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SECURITIES AND EXCHANGE COMMISSION
Washington DC 20549

FORM 10-Q

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For The Quarter Ended: September 30, 2001

Commission File Number1-9824

 

THE McCLATCHY COMPANY
(Exact name of registrant as specified in its charter)

Delaware
(State of Incorporation)

52-2080478
(IRS Employer Identification Number)

2100 "Q" Street
Sacramento, CA 95816-6899

(Address of principal executive offices)

(916) 321-1846
(Registrant's telephone number)

Indicate by check mark whether the registrant has (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes ____    No ____

The number of shares of each class of common stock outstanding as of November 13, 2001:

Class A Common Stock

18,926,816

Class B Common Stock

26,655,647

 

 

 

 

THE McCLATCHY COMPANY
INDEX TO FORM 10-Q

Part I - FINANCIAL INFORMATION

Page

 

Item 1 - Financial Statements:

 

 

 

Consolidated Balance Sheet - September 30, 2001 and December 31, 2000 (unaudited)

3

 

 

Consolidated Statement of Income for the Three Months and Nine Months
Ended September 30, 2001 and September 24, 2000 (unaudited)

5

 

 

Consolidated Statement of Cash Flows for the Nine Months Ended
   September 30, 2001 and September 24, 2000 (unaudited)

6

 

 

Consolidated Statement of Stockholders' Equity for the Period from
   December 31, 2000 and September 30, 2001 (unaudited)

7

 

 

Notes to Consolidated Financial Statements (unaudited)

8

 

Item 2 - Management's Discussion and Analysis of Results of Operations and Financial Condition

9

 

Item 3 - Quantitative and Qualitative Disclosures About Market Risk

13

Part II - OTHER INFORMATION

14

 

 

 

PART 1 - FINANCIAL INFORMATION

Item 1 - FINANCIAL STATEMENTS

 

THE McCLATCHY COMPANY

CONSOLIDATED BALANCE SHEET (UNAUDITED)

(In thousands)

September 30,

December 31,

2001

2000

ASSETS

CURRENT ASSETS

  Cash

$                1,309

$           10,654 

  Trade receivables (less allowances of

     $4,372 in 2001 and $4,219 in 2000)

164,510

184,314 

  Other receivables

1,593

2,252 

  Newsprint, ink and other inventories

14,421

16,355 

  Deferred income taxes

15,937

15,815 

  Other current assets

6,925

6,148 

204,695

235,538 

PROPERTY, PLANT AND EQUIPMENT

  Buildings and improvements

219,848

211,864 

  Equipment

492,987

493,392 

712,835

705,256 

  Less accumulated depreciation

(371,495)

(351,135)

341,340

354,121 

  Land

52,806

52,400 

  Construction in progress

22,364

25,165 

416,510

431,686 

INTANGIBLES - NET

1,353,623

1,395,265 

OTHER ASSETS

101,004

103,169 

TOTAL ASSETS

$          2,075,832

  $       2,165,658 

See notes to consolidated financial statements

 

 

THE McCLATCHY COMPANY
CONSOLIDATED BALANCE SHEET (UNAUDITED)
(In thousands, except share amounts)

September 30,

December 31,

LIABILITIES AND STOCKHOLDERS' EQUITY

2001

2000

CURRENT LIABILITIES

  Current portion of bank debt

$             43,286

$               898

  Accounts payable

105,454

100,313

  Accrued compensation

52,894

58,327

  Income taxes

10,540

6,183

  Unearned revenue

39,776

35,201

  Carrier deposits

3,021

2,961

  Other accrued liabilities

21,247

23,452

276,218

227,335

LONG-TERM BANK DEBT

614,214

778,102

OTHER LONG-TERM OBLIGATIONS

82,367

73,571

DEFERRED INCOME TAXES

116,452

127,799

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY

  Common stock $.01 par value:

    Class A - authorized

       100,000,000 shares, issued 18,805,009 in 2001

        and 18,044,571 in 2000

188

180

    Class B - authorized

        60,000,000 shares, issued 26,755,647 in 2001

        and 27,199,955 in 2000

268

272

   Additional paid-in capital

295,121

284,998

   Retained earnings

696,861

673,401

   Accumulated other comprehensive loss

(5,857)

