-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GyZ2Yrm0CYLZD8Ck6kpHTHQYFPQJxkV99NYKUGfsGECTd7rFOZ2p0GzuRPSx0xWO DC8HFZqSO2aq3i7X36usxw== 0000950008-98-000262.txt : 19980528 0000950008-98-000262.hdr.sgml : 19980528 ACCESSION NUMBER: 0000950008-98-000262 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980319 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19980527 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MCCLATCHY CO CENTRAL INDEX KEY: 0001056087 STANDARD INDUSTRIAL CLASSIFICATION: NEWSPAPERS: PUBLISHING OR PUBLISHING & PRINTING [2711] IRS NUMBER: 522080478 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 333-46501 FILM NUMBER: 98632067 BUSINESS ADDRESS: STREET 1: C/0 MCCLATCHY NEWSPAPERS INC STREET 2: LEGAL DEPT., 2100 Q STREET CITY: SACRAMENTO STATE: CA ZIP: 95816 BUSINESS PHONE: 9163211846 MAIL ADDRESS: STREET 1: PILLSBURY MADISON & SUTRO LLP STREET 2: 2550 HANOVER STREET CITY: PALO ALTO STATE: CA ZIP: 94304-1115 FORMER COMPANY: FORMER CONFORMED NAME: MNI NEWCO INC DATE OF NAME CHANGE: 19980218 8-K/A 1 AMENDMENT TO CURRENT REPORT ON FORM 8-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K/A AMENDMENT NO. 1 CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report: March 19, 1998 THE MCCLATCHY COMPANY ------------------------------------------------------ (Exact name of registrant as specified in its charter) DELAWARE 1-9824 52-2080478 - ---------------------------- ------------------- ------------------------ (State or Other Jurisdiction (Commission (I.R.S. Employer of Incorporation) File Number) Identification Number) 2100 "Q" STREET, SACRAMENTO, CA 95816 ---------------------------------------- ---------- (Address of principal executive offices) (Zip Code) (916) 321-1846 ------------------------------- (Registrant's telephone number, including area code) (Former name or former address, if changed since last report) Item 2. Acquisition or Disposition of Assets. ------------------------------------ Effective March 19, 1998, McClatchy Newspapers, Inc. ("McClatchy"), a Delaware corporation, merged with and into MNI Mergerco, Inc. ("MNI Merger Sub"), a Delaware corporation and wholly owned subsidiary of The McClatchy Company (formerly named MNI Newco, Inc.) ("New McClatchy"), a Delaware corporation, and Cowles Media Company ("Cowles"), a Delaware corporation, merged with and into CMC Mergerco, Inc. ("CMC Merger Sub"), a Delaware corporation and wholly owned subsidiary of New McClatchy (collectively, the "Reorganization"), pursuant to the Agreement and Plan of Merger and Reorganization (the "Reorganization Agreement"), dated as of November 13, 1997 and amended and restated as of February 13, 1998, by and among McClatchy, Cowles, New McClatchy, MNI Merger Sub, and CMC Merger Sub. Pursuant to the terms of the Reorganization Agreement, each outstanding share of McClatchy Class A common stock, par value $0.01 per share, and McClatchy Class B common stock, par value $0.01 per share, was converted, respectively, into shares of New McClatchy Class A common stock, par value $0.01 per share (the "New McClatchy Class A Common Stock"), and New McClatchy Class B common stock, par value $0.01 per share, and each outstanding share of Cowles common stock was converted into $90.50 in cash, shares of New McClatchy Class A Common Stock (based upon an exchange ratio of 3.01667 shares of New McClatchy Class A Common Stock for each share of Cowles common stock) or a combination of cash and New McClatchy Class A Common Stock. Based on elections of Cowles stockholders, approximately 6.4 million shares of New McClatchy Class A Common Stock were issued to Cowles stockholders and approximately $1.123 billion was paid to Cowles stockholders. New McClatchy, the registrant for this Current Report on Form 8-K, filed a Registration Statement on Form S-4 (Registration No. 333-46501) (the "Registration Statement") with the Securities and Exchange Commission (the "SEC") on February 18, 1998 which was declared effective by the SEC on February 19, 1998. The Registration Statement sets forth certain information regarding the Reorganization, McClatchy, Cowles, and New McClatchy, including, but not limited to, the date and manner of the Reorganization, a description of the assets involved, the nature and amount of consideration paid by McClatchy to the stockholders of Cowles, the principle followed in determining the amount of such consideration, the nature of any material relationships between the stockholders of Cowles and New McClatchy or any of its affiliates, any director or officer of New McClatchy, or any associate of any such director or officer, and the source of funds used for the consideration paid to Cowles stockholders. Item 7. Financial Statements and Exhibits. (a) Financial Statements of Business Acquired. (i) Cowles Media Company Consolidated Balance Sheets as of December 27, 1997 and December 28, 1996. (ii) Cowles Media Company Consolidated Statement of Earnings for the Nine Months Ended December 27, 1997 and December 28, 1996. (iii) Cowles Media Company Consolidated Statement of Cash Flows For the Nine Months Ended December 27, 1997 and December 28, 1996. (iv) Cowles Media Company Notes to Interim Consolidated Financial Statements. (b) Pro Forma Financial Information. (i) Pro Forma Condensed Combined Balance Sheet as of December 31, 1997. (ii) Pro Forma Condensed Combined Statement of Operations for the Twelve Months Ended December 31, 1997. (iii) Notes to Pro Forma Condensed Combined Financial Statements. COWLES MEDIA COMPANY CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 27, 1997 AND DECEMBER 28, 1996 (UNAUDITED) ALL REFERENCES ARE TO INTERIM PERIODS.
