mni8k2q2010exh99-1.htm

EX-99.1 2 mni8k2q2010exh99-1.htm MNI 2ND QTR 2010 EARNINGS EXH 99.1 mni8k2q2010exh99-1.htm

Exhibit 99.1

McCLATCHY REPORTS SECOND QUARTER 2010 EARNINGS

·	Reports earnings per share of 9 cents and adjusted earnings per share from continuing operations(1) of 10 cents

·	Improving revenue trends continued in the second quarter of 2010

·	Cash expenses declined by 9.1%, or $24.8 million, from second quarter 2009, excluding restructuring-related charges

·	Leverage ratio improved for the fifth consecutive quarter to 4.43 times trailing 12 months cash flow

SACRAMENTO, Calif., July 29, 2010 – The McClatchy Company (NYSE-MNI) today reported net income in the second quarter of 2010 of $7.3 million, or 9 cents per share. Adjusted earnings(1) in the second quarter of 2010, excluding several unusual items, were $8.6 million, or 10 cents per share.

The company’s earnings from continuing operations in the second quarter of 2009 were $42.0 million, or 50 cents per share. Adjusted earnings from continuing operations(1) in the second quarter of 2009, excluding several unusual items, were $25.2 million, or 30 cents per share. Total net income including discontinued operations was $42.2 million, or 50 cents per share.

Unusual items affecting the second-quarter results in each year are discussed below.

Revenues in the second quarter of 2010 were $342.0 million, down 6.4% from revenues of $365.3 million in the second quarter of 2009. Advertising revenues were $260.5 million, down 8.2% from 2009, and circulation revenues were $67.7 million, down 2.4%.

Second quarter 2010 cash operating expenses, excluding severance costs, declined $24.8 million, or 9.1%, from the 2009 second quarter. As a result, operating cash flow, a non-GAAP measure, was $93.9 million, up 1.6% from the second quarter of 2009 (Non-GAAP measurements are discussed below).

First Six Months Results:

Income from continuing operations in the first half of 2010 was $5.3 million, or 6 cents per share. Adjusted earnings from continuing operations,(1) excluding several unusual items discussed below, were 15 cents per share. Total net income, including discontinued operations, was $9.5 million, or 11 cents per share.

Income from continuing operations for the first six months of 2009 was $4.3 million, or 5 cents per share, and was affected by the unusual items discussed below. Adjusted earnings from continuing operations(1) were zero cents per share in the first half of 2009. The company’s total net income for the first six months of 2009, including the results of discontinued operations, was $4.7 million, or 6 cents per share.

Revenues in the first six months of 2010 were down 7.3% to $677.6 million compared to $731.0 million in 2009. Advertising revenues in the 2010 period totaled $513.5 million, down 9.7%, and circulation revenues were $137.4 million, down 0.3%.

Management’s Comments:

Commenting on McClatchy’s second quarter results, Gary Pruitt, chairman and chief executive officer, said, “Advertising revenue trends continued to improve as we anticipated. Advertising revenues declined year-over-year by 8.2% compared to declines of 11.2% in the first quarter of 2010 and 20.5% in the fourth quarter of 2009. We were also encouraged by the improving trends within the quarter: advertising revenues were down 10.2% in April, down 7.3% in May and down 6.4% in June.

“We continue to see signs of recovery. Notably, employment advertising, more than half of which is now online, was up 1.5% in May and 0.8% in June. In fact, May 2010 was the first month with growth in employment advertising revenue in four years.

“We also reported growth in both national and total classified advertising in several of our markets for the quarter. So while the economic recovery hasn’t been robust or smooth, we believe it is beginning to spread across the markets we serve.

“In addition to improving revenue trends, our second-quarter results reflect our hard work in permanently reducing our expenses. While we have concluded the major restructuring plans carried out in 2009, we still held cash expenses down 9.1% below the second quarter of 2009 and operating cash flow was up $1.5 million. Through the first six months of the year our operating cash flow grew $40.2 million, or 29.6%, to $175.8 million.

