.0 |
|
|
|
1,650 |
|
|
|
1,627 |
|
Other
|
|
Various
|
|
|
|
655 |
|
|
|
668 |
|
|
|
|
|
|
|
$ |
383,396 |
|
|
$ |
401,274 |
|
Except in
very limited cases, the Company uses the equity method of accounting for
investments.
McClatchy
and its partners, affiliates of Cox Enterprises, Inc. and Media General, Inc.,
completed the sale of SP Newsprint Company on March 31, 2008 (the first day of
the Company’s second fiscal quarter). The Company expects to record
an after-tax gain on the transaction in the second quarter of 2008 in the range
of $20 million to $21 million. The Company used the $55 million of
proceeds it received from the sale to reduce debt in the second quarter of
2008.
|
|
|
|
|
|
|
|
|
|
|
Intangible
assets and goodwill, along with their weighted-average amortization
periods consisted of the following (in thousands):
|
|
|
March
30, 2008
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Gross
|
|
|
Accumulated
|
|
|
Net
|
|
Amortization
|
|
|
Amount
|
|
|
Amortization
|
|
|
Amount
|
|
Period
|
Intangible
assets subject to amortization:
|
|
|
|
|
|
|
|
|
|
|
Advertiser
and subscriber lists
|
|
$ |
817,701 |
|
|
$ |
(220,367 |
) |
|
$ |
597,334 |
|
14
years
|
Other
|
|
|
26,266 |
|
|
|
(13,332 |
) |
|
|
12,934 |
|
8
years
|
Total
|
|
$ |
843,967 |
|
|
$ |
(233,699 |
) |
|
$ |
610,268 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
intangible assets not subject to amortization:
|
|
|
|
|
|
|
|
|
|
|
Newspaper
mastheads
|
|
|
|
|
|
|
|
|
|
|
265,950 |
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
876,218 |
|
|
Goodwill
|
|
|
|
|
|
|
|
|
|
|
1,042,880 |
|
|
Total
intangible assets and goodwill
|
|
|
|
|
|
|
|
|
|
$ |
1,919,098 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
30, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Gross
|
|
|
Accumulated
|
|
|
Net
|
|
Amortization
|
|
|
Amount
|
|
|
Amortization
|
|
|
Amount
|
|
Period
|
Intangible
assets subject to amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advertiser
and subscriber lists
|
|
$ |
817,701 |
|
|
$ |
(205,979 |
) |
|
$ |
611,722 |
|
14
years
|
Other
|
|
|
26,261 |
|
|
|
(12,342 |
) |
|
|
13,919 |
|
8
years
|
Total
|
|
$ |
843,962 |
|
|
$ |
(218,321 |
) |
|
$ |
625,641 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
intangible assets not subject to amortization:
|
|
|
|
|
|
|
|
|
|
|
Newspaper
mastheads
|
|
|
|
|
|
|
|
|
|
|
265,950 |
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
891,591 |
|
|
Goodwill
|
|
|
|
|
|
|
|
|
|
|
1,042,880 |
|
|
Total
intangible assets and goodwill
|
|
|
|
|
|
|
|
|
|
$ |
1,934,471 |
|
|
Amortization
expense for continuing operations was $15.4 million and $15.0 million in the
first fiscal quarters of 2008 and 2007, respectively.
The
estimated amortization expense for the remainder of fiscal 2008 and the
five succeeding fiscal years is as follows (in
thousands):
|
|
|
Amortization
|
|
|
Year
|
|
Expense
|
|
|
|
|
|
|
|
2008
(remaining)
|
|
$ |
45,558 |
|
|
2009
|
|
|
59,312 |
|
|
2010
|
|
|
58,634 |
|
|
2011
|
|
|
57,538 |
|
|
2012
|
|
|
57,368 |
|
|
2013
|
|
|
56,228 |
|
NOTE
5. LONG-TERM DEBT
As of
March 30, 2008 and December 30, 2007, long-term debt consisted of the
following (in thousands):
|
|
March
30,
2008
|
|
|
December
30,
2007
|
|
Term
A bank debt, interest of 4.96% at March 30, 2008 and 6.07% at December
30, 2007
|
|
$ |
550,000 |
|
|
$ |
550,000 |
|
Revolving
bank debt, interest of 4.64% at March 30, 2008 and 6.02% at
December 30, 2007
|
|
|
432,547 |
|
|
|
508,600 |
|
Publicly
traded notes:
|
|
|
|
|
|
|
|
|
$200
million 9.875% debentures due in 2009
|
|
|
205,921 |
|
|
|
207,327 |
|
$300
million 7.125% debentures due in 2011
|
|
|
303,243 |
|
|
|
303,497 |
|
$200
million 4.625% debentures due in 2014
|
|
|
177,050 |
|
|
|
176,180 |
|
$400
million 5.750% debentures due in 2017
|
|
|
364,538 |
|
|
|
363,600 |
|
$100
million 7.150% debentures due in 2027
|
|
|
91,274 |
|
|
|
91,162 |
|
$300
million 6.875% debentures due in 2029
|
|
|
271,797 |
|
|
|
271,461 |
|
Total
long-term debt
|
|
$ |
2,396,370 |
|
|
$ |
2,471,827 |
|
The
publicly traded notes are stated net of unamortized discounts and premiums
resulting from recording such assumed liabilities at fair value as of the June
27, 2006 acquisition date of Knight-Ridder, Inc.
In the
second quarter of 2008, the Company announced a tender offer for the cash
purchase of up to $300 million aggregate principal amount of its
outstanding debt securities maturing in 2009, 2011 and 2014. The
terms and conditions of the tender offer are set forth in
the Offer to Purchase and the related Letter of Transmittal, each dated April
23, 2008 and amended by a press release dated May 7,
2008. The tender offer is scheduled to expire on May 21, 2008
at 5:00 PM, New York City time.
The
Company's credit facility entered into on June 27, 2006 provided for a $3.2
billion senior unsecured credit facility (Credit Agreement) and was established
in connection with the acquisition of Knight-Ridder, Inc. (the
Acquisition). At the closing of the Acquisition, the Company’s new
Credit Agreement consisted of a $1.0 billion five-year revolving credit facility
and $2.2 billion five-year Term A loan. Both the Term A loan and the revolving
credit facility are due on June 27, 2011.
