mniexh99-12q2008pr.htm

Exhibit 99.1

McCLATCHY REPORTS SECOND QUARTER RESULTS

SACRAMENTO, Calif., July 24, 2008 – The McClatchy Company (NYSE-MNI) today reported net income from continuing operations in the second quarter of 2008 of $20.1 million, or 24 cents per share. Adjusted earnings from continuing operations(1) excluding several unusual items in the second quarter of 2008 were $17.3 million or 21 cents per share. Total net income including discontinued operations was $19.7 million, or 24 cents per share.

Earnings in the second quarter of 2008 included the impact of several unusual events including: a gain on the sale of a one-third interest in SP Newsprint Company (SP), a gain on the extinguishment of debt related to a bond tender, the charges related to implementing a previously announced restructuring plan, the write-down of certain internet investments and a charge for certain discrete tax items.

The company’s second quarter 2007 earnings from continuing operations were $34.5 million, or 42 cents per share, and included the effect of an after-tax non-cash loss of $4.7 million, or six cents per share, related to the settlement of litigation and amendment to a Joint Operating Agreement paid by the Seattle Times Company (STC) in which McClatchy is a 49.5% owner. The company’s total net income for the second fiscal quarter of 2007, including the results of discontinued operations, was $35.2 million, or 43 cents per share.

Revenues in the second quarter of 2008 were $489.7 million, down 15.6% from revenues from continuing operations of $580.0 million in the second quarter of 2007. Advertising revenues were $406.3 million, down 16.8% from 2007, and circulation revenues were $66.1 million, down 5.2%. Online advertising revenues grew 12.5% in the second quarter of 2008 and were 11.8% of total advertising revenues compared to 8.6% of total advertising revenues for all of 2007.

On March 31, 2008 (the first day of the company’s second fiscal quarter), McClatchy and its partners, affiliates of Cox Enterprises, Inc. and Media General, Inc., completed the sale of SP Newsprint Company, of which McClatchy was a one-third owner. The pre-tax gain on the sale of SP was $32.0 million and proceeds of $55 million from the sale were used to reduce debt.

In May 2008, the company purchased $300 million aggregate principal amount of its outstanding publicly traded debt securities for $282.4 million and recorded a pre-tax gain of $19.5 million. The Company repaid $294.7 million in debt in the second quarter reducing total debt to $2.10 billion from $2.40 billion at the end of the first quarter.

On June 16, 2008, the company announced a restructuring plan which is expected to result in $95 million to $100 million in annual savings over the next four quarters. This plan includes a reduction in workforce of approximately 10% and is expected to result in severance of approximately $30 million. The company expects to reduce non-newsprint cash expense in the low double-digit percentage range over the balance of 2008 excluding the severance. Second quarter 2008 results include related severance and retirement plan curtailment charges of $23.3 million.

On June 30, 2008 (the first day of the company’s third fiscal quarter) the company sold its 15.0% interest in ShopLocal, LLC for $7.875 million and used the proceeds to reduce debt. A tax benefit from the sale is expected to result in cash tax savings of approximately $5.6 million in the fourth quarter of 2008. The company reduced its carrying value of ShopLocal to match the sales price. In addition, one of the internet companies in which McClatchy has an investment incurred an impairment on a product and as a result, the company recognized a charge related to this investment in the second quarter. The total non-cash pre-tax charges related to impairments of internet investments, including ShopLocal, in the second quarter were $21.5 million.

First Six Months Results:

Income from continuing operations for the first six months of 2008 was $19.1 million or 23 cents per share, and was affected by the issues discussed above as well as two additional items in the first quarter of 2008 which are discussed in the table of adjusted earnings(1) below. Adjusted earnings from continuing operations were $20.0 million or 24 cents in the first half of 2008. The company’s total net income for the first six months of 2008 including the results of discontinued operations was $18.8 million, or 23 cents per share.

