[X]
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
|
|||
|
For
the quarterly period ended: April 1, 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
|
Part
I - FINANCIAL
INFORMATION
|
Page
|
|
Item
1 - Financial Statements
(unaudited):
|
||
Item
4 - Controls and Procedures
|
||
Part
II - OTHER
INFORMATION
|
||
Item
1 - Legal Proceedings
|
||
Item
1A - Risk Factors
|
||
Item
6 - Exhibits
|
||
THE
MCCLATCHY COMPANY
|
||||||||
CONSOLIDATED
BALANCE SHEET (UNAUDITED)
|
||||||||
(In
thousands, except per share amounts)
|
||||||||
ASSETS
|
April
1,
|
December
31,
|
||||||
CURRENT
ASSETS:
|
2007
|
2006
|
||||||
Cash
and cash equivalents
|
$ |
10,145
|
$ |
19,581
|
||||
Trade
receivables – (less allowance of $14,231 in 2007 and $12,732 in
2006)
|
271,024
|
311,785
|
||||||
Other
receivables
|
36,254
|
36,477
|
||||||
Newsprint,
ink and other inventories
|
43,420
|
52,097
|
||||||
Deferred
income taxes
|
47,055
|
248,753
|
||||||
Prepaid
income taxes
|
88,836
|
88,836
|
||||||
Newspaper
assets held for sale
|
-
|
563,589
|
||||||
Land
and other assets held for sale
|
231,050
|
231,029
|
||||||
Other
current assets
|
22,911
|
23,192
|
||||||
750,695
|
1,575,339
|
|||||||
PROPERTY,
PLANT AND EQUIPMENT:
|
||||||||
Land
|
205,033
|
204,692
|
||||||
Building
and improvements
|
392,515
|
382,206
|
||||||
Equipment
|
832,941
|
811,173
|
||||||
Construction
in progress
|
15,014
|
36,401
|
||||||
1,455,503
|
1,434,472
|
|||||||
Less
accumulated depreciation
|
(480,405 | ) | (458,496 | ) | ||||
965,098
|
975,976
|
|||||||
INTANGIBLE
ASSETS:
|
||||||||
Identifiable
intangibles - net
|
1,354,079
|
1,369,046
|
||||||
Goodwill
- net
|
3,591,862
|
3,559,828
|
||||||
4,945,941
|
4,928,874
|
|||||||
INVESTMENTS
AND OTHER ASSETS:
|
||||||||
Investments
in unconsolidated companies
|
510,963
|
520,213
|
||||||
Income
tax refund
|
200,998
|
-
|
||||||
Prepaid
pension assets
|
29,878
|
32,457
|
||||||
Other
assets
|
19,902
|
21,851
|
||||||
761,741
|
574,521
|
|||||||
TOTAL
ASSETS
|
$ |
7,423,475
|
$ |
8,054,710
|
||||
See
notes to consolidated financial statements.
|
THE
MCCLATCHY COMPANY
|
||||||||
CONSOLIDATED
BALANCE
SHEET
(UNAUDITED)
|
||||||||
(In
thousands, except per share amounts)
|
||||||||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
April
1,
|
December
31,
|
||||||
CURRENT
LIABILITIES:
|
2007
|
2006
|
||||||
Current
portion of bank debt
|
-
|
$ |
530,000
|
|||||
Accounts
payable
|
$ |
92,063
|
139,501
|
|||||
Accrued
compensation
|
109,372
|
135,363
|
||||||
Income
taxes
|
9,298
|
47,330
|
||||||
Unearned
revenue
|
84,875
|
82,524
|
||||||
Newspaper
liabilities held for sale
|
-
|
83,806
|
||||||
Accrued
interest
|
36,704
|
33,697
|
||||||
Accrued
dividends
|
14,756
|
14,727
|
||||||
Other
accrued liabilities
|
49,495
|
45,166
|
||||||
396,563
|
1,112,114
|
|||||||
NON-CURRENT
