BUSINESS AND BASIS OF ACCOUNTING	9 Months Ended
Sep. 29, 2019
BUSINESS AND BASIS OF ACCOUNTING
BUSINESS AND BASIS OF ACCOUNTING	THE MCCLATCHY COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. BUSINESS AND BASIS OF ACCOUNTING The McClatchy Company (“Company,” “we,” “us” or “our”) provides strong, independent local journalism to 30 communities with operations in 14 states, as well as selected national news coverage through our Washington D.C. based bureau. We also provide a full suite of digital marketing services, both through our local sales teams based in the communities we serve, as well as through excelerate®, our national digital marketing agency. We are a publisher of brands such as the Miami Herald, The Kansas City Star, The Sacramento Bee, The Charlotte Observer, The (Raleigh) News & Observer, and the Fort Worth Star-Telegram. Basis of Presentation Preparation of the financial statements in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”) and pursuant to the rules and regulation of the Securities and Exchange Commission requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates. The condensed consolidated financial statements include the Company and our subsidiaries. Intercompany items and transactions are eliminated. In our opinion, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, which are of a normal recurring nature, that are necessary to present fairly our financial position, results of operations, and cash flows for the interim periods presented. The financial statements contained in this report are not necessarily indicative of the results to be expected for the full year. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 30, 2018 (“Form 10-K”). Each of the fiscal periods included herein comprise 13 weeks for the third-quarter periods and 39 weeks for the nine-month periods. Going Concern The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. For the nine months ended September 29, 2019, we reported a net loss of $364.2 million. As of September 29, 2019, we had a working capital deficit of $152.8 million, of which $108.7 million is attributable to minimum required contributions to our qualified defined benefit pension plan (“Pension Plan”) coming due in the next twelve months. We face liquidity challenges relating to the minimum required contributions in fiscal year 2020 to our Pension Plan. These required contributions are estimated to be approximately $124.2 million, which would be paid in installments beginning in January 2020 with the bulk of those payments due September 15, 2020, or afterwards. To address our liquidity needs and the going concern uncertainty, in June 2019 we filed an application for a waiver of the minimum required contributions under the Pension Plan in accordance with section 412 of the Internal Revenue Code for the 2019, 2020 and 2021 plan years with the Internal Revenue Service (“IRS”). In early November 2019, the IRS declined to grant us our three-year waiver request. We continue to explore other means of pension relief, including working with many members of Congress in search of legislative relief that would mitigate the burden of the minimum required contributions. We have also consulted with the Pension Benefit Guaranty Corporation (“PBGC”) to discuss measures allowed under existing regulations to provide a more permanent solution, such as a distress termination of the Pension Plan. A distress termination would allow us to continue to operate and relieve the current liquidity pressures of the minimum required contributions under Employee Retirement Income Security Act ("ERISA"). However, there can be no assurance that the ongoing discussions with Congress and/or the PBGC will result in any relief including a restructuring transaction, or that such relief will occur on a timely basis or at all. In addition to seeking pension relief, we are engaged in discussions with our largest debt holder, regarding the recapitalization of our balance sheet and outstanding debt obligations and the formulation of a restructuring plan that would provide a more permanent, rather than temporary, solution. No agreement has been reached with respect to the above discussions and discussions remain ongoing. We will continue to work collaboratively with our constituents to achieve the goals of our business plan and balance the interests of a wide range of stakeholders. However, there can be no assurance that the ongoing discussions with our debt holder will result in any restructuring transaction, that we will obtain any required stakeholder consent to consummate a restructuring transaction, or that the restructuring transaction will occur on a timely basis or at all. In conjunction with all of these efforts to address our liquidity pressures, we have engaged the financial and legal services of Evercore Group L.L.C., FTI Consulting, Inc., Skadden, Arps, Slate, Meagher & Flom LLP and the Groom Law Group, Chartered (collectively, “Advisors”), who are all assisting us in evaluating and executing available transactions with our stakeholders. We believe we have taken and are continuing to take prudent actions to address our ability to continue as a going concern; however, there is no assurance that such alternatives will be available on terms acceptable to us, in a timely manner or at all, or our plans will fully mitigate the liquidity challenges we face because some matters are not within our control. These conditions raise substantial doubt about our ability to continue as a going concern within one year after the date that the financial statements are issued or available to be issued. The condensed consolidated financial statements do not include any adjustments relating to the recoverability or classification of assets or liabilities that might be necessary should we be unable to continue as a going concern. NYSE American Continued Listing Status On September 9, 2019, we received written notification from NYSE American LLC ("NYSE American") indicating that we were not in compliance with certain listing standards. We have approximately 18 months from the receipt of the notice to become compliant under a plan that is subject to approval by NYSE American. We are below compliance with Sections 1003(a)(i) and 1003(a)(ii) of the NYSE American continued listing standards since we reported a stockholders' deficit of $372.5 million as of June 30, 2019 and net losses in each of the four most recent fiscal years ended December 30, 2018. However, NYSE American will not normally consider suspending dealings in, or removing from the list, the securities of an issuer which is below the continued listing standards set forth in Sections 1003(a)(i)-(iii) of the NYSE American continued listing standards if the issuer meets certain other criteria, including, among others, total assets and revenues of $50 million in the last fiscal year or in two of the last three fiscal years, and a market value of publicly held shares (as defined by NYSE American) of at least $15 million. We submitted a plan to NYSE American on October 9, 2019, advising how we plan to regain compliance with the continued listing standards by March 9, 2021. If NYSE American does not accept the plan, NYSE American will initiate delisting procedures. If NYSE American accepts our plan, our common stock will continue to be listed and traded on NYSE American during the cure period, subject to our compliance with the plan and other continued listing standards.

