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EX-32.2 - MNI 3Q 2010 EXH 32.2 PJT SIG - MCCLATCHY COmni3q10qexh32-2.htm
EX-31.2 - MNI 3Q 2010 EXH 31.2 PJT SIG - MCCLATCHY COmni3q10qexh31-2.htm
EX-32.1 - MNI 3Q 2010 EXH 32.1 GP SIG - MCCLATCHY COmni3q10qexh32-1.htm
EX-31.1 - MNI 3Q 2010 EXH 31.1 GP SIG - MCCLATCHY COmni3q10qexh31-1.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549

FORM 10-Q

 (Mark One)

 
[X]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
   
 
For the quarterly period ended:
September 26, 2010
 
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
mnilogo11310.jpg
(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)
916-321-1846
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.   [ X ] 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 [ X ]    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
[X]
No
 As of October 29, 2010, the registrant had shares of common stock as listed below outstanding:
Class A Common Stock
  60,155,042
Class B Common Stock
  24,800,962
 
 
 


 

THE McCLATCHY COMPANY

INDEX TO FORM 10-Q


 
 
Part I - FINANCIAL INFORMATION
Page
   
Item 1 - Financial Statements (unaudited):
 
     
 
Condensed Consolidated Balance Sheet – September 26, 2010, and December 27, 2009
1
   
 
Condensed Consolidated Statement of Operations for the three and nine months ended September 26, 2010, and September 27, 2009
3
   
 
Condensed Consolidated Statement of Cash Flows for the nine months ended September 26, 2010, and September 27, 2009
4
   
 
Condensed Consolidated Statement of Stockholders’ Equity for the period December 27, 2009, to September 26, 2010
5
   
 
Notes to Condensed Consolidated Financial Statements
6
   
Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations
24
   
Item 3 - Quantitative and Qualitative Disclosures About Market Risk
38
   
Item 4 - Controls and Procedures
38
   
Part II - OTHER INFORMATION
 
   
Item 1 – Legal Proceedings
38
   
Item 1A - Risk Factors
39
   
Item  2– Unregistered Sales of Equity Securities and Use of Proceeds
45
   
Item 6 - Exhibits
45
   
Signatures
45
   
Index of Exhibits
46

 
 

 

PART I - FINANCIAL INFORMATION

Item 1 - FINANCIAL STATEMENTS

THE McCLATCHY COMPANY
 
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
 
(In thousands, except share amounts)
 
             
ASSETS
 
September 26,
   
December 27,
 
CURRENT ASSETS:
 
2010
   
2009
 
   Cash and cash equivalents
  $ 2,376     $ 6,157  
   Trade receivables – (less allowance of $8,410 in 2010 and $10,298 in 2009)
    156,790       205,840  
   Other receivables
    13,843       9,660  
   Newsprint, ink and other inventories
    32,296       36,374  
   Deferred income taxes
    24,761       23,648  
   Income tax receivable
    2,838       10,019  
   Land and other assets held for sale
    4,756       6,390  
   Other current assets
    16,329       23,153  
      253,989       321,241  
PROPERTY, PLANT AND EQUIPMENT:
               
   Land
    195,423       195,918  
   Building and improvements
    390,007       389,803  
   Equipment
    797,402       800,034  
   Construction in progress
    4,767       3,091  
      1,387,599       1,388,846  
   Less accumulated depreciation
    (667,794 )     (621,266 )
      719,805       767,580  
INTANGIBLE ASSETS:
               
   Identifiable intangibles – net
    667,887       711,758  
   Goodwill
    1,006,020       1,006,020  
      1,673,907       1,717,778  
                 
INVESTMENTS AND OTHER ASSETS:
               
   Investments in unconsolidated companies
    330,716       322,109  
   Other assets
    192,070       174,191  
      522,786       496,300  
TOTAL ASSETS
  $ 3,170,487     $ 3,302,899  
                 
See notes to condensed consolidated financial statements.
               


 
1

 

THE McCLATCHY COMPANY
 
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED) – Continued
 
(In thousands, except share amounts)
 
             
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
September 26,
   
December 27,
 
CURRENT LIABILITIES:
 
2010
   
2009
 
   Accounts payable
  $ 49,184     $ 46,240  
   Accrued compensation
    92,933       86,969  
   Income taxes payable
    4,246       11,453  
   Unearned revenue
    77,321       78,908  
   Accrued interest
    20,974       21,148  
   Other accrued liabilities
    18,951       18,492  
      263,609       263,210  
                 
NON-CURRENT LIABILITIES:
               
   Long-term debt
    1,762,068       1,896,436  
   Deferred income taxes
    226,589       243,167  
   Pension and post-retirement obligations
    592,021       604,701  
   Other long-term obligations
    130,041       125,196  
      2,710,719       2,869,500  
COMMITMENTS AND CONTINGENCIES
               
                 
STOCKHOLDERS’ EQUITY:
               
   Common stock $.01 par value:
               
     Class A - authorized 200,000,000 shares, issued
               
       60,168,831 in 2010 and 59,705,101 in 2009
    602       597  
     Class B - authorized 60,000,000 shares,
               
        issued 24,800,962  in 2010 and 2009
    248       248  
     Additional paid-in capital
    2,211,528       2,207,122  
     Accumulated deficit
    (1,761,700 )     (1,783,101 )
     Treasury stock at cost, 96,991 shares in 2010 and 37,902 shares in 2009
    (464 )     (153 )
     Accumulated other comprehensive loss
    (254,055 )     (254,524 )
 
    196,159       170,189  
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
  $ 3,170,487     $ 3,302,899  
                 
See notes to condensed consolidated financial statements.
               