“As we look to the third quarter we expect continued improvement in advertising revenue trends. So far in July ad revenue trends are in the same range as June and we expect ad revenues to be down in the mid-single digits for all of the third quarter. We expect to reduce cash expenses in the third quarter in the low-single digits despite the impact of higher newsprint prices and having rolled over our major restructuring actions in 2009. As a result, we continue to believe we are on track to maintain, if not grow, operating cash flow in 2010.”

Pat Talamantes, McClatchy’s chief financial officer, said, “We were able to extend a majority of our debt maturities to 2017 with our debt refinancing in February this year, and we have continued to reduce our debt. We’ve repaid more than $113 million in debt in the first six months of 2010, and debt principal at the end of June was $1.836 billion. Our maturities through 2013 consist of only $35.7 million due in mid 2011 and $43.5 million due in mid 2013.

“Our leverage profile also continued to improve. McClatchy’s leverage ratio declined for the fifth consecutive quarter, ending the second quarter at 4.43 times cash flow, down from 4.65 times cash flow at the end of the first quarter. Our interest coverage ratio was 3.0 times cash flow at the end of the second quarter. Both of these measurements are well within our bank covenants.”

(1)Adjusted Earnings From Continuing Operations and EPS:

The company entered into several transactions and reported several unusual events in the second quarters and first halves of fiscal 2010 and 2009 that affected results:

·	The company incurred a loss related to its debt refinancing and debt repayments in the first quarter of 2010.

·	Compensation in 2010 and 2009 included pre-tax severance charges incurred in connection with the restructuring plans.

On May 21, 2009, the company launched a private debt exchange offer for all of its outstanding debt securities for a combination of cash and new debt securities. The offer closed on June 25, 2009, and the company exchanged $3.4 million in cash and $24.2 million of newly issued senior notes for $102.8 million of debt securities. All but $375,000 of the newly issued senior notes were retired in the company’s February 2010 debt refinancing.

·	During the second quarters of 2010 and 2009, the company recorded accelerated depreciation on production equipment associated with the outsourcing of printing at various newspapers.

·	Both the 2010 and 2009 second quarters included charges for certain discrete tax items.

The impacts of these items on the 2010 and 2009 results are summarized below (dollars in thousands, except per share amounts):


	Three Months Ended						Six Months Ended
	June 27, 2010			June 28, 2009			June 27, 2010			June 28, 2009
(Dollars in thousands, except per share amounts)
Income from continuing operations	$	7,278		$	42,003		$	5,320		$	4,279
Unusual items, net of tax:
Sale of equity investment		211			407			211			496
Loss (gain) on extinguishment of debt		17			(28,332	)		4,732			(28,332	)
Restructuring related charges		488			2,874			2,385			16,769
Amendment related write-offs of financing costs		-			258			-			258
Accelerated depreciation on equipment		1,824			7,460			1,824			7,460
Certain discrete tax items		(1,247	)		492			(1,434	)		(930	)
Adjusted income from continuing operations	$	8,571		$	25,162		$	13,038		$ Nil
Earnings per share:
Income from continuing operations	$	0.09		$	0.50		$	0.06		$	0.05
Adjusted income from continuing operations	$	0.10		$	0. 30		$	0.15		$	0.00

Non-GAAP Financial Measures:

In addition to the results reported in accordance with accounting principles generally accepted in the United States (“GAAP”) included in this press release the company has provided information regarding operating income, non-operating expenses and income, income taxes, net income and diluted earnings per share (EPS) excluding certain special or unusual items described in the table above. In addition the company has presented operating cash flows (defined as operating income plus depreciation and amortization, and restructuring related charges) along with operating cash flow margins (operating cash flow divided by net revenues) which are reconciled to GAAP measures in an attached schedule. Management believes these non-GAAP measures, when read in conjunction with the company’s GAAP financials, provide useful information to investors by offering:

·	the ability to make more meaningful period-to-period comparisons of the company’s on-going operating results;

·	the ability to better identify trends in the company’s underlying business;

·	a better understanding of how management plans and measures the company’s underlying business; and

·	an easier way to compare the company’s most recent results of operations against investor and analyst financial models.

