McClatchy Reports Fourth Quarter 2012 Earnings

-- Refinanced 11.5% senior secured notes extending maturity and reducing interest

-- Digital-only advertising revenues up 14.9% from comparable 13-week 2011 quarter

-- Plus Program launched and expected to add more than $20 million to 2013 revenues

-- Advertising revenue from nontraditional sources now at 36.0% of total advertising

Feb 07, 2013, 11:34 ET from The McClatchy Company

SACRAMENTO, Calif., Feb. 7, 2013 /PRNewswire/ -- The McClatchy Company (NYSE: MNI) today reported a net loss in the fourth quarter of 2012 of $30.0 million or 35 cents per share, including a $60.0 million after-tax loss on debt refinancing. In the fourth quarter of 2011 the company reported net income of $42.0 million or 49 cents per diluted share.

The company's fiscal 2012 reporting period is a 53-week year compared to a 52-week year in 2011, and as a result, the fiscal fourth quarter of 2012 includes 14 weeks compared to 13 weeks in the 2011 fiscal fourth quarter. The company estimates that the reported net loss in 2012 was reduced by approximately $4.0 million because of the additional week being reported.

Fourth Quarter Results:

Revenues in the fourth quarter of 2012 were $355.7 million, up 1.2% from the fourth quarter of 2011. On a 13-week basis, fourth quarter total revenues were an estimated $333.0 million, down 5.3% compared to fourth quarter 2011, with advertising revenues of approximately $253.9 million, down 6.3%, and circulation revenues of about $65.7 million, down 1.9%.  On a 13-week basis, total digital advertising revenues grew 3.5% in the fourth quarter of 2012, with digital-only advertising revenues up 14.9% from the 2011 quarter. Total digital advertising represented 20.2% of total advertising revenues in the fourth quarter of 2012 compared to 18.5% of total advertising revenues in the fourth quarter of 2011.

Results in the fourth quarter of 2012 included the following items:

  • A loss from the extinguishment of debt totaling $94.5 million ($60.0 million after-tax) related to the refinancing of the company's 11.5% secured bonds due in 2017.
  • A reduction to equity income totaling $7.0 million ($4.3 million after-tax) related to an impairment charge taken by a company in which McClatchy is a minority owner.
  • Accelerated depreciation totaling $2.3 million ($1.3 million after-tax) related to relocating Miami newspaper operations.
  • Severance and other restructuring charges totaling $2.3 million ($1.4 million after-tax).
  • The reversal of non-cash interest expense totaling $0.4 million ($0.2 million after-tax) related to the release of tax reserves.
  • A favorable adjustment to net income totaling $3.0 million for a reduction to tax reserves related to state tax positions previously taken.

Income in the fourth quarter of 2012, excluding the net impact of these items, was $33.8 million compared to income in the fourth quarter of 2011 adjusted for certain items of $43.2 million. (Non-GAAP measurements are discussed below.)

Operating cash expenses on a comparable 13-week period, excluding charges associated with restructuring plans, declined approximately $2.8 million, or 1.2%, from the 2011 quarter. Operating cash flow, a non-GAAP measure, was $118.0 million, and was an estimated $109.5 million on a 13-week basis, in the fourth quarter of 2012.

Full Year Results:

Net loss for fiscal 2012 was $0.1 million, or 0 cents per share and included the $60.0 million after-tax loss on debt refinancing taken in the fourth quarter of 2012. Net income for fiscal 2011 was $54.4 million, or 63 cents per diluted share. 

Revenues in 2012 were down 3.1% to $1.231 billion compared to $1.270 billion in 2011.  On a 52-week basis, 2012 total revenues were an estimated $1.208 billion, down 4.9% compared to 2011 total revenues, with advertising revenues of approximately $898.2 million, down 6.1% and circulation revenues of approximately $258.4 million, down 1.5%.

Results in 2012 included the following items:

  • A loss from the extinguishment of debt totaling $88.4 million ($56.1 million after-tax) primarily related to the refinancing of the company's 11.5% secured bonds due in 2017.
  • A reduction to equity income totaling $7.0 million ($4.3 million after-tax) related to an impairment charge taken by a company in which McClatchy is a minority owner.
  • Accelerated depreciation totaling $8.8 million ($5.3 million after-tax) primarily related to relocating Miami newspaper operations.
  • Severance and other restructuring charges totaling $9.5 million ($5.9 million after-tax).
  • The reversal of non-cash interest expense totaling $8.1 million ($5.1 million after-tax) related to the release of tax reserves.
  • A favorable adjustment to net income totaling $10.0 million for tax settlements and adjustments to reserves related to state tax positions previously taken.