LIABILITIES:
|
||||||||
Long-term
debt
|
2,756,386
|
2,746,669
|
||||||
Deferred
income taxes
|
706,893
|
706,893
|
||||||
Pension
and post retirement obligations
|
314,966
|
311,127
|
||||||
Other
long-term obligations
|
101,997
|
74,283
|
||||||
3,880,242
|
3,838,972
|
|||||||
COMMITMENTS
AND CONTINGENCIES
|
||||||||
STOCKHOLDERS'
EQUITY:
|
||||||||
Common
stock $.01 par value:
|
||||||||
Class
A - authorized 200,000,000 shares, issued
|
||||||||
55,871,236
in 2007 and 55,795,162 in 2006
|
559
|
557
|
||||||
Class
B - authorized 60,000,000 shares,
|
||||||||
issued
26,104,397 in 2007 and 26,116,397 in 2006
|
261
|
261
|
||||||
Additional
paid-in capital
|
2,188,793
|
2,182,544
|
||||||
Treasury
stock, 3,029 shares at cost
|
(122 | ) |
-
|
|||||
Retained
earnings
|
1,007,870
|
1,016,023
|
||||||
Accumulated
other comprehensive loss
|
(50,691 | ) | (95,761 | ) | ||||
3,146,670
|
3,103,624
|
|||||||
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY
|
$ |
7,423,475
|
$ |
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
|
||||||||
April
1,
|
March
26,
|
|||||||
2007
|
2006
|
|||||||
REVENUES
- NET:
|
||||||||
Advertising
|
$ |
477,023
|
$ |
166,334
|
||||
Circulation
|
71,880
|
23,764
|
||||||
Other
|
17,655
|
4,365
|
||||||
566,558
|
194,463
|
|||||||
OPERATING
EXPENSES:
|
||||||||
Compensation
|
236,324
|
85,739
|
||||||
Newsprint
and supplements
|
75,417
|
26,264
|
||||||
Depreciation
and amortization
|
37,833
|
9,887
|
||||||
Other
operating expenses
|
129,596
|
37,294
|
||||||
479,170
|
159,184
|
|||||||
OPERATING
INCOME
|
87,388
|
35,279
|
||||||
NON-OPERATING
(EXPENSES) INCOME:
|
||||||||
Interest
expense
|
(53,785 | ) |
-
|
|||||
Interest
income
|
64
|
13
|
||||||
Equity
income (losses) in unconsolidated companies - net
|
(9,749 | ) |
396
|
|||||
Other
- net
|
(48 | ) | (7 | ) | ||||
(63,518 | ) |
402
|
||||||
INCOME
FROM CONTINUING OPERATIONS
|
||||||||
BEFORE
INCOME TAX PROVISION
|
23,870
|
35,681
|
||||||
INCOME
TAX PROVISION
|
9,357
|
13,900
|
||||||
INCOME
FROM CONTINUING OPERATIONS
|
14,513
|
21,781
|
||||||
|
||||||||
INCOME
(LOSS) FROM DISCONTINUED OPERATIONS,
|
||||||||
NET
OF INCOME TAXES
|
(5,483 | ) |
5,946
|
|||||
NET
INCOME
|
$ |
9,030
|
$ |
27,727
|
||||
NET
INCOME (LOSS) PER COMMON SHARE:
|
||||||||
Basic:
|
||||||||
Income
from continuing operations
|
$ |
0.18
|
$ |
0.46
|
||||
Income
(loss) from discontinued operations
|
(0.07 | ) |
0.13
|
|||||
Net
income per share
|
$ |
0.11
|
$ |
0.59
|
||||
Diluted:
|
||||||||
Income
from continuing operations
|
$ |
0.18
|
$ |
0.46
|
||||
Income (loss) from continuing operations |
(0.07
|
) | 0.13 | |||||
Net
income per share
|
$ |
0.11
|
$ |
0.59
|
||||
WEIGHTED
AVERAGE NUMBER OF COMMON SHARES:
|
||||||||
Basic
|
81,885
|
46,735
|
||||||
Diluted
|
81,982
|
46,974
|
||||||
See
notes to consolidated financial statements.
