10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended:  September 25, 2016

or

◻TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from   to 

Commission file number: 1-9824

The McClatchy Company

(Exact name of registrant as specified in its charter)

Delaware	52-2080478
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
2100 “Q” Street, Sacramento, CA	95816
(Address of principal executive offices)	(Zip Code)

916-321-1844

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒  No ◻

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ☒  No ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ◻	Accelerated filer ☒
Non-accelerated filer (Do not check if smaller reporting company) ◻	Smaller reporting company ◻

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12-b of the Exchange Act).

Yes ◻  No ☒

As of October 28, 2016, the registrant had shares of common stock as listed below outstanding:

Class A Common Stock	5,131,894
Class B Common Stock	2,443,191

THE MCCLATCHY COMPANY

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION		1
Item 1.	Financial Statements	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28
Item 4.	Controls and Procedures	28
PART II – OTHER INFORMATION		29
Item 1.	Legal Proceedings	29
Item 1A.	Risk Factors	29
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29
Item 6.	Exhibits	29
SIGNATURES		30

PART I – FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS.

THE MCCLATCHY COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited; amounts in thousands, except per share amounts)

	QuartersEnded				Nine Months Ended
	September 25,		September 27,		September 25,		September 27,
	2016		2015		2016		2015
REVENUES — NET:
Advertising	$	133,212	$	149,860	$	410,368	$	459,627
Audience		91,022		89,310		272,163		273,361
Other		10,467		12,041		32,383		37,761
		234,701		251,211		714,914		770,749
OPERATING EXPENSES:
Compensation		95,045		95,015		296,056		302,778
Newsprint, supplements and printing expenses		19,320		22,583		57,917		71,882
Depreciation and amortization		20,559		27,295		69,551		75,892
Other operating expenses		97,912		97,929		298,265		301,503
Goodwill impairment and other asset write-downs (see Notes 1 and 2)		330		—		330		300,429
		233,166		242,822		722,119		1,052,484
OPERATING INCOME (LOSS)		1,535		8,389		(7,205)		(281,735)
NON-OPERATING (EXPENSE) INCOME:
Interest expense		(20,953)		(21,230)		(62,423)		(65,740)
Interest income		110		64		318		197
Equity income in unconsolidated companies, net		3,632		5,158		9,745		13,701
Gains related to equity investments		—		—		—		8,093
Gain (loss) on extinguishment of debt, net		—		1,632		1,535		749
Other — net		(13)		(44)		20		(292)
		(17,224)		(14,420)		(50,805)		(43,292)
Loss before income taxes		(15,689)		(6,031)		(58,010)		(325,027)
Income tax benefit		(5,885)		(4,882)		(20,731)		(16,035)
NET LOSS	$	(9,804)	$	(1,149)	$	(37,279)	$	(308,992)
Net loss per common share:
Basic	$	(1.30)	$	(0.15)	$	(4.77)	$	(35.40)
Diluted	$	(1.30)	$	(0.15)	$	(4.77)	$	(35.40)
Weighted average number of common shares:
Basic		7,614		8,717		7,809		8,728
Diluted		7,614		8,717		7,809		8,728

See notes to the condensed consolidated financial statements.

1

THE MCCLATCHY COMPANY

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)

(Unaudited; amounts in thousands) 

	Quarters Ended				Nine Months Ended
	September 25,		September 27,		September 25,		September 27,
	2016		2015		2016		2015
NET LOSS	$	(9,804)	$	(1,149)	$	(37,279)	$	(308,992)
OTHER COMPREHENSIVE INCOME (LOSS):
Pension and post retirement plans:
Change in pension and post-retirement benefit plans, net of taxes of $(1,535), $(1,921), $(4,604) and $(5,763)		2,303		2,881		6,907		8,645
Investment in unconsolidated companies:
Other comprehensive income (loss), net of taxes of $547, $128, $625 and $382		(819)		(192)		(937)		(572)
Other comprehensive income		1,484		2,689		5,970		8,073
Comprehensive income (loss)	$	(8,320)	$	1,540	$	(31,309)	$	(300,919)

See notes to the condensed consolidated financial statements.

2

THE MCCLATCHY COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited; amounts in thousands, except share amounts)

	September 25,		December 27,
	2016		2015
ASSETS
Current assets:
Cash and cash equivalents	$	23,179	$	9,332
Trade receivables (net of allowances of $3,544 in 2016 and $4,451 in 2015)		96,694		138,153
Other receivables		12,338		16,367
Newsprint, ink and other inventories		14,474		16,659
Assets held for sale		13,184		5,357
Other current assets		15,375		19,194
		175,244		205,062
Property, plant and equipment, net		305,676		364,219
Intangible assets:
Identifiable intangibles — net		312,659		348,651
Goodwill		705,174		705,174
		1,017,833		1,053,825
Investments and other assets:
Investments in unconsolidated companies		244,908		233,538
Deferred income taxes		30,676		1,312
Other assets		65,263		65,078
		340,847		299,928
	$	1,839,600	$	1,923,034
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	34,327	$	—
Accounts payable		32,701		41,751
Accrued pension liabilities		8,450		8,450
Accrued compensation		26,752		29,410
Income taxes payable		3,311		687
Unearned revenue		63,728		60,811
Accrued interest		16,734		9,423
Other accrued liabilities		23,932		15,195
		209,935		165,727
Non-current liabilities:
Long-term debt		843,415		905,425
Pension and postretirement obligations		526,914		581,852
Financing obligations		53,502		32,398
Other long-term obligations		50,350		44,869
		1,474,181		1,564,544
Commitments and contingencies
Stockholders’ equity:
Common stock $.01 par value:
Class A (authorized 200,000,000 shares, issued 5,948,624 in 2016 and 5,878,253 in 2015)		59		59
Class B (authorized 60,000,000 shares, issued 2,443,191 in 2016 and 2015)		24		24
Additional paid-in-capital		2,222,335		2,220,230
Accumulated deficit		(1,640,825)		(1,603,546)
Treasury stock at cost, 848,230 shares in 2016 and 165,217 shares in 2015		(10,271)		(2,196)
Accumulated other comprehensive loss		(415,838)		(421,808)
		155,484		192,763
	$	1,839,600	$	1,923,034

See notes to the condensed consolidated financial statements.

3

THE MCCLATCHY COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 

(Unaudited; amounts in thousands)

	Nine Months Ended
	September 25,		September 27,
	2016		2015
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(37,279)	$	(308,992)
Reconciliation to net cash provided by (used in) operating activities:
Depreciation and amortization		69,551		75,892
Gains on disposal of equipment		(684)		(83)
Retirement benefit expense		11,082		7,478
Stock-based compensation expense		2,105		2,750
Equity income in unconsolidated companies		(9,745)		(13,701)
Gains related to equity investments		—		(8,093)
Distributions of income from equity investments		—		7,500
Gain on extinguishment of debt, net		(1,535)		(749)
Goodwill impairment and other asset write-downs		330		300,429
Other		(4,723)		(4,389)
Changes in certain assets and liabilities:
Trade receivables		41,459		31,672
Inventories		2,185		646
Other assets		2,671		(1,693)
Accounts payable		(9,050)		(10,897)
Accrued compensation		(2,658)		(1,996)
Income taxes		(25,728)		(211,623)
Accrued interest		7,311		7,155
Other liabilities		15,961		(189)
Net cash provided by (used in) operating activities		61,253		(128,883)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment		(10,541)		(10,766)
Proceeds from sale of property, plant and equipment and other		3,067		224
Distributions from equity investments		—		7,460
Contributions to equity investments		(2,917)		(1,250)
Proceeds from sale of equity investments		—		633
Net cash used in investing activities		(10,391)		(3,699)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repurchase of public notes		(28,804)		(64,281)
Purchase of treasury shares		(8,075)		(2,761)
Other		(136)		(1,627)
Net cash used in financing activities		(37,015)		(68,669)
Increase (decrease) in cash and cash equivalents		13,847		(201,251)
Cash and cash equivalents at beginning of period		9,332		220,861
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	23,179	$	19,610

See notes to the condensed consolidated financial statements

4

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

1.  SIGNIFICANT ACCOUNTING POLICIES

Business and Basis of Accounting

The McClatchy Company (the “Company,” “we,” “us” or “our”) is a 21st century news and information publisher of well-respected publications such as the Miami Herald, The Kansas City Star, The Sacramento Bee, The Charlotte Observer,  The (Raleigh) News and Observer, and the (Fort Worth) Star-Telegram. We operate 29 media companies in 28 U.S. markets in 14 states, providing each of our communities with high-quality news and advertising services in a wide array of digital and print formats. We are headquartered in Sacramento, California, and our Class A Common Stock is listed on the New York Stock Exchange under the symbol MNI.

We also own 15.0% of CareerBuilder LLC (“CareerBuilder”), which operates the nation’s largest online jobs website, CareerBuilder.com, as well as certain other digital investments. In September 2016, TEGNA Inc., a majority holder of CareerBuilder, announced that it and other owners, including us, would evaluate strategic alternatives for CareerBuilder. No specific timeline was announced for this process.

Preparation of the financial statements in conformity with accounting principles generally accepted in the United States 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 27, 2015 (“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.

Reverse Stock Split

Following our May 2016 annual meeting of shareholders, our Board of Directors approved a one-for-ten (1:10) reverse stock split of our issued and outstanding Class A and Class B common stock, which became effective June 7, 2016. As a result, every ten shares of our common stock outstanding were combined into one share of our common stock. The ratio was the same for the Class A common stock and the Class B common stock and each shareholder held the same percentage of Class A and Class B common stock outstanding immediately following the reverse stock split as the shareholder held immediately prior to the reverse stock split. No fractional shares were issued in connection with the reverse stock split. The par value and authorized number of shares of the Class A and Class B common stock were not adjusted as a result of the reverse stock split. All issued and outstanding Class A and Class B common stock and per share amounts contained within our condensed consolidated financial statements and footnotes have been retroactively adjusted to reflect this reverse stock split for all periods presented.

All restricted stock unit awards and stock appreciation right awards outstanding immediately prior to the reverse stock split were adjusted by dividing the number of shares of common stock into which the restricted stock units and stock appreciation rights are exercisable by ten and multiplying the exercise price by ten, all in accordance with the terms of the agreements governing such awards. All restricted stock units and stock appreciation rights activity contained within our condensed consolidated financial statement footnotes have been retroactively adjusted to reflect this reverse stock split for all periods presented.

5

Fair Value of Financial Instruments

We account for certain assets and liabilities at fair value.  The hierarchy below lists three levels of fair value based on the extent to which inputs used in measuring fair value are observable in the market. We categorize each of our fair value measurements in one of these three levels based on the lowest level input that is significant to the fair value measurement in its entirety.  These levels are:

Level 1 – Unadjusted quoted prices available in active markets for identical investments as of the reporting date.

Level 2 – Observable inputs to the valuation methodology are other than Level 1 inputs and are either directly or indirectly observable as of the reporting date and fair value can be determined through the use of models or other valuation methodologies.

Level 3 – Inputs to the valuation methodology are unobservable inputs in situations where there is little or no market activity for the asset or liability, and the reporting entity makes estimates and assumptions related to the pricing of the asset or liability including assumptions regarding risk.

Our policy is to recognize significant transfers between levels at the actual date of the event or circumstance that caused the transfer. 

The following methods and assumptions were used to estimate the fair value of each class of financial instruments:

Cash and cash equivalents, accounts receivable and accounts payable.  As of September 25, 2016, and December 27, 2015, the carrying amount of these items approximates fair value because of the short maturity of these financial instruments.

Long-term debt.  The fair value of our long-term debt is determined using quoted market prices and other inputs that were derived from available market information, including the current market activity of our publicly-traded notes and bank debt, trends in investor demand for debt and market values of comparable publicly-traded debt. These are considered to be Level 2 inputs under the fair value measurements and disclosure guidance, and may not be representative of actual value. At September 25, 2016 and December 27, 2015, the estimated fair value of long-term debt was $821.4 million and $729.8 million, respectively. At September 25, 2016, and December 27, 2015, the carrying value of our long-term debt, including the current portion of long-term debt, was $877.7 million and $905.4 million, respectively.

Certain assets are measured at fair value on a nonrecurring basis; that is, they are subject to fair value adjustments only in certain circumstances (for example, when there is evidence of impairment). Our non-financial assets that may be measured at fair value on a nonrecurring basis are assets held for sale, goodwill, intangible assets not subject to amortization and equity method investments. All of these are measured using Level 3 inputs. We utilize valuation techniques that seek to maximize the use of observable inputs and minimize the use of unobservable inputs. The significant unobservable inputs include our expected cash flows and discount rates that we estimate market participants would seek for bearing the risk associated with such assets.

Property, Plant and Equipment

During the quarter and nine months ended September 25, 2016, we incurred $0.3 million and $6.9 million in accelerated depreciation related to production equipment no longer needed as a result of outsourcing our printing process at certain of our media companies and replacing an old printing press at one of our media companies. During the quarter and nine months ended September 27, 2015, we incurred $4.9 million and $6.7 million in accelerated depreciation primarily related to production equipment associated with outsourcing our printing process at a few of our media companies.

6

Depreciation expense with respect to property, plant and equipment is summarized below:

	Quarters Ended				Nine Months Ended
	September 25,		September 27,		September 25,		September 27,
(in thousands)	2016		2015		2016		2015
Depreciation expense	$	8,561	$	15,224	$	33,559	$	39,606

Assets Held for Sale

Assets held for sale includes land and buildings at two of our media companies that we began to actively market for sale during the nine months ended September 25, 2016, and a parking structure at another media company that we began to actively market for sale during 2015. In connection with the classification to assets held for sale, the carrying value of the land and building of one of the media companies was reduced to their estimated fair value less selling costs, as determined based on the current market conditions and the selling price. As a result, a write-down of $0.3 million was recorded in the quarter and nine months ended September 25, 2016, and is included in goodwill impairment and other asset write-downs on the condensed consolidated statements of operations.

Intangible Assets and Goodwill

We test for impairment of goodwill annually, at year‑end, or whenever events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. The required two‑step approach uses accounting judgments and estimates of future operating results. Changes in estimates or the application of alternative assumptions could produce significantly different results. Impairment testing is done at a reporting unit level. We perform this testing on operating segments, which are also considered our reporting units. An impairment loss generally is recognized when the carrying amount of the reporting unit’s net assets exceeds the estimated fair value of the reporting unit. The fair value of our reporting units is determined using a combination of a discounted cash flow model and market based approaches. The estimates and judgments that most significantly affect the fair value calculation are assumptions related to revenue growth, newsprint prices, compensation levels, discount rate, and for the market based approach, private and public market trading multiples for newspaper assets. We consider current market capitalization, based upon the recent stock market prices, plus an estimated control premium in determining the reasonableness of the aggregate fair value of the reporting units. We had no impairment of goodwill during the quarter or nine months ended September 25, 2016. During the quarter ended June 28, 2015, we performed interim tests of impairment of goodwill due to the continuing challenging business conditions and the resulting weakness in our stock price. As a result, we recorded an impairment charge related to goodwill of $290.9 million in the nine months ended September 27, 2015, which was recorded in the goodwill impairment and other asset write-downs line item on our condensed consolidated statements of operations.

Newspaper mastheads (newspaper titles and website domain names) are not subject to amortization and are tested for impairment annually, at year‑end, or more frequently if events or changes in circumstances indicate that the asset might be impaired. The impairment test consists of a comparison of the fair value of each newspaper masthead with its carrying amount. We use a relief-from-royalty approach that utilizes the discounted cash flow model discussed above, to determine the fair value of each newspaper masthead. We had no impairment of newspaper mastheads during the quarter and nine months ended September 25, 2016.  During the quarter ended June 28, 2015, we performed interim tests of impairment of intangible newspaper mastheads due to the continuing challenging business conditions and the resulting weakness in our stock price. As a result, we recorded an intangible newspaper masthead impairment charge of $9.5 million in the nine months ended September 27, 2015, which was recorded in the goodwill impairment and other asset write-downs line item on our condensed consolidated statements of operations.

Long‑lived assets such as intangible assets (primarily advertiser and subscriber lists) are amortized and tested for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. The carrying amount of each asset group is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use of such asset group. We had no impairment of long‑lived assets subject to amortization during the quarter and nine months ended September 25, 2016, or September 27, 2015.

7

Segment Reporting

We operate 29 media companies, providing each of our communities with high-quality news and advertising services in a wide array of digital and print formats. We have two operating segments that we aggregate into a single reportable segment because each has similar economic characteristics, products, customers and distribution methods. Our operating segments are based on how our chief executive officer, who is also our Chief Operating Decision Maker (“CODM”), makes decisions about allocating resources and assessing performance. The CODM is provided discrete financial information for the two operating segments. Each operating segment consists of a group of media companies and both operating segments report to the same segment manager. One of our operating segments (“Western Segment”) consists of our media operations in California, the Northwest, and the Midwest, while the other operating segment (“Eastern Segment”) consists primarily of media operations in the Southeast and Florida.

Accumulated Other Comprehensive Loss

Our accumulated other comprehensive loss (“AOCL”) and reclassifications from AOCL, net of tax, consisted of the following: 

			Other
	Minimum		Comprehensive
	Pension and		Loss
	Post-		Related to
	Retirement		Equity
(in thousands)	Liability		Investments		Total
Balance at December 27, 2015	$	(411,956)	$	(9,852)	$	(421,808)
Other comprehensive income (loss) before reclassifications		—		(937)		(937)
Amounts reclassified from AOCL		6,907		—		6,907
Other comprehensive income (loss)		6,907		(937)		5,970
Balance at September 25, 2016	$	(405,049)	$	(10,789)	$	(415,838)

	Amount Reclassified from AOCL
	Quarters Ended				Nine Months Ended
(in thousands)	September 25,		September 27,		September 25,		September 27,		Affected Line in the Condensed
AOCL Component	2016		2015		2016		2015		Consolidated Statements of Operations
Minimum pension and post-retirement liability	$	3,838	$	4,802	$	11,511	$	14,408	Compensation
		(1,535)		(1,921)		(4,604)		(5,763)	Benefit for income taxes
	$	2,303	$	2,881	$	6,907	$	8,645	Net of tax

Income Taxes

We account for income taxes using the liability method. Under this method, deferred tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse.

We recognize accrued interest related to unrecognized tax benefits in interest expense. Accrued penalties are recognized as a component of income tax expense.

Earnings Per Share (EPS)

As discussed previously, all share amounts have been restated to reflect the reverse stock split that became effective on June 7, 2016, and applied retrospectively. Basic EPS excludes dilution from common stock equivalents and reflects income divided by the weighted average number of common shares outstanding for the period.  Diluted EPS is based upon the weighted average number of outstanding shares of common stock and dilutive common stock equivalents in the period.  Common stock equivalents arise from dilutive stock appreciation rights, restricted stock units, and restricted stock and are computed using the treasury stock method.  Anti-dilutive common stock equivalents are excluded from diluted

8

EPS.  The weighted average anti-dilutive common stock equivalents that could potentially dilute basic EPS in the future, but were not included in the weighted average share calculation, consisted of the following:

	Quarters Ended		Nine Months Ended
	September 25,	September 27,	September 25,	September 27,
(shares in thousands)	2016	2015	2016	2015
Anti-dilutive common stock equivalents	305	524	284	544

Cash Flow Information

Cash paid for interest and income taxes and other non-cash activities consisted of the following:

	Nine Months Ended
	September 25,		September 27,
(in thousands)	2016		2015
Interest paid (net of amount capitalized)	$	47,349	$	53,241
Income taxes paid (net of refunds)		762		197,718
Other non-cash financing activities:
Increase of financing obligation for contribution of real property to pension plan	$	47,130
Reduction of pension obligation for contribution of real property to pension plan		(47,130)
Reduction of financing obligation for sale of Charlotte property by pension plan		(25,060)
Reduction of property, plant and equipment, net for sale of Charlotte property by pension plan		(26,171)

The income tax payments in the nine months ended September 27, 2015, were primarily related to the net taxes paid for a gain on the sale of a previous owned equity investment in the fourth quarter of 2014, offset by tax losses on bond repurchases in the fourth quarter of 2014. While the transactions occurred in the fourth quarter of 2014, the actual tax payments were made in the first quarter of 2015.

Other non-cash financing activities relate to the contribution of real property to the Pension Plan and to the sale of one of the properties by the Pension Plan. See Note 5 for further discussion.

