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 March 31, 1995
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
McCLATCHY NEWSPAPERS, INC.
(Exact name of registrant as specified in its charter)
Delaware 94-0666175
(State of Incorporation) (IRS Employer
Identification Number)
2100 "Q" Street, Sacramento, CA. 95816
(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 X No .
The number of shares of each class of common stock outstanding as of May 8,
1995:
Class A Common Stock 6,750,943
Class B Common Stock 23,176,789
1 of 17<PAGE>
McCLATCHY NEWSPAPERS, INC.
INDEX TO FORM 10-Q
Page
Part I - FINANCIAL INFORMATION
Item 1 - Financial Statements:
Consolidated Balance Sheet - March 31, 1995
(unaudited) and December 31, 1994 3
Consolidated Statement of Income for the
Three Months Ended March 31, 1995
and 1994 (unaudited) 5
Consolidated Statement of Cash Flows for
the Three Months Ended March 31, 1995
and 1994 (unaudited) 6
Consolidated Statement of Stockholders'
Equity for the Period from January 1,
1994 to March 31, 1995 (unaudited) 7
Notes to Consolidated Financial Statements
(unaudited) 8
Item 2 - Management's Discussion and Analysis of
Results of Operations and Financial Condition 15
Part II - OTHER INFORMATION 17<PAGE>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
McCLATCHY NEWSPAPERS, INC.
CONSOLIDATED BALANCE SHEET
(In thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 92,491 $ 68,574
Short-term investments 14,021 29,448
Trade receivables (less
allowances of $2,314 in
1995 and $2,000 in 1994) 50,277 58,185
Other receivables 1,718 1,704
Newsprint, ink and other
inventories 8,978 8,578
Deferred income taxes 11,451 11,425
Other current assets 3,594 2,476
Total current assets 182,530 180,390
Property, plant and
equipment:
Land 19,603 19,591
Buildings and improvements 126,406 126,055
Equipment 300,443 299,717
Construction in progress 14,047 9,885
Total 460,499 455,248
Accumulated depreciation (187,401) (180,601)
Net property, plant and
equipment 273,098 274,647
Intangibles - net 114,104 115,446
Long-term investments 11,302 11,303
Investment in newsprint mill
partnership 4,856 4,111
Other assets 740 740
Total assets $ 586,630 $ 586,637
</TABLE>
See notes to consolidated financial statements<PAGE>
McCLATCHY NEWSPAPERS, INC.
CONSOLIDATED BALANCE SHEET
(In thousands, except share amounts)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
(Unaudited)
<S> <C> <C>
Current liabilities:
Accounts payable $ 14,672 $ 17,791
Accrued compensation 33,987 32,253
Income taxes 4,008 5,615
Unearned revenue 12,766 12,096
Carrier deposits 3,384 3,331
Other accrued liabilities 6,506 8,006
Total current liabilities 75,323 79,092
Long-term obligations 14,624 14,961
Deferred income taxes 50,339 50,364
Commitments and contingencies
(note 8)
Stockholders' equity:
Common stock $.01 par value:
Class A - authorized
50,000,000 shares, issued
6,755,997 in 1995 and
6,638,022 in 1994 68 66
Class B - authorized
30,000,000 shares, issued
23,176,789 in 1995 and
23,276,789 in 1994 232 233
Additional paid-in capital 61,613 61,290
Retained earnings 384,802 381,002
Treasury stock, 20,000 Class A
shares (371) (371)
Total stockholders' equity 446,344 442,220
Total liabilities and
stockholders' equity $ 586,630 $ 586,637
</TABLE>
See notes to consolidated financial statements<PAGE>
McCLATCHY NEWSPAPERS, INC.
