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
|
September
27, 2009
|
|
|
|
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
|
|
The
McClatchy Company
|
(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 has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such
files). [ ]
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 [
] Accelerated
filer [ X ]
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 November 4, 2009, the registrant had shares of common stock as listed below
outstanding:
Class
A Common Stock
|
59,667,199
|
Class
B Common Stock
|
24,800,962
|
THE
McCLATCHY COMPANY
INDEX
TO FORM 10-Q
Part
I - FINANCIAL INFORMATION
|
Page
|
|
|
Item
1 - Financial Statements (unaudited):
|
|
|
|
|
|
Consolidated
Balance Sheet – September 27, 2009 and December 28, 2008
|
1
|
|
|
|
Consolidated
Statement of Operations for the three and nine months ended September
27, 2009 and September 28, 2008
|
3
|
|
|
|
Consolidated
Statement of Cash Flows for the nine months ended September 27, 2009 and
September 28, 2008
|
4
|
|
|
|
Consolidated
Statement of Stockholders' Equity for the period December 28, 2008 to
September 27, 2009
|
5
|
|
|
|
Notes
to Consolidated Financial Statements
|
6
|
|
|
Item
2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
|
17
|
|
|
Item
3 - Quantitative and Qualitative Disclosures About Market
Risk
|
31
|
|
|
Item
4 - Controls and Procedures
|
32
|
|
|
Part
II - OTHER INFORMATION
|
32
|
|
|
Item
1A - Risk Factors
|
32
|
|
|
Item
6 - Exhibits
|
37
|
|
|
Signatures
|
38
|
|
|
Index
of Exhibits
|
39
|
PART I - FINANCIAL
INFORMATION
Item
1 - FINANCIAL STATEMENTS
THE
McCLATCHY COMPANY
|
|
CONSOLIDATED
BALANCE SHEET (UNAUDITED)
|
|
(In
thousands, except share amounts)
|
|
|
|
|
|
|
|
|
ASSETS
|
|
September
27,
|
|
|
December
28,
|
|
CURRENT
ASSETS:
|
|
2009
|
|
|
2008
|
|
Cash
and cash equivalents
|
|
$ |
4,230 |
|
|
$ |
4,998 |
|
Trade
receivables – (less allowance of
$13,127
in 2009 and $15,255 in 2008)
|
|
|
169,474 |
|
|
|
243,700 |
|
Other
receivables
|
|
|
10,311 |
|
|
|
16,544 |
|
Newsprint,
ink and other inventories
|
|
|
34,247 |
|
|
|
49,301 |
|
Deferred
income taxes
|
|
|
29,087 |
|
|
|
29,084 |
|
Prepaid
income taxes
|
|
|
70 |
|
|
|
- |
|
Income
tax refund
|
|
|
9,894 |
|
|
|
11,451 |
|
Land
and other assets held for sale
|
|
|
183,641 |
|
|
|
182,566 |
|
Other
current assets
|
|
|
25,330 |
|
|
|
19,085 |
|
|
|
|
466,284 |
|
|
|
556,729 |
|
PROPERTY,
PLANT AND EQUIPMENT:
|
|
|
|
|
|
|
|
|
Land
|
|
|
195,883 |
|
|
|
199,584 |
|
Building
and improvements
|
|
|
388,296 |
|
|
|
390,890 |
|
Equipment
|
|
|
814,787 |
|
|
|
823,466 |
|
Construction
in progress
|
|
|
6,506 |
|
|
|
5,071 |
|
|
|
|
1,405,472 |
|
|
|
1,419,011 |
|
Less
accumulated depreciation
|
|
|
(626,077 |
) |
|
|
(576,134 |
) |
|
|
|
779,395 |
|
|
|
842,877 |
|
INTANGIBLE
ASSETS:
|
|
|
|
|
|
|
|
|
Identifiable
intangibles – net
|
|
|
726,588 |
|
|
|
771,076 |
|
Goodwill
|
|
|
1,006,020 |
|
|
|
1,006,020 |
|
|
|
|
1,732,608 |
|
|
|
1,777,096 |
|
|
|
|
|
|
|
|
|
|
INVESTMENTS
AND OTHER ASSETS:
|
|
|
|
|
|
|
|
|
Investments
in unconsolidated companies
|
|
|
327,869 |
|
|
|
323,257 |
|
Other
assets
|
|
|
19,239 |
|
|
|
22,247 |
|
|
|
|
347,108 |
|
|
|
345,504 |
|
TOTAL
ASSETS
|
|
$ |
3,325,395 |
|
|
$ |
3,522,206 |
|
|
|
|
|
|
|
|
|
|
See
notes to consolidated financial statements.
|
|
|
|
|
|
|
|
|
THE
McCLATCHY COMPANY
|
|
CONSOLIDATED
BALANCE SHEET (UNAUDITED) – Continued
|
|
(In
thousands, except share amounts)
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
September
27,
|
|
|
December
28,
|
|
CURRENT
LIABILITIES:
|
|
2009
|
|
|
2008
|
|
Accounts
payable
|
|
$ |
40,446 |
|
|
$ |
68,336 |
|
Accrued
compensation
|
|
|
61,574 |
|
|
|
85,583 |
|
Income
taxes payable
|
|
|
40,571 |
|
|
|
46,562 |
|
Unearned
revenue
|
|
|
80,115 |
|
|
|
81,091 |
|
Accrued
interest
|
|
|
19,883 |
|
|
|
22,107 |
|
Accrued
dividends
|
|
|
- |
|
|
|
7,431 |
|
Other
accrued liabilities
|
|
|
32,943 |
|
|
|
36,481 |
|
|
|
|
275,532 |
|
|
|
347,591 |
|
|
|
|
|
|
|
|
|
|
NON-CURRENT
LIABILITIES:
|
|
|
|
|
|
|
|
|
Long-term
debt:
|
|
|
|
|
|
|
|
|
Principal
only
|
|
|
1,892,972 |
|
|
|
2,037,776 |
|
Principal
and future interest
|
|
|
39,487 |
|
|
|
- |
|
Deferred
income taxes
|
|
|
208,353 |
|
|
|
202,015 |
|
Pension
and postretirement obligations
|
|
|
695,957 |
|
|
|
747,720 |
|
Other
long-term obligations
|
|
|
110,487 |
|
|
|
134,675 |
|
|
|
|
2,947,256 |
|
|
|
3,122,186 |
|
COMMITMENTS
AND CONTINGENCIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS'
EQUITY:
|
|
|
|
|
|
|
|
|
Common
stock $.01 par value:
|
|
|
|
|
|
|
|
|
Class
A - authorized 200,000,000 shares, issued
|
|
|
|
|
|
|
|
|
59,307,617
in 2009 and 57,520,445 in 2008
|
|
|
593 |
|
|
|
575 |
|
Class
B – authorized 60,000,000 shares,
|
|
|
|
|
|
|
|
|
Issued
24,800,962 in 2009 and 25,050,962 in 2008
|
|
|
248 |
|
|
|
251 |
|
Additional
paid-in capital
|
|
|
2,205,981 |
|
|
|
2,203,776 |
|
Accumulated
deficit
|
|
|
(1,808,930 |
) |
|
|
(1,829,717 |
) |
Treasury
stock, 37,902 shares in 2009 and 5,264 shares in 2008 at
cost
|
|
|
(153 |
) |
|
|
(144 |
) |
Accumulated
other comprehensive loss
|
|
|
(295,132 |
) |
|
|
(322,312 |
) |
|
|
|
102,607 |
|
|
|
52,429 |
|
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
$ |
3,325,395 |
|
|
$ |
3,522,206 |
|
|
|
|
|
|
|
|
|
|
See
notes to consolidated financial statements.
|
|
|
|
|
|
|
|
|
THE
McCLATCHY COMPANY
|
|
CONSOLIDATED
STATEMENT OF OPERATIONS (UNAUDITED)
|
|
(In
thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended
|
|
|
Nine
Months Ended
|
|
|
|
September
27,
|
|
|
September
28,
|
|
|
September
27,
|
|
|
September
28,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
REVENUES
- NET:
|
|
|
|
|
|
|
|
|
|
|
|
|
Advertising
|
|
$ |
266,120 |
|
|
$ |
370,117 |
|
|
$ |
834,470 |
|
|
$ |
1,180,468 |
|
Circulation
|
|
|
69,029 |
|
|
|
64,691 |
|
|
|
206,860 |
|
|
|
198,610 |
|
Other
|
|
|
12,241 |
|
|
|
16,812 |
|
|
|
37,020 |
|
|
|
50,508 |
|
|
|
|
347,390 |
|
|
|
451,620 |
|
|
|
1,078,350 |
|
|
|
1,429,586 |
|
OPERATING
EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation
|
|
|
130,048 |
|
|
|
199,861 |
|
|
|
453,483 |
|
|
|
647,771 |
|
Newsprint
and supplements
|
|
|
33,312 |
|
|
|
61,815 |
|
|
|
133,183 |
|
|
|
186,462 |
|
Depreciation
and amortization
|
|
|
32,678 |
|
|
|
35,479 |
|
|
|
110,685 |
|
|
|
108,510 |
|
Other
operating expenses
|
|
|
90,985 |
|
|
|
113,828 |
|
|
|
286,706 |
|
|
|
345,757 |
|
|
|
|
287,023 |
|
|
|
410,983 |
|
|
|
984,057 |
|
|
|
1,288,500 |
|
OPERATING
INCOME
|
|
|
60,367 |
|
|
|
40,637 |
|
|
|
94,293 |
|
|
|
141,086 |
|
NON-OPERATING
(EXPENSES) INCOME:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
(34,549 |
) |
|
|
(34,195 |
) |
|
|
(102,775 |
) |
|
|
(116,140 |
) |
Interest
income
|
|
|
9 |
|
|
|
761 |
|
|
|
46 |
|
|
|
1,332 |
|
Equity
income (losses) in unconsolidated
companies,
net
|
|
|
4,379 |
|
|
|
(850 |
) |
|
|
3,635 |
|
|
|
(14,340 |
) |
Gain
on sale of SP Newsprint
|
|
|
999 |
|
|
|
2,570 |
|
|
|
214 |
|
|
|
34,546 |
|
Gain
(loss) on extinguishment of debt
|
|
|
(680 |
) |
|
|
180 |
|
|
|
44,149 |
|
|
|
19,680 |
|
Impairments
related to internet investments
|
|
|
- |
|
|
|
(2,983 |
) |
|
|
- |
|
|
|
(24,498 |
) |
Other
- net
|
|
|
20 |
|
|
|
101 |
|
|
|
(314 |
) |
|
|
1,120 |
|
|
|
|
(29,822 |
) |
|
|
(34,416 |
) |
|
|
(55,045 |
) |
|
|
(98,300 |
) |
INCOME
FROM CONTINUING OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BEFORE
INCOME TAX PROVISION
|
|
|
30,545 |
|
|
|
6,221 |
|
|
|
39,248 |
|
|
|
42,786 |
|
INCOME
TAX PROVISION
|
|
|
6,944 |
|
|
|
2,054 |
|
|
|
11,368 |
|
|
|
19,561 |
|
INCOME
FROM CONTINUING OPERATIONS
|
|
|
23,601 |
|
|
|
4,167 |
|
|
|
27,880 |
|
|
|
23,225 |
|
INCOME
(LOSS) FROM DISCONTINUED
OPERATIONS
- NET OF INCOME TAXES
|
|
|
(38 |
) |
|
|
67 |
|
|
|
381 |
|
|
|
(175 |
) |
NET
INCOME
|
|
$ |
23,563 |
|
|
$ |
4,234 |
|
|
$ |
28,261 |
|
|
$ |
23,050 |
|
NET
INCOME PER COMMON SHARE:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from continuing operations
|
|
$ |
0.28 |
|
|
$ |
0.05 |
|
|
$ |
0.33 |
|
|
$ |
0.28 |
|
Income
from discontinued operations
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Net
income per share
|
|
$ |
0.28 |
|
|
$ |
0.05 |
|
|
$ |
0.33 |
|
|
$ |
0.28 |
|
Diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from continuing operations
|
|
$ |
0.28 |
|
|
$ |
0.05 |
|
|
$ |
0.33 |
|
|
$ |
0.28 |
|
Income
from discontinued operations
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Net
income per share
|
|
$ |
0.28 |
|
|
$ |
0.05 |
|
|
$ |
0.33 |
|
|
$ |
0.28 |
|
WEIGHTED
AVERAGE NUMBER OF COMMON SHARES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
84,052 |
|
|
|
82,382 |
|
|
|
83,565 |
|
|
|
82,274 |
|
Diluted
|
|
|
84,061 |
|
|
|
82,434 |
|
|
|
83,579 |
|
|
|
82,327 |
|
See notes to consolidated
financial statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THE
McCLATCHY COMPANY
|
|
CONSOLIDATED
STATEMENT OF CASH FLOWS (UNAUDITED)
|
|
(In
thousands)
|
|
|
|
Nine
Months Ended
|
|
|
|
September
27,
|
|
|
September
28,
|
|
|
|
2009
|
|
|
2008
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
Income
from continuing operations
|
|
$ |
27,880 |
|
|
$ |
23,225 |
|
Reconciliation
to net cash provided by continuing operations:
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
110,685 |
|
|
|
108,510 |
|
Employee
benefit expense
|
|
|
1,358 |
|
|
|
11,212 |
|
Stock
compensation expense
|
|
|
1,440 |
|
|
|
3,676 |
|
Equity
(income) loss in unconsolidated companies
|
|
|
(3,635 |
) |
|
|
14,340 |
|
Gain
on sale of SP Newsprint
|
|
|
(214 |
) |
|
|
(34,546 |
) |
Gain
on extinguishment of debt
|
|
|
(44,149 |
) |
|
|
(19,680 |
) |
Write-off
of deferred financing costs
|
|
|
364 |
|
|
|
3,738 |
|
Other
|
|
|
8,714 |
|
|
|
3,932 |
|
Changes
in certain assets and liabilities:
|
|
|
|
|
|
|
|
|
Trade
receivables
|
|
|
74,226 |
|
|
|
71,474 |
|
Inventories
|
|
|
15,054 |
|
|
|
(12,724 |
) |
Other
assets
|
|
|
(2,915 |
) |
|
|
11,052 |
|
Accounts
payable
|
|
|
(28,066 |
) |
|
|
(29,688 |
) |
Accrued
compensation
|
|
|
(24,009 |
) |
|
|
(9,333 |
) |
Income
taxes
|
|
|
(39,161 |
) |
|
|
(4,007 |
) |
Other
liabilities
|
|
|
(12,545 |
) |
|
|
(13,916 |
) |
Net
cash provided by operating activities of continuing
operations
|
|
|
85,027 |
|
|
|
151,763 |
|
Net
cash provided (used) by operating activities of discontinued
operations
|
|
|
(6,879 |
) |
|
|
188,880 |
|
Net
cash provided by operating activities
|
|
|
78,148 |
|
|
|
340,643 |
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Purchases
of property, plant and equipment
|
|
|
(11,227 |
) |
|
|
(17,052 |
) |
Proceeds
from sale of property, plant and equipment
|
|
|
10,699 |
|
|
|
31,721 |
|
Proceeds
from sale of SP Newsprint
|
|
|
4,214 |
|
|
|
63,141 |
|
Equity
investments and other net
|
|
|
(23 |
) |
|
|
(855 |
) |
Net
cash provided by investing activities of continuing
operations
|
|
|
3,663 |
|
|
|
76,955 |
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Repayment
of term debt
|
|
|
(2,000 |
) |
|
|
- |
|
Net
repayments of revolving bank debt
|
|
|
(22,730 |
) |
|
|
(97,970 |
) |
Payment
of financing costs
|
|
|
(5,665 |
) |
|
|
(9,330 |
) |
Extinguishment
of public notes and related expenses
|
|
|
(38,050 |
) |
|
|
(288,987 |
) |
Payment
of cash dividends
|
|
|
(14,905 |
) |
|
|
(44,399 |
) |
Other
- principally stock issuances
|
|
|
771 |
|
|
|
2,264 |
|
Net
cash used by financing activities
|
|
|
(82,579 |
) |
|
|
(438,422 |
) |
NET
CHANGE IN CASH AND CASH EQUIVALENTS
|
|
|
(768 |
) |
|
|
(20,824 |
) |
CASH
AND CASH EQUIVALENTS, BEGINNING OF YEAR
|
|
|
4,998 |
|
|
|
25,816 |
|
CASH
AND CASH EQUIVALENTS, END OF PERIOD
|
|
$ |
4,230 |
|
|
$ |
4,992 |
|
OTHER
CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
Cash
paid (received) during the period for:
|
|
|
|
|
|
|
|
|
Income
taxes (net of refunds)
|
|
$ |
55,806 |
|
|
$ |
(172,170 |
) |
Interest
(net of capitalized interest)
|
|
$ |
88,162 |
|
|
$ |
111,592 |
|
Other
non-cash financing activities:
|
|
|
|
|
|
|
|
|
Issuance
of senior notes and future interest in debt exchange
|
|
$ |
43,503 |
|
|
|
- |
|
Carrying
value of unsecured notes exchanged for senior notes in debt
exchange
|
|
$ |
(89,423 |
) |
|
|
- |
|
See
notes to consolidated financial statements.
