McClatchy Reports Q4 $1.4 Billion Loss On Big 'Goodwill' Gesture

By: Mark Fitzgerald The McClatchy Co. reported Thursday that it incurred a $1.43 billion after-tax loss on the fourth quarter of 2007 -- after taking yet another huge goodwill impairment charge.

McClatchy said its loss from continuing operations of $17.42 per share -- which compares to a $3.40 per-share loss in the same period in 2006 -- includes a non-cash after-tax impairment charge related to goodwill and flagging newspaper mastheads of $1.47 billion.

The impairment charge on goodwill and other non-tangible assets -- reflecting a loss in the fair market value of the nation's third-largest newspaper chain -- follows a goodwill write-down of $1.4 billion in the third quarter of 2007. The swoon in McClatchy stock, which has lost more than half its value since the Knight Ridder deal, made the impairment charges inevitable, and CEO Gary Pruitt had warned more than a month ago that a Q4 charge was coming.

In effect, McClatchy has written off half the value of the $4.4 billion blockbuster purchase of Knight Ridder in the summer of 2006.

The impairment charge includes a write-down of $1.39 billion to goodwill, and $166.6 million to newspaper mastheads, McClatchy said.

McClatchy said Thursday its loss from continuing operations for all of 2007 was $2.73 billion or $33.26 per share, including the non-cash impairment charges. McClatchy's total net loss, including discontinued operations, was $2.74 billion, or $33.37 per share.

Chairman and CEO Gary Pruitt said the big write-down was necessitated by the continuing decline in the stock price on top of the "recessionary outlook."

"It's important to understand that this non-cash charge does not reflect our view of the long-term health of the newspaper industry or the value of McClatchy," he said in a statement. "However, when completing the goodwill impairment assessment, GAAP required that we reconcile the sum of the fair values of our reporting units to our current market capitalization. ... We believe investors should focus on the more important fundamentals of our business. We continue to produce strong cash flows and are quickly moving to become a successful hybrid print and online news company. We are focused on four major areas: driving new revenues, with a particular emphasis on online advertising; focusing on growing total audience; providing high quality public service journalism; and reducing our cost structure."

McClatchy did not break out advertising revenue by category, but said overall ad revenue fell to $489,405 for the quarter from $576,123, a drop of 15.1%.