[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
For the quarterly period ended: September 30, 2007 | ||||
or
|
||||
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
For
the transition period from __________________ to
__________________
|
||||
Commission
file number: 1-9824
|
||||
(Exact
name of registrant as specified in its
charter)
|
Delaware
|
52-2080478
|
||
(State
or other jurisdiction of incorporation or organization)
|
(I.R.S.
Employer Identification No.)
|
||
2100
"Q" Street, Sacramento, CA
|
95816
|
||
(Address
of principal executive offices)
|
(Zip
Code)
|
916-321-1846
|
Registrant's telephone number, including area
code
|
Large
accelerated filer [X]
|
Accelerated
filer [ ]
|
Non-accelerated
filer [ ]
|
[ ]
|
Yes
|
[X]
|
No
|
|
Class
A Common Stock
|
57,105,279
|
|
|
Class
B Common Stock
|
25,050,962
|
Part
I - FINANCIAL INFORMATION
|
Page
|
|
Item
1 - Financial Statements (unaudited):
|
||
Consolidated
Balance Sheet – September 30, 2007 and December 31, 2006
|
1
|
|
Consolidated
Statement of Income for the three and nine months ended September 30,
2007 and September 24, 2006
|
3
|
|
Consolidated
Statement of Cash Flows for the nine months ended September 30, 2007
and
September 24, 2006
|
4
|
|
Consolidated
Statement of Stockholders' Equity for the period December 31, 2006
to
September 30, 2007
|
6
|
|
Notes
to Consolidated Financial Statements
|
7
|
|
Item
2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
|
22
|
|
Item
3 - Quantitative and Qualitative Disclosures About Market
Risk
|
35
|
|
Item
4 - Controls and Procedures
|
36
|
|
Part
II - OTHER INFORMATION
|
||
Item
1A - Risk Factors
|
37
|
|
Item
6 - Exhibits
|
37
|
|
Signatures
|
38
|
|
Index
of Exhibits
|
39
|
THE
MCCLATCHY COMPANY
|
||||||||
CONSOLIDATED
BALANCE SHEET (UNAUDITED)
|
||||||||
(In
thousands)
|
||||||||
September
30,
|
December
31,
|
|||||||
2007
|
2006
|
|||||||
ASSETS
|
||||||||
CURRENT
ASSETS:
|
||||||||
Cash
and cash equivalents
|
$ |
24,996
|
$ |
19,581
|
||||
Trade
receivables (less allowance of
|
||||||||
$11,096
in 2007 and $12,732 in 2006)
|
256,380
|
311,785
|
||||||
Other
receivables
|
20,591
|
36,477
|
||||||
Newsprint,
ink and other inventories
|
36,522
|
52,097
|
||||||
Deferred
income taxes
|
47,055
|
248,753
|
||||||
Prepaid
income taxes
|
88,405
|
88,836
|
||||||
Income
tax refund
|
200,998
|
-
|
||||||
Land
and other assets held for sale
|
178,448
|
231,029
|
||||||
Other
current assets
|
20,079
|
23,192
|
||||||
Newspaper
assets held for sale
|
-
|
563,589
|
||||||
873,474
|
1,575,339
|
|||||||
PROPERTY,
PLANT AND EQUIPMENT:
|
||||||||
Land
|
205,042
|
204,692
|
||||||
Building
and improvements
|
391,661
|
382,206
|
||||||
Equipment
|
837,611
|
811,173
|
||||||
Construction
in progress
|
22,356
|
36,401
|
||||||
1,456,670
|
1,434,472
|
|||||||
Less
accumulated depreciation
|
(512,140 | ) | (458,496 | ) | ||||
944,530
|
975,976
|
|||||||
INTANGIBLE
ASSETS:
|
||||||||
Identifiable
intangibles -net
|
1,073,729
|
1,369,046
|
||||||
Goodwill
|
2,536,787
|
3,559,828
|
||||||
3,610,516
|
4,928,874
|
|||||||
INVESTMENTS
AND OTHER ASSETS:
|
||||||||
Investments
in unconsolidated companies
|
411,876
|
520,213
|
||||||
Prepaid
pension assets
|
27,770
|
32,457
|
||||||
Other
|
19,262
|
21,851
|
||||||
458,908
|
574,521
|
|||||||
TOTAL
ASSETS
|
$ |
5,887,428
|
$ |
8,054,710
|
||||
See
notes to consolidated financial statements.