|
|
|
|
|
|
|
|
|
THE
McCLATCHY COMPANY
|
|
CONSOLIDATED
STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED)
|
|
(In
thousands, except share and per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
Earnings
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
Par
Value
|
|
|
Paid-In
|
|
|
Accumulated
|
|
|
Comprehensive
|
|
|
Treasury
|
|
|
|
|
|
|
Class
A
|
|
|
Class
B
|
|
|
Capital
|
|
|
Deficit
|
|
|
Income
(Loss)
|
|
|
Stock
|
|
|
Total
|
|
BALANCES,
DECEMBER 28, 2008
|
|
$ |
575 |
|
|
$ |
251 |
|
|
$ |
2,203,776 |
|
|
$ |
(1,829,717 |
) |
|
$ |
(322,312 |
) |
|
$ |
(144 |
) |
|
$ |
52,429 |
|
Net
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,261 |
|
|
|
|
|
|
|
|
|
|
|
28,261 |
|
Other
comprehensive income, net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
and postretirement plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unamortized
gain/prior service credit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,632 |
|
|
|
|
|
|
|
26,632 |
|
Other
comprehensive income related to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
investments
in unconsolidated companies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
548 |
|
|
|
|
|
|
|
548 |
|
Other
comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,180 |
|
Total
comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
55,441 |
|
Dividends
declared ($.09 per share)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,474 |
) |
|
|
|
|
|
|
|
|
|
|
(7,474 |
) |
Conversion
of 250,000 Class B shares to Class A shares
|
|
|
3 |
|
|
|
(3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of 1,504,534 Class A shares under stock plans
|
|
|
15 |
|
|
|
|
|
|
|
765 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
780 |
|
Stock
compensation expense
|
|
|
|
|
|
|
|
|
|
|
1,440 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,440 |
|
Purchase
of 32,628 shares of treasury stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9 |
) |
|
|
(9 |
) |
BALANCES,
SEPTEMBER 27, 2009
|
|
$ |
593 |
|
|
$ |
248 |
|
|
$ |
2,205,981 |
|
|
$ |
(1,808,930 |
) |
|
$ |
(295,132 |
) |
|
$ |
(153 |
) |
|
$ |
102,607 |
|
|
|
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 News & Observer
(Raleigh).
McClatchy
also owns a portfolio of premium digital assets, including 14.4% of
CareerBuilder LLC, the nation’s largest online job site, 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 and
33.3% of HomeFinder, LLC which operates the online real estate website
HomeFinder.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 28, 2008.
Management
has evaluated all events or transactions that occurred after September 27, 2009
through November 5, 2009, the date this report was filed with the Securities and
Exchange Commission. During this period there were no material
recognizable subsequent events.
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 September 27,
2009, the Company had six stock-based compensation plans. Total
stock-based compensation expense from continuing operations was $0.5 million and
$1.4 million for the three and nine months ended September 27, 2009,
respectively, and was $1.3 million and $3.7 million for the three and nine
months ended September 28, 2008, 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.
The
Company records a reserve for uncertainty in income taxes based upon recognition
thresholds and measurement of tax positions taken or expected to be taken in its
tax returns. The Company recognizes interest accrued related to unrecognized tax
benefits in interest expense. Penalties are recognized as a component
of income tax expense. The Company’s unrecognized tax benefits
declined $20.5 million from year-end 2008 reflecting accrued interest on
unrecognized tax benefits offset by lapses in open tax years that included
accruals for certain benefits, favorable audit adjustments and settlements and
reclassifications of amounts related to other settlements.
Fair Value of Financial
Instruments - Generally accepted accounting principles require the
disclosure of the fair value of certain financial instruments, whether or not
recognized in the balance sheet, for which it is practicable to estimate fair
value. The Company estimated the fair values presented below using
accepted valuation methodologies consistently applied, and market information
available as of quarter-end. Considerable judgment is required to
develop estimates of fair value, and the estimates presented are not necessarily
indicative of the amounts that the Company could realize in a current market
exchange. The use of different market assumptions or estimation
methodologies could have a material effect on the estimated fair
values. Additionally, the fair values were estimated at quarter-end,
and current estimates of fair value may differ significantly from the amounts
presented.
The
following methods and assumptions were used to estimate the fair value of each
class of financial instruments:
Cash and equivalents, accounts
receivable, accounts payable and current portion of long-term
debt. The carrying amount of these items approximates fair
value.
Long-term
debt. The fair value of long-term debt is determined based on
a number of observable inputs including the current market activity of the
Company's publicly traded notes and bank debt, trends in investor demand and
market values of comparable publicly traded debt. At September 27,
2009, the estimated fair value of long-term debt was $1.3 billion compared to a
carrying value of $1.9 billion.
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
|
|
|
For
the Nine
Months
Ended
|
|
|
|
September
27,
2009
|
|
|
September
28,
2008
|
|
|
September
27,
2009
|
|
|
September
28,
2008
|
|
Net
income
|
|
$ |
23,563 |
|
|
$ |
4,234 |
|
|
$ |
28,261 |
|
|
$ |
23,050 |
|
Pension,
net actuarial gain (loss) and
prior
service costs, net of tax
|
|
|
(186 |
) |
|
|
(4,450 |
) |
|
|
26,632 |
|
|
|
(40,315 |
) |
Other
comprehensive income (loss)
related
to equity investments
|
|
|
478 |
|
|
|
(474 |
) |
|
|
548 |
|
|
|
(1,193 |
) |
Total
comprehensive income (loss)
|
|
$ |
23,855 |
|
|
$ |
(690 |
) |
|
$ |
55,441 |
|
|
$ |
(18,458 |
) |
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 three and nine months ended September
27, 2009 were 6,236,915 and 6,406,808, respectively, and were 4,953,330 and
4,980,425 for the three and nine months ended September 28, 2008,
respectively.
New Accounting
Pronouncements
In
June 2009, a new accounting pronouncement was issued that removes the
concept of a qualifying special-purpose entity and clarifies that the objective
of previously issued guidance is to determine whether a transferor and all of
the entities included in the transferor’s financial statements being presented
have surrendered control over transferred financial assets. The new guidance is
effective for the Company on December 28, 2009. The Company does not expect
the adoption of this pronouncement to have a material effect on the consolidated
financial statements.
Also in
June 2009, a new pronouncement was issued amending the interpretation of
accounting literature related to business combinations. The new guidance applies
to rules in determining whether an enterprise has a controlling financial
interest in a variable interest entity. This determination identifies the
primary beneficiary of a variable interest entity as the enterprise that has
both the power to direct the activities of a variable interest entity that most
significantly impacts the entity’s economic performance, and the obligation to
absorb losses or the right to receive benefits of the entity that could
potentially be significant to the variable interest entity. The new
pronouncement also requires ongoing reassessments of whether an enterprise is
the primary beneficiary and eliminates the quantitative approach previously
required for determining the primary beneficiary. The new pronouncement is
effective for the Company on December 28, 2009. The Company does not expect the
adoption of this pronouncement to have a material effect on the consolidated
financial statements.
NOTE
2. INVESTMENTS IN UNCONSOLIDATED COMPANIES AND LAND HELD FOR
SALE
The
following is the Company's ownership interest and investment in unconsolidated
companies and joint ventures as of September 27, 2009 and December 28, 2008
(dollars in thousands):
Company
|
|
%
Ownership Interest
|
|
|
September
27,
2009
|
|
|
December
28,
2008
|
|
CareerBuilder,
LLC
|
|
|
14.4 |
|
|
$ |
218,449 |
|
|
$ |
217,516 |
|
Classified
Ventures, LLC
|
|
|
25.6 |
|
|
|
82,518 |
|
|
|
82,642 |
|
Seattle
Times Company (C-Corporation)
|
|
|
49.5 |
|
|
|
- |
|
|
|
- |
|
HomeFinder,
LLC
|
|
|
33.3 |
|
|
|
5,783 |
|
|
|
- |
|
Ponderay
(general partnership)
|
|
|
27.0 |
|
|
|
16,873 |
|
|
|
18,349 |
|
Other
|
|
Various
|
|
|
|
4,246 |
|
|
|
4,750 |
|
|
|
|
|
|
|
$ |
327,869 |
|
|
$ |
323,257 |
|
The
Company uses the equity method of accounting for a majority of
investments.
HomeFinder,
LLC, formerly a division of Classified Ventures, LLC (CV), operates the real
estate website HomeFinder.com. It was spun-off in the first quarter of 2009 into
a separate limited liability corporation in which the Company has a one-third
ownership interest. The carrying value of the Company’s investment in HomeFinder
primarily represents its proportionate ownership of HomeFinder which was
previously reflected in the Company’s value of CV.
On March
31, 2008, McClatchy and its partners, affiliates of Cox Enterprises, Inc. and
Media General, Inc., completed the sale of SP Newsprint Company (SP), of which
McClatchy was a one-third owner. The Company recorded a gain on the
transaction of approximately $34.4 million in 2008. The Company
used the $55 million of proceeds it received from the sale to reduce debt in the
third fiscal quarter of 2008 and received $5 million of proceeds on March 2,
2009 that had been recorded as a long-term receivable and was used to reduce
debt.
On June
30, 2008 (the first day of the Company’s third fiscal quarter in 2008), the
Company sold its 15.0% ownership interest in ShopLocal, LLC for $7.9 million and
used the proceeds to reduce debt. The Company reduced its carrying
value of ShopLocal to match the sales price. In addition, Classified Ventures,
LLC identified potential goodwill impairment at a real estate-related reporting
unit in the second quarter of 2008 and the Company recognized a charge related
to its investment. In the third quarter of fiscal 2008 the Company recognized an
additional charge of $3 million related to this investment. The final
charge was determined and recorded in the fourth quarter of 2008 when Classified
Ventures completed its impairment analysis. The total non-cash pre-tax charges
related to impairments of internet investments, including ShopLocal and
Classified Ventures, in the first nine months of 2008 were $24.5
million.