|
THE
MCCLATCHY COMPANY
|
||||||||
CONSOLIDATED
STATEMENT
OF CASH FLOWS
(UNAUDITED)
|
||||||||
(In
thousands)
|
||||||||
Three
Months Ended
|
||||||||
April
1,
|
March
26,
|
|||||||
2007
|
2006
|
|||||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
Income
from continuing operations
|
$ |
14,513
|
$ |
21,781
|
||||
Reconciliation
to net cash provided by continuing operations:
|
||||||||
Depreciation
and amortization
|
37,833
|
9,887
|
||||||
Contribution
to pension plans
|
-
|
(31,545 | ) | |||||
Employee
benefit expense
|
9,249
|
4,010
|
||||||
Stock
compensation expense
|
2,182
|
2,020
|
||||||
Deferred
income taxes
|
-
|
(2,258 | ) | |||||
Equity
loss (income) in unconsolidated companies
|
9,749
|
(396 | ) | |||||
Other
|
1,210
|
141
|
||||||
Changes
in certain assets and liabilities:
|
||||||||
Trade
receivables
|
40,761
|
9,324
|
||||||
Inventories
|
8,677
|
(569 | ) | |||||
Other
assets
|
876
|
(3,258 | ) | |||||
Accounts
payable
|
(42,911 | ) | (6,628 | ) | ||||
Accrued
compensation
|
(25,991 | ) | (7,991 | ) | ||||
Income
taxes
|
(38,032 | ) |
9,839
|
|||||
Other
liabilities
|
(2,779 | ) |
3,587
|
|||||
Net
cash provided by operating activities of continuing
operations
|
15,337
|
7,944
|
||||||
Net
cash provided by operating activities of discontinued
operations
|
2,501
|
12,070
|
||||||
Net
cash provided by operating activities
|
17,838
|
20,014
|
||||||
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
Purchases
of property, plant and equipment
|
(12,815 | ) | (9,669 | ) | ||||
Equity
investments
|
(1,200 | ) |
-
|
|||||
Other
- net
|
162
|
14
|
||||||
Net
cash used by investing activities of continuing operations
|
(13,853 | ) | (9,655 | ) | ||||
Proceeds
from sale of newspaper, net of transaction costs
|
522,922
|
-
|
||||||
Other
|
(4,837 | ) | (2,540 | ) | ||||
Net
cash provided (used) by investing activities of discontinued
operations
|
518,085
|
(2,540 | ) | |||||
Net
cash provided (used) by investing activities
|
504,232
|
(12,195 | ) | |||||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
Repayments
of term bank debt
|
(350,000 | ) |
-
|
|||||
Net
borrowings (repayments) from revolving bank debt
|
(170,599 | ) |
77,000
|
|||||
Net
repayments of commercial paper
|
-
|
(77,900 | ) | |||||
Payment
of cash dividends
|
(14,739 | ) | (8,415 | ) | ||||
Other
- principally stock issuances
|
3,832
|
1,902
|
||||||
Net
cash used by financing activities
|
(531,506 | ) | (7,413 | ) | ||||
NET
CHANGE IN CASH AND CASH EQUIVALENTS
|
(9,436 | ) |
406
|
|||||
CASH
AND CASH EQUIVALENTS, BEGINNING OF YEAR
|
19,581
|
3,052
|
||||||
CASH
AND CASH EQUIVALENTS, END OF PERIOD
|
$ |
10,145
|
$ |
3,458
|
||||
OTHER
CASH FLOW INFORMATION:
|
||||||||
Cash
paid during the period for:
|
||||||||
Income
taxes (net of refunds)
|
$ |
46,656
|
$ |
270
|
||||
Interest
(net of capitalized interest)
|
$ |
51,786
|
$ |
1,826
|
||||
See
notes to consolidated financial statements.
