McClatchy News kicked off the New York Stock Exchange

The McClatchy Company (NYSE: MNI – News) today reported a net loss from continuing operations in the fourth quarter of 2008 of $20.4 million, or 25 cents per share, including a pre-tax non-cash impairment charge of $59.6 million related to newspaper mastheads. Adjusted earnings from continuing operations(1) were $21.8 million, or 26 cents per share, in the fourth quarter of 2008 after excluding several unusual items discussed below. Total net loss including discontinued operations was $21.7 million, or 26 cents per share in the 2008 fourth quarter.

Management conducted its annual impairment testing of goodwill and other long-lived assets as of the end of its fiscal year, December 28, 2008. Upon completion of that testing, the company recorded a pre-tax non-cash impairment charge of $59.6 million to newspaper mastheads. The company did not record an impairment charge related to goodwill in 2008.

For the fourth quarter of 2007, the company reported an after-tax loss from continuing operations of $1.43 billion, or $17.42 per share, including the effect of non-cash after-tax impairment charges related to goodwill and newspaper mastheads of $1.47 billion, or $17.86 per share. Adjusted earnings from continuing operations(1) were $36.1 million, or 44 cents per share, in the fourth quarter of 2007 after excluding the non-cash impairment charges. The company’s total net loss, including the results of discontinued operations, was $1.43 billion, or $17.46 per share.

Revenues in the fourth quarter of 2008 were $470.9 million, down 17.9% from revenues from continuing operations of $573.4 million in the fourth quarter of 2007. Advertising revenues were $388.3 million, down 20.7% from 2007, and circulation revenues were $67.0 million, up 1.4%. Online advertising revenues grew 10.3% in the fourth quarter of 2008 and were 10.9% of total advertising revenues compared to 7.8% of total advertising revenues in the fourth quarter of 2007.

Using cash from operations and proceeds from asset sales, the company repaid $30 million of debt in the quarter and $433 million for all of 2008. Debt at the end of the fiscal year was $2.038 billion, down from $2.471 billion at the end of 2007.

Restructuring Plan

McClatchy noted that the duration and depth of the economic recession have taken a severe toll on its advertising revenues. Given the unprecedented deterioration in revenues and with no visibility of an improving economy, the company is continuing to reduce expenses. McClatchy announced that it is developing a plan to reduce costs by an additional $100 million to $110 million, or approximately seven percent of 2008 cash expenses, over the next 12 months beginning later in the first quarter of 2009. Details of the plan have not yet been finalized and as a result, costs to complete the plan are not yet known. In addition, the company will freeze its pension plans and temporarily suspend the company match to its 401(k) plans, effective March 31, 2009. The company will extend a salary freeze for senior executives in 2009 that was implemented in 2007. The company previously announced that it had implemented a company-wide salary freeze from September 2008 through September 2009. Gary Pruitt, McClatchy’s chairman and chief executive officer, also has declined any bonus for 2008 and 2009. In addition, other senior executives will not receive bonuses for 2008.

As previously reported, McClatchy will suspend its quarterly dividend after paying the first quarter 2009 dividend, which was declared on January 27, 2009, in order to preserve cash for debt repayment. The first quarter 2009 dividend of $.09 (nine cents) per share is half the per share dividend paid in the 2008 first quarter.

Full Year Results

Net income from continuing operations for fiscal 2008 was $2.8 million, or three cents per share, and was affected by the impact of the non-cash impairment charges and other unusual items discussed below. Adjusted earnings from continuing operations(1) were $55.4 million, or 67 cents per share, in fiscal 2008. Total net income including discontinued operations was $1.4 million, or two cents per share.

In addition to the impairment charges previously noted, results in 2008 included the impact of several unusual items including: a gain on the sale of a one-third interest in SP Newsprint Company; a gain on the extinguishment of debt; write-offs of deferred financing costs as a result of amendments to the company’s credit agreement; charges related to the implementation of previously announced restructuring plans; the write-down of certain internet investments; and adjustments for certain discrete tax items.