At the
end of 2008, the Seattle Times Company (STC) recorded a comprehensive loss
related to its retirement plan liabilities. The Company recorded its share of
the comprehensive loss in the Company’s comprehensive income (loss) in
stockholders’ equity to the extent that it had a carrying value in its
investment in STC. As a result, the Company’s investment in STC at December 28,
2008 was zero, and no future income or losses from STC will be recorded until
the Company’s carrying value on its balance sheet is restored through future
income by STC. Accordingly, no amounts were recorded from this investment in the
first nine months of fiscal 2009.
As part
of the acquisition of Knight-Ridder, Inc., the Company acquired 10 acres of land
in Miami. Such land is under contract to be sold for gross proceeds
of $190.0 million pursuant to a March 2005 sale agreement. The
contract was amended on December 30, 2008, and pursuant to the amendment, the
parties agreed to extend the closing date of the sale from December 31, 2008 to
June 30, 2009. The buyer had the right to extend the closing date for
up to an additional six months to December 31, 2009, conditioned upon an
increase in the termination fee payable to McClatchy, from $2 million to $6
million, in the event the transaction fails to close. In addition,
under the terms of the amendment, the buyer relinquished its right of first
refusal to purchase The Miami
Herald’s building and underlying land, which right was included in the
original agreement. The purchase price under the original agreement
has remained unchanged at $190.0 million. McClatchy has received $10
million in non-refundable deposits from the buyer which will be applied toward
the purchase price. On June 30, 2009, the buyer exercised its option to extend
the date for closing from June 30, 2009, to a date on or before December 31,
2009.
NOTE
3. INTANGIBLE ASSETS AND GOODWILL
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible
assets and goodwill, along with their weighted-average amortization
periods consisted of the following (in thousands):
|
|
|
September
27, 2009
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Gross
|
|
|
Accumulated
|
|
|
Net
|
|
|
Amortization
|
|
|
Amount
|
|
|
Amortization
|
|
|
Amount
|
|
|
Period
|
Intangible
assets subject to amortization:
|
|
|
|
|
|
|
|
|
|
|
|
Advertiser
and subscriber lists
|
|
$ |
803,840 |
|
|
$ |
(292,789 |
) |
|
$ |
511,051 |
|
|
14
years
|
Other
|
|
|
40,066 |
|
|
|
(30,916 |
) |
|
|
9,150 |
|
|
8
years
|
Total
|
|
$ |
843,906 |
|
|
$ |
(323,705 |
) |
|
|
520,201 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
intangible assets not subject to amortization:
|
|
|
|
|
|
|
|
|
|
|
|
Newspaper
mastheads
|
|
|
|
|
|
|
|
|
|
|
206,387 |
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
726,588 |
|
|
|
Goodwill
|
|
|
|
|
|
|
|
|
|
|
1,006,020 |
|
|
|
Total
intangible assets and goodwill
|
|
|
|
|
|
|
|
|
|
$ |
1,732,608 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
28, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Gross
|
|
|
Accumulated
|
|
|
Net
|
Amortization
|
|
|
Amount
|
|
|
Amortization
|
|
|
Amount
|
Period
|
Intangible
assets subject to amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advertiser
and subscriber lists
|
|
$ |
803,840 |
|
|
$ |
(249,650 |
) |
|
$ |
554,190 |
|
|
14
years
|
Other
|
|
|
40,066 |
|
|
|
(29,567 |
) |
|
|
10,499 |
|
|
8
years
|
Total
|
|
$ |
843,906 |
|
|
$ |
(279,217 |
) |
|
|
564,689 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
intangible assets not subject to amortization:
|
|
|
|
|
|
|
|
|
|
|
|
Newspaper
mastheads
|
|
|
|
|
|
|
|
|
|
|
206,387 |
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
771,076 |
|
|
|
Goodwill
|
|
|
|
|
|
|
|
|
|
|
1,006,020 |
|
|
|
Total
intangible assets and goodwill
|
|
|
|
|
|
|
|
|
|
$ |
1,777,096 |
|
|
|
Amortization
expense for continuing operations was $14.8 million and $15.4 million in the
three months ended September 27, 2009 and September 28, 2008, respectively; and
was $44.5 million and $46.1 million for the nine months ended September 27, 2009
and September 28, 2008, respectively. The estimated amortization expense for the
remainder of fiscal 2009 and the five succeeding fiscal years is as follows (in
thousands):
|
|
Amortization
|
|
Year
|
|
Expense
|
|
|
|
|
|
2009
(remaining)
|
|
|
14,824 |
|
2010
|
|
|
58,639 |
|
2011
|
|
|
57,538 |
|
2012
|
|
|
57,363 |
|
2013
|
|
|
56,223 |
|
2014
|
|
|
51,745 |
|
NOTE
4. LONG-TERM DEBT
As of
September 27, 2009 and December 28, 2008, long-term debt consisted of the
following (in thousands):
|
|
September
27,
2009
|
|
|
December
28,
2008
|
|
Term
A bank debt, interest of 4.3% at September 27, 2009 and 4.8% at
December
28, 2008
|
|
$ |
548,000 |
|
|
$ |
550,000 |
|
Revolving
bank debt, interest of 4.3% at September 27, 2009 and 4.5% at
December 28, 2008
|
|
|
368,970 |
|
|
|
391,700 |
|
Notes:
|
|
|
|
|
|
|
|
|
$31
million 9.875% notes due in 2009
|
|
|
- |
|
|
|
31,217 |
|
$166
million 7.125% notes due in 2011
|
|
|
167,142 |
|
|
|
171,404 |
|
$169
million 4.625% notes due in 2014
|
|
|
153,960 |
|
|
|
161,692 |
|
$347
million 5.750% notes due in 2017
|
|
|
320,782 |
|
|
|
367,351 |
|
$89
million 7.150% debentures due in 2027
|
|
|
82,000 |
|
|
|
91,607 |
|
$276
million 6.875% debentures due in 2029
|
|
|
252,118 |
|
|
|
272,805 |
|
Total
carrying value of debt principal
|
|
|
1,892,972 |
|
|
|
2,037,776 |
|
$ $24
million 15.75% senior notes due in 2014
|
|
|
24,225 |
|
|
|
- |
|
Long-term
portion of future interest on 15.75% senior notes
|
|
|
15,262 |
|
|
|
- |
|
Total
carrying value of debt principal and future interest
|
|
|
39,487 |
|
|
|
- |
|
Total
long-term debt
|
|
$ |
1,932,459 |
|
|
$ |
2,037,776 |
|
The
Company's bank debt consists of a credit facility entered into on June 27, 2006
that provided for a $3.2 billion senior unsecured (subsequently secured as
discussed below) 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 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. The terms of the
credit facility are discussed in greater detail below.
The
publicly-traded notes are stated net of unamortized discounts and premiums
(totaling to discounts of $71.2 million and $84.9 million as of September 27,
2009 and December 28, 2008, respectively) resulting from recording such assumed
liabilities at fair value as of the June 27, 2006 acquisition of Knight
Ridder. The Company repaid the 9.875% notes due in 2009 on April 15,
2009.
In the
second fiscal quarter of 2008, the Company purchased $300 million aggregate
principal amount of its outstanding debt securities for
$282.4 million in cash obtained from its revolving credit facility and recorded
a pre-tax gain in the second fiscal quarter of 2008 of $19.5
million. The Company purchased $150 million, $130 million and $20
million of its outstanding principal amount of debt securities maturing in 2009,
2011 and 2014, respectively. In the third fiscal quarter of 2008, the
Company purchased $5.9 million aggregate principal of its outstanding debt
securities maturing in 2009 for $5.8 million in cash obtained from its revolving
credit facility and recorded a pre-tax gain in the third fiscal quarter of
$180,000. The Company recognized $19.7 million in gain on the
extinguishment of debt through September 28, 2008 on these
transactions.
On
June 26, 2009, the Company completed a private debt exchange offer for its
outstanding debt securities for a combination of cash and newly issued 15.75%
senior notes due July 15, 2014 (New Notes). The New Notes are senior unsecured
obligations and are guaranteed by McClatchy’s existing and future material
domestic subsidiaries. In exchange for $3.4 million in cash and $24.4
million of New Notes the Company retired the following outstanding principal
amount of debt securities maturing in the respective years: $3.8 million in 2011
notes, $11.1 million in 2014 notes, $53.4 million in 2017 notes, $10.8 million
in 2027 debentures and $23.8 million in 2029 debentures. The Company recorded a
pre-tax gain of approximately $44.1 million in 2009 (34 cents per share). The
gain was equal to the carrying amount of the exchanged securities, less the
total future cash payments of the New Notes, including both payments of interest
(payable semiannually, hence $4.0 million is included in current liabilities)
and principal amount, and related expenses of the
exchange. Accordingly, future interest on these New Notes will not be
reflected in interest expense.
The New
Notes are governed by an indenture entered into on June 26, 2009 which includes
a number of covenants that are applicable to the Company and its restricted
subsidiaries. The covenants are subject to a number of important
exceptions and qualifications set forth in the indenture. These
covenants include, among other things, restrictions on the ability of the
Company and its restricted subsidiaries to incur additional debt, make
investments and other restricted payments, pay dividends on capital stock, or
redeem or repurchase capital stock or subordinated obligations; sell assets or
enter into sale/leaseback transactions; create specified liens; create or permit
restrictions on the ability of the Company’s restricted subsidiaries to pay
dividends or make other distributions to it; engage in certain transactions with
affiliates; and consolidate or merge with or into other companies or sell all or
substantially all of the Company’s and its subsidiaries’ assets, taken as a
whole.
In
connection with the private debt exchange offer described above, the Company
entered into an agreement on May 20, 2009 to amend the Credit Agreement which,
among other things, allows the Company to use up to $60 million under its
revolving credit facility to repurchase its 7.125% Notes due June 1, 2011 or its
4.625% Notes due November 1, 2014 (up to a $25 million limit on the 2014 Notes),
subject to certain conditions. The cash may also be used in
connection with a debt exchange offer so long as any new notes issued in such an
offer have a stated maturity of no earlier than July 1, 2014. In March and
September 2008, the Company entered into amendments to the Credit Agreement
which gave the Company additional flexibility in its bank covenants. Terms of
the Credit Agreement are described below. Pursuant to the most recent
amendment, the revolving credit facility will be reduced to $560 million from
$600 million (to a total facility of $1.1 billion) in increments through
December 31,
2009; and
further reduced by $10 million through June 30, 2010. A further reduction of
$125 million is required upon the sale by the Company of certain land in Miami,
FL (the Miami land). As of September 27, 2009, the revolving credit facility
provided for loans up to $595 million. A total of $171.9 million was available
under the revolving credit facility at September 27, 2009, all of which could be
borrowed under the Company's current bank covenants. The principal amount
available for borrowing under the revolving credit facility declined to $590
million on September 30, 2009. The final maturity of the revolving
credit commitment and the term loan remains June 27, 2011.
The
Company wrote off $0.4 million and $3.7 million of deferred financing costs in
the first half of 2009 and 2008, respectively in connection with the amendments,
which were recorded in interest expense in the consolidated statement of
operations.
Debt
under the amended Credit Agreement incurs interest at the London Interbank
Offered Rate (LIBOR) plus a spread ranging from 325 basis points to 475 basis
points, or at the agent’s base rate plus a spread ranging from 225 basis points
to 375 basis points, based upon the Company’s total leverage ratio (as defined
in the Credit Agreement). A commitment fee for the unused revolving
credit is priced at 50 basis points to 75 basis points, based upon the Company’s
total leverage ratio. The Company currently pays interest on borrowings at
a rate of 400 basis points over LIBOR and pays 62.5 basis points for commitment
fees.
The
amended Credit Agreement contains quarterly financial covenants including
requirements that the Company maintain a minimum interest coverage ratio (as
defined in the Credit Agreement) of 2.00 to 1.00 through maturity of the
agreement and a maximum leverage ratio (as defined in the Credit Agreement) of
7.00 to 1.00 from March 29, 2009 through September 26, 2010 and 6.25 to 1.00
from and after December 26, 2010. Upon the sale by the Company of the
Miami land, the applicable leverage ratio covenant will be reduced by 0.25
times. At September 27, 2009, the Company’s interest coverage ratio (as defined
in the Credit Agreement) was 2.80 to 1.00 and its leverage ratio (as defined in
the Credit Agreement) was 5.73 to 1.00 and the Company was in compliance with
all financial debt covenants. Because of the significance of the
Company’s outstanding debt, remaining in compliance with debt covenants is
critical to the Company’s operations.
Advertising
revenues declined across the board in fiscal year 2008 and continued to decline
in the first nine months of fiscal 2009. Declining revenues which are not offset
by expense savings impact the Company’s interest coverage and leverage ratios.
To address the revenue decline the Company has implemented various restructuring
plans in 2008 and 2009. If revenue declines continue beyond those
currently anticipated, or other unforeseen adverse developments occur, the
Company would seek to remain in compliance with debt covenants through further
restructuring initiatives.
Substantially
all of the Company’s subsidiaries (as defined in the Credit Agreement) have
guaranteed the Company’s obligations under the Credit Agreement. The
Company has granted a security interest to the agent under the Credit Agreement
in assets that include, but are not limited to, intangible assets, inventory,
receivables and certain minority investments as collateral for the facility but
the security interest excludes any land, buildings, machinery and equipment
(PP&E) and any leasehold interests and improvements with respect to such
PP&E, which would be reflected on a consolidated balance sheet of the
Company and its subsidiaries, and shares of stock and indebtedness of the
subsidiaries of the Company. In addition, the Credit Agreement includes various
requirements for mandatory prepayments of bank debt from certain sources of
cash; limitations on cash dividends allowed to be paid at certain leverage
levels; and other covenants including limitations on additional debt and the
ability to retire public bonds early, amongst other changes.