-

986,581

958,851

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$        2,075,832

$     2,165,658

See notes to consolidated financial statements

 

 

THE McCLATCHY COMPANY

CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)

(In thousands, except per share amounts)

Three Months Ended

Nine Months Ended

September 30,
2001

September 24,
2000

September 30,
2001

September 24,
2000

REVENUES - NET

Newspapers:

Advertising

$         212,262

$       227,103 

$        646,098

$        673,992 

Circulation

42,220

42,720 

127,454

129,896 

Other

6,292

6,347 

20,054

19,552 

260,774

276,170 

793,606

823,440 

Non-newspapers

3,069

3,012 

9,725

8,685 

263,843

279,182 

803,331

832,125 

OPERATING EXPENSES

Compensation

105,549

102,960 

321,126

314,462 

Newsprint and supplements

40,753

41,392 

126,348

119,296 

Depreciation and amortization

27,280

26,892 

81,919

80,529 

Other operating expenses

49,118

50,494 

150,091

149,236 

222,700

221,738 

679,484

663,523 

OPERATING INCOME

41,143

57,444 

123,847

168,602 

NON-OPERATING (EXPENSES) INCOME

Interest expense

(10,206)

(15,992)

(35,336)

(49,106)

Partnership income (loss)

510

(120)

780

(680)

Loss on Internet investments

-

-

(10,556)

-

Other - net

246

399 

762

1,458 

INCOME BEFORE INCOME TAX PROVISION

31,693

41,731 

79,497

120,274 

INCOME TAX PROVISION

17,465

20,143 

42,399

58,056 

NET INCOME

$             14,228

$        21,588 

$           37,098

   $        62,218 

NET INCOME PER COMMON SHARE:

Basic

$                 0.31

$            0.48 

$              0.82

$           1.38 

Diluted

$                 0.31

$            0.48 

$              0.81

$           1.38 

WEIGHTED AVERAGE

NUMBER OF COMMON SHARES:

Basic

45,530

45,153 

45,426

45,066 

Diluted

45,678

45,287 

45,571

45,204 

 See notes to consolidated financial statements

 

 

THE McCLATCHY COMPANY

CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)

(In thousands)

Nine Months Ended

September 30,
2001

September 24,
2000

CASH FLOWS FROM OPERATING ACTIVITIES:

  Net income

$         37,098 

$        62,218 

  Reconciliation to net cash provided:

    Depreciation and amortization

83,779 

83,125 

    Changes in certain assets and liabilities - net

21,966 

(19,883)

    Loss on Internet investments

10,556 

-

    Other

(7,012)

(2,084)

  Net cash provided by operating activities

146,387 

123,376 

CASH FLOW FROM INVESTING ACTIVITIES:

    Purchases of property, plant and equipment

(26,858)

(26,116)

    Other - net

(2,458)

(1,549)

    Net cash used by investing activities

(29,316)

(27,665)

CASH FLOW FROM FINANCING ACTIVITIES:

    Repayment of long-term debt

(121,500)

(87,000)

    Payment of cash dividends

(13,638)

(13,528)

    Other - principally stock issuances in employee plans

8,722 

4,535 

    Net cash used by financing activities

(126,416)

(95,993)

NET CHANGE IN CASH AND CASH EQUIVALENTS

(9,345)

(282)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

10,654 

1,241 

CASH AND CASH EQUIVALENTS, END OF PERIOD

$          1,309 

$            959 

OTHER CASH FLOW INFORMATION

Cash paid during the period for:

Income taxes (net of refunds)

$         44,201 

$      64,294 

Interest paid (net of capitalized interest)

$         39,270 

$      47,039 

 

 

 

THE MCCLATCHY COMPANY

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED)

(In thousands, except share and per share amounts)

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

Additional

 

 

 

Other

 

 

 

Par Value

 

Paid-In

 

Retained

 

Comprehensive

 

 

 

Class A

 

Class B

 

Capital

 

Earnings

 

Earnings (Losses)

 

Total

BALANCES, DECEMBER 31, 2000

$       180

 

$        272

 

$   284,998

 

$ 673,401 

 

 

 

$   958,851

 

 

 

 

 

 

 

 

 

 

 

 

Net Income (nine months)

 

 

 

 

 

 

37,098 

 

 

 

37,098 

 

 

 

 

 

 

 

 

 

 

 

 