 
2

 

THE McCLATCHY COMPANY
 
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
 
(In thousands, except per share amounts)
 
                         
   
Three Months Ended
   
Nine Months Ended
 
   
September 26,
   
September 27,
   
September 26,
   
September 27,
 
   
2010
   
2009
   
2010
   
2009
 
REVENUES - NET:
                       
   Advertising
  $ 249,134     $ 266,120     $ 762,595     $ 834,470  
   Circulation
    66,383       69,029       203,735       206,860  
   Other
    12,193       12,241       38,975       37,020  
      327,710       347,390       1,005,305       1,078,350  
OPERATING EXPENSES:
                               
   Compensation
    126,574       130,048       394,144       453,483  
   Newsprint and supplements
    32,962       33,312       97,925       133,183  
   Depreciation and amortization
    32,651       32,678       100,373       110,685  
   Other operating expenses
    85,184       90,985       258,836       286,706  
      277,371       287,023       851,278       984,057  
                                 
OPERATING INCOME
    50,339       60,367       154,027       94,293  
                                 
NON-OPERATING (EXPENSES) INCOME:
                               
   Interest expense
    (44,032 )     (34,549 )     (134,248 )     (102,775 )
   Interest income
    449       9       520       46  
   Equity income in unconsolidated
      companies, net
    5,368       5,378       8,153       3,849  
   Gain (loss) on extinguishment of debt
    -       (680 )     (7,519 )     44,149 44,149  
   Other - net
    42       20       146       (314 )
      (38,173 )     (29,822 )     (132,948 )     (55,045 )
INCOME FROM CONTINUING OPERATIONS
                               
  BEFORE INCOME TAX PROVISION
    12,166       30,545       21,079       39,248  
INCOME TAX PROVISION
    85       6,944       3,678       11,368  
INCOME FROM CONTINUING OPERATIONS
    12,081       23,601       17,401       27,880  
INCOME (LOSS) FROM DISCONTINUED
  OPERATIONS - NET OF INCOME TAXES
    (161 )     (38 )     4,000       381  
NET INCOME
  $ 11,920     $ 23,563     $ 21,401     $ 28,261  
                                 
NET INCOME PER COMMON SHARE:
                               
   Basic:
                               
     Income from continuing operations
  $ 0.14     $ 0.28     $ 0.20     $ 0.33  
     Income from discontinued operations
    -       -       .05       -  
     Net income per share
  $ 0.14     $ 0.28     $ 0.25     $ 0.33  
   Diluted:
                               
     Income from continuing operations
  $ 0.14     $ 0.28     $ 0.20     $ 0.33  
     Income from discontinued operations
    -       -       .05       -  
     Net income per share
  $ 0.14     $ 0.28     $ 0.25     $ 0.33  
                                 
WEIGHTED AVERAGE NUMBER OF COMMON SHARES:
                         
   Basic
    84,834       84,052       84,695       83,565  
   Diluted
    85,458       84,061       85,443       83,579  
                                 
See notes to condensed consolidated financial statements.
                         

 
3

 

THE McCLATCHY COMPANY
 
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
 
(In thousands)
 
   
Nine Months Ended
 
   
September 26,
   
September 27,
 
   
2010
   
2009
 
CASH FLOWS FROM OPERATING ACTIVITIES:
           
   Income from continuing operations
  $ 17,401     $ 27,880  
   Reconciliation to net cash provided by continuing operations:
               
     Depreciation and amortization
    100,373       110,685  
     Employee benefit expense
    4,230       1,358  
     Stock compensation expense
    3,545       1,440  
     Equity income in unconsolidated companies
    (8,153 )     (3,849 )
     Contribution to pension plan
    (8,235 )     -  
     Loss (gain) on extinguishment of debt
    7,519       (44,149 )
     Write-off of deferred financing costs
    2,148       364  
     Other
    7,408       8,714  
     Changes in certain assets and liabilities:
               
       Trade receivables
    49,050       74,226  
       Inventories
    4,078       15,054  
       Other assets
    5,114       (2,915 )
       Accounts payable
    4,803       (28,066 )
       Accrued compensation
    5,964       (24,009 )
       Income taxes
    (22,660 )     (39,161 )
       Other liabilities
    (4,937 )     (12,545 )
       Net cash provided by operating activities of continuing operations
    167,648       85,027  
       Net cash used by operating activities of discontinued operations
    (743 )     (6,879 )
       Net cash provided by operating activities
    166,905       78,148  
CASH FLOWS FROM INVESTING ACTIVITIES:
               
   Purchases of property, plant and equipment
    (9,646 )     (11,227 )
   Proceeds from sale of property, plant and equipment
    3,157       10,699  
   Proceeds from sale of investment
    -       4,214  
   Deposit for Miami land
    6,000       -  
   Equity investments and other
    (120 )     (23 )
       Net cash provided (used) by investing activities of continuing operations
    (609 )     3,663  
CASH FLOWS FROM FINANCING ACTIVITIES:
               
   Proceeds from issuance of notes
    864,710       -  
   Net repayments of revolving bank debt
    (310,700 )     (22,730 )
   Repayment of term debt
    (505,765 )     (2,000 )       
   Purchase of notes
    (187,339 )     -  
   Payment of financing costs
    (31,538 )     (5,665 )
   Extinguishment of public notes and related expenses
    -       (38,050 )
   Payment of cash dividends
    -       (14,905 )
   Other - principally stock transactions
    555       771  
       Net cash used by financing activities
    (170,077 )     (82,579 )
NET CHANGE IN CASH AND CASH EQUIVALENTS
    (3,781 )     (768 )
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
    6,157       4,998  
CASH AND CASH EQUIVALENTS, END OF PERIOD
  $ 2,376     $ 4,230  
OTHER CASH FLOW INFORMATION:
               
   Cash paid (received) during the period for:
               
     Income taxes (net of refunds)
    26,723       55,806  
     Interest (net of capitalized interest)
    114,704       88,162  
   Other non-cash financing activities:
               
     Issuance of senior notes and future interest in debt exchange
    -       43,503  
     Carrying value of unsecured notes exchanged for senior notes in debt exchange
    -       (89,423 )
See notes to condensed consolidated financial statements.
               

