Exhibit 99.1
McCLATCHY REPORTS PRELIMINARY FOURTH QUARTER AND FULL YEAR 2007 RESULTS
Expects to Record Non-Cash Impairment Charge Driven by Recent Stock Price Decline
SACRAMENTO, Calif., February 6, 2008 – The McClatchy Company (NYSE-MNI) today reported preliminary income from continuing operations in the fourth quarter of 2007 of $33.2 million, or 40 cents per share compared to fourth quarter 2006 income from continuing operations of $76.9 million, or 94 cents per share. The company’s preliminary 2007 fourth quarter results include income tax expense of $7.5 million, or nine cents per share, related to changes in prior period estimates. Total preliminary net income in the 2007 fourth quarter was $30.1 million or 37 cents per share. Preliminary results do not include an anticipated non-cash charge for impairment of goodwill and long-lived assets discussed below.
Management noted that it is in the process of performing its required annual impairment testing of goodwill and other long-lived assets as of the end of its fiscal year, December 30, 2007. Due primarily to the decline in the company’s stock price since the end of its third quarter, the company expects to record a non-cash impairment charge to GAAP earnings in its fourth quarter. The amount of any such charge will be included in its financial statements when it files its Form 10-K with the Securities and Exchange Commission (SEC) on or before February 28, 2008. The company will issue a press release announcing the final fourth quarter and full-year 2007 results when it files its Form 10-K with the SEC.
The company’s fiscal 2007 reporting period is a 52-week year compared to a 53-week year in 2006, and as a result, the fiscal fourth quarter of 2007 includes 13 weeks compared to 14 weeks in the 2006 fiscal quarter. The company estimates that income from continuing operations was higher by approximately $5.3 million in 2006 because of the additional week reported in that quarter.
Revenues from continuing operations in the fourth quarter of 2007 were $573.4 million, down 14.9% from revenues from continuing operations of $673.6 million in 2006. The company estimates that on a comparable 13-week basis, revenues from continuing operations in the fourth quarter of 2007 were down 9.1% from 2006. Advertising revenues were $489.4 million, down
9.3% from 2006 on a comparable 13-week basis, and circulation revenues were $66.1 million, down 7.8% on a comparable basis. The decline in circulation revenue in the 2007 quarter reflects, in part, a reclassification of $2.0 million in delivery expenses which reduced both revenues and expenses. Excluding the impact of this adjustment, circulation revenue was down 5.0%.
The company benefited from continued strong cost reduction efforts in the 2007 fourth quarter. On a comparable 13-week basis cash expenses were down 9.1% (8.6% excluding the circulation related reclassification) as the result of reduction in staffing levels, lower newsprint expense and continued vigilance in all other expenses.
The company recorded a loss from unconsolidated equity investments of $8.3 million (primarily reflecting losses from its investments in newsprint companies), compared to income from investments of $4.9 million in the 2006 quarter. The internet companies in which the company has investments were profitable during the quarter.
Last month McClatchy and its partners, affiliates of Cox Enterprises, Inc. and Media General, Inc., announced an agreement to sell SP Newsprint Company, of which McClatchy is a one-third owner. The transaction is expected to close by the end of April 2008, subject to regulatory approval. McClatchy expects to record a gain on the transaction when it closes, and the sale is expected to provide McClatchy approximately $40 million in after-tax cash proceeds.
In the 2006 fourth quarter the company recorded a loss from discontinued operations of $356.2 million, or $4.34 per share related to the results of the (Minneapolis) Star Tribune newspaper, which the company sold on March 5, 2007. The 2006 loss from discontinued operations included a $363.0 million after-tax write-down of the net assets of the Star Tribune to the agreed-upon selling price. The company’s total net loss for the 2006 quarter was $279.3 million, or $3.40 per share, including discontinued operations.
Preliminary Full Year Results:
The company reported a preliminary loss from continuing operations in 2007 of $1.26 billion or $15.40 per share, including the third quarter non-cash after-tax impairment charges of $1.37 billion, or $16.66 per share, but not including the impairment charge expected to be taken in the company’s fourth quarter. Preliminary income from continuing operations prior to any impairment charges was $103.5 million. The company’s total preliminary net loss, including the results of discontinued operations, in 2007 was $1.27 billion, or $15.52 per share. Discontinued operations reflect the results of the Star Tribune newspaper which was sold on March 5, 2007.
Income from continuing operations for the full year of 2006 was $183.5 million, or $2.84 per share. Income from continuing operations included a pre-tax gain of $9.0 million related to the sale of land in the third quarter of 2006. The loss from discontinued operations for the full-year 2006 was $339.1 million, or $5.25 per share, and the company’s total net loss was $155.6 million or $2.41 per share.
Discontinued operations in 2006 reflect the results of eight former Knight Ridder newspapers which were sold in the third quarter of 2006, and the results of the Star Tribune newspaper. The company’s 2006 results from continuing operations include the operations of the Knight Ridder newspapers it retained after the acquisition.
Revenues from continuing operations in 2007 were $2.3 billion compared to $1.7 billion in 2006. The greater revenues primarily reflect the addition of the retained Knight Ridder newspapers acquired in the third quarter of 2006. Revenues in 2006 also reflect the additional 53rd week. Advertising revenues in 2007 totaled $1.9 billion and circulation revenues were $275.7 million.
