SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: January 29, 1998
MCCLATCHY NEWSPAPERS, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 1-9824 940666175
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(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification Number)
2100 "Q" STREET, SACRAMENTO, CA 95816
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(Address of principal executive offices) (Zip Code)
(916) 321-1846
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(Registrant's telephone number,
including area code)
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Exhibit Index located at page 4
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Item 5. Other Events.
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In a press release dated January 29, 1998, attached hereto as Exhibit
99.1, which is incorporated by reference and made a part of this Current Report
on Form 8-K, the Registrant announced its fourth quarter and year-end results.
Item 7. Financial Statements and Exhibits.
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(c) Exhibits.
99.1 Press Release dated January 29, 1998.
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Exhibit Index located at page 4
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SIGNATURE
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 hereunto duly authorized.
Dated: January 29, 1998
McClatchy Newspapers, Inc.
By /s/ Karole Morgan-Prager
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Karole Morgan-Prager
General Counsel and Corporate
Secretary
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Exhibit Index located at page 4
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EXHIBIT INDEX
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Sequentially
Exhibit No. Description Numbered Page
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99.1 Press Release dated January 29, 1998
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Exhibit Index located at page 4
Contact: Elaine Lintecum
Investor Relations Manager
(916) 321-1846
MCCLATCHY REPORTS RECORD
FOURTH QUARTER AND YEAR-END RESULTS
SACRAMENTO, CA, January 29, 1998 -- McClatchy Newspapers, Inc.
(NYSE-MNI) today reported record fourth quarter earnings of $20.3 million or
$0.53 per share, up 16.4% over 1996 fourth quarter results of $17.5 million or
$0.46 per share. This represents the sixth consecutive quarter of record
earnings at McClatchy.
Fourth quarter earnings in both 1997 and 1996 included after-tax gains
of three cents and four cents per share, respectively, related to the sale of
non-strategic small businesses and certain real estate in 1997, and the sale of
a community newspaper in 1996.
Total revenues for the quarter were $169.5 million, up 2.4% from 1996
revenues. Excluding revenues from five community newspapers sold in December
1996 and February 1997, revenues were up 3.8%. Without the sold newspapers,
advertising revenues increased 4.5% to $134.2 million, and circulation revenues
increased nominally to $26.8 million.
Earnings for the full year were $68.8 million or $1.80 per share versus
$44.5 million or $1.18 in 1996. Net income from ongoing operations (exclusive of
gains on the sales of the community newspapers and other business operations and
real estate) was $63.3 million, or $1.66 per share, compared to 1996 earnings of
$42.9 million, or $1.14 per share.
Total revenues for the full year 1997 were $641.9 million, up 2.8% from
1996 revenues of $624.2 million. Excluding the sold newspapers, revenues were
$640.9 million, up 4.3% from 1996 revenues of $614.8 million.
Much of the increase in net income is attributable to strong results at
McClatchy's Carolinas newspapers, higher revenues at its California newspapers
and lower average newsprint prices in 1997. Earnings for the fourth quarter and
full-year also benefited from lower interest expense as McClatchy repaid debt.
Gary Pruitt, president and chief executive officer of McClatchy said,
"We are pleased to be able to report record earnings in 1997 on top of record
results in 1996. Our string of record earnings will end in 1998 as a result of
the Cowles [Media Company] merger, but we are confident this strategic move will
yield shareholder value and strengthen our company in the years ahead."
On November 13, 1997 the company signed a definitive agreement to
acquire all of the outstanding shares of Cowles Media Company (Cowles) in a
transaction valued at $1.4 billion, including the assumption of approximately
$91 million in existing Cowles debt. Under terms of the agreement, a minimum of
75 percent and a maximum of 85 percent of
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Cowles shares will be exchanged for $90.50 per share in cash. The remaining 15
to 25 percent, at the election of the shareholders, may be exchanged on a per
share basis for $90.50 in value of McClatchy Class A common shares, subject to a
minimum exchange ratio of 2.68820 and a maximum exchange ration of 3.01667. The
company will fund the cash consideration of the proposed merger with bank debt.
Cowles, publisher of the Star Tribune newspaper, which serves the Twin Cities of
Minneapolis and St. Paul, also owns four separate subsidiaries that publish
business magazines, special-interest magazines and home improvement books. On
January 9, 1998, the company announced that definitive agreements had been
reached to sell Cowles' magazine publishing subsidiaries to PRIMEDIA Inc. and to
sell the book publishing subsidiary to a management group led by the
subsidiary's president. The combined proceeds, including the assumption of debt,
are expected to be in excess of $208 million. The company will use the proceeds
from the sale of the non-newspaper businesses to reduce the debt associated with
the Cowles merger. The company anticipates that the sale of the non-newspaper
businesses will close simultaneously with the proposed merger in March 1998.
