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McClatchy Reports Preliminary Third Quarter 2007 Earnings
SACRAMENTO, Calif.
(Map)
-
Income from continuing operations in the third quarter of 2006 was
Management noted that it is in the process of performing impairment
testing of goodwill and other long-lived assets as of
Revenues from continuing operations in the third quarter of 2007 were
Total losses recorded from unconsolidated investments were
First Nine Months Results:
Income from continuing operations for the first nine months of 2007 was
Earnings from continuing operations in the first nine months of 2006 were
Revenues from continuing operations in the first nine months of 2007 were
On a pro forma basis, including the 20 former Knight Ridder newspapers
acquired in
Interest expense from continuing operations for the first nine months of
2007 includes
Management's Comments:
Commenting on McClatchy's results,
"Our advertising results were in line with management expectations, and we
were able to mitigate the impact of the advertising decline on our income with
strong cost controls in the quarter. Total cash expenses were down 8.6% in
the third quarter and were down 9.1% through the first nine months. Through
"Our outlook for the fourth quarter has been tempered by the continuing adverse effect of the real estate downturn and its impact on the economies in our local markets, particularly in California and Florida. It's clear the economies of these two markets and perhaps the country as a whole are experiencing a greater slowdown than many had anticipated just a few months ago -- and McClatchy is feeling the effects more than most other newspaper companies given our significant operations in California and Florida. Accordingly, we expect the advertising revenue decline in the fourth quarter to be similar to that in the second and third quarters. We do not know when this downturn will end, and do not have visibility beyond the fourth quarter. Nonetheless, we believe that cyclical factors represent a significant portion of the current advertising downturn as evidenced by our operations in the California and Florida regions. Looking longer term, we like the prospects for these two regions. We will continue to focus on cost controls and will weather the downturn by remaining efficient and protecting cash flows as best we can.
"The challenging business environment in the second half of 2007, coupled with the drag on our stock price, has resulted in our moving up our annual testing of goodwill and intangible assets for impairment. We are now testing for impairment at the end of the third quarter rather than waiting until the normal time for our testing at year-end. While we are early in our analysis, we expect the real estate downturn and its attendant effects on the local economies in which we operate, together with the additional amount of goodwill recorded under the accounting rules in the Knight Ridder acquisition, will result in an impairment charge.
"We recognize that newspaper revenues have declined and that values have dropped. But McClatchy is a solidly profitable company that is rapidly paying down debt and re-engineering its operations to navigate through a changing environment for all media companies. The impairment at issue involves only non-cash accounting charges, and the simplest way to put that in perspective is to remember that nothing about it changes our operations or our ability to reduce debt."
McClatchy announced the acquisition of Knight-Ridder, Inc. on