Earnings from continuing operations for the first half of 2007 were $49.0 million or 60 cents per share including the settlement of litigation and amendment to a Joint Operating Agreement paid by the Seattle Times Company. The company’s total net income, including the results of discontinued operations, for the first half of 2007 was $44.3 million, or 54 cents per share. Discontinued operations reflect the results of the (Minneapolis) Star Tribune newspaper which was sold on March 5, 2007.

Revenues from continuing operations in the first six months of 2008 were down 14.7% to $978.0 million compared to $1.1 billion in 2007. Advertising revenues in 2008 totaled $810.4 million, down 16.1% and circulation revenues were $133.9 million, down 5.4%. Online advertising revenues grew 11.5% in the first half of 2008 and represented 11.6% of total advertising revenues.

Debt repayments totaled more than $370 million in the first six months of 2008 and the company noted that debt was $ 2.10 billion as of June 29, 2008.

Management’s Comments:

Commenting on McClatchy’s results, Gary Pruitt, chairman and chief executive officer, said, “Our advertising revenues in the second quarter of 2008 were down in the mid-teen percentage range and continued to be hurt by the weak economy and the secular shift in advertising to the internet.

“We were pleased to see strength in our online business in the second quarter, reflected in both audience growth and advertising sales. Through the second quarter, unique visitors to our websites were up 24.7% following 41.4% growth in the first quarter.

“Online advertising revenues grew a strong 12.5% in the second quarter of 2008. Excluding employment advertising, which is the category most tied to print up-sell advertising and which has declined nationally both in print and online, our online advertising grew 58.5% in the second quarter of this year. We were pleased to note that nearly 50% of our online advertising came from ads placed only online; they were not tied to a print up-sell.

“Despite the strong growth in our online business, the advertising environment continues to be weak and we expect revenues to continue to be down. Whether revenues improve from recent trends depends upon the direction of the overall economy.

“We are not standing idly by; we are investing significantly in our online operations, including adding sales staff, realigning sales incentives to focus on driving sales and expanding online sales training budgets and efforts. We are working with industry peers and technology companies to offer the best online products. Our partnership with Yahoo will enhance audience reach and enable us to build and refine capabilities for highly targeted advertising and online search, further growing online revenues. In June we named Stephen Bernard to a newly-created position as corporate vice president for advertising to better serve our large retail and national customers both online and in print.

“We are also focused on our cost structure. The continuing decline in print advertising means we have accelerated plans to become a smaller, more efficient company well-positioned for future success in an increasingly competitive environment. We are aggressively pursuing synergies with other newspapers, such as the announcement to partner with Pioneer Newspapers to print our Boise, Idaho, and Bellingham, Wash., papers beginning in 2009. On June 16 we announced a plan to reduce our workforce through both voluntary and involuntary separations by about 1,400 full-time equivalent employees. We are retaining our strategic focus on sales, news and online operations as we realign our cost structure, but are taking advantage of opportunities to streamline operations. Excluding severance and other benefit charges related to this restructuring plan, cash expenses were down 9.1% in the second quarter, and were down 10.0% in the first half of 2008.

“We are committed to doing more if revenues decline further in the second half. Our board will meet during the third quarter to consider dividend policies and we will look at additional cost saving measures as necessary. But we know that economic slowdowns do not last forever and our 151-year-old company has been successful by taking a long-term view and staying true to our strategic plan. So while we will remain focused on realigning our cost structure as we transition to an integrated multimedia company in print and online, we are also focused on continuing to be the leading local media company in some of the best growth markets in the nation. We are working hard to position the company to benefit from a stronger economy once conditions improve.”

Pat Talamantes, McClatchy’s chief financial officer, said, “We continue to generate significant cash. Our cash flow, coupled with asset sales and the income tax refund related to our sale of the (Minneapolis) Star Tribune in 2007, allowed us to repay more than $370 million of debt in the first half. Debt at the end of the quarter was $2.1 billion, compared to $2.5 billion at the end of 2007. As a result, our interest expense declined $12.9 million or 26% from second quarter 2007. We have met all of our financial obligations, including the financial covenants in our credit agreement, and we expect to continue to do so. We continue to monitor our financial position and have good relationships with our bank group, and we will seek an amendment to our covenants if necessary. We still expect to make further progress in deleveraging our balance sheet and expect total debt to be in the $2 billion range by the end of 2008.”

