Investments in Unconsolidated Companies and Miami Land and Building

6 Months Ended

Jun. 24, 2012

Investments in Unconsolidated Companies and Miami Land and Building [Abstract]

INVESTMENTS IN UNCONSOLIDATED COMPANIES AND MIAMI LAND AND BUILDING

NOTE 2. INVESTMENTS IN UNCONSOLIDATED COMPANIES AND MIAMI LAND AND BUILDING

Investments

The Company’s ownership interest and investment in unconsolidated companies and joint ventures as of June 24, 2012 and December 25, 2011 consisted of the following (dollars in thousands):

Company	% Ownership Interest	June 24, 2012		December 25, 2011
CareerBuilder, LLC	15.0	$	222,501	$	218,805
Classified Ventures, LLC	25.6		76,718		66,886
HomeFinder, LLC	33.3		3,135		1,628
Seattle Times Company (C-Corporation)	49.5		—		—
Ponderay (general partnership)	27.0		12,064		11,800
Other	Various		5,735		5,774
		$	320,153	$	304,893

The Company uses the equity method of accounting for a majority of investments.

During the six months ended June 24, 2012, McClatchy’s proportionate share of net income from certain investees listed in the table above was greater than 20% of McClatchy’s consolidated net income before taxes. Summarized income statement information for these companies for the first six months of 2012 and 2011 follows (in thousands):

	Six Months Ended
	June 24, 2012		June 26, 2011
Revenues	$	527,855	$	474,915
Operating income		92,238		71,747
Net income		90,328		79,943

Miami Land and Building

On January 31, 2011, the original contract to sell certain land in Miami terminated because the buyer did not consummate the transaction by the closing deadline in the contract. Under the terms of an agreement with the developer, McClatchy is entitled to receive a $7.0 million termination fee and has filed a claim against the developer to secure payment. However, the Company has not recorded any amounts in its financial statements related to this fee pending the resolution of this claim. McClatchy previously received approximately $16.5 million in nonrefundable deposits, which it used to repay debt.

On May 27, 2011, the Company sold 14.0 acres of land in Miami, including the building holding the operations of one of its subsidiaries, The Miami Herald Media Company, and an adjacent parking lot for a purchase price of $236.0 million. Approximately 9.4 acres of this Miami land was previously subject to the original contract, which was terminated as discussed above. The Company received cash proceeds of $230.0 million, and an additional $6.0 million was held in an escrow account, payable to McClatchy once expenses are incurred related to the relocation of its Miami operations. The $6.0 million was released from escrow and received by McClatchy in April 2012 for payment of costs associated with the relocation of the Miami operations.

Under the sale agreement, The Miami Herald Media Company will continue to operate from its existing location through May 2013 rent free. Because the Company will not pay rent for this period, the Company is deemed to have continuing involvement in the property. As a result, under generally accepted accounting principles, the sale is treated as a financing transaction. Accordingly, the Company will continue to depreciate the carrying value of the building in its financial statements until its operations are moved, and no gain or loss has been recognized on the transaction.

As a result of the accounting treatment described above, the Company has recorded a liability (in financing obligations) equal to the sales proceeds received in the second quarter of 2011 ($230.0 million), plus $6.0 million for reimbursement of moving expenses. The Company is required to impute rent based on market rates. The imputed rent is reflected as interest expense as required by generally accepted accounting principles until the operations are moved. The Company expects to recognize a gain of approximately $10 million at the time the operations are moved because there will no longer be a continuing involvement with the Miami property.

In the first quarter of 2012, the Company purchased approximately 6.1 acres of land located in Doral, Fla., for approximately $3.1 million. McClatchy is building a new production facility on this site for its Miami newspaper operations. In January 2012, the Company entered into an agreement to lease a two-story office building adjacent to the future production facility. The Company’s Miami newspapers plan to relocate their operations from their current location to the new site in May 2013.

The lease on the office building is an operating lease with initial annual base lease payments of $1.8 million beginning in May 2013 when the building is expected to be occupied. Total costs related to relocating the newspapers’ operations and for constructing the new production facility, including the purchase of the property, construction costs, accelerated depreciation and moving expenses, are estimated to be as follows:

• Cash outlays for capital expenditures related to the new facilities are estimated to be $33 million. The Company began incurring these costs in the first quarter of 2012.

• Cash expenses to relocate the Miami newspapers’ operations are expected to be $12 million.

• Accelerated depreciation of $13 million is expected to be incurred on existing assets expected to be retired or decommissioned in connection with the relocation.

• Cash costs of $6 million in connection with the relocation were reimbursed in April 2012 from an escrow account established for this purpose by the purchaser of the existing Miami facilities.

The relocation of the Miami operations is expected to be completed in May 2013, and accordingly, the costs and expenses are expected to be incurred through the third quarter of 2013.