 
4

 

THE McCLATCHY COMPANY
 
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (UNAUDITED)
 
(In thousands, except share and per share amounts)
 
       
                           
Accumulated
             
               
Additional
         
Other
             
   
Par Value
   
Paid-In
   
Accumulated
   
Comprehensive
   
Treasury
       
   
Class A
   
Class B
   
Capital
   
Deficit
   
Income (Loss)
   
Stock
   
Total
 
BALANCES, DECEMBER 28, 2009
  $ 597     $ 248     $ 2,207,122     $ (1,783,101 )   $ (254,524 )   $ (153 )   $ 170,189  
Net income
                                                       
Other comprehensive income (loss), net of tax:
                            21,401                       21,401  
  Pension and postretirement plans:
                                                       
    Unamortized gain/prior service credit
                                    280               280  
  Other comprehensive income related to
     investments in unconsolidated companies
                                    189               189  
Other comprehensive income
                                                    469  
Total comprehensive income
                                                    21,870  
Issuance of 463,730 Class A shares under
     stock plans
    5               861                               866  
Stock compensation expense
                    3,545                               3,545  
Purchase of 59,089 shares of treasury stock
                                            (311 )     (311 )
BALANCES, SEPTEMBER 26, 2010
  $ 602     $ 248     $ 2,211,528     $ (1,761,700 )   $ (254,055 )   $ (464 )   $ 196,159  
   
See notes to condensed consolidated financial statements.
 


 
5

 


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

NOTE 1.   SIGNIFICANT ACCOUNTING POLICIES

The McClatchy Company (the Company or McClatchy) is the third-largest newspaper publisher in the United States based upon daily circulation, with 30 daily newspapers and 43 non-dailies in 29 markets across the country.  McClatchy also operates leading local websites and direct marketing operations in each of its markets, which complement its newspapers and extend its audience reach in each market.  The Company’s newspapers include, among others, The Miami Herald, The Sacramento Bee, the Fort Worth Star-Telegram, The Kansas City Star, The Charlotte Observer, and The (Raleigh) News & Observer.

McClatchy also owns a portfolio of digital assets, including 14.4% of CareerBuilder LLC, the nation’s largest online jobs website, 25.6% of Classified Ventures LLC, a newspaper industry partnership that offers classified websites such as the auto website Cars.com and the rental site Apartments.com, and 33.3% of HomeFinder, LLC, which operates the online real estate website HomeFinder.com. McClatchy’s Class A common stock is listed on the New York Stock Exchange under the symbol MNI.

The condensed consolidated financial statements include the Company and its subsidiaries.  Intercompany items and transactions are eliminated.  In preparing the financial statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenues and expenses during the reporting period.  Management also makes judgments that affect disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary (consisting of normal recurring items) to present fairly the Company’s 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 expected for the full year.  These financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the period ended December 27, 2009.

Stock - based compensation – All share-based payments to employees, including grants of employee stock options, stock appreciation rights and restricted stock under equity incentive plans and purchases under the employee stock purchase plan (ESPP), are recognized in the financial statements based on their fair values.  As of September 26, 2010, the Company had six stock-based compensation plans.  Total stock-based compensation expense was $1.4 million and $3.5 million for the three and nine months ended September 26, 2010, respectively, and was $0.5 million and $1.4 million for the three and nine months ended September 27, 2009, respectively.

Income taxes – The Company accounts 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.

 
6

 


Current accounting standards in the United States prescribe a recognition threshold and measurement of a tax position taken or expected to be taken in an enterprise’s tax returns.  The Company recognizes accrued interest related to unrecognized tax benefits in interest expense.  Accrued penalties are recognized as a component of income tax expense.  There were no significant changes to the Company’s unrecognized tax benefits recorded on the Company’s balance sheet in the third quarter or first nine months of fiscal 2010.

Fair value of financial instruments – Generally accepted accounting principles in the United States (“GAAP”) require the disclosure of the fair value of certain financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate fair value.  The Company estimated the fair values presented below using appropriate valuation methodologies and market information available as of quarter-end.  Considerable judgment is required to develop estimates of fair value, and the estimates presented are not necessarily indicative of the amounts that the Company could realize in a current market exchange.  The use of different market assumptions or estimation methodologies could have a material effect on the estimated fair values.  Additionally, the fair values were estimated at quarter-end, and current estimates of fair value may differ significantly from the amounts presented.

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

Cash and equivalents, accounts receivable, accounts payable and current portion of long-term debt.  The carrying amount of these items approximates fair value.

Long-term debt.  The fair value of long-term debt is determined based on a number of observable inputs including the current market activity of the Company’s publicly traded notes and bank debt, trends in investor demand and market values of comparable publicly traded debt.  As of September 26, 2010, the estimated fair value of long-term debt was $1.59 billion compared to a carrying value of $1.76 billion.

Comprehensive income (loss) – The Company records changes in its net assets from non-owner sources in its Statement of Stockholders’ Equity.  The following table summarizes the composition of total comprehensive income (loss) (in thousands):

   
For the Three
Months Ended
   
For the Nine
Months Ended
 
   
September 26,
2010
   
September 27,
2009
   
September 26,
2010
   
September 27,
2009
 
Net income
  $ 11,920     $ 23,563     $ 21,401     $ 28,261  
Pension amortization from other comprehensive
  income (loss), net of tax
    115       (186 )     280       26,632  
Other comprehensive income
  related to equity investments
    994       478       189       548  
Total comprehensive income
  $ 13,029     $ 23,855     $ 21,870     $ 55,441  

 
7

 

Earnings per share (EPS) – 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 options and restricted stock and are computed using the treasury stock method.  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 for the three and nine months ended September 26, 2010, were 5.4 million for both periods, and were 6.2 million and 6.4 million for the three and nine months ended September 27, 2009, respectively.