|
THE
MCCLATCHY COMPANY
|
||||||||||||||||||||||||||||
CONSOLIDATED
STATEMENT OF STOCKHOLDERS'
EQUITY (UNAUDITED)
|
||||||||||||||||||||||||||||
(In
thousands, except per share amounts)
|
||||||||||||||||||||||||||||
Accumulated
|
||||||||||||||||||||||||||||
Additional
|
Other
|
|||||||||||||||||||||||||||
Par
Value
|
Paid-In
|
Treasury
|
Retained
|
Comprehensive
|
||||||||||||||||||||||||
Class
A
|
Class
B
|
Capital
|
Stock
|
Earnings
|
Loss
|
Total
|
||||||||||||||||||||||
BALANCES,
DECEMBER 31, 2006
|
$ |
557
|
$ |
261
|
$ |
2,182,544
|
$ |
-
|
$ |
1,016,023
|
$ | (95,761 | ) | $ |
3,103,624
|
|||||||||||||
Adoption
of FIN 48
|
(2,427 | ) | (2,427 | ) | ||||||||||||||||||||||||
ADJUSTED
BALANCES, JANUARY 1, 2007
|
557
|
261
|
2,182,544
|
1,013,596
|
(95,761 | ) |
3,101,197
|
|||||||||||||||||||||
Net
income
|
9,030
|
9,030
|
||||||||||||||||||||||||||
Total
comprehensive income
|
9,030
|
|||||||||||||||||||||||||||
Adjustment
to eliminate minimum pension
liability
related to Star Tribune
|
45,070
|
45,070
|
||||||||||||||||||||||||||
Dividends
declared ($.18 per share)
|
(14,756 | ) | (14,756 | ) | ||||||||||||||||||||||||
Conversion
of 12,000 Class B shares
|
||||||||||||||||||||||||||||
to
Class A shares
|
-
|
|||||||||||||||||||||||||||
Issuance
of 67,103 Class A shares
|
||||||||||||||||||||||||||||
under
stock plans
|
2
|
3,219
|
3,221
|
|||||||||||||||||||||||||
Stock
compensation expense
|
2,297
|
2,297
|
||||||||||||||||||||||||||
Tax
benefit from stock plans
|
733
|
733
|
||||||||||||||||||||||||||
Purchase
of treasury stock
|
(122 | ) | (122 | ) | ||||||||||||||||||||||||
BALANCES,
APRIL 1, 2007
|
$ |
559
|
$ |
261
|
$ |
2,188,793
|
$ | (122 | ) | $ |
1,007,870
|
$ | (50,691 | ) | $ |
3,146,670
|
||||||||||||
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
|
Reduction
in retained earnings (cumulative effect)
|
$
2,427
|
||
Additional
goodwill
|
22,736
|
||
Increase
in liability for unrecognized tax benefits
|
$
25,163
|
March
26,
2006
|
||||
Revenues
|
$ |
596,295
|
||
Income
from continuing operations
|
$ | 18,880 | (1) | |
Income
from continuing operations per diluted share
|
$ |
0.23
|
||
(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
|
||||||||
April
1,
2007
|
March
26,
2006
|
|||||||
Revenues
|
$ |
52,903
|
$ |
87,541
|
||||
Income
(loss)
from discontinued operations before income taxes
(1)
|
(4,783 | ) | $ |
10,257
|
||||
Income
tax
expense
|
700
|
4,311
|
||||||
Income
(loss) from discontinued operations
|
$ | (5,483 | ) | $ |
5,946
|
|
(1)
Includes interest expense allocated to discontinued operations
of $1.2
million and $2.1 million in the first fiscal quarters of 2007 and
2006,
respectively.
