UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10‑-K

☒	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: December 30, 2018
For the fiscal year ended: December 29, 2019
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

The McClatchy Company

(Exact name of registrant as specified in its charter)


Delaware		52‑2080478
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
2100 Q Street, Sacramento, CA		95816
(Address of principal executive offices)		(Zip Code)

916‑321‑1844

Registrant’s telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		~~Name~~Ticker ~~of each exchange on which registered~~Symbol		Name of each exchange on which registered
Class A Common Stock, par value $.01 per share		~~NYSE American LLC~~MNI(1)		NYSE American LLC(1)

Securities registered pursuant to Section 12 (g) of the Act: None(1)

⁽¹⁾

On February 21, 2020, the NYSE American filed a Form 25 with the Securities and Exchange Commission (the “SEC”) to delist the Class A Common Stock of The McClatchy Company. The delisting became effective 10 days after the Form 25 was filed. The deregistration of the Class A Common Stock under section 12(b) of the Securities Exchange Act of 1934 will be effective 90 days, or such shorter period as the SEC may determine, after filing of the Form 25. Following deregistration of the Class A Common Stock under Section 12(b) of the Securities Exchange Act of 1934, the Class A Common Stock shall remain registered under Section 12(g) of the Securities Exchange Act of 1934. Beginning on February 16, 2020, the Class A Common Stock was quoted on the OTC Pink Market under the symbol “MNIQQ.”

Indicate by check mark if the registrant is a well‑known seasoned issuer, as defined in Rule 405 of the Securities Act. ☐ Yes ☒ No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ☐ Yes ☒ No

Indicate by check mark whether the registrant (1) has 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 ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S‑T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ☒ Yes ☐ No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S‑K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10‑K or any amendment to this Form 10‑K. ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non‑accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b‑2 of the Exchange Act. ~~(Check one):~~

Large accelerated filer ☐ Accelerated filer ☒☐ Non-accelerated filer ☐☒ Smaller reporting company ☒ Emerging growth company ◻

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Exchange Act). ☐ Yes ☒ No

Based on the closing price of the registrant’s Class A Common Stock on the NYSE American LLC on June 2930, ~~2018~~2019, the last business day of the registrant’s second fiscal quarter, the aggregate market value of the voting and non‑voting common equity held by non‑affiliates was approximately $6917.71 million. For purposes of the foregoing calculation only, as required by Form 10‑K, the Registrant has included in the shares owned by affiliates, the beneficial ownership of Common Stock of officers and directors of the Registrant and members of their families, and such inclusion shall not be construed as an admission that any such person is an affiliate for any purpose.

Shares outstanding as of March 125, ~~2019~~2020:

Class A Common Stock	5,408,396
Class B Common Stock	2,428,191


Class A Common Stock	5,506,185		Class B Common Stock	2,428,191

DOCUMENTS INCORPORATED BY REFERENCE:

~~Portions~~The ofregistrant ~~the~~intends ~~registrant’s~~to file a Definitive Proxy Statement ~~for~~pursuant ~~the~~to ~~Annual~~Regulation ~~Meeting~~14A ofor ~~Shareholders~~an toamendment ~~be filed pursuant~~ to ~~Regulation~~Form ~~14A~~10-K within 120 days after our fiscal year end of December 3029, ~~2018,~~2019. Portions of such definitive proxy statement or an amendment to Form 10-K are incorporated by reference in Part III of this Annual Report on Form 10‑K.

Table of Contents

TABLE OF CONTENTS

PART I
Item 1.	Business	23
Item 1A.	Risk Factors	10
Item 1B.	Unresolved Staff Comments	10
Item 2.	Properties	10
Item 3.	Legal Proceedings	10
Item 4.	Mine Safety Disclosures	10
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	1113
Item 6.	Selected Financial Data	1113
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1214
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	2326
Item 8.	Financial Statements and Supplementary Data	2427
Item 9.	Changes In and Disagreements With Accountants on Accounting and Financial Disclosure	6367
Item 9A.	Controls and Procedures	6367
Item 9B.	Other Information	6367
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	65
Item 11.	Executive Compensation	65
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	6468
Item 13.	Certain Relationships and Related Transactions, and Director Independence	6468
Item 14.	Principal Accounting Fees and Services	6468
PART IV
Item 15.	Exhibits, Financial Statement Schedules	66
Item 16.	Form 10-K Summary	6871
SIGNATURES		6972