Recently Issued Accounting Pronouncements Not Yet Adopted

In May 2014, the FASB issued Accounting Standards Update (“ASU”) ASU No. 2014-09, “Revenue from Contracts with Customers.” ASU 2014-09 outlines a new, single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance. This new revenue recognition model provides a five-step analysis in determining when and how revenue is recognized. The new model will require revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration a company expects to receive in exchange for those goods or services. In 2016, the FASB issued additional updates: ASU No. 2016-08, 2016-10, 2016-11 and 2016-12. These updates provide further guidance and clarification on specific items within the previously issued update. We are currently in the process of evaluating the impact of the adoption on our condensed consolidated financial statements. ASU 2014-09, as well as the additional FASB updates noted above, is effective for us for annual and interim periods beginning on or after December 15, 2017, and early adoption is permitted for interim or annual reporting periods beginning after December 15, 2016. We do not plan to early adopt this guidance. We are currently in the process of evaluating the impact of the adoption on our condensed consolidated financial statements.

In August 2014, the FASB issued ASU No. 2014-15, “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern.” ASU 2014-15 requires management to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnotes disclosures in certain circumstances. It is effective for us for annual and interim periods beginning on or after December 15, 2016, with early adoption permitted. We do not believe the adoption of this guidance will have an impact on our condensed consolidated financial statements.

In July 2015, the FASB issued ASU No. 2015-11, “Simplifying the Measurement of Inventory.” ASU 2015-11 simplifies the measurement of inventory by requiring certain inventory to be measured at the “lower of cost and net realizable value”

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and options that currently exist for “market value” will be eliminated. The ASU defines net realizable value as the “estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.” It is effective for us for interim and annual reporting periods beginning after December 15, 2016. The standard should be applied prospectively with early adoption permitted. We are currently in the process of evaluating the impact of the adoption on our condensed consolidated financial statements.

In January 2016, the FASB issued ASU No. 2016-01, “Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.” ASU 2016-01 addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. ASU 2016-01 is effective for us for interim and annual reporting periods beginning after December 15, 2017. We do not believe the adoption of this guidance will have an impact on our condensed consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, “Leases” (Accounting Standards Codification 842 (“ASC 842”)) and it replaces the existing guidance in ASC 840, “Leases.” ASC 842 requires lessees to recognize most leases on their balance sheets as lease liabilities with corresponding right-of-use assets. The new lease standard does not substantially change lessor accounting. It is effective for us for interim and annual reporting periods beginning after December 15, 2018, with early adoption permitted. We are currently in the process of evaluating the impact of the adoption on our condensed consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” ASU 2016-13 requires that financial assets measured at amortized cost be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis. The income statement reflects the measurement of credit losses for newly recognized financial assets, as well as the expected credit losses during the period. The measurement of expected credit losses is based upon historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. It is effective for us for interim and annual reporting periods beginning after December 15, 2019, and early adoption is permitted for interim or annual reporting periods beginning after December 15, 2018. We are currently in the process of evaluating the impact of the adoption on our condensed consolidated financial statements.

In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows(Topic 230): Classification of Certain Cash Receipts and Cash Payments.” ASU 2016-15 addresses eight specific cash flow issues and is intended to reduce diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. It is effective for us for interim and annual reporting periods beginning after December 15, 2017, and early adoption is permitted. We are currently in the process of evaluating the impact of the adoption on our condensed consolidated financial statements.

Recently Adopted Accounting Pronouncements

In February 2015, the FASB issued ASU No. 2015-02, “Consolidation (Topic 810); Amendments to the Consolidated Analysis,” which changed the analysis that a reporting entity must perform to determine whether it should consolidate certain types of legal entities. This guidance was effective for us at the beginning of 2016. The adoption of this guidance did not have an impact on our condensed consolidated financial statements.

In April 2015, the FASB issued ASU No. 2015-05, "Customer's Accounting for Fees Paid in a Cloud Computing Arrangement." ASU 2015-05 provided guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. The new guidance does not change the accounting for service contracts. This guidance was effective for us at the beginning of 2016. The adoption of this guidance did not have an impact on our condensed consolidated financial statements.

In March 2016, the FASB issued ASU No. 2016-07, “Investments-Equity Method and Joint Ventures (Topic 323).” ASU 2016-07 eliminates the requirement that when an existing cost method investment qualifies for use of the equity method, an investor must restate its historical financial statements, as if the equity method had been used during all previous periods.

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Under the new guidance, at the point an investment qualifies for the equity method, any unrealized gain or loss in accumulated other comprehensive income (loss) will be recognized through earnings. ASU 2016-07 is effective for us for interim and annual reporting periods beginning after December 15, 2016, with early adoption permitted. We early adopted this standard and it did not have an impact on our condensed consolidated financial statements.  

In March 2016, the FASB issued ASU No. 2016-09, “Compensation-Stock Compensation (Topic 718): Improvements of Employee Share-Based Payment Accounting.” ASU 2016-09 makes several modifications to Topic 718 related to the accounting for forfeitures, employer tax withholding on share-based compensation and the financial statement presentation of excess tax benefits or deficiencies. This guidance also clarifies the statement of cash flows presentation of certain components of share-based awards. ASU 2016-09 is effective for us for interim and annual reporting periods beginning after December 15, 2016, with early adoption permitted. We early adopted this standard as of the beginning of fiscal year 2016. While certain amendments of this standard were not applicable to us or were applied prospectively, certain other amendments were applied retrospectively as required by the standard. The adoption of this standard did not have an impact on any periods presented in our condensed consolidated financial statements.

2.  INTANGIBLE ASSETS AND GOODWILL

Intangible assets subject to amortization (primarily advertiser lists, subscriber lists and developed technology), mastheads and goodwill consisted of the following: 

	December 27,		Amortization		September 25,
(in thousands)	2015		Expense		2016
Intangible assets subject to amortization	$	833,254	$	—	$	833,254
Accumulated amortization		(663,735)		(35,992)		(699,727)
		169,519		(35,992)		133,527
Mastheads		179,132		—		179,132
Goodwill		705,174		—		705,174
Total	$	1,053,825	$	(35,992)	$	1,017,833

Amortization expense with respect to intangible assets is summarized below:

	Quarters Ended				Nine Months Ended
	September 25,		September 27,		September 25,		September 27,
(in thousands)	2016		2015		2016		2015
Amortization expense	$	11,998	$	12,071	$	35,992	$	36,286

The estimated amortization expense for the remainder of fiscal year 2016 and the five succeeding fiscal years is as follows: 

	Amortization
	Expense
Year	(in thousands)
2016 (Remainder)	$	11,994
2017		48,907
2018		47,275
2019		23,769
2020		418
2021		296

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3.  INVESTMENTS IN UNCONSOLIDATED COMPANIES

The carrying value of investments in unconsolidated companies consisted of the following:

(in thousands)	% Ownership	September 25,		December 27,
Company	Interest	2016		2015
CareerBuilder, LLC	15.0	$	240,248	$	230,170
Other	Various		4,660		3,368
		$	244,908	$	233,538

In September 2016, TEGNA Inc., a majority holder of CareerBuilder, announced that it and other owners, including us, would evaluate strategic alternatives for CareerBuilder. No specific timeline was announced for this process.

During the nine months ended September 25, 2016, our proportionate share of net income from certain investments listed in the table above was greater than 20% of our condensed consolidated net loss before taxes. Summarized condensed financial information, as provided to us by these certain investees, is as follows:

	Nine months ended
	September 25,		September 27,
(in thousands)	2016		2015
Net revenues	$	523,823	$	526,729
Gross profit		494,632		490,140
Operating income		78,077		100,495
Net income		77,599		97,887

On February 23, 2016, we, along with Gannett Co. Inc. and Tribune Publishing Co. (now “tronc, Inc.”) (the “Selling Partners”) sold all of the assets in HomeFinder LLC (“HomeFinder”) to Placester Inc. (“Placester”) in exchange for a small stock ownership in Placester and a 3-year affiliate agreement with Placester to continue to allow the Selling Partners to sell Placester and HomeFinder’s products and services. As a result of this transaction, during the quarter ended March 27, 2016, we wrote off our HomeFinder investment of $0.9 million, which is recorded in equity income in unconsolidated companies, net, on our condensed consolidated statements of operations.

4.  LONG-TERM DEBT

Our long-term debt consisted of the following:

	Face Value at		Carrying Value
	September 25,		September 25,		December 27,
(in thousands)	2016		2016		2015
Notes:
9.00% senior secured notes due in 2022	$	506,415	$	497,898	$	506,571
5.750% notes due in 2017		34,645		34,327		54,551
7.150% debentures due in 2027		89,188		84,763		84,469
6.875% debentures due in 2029		276,230		260,754		259,834
Long-term debt	$	906,478	$	877,742	$	905,425
Less current portion		34,645		34,327		—
Total long-term debt, net of current	$	871,833	$	843,415	$	905,425

Our outstanding notes are stated net of unamortized debt issuance costs and unamortized discounts, if applicable, totaling $28.7 million and $31.9 million as of September 25, 2016, and December 27, 2015, respectively.

During the quarter ended September 25, 2016, we classified our 5.75% notes due on September 1, 2017, to current portion of long-term debt on the condensed consolidated balance sheet. In October 2016, we repurchased a total $17.8 million of the 5.75% notes through a privately negotiated transaction and we expect to record a loss on extinguishment of debt of approximately $0.4 million during the quarter ended December 25, 2016.

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Debt Repurchases and Gain on Extinguishment of Debt

During the nine months ended September 25, 2016, we repurchased a total of $30.8 million of notes through privately negotiated transactions as follows:

(in thousands)	Face Value
9.00% senior secured notes due in 2022	$	10,000
5.750% notes due in 2017		20,797
Total notes repurchased	$	30,797

We recorded a net gain on extinguishment of debt of $1.5 million during the nine months ended September 25, 2016. We repurchased these notes at a discount and wrote off historical discounts and debt issuance costs during the nine months ended September 25, 2016. There were no notes repurchased during the quarter ended September 25, 2016. During the quarter and nine months ended September 27, 2015, we repurchased $25.0 million and $66.4 million, respectively, of our notes through privately negotiated transactions. We recorded a net gain on extinguishment of debt of $1.6 million and $0.7 million during the quarter and nine months ended September 27, 2015.

Credit Agreement

Our Third Amended and Restated Credit Agreement dated December 18, 2012, as amended (“Credit Agreement”), is secured by a first-priority security interest in certain of our assets as described below. The Credit Agreement, among other things, provides for commitments of $65.0 million and a maturity date of December 18, 2019. On October 21, 2014, we entered into a Collateralized Issuance and Reimbursement Agreement (“LC Agreement”). Pursuant to the terms of LC Agreement, we may request letters of credit be issued on our behalf in an aggregate face amount not to exceed $35.0 million. We are required to provide cash collateral equal to 101% of the aggregate undrawn stated amount of each outstanding letter of credit.

As of September 25, 2016, there were standby letters of credit outstanding under the LC Agreement with an aggregate face amount of $30.7 million. There were no borrowings outstanding under the Credit Agreement as of September 25, 2016.

Under the Credit Agreement, we may borrow at either the London Interbank Offered Rate plus a spread ranging from 275 basis points to 425 basis points, or at a base rate plus a spread ranging from 175 basis points to 325 basis points, in each case based upon our consolidated total leverage ratio. The Credit Agreement provides for a commitment fee payable on the unused revolving credit ranging from 50 basis points to 62.5 basis points, based upon our consolidated total leverage ratio.

Senior Secured Notes and Indenture

Substantially all of our subsidiaries guarantee the obligations under the 9.00% Senior Secured Notes due in 2022 (“9.00% Notes”) and the Credit Agreement. We own 100% of each of the guarantor subsidiaries and we have no significant independent assets or operations separate from the subsidiaries that guarantee our 9.00% Notes and the Credit Agreement. The guarantees provided by the guarantor subsidiaries are full and unconditional and joint and several, and the subsidiaries other than the subsidiary guarantors are minor.

In addition, we have granted a security interest to the banks that are a party to the Credit Agreement and the trustee under the indenture governing the 9.00% Notes that includes, but is not limited to, intangible assets, inventory, receivables and certain minority investments as collateral for the debt. The security interest does not include any property, plant & equipment (“PP&E”), leasehold interests or improvements with respect to such PP&E which would be reflected on our condensed consolidated balance sheets or shares of stock and indebtedness of our subsidiaries.

Covenants under the Senior Debt Agreements

The financial covenant under the Credit Agreement requires us to comply with a maximum consolidated total leverage ratio measured quarterly. As of September 25, 2016, we are required to maintain a consolidated total leverage ratio of not more than 6.00 to 1.00.  For purposes of consolidated total leverage ratio, debt is largely defined as net debt, which is debt

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net of cash on hand in excess of $20.0 million. As of September 25, 2016, we were in compliance with our financial covenants.

The Credit Agreement also prohibits the payment of a dividend if a payment would not be permitted under the indenture for the 9.00% Notes (discussed below). Dividends under the indenture for the 9.00% Notes are allowed if the consolidated leverage ratio (as defined in the indenture) is less than 5.25 to 1.00 and we have sufficient amounts under our restricted payments basket (as defined in the indenture).

The indenture for the 9.00% Notes and the Credit Agreement include a number of restrictive covenants that are applicable to us and our restricted subsidiaries. The covenants are subject to a number of important exceptions and qualifications set forth in those agreements. These covenants include, among other things, restrictions on our ability to incur additional debt; make investments and other restricted payments; pay dividends on capital stock or redeem or repurchase capital stock or certain of our outstanding notes or debentures prior to stated maturity; sell assets or enter into sale/leaseback transactions; create specified liens; create or permit restrictions on the ability of our restricted subsidiaries to pay dividends or make other distributions; engage in certain transactions with affiliates; and consolidate or merge with or into other companies or sell all or substantially all of the Company’s and our subsidiaries’ assets, taken as a whole.

5.  EMPLOYEE BENEFITS

We maintain a noncontributory qualified defined benefit pension plan (“Pension Plan”), which covers certain eligible current and former employees and has been frozen since March 31, 2009.  No new participants may enter the Pension Plan and no further benefits will accrue. However, years of service continue to count toward early retirement calculations and vesting of benefits previously earned.

We also have a limited number of supplemental retirement plans to provide certain key current and former employees with additional retirement benefits.  These plans are funded on a pay-as-you-go basis and the accrued pension obligation is largely included in other long-term obligations.

The elements of retirement expense are as follows:

	Quarters Ended				Nine Months Ended
	September 25,		September 27,		September 25,		September 27,
(in thousands)	2016		2015		2016		2015
Pension plans:
Service Cost	$	4,700	$	2,920	$	14,100	$	8,760
Interest Cost		22,167		21,248		66,501		63,745
Expected return on plan assets		(27,107)		(26,571)		(81,322)		(79,712)
Actuarial loss		4,596		5,548		13,787		16,645
Net pension expense		4,356		3,145		13,066		9,438
Net post-retirement benefit credit		(662)		(653)		(1,984)		(1,960)
Net retirement expenses	$	3,694	$	2,492	$	11,082	$	7,478

In February 2016, we contributed certain of our real property appraised at $47.1 million to our Pension Plan, and we entered into lease-back arrangements for the contributed facilities. This contribution was measured at fair value using Level 3 inputs, which primarily consisted of expected cash flows and discount rate that we estimated market participants would seek for bearing the risk associated with such assets. After applying credits, which resulted from contributing more than the Pension Plan’s minimum required contribution amounts in prior years, we have no required pension contribution under the Employee Retirement Income Security Act for fiscal year 2016. We leased back the contributed facilities under 11-year leases with initial annual payments totaling approximately $3.5 million. A similar contribution of properties was made to the Pension Plan in 2011, and the accounting treatment for both contributions is described below.

The contributions and leasebacks of these properties are treated as financing transactions and, accordingly, we continue to depreciate the carrying value of the properties in our financial statements. No gain or loss will be recognized on the

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contributions of any property until the sale of the property by the Pension Plan. At the time of our contributions, our pension obligation was reduced and our financing obligations were recorded equal to the fair market value of the properties. The financing obligations are reduced by a portion of the lease payments made to the Pension Plan each month, and increased for imputed interest expense on the obligations to the extent imputed interest exceeds monthly payments. The long-term balance of this obligation at September 25, 2016, and December 27, 2015, was $53.5 million and $32.4 million, respectively, and relates to the contributions to the Pension Plan in 2016 and 2011.

In May 2016, the Pension Plan sold the Charlotte real property for approximately $34.3 million, and we terminated our lease on the property. The property was included in the 2011 contributions to the Pension Plan discussed previously. As a result of the sale by the Pension Plan, we recognized a $1.1 million loss on the sale of the Charlotte property in the other operating expenses on the condensed consolidated statement of operations for the nine months ended September 25, 2016. At the time of sale, our financial obligation was reduced by $25.1 million and we removed the assets with a carrying value of $26.2 million from PP&E.

In October 2016, the Pension Plan sold the Olympia real property for approximately $4.8 million. The property was included in the 2011 contributions to the Pension Plan discussed previously. As a result of the sale by the Pension Plan, we will recognize approximately $0.2 million loss on the sale of the Olympia property in other operating expenses on the condensed consolidated statement of operations during the quarter ended December 25, 2016.

We have a defined contribution plan (“401(k) plan”), which enables qualified employees to voluntarily defer compensation.  The 401(k) plan includes a matching company contribution and a supplemental contribution that is tied to our performance.  We suspended our matching contribution to the 401(k) plan in 2009 and as of September 25, 2016, we have not reinstated that benefit.

6.  COMMITMENTS AND CONTINGENCIES

In December 2008, carriers of The Fresno Bee filed a class action lawsuit against us and The Fresno Bee in the Superior Court of the State of California in Fresno County captioned Becerra v. The McClatchy Company (“Fresno case”) alleging that the carriers were misclassified as independent contractors and seeking mileage reimbursement. In February 2009, a substantially similar lawsuit, Sawin v. The McClatchy Company, involving similar allegations was filed by carriers of The Sacramento Bee (“Sacramento case”) in the Superior Court of the State of California in Sacramento County. The class consists of roughly 5,000 carriers in the Sacramento case and 3,500 carriers in the Fresno case. The plaintiffs in both cases are seeking unspecified restitution for mileage reimbursement. With respect to the Sacramento case, in September 2013, all wage and hour claims were dismissed and the only remaining claim is an equitable claim for mileage reimbursement under the California Civil Code. In the Fresno case, in March 2014, all wage and hour claims were dismissed and the only remaining claim is an equitable claim for mileage reimbursement under the California Civil Code.

The court in the Sacramento case trifurcated the trial into three separate phases: the first phase addressed independent contractor status, the second phase will address liability, if any, and the third phase will address restitution, if any. On September 22, 2014, the court in the Sacramento case issued a tentative decision following the first phase, finding that the carriers that contracted directly with The Sacramento Bee during the period from February 2005 to July 2009 were misclassified as independent contractors. We objected to the tentative decision but the court ultimately adopted it as final. The court has not yet established a date for the second and third phases of trial concerning whether The Sacramento Bee is liable to the carriers in the class for mileage reimbursement or owes any restitution. In June 2016, The McClatchy Company was dismissed from the lawsuit, leaving The Sacramento Bee as the sole defendant.

The court in the Fresno case bifurcated the trial into two separate phases: the first phase addressed independent contractor status and liability for mileage reimbursement and the second phase was designated to address restitution, if any. The first phase of the Fresno case began in the fourth quarter of fiscal year 2014 and concluded in late March 2015. On April 14, 2016, the court in the Fresno case issued a statement of decision granting judgment in favor of us and The Fresno Bee.

In January 2016, Ponderay Newsprint Company (“PNC”), a general partnership that owns and operates a newsprint mill in the state of Washington, and of which we own a 27% interest, filed a complaint in the Superior Court of the State of Washington seeking declaratory judgment and alleging breach of contract and breach of the duty of good faith and fair

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dealing against Public Utility District No. 1 of Pend Oreille County (“PUD”) relating to the industrial power supply contracts (“Supply Contracts”) between PNC and the PUD.  This complaint followed the PUD’s assertion that PNC had effected a termination of the Supply Contracts by the submission of its most recent power schedule, which called for an uncertain, and probable declining, need for power between 2017-2019.  Based on PNC’s fervent belief that its power schedule was fully compliant with the Supply Contracts, the aforementioned complaint was filed. In March 2016, the PUD filed a counterclaim against PNC and a third-party complaint against the individual partners of PNC, alleging breach of contract.

We continue to defend these actions vigorously and expect that we will ultimately prevail. As a result, we have not established a reserve in connection with the cases. While we believe that a material impact on our condensed consolidated financial position, results of operations or cash flows from these claims is unlikely, given the inherent uncertainty of litigation, a possibility exists that future adverse rulings or unfavorable developments could result in future charges that could have a material impact. We have and will continue to periodically reexamine our estimates of probable liabilities and any associated expenses and make appropriate adjustments to such estimates based on experience and developments in litigation.