|
THE
MCCLATCHY COMPANY
|
||||||||
CONSOLIDATED
BALANCE SHEET (UNAUDITED)
|
||||||||
(In
thousands, except share and per share amounts)
|
||||||||
September
30,
|
December
31,
|
|||||||
2007
|
2006
|
|||||||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||||||
CURRENT
LIABILITIES:
|
||||||||
Current
portion of bank debt
|
$ |
-
|
$ |
530,000
|
||||
Accounts
payable
|
89,166
|
139,501
|
||||||
Accrued
compensation
|
99,307
|
135,363
|
||||||
Income
taxes
|
-
|
47,330
|
||||||
Unearned
revenue
|
86,230
|
82,524
|
||||||
Accrued
interest
|
38,353
|
33,697
|
||||||
Accrued
dividends
|
14,778
|
14,727
|
||||||
Other
accrued liabilities
|
50,023
|
45,166
|
||||||
Newspaper
liabilities held for sale
|
-
|
83,806
|
||||||
377,857
|
1,112,114
|
|||||||
NON-CURRENT
LIABILITIES:
|
||||||||
Long-term
debt
|
2,579,413
|
2,746,669
|
||||||
Deferred
income taxes
|
691,537
|
706,893
|
||||||
Pension
and postretirement obligations
|
315,234
|
311,127
|
||||||
Other
long-term obligations
|
107,390
|
74,283
|
||||||
3,693,574
|
3,838,972
|
|||||||
COMMITMENTS
AND CONTINGENCIES
|
||||||||
STOCKHOLDERS'
EQUITY:
|
||||||||
Common
stock $.01 par value:
|
||||||||
Class
A - authorized 200,000,000 shares,
|
||||||||
issued 57,103,913 in 2007 and 55,795,162 in 2006
|
571
|
557
|
||||||
Class
B - authorized 60,000,000 shares,
|
||||||||
issued 25,054,430 in 2007 and 26,116,397 in 2006
|
251
|
261
|
||||||
Additional
paid-in capital
|
2,195,755
|
2,182,544
|
||||||
Retained
earnings (accumulated deficit)
|
(332,964 | ) |
1,016,023
|
|||||
Treasury
stock, 3,029 shares at cost
|
(122 | ) |
-
|
|||||
Accumulated
other comprehensive loss
|
(47,494 | ) | (95,761 | ) | ||||
1,815,997
|
3,103,624
|
|||||||
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY
|
$ |
5,887,428
|
$ |
8,054,710
|
||||
See
notes to consolidated financial statements.
|
THE
McCLATCHY COMPANY
|
||||||||||||||||
CONSOLIDATED
STATEMENT OF INCOME (UNAUDITED)
|
||||||||||||||||
(In
thousands, except per share amounts)
|
||||||||||||||||
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
September
30,
|
September
24,
|
September
30,
|
September
24,
|
|||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
REVENUES
- NET:
|
||||||||||||||||
Advertising
|
$ |
457,017
|
$ |
506,774
|
$ |
1,422,317
|
$ |
856,791
|
||||||||
Circulation
|
67,995
|
70,637
|
209,582
|
117,905
|
||||||||||||
Other
|
15,332
|
17,717
|
55,030
|
26,895
|
||||||||||||
540,344
|
595,128
|
1,686,929
|
1,001,591
|
|||||||||||||
OPERATING
EXPENSES:
|
||||||||||||||||
Compensation
|
224,309
|
232,611
|
689,592
|
402,453
|
||||||||||||
Newsprint
and supplements
|
63,600
|
83,171
|
211,203
|
136,702
|
||||||||||||
Depreciation
and amortization
|
36,250
|
36,662
|
112,440
|
56,522
|
||||||||||||
Other
operating expenses
|
118,440
|
129,001
|
371,180
|
204,691
|
||||||||||||
Goodwill
and newspaper masthead impairment
|
1,434,590
|
-
|
1,434,590
|
-
|
||||||||||||
1,877,189
|
481,445
|
2,819,005
|
800,368
|
|||||||||||||
OPERATING
INCOME (LOSS)
|
(1,336,845 | ) |
113,683
|
(1,132,076 | ) |
201,223
|
||||||||||
NON-OPERATING
(EXPENSES) INCOME:
|
||||||||||||||||
Interest
expense
|
(48,264 | ) | (46,689 | ) | (151,605 | ) | (46,679 | ) | ||||||||
Interest
income
|
23
|
2,007
|
129
|
2,035
|
||||||||||||
Equity
income (losses) in unconsolidated companies, net
|
(7,652 | ) | (811 | ) | (28,599 | ) |
81
|
|||||||||
Write-down
of investments and land held for sale
|
(84,568 | ) |
-
|
(84,568 | ) |
-
|
||||||||||
Other
- net
|
700
|
8,445
|
1,443
|
8,390
|
||||||||||||
(139,761 | ) | (37,048 | ) | (263,200 | ) | (36,173 | ) | |||||||||
INCOME
(LOSS) FROM CONTINUING OPERATIONS
|
||||||||||||||||
BEFORE
INCOME TAX PROVISION (BENEFIT)
|
(1,476,606 | ) |
76,635
|
(1,395,276 | ) |
165,050
|
||||||||||
INCOME
TAX PROVISION (BENEFIT)
|
(131,419 | ) |
24,025
|
(99,133 | ) |
58,470
|
||||||||||
INCOME
(LOSS) FROM CONTINUING OPERATIONS
|
(1,345,187 | ) |
52,610
|
(1,296,143 | ) |
106,580
|
||||||||||
INCOME
(LOSS) FROM DISCONTINUED OPERATIONS -
|
||||||||||||||||
NET
OF INCOME TAXES
|
(1,546 | ) | (779 | ) | (6,324 | ) |
17,114
|
|||||||||
NET
INCOME (LOSS)
|
$ | (1,346,733 | ) | $ |
51,831
|
$ | (1,302,467 | ) | $ |
123,694
|
||||||
NET
INCOME (LOSS) PER COMMON SHARE:
|
||||||||||||||||
Basic:
|
||||||||||||||||