1997 1996 ---------------- -------------- (In thousands) Assets Current assets: Cash and cash equivalents $ 5,469 $ - Receivables, less allowance for doubtful accounts of $9,341 as of December 27, 1997 and $10,353 as of December 28, 1996 71,511 62,571 Inventories 15,311 13,435 Deferred tax asset 5,479 5,979 Prepaid expenses and other 16,916 15,590 ---------------- -------------- Total current assets 114,686 97,575 ---------------- -------------- Property, plant and equipment, at cost: Land and land improvements 10,261 10,731 Buildings 59,102 57,335 Machinery and equipment 184,245 172,854 Construction in progress 16,947 13,501 ---------------- -------------- 270,555 254,421 Less accumulated depreciation 154,458 139,974 ---------------- -------------- Net property, plant and equipment 116,097 114,447 Intangible assets, net of accumulated amortization of $39,789 as of December 27, 1997 and $37,900 as of December 28, 1996 120,195 101,306 Other assets 6,827 7,194 ---------------- -------------- Total $ 357,805 $ 320,522 ================ ============== Liabilities and Stockholders' Equity Current liabilities: Current installments of long-term debt $ 8,841 6,085 Accounts payable 14,669 14,463 Accrued expenses and other liabilities 51,251 50,926 Unearned income, principally subscriptions paid in advance 49,090 51,233 Income taxes 3,723 6,385 ---------------- -------------- Total current liabilities 127,574 129,092 Long-term debt, less current installments 82,993 85,368 Deferred income taxes 11,014 9,608 Deferred credit 1,875 3,375 Other liabilities 23,348 18,674 Stockholders' equity: Voting common stock, $0.17 stated value; 4,000,000 shares authorized; 3,858,687 shares issued; and 3,837,006 and 3,827,920 shares outstanding 643 643 Non-voting common stock, $0.17 stated value; 10,600,000 shares authorized; 10,145,836 shares issued; and 10,060,870 and 9,892,200 shares outstanding 1,691 1,691 Capital in excess of stated value 4,562 4,406 Retained earnings 107,000 75,320 ---------------- -------------- 113,896 82,060 Less: Treasury stock at cost; 106,648 as of December 27, 1997 and 284,403 as of December 28, 1996 2,895 7,655 ---------------- -------------- Total stockholders' equity 111,001 74,405 ---------------- -------------- Commitments and contingent liabilities Total $ 357,805 $ 320,522 ================ ============== SEE ACCOMPANYING NOTE TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS.
COWLES MEDIA COMPANY CONSOLIDATED STATEMENT OF EARNINGS FOR THE NINE MONTHS ENDED DECEMBER 27, 1997 AND DECEMBER 28, 1996 (UNAUDITED) ALL REFERENCES ARE TO INTERIM PERIODS.