At
September 27, 2009, the Company had outstanding letters of credit totaling $54.2
million securing estimated obligations stemming from workers’ compensation
claims and other contingent claims.
The
following table presents the approximate annual maturities of debt principal
(excluding future interest), based upon the Company's required payments, for the
next five years and thereafter (in thousands):
|
Year
|
|
Payments
|
|
2009
|
|
$ |
- |
|
2010
|
|
|
- |
|
2011
|
|
|
1,083,165 |
|
2012
|
|
|
- |
|
2013
|
|
|
- |
|
Thereafter
|
|
|
905,219 |
|
Debt principal
|
|
|
1,988,384 |
|
Plus
capitalized future interest
|
|
|
15,262 |
|
Less
net discount
|
|
|
(71,187 |
) |
Total
debt
|
|
$ |
1,932,459 |
|
As of
June 30, 2009, subsequent to the bond exchange offering, both S&P and
Moody’s issued lower ratings on the Company’s debt and issued corporate family
ratings as described in the table below. The ratings downgrades had no impact on
the interest rate and commitment fees the Company pays under the Credit
Agreement. The ratings have remained the same through the filing date
of this report on Form 10-Q.
|
|
Debt
Ratings
|
|
Credit
Facility:
|
|
|
S
& P
|
|
CC
|
Moody's
|
|
B1
|
|
|
|
Unsecured
Notes:
|
|
|
S
& P
|
|
C
|
Moody's
|
|
Caa3
|
|
|
|
Senior
Notes:
|
|
|
S
& P
|
|
C
|
Moody's
|
|
Caa1
|
|
|
|
Corp.
Family Rating:
|
|
|
S
& P
|
|
CC
|
Moody's
|
|
Caa2
|
NOTE
5. 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 qualified retirement plan are made
by the Company in amounts deemed necessary to provide the required
benefits. No contributions to the Company's retirement plan are
currently planned during fiscal 2009.
The
Company also has a limited number of supplemental retirement plans to provide
key employees with additional retirement benefits. These plans are
funded on a pay-as-you-go basis and the accrued pension obligation is largely
included in other long-term obligations.
On June
16, 2008 and again on September 16, 2008, the Company announced plans to reduce
its workforce as the Company streamlines its operations and staff
size. The workforce reductions resulted in pension curtailment losses
in certain defined benefit plans of $2.4 million, including $0.7 million in the
third fiscal quarter of 2008; and a gain in a postretirement plan of $2.2
million, including $0.8 million in the third fiscal quarter of
2008.
The
Company froze its pension plans as of March 31, 2009. Accordingly, the Company
recorded a curtailment gain of $1.9 million in the nine-month period of 2009
related to the plan freeze.
The
elements of pension costs for continuing operations are as follows (in
thousands):
|
|
Three
Months Ended
|
|
|
Nine
Months Ended
|
|
|
|
September
27,
2009
|
|
|
September
28,
2008
|
|
|
September
27,
2009
|
|
|
September
28,
2008
|
|
Service
cost
|
|
$ |
1,160 |
|
|
$ |
5,760 |
|
|
$ |
5,622 |
|
|
$ |
22,863 |
|
Interest
cost
|
|
|
23,979 |
|
|
|
25,762 |
|
|
|
71,157 |
|
|
|
75,042 |
|
Expected
return on plan assets
|
|
|
(25,069 |
) |
|
|
(29,082 |
) |
|
|
(74,257 |
) |
|
|
(85,682 |
) |
Prior
service cost amortization
|
|
|
4 |
|
|
|
108 |
|
|
|
29 |
|
|
|
208 |
|
Actuarial
(gain) loss
|
|
|
(2 |
) |
|
|
(2,136 |
) |
|
|
20 |
|
|
|
(1,953 |
) |
Curtailment
(gain) loss
|
|
|
- |
|
|
|
724 |
|
|
|
(1,900 |
) |
|
|
2,373 |
|
Net
pension expense
|
|
$ |
72 |
|
|
$ |
1,136 |
|
|
$ |
671 |
|
|
$ |
12,851 |
|
No
material contributions were made to the Company's multi-employer plans for
continuing operations for the three and nine months ended September 27, 2009 and
September 28, 2008.
The
Company also provides for or subsidizes postretirement healthcare and certain
life insurance benefits for certain employees and retirees. The
elements of postretirement benefits for continuing operations are as follows (in
thousands):
|
|
Three
Months Ended
|
|
|
Nine
Months Ended
|
|
|
|
September
27,
2009
|
|
|
September
28,
2008
|
|
|
September
27,
2009
|
|
|
September
28,
2008
|
|
Service
cost
|
|
$ |
- |
|
|
$ |
9 |
|
|
$ |
- |
|
|
$ |
37 |
|
Interest
cost
|
|
|
540 |
|
|
|
695 |
|
|
|
1,621 |
|
|
|
1,810 |
|
Prior
service cost amortization
|
|
|
(262 |
) |
|
|
(252 |
) |
|
|
(786 |
) |
|
|
(878 |
) |
Actuarial
(gain) loss
|
|
|
(49 |
) |
|
|
133 |
|
|
|
(148 |
) |
|
|
(440 |
) |
Curtailment
gain
|
|
|
- |
|
|
|
(795 |
) |
|
|
- |
|
|
|
(2,167 |
) |
Net
postretirement expense (benefit)
|
|
$ |
229 |
|
|
$ |
(210 |
) |
|
$ |
687 |
|
|
$ |
(1,638 |
) |
The
Company has deferred compensation plans (401(k) plans and other savings plans)
which enable qualified employees to voluntarily defer
compensation. On March 31, 2009, the Company temporarily suspended
its matching contribution to the 401(k) plans. A new 401(k) plan was implemented
on June 29, 2009 and replaced the Company’s previous 401(k)
plans. The new plan includes a Company match (once reinstated) and a
supplemental contribution which will be tied to Company performance (as
defined). The Company made no matching contributions to the plan in the third
quarter of 2009. The Company’s customary matching contributions to
the 401(k) plans were $2.8 million in the third fiscal quarter of 2008, and were
$2.2 million and $8.8 million in the first nine months of 2009 and 2008,
respectively.
NOTE
6. 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, although no assurances can be given. No material amounts
for any losses from litigation which may ultimately occur have been recorded in
the consolidated financial statements, as management believes that any such
losses are not probable.
In the
third quarter of 2007, the Company entered into an agreement with the Pension
Benefit Guaranty Corporation (PBGC) to guarantee certain potential pension plan
termination liabilities associated with the plans maintained by certain divested
newspapers. The agreement expired on September 1, 2009 date with no payments
required from the Company.
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 News & Observer
(Raleigh).
McClatchy
also owns a portfolio of premium digital assets, including 14.4% of
CareerBuilder, the nation’s largest online job site, 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 and 33.3% of HomeFinder, LLC which operates the online real
estate website HomeFinder.com. McClatchy is listed on the New York Stock
Exchange under the symbol MNI.
The
Company's primary source of revenues is print and digital advertising, which
accounted for 76.6% of the Company's revenues for the third fiscal quarter of
2009. Print and digital advertising revenues are derived from retail,
national and classified advertising. Print and preprinted insert
advertising are also sold in direct marketing and other advertising
products. While percentages vary from year to year and from newspaper
to newspaper, classified advertising revenues have 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 revenues as a percentage of total
advertising revenues have declined to 28.4% in the third fiscal quarter of 2009,
compared to 32.8% in the third fiscal quarter of 2008, and to 38.0% in the third
fiscal quarter of 2007, primarily as a result of the economic slowdown affecting
classified advertising and the secular shift in advertising demand to digital
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) have decreased year over year, retail advertising has steadily
increased as a percentage of total advertising up to 52.4% in the third quarter
of fiscal 2009, compared to 49.0% in the third fiscal quarter of 2008 and to
44.7% in the third fiscal quarter of 2007. This is partially a
reflection of retail advertising declining at a slower rate than classified
advertising, thus increasing as a percent of total advertising.
National
advertising revenues as a percentage of total advertising revenues remained
relatively similar year over year and contributed about 9.0% of total
advertising revenues in both the third fiscal quarter of 2009 and
2008. Direct marketing revenues and other advertising revenues made
up the remainder of the Company's advertising revenues in the third fiscal
quarter of 2009.
While
included in the revenues described above, all categories of digital advertising
are performing better than print advertising. In 2007, the Company
joined a number of other newspaper companies in forming a broad-based
partnership with Yahoo, Inc. (Yahoo). The Company’s local sales force
is able to sell Yahoo advertising inventory and share in the revenue from the
sales. In addition, the
alliance
allows the Company to use Yahoo’s behaviorally targeted ad-serving platform (APT
platform) to sell advertising on the Company’s websites. While sales of Yahoo
inventory and behaviorally targeted sales were conducted on a limited test basis
in 2008, the Company began rolling out the APT platform to its newspaper
websites in early 2009. As of the end of the third fiscal quarter of 2009, all
of the Company’s newspaper sites were selling Yahoo inventory and half of the
newspaper sites had launched the APT platform.
In total,
revenues from digital advertising increased 3.1% in the third quarter of 2009
compared to the third quarter of 2008 while print advertising revenues declined
32.4% over the same periods. However, employment advertising
revenues, which have been negatively affected by the economic downturn, are down
substantially in both print and digital. Excluding employment
advertising, digital advertising revenues grew 28.4% in the quarter and 27.2% in
the first nine months of fiscal 2009, compared to the same periods in fiscal
2008. Also, digital advertising revenues represented 17.6% of total
advertising revenues in the third fiscal quarter of 2009, up from 12.2% of total
advertising revenues for the third quarter of 2008 and from 9.1% of total
advertising revenues for the third quarter of 2007.
Circulation
revenues increased to 19.9% of the Company's revenues in the third fiscal
quarter of 2009 from 14.3% in the third fiscal 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 and nine months ended
September 27, 2009 and September 28, 2008.
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 2008 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, goodwill and intangible impairment, pension and
postretirement benefits, income taxes, and insurance. There have been
no material changes to the Company’s critical accounting policies described in
the Company's 2008 Annual Report on Form 10-K.
Recent
Events and Trends
Advertising
Revenues:
Advertising
revenues in the third quarter and first nine months of fiscal 2009 decreased as
a result of the continuing weak economy and the secular shift in advertising
demand from print to digital products. Management believes a
significant portion of the advertising downturn reflects the current economic
cycle and expects advertising revenues to be down in the fourth fiscal quarter
of 2009 compared to 2008. For further information, see the revenue
discussions in management’s review of “Results of Operations”.
Newsprint:
Significant
changes in newsprint prices can increase or decrease the Company's operating
expenses, and therefore directly affect the Company’s operating results.
Newsprint pricing is dependent on global demand and supply for newsprint.
Newsprint prices fell in each month of the first six months of 2009, and in the
third quarter of 2009 newsprint prices were 25.5% lower on average than in the
2008 third quarter. However, newsprint producers have announced price
increases for the near term. Global demand remains weak resulting in continued
low capacity utilization irrespective of recent newsprint mill closure
announcements. Hence, the Company does not yet know whether the full
amount of announced newsprint price increases will be implemented or the timing
of such increases. The impact of newsprint prices on the Company's
financial results is discussed under "Results of Operations".
Restructuring
Plans:
In June
2008 and again in September 2008, the Company announced plans to reduce its
workforce, as the Company streamlined its operations and staff
size. The Company’s workforce in 2008 was reduced by approximately
2,500 positions. The workforce reductions resulted in total severance
costs of approximately $45 million which was accrued and largely paid in
2008. Savings from the restructuring, including compensation savings,
are expected to be approximately $200 million annually, and the Company expects
about $140 million in savings to be realized during fiscal 2009, much of which
has been realized in the first nine months of 2009.
In March
2009, the Company announced additional restructuring efforts which included
reducing the Company’s workforce by 15%, or 1,600 full-time equivalent
employees, the freezing of the Company’s pension plans and a temporary
suspension of the Company matching contribution to the 401(k) plan as of March
31, 2009. The Company’s restructuring plan also involved wage
reductions across the Company for additional savings. The Company’s chairman and
chief executive officer (CEO) declined his 2008 and 2009 bonuses and other
executive officers did not receive bonuses for 2008. In addition, effective
March 30, 2009, the CEO’s base salary was reduced by 15%, other executive
officers' salaries were reduced by 10%, and no bonuses will be paid to any
executive officers for 2009. The Company also reduced the cash
compensation, including retainers and meeting fees, paid to its directors by
approximately 13%, and the directors declined any stock awards for 2008 and
2009. Much of the expected expense reductions from this plan, which
are largely permanent in nature, began to be realized in the second quarter of
2009. A total of $25.1 million in severance related costs associated
with this restructuring plan were incurred through September 27, 2009 and were
largely paid by the end of the third quarter of 2009.
Debt
Exchange Offers and Related 2009 Bank Credit Agreement Amendment:
In May
2008, the Company purchased $300 million aggregate principal amount of
its outstanding debt securities for $282.4 million in cash obtained
from its revolving credit facility and recorded a pre-tax gain of $19.5
million. The Company purchased $150 million, $130 million and $20
million of its outstanding principal amount of debt securities maturing in 2009,
2011 and 2014, respectively. In the third fiscal quarter of 2008, the Company
purchased $5.9 million aggregate principal of its outstanding debt securities
maturing in 2009 for $5.8 million in cash obtained from its revolving credit
facility.