Income
(loss) from continuing operations
|
$ | (16.40 | ) | $ |
0.65
|
$ | (15.81 | ) | $ |
1.83
|
||||||
Income
(loss) from discontinued operations
|
(0.02 | ) | (0.01 | ) | (0.08 | ) |
0.30
|
|||||||||
Net
income (loss) per share
|
$ | (16.42 | ) | $ |
0.64
|
$ | (15.89 | ) | $ |
2.13
|
||||||
Diluted:
|
||||||||||||||||
Income
(loss) from continuing operations
|
$ | (16.40 | ) | $ |
0.65
|
$ | (15.81 | ) | $ |
1.82
|
||||||
Income
(loss) from discontinued operations
|
(0.02 | ) | (0.01 | ) | (0.08 | ) |
0.30
|
|||||||||
Net
income (loss) per share
|
$ | (16.42 | ) | $ |
0.64
|
$ | (15.89 | ) | $ |
2.12
|
||||||
WEIGHTED
AVERAGE NUMBER OF COMMON SHARES:
|
||||||||||||||||
Basic
|
82,040
|
81,013
|
81,967
|
58,173
|
||||||||||||
Diluted
|
82,040
|
81,191
|
81,967
|
58,416
|
||||||||||||
See
notes to consolidated financial statements.
|
CONSOLIDATED
STATEMENT OF CASH FLOWS (UNAUDITED)
|
||||||||
(In
thousands)
|
||||||||
Nine
Months Ended
|
||||||||
September
30,
|
September
24,
|
|||||||
2007
|
2006
|
|||||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
Income
(loss) from continuing operations
|
$ | (1,296,143 | ) | $ |
106,580
|
|||
Reconciliation
to net cash provided of continuing operations:
|
||||||||
Depreciation
and amortization
|
112,440
|
56,522
|
||||||
Goodwill
and newspaper masthead impairment
|
1,434,590
|
-
|
||||||
Write-down
of investments and land held for sale
|
84,568
|
-
|
||||||
Contribution
to pension plans
|
-
|
(31,545 | ) | |||||
Employee
benefit expense
|
25,435
|
14,762
|
||||||
Stock
compensation expense
|
5,895
|
5,198
|
||||||
Deferred
income taxes
|
(150,481 | ) | (16,514 | ) | ||||
Gain
on sale of land
|
-
|
(9,047 | ) | |||||
Equity
(income) loss in unconsolidated companies
|
28,599
|
(81 | ) | |||||
Write
off and amortization of debt issuance costs
|
-
|
11,270
|
||||||
Other
|
3,090
|
(203 | ) | |||||
Changes
in certain assets and liabilities:
|
||||||||
Trade
receivables
|
55,405
|
4,880
|
||||||
Inventories
|
15,570
|
(2,717 | ) | |||||
Other
assets
|
21,796
|
(23,625 | ) | |||||
Accounts
payable
|
(42,793 | ) | (13,540 | ) | ||||
Accrued
compensation
|
(35,326 | ) | (4,395 | ) | ||||
Income
taxes
|
(44,580 | ) | (9,244 | ) | ||||
Other
liabilities
|
1,342
|
22,123
|
||||||
Net
cash provided by operating activities of continuing
operations
|
219,407
|
110,424
|
||||||
Net
cash provided by operating activities of discontinued
operations
|
2,007
|
30,603
|
||||||
Net
cash provided by operating activities
|
221,414
|
141,027
|
||||||
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
Proceeds
from sale of equipment
|
24,441
|
-
|
||||||
Proceeds
from sale of investments
|
24,288
|
320,328
|
||||||
Acquisition
of Knight Ridder - net of cash received
|
-
|
(2,771,290 | ) | |||||
Purchases
of property, plant and equipment
|
(43,222 | ) | (41,932 | ) | ||||
Equity
investments
|
(3,231 | ) | (405 | ) | ||||
Other
- net
|
(25 | ) |
325
|
|||||
Net
cash provided (used) by investing activities of continuing
operations
|
2,251
|
(2,492,974 | ) | |||||
Proceeds
from sale of newspapers
|
522,922
|
1,990,147
|
||||||
Purchases
of property, plant and equipment of discontinued
operations
|
(4,837 | ) | (8,327 | ) | ||||
Net
cash provided by investing activities of discontinued
operations
|
518,085
|
1,981,820
|
||||||
Net
cash provided (used) by investing activities
|
520,336
|
(511,154 | ) | |||||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
Borrowings
from term bank debt
|
-
|
2,200,000
|
||||||
Repayments
of term bank debt
|
(550,000 | ) | (1,100,000 | ) | ||||
Net
repayments of revolving bank debt
|
(149,022 | ) | (152 | ) | ||||
Repayment
of Knight Ridder debt
|
-
|
(389,261 | ) | |||||
Net
repayments of commercial paper
|
-
|
(154,200 | ) | |||||
Payment
of cash dividends
|
(44,263 | ) | (25,273 | ) | ||||
Payment
of debt issuance costs
|
-
|
(26,762 | ) | |||||
Other
- principally stock issuances
|
6,950
|
3,638
|
||||||
Net
cash (used) provided by financing activities
|
(736,335 | ) |
507,990
|
|||||
NET
CHANGE IN CASH AND CASH EQUIVALENTS
|
5,415
|
137,863
|
||||||
CASH
AND CASH EQUIVALENTS, BEGINNING OF YEAR
|
19,581
|
3,052
|
||||||
CASH
AND CASH EQUIVALENTS, END OF PERIOD
|
$ |
24,996
|
$ |
140,915
|
||||
See
notes to consolidated financial statements.