New accounting pronouncements – In June 2009, a new pronouncement was issued amending the interpretation of accounting literature related to consolidations.  The new guidance applies to determinations as to whether an enterprise has a controlling financial interest in a variable interest entity. This determination identifies the primary beneficiary of a variable interest entity as the enterprise that has both the power to direct the activities of a variable interest entity that most significantly impacts the entity’s economic performance and the obligation to absorb losses or the right to receive benefits of the entity that could potentially be significant to the variable interest entity. The new pronouncement also requires ongoing reassessments of whether an enterprise is the primary beneficiary and eliminates the quantitative approach previously required for determining the primary beneficiary. The new pronouncement was effective for the Company on December 28, 2009. The adoption of this pronouncement did not have a material effect on the condensed consolidated financial statements.

NOTE 2.   INVESTMENTS IN UNCONSOLIDATED COMPANIES AND OTHER ASSETS

The following is the Company’s ownership interest and investment in unconsolidated companies and joint ventures as of September 26, 2010 and December 27, 2009 (dollars in thousands):

 Company
 
% Ownership Interest
   
September 26,
2010
   
December 27, 2009
 
CareerBuilder, LLC
    14.4     $ 219,986     $ 218,736  
Classified Ventures, LLC
    25.6       92,236       81,538  
Seattle Times Company (C-Corporation)
    49.5       -       -  
HomeFinder, LLC
    33.3       3,409       5,048  
Ponderay (general partnership)
    27.0       12,621       13,754  
Other
 
Various
      2,464       3,033  
            $ 330,716     $ 322,109  

The Company uses the equity method of accounting for a majority of investments.   During the nine months ended September 26, 2010, McClatchy’s proportionate share of net income from one investee listed in the table above was greater than 20% of McClatchy’s consolidated net income before taxes.  Summarized income statement information for this company for the first nine months of 2010 and 2009 follows (in thousands):

   
Nine Months Ended
 
   
September 26,
 2010
   
September 27,
2009
 
     Revenues
  $ 246,321     $ 231,539  
 O Operating income
    56,911       49,815  
 Net income
    46,635       37,679  
 
As part of the Company’s acquisition of Knight-Ridder, Inc. in 2006, the Company acquired 10 acres of land in Miami.  This land is under contract to be sold for gross proceeds of $190.0 million pursuant to a sale agreement originally entered into in March 2005. In December 2009, the closing date under the terms of the sales contract (as amended) was extended to January 31, 2011.


 
8

 
The Company determined the fair value of the land at December 27, 2009 by developing an analysis that included, among other things, the consideration of the existing sales contract. The carrying value was determined to be $151.0 million.  As indicated above, the closing date under the sales contract was extended until January 31, 2011, and should the buyer fail to close by that date further analysis will be required to determine the fair value of the land, which may result in an additional impairment. The Company has received a total of $16.0 million in non-refundable deposits since 2007 from the buyer and is entitled to a termination fee of $7.0 million should the buyer fail to close the transaction. 

NOTE 3. INTANGIBLE ASSETS AND GOODWILL
                   
Intangible assets and goodwill, along with their weighted-average amortization periods consisted of the following as of September 26, 2010 and December 27, 2009 (in thousands):
     
   
September 26, 2010
                   
Weighted
                   
Average
   
Gross
   
Accumulated
   
Net
 
Amortization
   
Amount
   
Amortization
   
Amount
 
Period
Intangible assets subject to amortization:
                   
   Advertiser and subscriber lists
  $ 803,840     $ (349,803 )   $ 454,037  
14 years
   Other
    37,070       (29,607 )     7,463  
  8 years
     Total
  $ 840,910     $ (379,410 )     461,500    
                           
Other intangible assets not subject to amortization:
                   
   Newspaper mastheads
                    206,387    
     Total
                    667,887    
   Goodwill
                    1,006,020    
     Total intangible assets and goodwill
                  $ 1,673,907    
     
   
December 27, 2009
                         
Weighted
                         
Average
   
Gross
   
Accumulated
   
Net
 
Amortization
   
Amount
   
Amortization
   
Amount
 
Period
Intangible assets subject to amortization:
                         
   Advertiser and subscriber lists
  $ 803,840     $ (307,177 )   $ 496,663  
14 years
   Other
    37,066       (28,358 )     8,708  
  8 years
     Total
  $ 840,906     $ (335,535 )     505,371    
                           
Other intangible assets not subject to amortization:
                   
   Newspaper mastheads
                    206,387    
     Total
                    711,758    
   Goodwill
                    1,006,020    
     Total intangible assets and goodwill
                  $ 1,717,778    
 
Changes in indefinite lived intangible assets and goodwill as of September 26, 2010, consisted of the following (in thousands):
 
   
Original
Gross Amount
   
Accumulated Impairment
   
Carrying
Amount
 
     Mastheads and other
  $ 683,000     $ (476,613 )   $ 206,387  
     Goodwill
    3,581,016       (2,574,996 )     1,006,020  
   Total
  $ 4,264,016     $ (3,051,609 )   $ 1,212,407  
 
 
9

 
 

 
Amortization expense for continuing operations was $14.7 million and $14.8 million in the three months ended September 26, 2010, and September 27, 2009, respectively; and was $44.0 million and $44.5 million for the nine months ended September 26, 2010, and September 27, 2009, respectively. The estimated amortization expense for the remainder of fiscal 2010 and the five succeeding fiscal years is as follows (in thousands):
 
   
Amortization
 
 
Year
 
Expense
 
         
 
                     2010 (remaining)
  $ 14,649  
 
2011
    57,538  
 
2012
    57,363  
 
2013
    56,223  
 
2014
    51,745  
 
2015
    47,266  







 
10

 

NOTE 4.   LONG-TERM DEBT
 
As of September 26, 2010, and December 27, 2009, long-term debt consisted of the following (in thousands):
 
   
September 26,
2010
   
December 27,
2009
 
Term A bank debt, interest of 7.3% at September 26, 2010 and 4.2% at
   December 27, 2009
  $ 41,035     $ 546,800  
Revolving bank debt, interest of 4.5% at September 26, 2010 and 4.2% at
   December 27, 2009
    20,000       330,700  
Notes:
               
        $875 million 11.50% senior secured notes due in 2017
    865,612       -  
        $375 thousand 15.75% senior notes due in 2014(1)
    552       41,120  
        $18 million 7.125% debentures due in 2011
    18,187       167,001  
        $169 million 4.625% debentures due in 2014
    156,899       154,694  
        $347 million 5.750% debentures due in 2017
    324,030       321,594  
        $89 million 7.150% debentures due in 2027
    82,396       82,099  
        $276 million 6.875% debentures due in 2029
    253,357       252,428  
Long-term debt
  $ 1,762,068     $ 1,896,436  
________
(1)  
 Includes future interest to be paid on these notes.