The loss from continuing operations for full year 2007 was $2.73 billion, or $33.26 per share, including the effect of the non-cash impairment charges taken in 2007. Adjusted earnings from continuing operations(1) were $110.9 million, or $1.35 per share, in fiscal 2007 after considering the non-cash impairment charges and adjustments for certain discrete tax items. The company’s total net loss, including the results of discontinued operations, was $2.74 billion, or $33.37 per share.

Revenues from continuing operations in 2008 were $1.9 billion, down 15.9% compared to $2.26 billion in 2007. Advertising revenues in 2008 totaled $1.6 billion, down 17.9% and circulation revenues were $265.6 million, down 3.7%. Online advertising revenues grew 10.6% in 2008 and represented 11.6% of total advertising revenues compared to 8.6% for all of 2007.

Management’s Comments

Commenting on McClatchy’s results, Pruitt said, “2008 was a difficult and disappointing year. We faced troubled economic times and structural changes in our business.

“Still, 2008 was a good year for our online business; online audiences and revenues rose sharply. In the fourth quarter, average monthly unique visitors to our websites were up 25.3% and were up 33.5% for all of 2008. Online advertising revenues grew 10.3% in the fourth quarter of 2008 and were up 47.3% excluding employment advertising, a category that has been impacted both online and in print by the nationwide decline in jobs.

“But the economy remains mired in recession and our industry is still in a period of transition. The advertising environment continues to be weak and we expect print advertising revenues to continue to be down. While we do not have final advertising revenue results for January, we know that the month was slower than the fourth quarter. We don’t have any better sense than other market observers as to how long the current recession will last and we do not yet have visibility of revenue trends.

“We must respond with both continued rigor in driving our revenue results as well as permanently reducing our cost structure. At McClatchy we are quickly becoming a hybrid print and online news and information company.

“Evidence of our cost reduction efforts can be found in our results. Excluding severance and other benefit charges related to our previously announced restructuring plans, cash expenses were down 14.4% in the fourth quarter and were down 11.5% in all of 2008.

“This necessary transition to a more efficient company is especially painful in a horrible economy and we have had to make some very difficult decisions to keep the company safe,” Pruitt said. “Even so, we are determined to treat our employees well and secure their retirement as best we can. So while we have announced that we are freezing our pension plans and will temporarily suspend 401(k) matching contributions as of March 31, we will continue to offer competitive benefits for our employees. We expect to offer a new 401(k) plan later this year that will include both a matching contribution (once reinstated), plus a supplemental contribution that is tied to cash flow performance. I recognize the sacrifices our employees are making to help us get though this difficult time and I appreciate their loyalty to McClatchy. I am confident that the McClatchy team is up to this challenge and we will see brighter days when the economy finally turns.”

Pat Talamantes, McClatchy’s chief financial officer, said, “Our new cost initiatives, combined with our 2008 efforts, are designed to save approximately $300 million annually before severance costs. Approximately $60 million of savings has been realized in 2008, and $44.7 million of severance costs associated with these programs has been expensed in 2008 and largely paid.”

“Despite the downturn in advertising revenues, we still continue to generate significant cash and are using it to repay debt,” Talamantes said. “Our debt at year end is $2.038 billion, down $433 million from the end of 2007. Based on our trailing 12 months of cash flow, our leverage ratio is currently 5.1 times cash flow and our interest coverage ratio is 2.8 times cash flow as defined by our bank agreement — well within the allowable covenant thresholds. We have $159 million in availability under our bank credit lines, and have no significant debt maturities until June 2011. We believe that we can work through this difficult environment, and we expect to make further progress in paying down debt in 2009.”