On June
26, 2009, the Company completed a private debt exchange offer for all of its
outstanding debt securities for a combination of cash and newly issued 15.75%
senior notes due July 15, 2014 (New Notes). The New Notes are senior unsecured
obligations and will be guaranteed by McClatchy’s existing and future material
domestic subsidiaries. The Company exchanged $3.4 million in cash and $24.2
million of New Notes in the exchange offer. In exchange for the cash
and New Notes the Company retired the following outstanding principal amount of
debt securities maturing in the respective years: $3.8 million in 2011 notes,
$11.1 million in 2014 notes, $53.4 million in 2017 notes, $10.8 million in 2027
debentures and $23.8 million in 2029 debentures. The Company has recorded a
pre-tax gain of approximately $44.1 million on the exchange in 2009. The gain
was equal to the carrying amount of the exchanged securities less the total
future cash payments of the New Notes, including both payments of interest and
principal amount, and related expenses of the exchange.
In
connection with the debt exchange offer described above, the Company entered
into an agreement on May 20, 2009 to amend the Credit Agreement which, among
other things, allows it to use its revolving credit facility for up to $60
million to repurchase its 7.125% Notes due June 1, 2011 or its 4.625% Notes due
November 1, 2014 (up to a $25 million limit on the 2014 notes), subject to
certain conditions. A total of $3.4 million of the $60 million
revolving credit facility allowable for bond repurchase was used in the exchange
offer discussed above.
See
additional discussion of the impact of these capital transactions on the
Company’s results of operations and financial position in Note 4 to the
consolidated financial statements and the Liquidity and Capital Resources
discussion below.
Equity
Investments:
On March
31, 2008, the Company, along with the other general partners of SP Newsprint Co.
(SP), completed the sale of SP, of which the Company was a one-third
owner. The Company recorded a gain on the transaction of $34.4
million in 2008. The Company used the $55 million of proceeds it
received from the sale to reduce debt in the second fiscal quarter of 2008 and
received $5 million of proceeds on March 2, 2009 that had been recorded as a
long-term receivable, which was used to reduce debt.
On June
30, 2008 (the first day of the Company’s third fiscal quarter), the Company sold
its 15.0% ownership interest in ShopLocal, LLC for $7.9 million and used the
proceeds to reduce debt. The Company reduced its carrying value of
ShopLocal to match the sales price. In addition, Classified Ventures, LLC
identified potential goodwill impairment at a real estate-related reporting unit
and as a result, the Company recognized an estimated charge related to this
investment in the second quarter of 2008 and recorded an additional charge in
the third fiscal quarter of 2008. The final charge was determined and
recorded in the fourth quarter of 2008 when Classified Ventures completed its
impairment analysis. The total non-cash pre-tax charges related to impairments
of internet investments, including ShopLocal and Classified Ventures, in the
first nine months of 2008 were $24.5 million.
RESULTS
OF OPERATIONS
Third
Fiscal Quarter of 2009 Compared to Third Fiscal Quarter of 2008
The
Company reported income from continuing operations in the third fiscal quarter
of 2009 of $23.6 million, or $0.28 per share, compared to $4.2 million, or $0.05
per share in the third fiscal quarter of 2008. The Company recorded a
loss from discontinued operations in the third fiscal quarter of 2009 of $38,000
compared to income of $67,000 in the third fiscal quarter of
2008.
Revenues:
Revenues
in the third quarter of 2009 were $347.4 million, down 23.1% from revenues from
continuing operations of $451.6 million in the third quarter of
2008. Advertising revenues were $266.1 million, down 28.1% from 2008,
and circulation revenues were $69.0 million, up 6.7%.
The
following summarizes the Company's revenues by category, which compares the
third fiscal quarter of 2009 with the third fiscal quarter of 2008 (dollars in
thousands):
|
|
Quarter
Ended
|
|
|
|
September
27,
2009
|
|
|
September
28,
2008
|
|
|
%
Change
|
|
Advertising:
|
|
|
|
|
|
|
|
|
|
Retail
|
|
$ |
139,462 |
|
|
$ |
181,416 |
|
|
|
-23.1 |
|
National
|
|
|
24,097 |
|
|
|
33,485 |
|
|
|
-28.0 |
|
Classified:
|
|
|
|
|
|
|
|
|
|
|
|
|
Auto
|
|
|
22,050 |
|
|
|
33,406 |
|
|
|
-34.0 |
|
Employment
|
|
|
14,105 |
|
|
|
35,024 |
|
|
|
-59.7 |
|
Real
estate
|
|
|
17,201 |
|
|
|
30,099 |
|
|
|
-42.9 |
|
Other
|
|
|
22,285 |
|
|
|
22,902 |
|
|
|
-2.7 |
|
Total
classified
|
|
|
75,641 |
|
|
|
121,431 |
|
|
|
-37.7 |
|
Direct
marketing
|
|
|
|
|
|
|
|
|
|
|
|
|
and
other
|
|
|
26,920 |
|
|
|
33,785 |
|
|
|
-20.3 |
|
Total
advertising
|
|
|
266,120 |
|
|
|
370,117 |
|
|
|
-28.1 |
|
Circulation
|
|
|
69,029 |
|
|
|
64,691 |
|
|
|
6.7 |
|
Other
|
|
|
12,241 |
|
|
|
16,812 |
|
|
|
-27.2 |
|
Total
revenues
|
|
$ |
347,390 |
|
|
$ |
451,620 |
|
|
|
-23.1 |
|
Retail
advertising decreased $42.0 million, or 23.1% from the third fiscal quarter of
2008, which primarily reflects the impact of the economic
recession. Print retail run of press (ROP) advertising decreased
$32.2 million, or 33.2%, and preprint advertising decreased $16.2 million, or
22.1%. Digital retail advertising increased $6.4 million, or 57.7%,
from the first fiscal quarter of 2008 reflecting continued growth in new
advertisers and the impact of the Yahoo alliance.
National
advertising decreased $9.4 million, or 28.0%, from the third fiscal quarter of
2008. The declines in total national advertising were reflected across many
segments in this category of advertising. However, digital national
advertising increased $1.4 million, or 36.1% from the third fiscal quarter of
2008.
Classified
advertising decreased $45.8 million, or 37.7% from the third fiscal quarter of
2008. Print classified advertising declined $39.3 million, or 43.0%,
while digital classified advertising decreased $6.5 million, or 21.6%. The
digital advertising decline resulted primarily from lower employment
advertising. Digital automotive and real estate categories declined
less than the employment category on a relative basis because the employment
category has been hit harder by the economic recession. A
review of the major classified categories follows:
·
|
Automotive
advertising decreased $11.4 million, or 34.0%, from the third fiscal
quarter of 2008, reflecting an industry-wide trend. Print
automotive advertising declined 45.0%, while digital automotive
advertising declined 1.5% from the 2008
quarter.
|
·
|
Employment
advertising decreased $20.9 million, or 59.7%, from the third fiscal
quarter of 2008, reflecting a sharp, national slowdown in hiring and
therefore, employment advertising. The declines were reflected
both in print employment advertising, down 67.3%, and online employment
advertising, down 49.4%.
|
·
|
Real
estate advertising decreased $12.9 million, or 42.9%, from the third
fiscal quarter of 2008, also an industry-wide trend. In total,
print real estate advertising declined 49.5%, while digital advertising
fell by 5.3%.
|
Digital
advertising revenues, which are included in each of the advertising categories
discussed above, totaled $46.7 million in the third fiscal quarter of 2009, an
increase of 3.1% as compared to the third fiscal quarter of
2008. However, excluding employment advertising, the category most
affected by the current cyclical downturn, digital advertising grew 28.4%
compared to the third fiscal quarter of 2008.
Direct
marketing decreased $6.9 million, or 20.7%, from the third fiscal quarter of
2008 reflecting the same trends as retail advertising discussed
above.
Circulation
revenues increased $4.3 million, or 6.7%, from the third fiscal quarter of 2008,
primarily reflecting higher circulation prices at most newspapers, partially
offset by lower circulation volumes. Average paid daily circulation
declined 12.7% and Sunday circulation was down 9.6% in the third fiscal quarter
of 2009. The Company expects circulation volumes to remain lower in
fiscal 2009 compared to fiscal 2008 reflecting primarily price increases, the
Company’s focus on reducing costly circulation programs deemed to be of lesser
value to its advertising customers and, to a lesser extent, changes in
readership trends.
Operating
Expenses:
Operating
expenses in 2009 and 2008 include restructuring charges. The following table
summarizes operating expenses, as well as the amount of the restructuring
charges included in operating expenses in the 2009 and 2008 quarters (in
thousands):
|
|
Quarter
Ended
|
|
|
|
|
|
|
September
27,
|
|
|
September
28,
|
|
|
%
|
|
|
|
2009
|
|
|
2008
|
|
|
Change
|
|
Operating
expenses
|
|
$ |
287,023 |
|
|
$ |
410,983 |
|
|
|
-30.2 |
|
Restructuring
charges
|
|
|
1,350 |
|
|
|
17,
043 |
|
|
NM
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation
expense
|
|
$ |
130,048 |
|
|
$ |
199,861 |
|
|
|
-34.9 |
|
Compensation-related
restructuring charges
|
|
|
1,350 |
|
|
|
17,
043 |
|
|
NM
|
|
NM= not
meaningful.
Operating
expenses in the third quarter of fiscal 2009 decreased by $124.0 million, or
30.2% compared to the third quarter of fiscal 2008. Compensation
expenses decreased $69.8 million, or 34.9%, from the third fiscal quarter of
2008 and included the restructuring charges discussed above, which were higher
in the 2008 quarter than in the 2009 quarter. Payroll was down 36.9%
and fringe benefits
costs declined 23.7%. Average headcount decreased 26.1% from the
third quarter of 2008 and retirement and medical costs were also
down.
Newsprint
and supplement expense was down 46.1% with newsprint expense down 49.5%,
reflecting a combination of lower newsprint usage and newsprint
prices. Supplement expense was down 27.2%. Depreciation
and amortization expenses decreased $2.8 million from the third fiscal quarter
of 2008. Other operating costs were down $22.8 million, or 20.1%, reflecting
Company-wide cost controls.
Interest:
Interest
expense for continuing operations was $34.5 million for the third fiscal quarter
of 2009, up slightly from the third quarter of 2008. Interest related to the
Company’s debt was down $2.2 million from the 2008 quarter primarily reflecting
lower interest rates and debt balances. Interest expense increased
$2.6 million on the Company’s unrecognized tax benefits.
Equity Income (Loss):
Income
from unconsolidated investments was $4.4 million in the third fiscal quarter of
2009 compared to a loss of $850,000 in the third fiscal quarter of 2008, due
primarily to improved financial results at the internet companies in which the
Company has ownership interests.
The
Company sold SP at the beginning of the second fiscal quarter of 2008 and
recorded a gain on the sale of $34.5 million. In the third quarter of 2009, the
Company recorded final closing adjustments resulting in an additional gain of
$1.0 million.
In
addition, the Company recorded charges totaling $3.0 million in the third fiscal
quarter of 2008 related to estimated impairments of certain internet
investments.
For an
expanded discussion of transactions and events related to the Company’s less
than 50% owned companies, see Note 3 to the consolidated financial
statements.
Gain
on Extinguishment of Debt:
In the
second fiscal quarter of 2009, the Company closed a debt exchange offer and in
the third quarter of 2009 the Company recorded additional expenses of $0.7
million associated with this exchange. In the third fiscal quarter of 2008, the
Company recorded a pre-tax gain on the extinguishment of debt of $180,000
relating to a bond tender offer for cash. For further information, see Note 4 to
the consolidated financial statements.
Income
Taxes:
The income tax rate from continuing
operations in the third fiscal quarter of 2009 was 22.7% compared to 33.0% in
2008. The Company refined its estimate of its 2009 projected effective
annual tax rate and applied the revised rate to its results from continuing
operations resulting in an adjustment in the third quarter of 2009. The
projected annual effective tax rate on earnings excluding discrete tax items
(primarily gains on debt extinguishments or sales of investments) is estimated
to be 61.8% for full year 2009. The Company had previously applied a lower tax
rate to operating losses excluding discrete items through the first half of
2009. As a result, the Company recorded a tax benefit of $11.4 million in the
third fiscal quarter of 2009 to adjust the year-to-date tax
provision.
First
Nine Months of 2009 Compared to First Nine Months of 2008
The
Company reported income from continuing operations in the first nine months of
2009 of $27.9 million, or $0.33 per share, compared to $23.2 million, or $0.28
per share in 2008. The Company’s net income was $28.3 million,
or $0.33 per share, including discontinued operations in the first nine months
of 2009, compared to $23.1 million, or $0.28 per share, in the first nine months
of 2008. Net income in both years was impacted by the events
discussed in the comparison of quarterly results above.
Revenues:
Revenues
from continuing operations in the first nine months of 2009 were down 24.6% to
$1.1 billion compared to $1.4 billion in 2008. Advertising revenues
in 2009 totaled $834.5 million, down 29.3%, and circulation revenues were $206.9
million, up 4.2%.