Operating income, non-operating expenses and income, income taxes, net income and diluted earnings per share excluding certain special or unusual items should not be considered a substitute or an alternative to these computations calculated in accordance with and required by GAAP. Nor are operating cash flow and operating cash flow margins to be considered replacements for cash provided by operating activities as shown in the company’s statement of cash flows.

In addition, the company’s statistical report, which summarizes revenue performance for the second fiscal quarter and first half of 2010, follows.

At noon, Eastern time, today, McClatchy will review its results in a conference call (877-278-1205 pass code 86940127) 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, publishing 30 daily newspapers, 43 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 News & Observer (Raleigh).

McClatchy also owns a portfolio of premium digital assets, including 14.4% of CareerBuilder, the nation's largest online job site, 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 and 33.3% of HomeFinder, LLC which operates the real estate website HomeFinder.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, future dividend payments, 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 the economic recession; McClatchy may not generate cash from operations, or otherwise, necessary to reduce debt or

meet debt covenants as expected; McClatchy may not consummate contemplated transactions to 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; the company’s inability to continue to satisfy the New York Stock Exchange’s qualitative and quantitative listing standards for continued listing; increases in the cost of newsprint; bankruptcies or financial strain of its major advertising customers; litigation or any potential litigation; geo-political uncertainties including the risk of war; changes in printing and distribution costs from anticipated levels; changes in interest rates; changes in pension assets and liabilities; increased consolidation among major retailers in our markets or other events depressing the level of advertising; our inability to negotiate and obtain favorable terms under collective bargaining agreements with unions; competitive action by other companies; decreased circulation and diminished revenues from retail, classified and national advertising; and other factors, many of which are beyond our control; 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 27, 2009, 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.

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*THE McCLATCHY COMPANY*
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
(In thousands, except per share amounts)

	Three Months Ended						Six Months Ended
	June 27,			June 28,			June 27,			June 28,
	2010			2009			2010			2009
REVENUES - NET:
Advertising	$	260,540		$	283,661		$	513,461		$	568,350
Circulation		67,666			69,351			137,352			137,831
Other		13,824			12,323			26,782			24,779
		342,030			365,335			677,595			730,960
OPERATING EXPENSES:
Compensation		129,934			140,127			267,570			323,435
Newsprint and supplements		32,651			45,495			64,963			99,871
Depreciation and amortization		35,904			43,630			67,722			78,007
Other operating expenses		86,444			91,295			173,652			195,721
		284,933			320,547			573,907			697,034

OPERATING INCOME		57,097			44,788			103,688			33,926

NON-OPERATING (EXPENSES) INCOME:
Interest expense		(49,449	)		(34,305	)		(90,216	)		(68,226	)
Interest income		44			6			71			37
Equity income (losses) in unconsolidated companies, net		3,739			1,601			2,785			(1,529	)
Gain (loss) on extinguishment of debt		(27	)		44,829			(7,519	)		44,829
Other - net		95			(233	)		104			(334	)
		(45,598	)		11,898			(94,775	)		(25,223	)

INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAX PROVISION		11,499			56,686			8,913			8,703

INCOME TAX PROVISION		4,221			14,683			3,593			4,424

INCOME FROM CONTINUING OPERATIONS		7,278			42,003			5,320			4,279

INCOME FROM DISCONTINUED OPERATIONS - NET OF INCOME TAXES		-			210			4,161			419

NET INCOME	$	7,278		$	42,213		$	9,481		$	4,698

NET INCOME PER COMMON SHARE:
Basic:
Income from continuing operations	$	0.09		$	0.50		$	0.06		$	0.05
Income from discontinued operations		-			-			0.05			0.01
Net income per share	$	0.09		$	0.50		$	0.11		$	0.06

Diluted:
Income from continuing operations	$	0.09		$	0.50		$	0.06		$	0.05
Income from discontinued operations		-			-			0.05			0.01
Net income per share	$	0.09		$	0.50		$	0.11		$	0.06

WEIGHTED AVERAGE NUMBER OF COMMON SHARES:
Basic		84,673			83,623			84,625			83,321
Diluted		85,484			83,632			85,396			83,331