|
Company
|
%
Ownership Interest
|
April
1,
2007
|
December
31, 2006
|
|||||||||
CareerBuilder
|
15.0
|
(1) | $ |
226,083
|
$ |
230,506
|
||||||
Seattle
Times Company
|
49.5
|
99,142
|
102,228
|
|||||||||
Classified
Ventures
|
25.6
|
98,033
|
98,259
|
|||||||||
SP
Newsprint
|
33.3
|
39,997
|
40,666
|
|||||||||
Ponderay
Newsprint
|
27.0
|
24,874
|
26,162
|
|||||||||
ShopLocal
|
15.0
|
11,461
|
10,993
|
|||||||||
Topix
|
11.3
|
9,718
|
9,956
|
|||||||||
McClatchy
Tribune Information Services
|
50.0
|
861
|
773
|
|||||||||
Other
|
Various
|
794
|
670
|
|||||||||
$ |
510,963
|
$ |
520,213
|
NOTE
4. INTANGIBLE ASSETS AND GOODWILL
|
|||||||||||||
Intangible
assets
and goodwill, along with their weighted-average amortization periods
consisted of the following (dollars in thousands):
|
|||||||||||||
April
1, 2007
|
|||||||||||||
Gross
Amount
|
Accumulated
Amortization
|
Net
Amount
|
Weighted
Average Amortization Period
|
||||||||||
Intangible
assets subject to amortization:
|
|||||||||||||
Advertiser
and
subscriber lists
|
$ |
817,701
|
$ | (162,815 | ) | $ |
654,886
|
14
years
|
|||||
Other
|
26,186
|
(9,993 | ) |
16,193
|
8
years
|
||||||||
Total
|
$ |
843,887
|
$ | (172,808 | ) |
671,079
|
|||||||
Other
intangible assets not subject to amortization:
|
|||||||||||||
Newspaper
mastheads
|
683,000
|
||||||||||||
Total
|
1,354,079
|
||||||||||||
Goodwill
-
net
|
3,591,862
|
||||||||||||
Total
intangible assets and goodwill
|
$ |
4,945,941
|
|||||||||||
December
31, 2006
|
|||||||||||||
Gross
Amount
|
Accumulated
Amortization
|
Net
Amount
|
Weighted
Average Amortization Period
|
||||||||||
Intangible
assets subject to amortization:
|
|||||||||||||
Advertiser
and
subscriber lists
|
$ |
817,701
|
$ | (148,427 | ) | $ |
669,274
|
14
years
|
|||||
Other
|
26,161
|
(9,389 | ) |
16,772
|
8
years
|
||||||||
Total
|
$ |
843,862
|
$ | (157,816 | ) |
686,046
|
|||||||
Other
intangible assets not subject to amortization:
|
|||||||||||||
Newspaper
mastheads
|
683,000
|
||||||||||||
Total
|
1,369,046
|
||||||||||||
Goodwill
-
net
|
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 in the first fiscal quarter of 2007 (in
thousands):
|
||||||||||||||||||||
December
31, 2006
|
Additions
|
Disposals/
Adjustments
|
Amortization
Expense
|
April
1,
2007
|
||||||||||||||||
Intangible
assets subject to amortization
|
$ |
843,862
|
$ |
25
|
-
|
-
|
$ |
843,887
|
||||||||||||
Accumulated
amortization
|
(157,816 | ) |
-
|
-
|
$ | (14,992 | ) | (172,808 | ) | |||||||||||
Total
|
686,046
|
25
|
-
|
(14,992 | ) |
671,079
|
||||||||||||||
Mastheads
and
other
|
683,000
|
-
|
-
|
683,000
|
||||||||||||||||
Goodwill
-
net
|
3,559,828
|
32,034
|
-
|
-
|
3,591,862
|
|||||||||||||||
Total
|
$ |
4,928,874
|
$ |
32,059
|
$ |
-
|
$ | (14,992 | ) | $ |
4,945,941
|
|||||||||
The
additional $32.0 million in goodwill related to purchase price
adjustments
for the Acquisition. The most significant individual items related to
the increase in income tax reserves ($29.0 million) and working
capital
adjustments related to the sale of the 12 newspapers ($2.9
million).
|
||||||||||||||||||||
Amortization
expense for continuing operations was $15.0 million and $1.2 million
in
the first fiscal quarter 2007 and 2006, respectively. The estimated
amortization expense for the remainder of fiscal year 2007 and
the five
succeeding fiscal years is as follows (in thousands):
|
||||||||||||||||||||
Amortization
|
||||||||||||||||||||
Year
|
Expense
|
|||||||||||||||||||
2007
(Remaining)
|
$ |
44,958
|
||||||||||||||||||
2008
|
59,941
|
|||||||||||||||||||
2009
|
59,910
|
|||||||||||||||||||
2010
|
59,232
|
|||||||||||||||||||
2011
|
57,837
|
|||||||||||||||||||
2012
|
57,368
|
NOTE
5.