On March
28, 2008, the Company entered into an agreement to amend the Credit Agreement
giving the Company greater flexibility in its bank covenants as described
below. Pursuant to the amendment, the revolving credit facility was
reduced to $750.0 million on March 28, 2008 and was further reduced to $625.0
million in May 2008 after receipt by the Company of a tax refund attributable to
the sale of The Star Tribune Company. The revolving credit facility
will be further reduced to $500.0 million upon the sale of land in Miami,
Florida. The Company wrote off $3.4 million of deferred financing
costs in connection with the amendment, which was recorded in interest expense
for the quarter ended March 30, 2008.
A total
of $316.5 million was available under the revolving credit facility at March 30,
2008; however, based upon the Company’s current leverage covenant and trailing
operating cash flow (as defined), the Company could borrow an
additional $235.6 million. In the second quarter of 2008, the
amount available under the revolver was increased as the result of applying the
proceeds of the SP sale and the tax refund related to the (Minneapolis) Star Tribune sale to reduce
the revolver, net of a reduction in the revolver commitment of $125 million
required under the recently amended credit agreement. As of May 6,
2008, a total of $414.3 million was available under the revolving credit
facility, all of which could be borrowed under the Company's current leverage
covenant and trailing operating cash flow (as defined).
Debt
under the amended Credit Agreement incurs interest at the London Interbank
Offered Rate (LIBOR) plus a spread ranging from 37.5 basis points to 200.0 basis
points. Applicable rates are based upon the Company’s ratings on its
long-term debt from Moody’s Investor Services (Moody’s) and Standard &
Poor’s (S&P) whenever the Company’s total leverage ratio is less than 4.00
to 1.00 or based on the Company’s total leverage ratio whenever the ratio is
greater than 4.00 to 1.00. A commitment fee for the unused revolving
credit ranges from 10.0 basis points to 50.0 basis points depending on the
Company’s ratings or total leverage ratio. The Company currently pays
interest on debt under the Credit Agreement based on its leverage ratio, and its
interest payments are currently priced at LIBOR plus 175.0 basis points on
outstanding debt and its commitment fees on the unused revolver are priced at
37.5 basis points.
On April
1, 2008, Moody’s downgraded the Company’s corporate credit rating citing the
ongoing pressure on the Company’s cash flow from declining advertising revenue
and noted that the ratings outlook is negative. In addition, on April
23, 2008, S&P lowered its ratings on the Company and placed all ratings on
credit watch with negative implications citing the worsening pace of decline in
advertising revenue. The ratings downgrades had no impact on the
interest rate and commitment fees the Company pays under the Credit
Agreement.
The
following table summarizes the ratings of the Company’s debt
instruments:
|
|
Debt
Ratings
|
|
|
|
As
of
|
|
|
As
of Last
|
|
|
|
30-Mar-08
|
|
|
Rating
Action
|
|
Credit Facility:
|
|
|
|
|
|
|
S&P
|
|
BB
|
|
|
BB-
|
|
Moody's
|
|
Ba1
|
|
|
Ba1
|
|
|
|
|
|
|
|
|
Bonds:
|
|
|
|
|
|
|
S&P
|
|
B+ |
|
|
|
B |
|
|
Moody's
|
|
Ba3
|
|
|
B1 |
|
|
|
|
|
|
|
|
|
|
|
Corp.
Family Rating:
|
|
|
|
|
|
|
|
|
S&P
|
|
BB
|
|
|
BB-
|
|
Moody's
|
|
Ba2
|
|
|
Ba3
|
|
The
amended Credit Agreement contains quarterly financial covenants including a
minimum interest coverage ratio (as defined in the Credit Agreement) of 2.75 to
1.00 and a maximum leverage ratio (as defined in the Credit Agreement) of 5.00
to 1.00 through September 27, 2009; 4.75 to 1.00 from December 27, 2009 through
December 26, 2010 and 4.50 to 1.00 thereafter. The
Company is also subject to a $250 million limit on any repurchases of its
publicly traded notes with maturity dates after 2011, increases in dividends or
repurchases of its common stock so long as its total leverage ratio is equal to
or greater than 4.00 to 1.00. At March 30, 2008, the Company was in compliance
with all debt covenants.
In
addition, the Company’s Material Subsidiaries (as defined in the Credit
Agreement) have guaranteed the Company’s obligations under the Credit
Agreement. These guarantees were effected on May 4, 2007, and continue in
effect until the earlier of the termination of the Credit Agreement or the date
which is one year after the date both ratings agencies have rated the Company’s
bank debt as investment grade.
At March
30, 2008, the Company had outstanding letters of credit totaling $49.3 million
securing estimated obligations stemming from workers’ compensation claims and
other contingent claims.
The
following table presents the approximate annual maturities of debt, based upon
the Company's required payments, for the next five years and thereafter (in
thousands):
|
Year
|
|
Payments
|
|
|
2009
|
|
$ |
200,000 |
|
|
2010
|
|
|
- |
|
|
2011
|
|
|
1,282,547 |
|
|
2012
|
|
|
- |
|
|
2013
|
|
|
- |
|
|
Thereafter
|
|
|
1,000,000 |
|
|
|
|
|
2,482,547 |
|
|
Less
net discount
|
|
|
(86,177 |
) |
|
Total
debt
|
|
$ |
2,396,370 |
|
NOTE
6. EMPLOYEE BENEFITS
The
Company sponsors defined benefit pension plans (retirement plans), which cover a
majority of its employees. Benefits are based on years of service and
compensation. Contributions to the retirement plans are made by the
Company in amounts deemed necessary to provide the required
benefits. No contributions to the Company's retirement plans are
currently planned during fiscal 2008.
The
Company also has a limited number of supplemental retirement plans to provide
key employees with additional retirement benefits. The terms of the
plans are generally the same as those of the retirement plans, except that the
supplemental retirement plans are limited to key employees and provide an
enhanced pension benefit. These plans are funded on a pay-as-you-go
basis and the accrued pension obligation is largely included in other long-term
obligations.
As of
December 31, 2007, the McClatchy and Knight-Ridder Retirement Plans merged into
one retirement plan.