The company's pro forma statistical report, which summarizes revenue performance for September, the third fiscal quarter and first nine months of 2007, follows. This report includes advertising revenues for the 20 Knight Ridder newspapers the company acquired, but did not own in the first nine months of its fiscal 2006, and excludes the revenues of the Star Tribune newspaper. The pro forma information is meant to provide investors a sense of what the advertising results of the continuing operations would have been in the nine-month interim period of 2006. 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
About McClatchy:
The McClatchy Company is the third largest newspaper company in the
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 operates Real Cities (http://www.RealCities.com), the largest national advertising network of local news websites and 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 classified websites such as the nation's number two online auto website, cars.com, and the number one rental site, apartments.com. 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 and
the expected impairment charge related to goodwill and/or long-lived assets,
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: 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
***THE McCLATCHY COMPANY***
PRELIMINARY CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
(In thousands, except per share amounts)
Three Months Ended Nine Months Ended
Sept. 30, Sept. 24, Sept. 30, Sept. 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
442,599 481,445 1,384,415 800,368
OPERATING INCOME 97,745 113,683 302,514 201,223
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
Other - net 700 8,445 1,443 8,390
(55,193) (37,048) (178,632) (36,173)
INCOME FROM CONTINUING
OPERATIONS BEFORE INCOME
TAX PROVISION 42,552 76,635 123,882 165,050
INCOME TAX PROVISION 19,062 24,025 51,348 58,470
INCOME FROM CONTINUING
OPERATIONS 23,490 52,610 72,534 106,580
INCOME (LOSS) FROM DISCONTINUED
OPERATIONS - NET OF INCOME TAXES (11) (779) (4,789) 17,114
NET INCOME $23,479 $51,831 $67,745 $123,694
NET INCOME PER COMMON SHARE:
Basic:
Income from continuing
operations $0.29 $0.65 $0.88 $1.83
Income (loss) from
discontinued operation (0.00) (0.01) (0.05) 0.30
Net income per share $0.29 $0.64 $0.83 $2.13
Diluted:
Income from continuing
operations $0.29 $0.65 $0.88 $1.82
Income (loss) from
discontinued operation (0.00) (0.01) (0.05) 0.30
Net income per share $0.29 $0.64 $0.83 $2.12
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES:
Basic 82,040 81,013 81,967 58,173
Diluted 82,098 81,191 82,030 58,416
***The McClatchy Company***
Consolidated Statistical Report
(In thousands, except for preprints)
September
Combined
Revenues - Net: 2007 2006 % Change
Advertising
Retail $64,663 $69,210 -6.6%
National 14,253 14,982 -4.9%
Classified Total 53,771 63,657 -15.5%
Automotive 12,985 15,019 -13.5%
Real Estate 14,934 20,250 -26.3%
Employment 17,930 21,382 -16.1%
Other Class 7,922 7,006 13.1%
Direct Marketing 11,155 13,747 -18.9%
Other Adv Rev 129 60 115.0%
Total Advertising $143,971 $161,656 -10.9%
Circulation 21,532 22,992 -6.4%
Other 4,723 5,987 -21.1%
Total Revenues $170,226 $190,635 -10.7%
Memo: Online Only Advertising
Revenue $13,275 $13,390 -0.9%
Advertising Revenues by Market:
California $26,112 $33,116 -21.1%
Florida 21,190 26,187 -19.1%
Texas 15,242 16,000 -4.7%
Southeast 38,882 40,500 -4.0%
Midwest 20,170 21,822 -7.6%
Northwest 16,342 18,425 -11.3%
Other 6,033 5,606 7.6%
Total Advertising $143,971 $161,656 -10.9%
Advertising Statistics for Dailies:
Full Run ROP Linage
Millions of Preprints Distributed
Average Paid Circulation:*
Daily
Sunday
September