|
THE
McCLATCHY COMPANY
|
||||||||
CONSOLIDATED
STATEMENT OF CASH FLOWS (UNAUDITED)
Continued
|
||||||||
(In
thousands)
|
||||||||
Nine
Months Ended
|
||||||||
September
30,
|
|
September
24,
|
||||||
2007
|
2006
|
|||||||
NON-CASH
INVESTING AND FINANCING ACTIVITIES:
|
|
|
||||||
Acquisition
of Knight Ridder:
|
||||||||
Class
A common stock issued
|
$ |
-
|
$ |
1,821,476
|
||||
Assumption
of long-term debt
|
$ |
-
|
$ |
1,899,700
|
||||
OTHER
CASH FLOW INFORMATION:
|
||||||||
Cash
paid during the period for:
|
||||||||
Income
taxes (net of refunds)
|
$ |
97,417
|
$ |
83,821
|
||||
Interest
(net of capitalized interest)
|
$ |
138,130
|
$ |
27,836
|
||||
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)
|
Loss
|
Stock
|
Total
|
||||||||||||||||||||||
BALANCES,
DECEMBER 31, 2006
|
$ |
557
|
$ |
261
|
$ |
2,182,544
|
$ |
1,016,023
|
$ | (95,761 | ) | $ |
-
|
$ |
3,103,624
|
|||||||||||||
Adoption
of FIN 48
|
(2,218 | ) | (2,218 | ) | ||||||||||||||||||||||||
ADJUSTED
BALANCES,
JANUARY 1, 2007
|
557
|
261
|
2,182,544
|
1,013,805
|
(95,761 | ) |
-
|
3,101,406
|
||||||||||||||||||||
Net
loss
|
(1,302,467 | ) | (1,302,467 | ) | ||||||||||||||||||||||||
Pension
amortization from other
comprehensive income
|
3,197
|
3,197
|
||||||||||||||||||||||||||
Total
comprehensive loss
|
(1,299,270 | ) | ||||||||||||||||||||||||||
Adjustment
to eliminate minimum pension
liability related to
Star Tribune
|
45,070
|
45,070
|
||||||||||||||||||||||||||
Dividends
declared ($.54 per share)
|
(44,302 | ) | (44,302 | ) | ||||||||||||||||||||||||
Conversion
of 1,061,967
Class B shares to Class
A
|
10
|
(10 | ) |
-
|
||||||||||||||||||||||||
Issuance
of 246,784 Class A shares
|
||||||||||||||||||||||||||||
under
stock plans
|
4
|
6,767
|
6,771
|
|||||||||||||||||||||||||
Stock
compensation expense
|
6,144
|
6,144
|
||||||||||||||||||||||||||
Tax
benefit from stock plans
|
300
|
300
|
||||||||||||||||||||||||||
Purchase
of treasury stock
|
(122 | ) | (122 | ) | ||||||||||||||||||||||||
BALANCES,
SEPTEMBER 30,
2007
|
$ |
571
|
$ |
251
|
$ |
2,195,755
|
$ | (332,964 | ) | $ | (47,494 | ) | $ | (122 | ) | $ |
1,815,997
|
|||||||||||
See
notes to consolidated financial statements.
|
NOTE
1.
|
SIGNIFICANT
ACCOUNTING POLICIES
|
5
to 60 years for buildings and improvements
|
9
to 25 years for presses
|
2
to 15 years for other equipment
|
For
the three
months
ended
|
For
the nine
months
ended
|
|||||||||||||||
September
30,
2007
|
September
24,
2006
|
September
30,
2007
|
September
24,
2006
|
|||||||||||||
Net
income (loss)
|
$ | (1,346,733 | ) | $ |
51,831
|
$ | (1,302,467 | ) | $ |
123,694
|
||||||
Pension
amortization from other
comprehensive income, net of tax
|
1,065
|
-
|
3,197
|
-
|
||||||||||||
Total
comprehensive income (loss)
|
$ | (1,345,668 | ) | $ |
51,831
|
$ | (1,299,270 | ) | $ |
123,694
|
Nine
Months Ended
|
||||
September
24,
2006
|
||||
Revenues
|
$ |
1,823,854
|
||
Income
from continuing operations (1)
|
$ |
158,753
|
||
Income
from continuing operations per diluted share
|
$ |
1.18
|
||
(1) Excludes
$18.1 million of income tax benefits related to the Company’s
recalculation of its deferred tax liabilities and assets.