Fair value of SWAPs January 1, 2001

 

 

 

 

 

 

 

 

$              (377)

 

 

Change in fair value of SWAPs

 

 

 

 

 

 

 

 

(5,480)

 

 

Other comprehensive loss

 

 

 

 

 

 

 

 

(5,857)

 

(5,857)

Total comprehensive income

 

 

 

 

 

 

 

 

 

 

31,241 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends paid ($.30) share

 

 

 

 

 

 

(13,638)

 

 

 

(13,638)

 

 

 

 

 

 

 

 

 

 

 

 

Conversion of 444,308 Class B shares    to Class A

 

4

 

 

(4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of 316,130 Class A
shares under stock plans

 

4

 

 

 

 

8,718

 

 

 

 

 

 

8,722

 

 

 

 

 

 

 

 

 

 

 

 

Tax benefit from stock plans

 

 

 

 

1,405

 

 

 

 

 

1,405 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCES, SEPTEMBER 30, 2001

 

 

 

 

 

 

 

 

 

 

 

 

$       188

 

$        268

 

$   295,121

 

$ 696,861 

 

$            (5,857)

 

$   986,581 

 

 

 

 

 

 

 

 

 

 

 

 

 

THE McCLATCHY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 1.

BASIS OF PRESENTATION

The McClatchy Company (the Company) and its subsidiaries are engaged primarily in the publication of newspapers located in Minnesota, California, Washington State, Alaska, and North and South Carolina.

The consolidated financial statements include the accounts of the Company and its subsidiaries. Significant intercompany items and transactions have been eliminated. In preparing the financial statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly the Company's financial position, results of operations, and cash flows for the interim periods presented. All adjustments are normal recurring entries, except for a $1.4 million environmental reserve and a $10.6 million writedown of certain Internet investments included in the nine-month periods. Such financial statements are not necessarily indicative of the results to be expected for the full year.

NOTE 2. 

LONG-TERM BANK DEBT AND DERIVATIVE INSTRUMENTS

The Company's Credit Agreement includes term loans consisting of Tranche A of $404,000,000 bearing interest at the London Interbank Offered Rate (LIBOR) plus 62.5 basis points, payable in increasing quarterly installments through March 21, 2005, and Tranche B of $181,000,000 bearing interest at LIBOR plus 150 basis points and payable in semi-annual installments through September 19, 2007. A revolving credit line of up to $200,000,000 bears interest at LIBOR plus 62.5 basis points and is payable by March 19, 2005. Interest rates applicable to debt drawn down at September 30, 2001, ranged from 3.3% to 4.6%. The debt is unsecured and is pre-payable without penalty.

The terms of the Credit Agreement include certain operating and financial restrictions, such as limits on the Company's ability to incur additional debt, create liens, sell assets, engage in mergers, make investments and pay dividends.

The Company is a party to three interest rate swap agreements, expiring in 2002 to 2003, with aggregate notional amounts totaling $300,000,000. The effect of these agreements is to fix the LIBOR interest rate exposure at approximately 5.9% on that portion of the Company's term loans.

The Company has outstanding letters of credit totaling $8,110,000 securing estimated obligations stemming from workers' compensation claims and other contingent claims.

 

Long-term bank debt (in thousands):

September 30,
2001

December 31, 2000

Credit Agreement:

Term loans

$          585,000 

$         669,000 

Revolving credit line

72,500 

110,000 

Total indebtedness

657,500 

779,000 

Less current portion

(43,286)

(898)

Long-term indebtedness

$           614,214

$         778,102 

The Company does not have, nor does it intend to enter into, derivative contracts for trading purposes. The Company has not attempted to hedge fluctuations in the normal purchases of goods and services used to conduct its business operations. Currently there is no intent to hedge or enter into contracts with embedded derivatives for the purchase of newsprint, ink and other inventories, leases of equipment and facilities, or its business insurance contracts.

The Company's three interest rate swap agreements are designated as cash flow hedges and are specifically designed to hedge the variability in the expected cash flows that are attributable to interest rate fluctuations on $200,000,000 of its variable rate bank debt through June 2002, and $100,000,000 through June 2003. The three swap instruments, as well as the related debt, are reset to three-month LIBOR rates quarterly. The swaps were entered into to match the significant terms of the underlying debt to provide highly effective hedges.