On a pro forma basis, including the retained Knight Ridder newspapers acquired in the third quarter of 2006 and excluding the Star Tribune newspaper in both years, and including a comparable 52 weeks in each year, total revenues in 2007 would have been down 7.9%, with advertising revenues down 8.6%, and circulation revenues down 4.9%.
Interest expense from continuing operations in 2007 includes $5.7 million related to $530.0 million in debt repaid from the proceeds of the sale of the Star Tribune on March 5, 2007. However, the operations of the Star Tribune were included in discontinued operations during the first two months of 2007. Total losses recorded from unconsolidated equity investments were $36.9 million in 2007, primarily reflecting losses from its investments in newsprint companies and The Seattle Times Company, compared to income from unconsolidated investments in 2006 of $5.0 million. The internet companies in which the company has equity investments were profitable in 2007.
Management’s Comments:
Commenting on McClatchy’s results, Gary Pruitt, chairman and chief executive officer, said, “The economic downturn led by real estate continued to impact our advertising revenues in the fourth quarter. California and Florida have been particularly hurt by the real estate downturn, so even though they represent only about a third of our total revenues they account for a majority of our advertising revenue declines. These two regions accounted for 58% of the decline in advertising revenues in the fourth quarter, and on a pro forma basis accounted for 67% of the revenue loss for all of 2007, clearly pointing to the cyclical factors impacting our business throughout 2007. In fact, advertising revenue in our other regions declined only 4.5% in 2007 compared to a 15.3% decline in California and Florida.
“Still, our advertising results in the fourth quarter were in line with management’s expectations, and we were able to mitigate the impact of the advertising decline on our results with strong cost controls in the quarter. Total cash expenses on a comparable basis (factoring out the extra week in December 2006) were down 9.1% in both the fourth quarter and for all of 2007 on a pro forma basis. Operating cash flow in 2007 was down just 4.3% from 2006 on a pro forma basis.
“While we saw a slight improvement in advertising in the fourth quarter compared to the second and third quarters, the advertising environment in 2008 does not appear to be improving.
In fact, in January we’ve seen headwinds from a worsening national economy. We now expect advertising will likely be down in the low double-digit range in the first quarter of 2008. As the year progresses we expect advertising revenue trends to improve somewhat from the first quarter, but we don’t have sufficient visibility to be more specific.
“This recessionary outlook, coupled with the continued decline in our stock price since the end of the third quarter will likely result in an additional impairment charge in the fourth quarter. It’s important to understand that this non-cash charge does not reflect our view of the long-term health of the newspaper industry or McClatchy. In fact, if we were able to base the valuation on our discounted cash flow analysis and recent transactions, our current level of goodwill could be sustained. But GAAP requires that we reconcile the value indicated by our publicly traded stock with our stockholders’ equity.
“We believe investors should focus on the more important fundamentals of our business. We continue to produce strong cash flows and are quickly moving to become a successful hybrid print and online media company. We are focused on four major areas: driving new revenues, with a particular emphasis on online advertising; focusing on growing total audience; providing high quality public service journalism; and reducing our cost structure. We will continue our cost restructuring and expect cash operating expenses to be down in the high-single digit range in the first quarter. Interest expense is expected to decline reflecting both lower interest rates and our continued focus on repaying debt.
“Periods such as these require sound business judgments and focused steadfast execution. We are determined to remain the leading local media company in some of the best growth markets in the nation. Recessions by definition are followed by economic expansions, and we are working hard to position the company to benefit from a stronger economy once it turns.”
Pat Talamantes, McClatchy’s chief financial officer, said, “We were pleased to announce the agreement to sell SP Newsprint Company, which will provide approximately $40 million in after-tax cash proceeds. We will continue to use our cash flows and proceeds from assets sales to reduce debt. Debt at the end of the year was $2.47 billion, down over $800 million from the end of 2006, and we currently expect our debt balance at the end of 2008 to be approximately $2 billion.”
The company’s pro forma statistical report, which summarizes revenue performance for December, the fourth fiscal quarter and full year of 2007, follows. This report includes advertising revenues for the 20 Knight Ridder newspapers the company acquired, but did not own in the first half of its fiscal 2006, and excludes the revenues of the Star Tribune newspaper, and presents estimates of comparable reporting periods excluding the extra week in the reporting periods in December 2006. The pro forma information is meant to provide investors a sense of what the revenue from continuing operations would have been for comparable operations and reporting periods. Reconciliations of non-GAAP terms used in this release are included in attached summary schedules and are posted on our website at www.mcclatchy.com.
At noon Eastern Time today, McClatchy will review its results in a conference call (877-278-1205 pass code 30561084) and webcast (www.mcclatchy.com). The webcast will be archived at McClatchy’s website.
About McClatchy:
The McClatchy Company is the third largest newspaper company in the United States, with 31 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 complement its newspapers and extend its audience reach in each market. Together with its newspapers and direct marketing products, these operations make McClatchy the leading local media company in each of its premium high growth markets. McClatchy-owned newspapers include The Miami Herald, The Sacramento Bee, The Fort Worth Star-Telegram, The Kansas City Star, The Charlotte Observer, and The (Raleigh) News & Observer.