|
LONG-TERM
DEBT
|
|
April
1,
2007
|
December
31,
2006
|
||||||
Term
A bank debt, interest at 6.11% in 2007 and 6.12% in 2006
|
$ |
750,000
|
$ |
1,100,000
|
||||
Revolving bank debt, interest at 6.08% in 2007 and 6.10% in
2006
|
494,923
|
665,795
|
||||||
Publicly-traded notes:
|
||||||||
$100 million 6.625% debentures due in 2007
|
100,019
|
100,025
|
||||||
$200 million 9.875% debentures due in 2009
|
211,545
|
212,950
|
||||||
$300 million 7.125% debentures due in 2011
|
304,259
|
304,512
|
||||||
$200 million 4.625% debentures due in 2014
|
173,573
|
172,705
|
||||||
$400 million 5.750% debentures due in 2017
|
360,786
|
359,848
|
||||||
$100
million 7.150% debentures due in 2027
|
90,828
|
90,717
|
||||||
$300
million 6.875% debentures due in 2029
|
270,453
|
270,117
|
||||||
Total debt
|
2,756,386
|
3,276,669
|
||||||
Less current portion
|
-
|
530,000
|
||||||
Long-term debt
|
$ |
2,756,386
|
$ |
2,746,669
|
|
Year
|
Payments
|
|||
2008
|
-
|
||||
|
2009
|
$ |
200,000
|
||
|
2010
|
-
|
|||
|
2011
|
1,644,923
|
|||
|
2012
|
-
|
|||
|
Thereafter |
1,000,000
|
|||
2,844,923
|
|||||
|
Less discount | (88,537 | ) | ||
|
Total debt | $ |
2,756,386
|
Three
Months Ended
|
||||||||
April
1,
2007
|
March
26,
2006
|
|||||||
Service
Cost
|
$ |
7,939
|
$ |
3,793
|
||||
Interest
Cost
|
24,217
|
5,796
|
||||||
Expected
return
on plan assets
|
(28,226 | ) | (7,751 | ) | ||||
Prior
service cost amortization
|
80
|
44
|
||||||
Actuarial
loss
|
4,009
|
2,119
|
||||||
Net
pension
expense
|
$ |
8,019
|
$ |
4,001
|
Three
Months Ended
|
||||||||
April
1,
2007
|
March
26,
2006
|
|||||||
Service
cost
|
$ |
221
|
-
|
|||||
Interest cost
|
1,009
|
$ |
9
|
|||||
Net
post-retirement benefit expense
|
$ |
1,230
|
$ |
9
|
Options/
SARs
|
Weighted
Average Exercise
Price
|
Aggregate
Intrinsic
Value
(in
thousands)
|
||||||||||
Outstanding December 31, 2006
|
4,064,075
|
$ |
52.78
|
$ |
4,857
|
|||||||
Granted
|
36,000
|
$ |
39.45
|
|||||||||
Exercised
|
(64,000 | ) | $ |
26.63
|
||||||||
Forfeited
|
(92,000 | ) | $ |
63.97
|
||||||||
Expired
|
(31,000 | ) | $ |
51.13
|
$ |
117
|
||||||
Outstanding April 1, 2007
|
3,913,075
|
$ |
52.83
|
|||||||||
Options exercisable:
|
||||||||||||
April
1, 2007
|
2,331,450
|
$ |
53.70
|
Range
of Exercise
Prices
|
Options/
SARs
Outstanding
|
Average
Remaining
Contractual
Life
|
Weighted
Average
Exercise
Price
|
Options/
SARs
Exercisable
|
Weighted
Average
Exercise
Price
|
|||||||||||||||||
$ |
25.75
- $42.50
|
1,517,750
|
6.95
|
$ |
40.72
|
619,750
|
$ |
38.32
|
||||||||||||||
$ |
45.98
- $59.09
|
1,352,950
|
6.54
|
$ |
54.34
|
992,575
|
$ |
52.96
|
||||||||||||||
$ |
59.58
- $73.36
|
1,042,375
|
7.07
|
$ |
68.51
|
719,125
|
$ |
67.95
|
||||||||||||||
$ |
25.75
- $73.36
|
3,913,075
|
6.84
|
$ |
52.83
|
2,331,450
|
$ |
53.70
|
Three
Months Ended
|
||||||||
April
1,
2007
|
March
26,
2006
|
|||||||
Dividend
yield
|
1.96
|
1.35
|
||||||
Expected
life
in years
|
5.41
|
5.33
|
||||||
Volatility
|
0.19
|
0.19
|
||||||
Risk-free
interest rate
|
4.74 | % | 4.61 | % | ||||
Weighted
average fair value of options/SARs granted
|
$ |
8.40
|
$ |
12.80
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
·
|
The
Company issued approximately 35.0 million Class A shares in connection
with the Acquisition. As a result, the weighted average diluted
shares
used to calculate earnings per share in the first fiscal quarter
of 2007
increased to 82.0 million shares compared to 47.0 million in first
fiscal
quarter of 2006.