Print Only
Revenues - Net: 2007 2006 % Change
Advertising
Retail $62,698 $67,668 -7.3%
National 13,135 13,347 -1.6%
Classified Total 43,579 53,444 -18.5%
Automotive 10,766 13,215 -18.5%
Real Estate 13,670 18,928 -27.8%
Employment 11,782 14,748 -20.1%
Other Class 7,361 6,553 12.3%
Direct Marketing 11,155 13,747 -18.9%
Other Adv Rev 129 60 115.0%
Total Advertising $130,696 $148,266 -11.9%
Circulation
Other
Total Revenues
Memo: Online Only Advertising
Revenue
Advertising Revenues by Market:
California $24,131 $31,172 -22.6%
Florida 19,572 24,046 -18.6%
Texas 14,011 14,753 -5.0%
Southeast 34,777 36,586 -4.9%
Midwest 18,156 19,627 -7.5%
Northwest 14,596 16,874 -13.5%
Other 5,453 5,208 4.7%
Total Advertising $130,696 $148,266 -11.9%
Advertising Statistics for Dailies:
Full Run ROP Linage 2,481.4 2,820.8 -12.0%
Millions of Preprints Distributed 486.3 548.8 -11.4%
Average Paid Circulation:*
Daily 2,745.1 2,841.6 -3.4%
Sunday 3,353.5 3,494.9 -4.0%
* 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 3
Combined
Revenues - Net: 2007 2006 % Change
Advertising
Retail $204,349 $210,934 -3.1%
National 41,718 47,578 -12.3%
Classified Total 173,794 206,971 -16.0%
Automotive 42,331 49,727 -14.9%
Real Estate 48,322 65,349 -26.1%
Employment 59,155 69,804 -15.3%
Other Class 23,987 22,091 8.6%
Direct Marketing 36,639 41,011 -10.7%
Other Adv Rev 517 280 84.3%
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%
Memo: Online Only Advertising
Revenue $41,568 $41,009 1.4%
Advertising Revenues by Market:
California $86,405 $106,163 -18.6%
Florida 66,530 80,572 -17.4%
Texas 47,891 50,804 -5.7%
Southeast 119,461 123,127 -3.0%
Midwest 64,089 67,902 -5.6%
Northwest 53,248 57,319 -7.1%
Other 19,393 20,887 -7.2%
Total Advertising $457,017 $506,774 -9.8%
Advertising Statistics for Dailies:
Full Run ROP Linage
Millions of Preprints Distributed
Average Paid Circulation:*
Daily
Sunday
Quarter 3
Print Only
Revenues - Net: 2007 2006 % Change
Advertising
Retail $198,243 $206,602 -4.0%
National 39,511 42,632 -7.3%
Classified Total 140,539 175,240 -19.8%
Automotive 35,778 44,266 -19.2%
Real Estate 44,485 61,273 -27.4%
Employment 38,046 49,052 -22.4%
Other Class 22,230 20,649 7.7%
Direct Marketing 36,639 41,011 -10.7%
Other Adv Rev 516 280 84.3%
Total Advertising $415,448 $465,765 -10.8%
Circulation
Other
Total Revenues
Memo: Online Only Advertising Revenue
Advertising Revenues by Market:
California $79,982 $99,927 -20.0%
Florida 61,649 74,978 -17.8%
Texas 44,231 47,430 -6.7%
Southeast 106,900 112,022 -4.6%
Midwest 57,682 61,842 -6.7%
Northwest 47,683 52,651 -9.4%
Other 17,321 16,915 2.4%
Total Advertising $415,448 $465,765 -10.8%
Advertising Statistics for Dailies:
Full Run ROP Linage 8,019.8 9,037.3 -11.3%
Millions of Preprints Distributed 1,603.9 1,716.7 -6.6%
Average Paid Circulation:*
Daily 2,645.8 2,730.8 -3.1%
Sunday 3,311.6 3,434.8 -3.6%
* 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)
September Year-to-Date
Combined
Revenues - Net: *Pro Forma % As Reported
2007 2006 Change 2006
Advertising
Retail $623,878 $642,716 -2.9% $350,132
National 132,934 148,816 -10.7% 76,759
Classified Total 550,406 639,775 -14.0% 363,310
Automotive 128,264 151,773 -15.5% 86,570
Real Estate 158,233 197,224 -19.8% 120,897
Employment 195,182 224,069 -12.9% 121,075
Other Class 68,728 66,709 3.0% 34,768
Direct Marketing 113,531 119,336 -4.9% 65,330
Other Adv Rev 1,568 1,272 23.3% 1,260
Total Advertising $1,422,317 $1,551,915 -8.4% $856,791
Circulation 209,582 218,308 -4.0% 117,905
Other 55,030 53,631 2.6% 26,895
Total Revenues $1,686,929 $1,823,854 -7.5% $1,001,591
Memo: Online Only