McClatchy also has a portfolio of premium digital assets. Its leading local websites offer users information, comprehensive news, advertising, e-commerce and other services. The company owns and operates McClatchy Interactive, an interactive operation that provides websites with content, publishing tools and software development. McClatchy owns 14.4% of CareerBuilder, the nation’s largest online job site. McClatchy also owns 25.6% of Classified Ventures, a newspaper industry partnership that offers two of the nations’s premier classified websites, the auto website, cars.com, and the rental site, apartments.com. McClatchy also operates Real Cities (www.RealCities.com), the largest national advertising network of local news websites. McClatchy is listed on the New York Stock Exchange under the symbol MNI.
Additional Information:
Statements in this press release regarding future financial and operating results, including revenues, operating expenses, cash flows, debt levels, as well as future opportunities for the company and any other statements about management’s future expectations, beliefs, goals, plans or prospects constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any statements that are not statements of historical fact (including statements containing the words “believes,” “plans,” “anticipates,” “expects,” estimates and similar expressions) should also be considered to be forward-looking statements. There are a number of important risks and uncertainties that could cause actual results or events to differ materially from those indicated by such forward-looking statements, including: the duration and depth of an economic recession in markets where McClatchy operates its newspapers may reduce its income and cash flow greater than expected; McClatchy may not consummate contemplated transactions which may enable debt reduction on anticipated terms or at all; McClatchy may not achieve its expense reduction targets or may do harm to its operations in attempting to achieve such targets; McClatchy’s operations have been, and will likely continue to be, adversely affected by competition, including competition from internet publishing and advertising platforms; McClatchy’s expense and income levels could be adversely affected by changes in the cost of newsprint and McClatchy’s operations could be negatively affected by any deterioration in its labor relations, as well as the other risks detailed from time to time in the
Company’s publicly filed documents, including the Company’s Annual Report on Form 10-K for the year ended December 31, 2006, filed with the U.S. Securities and Exchange Commission. McClatchy disclaims any intention and assumes no obligation to update the forward-looking information contained in this release.
| THE McCLATCHY COMPANY | |
| PRELIMINARY CONSOLIDATED STATEMENT OF INCOME (UNAUDITED) | |
| (In thousands, except per share amounts) | |
| | | | | | | | | | | | |
| | Three Months Ended | | | Year Ended | |
| | December 30, | | | December 31, | | | December 30, | | | December 31, | |
| | 2007 | | | 2006 | | | 2007 | | | 2006 | |
| REVENUES - NET: | | | | | | | | | | | |
| Advertising | $ | 489,405 | | | $ | 576,123 | | | $ | 1,911,722 | | | $ | 1,432,913 | |
| Circulation | | 66,076 | | | | 77,037 | | | | 275,658 | | | | 194,940 | |
| Other | | 17,953 | | | | 20,439 | | | | 72,983 | | | | 47,337 | |
| | | 573,434 | | | | 673,599 | | | | 2,260,363 | | | | 1,675,190 | |
| OPERATING EXPENSES: | | | | | | | | | | | | | | | |
| Compensation | | 222,372 | | | | 250,129 | | | | 911,964 | | | | 652,582 | |
| Newsprint and supplements | | 66,431 | | | | 94,366 | | | | 277,634 | | | | 231,068 | |
| Depreciation and amortization | | 36,119 | | | | 42,343 | | | | 148,559 | | | | 98,865 | |
| Other operating expenses | | 124,932 | | | | 141,076 | | | | 496,112 | | | | 345,767 | |
| Goodwill and newspaper masthead impairment | | - | | | | - | | | | 1,434,590 | | | | - | |
| | | 449,854 | | | | 527,914 | | | | 3,268,859 | | | | 1,328,282 | |
| | | | | | | | | | | | | | | | |