The
elements of pension costs for continuing operations are as follows (in
thousands):
|
|
Three
Months Ended
|
|
|
|
March
30,
2008
|
|
|
April
1,
2007
|
|
Service
cost
|
|
$ |
9,110 |
|
|
$ |
7,939 |
|
Interest
cost
|
|
|
24,876 |
|
|
|
24,217 |
|
Expected
return on plan assets
|
|
|
(28,322 |
) |
|
|
(28,226 |
) |
Prior
service cost amortization
|
|
|
50 |
|
|
|
80 |
|
Actuarial
loss
|
|
|
90 |
|
|
|
4,009 |
|
Net
pension expense
|
|
$ |
5,804 |
|
|
$ |
8,019 |
|
No
material contributions were made to the Company's multi-employer plans for
continuing operations for the three months ended March 30, 2008 and April 1,
2007.
The
Company also provides for or subsidizes postretirement healthcare and certain
life insurance benefits for employees. The elements of postretirement
benefits for continuing operations are as follows (in thousands):
|
|
Three
Months Ended
|
|
|
|
March
30,
2008
|
|
|
April
1,
2007
|
|
Service
cost
|
|
$ |
28 |
|
|
$ |
221 |
|
Interest
cost
|
|
|
584 |
|
|
|
1,009 |
|
Prior
service cost
|
|
|
(313 |
) |
|
|
- |
|
Actuarial
gain
|
|
|
(6 |
) |
|
|
- |
|
Net
postretirement expense
|
|
$ |
293 |
|
|
$ |
1,230 |
|
NOTE
7. COMMITMENTS AND CONTINGENCIES
There are
libel and other legal actions that have arisen in the ordinary course of
business and are pending against the Company. From time to time the
Company is involved as a party in various governmental proceedings, including
environmental matters. Management believes, after reviewing such
actions with counsel, that the outcome of pending actions will not have a
material adverse effect on the Company’s consolidated financial statements taken
as a whole.
ITEM
2. MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
Overview
The
McClatchy Company (the Company) is the third largest newspaper company in the
United States, with 30 daily newspapers, approximately 50 non-dailies, and
direct marketing and direct mail operations. McClatchy also operates
leading local websites in each of its markets which extend its audience
reach. The websites offer users comprehensive news and information,
advertising, e-commerce and other services. Together with its newspapers
and direct marketing products, these interactive operations make McClatchy a
leading local media company in each of its premium high growth markets.
McClatchy-owned newspapers include, among others, The Miami Herald, The Sacramento Bee, The (Fort Worth) Star-Telegram, The Kansas City Star, The Charlotte Observer, and The (Raleigh) News &
Observer.
McClatchy
also owns a portfolio of premium digital assets, including 14.4% of
CareerBuilder, the nation’s largest online job site, and 25.6% of Classified
Ventures, a newspaper industry partnership that offers two of the nation’s
premier classified websites: the auto website, cars.com, and the rental site,
apartments.com. McClatchy is listed on the New York Stock Exchange under the
symbol MNI.
The
Company's primary source of revenue is print and online advertising, which
accounted for 82.7% of the Company's revenue for the first quarter of
2008. While percentages vary from year to year and from newspaper to
newspaper, classified advertising has steadily decreased as a percentage of
total advertising revenues primarily in the employment and real estate
categories and to a lesser extent the automotive category. Classified
advertising as a percentage of total advertising revenues has declined to 34.7%
in the first quarter of 2008 compared to 39.6% in the first quarter of 2007 and
42.1% in the first quarter of 2006, primarily as a result of the economic
slowdown affecting classified advertising and the secular shift in advertising
demand to online products.
While
revenues from retail advertising carried as a part of newspapers (run-of-press
or ROP advertising) or in advertising inserts placed in newspapers (preprint
advertising) has decreased year over year, retail advertising has steadily
increased as a percentage of total advertising up to 47.2% in the first quarter
of 2008 compared to 43.2% in the first quarter of 2007 and 40.6% in the first
quarter of 2006.
National
advertising as a percentage of total advertising revenue remained relatively
similar year over year and contributed 9.5% of total advertising revenue in the
first quarter of 2008. Direct marketing and other advertising made up
the remainder of the Company's advertising revenues in the first quarter of
2008.
While
included in the revenues above, all categories of advertising, with the
exception of employment which has been negatively affected by the economic
downturn, are growing online. Online advertising grew 10.6% in the first quarter
of 2008 and represented 11.3% of total advertising, up from 8.6% of total
advertising for all of 2007.
Circulation
revenues contributed 13.9% of the Company's newspaper revenues in the first
quarter of 2008. Most of the Company’s newspapers are delivered by
independent contractors. Circulation revenues are recorded net of
direct delivery costs.
See the
following "Results of Operations" for a discussion of the Company's revenue
performance and contribution by category for the three months ended March 30,
2008 and April 1, 2007.
Critical
Accounting Policies
Critical
accounting policies are those accounting policies that management believes are
important to the portrayal of the Company's financial condition and results and
require management's most difficult, subjective or complex judgments, often as a
result of the need to make estimates about the effect of matters that are
inherently uncertain. The Company's 2007 Annual Report on Form 10-K
includes a description of certain critical accounting policies, including those
with respect to revenue recognition, allowance for doubtful accounts,
acquisition accounting, discontinued operations, goodwill and intangible
impairment, pension and postretirement benefits, income taxes, insurance and
stock-based employee compensation.
Recent
Events and Trends
Disposition
Transaction:
On March
5, 2007, the Company sold the (Minneapolis) Star Tribune newspaper and
other publications and websites related to the newspaper for $530
million. The Company received an income tax benefit of approximately
$200 million related to the sale. Approximately $15 million was
recouped through reductions to income taxes payable and $185 million was
recorded as a current income tax refund receivable on the Consolidated Balance
Sheet as of March 30, 2008. The Company received the refund in April 2008 and
used it to reduce debt.
The
results of Star
Tribune's operations, including interest on debt incurred in connection
with the purchase of the company, have been recorded as discontinued operations
in all periods presented. The Company used the proceeds from the sale of the
Star Tribune to reduce
debt.