At December 27, 2009, prior to the refinancing transaction discussed below, the Company’s bank debt consisted of a credit facility entered into on June 27, 2006 (as amended through May 20, 2009, the “original credit agreement”), that provided for a $1.14 billion senior secured credit facility and that was originally established in connection with the acquisition of Knight-Ridder, Inc.  At December 27, 2009, the Company’s original credit agreement consisted of a $590.0 million, five-year revolving credit facility and a $546.8 million, five-year term loan. Both the term loan and the revolving credit facility under the original credit agreement were due on June 27, 2011.  This agreement was amended and restated in connection with the debt refinancing transaction discussed below.

The Company’s outstanding notes are stated net of unamortized discounts (totaling $73.7 million and $69.4 million as of September 26, 2010, and December 27, 2009, respectively) resulting from recording such assumed liabilities at fair value as of the June 27, 2006, acquisition of Knight Ridder and the issuance of the 11.50% senior secured notes at an original issue discount.

Long-term debt includes $11.8 million of bank term debt and $3.4 million of revolver debt due on June 27, 2011, and $18.2 million of 7.125% notes due on June 1, 2011, which are expected to be refinanced using the Company’s bank revolving credit, which matures on July 1, 2013.

 In accounting for the refinancing discussed below, management analyzed the transactions on an individual lender basis in accordance with relevant accounting guidance as it relates to debt modification or extinguishment.  The Company recognized $7.5 million in loss on debt refinancing and subsequent debt payments in 2010.


 
11

 

Debt Refinancing:

On January 26, 2010, the Company entered into an amendment to the original credit agreement that became effective on February 11, 2010, immediately prior to the closing of an offering of $875.0 million of senior secured notes. The original credit agreement was amended and restated in its entirety (the “Amended and Restated Credit Agreement”).  Pursuant to this amendment, the Amended and Restated Credit Agreement is a senior secured credit facility that provides for a $41.0 million term loan and a $236.4 million revolving credit facility, including a $100.0 million letter of credit sub-facility and extended the term of certain of the credit commitments to July 1, 2013.  In connection with the Amended and Restated Credit Agreement, certain of the lenders did not extend the maturity of their commitments from the original maturity date of June 27, 2011.  Non-extended term loans of $11.8 million will mature on June 27, 2011, as will revolving loan commitments of $40.4 million.  The remaining term loans of $29.2 million and revolving loan commitments of $196.0 million under the Amended and Restated Credit Agreement will mature on July 1, 2013.

In connection with the Amended and Restated Credit Agreement, the Company issued new 11.50% Senior Secured Notes due February 15, 2017 (the “2017 Notes”), totaling $875.0 million. The 2017 Notes are secured by a first-priority lien on certain of McClatchy’s and the subsidiary guarantors’ assets and rank pari passu with liens granted under McClatchy’s Amended and Restated Credit Agreement. The assets securing the loans made under the Amended and Restated Credit Agreement and the 2017 Notes include intangible assets, inventory, receivables and certain other assets, but exclude land, buildings, machinery and equipment. In addition, in February 2010, the Company completed tender offers for its 7.125% notes due in 2011 and 15.75% senior notes due in 2014, paying $187.3 million in cash for aggregate principal amounts of $148.0 million of 2011 notes and $23.9 million of 2014 notes.

The 2017 Notes were originally issued in a private placement.  In August 2010, the original 2017 Notes were exchanged for new 2017 Notes that have terms that are substantially identical to the original notes, except that the exchange notes are not subject to transfer restrictions or registration rights relating to the original notes and the exchanged 2017 Notes were issued in an offering registered with the U.S. Securities and Exchange Commission and are now publicly traded. The original guarantees on the 2017 Notes were exchanged for guarantees with terms that are substantially identical to the original guarantees, except that the exchange guarantees are not subject to the transfer restrictions or registration rights relating to the original guarantees.

Debt under the Amended and Restated Credit Agreement incurs interest at the London Interbank Offered Rate (LIBOR) plus a spread ranging from 425 basis points to 575 basis points or at a base rate plus a spread ranging from 325 basis points to 475 basis points.  In each case, the applicable spread is based upon the Company’s consolidated total leverage ratio (as defined in the Amended and Restated Credit Agreement).  In the case of a LIBOR spread, the Amended and Restated Credit Agreement sets a floor on LIBOR for the purposes of interest payments of no less than 300 basis points (except for working capital borrowings, which are not subject to the 300 basis point floor and are limited to $120 million and a 30 day term).  A commitment fee for the unused revolving credit is priced at 50 basis points to 75 basis points based upon the Company’s consolidated total leverage ratio (as defined in the Amended and Restated Credit Agreement). The Company currently pays interest on borrowings under the Amended and Restated Credit Agreement at a rate of 425 basis points over the 300 basis point LIBOR floor (or 7.25%) and pays 50.0 basis points for commitment fees.

 
12

 

The Amended and Restated Credit Agreement contains quarterly financial covenants, including requirements that the Company maintain a minimum consolidated interest coverage ratio (as defined in the Amended and Restated Credit Agreement) of at least 1.50 to 1.00 from the quarter ending in March 2010 through the quarter ending in September 2011; increasing to 1.60 to 1.00 from the quarter ending in December 2011 through the quarter ending in September 2012; and further increasing to 1.70 to 1.00 thereafter. The Company is required to maintain a maximum consolidated leverage ratio (as defined in the Amended and Restated Credit Agreement) of not more than 6.75 to 1.00 from the quarter ending in March 2010 through the quarter ending December 2010; declining to 6.50 to 1.00 from the quarter ending in March 2011 through the quarter ending in December 2011; declining to 6.25 to 1.00 from the quarter ending in March 2012 through the quarter ending in December 2012 and declining to 6.00 to 1.00 thereafter.  Because of the significance of the Company’s outstanding debt, remaining in compliance with debt covenants is critical to the Company’s operations.  If revenue declines continue beyond those currently anticipated, the Company expects to continue to restructure operations and reduce debt to maintain compliance with its covenants.  As of September 26, 2010, Company was in compliance with all financial debt covenants.