Table of Contents

PART I

Forward‑Looking Statements:

This annual report on Form 10‑K contains forward‑looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended, including statements relating to ~~our~~ future financial performance and operations, ~~business~~trends in advertising, ~~strategies~~uses of cash, including offers for or repurchases of our debt, the refinancing of our debt and ~~operations~~our pension plan obligations. These statements are based upon our current expectations and knowledge of factors impacting our business and are generally preceded by, followed by or are a part of sentences that include the words “believes,” “expects,” “anticipates,” “estimates” or similar expressions. All statements, other than statements of historical fact, are statements that could be deemed forward‑looking statements. For all of those statements, we claim the protection of the safe harbor for forward‑looking statements contained in the Private Securities Litigation Reform Act of 1995. Such statements are subject to risks, trends and uncertainties.

These risks and uncertainties include:, but are not limited to:

the effects of the Bankruptcy Court rulings in the Chapter 11 Cases (as defined below) and the outcome of the proceedings in general;

the length of time the Company will operate while in the Chapter 11 Cases;

our restructuring efforts rely on coming to terms with multiple parties who may have conflicting interests;

the potential adverse effects of Chapter 11 Cases on the Company’s liquidity or results of operations or its ability to pursue its business strategies, maintain business and operational relationships and retain key executives;

our ability to complete definitive documentation in connection with any Chapter 11 satisfactory to the Company and our stakeholders, and our ability to obtain requisite support for our proposed restructuring plan from various stakeholders and confirm and consummate that plan in accordance with its terms;

the sufficiency of the DIP Facility (as defined below) to allow the Company to operate as usual and fulfill ongoing commitments to stakeholders;

our ability to successfully emerge from Chapter 11, which will be contingent upon numerous factors, including obtaining the Bankruptcy Court’s approval of our proposed Chapter 11 plan of reorganization and our ability to obtain a new credit facility, or “exit financing” upon our emergence from Chapter 11;

increased levels of employee attrition during the Chapter 11 Cases;

our reliance on third party vendors and the impact of the Chapter 11 filing on such relationships;

our ability to continue as a going concern;

the continued trading of our securities on the OTC Pink Market;

significant competition in the market for news and advertising;

general economic and business conditions;

any business, workforce and sales disruption, including from third parties on whom we are dependent, or difficulties securing financing resulting from natural disasters and public health emergencies, such as the coronavirus;

changes in technology, services and standards, and changes in consumer behavior;

ability to grow and manage our digital businesses;

our ability to successfully execute cost-control measures, including selling excess assets;

any changes to our business and operations that may result in goodwill and masthead impairment charges;

any harm to our reputation, business and results of operations resulting from data security breaches and other threats and disruptions;

· financial risk arising from our consolidated debt;

· restrictions to our business due to covenants in our bond indenture and revolving credit agreement;

· our ability to repay our existing indebtedness and meet our other obligations;

· potential increase in contributions to our qualified defined benefit pension plan in the next several years;

fluctuating price of newsprint or disruptions in newsprint supply chain;

any labor unrest;

· unsuccessful returns from our venture investments;

accelerated decline in print circulation volume;

· ~~our~~developments ~~reliance~~in onthe ~~third~~laws ~~party~~and ~~vendors~~regulations to which we are subject resulting in increased costs and lower revenues; and

· developments in the laws and regulations to which we are subject resulting in increased costs and lower advertising revenues; and

adverse results from litigation or governmental investigations.

Although the forward-looking statements in this report reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by them. In light of these risks and uncertainties, you are cautioned not to place undue reliance on these forward-looking statements. Except as required by law, we undertake no obligation to announce publicly revisions we make to these forward-looking statements to reflect the effect of events or circumstances that may arise after the date of this report. All written and oral forward-looking statements made subsequent to the date of this report and attributable to us or persons acting on our behalf are expressly qualified in their entirety by this section.