Advertising
Revenues:
Advertising
revenues in the first quarter of 2008 decreased as a result of the continuing
weak economy and the secular shift in advertising demand to online
products. California and Florida continue to be hurt more than other
regions by the real estate downturn, so even though they represent only a third
of the Company’s advertising revenues they account for 56% of the advertising
decline. These decreases were partially offset by growth in online
advertising in the first quarter of 2008. Management believes a
significant portion of the advertising downturn reflects the current economic
cycle and expects declines to continue in the second quarter of 2008. See the
revenue discussions in management’s review of “Results of
Operations”.
Newsprint:
After a
period of declining newsprint prices through most of 2007, newsprint prices
began to increase in the fourth quarter of 2007 and continued to increase
through the first quarter of 2008. The Company’s newsprint suppliers
have announced price increases for the second quarter of 2008. For
the first quarter of 2008, newsprint expense was 19.8% lower than in the first
quarter of 2007, primarily reflecting lower newsprint usage and to a lesser
extent, lower prices than in the first quarter of 2007. Newsprint
pricing is dependent on global demand and supply for
newsprint. Significant changes in newsprint prices can increase or
decrease the Company's operating expenses and therefore, directly affect the
Company’s operating results. However, because the Company has an
ownership interest in Ponderay Newsprint Co. (Ponderay), a newsprint producer,
an increase in newsprint prices, while negatively affecting the Company’s
operating expenses, would increase the earnings from its share of this
investment. A decline in newsprint prices would have the opposite
effect. Ponderay is also impacted by the higher cost of energy and
fiber used in the papermaking process. The impact of newsprint price
increases on the Company's financial results is discussed under "Results of
Operations".
On March
31, 2008 (the first day of the Company’s second fiscal quarter), the Company,
along with the other general partners of SP Newsprint Co. (SP), completed the
sale of SP. The Company expects to record an after-tax gain on the
transaction in the second quarter of 2008 in the range of $20 million to $21
million. The Company used the $55 million of proceeds it received
from the sale to reduce debt in the second quarter of 2008 and has $5 million in
escrow which it has recorded as a long-term asset. The Company
expects to pay approximately $20 million in taxes related to the taxable gain in
the third quarter 2008.
Tender
Offer of Public Notes:
In the
second quarter of 2008, the Company announced a tender offer for the cash
purchase of up to $300 million aggregate principal amount of its
outstanding debt securities maturing in 2009, 2011 and 2014. The
terms and conditions of the tender offer are set forth in
the Offer to Purchase and the related Letter of Transmittal, each dated April
23, 2008 and amended by a press release dated May 7,
2008. The tender offer is scheduled to expire on May 21, 2008
at 5:00 PM, New York City time.
RESULTS
OF OPERATIONS
First
Fiscal Quarter of 2008 Compared to First Fiscal Quarter of 2007
The
Company reported a loss from continuing operations in the first quarter of 2008
of $993,000, or $0.01 per share, compared to income from continuing operations
in the first quarter of 2007 of $14.5 million, or $0.18 cents per
share. In the first fiscal quarter of 2007, the Company recorded a
loss from discontinued operations of $5.5 million, or $0.07 per share relating
to the results of the (Minneapolis) Star Tribune. The
Company’s total net loss was $849,000, or $0.01 per share including discontinued
operations in the first fiscal quarter of 2008, compared to net income of $9.0
million, or $0.11 per share in the first fiscal quarter of 2007.
Revenues:
Revenues
in the first quarter of 2008 were $488.3 million, down 13.8% from revenues of
$566.6 million in the first quarter of 2007. Advertising revenues
were $404.0 million, down 15.3% from advertising in the first quarter of 2007,
and circulation revenues were $67.9 million, down 5.6%.
As
discussed in Recent Events and Trends above, the economic weakness in the United
States and particularly the declining real estate market continued to impact the
Company’s advertising revenues in the first quarter of 2008. Also,
California and Florida continue to be affected more than other regions by the
real estate downturn; accordingly, even though they represent only a third of
advertising revenues they account for 56% of the advertising revenue
declines. Advertising revenues were down 23.4% in these two regions
in the first fiscal quarter.
The
following summarizes the Company's revenue by category, which compares first
fiscal quarter of 2008 with first fiscal quarter of 2007 (dollars in
thousands):
|
|
Quarter
Ended
|
|
|
|
March
30,
2008
|
|
|
April
1,
2007
|
|
|
%
Change
|
|
Advertising:
|
|
|
|
|
|
|
|
|
|
Retail
|
|
$ |
190,757 |
|
|
$ |
206,188 |
|
|
|
(7.5 |
) |
National
|
|
|
38,225 |
|
|
|
45,151 |
|
|
|
(15.3 |
) |
Classified:
|
|
|
|
|
|
|
|
|
|
|
|
|
Auto
|
|
|
35,386 |
|
|
|
42,155 |
|
|
|
(16.1 |
) |
Employment
|
|
|
46,441 |
|
|
|
69,717 |
|
|
|
(33.4 |
) |
Real
estate
|
|
|
35,423 |
|
|
|
55,187 |
|
|
|
(35.8 |
) |
Other
|
|
|
22,961 |
|
|
|
21,612 |
|
|
|
6.2 |
|
Total
classified
|
|
|
140,211 |
|
|
|
188,671 |
|
|
|
(25.7 |
) |
Direct
marketing
|
|
|
|
|
|
|
|
|
|
|
|
|
and
other
|
|
|
34,830 |
|
|
|
37,013 |
|
|
|
(5.9 |
) |
Total
advertising
|
|
|
404,023 |
|
|
|
477,023 |
|
|
|
(15.3 |
) |
Circulation
|
|
|
67,864 |
|
|
|
71,880 |
|
|
|
(5.6 |
) |
Other
|
|
|
16,396 |
|
|
|
17,655 |
|
|
|
(7.1 |
) |
Total
revenues
|
|
$ |
488,283 |
|
|
$ |
566,558 |
|
|
|
(13.8 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail
advertising decreased $15.4 million or 7.5% from the first fiscal quarter of
2007. Online retail advertising increased $4.1 million or 69.0% from
the first fiscal quarter of 2007, while print ROP advertising decreased $14.4
million or 11.9% from the first fiscal quarter of 2007. Preprint
advertising decreased $5.1 million or 6.5% from the first fiscal quarter of
2007.
National
advertising decreased $6.9 million or 15.3% from the first fiscal quarter of
2007. The declines in total national advertising were primarily in the
telecommunications and to a lesser extent in the national automotive
category. Online national advertising increased $2.3 million or
163.5% from the first fiscal quarter of 2007.