1997 1996 --------------- -------------- (In thousands) Operating Revenue $ 401,667 $ 387,359 Expenses: Operating 327,009 327,132 Depreciation 12,852 11,864 Amortization of intangible assets 4,785 5,600 --------------- -------------- Operating earnings 57,021 42,763 --------------- -------------- Other income (expenses), net: Investment income 406 202 Interest expense (4,708) (5,955) Other, net 576 4,181 --------------- -------------- (3,726) (1,572) --------------- -------------- Earnings before income taxes 53,295 41,191 Provision for income taxes 19,281 18,577 =============== ============== Net earnings $ 34,014 $ 22,614 =============== ============== Net earnings per share: Basic $ 2.44 $ 1.63 Dilutive $ 2.41 $ 1.63 Average equivalent common shares: Basic 13,922 13,884 Dilutive 14,121 13,897 SEE ACCOMPANYING NOTE TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS.
COWLES MEDIA COMPANY CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE NINE MONTHS ENDED DECEMBER 27, 1997 AND DECEMBER 28, 1996 (UNAUDITED) ALL REFERENCES ARE TO INTERIM PERIODS.
1997 1996 -------------- ------------ (In thousands) Net cash from operating activities $ 37,487 $ 36,838 Cash Flows from Investing Activities: Net cash outlay for acquisitions (15,176) (4,963) Capital expenditures (12,857) (12,142) Proceeds from sales of assets and businesses 144 5,704 Other (981) (1,165) -------------- ------------ Net cash used by investing activities (28,870) (12,566) -------------- ------------ Cash Flows from Financing Activities: Preceeds from long-term debt - 20,000 Payments on long-term debt (5,672) (33,747) Dividends paid (7,023) (6,627) Proceeds from stock options exercised 4,660 165 Capital stock repurchased (959) (4,673) Other (21) (64) -------------- ------------ Net cash used by financing activities (9,015) (24,946) -------------- ------------ Net Change in Cash and Cash Equivalents (398) (674) Cash and cash equivalents at beginning of year 5,867 674 -------------- ------------ Cash and cash equivalents at end of period $ 5,469 $ - ============== ============ SEE ACCOMPANYING NOTE TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS.
COWLES MEDIA COMPANY NOTE TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS December 27, 1997, December 28, 1996 ALL REFERENCES ARE TO INTERIM PERIODS UNLESS OTHERWISE NOTED. The interim financial statements should be read in conjunction with the audited consolidated financial statements of Cowles Media Company and related notes thereto included in the filing of MNI Newco, Inc. on Form S-4 with the U.S. Securities and Exchange Commission on February 17, 1998. In the opinion of management, the interim financial statements contain all adjustments necessary to present fairly the Company's balance sheets, consolidated statement of earnings and cash flows for the interim periods presented. All adjustments are normal recurring entries. These interim financial statements are not necessarily indicative of the results to be expected for a full year. PRO FORMA CONDENSED COMBINED BALANCE SHEET (UNAUDITED) DECEMBER 31, 1997 (In Thousands)
PRO FORMA PRO FORMA COMBINED PRO FORMA McCLATCHY COWLES PURCHASE PRIOR TO BUSINESSES DECEMBER 31, DECEMBER 27, ACCOUNTING BUSINESSES DISPOSED PRO FORMA 1997 1997 ADJUSTMENTS DISPOSED ADJUSTMENTS COMBINED ------------ ------------ ------------- ------------- -------------- ---------- (See Note 1) (See Note 2) Current assets $ 122,795 $ 114,686 $ 2,271 $ 239,752 $ (50,892) $ 188,860 Property, plant and equipment, net 325,186 116,097 71,436 512,719 (57,806) 454,913 Intangibles, net 393,215 120,195 1,173,646 1,687,056 (116,550) 1,570,506 Other assets 12,585 6,827 59,339 78,751 (736) 78,015 ------------ ------------ ------------- ------------- ------------- ---------- Total assets $ 853,781 $ 357,805 $ 1,306,692 $ 2,518,278 $ (225,984) 2,292,294 ============ ============ ============= ============= ============= ========== Current liabilities, excluding the current portion of long-term debt $ 98,443 $ 118,738 $ - $ 217,176 $ (50,984) $ 166,192 Long-term debt 94,000 91,834 1,122,312 1,308,146 (167,700) 1,140,446 Other long-term obligations 96,669 36,237 103,188 236,094 (7,300) 228,794 Stockholders' equity: Common stock 381 2,334 (2,270) 445 - 445 Additional paid in capital 74,354 4,562 187,567 266,483 - 266,483 Retained earnings 489,934 104,105 (104,105) 489,934 - 489,934 ------------ ------------ ------------- ------------- ------------- ---------- Total 564,669 111,001 81,192 756,862 - 756,862 ------------ ------------ ------------- ------------- ------------- ---------- Total liabilities and stockholders' equity $ 853,781 $ 357,805 $ 1,306,692 $ 2,518,278 $ (225,984) 2,292,294 ============ ============ ============= ============= ============= ========== SEE ACCOMPANYING NOTES TO PRO FORMA CONDENSED FINANCIAL STATEMENTS.