The
following summarizes the Company's revenues by category, which compares the
first nine months of 2009 with the first nine months of 2008 (dollars in
thousands):
|
|
Nine
Months Ended
|
|
|
|
September
27,
2009
|
|
|
September
28,
2008
|
|
|
%
Change
|
|
Advertising:
|
|
|
|
|
|
|
|
|
|
Retail
|
|
$ |
436,719 |
|
|
$ |
568,670 |
|
|
|
-23.2 |
|
National
|
|
|
75,791 |
|
|
|
108,391 |
|
|
|
-30.1 |
|
Classified:
|
|
|
|
|
|
|
|
|
|
|
|
|
Auto
|
|
|
69,551 |
|
|
|
104,790 |
|
|
|
-33.6 |
|
Employment
|
|
|
46,447 |
|
|
|
121,888 |
|
|
|
-61.9 |
|
Real
estate
|
|
|
55,631 |
|
|
|
99,934 |
|
|
|
-44.3 |
|
Other
|
|
|
65,721 |
|
|
|
70,174 |
|
|
|
-6.3 |
|
Total
classified
|
|
|
237,350 |
|
|
|
396,786 |
|
|
|
-40.2 |
|
Direct
marketing
|
|
|
|
|
|
|
|
|
|
|
|
|
and
other
|
|
|
84,610 |
|
|
|
106,621 |
|
|
|
-20.6 |
|
Total
advertising
|
|
|
834,470 |
|
|
|
1,180,468 |
|
|
|
-29.3 |
|
Circulation
|
|
|
206,860 |
|
|
|
198,610 |
|
|
|
4.2 |
|
Other
|
|
|
37,020 |
|
|
|
50,508 |
|
|
|
-26.7 |
|
Total
revenues
|
|
$ |
1,078,350 |
|
|
$ |
1,429,586 |
|
|
|
-24.6 |
|
Retail
advertising decreased $132.0 million, or 23.2%, from the first nine months of
2008 and largely reflected the factors discussed in the comparison of quarterly
results above. Print ROP advertising decreased $103.2 million, or
33.1%, from the first nine months of 2008 and preprint advertising decreased
$46.3 million, or 20.6%, from 2008. Online retail advertising
increased $17.5 million, or 53.1%, from the first nine months of 2008 driven by
increased banner and display advertisements and, to a lesser degree, the impact
of rolling out the Yahoo advertising platform at the Company’s newspapers as
discussed in the comparison of quarterly results above.
National
advertising revenues decreased $32.6 million, or 30.1%, from the first nine
months of 2008. The declines in total national advertising were across a broad
number of segments in this category. Online national advertising
increased $3.9 million, or 32.8%, from the first nine months of
2008.
Classified
advertising revenues decreased $159.4 million, or 40.2%, from the first nine
months of 2008 and was impacted by generally the same factors discussed in the
quarterly results above. Print classified advertising declined $135.9
million, or 44.9%, while digital classified advertising decreased $23.6 million,
or 25.1%, from the first nine months of 2008 due almost entirely to a decline in
digital employment advertising. More specifically:
·
|
Automotive
advertising decreased $35.2 million, or 33.6%, from the first nine months
of 2008, reflecting lower automotive sales and the consolidation of
automotive dealers. Print automotive advertising declined
43.5%, while online advertising was down
1.6%.
|
·
|
Employment
advertising decreased $75.4 million, or 61.9%, from the first nine months
of 2008 reflecting a national slowdown in hiring and therefore employment
advertising. The declines were reflected both in print
employment advertising, down 67.6%, and online employment advertising,
down 53.5%.
|
·
|
Real
estate advertising decreased $44.3 million, or 44.3%, from the first nine
months of 2008. In total, print real estate advertising
declined 50.9%, while online advertising declined
0.7%.
|
Online
advertising revenues, which are included in each of the advertising categories
discussed above, totaled $136.8 million in the first nine months of 2009, a
decrease of 1.6% as compared to the first nine months of
2008. Excluding employment advertising that has been particularly
hard hit by the economic downturn, online advertising grew 27.2% in the first
nine months of 2009.
Direct
marketing advertising decreased $22.1 million, or 21.0%, from the first nine
months of 2008 reflecting the overall slow advertising environment in
2009.
Circulation
revenues increased $8.3 million, or 4.2%, from the first nine months of 2008,
primarily reflecting the impact of increases in circulation prices, partially
offset by lower circulation volumes. The Company expects circulation
volumes to remain lower in fiscal 2009 compared to fiscal 2008 reflecting
primarily price increases, the Company’s focus on reducing costly circulation
programs deemed to be of lesser value to its advertising customers and, to a
lesser extent, changes in readership trends.
Operating
Expenses:
Operating
expenses in 2009 and 2008 include restructuring charges and the 2009 amount
includes $10.6 million of accelerated depreciation on equipment related to the
outsourcing of printing at various newspapers. The following table summarizes
operating expenses, as well as the amount of these items in operating expenses
in the 2009 and 2008 (in thousands):
|
|
Nine
Months Ended
|
|
|
|
|
|
|
September
27,
|
|
|
September
28,
|
|
|
%
|
|
|
|
2009
|
|
|
2008
|
|
|
Change
|
|
Operating
expenses
|
|
$ |
984,057 |
|
|
$ |
1,288,500 |
|
|
|
-23.6 |
|
Restructuring
and other items
|
|
|
35,659 |
|
|
|
42,687 |
|
|
|
-16.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation
expense
|
|
$ |
453,483 |
|
|
$ |
647,771 |
|
|
|
-30.0 |
|
Restructuring
charges
|
|
|
25,095 |
|
|
|
42,451 |
|
|
|
-40.9 |
|
Operating
expenses decreased $304.4 million, or 23.6%, from the first nine months of 2008,
as the Company continued to reduce costs to mitigate the impact of revenue
declines. Operating expenses in the first nine months of fiscal 2009 included
$25.1 million in severance and benefit plan curtailment gain related to the
Company’s continued restructuring program and $10.6 million of accelerated
depreciation on equipment related to the outsourcing of printing at various
newspapers. Operating expenses in the first nine months of 2008 included $42.5
million in severance and benefit plan curtailment gain related to the Company’s
restructuring plans.
Compensation
expenses decreased $194.3 million, or 30.0% from 2008, and included the
restructuring charges discussed above. The decline in compensation
primarily reflected salary cuts and reductions in head count.
Newsprint
and supplement expense was down 28.6% primarily reflecting declines in newsprint
usage. Newsprint expense was down 29.5% while supplement expense was down
23.3%. Depreciation and amortization expenses were up $2.2 million
from the first nine months of 2008 and include the impact of the $10.6 million
accelerated depreciation on equipment, which was partially offset by lower
depreciation on other assets as useful lives expired. Other operating
costs were down $59.1 million, or 17.1%, reflecting Company-wide cost
controls.
Interest:
Interest
expense for continuing operations declined $13.3 million, or 11.5%, from the
first nine months of 2008. Interest expense in the 2009 nine-month
period included a $0.4 million charge related to the write-off of deferred
financing costs as a result of the amendment to the Company’s bank credit
agreement as of May 20, 2009, while interest in the 2008 nine-month period
included a $3.7 million charge for an amendment as of March 29,
2008. Interest related to the Company’s debt, was $95.7 million
through the nine-month period in 2009 compared to $112.4 million in 2008,
primarily reflecting lower interest rates and debt balances. Interest on
unrecognized tax benefits were $3.4 million higher in the first nine months of
2009 than 2008.
Equity
Income (Loss):
Income
from unconsolidated investments was $3.6 million in the first nine months of
2009 compared to a loss of $14.3 million in the same period in 2008. The 2009
amounts included strong earnings results from the Company’s internet
investments, while the 2008 amounts included losses recorded from SP in the
first quarter of 2008.
See the
quarterly comparison above for the impact of the sale of SP and
impairment-related charges on certain internet investments and Note 2 to the
consolidated financial statements for an expanded discussion of transactions and
events related to the Company’s less than 50% owned investments.
Gain
on Extinguishment of Debt
In 2009,
the Company recorded a pre-tax gain on the extinguishment of debt of $44.1
million relating to a private bond exchange offer for its public debt securities
using cash and 15.75% senior notes due July 15, 2014. In 2008, the Company
recorded a pre-tax gain on the extinguishment of debt of $19.7 million relating
to bond tender offers for cash. For further information, see Note 4
to the consolidated financial statements.
Income
Taxes:
The
income tax rate for the first nine months of 2009 from continuing operations was
29.0% compared to 45.7% in 2008. Both the 2009 and 2008 tax rates
were impacted by state tax accruals and discrete tax adjustments.
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LIQUIDITY
AND CAPITAL RESOURCES
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Sources
and Uses of Liquidity and Capital Resources:
The
Company’s cash and cash equivalents were $4.2 million as of September 27,
2009. The Company generated $85.0 million of cash from operating
activities from continuing operations in the first nine months of 2009 compared
to $151.8 million in 2008. The decrease in cash from operating
activities in 2009 primarily relates to lower advertising revenues and receipts
in 2009 and is partially offset by lower expenses and payments. The
Company used $6.9 million in cash from discontinued operations primarily to pay
an income tax settlement related to one of its divested newspapers. In the first
nine months of 2008, the Company generated $188.9 million in cash from
discontinued operations due primarily to the receipt of a tax refund related to
the sale of the Minneapolis Star Tribune
newspaper.
In 2009,
the Company generated $3.7 million of cash from investing activities primarily
due to the receipt of $10.7 million in sales proceeds from selling various
assets and $4.2 million received in 2009 from the 2008 sale of its interest in
the SP Newsprint Company. These sources were partially offset by purchases of
property, plant and equipment totaling $11.2 million and other items. In 2008,
investing activities provided $77.0 million in cash primarily due to the receipt
of $63.1 million from the sale of SP and ShopLocal, and $31.7 million from the
sale of other assets, offset by the purchase of property, plant and equipment
totaling $17.1 million. The Company used the proceeds it received
from its sales of investments and assets to reduce debt in 2009 and
2008.
As part
of the acquisition of Knight-Ridder, Inc. in 2006, the Company acquired 10 acres
of land in Miami, Florida (the Miami land). Such land is under
contract to be sold for gross proceeds of $190.0 million pursuant to a March
2005 sale agreement. The contract was amended on December 30, 2008,
and pursuant to the amendment, the parties agreed to extend the closing date of
the sale from December 31, 2008 to June 30, 2009. The buyer had the
right to extend the closing date for up to an additional six months to December
31, 2009, conditioned upon an increase in the termination fee payable to
McClatchy, from $2 million to $6 million, in the event the transaction fails to
close. In addition, under the terms of the amendment, the buyer
relinquished its right of first refusal to purchase The Miami Herald’s building
and underlying land, which right was included in the original
agreement. The amendment did not affect the purchase price under the
original agreement which has remained $190 million. McClatchy has
received $10 million in non-refundable deposits from the buyer which will be
applied toward the purchase price. On June 30, 2009, the buyer exercised its
option to extend the date for closing from June 30, 2009, to a date on or before
December 31, 2009.
During
the second quarter of fiscal 2009, the Company repaid $31 million in bonds due
on April 15, 2009. The Company also paid an aggregate of $6.4 million
in cash ($3.4 million in payments to bondholders) and related expenses and
issued $24.2 million of 15.75% senior notes due July 15, 2014 in total
consideration to retire $102.8 million in publicly traded debt securities in its
June 2009 private exchange offer. See Note 4 and the discussion under “Debt and Related Matters”
below for more detail on this transaction. In the second quarter of fiscal 2008,
the Company used $283.2 million, including offering
expenses, to complete a tender for $300 million of its bonds (see Note 4 to the
consolidated financial statements) and paid $5.8 million to retire $5.9 million
of bonds in the open market in the third quarter of 2008. The Company repaid
$98.0 million of revolving bank debt and paid $9.3 million in refinancing fees
in 2008.
The
Company repaid $2 million of its Term A loan and reduced its revolving bank debt
by $22.7 million in the first nine months of 2009. The Company also paid $14.9
million in dividends in the first nine months of fiscal 2009. The
Company suspended its dividend after the payment of the first quarter dividend
in 2009 and no other dividend payments are expected to be declared or paid in
2009. In addition, the Company is restricted from paying dividends
after June 2009 if its leverage ratio (as defined in its Credit Agreement) is
greater than 3.0 to 1.0. The Company paid $44.4 million in dividends in the
first nine months of 2008.
While the
Company expects that most of its free cash flow generated from operations in the
foreseeable future will be used to repay debt, management believes that
operating cash flow and liquidity under its credit facilities as described below
are adequate to meet the current liquidity needs of the Company, including
currently planned capital expenditures. The Company’s Credit Agreement and
$166.2 million in notes mature in the second fiscal quarter of 2011. The
Company will seek to refinance this debt prior to maturity and from time to time
explores opportunities to do so. In addition, the Company may
continue to be opportunistic in reducing debt by pursuing cash repurchases of
its notes and/or note exchanges.
.
Debt
and Related Matters:
The
Company's bank debt consists of a credit facility entered into on June 27, 2006
that provided for a $3.2 billion senior unsecured (subsequently secured as
discussed below) 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 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.
In
connection with the private debt exchange offer described below, the Company
entered into an agreement on May 20, 2009 to amend the Credit Agreement which,
among other things, allows the Company to use up to $60 million under its
revolving credit facility to repurchase its 7.125% Notes due June 1, 2011 or its
4.625% Notes due November 1, 2014 (up to a $25 million limit on the 2014 Notes),
subject to certain conditions. The cash may also be used in
connection with a debt exchange offer so long as any new notes issued in such an
offer have a stated maturity of no earlier than July 1, 2014. In March and
September 2008, the Company entered into amendments to the Credit Agreement
which gave the Company additional flexibility in its bank covenants. Terms of
the Credit Agreement are described below. Pursuant to the most recent
amendment, the revolving credit facility will be reduced to $560 million from
$600 million (to a total facility of $1.1 billion) in increments through
December 31, 2009; and further reduced by $10 million through June 30, 2010. A
further reduction of $125 million is required upon the sale by the Company of
the Miami land.