Classified
advertising decreased $48.5 million or 25.7% from the first fiscal quarter of
2007. Print classified advertising declined $46.5 million or 30.0%,
while online classified advertising decreased $2.0 million or 5.9% from the
first fiscal quarter of 2007.
·
|
Real
estate advertising decreased $19.8 million or 35.8% from the first fiscal
quarter of 2007. The Company has seen dramatic declines in
California and Florida, which continue to be adversely impacted more than
other regions by the real estate downturn. In the first quarter of 2008,
$12.8 million or 64.9% of the Company’s decline in real estate advertising
was in these two states. In total, print
real estate advertising declined 39.0%, while online advertising grew
8.7%.
|
·
|
Automotive
advertising decreased $6.8 million or 16.1% from the first fiscal quarter
of 2007, reflecting an industry-wide trend. Print automotive
advertising declined 24.4%, while online advertising grew 37.7% reflecting
the strength of the Company's cars.com online
products.
|
·
|
Employment
advertising decreased $23.3 million or 33.4% from the first fiscal quarter
of 2007 reflecting a national slowdown in hiring and therefore employment
advertising. The declines were reflected both in print
employment advertising, down 39.0%, and online employment advertising,
down 22.0%.
|
Online
advertising revenue, which is included in each of the advertising categories
discussed above, totaled $45.6 million in the first fiscal quarter of 2008, an
increase of 10.6% as compared to the first fiscal quarter of 2007. In
particular, those areas of online advertising that are not as strongly tied to
print up-sells (advertising sold as a combined purchase of print and online
advertising), primarily retail and automotive, have shown the strongest growth
in advertising sales.
Direct
marketing decreased $2.2 million or 6.0% from the first fiscal quarter of 2007
reflecting the overall slow advertising environment in 2008.
Circulation
revenues decreased $4.0 million or 5.6% from the first fiscal quarter of 2007,
primarily reflecting lower circulation volumes. The Company expects
circulation volumes to remain lower in fiscal 2008 compared to fiscal
2007.
Operating
Expenses:
Operating
expenses were down $47.6 million or 9.9% from the first fiscal quarter of 2007,
as the Company continued to reduce costs to mitigate the impact of revenue
declines. Compensation costs were down 7.4%, with payroll down 5.3%,
reflecting in part a 7.5% reduction in staffing. Fringe benefits
costs declined 15.0% reflecting lower retirement and medical
costs. Newsprint and supplement expense was down 19.8% with newsprint
expense down 21.2%, primarily reflecting lower newsprint
usage. Supplement expense was down 10.9%. Other operating
costs were down 10.8%, reflecting company-wide cost controls. Depreciation and
amortization expenses were down 3.8% from the first fiscal quarter of
2007.
Interest:
Interest
expense for continuing operations was $45.3 million for the first fiscal quarter
of 2008. Interest expense included a $3.4 million charge related to
the write off of deferred financing costs as a result of the amendment to the
Company’s bank credit agreement on March 28, 2008. Excluding the
write-off, interest expense declined $11.9 million reflecting lower interest
rates and debt balances.
Equity
Loss:
Total
losses from unconsolidated investments were $13.1 million in the first quarter
of 2008 compared to $9.7 million in 2007. The increase in losses from
unconsolidated investments was primarily related to additional losses incurred
by SP Newsprint Company and advertising expenses incurred by Classified
Ventures’ cars.com, primarily as a result of its Super Bowl
advertising. Cars.com did not run a similar advertising campaign in
2007. The Company expects the losses relating to its newsprint
investments to significantly decrease in future periods primarily because SP
Newsprint has been sold.
Income
Taxes:
The
Company recorded an income tax provision of $336,000 on a pre-tax loss from
continuing operations of $657,000 in the first quarter of 2008 due to $606,000
in tax expense related to changes in prior period estimates. An income tax
provision of $9.4 million was recorded on pre-tax income from continuing
operations of $23.9 million in the first quarter of 2007. The
effective tax rate for the current fiscal year is expected to be in the range of
41.0% to 41.5%.
Discontinued
Operations:
Income
from discontinued operations in the first fiscal quarter of 2008 was $144,000 or
less than $0.01 per share compared to a loss in the first fiscal quarter of 2007
of $5.5 million or $0.07 per share (related to the Star Tribune newspaper – see
Note 2 to the Consolidated Financial Statements).
LIQUIDITY
AND CAPITAL RESOURCES
Sources
and Uses of Liquidity and Capital Resources:
The
Company’s cash and cash equivalents were $12.3 million as of March 30,
2008. The Company generated $85.5 million of cash from operating
activities from continuing operations in the first fiscal quarter of
2008. The increase in cash from operating activities in the first
fiscal quarter of 2008 resulted primarily from changes in working
capital.
The
Company used $5.5 million of cash from investing activities primarily to
purchase property, plant and equipment totaling $4.8 million.
On March
31, 2008, the first day of the Company’s second fiscal quarter, the Company,
along with the other general partners of SP, completed the sale of
SP. The Company expects to record an after-tax gain on the
transaction in the second quarter of 2008 in the range of $20 million to $21
million. The Company used the $55 million of proceeds it received
from the sale to reduce debt in the second quarter of 2008 and has $5 million in
escrow which it has recorded as a long-term asset. The Company
expects to pay taxes related to the gain of approximately $20 million in the
third quarter 2008.
The
Company received an income tax refund in April 2008 of approximately $185
million related to the sale of The Star Tribune Company and used the proceeds to
repay debt.
The
Company owns 10 acres of land in Miami which is currently under contract to
sell. As of March 30, 2008, the Company expects to consummate the
sale of its Miami land prior to December 31, 2008 for a sale price of
approximately $180 million to $190 million with after-tax net proceeds of
approximately $115.0 million. Proceeds from the sale will be used to repay
debt.
The
Company used $93.4 million of cash from financing sources in the first fiscal
quarter of 2008, primarily for repayment of bank debt. The Company
repaid $76.1 million of debt in the first fiscal quarter of 2008 and paid $3.3
million in financing costs relating to amending the Credit
Agreement. The Company paid $14.8 million in dividends in the first
fiscal quarter of 2008.