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
September
30,
2007
|
September
24,
2006
|
September
30,
2007
|
September
24,
2006
|
|||||||||||||
Revenues
|
$ | (73 | ) | $ |
146,995
|
$ |
52,921
|
$ |
326,770
|
|||||||
Income
(loss) from discontinued operations
before income taxes (1)
|
(2,553 | ) | (2,397 | ) | (7,190 | ) |
28,233
|
|||||||||
Income
tax expense (benefit)
|
(1,007 | ) | (1,618 | ) | (866 | ) |
11,119
|
|||||||||
Income
(loss) from discontinued operations
|
$ | (1,546 | ) | $ | (779 | ) | $ | (6,324 | ) | $ |
17,114
|
|||||
(1) Includes
interest expense allocated to discontinued operations of $1.2 million
for
the nine months ended September 30, 2007, and $18.6 million and $22.4
million for the three months and nine months ended September 24, 2006
respectively.
|
Company
|
%
Ownership Interest
|
September
30,
2007
|
December
31,
2006
|
|||||||||
CareerBuilder
|
14.4
|
$ |
225,230
|
$ |
230,506
|
|||||||
Seattle
Times Company
|
49.5
|
19,057
|
102,228
|
|||||||||
Classified
Ventures
|
25.6
|
99,360
|
98,259
|
|||||||||
SP
Newsprint
|
33.3
|
29,561
|
40,666
|
|||||||||
Ponderay
Newsprint
|
27.0
|
16,576
|
26,162
|
|||||||||
ShopLocal
|
15.0
|
10,974
|
10,993
|
|||||||||
Topix
|
11.3
|
9,283
|
9,956
|
|||||||||
McClatchy
Tribune Information Services
|
50.0
|
1,078
|
773
|
|||||||||
Other
|
Various
|
757
|
670
|
|||||||||
$ |
411,876
|
$ |
520,213
|
Intangible
assets and goodwill, along with their weighted-average amortization
periods consisted of the following (in thousands):
|
|||||||||||||
September
30, 2007
|
|||||||||||||
Weighted
|
|||||||||||||
Average
|
|||||||||||||
Gross
|
Accumulated
|
Net
|
Amortization
|
||||||||||
Amount
|
Amortization
|
Amount
|
Period
|
||||||||||
Intangible
assets subject to amortization:
|
|||||||||||||
Advertiser
and subscriber lists
|
$ |
817,701
|
$ | (191,591 | ) | $ |
626,110
|
14
years
|
|||||
Other
|
26,261
|
(11,234 | ) |
15,027
|
8
years
|
||||||||
Total
|
$ |
843,962
|
$ | (202,825 | ) |
641,137
|
|||||||
Other
intangible assets not subject to amortization:
|
|||||||||||||
Newspaper
mastheads
|
432,592
|
||||||||||||
Total
|
1,073,729
|
||||||||||||
Goodwill
|
2,536,787
|
||||||||||||
Total
intangible assets and goodwill
|
$ |
3,610,516
|
|||||||||||
December
31, 2006
|
|||||||||||||
Weighted
|
|||||||||||||
Average
|
|||||||||||||
Gross
|
Accumulated
|
Net
|
Amortization
|
||||||||||
Amount
|
Amortization
|
Amount
|
Period
|
||||||||||
Intangible
assets subject to amortization:
|
|||||||||||||
Advertiser
and subscriber lists
|
$ |
817,701
|
$ | (148,427 | ) | $ |
669,274
|
14
years
|
|||||
Other
|
26,261
|
(9,389 | ) |
16,772
|
8
years
|
||||||||
Total
|
$ |
843,962
|
$ | (157,816 | ) |
686,046
|
|||||||
Other
intangible assets not subject to amortization:
|
|||||||||||||
Newspaper
mastheads
|
683,000
|
||||||||||||
Total
|
1,369,046
|
||||||||||||
Goodwill
|
3,559,828
|
||||||||||||
Total
intangible assets and goodwill
|
$ |
4,928,874
|
The
following is a summary of the changes in the identifiable intangible
assets and goodwill from December 31, 2006 to September 30, 2007
(in
thousands):
|
||||||||||||||||||||||||
|
December
31,
|
Impairment
loss/
|
Amortization
|
September
30,
|
||||||||||||||||||||
|
2006
|
Additions
|
Adjustments
|
Expense
|
2007
|
|||||||||||||||||||
Intangible
assets subject
|
||||||||||||||||||||||||
to
amortization
|
|
$ | 843,862 |
$
|
25
|
$ |
75
|
$ |
-
|
$ |
843,962
|
|||||||||||||
Accumulated
amortization
|
(157,816
|
) |
-
|
(9 | ) | (45,000 | ) | (202,825 | ) | |||||||||||||||
|
686,046 |
25
|
66
|
(45,000 | ) |
641,137
|
||||||||||||||||||
Newspaper
mastheads
|
|
683,000
|
-
|
(250,408 | ) |
-
|
432,592
|
|||||||||||||||||
Goodwill
|
|
3,559,828
|
|
161,141 | (1 |
)
|
(1,184,182 | ) |
-
|
2,536,787
|
||||||||||||||
Total
|
|
$ |
4,928,874
|
$
|
161,166
|
$ | (1,434,524 | ) | $ | (45,000 | ) | $ |
3,610,516
|
|||||||||||
(1)
Relates primarily to revised estimates of deferred income tax assets
and
liabilities and acquired income tax reserves.