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS (UNAUDITED) FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1997 (In Thousands)
PRO FORMA PRO FORMA COMBINED PRO FORMA McCLATCHY COWLES PURCHASE PRIOR TO BUSINESSES December 31, December 27, ACCOUNTING BUSINESSES DISPOSED PRO FORMA 1997 1997 ADJUSTMENTS DISPOSED ADJUSTMENTS COMBINED ------------- ------------- -------------- --------------- -------------- ------------ (See Note 3) (See Note 4) Revenues - net $ 641,950 531,377 - $ 1,173,327 $ (161,543) $ 1,011,784 Operating expenses (472,926) (440,388) - $ (913,314) 150,557 (762,757) Depreciation and amortization (53,269) (22,366) (49,051) $ (124,686) 9,169 (115,517) ------------ ------------- -------------- --------------- ------------ ------------ Total expenses (526,195) (462,754) (49,051) (1,038,000) 159,726 (878,274) Operating income 115,755 68,623 (49,051) $ 135,327 (1,817) 133,510 Interest expense (8,698) (7,026) (83,051) $ (98,775) 14,965 (83,810) Other 9,203 3,827 - $ 13,030 (670) 12,360 ------------- ------------- -------------- -------------- ------------ ------------ Income before taxes 116,260 65,424 (132,102) $ 49,582 $ 12,478 $ 62,060 Income taxes (47,461) (24,532) 43,526 $ (28,467) $ (1,057) (29,524) ------------- ------------- -------------- -------------- ------------ ------------ Income from continuing operations $ 68,799 $ 40,892 $ (88,576) $ 21,115 $ 11,421 $ 32,536 ============= ============= ============== ============== ============ ============ Weighted average shares 38,155 6,406 44,561 Diluted earnings per share $ 1.80 $ 0.73 SEE ACCOMPANYING NOTES TO PRO FORMA CONDENSED FINANCIAL STATEMENTS.
NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED) 1. Pro Forma Adjustments to Reflect Purchase Accounting The Following tables set forth the determination of the estimated purchase price as of December 31, 1997 based on a market value of $30.00 per share of McClatchy Common Stock, and assumes that 15% of the total consideration in the Cowles Merger is paid in The McClatchy Company Class A Common Stock (in thousands): McClatchy Class A Common Stock (6,406,456 @ $30.00 per share) $ 192,193 Assumed debt 91,834 Cash paid including transaction costs 1,122,312 --------------- Estimated purchase price $ 1,406,339 ===============
The McClatchy Company funded the merger of Cowles using bank debt along with issuing Class A Common Stock as discussed above. A syndicate of banks have provided the debt in three tranches. The term loan facility consists of two tranches: Tranche A, of $735 million, bears interest at LIBOR plus 125 basis points and is payable in seven years; and Tranche B, of $330 million, bears interest at LIBOR plus 175 basis points and is payable in nine and one-half years. In addition, a revolving credit facility of up to $200 million bears interest at LIBOR plus 125 basis points, is partially available for The McClatchy Company's working capital needs and is payable in seven years. The debt is secured by certain assets of The McClatchy Company, and all of the debt is pre-payable without penalty. To the extent that the Company reduces outstanding debt relative to its EBITDA, the interest rate spread over LIBOR on the debt will decline. Although McClatchy has no present plan in place for early repayment of this debt, the Company intends to accelerate payments on this debt as cash generation allows. The estimated transaction costs totaling $30 million include approximately $20 million of bank fees and approximately $10 million in advisory, accounting and legal fees, including costs of disposing of the Non-newspaper Subs (See note 2). The preliminary allocation of the estimated purchase price is as follows (in thousands): Cowles shareholder equity as reported $ 111,001 Cowles debt as reported 91,834 Increases to assets and liabilities: Newsprint inventory at fair market price 2,271 Star Tribune property 22,000 Non-newspaper net assets 49,436 Star Tribune identifiable intangible assets 136,000 Pension and other assets 59,339 Deferred income taxes payable (103,188) Goodwill 1,037,646 ---------------- Investment in Cowles $ 1,406,339 ================