THE MCCLATCHY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

1. BUSINESS AND BASIS OF ACCOUNTING

The McClatchy Company (“Company,” “we,” “us” or “our”) provides strong, independent local journalism to 30 communities with operations in 14 states, as well as selected national news coverage through our Washington D.C. based bureau. We also provide a full suite of digital marketing services, both through our local sales teams based in the communities we serve, as well as through excelerate®, our national digital marketing agency. We are a publisher of brands such as the Miami Herald, The Kansas City Star, The Sacramento Bee, The Charlotte Observer, The (Raleigh) News & Observer, and the Fort Worth Star-Telegram.

Basis of Presentation

Preparation of the financial statements in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”) and pursuant to the rules and regulation of the Securities and Exchange Commission requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates. The condensed consolidated financial statements include the Company and our subsidiaries. Intercompany items and transactions are eliminated.

In our opinion, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, which are of a normal recurring nature, that are necessary to present fairly our financial position, results of operations, and cash flows for the interim periods presented. The financial statements contained in this report are not necessarily indicative of the results to be expected for the full year. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 30, 2018 (“Form 10-K”). Each of the fiscal periods included herein comprise 13 weeks for the third-quarter periods and 39 weeks for the nine-month periods.

Going Concern

The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. For the nine months ended September 29, 2019, we reported a net loss of $364.2 million. As of September 29, 2019, we had a working capital deficit of $152.8 million, of which $108.7 million is attributable to minimum required contributions to our qualified defined benefit pension plan (“Pension Plan”) coming due in the next twelve months.

We face liquidity challenges relating to the minimum required contributions in fiscal year 2020 to our Pension Plan. These required contributions are estimated to be approximately $124.2 million, which would be paid in installments beginning in January 2020 with the bulk of those payments due September 15, 2020, or afterwards.

To address our liquidity needs and the going concern uncertainty, in June 2019 we filed an application for a waiver of the minimum required contributions under the Pension Plan in accordance with section 412 of the Internal Revenue Code for the 2019, 2020 and 2021 plan years with the Internal Revenue Service (“IRS”). In early November 2019, the IRS declined to grant us our three-year waiver request.

We continue to explore other means of pension relief, including working with many members of Congress in search of legislative relief that would mitigate the burden of the minimum required contributions. We have also consulted with the Pension Benefit Guaranty Corporation (“PBGC”) to discuss measures allowed under existing regulations to provide a more permanent solution, such as a distress termination of the Pension Plan. A distress termination would allow us to continue to operate and relieve the current liquidity pressures of the minimum required contributions under Employee Retirement Income Security Act ("ERISA"). However, there can be no assurance that the ongoing discussions with Congress and/or the PBGC will result in any relief including a restructuring transaction, or that such relief will occur on a timely basis or at all.

In addition to seeking pension relief, we are engaged in discussions with our largest debt holder, regarding the recapitalization of our balance sheet and outstanding debt obligations and the formulation of a restructuring plan that would provide a more permanent, rather than temporary, solution. No agreement has been reached with respect to the above discussions and discussions remain ongoing. We will continue to work collaboratively with our constituents to achieve the goals of our business plan and balance the interests of a wide range of stakeholders. However, there can be no assurance that the ongoing discussions with our debt holder will result in any restructuring transaction, that we will obtain any required stakeholder consent to consummate a restructuring transaction, or that the restructuring transaction will occur on a timely basis or at all.

In conjunction with all of these efforts to address our liquidity pressures, we have engaged the financial and legal services of Evercore Group L.L.C., FTI Consulting, Inc., Skadden, Arps, Slate, Meagher & Flom LLP and the Groom Law Group, Chartered (collectively, “Advisors”), who are all assisting us in evaluating and executing available transactions with our stakeholders.

We believe we have taken and are continuing to take prudent actions to address our ability to continue as a going concern; however, there is no assurance that such alternatives will be available on terms acceptable to us, in a timely manner or at all, or our plans will fully mitigate the liquidity challenges we face because some matters are not within our control. These conditions raise substantial doubt about our ability to continue as a going concern within one year after the date that the financial statements are issued or available to be issued. The condensed consolidated financial statements do not include any adjustments relating to the recoverability or classification of assets or liabilities that might be necessary should we be unable to continue as a going concern.

NYSE American Continued Listing Status

On September 9, 2019, we received written notification from NYSE American LLC ("NYSE American") indicating that we were not in compliance with certain listing standards. We have approximately 18 months from the receipt of the notice to become compliant under a plan that is subject to approval by NYSE American.

We are below compliance with Sections 1003(a)(i) and 1003(a)(ii) of the NYSE American continued listing standards since we reported a stockholders' deficit of $372.5 million as of June 30, 2019 and net losses in each of the four most recent fiscal years ended December 30, 2018. However, NYSE American will not normally consider suspending dealings in, or removing from the list, the securities of an issuer which is below the continued listing standards set forth in Sections 1003(a)(i)-(iii) of the NYSE American continued listing standards if the issuer meets certain other criteria, including, among others, total assets and revenues of $50 million in the last fiscal year or in two of the last three fiscal years, and a market value of publicly held shares (as defined by NYSE American) of at least $15 million.

We submitted a plan to NYSE American on October 9, 2019, advising how we plan to regain compliance with the continued listing standards by March 9, 2021. If NYSE American does not accept the plan, NYSE American will initiate delisting procedures. If NYSE American accepts our plan, our common stock will continue to be listed and traded on NYSE American during the cure period, subject to our compliance with the plan and other continued listing standards.