CONSOLIDATED STATEMENT OF INCOME
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1995 1994
(Unaudited)
<S> <C> <C>
Revenues - net:
Advertising $ 87,073 $ 83,829
Circulation 21,707 21,194
Other 5,018 3,901
Total 113,798 108,924
Operating expenses:
Compensation 51,767 50,198
Newsprint and supplements 19,066 14,708
Depreciation and amortization 9,238 9,520
Other operating expenses 23,369 22,893
Total 103,440 97,319
Operating income 10,358 11,605
Nonoperating expenses (income):
Interest expense 10 3
Investment income (1,581) (354)
Partnership losses 700 1,500
Other - net (7) 20
Total (878) 1,169
Income before income tax provision 11,236 10,436
Income tax provision 4,594 4,539
Net income $ 6,642 $ 5,897
Net income per common share $ 0.22 $ 0.20
Weighted average number
of common shares 29,998 28,937
</TABLE>
See notes to consolidated financial statements<PAGE>
McCLATCHY NEWSPAPERS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended March 31,
1995 1994
(Unaudited)
<S> <C> <C>
Cash provided (used) by operating
activities:
Net income $ 6,642 $ 5,897
Reconciliation to net cash
provided:
Depreciation and amortization 9,275 9,563
Partnership losses 700 1,500
Changes in certain assets and
liabilities - net 2,182 10,218
Other (52) (2,094)
Net cash provided by operating
activities 18,747 25,084
Cash provided (used) by investing
activities:
Maturities of investments held
to maturity 23,849 -
Proceeds from investments
available for sale 1,007 -
Purchases of investments held
to maturity (5,940) -
Purchases of investments
available for sale (3,488) -
Purchase of property, plant and
equipment (5,925) (7,865)
Advances to newsprint mill
partnership (1,445) (1,350)
Other - net (370) 51
Net cash provided (used) by
investing activities 7,688 (9,164)
Cash provided (used) by financing
activities:
Payment of cash dividends (2,842) (2,308)
Other - principally stock
issuances 324 110
Net cash used by financing
activities (2,518) (2,198)
Net change in cash and cash
equivalents 23,917 13,722
Cash and cash equivalents,
beginning of year 68,574 42,326
Cash and cash equivalents,
end of period $ 92,491 $ 56,048
Other cash flow information:
Cash paid during the period for:
Income taxes (net of refunds) $ 6,235 $ 1,700
</TABLE>
See notes to consolidated financial statements<PAGE>
<TABLE>
McCLATCHY NEWSPAPERS, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED)
(In thousands, except share and per share amounts)
<CAPTION>
Par Value Additional Treasury
Class A Class B Paid-In Retained Stock
Common Common Capital Earnings At Cost Total
<S> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1993 $ 51 $238 $39,472 $344,133 $(371) $383,523
Net income (3 months) 5,897 5,897
Dividends paid ($.08 per share) (2,308) (2,308)
Conversion of 272,000 Class B to
Class A 3 (3)
Issuance of 16,256 Class A under
employee stock plans 281 281
Balances, March 31, 1994 54 235 39,753 347,722 (371) 387,393
Net income (9 months) 40,748 40,748
Dividends paid ($.25 per share) (7,468) (7,468)
Conversion of 205,000 Class B
shares to Class A 2 (2)
Issuance of 956,250 Class A
shares to public 9 19,992 20,001
Issuance of 88,066 Class A
shares under employee plans 1 1,545 1,546
Balances December 31, 1994 66 233 61,290 381,002 (371) 442,220
Net income (3 months) 6,642 6,642
Dividends paid ($.095 per share) (2,842) (2,842)
Conversion of 100,000 Class B to
Class A 1 (1)
Issuance of 17,975 shares under
employee plan 1 323 324
Balance, March 31, 1995 $ 68 $232 $61,613 $384,802 $(371) $446,344
See notes to consolidated statements
/TABLE
<PAGE>
McCLATCHY NEWSPAPERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
McClatchy Newspapers, Inc. (the Company) and its subsidiaries are
engaged primarily in the publication of newspapers located in western
coastal states 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 the recording of $768,000 of costs associated with the closure of
the Company's monthly Spectrum tabloids in March 1994. Such financial
statements are not necessarily indicative of the results to be expected for
the full year.
Revenue recognition - Advertising revenues are recorded when
advertisements are placed in the newspaper and circulation revenues are
recorded as newspapers are delivered over the subscription term. Unearned
revenues represent prepaid circulation subscriptions.
Cash equivalents are highly liquid investments with maturities of three
months or less when acquired.