The Amended and Restated Credit Agreement includes requirements for mandatory prepayments of bank debt from certain sources of cash, including from the sale of the Miami land, limitations on cash dividends allowed to be paid at certain leverage levels and other covenants, including limitations on the incurrence of additional debt, the ability to retire public bonds early, the disposition of assets, the granting of liens, transactions with affiliates and certain investments.

The 2017 Notes are governed by an indenture entered into on February 11, 2010, which includes a number of covenants that are applicable to the Company and its restricted subsidiaries. The covenants are subject to a number of important exceptions and qualifications set forth in the indenture for the 2017 Notes.  These covenants include, among other things, restrictions on the ability of the Company and its restricted subsidiaries to incur additional debt; make investments and other restricted payments; pay dividends on capital stock or redeem or repurchase capital stock or subordinated obligations; sell assets or enter into sale/leaseback transactions; create specified liens; create or permit restrictions on the ability of the Company’s restricted subsidiaries to pay dividends or make other distributions to the Company; 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 its subsidiaries’ assets, taken as a whole.

Substantially all of the Company’s subsidiaries have guaranteed the Company’s obligations under the Amended and Restated Credit Agreement and 2017 Notes (“senior secured debt”).  See Note 7 for consolidating financial information on the Company’s subsidiaries that have guaranteed the senior secured debt (“Guarantor Subsidiaries”), all other subsidiaries (“Non-Guarantor Subsidiaries”) and the parent company.

In addition, the Company has granted a security interest to the banks that are a party to the Amended and Restated Credit Agreement and the trustee under the indenture governing the 2017 Notes that include, but are not limited to, intangible assets, inventory, receivables and certain minority investments as collateral for the debt. The security interest does not include any land, buildings, machinery and equipment (“PP&E”) and any leasehold interests and improvements with respect to such PP&E, which would be reflected on a consolidated balance sheet of the Company and its subsidiaries, and shares of stock and indebtedness of the subsidiaries of the Company.

 
13

 


At September 26, 2010, the Company had outstanding letters of credit totaling $54.3 million securing estimated obligations stemming from workers’ compensation claims and other contingent claims. The Company had $162.1 million available under its revolving credit facilities under its Amended and Restated Credit Agreement.

The following table presents the approximate annual maturities of debt as of September 26, 2010, based upon the Company’s required payments, for the next five years and thereafter (in thousands):

 
Year
 
Payments (1)
 
 
2011
  $ 33,413  
 
2012
    59  
 
2013
    45,886  
 
2014
    169,313  
 
2015
    -  
 
Thereafter
    1,587,056  
 
Debt principal
  $ 1,835,727  
________

(1)      Includes future interest to be paid on $375,000 of 15.75% notes due in 2014.

NOTE 5.  EMPLOYEE BENEFITS

The Company sponsors a defined benefit pension plan (retirement plan), which covers a majority of its employees. The retirement plan was frozen in March 2009 as discussed below.  Benefits are based on years of service and compensation.  The Company funds contributions to the pension plan as required by law as advised by the plan’s actuaries.  No contributions to the Company’s retirement plan were made in fiscal 2009.  The Company made an $8.2 million contribution to its retirement plan in the third quarter of fiscal 2010 and does not anticipate any additional contributions in fiscal 2010.

The Company also has a limited number of supplemental retirement plans to provide key employees with additional retirement benefits, which were also frozen in March 2009 as discussed below.  These plans are funded on a pay-as-you-go basis and the accrued pension obligation is largely included in other long-term obligations.

In March 2009, the Company implemented a restructuring plan that reduced its work force by approximately 1,650 positions.  Through March 29, 2009, the workforce reductions resulted in severance costs of $20.4 million.  In connection with the restructuring action, the Company also froze all pension plans as of March 31, 2009.  Accordingly, the Company recorded a curtailment gain of $1.9 million in the first nine months of fiscal 2009 related to the plan freezes. The elements of pension costs for continuing operations are as follows (in thousands):

   
Three Months Ended
   
Nine Months Ended
 
   
September 26,
2010
   
September 27,
2009
   
September 26,
2010
   
September 27,
2009
 
Service cost
  $ 1,471     $ 1,160     $ 4,414     $ 5,622  
Interest cost
    23,449       23,979       70,347       71,157  
Expected return on plan assets
    (24,038 )     (25,069 )     (72,113 )     (74,257 )
Prior service cost amortization
    4       4       11       29  
Actuarial loss (gain)
    557       (2 )     1,671       20  
Curtailment gain
    -       -       -       (1,900 )
  Net pension expense
  $ 1,443     $ 72     $ 4,330     $ 671  
 
 
14

 

 
The Company also provides for or subsidizes post-retirement health care and certain life insurance benefits for a grandfathered group of employees and retirees.  The elements of post-retirement benefits for continuing operations are as follows (in thousands):

   
Three Months Ended
   
Nine Months Ended
 
   
September 26,
2010
   
September 27,
2009
   
September 26,
2010
   
September 27,
2009
 
Service cost
  $ -     $ -     $ -     $ -  
Interest cost
    372       540       1,116       1,621  
Prior service cost amortization
    (270 )     (262 )     (810 )     (786 )
Actuarial gain
    (153 )     (49 )     (460 )     (148 )
  Net post-retirement expense (benefit)
  $ (51 )   $ 229     $ (154 )   $ 687  


The Company had separate deferred compensation plans (401(k) plans) for employees of Knight Ridder, Inc. and The McClatchy Company, which enable qualified employees to voluntarily defer compensation.  On March 31, 2009, the Company temporarily suspended its matching contribution to the 401(k) plans.  On June 29, 2009, the Knight Ridder 401(k) plan was merged into the McClatchy plan   The Company’s amended 401(k) plan includes a Company match (once reinstated) and a supplemental contribution which is tied to Company performance (as defined in the plan).