Table of Contents

that may arise after the date of this report. All written and oral forward-looking statements made subsequent to the date of this report and attributable to us or persons acting on our behalf are expressly qualified in their entirety by this section.

ITEM 1. BUSINESS

Overview

The McClatchy Company (the “Company,” “McClatchy,” “we,” “us” or “our”) provides strong, independent local journalism to 30 communities with operations in 14 states, as well as selected national news coverage through our Washington, D.C. ~~based~~ bureau. We also provide a full suite of digital marketing services, both through our local sales teams based in the communities we serve, as well as through excelerate®, our national digital marketing agency. We consider our journalism to be in the public interest and strive to be essential to our audiences and advertisers through a wide array of storytelling formats. We are a publisher of well-respected brands such as the Miami Herald, The Kansas City Star, The Sacramento Bee, The Charlotte Observer, The (Raleigh) News & Observer, and the (Fort Worth) Star-Telegram. Incorporated in Delaware in 1997, we are headquartered in Sacramento, California. During fiscal years 2019 and 2018, our Class A Common Stock was traded on the NYSE American LLC (“NYSE American”) under the symbol MNI. As of February 14, 2020, our Class A Common Stock is traded “over-the-counter” on the OTC Pink Market under the symbol MNIQQ.

2Chapter 11 Proceedings

On February 13, 2020, McClatchy and each of our 53 wholly owned subsidiaries filed voluntary petitions for reorganization (“Chapter 11 Cases”) under Chapter 11 of the U.S. Bankruptcy Code (“Bankruptcy Code”) in the U.S. Bankruptcy Court for the Southern District of New York (“Bankruptcy Court”). The Chapter 11 Cases are being jointly administered under the caption In re: The McClatchy Company, et al., Case No. 20-10418.

In general, as debtors-in-possession under the Bankruptcy Code, we are authorized to continue to operate as an ongoing business but may not engage in transactions outside the ordinary course of business without the prior approval of the Bankruptcy Court. Pursuant to first-day motions filed with the Bankruptcy Court, the Bankruptcy Court authorized us to conduct our business activities in the ordinary course, including, among other things and subject to the terms and conditions of such orders, authorizing us to obtain debtor-in-possession financing, pay employee wages and benefits, and pay vendors and suppliers in the ordinary course for all goods and services going forward.

We will continue to pursue approval of a proposed restructuring plan with our secured lenders, bondholders, and the Pension Benefit Guaranty Corporation (“PBGC”).

We have obtained new $50.0 million debtor-in-possession financing under a credit agreement (“DIP Credit Agreement”) from Encina Business Credit, LLC, (“Encina”) which, coupled with our normal operating cash flows, is providing liquidity for McClatchy and all of our local news outlets to operate as usual and fulfill ongoing commitments to stakeholders. We are unable to predict when we will emerge from this Chapter 11 process.

For more information about the Chapter 11 Cases see Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) and Item 8, Note 2 of the Consolidated Financial Statements.

Going Concern

We have concluded that our financial condition and projected operating results, the minimum required contribution amounts on our defined benefit pension plan (“Pension Plan”) (as described below), the defaults under our debt agreements subsequent to December 29, 2019, and the risks and uncertainties surrounding our Chapter 11 proceedings raise substantial doubt as to our ability to continue as a going concern. Accordingly, the audit report issued by our independent registered public accounting firm contains an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern.

Table of Contents

~~Telegram. Incorporated~~ As inof ~~Delaware~~December 29, 2019, we ~~are~~faced ~~headquartered~~liquidity challenges relating to the minimum required contributions in ~~Sacramento~~fiscal year 2020 to our Pension Plan. These required contributions were estimated to be approximately $124.2 million, ~~California~~which would be paid in installments beginning in January 2020 with the majority of those payments due on or subsequent to September 15, ~~and~~2020. In January 2020, we entered into a Standstill Agreement with the PBGC, pursuant to which the PBGC agreed not to exercise the remedies available to it as a result of our ~~Class~~not Amaking ~~Common~~the ~~Stock~~scheduled isqualified ~~listed~~pension oncontribution of $4.0 million due in January 2020. The payment obligations to the ~~NYSE~~PBGC ~~American~~were further stayed when we filed for reorganization under ~~the~~Chapter ~~symbol MNI~~11 in February 2020.