As of
September 27, 2009, the revolving credit facility provided for loans up to $595
million. A total of $171.9 million was available under the revolving credit
facility at September 27, 2009, all of which could be borrowed under the
Company's current bank covenants. The principal amount available for borrowing
under the revolving credit facility declined to $590 million on September 30,
2009.
The
Company wrote off $0.4 million and $3.7 million of deferred financing costs in
the first half of 2009 and 2008, respectively in connection with the amendments,
which were recorded in interest expense in the consolidated statement of
operations.
Debt
under the amended Credit Agreement incurs interest at the London Interbank
Offered Rate (LIBOR) plus a spread ranging from 325 basis points to 475 basis
points or at the agent’s base rate plus a spread ranging from 225 basis points
to 325 basis points, based upon the Company’s total leverage ratio (as defined
in the Credit Agreement). A commitment fee for the unused revolving
credit is priced at 50 basis points to 75 basis points, based upon the Company’s
total leverage ratio. The Company currently pays interest on borrowings at
a rate of 400 basis points over LIBOR and pays 62.5 basis points for commitment
fees.
The
amended Credit Agreement contains quarterly financial covenants including
requirements that the Company maintain a minimum interest coverage ratio (as
defined in the Credit Agreement) of 2.00 to 1.00 through maturity of the
agreement and a maximum leverage ratio (as defined in the Credit Agreement) of
7.00 to 1.00 from September 27, 2009 through September 26, 2010 and 6.25 to 1.00
from and after December 26, 2010. Upon the sale by the Company of the
Miami land, the applicable leverage ratio covenant will be reduced by 0.25
times. At September 27, 2009, the Company’s interest coverage ratio (as defined
in the Credit Agreement) was 2.80 to 1.00 and its leverage ratio (as defined in
the Credit Agreement) was 5.73 to 1.00 and the Company was in compliance with
all financial debt covenants. Because of the significance of the
Company’s outstanding debt, remaining in compliance with debt covenants is
critical to the Company’s operations.
Advertising
revenue results declined in fiscal year 2008 and continued to decline in the
first nine months of 2009. Declining revenues that are not offset by expense
savings impact the Company’s interest coverage and leverage ratios. To offset
the revenue declines, the Company implemented various restructuring plans in
2008.
The
Company also implemented additional restructuring initiatives early in the
second quarter of 2009. The restructuring plans have included a combination of
reductions in staff of up to 1,600 positions, consolidating functions and
outsourcing certain functions. In addition, the Company froze its defined
benefit pension plans, suspended its 401(k) matching contributions and
implemented salary reductions, among other steps. Please see “Recent Events and
Trends”, section entitled “Restructuring Plans” for an
expanded discussion of these restructuring initiatives. If revenue
declines continue beyond those currently anticipated, the Company expects to
continue to restructure operations and reduce debt to maintain compliance with
its covenants.
Substantially
all of the Company’s subsidiaries (as defined in the Credit Agreement) have
guaranteed the Company’s obligations under the Credit Agreement. The
Company has granted a security interest to the agent under the Credit Agreement
in assets that include, but are not limited to, intangible assets, inventory,
receivables and certain minority investments as collateral for the facility but
the security interest excludes any land, buildings, machinery and equipment
(PP&E) and any leasehold interests and improvements with respect to such
PP&E, which would be reflected on a consolidated balance sheet of the
Company and its subsidiaries, and shares of stock and indebtedness of the
subsidiaries of the Company. In addition, the Credit Agreement includes
requirements for mandatory prepayments of bank debt from certain sources of
cash; limitations on cash dividends allowed to be paid at certain leverage
levels; and other covenants including limitations on additional debt and the
ability to retire public bonds early, amongst other changes.
At
September 27, 2009, the Company had outstanding letters of credit totaling $54.2
million securing estimated obligations stemming from workers’ compensation
claims and other contingent claims.
In the
second fiscal quarter of 2008, the Company purchased $300 million aggregate
principal amount of its outstanding debt securities for
$282.4 million in cash obtained from its revolving credit facility and recorded
a pre-tax gain in the second fiscal quarter of 2008 of $19.5
million. The Company purchased $150 million, $130 million and $20
million of its outstanding principal amount of debt securities maturing in 2009,
2011 and 2014, respectively. In the third fiscal quarter of 2008, the
Company purchased $5.9 million aggregate principal of its outstanding debt
securities maturing in 2009 for $5.8 million in cash obtained from its revolving
credit facility and recorded a pre-tax gain in the third fiscal quarter of
$180,000. The Company recognized $19.7 million in gain on the
extinguishment of debt through September 28, 2008 on these
transactions.
On
June 26, 2009, the Company completed a private debt exchange offer for all of
its outstanding public debt securities for a combination of cash and newly
issued 15.75% senior notes due July 15, 2014 (New Notes). The New Notes are
senior unsecured obligations and are guaranteed by McClatchy’s existing and
future material domestic subsidiaries. In exchange for $3.4 million in
cash and $24.2 million of New Notes the Company retired the following
outstanding principal amount of debt securities maturing in the respective
years: $3.8 million in 2011 notes, $11.1 million in 2014 notes, $53.4 million in
2017 notes, $10.8 million in 2027 debentures and $23.8 million in 2029
debentures. The Company recorded a pre-tax gain of approximately $44.1 million
in the third fiscal quarter of 2009. The gain was equal to the carrying amount
of the exchanged securities, less the total future cash payments of the New
Notes, including both payments of interest and principal amount, and related
expenses of the exchange.
The New
Notes are governed by an indenture entered into on June 26, 2009 which includes
a number of covenants that are applicable to the Company and its restricted
subsidiaries. The covenants are subject to a number of important
exceptions and qualifications set forth in the indenture. These
covenants include, among other things, restrictions on the ability of the
Company and its restricted subsidiaries to incur additional debt, make
investments and other restricted payments, pay dividends on capital stock, or
redeem or repurchase capital stock or subordinated obligations; sell assets or
enter into sale/leaseback transactions; create specified liens; create or permit
restrictions on the ability of the Company’s restricted subsidiaries to pay
dividends or make other distributions to it; engage in certain transactions with
affiliates; and consolidate or merge with or into other companies or sell all or
substantially all of the Company’s and its subsidiaries’ assets, taken as a
whole.
As of
June 30, 2009, subsequent to the bond exchange offering, both S&P and
Moody’s issued lower ratings on the Company’s debt and issued corporate family
ratings as described in the table below. The ratings downgrades had no impact on
the interest rate and commitment fees the Company pays under the Credit
Agreement. The ratings have remained the same through the filing date
of this report on Form 10-Q.
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Debt
Ratings |
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Credit
Facility:
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S
& P
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CC
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Moody's
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B1
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Unsecured
Notes:
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S
& P
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C
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Moody's
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Caa3
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Senior
Notes:
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S
& P
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C
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Moody's
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Caa1
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Corp.
Family Rating:
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S
& P
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CC
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Moody's
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Caa2
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Contractual
Obligations:
The
Company increased its long-term contractual obligations by $13.6 million from
fiscal year-end 2008 for commitments related primarily to outsourcing agreements
for various production activities.
The
Company decreased its pension obligations by approximately $50.3 million from
year-end 2008 as the qualified pension plan and certain postretirement plans
were revalued as of January 31, 2009 in connection with the freezing of the
pension plans. See Note 5 to the consolidated financial statements above for
more discussion.
Off-Balance-Sheet
Arrangements:
As of
September 27, 2009, the Company did not have any significant off-balance-sheet
arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.
ITEM 3. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
Debt
under the Credit Agreement bears interest at the LIBOR plus a spread ranging
from 325 basis points to 475 basis points, based upon the total leverage
ratio. A hypothetical 25 basis point change in LIBOR for a
fiscal year would increase or decrease annual net income by $1.5 million to $2.0
million based on the current amounts outstanding under the Credit
Agreement.
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 third fiscal quarter
of 2009 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:
This
report on Form 10-Q contains forward-looking statements regarding the Company's
actual and expected financial performance and operations. These
statements are based upon our current expectations and knowledge of factors
impacting our business, including, without limitation, statements about our
ability to consummate contemplated sales transactions for our assets or
investments which may enable debt reduction on anticipated terms, our customers
and the markets in which we operate, advertising revenues, circulation volumes,
the economy, our pension plans, including our assumptions regarding return on
pension plan assets and assumed salary increases, newsprint costs, our
restructuring plans, including projected costs and savings, amortization
expense, stock option expenses, prepayment of debt, capital expenditures,
litigation, sufficiency of capital resources, any plans to refinance our debt,
possible acquisitions and investments and our future financial
performance. Such statements are subject to risks, trends and
uncertainties.
Forward-looking
statements are generally preceded by, followed by or are a part of sentences
that include the words “believes,” “expects,” “anticipates,” “estimates,” or
similar expressions. For all of those statements, we claim the protection of the
safe harbor for forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995. You should understand that the
following important factors, in addition to those discussed elsewhere in this
document and in the documents which we incorporate by reference, could affect
the future results of McClatchy and could cause those future results to differ
materially from those expressed in our forward-looking statements: the duration
and depth of the economic recession; McClatchy may not generate cash from
operations, or otherwise, necessary to reduce debt or meet debt covenants as
expected; McClatchy may not consummate contemplated transactions to enable debt
reduction on anticipated terms or at all; 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; the
Company’s inability to continue to satisfy the NYSE’s qualitative and
quantitative listing standards for continued listing; increases in the cost of
newsprint; bankruptcies or financial strain of its major advertising customers;
litigation or any potential litigation; geo-political uncertainties including
the risk of war; changes in printing and distribution costs from anticipated
levels; changes in interest rates; changes in pension assets and liabilities;
increased consolidation among major retailers in our markets or other events
depressing the level of advertising; our inability to negotiate and obtain
favorable terms under collective bargaining agreements with unions; competitive
action by other companies; decreased circulation and diminished revenues from
retail, classified and national advertising; and other factors, many of which
are beyond our control.
The
Company has significant competition in the market for news and advertising,
which may reduce its advertising and circulation revenues in the
future.
The
Company’s primary source of revenues is advertising, followed by circulation
revenues. In recent years, the advertising industry generally has experienced a
secular shift toward internet advertising and away from other traditional media.
In addition, the Company’s circulation has declined over the last two years,
reflecting general trends in the newspaper industry including consumer migration
toward the internet and other media for news and information. The Company has
attempted to take advantage of the growth of online media and advertising by
operating local internet sites in each of its daily newspaper markets, but faces
increasing competition from other online sources for both advertising and
circulation revenues. This increased competition has had and is expected to
continue to have an adverse effect on the Company’s business and financial
results, including negatively impacting revenues and margins.
Weak
general economic and business conditions subject the Company to risks of
declines in advertising revenues.
The
United States economy is undergoing an extended period of economic uncertainty,
which has caused, among other things, a general tightening in the credit
markets, limited access to the credit markets, lower levels of liquidity,
increases in the rates of default and bankruptcy, lower consumer and business
spending, and lower consumer net worth. The resulting pressure on the labor and
retail markets and the downturn in consumer confidence have weakened the
economic climate in all of the markets in which the Company does business and
have had and are expected to continue to have an adverse effect on the Company’s
advertising revenues. Classified advertising revenues have continued to decline
since late 2006 and advertising results declined across the board in 2008,
through the third quarter of 2009 and into the fourth quarter of
2009. To the extent these economic conditions continue or worsen, the
Company’s business and advertising revenues will be adversely affected, which
could negatively impact the Company’s operations and cash flows and the
Company’s ability to meet the covenants in its existing senior secured credit
agreement.
If
management is unable to execute cost-control measures successfully, total
operating costs may be greater than expected, which may adversely affect the
Company’s profitability.
Given
general economic and business conditions and the Company’s recent operating
results, the Company has taken steps to lower operating costs by reducing
workforce and implementing general cost-control measures. If the
Company does not achieve its expected savings from these initiatives or if
operating costs increase as a result of these initiatives, total operating costs
may be greater than anticipated. Although management believes that
appropriate steps have been taken and are being taken
to
implement cost-control efforts, such efforts may affect the Company’s business
and its ability to generate future revenue. Significant portions of
the Company’s expenses are fixed costs that neither increase nor decrease
proportionately with revenues. As a result, management is limited in
its ability to reduce costs in the short term. If these cost-control
efforts do not reduce costs sufficiently, income from continuing operations may
continue to decline.
The
collectability of accounts receivable under current adverse economic conditions
could deteriorate to a greater extent than provided for in the Company’s
financial statements.
Recessionary
conditions in the U.S have increased the Company’s exposure to losses resulting
from the potential bankruptcy of the Company’s advertising customers. The
recession could also impair the ability of those with whom the Company does
business to satisfy their obligations to the Company even if they do not file
for bankruptcy. As a result, the Company’s results of operations may continue to
be adversely affected. The Company’s accounts receivables are stated
at net estimated realizable value and the Company’s allowance for doubtful
accounts has been determined based on several factors, including the aging of
accounts receivables and evaluation of significant individual credit risk
accounts. If such collectability estimates prove inaccurate, adjustments to
future operating results could occur.
The
economic downturn and the decline in the price of the Company’s publicly traded
stock may result in goodwill and masthead impairment charges.
The
Company recorded masthead impairment charges of $59.6 million in 2008 and $3.0
billion of goodwill and masthead impairment charges in 2007 reflecting the
economic downturn and the decline in the price of the Company’s publicly traded
common stock. Should general economic, market or business conditions continue to
decline, and continue to have a negative impact on the Company’s stock price,
the Company may be required to record additional impairment
charges.