Other Matters

McClatchy also announced that it was notified by the New York Stock Exchange (the “NYSE”) that it is not in compliance with the NYSE’s continued listing standards. The NYSE’s notice dated February 4, 2009 indicated that on February 2, 2009, the company’s average share price over the previous 30 trading days was $0.98, which is below the NYSE’s quantitative listing standards. Such standards require NYSE listed companies to maintain an average closing price of any listed security above $1.00 per share for any consecutive thirty trading-day period. McClatchy plans to notify the NYSE of its intent to cure this deficiency and has six months from the date of the NYSE notice to cure the non-compliance. The company’s Class A common stock will continue to be listed on the NYSE during this interim period, subject to compliance with other NYSE listing requirements and the NYSE’s right to reevaluate continued listing standards.

Consistent with the growing industry practice, McClatchy will discontinue issuing monthly revenue and statistical reports after this release. McClatchy is among the last newspaper companies to report advertising results monthly, and without comparable industry information, management does not believe monthly revenues are as useful to investors. The company will continue to provide revenue trends and other statistical information on a quarterly basis with its earnings releases.

The New York Times Stock Hit an All-Time Low Last Week

By Mick Gregory

The Times stock is nearing fire sale prices and gets a dead cat bounce to excite the Sulzbergers. Yet, who wants it?

The company has raised circulation prices at The Times and reduced third-party and non-profitable distribution, so circulation numbers falling are blamed on “management” not the content or bias. The New York Times’ quarterly dividend of 23 cents per share — a yield of 5.5 percent — amounts to a wash with real and hidden inflation at the same rate. I hope investors don’t really need the money.

Wall Street analysts have concerns about the continued weakness at The Boston Globe and the regional group is expected to keep earnings in a free fall. Additionally, there will be 12 weeks in the fourth quarter this year versus 13 weeks last year, reducing sales comparisons during the most profitable weeks of the year. So, you will see a dip in sales due to the calendar and poor performance.

Add the fact that the stock is one with an elite voting class in control by the high-living family that doesn’t have to follow the SEC stockholder protections that Sarbanes-Oxley provides for. There is no shareholder right to question the decisions of the Sulzberger famiy.

The stock is off 37 percent from its 52-week high of $26.90 set in February. Shares traded at a year-low of $16.02 last week but had a “dead cat” bounce this week of 3 percent. I predicted that the stock would dip below $18 several months ago. Now I am resetting my prediction to $14.

Then Mark Cuban should buy it and throw out the Sulzbergers. Maybe Dan Rather could be made the editor? Maybe Google’s founders are at that stage of self actualization, that they want to buy the Old Gray Lady? Nah, they are much too smart with money and innovative.

How about Gannett? They would be attacked worse than Murdoch. “How dare they!” What’s your guess?

Meanwhile, the grim reaper continues to cull the “journalistis” at every newspaper large and not so.

Here is an email an SOB editor must have spent two days writing:

11/4/07

Good evening,

As promised, I am passing along the major details of our newsroom
reorganization.

We will hold staff meetings to discuss it at 5 p.m. Wednesday for the
night staff and 11:45 a.m. Thursday for dayside.

What I am posting here is a framework mostly, dealing with staff
assignments. But that is only the first phase. We have considerable work to
do if we are going to fully realize this structure’s potential on the printed
newspaper page and online.

Among other things, we’ll need to revise all of our news protocols. And just
about every reporter on the list will have to endure what we call a “beat
clarification” process to establish topical priorities.

For now, the structure you see here will simply overlay the existing print and
online newspapers. But if we do our jobs well, within a few weeks, you’ll
begin to see real changes on the page. They will be, I sincerely hope, for the
better.

Let me say for the record, once again, with roughly 25 fewer newsroom
staffers, there will be noticeable content reductions in some areas. No
reorganization plan can change that. Some things we’ve done in the past
cannot be done.

As we’ve talked with people today, several have asked “why me” or “why
this decision instead of that.” Well, the whys for these changes ought to be
well understood by now. The San Diego Union Tribune announced a
newsroom staff reduction targeted at 10 percent today. Other papers, in just
the last few weeks, have announced similar or greater reductions. Our
overall budget reduction will be about 10 percent. After rehires, our new
staff will be about 12 to 15 percent smaller.