Other than the cases described above, we are subject to a variety of legal proceedings (including libel, employment, wage and hour, independent contractor and other legal actions) and governmental proceedings (including environmental matters) that arise from time to time in the ordinary course of our business. We are unable to estimate the amount or range of reasonably possible losses for these matters. However, we currently believe, after reviewing such actions with counsel, that the expected outcome of pending actions will not have a material effect on our condensed consolidated financial statements. No material amounts for any losses from litigation that may ultimately occur have been recorded in the condensed consolidated financial statements as we believe that any such losses are not probable.

We have certain indemnification obligations related to the sale of assets including but not limited to insurance claims and multi-employer pension plans of disposed newspaper operations. We believe the remaining obligations related to disposed assets will not be material to our financial position, results of operations or cash flows.

As of September 25, 2016, we had $30.7 million of standby letters of credit secured under the LC Agreement (see Note 4, Long-Term Debt, for further discussion).

7.  STOCK PLANS

As discussed previously, all share amounts have been restated to reflect the reverse stock split that became effective on June 7, 2016, and applied retrospectively.

Stock Plans Activity

The following table summarizes the restricted stock units (“RSUs”) activity during the nine months ended September 25, 2016:

		Weighted
		Average Grant
		Date Fair
		Value
Nonvested — December 27, 2015	153,880	$	29.83
Granted	124,690	$	10.62
Vested	(67,335)	$	30.90
Forfeited	(3,730)	$	15.78
Nonvested — September 25, 2016	207,505	$	18.19

The total fair value of the RSUs that vested during the nine months ended September 25, 2016, was $0.8 million.

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The following table summarizes the stock appreciation rights (“SARs”) activity during the nine months ended September 25, 2016: 

		Weighted		Aggregate
		Average		Intrinsic Value
	SARs	Exercise Price		(in thousands)
Outstanding December 27, 2015	320,125	$	73.49	$	—
Forfeited	(50)	$	27.60
Expired	(8,225)	$	83.46
Outstanding September 25, 2016	311,850	$	73.24	$	—

Stock-Based Compensation

All stock-based payments, including grants of stock appreciation rights, restricted stock units and common stock under equity incentive plans, are recognized in the financial statements based on their grant date fair values. As of September 25, 2016, we had two stock-based compensation plans. Stock-based compensation expenses are reported in the compensation line item in the condensed consolidated statements of operations. Total stock-based compensation expense for the periods presented in this report, are as follows:

	Quarters Ended				Nine Months Ended
	September 25,		September 27,		September 25,		September 27,
(in thousands)	2016		2015		2016		2015
Stock-based compensation expense	$	348	$	498	$	2,105	$	2,750

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ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Forward-Looking Information

This quarterly report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended, including statements relating to future financial performance and operations, trends in advertising, uses of cash, the refinancing of our debt and our pension plan obligations. These statements are based upon our current expectations and knowledge of factors impacting our business and are generally preceded by, followed by or are a part of sentences that include the words “believes,” “expects,” “anticipates,” “estimates” or similar expressions. All statements, other than statements of historical fact, are statements that could be deemed forward-looking statements. For all of those statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Such statements are subject to risks, trends and uncertainties. A detailed discussion of these and other risks and uncertainties that could cause actual results and events to differ materially from such forward-looking statements is included in the section entitled “Risk Factors” in Part I, Item 1A of our 2015 Annual Report on Form 10-K as well as our other filings with the Securities and Exchange Commission, including our disclosures herein. We undertake no obligation to revise or update any forward-looking statements except as required under applicable law.

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand the results of operations and financial condition of The McClatchy Company and its consolidated subsidiaries (together, the “Company,” “we,” “us” or “our”). This MD&A should be read in conjunction with our unaudited condensed consolidated financial statements and accompanying notes to the financial statements (“Notes”) as of and for the quarter and nine months ended September 25, 2016, included in Item 1 of this Quarterly Report on Form 10-Q, as well as with our audited consolidated financial statements and accompanying notes to the financial statements and MD&A contained in our 2015 Annual Report filed on Form 10-K with the Securities and Exchange Commission on March 8, 2016. All period references are to our fiscal periods unless otherwise indicated.

Overview

We are a 21st century news and information publisher of well-respected publications such as the Miami Herald, The Kansas City Star, The Sacramento Bee, The Charlotte Observer,  The (Raleigh) News and Observer, and the (Fort Worth) Star-Telegram. We operate 29 media companies in 28 U.S. markets in 14 states, providing each of these communities with high-quality news and advertising services in a wide array of digital and print formats. We are headquartered in Sacramento, California, and our Class A Common Stock is listed on the New York Stock Exchange under the symbol MNI.

We also own 15.0% of CareerBuilder, LLC (“CareerBuilder”), which operates the nation’s largest online jobs website, CareerBuilder.com, as well as certain other digital investments. In September 2016, TEGNA Inc., a majority holder of CareerBuilder, announced that it and other owners, including us, would evaluate strategic alternatives for CareerBuilder. No specific timeline was announced for this process.

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The following table reflects our sources of revenues as a percentage of total revenues for the periods presented:

	Quarters Ended				Nine Months Ended
	September 25,		September 27,		September 25,		September 27,
	2016		2015		2016		2015
Revenues:
Advertising	56.7	%	59.7	%	57.4	%	59.6	%
Audience	38.8	%	35.5	%	38.1	%	35.5	%
Other	4.5	%	4.8	%	4.5	%	4.9	%
Total revenues	100.0	%	100.0	%	100.0	%	100.0	%

Our primary sources of revenues are print and digital advertising and audience subscriptions. All categories (retail, national and classified) of advertising discussed below include both print and digital advertising. Retail advertising revenues include advertising carried as a part of newspapers (run of press (“ROP”) advertising), advertising inserts placed in newspapers (“preprint” advertising) and/or advertising delivered digitally. Audience revenues include either print or digital subscriptions, or a combination of both. Our print newspapers are delivered by independent contractors and large distributors. Other revenues include, among others, commercial printing and distribution revenues.

See “Results of Operations” below for a discussion of our revenue performance and contribution by category for the quarter and nine months ended September 25, 2016, and September 27, 2015.

Recent Developments

Reverse Stock Split

A one-for-ten (1:10) reverse stock split of our issued and outstanding Class A and Class B common stock became effective June 7, 2016. As a result, every ten shares of our common stock outstanding were combined into one share of our common stock. No fractional shares were issued in connection with the reverse stock split. The par value and authorized number of shares of the Class A and Class B common stock were not adjusted as a result of the reverse stock split. All issued and outstanding Class A and Class B common stock and per share amounts contained within our condensed consolidated financial statements and footnotes have been retroactively adjusted to reflect this reverse stock split for all periods presented. See Note 1 for additional discussion of this transaction.

Debt Repurchases and Extinguishment of Debt

During the three months ended March 27, 2016, we repurchased a total of $30.8 million of our 5.75% and 9.00% notes through privately negotiated transactions and recorded a net gain on extinguishment of debt of $1.5 million during the three months ended March 27, 2016. We did not repurchase notes during the second or third quarters of 2016. In October 2016, we repurchased a total $17.8 million of the 5.75% notes due in 2017 through a privately negotiated transaction and we expect to record a loss on extinguishment of debt of approximately $0.4 million during the fourth quarter of 2016.

Share Repurchase Program

In 2015, our Board of Directors authorized a share repurchase program for the repurchase of up to $15.0 million of our Class A Common Stock through December 31, 2016. This program was further amended in May 2016 to authorize a total of up to $20 million for the repurchase of our shares. The shares will be repurchased from time to time depending on prevailing market prices, availability, and market conditions, among other factors. The number of shares repurchased and the average price per share has been retroactively adjusted to reflect the one-for-ten (1:10) reverse stock split completed on June 7, 2016. During the quarter ended September 25, 2016, we repurchased approximately 89 thousand shares at a weighted average price of $16.08 per share. As of September 25, 2016, we have repurchased a total of 1.3 million shares or $15.6 million of the total buyback approved.

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Contribution of Company-Owned Real Property to Pension Plan

In February 2016, we contributed certain of our real property appraised at $47.1 million to our Pension Plan, and we entered into lease-back arrangements for the contributed facilities. After applying credits, which resulted from contributing more than the Pension Plan’s minimum required contribution amounts in prior years, we had no required pension contribution under the Employee Retirement Income Security Act for fiscal year 2016. We leased back the contributed facilities under 11-year leases with initial annual payments totaling approximately $3.5 million. The contribution and leaseback of these properties in 2016 are treated as a financing transaction and, accordingly, we continue to depreciate the carrying value of the properties in our financial statements. No gain or loss will be recognized on the contributions until the termination of the individual leases on those properties. At the time of our contribution, our pension obligation was reduced and a financing obligation was recorded equal to $47.1 million. The financing obligation will be reduced by a portion of the lease payments made to the Pension Plan each month and increased for imputed interest expense on the obligations to the extent imputed interest exceeds monthly payments. The long-term balance of this obligation at September 25, 2016, and December 27, 2015, was $53.5 million and $32.4 million, respectively, and relates to certain real properties that were contributed to the Pension Plan in 2016 and 2011. See Note 5 for additional discussion of this transaction.

Potential asset sales

We are currently discussing sale and leaseback terms under nonbinding letters of intent with potential buyers for our Sacramento, CA and Columbia, SC land and buildings. We also continue to consider indications of interest for a sale-leaseback of our Kansas City, MO property. There are no assurances that we will proceed with the sale-leaseback in Kansas City if we do not receive what we consider to be a fair price in the near term. 

Results of Operations

The following table reflects our financial results on a consolidated basis for the quarter and nine months ended September 25, 2016, and September 27, 2015:

	Quarters Ended				Nine Months Ended
	September 25,		September 27,		September 25,		September 27,
	2016		2015		2016		2015
Net loss	$	(9,804)	$	(1,149)	$	(37,279)	$	(308,992)
Net loss per diluted common share	$	(1.30)	$	(0.15)	$	(4.77)	$	(35.40)

The increase in the net loss in the quarter ended September 25, 2016, compared to the same period in 2015 is primarily due to lower advertising revenues partially offset by a decrease in accelerated depreciation. The decrease in the net loss in the nine months ended September 25, 2016, compared to the same period in 2015 was largely due to the impairment charges of $300.4 million recorded in the quarter ended June 28, 2015 (see Note 2). In addition, in the nine months ended September 25, 2016, results were impacted by lower revenues, which were partially offset by a decrease in operating expense due to efforts made to reduce future overhead, as described more fully below.

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Revenues

The following table summarizes our revenues by category:

	Quarters Ended							Nine Months Ended
	September 25,		September 27,		$		%	September 25,		September 27,			$	%
(in thousands)	2016		2015		Change		Change	2016		2015			Change	Change
Advertising:
Retail	$	64,613	$	71,511	$	(6,898)	(9.6)	$	199,911	$	225,585	$	(25,674)	(11.4)
National		10,277		11,186		(909)	(8.1)		30,659		31,838		(1,179)	(3.7)
Classified:
Automotive		7,955		9,804		(1,849)	(18.9)		24,581		28,319		(3,738)	(13.2)
Real estate		5,815		6,536		(721)	(11.0)		18,559		20,554		(1,995)	(9.7)
Employment		5,694		7,753		(2,059)	(26.6)		18,383		23,796		(5,413)	(22.7)
Other		14,380		14,478		(98)	(0.7)		43,884		44,768		(884)	(2.0)
Total classified		33,844		38,571		(4,727)	(12.3)		105,407		117,437		(12,030)	(10.2)
Direct marketing and other		24,478		28,592		(4,114)	(14.4)		74,391		84,767		(10,376)	(12.2)
Total advertising		133,212		149,860		(16,648)	(11.1)		410,368		459,627		(49,259)	(10.7)
Audience		91,022		89,310		1,712	1.9		272,163		273,361		(1,198)	(0.4)
Other		10,467		12,041		(1,574)	(13.1)		32,383		37,761		(5,378)	(14.2)
Total revenues	$	234,701	$	251,211	$	(16,510)	(6.6)	$	714,914	$	770,749	$	(55,835)	(7.2)

During the quarter and nine months ended September 25, 2016, total revenues decreased 6.6% and 7.2%, respectively, compared to the same periods in 2015 primarily due to the continued decline in demand for print advertising. Consistent with the end of 2015, the largest impact on print advertising came from large retail advertisers who began reducing preprinted insert advertising and in-newspaper ROP advertising in 2015, which continued into 2016. Another factor contributing to the decline in print advertising revenues is the desire of advertisers to reach online customers, and the secular shift in advertising demand from print to digital products.

Advertising Revenues

Total advertising revenues decreased 11.1% and 10.7% during the quarter and nine months ended September 25, 2016, respectively, compared to the same periods in 2015. While we experienced declines in all of our advertising revenue categories, the decrease in total advertising revenues was primarily related to declines in print retail and print and digital classified advertising revenues. These decreases in advertising revenues were partially offset by increases in several digital revenue categories, as discussed below.

The following table reflects the category of advertising revenue as a percentage of total advertising revenue for the periods presented:

	Quarters Ended				Nine Months Ended
	September 25,		September 27,		September 25,		September 27,
	2016		2015		2016		2015
Advertising:
Retail	48.5	%	47.7	%	48.7	%	49.1	%
National	7.7	%	7.5	%	7.5	%	6.9	%
Classified	25.4	%	25.7	%	25.7	%	25.6	%
Direct marketing and other	18.4	%	19.1	%	18.1	%	18.4	%
Total advertising	100.0	%	100.0	%	100.0	%	100.0	%

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Retail:

During the quarter and nine months ended September 25, 2016, retail advertising revenues decreased 9.6% and 11.4%, respectively, compared to the same periods in 2015. In the third quarter, the decrease in retail advertising revenues was primarily due to decreases of 15.4% in print ROP advertising revenues and 19.7% in preprint advertising revenues, compared to the same period in 2015. These decreases were partially offset by increases in digital retail advertising of 12.1% in the third quarter, compared to the same period in 2015. In the first nine months of 2016, the decrease in retail advertising revenues was primarily due to decreases of 17.7% in print ROP advertising revenues and 18.5% in preprint advertising revenues, compared to the same period in 2015. These decreases were partially offset by increases in digital retail advertising of 7.6% in the first nine months of 2016, compared to the same period in 2015. The overall decreases in retail advertising revenues, in the third quarter and first nine months of 2016, were widespread among the ROP and preprint categories.

National:

National advertising revenues decreased 8.1% and 3.7% during the quarter and nine months ended September 25, 2016, respectively, compared to the same periods in 2015. While we experienced a 28.2% and 23.7% decrease in print national advertising during the third quarter and nine months of 2016, respectively, compared to the same periods in 2015, we had an increase of 14.6% and 23.2% in digital national advertising during the same periods. Overall, the increase in digital national advertising revenues during the third quarter and first nine months of 2016 was largely led by programmatic digital advertising, including mobile, political and video revenues.

Classified:

During the quarter and nine months ended September 25, 2016, classified advertising revenues decreased 12.3% and 10.2%, respectively, compared to the same periods in 2015. During the third quarter of 2016, compared to the same period in 2015, we experienced decreases in print classified advertising of 16.2% and decreases in digital classified advertising of 6.8%. During the first nine months of 2016, compared to the same period in 2015, we experienced decreases in print classified advertising of 14.2% and decreases in digital classified advertising of 4.6%. See below for more detailed discussion of the primary changes in classified advertising revenues.

The following is a discussion of the major classified advertising categories for the quarter and nine months ended September 25, 2016, compared to the same periods in 2015:

· Automotive advertising revenues decreased 18.9% and 13.2% in the third quarter and first nine months of 2016, respectively. Print automotive advertising revenues declined 39.5% and 35.4% in those same periods, respectively, primarily due to advertisers continued to shift advertising buys from print to digital products. The digital automotive advertising revenues decreased 5.7% and increased 2.7% in those same periods, respectively, primarily due to the decline in bundled print and digital sales.

· Real estate advertising revenues decreased 11.0% and 9.7% in the third quarter and first nine months of 2016, respectively. Print real estate advertising revenues declined 19.5% and 16.7% in those same periods, respectively, while digital real estate advertising increased 1.3% and 1.1% in those same periods, respectively. Print real estate revenues have decreased as the real estate advertising market shifts from print media to digital media.

· Employment advertising revenues decreased 26.6% and 22.7% in the third quarter and first nine months of 2016, respectively. The employment market continues to shift from traditional print media to digital media. However, there is a wide array of digital media options for employment advertising, including large online-only job market companies, such as CareerBuilder.com, of which we own 15% and account for on an equity method (see Note 3). As a result, we have experienced declines in both our print and digital employment advertising. Print employment advertising revenues declined 33.4% and 24.8% and digital employment advertising revenues declined 20.6% and 21.0% in the third quarter and first nine months of 2016, respectively.

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· Other classified advertising revenues, which is our largest classified category and includes legal, remembrance and celebration notices and miscellaneous advertising, decreased 0.7% and 2.0% in the third quarter and first nine months of 2016, respectively. Other classified advertising revenues appearing in print declined 1.4% and 2.4% in those same periods, respectively. Other classified advertising revenues appearing in digital increased 1.6% and declined 0.5% in those same periods, respectively.

Digital:

Digital advertising revenues, which are included in each of the advertising categories discussed above, constituted 32.4% and 30.8% of total advertising revenues in the quarter and nine months ended September 25, 2016, respectively, compared to 27.4% and 26.4%, respectively, for the same periods in 2015. Total digital advertising includes digital advertising both bundled with print and digital-only advertising. Digital-only advertising is defined as digital advertising sold on a stand-alone basis or as the primary advertising buy with print sold as an “up-sell.” In the third quarter of 2016, total digital advertising revenues increased 4.9% to $43.1 million compared to the same period in 2015. In the first nine months of 2016, total digital advertising revenues increased 4.5% to $126.5 million compared to the same period in 2015. Digital-only advertising revenues increased 15.2% to $30.8 million in the third quarter of 2016, compared to the same period in 2015. Digital-only advertising revenues increased 16.3% to $87.3 million in the first nine months of 2016, compared to the same period in 2015. The advertising industry is still experiencing a secular shift in advertising demand from print to digital products as advertisers look for multiple advertising channels to reach their customers. While our product offerings and collaboration efforts in digital advertising has grown, we expect to continue to face intense competition in the digital advertising space. Digital advertising revenues bundled with print products declined 14.2% and 14.9% in the third quarter and first nine months of 2016, respectively, compared to the same periods in 2015 as a result of fewer print advertising sales.

Direct Marketing and Other:

Direct marketing and other advertising revenues decreased 14.4% and 12.2% during the quarter and nine months ended September 25, 2016, respectively, compared to the same periods in 2015. The decrease was largely due to the declines in preprint retail advertising by large retail customers as described above and, to a lesser extent to, the elimination of certain niche products during fiscal year 2016 that did not meet our profit expectations.

Audience Revenues

Audience revenues increased 1.9% and decreased 0.4% during the quarter and nine months ended September 25, 2016, compared to the same periods in 2015. Print audience revenues grew 2.8% in the third quarter of 2016 compared to the same period in 2015, primarily due to pricing adjustments that were implemented and were partially offset by lower print circulation volumes. We have a dynamic pricing model for our traditional subscriptions for which pricing is constantly being adjusted based upon the market’s ability to accept pricing adjustments. Print circulation volumes continue to decline as a result of fragmentation of audiences faced by all media as available media outlets proliferate and readership trends change. To help reduce potential attrition due to the increased pricing, we also increased our subscription related marketing and promotion efforts. Overall, digital audience revenues were flat and increased 1.9% during the third quarter and first nine months of 2016, respectively. Digital-only audience revenues increased 10.7% in both the third quarter and first nine months of 2016, respectively. The increase in digital-only audience revenues is as a result of a 3.3% increase in our digital-only subscribers to 80,300 as of the third quarter of 2016 compared to 77,700 as of the third quarter of 2015, and to digital rate increases in some markets.

Operating Expenses

Total operating expenses decreased 4.0% and 31.4% in the quarter and nine months ended September 25, 2016, compared to the same periods in 2015. The decrease during the third quarter was primarily due to decreases in depreciation expense, and the decrease in the first nine months was primarily due to the impairment charges of $300.4 million recorded in first nine months of 2015. The decreases in these periods were also due in part to our continued effort to reduce costs compared to the same periods in 2015. Our total operating expenses reflect our continued effort to reduce costs through streamlining processes to gain efficiencies as well as staff reductions.