Investments consist of the following classified as short-term
securities: $5,940,000 of commercial paper maturing on May 30, 1995 which
will be held to maturity, and is valued at amortized cost; and $8,081,000 of
U.S. and local government debt securities maturing through October 5, 1995,
which are available for sale and recorded at amortized cost because the
unrecognized gains and losses to adjust to market value is not significant
by security or in total. Long-term investments consist of U.S. and local
government debt securities totalling $11,302,000 maturing through November
15, 1997, which are classified as available for sale and recorded at
amortized cost because the unrecognized gains and losses to adjust to market
value is not significant by security or in total. Costs for investment
securities are determined by specific identification. No gains or losses
were realized in 1995 or 1994.<PAGE>
McCLATCHY NEWSPAPERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES - Continued
Concentrations of credit risks - Financial instruments which potentially
subject the Company to concentrations of credit risks are principally cash
and cash equivalents and trade accounts receivables. Cash and cash
equivalents are placed with major financial institutions and are currently
invested in the highest rated commercial paper and government securities.
The Company routinely assesses the financial strength of significant
customers and this assessment, combined with the large number and geographic
diversity of its customers, limits the Company's concentration of risk with
respect to trade accounts receivable.
Inventories are stated at the lower of cost (based principally on the
last-in, first-out method) or current market value. If the first-in, first-
out method of inventory accounting had been used, inventories would have
increased by $3,531,000 at March 31, 1995 and $2,856,000 at December 31,
1994.
Property, plant and equipment are stated at cost. Major renewals and
betterments, as well as interest incurred during construction, are
capitalized. For three months ended March 31, 1995 and 1994 such interest
was nominal.
Depreciation is computed generally on a straight-line basis over
estimated useful lives of:
- 10 to 60 years for buildings
- 9 to 20 years for presses
- 3 to 10 years for other equipment
Intangibles consist of the unamortized excess of the cost of acquiring
newspaper operations over the fair market values of the newspapers' tangible
assets at the date of purchase. Identifiable intangible assets, consisting
primarily of lists of advertisers and subscribers and covenants not to
compete, are amortized over periods ranging from three to twenty-five years.
The excess of purchase prices over identifiable assets is amortized over
forty years. Management periodically evaluates the recoverability of
intangible assets by reviewing the current and projected profitability of
each of its newspaper operations.
Deferred income taxes result from temporary differences between amounts
reported for financial and income tax reporting purposes. See note 4.<PAGE>
McCLATCHY NEWSPAPERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES - Continued
Earnings per share are based on the weighted average number of
outstanding shares of common stock and dilutive common stock equivalents
(stock options - see note 9).
2. INVESTMENT IN NEWSPRINT MILL PARTNERSHIP
A wholly-owned subsidiary of the Company owns a 13.5% interest in
Ponderay Newsprint Company ("Ponderay"), a general partnership formed to own
and operate a newsprint mill in the State of Washington. The Company has
guaranteed certain debt (see note 8) and has committed to take 28,400 metric
tons of annual production on a "take-if-tendered" basis until March 1, 2001.
The Company purchased $3,311,000 and $3,185,000 of newsprint from Ponderay
in the three months ended March 31, 1995 and 1994, respectively. For the
three months ended March 31, Ponderay net revenues and net losses were
$31,581,000 and $5,405,000 in 1995 and $23,118,000 and $11,556,000 in 1994.
3. LONG-TERM OBLIGATIONS
Long-term obligations consist of (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
<S> <C> <C>
Postretirement benefits
obligation $ 9,172 $ 9,209
Other long-term obligations 5,452 5,752
Total long-term obligations $ 14,624 $ 14,961
</TABLE>
Long-term obligations mature as follows (in thousands):
<TABLE>
<CAPTION>
Year Ending March 31,
<S> <C>
1997 $ 1,043
1998 874
1999 426
2000 324
Thereafter 11,957
Total $ 14,624
</TABLE>
The Company has an outstanding letter of credit for $4,861,000.<PAGE>
Other long-term obligations consist primarily of deferred compensation
and supplemental retirement benefits.<PAGE>
McCLATCHY NEWSPAPERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
4. INCOME TAX PROVISIONS
Income tax provisions consist of (in thousands):
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1995 1994
<S> <C> <C>
Current:
Federal $ 3,811 $ 7,482
State 834 793
Deferred:
Federal (23) (3,708)
State (28) (28)
Income tax provision $ 4,594 $ 4,539
The effective tax rate and the statutory federal income tax
rate are reconciled as follows:
Statutory rate 35.0% 35.0%
State taxes, net of federal
benefit 4.7 5.0
Amortization of intangibles 0.9 2.5
Other 0.3 1.0
Effective rate 40.9% 43.5%
</TABLE>
The components of deferred taxes recorded in the Company's
Balance Sheet on March 31, 1995 and December 31, 1994 are (in
thousands):
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Depreciation and amortization $ 40,779 $ 40,535
Partnership losses 11,009 11,147
State taxes 191 201
Deferred compensation (13,233) (13,085)
Other 142 142
Deferred tax liability (net of
$11,451 in 1995 and $11,425 in 1994
reported as current assets) $ 38,888 $ 38,940
/TABLE
<PAGE>
McCLATCHY NEWSPAPERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
5. INTANGIBLES
Intangibles consist of (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
<S> <C> <C>
Identifiable intangible assets, $ 125,968 $ 125,511
primarily customer lists
Excess purchase prices over
identifiable intangible 64,400 64,400
assets
Total 190,368 189,911
Less accumulated amortization 76,264 74,465
Intangibles - net $ 114,104 $ 115,446
</TABLE>
6. EMPLOYEE BENEFIT PLANS
The Company has a defined benefit pension plan (retirement plan) for a
majority of its employees. Benefits are based on years of service and
compensation. Contributions to the plan are made by the Company in amounts
deemed necessary to provide benefits. Plan assets consist primarily of
marketable securities including common stocks, bonds and U.S. government
obligations, and other interest bearing accounts.
