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Tuesday February 9, 2010
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Tuesday February 9, 2010
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Released: 02/06/2008
SACRAMENTO, Calif., Feb. 6 -- 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 http://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 (http://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 (http://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 Dec. 30, Dec. 31, Dec. 30, Dec. 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 As *Pro Forma Reported 4-week 5-week Revenues - Net: 2007 2006 % Change 2006
Advertising Retail $78,869 $81,350 -3.0% $99,193 National 14,724 15,299 -3.8% 19,692 Classified Total 37,449 46,950 -20.2% 58,737 Automotive 12,133 12,400 -2.2% 16,577 Real Estate 8,777 13,320 -34.1% 15,853 Employment 10,517 15,596 -32.6% 19,185 Other Class 6,022 5,634 6.9% 7,122 Direct Marketing 14,416 15,535 -7.2% 18,060 Other Adv Rev 100 77 29.9% 115 Total Advertising $145,558 $159,211 -8.6% $195,797
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 Only Advertising Revenue $11,188 $8,127 37.7% $10,516
Advertising Revenues by Market: California $26,389 $31,089 -15.1% $38,546 Florida 25,658 28,325 -9.4% 33,553 Texas 15,897 16,449 -3.4% 20,500 Southeast 35,133 37,630 -6.6% 46,749 Midwest 20,382 22,223 -8.3% 27,444 Northwest 16,087 17,370 -7.4% 21,329 Other 6,012 6,125 -1.8% 7,676 Total Advertising $145,558 $159,211 -8.6% $195,797
Advertising Statistics for Dailies: Full Run ROP Linage 3,147.8
Millions of Preprints Distributed 823.9
Average Paid Circulation:** Daily Sunday
December Print Only
*Pro Forma 4-week % Revenues - Net: 2007 2006 Change
Advertising Retail $76,627 $79,744 -3.9% National 13,652 17,423 -21.6% Classified Total 29,576 38,305 -22.8% Automotive 9,796 10,863 -9.8% Real Estate 7,721 12,266 -37.1% Employment 6,475 9,947 -34.9% Other Class 5,584 5,229 6.8% Direct Marketing 14,416 15,535 -7.2% Other Adv Rev 99 77 28.6% Total Advertising $134,370 $151,084 -11.1%
Circulation Other Total Revenues
Memo: Online Only Advertising Revenue
Advertising Revenues by Market: California $24,650 $29,440 -16.3% Florida 24,106 26,642 -9.5% Texas 14,824 15,608 -5.0% Southeast 32,035 34,695 -7.7% Midwest 18,644 20,664 -9.8% Northwest 14,653 15,988 -8.4% Other 5,458 8,047 -32.2% Total Advertising $134,370 $151,084 -11.1%
Advertising Statistics for Dailies: Full Run ROP Linage 2,461.1 2,591.0 -5.0%
Millions of Preprints Distributed 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 As *Pro Forma Reported 13-week % 14-week Revenues - Net: 2007 2006 Change 2006
Advertising Retail $249,192 $256,082 -2.7% $274,341 National 49,090 52,645 -6.8% 57,081 Classified Total 145,952 182,397 -20.0% 194,174 Automotive 39,608 45,692 -13.3% 49,859 Real Estate 39,337 56,951 -30.9% 59,484 Employment 45,075 59,325 -24.0% 62,914 Other Class 21,932 20,429 7.4% 21,917 Direct Marketing 44,727 48,174 -7.2% 50,249 Other Adv Rev 444 239 85.8% 278 Total Advertising $489,405 $539,537 -9.3% $576,123
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 Only Advertising Revenue $38,384 $36,487 5.2% $38,925
Advertising Revenues by Market: California $89,079 $107,189 -16.9% $114,646 Florida 79,578 90,428 -12.0% 95,656 Texas 50,946 55,135 -7.6% 59,185 Southeast 125,394 131,637 -4.7% 140,756 Midwest 69,661 74,863 -6.9% 80,085 Northwest 54,142 59,739 -9.4% 63,698 Other 20,605 20,546 0.3% 22,097 Total Advertising $489,405 $539,537 -9.3% $576,123
Advertising Statistics for Dailies: Full Run ROP Linage 9,516.6