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

	Quarter 2
	Combined							Print Only							Online Only


Revenues - Net:	2010		2009		% Change			2010		2009		% Change			2010		2009		% Change

Advertising
Retail	$	133,493	$	149,442		-10.7	%	$	115,343	$	131,942		-12.6	%	$	18,150	$	17,500		3.7	%
National		23,647		24,141		-2.0	%		18,026		18,767		-3.9	%		5,621		5,374		4.6	%
Classified Total		73,116		80,157		-8.8	%		49,912		56,327		-11.4	%		23,204		23,829		-2.6	%
Automotive		21,107		23,627		-10.7	%		13,400		15,452		-13.3	%		7,707		8,175		-5.7	%
Real Estate		14,790		18,692		-20.9	%		11,169		14,280		-21.8	%		3,621		4,412		-17.9	%
Employment		14,894		15,148		-1.7	%		6,954		7,600		-8.5	%		7,941		7,548		5.2	%
Other		22,325		22,690		-1.6	%		18,390		18,996		-3.2	%		3,936		3,694		6.6	%
Direct Marketing		30,033		29,402		2.1	%		30,033		29,402		2.1	%
Other Advertising		251		519		-51.6	%		251		520		-51.7	%
Total Advertising	$	260,540	$	283,661		-8.2	%	$	213,565	$	236,958		-9.9	%	$	46,975	$	46,703		0.6	%

Circulation		67,665		69,351		-2.4	%
Other		13,824		12,323		12.2	%
Total Revenues	$	342,029	$	365,335		-6.4	%


Advertising Revenues by Market:
California	$	46,867	$	51,417		-8.8	%	$	38,853	$	43,407		-10.5	%	$	8,014	$	8,010		0.0	%
Florida		35,267		39,540		-10.8	%		28,910		32,469		-11.0	%		6,357		7,071		-10.1	%
Texas		29,396		31,262		-6.0	%		24,418		26,462		-7.7	%		4,978		4,800		3.7	%
Southeast		75,616		82,246		-8.1	%		61,618		68,522		-10.1	%		13,998		13,724		2.0	%
Midwest		44,382		46,723		-5.0	%		35,927		38,928		-7.7	%		8,455		7,796		8.5	%
Northwest		28,995		32,434		-10.6	%		23,839		27,170		-12.3	%		5,156		5,263		-2.0	%
Other		17		39		-56.4	%		0		0		0.0	%		17		39		-56.4	%
Total Advertising	$	260,540	$	283,661		-8.2	%	$	213,565	$	236,958		-9.9	%	$	46,975	$	46,703		0.6	%

Advertising Statistics for Dailies:
Full Run ROP Linage									5,107.7		5,407.8		-5.5	%

Millions of Preprints Distributed									1,249.7		1,357.6		-7.9	%


Average Paid Circulation:*
Daily									2,145.9		2,299.0		-6.7	%
Sunday									2,753.4		2,953.6		-6.8	%

Columns may not add due to rounding

* 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:	2010		2009		% Change			2010		2009		% Change			2010		2009		% Change

Advertising
Retail	$	264,299	$	297,257		-11.1	%	$	229,395	$	264,438		-13.3	%	$	34,905	$	32,819		6.4	%
National		49,260		51,694		-4.7	%		38,142		41,284		-7.6	%		11,118		10,411		6.8	%
Classified Total		143,437		161,709		-11.3	%		98,120		114,806		-14.5	%		45,316		46,902		-3.4	%
Automotive		41,624		47,502		-12.4	%		26,399		31,564		-16.4	%		15,225		15,937		-4.5	%
Real Estate		29,231		38,430		-23.9	%		22,032		29,757		-26.0	%		7,199		8,673		-17.0	%
Employment		28,931		32,342		-10.5	%		13,533		16,820		-19.5	%		15,399		15,522		-0.8	%
Other		43,650		43,435		0.5	%		36,156		36,665		-1.4	%		7,494		6,770		10.7	%
Direct Marketing		55,710		56,810		-1.9	%		55,710		56,810		-1.9	%
Other Advertising		755		880		-14.2	%		755		880		-14.2	%
Total Advertising	$	513,461	$	568,350		-9.7	%	$	422,122	$	478,218		-11.7	%	$	91,339	$	90,132		1.3	%