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The following table summarizes operating expenses:  

	Quarters Ended							Nine Months Ended
	September 25,		September 27,		$		%	September 25,		September 27,		$		%
(in thousands)	2016		2015		Change		Change	2016		2015		Change		Change
Compensation expenses	$	95,045	$	95,015	$	30	0.0	$	296,056	$	302,778	$	(6,722)		(2.2)
Newsprint, supplements and printing expenses		19,320		22,583		(3,263)	(14.4)		57,917		71,882		(13,965)		(19.4)
Depreciation and amortization expenses		20,559		27,295		(6,736)	(24.7)		69,551		75,892		(6,341)		(8.4)
Other operating expenses		97,912		97,929		(17)	(0.0)		298,265		301,503		(3,238)		(1.1)
Goodwill impairment and other asset write-downs		330		—		330	nm		330		300,429		(300,099)		nm
	$	233,166	$	242,822	$	(9,656)	(4.0)	$	722,119	$	1,052,484	$	(330,365)		(31.4)

_____________________

nm – not meaningful

Compensation expenses, which include both payroll and fringe benefit costs, were flat and decreased 2.2% in the quarter and nine months ended September 25, 2016, respectively, compared to the same periods in 2015. Payroll expenses declined 1.1% and 3.8% during the third quarter and first nine months of 2016, respectively, compared to the same periods in 2015, reflecting an 8.9% and 8.6% decline, respectively, in average full-time equivalent employees. Fringe benefits costs increased 5.7% and 4.9% in the third quarter and first nine months of 2016 compared to the same periods in 2015. The increase was primarily due to increases in retirement costs related to our qualified defined benefit pension plan (“Pension Plan”) and a charge incurred when we outsourced the printing production at one of our media companies and exited the multiemployer pension plans that covered the impacted employees.

Newsprint, supplements and printing expenses decreased 14.4% and 19.4% in the quarter and nine months ended September 25, 2016, respectively, compared to the same periods in 2015. Newsprint expense declined 11.4% and 19.3% during the same periods, respectively, compared to the same periods in 2015. The newsprint declines reflect a newsprint usage decrease of 15.2% and 14.2% during the third quarter and first nine months of 2016, respectively. Newsprint prices increased 3.3% during the third quarter of 2016 and decreased 6.7% during the first nine months of 2016 compared the same periods in 2015. During these same periods, the decrease in newsprint expense was also attributable to a decrease in printing costs of $1.7 million and $5.1 million, respectively, related to lower outsourced printing costs and lower direct marketing printing costs, as discussed above.

Depreciation and amortization expenses decreased 24.7% and 8.4% in the quarter and nine months ended September 25, 2016, respectively, compared to the same periods in 2015. Depreciation expense decreased $6.7 million in the third quarter of 2016 compared to the same period in 2015, as a result of assets becoming fully depreciated in previous periods and due to a decrease of $4.6 million in accelerated depreciation. Barring any additional outsourcing of our production facilities or significant capital expenditures, we expect depreciation expense to decrease another approximately $2.0 million in the fourth quarter of 2016 compared to the third quarter of 2016. Depreciation expense decreased $6.0 million in the first nine months of 2016 compared to the same period in 2015, due to assets becoming fully depreciated in previous periods. During the third quarter and first nine months of 2016, we incurred accelerated depreciation of $0.3 million and $6.9 million, respectively, compared to $4.9 million and $6.7 million in the third quarter and first nine months of 2015. Amortization expense decreased $0.1 million and $0.3 million in the third quarter and first nine months of 2016, compared to the same periods in 2015.

Other operating expenses decreased nominally and 1.1% in the quarter and nine months ended September 25, 2016, respectively, compared to the same periods in 2015. The third quarter and first nine months of 2016 include $4.0 million and $11.5 million, respectively, in relocation and other costs incurred in the short-term, which allows for significant future cost savings. These costs during the third quarter of 2016 were primarily offset by a decrease in circulation delivery costs of $3.2 million. These costs in the first nine months of 2016 were primarily offset by decreases in professional fees of $3.3 million and circulation delivery costs of $9.8 million.

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Goodwill impairment and other asset write-downs includes a write down of $0.3 million related to classifying certain assets as assets held for sale during the quarter and nine months ended September 25, 2016, compared to impairment charges related to goodwill charges of $290.9 million and intangible newspaper masthead impairment charges of $9.5 million, which were both recorded during the quarter ended June 28, 2015. See Note 2 for additional discussion.

Non-Operating Expenses

Interest Expense:

Total interest expense decreased 1.3% and 5.0% in the quarter and nine months ended September 25, 2016, respectively, compared to the same periods in 2015, primarily reflecting lower overall debt balances due to the repurchases made during 2015 and during the first quarter of 2016.

Equity Income:

Total income from unconsolidated investments decreased 29.6% and 28.9% during the quarter and nine months ended September 25, 2016, respectively, compared to the same periods in 2015, due to lower income from our equity method investments as well as the write-down of our HomeFinder LLC investment of $0.9 million during the quarter ended March 27, 2016.

Gains related to equity investments:

We recognized $8.1 million in gains related to a previously sold equity investment during the nine months ended September 27, 2015, respectively, as a result of a final cash contribution of $7.5 million that was received in April 2015 and a final working capital adjustment of $0.6 million that was received in the first quarter of 2015.

Income Taxes:

In the quarter and nine months ended September 25, 2016, we recorded an income tax benefit of $5.9 million and $20.7 million, respectively. The income tax benefit differs from the expected federal tax amounts primarily due to the inclusion of state income taxes and other certain discrete tax items. 

Liquidity and Capital Resources

Sources and Uses of Liquidity and Capital Resources:

Our cash and cash equivalents were $23.2 million as of September 25, 2016, compared to $19.6 million as of September 27, 2015, and $9.3 million as of December 27, 2015.

We expect that most of our cash and cash equivalents, and our cash generated from operations, for the foreseeable future will be used to repay debt, pay income taxes, fund our capital expenditures, invest in new revenue initiatives, digital investments and enterprise-wide operating systems, make required contributions to the Pension Plan, repurchase stock, and other corporate uses as determined by management and our Board of Directors. As of September 25, 2016, we had approximately $906.5 million in total aggregate principal amounts of debt outstanding, consisting of $34.7 million of our 5.750% notes due in 2017 (also see Note 4), $506.4 million of our 9.00% Notes due 2022 and $365.4 million of our notes maturing in 2027 and 2029. We expect to continue to opportunistically repurchase our debt from time to time if market conditions are favorable and we also expect that we will refinance a significant portion of this debt prior to the scheduled maturity of such debt. However, we may not be able to do so on terms favorable to us or at all. We may also be required to use cash on hand or cash from operations to meet these obligations. We believe that our cash from operations is sufficient to satisfy our liquidity needs over the next 12 months, while maintaining adequate cash and cash equivalents.

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The following table summarizes our cash flows:

	Nine Months Ended
	September 25,		September 27,
(in thousands)	2016		2015
Cash flows provided by (used in)
Operating activities	$	61,253	$	(128,883)
Investing activities		(10,391)		(3,699)
Financing activities		(37,015)		(68,669)
Increase (decrease) in cash and cash equivalents	$	13,847	$	(201,251)

Operating Activities:

We generated $61.3 million of cash from operating activities in the nine months ended September 25, 2016, compared to using $128.9 million of cash in the nine months ended September 27, 2015. The change is primarily due to the timing of income tax payments, net of refunds in 2016 compared to income tax payments in 2015, as discussed below. In the first nine months of 2016, we had net income tax payments net of refunds of $0.8 million compared to income tax payments of $197.7 million in the first nine months of 2015. This difference was primarily related to the 2015 tax payments on the gain on the sale of a previously owned equity investment that was recorded in the fourth quarter of 2014, offset by the net tax losses on bond repurchases in the fourth quarter of 2014.

Pension Plan Matters

In February 2016, we contributed certain of our real property appraised at $47.1 million to our Pension Plan. After applying credits, which resulted from contributing more than the Pension Plan’s minimum required contribution amounts in prior years, we have no required pension contribution under the Employee Retirement Income Security Act in fiscal year 2016. The contribution of real property which exceeds our required pension contribution for 2016 is expected it to reduce our future pension contributions and expense, all other things being equal. We made no cash contributions to the Pension Plan during 2015 or the nine months ended September 25, 2016. After applying credits, we also do not expect to have a required pension contribution under the Employee Retirement Income Security Act in fiscal year 2017.

Investing Activities:

We used $10.4 million of cash from investing activities in the nine months ended September 25, 2016, which was primarily due to the purchase of property, plant and equipment for $10.5 million. We expect total capital expenditures to be in the range of $16.0 million to $19.0 million in fiscal year 2016. We used $3.7 million of cash from investing activities in the nine months ended September 27, 2015, which was primarily due to the receipt of a final distribution for $7.5 million from a former equity investment that was offset by the purchases of property, plant and equipment for $10.8 million.

Financing Activities:

We used $37.0 million of cash from financing activities in the nine months ended September 25, 2016, primarily related to the repurchase of debt and purchase of treasury shares. During the nine months ended September 25, 2016, we repurchased $30.8 million of our 5.75% Notes and 9.00% Notes for $28.8 million in cash in privately negotiated repurchases. See Note 4, Long-Term Debt, for further discussion. In addition, $8.1 million was used to repurchase shares during the first nine months of 2016, primarily related to the repurchases of 656 thousand shares of our Class A Common Stock (see Recent Developments previously) for $7.8 million in cash. We used $68.7 million of cash from financing activities in the first nine months of 2015, primarily related to the repurchase of $66.4 million of 5.75% Notes and 9.00% Notes for $64.3 million in cash. In addition, $2.8 million was used to repurchase shares during the first nine months of 2015, primarily related to the repurchase of 192 thousand shares of our Class A Common Stock for $2.2 million in cash.

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Contractual Obligations:

As of September 25, 2016, there have been no significant changes to our “Contractual Obligations” table in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2015 Annual Report on Form 10-K.

Off-Balance-Sheet Arrangements

As of September 25, 2016, we did not have any off-balance-sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.

Critical Accounting Policies

Critical accounting policies are those accounting policies that we believe are important to the portrayal of our financial condition and results and require our most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Our 2015 Annual Report on Form 10-K includes a description of certain critical accounting policies, including those with respect to goodwill and intangible impairment, pension and post-retirement benefits, income taxes, and insurance. There have been no material changes to our critical accounting policies described in our 2015 Annual Report on Form 10-K.

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ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk’, included in our 2015 Annual Report on Form 10-K contains certain disclosures about our exposure to market risk for changes in discount rates on our qualified defined benefit pension plan obligations. There have been no material changes to the information provided which would require additional disclosures as of the date of this filing.

ITEM 4.  CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

Our management evaluated, with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a - 15(e) or 15d - 15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this Quarterly Report on Form 10-Q.  Based on this evaluation, our management, including the CEO and CFO, concluded that our disclosure controls and procedures were effective at that time to ensure that information we are required to disclose in reports that we file or submit under the Securities Exchange Act of 1934 is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure and that such information is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting that occurred during the three months ended September 25, 2016, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

See Note 6, Commitments and Contingencies to the condensed consolidated financial statements included as part of this Quarterly Report on Form 10-Q.

ITEM 1A. RISK FACTORS.

There have been no material changes in our risk factors from those disclosed in Part I, Item 1A to our Annual Report on Form 10-K for the fiscal year ended December 27, 2015.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

					(c) Total Number of		(d) Approximate Dollar
	(a) Total Number				Shares Purchased as Part		Value of Shares that May
	of Shares		(b) Average Price		of Publicly Announced		Yet Be Purchased Under
Period	Purchased		Paid per Share		Program		the Program
06/27/2016-07/31/2016		75,966	$	15.56		1,257,535	$	4,649,162
08/01/2016-08/28/2016		13,033	$	19.16		1,270,568	$	4,399,475
08/29/2016-09/25/2016		—	$	—		1,270,568	$	4,399,475
Total Third Quarter 2016		88,999	$	16.08		1,270,568	$	4,399,475

In 2015, our Board of Directors authorized a share repurchase program for the repurchase of up to $15.0 million of our Class A Common Stock through December 31, 2016. This program was further amended in May 2016 to authorize a total of up to $20 million to repurchase shares. The shares will be repurchased from time to time depending on prevailing market prices, availability, and market conditions, among other factors. The number of shares repurchased and the average price per share has been retroactively adjusted to reflect the one-for-ten (1:10) reverse stock split completed on June 7, 2016.

ITEM 6. EXHIBITS

Exhibits, filed as part of this Quarterly Report on Form 10-Q, are listed in the Index of Exhibits.

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SIGNATURES

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 thereunto duly authorized.

	The McClatchy Company
	(Registrant)
November 3, 2016	/s/Patrick J. Talamantes
Date	Patrick J. Talamantes Chief Executive Officer
November 3, 2016	/s/R. Elaine Lintecum
Date	R. Elaine Lintecum Chief Financial Officer

30

INDEX OF EXHIBITS

Exhibit			Incorporated by reference herein
Number		Description	Form	Exhibit	File Date
31.1		Certification of the Chief Executive Officer of The McClatchy Company pursuant to Rule 13a-14(a) under the Exchange Act
31.2		Certification of the Chief Financial Officer of The McClatchy Company pursuant to Rule 13a-14(a) under the Exchange Act
32.1	**	Certification of the Chief Executive Officer of The McClatchy Company pursuant to 18 U.S.C. Section 1350
32.2	**	Certification of the Chief Financial Officer of The McClatchy Company pursuant to 18 U.S.C. Section 1350
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema
101.CAL		XBRL Taxonomy Extension Calculation Linkbase
101.DEF		XBRL Extension Definition Linkbase
101.LAB		XBRL Taxonomy Extension Label Linkbase
101.PRE		XBRL Taxonomy Extension Presentation Linkbase

** Furnished, not filed

31

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Patrick J. Talamantes, certify that:

1.I have reviewed this quarterly report on Form 10-Q of The McClatchy Company;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 3, 2016	/s/ Patrick J. Talamantes
	Patrick J. Talamantes
	Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, R. Elaine Lintecum, certify that:

1.I have reviewed this quarterly report on Form 10-Q of The McClatchy Company;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 3, 2016	/s/ R. Elaine Lintecum
	R. Elaine Lintecum
	Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of The McClatchy Company (the “Company”) on Form 10-Q for the fiscal period ended September 25, 2016 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Patrick J. Talamantes, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: November 3, 2016	/s/ Patrick J. Talamantes
	Patrick J. Talamantes
	Chief Executive Officer

A signed original of this written statement required by Section 906 has been provided to The McClatchy Company and will be retained by The McClatchy Company and furnished to the Securities and Exchange Commission or its staff upon request.

The foregoing certificate is being furnished to the Securities and Exchange Commission as an exhibit to the Form 10-Q and shall not be considered filed as part of the Form 10-Q.

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of The McClatchy Company (the “Company”) on Form 10-Q for the fiscal period ended September 25, 2016 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, R. Elaine Lintecum, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: November 3, 2016	/s/ R. Elaine Lintecum
	R. Elaine Lintecum
	Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to The McClatchy Company and will be retained by The McClatchy Company and furnished to the Securities and Exchange Commission or its staff upon request.

The foregoing certificate is being furnished to the Securities and Exchange Commission as an exhibit to the Form 10-Q and shall not be considered filed as part of the Form 10-Q.

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 25, 2016	Oct. 28, 2016
Entity Registrant Name	MCCLATCHY CO
Entity Central Index Key	0001056087
Document Type	10-Q
Document Period End Date	Sep. 25, 2016
Amendment Flag	false
Current Fiscal Year End Date	--12-25
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q3
Common Class A
Entity Common Stock, Shares Outstanding		5,131,894
Common Class B
Entity Common Stock, Shares Outstanding		2,443,191

XML

CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 25, 2016	Sep. 27, 2015	Sep. 25, 2016	Sep. 27, 2015
REVENUES - NET:
Advertising	$ 133,212	$ 149,860	$ 410,368	$ 459,627
Audience	91,022	89,310	272,163	273,361
Other	10,467	12,041	32,383	37,761
Revenues, total	234,701	251,211	714,914	770,749
OPERATING EXPENSES:
Compensation	95,045	95,015	296,056	302,778
Newsprint, supplements and printing expenses	19,320	22,583	57,917	71,882
Depreciation and amortization	20,559	27,295	69,551	75,892
Other operating expenses	97,912	97,929	298,265	301,503
Goodwill impairment and other asset write-downs (see Notes 1 and 2)	330		330	300,429
Operating expenses, total	233,166	242,822	722,119	1,052,484
OPERATING INCOME (LOSS)	1,535	8,389	(7,205)	(281,735)
NON-OPERATING (EXPENSE) INCOME:
Interest expense	(20,953)	(21,230)	(62,423)	(65,740)
Interest income	110	64	318	197
Equity income in unconsolidated companies, net	3,632	5,158	9,745	13,701
Gains related to equity investments				8,093
Gain (loss) on extinguishment of debt, net		1,632	1,535	749
Other - net	(13)	(44)	20	(292)
Non-operating (expense) income, total	(17,224)	(14,420)	(50,805)	(43,292)
Loss before income taxes	(15,689)	(6,031)	(58,010)	(325,027)
Income tax benefit	(5,885)	(4,882)	(20,731)	(16,035)
NET LOSS	$ (9,804)	$ (1,149)	$ (37,279)	$ (308,992)
Basic:
Net loss per share - basic (in dollars per share)	$ (1.30)	$ (0.15)	$ (4.77)	$ (35.40)
Diluted:
Net loss per share - diluted (in dollars per share)	$ (1.30)	$ (0.15)	$ (4.77)	$ (35.40)
Weighted average number of common shares:
Basic (in shares)	7,614	8,717	7,809	8,728
Diluted (in shares)	7,614	8,717	7,809	8,728

XML

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 25, 2016	Sep. 27, 2015	Sep. 25, 2016	Sep. 27, 2015
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
NET LOSS	$ (9,804)	$ (1,149)	$ (37,279)	$ (308,992)
Pension and post retirement plans:
Change in pension and post-retirement benefit plans, net of taxes of $(1,535), $(1,921), $(4,604) and $(5,763)	2,303	2,881	6,907	8,645
Investment in unconsolidated companies:
Other comprehensive income (loss), net of taxes of $547, $128, $625 and $382	(819)	(192)	(937)	(572)
Other comprehensive income (loss)	1,484	2,689	5,970	8,073
Comprehensive income (loss)	$ (8,320)	$ 1,540	$ (31,309)	$ (300,919)

XML

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 25, 2016	Sep. 27, 2015	Sep. 25, 2016	Sep. 27, 2015
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Unamortized net loss and other components of benefit plans, taxes	$ (1,535)	$ (1,921)	$ (4,604)	$ (5,763)
Other comprehensive loss, taxes	$ 547	$ 128	$ 625	$ 382

XML

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Sep. 25, 2016	Dec. 27, 2015
Current assets:
Cash and cash equivalents	$ 23,179	$ 9,332
Trade receivables (net of allowances of $3,544 in 2016 and $4,451 in 2015)	96,694	138,153
Other receivables	12,338	16,367
Newsprint, ink and other inventories	14,474	16,659
Assets held for sale	13,184	5,357
Other current assets	15,375	19,194
Total current assets	175,244	205,062
Property, plant and equipment, net	305,676	364,219
Intangible assets:
Identifiable intangibles - net	312,659	348,651
Goodwill	705,174	705,174
Total intangible assets	1,017,833	1,053,825
Investments and other assets:
Investments in unconsolidated companies	244,908	233,538
Deferred income taxes	30,676	1,312
Other assets	65,263	65,078
Total investments and other assets	340,847	299,928
TOTAL ASSETS	1,839,600	1,923,034
Current liabilities:
Current portion of long-term debt	34,327
Accounts payable	32,701	41,751
Accrued pension liabilities	8,450	8,450
Accrued compensation	26,752	29,410
Income taxes payable	3,311	687
Unearned revenue	63,728	60,811
Accrued interest	16,734	9,423
Other accrued liabilities	23,932	15,195
Total current liabilities	209,935	165,727
Non-current liabilities :
Long-term debt	843,415	905,425
Pension and postretirement obligations	526,914	581,852
Financing obligations	53,502	32,398
Other long-term obligations	50,350	44,869
Total non-current liabilities	1,474,181	1,564,544
Commitments and contingencies
Stockholders' equity:
Additional paid-in capital	2,222,335	2,220,230
Accumulated deficit	(1,640,825)	(1,603,546)
Treasury stock at cost, 848,230 shares in 2016 and 165,217 shares in 2015	(10,271)	(2,196)
Accumulated other comprehensive loss	(415,838)	(421,808)
Total stockholders' equity	155,484	192,763
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	1,839,600	1,923,034
Common Class A
Stockholders' equity:
Common stock	59	59
Common Class B
Stockholders' equity:
Common stock	$ 24	$ 24