No gain or loss has been recorded in net income as a result of ineffectiveness of these hedges. A loss, net of taxes, of $5,857,000 is recorded in comprehensive income related to these hedges - see the Company's Consolidated Statement of Stockholders' Equity.

Item 2 -

MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION

Recent Events and Trends

The Company's newsprint vendors increased the prices of newsprint in April, and again in September 2000. In addition, a price increase was announced to take effect March 2001. A portion of that increase was implemented but was rolled back on July 1. Prices in the third quarter were higher than the Company paid in the same quarter a year earlier; however, the higher newsprint prices were offset by lower newsprint usage in the third quarter of 2001. Price comparisons are expected to ease in the fourth quarter, and usage is also expected to be down from the 2000 level.

During 1998, the FASB issued SFAS 133 (Accounting for Derivative Instruments and Hedging Activities), which requires that all derivatives be carried at fair value on the balance sheet. This statement became effective in the Company's fiscal year 2001. The adoption of this statement did not materially impact the Company's financial results. See note 2 to the consolidated financial statements.

In June 2001, the Financial Accounting Standards Board approved for issuance Statement of Financial Accounting Standard (SFAS) No. 141, Business Combinations and SFAS No. 142, Goodwill and Other Intangible Assets. SFAS No. 141 addresses the initial recognition and measurement of goodwill and other intangible assets acquired in a business combination, and SFAS No. 142 addresses the initial recognition and measurement of intangible assets acquired outside of a business combination whether acquired individually or with a group of other assets. SFAS No. 142 also addresses the recognition and measurement of goodwill and other intangible assets subsequent to their acquisition. SFAS No. 141 is applicable to business combinations beginning July 1, 2001. The Company is required to adopt SFAS No. 142 no later than its fiscal year beginning January 1, 2002. The Company does not expect the adoption of SFAS No. 141 to have a material effect on its financial position, results of operations and cash flows. The Company expects that the adoption of SFAS No. 142 will reduce the amortization expense anticipated to be recognized by the Company in fiscal year 2002 by approximately $32 million.

Third Quarter 2001 Compared To 2000

The Company reported net income of $14.2 million, or 31 cents per share, down 34.1% from the 2000 quarterly earnings of $21.6 million, or 48 cents per share. The decline in earnings was primarily attributable to the fall off in advertising revenues that began early in 2001, and was exacerbated by the September 11 terrorist attacks.

Revenues

Revenues in the third quarter of 2001 were $263.8 million, down 5.5% from 2000, with advertising revenues down 6.5% to $212.3 million and circulation revenues down 1.2% to $42.2 million.

The decrease in advertising revenues is primarily attributable to a 32.3% decline in classified employment advertising. Advertising revenues would have increased by 0.7% if classified employment were excluded from advertising revenue in the third quarter 2001 and 2000.

Operating Revenues by Region (in thousands):

2001

2000

% Change

Minnesota newspaper

$        88,151

$     97,813

(9.9)% 

California newspapers

89,778

92,648

(3.1)    

Carolinas newspapers

43,104

45,765

(5.8)    

Northwest newspapers

39,741

39,944

(0.5)    

Non-newspaper operations

3,069

3,012

1.9   

$       263,843

$    279,182

(5.5)% 

Minnesota - The (Minneapolis, MN) Star Tribune generated 33.4% of the Company's third quarter revenues. Total revenues declined 9.9% at the Star Tribune. Advertising revenues declined 11.8%, primarily due to a 22.6% decline in classified advertising and a 15.7% decline in national advertising. These declines were partially offset by a 1.6% increase in retail advertising. Within the classified category, employment advertising declined 43.4%.

California - California contributed 34.0% of the Company's third quarter revenues. Total revenues at the three California Bee newspapers were down 3.1%. Advertising revenues declined 3.2% which was attributable to a 5.2% decline in both retail and classified advertising. These declines were partially offset by an 8.0% increase in national advertising. Within classified advertising, employment declined by an18.9% but was partially offset by a 19.3% gain in real estate.

Carolinas - The Carolinas, which includes four daily and ten community newspapers, generated 16.3% of third quarter revenues. Total revenues declined 5.8%, while advertising revenue decreased by 7.3%. This advertising decline was attributable to a 2.4% decline in retail and 15.7% decrease in classified. Within classified advertising, employment dropped 41.4%.