Income in 2012, excluding the net impact of these items, was $56.4 million compared to income in 2011 adjusted for certain items of $60.1 million. (Non-GAAP measurements are discussed below.)

Debt Refinancing:

On Dec. 18, 2012, the company issued $910 million aggregate principal amount of 9.0% Senior Secured Notes due 2022 and retired $762.4 million aggregate principal amount of its 11.50% Senior Secured Notes due 2017; and on Dec. 31, 2012, it retired $68,000 aggregate principal amount of the 11.5% Senior Secured Notes due 2017. On Jan. 17, 2013, the company redeemed in full the remaining $83.5 million aggregate principal amount of its 11.5% Senior Secured Notes due 2017.

Management's Comments:

Commenting on McClatchy's results, Pat Talamantes, McClatchy's President and CEO, said, "As we look back on 2012, we see a year in which the company made great progress on many fronts. Our successful transition to a hybrid print and digital media company continued as we were able to grow our nontraditional revenue sources with new product introductions while cultivating and enhancing our existing products.  In addition, we were able to strengthen the company's capital structure by refinancing a good portion of our debt at a lower interest rate while extending the maturity date by five years.

"In spite of a softer-than-expected Christmas season for our advertisers, our ad revenue picture improved through most of 2012. On a 52-week basis, advertising revenues were down 6.1% in 2012 compared to down 7.7% in 2011. In the fourth quarter of 2012, advertising revenues were down 6.3% despite going up against the toughest comparison of the year.

"We have been focused on diversifying and growing our revenue stream and believe that our year-over-year revenue improvement speaks to the success of this strategy. We were again pleased that advertising revenues from both digital and direct marketing grew in the quarter. These two sources now contribute more than 36% of our advertising revenues on a combined basis.

"Our unrelenting focus on growing our digital business continues to be rewarded. Total digital advertising revenues in the fourth quarter of 2012 were up 3.5% on a 13-week basis. Our digital traffic also grew in the quarter with daily average local unique visitors to our websites and mobile content up 3.4% compared to the same quarter of 2011. Digital-only revenues were up double digits for every quarter in 2012 with the fourth quarter up 14.9%.  Digital advertising now represents 20.2% of McClatchy's total advertising revenues compared to 18.5% in 2011. McClatchy's digital advertising revenues reached a record high in 2012 of $197.0 million on a 52-week basis.

"Direct marketing advertising revenues were up 1.8% in the fourth quarter on a 13-week basis. Over the last 11 quarters, this category has shown positive growth in all but one quarter. Direct marketing accounted for 15.9% of total advertising revenues in the quarter and more than 14% for 2012.

"The company-wide rollout of our new subscription packages, known as our Plus Program, is exceeding our initial expectations. Under the Plus Program, a metered paywall at each of our newspaper websites requires users to pay for content after accessing a limited number of pages or news articles for free each month. Existing home delivery subscribers are given full access to the digital content and rolled into a higher-priced, bundled print and digital subscription when their newspaper subscription renews.

"The early results are promising: a vast majority of renewing subscribers have accepted the program, telling us our print readers value our content and high-quality journalism and are willing to pay for it in a digital format. Similarly, we have added thousands of new digital-only subscribers to our paying customer base. In total, the Plus Program contributed $1.2 million in incremental revenues in 2012 which is impressive considering that most of our newspapers launched the program in the fourth quarter. We believe that the new Plus Program could result in more than $20 million in new revenues by the end of the year.

"Cash expenses, excluding restructuring costs and on a 13-week basis, were down 1.2% in the quarter as compared to the fourth quarter of 2011. We continued to carefully balance expense management with strategically investing in our products.  For instance, our cash expenses declined even though we invested approximately $2.0 million in new revenue initiatives and enterprise-wide operating systems in the fourth quarter.  

"Our share of income from all equity investments was $4.9 million in the fourth quarter of 2012 and $31.9 million for fiscal 2012. McClatchy's equity investments, particularly our digital investments, are consistently producing strong results which speak to the staying power of the underlying products. We received $38.6 million in distributions in fiscal 2012, including $18.9 million coming from Classified Ventures, LLC and $15.0 million from CareerBuilder, LLC. These are healthy, growing internet companies that are strategically important to our newspapers.

