By: E&P Staff The McClatchy Co. disclosed in a filing that it has taken an after-tax write down of $1.3 billion due to "continuing challenging business conditions and the resulting weakness in the company's stock price," according to the company.
Before taxes, the McClatchy recorded impairment charges of $1.18 billion to goodwill, $250.4 million to newspaper mastheads, and $84.6 million to investments in unconsolidated subsidiaries and other items.
About one-third of the goodwill impairment charge resulted from the accounting treatment of the value of common stock issued in the Knight Ridder acquisition, which resulted in additional goodwill being recorded.
In March 2006, McClatchy announced it bought Knight Ridder for approximately $4.5 billion in cash and stock.
In a statement, McClatchy CEO and Chairman Gary Pruitt said the accounting charges are non-cash and "nothing about them changes our operations or our ability to reduce debt.
"As I said last month when we released our preliminary earnings, we recognize that newspaper revenues have declined industry-wide and that values have dropped. We have been more affected than most by the real estate downturn because of our operations in California and Florida, the epicenters of the sub-print lending practices."
Pruitt added that the company does not know when the downturn will end and that they have "no visibility" beyond the end of this year.
"Nonetheless, we believe that cyclical factors represent a significant portion of the current advertising downturn," he said.
"We are well positioned in markets with growth prospects better than the nation as a whole, and while that clearly doesn't make us immune to national economic events, we believe it will serve us well when the economy begins to recover from the real-estate led slowdown. Looking long-term, we like the prospects for all of our growth markets."
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