XML

CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	Sep. 25, 2016	Dec. 27, 2015
Trade receivables, allowance	$ 3,544	$ 4,451
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Treasury stock, shares	848,230	165,217
Common Class A
Common stock, shares authorized	200,000,000	200,000,000
Common stock, shares issued	5,948,624	5,878,253
Common Class B
Common stock, shares authorized	60,000,000	60,000,000
Common stock, shares issued	2,443,191	2,443,191

XML

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	9 Months Ended
	Sep. 25, 2016	Sep. 27, 2015
CASH FLOWS FROM OPERATING ACTIVITIES:
NET LOSS	$ (37,279)	$ (308,992)
Reconciliation to net cash provided by (used in) operating activities:
Depreciation and amortization	69,551	75,892
Gain on disposal of equipment	(684)	(83)
Retirement benefit expense	11,082	7,478
Stock-based compensation expense	2,105	2,750
Equity income in unconsolidated companies	(9,745)	(13,701)
Gains related to equity investments		(8,093)
Distributions of income from equity investments		7,500
Gain on extinguishment of debt, net	(1,535)	(749)
Goodwill impairment and other asset write-downs	330	300,429
Other	(4,723)	(4,389)
Changes in certain assets and liabilities:
Trade receivables	41,459	31,672
Inventories	2,185	646
Other assets	2,671	(1,693)
Accounts payable	(9,050)	(10,897)
Accrued compensation	(2,658)	(1,996)
Income taxes	(25,728)	(211,623)
Accrued interest	7,311	7,155
Other liabilities	15,961	(189)
Net cash provided by (used in) operating activities	61,253	(128,883)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment	(10,541)	(10,766)
Proceeds from sale of property, plant and equipment and other	3,067	224
Distributions from equity investments		7,460
Contributions to equity investments	(2,917)	(1,250)
Proceeds from sale of equity investments		633
Net cash used in investing activities	(10,391)	(3,699)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repurchase of public notes	(28,804)	(64,281)
Purchase of treasury shares	(8,075)	(2,761)
Other	(136)	(1,627)
Net cash used in financing activities	(37,015)	(68,669)
Increase (decrease) in cash and cash equivalents	13,847	(201,251)
Cash and cash equivalents at beginning of period	9,332	220,861
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$ 23,179	$ 19,610

XML

SIGNIFICANT ACCOUNTING POLICIES

9 Months Ended

Sep. 25, 2016

SIGNIFICANT ACCOUNTING POLICIES

SIGNIFICANT ACCOUNTING POLICIES

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

1.  SIGNIFICANT ACCOUNTING POLICIES

Business and Basis of Accounting

The McClatchy Company (the “Company,” “we,” “us” or “our”) is a 21st century news and information publisher of well-respected publications such as the Miami Herald, The Kansas City Star, The Sacramento Bee, The Charlotte Observer,  The (Raleigh) News and Observer, and the (Fort Worth) Star-Telegram. We operate 29 media companies in 28 U.S. markets in 14 states, providing each of our communities with high-quality news and advertising services in a wide array of digital and print formats. We are headquartered in Sacramento, California, and our Class A Common Stock is listed on the New York Stock Exchange under the symbol MNI.

We also own 15.0% of CareerBuilder LLC (“CareerBuilder”), which operates the nation’s largest online jobs website, CareerBuilder.com, as well as certain other digital investments. In September 2016, TEGNA Inc., a majority holder of CareerBuilder, announced that it and other owners, including us, would evaluate strategic alternatives for CareerBuilder. No specific timeline was announced for this process.

Preparation of the financial statements in conformity with accounting principles generally accepted in the United States 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 27, 2015 (“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.

Reverse Stock Split

Following our May 2016 annual meeting of shareholders, our Board of Directors approved a one-for-ten  (1:10) reverse stock split of our issued and outstanding Class A and Class B common stock, which became effective June 7, 2016. As a result, every ten shares of our common stock outstanding were combined into one share of our common stock. The ratio was the same for the Class A common stock and the Class B common stock and each shareholder held the same percentage of Class A and Class B common stock outstanding immediately following the reverse stock split as the shareholder held immediately prior to the reverse stock split. No fractional shares were issued in connection with the reverse stock split. The par value and authorized number of shares of the Class A and Class B common stock were not adjusted as a result of the reverse stock split. All issued and outstanding Class A and Class B common stock and per share amounts contained within our condensed consolidated financial statements and footnotes have been retroactively adjusted to reflect this reverse stock split for all periods presented.

All restricted stock unit awards and stock appreciation right awards outstanding immediately prior to the reverse stock split were adjusted by dividing the number of shares of common stock into which the restricted stock units and stock appreciation rights are exercisable by ten and multiplying the exercise price by ten, all in accordance with the terms of the agreements governing such awards. All restricted stock units and stock appreciation rights activity contained within our condensed consolidated financial statement footnotes have been retroactively adjusted to reflect this reverse stock split for all periods presented.

Fair Value of Financial Instruments

We account for certain assets and liabilities at fair value.  The hierarchy below lists three levels of fair value based on the extent to which inputs used in measuring fair value are observable in the market. We categorize each of our fair value measurements in one of these three levels based on the lowest level input that is significant to the fair value measurement in its entirety.  These levels are:

Level 1 – Unadjusted quoted prices available in active markets for identical investments as of the reporting date.

Level 2 – Observable inputs to the valuation methodology are other than Level 1 inputs and are either directly or indirectly observable as of the reporting date and fair value can be determined through the use of models or other valuation methodologies.

Level 3 – Inputs to the valuation methodology are unobservable inputs in situations where there is little or no market activity for the asset or liability, and the reporting entity makes estimates and assumptions related to the pricing of the asset or liability including assumptions regarding risk.

Our policy is to recognize significant transfers between levels at the actual date of the event or circumstance that caused the transfer. 

The following methods and assumptions were used to estimate the fair value of each class of financial instruments:

Cash and cash equivalents, accounts receivable and accounts payable.  As of September 25, 2016, and December 27, 2015,  the carrying amount of these items approximates fair value because of the short maturity of these financial instruments.

Long-term debt.  The fair value of our long-term debt is determined using quoted market prices and other inputs that were derived from available market information, including the current market activity of our publicly-traded notes and bank debt, trends in investor demand for debt and market values of comparable publicly-traded debt. These are considered to be Level 2 inputs under the fair value measurements and disclosure guidance, and may not be representative of actual value. At September 25, 2016 and December 27, 2015, the estimated fair value of long-term debt was $821.4 million and $729.8 million, respectively. At September 25, 2016, and December 27, 2015, the carrying value of our long-term debt, including the current portion of long-term debt, was $877.7 million and $905.4 million, respectively.

Certain assets are measured at fair value on a nonrecurring basis; that is, they are subject to fair value adjustments only in certain circumstances (for example, when there is evidence of impairment). Our non-financial assets that may be measured at fair value on a nonrecurring basis are assets held for sale, goodwill, intangible assets not subject to amortization and equity method investments. All of these are measured using Level 3 inputs. We utilize valuation techniques that seek to maximize the use of observable inputs and minimize the use of unobservable inputs. The significant unobservable inputs include our expected cash flows and discount rates that we estimate market participants would seek for bearing the risk associated with such assets.

Property, Plant and Equipment

During the quarter and nine months ended September 25, 2016, we incurred $0.3 million and $6.9 million in accelerated depreciation related to production equipment no longer needed as a result of outsourcing our printing process at certain of our media companies and replacing an old printing press at one of our media companies. During the quarter and nine months ended September 27, 2015, we incurred $4.9 million and $6.7 million in accelerated depreciation primarily related to production equipment associated with outsourcing our printing process at a few of our media companies.

Depreciation expense with respect to property, plant and equipment is summarized below:

	Quarters Ended				Nine Months Ended
	September 25,		September 27,		September 25,		September 27,
(in thousands)	2016		2015		2016		2015
Depreciation expense	$	8,561	$	15,224	$	33,559	$	39,606

Assets Held for Sale

Assets held for sale includes land and buildings at two of our media companies that we began to actively market for sale during the nine months ended September 25, 2016, and a parking structure at another media company that we began to actively market for sale during 2015. In connection with the classification to assets held for sale, the carrying value of the land and building of one of the media companies was reduced to their estimated fair value less selling costs, as determined based on the current market conditions and the selling price. As a result, a write-down of $0.3 million was recorded in the quarter and nine months ended September 25, 2016, and is included in goodwill impairment and other asset write-downs on the condensed consolidated statements of operations.

Intangible Assets and Goodwill

We test for impairment of goodwill annually, at year‑end, or whenever events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. The required two‑step approach uses accounting judgments and estimates of future operating results. Changes in estimates or the application of alternative assumptions could produce significantly different results. Impairment testing is done at a reporting unit level. We perform this testing on operating segments, which are also considered our reporting units. An impairment loss generally is recognized when the carrying amount of the reporting unit’s net assets exceeds the estimated fair value of the reporting unit. The fair value of our reporting units is determined using a combination of a discounted cash flow model and market based approaches. The estimates and judgments that most significantly affect the fair value calculation are assumptions related to revenue growth, newsprint prices, compensation levels, discount rate, and for the market based approach, private and public market trading multiples for newspaper assets. We consider current market capitalization, based upon the recent stock market prices, plus an estimated control premium in determining the reasonableness of the aggregate fair value of the reporting units. We had no impairment of goodwill during the quarter or nine months ended September 25, 2016. During the quarter ended June 28, 2015, we performed interim tests of impairment of goodwill due to the continuing challenging business conditions and the resulting weakness in our stock price. As a result, we recorded an impairment charge related to goodwill of $290.9 million in the nine months ended September 27, 2015, which was recorded in the goodwill impairment and other asset write-downs line item on our condensed consolidated statements of operations.

Newspaper mastheads (newspaper titles and website domain names) are not subject to amortization and are tested for impairment annually, at year‑end, or more frequently if events or changes in circumstances indicate that the asset might be impaired. The impairment test consists of a comparison of the fair value of each newspaper masthead with its carrying amount. We use a relief-from-royalty approach that utilizes the discounted cash flow model discussed above, to determine the fair value of each newspaper masthead. We had no impairment of newspaper mastheads during the quarter and nine months ended September 25, 2016.  During the quarter ended June 28, 2015, we performed interim tests of impairment of intangible newspaper mastheads due to the continuing challenging business conditions and the resulting weakness in our stock price. As a result, we recorded an intangible newspaper masthead impairment charge of $9.5 million in the nine months ended September 27, 2015, which was recorded in the goodwill impairment and other asset write-downs line item on our condensed consolidated statements of operations.

Long‑lived assets such as intangible assets (primarily advertiser and subscriber lists) are amortized and tested for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. The carrying amount of each asset group is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use of such asset group. We had no impairment of long‑lived assets subject to amortization during the quarter and nine months ended September 25, 2016, or September 27, 2015.

Segment Reporting

We operate 29 media companies, providing each of our communities with high-quality news and advertising services in a wide array of digital and print formats. We have two operating segments that we aggregate into a single reportable segment because each has similar economic characteristics, products, customers and distribution methods. Our operating segments are based on how our chief executive officer, who is also our Chief Operating Decision Maker (“CODM”), makes decisions about allocating resources and assessing performance. The CODM is provided discrete financial information for the two operating segments. Each operating segment consists of a group of media companies and both operating segments report to the same segment manager. One of our operating segments (“Western Segment”) consists of our media operations in California, the Northwest, and the Midwest, while the other operating segment (“Eastern Segment”) consists primarily of media operations in the Southeast and Florida.

Accumulated Other Comprehensive Loss

Our accumulated other comprehensive loss (“AOCL”) and reclassifications from AOCL, net of tax, consisted of the following: 

			Other
	Minimum		Comprehensive
	Pension and		Loss
	Post-		Related to
	Retirement		Equity
(in thousands)	Liability		Investments		Total
Balance at December 27, 2015	$	(411,956)	$	(9,852)	$	(421,808)
Other comprehensive income (loss) before reclassifications		—		(937)		(937)
Amounts reclassified from AOCL		6,907		—		6,907
Other comprehensive income (loss)		6,907		(937)		5,970
Balance at September 25, 2016	$	(405,049)	$	(10,789)	$	(415,838)

	Amount Reclassified from AOCL
	Quarters Ended				Nine Months Ended
(in thousands)	September 25,		September 27,		September 25,		September 27,		Affected Line in the Condensed
AOCL Component	2016		2015		2016		2015		Consolidated Statements of Operations
Minimum pension and post-retirement liability	$	3,838	$	4,802	$	11,511	$	14,408	Compensation
		(1,535)		(1,921)		(4,604)		(5,763)	Benefit for income taxes
	$	2,303	$	2,881	$	6,907	$	8,645	Net of tax

Income Taxes

We account for income taxes using the liability method. Under this method, deferred tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse.

We recognize accrued interest related to unrecognized tax benefits in interest expense. Accrued penalties are recognized as a component of income tax expense.

Earnings Per Share (EPS)

As discussed previously, all share amounts have been restated to reflect the reverse stock split that became effective on June 7, 2016, and applied retrospectively. Basic EPS excludes dilution from common stock equivalents and reflects income divided by the weighted average number of common shares outstanding for the period.  Diluted EPS is based upon the weighted average number of outstanding shares of common stock and dilutive common stock equivalents in the period.  Common stock equivalents arise from dilutive stock appreciation rights, restricted stock units, and restricted stock and are computed using the treasury stock method.  Anti-dilutive common stock equivalents are excluded from diluted EPS.  The weighted average anti-dilutive common stock equivalents that could potentially dilute basic EPS in the future, but were not included in the weighted average share calculation, consisted of the following:

	Quarters Ended		Nine Months Ended
	September 25,	September 27,	September 25,	September 27,
(shares in thousands)	2016	2015	2016	2015
Anti-dilutive common stock equivalents	305	524	284	544

Cash Flow Information

Cash paid for interest and income taxes and other non-cash activities consisted of the following:

	Nine Months Ended
	September 25,		September 27,
(in thousands)	2016		2015
Interest paid (net of amount capitalized)	$	47,349	$	53,241
Income taxes paid (net of refunds)		762		197,718
Other non-cash financing activities:
Increase of financing obligation for contribution of real property to pension plan	$	47,130
Reduction of pension obligation for contribution of real property to pension plan		(47,130)
Reduction of financing obligation for sale of Charlotte property by pension plan		(25,060)
Reduction of property, plant and equipment, net for sale of Charlotte property by pension plan		(26,171)

The income tax payments in the nine months ended September 27, 2015, were primarily related to the net taxes paid for a gain on the sale of a previous owned equity investment in the fourth quarter of 2014, offset by tax losses on bond repurchases in the fourth quarter of 2014. While the transactions occurred in the fourth quarter of 2014, the actual tax payments were made in the first quarter of 2015.

Other non-cash financing activities relate to the contribution of real property to the Pension Plan and to the sale of one of the properties by the Pension Plan. See Note 5 for further discussion.

Recently Issued Accounting Pronouncements Not Yet Adopted

In May 2014, the FASB issued Accounting Standards Update (“ASU”) ASU No. 2014-09, “Revenue from Contracts with Customers.” ASU 2014-09 outlines a new, single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance. This new revenue recognition model provides a five-step analysis in determining when and how revenue is recognized. The new model will require revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration a company expects to receive in exchange for those goods or services. In 2016, the FASB issued additional updates: ASU No. 2016-08, 2016-10, 2016-11 and 2016-12. These updates provide further guidance and clarification on specific items within the previously issued update. We are currently in the process of evaluating the impact of the adoption on our condensed consolidated financial statements. ASU 2014-09, as well as the additional FASB updates noted above, is effective for us for annual and interim periods beginning on or after December 15, 2017, and early adoption is permitted for interim or annual reporting periods beginning after December 15, 2016. We do not plan to early adopt this guidance. We are currently in the process of evaluating the impact of the adoption on our condensed consolidated financial statements.

In August 2014, the FASB issued ASU No. 2014-15, “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern.” ASU 2014-15 requires management to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnotes disclosures in certain circumstances. It is effective for us for annual and interim periods beginning on or after December 15, 2016, with early adoption permitted. We do not believe the adoption of this guidance will have an impact on our condensed consolidated financial statements.

In July 2015, the FASB issued ASU No. 2015-11, “Simplifying the Measurement of Inventory.” ASU 2015-11 simplifies the measurement of inventory by requiring certain inventory to be measured at the “lower of cost and net realizable value” and options that currently exist for “market value” will be eliminated. The ASU defines net realizable value as the “estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.” It is effective for us for interim and annual reporting periods beginning after December 15, 2016. The standard should be applied prospectively with early adoption permitted. We are currently in the process of evaluating the impact of the adoption on our condensed consolidated financial statements.

In January 2016, the FASB issued ASU No. 2016-01, “Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.” ASU 2016-01 addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. ASU 2016-01 is effective for us for interim and annual reporting periods beginning after December 15, 2017. We do not believe the adoption of this guidance will have an impact on our condensed consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, “Leases” (Accounting Standards Codification 842 (“ASC 842”)) and it replaces the existing guidance in ASC 840, “Leases.” ASC 842 requires lessees to recognize most leases on their balance sheets as lease liabilities with corresponding right-of-use assets. The new lease standard does not substantially change lessor accounting. It is effective for us for interim and annual reporting periods beginning after December 15, 2018, with early adoption permitted. We are currently in the process of evaluating the impact of the adoption on our condensed consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” ASU 2016-13 requires that financial assets measured at amortized cost be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis. The income statement reflects the measurement of credit losses for newly recognized financial assets, as well as the expected credit losses during the period. The measurement of expected credit losses is based upon historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. It is effective for us for interim and annual reporting periods beginning after December 15, 2019, and early adoption is permitted for interim or annual reporting periods beginning after December 15, 2018. We are currently in the process of evaluating the impact of the adoption on our condensed consolidated financial statements.

In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows(Topic 230): Classification of Certain Cash Receipts and Cash Payments.” ASU 2016-15 addresses eight specific cash flow issues and is intended to reduce diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. It is effective for us for interim and annual reporting periods beginning after December 15, 2017, and early adoption is permitted. We are currently in the process of evaluating the impact of the adoption on our condensed consolidated financial statements.

Recently Adopted Accounting Pronouncements

In February 2015, the FASB issued ASU No. 2015-02, “Consolidation (Topic 810); Amendments to the Consolidated Analysis,” which changed the analysis that a reporting entity must perform to determine whether it should consolidate certain types of legal entities. This guidance was effective for us at the beginning of 2016. The adoption of this guidance did not have an impact on our condensed consolidated financial statements.

In April 2015, the FASB issued ASU No. 2015-05, "Customer's Accounting for Fees Paid in a Cloud Computing Arrangement." ASU 2015-05 provided guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. The new guidance does not change the accounting for service contracts. This guidance was effective for us at the beginning of 2016. The adoption of this guidance did not have an impact on our condensed consolidated financial statements.

In March 2016, the FASB issued ASU No. 2016-07, “Investments-Equity Method and Joint Ventures (Topic 323).” ASU 2016-07 eliminates the requirement that when an existing cost method investment qualifies for use of the equity method, an investor must restate its historical financial statements, as if the equity method had been used during all previous periods. Under the new guidance, at the point an investment qualifies for the equity method, any unrealized gain or loss in accumulated other comprehensive income (loss) will be recognized through earnings. ASU 2016-07 is effective for us for interim and annual reporting periods beginning after December 15, 2016, with early adoption permitted. We early adopted this standard and it did not have an impact on our condensed consolidated financial statements.  

In March 2016, the FASB issued ASU No. 2016-09, “Compensation-Stock Compensation (Topic 718): Improvements of Employee Share-Based Payment Accounting.” ASU 2016-09 makes several modifications to Topic 718 related to the accounting for forfeitures, employer tax withholding on share-based compensation and the financial statement presentation of excess tax benefits or deficiencies. This guidance also clarifies the statement of cash flows presentation of certain components of share-based awards. ASU 2016-09 is effective for us for interim and annual reporting periods beginning after December 15, 2016, with early adoption permitted. We early adopted this standard as of the beginning of fiscal year 2016. While certain amendments of this standard were not applicable to us or were applied prospectively, certain other amendments were applied retrospectively as required by the standard. The adoption of this standard did not have an impact on any periods presented in our condensed consolidated financial statements.