|
Amortization
expense for continuing operations was $15.0 million and $14.2 million
in
the third fiscal quarters of 2007 and 2006, respectively and was
$45.0
million and $16.6 million for the first nine months of fiscal 2007
and
2006, respectively.
|
|||||||
The
estimated amortization expense for the remainder of fiscal 2007
and the
five succeeding fiscal years is as follows (in
thousands):
|
|||||||
Amortization
|
|||||||
Year
|
|
Expense
|
|||||
2007
|
$ 14,950
|
||||||
2008
|
59,941
|
||||||
2009
|
59,910
|
||||||
2010
|
59,232
|
||||||
2011
|
57,837
|
||||||
2012
|
57,368
|
September
30,
2007
|
December
31,
2006
|
|||||||
Term
A bank debt, weighted average interest of 6.11% at September 30,
2007 and
6.12% at December 31, 2006
|
$ |
550,000
|
$ |
1,100,000
|
||||
Revolving
bank debt, interest of 6.07% at September 30, 2007 and 6.10% at
December 31, 2006
|
516,773
|
665,795
|
||||||
Publicly-traded
notes:
|
||||||||
$100
million 6.625% debentures due in 2007
|
100,006
|
100,025
|
||||||
$200
million 9.875% debentures due in 2009
|
208,734
|
212,950
|
||||||
$300
million 7.125% debentures due in 2011
|
303,751
|
304,512
|
||||||
$200
million 4.625% debentures due in 2014
|
175,312
|
172,705
|
||||||
$400
million 5.750% debentures due in 2017
|
362,661
|
359,848
|
||||||
$100
million 7.150% debentures due in 2027
|
91,051
|
90,717
|
||||||
$300
million 6.875% debentures due in 2029
|
271,125
|
270,117
|
||||||
Total
debt
|
2,579,413
|
3,276,669
|
||||||
Less
current portion
|
-
|
530,000
|
||||||
Long
term debt
|
$ |
2,579,413
|
$ |
2,746,669
|
|
Year
|
Payments
|
|||
2008
|
$ |
-
|
|||
2009
|
200,000 | ||||
2010
|
-
|
||||
2011
|
1,466,775
|
||||
2012
|
-
|
||||
Thereafter
|
1,000,000
|
||||
2,666,775
|
|||||
Less net discount | (87,362 | ) | |||
Total debt | $ |
2,579,413
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
September
30,
2007
|
September
24,
2006
|
September
30,
2007
|
September
24,
2006
|
|||||||||||||
Service
cost
|
$ |
9,405
|
$ |
4,921
|
$ |
28,216
|
$ |
12,949
|
||||||||
Interest
cost
|
23,494
|
23,114
|
70,482
|
35,372
|
||||||||||||
Expected
return on plan assets
|
(27,125 | ) | (25,476 | ) | (81,375 | ) | (41,744 | ) | ||||||||
Prior
service cost amortization
|
52
|
46
|
157
|
140
|
||||||||||||
Loss
amortization
|
1,727
|
2,217
|
5,180
|
6,708
|
||||||||||||
Net
pension expense
|
$ |
7,553
|
$ |
4,822
|
$ |
22,660
|
$ |
13,425
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
September
30,
2007
|
September
24,
2006
|
September
30,
2007
|
September
24,
2006
|
|||||||||||||
Service
cost
|
$ |
211
|
$ |
233
|
$ |
632
|
$ |
234
|
||||||||
Interest
cost
|
717
|
997
|
2,151
|
1,103
|
||||||||||||
(Gain)
amortization
|
(3 | ) |
-
|
(8 | ) |
-
|
||||||||||
Net
post-retirement expense
|
$ |
925
|
$ |
1,230
|
$ |
2,775
|
$ |
1,337
|
Options/
SARs
|
Weighted
Average Exercise
Price
|
Aggregate
Intrinsic
Value
(in
thousands)
|
||||||||||
Outstanding
December 31, 2006
|
4,064,075
|
$ |
52.78
|
$ |
4,857
|
|||||||
Granted
|
37,250
|
39.45
|
||||||||||
Exercised
|
(69,625 | ) |
26.55
|
|||||||||
Forfeited
|
(100,000 | ) |
63.41
|
|||||||||
Expired
|
(238,000 | ) |
56.65
|
|||||||||
Outstanding
September 30, 2007
|
3,693,700
|
52.61
|
nil
|
|||||||||
Options
and SARs exercisable:
|
||||||||||||
September
30, 2007
|
2,119,825
|
|
Range
of Exercise
Prices
|
Options/
SARs
Outstanding
|
Average
Remaining
Contractual
Life
|
Weighted
Average
Exercise
Price
|
Options/
SARs
Exercisable
|
Weighted
Average
Exercise
Price
|
|||||||||||||||||
$ |
26.19-$42.50
|
1,483,625
|
6.54
|
$ |
40.81
|
588,125
|
$ |
38.43
|
|||||||||||||||
$ |
45.98-$59.09
|
1,250,575
|
6.08
|
$ |
54.38
|
892,825
|
$ |
52.86
|
|||||||||||||||
$
|
59.58-$73.36
|
959,500
|
6.58
|
$ |
68.53
|
638,875
|