The Company has made no matching contributions to the plan since the second fiscal quarter of 2009.  Matching contributions in the first nine months of fiscal 2009 were $2.8 million. The Company incurred $2.7 million of supplemental contribution expense for the 401(k) plan in the third fiscal quarter of 2010 and $8.3 million in the first nine months of 2010. No supplemental contributions were recorded in 2009.


NOTE 6.  COMMITMENTS AND CONTINGENCIES

Libel and other legal actions arise in the ordinary course of business and certain legal actions are currently pending against the Company.  From time to time, the Company is involved as a party in various proceedings with government agencies, including environmental matters.  Management believes, after reviewing such actions with counsel, that the anticipated outcome of any pending action will not have a material adverse effect on the Company’s condensed consolidated financial statements taken as a whole, although no assurances can be given.  No material amounts for any losses from litigation which may ultimately occur have been recorded in the consolidated financial statements as management believes that any such losses are not probable at this time.

 
15

 


The Company has certain indemnification obligations related to disposed newspaper operations.  In the first quarter of 2010, the Company recorded $6.5 million in income related to a reduction in a reserve for potential indemnification obligations.  The obligations are associated with disposed newspapers and the reserve was reduced because the affected newspapers paid the current amounts and have shown the ability to continue to service their obligations.  The original charge for this item (recorded in 2009) and its reversal has been included in results from discontinued operations.

NOTE 7.  FINANCIAL INFORMATION FOR SUBSIDIARY GUARANTORS AND NON-GUARANTORS

Substantially all of the Company’s subsidiaries (“Guarantor Subsidiaries”) have guaranteed the Company’s obligations under the Amended and Restated Credit Agreement and 2017 Notes.  Each of the Guarantor Subsidiaries are 100% owned by The McClatchy Company (“Parent”) and the guarantees provided by the Guarantor Subsidiaries are full and unconditional and joint and several.  The primary asset owned by the Parent other than ownership of its subsidiaries is land held for sale in Miami valued at $151 million. See Note 2 for a greater description of this land. The after-tax proceeds of the sale of this land are required to be used to pay down debt under the Company’s Amended and Restated Credit Agreement and are excluded from the requirement to repay the 2017 Notes.

The following tables present condensed consolidating financial information for the Guarantor Subsidiaries, all other subsidiaries (“Non-Guarantor Subsidiaries”) and the Parent.  These condensed consolidating financial statements were prepared in accordance with Rule 3-10 of the Securities and Exchange Commission Regulation S-X, “Financial Statements of Guarantors and Issuers of Guaranteed Securities Registered or Being Registered.”  The Company accounts for investments in these subsidiaries under the equity method of accounting, under which the Company’s book value of its subsidiaries’ capital structures (investments in subsidiaries and intercompany balances) is reflected as an asset by the Parent. To consolidate the financial statements of the Parent and its subsidiaries, the Parent’s investment and the subsidiary’s capital structure must be eliminated as shown in the elimination column on the Consolidating Balance Sheets that follows. Similarly, the Parent’s equity income or loss from its subsidiaries is eliminated in the Consolidated Statement of Operations that follows.  All cash receipts and payments take place at Guarantor Subsidiaries and no cash transactions take place at Non-Guarantor Subsidiaries or at the Parent company.  Accordingly all activities attributed to the Parent and Non-Guarantor Subsidiaries are of a non-cash nature in the statement of cash flows. Amounts are in thousands:

 
16

 


CONDENSED CONSOLIDATING BALANCE SHEET AS OF SEPTEMBER 26, 2010 (UNAUDITED)
 
   
Guarantor Subsidiaries
   
Non-Guarantor Subsidiaries
   
Parent
   
Eliminations
   
Consolidated
 
CURRENT ASSETS:
                             
   Cash and cash equivalents
  $ 2,376                       $ 2,376  
   Trade receivables, net of allowances
    156,790                         156,790  
   Newsprint, ink and other inventories
    32,296                         32,296  
   Other current assets
    57,150     $ 367     $ 5,010             62,527  
   Total current assets
    248,612       367       5,010             253,989  
Property, plant and equipment, net
    719,804       1                     719,805  
Identifiable intangibles - net
    667,887                             667,887  
Goodwill
    1,006,020                             1,006,020  
Investments in unconsolidated companies
    313,367       1,059       16,290             330,716  
Other assets
    8,207               183,863             192,070  
Investment in and advances to subsidiaries
                    1,951,102     $ (1,951,102 )        
TOTAL ASSETS
  $ 2,963,897     $ 1,427     $ 2,156,265     $ (1,951,102 )   $ 3,170,487  
CURRENT LIABILITIES:
                                       
   Accounts payable and accrued compensation
  $ 135,913     $ 810     $ 5,394             $ 142,117  
   Unearned revenue
    77,321                               77,321  
   Other accrued liabilities
    19,800       (5 )     24,376               44,171  
   Total current liabilities
    233,034       805       29,770               263,609  
Long-term debt
                    1,762,068               1,762,068  
Pension and post-retirement obligations
    592,021                               592,021  
Other long-term obligations
    188,233       129       168,268               356,630  
Total Liabilities
    1,013,288       934       1,960,106               2,974,328  
CAPITAL STRUCTURE
    1,950,609       493       196,159     $ (1,951,102 )     196,159  
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
  $ 2,963,897     $ 1,427     $ 2,156,265     $ (1,951,102 )   $ 3,170,487  



 
17

 


CONDENSED CONSOLIDATING BALANCE SHEET AS OF DECEMBER 27, 2009 (UNAUDITED)
 