| OPERATING INCOME (LOSS) | | 123,580 | | | | 145,685 | | | | (1,008,496 | ) | | | 346,908 | |
| | | | | | | | | | | | | | | | |
| NON-OPERATING (EXPENSES) INCOME: | | | | | | | | | | | | | | | |
| Interest expense | | (46,392 | ) | | | (46,985 | ) | | | (197,997 | ) | | | (93,664 | ) |
| Interest income | | 114 | | | | 1,527 | | | | 243 | | | | 3,562 | |
| Equity income (losses) in unconsolidated companies, net | | (8,300 | ) | | | 4,870 | | | | (36,899 | ) | | | 4,951 | |
| Write-down of investments and land held for sale | | - | | | | - | | | | (84,279 | ) | | | - | |
| Other - net | | 539 | | | | 738 | | | | 1,693 | | | | 9,128 | |
| | | (54,039 | ) | | | (39,850 | ) | | | (317,239 | ) | | | (76,023 | ) |
| INCOME (LOSS) FROM CONTINUING OPERATIONS | | | | | | | | | | | | | |
| BEFORE INCOME TAX PROVISION (BENEFIT) | | 69,541 | | | | 105,835 | | | | (1,325,735 | ) | | | 270,885 | |
| | | | | | | | | | | | | | | | |
| INCOME TAX PROVISION (BENEFIT) | | 36,335 | | | | 28,920 | | | | (62,798 | ) | | | 87,390 | |
| | | | | | | | | | | | | | | | |
| INCOME (LOSS) FROM CONTINUING OPERATIONS | | 33,206 | | | | 76,915 | | | | (1,262,937 | ) | | | 183,495 | |
| | | | | | | | | | | | | | | | |
| LOSS FROM DISCONTINUED OPERATIONS - | | | | | | | | | | | | | | | |
| NET OF INCOME TAXES | | (3,080 | ) | | | (356,186 | ) | | | (9,404 | ) | | | (339,072 | ) |
| | | | | | | | | | | | | | | | |
| NET INCOME (LOSS) | $ | 30,126 | | | $ | (279,271 | ) | | $ | (1,272,341 | ) | | $ | (155,577 | ) |
| | | | | | | | | | | | | | | | |
| NET INCOME (LOSS) PER COMMON SHARE: | | | | | | | | | | | | | | | |
| Basic: | | | | | | | | | | | | | | | |
| Income (loss) from continuing operations | $ | 0.40 | | | $ | 0.94 | | | $ | (15.40 | ) | | $ | 2.85 | |
| Loss from discontinued operations | $ | (0.03 | ) | | $ | (4.35 | ) | | $ | (0.12 | ) | | $ | (5.27 | ) |
| Net income (loss) per share | $ | 0.37 | | | $ | (3.41 | ) | | $ | (15.52 | ) | | $ | (2.42 | ) |
| | | | | | | | | | | | | | | | |
| Diluted: | | | | | | | | | | | | | | | |
| Income (loss) from continuing operations | $ | 0.40 | | | $ | 0.94 | | | $ | (15.40 | ) | | $ | 2.84 | |
| Loss from discontinued operations | $ | (0.03 | ) | | $ | (4.34 | ) | | $ | (0.12 | ) | | $ | (5.25 | ) |
| Net income (loss) per share | $ | 0.37 | | | $ | (3.40 | ) | | $ | (15.52 | ) | | $ | (2.41 | ) |
| | | | | | | | | | | | | | | | |
| WEIGHTED AVERAGE NUMBER OF COMMON SHARES: | | | | | | | | | | | | | |
| Basic | | 82,097 | | | | 81,803 | | | | 82,000 | | | | 64,415 | |
| Diluted | | 82,162 | | | | 81,995 | | | | 82,000 | | | | 64,645 | |
| The McClatchy Company | |
| Consolidated Statistical Report | |
| (In thousands, except for preprints) | |
| | | | | | | | | | | | | | | | | |
| | | December | |
| | | Combined | | Print Only | |
| | | | | *Pro Forma | | | | | As Reported | | | *Pro Forma | | | |
| | | | | 4-week | | % | | | 5-week | | | | 4-week | | % | |
| Revenues - Net: | | 2007 | | 2006 | | Change | | | 2006 | | 2007 | | 2006 | | Change | |
| | | | | | | | | | | | | | | | | |
| Advertising | | | | | | | | | | | | | | | | |
| Retail | | $ | 78,869 | | $ | 81,350 | | | -3.0 | % | | $ | 99,193 | | $ | 76,627 | | $ | 79,744 | | | -3.9 | % |
| National | | | 14,724 | | | 15,299 | | | -3.8 | % | | | 19,692 | | | 13,652 | | | 17,423 | | | -21.6 | % |
| Classified Total | | | 37,449 | | | 46,950 | | | -20.2 | % | | | 58,737 | | | 29,576 | | | 38,305 | | | -22.8 | % |
| Automotive | | | 12,133 | | | 12,400 | | | -2.2 | % | | | 16,577 | | | 9,796 | | | 10,863 | | | -9.8 | % |
| Real Estate | | | 8,777 | | | 13,320 | | | -34.1 | % | | | 15,853 | | | 7,721 | | | 12,266 | | | -37.1 | % |
| Employment | | | 10,517 | | | 15,596 | | | -32.6 | % | | | 19,185 | | | 6,475 | | | 9,947 | | | -34.9 | % |
| Other Class | | | 6,022 | | | 5,634 | | | 6.9 | % | | | 7,122 | | | 5,584 | | | 5,229 | | | 6.8 | % |
| Direct Marketing | | | 14,416 | | | 15,535 | | | -7.2 | % | | | 18,060 | | | 14,416 | | | 15,535 | | | -7.2 | % |
| Other Adv Rev | | | 100 | | | 77 | | | 29.9 | % | | | 115 | | | 99 | | | 77 | | | 28.6 | % |