$ |
67.92
|
|||||||||||||||
$ |
26.19-$73.36
|
3,693,700
|
6.40
|
$ |
52.61
|
2,119,825
|
$ |
53.39
|
Nine
Months Ended
|
||||||||
September
30,
2007
|
September
24,
2006
|
|||||||
Dividend
yield
|
1.96
|
1.57
|
||||||
Expected
life in years
|
5.41
|
5.27
|
||||||
Volatility
|
.19
|
.19
|
||||||
Risk-free
interest rate
|
4.74 | % | 5.00 | % | ||||
Weighted
average fair value of options/SARs granted
|
$ |
8.40
|
$ |
11.01
|
ITEM
2.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
Revenues:
|
|
Quarter
Ended
|
||||||||||||
September
30,
2007
|
September
24,
2006
(1)
|
%
Change
|
||||||||||
Advertising:
|
||||||||||||
Retail
|
$ |
204,349
|
$ |
210,934
|
(3.1 | ) | ||||||
National
|
41,718
|
47,578
|
(12.3 | ) | ||||||||
Classified:
|
||||||||||||
Auto
|
42,331
|
49,727
|
(14.9 | ) | ||||||||
Employment
|
59,155
|
69,804
|
(15.3 | ) | ||||||||
Real estate
|
48,322
|
65,349
|
(26.1 | ) | ||||||||
Other
|
23,987
|
22,091
|
8.6
|
|||||||||
Total
classified
|
173,795
|
206,971
|
(16.0 | ) | ||||||||
Direct marketing
|
||||||||||||
and other
|
37,155
|
41,291
|
(10.0 | ) | ||||||||
Total advertising
|
457,017
|
506,774
|
(9.8 | ) | ||||||||
Circulation
|
67,995
|
70,637
|
(3.7 | ) | ||||||||
Other
|
15,332
|
17,717
|
(13.5 | ) | ||||||||
Total revenues
|
$ |
540,344
|
$ |
595,128
|
(9.2 | ) | ||||||
|
||||||||||||
(1)
Certain amounts have been reclassified to conform to the 2007
presentation.
|
·
|
Real
estate advertising decreased $17.0 million or 26.1% from the third
fiscal
quarter of 2006. The Company has seen dramatic declines in
California and Florida, where real estate values, and thus advertising,
were exceptionally strong in 2006. The declines were reflected
in both print advertising, down 27.4% and online advertising, down
5.8%.
|
·
|
Automotive
advertising decreased $7.4 million or 14.9% from the third fiscal
quarter
of 2006, reflecting an industry-wide trend. Print advertising
declined 19.2%, while online advertising grew 20.0% reflecting the
strength of the Company's cars.com online
products.
|
·
|
Employment
advertising decreased $10.6 million or 15.3% from the third fiscal
quarter
of 2006 reflecting an industry-wide trend. Print employment
advertising declined 22.4%, while online employment advertising increased
1.7%.
|
As
Reported
|
Pro
Forma
|
|||||||||||||||||||
Year
to Date
|
Year
to Date
|
|||||||||||||||||||
September
30,
2007
|
September
24,
2006
|
%
Change
|
September
24,
2006
|
%
Change
|
||||||||||||||||
|
Advertising: | |||||||||||||||||||
|
Retail
|
$ |
623,878
|
$ |
350,132
|
78.2
|
$ |
642,716
|
(2.9 | ) | ||||||||||
|
National
|
132,934
|
76,759
|
73.2
|
148,816
|
(10.7 | ) | |||||||||||||
|
Classified: | |||||||||||||||||||
|
Auto
|
128,264
|
86,570
|
48.2
|
151,773
|
(15.5 | ) | |||||||||||||
|
Employment
|
195,182
|
121,075
|
61.2
|
224,069
|
(12.9 | ) | |||||||||||||
|
Real estate
|
158,233
|
120,897
|
30.9
|
197,224
|
(19.8 | ) | |||||||||||||
|
Other
|
68,728
|
34,768
|
97.7
|
66,709
|
3.0
|
||||||||||||||
|
Total
classified
|
550,407
|
363,310
|
51.5
|
639,775
|
(14.0 | ) | |||||||||||||
|
Direct
marketing and other
|
115,098
|
66,590
|
72.8
|
120,608
|
(4.6 | ) | |||||||||||||
|
Total
advertising
|
1,422,317
|
856,791
|
66.0
|
1,551,915
|
(8.4 | ) | |||||||||||||
|
Circulation
|
209,582
|
117,905
|
77.8
|
218,308
|
(4.0 | ) | |||||||||||||
|
Other
|
55,030
|
26,895
|
104.6
|
53,631
|
2.6
|
||||||||||||||
|
Total
revenues
|
$ |
1,686,929
|
$ |
1,001,591
|
68.4
|
$ |
1,823,854
|
(7.5 | ) |
·
|
Real
estate advertising was up $37.3 million or 30.9% from the first nine
months of fiscal 2006. On a pro forma basis, real estate advertising
decreased $39.0 million or 19.8% from the first nine months of fiscal
2006
as discussed in the quarterly review
above.