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INTANGIBLE ASSETS AND GOODWILL

9 Months Ended

Sep. 25, 2016

INTANGIBLE ASSETS AND GOODWILL

INTANGIBLE ASSETS AND GOODWILL

2.  INTANGIBLE ASSETS AND GOODWILL

Intangible assets subject to amortization (primarily advertiser lists, subscriber lists and developed technology), mastheads and goodwill consisted of the following: 

	December 27,		Amortization		September 25,
(in thousands)	2015		Expense		2016
Intangible assets subject to amortization	$	833,254	$	—	$	833,254
Accumulated amortization		(663,735)		(35,992)		(699,727)
		169,519		(35,992)		133,527
Mastheads		179,132		—		179,132
Goodwill		705,174		—		705,174
Total	$	1,053,825	$	(35,992)	$	1,017,833

Amortization expense with respect to intangible assets is summarized below:

	Quarters Ended				Nine Months Ended
	September 25,		September 27,		September 25,		September 27,
(in thousands)	2016		2015		2016		2015
Amortization expense	$	11,998	$	12,071	$	35,992	$	36,286

The estimated amortization expense for the remainder of fiscal year 2016 and the five succeeding fiscal years is as follows: 

	Amortization
	Expense
Year	(in thousands)
2016 (Remainder)	$	11,994
2017		48,907
2018		47,275
2019		23,769
2020		418
2021		296

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INVESTMENTS IN UNCONSOLIDATED COMPANIES

9 Months Ended

Sep. 25, 2016

INVESTMENTS IN UNCONSOLIDATED COMPANIES

INVESTMENTS IN UNCONSOLIDATED COMPANIES

3.  INVESTMENTS IN UNCONSOLIDATED COMPANIES

The carrying value of investments in unconsolidated companies consisted of the following:

(in thousands)	% Ownership	September 25,		December 27,
Company	Interest	2016		2015
CareerBuilder, LLC	15.0	$	240,248	$	230,170
Other	Various		4,660		3,368
		$	244,908	$	233,538

In September 2016, TEGNA Inc., a majority holder of CareerBuilder, announced that it and other owners, including us, would evaluate strategic alternatives for CareerBuilder. No specific timeline was announced for this process.

During the nine months ended September 25, 2016, our proportionate share of net income from certain investments listed in the table above was greater than 20% of our condensed consolidated net loss before taxes. Summarized condensed financial information, as provided to us by these certain investees, is as follows:

	Nine months ended
	September 25,		September 27,
(in thousands)	2016		2015
Net revenues	$	523,823	$	526,729
Gross profit		494,632		490,140
Operating income		78,077		100,495
Net income		77,599		97,887

On February 23, 2016, we, along with Gannett Co. Inc. and Tribune Publishing Co. (now “tronc, Inc.”) (the “Selling Partners”) sold all of the assets in HomeFinder LLC (“HomeFinder”) to Placester Inc. (“Placester”) in exchange for a small stock ownership in Placester and a 3-year affiliate agreement with Placester to continue to allow the Selling Partners to sell Placester and HomeFinder’s products and services. As a result of this transaction, during the quarter ended March 27, 2016, we wrote off our HomeFinder investment of $0.9 million, which is recorded in equity income in unconsolidated companies, net, on our condensed consolidated statements of operations.

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LONG-TERM DEBT

9 Months Ended

Sep. 25, 2016

LONG-TERM DEBT

LONG-TERM DEBT

4.  LONG-TERM DEBT

Our long-term debt consisted of the following:

	Face Value at		Carrying Value
	September 25,		September 25,		December 27,
(in thousands)	2016		2016		2015
Notes:
9.00% senior secured notes due in 2022	$	506,415	$	497,898	$	506,571
5.750% notes due in 2017		34,645		34,327		54,551
7.150% debentures due in 2027		89,188		84,763		84,469
6.875% debentures due in 2029		276,230		260,754		259,834
Long-term debt	$	906,478	$	877,742	$	905,425
Less current portion		34,645		34,327		—
Total long-term debt, net of current	$	871,833	$	843,415	$	905,425

Our outstanding notes are stated net of unamortized debt issuance costs and unamortized discounts, if applicable, totaling $28.7 million and $31.9 million as of September 25, 2016, and December 27, 2015, respectively.

During the quarter ended September 25, 2016, we classified our 5.75% notes due on September 1, 2017, to current portion of long-term debt on the condensed consolidated balance sheet. In October 2016, we repurchased a total $17.8 million of the 5.75% notes through a privately negotiated transaction and we expect to record a loss on extinguishment of debt of approximately $0.4 million during the quarter ended December 25, 2016.

Debt Repurchases and Gain on Extinguishment of Debt

During the nine months ended September 25, 2016, we repurchased a total of $30.8 million of notes through privately negotiated transactions as follows:

(in thousands)	Face Value
9.00% senior secured notes due in 2022	$	10,000
5.750% notes due in 2017		20,797
Total notes repurchased	$	30,797

We recorded a net gain on extinguishment of debt of $1.5 million during the nine months ended September 25, 2016. We repurchased these notes at a discount and wrote off historical discounts and debt issuance costs during the nine months ended September 25, 2016. There were no notes repurchased during the quarter ended September 25, 2016. During the quarter and nine months ended September 27, 2015, we repurchased $25.0 million and $66.4 million, respectively, of our notes through privately negotiated transactions. We recorded a net gain on extinguishment of debt of $1.6 million and $0.7 million during the quarter and nine months ended September 27, 2015.  

Credit Agreement

Our Third Amended and Restated Credit Agreement dated December 18, 2012, as amended (“Credit Agreement”), is secured by a first-priority security interest in certain of our assets as described below. The Credit Agreement, among other things, provides for commitments of $65.0 million and a maturity date of December 18, 2019. On October 21, 2014, we entered into a Collateralized Issuance and Reimbursement Agreement (“LC Agreement”). Pursuant to the terms of LC Agreement, we may request letters of credit be issued on our behalf in an aggregate face amount not to exceed $35.0 million. We are required to provide cash collateral equal to 101% of the aggregate undrawn stated amount of each outstanding letter of credit.

As of September 25, 2016, there were standby letters of credit outstanding under the LC Agreement with an aggregate face amount of $30.7 million. There were no borrowings outstanding under the Credit Agreement as of September 25, 2016.

Under the Credit Agreement, we may borrow at either the London Interbank Offered Rate plus a spread ranging from 275 basis points to 425 basis points, or at a base rate plus a spread ranging from 175 basis points to 325 basis points, in each case based upon our consolidated total leverage ratio. The Credit Agreement provides for a commitment fee payable on the unused revolving credit ranging from 50 basis points to 62.5 basis points, based upon our consolidated total leverage ratio.

Senior Secured Notes and Indenture

Substantially all of our subsidiaries guarantee the obligations under the 9.00% Senior Secured Notes due in 2022 (“9.00% Notes”) and the Credit Agreement. We own 100% of each of the guarantor subsidiaries and we have no significant independent assets or operations separate from the subsidiaries that guarantee our 9.00% Notes and the Credit Agreement. The guarantees provided by the guarantor subsidiaries are full and unconditional and joint and several, and the subsidiaries other than the subsidiary guarantors are minor.

In addition, we have granted a security interest to the banks that are a party to the Credit Agreement and the trustee under the indenture governing the 9.00% Notes that includes, but is not limited to, intangible assets, inventory, receivables and certain minority investments as collateral for the debt. The security interest does not include any property, plant & equipment (“PP&E”), leasehold interests or improvements with respect to such PP&E which would be reflected on our condensed consolidated balance sheets or shares of stock and indebtedness of our subsidiaries.

Covenants under the Senior Debt Agreements

The financial covenant under the Credit Agreement requires us to comply with a maximum consolidated total leverage ratio measured quarterly. As of September 25, 2016, we are required to maintain a consolidated total leverage ratio of not more than 6.00 to 1.00.  For purposes of consolidated total leverage ratio, debt is largely defined as net debt, which is debt net of cash on hand in excess of $20.0 million. As of September 25, 2016, we were in compliance with our financial covenants.

The Credit Agreement also prohibits the payment of a dividend if a payment would not be permitted under the indenture for the 9.00% Notes (discussed below). Dividends under the indenture for the 9.00% Notes are allowed if the consolidated leverage ratio (as defined in the indenture) is less than 5.25 to 1.00 and we have sufficient amounts under our restricted payments basket (as defined in the indenture).

The indenture for the 9.00% Notes and the Credit Agreement include a number of restrictive covenants that are applicable to us and our restricted subsidiaries. The covenants are subject to a number of important exceptions and qualifications set forth in those agreements. These covenants include, among other things, restrictions on our ability to incur additional debt; make investments and other restricted payments; pay dividends on capital stock or redeem or repurchase capital stock or certain of our outstanding notes or debentures prior to stated maturity; sell assets or enter into sale/leaseback transactions; create specified liens; create or permit restrictions on the ability of our restricted subsidiaries to pay dividends or make other distributions; engage in certain transactions with affiliates; and consolidate or merge with or into other companies or sell all or substantially all of the Company’s and our subsidiaries’ assets, taken as a whole.

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EMPLOYEE BENEFITS

9 Months Ended

Sep. 25, 2016

EMPLOYEE BENEFITS

EMPLOYEE BENEFITS

5.  EMPLOYEE BENEFITS

We maintain a noncontributory qualified defined benefit pension plan (“Pension Plan”), which covers certain eligible current and former employees and has been frozen since March 31, 2009.  No new participants may enter the Pension Plan and no further benefits will accrue. However, years of service continue to count toward early retirement calculations and vesting of benefits previously earned.

We also have a limited number of supplemental retirement plans to provide certain key current and former employees with additional retirement benefits.  These plans are funded on a pay-as-you-go basis and the accrued pension obligation is largely included in other long-term obligations.

The elements of retirement expense are as follows:

	Quarters Ended				Nine Months Ended
	September 25,		September 27,		September 25,		September 27,
(in thousands)	2016		2015		2016		2015
Pension plans:
Service Cost	$	4,700	$	2,920	$	14,100	$	8,760
Interest Cost		22,167		21,248		66,501		63,745
Expected return on plan assets		(27,107)		(26,571)		(81,322)		(79,712)
Actuarial loss		4,596		5,548		13,787		16,645
Net pension expense		4,356		3,145		13,066		9,438
Net post-retirement benefit credit		(662)		(653)		(1,984)		(1,960)
Net retirement expenses	$	3,694	$	2,492	$	11,082	$	7,478

In February 2016, we contributed certain of our real property appraised at $47.1 million to our Pension Plan, and we entered into lease-back arrangements for the contributed facilities. This contribution was measured at fair value using Level 3 inputs, which primarily consisted of expected cash flows and discount rate that we estimated market participants would seek for bearing the risk associated with such assets. After applying credits, which resulted from contributing more than the Pension Plan’s minimum required contribution amounts in prior years, we have no required pension contribution under the Employee Retirement Income Security Act for fiscal year 2016. We leased back the contributed facilities under 11-year leases with initial annual payments totaling approximately $3.5 million. A similar contribution of properties was made to the Pension Plan in 2011, and the accounting treatment for both contributions is described below.

The contributions and leasebacks of these properties are treated as financing transactions and, accordingly, we continue to depreciate the carrying value of the properties in our financial statements. No gain or loss will be recognized on the contributions of any property until the sale of the property by the Pension Plan. At the time of our contributions, our pension obligation was reduced and our financing obligations were recorded equal to the fair market value of the properties. The financing obligations are reduced by a portion of the lease payments made to the Pension Plan each month, and increased for imputed interest expense on the obligations to the extent imputed interest exceeds monthly payments. The long-term balance of this obligation at September 25, 2016, and December 27, 2015, was $53.5 million and $32.4 million, respectively, and relates to the contributions to the Pension Plan in 2016 and 2011.

In May 2016, the Pension Plan sold the Charlotte real property for approximately $34.3 million, and we terminated our lease on the property. The property was included in the 2011 contributions to the Pension Plan discussed previously. As a result of the sale by the Pension Plan, we recognized a $1.1 million loss on the sale of the Charlotte property in the other operating expenses on the condensed consolidated statement of operations for the nine months ended September 25, 2016. At the time of sale, our financial obligation was reduced by $25.1 million and we removed the assets with a carrying value of $26.2 million from PP&E.

In October 2016, the Pension Plan sold the Olympia real property for approximately $4.8 million. The property was included in the 2011 contributions to the Pension Plan discussed previously. As a result of the sale by the Pension Plan, we will recognize approximately $0.2 million loss on the sale of the Olympia property in other operating expenses on the condensed consolidated statement of operations during the quarter ended December 25, 2016.

We have a defined contribution plan (“401(k) plan”), which enables qualified employees to voluntarily defer compensation.  The 401(k) plan includes a matching company contribution and a supplemental contribution that is tied to our performance.  We suspended our matching contribution to the 401(k) plan in 2009 and as of September 25, 2016, we have not reinstated that benefit.

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COMMITMENTS AND CONTINGENCIES

9 Months Ended

Sep. 25, 2016

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

6.  COMMITMENTS AND CONTINGENCIES

In December 2008, carriers of The Fresno Bee filed a class action lawsuit against us and The Fresno Bee in the Superior Court of the State of California in Fresno County captioned Becerra v. The McClatchy Company (“Fresno case”) alleging that the carriers were misclassified as independent contractors and seeking mileage reimbursement. In February 2009, a substantially similar lawsuit, Sawin v. The McClatchy Company, involving similar allegations was filed by carriers of The Sacramento Bee (“Sacramento case”) in the Superior Court of the State of California in Sacramento County. The class consists of roughly 5,000 carriers in the Sacramento case and 3,500 carriers in the Fresno case. The plaintiffs in both cases are seeking unspecified restitution for mileage reimbursement. With respect to the Sacramento case, in September 2013, all wage and hour claims were dismissed and the only remaining claim is an equitable claim for mileage reimbursement under the California Civil Code. In the Fresno case, in March 2014, all wage and hour claims were dismissed and the only remaining claim is an equitable claim for mileage reimbursement under the California Civil Code.

The court in the Sacramento case trifurcated the trial into three separate phases: the first phase addressed independent contractor status, the second phase will address liability, if any, and the third phase will address restitution, if any. On September 22, 2014, the court in the Sacramento case issued a tentative decision following the first phase, finding that the carriers that contracted directly with The Sacramento Bee during the period from February 2005 to July 2009 were misclassified as independent contractors. We objected to the tentative decision but the court ultimately adopted it as final. The court has not yet established a date for the second and third phases of trial concerning whether The Sacramento Bee is liable to the carriers in the class for mileage reimbursement or owes any restitution. In June 2016, The McClatchy Company was dismissed from the lawsuit, leaving The Sacramento Bee as the sole defendant.

The court in the Fresno case bifurcated the trial into two separate phases: the first phase addressed independent contractor status and liability for mileage reimbursement and the second phase was designated to address restitution, if any. The first phase of the Fresno case began in the fourth quarter of fiscal year 2014 and concluded in late March 2015. On April 14, 2016, the court in the Fresno case issued a statement of decision granting judgment in favor of us and The Fresno Bee.

In January 2016, Ponderay Newsprint Company (“PNC”), a general partnership that owns and operates a newsprint mill in the state of Washington, and of which we own a 27% interest, filed a complaint in the Superior Court of the State of Washington seeking declaratory judgment and alleging breach of contract and breach of the duty of good faith and fair dealing against Public Utility District No. 1 of Pend Oreille County (“PUD”) relating to the industrial power supply contracts (“Supply Contracts”) between PNC and the PUD.  This complaint followed the PUD’s assertion that PNC had effected a termination of the Supply Contracts by the submission of its most recent power schedule, which called for an uncertain, and probable declining, need for power between 2017-2019.  Based on PNC’s fervent belief that its power schedule was fully compliant with the Supply Contracts, the aforementioned complaint was filed. In March 2016, the PUD filed a counterclaim against PNC and a third-party complaint against the individual partners of PNC, alleging breach of contract.

We continue to defend these actions vigorously and expect that we will ultimately prevail. As a result, we have not established a reserve in connection with the cases. While we believe that a material impact on our condensed consolidated financial position, results of operations or cash flows from these claims is unlikely, given the inherent uncertainty of litigation, a possibility exists that future adverse rulings or unfavorable developments could result in future charges that could have a material impact. We have and will continue to periodically reexamine our estimates of probable liabilities and any associated expenses and make appropriate adjustments to such estimates based on experience and developments in litigation.

Other than the cases described above, we are subject to a variety of legal proceedings (including libel, employment, wage and hour, independent contractor and other legal actions) and governmental proceedings (including environmental matters) that arise from time to time in the ordinary course of our business. We are unable to estimate the amount or range of reasonably possible losses for these matters. However, we currently believe, after reviewing such actions with counsel, that the expected outcome of pending actions will not have a material effect on our condensed consolidated financial statements. No material amounts for any losses from litigation that may ultimately occur have been recorded in the condensed consolidated financial statements as we believe that any such losses are not probable.

We have certain indemnification obligations related to the sale of assets including but not limited to insurance claims and multi-employer pension plans of disposed newspaper operations. We believe the remaining obligations related to disposed assets will not be material to our financial position, results of operations or cash flows.

As of September 25, 2016, we had $30.7 million of standby letters of credit secured under the LC Agreement (see Note 4, Long-Term Debt, for further discussion).

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STOCK PLANS

9 Months Ended

Sep. 25, 2016

STOCK PLANS

STOCK PLANS

7.  STOCK PLANS

As discussed previously, all share amounts have been restated to reflect the reverse stock split that became effective on June 7, 2016, and applied retrospectively.

Stock Plans Activity

The following table summarizes the restricted stock units (“RSUs”) activity during the nine months ended September 25, 2016:

		Weighted
		Average Grant
		Date Fair
		Value
Nonvested — December 27, 2015	153,880	$	29.83
Granted	124,690	$	10.62
Vested	(67,335)	$	30.90
Forfeited	(3,730)	$	15.78
Nonvested — September 25, 2016	207,505	$	18.19

The total fair value of the RSUs that vested during the nine months ended September 25, 2016, was $0.8 million.

The following table summarizes the stock appreciation rights (“SARs”) activity during the nine months ended September 25, 2016: 

		Weighted		Aggregate
		Average		Intrinsic Value
	SARs	Exercise Price		(in thousands)
Outstanding December 27, 2015	320,125	$	73.49	$	—
Forfeited	(50)	$	27.60
Expired	(8,225)	$	83.46
Outstanding September 25, 2016	311,850	$	73.24	$	—

Stock-Based Compensation

All stock-based payments, including grants of stock appreciation rights, restricted stock units and common stock under equity incentive plans, are recognized in the financial statements based on their grant date fair values. As of September 25, 2016, we had two stock-based compensation plans. Stock-based compensation expenses are reported in the compensation line item in the condensed consolidated statements of operations. Total stock-based compensation expense for the periods presented in this report, are as follows:

	Quarters Ended				Nine Months Ended
	September 25,		September 27,		September 25,		September 27,
(in thousands)	2016		2015		2016		2015
Stock-based compensation expense	$	348	$	498	$	2,105	$	2,750

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SIGNIFICANT ACCOUNTING POLICIES (Policies)

9 Months Ended

Sep. 25, 2016

SIGNIFICANT ACCOUNTING POLICIES

Business and Basis of Accounting

Business and Basis of Accounting

The McClatchy Company (the “Company,” “we,” “us” or “our”) is a 21st century news and information publisher of well-respected publications such as the Miami Herald, The Kansas City Star, The Sacramento Bee, The Charlotte Observer,  The (Raleigh) News and Observer, and the (Fort Worth) Star-Telegram. We operate 29 media companies in 28 U.S. markets in 14 states, providing each of our communities with high-quality news and advertising services in a wide array of digital and print formats. We are headquartered in Sacramento, California, and our Class A Common Stock is listed on the New York Stock Exchange under the symbol MNI.

We also own 15.0% of CareerBuilder LLC (“CareerBuilder”), which operates the nation’s largest online jobs website, CareerBuilder.com, as well as certain other digital investments. In September 2016, TEGNA Inc., a majority holder of CareerBuilder, announced that it and other owners, including us, would evaluate strategic alternatives for CareerBuilder. No specific timeline was announced for this process.

Preparation of the financial statements in conformity with accounting principles generally accepted in the United States 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 27, 2015 (“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.