2. Pro Forma Adjustments for Businesses Disposed McClatchy and Cowles executed definitive agreements in January 1998 to sell Cowles magazine subsidiaries to PRIMEDIA, Inc., and to sell its book publishing subsidiary to a management group led by the subsidiary's president. The sales of the non-newspaper subsidiaries, valued at $208.1 million including the assumption of $29.4 million in debt and other liabilities, closed on March 19,1998. Accordingly, the pro forma financial statements reflect these businesses as a discontinued operating segment. The following adjustments are in thousands:
Pro Forma To reclassify assets and liabilities of segment sold: Businesses Cowles Pro Forma Disposed December 27, 1997 Adjustments Adjustments ----------------- ------------ ----------- Current assets $ 50,892 $ - 50,892 Net property, plant & equipment including increase in carrying value 8,370 49,436 57,806 Net intangibles 116,550 - 116,550 Other assets 736 - 736 Current liabilities (50,984) - (50,984) Long-term debt (21,767) (333) (22,100) Other obligations (5,228) (2,072) (7,300) ---------------- ------------- ----------- Net reduction in New McClatchy debt $ 98,569 47,031 $ 145,600 ================ ============= ===========
The carrying value of the net assets sold represents McClatchy's best estimate of the after-tax proceeds expected to reduce debt. McClatchy did not have a gain or loss on the sale of these assets. The after-tax proceeds are net of $3 million in costs ($2 million in advisor fees and $1 million in legal and accounting fees). McClatchy's debt and other obligations are reduced by $175 million (debt assumed by buyers $22.1 million, other obligations assumed of $7.3 million and after-tax proceeds of $145.6 million applied to new debt). 3. Pro Forma Adjustments to Combined Statement of Operations (excluding assets to be sold) for the year ended December 31, 1997: Increase in depreciation and amortization on carrying value of property, plant and equipment and identifiable intangible assets of Star Tribune $ (23,110) Increase in amortization of goodwill (25,941) Interest charges on new debt @ 7.4% (83,051) Tax effect of pro forma adjustments 43,526 -------------------- $ (88,576) ==================== The tax effects are calculated as follows: Additional depreciation and amortization $ (49,051) Additional interest (83,051) -------------------- Net income adjustments (132,102) Non taxable goodwill amortization 25,941 -------------------- Net taxable adjustments (106,161) Statutory rate 41% -------------------- Taxes $ (43,526) ====================
4. Pro Forma Adjustments for Businesses Disposed To reclassify operating results of discontinued operations (in thousands):
Cowles Businesses December 31, Pro Forma Disposed 1997 Adjustments Adjustments ----------- ----------- ------------ Revenues $ (161,543) $ - $ (161,543) Operating expenses (150,557) - (150,557) Depreciation and amortization 9,169 - 9,169 Operating income (1,817) - (1,817) Interest expense (2,015) (12,950) (14,965) Other non-operating expense (670) - (670) Earnings before taxes (472) 12,950 12,478 Taxes (4,253) 5,310 1,057 Adjustment to income from continuing operations $ 3,781 7,640 11,421 Pro forma adjustments to remove interest on debt repaid with net proceeds of sales of non-newspaper businesses and related tax effect.
(c) Exhibits. 2.1 Agreement and Plan of Merger and Reorganization (the "Reorganization Agreement"), dated as of November 13, 1997 and amended and restated as of February 13, 1998, by and among McClatchy, Cowles, New McClatchy, MNI Merger Sub, and CMC Merger Sub. (Attached as Annex A to the Joint Proxy/Prospectus included in the Registrant's Registration Statement on Form S-4 (File No. 233-46501) and incorporated by reference herein.) SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Dated: May 26, 1998 The McClatchy Company By /s/ Karole Morgan-Prager -------------------------------- Karole Morgan-Prager Vice President, General Counsel and Corporate Secretary EXHIBIT INDEX ------------- Exhibit No. Description - ----------- ----------- 2.1 Agreement and Plan of Merger and Reorganization (the "Reorganization Agreement"), dated as of November 13, 1997 and amended and restated as of February 13, 1998, by and among McClatchy, Cowles, New McClatchy, MNI Merger Sub, and CMC Merger Sub. (Attached as Annex A to the Joint Proxy/Prospectus included in the Registrant's Registration Statement on Form S-4 (File No. 233-46501) and incorporated by reference herein.) -----END PRIVACY-ENHANCED MESSAGE-----