(1)Adjusted Earnings From Continuing Operations and EPS:

Earnings in the second quarter of 2008 included the impact of several unusual events including: the sale of a one-third interest in SP Newsprint Company (SP), a gain on the extinguishment of debt related to a second quarter bond tender, the impact of implementing a previously announced restructuring plan, the write-down of certain internet investments and a charge for certain discrete tax items. The company’s 2008 first quarter results included two charges: a charge related to an amendment to the company’s bank agreement that provides the company greater flexibility under its debt covenants, and a charge for certain discrete tax items. The impacts of these items on 2008 results are summarized below (dollars in thousands, except per share amounts):

	Three Months Ended						Six Months Ended
	Amount			Per share			Amount			Per share

Income(loss) from continuing operations	$	20,051		$	0.24		$	19,057		$	0.23
Unusual items, net of tax:
Gain on sale of SP Newsprint Co interest		(19,393	)		(0.23	)		(19,393	)		(0.23	)
Gain on extinguishment of debt		(12,299	)		(0.14	)		(12,299	)		(0.14	)
Restructuring related charges		13,188			0.16			14,373			0.17
Impairments related to internet investments		13,532			0.16			13,532			0.16
Write-off of financing costs, net of tax		-			-			1,914			0.02
Certain discrete tax items		2,245			0.02			2,851			0.03
Adjusted income from continuing operations	$	17,324		$	0.21		$	20,035		$	0.24

Non-GAAP measures should not be considered a substitute for GAAP measures. However, the adjusted income from continuing operations provides meaningful supplemental information about the company’s 2008 underlying results of operations, and management believes it assists investors and financial analysts in analyzing and forecasting future periods.

The company’s statistical report, which summarizes revenue performance for June, the second fiscal quarter and first half of 2008, follows.

At noon Eastern Time today, McClatchy will review its results in a conference call (877-278-1205 pass code 53484230) and webcast (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 30 daily newspapers, approximately 50 non-dailies, and direct marketing and direct mail operations. McClatchy also operates leading local websites in each of its markets which extend its audience reach. The websites offer

users comprehensive news and information, advertising, e-commerce and other services. Together with its newspapers and direct marketing products, these interactive operations make McClatchy the leading local media company in each of its premium high growth markets. McClatchy-owned newspapers include The Miami Herald, The Sacramento Bee, the Fort Worth Star-Telegram, The Kansas City Star, the Charlotte Observer, and The (Raleigh) News & Observer.

McClatchy also owns a portfolio of premium digital assets, including 14.4% of CareerBuilder, the nation's largest online job site, and 25.6% of Classified Ventures, a newspaper industry partnership that offers two of the nation's premier classified websites: the auto website, cars.com, and the rental site, apartments.com. McClatchy is listed on the New York Stock Exchange under the symbol MNI.

Additional Information:

Statements in this press release regarding future financial and operating results, including revenues, anticipated savings from cost reduction efforts, cash flows, debt levels, as well as future opportunities for the company and any other statements about management’s future expectations, beliefs, goals, plans or prospects constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any statements that are not statements of historical fact (including statements containing the words “believes,” “plans,” “anticipates,” “expects,” estimates and similar expressions) should also be considered to be forward-looking statements. There are a number of important risks and uncertainties that could cause actual results or events to differ materially from those indicated by such forward-looking statements, including: the duration and depth of an economic recession in markets where McClatchy operates its newspapers may reduce its income and cash flow greater than expected; McClatchy may not consummate contemplated transactions which may enable debt reduction on anticipated terms or at all; McClatchy may not achieve its expense reduction targets or may do harm to its operations in attempting to achieve such targets; McClatchy’s operations have been, and will likely continue to be, adversely affected by competition, including competition from internet publishing and advertising platforms; McClatchy’s expense and income levels could be adversely affected by changes in the cost of newsprint and McClatchy’s operations could be negatively affected by any deterioration in its labor relations, as well as the other risks detailed from time to time in the Company’s publicly filed documents, including the Company’s Annual Report on Form 10-K for the year ended December 30, 2007, filed with the U.S. Securities and Exchange Commission. McClatchy disclaims any intention and assumes no obligation to update the forward-looking information contained in this release.

