McClatchy Files Form 10-K and Reports Final Results for 2007
Reports Non-cash Impairment Charges
The McClatchy Company (NYSE: MNI) today reported that it filed its Annual Report on Form 10-K for the year ended December 30, 2007 (the Report) with the Securities and Exchange Commission (SEC), which includes its final fourth quarter and full year 2007 results.
The company's fourth quarter 2007 after-tax loss from continuing operations was $1.43 billion, or $17.42 per share including the effect of non-cash after-tax impairment charges related to goodwill and newspaper mastheads of $1.47 billion, or $17.86 per share. The company's total net loss, including the results of discontinued operations, was $1.43 billion, or $17.46 per share.
The loss from continuing operations for full year 2007 was $2.73 billion or $33.26 per share including the effect of the non-cash impairment charges taken in the third and fourth quarters. The company's total net loss, including the results of discontinued operations, was $2.74 billion, or $33.37 per share.
As the company noted in its press release on February 6, 2008, management performed its regular annual impairment testing of goodwill and other long-lived assets as of December 30, 2007, in accordance with Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets. Upon completion of that testing, the company recorded non-cash pre-tax impairment charges of $1.39 billion to goodwill and $166.6 million to newspaper mastheads in the fourth quarter.
Gary Pruitt, McClatchy's chairman and chief executive officer, said "As I noted in our fourth quarter preliminary earnings release, the recessionary outlook, coupled with the continued decline in our stock price since the end of the third quarter, resulted in additional impairment charges 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 the value of McClatchy. However, when completing the goodwill impairment assessment, GAAP required that we reconcile the sum of the fair values of our reporting units to our current market capitalization. The company considered the current stock market price of its Class A shares and the fair value of public debt, as well as general economic indicators in determining the amount of the impairment charges recorded in the fourth quarter."
"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 news 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."
The unaudited consolidated statement of income for the 2007 fourth quarter and full year is attached to this release.
The McClatchy 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 information, comprehensive news, advertising, e-commerce and other services. Together with its newspapers and direct marketing products, these interactive 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. 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, and owns 25.6% of Classified Ventures, a newspaper industry partnership that offers two of the nation's premier classified websites: the auto website, cars.com, and the rental site, apartments.com. McClatchy is listed on the New York Stock Exchange under the symbol MNI.
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 30, 2007, filed with the U.S. Securities and Exchange Commission. McClatchy disclaims any intention and assumes no obligation to update the forward-looking information contained in this release.
***THE McCLATCHY COMPANY*** CONSOLIDATED STATEMENT OF INCOME (UNAUDITED) (In thousands, except per share amounts)
Three Months Ended Year Ended December December December December 30, 31, 30, 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 1,557,456 - 2,992,046 - 2,007,310 527,914 4,826,315 1,328,282
OPERATING INCOME (LOSS) (1,433,876) 145,685 (2,565,952) 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 - - (84,568) - Other - net 539 738 1,982 9,128 (54,039) (39,850) (317,239) (76,023) INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAX PROVISION (BENEFIT) (1,487,915) 105,835 (2,883,191) 270,885
INCOME TAX PROVISION (BENEFIT) (57,449) 28,920 (156,582) 87,390
INCOME (LOSS) FROM CONTINUING OPERATIONS (1,430,466) 76,915 (2,726,609) 183,495
LOSS FROM DISCONTINUED OPERATIONS - NET OF INCOME TAXES (3,080) (356,186) (9,404) (339,072)
NET LOSS $(1,433,546) $(279,271) $(2,736,013) $(155,577)
NET INCOME (LOSS) PER COMMON SHARE: Basic: Income (loss) from continuing operations $(17.42) $0.94 $(33.26) $2.85 Loss from discontinued operations $(0.04) $(4.35) $(0.11) $(5.27) Net loss per share $(17.46) $(3.41) $(33.37) $(2.42)
Diluted: Income (loss) from continuing operations $(17.42) $0.94 $(33.26) $2.84 Loss from discontinued operations $(0.04) $(4.34) $(0.11) $(5.25) Net loss per share $(17.46) $(3.40) $(33.37) $(2.41)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES: Basic 82,097 81,803 82,000 64,415 Diluted 82,097 81,995 82,000 64,645
SOURCE The McClatchy Company