The
Company has $1.9 billion in total consolidated debt, which subjects the Company
to significant interest and credit risk.
As of
September 27, 2009, the Company had approximately $1.9 billion in total
consolidated debt outstanding. This level of debt increases the Company’s
vulnerability to general adverse economic and industry conditions. Debt service
costs are subject to interest rate changes as well as any changes in the
Company’s leverage ratio (ratio of debt to operating cash flow as defined in the
Company’s existing senior secured credit agreement with its banks). Higher
leverage ratios could increase the level of debt service costs and also affect
the Company’s future ability to refinance maturing debt, or the ultimate
structure of such refinancing. In addition, the Company’s credit ratings could
affect its ability to refinance its debt. On June 30, 2009, Standard
& Poor’s lowered its corporate credit rating on the Company to ‘CC’ from
‘CCC+’, with a negative rating outlook, and the ratings on the Company’s bonds
were lowered from ‘CCC-’ to ‘C’ (including the newly issued senior
notes). On June 30, 2009, Moody’s lowered its corporate credit rating
on the Company to ‘Caa2’ from ‘Caa1’, with a negative rating outlook, and the
ratings on the Company’s unsecured bonds were lowered from ‘Caa2’ to ‘Caa3’ and
Moody’s issued a “Caa1” rating on the Company’s newly issued senior
notes.
Potential
disruptions in the credit markets could adversely affect the availability and
cost of short-term funds for liquidity requirements, and could adversely affect
the Company’s access to capital or to obtain financing at reasonable rates and
its ability to refinance existing debt at reasonable rates or at
all.
If
internal funds are not available from the Company’s operations, the Company may
be required to rely on the banking and credit markets to meet its financial
commitments and short-term liquidity needs. Disruptions in the capital and
credit markets, as have been experienced during 2008 and 2009, could adversely
affect the Company’s ability to draw on its existing senior secured revolving
credit facility. The Company’s access to funds under that credit facility is
dependent on the ability of the banks that are parties to the facility to meet
their funding commitments. Those banks may not be able to meet their funding
commitments to the Company if they experience shortages of capital and liquidity
or if they experience excessive volumes of borrowing requests within a short
period of time. Any disruption could require the Company to take measures to
conserve cash until the markets stabilize or until alternative credit
arrangements or other funding for the Company’s business needs can be arranged.
Although the Company believes that its operating cash flow and current access to
capital and credit markets, including the Company’s existing senior secured
revolving credit facility, will give it the ability to meet its financial needs
for the foreseeable future, there can be no assurance that continued or
increased volatility and disruption in the capital and credit markets will not
impair the Company’s liquidity. If this should happen, any alternative credit
arrangements may not be put in place without a potentially significant increase
in the Company’s cost of borrowing.
As of
September 27, 2009, the Company had approximately $1.9 billion in long-term
debt, of which $0.9 billion was in the form of borrowings under bank credit
facilities maturing in 2011. The balance was in the form of unsecured
publicly traded notes maturing in part in 2011, 2014, 2017, 2027 and 2029, with
aggregate outstanding principal amounts of $166 million, $169 million, $347
million, $89 million and $276 million, respectively; and senior notes totaling
$24.2 million in principal which are also due in 2014. While cash flow should
permit the Company to lower the amount of this debt before it matures, a
significant portion of this debt will probably need to be
refinanced. Access to the capital markets for longer-term financing
is currently restricted due to the unprecedented and ongoing turmoil in the
capital markets. As of September 27, 2009, the Company had
approximately $171.9 million of additional borrowing capacity under its existing
senior secured revolving credit facility, providing near-term liquidity to fund
its needs.
The
Company may not be able to finance future needs or adapt its business plan to
changes because of restrictions contained in the terms of its existing senior
secured credit agreement and the instruments governing other debt.
The
agreements governing the Company’s existing debt, including its existing senior
secured credit agreement, contain various covenants that limit, subject in each
case to certain exceptions, the ability to, among other things:
· incur
additional debt, including guarantees by the Company or its
subsidiaries;
·
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pay
dividends or make distributions on capital stock, repurchase or make
payments on capital stock or prepay, repurchase, redeem, retire, defease,
acquire or cancel any of the Company’s existing notes or debentures prior
to the stated maturity thereof;
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· create
specified liens;
· make
investments or acquisitions;
·
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create
or permit restrictions on the ability of its subsidiaries to pay dividends
or make other distributions to the Company or to guarantee its debt, limit
the Company or any of its subsidiaries’ ability to create liens, or that
require the grant of a lien to secure an obligation if a lien is granted
to secure another obligation;
|
·
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engage
in certain transactions with affiliates;
or
|
·
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dissolve,
liquidate, consolidate or merge with or into other companies, sell,
transfer, license, lease or dispose of Company
assets.
|
The
Company’s ability to comply with covenants contained in its existing senior
secured credit agreement and agreements governing other debt to which the
Company is or may become a party may be affected by events beyond management’s
control, including prevailing economic, financial and industry conditions. The
existing senior secured credit agreement requires the Company to comply with a
maximum consolidated leverage ratio and a minimum consolidated interest coverage
ratio. Additionally the existing senior secured credit agreement contains
numerous affirmative covenants, including covenants regarding payment of taxes
and other obligations, maintenance of insurance, maintenance of credit ratings
for the existing senior secured credit agreement, reporting requirements and
compliance with applicable laws and regulations. Additional debt
incurred in the future may subject the Company to further
covenants.
Remaining
in compliance with the covenants contained in the Company’s indebtedness is
critical to the Company’s operations. A covenant default under the
Company’s existing senior secured credit agreement would permit lenders to stop
lending to the Company under the revolving credit facility. In
addition, if any default under the agreements governing any indebtedness is not
cured or waived, the default could result in an acceleration of debt under the
Company’s other debt instruments that contain cross acceleration or
cross-default provisions, which could require the Company to repay debt,
together with accrued interest, prior to the date it otherwise is due and that
could adversely affect the Company’s financial condition. In
addition, the Company has granted a security interest, which could be enforced
in the event of default, to the lenders under its existing senior secured credit
agreement in substantially all of the assets of the Company and its
subsidiaries, including intangible assets, inventory, receivables and certain
minority investments. Even if the lenders under our existing senior
secured credit agreement do not accelerate their loans or enforce their security
interest, a default may result in the lenders requiring the Company to apply all
available cash to reduce their loans or otherwise further limit the Company’s
use of its free cash flow during the continuance of such default.
The
Company requires newsprint for operations and, therefore, its operating results
may be adversely affected if the price of newsprint increases.
Newsprint
is the major component of the Company’s cost of raw materials. Excluding costs
related to restructuring, newsprint accounted for 11.8% McClatchy’s operating
expenses for the first nine months of fiscal 2009. Accordingly, earnings are
sensitive to changes in newsprint prices. The Company has not attempted to hedge
fluctuations in the normal purchases of newsprint or enter into contracts with
embedded derivatives for the purchase of newsprint. If the price of newsprint
increases materially, operating results could be adversely affected. If
newsprint suppliers experience labor unrest, transportation difficulties or
other supply disruptions, the Company’s ability to produce and deliver
newspapers could be impaired and/or the cost of the newsprint could increase,
both of which would negatively affect its operating results.
A
portion of the Company’s employees are members of unions and if the Company
experiences labor unrest, its ability to produce and deliver newspapers could be
impaired.
If
McClatchy experiences labor unrest, its ability to produce and deliver
newspapers could be impaired in some locations. The results of future labor
negotiations could harm the Company’s operating results. The Company’s
newspapers have not endured a labor strike for decades. However, management
cannot ensure that a strike will not occur at one or more of the Company’s
newspapers in the future. As of September 27, 2009, approximately 5.9% of
full-time and part-time employees were represented by unions. Most of the
Company’s union-represented employees are currently working under labor
agreements, which expire at various times through 2012. McClatchy faces
collective bargaining upon the expirations of these labor agreements. Even if
its newspapers do not suffer a labor strike, the Company’s operating results
could be harmed if the results of labor negotiations restrict its ability to
maximize the efficiency of its newspaper operations.
Under
the Pension Protection Act (PPA), the Company will be required to make greater
cash contributions to its defined benefit pension plans in the next several
years than previously required, placing greater liquidity needs upon its
operations.
The poor
capital markets of 2008 that have affected all investments impacted the funds in
the Company’s pension plans which had poor returns in 2008. As a result of the
plans’ lower assets, the projected benefit obligations of the Company’s
qualified pension plans exceed plan assets by $575 million as of March 29, 2009.
The excess of benefit obligations over pension assets is expected to give rise
to an increase in required pension contributions over the next several years.
The PPA funding rules are likely to require the net liability at the end of 2009
to be funded with tax deductible contributions between 2010 and 2015, with
approximately 3% to 5% of such net liability coming due in 2010. While
legislation has recently been enacted to give some relief in funding and there
may be more related legislation, the contributions will place additional strain
on the Company’s liquidity needs.
The
Company has invested in certain internet ventures, but such ventures may not be
as successful as expected which could adversely affect the results of operations
of the Company.
The
Company continues to evaluate its business and make strategic investments in
digital ventures, either alone or with partners, to further its growth in its
online businesses. There can be no assurances that these investments or
partnerships will result in growth in advertising or will produce equity income
or capital gains in future years.
Exhibits
filed as part of this Report as listed in the Index of Exhibits, on page 39
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
|
|
November
6, 2009
|
|
By: /s/
Gary B. Pruitt
|
Date
|
Gary
B. Pruitt
Chief
Executive Officer
|
November
6, 2009
|
|
By: /s/
Patrick J. Talamantes
|
Date
|
|
Patrick
J. Talamantes
Chief
Financial Officer
|
|
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TABLE
OF EXHIBITS
|
|
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|
Exhibit
|
|
Description
|
|
|
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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
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|
|
|
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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
|
|
|
|
|
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3.2 |
* |
The
Company's Bylaws as amended and restated effective July 23, 2008, included
as Exhibit 3.2 in the Company's Current Report on Form 8-K filed July 28,
2008
|
|
|
|
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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
|
|
|
|
|
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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 |
* |
Amendment
No. 4 to Credit Agreement dated September 26, 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
September 30, 2008
|
|
|
|
|
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10.6 |
* |
Amendment
No. 5 to Credit Agreement dated May 20, 2009 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 May 21,
2009
|
|
|
|
|
|
10.7 |
* |
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
|
|
|
|
|
|
10.8 |
* |
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
|
|
|
|
|
|
10.9 |
* |
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
|
Exhibit
|
|
Description
|
|
10.10* |
|
Indenture,
dated as of June 26, 2009, by and between U.S. Bank National Association,
as Trustee, and the Company included as Exhibit 4.1 to the Company’s
Current Report on Form 8-K filed June 30, 2009
|
|
|
|
|
|
10.11* |
|
Registration
Rights Agreement, dated as of June 26, 2009, by and between Lazard Capital
Markets LLC and the Company included as Exhibit 4.2 to the Company’s
Current Report on Form 8-K filed June 30, 2009
|
|
|
|
|
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**10.12* |
|
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
|
|
|
|
|
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**10.13* |
|
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
|
|
|
|
|
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**10.14* |
|
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
|
|
|
|
|
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**10.15* |
|
Amended
and Restated Supplemental Executive Retirement Plan included as Exhibit
10.4 to the Company's 2002 Report on Form 10-K
|
|
|
|
|
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**10.16* |
|
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
|
|
|
|
|
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**10.17* |
|
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
|
|
|
|
|
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**10.18* |
|
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
|
|
|
|
|
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**10.19* |
|
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
|
|
|
|
|
|
**10.20* |
|
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
|
|
|
|
|
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**10.21* |
|
Separation
and Release Agreement between the Company and Lynn Dickerson dated July
16, 2009, included as exhibit 10.21 to the Company’s Quarterly Report on
Form 10-Q filed for the Quarter Ending on June 28, 2009
|
|
|
|
|
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**10.22* |
|
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
|
|
|
|
|
|
**10.23* |
|
Amended
and Restated 1997 Stock Option Plan included as Exhibit 10.7 to the
Company's 2002 Report on Form 10-K
|
|
|
|
|
|
**10.24* |
|
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
|
|
|
|
|
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**10.25* |
|
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
|
|
|
|
|
|
**10.26* |
|
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
|
Exhibit
|
|
Description
|
|
|
|
|
10.27* |
|
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
|
|
|
|
|
|
10.28* |
|
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
|
|
|
|
|
|
10.29* |
|
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
|
|
|
|
|
|
**10.30* |
|
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
|
|
|
|
|
|
**10.31* |
|
The
Company’s 2004 Stock Incentive Plan, as amended and restated included as
Exhibit 10.25 in the Company’s Quarterly Report on Form 10-Q filed for the
quarter ending on June 29, 2008
|
|
|
|
|
|
**10.32* |
|
Amendment
No. 1 to the Company’s Amended and Restated Long-Term Incentive Plan
included as Exhibit 10.26 in the Company’s Quarterly Report on
Form 10-Q filed for the quarter ending on June 29, 2008
|
|
|
|
|
|
**10.33* |
|
The
Company’s Amended and Restated CEO Bonus Plan included as Exhibit
10.27 in the Company’s Quarterly Report on Form 10-Q filed for
the quarter ending on June 29, 2008
|
|
|
|
|
|
**10.34* |
|
The
Company’s Amended and Restated Employee Stock Purchase Plan included as
Exhibit 10.28 in the Company’s Quarterly Report on Form 10-Q
filed for the quarter ending on June 29, 2008
|
|
|
|
|
|
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
|
41