Circulation		137,351		137,831		-0.3	%
Other		26,782		24,779		8.1	%
Total Revenues	$	677,594	$	730,960		-7.3	%


Advertising Revenues by Market:
California	$	92,641	$	103,181		-10.2	%	$	77,257	$	87,683		-11.9	%	$	15,383	$	15,497		-0.7	%
Florida		74,126		83,657		-11.4	%		61,227		70,095		-12.7	%		12,899		13,562		-4.9	%
Texas		57,768		63,263		-8.7	%		48,062		53,842		-10.7	%		9,706		9,422		3.0	%
Southeast		147,894		163,132		-9.3	%		120,929		136,147		-11.2	%		26,965		26,985		-0.1	%
Midwest		84,894		91,771		-7.5	%		68,746		77,300		-11.1	%		16,147		14,471		11.6	%
Northwest		56,102		63,291		-11.4	%		45,901		53,151		-13.6	%		10,203		10,139		0.6	%
Other		36		55		-34.5	%		0		0		0.0	%		36		56		-35.7	%
Total Advertising	$	513,461	$	568,350		-9.7	%	$	422,122	$	478,218		-11.7	%	$	91,339	$	90,132		1.3	%

Advertising Statistics for Dailies:
Full Run ROP Linage									10,053.9		10,726.6		-6.3	%

Millions of Preprints Distributed									2,494.2		2,683.6		-7.1	%


Average Paid Circulation:*
Daily									2,186.5		2,386.4		-8.4	%
Sunday									2,804.5		3,031.9		-7.5	%

Columns may not add due to rounding

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

*THE McCLATCHY COMPANY*
Reconciliation of GAAP Measures to Non-GAAP Amounts
(In thousands)

Reconciliation of Operating Income to Operating Cash Flows

	Three Months Ended						Six Months Ended

	June 27,			June 28,			June 27,			June 28,
	2010			2009			2010			2009
REVENUES - NET:
Advertising	$	260,540		$	283,661		$	513,461		$	568,350
Circulation		67,666			69,351			137,352			137,831
Other		13,824			12,323			26,782			24,779
		342,030			365,335			677,595			730,960
OPERATING EXPENSES:
Compensation excluding restructuring charges		129,027			136,109			263,138			299,689
Newsprint and supplements		32,651			45,495			64,963			99,871
Other cash operating expenses		86,444			91,295			173,652			195,721
Cash operating expenses excluding restructuring charges		248,122			272,899			501,753			595,281
Restructuring related compensation		907			4,018			4,432			23,746
Depreciation and amortization		35,904			43,630			67,722			78,007
Total operating expenses		284,933			320,547			573,907			697,034
OPERATING INCOME		57,097			44,788			103,688			33,926
Add back:
Depreciation and amortization		35,904			43,630			67,722			78,007
Restructuring related compensation charges		907			4,108			4,432			23,746
OPERATING CASH FLOW	$	93,908		$	92,436		$	175,842		$	135,679

OPERATING CASH FLOW MARGIN		27.5	%		25.3	%		26.0	%		18.6	%

Reconciliation of Net Income to Adjusted Net Income

Net income from continuing operations	$	7,278		$	42,003		$	5,320		$	4,279
Add back certain items, net of tax:
Loss (gain) on extinguishment of debt		17			(28,332	)		4,732			(28,332	)
Restructuring related charges		488			2,874			2,385			16,769
Loss on sale of equity investments		211			407			211			496
Amendment related write-off of financing costs		-			258			-			258
Accelerated depreciation on equipment		1,824			7,460			1,824			7,460
Certain discrete tax items		(1,247	)		492			(1,434	)		(930	)
Adjusted income from continuing operations	$	8,571		$	25,162		$	13,038		$	-

Earnings per share:
Income from continuing operations	$	0.09		$	0.50		$	0.06		$	0.05
Adjusted income from continuing operations	$	0.10		$	0.30		$	0.15		$	Nil