"Looking forward, we will continue to focus on our new products and revenue initiatives, especially in digital and direct marketing while enhancing our existing products.  And we expect revenues from our new Plus Program in 2013 will grow as readers renew their subscriptions. We believe this will translate into an improving revenue picture for McClatchy in 2013.  Based on preliminary data, we estimate that January 2013 advertising revenues were down in the same range as the fourth quarter on a 13-week basis. Given the incremental revenues from our Plus Program, we expect the decline in total revenues in the first quarter of 2013 to improve somewhat compared to the decline we reported in the fourth quarter of 2012. 

"Our disciplined approach to expense management remains firmly in place as we continue to balance opportunities to invest in our business. We expect to continue to benefit from stability in newsprint pricing in 2013. Despite additional investments in new revenue initiatives and enterprise-wide operating systems and higher pension expenses, which together are expected to total about $5 million, we expect cash expenses in the first quarter of 2013 to be flat compared to last year.  For full year 2013, we expect investments in new products and systems will total approximately $10 million and that pension expenses could be higher by $10 million to $12 million. Even so, we expect total cash expenses to be flat with 2012 expenses on a 52-week basis."

Elaine Lintecum, McClatchy's CFO said, "We view the successful issuance of our new $910.0 million 9.0% senior notes due 2022 as a strong vote of confidence in the company's future prospects. Even though we had five years until our 2017 secured bonds matured, this was the right time to do the refinancing given the historically attractive market conditions. Our proforma effective interest rate on debt, after including the retirement of the remaining 11.5% notes in January of this year, is 7.8%, down from 9.1%, and cash interest savings in 2013 is expected to be about $15 million. That savings improves our free cash flow and the extended maturity gives us flexibility to execute our strategic plans and create shareholder value. 

"We used the proceeds from the offering to retire $846.0 million of the company's 11.5% notes. In December 2012, $762.4 million of the 11.5% notes were retired leaving us with a debt balance of $1.712 billion at the end of 2012. The remaining $83.6 million of 11.5% notes were fully redeemed by January 17, 2013, leaving a debt balance of $1.628 billion.

"In addition to the successful bond offering, we were also able to further improve our financial flexibility by increasing our revolving line of credit to $75.0 million while extending the maturity date of the facility to December 2017. Our leverage ratio at the end of the fourth quarter as defined in our credit agreement was 4.72 times cash flow and our interest coverage was 2.44 times. Adjusting for completing the retirement of the remainder of the 11.5% notes in mid January, our proforma leverage ratio was 4.49 times cash flow.

"We ended 2012 with a cash balance of $113.1 million providing the funds for the completion of our debt refinancing. We contributed $7.5 million to our pension plan in early 2013 and expect that there will be no substantial additional cash contributions made for the remainder of the year. We estimate that total capital expenditures for 2013 will be approximately $33 million with $12 million of the amount going towards final costs of the new Miami production facility."

The company's statistical report, which summarizes revenue performance for the fourth fiscal quarter of 2012 and for the full fiscal year 2012, follows. 

Non-GAAP Financial Measures:

In addition to the results reported in accordance with accounting principles generally accepted in the United States ("GAAP") included in this press release, the company has presented non-GAAP financial measures such as adjusted net income, operating cash flows and operating cash flow margins. Adjusted net income is defined as net income excluding amounts (net of tax) for loss (gain) on extinguishment of debt, restructuring related charges, gain on sale of internet asset, accelerated depreciation on equipment, non-cash impairments, reversal of interest on tax items and other certain discrete tax items.  Operating cash flow is defined as operating income plus depreciation and amortization, restructuring related charges and other non-cash impairments.  Operating cash flow margin is defined as operating cash flow divided by net revenues.  These non-GAAP financial measures are reconciled to GAAP measures in the attached schedule. Management believes these non-GAAP measures, when read in conjunction with the company's GAAP financials, provide useful information to investors by offering:

  • The ability to make more meaningful period-to-period comparisons of the company's on-going operating results.
  • The ability to better identify trends in the company's underlying business.
  • A better understanding of how management plans and measures the company's underlying business.
  • An easier way to compare the company's most recent operating results against investor and analyst financial models.

These non-GAAP financial measures should not be considered a substitute or an alternative to these computations calculated in accordance with and required by GAAP.  McClatchy's non-GAAP financial measures may not be comparable to similarly titled measures presented by other companies.

At noon Eastern time today, McClatchy will review its results in a conference call (877-278-1205, pass code 92613413) and webcast (www.mcclatchy.com).  The webcast will be archived at McClatchy's website.