Reverse Stock Split

Reverse Stock Split

Following our May 2016 annual meeting of shareholders, our Board of Directors approved a one-for-ten  (1:10) reverse stock split of our issued and outstanding Class A and Class B common stock, which became effective June 7, 2016. As a result, every ten shares of our common stock outstanding were combined into one share of our common stock. The ratio was the same for the Class A common stock and the Class B common stock and each shareholder held the same percentage of Class A and Class B common stock outstanding immediately following the reverse stock split as the shareholder held immediately prior to the reverse stock split. No fractional shares were issued in connection with the reverse stock split. The par value and authorized number of shares of the Class A and Class B common stock were not adjusted as a result of the reverse stock split. All issued and outstanding Class A and Class B common stock and per share amounts contained within our condensed consolidated financial statements and footnotes have been retroactively adjusted to reflect this reverse stock split for all periods presented.

All restricted stock unit awards and stock appreciation right awards outstanding immediately prior to the reverse stock split were adjusted by dividing the number of shares of common stock into which the restricted stock units and stock appreciation rights are exercisable by ten and multiplying the exercise price by ten, all in accordance with the terms of the agreements governing such awards. All restricted stock units and stock appreciation rights activity contained within our condensed consolidated financial statement footnotes have been retroactively adjusted to reflect this reverse stock split for all periods presented.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

We account for certain assets and liabilities at fair value.  The hierarchy below lists three levels of fair value based on the extent to which inputs used in measuring fair value are observable in the market. We categorize each of our fair value measurements in one of these three levels based on the lowest level input that is significant to the fair value measurement in its entirety.  These levels are:

Level 1 – Unadjusted quoted prices available in active markets for identical investments as of the reporting date.

Level 2 – Observable inputs to the valuation methodology are other than Level 1 inputs and are either directly or indirectly observable as of the reporting date and fair value can be determined through the use of models or other valuation methodologies.

Level 3 – Inputs to the valuation methodology are unobservable inputs in situations where there is little or no market activity for the asset or liability, and the reporting entity makes estimates and assumptions related to the pricing of the asset or liability including assumptions regarding risk.

Our policy is to recognize significant transfers between levels at the actual date of the event or circumstance that caused the transfer. 

The following methods and assumptions were used to estimate the fair value of each class of financial instruments:

Cash and cash equivalents, accounts receivable and accounts payable.  As of September 25, 2016, and December 27, 2015,  the carrying amount of these items approximates fair value because of the short maturity of these financial instruments.

Long-term debt.  The fair value of our long-term debt is determined using quoted market prices and other inputs that were derived from available market information, including the current market activity of our publicly-traded notes and bank debt, trends in investor demand for debt and market values of comparable publicly-traded debt. These are considered to be Level 2 inputs under the fair value measurements and disclosure guidance, and may not be representative of actual value. At September 25, 2016 and December 27, 2015, the estimated fair value of long-term debt was $821.4 million and $729.8 million, respectively. At September 25, 2016, and December 27, 2015, the carrying value of our long-term debt, including the current portion of long-term debt, was $877.7 million and $905.4 million, respectively.

Certain assets are measured at fair value on a nonrecurring basis; that is, they are subject to fair value adjustments only in certain circumstances (for example, when there is evidence of impairment). Our non-financial assets that may be measured at fair value on a nonrecurring basis are assets held for sale, goodwill, intangible assets not subject to amortization and equity method investments. All of these are measured using Level 3 inputs. We utilize valuation techniques that seek to maximize the use of observable inputs and minimize the use of unobservable inputs. The significant unobservable inputs include our expected cash flows and discount rates that we estimate market participants would seek for bearing the risk associated with such assets.

Property, Plant and Equipment

Property, Plant and Equipment

During the quarter and nine months ended September 25, 2016, we incurred $0.3 million and $6.9 million in accelerated depreciation related to production equipment no longer needed as a result of outsourcing our printing process at certain of our media companies and replacing an old printing press at one of our media companies. During the quarter and nine months ended September 27, 2015, we incurred $4.9 million and $6.7 million in accelerated depreciation primarily related to production equipment associated with outsourcing our printing process at a few of our media companies.

Depreciation expense with respect to property, plant and equipment is summarized below:

	Quarters Ended				Nine Months Ended
	September 25,		September 27,		September 25,		September 27,
(in thousands)	2016		2015		2016		2015
Depreciation expense	$	8,561	$	15,224	$	33,559	$	39,606

Assets Held For Sale

Assets Held for Sale

Assets held for sale includes land and buildings at two of our media companies that we began to actively market for sale during the nine months ended September 25, 2016, and a parking structure at another media company that we began to actively market for sale during 2015. In connection with the classification to assets held for sale, the carrying value of the land and building of one of the media companies was reduced to their estimated fair value less selling costs, as determined based on the current market conditions and the selling price. As a result, a write-down of $0.3 million was recorded in the quarter and nine months ended September 25, 2016, and is included in goodwill impairment and other asset write-downs on the condensed consolidated statements of operations.

Intangible Assets and Goodwill

Intangible Assets and Goodwill

We test for impairment of goodwill annually, at year‑end, or whenever events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. The required two‑step approach uses accounting judgments and estimates of future operating results. Changes in estimates or the application of alternative assumptions could produce significantly different results. Impairment testing is done at a reporting unit level. We perform this testing on operating segments, which are also considered our reporting units. An impairment loss generally is recognized when the carrying amount of the reporting unit’s net assets exceeds the estimated fair value of the reporting unit. The fair value of our reporting units is determined using a combination of a discounted cash flow model and market based approaches. The estimates and judgments that most significantly affect the fair value calculation are assumptions related to revenue growth, newsprint prices, compensation levels, discount rate, and for the market based approach, private and public market trading multiples for newspaper assets. We consider current market capitalization, based upon the recent stock market prices, plus an estimated control premium in determining the reasonableness of the aggregate fair value of the reporting units. We had no impairment of goodwill during the quarter or nine months ended September 25, 2016. During the quarter ended June 28, 2015, we performed interim tests of impairment of goodwill due to the continuing challenging business conditions and the resulting weakness in our stock price. As a result, we recorded an impairment charge related to goodwill of $290.9 million in the nine months ended September 27, 2015, which was recorded in the goodwill impairment and other asset write-downs line item on our condensed consolidated statements of operations.

Newspaper mastheads (newspaper titles and website domain names) are not subject to amortization and are tested for impairment annually, at year‑end, or more frequently if events or changes in circumstances indicate that the asset might be impaired. The impairment test consists of a comparison of the fair value of each newspaper masthead with its carrying amount. We use a relief-from-royalty approach that utilizes the discounted cash flow model discussed above, to determine the fair value of each newspaper masthead. We had no impairment of newspaper mastheads during the quarter and nine months ended September 25, 2016.  During the quarter ended June 28, 2015, we performed interim tests of impairment of intangible newspaper mastheads due to the continuing challenging business conditions and the resulting weakness in our stock price. As a result, we recorded an intangible newspaper masthead impairment charge of $9.5 million in the nine months ended September 27, 2015, which was recorded in the goodwill impairment and other asset write-downs line item on our condensed consolidated statements of operations.

Long‑lived assets such as intangible assets (primarily advertiser and subscriber lists) are amortized and tested for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. The carrying amount of each asset group is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use of such asset group. We had no impairment of long‑lived assets subject to amortization during the quarter and nine months ended September 25, 2016, or September 27, 2015.

Segment Reporting

Segment Reporting

We operate 29 media companies, providing each of our communities with high-quality news and advertising services in a wide array of digital and print formats. We have two operating segments that we aggregate into a single reportable segment because each has similar economic characteristics, products, customers and distribution methods. Our operating segments are based on how our chief executive officer, who is also our Chief Operating Decision Maker (“CODM”), makes decisions about allocating resources and assessing performance. The CODM is provided discrete financial information for the two operating segments. Each operating segment consists of a group of media companies and both operating segments report to the same segment manager. One of our operating segments (“Western Segment”) consists of our media operations in California, the Northwest, and the Midwest, while the other operating segment (“Eastern Segment”) consists primarily of media operations in the Southeast and Florida.

Accumulated Other Comprehensive Loss

Accumulated Other Comprehensive Loss

Our accumulated other comprehensive loss (“AOCL”) and reclassifications from AOCL, net of tax, consisted of the following: 

			Other
	Minimum		Comprehensive
	Pension and		Loss
	Post-		Related to
	Retirement		Equity
(in thousands)	Liability		Investments		Total
Balance at December 27, 2015	$	(411,956)	$	(9,852)	$	(421,808)
Other comprehensive income (loss) before reclassifications		—		(937)		(937)
Amounts reclassified from AOCL		6,907		—		6,907
Other comprehensive income (loss)		6,907		(937)		5,970
Balance at September 25, 2016	$	(405,049)	$	(10,789)	$	(415,838)

	Amount Reclassified from AOCL
	Quarters Ended				Nine Months Ended
(in thousands)	September 25,		September 27,		September 25,		September 27,		Affected Line in the Condensed
AOCL Component	2016		2015		2016		2015		Consolidated Statements of Operations
Minimum pension and post-retirement liability	$	3,838	$	4,802	$	11,511	$	14,408	Compensation
		(1,535)		(1,921)		(4,604)		(5,763)	Benefit for income taxes
	$	2,303	$	2,881	$	6,907	$	8,645	Net of tax

Income Taxes

Income Taxes

We account for income taxes using the liability method. Under this method, deferred tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse.

We recognize accrued interest related to unrecognized tax benefits in interest expense. Accrued penalties are recognized as a component of income tax expense.

Earnings Per Share (EPS)

Earnings Per Share (EPS)

As discussed previously, all share amounts have been restated to reflect the reverse stock split that became effective on June 7, 2016, and applied retrospectively. Basic EPS excludes dilution from common stock equivalents and reflects income divided by the weighted average number of common shares outstanding for the period.  Diluted EPS is based upon the weighted average number of outstanding shares of common stock and dilutive common stock equivalents in the period.  Common stock equivalents arise from dilutive stock appreciation rights, restricted stock units, and restricted stock and are computed using the treasury stock method.  Anti-dilutive common stock equivalents are excluded from diluted EPS.  The weighted average anti-dilutive common stock equivalents that could potentially dilute basic EPS in the future, but were not included in the weighted average share calculation, consisted of the following:

	Quarters Ended		Nine Months Ended
	September 25,	September 27,	September 25,	September 27,
(shares in thousands)	2016	2015	2016	2015
Anti-dilutive common stock equivalents	305	524	284	544

Cash Flow Information

Cash Flow Information

Cash paid for interest and income taxes and other non-cash activities consisted of the following:

	Nine Months Ended
	September 25,		September 27,
(in thousands)	2016		2015
Interest paid (net of amount capitalized)	$	47,349	$	53,241
Income taxes paid (net of refunds)		762		197,718
Other non-cash financing activities:
Increase of financing obligation for contribution of real property to pension plan	$	47,130
Reduction of pension obligation for contribution of real property to pension plan		(47,130)
Reduction of financing obligation for sale of Charlotte property by pension plan		(25,060)
Reduction of property, plant and equipment, net for sale of Charlotte property by pension plan		(26,171)

The income tax payments in the nine months ended September 27, 2015, were primarily related to the net taxes paid for a gain on the sale of a previous owned equity investment in the fourth quarter of 2014, offset by tax losses on bond repurchases in the fourth quarter of 2014. While the transactions occurred in the fourth quarter of 2014, the actual tax payments were made in the first quarter of 2015.

Other non-cash financing activities relate to the contribution of real property to the Pension Plan and to the sale of one of the properties by the Pension Plan. See Note 5 for further discussion.

Recently Issued and Adopted Accounting Pronouncements

Recently Issued Accounting Pronouncements Not Yet Adopted

In May 2014, the FASB issued Accounting Standards Update (“ASU”) ASU No. 2014-09, “Revenue from Contracts with Customers.” ASU 2014-09 outlines a new, single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance. This new revenue recognition model provides a five-step analysis in determining when and how revenue is recognized. The new model will require revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration a company expects to receive in exchange for those goods or services. In 2016, the FASB issued additional updates: ASU No. 2016-08, 2016-10, 2016-11 and 2016-12. These updates provide further guidance and clarification on specific items within the previously issued update. We are currently in the process of evaluating the impact of the adoption on our condensed consolidated financial statements. ASU 2014-09, as well as the additional FASB updates noted above, is effective for us for annual and interim periods beginning on or after December 15, 2017, and early adoption is permitted for interim or annual reporting periods beginning after December 15, 2016. We do not plan to early adopt this guidance. We are currently in the process of evaluating the impact of the adoption on our condensed consolidated financial statements.

In August 2014, the FASB issued ASU No. 2014-15, “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern.” ASU 2014-15 requires management to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnotes disclosures in certain circumstances. It is effective for us for annual and interim periods beginning on or after December 15, 2016, with early adoption permitted. We do not believe the adoption of this guidance will have an impact on our condensed consolidated financial statements.

In July 2015, the FASB issued ASU No. 2015-11, “Simplifying the Measurement of Inventory.” ASU 2015-11 simplifies the measurement of inventory by requiring certain inventory to be measured at the “lower of cost and net realizable value” and options that currently exist for “market value” will be eliminated. The ASU defines net realizable value as the “estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.” It is effective for us for interim and annual reporting periods beginning after December 15, 2016. The standard should be applied prospectively with early adoption permitted. We are currently in the process of evaluating the impact of the adoption on our condensed consolidated financial statements.

In January 2016, the FASB issued ASU No. 2016-01, “Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.” ASU 2016-01 addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. ASU 2016-01 is effective for us for interim and annual reporting periods beginning after December 15, 2017. We do not believe the adoption of this guidance will have an impact on our condensed consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, “Leases” (Accounting Standards Codification 842 (“ASC 842”)) and it replaces the existing guidance in ASC 840, “Leases.” ASC 842 requires lessees to recognize most leases on their balance sheets as lease liabilities with corresponding right-of-use assets. The new lease standard does not substantially change lessor accounting. It is effective for us for interim and annual reporting periods beginning after December 15, 2018, with early adoption permitted. We are currently in the process of evaluating the impact of the adoption on our condensed consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” ASU 2016-13 requires that financial assets measured at amortized cost be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis. The income statement reflects the measurement of credit losses for newly recognized financial assets, as well as the expected credit losses during the period. The measurement of expected credit losses is based upon historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. It is effective for us for interim and annual reporting periods beginning after December 15, 2019, and early adoption is permitted for interim or annual reporting periods beginning after December 15, 2018. We are currently in the process of evaluating the impact of the adoption on our condensed consolidated financial statements.

In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows(Topic 230): Classification of Certain Cash Receipts and Cash Payments.” ASU 2016-15 addresses eight specific cash flow issues and is intended to reduce diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. It is effective for us for interim and annual reporting periods beginning after December 15, 2017, and early adoption is permitted. We are currently in the process of evaluating the impact of the adoption on our condensed consolidated financial statements.

Recently Adopted Accounting Pronouncements

In February 2015, the FASB issued ASU No. 2015-02, “Consolidation (Topic 810); Amendments to the Consolidated Analysis,” which changed the analysis that a reporting entity must perform to determine whether it should consolidate certain types of legal entities. This guidance was effective for us at the beginning of 2016. The adoption of this guidance did not have an impact on our condensed consolidated financial statements.

In April 2015, the FASB issued ASU No. 2015-05, "Customer's Accounting for Fees Paid in a Cloud Computing Arrangement." ASU 2015-05 provided guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. The new guidance does not change the accounting for service contracts. This guidance was effective for us at the beginning of 2016. The adoption of this guidance did not have an impact on our condensed consolidated financial statements.

In March 2016, the FASB issued ASU No. 2016-07, “Investments-Equity Method and Joint Ventures (Topic 323).” ASU 2016-07 eliminates the requirement that when an existing cost method investment qualifies for use of the equity method, an investor must restate its historical financial statements, as if the equity method had been used during all previous periods. Under the new guidance, at the point an investment qualifies for the equity method, any unrealized gain or loss in accumulated other comprehensive income (loss) will be recognized through earnings. ASU 2016-07 is effective for us for interim and annual reporting periods beginning after December 15, 2016, with early adoption permitted. We early adopted this standard and it did not have an impact on our condensed consolidated financial statements.  

In March 2016, the FASB issued ASU No. 2016-09, “Compensation-Stock Compensation (Topic 718): Improvements of Employee Share-Based Payment Accounting.” ASU 2016-09 makes several modifications to Topic 718 related to the accounting for forfeitures, employer tax withholding on share-based compensation and the financial statement presentation of excess tax benefits or deficiencies. This guidance also clarifies the statement of cash flows presentation of certain components of share-based awards. ASU 2016-09 is effective for us for interim and annual reporting periods beginning after December 15, 2016, with early adoption permitted. We early adopted this standard as of the beginning of fiscal year 2016. While certain amendments of this standard were not applicable to us or were applied prospectively, certain other amendments were applied retrospectively as required by the standard. The adoption of this standard did not have an impact on any periods presented in our condensed consolidated financial statements.

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SIGNIFICANT ACCOUNTING POLICIES (Tables)

9 Months Ended

Sep. 25, 2016

SIGNIFICANT ACCOUNTING POLICIES

Schedule of components of property, plant and equipment

	Quarters Ended				Nine Months Ended
	September 25,		September 27,		September 25,		September 27,
(in thousands)	2016		2015		2016		2015
Depreciation expense	$	8,561	$	15,224	$	33,559	$	39,606

Schedule of components of accumulated other comprehensive loss, net of tax

			Other
	Minimum		Comprehensive
	Pension and		Loss
	Post-		Related to
	Retirement		Equity
(in thousands)	Liability		Investments		Total
Balance at December 27, 2015	$	(411,956)	$	(9,852)	$	(421,808)
Other comprehensive income (loss) before reclassifications		—		(937)		(937)
Amounts reclassified from AOCL		6,907		—		6,907
Other comprehensive income (loss)		6,907		(937)		5,970
Balance at September 25, 2016	$	(405,049)	$	(10,789)	$	(415,838)

Schedule of reclassification out of accumulated other comprehensive income

	Amount Reclassified from AOCL
	Quarters Ended				Nine Months Ended
(in thousands)	September 25,		September 27,		September 25,		September 27,		Affected Line in the Condensed
AOCL Component	2016		2015		2016		2015		Consolidated Statements of Operations
Minimum pension and post-retirement liability	$	3,838	$	4,802	$	11,511	$	14,408	Compensation
		(1,535)		(1,921)		(4,604)		(5,763)	Benefit for income taxes
	$	2,303	$	2,881	$	6,907	$	8,645	Net of tax

Summary of anti-dilutive stock options

	Quarters Ended		Nine Months Ended
	September 25,	September 27,	September 25,	September 27,
(shares in thousands)	2016	2015	2016	2015
Anti-dilutive common stock equivalents	305	524	284	544

Schedule of cash paid for interest and income taxes

	Nine Months Ended
	September 25,		September 27,
(in thousands)	2016		2015
Interest paid (net of amount capitalized)	$	47,349	$	53,241
Income taxes paid (net of refunds)		762		197,718
Other non-cash financing activities:
Increase of financing obligation for contribution of real property to pension plan	$	47,130
Reduction of pension obligation for contribution of real property to pension plan		(47,130)
Reduction of financing obligation for sale of Charlotte property by pension plan		(25,060)
Reduction of property, plant and equipment, net for sale of Charlotte property by pension plan		(26,171)

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INTANGIBLE ASSETS AND GOODWILL (Tables)

9 Months Ended

Sep. 25, 2016

INTANGIBLE ASSETS AND GOODWILL

Schedule of intangible assets (primarily advertiser lists, subscriber lists and developed technology), mastheads and goodwill

	December 27,		Amortization		September 25,
(in thousands)	2015		Expense		2016
Intangible assets subject to amortization	$	833,254	$	—	$	833,254
Accumulated amortization		(663,735)		(35,992)		(699,727)
		169,519		(35,992)		133,527
Mastheads		179,132		—		179,132
Goodwill		705,174		—		705,174
Total	$	1,053,825	$	(35,992)	$	1,017,833

Summary of amortization expense with respect to intangible assets

	Quarters Ended				Nine Months Ended
	September 25,		September 27,		September 25,		September 27,
(in thousands)	2016		2015		2016		2015
Amortization expense	$	11,998	$	12,071	$	35,992	$	36,286

Amortization expense for the five succeeding fiscal years

The estimated amortization expense for the remainder of fiscal year 2016 and the five succeeding fiscal years is as follows: 

	Amortization
	Expense
Year	(in thousands)
2016 (Remainder)	$	11,994
2017		48,907
2018		47,275
2019		23,769
2020		418
2021		296

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INVESTMENTS IN UNCONSOLIDATED COMPANIES (Tables)