 

The Northwest - The Northwest newspapers generated 15.1% of the Company's third quarter revenues. Total revenues declined by 0.5% and advertising revenues decreased 0.5%. The Northwest newspapers recorded a 1.3% increase in retail and a 5.6% increase in national. These increases were offset by a 6.9% decline in classified advertising. Within classified advertising, employment declined 12.3%.

Non-Newspaper Operations - Revenues were up 1.9%, largely due to a 5.8% increase in revenue at The Newspaper Network (TNN), the Company's national sales and marketing subsidiary. Revenue growth at TNN was partially offset by declines in revenue at Nando Media, the Company's national online publishing operation.

Operating Expenses:

Total operating expenses increased 0.4% in the third quarter. Newsprint expense declined 1.8%. Newsprint prices were 8.1% above 2000 levels, offset by a 9.2% decrease in consumption. Consumption declined due to lower advertising linage and conversions to narrower web widths. Total compensation increased 2.5%. Salary costs were down 2.0% reflecting headcount reductions, but unfavorable comparisons in retirement and health insurance costs pushed total compensation costs higher.

Non-Operating (Expenses) Income - Net:

Interest expense was $10.2 million for the third quarter 2001. This is a 36.2% decrease from the third quarter 2000 as the Company continued to benefit from lower interest rates and debt repayment from free cash flow. The Company recorded $510,000 as its share of the Ponderay Newsprint Mill's income versus a $120,000 loss in 2000.

Income Taxes:

The Company's effective income tax rate was 55.1% versus 48.3% in 2000 and primarily reflects lower income before tax, relative to a fixed amount of non-deductible expenses in each year.

Nine-Month Comparisons

Earnings in the nine-month period ending September 30, 2001 were $37.1 million or 81 cents per share, down 40.4% from 2000 earnings of $62.2 million or $1.38 cents per share. Earnings in the 2001 nine-month period reflect a writedown of Internet investments and a reserve for an environmental clean-up, both recorded in the second quarter of the year. Excluding these items, earnings were 94 cents per share in the 2001 nine-month period. Generally, the same factors that drove the third quarter results also affected the nine-month period, with notable differences discussed below.

Revenues:

Total revenues were $803.3 million in the first nine months of 2001, down 3.5% from 2000. Advertising revenues declined 4.1% to $646.1 million and circulation revenues declined 1.9% to $127.5 million.

 

Operating Revenues By Region (in thousands):

2001

2000

% Change

Minnesota newspaper

$     273,273

$    295,448

(7.5)%

California newspapers

267,716

270,837

(1.2)   

Carolinas newspapers

133,385

138,865

(4.0)   

Northwest newspapers

119,232

118,290

0.8   

Non-newspaper operations

9,725

8,685

12.0    

$    803,331

$    832,125

(3.5)%

 

Minnesota and Carolina Newspapers - The Star Tribune and Carolina newspapers generated 34.0% and 16.6% of total revenue, respectively. Advertising revenues declined by 8.9% and 5.0% at the Star Tribune and Carolina newspapers. These declines were primarily attributable to a $30.1 million decrease in employment advertising at these regions.

California Newspapers - The Company's California newspapers generated 33.3% of total revenue. Advertising revenues declined by 0.9% primarily due to a 10.6% decrease in classified employment. This decrease was partially offset by gains in national and classified real estate advertising.

Northwest Newspapers - The Northwest newspapers generated 14.8% of total revenues and was the only region to show revenue growth. Advertising revenues increased 1.5% as retail and national gains help to offset lower classified advertising.

Non-Newspaper Operations - Revenues increased 12.0%, largely due to a 15.9% increase of TNN's revenues. Revenue growth at TNN was partially offset by declines in revenue at Nando Media.

Operating Expenses:

Total operating expenses increased 2.4% primarily due to higher newsprint prices and a $1.4 million environmental reserve. Newsprint expenses increased 6.3% with prices up 12.8%, while consumption was down 5.7%. Other operating expenses increased 1.7%, with a 2.1% increase in compensation and a 1.1% increase in all other operating expenses, which was partially due to the environmental reserve.