The Company also has a supplemental retirement plan to provide key
employees with additional retirement benefits. The terms of the plan are
generally the same as those of the retirement plan, except that the
supplemental retirement plan is limited to key employees and benefits under
it are reduced by benefits received under the retirement plan. The accrued
pension obligation for the supplemental retirement plan is included in other
long-term obligations.
Expenses of these plans for the three months ended March 31, 1995 and
1994 were $1,703,000 and $1,408,000, respectively.
The Company also has a Deferred Compensation and Investment Plan (401(k)
plan) which enables qualified employees voluntarily to defer compensation.
Company contributions to the 401(k) plan for the three months then ended
March 31, 1995 and 1994 were $970,000 and $968,000, respectively.
The Company also provides or subsidizes certain retiree health care and
life insurance benefits. For the three months ended March 31, 1995 and
1994, postretirement benefit expenses were $150,000 and $225,000,
respectively.<PAGE>
McCLATCHY NEWSPAPERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
7. CASH FLOW INFORMATION
Cash provided or used by operations in the three months ended March 31,
1995 and 1994 was affected by changes in certain assets and liabilities as
follows (in thousands):
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Increase (decrease) in assets:
Receivables $ (7,945) $ (3,792)
Inventories 400 (2,697)
Other assets 1,118 1,059
Total (6,427) (5,430)
Increase (decrease) in
liabilities:
Accounts payable (3,119) (2,191)
Accrued compensation 1,595 1,667
Income taxes (1,607) 4,825
Other liabilities (1,114) 487
Total (4,245) 4,788
Net cash increase from changes
in assets and liabilities $ 2,182 $ 10,218
</TABLE>
8. COMMITMENTS AND CONTINGENCIES
The Company guarantees $21,602,000 of bank debt related primarily to its
joint venture in the Ponderay newsprint mill.
There are libel and other legal actions that have arisen in the ordinary
course of business and are pending against the Company. Management
believes, after reviewing such actions with counsel, that the outcome of
pending actions will not have a material adverse effect on the Company's
consolidated results of operations or financial position.
9. COMMON STOCK AND STOCK PLANS
On May 9, 1994 the Company filed a registration statement with the
Securities and Exchange Commission registering 1,581,250 shares of Class A
common stock to be sold by the Company and certain selling stockholders in a
combined primary and secondary offering to the public. Selling stockholders
converted 625,000 shares of Class B common to Class A common stock and the
Company converted 750,000 Class B shares held in treasury (at no cost). In
addition, 206,250 Class A shares were issued to cover over-allotments in the
offering. As a result of the offering, the number of outstanding shares
increased 956,250.<PAGE>
McCLATCHY NEWSPAPERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
9. COMMON STOCK AND STOCK PLANS - Continued
The Company's Class A and Class B common stock participate equally in
dividends. Holders of Class A common stock are entitled to one-tenth of a
vote per share and to elect as a class 25% of the Board of Directors,
rounded up to the nearest whole number. Holders of Class B common stock are
entitled to one vote per share and to elect as a class 75% of the Board of
Directors, rounded down to the nearest whole number. Class B common stock
is convertible at the option of the holder into Class A common stock on a
share-for-share basis.