9 Months Ended

Sep. 25, 2016

INVESTMENTS IN UNCONSOLIDATED COMPANIES

Summary of carrying value of investments in unconsolidated companies

(in thousands)	% Ownership	September 25,		December 27,
Company	Interest	2016		2015
CareerBuilder, LLC	15.0	$	240,248	$	230,170
Other	Various		4,660		3,368
		$	244,908	$	233,538

Summary of income statement information from the entities accounted for under the equity method

	Nine months ended
	September 25,		September 27,
(in thousands)	2016		2015
Net revenues	$	523,823	$	526,729
Gross profit		494,632		490,140
Operating income		78,077		100,495
Net income		77,599		97,887

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LONG-TERM DEBT (Tables)

9 Months Ended

Sep. 25, 2016

LONG-TERM DEBT

Summary of company's long-term debt

	Face Value at		Carrying Value
	September 25,		September 25,		December 27,
(in thousands)	2016		2016		2015
Notes:
9.00% senior secured notes due in 2022	$	506,415	$	497,898	$	506,571
5.750% notes due in 2017		34,645		34,327		54,551
7.150% debentures due in 2027		89,188		84,763		84,469
6.875% debentures due in 2029		276,230		260,754		259,834
Long-term debt	$	906,478	$	877,742	$	905,425
Less current portion		34,645		34,327		—
Total long-term debt, net of current	$	871,833	$	843,415	$	905,425

Redeemed or repurchase of notes

(in thousands)	Face Value
9.00% senior secured notes due in 2022	$	10,000
5.750% notes due in 2017		20,797
Total notes repurchased	$	30,797

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EMPLOYEE BENEFITS (Tables)

9 Months Ended

Sep. 25, 2016

EMPLOYEE BENEFITS

Schedule of elements of retirement expense

	Quarters Ended				Nine Months Ended
	September 25,		September 27,		September 25,		September 27,
(in thousands)	2016		2015		2016		2015
Pension plans:
Service Cost	$	4,700	$	2,920	$	14,100	$	8,760
Interest Cost		22,167		21,248		66,501		63,745
Expected return on plan assets		(27,107)		(26,571)		(81,322)		(79,712)
Actuarial loss		4,596		5,548		13,787		16,645
Net pension expense		4,356		3,145		13,066		9,438
Net post-retirement benefit credit		(662)		(653)		(1,984)		(1,960)
Net retirement expenses	$	3,694	$	2,492	$	11,082	$	7,478

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STOCK PLANS (Tables)

9 Months Ended

Sep. 25, 2016

STOCK PLANS

Summary of the restricted stock units ("RSUs") activity

		Weighted
		Average Grant
		Date Fair
		Value
Nonvested — December 27, 2015	153,880	$	29.83
Granted	124,690	$	10.62
Vested	(67,335)	$	30.90
Forfeited	(3,730)	$	15.78
Nonvested — September 25, 2016	207,505	$	18.19

Summary of the stock appreciation rights ("SARs") activity

The following table summarizes the stock appreciation rights (“SARs”) activity during the nine months ended September 25, 2016: 

		Weighted		Aggregate
		Average		Intrinsic Value
	SARs	Exercise Price		(in thousands)
Outstanding December 27, 2015	320,125	$	73.49	$	—
Forfeited	(50)	$	27.60
Expired	(8,225)	$	83.46
Outstanding September 25, 2016	311,850	$	73.24	$	—

Summary of stock-based compensation expense

	Quarters Ended				Nine Months Ended
	September 25,		September 27,		September 25,		September 27,
(in thousands)	2016		2015		2016		2015
Stock-based compensation expense	$	348	$	498	$	2,105	$	2,750

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SIGNIFICANT ACCOUNTING POLICIES (Details) $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 25, 2016 USD ($) company item	Sep. 25, 2016 USD ($) company item	Dec. 27, 2015 USD ($)
Investments in Unconsolidated Companies Activity
Number of media companies | company	29	29
Number of markets | item	28	28
Number of states | item	14	14
Length of fiscal quarter	91 days	273 days
Long-term debt fair value disclosure
Estimated fair value of long-term debt | $	$ 821,400	$ 821,400	$ 729,800
Long-term debt | $	$ 877,742	$ 877,742	$ 905,425
Career Builder LLC
Investments in Unconsolidated Companies Activity
Ownership Interest (as a percent)	15.00%	15.00%

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SIGNIFICANT ACCOUNTING POLICIES - Reverse Stock Split (Details)	Jun. 07, 2016 shares
Reverse Stock Split
Fractional shares issued	0
Common Class A
Reverse Stock Split
Conversion ratio	0.1
Common Class B
Reverse Stock Split
Conversion ratio	0.1

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SIGNIFICANT ACCOUNTING POLICIES - PP&E, Intangibles (Details)	3 Months Ended		9 Months Ended
	Sep. 25, 2016 USD ($)	Sep. 27, 2015 USD ($)	Sep. 25, 2016 USD ($) segment company	Sep. 27, 2015 USD ($)
Property, plant and equipment
Accelerated depreciation incurred	$ 300,000	$ 4,900,000	$ 6,900,000	$ 6,700,000
Depreciation expense	8,561,000	15,224,000	$ 33,559,000	39,606,000
Assets held for sale
Number of media companies with assets held for sale | company			2
Intangible Assets and Goodwill
Goodwill impairment and other asset write-downs	330,000		$ 330,000	300,429,000
Goodwill impairment charge	0		0	290,900,000
Impairment charge of newspaper masthead	0		0	9,500,000
Intangible assets subject to amortization, net
Impairment of long-lived assets subject to amortization	$ 0	$ 0	$ 0	$ 0
Segment reporting
Number of operating segments | segment			2

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SIGNIFICANT ACCOUNTING POLICIES - AOCI (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 25, 2016	Sep. 27, 2015	Sep. 25, 2016	Sep. 27, 2015
Changes in accumulated other comprehensive loss
Balance at the beginning of the period			$ (421,808)
Other comprehensive income (loss) before reclassifications			(937)
Amounts reclassified from AOCL			6,907
Other comprehensive income (loss)	$ 1,484	$ 2,689	5,970	$ 8,073
Balance at the end of the period	(415,838)		(415,838)
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward]
Compensation	95,045	95,015	296,056	302,778
Provision for income taxes	(5,885)	(4,882)	(20,731)	(16,035)
Net of tax	9,804	1,149	37,279	308,992
Minimum Pension and Post-Retirement Liability
Changes in accumulated other comprehensive loss
Balance at the beginning of the period			(411,956)
Amounts reclassified from AOCL			6,907
Other comprehensive income (loss)			6,907
Balance at the end of the period	(405,049)		(405,049)
Minimum Pension and Post-Retirement Liability | Amount Reclassified from AOCI
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward]
Compensation	3,838	4,802	11,511	14,408
Provision for income taxes	(1,535)	(1,921)	(4,604)	(5,763)
Net of tax	2,303	$ 2,881	6,907	$ 8,645
Other Comprehensive Loss Related to Equity Investments
Changes in accumulated other comprehensive loss
Balance at the beginning of the period			(9,852)
Other comprehensive income (loss) before reclassifications			(937)
Other comprehensive income (loss)			(937)
Balance at the end of the period	$ (10,789)		$ (10,789)

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SIGNIFICANT ACCOUNTING POLICIES - EPS (Details) - shares shares in Thousands	3 Months Ended		9 Months Ended
	Sep. 25, 2016	Sep. 27, 2015	Sep. 25, 2016	Sep. 27, 2015
Anti-dilutive stock options, restricted stock units and restricted stock
Weighted average anti-dilutive stock options
Anti-dilutive stock options (in shares)	305	524	284	544

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SIGNIFICANT ACCOUNTING POLICIES - Cash flow (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 25, 2016	Sep. 27, 2015
Cash Flow Information
Interest paid (net of amount capitalized)	$ 47,349	$ 53,241
Income taxes paid (net of refunds)	762	$ 197,718
Other non-cash financing activities
Increase of financing obligation for contribution of real property to pension plan	47,130
Reduction of pension obligation for contribution of real property to pension plan	(47,130)
Reduction of financing obligation for sale of Charlotte property by pension plan	(25,060)
Reduction of property, plant and equipment, net for sale of Charlotte property by pension plan	$ (26,171)

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INTANGIBLE ASSETS AND GOODWILL (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 25, 2016	Sep. 27, 2015	Sep. 25, 2016	Sep. 27, 2015
Intangible assets subject to amortization, gross
Balance at the beginning of the period			$ 833,254,000
Balance at the end of the period	$ 833,254,000		833,254,000
Accumulated amortization
Balance at the beginning of the period			(663,735,000)
Amortization Expense	(11,998,000)	$ (12,071,000)	(35,992,000)	$ (36,286,000)
Balance at the end of the period	(699,727,000)		(699,727,000)
Intangible assets subject to amortization, net
Balance at the beginning of the period			169,519,000
Amortization Expense	(11,998,000)	(12,071,000)	(35,992,000)	(36,286,000)
Balance at the end of the period	133,527,000		133,527,000
Mastheads
Balance at the beginning of the period			179,132,000
Impairment Charges	0		0	(9,500,000)
Balance at the end of the period	179,132,000		179,132,000
Goodwill [Roll Forward]
Balance at the beginning of the period			705,174,000
Goodwill impairment charge	0		0	(290,900,000)
Balance at the end of the period	705,174,000		705,174,000
Total
Balance at the beginning of the period			1,053,825,000
Amortization Expense	(11,998,000)	$ (12,071,000)	(35,992,000)	$ (36,286,000)
Balance at the end of the period	$ 1,017,833,000		$ 1,017,833,000

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INTANGIBLE ASSETS AND GOODWILL - Amortization (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 25, 2016	Sep. 27, 2015	Sep. 25, 2016	Sep. 27, 2015
INTANGIBLE ASSETS AND GOODWILL
Amortization expense	$ 11,998	$ 12,071	$ 35,992	$ 36,286
Estimated amortization expense
2016 (remainder)	11,994		11,994
2017	48,907		48,907
2018	47,275		47,275
2019	23,769		23,769
2020	418		418
2021	$ 296		$ 296

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INVESTMENTS IN UNCONSOLIDATED COMPANIES (Details) - USD ($) $ in Thousands		3 Months Ended	9 Months Ended
	Feb. 23, 2016	Mar. 27, 2016	Sep. 25, 2016	Sep. 27, 2015	Dec. 27, 2015
Investments in unconsolidated companies and joint ventures
Investments in unconsolidated companies			$ 244,908		$ 233,538
Equity Method Investment, Summarized Financial Information, Gross Profit (Loss) [Abstract]
Proportionate share of net income before taxes (as a percent)			20.00%
Net revenue			$ 523,823	$ 526,729
Gross profit			494,632	490,140
Operating income			78,077	100,495
Net income			$ 77,599	$ 97,887
Home Finder LLC | Disposal Group, Disposed of by Sale, Not Discontinued Operations
Equity Method Investment, Summarized Financial Information, Gross Profit (Loss) [Abstract]
Write down of certain unconsolidated investments		$ 900
Home Finder LLC | Disposal Group, Disposed of by Sale, Not Discontinued Operations | Affiliate Agreement
Equity Method Investment, Summarized Financial Information, Gross Profit (Loss) [Abstract]
Term of Agreement	3 years
Career Builder LLC
Investments in unconsolidated companies and joint ventures
Ownership Interest (as a percent)			15.00%
Investments in unconsolidated companies			$ 240,248		230,170
Other
Investments in unconsolidated companies and joint ventures
Investments in unconsolidated companies			$ 4,660		$ 3,368

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LONG-TERM DEBT (Details) - USD ($) $ in Thousands	Sep. 25, 2016	Dec. 27, 2015
Long-term debt disclosures
Face Value	$ 906,478
Less current portion	34,645
Total long-term debt, net of current	871,833
Carrying value	877,742	$ 905,425
Less current portion	34,327
Total long-term debt, net of current	843,415	905,425
Unamortized debt issuance costs and discounts	$ 28,700	$ 31,900
9.00% senior secured notes due in 2022
Long-term debt disclosures
Interest rate (as a percent)	9.00%	9.00%
Face Value	$ 506,415
Carrying value	$ 497,898	$ 506,571
5.750% notes due in 2017
Long-term debt disclosures
Interest rate (as a percent)	5.75%	5.75%
Face Value	$ 34,645
Carrying value	$ 34,327	$ 54,551
7.150% debentures due in 2027
Long-term debt disclosures
Interest rate (as a percent)	7.15%	7.15%
Face Value	$ 89,188
Carrying value	$ 84,763	$ 84,469
6.875% debentures due in 2029
Long-term debt disclosures
Interest rate (as a percent)	6.875%	6.875%
Face Value	$ 276,230
Carrying value	$ 260,754	$ 259,834

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LONG-TERM DEBT - Notes and Covenants (Details) $ in Thousands		1 Months Ended	3 Months Ended			9 Months Ended
	Oct. 21, 2014 USD ($)	Oct. 31, 2016 USD ($)	Dec. 25, 2016 USD ($)	Sep. 25, 2016 USD ($)	Sep. 27, 2015 USD ($)	Sep. 25, 2016 USD ($)	Sep. 27, 2015 USD ($)	Dec. 27, 2015
LONG-TERM DEBT
Face value of notes redeemed or repurchased				$ 0
Gain (loss) on extinguishment of debt, net					$ 1,632	$ 1,535	$ 749
Notes repurchased privately				30,797		$ 30,797
Amendment 21 October 2014
LONG-TERM DEBT
Maximum borrowing capacity, before amendment	$ 65,000
Revolving credit facility | LIBOR
LONG-TERM DEBT
Variable rate basis						London Interbank Offered Rate
Revolving credit facility | Base rate
LONG-TERM DEBT
Variable rate basis						base rate
Revolving credit facility | Amendment 21 October 2014
LONG-TERM DEBT
Outstanding line of credit				0		$ 0
Maximum consolidated leverage ratio						6.00
Minimum threshold amount of debt used to calculate consolidated total leverage ratio						$ 20,000
Dividends restricted if consolidated leverage ratio is exceeded						5.25
Revolving credit facility | Amendment 21 October 2014 | Minimum
LONG-TERM DEBT
Commitment fees for the unused revolving credit (as a percent)						0.50%
Revolving credit facility | Amendment 21 October 2014 | Maximum
LONG-TERM DEBT
Commitment fees for the unused revolving credit (as a percent)						0.625%
Revolving credit facility | Amendment 21 October 2014 | LIBOR | Minimum
LONG-TERM DEBT
Basis spread on variable rate (as a percent)						2.75%
Revolving credit facility | Amendment 21 October 2014 | LIBOR | Maximum
LONG-TERM DEBT
Basis spread on variable rate (as a percent)						4.25%
Revolving credit facility | Amendment 21 October 2014 | Base rate | Minimum
LONG-TERM DEBT
Basis spread on variable rate (as a percent)						1.75%
Revolving credit facility | Amendment 21 October 2014 | Base rate | Maximum
LONG-TERM DEBT
Basis spread on variable rate (as a percent)						3.25%
Letter of credit
LONG-TERM DEBT
Maximum borrowing capacity	$ 35,000
Percentage of aggregate undrawn amount of letter of credit required to provide cash collateral	101.00%
Outstanding letters of credit				$ 30,700		$ 30,700
9.00% Notes
LONG-TERM DEBT
Ownership percentage in each of the guarantor subsidiaries				100.00%		100.00%
9.00% senior secured notes due in 2022
LONG-TERM DEBT
Interest rate (as a percent)				9.00%		9.00%		9.00%
Notes repurchased privately				$ 10,000		$ 10,000
5.750% notes due in 2017
LONG-TERM DEBT
Interest rate (as a percent)				5.75%		5.75%		5.75%
Face value of notes redeemed or repurchased					$ 25,000	$ 66,400
Notes repurchased privately				$ 20,797		$ 20,797
5.750% notes due in 2017 | Expected
LONG-TERM DEBT
Face value of notes redeemed or repurchased		$ 17,800
Gain (loss) on extinguishment of debt, net			$ (400)

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EMPLOYEE BENEFITS (Details) $ in Thousands	1 Months Ended	3 Months Ended		9 Months Ended
	Feb. 29, 2016 USD ($)	Sep. 25, 2016 USD ($)	Sep. 27, 2015 USD ($)	Sep. 25, 2016 USD ($) item	Sep. 27, 2015 USD ($)
EMPLOYEE BENEFITS
Number of new participants | item				0
Retirement expense for continuing operations
Net pension expense		$ 3,694	$ 2,492	$ 11,082	$ 7,478
Pension plan
Retirement expense for continuing operations
Service cost		4,700	2,920	14,100	8,760
Interest cost		22,167	21,248	66,501	63,745
Expected return on plan assets		(27,107)	(26,571)	(81,322)	(79,712)
Actuarial loss		4,596	5,548	13,787	16,645
Net pension expense		4,356	3,145	13,066	9,438
Value of contributions to plan	$ 47,100
Post-retirement plans
Retirement expense for continuing operations
Net pension expense		$ (662)	$ (653)	$ (1,984)	$ (1,960)

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EMPLOYEE BENEFITS - Contributions (Details) - USD ($)	1 Months Ended			3 Months Ended	9 Months Ended
	Oct. 31, 2016	May 31, 2016	Feb. 29, 2016	Dec. 25, 2016	Sep. 25, 2016	Dec. 27, 2015
Medical cost trend rates
Financing obligations					$ 53,502,000	$ 32,398,000
Pension plan
Medical cost trend rates
Value of contributions to plan			$ 47,100,000
Required pension contribution			$ 0
Term of leases entered into for property contributed to pension plan			11 years
Gain or loss recognized on the contribution of property					0
Financing obligations		$ (25,100,000)
Reduction in plant, property, and equipment		26,200,000
Aggregate Annual Rent Payments On Contributed Property			$ 3,500,000
Proceeds from sale of real property location		$ 34,300,000
Expected | Pension plan
Medical cost trend rates
Proceeds from sale of real property location	$ 4,800,000
Other Operating Income (Expense) | Pension plan
Medical cost trend rates
(Loss) on sale of real property location					$ (1,100,000)
Other Operating Income (Expense) | Expected | Pension plan
Medical cost trend rates
(Loss) on sale of real property location				$ (200,000)

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COMMITMENTS AND CONTINGENCIES (Details) $ in Millions	1 Months Ended		9 Months Ended
	Feb. 28, 2009 item	Dec. 31, 2008 item	Sep. 25, 2016 USD ($) item
Letter of credit
Additional disclosures
Outstanding letters of credit | $			$ 30.7
"Sacramento Case"
Contingencies
Number of carriers	5,000
Number of phases			3
"Fresno Case"
Contingencies
Number of carriers		3,500
Number of phases			2
PNC
Contingencies
Ownership Interest (as a percent)			27.00%

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STOCK PLANS - Activity (Details) $ / shares in Units, $ in Millions	9 Months Ended
	Sep. 25, 2016 USD ($) $ / shares shares
RSUs
RSU's
Nonvested at the beginning of the period (in shares) | shares	153,880
Granted (in shares) | shares	124,690
Vested (in shares) | shares	(67,335)
Forfeited (in shares) | shares	(3,730)
Nonvested at the end of the period (in shares) | shares	207,505
Weighted Average Grant Date Fair Value
Outstanding at the beginning of the period (in dollars per share) | $ / shares	$ 29.83
Granted (in dollars per share) | $ / shares	10.62
Vested (in dollars per share) | $ / shares	30.90
Forfeited (in dollars per share) | $ / shares	15.78
Outstanding at the end of the period (in dollars per share) | $ / shares	$ 18.19
Additional disclosures
Total fair value | $	$ 0.8
Stock options and SARs
Options/SARs
Outstanding at the beginning of the period (in shares) | shares	320,125
Forfeited (in shares) | shares	(50)
Expired (in shares) | shares	(8,225)
Outstanding at the end of the period (in shares) | shares	311,850
Weighted Average Exercise Price
Outstanding at the beginning of the period (in dollars per share) | $ / shares	$ 73.49
Forfeited (in dollars per share) | $ / shares	27.60
Expired (in dollars per share) | $ / shares	83.46
Outstanding at the end of the period (in dollars per share) | $ / shares	$ 73.24

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STOCK PLANS - Stock-based compensation (Details) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 25, 2016 USD ($)	Sep. 27, 2015 USD ($)	Sep. 25, 2016 USD ($) item	Sep. 27, 2015 USD ($)
STOCK PLANS
Number of stock-based compensation plans | item			2
Stock-based compensation expense | $	$ 348	$ 498	$ 2,105	$ 2,750