The company's bank debt balance is now expected to be no more than
$1.16 billion at the close of the transactions assuming the sales of the
non-newspaper businesses close at the time of the merger. The company currently
intends to accelerate payments on this debt as cash generation allows.
McClatchy had initially expected earnings dilution of 45% to 55% in
1998 because of the issuance of stock in the merger, the debt incurred (and
related interest expense), and amortization of intangible assets created in the
merger. The company had expected its cash earnings (net income after adding back
amortization) to be accretive by 2000. Assuming the Cowles merger closes in
March 1998, McClatchy currently expects that 1998 earnings, as reported on First
Call average consensus at $1.82 per share prior to the announcement of the
proposed merger, would be diluted by 40% to 50%. Additionally, the company
currently expects that net income will turn accretive on a cash basis by the end
of 1999.
McClatchy Newspapers, Inc., headquartered in Sacramento, California,
currently publishes 10 daily and 13 non-daily newspapers located in western
coastal states and North and South Carolina. The company reported 1997 daily
circulation of 979,900 and Sunday circulation of 1,176,700. McClatchy's
newspapers include, among others, The Sacramento Bee, The News and Observer
(Raleigh, NC), The Fresno (CA) Bee, The News Tribune (Tacoma, WA) and the
Anchorage Daily News. McClatchy also owns and operates other media-related
businesses, including Nando.net, a national on-line publishing operation and The
Newspaper Network, a national newspaper marketing company. McClatchy is listed
on the New York Stock Exchange under the symbol MNI.
This release contains estimates and other forward-looking statements
covering subjects related to financial operating results. These forward-looking
statements, and any other statements going beyond historical facts reported by
McClatchy, are subject to risks and uncertainties that could cause actual
results to differ materially. These include changes in interest rates to be paid
on the company's debt facilities, a delay or failure to close the sales of
Cowles' magazine and book publishing businesses, increases in newsprint prices
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and/or printing and distribution costs over anticipated levels, competition from
other forms of media in the company's principal markets, increased consolidation
among major retailers in the company's newspaper markets or other events
depressing the level of advertising, an economic downturn in the local economies
of California's Central Valley, Washington state, Alaska, Carolinas or, upon
closing of the proposed merger, Minnesota; or other occurrences leading to
decreased circulation and diminished revenues from both display and classified
advertising.
<TABLE>
MCCLATCHY NEWSPAPERS, INC.
SUMMARY OF UNAUDITED RESULTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<CAPTION>
Quarter Ended Year-Ended
December 31 December 31
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1997 1996 1997 1996
---------------- ----------------- ------------------ ---------------
<S> <C> <C> <C> <C>
Revenues - net $ 169,449 $ 165,468 $ 641,950 $ 624,233
Operating expenses:
Compensation 64,375 64,952 254,048 253,327
Newsprint and supplements 26,751 24,193 96,869 112,716
Depreciation and amortization 13,102 13,452 53,269 52,954
Other operating expenses 31,724 32,567 122,009 120,001
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Total operating expenses 135,952 135,164 526,195 538,998
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Operating income 33,497 30,304 115,755 85,235
Interest expense (1,693) (3,062) (8,698) (13,321)
Partnership income (loss) (440) (76) (500) 3,024
Gain on sale of newspaper
operations and other
operations/assets 1,993 2,840 9,254 2,840
Other non-operating expenses - 127 71 449 137
net --------------- ---------------- ----------------- ---------------
Income before taxes 33,484 30,077 116,260 77,915
Income tax provision 13,159 12,617 47,461 33,422
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Net income $ 20,325 $ 17,460 $ 68,799 $ 44,493
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Net income per common share:(1)
Basic $ 0.53 $ 0.46 $ 1.81 $ 1.18
Diluted $ 0.53 $ 0.46 $ 1.80 $ 1.18
Weighted average common
shares:(1)
Basic 35,104 37,733 37,971 37,593
Diluted 38,288 37,999 38,155 37,812
(1) Share and per share amounts have been adjusted to reflect a five-for-four
stock split declared in December 1996 and paid on January 2, 1997.
</TABLE>
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