Millions of Preprints Distributed 2,230.4
Average Paid Circulation:** Daily Sunday
Quarter 4
Print Only
*Pro Forma 13-week % Revenues - Net: 2007 2006 Change
Advertising Retail $242,081 $250,877 -3.5% National 46,106 50,923 -9.5% Classified Total 117,663 152,837 -23.0% Automotive 32,770 40,453 -19.0% Real Estate 35,799 53,167 -32.7% Employment 28,769 40,131 -28.3% Other Class 20,325 19,086 6.5% Direct Marketing 44,727 48,174 -7.2% Other Adv Rev 444 239 85.8% Total Advertising $451,021 $503,050 -10.3%
Circulation Other Total Revenues
Memo: Online Only Advertising Revenue
Advertising Revenues by Market: California $83,164 $101,342 -17.9% Florida 74,788 84,688 -11.7% Texas 47,440 51,933 -8.7% Southeast 114,132 120,811 -5.5% Midwest 63,560 68,847 -7.7% Northwest 49,139 55,082 -10.8% Other 18,798 20,347 -7.6% Total Advertising $451,021 $503,050 -10.3%
Advertising Statistics for Dailies: Full Run ROP Linage 8,177.5 9,242.4 -11.5%
Millions of Preprints Distributed 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
*Pro Forma As Reported 52-week % 53-week Revenues - Net: 2007 2006 Change 2006
Advertising Retail $873,070 $898,798 -2.9% $624,473 National 182,024 201,461 -9.6% 133,840 Classified Total 696,358 822,172 -15.3% 557,484 Automotive 167,872 197,464 -15.0% 136,429 Real Estate 197,569 254,175 -22.3% 180,381 Employment 240,257 283,394 -15.2% 183,989 Other Class 90,660 87,139 4.0% 56,685 Direct Marketing 158,257 167,510 -5.5% 115,579 Other Adv Rev 2,013 1,511 33.2% 1,537 Total Advertising $1,911,722 $2,091,452 -8.6% $1,432,913
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 Only Advertising Revenue $163,939 $160,334 2.2% $102,021
Advertising Revenues by Market: California $363,197 $427,984 -15.1% $421,993 Florida 300,905 356,411 -15.6% 176,229 Texas 198,022 213,089 -7.1% 109,989 Southeast 487,901 504,097 -3.2% 344,187 Midwest 265,526 283,604 -6.4% 147,986 Northwest 217,863 227,255 -4.1% 189,546 Other 78,308 79,012 -0.9% 42,983 Total Advertising $1,911,722 $2,091,452 -8.6% $1,432,913
Advertising Statistics for Dailies: Full Run ROP Linage 24,473.6
Millions of Preprints Distributed 5,074.3
Average Paid Circulation:** Daily Sunday
December Year-to-Date
Print Only
*Pro Forma 52-week % Revenues - Net: 2007 2006 Change
Advertising Retail $847,419 $881,985 -3.9% National 173,654 190,185 -8.7% Classified Total 566,440 689,927 -17.9% Automotive 142,798 176,594 -19.1% Real Estate 182,711 238,440 -23.4% Employment 156,778 193,620 -19.0% Other Class 84,153 81,273 3.5% Direct Marketing 158,257 167,510 -5.5% Other Adv Rev 2,013 1,511 33.2% Total Advertising $1,747,783 $1,931,118 -9.5%
Circulation Other Total Revenues
Memo: Online Only Advertising Revenue
Advertising Revenues by Market: California $337,677 $403,588 -16.3% Florida 279,904 332,056 -15.7% Texas 183,973 199,157 -7.6% Southeast 438,915 458,957 -4.4% Midwest 240,526 258,232 -6.9% Northwest 196,124 209,015 -6.2% Other 70,664 70,113 0.8% Total Advertising $1,747,783 $1,931,118 -9.5%
Advertising Statistics for Dailies: Full Run ROP Linage 32,679.7 36,487.8 -10.4%
Millions of Preprints Distributed 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
Dec. 30, Dec. 31, Dec. 30, Dec. 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 masthead impairment - - 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 newspaper masthead 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)
Less Pro Historical Acquisitions/ 53rd 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
SOURCE The McClatchy Company
The McClatchy Company