The McClatchy Company
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
(In thousands, except per share amounts)

	Three Months Ended						Six Months Ended
	June 29,			July 1,			June 29,			July 1,
	2008			2007			2008			2007
REVENUES - NET:
Advertising	$	406,328		$	488,277		$	810,351		$	965,300
Circulation		66,055			69,707			133,919			141,587
Other		17,300			22,043			33,696			39,698
		489,683			580,027			977,966			1,146,585
OPERATING EXPENSES:
Compensation		229,057			228,959			447,910			465,283
Newsprint and supplements		64,189			72,186			124,647			147,603
Depreciation and amortization		36,649			38,357			73,031			76,190
Other operating expenses		116,073			123,144			231,929			252,740
		445,968			462,646			877,517			941,816

OPERATING INCOME		43,715			117,381			100,449			204,769

NON-OPERATING (EXPENSES) INCOME:
Interest expense		(36,668	)		(49,556	)		(81,945	)		(103,341	)
Interest income		475			42			571			106
Equity losses in unconsolidated companies, net		(366	)		(11,198	)		(13,490	)		(20,947	)
Impairments related to internet investments		(21,515	)		-			(21,515	)		-
Gain on sale of SP Newsprint		31,976			-			31,976			-
Gain on extinguishment of debt		19,500			-			19,500			-
Other - net		105			791			1,019			743
		(6,493	)		(59,921	)		(63,884	)		(123,439	)
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAX PROVISION		37,222			57,460			36,565			81,330

INCOME TAX PROVISION		17,171			22,929			17,508			32,286

INCOME FROM CONTINUING OPERATIONS		20,051			34,531			19,057			49,044

INCOME (LOSS) FROM DISCONTINUED OPERATIONS -
NET OF INCOME TAXES		(386	)		705			(242	)		(4,778	)

NET INCOME	$	19,665		$	35,236		$	18,815		$	44,266

NET INCOME PER COMMON SHARE:
Basic:
Income from continuing operations	$	0.24		$	0.42		$	0.23		$	0.60
Income (loss) from discontinued operations		(0.00	)		0.01			(0.00	)		(0.06	)
Net income per share	$	0.24		$	0.43		$	0.23		$	0.54

Diluted:
Income from continuing operations	$	0.24		$	0.42		$	0.23		$	0.60
Income (loss) from discontinued operations		(0.00	)		0.01			(0.00	)		(0.06	)
Net income per share	$	0.24		$	0.43		$	0.23		$	0.54

WEIGHTED AVERAGE NUMBER OF COMMON SHARES:
Basic		82,264			81,976			82,220			81,931
Diluted		82,317			82,037			82,274			82,010

See notes to consolidated financial statements.


The McClatchy Company
Consolidated Statistical Report
(In thousands, except for preprints)

	June
	Combined							Print Only							Online Only


Revenues - Net:	2008		2007		% Change			2008		2007		% Change			2008		2007		% Change

Advertising
Retail	$	56,715	$	65,433		-13.3	%	$	52,851	$	63,225		-16.4	%	$	3,864	$	2,208		75.0	%
National		10,853		14,635		-25.8	%		9,552		13,980		-31.7	%		1,301		655		98.6	%
Classified Total		40,355		57,234		-29.5	%		30,394		46,336		-34.4	%		9,961		10,898		-8.6	%
Automotive		10,949		13,731		-20.3	%		8,152		11,750		-30.6	%		2,797		1,981		41.2	%
Real Estate		10,204		16,637		-38.7	%		8,746		15,438		-43.3	%		1,458		1,199		21.6	%
Employment		11,832		19,582		-39.6	%		6,835		12,344		-44.6	%		4,997		7,238		-31.0	%
Other		7,370		7,284		1.2	%		6,661		6,804		-2.1	%		709		480		47.7	%
Direct Marketing		10,947		10,168		7.7	%		10,947		10,168		7.7	%
Other Advertising		123		273		-54.9	%		123		273		-54.9	%
Total Advertising	$	118,993	$	147,743		-19.5	%	$	103,867	$	133,982		-22.5	%	$	15,126	$	13,761		9.9	%