About McClatchy

The McClatchy Company is a leading news and information provider, offering a wide array of print and digital products in each of the markets it serves.  As the third largest newspaper company in the country, McClatchy's operations include 30 daily newspapers, community newspapers, websites, mobile news and advertising, niche publications, direct marketing and direct mail services.  The company's largest newspapers include the Fort Worth Star-Telegram, The Sacramento Bee, The Kansas City Star, The Miami Herald, The Charlotte Observer and The (Raleigh) News & Observer.  McClatchy is listed on the New York Stock Exchange under the symbol MNI.

Additional Information:

Statements in this press release regarding future financial and operating results, including revenues, anticipated savings from cost reduction efforts, cash flows, debt levels, as well as future opportunities for the company and any other statements about management's future expectations, beliefs, goals, plans or prospects constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any statements that are not statements of historical fact (including statements containing the words "believes," "plans," "anticipates," "expects," "estimates" and similar expressions) should also be considered to be forward-looking statements. There are a number of important risks and uncertainties that could cause actual results or events to differ materially from those indicated by such forward-looking statements, including:  McClatchy may not generate cash from operations, or otherwise, necessary to reduce debt or meet debt covenants as expected; McClatchy may not successfully implement circulation strategies designed to increase circulation revenue, including the Plus Program,  and may experience decreased circulation volumes or subscriptions through the Plus Program; McClatchy may experience diminished revenues from retail, classified, national and direct marketing advertising; McClatchy may not achieve its expense reduction targets or may do harm to its operations in attempting to achieve such targets; McClatchy's operations have been, and will likely continue to be, adversely affected by competition, including competition from internet publishing and advertising platforms; increases in the cost of newsprint; bankruptcies or financial strain of its major advertising customers; litigation or any potential litigation; geo-political uncertainties including the risk of war; changes in printing and distribution costs from anticipated levels, including changes in postal rates or agreements; changes in interest rates; changes in pension assets and liabilities; changes in factors that impact pension contribution requirements, including, without limitation, the value of the company-owned real property that McClatchy has contributed to its pension plan; increased consolidation among major retailers in our markets or other events depressing the level of advertising; our inability to negotiate and obtain favorable terms under collective bargaining agreements with unions; competitive action by other companies; and other factors, many of which are beyond our control; as well as the other risks detailed from time to time in the company's publicly filed documents, including the company's Annual Report on Form 10-K for the year ended Dec. 25, 2011, filed with the U.S. Securities and Exchange Commission. McClatchy disclaims any intention and assumes no obligation to update the forward-looking information contained in this release. 

***THE McCLATCHY COMPANY***

CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)

(In thousands, except per share amounts)

Three Months Ended

Year Ended

December 30,

December 25,

December 30,

December 25,

2012

2011

2012

2011

REVENUES - NET:

   Advertising

$       270,386

$      270,948

$       914,738

$      956,305

   Circulation

70,543

66,953

263,286

262,335

   Other

14,735

13,536

52,700

51,000

355,664

351,437

1,230,724

1,269,640

OPERATING EXPENSES:

   Compensation

114,245

104,864

443,401

457,707

   Newsprint, supplements and printing expense

38,567

38,313

140,932

145,874

   Depreciation and amortization

32,971

30,326

125,275

121,528

   Other operating expenses

87,134

87,650

334,980

343,216

272,917

261,153

1,044,588

1,068,325

OPERATING INCOME

82,747

90,284

186,136

201,315

NON-OPERATING (EXPENSES) INCOME:

   Interest expense

(38,509)

(37,739)

(151,334)

(165,434)

   Interest income

18

38

88

97

   Equity gain in unconsolidated companies, net

4,855

6,482

31,935

27,762

   (Loss) gain on extinguishment of debt

(94,504)

1,289

(88,430)

(1,203)

   Other - net

(4)

(17)

79

248

(128,144)

(29,947)

(207,662)

(138,530)

(LOSS) INCOME BEFORE INCOME TAX (BENEFIT) PROVISION

(45,397)

60,337

(21,526)

62,785

INCOME TAX (BENEFIT) PROVISION 

(15,382)

18,332

(21,382)

8,396

NET (LOSS) INCOME 

(30,015)

42,005

(144)

54,389

NET (LOSS) INCOME PER COMMON SHARE:

   Basic

$           (0.35)

$            0.49

$           (0.00)

$            0.64

   Diluted 

$           (0.35)

$            0.49

$           (0.00)

$            0.63

WEIGHTED AVERAGE NUMBER OF COMMON SHARES:

   Basic

85,891

85,403

85,744

85,211

   Diluted

85,891

86,169

85,744

86,044

The McClatchy Company

Consolidated Statistical Report

(In thousands, except for preprints)

Quarter  4

Combined

Print Only

Digital

13-week

13-week

13-week

13-week

13-week

13-week

Revenues - Net:

2012

Proforma

2011

% Change

Proforma

2011

% Change

Proforma

2011

% Change

Advertising 

Retail

$145,538

$136,123

$149,297

-8.8%

$113,874

$127,112

-10.4%

$22,249

$22,185

0.3%

National

22,902

21,490

22,429

-4.2%

15,521

17,797

-12.8%

5,968

4,631

28.9%

Classified Total

58,968

55,345

58,683

-5.7%

31,742

35,420

-10.4%

23,603

23,263

1.5%

Automotive

21,942

20,530

19,629

4.6%

9,092

9,779

-7.0%

11,438

9,851

16.1%

Real Estate

8,561

8,094

10,139

-20.2%

4,999

6,609

-24.4%

3,095

3,530

-12.3%

Employment

10,267

9,658

11,378

-15.1%

4,444

5,394

-17.6%

5,214

5,984

-12.9%

Other

18,198

17,063

17,537

-2.7%

13,207

13,638

-3.2%

3,856

3,898

-1.1%

Direct Marketing

42,888

40,852

40,144

1.8%

40,852

40,144

1.8%

Other Advertising

90

87

395

-78.0%

87

396

-78.0%

Total Advertising

$270,386

$253,897

$270,948

-6.3%

$202,076

$220,869

-8.5%

$51,820

$50,079

3.5%

Circulation

70,543

65,660

66,953

-1.9%

Other

14,735

13,412

13,536

-0.9%

Total Revenues

$355,664

$332,969

$351,437

-5.3%

Advertising Revenues by Market:

California

$47,232

$44,110

$46,036

-4.2%

$35,918

$37,696

-4.7%

$8,191

$8,341

-1.8%

Florida

43,091

40,869

44,470

-8.1%

34,106

37,948

-10.1%

6,764

6,521

3.7%

Texas

28,200

26,374

29,059

-9.2%

20,917

23,733

-11.9%

5,457

5,326

2.5%

Southeast

77,110

72,424

77,755

-6.9%

55,993

62,347

-10.2%

16,432

15,408

6.6%

Midwest

45,871

43,062

45,719

-5.8%

34,088

36,834

-7.5%

8,974

8,885

1.0%

Northwest

28,757

26,938

27,788

-3.1%

21,054

22,311

-5.6%

5,885

5,477

7.4%

Other

125

119

121

-1.7%

0

0

0.0%

119

121

-1.7%

Total Advertising

$270,386

$253,896

$270,948

-6.3%

$202,076

$220,869

-8.5%

$51,822

$50,079

3.5%

Advertising Statistics for Dailies:

Full Run ROP Linage

4,506.7

4,815.1

-6.4%

Millions of Preprints Distributed

1,433.5

1,463.4

-2.0%

Average Paid Circulation:*

Daily

1,990.1

2,079.3

-4.3%

Sunday

2,708.6

2,818.7

-3.9%

Columns may not add due to rounding

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

The McClatchy Company

Consolidated Statistical Report

(In thousands, except for preprints)

December Year-to-Date

Combined

Print Only

Digital

52-week

52-week

52-week

52-week

52-week

52-week

Revenues - Net:

2012

Proforma

2011

% Change

Proforma

2011

% Change

Proforma

2011

% Change

Advertising 

Retail

$474,031

$464,616

$499,250

-6.9%

$384,052

$422,299

-9.1%

$80,565

$76,951

4.7%

National

70,477

69,065

76,296

-9.5%

50,024

57,515

-13.0%

19,041

18,781

1.4%

Classified Total

238,280

234,658

251,409

-6.7%

137,308

156,745

-12.4%

97,349

94,664

2.8%

Automotive

83,396

81,984

80,823

1.4%

38,460

42,668

-9.9%

43,524

38,156

14.1%

Real Estate

36,386

35,919

44,703

-19.6%

22,795

30,229

-24.6%

13,124

14,473

-9.3%

Employment

46,954

46,346

51,933

-10.8%

21,305

24,717

-13.8%

25,041

27,216

-8.0%

Other

71,544

70,409

73,950

-4.8%

54,749

59,131

-7.4%

15,660

14,819

5.7%

Direct Marketing

131,309

129,273

128,339

0.7%

129,273

128,339

0.7%

Other Advertising

641

638

1,011

-36.9%

638

1,011

-36.9%

Total Advertising

$914,738

$898,250

$956,305

-6.1%

$701,295

$765,909

-8.4%

$196,955

$190,396

3.4%

Circulation

263,286

258,403

262,335

-1.5%

Other

52,700

51,377

51,000

0.7%

Total Revenues

$1,230,724

$1,208,030

$1,269,640

-4.9%

Advertising Revenues by Market:

California

$158,036

$154,914

$165,355

-6.3%

$123,667

$133,350

-7.3%

$31,247

$32,005

-2.4%

Florida

136,741

134,520

140,736

-4.4%

109,401

115,662

-5.4%

25,119

25,073

0.2%

Texas

96,928

95,102

106,179

-10.4%

73,670

85,090

-13.4%

21,432

21,089

1.6%

Southeast

264,201

259,515

276,419

-6.1%

198,426

219,204

-9.5%

61,089

57,215

6.8%

Midwest

158,584

155,775

163,410

-4.7%

120,963

129,466

-6.6%

34,812

33,944

2.6%

Northwest

99,701

97,882

103,986

-5.9%

75,168

83,136

-9.6%

22,714

20,850

8.9%

Other

548

542

220

146.4%

0

1

-100.0%

542

220

146.4%

Total Advertising

$914,739

$898,250

$956,305

-6.1%

$701,295

$765,909

-8.4%

$196,955

$190,396

3.4%

Advertising Statistics for Dailies:

Full Run ROP Linage

17,355.8

18,496.9

-6.2%

Millions of Preprints Distributed

4,657.9

4,969.1

-6.3%

Average Paid Circulation:*

Daily

1,985.9

2,103.6

-5.6%

Sunday

2,715.1

2,800.5

-3.0%

Columns may not add due to rounding

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

THE McCLATCHY COMPANY

Reconciliation of GAAP Measures to Non-GAAP Amounts

(In thousands)

Reconciliation of Operating Income (Loss) to Operating Cash Flows

 Three Months Ended 

 Year Ended 

Dec. 30, 

Dec 25, 

Dec. 30, 

Dec 25, 

2012

2011

2012

2011

REVENUES - NET:

   Advertising

$     270,386

$     270,948

$  914,738

$  956,305

   Circulation

70,543

66,953

263,286

262,335

   Other

14,735

13,536

52,700

51,000

355,664

351,437

1,230,724

1,269,640

OPERATING EXPENSES:

   Compensation excluding restructuring charges

113,290

104,263

438,750

443,854

   Newsprint, supplements and printing expense

38,567

38,313

140,932

145,874

   Other cash operating expenses

85,836

83,618

330,140

327,859

   Cash operating expenses excluding  restructuring charges

237,693

226,194

909,822

917,587

   Restructuring related compensation charges

955

601

4,651

13,853

   Other restructuring charges

1,298

890

4,840

890

   Impairment charges related to asset sales

-

3,142

-

14,467

   Depreciation and amortization

32,971

30,326

125,275

121,528

   Total operating expenses

272,917

261,153

1,044,588

1,068,325

OPERATING INCOME 

82,747

90,284

186,136

201,315

Add back:

   Depreciation and amortization

32,971

30,326

125,275

121,528

   Restructuring related compensation charges

955

601

4,651

13,853

   Other restructuring charges

1,298

890

4,840

890

   Impairment charges related to asset sales

-

3,142

-

14,467

OPERATING CASH FLOW

$     117,971

$     125,243

$  320,902

$  352,053

OPERATING CASH FLOW MARGIN

33.2%

35.6%

26.1%

27.7%

Reconciliation of Net Income to Adjusted Net Income

Net Income (Loss):

$     (30,015)

$       42,005

$        (144)

$    54,389

Add back certain items, net of tax:

   Loss (gain) on extinguishment of debt

59,956

(796)

56,108

748

   Restructuring related compensation charges

583

367

2,896

8,547

   Gain on sale of internet asset

-

-

-

(1,182)

   Accelerated depreciation on equipment

1,350

740

5,299

740

   Other restructuring charges

821

553

3,070

553

   Non-cash impairments

-

1,928

-

9,081

   Impairment recorded by minority owned company

4,297

-

4,297

-

   Reversal of interest on tax items

(221)

(219)

(5,069)

(2,969)

   Certain discrete tax items

(2,968)

(1,371)

(10,014)

(9,769)

Adjusted net income

$       33,803

$       43,207

$    56,443

$    60,138

SOURCE The McClatchy Company



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