Non-Operating (Expense) Income - Net:

Interest expense decreased 28.0% to $35.3 million compared to $49.1 million in 2000. This is a 28.0% decrease from the third quarter 2000 and reflects lower debt balances and falling interest rates. Non-operating expenses included a pre-tax charge of $l0.6 million to write down certain Internet investments. The Company recorded $780,000 as its share of The Ponderay Newsprint Mill's income versus a $680,000 loss in 2000.

Income Taxes:

The Company's effective income tax rate was 53.3% due to the same factors discussed in the third quarter comparisons above.

Liquidity & Capital Resources

Operations generated $146.4 million through September 30, 2001. Cash was used primarily to repay debt, pay for capital expenditures and pay dividends. Capital expenditures are projected to be about $38 million in 2001.

See footnote 2 to the consolidated financial statements for a description of the Company's $657.5 million of bank debt and the derivative instruments. The Company has outstanding letters of credit totaling $8.1 million securing estimated obligations stemming from workers' compensation claims, and other contingent claims. The Company had $126.9 million of available credit under its Credit Agreement at September 30, 2001.

Consistent with its policy of hedging the variability of expected cash flows attributable to interest rate fluctuations, in late October 2001 the Company entered into two interest rate swap agreements to replace a current swap agreement that expires in June 2002. The first is an interest rate swap agreement for a notional amount of $100 million at a fixed interest rate of 3.40% that begins in June 2002 and expires in June 2003. The second is an interest rate swap agreement for a notional amount of $100 million at a fixed interest rate of 3.78% that begins in June 2002 and expires in June 2004. The swaps were entered into to match the significant terms of the underlying debt to provide highly effective hedges, and are designated as cash flow hedges under the provisions of FAS 133.

The effect of these hedges is to have fixed rate swap agreements through June 2003 hedging $300 million of debt and to have fixed rate swap agreements from June 2003 through June 2004 hedging $100 million of debt. The remainder of McClatchy's bank debt is floating (see footnote 2 to the consolidated financial statements).

While the Company expects that most of its free cash flow generated from operations in 2001 and in the foreseeable future will be used to repay debt, management is of the opinion that operating cash flow and its present credit lines as described above are adequate to meet the liquidity needs of the Company, including currently planned capital expenditures and other investments.

Forward Looking Information

Management has made forward-looking statements in this document that are subject to risks and uncertainties. Forward-looking statements include the information concerning possible or assumed future results of operations of McClatchy. Forward-looking statements are generally preceded by, followed by or are a part of sentences that include the words believes, expects, anticipates, projects or similar expressions. For those statements, the Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. The following important factors, in addition to those discussed elsewhere in this document, could affect the future results of McClatchy, and could cause those future results to differ materially from those expressed in the forward-looking statements: general economic, market or business conditions; increases in newsprint prices and/or printing and distribution costs over anticipated levels; increases in interest rates; competition from other forms of media in our principal markets; increased consolidation among major retailers in our newspaper markets or other events depressing the level of advertising; an economic downturn in the economies of Minnesota, California's Central Valley, the Carolinas, Washington State and Alaska; changes in the Company's ability to negotiate and obtain favorable terms under collective bargaining arrangements with its employees; competitive actions by other companies; other occurrences leading to decreased circulation and diminished revenues from both display and classified advertising; and other factors, many of which are beyond management's control. Consequently, there can be no assurance that the actual results or developments anticipated will be realized or that these results or developments will have the expected consequences.

 

 

 

Item 3

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

In addition to normal business risks discussed above, the Company utilizes interest rate protection agreements to help maintain the overall interest rate parameters set by management. None of these agreements were entered into for trading purposes. (See note 2 to the consolidated financial statements.) As a result of this interest rate mix, a hypothetical 10 percent change in interest rates would have a $0.02 per-share increase or decrease in the Company's annual results of operations. It would also impact the fair values of its market risk sensitive financial instruments, but would not materially affect the Company's financial position taken as a whole.

 

PART II - OTHER INFORMATION

Item 1.

Legal Proceedings - None

Item 2.

Changes in Securities - None

Item 3.

Default Upon Senior Securities - None

Item 4

Submission of Matters to a Vote of Security Holders - None

 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereto duly authorized.

 

The McClatchy Company
Registrant

 


Date: November 13, 2001


/s/ Patrick J. Talamantes                         
Patrick J. Talamantes
Vice President, Finance, Treasurer and

Chief Financial Officer