| Total Advertising | | $ | 145,558 | | $ | 159,211 | | | -8.6 | % | | $ | 195,797 | | $ | 134,370 | | $ | 151,084 | | | -11.1 | % |
| | | | | | | | | | | | | | | | | | | | | | | | |
| Circulation | | | 18,747 | | | 21,344 | | | -12.2 | % | | | 26,729 | | | | | | | | | | |
| Other | | | 6,010 | | | 4,360 | | | 37.8 | % | | | 5,339 | | | | | | | | | | |
| Total Revenues | | $ | 170,315 | | $ | 184,915 | | | -7.9 | % | | $ | 227,865 | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Memo: Online OnlyAdvertising Revenue | | $ | 11,188 | | $ | 8,127 | | | 37.7 | % | | $ | 10,516 | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| Advertising Revenues by Market: | | | | | | | | | | | | | | | | | | | | |
| California | | $ | 26,389 | | $ | 31,089 | | | -15.1 | % | | $ | 38,546 | | $ | 24,650 | | $ | 29,440 | | | -16.3 | % |
| Florida | | | 25,658 | | | 28,325 | | | -9.4 | % | | | 33,553 | | | 24,106 | | | 26,642 | | | -9.5 | % |
| Texas | | | 15,897 | | | 16,449 | | | -3.4 | % | | | 20,500 | | | 14,824 | | | 15,608 | | | -5.0 | % |
| Southeast | | | 35,133 | | | 37,630 | | | -6.6 | % | | | 46,749 | | | 32,035 | | | 34,695 | | | -7.7 | % |
| Midwest | | | 20,382 | | | 22,223 | | | -8.3 | % | | | 27,444 | | | 18,644 | | | 20,664 | | | -9.8 | % |
| Northwest | | | 16,087 | | | 17,370 | | | -7.4 | % | | | 21,329 | | | 14,653 | | | 15,988 | | | -8.4 | % |
| Other | | | 6,012 | | | 6,125 | | | -1.8 | % | | | 7,676 | | | 5,458 | | | 8,047 | | | -32.2 | % |
| Total Advertising | | $ | 145,558 | | $ | 159,211 | | | -8.6 | % | | $ | 195,797 | | $ | 134,370 | | $ | 151,084 | | | -11.1 | % |
| | | | | | | | | | | | | | | | | | | | | | | | |
| Advertising Statistics for Dailies: | | | | | | | | | | | | | | | | | | | | |
| Full Run ROP Linage | | | | | | | | | | | | | 3,147.8 | | | 2,461.1 | | | 2,591.0 | | | -5.0 | % |
| | | | | | | | | | | | | | | | | | | | | | | | |
| Millions of Preprints Distributed | | | | | | | | | | 823.9 | | | 644.8 | | | 702.8 | | | -8.3 | % |
| | | | | | | | | | | | | | | | | | | | | | | | |
| Average Paid Circulation:** | | | | | | | | | | | | | | | | | | | | |
| Daily | | | | | | | | | | | | | | | | 2,703.2 | | | 2,800.0 | | | -3.5 | % |
| Sunday | | | | | | | | | | | | | | | | 3,306.1 | | | 3,466.8 | | | -4.6 | % |
| | | | | | | | | | | | | | | | | | | | | | | | |
| * Pro Forma includes Knight Ridder acquisitions and excludes (Minneapolis) Star Tribune newspaper. | | | | |
| ** Reflects average paid circulation based upon number of days in period. Does not reflect ABC reported figures. | | | | |
| The McClatchy Company | |
| Consolidated Statistical Report | |
| (In thousands, except for preprints) | |
| | | | | | | | | | | | | | | | | |
| | | Quarter 4 | |
| | | Combined | | Print Only | |
| | | | | *Pro Forma | | | | | As Reported | | | *Pro Forma | | | |
| | | | | 13-week | | % | | | 14-week | | | | 13-week | | % | |
| Revenues - Net: | | 2007 | | 2006 | | Change | | | 2006 | | 2007 | | 2006 | | Change | |
| | | | | | | | | | | | | | | | | |
| Advertising | | | | | | | | | | | | | | | | |
| Retail | | $ | 249,192 | | $ | 256,082 | | | -2.7 | % | | $ | 274,341 | | $ | 242,081 | | $ | 250,877 | | | -3.5 | % |
| National | | | 49,090 | | | 52,645 | | | -6.8 | % | | | 57,081 | | | 46,106 | | | 50,923 | | | -9.5 | % |
| Classified Total | | | 145,952 | | | 182,397 | | | -20.0 | % | | | 194,174 | | | 117,663 | | | 152,837 | | | -23.0 | % |
| Automotive | | | 39,608 | | | 45,692 | | | -13.3 | % | | | 49,859 | | | 32,770 | | | 40,453 | | | -19.0 | % |
| Real Estate | | | 39,337 | | | 56,951 | | | -30.9 | % | | | 59,484 | | | 35,799 | | | 53,167 | | | -32.7 | % |
| Employment | | | 45,075 | | | 59,325 | | | -24.0 | % | | | 62,914 | | | 28,769 | | | 40,131 | | | -28.3 | % |
| Other Class | | | 21,932 | | | 20,429 | | | 7.4 | % | | | 21,917 | | | 20,325 | | | 19,086 | | | 6.5 | % |
| Direct Marketing | | | 44,727 | | | 48,174 | | | -7.2 | % | | | 50,249 | | | 44,727 | | | 48,174 | | | -7.2 | % |
| Other Adv Rev | | | 444 | | | 239 | | | 85.8 | % | | | 278 | | | 444 | | | 239 | | | 85.8 | % |
