SACRAMENTO, Calif., March 13, 2015 /PRNewswire/ -- The McClatchy Company (NYSE-MNI) today filed its Annual Report on Form 10-K for the year ended Dec. 28, 2014 with the Securities and Exchange Commission. There are no changes to reported operating income, net income or net income per common share from the fourth quarter earnings release issued by the company on Feb. 11, 2015. McClatchy's 10-K Report includes the results of the conclusions reached by management, working with its external auditors, as to the review of certain digital agreements related to the sales of third party digital advertising products and services. The company indicated in its fourth quarter 2014 earnings press release that the review was underway at that time.

The review process was being performed in connection with the company's ongoing affiliation agreement with Cars.com in light of the recent sale of its interest in its Cars.com equity investment. As a result of the sale, management sought to identify whether the revenues from the sale of third party digital advertising products and services should be reported as gross, with wholesale fees paid to the third parties reported as expense, or reported as net revenues. If reported as net revenues, the wholesale fees paid to third parties are recorded as a reduction of the associated revenues.

Management concluded after completion of the review that net revenue accounting is appropriate for certain contracts under which it sells digital advertising products and services. Accordingly, fiscal year 2014 revenues and expenses were adjusted to report the wholesale fees associated with sales of certain third party digital advertising products and services as a reduction of the associated revenues in the company's consolidated statements of operations. While this adjustment results in lower reported revenues by 1.8% and lower operating expenses, there is no impact to operating income, operating cash flows, net income or net income per common share amounts in fiscal 2014. Management believes the adjustment is not material to its previously issued interim and annual consolidated financial statements. 

To assist investors, the company has attached to this press release additional financial information including certain quarterly financial data for continuing operations in fiscal year 2014. The accompanying schedule reports revenues and expenses from continuing operations on a net revenue basis, the basis of reporting for 2014 included in its Form 10-K and that will be used in future reported results. This information excludes results from the Anchorage Daily News, which was sold on May 5, 2014, and is classified as a discontinued operation in McClatchy's financial results. 

Additionally, the company provided an updated leverage ratio as of the end of the fourth quarter of 2014. The 2014 leverage ratio as defined in the company's credit agreement was 3.63 times cash flow compared to a required leverage covenant of 6.0 times cash flow (as defined). In its fourth quarter earnings release the company previously had estimated its leverage ratio to be 3.73 times cash flow. Additionally, based on pro forma cash, taking into account taxes on the fourth quarter transactions, the leverage ratio was 4.46 times cash flow (as defined).

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 operating cash flow and operating cash flow margin. Operating cash flow is defined as operating income plus depreciation and amortization, severance charges and certain other charges. Operating cash flow margin is defined as operating cash flow divided by total 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 ongoing 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; and
• 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.

About McClatchy

The McClatchy Company is a 21st century news and information leader, publisher of iconic brands such as the Miami Herald, The Kansas City Star, The Sacramento Bee, The Charlotte Observer, The (Raleigh) News and Observer, and the (Fort Worth) Star-Telegram. McClatchy operates media companies in 28 U.S. markets in 14 states, providing each of its communities with high-quality news and advertising services in a wide array of digital and print formats. McClatchy is headquartered in Sacramento, Calif., and 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; we may not be successful in the reducing debt whether through tenders offers, open market repurchase programs or other negotiated transactions; transactions may not close as anticipated or result in cash distributions in the amount or timing anticipated; McClatchy may not successfully implement audience strategies designed to increase audience revenue and may experience decreased audience volumes or subscriptions; 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. 28, 2014, 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.

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SOURCE The McClatchy Company