Debt
and Related Matters:
In the
second quarter of 2008, the Company announced a tender offer for the cash
purchase of up to $300 million aggregate principal amount of its
outstanding debt securities maturing in 2009, 2011 and 2014. The
terms and conditions of the tender offer are set forth in
the Offer to Purchase and the related Letter of Transmittal, each dated April
23, 2008 and amended by a press release dated May 7,
2008. The tender offer is scheduled to expire on May 21, 2008
at 5:00 PM, New York City time.
The Company’s credit
agreement entered into on June 27, 2006 provided for a $3.2 billion senior
unsecured credit facility (Credit Agreement) and was established in connection
with the acquisition of Knight-Ridder, Inc. on June 27, 2006 (the
Acquisition). At the closing of the Acquisition, the Company’s Credit
Agreement consisted of a $1 billion five-year revolving credit facility and $2.2
billion five-year Term A loan. On March 28, 2008, the Company entered into an
agreement to amend the Credit Agreement. Pursuant to the amendment,
the revolving credit facility was reduced to $750 million on March 28, 2008 and
was further reduced to $625 million in May 2008 after receipt by the Company of
a $185 million tax refund attributable to the sale of The Star Tribune
Company. The revolving credit facility will be further reduced to
$500 million upon the sale of land in Miami, Florida. Both the Term A
loan and the revolver are due on June 27, 2011. As of March 30, 2008, a
total of $432.5 million and $550.0 million was outstanding on the revolver and
Term A loan, respectively.
A total
of $316.5 million was available under the revolving credit facility at March 30,
2008. In the second quarter of 2008, the amount available under
the revolver was increased as the result of applying the proceeds of the SP sale
and the tax refund related to the (Minneapolis) Star Tribune sale to reduce
the revolver, net of a reduction in the revolver commitment of $125 million
required under the recently amended credit agreement. As of May 6,
2008, a total of $414.3 million was available under the revolving credit
facility, all of which could be borrowed under the Company's current leverage
covenant and trailing operating cash flow (as defined).
Debt
under the amended Credit Agreement incurs interest at the London Interbank
Offered Rate (LIBOR) plus a spread ranging from 37.5 basis points to 200.0 basis
points. Applicable rates are based upon the Company’s ratings on its
bank debt from Moody’s Investor Services (Moody’s) and Standard &
Poor’s (S&P) whenever the Company’s total leverage ratio is less than 4.00
to 1.00 or based on the Company’s total leverage ratio whenever the ratio is
greater than 4.00 to 1.00. A commitment fee for the unused revolving
credit ranges from 10.0 basis points to 50.0 basis points depending on the
Company’s ratings or total leverage ratio. The Company
currently pays interest on debt under the Credit Agreement based on its leverage
ratio, and its interest payments are currently priced at LIBOR plus 175.0 basis
points on outstanding debt and its commitment fees on the unused revolver are
priced at 37.5 basis points.
On April
1, 2008, Moody’s downgraded the Company’s corporate credit rating citing the
ongoing pressure on the Company’s cash flow from declining advertising revenue
and noted that the rating outlook is negative. In addition, on April
23, 2008, S&P lowered its ratings on the Company and placed all ratings on
credit watch with negative implications citing the worsening pace of decline in
advertising revenue. The ratings downgrades had no impact to the
interest rate and commitment fees the Company pays under the Credit
Agreement.
The
following table summarizes the ratings of the company’s debt
instruments:
|
|
Debt
Ratings
|
|
|
|
As
of
|
|
|
As
of Last
|
|
|
|
30-Mar-08
|
|
|
Rating
Action
|
|
Credit Facility:
|
|
|
|
|
|
|
S&P
|
|
BB
|
|
|
BB-
|
|
Moody's
|
|
Ba1
|
|
|
Ba1
|
|
|
|
|
|
|
|
|
Bonds:
|
|
|
|
|
|
|
S&P
|
|
B+ |
|
|
|
B |
|
|
Moody's
|
|
Ba3
|
|
|
B1 |
|
|
|
|
|
|
|
|
|
|
|
Corp.
Family Rating:
|
|
|
|
|
|
|
|
|
S&P
|
|
BB
|
|
|
BB-
|
|
Moody's
|
|
Ba2
|
|
|
Ba3
|
|
The
amended Credit Agreement contains quarterly financial covenants including a
minimum interest coverage ratio (as defined in the Credit Agreement) of 2.75 to
1.00 and a maximum leverage ratio (as defined in the Credit Agreement) of 5.00
to 1.00 through September 27, 2009; 4.75 to 1.00 from December 27, 2009 through
December 26, 2010 and 4.50 to 1.00 thereafter. The Company is also
subject to a $250 million limit on any repurchases of its publicly traded notes
with maturity dates after 2011, increases in dividends or repurchases of its
common stock so long as its total leverage ratio is equal to or greater than
4.00 to 1.00. At March 30, 2008, the Company was in compliance with all debt
covenants.
In
addition, the Company’s Material Subsidiaries (as defined in the Credit
Agreement) have guaranteed the Company’s obligations under the Credit
Agreement. These guarantees were effected on May 4, 2007, and continue in
effect until the earlier of the termination of the Credit Agreement or the date
which is one year after the date both ratings agencies have rated the Company’s
bank debt as investment grade.
At March
30, 2008, the Company had outstanding letters of credit totaling $49.3 million
securing estimated obligations stemming from workers’ compensation claims and
other contingent claims.
Contractual
Obligations:
As of
March 30, 2008, the Company has purchase obligations primarily related to
capital expenditures for property, plant and equipment expiring at various dates
through 2009, totaling approximately $6.6 million.
ITEM 3. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
Debt
under the Credit Agreement bears interest at the LIBOR plus a spread ranging
from 37.5 basis points to 200.0 basis points. Applicable rates are
based upon the Company's ratings on bank debt from Moody's and S&P or the
Company’s total leverage ratio, depending on the ratio. A
hypothetical 25 basis point change in LIBOR for a fiscal year would increase or
decrease the annual net income by $1.2 million to $1.5 million based on expected
debt balances in 2008.
See the
discussion at “Recent Events and Trends - Operating Expenses” in Management's
Discussion and Analysis of Financial Condition and Results of Operations for the
impact of market changes on the Company's newsprint and pension
costs.