| Total Advertising | | $ | 489,405 | | $ | 539,537 | | | -9.3 | % | | $ | 576,123 | | $ | 451,021 | | $ | 503,050 | | | -10.3 | % |
| | | | | | | | | | | | | | | | | | | | | | | | |
| Circulation | | | 66,076 | | | 71,651 | | | -7.8 | % | | | 77,037 | | | | | | | | | | |
| Other | | | 17,953 | | | 19,464 | | | -7.8 | % | | | 20,439 | | | | | | | | | | |
| Total Revenues | | $ | 573,434 | | $ | 630,652 | | | -9.1 | % | | $ | 673,599 | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Memo: Online OnlyAdvertising Revenue | | $ | 38,384 | | $ | 36,487 | | | 5.2 | % | | $ | 38,925 | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| Advertising Revenues by Market: | | | | | | | | | | | | | | | | | | | | |
| California | | $ | 89,079 | | $ | 107,189 | | | -16.9 | % | | $ | 114,646 | | $ | 83,164 | | $ | 101,342 | | | -17.9 | % |
| Florida | | | 79,578 | | | 90,428 | | | -12.0 | % | | | 95,656 | | | 74,788 | | | 84,688 | | | -11.7 | % |
| Texas | | | 50,946 | | | 55,135 | | | -7.6 | % | | | 59,185 | | | 47,440 | | | 51,933 | | | -8.7 | % |
| Southeast | | | 125,394 | | | 131,637 | | | -4.7 | % | | | 140,756 | | | 114,132 | | | 120,811 | | | -5.5 | % |
| Midwest | | | 69,661 | | | 74,863 | | | -6.9 | % | | | 80,085 | | | 63,560 | | | 68,847 | | | -7.7 | % |
| Northwest | | | 54,142 | | | 59,739 | | | -9.4 | % | | | 63,698 | | | 49,139 | | | 55,082 | | | -10.8 | % |
| Other | | | 20,605 | | | 20,546 | | | 0.3 | % | | | 22,097 | | | 18,798 | | | 20,347 | | | -7.6 | % |
| Total Advertising | | $ | 489,405 | | $ | 539,537 | | | -9.3 | % | | $ | 576,123 | | $ | 451,021 | | $ | 503,050 | | | -10.3 | % |
| | | | | | | | | | | | | | | | | | | | | | | | |
| Advertising Statistics for Dailies: | | | | | | | | | | | | | | | | | | | | |
| Full Run ROP Linage | | | | | | | | | | | | | 9,516.6 | | | 8,177.5 | | | 9,242.4 | | | -11.5 | % |
| | | | | | | | | | | | | | | | | | | | | | | | |
| Millions of Preprints Distributed | | | | | | | | | | 2,230.4 | | | 2,042.6 | | | 2,126.6 | | | -3.9 | % |
| | | | | | | | | | | | | | | | | | | | | | | | |
| Average Paid Circulation:** | | | | | | | | | | | | | | | | | | | | |
| Daily | | | | | | | | | | | | | | | | 2,754.2 | | | 2,854.1 | | | -3.5 | % |
| Sunday | | | | | | | | | | | | | | | | 3,344.8 | | | 3,485.5 | | | -4.0 | % |
| | | | | | | | | | | | | | | | | | | | | | | | |
| * Pro Forma includes Knight Ridder acquisitions and excludes (Minneapolis) Star Tribune newspaper. | | | | |
| ** Reflects average paid circulation based upon number of days in period. Does not reflect ABC reported figures. | | | | |
| The McClatchy Company | |
| Consolidated Statistical Report | |
| (In thousands, except for preprints) | |
| | | | | | | | | | | | | | | | | |
| | | December Year-to-Date | |
| | | Combined | | Print Only | |
| | | | | *Pro Forma | | | | | As Reported | | | | *Pro Forma | | | |
| | | | | 52-week | | % | | | 53-week | | | | 52-week | | % | |
| Revenues - Net: | | 2007 | | 2006 | | Change | | | 2006 | | 2007 | | 2006 | | Change | |
| | | | | | | | | | | | | | | | | |
| Advertising | | | | | | | | | | | | | | | | |
| Retail | | $ | 873,070 | | $ | 898,798 | | | -2.9 | % | | $ | 624,473 | | $ | 847,419 | | $ | 881,985 | | | -3.9 | % |
| National | | | 182,024 | | | 201,461 | | | -9.6 | % | | | 133,840 | | | 173,654 | | | 190,185 | | | -8.7 | % |
| Classified Total | | | 696,358 | | | 822,172 | | | -15.3 | % | | | 557,484 | | | 566,440 | | | 689,927 | | | -17.9 | % |
| Automotive | | | 167,872 | | | 197,464 | | | -15.0 | % | | | 136,429 | | | 142,798 | | | 176,594 | | | -19.1 | % |
| Real Estate | | | 197,569 | | | 254,175 | | | -22.3 | % | | | 180,381 | | | 182,711 | | | 238,440 | | | -23.4 | % |
| Employment | | | 240,257 | | | 283,394 | | | -15.2 | % | | | 183,989 | | | 156,778 | | | 193,620 | | | -19.0 | % |
| Other Class | | | 90,660 | | | 87,139 | | | 4.0 | % | | | 56,685 | | | 84,153 | | | 81,273 | | | 3.5 | % |
| Direct Marketing | | | 158,257 | | | 167,510 | | | -5.5 | % | | | 115,579 | | | 158,257 | | | 167,510 | | | -5.5 | % |