Circulation		19,813		21,112		-6.2	%
Other		5,577		5,736		-2.8	%
Total Revenues	$	144,383	$	174,591		-17.3	%


Advertising Revenues by Market:
California	$	21,877	$	30,459		-28.2	%	$	19,479	$	28,277		-31.1	%	$	2,398	$	2,182		9.9	%
Florida		16,622		20,595		-19.3	%		14,431		18,590		-22.4	%		2,191		2,005		9.3	%
Texas		12,796		15,323		-16.5	%		11,486		14,169		-18.9	%		1,310		1,154		13.5	%
Southeast		34,558		41,133		-16.0	%		29,757		36,824		-19.2	%		4,801		4,309		11.4	%
Midwest		19,169		22,239		-13.8	%		16,533		20,119		-17.8	%		2,636		2,120		24.3	%
Northwest		13,875		17,480		-20.6	%		12,181		15,620		-22.0	%		1,694		1,860		-8.9	%
Other		96		514		-81.3	%		0		383		-100.0	%		96		131		-26.7	%
Total Advertising	$	118,993	$	147,743		-19.5	%	$	103,867	$	133,982		-22.5	%	$	15,126	$	13,761		9.9	%

Advertising Statistics for Dailies:
Full Run ROP Linage									2,237.4		2,592.6		-13.7	%

Millions of Preprints Distributed									458.2		501.2		-8.6	%


Average Paid Circulation:*
Daily									2,501.1		2,606.1		-4.0	%
Sunday									3,149.1		3,309.0		-4.8	%



* 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 2
	Combined							Print Only							Online Only

Revenues - Net:	2008		2007		% Change			2008		2007		% Change			2008		2007		% Change

Advertising
Retail	$	196,497	$	213,340		-7.9	%	$	184,681	$	206,801		-10.7	%	$	11,816	$	6,539		80.7	%
National		36,682		46,065		-20.4	%		32,447		44,290		-26.7	%		4,235		1,775		138.6	%
Classified Total		135,144		187,941		-28.1	%		103,085		153,475		-32.8	%		32,059		34,466		-7.0	%
Automotive		35,997		43,778		-17.8	%		27,563		37,740		-27.0	%		8,434		6,038		39.7	%
Real Estate		34,412		54,724		-37.1	%		29,891		50,926		-41.3	%		4,521		3,798		19.0	%
Employment		40,423		66,310		-39.0	%		23,722		43,341		-45.3	%		16,701		22,969		-27.3	%
Other		24,312		23,129		5.1	%		21,909		21,468		2.1	%		2,403		1,661		44.7	%
Direct Marketing		37,590		40,246		-6.6	%		37,590		40,246		-6.6	%
Other Advertising		415		685		-39.4	%		415		685		-39.4	%
Total Advertising	$	406,328	$	488,277		-16.8	%	$	358,218	$	445,497		-19.6	%	$	48,110	$	42,780		12.5	%

Circulation		66,055		69,708		-5.2	%
Other		17,300		22,042		-21.5	%
Total Revenues	$	489,683	$	580,027		-15.6	%