The Company's Amended Employee Stock Purchase Plan (the Purchase Plan)
reserved 1,500,000 shares of Class A common stock for issuance to employees.
Eligible employees may purchase shares at 85% of "fair market value" (as
defined) through payroll deductions. The Purchase Plan can be automatically
terminated by the Company at any time. As of March 31, 1995, 459,815 shares
of Class A common stock have been issued under the Purchase Plan.
The Company's 1987 Stock Option Plan (1987 Employee Plan), as amended,
reserved 600,000 shares of Class A common stock for issuance to key
employees. Options are granted at the market price of the Class A common
stock on the date of the grant. The options vest in installments over four
years, and once vested are exercisable up to ten years from the date of
award. Although the Employee Plan permits the Company, at its sole
discretion, to settle unexercised options by making payments to the option
holder of stock appreciation rights (SARs), the Company does not intend to
avail itself of this alternative except in limited circumstances.
On January 26, 1994 the Board of Directors adopted the 1994 Employee
Stock Option Plan (1994 Employee Plan) which was approved by stockholders in
May 1994 and reserves 650,000 Class A shares for issuance to key employees.
The terms of this plan are substantially the same as the terms of the 1987
Employee Plan.
The Company's stock option plan for outside (nonemployee) directors
(Directors' Plan) provides for the issuance of up to 150,000 shares of Class
A common stock. Under the Directors' Plan each outside director is granted
an option at fair market value for 1,500 shares annually. Terms of the
Directors' Plan are similar to the terms of the Employee Plans.
In the 1987 Employee Plan, there are 356,550 options exercisable as of
March 31, 1995. Substantially all of the shares reserved in the plan have
been granted. In the 1994 Employee Plan 516,600 remain for future grants
and none of the options are exercisable. A total of 647,350 options are
outstanding in the employee plans at an average option price of $19.30 per
share. In the Directors' Plan 54,000 options are outstanding at an average
price of $21.11 per share, 37,125 shares were exercisable at March 31, 1995
and 96,000 are available for future awards.<PAGE>
Item 2 - Management's Discussion And Analysis Of Results Of Operations And
Financial Condition
Recent Events
Three newsprint price increases were implemented by newsprint producers
in May, August and December of 1994, and a fourth was implemented in March
1995 as increasing advertising lineage created a greater demand for
newsprint. An additional price increase was announced for May 1995. These
increases reduced the Company's first quarter operating income and will
continue to put pressure on earnings in 1995. Advertising and circulation
volume and rate increases, coupled with company-wide cost control programs
focused on newsprint usage and all other categories of expenses have, in the
past, mitigated the impact of newsprint price increases. The Company
intends to continue to pursue all of these measures; however, they may not
have the same effect on future results.
First quarter 1994 earnings reflect a pretax charge of $768,000 for
closing many of the Company's Senior Spectrum tabloids which served readers
over age 55. Two Sacramento area weekly tabloids continue to be published.
However, monthly tabloids outside of the Sacramento area were not profitable
as advertisers reduced expenditures in niche publications.
First Quarter 1995 Compared to 1994
Net income increased 12.6% to $6.6 million versus $5.9 million in 1994.
While revenues increased 4.5% to $113.8 million, operating expenses, led by
a 29.6% increase in newsprint and supplements, increased 6.3%. As a result,
operating income fell 10.7% versus 1994. A $1.2 million gain in investment
income and smaller losses from the Company's joint venture in Ponderay
newsprint mill were major factors in the increase in net income.
Net revenues and earnings growth would have been greater but for two
unrelated events. Heavy rains and flooding in Northern California, home of
three of the Company's larger newspapers, depressed advertising activity as
the severe weather conditions kept consumers at home for much of the first
quarter. Also, pre-Easter advertising was largely recorded in the first
quarter of 1994, but will be in the second quarter of 1995 due to the
holiday being later this year.
Advertising revenues increased 3.9% to $87.1 million due primarily to
advertising rate increases at most of the Company's newspapers. Advertising
volumes, which started out strong in January declined in February and March.<PAGE>
Full run "run-of-press" (ROP) advertising, which is found in the body of
the newspaper and accounts for a majority of advertising revenue, increased
nominally. Increases in classified and national linage offset a decline in
retail advertising. In particular, full-run ROP linage was down 2.6% at The
Sacramento, Fresno and Modesto Bees. Gains at the Company's next four
largest newspapers offset the losses in Northern California.