ITEM
4. CONTROLS AND PROCEDURES
Evaluation of disclosure controls
and procedures. Our management evaluated, with the
participation of our Chief Executive Officer (CEO) and Chief Financial Officer
(CFO), the effectiveness of the design and operation of the Company's disclosure
controls and procedures (as defined in Rules 13a - 15(e) or 15d - 15(e) under
the Securities Exchange Act of 1934, as amended) as of the end of the period
covered by this Quarterly Report on Form 10-Q. Based on this evaluation, the
Company's management, including the CEO and CFO, concluded that the Company's
disclosure controls and procedures were effective as of the end of the period
covered by this Quarterly Report on Form 10-Q to ensure that information we are
required to disclose in reports that we file or submit under the Securities
Exchange Act of 1934 is accumulated and communicated to our management,
including our principal executive and principal financial officers, as
appropriate to allow timely decisions regarding required disclosure and that
such information is recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commission Rules and
Forms.
Changes in internal control over
financial reporting. There was no change in our internal
control over financial reporting that occurred during the first quarter of
fiscal 2008 that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.
PART
II - OTHER INFORMATION
ITEM
1A. RISK FACTORS
Forward-Looking
Information:
Statements
in this quarterly report on Form 10-Q regarding future financial and operating
results, including revenues, operating expenses, cash flows, debt levels, as
well as future opportunities for the Company and any other statements about
management’s future expectations, beliefs, goals, plans or prospects constitute
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Any statements that are not statements
of historical fact (including statements containing the words “believes,”
“plans,” “anticipates,” “expects,” estimates and similar expressions) should
also be considered to be forward-looking statements. There are a
number of important risks and uncertainties that could cause actual results or
events to differ materially from those indicated by such forward-looking
statements, including: the duration and depth of an economic
recession in markets where McClatchy operates its newspapers may reduce its
income and cash flow greater than expected; McClatchy may not consummate
contemplated transactions which may enable debt reduction on anticipated terms
or at all; McClatchy may not complete the repurchase of its public bonds in an
amount or upon terms currently anticipated; McClatchy may not achieve its
expense reduction targets or may do harm to its operations in attempting to
achieve such targets; McClatchy’s operations have been, and will likely continue
to be, adversely affected by competition, including competition from internet
publishing and advertising platforms; McClatchy’s expense and income levels
could be adversely affected by changes in the cost of newsprint and McClatchy’s
operations could be negatively affected by any deterioration in its labor
relations, as well as the other risks detailed from time to time in the
Company’s publicly filed documents, including the Company’s Annual Report on
Form 10-K for the year ended December 30, 2007, filed with the U.S. Securities
and Exchange Commission. McClatchy disclaims any intention and assumes no
obligation to update the forward-looking information contained in this quarterly
report.
See
McClatchy’s 2007 Form 10-K filed with the Securities and Exchange Commission on
February
28, 2008 for further discussion of risk factors that could affect operating
results.
Exhibits
filed as part of this Report as listed in the Index of Exhibits, on page 26
hereof.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
|
The
McClatchy Company
|
Registrant
|
May
9, 2008
|
|
/s/
Gary B. Pruitt
|
Date
|
Gary
B. Pruitt
Chief
Executive Officer
|
May
9, 2008
|
|
/s/
Patrick J. Talamantes
|
Date
|
|
Patrick
J. Talamantes
Chief
Financial Officer
|
|
|
TABLE
OF EXHIBITS
|
|
|
|
|
Exhibit
|
|
Description
|
|
|
|
|
2.1* |
|
Agreement
and Plan of Merger, dated March 12, 2006, between the Company and
Knight-Ridder, Inc., included as Exhibit 2.1 in the Company’s Current
Report on Form 8-K filed March 12, 2006.
|
|
|
|
|
|
3.1* |
|
The
Company's Restated Certificate of Incorporation dated June 26, 2006,
included as Exhibit 3.1 in the Company's Quarterly Report on Form 10-Q for
the quarter ended
June
25, 2006.
|
|
|
|
|
|
3.2* |
|
The
Company's By-laws as amended as of June 22, 2006, included as Exhibit 3.2
in the Company's Current Report on Form 8-K filed June 28,
2006.
|
|
|
|
|
|
4.1* |
|
Form
of Physical Note for Commercial Paper Program included as Exhibit 4.1 to
the Company's Quarterly Report on Form 10-Q for the quarter ended June 27,
2004.
|
|
|
|
|
|
10.1* |
|
Credit
Agreement dated June 27, 2006 by and among the Company, lenders party
thereto, Bank of America, N.A. as Administrative Agent, Swing Line Lender
and Letter of Credit Issuer, JPMorgan Chase Bank as Syndication Agent and
Banc of America Securities LLC and JPMorgan Securities Inc. as Joint Lead
Arrangers and Joint Book Managers, included as Exhibit 10.2 in the
Company's Quarterly Report on Form
10-Q
filed for the quarter ending on June 25, 2006.
|
|
|
|
|
|
10.2* |
|
Amendment
No. 1 to Credit Agreement dated March 28, 2007 by and between The
McClatchy Company and Bank of America, N.A., as Administrative Agent,
included as Exhibit 99.1 in the Company's Current Report on Form 8-K filed
April 2, 2007.
|
|
|
|
|
|
10.3* |
|
Amendment
No. 2 to Credit Agreement dated July 30, 2007 by and between The McClatchy
Company and Bank of America, N.A., as Administrative Agent, included as
Exhibit 10.1 in the Company's Current Report on Form 8-K filed July 31,
2007.
|
|
|
|
|
|
10.4* |
|
Amendment
No. 3 to Credit Agreement dated March 28, 2008 by and between The
McClatchy Company and Bank of America, N.A., as Administrative Agent,
included as Exhibit 10.1 in the Company’s Current Report on Form 8-K filed
March 31, 2008.
|
|
|
|
|
|
10.5* |
|
General
Continuing Guaranty dated May 4, 2007 by each Material
Subsidiary in favor of the Lenders party to the Credit Agreement
dated June 27, 2006 by and between The McClatchy Company, the
Lenders and Bank of America, N.A., as Administrative Agent, included as
Exhibit 10.3 in the Company’s Quarterly Report on Form 10-Q for the
quarter ending on April 1, 2007.