Absent these changes, over which the newsroom had no control, many of the
assignment changes outlined below would not have happened. Many of the
columns we killed today would have continued. Many of the restructured
departments would look unchanged.

But we had to make changes, significant changes and what is outlined here
represents our best ideas for maintaining the core of our print newspaper
while continuing to build our online presence. All of this can be second
guessed and I would guess it will be in coming weeks.

But do always keep in mind, if it doesn’t work, if it doesn’t achieve our
hoped for goals, then we’ll do something else. More than ever, we need to be
both patient and flexible. As always, my door is open to anyone who wants
to discuss these issues further.

Among the most significant changes is the creation of a new online/print
news team, sort of a journalistic skunk works. This team will be led by Carla
Savalli, our senior editor for local news who has been our chief change agent
in the last year, creating the 24/7 news desk for one thing.

Carla becomes senior editor for innovation and new content. She’ll supervise
the skunk works and also oversee our online operation.

Her team will include:
Nancy Malone — Deputy editor
Kevin Graman — Daily general assignment
To be announced – AM breaking news/general assignment
Rehire or new hire — PM breaking news/general assignment
Erica Curless – Idaho general assignment
Jim Camden — Online data base reporter

In addition, Bill Morlin, investigations and federal courts will continue to
report to Carla. Jim Camden will be giving up his Spin Control political
column. However, we’re going to develop a new political blog, similar to the
hugely successful SportsLink, where all of our public life and government
writers can post on political developments.

The innovation and new content team will flip on its end the traditional late-
in-the-day deadline structure. For this group, deadline pressure will come
early in the day as they write first for the web and then provide context and
insight for the online newspaper. They will use all of the tools at our
disposal, print, online, blogs, audio, video, etc., to tell the stories that make
our region different from any other on any given day.

The reordered city desk will be run by Addy Hatch, our current city editor.
Her deputies will include Dave Wasson, Dan Hansen and Scott Maben.

The big change in the city desk structure is the incorporation of the Business
department and staff into the city desk. We’ll continue to have a daily,
Saturday and Sunday business section, of course. But the staff will be
supervised through the city desk. Alison Boggs, the current business editor,
returns to reporting.

You’ll see that we’ve asked Shawn Vestal to return to reporting, meaning
The Falls blog will end. And Pia Hansen is giving up her column to take on
an important general assignment role. Bert Caldwell gives up his column
and returns to full-time business reporting.

That gives us this city desk lineup:
Alison Boggs – Social services/aging
Shawn Vestal – Higher education
John Stucke – Health
Jody Lawrence-Turner — Public safety
Jonathan Brunt — Spokane City/Spokane County
Sara Leaming — K-12
Richard Roessler — Olympia
Rehire – Natural resources
Karen Dorn-Steele — County/state courts
Pia Hansen — GA/personality profiles/obits
Becky Kramer – Idaho GA
Betsy Russell — Boise
Parker Howell — Business
Bert Caldwell — Business
Tom Sowa — Business/.txt
Doug Clark – Columnist

Among the newspaper’s most important initiatives is our Voices operation.
This year, we launched a weekly Voice for Post Falls/Rathdrum/Spirit Lake.
Next spring we’ll launch a new Voice for the West Plains. We also have a
twice-weekly Voice for the Spokane Valley and two weekly sections for the
city of Spokane. The Voices are among our fastest growing print section and
readership just keeps growing. Under this plan, for the first time, the Voices
will be fully staffed by full-time reporters.

Tad Brooks will continue to serve as Voices editor. Jeff Jordan is deputy
editor and Jim Allen is assistant editor. Tad and his team will assign
reporters to specific Voices. For the first time ever, a staff reporter will be
assigned to Handle extra serving Kootenai County.

The Voices staff now includes:
Nina Culver
Mike Prager
Lisa Leinberger
John Craig
Amy Cannata

Amy, our first mobile journalist (MoJo) will bring her particular expertise to
the Voices where we intend to launch a significant online initiative
sometime next year.