In other categories of advertising, part-run ROP linage (found in zoned
editions of the newspapers) in the Company's seven largest dailies was even
with 1994. Linage in total-market-coverage products distributed to
nonsubscribers increased 5.9% and the number of preprinted advertising
inserts distributed in newspapers increased 3.5%. Advertising linage in the
Company's 13 other newspapers increased 0.7%.
Circulation revenues posted a 2.4% gain reflecting increased home-
delivery rates at certain newspapers and higher average paid circulation.
On average, the number of daily subscribers increased 0.8% over the 1994
quarter and Sunday was up 0.4%.
Other revenues continued to grow at a faster rate than advertising and
circulation, up 28.6% to $5.0 million. Increased commercial printing at
McClatchy Printing Company and at The News Tribune and Tri-City Herald in
Washington state was the primary source of the increased revenues.
The overwhelming factor in the increase in operating expenses was higher
prices paid for newsprint due to four newsprint price hikes beginning in May
1994. Newsprint and supplement expense increased 29.6% as the higher prices
offset lower usage.
In other operating expense categories, compensation costs rose 3.1%
reflecting a 2.4% increase in salaries and 5.6% increase in the cost of
fringe benefits. The increase in fringe benefits related mostly to higher
reserves for workers' compensation and retirement benefits. Deprecation and
amortization was down 3.0% as certain assets at the South Carolina
newspapers and the Tri-City Herald became fully depreciated or amortized.
Other operating expenses increased 2.1% as cost containment measures held
them below inflation and because 1994 expenses included costs of closing the
Senior Spectrum tabloids.
In the nonoperating area the Company gained $2.0 million from a $1.2
million increase in investment income and a reduction in McClatchy's share
of the Ponderay newsprint mill loss of $800,000.
The Company's effective tax rate was 40.9% versus 43.5% in 1994 due
primarily to a drop in nondeductible amortization of intangibles. See note
4 to the consolidated financial statements.<PAGE>
Liquidity & Capital Resources
The Company's cash and cash equivalent position improved $23.9 million
from year-end 1994 to $92.5 million at March 31, 1995. While $18.7 million
of cash was generated by operations and $24.9 million was generated by
investment proceeds, a portion of the funds were used for capital
expenditures, proceeds to Ponderay newsprint mill, short-term investment
securities and dividends. Capital expenditures are projected to be $35.8
million in 1995.
The Company has a partnership interest in a newsprint mill which has
incurred losses since 1989. However, its losses are expected to diminish
assuming newsprint prices continue to increase. The Company presently
intends, when necessary, to contribute funds to help finance its share of
the mill's cash needs. See notes 2 and 8 to the consolidated financial
statements for a discussion of the Company's commitments to the joint
venture.
See note 3 for a discussion of the Company's long-term obligations.
Management is of the opinion that operating cash flow and cash and
investment balances are adequate to meet the liquidity needs of the Company,
including currently planned capital expenditures and other investments.
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
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K - 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.
McClatchy Newspapers, Inc.
Registrant
Date: May 10, 1995 /s/ James P. Smith
James P. Smith
Vice President,
Finance and Treasurer<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains financial information extracted from SEC filing Form 10-K
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 92,491
<SECURITIES> 14,021
<RECEIVABLES> 54,309
<ALLOWANCES> 2,314
<INVENTORY> 8,978
<CURRENT-ASSETS> 182,530
<PP&E> 460,499
<DEPRECIATION> 187,401
<TOTAL-ASSETS> 586,630
<CURRENT-LIABILITIES> 75,323
<BONDS> 0
<COMMON> 300
0
0
<OTHER-SE> 446,044
<TOTAL-LIABILITY-AND-EQUITY> 586,630
<SALES> 113,798
<TOTAL-REVENUES> 113,798
<CGS> 0
<TOTAL-COSTS> 103,440
<OTHER-EXPENSES> (888)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10
<INCOME-PRETAX> 11,236
<INCOME-TAX> 4,594
<INCOME-CONTINUING> 6,642
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,642
<EPS-PRIMARY> 0.22
<EPS-DILUTED> 0.22
</TABLE>