Advertising Revenues by Market:
California	$	72,433	$	95,226		-23.9	%	$	64,771	$	88,488		-26.8	%	$	7,662	$	6,738		13.7	%
Florida		58,229		72,616		-19.8	%		51,550		67,127		-23.2	%		6,679		5,489		21.7	%
Texas		44,139		50,745		-13.0	%		40,081		47,112		-14.9	%		4,058		3,633		11.7	%
Southeast		119,619		138,365		-13.5	%		104,150		124,319		-16.2	%		15,469		14,046		10.1	%
Midwest		64,027		71,828		-10.9	%		55,555		65,120		-14.7	%		8,472		6,708		26.3	%
Northwest		47,524		57,899		-17.9	%		42,111		52,081		-19.1	%		5,413		5,818		-7.0	%
Other		357		1,598		-77.7	%		0		1,250		-100.0	%		357		348		2.6	%
Total Advertising	$	406,328	$	488,277		-16.8	%	$	358,218	$	445,497		-19.6	%	$	48,110	$	42,780		12.5	%

Advertising Statistics for Dailies:
Full Run ROP Linage									7,237.9		8,560.7		-15.5	%

Millions of Preprints Distributed									1,535.0		1,645.9		-6.7	%

Average Paid Circulation:*
Daily									2,624.2		2,720.5		-3.5	%
Sunday									3,232.0		3,360.8		-3.8	%

* 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)

	June Year-to-Date
	Combined							Print Only							Online Only


Revenues - Net:	2008		2007		% Change			2008		2007		% Change			2008		2007		% Change

Advertising
Retail	$	387,255	$	419,529		-7.7	%	$	365,476	$	407,096		-10.2	%	$	21,779	$	12,433		75.2	%
National		74,907		91,216		-17.9	%		66,972		88,037		-23.9	%		7,935		3,179		149.6	%
Classified Total		275,355		376,612		-26.9	%		211,395		308,239		-31.4	%		63,960		68,373		-6.5	%
Automotive		71,383		85,933		-16.9	%		55,178		74,249		-25.7	%		16,205		11,684		38.7	%
Real Estate		69,835		109,911		-36.5	%		61,308		102,427		-40.1	%		8,527		7,484		13.9	%
Employment		86,864		136,027		-36.1	%		52,139		89,963		-42.0	%		34,725		46,064		-24.6	%
Other		47,273		44,741		5.7	%		42,770		41,600		2.8	%		4,503		3,141		43.4	%
Direct Marketing		72,020		76,892		-6.3	%		72,020		76,892		-6.3	%
Other Advertising		814		1,051		-22.5	%		814		1,051		-22.5	%
Total Advertising	$	810,351	$	965,300		-16.1	%	$	716,667	$	881,315		-18.7	%	$	93,674	$	83,985		11.5	%

Circulation		133,919		141,587		-5.4	%
Other		33,696		39,698		-15.1	%
Total Revenues	$	977,966	$	1,146,585		-14.7	%


Advertising Revenues by Market:
California	$	143,514	$	187,712		-23.5	%	$	128,790	$	174,532		-26.2	%	$	14,724	$	13,180		11.7	%
Florida		120,971		154,797		-21.9	%		108,048		143,466		-24.7	%		12,923		11,331		14.0	%
Texas		89,091		99,185		-10.2	%		80,942		92,302		-12.3	%		8,149		6,883		18.4	%
Southeast		237,281		271,116		-12.5	%		206,982		243,312		-14.9	%		30,299		27,804		9.0	%
Midwest		125,234		138,965		-9.9	%		109,422		125,900		-13.1	%		15,812		13,065		21.0	%
Northwest		93,514		110,472		-15.4	%		82,493		99,302		-16.9	%		11,021		11,170		-1.3	%
Other		746		3,053		-75.6	%		0		2,501		-100.0	%		746		552		35.1	%
Total Advertising	$	810,351	$	965,300		-16.1	%	$	716,677	$	881,315		-18.7	%	$	93,674	$	83,985		11.5	%

Advertising Statistics for Dailies:
Full Run ROP Linage									14,197.2		16,467.5		-13.8	%

Millions of Preprints Distributed									3,067.6		3,325.3		-7.7	%


Average Paid Circulation:*
Daily									2,670.6		2,775.4		-3.8	%
Sunday									3,280.3		3,420.7		-4.1	%



* Reflects average paid circulation based upon number of days in period. Does not reflect ABC reported figures.