| Other Adv Rev | | | 2,013 | | | 1,511 | | | 33.2 | % | | | 1,537 | | | 2,013 | | | 1,511 | | | 33.2 | % |
| Total Advertising | | $ | 1,911,722 | | $ | 2,091,452 | | | -8.6 | % | | $ | 1,432,913 | | $ | 1,747,783 | | $ | 1,931,118 | | | -9.5 | % |
| | | | | | | | | | | | | | | | | | | | | | | | |
| Circulation | | | 275,658 | | | 289,959 | | | -4.9 | % | | | 194,940 | | | | | | | | | | |
| Other | | | 72,983 | | | 73,096 | | | -0.2 | % | | | 47,337 | | | | | | | | | | |
| Total Revenues | | $ | 2,260,363 | | $ | 2,454,507 | | | -7.9 | % | | $ | 1,675,190 | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Memo: Online OnlyAdvertising Revenue | | $ | 163,939 | | $ | 160,334 | | | 2.2 | % | | $ | 102,021 | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| Advertising Revenues by Market: | | | | | | | | | | | | | | | | | | | | |
| California | | $ | 363,197 | | $ | 427,984 | | | -15.1 | % | | $ | 421,993 | | $ | 337,677 | | $ | 403,588 | | | -16.3 | % |
| Florida | | | 300,905 | | | 356,411 | | | -15.6 | % | | | 176,229 | | | 279,904 | | | 332,056 | | | -15.7 | % |
| Texas | | | 198,022 | | | 213,089 | | | -7.1 | % | | | 109,989 | | | 183,973 | | | 199,157 | | | -7.6 | % |
| Southeast | | | 487,901 | | | 504,097 | | | -3.2 | % | | | 344,187 | | | 438,915 | | | 458,957 | | | -4.4 | % |
| Midwest | | | 265,526 | | | 283,604 | | | -6.4 | % | | | 147,986 | | | 240,526 | | | 258,232 | | | -6.9 | % |
| Northwest | | | 217,863 | | | 227,255 | | | -4.1 | % | | | 189,546 | | | 196,124 | | | 209,015 | | | -6.2 | % |
| Other | | | 78,308 | | | 79,012 | | | -0.9 | % | | | 42,983 | | | 70,664 | | | 70,113 | | | 0.8 | % |
| Total Advertising | | $ | 1,911,722 | | $ | 2,091,452 | | | -8.6 | % | | $ | 1,432,913 | | $ | 1,747,783 | | $ | 1,931,118 | | | -9.5 | % |
| | | | | | | | | | | | | | | | | | | | | | | | |
| Advertising Statistics for Dailies: | | | | | | | | | | | | | | | | | | | | |
| Full Run ROP Linage | | | | | | | | | | | | | 24,473.6 | | | 32,679.7 | | | 36,487.8 | | | -10.4 | % |
| | | | | | | | | | | | | | | | | | | | | | | | |
| Millions of Preprints Distributed | | | | | | | | | | 5,074.3 | | | 6,977.0 | | | 7,318.5 | | | -4.7 | % |
| | | | | | | | | | | | | | | | | | | | | | | | |
| Average Paid Circulation:** | | | | | | | | | | | | | | | | | | | | |
| Daily | | | | | | | | | | | | | | | | 2,737.7 | | | 2,836.7 | | | -3.5 | % |
| Sunday | | | | | | | | | | | | | | | | 3,374.4 | | | 3,513.8 | | | -4.0 | % |
| | | | | | | | | | | | | | | | | | | | | | | | |
| * Pro Forma includes Knight Ridder acquisitions and excludes (Minneapolis) Star Tribune newspaper. | | | | |
| ** Reflects average paid circulation based upon number of days in period. Does not reflect ABC reported figures. | | | | |
| THE McCLATCHY COMPANY | |
| PRELIMINARY RECONCILIATION OF GAAP AMOUNTS | |
| (In thousands) | |
| | | | | | | | | | | | | |
| | | Three Months Ended | | | Year Ended | |
| | | | | | | | | | | | | |
| | | December 30, | | | December 31, | | | December 30, | | | December 31, | |
| | | 2007 | | | 2006 | | | 2007 | | | 2006 | |
| | | | | | Pro Forma | | | | | | Pro Forma | |
| REVENUES - NET: | | | | | | | | | | | | |
| Advertising | | $ | 489,405 | | | $ | 539,537 | | | $ | 1,911,722 | | | $ | 2,091,452 | |
| Circulation | | | 66,076 | | | | 71,651 | | | | 275,658 | | | | 289,959 | |
| Other | | | 17,953 | | | | 19,464 | | | | 72,983 | | | | 73,096 | |
| | | | 573,434 | | | | 630,652 | | | | 2,260,363 | | | | 2,454,507 | |
| OPERATING EXPENSES: | | | | | | | | | | | | | | | | |
| Cash expenses | | | 413,735 | | | | 455,035 | | | | 1,685,710 | | | | 1,854,263 | |
| Depreciation and amortization | | | 36,119 | | | | 39,422 | | | | 148,559 | | | | 150,081 | |
Goodwill and newspaper mastheadimpairment | | | - | | | | - | | | | 1,434,590 | | | | - | |
| | | | 449,854 | | | | 494,457 | | | | 3,268,859 | | | | 2,004,344 | |
| | | | | | | | | | | | | | | | | |
| OPERATING INCOME (LOSS) | | | 123,580 | | | | 136,195 | | | | (1,008,496 | ) | | | 450,163 | |