|
·
|
On
March 5, 2007, the Company sold the (Minneapolis) Star Tribune
newspaper for $530.0 million in proceeds and is expected to receive
a tax
refund of approximately $201 million related to the sale in
2008. The results of Star Tribune's operations have
been recorded as discontinued operations in all periods
presented.
|
·
|
The
purchase price for the Acquisition has been allocated to the assets
acquired and liabilities assumed based upon their estimated fair
values as
of June 27, 2006, the date of the Acquisition. The purchase price
allocation, while substantially complete, is subject to further
adjustments based upon completion of analyses of deferred income
tax
assets and liabilities and other
items.
|
Revenues:
|
|
As
Reported
|
Pro
Forma
|
|||||||||||||||||||
April
1,
2007
|
March
26,
2006
|
%
Change
|
March
26,
2006
|
%
Change
|
||||||||||||||||
Advertising:
|
||||||||||||||||||||
Retail
|
$ |
206,028
|
$ |
64,688
|
218.5
|
$ |
204,345
|
0.8
|
||||||||||||
National
|
45,150
|
13,758
|
228.2
|
50,399
|
(10.4 | ) | ||||||||||||||
Classified:
|
||||||||||||||||||||
Auto
|
42,135
|
18,499
|
127.8
|
50,221
|
(16.1 | ) | ||||||||||||||
Employment
|
69,646
|
25,127
|
177.2
|
75,713
|
(8.0 | ) | ||||||||||||||
Real estate
|
55,150
|
26,463
|
108.4
|
64,214
|
(14.1 | ) | ||||||||||||||
Other
|
21,604
|
6,193
|
248.8
|
21,528
|
0.4
|
|||||||||||||||
Total classified
|
188,535
|
76,282
|
147.2
|
211,676
|
(10.9 | ) | ||||||||||||||
Direct marketing and other
|
37,310
|
11,606
|
221.5
|
37,353
|
(0.1 | ) | ||||||||||||||
Total advertising
|
477,023
|
166,334
|
186.8
|
503,773
|
(5.3 | ) | ||||||||||||||
Circulation
|
71,880
|
23,764
|
202.5
|
74,585
|
(3.6 | ) | ||||||||||||||
Other
|
17,655
|
4,365
|
304.5
|
17,937
|
(1.6 | ) | ||||||||||||||
Total revenues
|
$ |
566,558
|
$ |
194,463
|
191.3
|
$ |
596,295
|
(5.0 | ) |
·
|
Automotive
advertising increased $23.6 million or 127.8% from the first fiscal
quarter of 2006. On a pro forma basis, automotive advertising
declined $8.1 million or 16.1% from the first fiscal quarter of
2006,
reflecting an industry-wide trend.
|
·
|
Employment
advertising increased $44.5 million or 177.2% from the first fiscal
quarter of 2006. On a pro forma basis, employment advertising
decreased $6.1 million or 8.0% from the first fiscal quarter of
2006. Employment advertising was affected by the new affiliate
agreement with CareerBuilder for online employment
advertising. This agreement is helping to grow online
employment revenues at the legacy McClatchy
newspapers. However, under the new affiliate agreement selected
products are no longer available to be sold by the 20 acquired
Knight
Ridder newspapers, which are depressing their internet
revenues. The Company will begin cycling through this change in
August 2007.
|
·
|
Real
estate advertising was up $28.7 million or 108.4% from the first
fiscal
quarter of 2006. On a pro forma basis, real estate advertising
decreased
$9.1 million or 14.1% from the first 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 Company expects declines in this revenue
category to continue because of the difficult trends in these
states.