|
·
|
Automotive
advertising increased $41.7 million or 48.2% from the first nine
months of
fiscal 2006. On a pro forma basis, automotive advertising
declined $23.5 million or 15.5% from the first nine months of fiscal
2006,
reflecting an industry-wide trend. As in the quarterly
discussion above, growth in online automotive advertising revenue
was
offset by declines in print
advertising.
|
·
|
Employment
advertising increased $74.1 million or 61.2% from the first nine
months of
fiscal 2006. On a pro forma basis, employment advertising
decreased $28.9 million or 12.9% from the first nine months of fiscal
2006
as discussed in the quarterly comparisons
above.
|
Discontinued
Operations:
|
|
Sources
and Uses of Liquidity and Capital Resources:
|
|
ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
|
|
ITEM
6. EXHIBITS
|
|
The
McClatchy Company
|
||
Registrant
|
||
November
8, 2007
|
/s/
Gary B. Pruitt
|
|
Date
|
Gary
B. Pruitt
Chief
Executive Officer
|
|
November
8, 2007
|
/s/
Patrick J. Talamantes
|
|
Date
|
Patrick
J. Talamantes
Chief
Financial Officer
|
INDEX OF EXHIBITS
|
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Exhibit
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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, 2007.
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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 By-laws as amended as of June 22, 2006, included as Exhibit
3.2
in the Company's Current Report on Form 8-K filed June 28,
2006.
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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.
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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 Current Report on Form 10-Q filed for the quarter ending
on June
25, 2006.
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10.2* |
Amendment
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.
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10.3* |
Amendment
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.
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10.4* |
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 Current Report on Form 10-Q for the quarter
ending on April 1, 2007.
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10.5* |
Third
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.
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10.6* |
Fourth
Supplemental Indenture dated June 27, 2006, between the Company and
Knight-Ridder, Inc. included as Exhibit 10.4 in the Company's Current
Report on Form 10-Q filed for the quarter ending on June 25,
2006.
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**10.7*
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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 31, 2000.
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**10.8*
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The
Company's Amended and Restated Long-Term Incentive Plan included
as
Exhibit 99.1 to the Company's Report on Form 8-K filed May 23,
2005.
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**10.9*
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Amended
and Restated Supplemental Executive Retirement Plan included as Exhibit
10.4 to the Company's 2001 Form 10-K.
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**10.10*
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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
Form
10-K.
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**10.11*
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Amended
and Restated 1994 Stock Option Plan included as Exhibit 10.15 to
the
Company's Report on Form 10-Q filed for the Quarter Ending on July
1,
2001.
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**10.12*
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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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**10.13*
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Amendment
1 to The McClatchy Company 2004 Stock Incentive Plan dated January
23,
2007, included as Exhibit 10.10 to the Company's 2006 Report on Form
10-K.
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**10.14*
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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.
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**10.15*
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The
Company's Amended and Restated Chief Executive Bonus Plan, included
as
Exhibit 10.12 to the Company's Report on Form 10-Q for the Quarter
Ending
June 29, 2003.
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**10.16*
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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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10.17* |
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.
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**10.18*
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Amended
and Restated 1997 Stock Option Plan included as Exhibit 10.7 to the
Company's 2002 Report on Form 10-K.
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**10.19*
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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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**10.20*
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The
Company's Amended and Restated 2001 Director Stock Option Plan, included
as Exhibit 10.13 to the Company's 2004 Report on Form
10-K.
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**10.21*
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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.
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10.22* |
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 Report on Form 8-K filed December 26,
2006.
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10.23* |
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 Current Report on Form 10Q filed for the quarter ending
July
1, 2007.
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10.24* |
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 Current Report on Form 10Q filed for the quarter
ending
July 1, 2007.
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21* |
Subsidiaries
of the Company.
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31.1
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Certification
of the Chief Executive Officer of The McClatchy Company pursuant
to Rule
13a-14(a) under the Exchange Act.
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31.2
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Certification
of the Chief Financial Officer of The McClatchy Company pursuant
to Rule
13a-14(a) under the Exchange Act.
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32.1
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Certification
of the Chief Executive Officer of The McClatchy Company pursuant
to 18
U.S.C. Section 1350.
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32.2
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Certification
of the Chief Financial Officer of The McClatchy Company pursuant
to 18
U.S.C. Section 1350.
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*
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Incorporated
by reference
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**
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Compensation
plans or arrangements for the Company's executive officers and
directors
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