| Add back depreciation and amortization | | | 36,119 | | | | 39,422 | | | | 148,559 | | | | 150,081 | |
Add back goodwill and newspapermasthead impairment | | | - | | | | - | | | | 1,434,590 | | | | - | |
| OPERATING CASH FLOW | | $ | 159,699 | | | $ | 175,617 | | | $ | 574,653 | | | $ | 600,244 | |
| | | | | | | | | | | | | | | | | |
| OPERATING CASH FLOW MARGIN | | | 27.8 | % | | | 27.8 | % | | | 25.4 | % | | | 24.5 | % |
| | | | | | | | | | | | | | | | | |
| Operating cash flow margins are derived by dividing operating cash flow by total net revenues for each period. The company believes operating cash flow is commonly used as a measure of performance for newspaper companies, however, it does not purport to represent cash provided by operating activities as shown in the company's statement of cash flows, nor is it meant as a substitute for measures of performance prepared in accordance with generally accepted accounting principles. | |
| | | | | | | | | | | | | | | | | |
| Management is in the process of performing impairment testing of goodwill and other long-lived assets as of December 30, 2007. Due primarily to the decline of the company’s stock price since the end of its third quarter, the Company expects to record a non-cash impairment charge to GAAP earnings in its fourth quarter. The amount of any such charge will be included in its financial statements when it files its Form 10-K with the Securities and Exchange Commission (SEC) on or before February 28, 2008. The Company will issue a press release announcing the final fourth quarter and full-year 2007 results when it files it Form 10-K with the SEC. | |
| The McClatchy Company | |
| PRELIMINARY RECONCILIATION OF GAAP AMOUNTS | |
| Pro Forma Operating Income and Cash Flow | |
| Three Months ended December 31, 2006 | |
| (in thousands) | |
| | | | | | | | | | |
| | | Historical | | | Less 53rd | | | Pro Forma | |
| | | Amounts | | | Week | | | Amounts | |
| REVENUES -NET | | | | | | | | | |
| Advertising | | $ | 576,123 | | | $ | (36,586 | ) | | $ | 539,537 | |
| Circulation | | | 77,037 | | | | (5,386 | ) | | | 71,651 | |
| Other | | | 20,439 | | | | (975 | ) | | | 19,464 | |
| | | | 673,599 | | | | (42,947 | ) | | | 630,652 | |
| OPERATING EXPENSES | | | | | | | | | | | | |
| Cash expenses | | | 485,571 | | | | (30,536 | ) | | | 455,035 | |
| Depreciation and amortization | | | 42,343 | | | | (2,921 | ) | | | 39,422 | |
| | | | 527,914 | | | | (33,457 | ) | | | 494,457 | |
| | | | | | | | | | | | | |
| OPERATING INCOME | | | 145,685 | | | | (9,490 | ) | | | 136,195 | |
| Add back depreciation and amortization | | | 42,343 | | | | (2,921 | ) | | | 39,422 | |
| OPERATING CASH FLOW | | $ | 188,028 | | | $ | (12,411 | ) | | $ | 175,617 | |
| The McClatchy Company | |
| PRELIMINARY RECONCILIATION OF GAAP AMOUNTS | |
| Pro Forma Operating Income and Cash Flow | |
| Twelve Months ended December 31, 2006 | |
| (in thousands) | |
| | | | | | | | | | | | | |
| | | Historical | | | Acquisitions/ | | | Less 53rd | | | Pro Forma | |
| | | Amounts | | | Divestitures | | | Week | | | Amounts | |
| REVENUES -NET | | | | | | | | | | | | |
| Advertising | | $ | 1,432,913 | | | $ | 695,125 | | | $ | (36,586 | ) | | $ | 2,091,452 | |
| Circulation | | | 194,940 | | | | 100,405 | | | | (5,386 | ) | | | 289,959 | |
| Other | | | 47,337 | | | | 26,734 | | | | (975 | ) | | | 73,096 | |
| | | | 1,675,190 | | | | 822,264 | | | | (42,947 | ) | | | 2,454,507 | |
| OPERATING EXPENSES | | | | | | | | | | | | | | | | |
| Cash expenses | | | 1,229,417 | | | | 655,382 | | | | (30,536 | ) | | | 1,854,263 | |
| Depreciation and amortization | | | 98,865 | | | | 54,137 | | | | (2,921 | ) | | | 150,081 | |
| | | | 1,328,282 | | | | 709,519 | | | | (33,457 | ) | | | 2,004,344 | |
| | | | | | | | | | | | | | | | | |
| OPERATING INCOME | | | 346,908 | | | | 112,745 | | | | (9,490 | ) | | | 450,163 | |
| Add back depreciation and amortization | | | 98,865 | | | | 54,137 | | | | (2,921 | ) | | | 150,081 | |
| OPERATING CASH FLOW | | $ | 445,773 | | | $ | 166,882 | | | $ | (12,411 | ) | | $ | 600,244 | |
13