|
|
|
|
|
|
10.6* |
|
Second
Supplemental Indenture dated June 27, 2006, between the Company and
Knight-Ridder, Inc. included as Exhibit 10.3 in the Company's Current
Report on Form 10-Q filed for the quarter ending on June 25,
2006.
|
|
|
|
|
|
10.7* |
|
Fourth
Supplemental Indenture dated June 27, 2006, between the Company and
Knight-Ridder, Inc. included as Exhibit 10.4 in the Company's Quarterly
Report on Form 10-Q filed for the quarter ending on June 25,
2006.
|
|
|
|
|
|
**10.8* |
|
The
McClatchy Company Management by Objective Plan Description included as
Exhibit 10.4 in the Company's Report filed on Form 10-K for the Year
ending December 30, 2000.
|
|
|
|
|
|
**10.9* |
|
The
Company's Amended and Restated Long-Term Incentive Plan included as
Exhibit 99.1 to the Company's Current Report on Form 8-K filed May 23,
2005.
|
|
Exhibit
|
|
Description
|
|
|
|
|
**10.10* |
|
Amended
and Restated Supplemental Executive Retirement Plan included as Exhibit
10.4 to the Company's 2002 Report on Form 10-K.
|
|
|
|
|
|
**10.11* |
|
The
Company's Amended and Restated 1990 Directors' Stock Option Plan dated
February 1, 1998 included as Exhibit 10.12 to the Company's 1997 Report on
Form
10-K.
|
|
|
|
|
|
**10.12* |
|
Amended
and Restated 1994 Stock Option Plan included as Exhibit 10.15 to the
Company's Quarterly Report on Form 10-Q filed for the Quarter Ending on
July 1, 2001.
|
|
|
|
|
|
**10.13* |
|
Form
of 2004 Stock Incentive Plan Nonqualified Stock Option Agreement included
as Exhibit 99.1 to the Company's Current Report on Form 8-K filed December
16, 2004.
|
|
|
|
|
|
**10.14* |
|
Amendment
1 to The McClatchy Company 2004 Stock Incentive Plan dated January 23,
2007 included as Exhibit 10.10 to the Company's 2006 Report on Form
10-K.
|
|
|
|
|
|
**10.15* |
|
Form
of Restricted Stock Agreement related to the Company's 2004 Stock
Incentive Plan, included as Exhibit 99.1 to the Company's Current Report
on Form 8-K dated January 28, 2005.
|
|
|
|
|
|
**10.16* |
|
The
Company's Amended and Restated Chief Executive Bonus Plan, included as
Exhibit 10.12 to the Company's Quarterly Report on Form 10-Q for the
Quarter Ending June 29, 2003.
|
|
|
|
|
|
**10.17* |
|
Amended
and Restated Employment Agreement between the Company and Gary B. Pruitt
dated October 22, 2003, included as Exhibit 10.10 to the Company's 2003
Form 10-K.
|
|
|
|
|
|
10.18* |
|
Form
of Indemnification Agreement between the Company and each of its officers
and directors, included as Exhibit 99.1 to the Company's Current Report on
Form 8-K filed on May 23, 2005.
|
|
|
|
|
|
**10.19* |
|
Amended
and Restated 1997 Stock Option Plan included as Exhibit 10.7 to the
Company's 2002 Report on Form 10-K.
|
|
|
|
|
|
**10.20* |
|
Amendment
1 to The McClatchy Company 1997 Stock Option Plan dated January 23, 2007
included as Exhibit 10.16 to the Company's 2006 Report on Form
10-K.
|
|
|
|
|
|
**10.21* |
|
The
Company's Amended and Restated 2001 Director Stock Option Plan, included
as Exhibit 10.13 to the Company's 2005 Report on Form
10-K.
|
|
|
|
|
|
**10.22* |
|
Amendment
1 to The McClatchy Company 2001 Director Option Plan dated January 23,
2007 included as Exhibit 10.18 to the Company's 2006 Report on Form
10-K.
|
|
|
|
|
|
10.23* |
|
Stock
Purchase Agreement by and between The McClatchy Company and Snowboard
Acquisition Corporation, dated December 26, 2006, included as Exhibit 2.1
to the Company's Current Report on Form 8-K filed December 26,
2006.
|
|
|
|
|
|
10.24* |
|
Contract
for Purchase and Sale of Real Property by and between The Miami Herald
Publishing Company and Richmond, Inc. and Knight Ridder, Inc. and
Citisquare Group, LLC, dated March 3, 2005, included as Exhibit 10.23 in
the Company's Quarterly Report on Form 10Q filed for the quarter ending
July 1, 2007.
|
|
|
|
|
Exhibit
|
|
Description
|
|
|
|
|
10.25* |
|
Amendment
to Contract for Purchase and Sale of Real Property by and between The
Miami Herald Publishing Company and Richmond, Inc. and Knight Ridder, Inc.
and Citisquare Group, LLC, dated March 3, 2005, included as Exhibit 10.24
in the Company's Quarterly Report on Form 10Q filed for the quarter ending
July 1, 2007.
|
|
|
|
|
|
**10.26* |
|
Form
of Chief Executive Stock Appreciation Rights Agreement related to the
Company's 2004 Stock Incentive Plan included as Exhibit 10.25 in the
Company’s 2007 Report on Form 10-K.
|
|
|
|
|
|
21* |
|
Subsidiaries
of the Company.
|
|
|
|
|
|
31.1 |
|
Certification
of the Chief Executive Officer of The McClatchy Company pursuant to Rule
13a-14(a) under the Exchange Act.
|
|
|
|
|
|
31.2 |
|
Certification
of the Chief Financial Officer of The McClatchy Company pursuant to Rule
13a-14(a) under the Exchange Act.
|
|
|
|
|
|
32.1 |
|
Certification
of the Chief Executive Officer of The McClatchy Company pursuant to 18
U.S.C. Section 1350.
|
|
|
|
|
|
32.2 |
|
Certification
of the Chief Financial Officer of The McClatchy Company pursuant to 18
U.S.C. Section 1350.
|
|
|
|
|
|
* |
|
Incorporated
by reference
|
|
** |
|
Compensation
plans or arrangements for the Company's executive officers and
directors
|
28