For those specifically interested in Idaho coverage, the breakdown is this:
Erica Curless – Idaho general assignment
Becky Kramer – Idaho General Assignment
Betsy Russell – Boise bureau and capitol coverage
To be named – Handle Extra/Post Falls Voice reporter (from the
Voices reporters listed above).
Dave Oliveria – Online and Huckleberries Online

That is a net loss of three Idaho news reporters from the pre-layoff period.
We will continue to staff the Idaho bureau office. We’ll cover Idaho preps
and University of Idaho sports out of that office and Kathy Plonka will
remain in Idaho as a staff photographer. The quantity and quality of Idaho
coverage ought to improve immediately as we get these folks in place.
Before the end of the year, we’ll launch our new Regional page where
content from Idaho and the Valley that doesn’t make one of the section
fronts will get good display.

On the Features side, the most significant change is the loss of Shadra
Beesley as 7 editor. Shadra has been a force since joining us a year or so
ago. She didn’t just caretake the 7 she inherited from Nancy Malone, she put
her own stamp on it. But Shadra is one of our most versatile editors. She will
move to the night copy desk where she will be an invaluable help in simply
putting out the paper. My thanks to her. Jim Kershner will be giving up his
longtime column in order to help boost our features reporting.

Features Editor Ken Paulman and deputy editor Rick Bonino will take on 7
as part of their regular editing responsibilities. Cheryl-Anne Milsap will
continue to edit Home, write her weekly Home Planet column and produce
our new Spokane Scene page.

The Features reporter lineup doesn’t change over much, except we did have
to accommodate for the loss of Virginia DeLeon. The staff:
Heather Lalley — Ethics, values and religion
Jim Kershner – General assignment and performing arts
Paul Turner — The Slice
Dan Webster – General assignment, books and movies
Lorie Hutson — Food/GA
Tom Bowers — 7
Som Jordan – 7

Our online operation will continue to be run by Online News Editor Ryan
Pitts who will report to Carla Savalli, but retain full responsibility for the
operation of SpokesmanReview.com and our other digital platforms. This is
a department where we took some serious hits. At one point we had lost all
three of our online producers. Here is Ryan’s lineup:
Colin Mulvaney — Multimedia coordinator
Gina Boysun — Programmer
To be hired — Programmer
Andrew Zahler — Online producer
Thuy Nguyen — Online producer
Rehire or new hire – Online producer/multimedia
Dave Oliveria — Huckleberries Online

Our night and day copy desks, now consolidated, also lost a number of key
staff members.

Geoff Pinnock retains oversight of our desk and production departments, as
well as photo, as our senior editor for design and presentation. Bertil
Peterson remains news editor. Adrian Rogers, who was deputy news editor
until taking time off to go back to school, will return as Bertil’s chief deputy.
Copy editors include:
Tom Green
Kat Smith
Ruth Reynolds
Cathy Reynolds
Katharine Kumangai
Anne LaTourneau
Mike McGarr
Shadra Beesley
Rehire or new hire

Design and art staffers include:
Ralph Walter – assistant design chief
Rick House — Copy editor/designer
Kimberly Lusk — Copy editor/designer
Molly Quinn – Artist

The Editorial Page staff includes:
Doug Floyd — Editorial page editor
Gary Crooks – Editorial page writer
Rebecca Nappi – Editorial Page writer
Lynn Swanbom — Editorial page copy editor

The editorial assistant staff includes:
Mary Beth Donelan — Administrator
Rainey Wilson — Editorial assistant
Marissa Hipp — 7 editorial assistant
Sherry Adkins — Editorial assistant
Tracy Poindexter — Editorial assistant
To be hired — Receptionist

The photo staff includes:
Larry Reisenouer — Photo editor
Liz Kishimoto – Assistant photo editor
Brian Plonka — Photographer
Dan Pelle — Photographer
Christoper Anderson — Photographer
Jesse Tinsley — Photographer
Kathy Plonka — Photographer
Bart Rayniak — Photographer
To be hired — Photographer

The Sports staff is unchanged.