|
·
|
Online
classified advertising increased $25.0 million or 282.6% from the
first
fiscal quarter of 2006. On a pro forma basis, online classified
advertising increased $0.3 million or 0.8% from the first fiscal
quarter
of 2006.
|
|
ITEM 3. QUANTITIVE AND QUALITIVE DISCLOSURES
ABOUT MARKET RISK
|
Item
6. Exhibits filed as part of this Report as
listed in the Index of Exhibits, on page 31 hereof.
|
The
McClatchy Company
|
||
Registrant
|
||
May 11, 2007
|
/s/
Gary B. Pruitt
|
|
Date
|
Gary
B. Pruitt
Chief
Executive Officer
|
|
May 11, 2007
|
/s/
Patrick J. Talamantes
|
|
Date
|
Patrick
J. Talamantes
Chief
Financial Officer
|
Exhibit
|
Description
|
|
2.1
|
*
|
Agreement
and Plan of Merger, dated March 12, 2006, between the Company and
Knight-Ridder, Inc., included as Exhibit 2.1 in the Company’s Current
Report on Form 8-K filed March 12, 2006.
|
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.
|
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.
|
4.1
|
*
|
Form
of Physical Note for Commercial Paper Program included as Exhibit
4.1 to
the Company's Quarterly Report on Form 10-Q for the quarter ended
June 27,
2004.
|
10.1
|
*
|
Credit
Agreement dated June 27, 2006 by and among the Company, lenders
party
thereto, Bank of America, N.A., as Administrative Agent, Swing
Line Lender
and Letter of Credit Issuer, JPMorgan Chase Bank as Syndication
Agent and
Banc of America Securities LLC and JPMorgan Securities Inc. as
Joint Lead
Arrangers and Joint Book Managers, included as Exhibit 10.2 in
the
Company's Current Report on Form 10-Q filed for the quarter ending
on June
25, 2006.
|
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.
|
10.3
|
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.
|
|
10.4
|
*
|
Second
Supplemental Indenture dated June 27, 2006, between the Company
and
Knight-Ridder, Inc. included as Exhibit 10.3 in the Company's Current
Report on Form 10-Q filed for the quarter ending on June 25,
2006.
|
10.5
|
*
|
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.
|
**10.6
|
*
|
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.
|
**10.7
|
* |
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.
|
**10.8
|
*
|
Amended
and Restated Supplemental Executive Retirement Plan included as
Exhibit
10.4 to the Company's 2001 Form 10-K.
|
**10.9
|
*
|
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.
|
**10.10
|
*
|
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.
|
**10.11
|
*
|
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.
|
**10.12
|
*
|
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.
|
**10.13
|
*
|
Form
of Restricted Stock Agreement related to the Company's 2004 Stock
Incentive Plan, included as Exhibit 99.1 to the Company's Current
Report
on Form 8-K dated January 28, 2005.
|
**10.14
|
*
|
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.
|
**10.15
|
*
|
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.
|
10.16
|
*
|
Form
of Indemnification Agreement between the Company and each of its
officers
and directors, included as Exhibit 99.1 to the Company's Current
Report on
Form 8-K filed on May 23, 2005.
|
**10.17
|
*
|
Amended
and Restated 1997 Stock Option Plan included as Exhibit 10.7 to
the
Company's 2002 Report on Form 10-K.
|
**10.18
|
*
|
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.
|
**10.19
|
*
|
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.
|
**10.20
|
*
|
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.
|
10.21
|
*
|
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.
|
21
|
*
|
Subsidiaries
of the Company.
|
31.1
|
Certification
of the Chief Executive Officer of The McClatchy Company pursuant
to Rule
13a-14(a) under the Exchange Act.
|
|
31.2
|
Certification
of the Chief Financial Officer of The McClatchy Company pursuant
to Rule
13a-14(a) under the Exchange Act.
|
|
32.1
|
Certification
of the Chief Executive Officer of The McClatchy Company pursuant
to 18
U.S.C. Section 1350.
|
|
32.2
|
Certification
of the Chief Financial Officer of The McClatchy Company pursuant
to 18
U.S.C. Section 1350.
|
|
|
*
|
Incorporated
by reference
|
*
|
*
|
Compensation
plans or arrangements for the Company's executive officers and
directors
|