   
Guarantor Subsidiaries
   
Non-Guarantor Subsidiaries
   
Parent
   
Eliminations
   
Consolidated
 
CURRENT ASSETS:
                             
   Cash and cash equivalents
  $ 6,157                       $ 6,157  
   Trade receivables, net of allowances
    205,840                         205,840  
   Newsprint, ink and other inventories
    36,374                         36,374  
   Other current assets
    70,054     $ 440     $ 2,376             72,870  
   Total current assets
    318,425       440       2,376             321,241  
Property, plant and equipment, net
    767,577       3                     767,580  
Identifiable intangibles - net
    711,758                             711,758  
Goodwill
    1,006,020                             1,006,020  
Investments in unconsolidated companies
    304,838       1,106       16,165             322,109  
Other assets
    7,634               166,557             174,191  
Investment in and advances to subsidiaries
                    2,062,951     $ (2,062,951 )        
TOTAL ASSETS
  $ 3,116,252     $ 1,549     $ 2,248,049     $ (2,062,951 )   $ 3,302,899  
CURRENT LIABILITIES:
                                       
   Accounts payable and accrued compensation
  $ 126,870     $ 904     $ 5,435             $ 133,209  
   Unearned revenue
    78,908                               78,908  
   Other accrued liabilities
    27,236       28       23,829               51,093  
   Total current liabilities
    233,014       932       29,264               263,210  
Long-term debt
                    1,896,436               1,896,436  
Pension and post-retirement obligations
    604,701                               604,701  
Other long-term obligations
    215,928       275       152,160               368,363  
Total Liabilities
    1,053,643       1,207       2,077,860               3,132,710  
CAPITAL STRUCTURE
    2,062,609       342       170,189     $ (2,062,951 )     170,189  
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
  $ 3,116,252     $ 1,549     $ 2,248,049     $ (2,062,951 )   $ 3,302,899  


 
18

 


CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 26, 2010 (UNAUDITED)
 
   
Guarantor Subsidiaries
   
Non-Guarantor Subsidiaries
   
Parent
 
Eliminations
 
Consolidated
 
REVENUES - NET:
                         
   Advertising
  $ 249,134                   $ 249,134  
   Circulation
    66,383                     66,383  
   Other
    12,066     $ 127               12,193  
 Total revenues -net
    327,583       127               327,710  
OPERATING EXPENSES:
                               
   Compensation
    126,543       31               126,574  
   Newsprint and supplements
    32,962                       32,962  
   Depreciation and amortization
    32,651                       32,651  
   Other operating expenses
    84,803       25     $ 356         85,184  
Total operating expenses
    276,959       56       356         277,371  
OPERATING INCOME (LOSS)
    50,624       71       (356         50,339  
NON-OPERATING (EXPENSES) INCOME:
                                 
   Interest credit (expense)
    882               (44,914 )         (44,032 )
   Intercompany (charges)  credits
    (31,984 )     3,380       28,604            
   Other – net
    5,463       220       176         5,859  
INCOME (LOSS) FROM CONTINUING
   OPERATIONS BEFORE INCOME TAXES
    24,985       3,671       (16,490 )         12,166  
INCOME TAX PROVISION (BENEFIT)
    5,724       1,505       (7,144 )         85  
INCOME (LOSS) FROM CONTINUING OPERATIONS
    19,261       2,166       (9,346 )         12,081  
EQUITY INCOME FROM SUBSIDIARIES
                    21,427  
  (21,427
)      
LOSS FROM DISCONTINUED OPERATIONS,
                                 
   NET OF INCOME TAXES
                    (161 )         (161 )
NET INCOME
  $ 19,261     $ 2,166     $ 11,920  
    (21,427
$ 11,920  


 
19

 



CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 26, 2010 (UNAUDITED)
 
   
Guarantor Subsidiaries
   
Non-Guarantor Subsidiaries
   
Parent
 
Eliminations
 
Consolidated
 
REVENUES - NET:
                         
   Advertising
  $ 762,595                   $ 762,595  
   Circulation
    203,735                     203,735  
   Other
    38,566     $ 409               38,975  
 Total revenues –net
    1,004,896       409               1,005,305  
OPERATING EXPENSES:
                               
   Compensation
    394,046       98               394,144  
   Newsprint and supplements
    97,925                       97,925  
   Depreciation and amortization
    100,373                       100,373  
   Other operating expenses
    257,674       64     $ 1,098         258,836  
Total operating expenses
    850,018       162       1,098         851,278  
OPERATING INCOME (LOSS)
    154,878       247       (1,098 )         154,027  
NON-OPERATING (EXPENSES) INCOME:
                                 
   Interest expense
    (775 )             (133,473 )         (134,248 )
   Loss on debt extinguishment
                    (7,519 )         (7,519 )
   Intercompany (charges)  credits
    (95,992 )     10,139       85,853            
   Other – net
    8,655       (88 )     252         8,819  
INCOME (LOSS) FROM CONTINUING
   OPERATIONSBEFORE INCOME TAXES
    66,766       10,298       (55,985 )         21,079  
INCOME TAX PROVISION (BENEFIT)
    21,237       4,222       (21,781 )         3,678  
INCOME (LOSS) FROM CONTINUING OPERATIONS
    45,529       6,076       (34,204 )         17,401  
EQUITY INCOME FROM SUBSIDIARIES
                    51,605  
    (51,605
     
INCOME FROM DISCONTINUED OPERATIONS,
                                 
   NET OF INCOME TAXES
                    4,000         4,000  
NET INCOME
  $ 45,529     $ 6,076     $ 21,401  
    (51,605
$ 21,401  


 
20

 


CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 27, 2009 (UNAUDITED)
 
   
Guarantor Subsidiaries
   
Non-Guarantor Subsidiaries
   
Parent
 
Eliminations
 
Consolidated
 
REVENUES - NET:
                         
   Advertising
  $ 266,120                   $ 266,120  
   Circulation
    69,029                     69,029  
   Other
    12,068     $ 173               12,241  
 Total revenues –net
    347,217       173