Advertising Revenue $125,555 $123,846 1.4% $63,098
Advertising Revenues by Market:
California $274,117 $320,795 -14.6% $307,347
Florida 221,328 265,983 -16.8% 80,572
Texas 147,076 157,954 -6.9% 50,804
Southeast 362,508 372,460 -2.7% 203,431
Midwest 195,865 208,741 -6.2% 67,902
Northwest 163,721 167,516 -2.3% 125,848
Other 57,702 58,466 -1.3% 20,887
Total Advertising $1,422,317 $1,551,915 -8.4% $856,791
Advertising Statistics for Dailies:
Full Run ROP Linage 14,957.0
Millions of Preprints Distributed 2,843.9
Average Paid Circulation:**
Daily
Sunday
September Year-to-Date
Print Only
Revenues - Net: *Pro Forma
2007 2006 % Change
Advertising
Retail $605,338 $631,109 -4.1%
National 127,548 139,262 -8.4%
Classified Total 448,777 537,090 -16.4%
Automotive 110,028 136,140 -19.2%
Real Estate 146,912 185,274 -20.7%
Employment 128,009 153,489 -16.6%
Other Class 63,829 62,187 2.6%
Direct Marketing 113,531 119,336 -4.9%
Other Adv Rev 1,568 1,272 23.3%
Total Advertising $1,296,762 $1,428,069 -9.2%
Circulation
Other
Total Revenues
Memo: Online Only Advertising Revenue
Advertising Revenues by Market:
California $254,514 $302,246 -15.8%
Florida 205,116 247,367 -17.1%
Texas 136,534 147,224 -7.3%
Southeast 324,783 338,146 -4.0%
Midwest 176,967 189,385 -6.6%
Northwest 146,985 153,933 -4.5%
Other 51,864 49,768 4.2%
Total Advertising $1,296,763 $1,428,069 -9.2%
Advertising Statistics for Dailies:
Full Run ROP Linage 24,487.2 27,245.4 -10.1%
Millions of Preprints Distributed 4,929.2 5,191.9 -5.1%
Average Paid Circulation:**
Daily 2,732.2 2,830.1 -3.5%
Sunday 3,384.3 3,524.0 -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***
RECONCILIATION OF GAAP AMOUNTS
(In thousands)
Three Months Ended Nine Months Ended
Sept. 30, Sept. 24, Sept. 30, Sept. 24,
2007 2006 2007 2006
Pro Forma
REVENUES - NET:
Advertising $457,017 $506,774 $1,422,317 $1,551,915
Circulation 67,995 70,637 209,582 218,308
Other 15,332 17,717 55,030 53,631
540,344 595,128 1,686,929 1,823,854
OPERATING EXPENSES:
Cash expenses 406,349 444,783 1,271,975 1,399,228
Depreciation and
amortization 36,250 36,662 112,440 117,058
442,599 481,445 1,384,415 1,516,286
OPERATING INCOME 97,745 113,683 302,514 307,568
Add back depreciation and
amortization 36,250 36,662 112,440 117,058
OPERATING CASH FLOW $133,995 $150,345 $ 414,954 $424,626
OPERATING CASH FLOW MARGIN 24.8% 25.3% 24.6% 23.3%
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 September 30, 2007, due to the
continuing challenging business conditions and the resulting weakness in
the company's stock price as of the end of its third quarter. Upon
completion of that testing, the company expects to record a non-cash
impairment charge to GAAP earnings in its third quarter financial
statements when it files its Form 10-Q with the Securities and Exchange
Commission (SEC) on or before November 9, 2007.
***The McClatchy Company***
RECONCILIATION OF GAAP AMOUNTS
Pro Forma Operating Income and Cash Flow
Nine Months ended September 24, 2006
(in thousands)
Historical Acquisitions/ Pro Forma
Amounts Divestitures Amounts
REVENUES -NET
Advertising $856,791 $695,124 $1,551,915
Circulation 117,905 100,403 218,308
Other 26,895 26,736 3,631
1,001,591 822,263 1,823,854
OPERATING EXPENSES
Cash expenses 743,846 655,382 1,399,228
Depreciation and amortization 56,522 60,536 117,058
800,368 715,918 1,516,286
OPERATING INCOME 201,223 106,345 307,568
Add back depreciation and
amortization 56,522 60,536 117,058
OPERATING CASH FLOW $257,745 $166,881 $424,626
Note: Excludes synergies that have been or may be realized from the
Knight Ridder Acquisition.
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