~~The~~Delisting ~~cornerstone~~ of our ~~business~~Common isStock providing content, either editorial or through advertising that will inform, educate, entertain and enhance the everyday lives of people with ties to the communities in which we operate. Our media companies and our digital media agency, excelerate®, distribute content, including video products, through our owned and operated websites and mobile applications, third-party search and ad exchanges, social media platforms, electronic editions of our daily newspapers (“e-editions”) as well as our printed daily newspapers. We also print selected niche publications and community newspapers, as well as offer other print and digital direct marketing services. Our media companies range from large daily newspapers and news websites serving metropolitan areas to non‑daily newspapers with news websites and online platforms serving small communities. We had 66.4 million average monthly unique visitors to our online platforms and 3.9 billion page views of our digital products for the ~~full~~NYSE year ended December 30, 2018. Our local websites, e-editions and mobile applications in each of our markets provide us fully developed but rapidly evolving channels to extend our journalism and advertising products to our audience in each market. In 2018, we continued to expand our full-service digital agency, excelerate®, which provides digital marketing tools designed to customize digital marketing plans for our customers. For the year ended December 30, 2018, we had an average aggregate paid daily print circulation of 1.1 million and Sunday print circulation of 1.7 million.American

Our ~~business~~Class isA ~~roughly~~Common ~~divided~~Stock ~~between~~was ~~those~~previously ~~media~~listed ~~companies~~on ~~operated~~the ~~west~~NYSE American under the symbol MNI. On February 13, 2020, the NYSE American suspended the trading of our Class A Common Stock upon our filing the ~~Mississippi~~Chapter ~~River~~11 petitions, and ~~those~~our ~~that~~Class ~~are~~A ~~east~~Common ofStock ithas been quoted “over-the-counter” on the OTC Pink Market, ~~but~~operated ~~includes four~~by ~~operating~~OTC ~~regions:~~Markets Group, under the ~~West~~symbol MNIQQ. On February 21, ~~Central~~ 2020, ~~Carolinas~~ ~~and~~the ~~East~~NYSE ~~regions~~American filed a Form 25 with the SEC to delist our Class A Common Stock from the NYSE American. ~~For~~The delisting was effective 10 days after the ~~year~~Form ~~ended~~25 ~~December 30~~was filed. The deregistration of the Common Stock under Section 12(b) of the Securities Exchange Act of 1934, ~~2018~~ as amended (the “Exchange Act”), nowill ~~single~~become ~~media~~effective ~~company~~90 ~~represented~~days ~~more~~after ~~than~~the ~~12.0%~~filing date of ~~our~~the ~~total~~Form ~~revenues~~25.

~~Our~~Business ~~fiscal year ends on the last Sunday in December. The fiscal year ended December 30, 2018, consisted of a 52-week period and fiscal year ended December 31, 2017, consisted of a 53-week period.~~ Operations

The cornerstone of our business is providing content, either editorial or through advertising that will inform, educate, entertain and enhance the everyday lives of people with ties to the communities in which we operate. Our media companies and our digital media agency, excelerate®, distribute content, including video products, through our owned and operated websites and mobile applications, third-party search and advertising exchanges, social media platforms, electronic editions of our daily newspapers (“e-editions”) as well as our printed daily newspapers. We also print selected niche publications and community newspapers, and offer other print and digital direct marketing services. Our media companies range from large daily newspapers and news websites serving metropolitan areas to non‑daily newspapers with news websites and online platforms serving small communities. We had 55.7 million average monthly unique visitors to our online platforms and 3.4 billion page views of our digital products for the full year ended December 29, 2019. Our local websites, e-editions and mobile applications in each of our markets provide us fully developed but rapidly evolving channels to extend our journalism and advertising products to our audience in each market. In 2019, we continued to expand our full-service digital agency, excelerate®, which provides digital marketing tools designed to customize digital marketing plans for our customers. For the year ended December 29, 2019, we had an average aggregate paid daily circulation of 1.1 million and Sunday circulation of 1.5 million.

Our business is roughly divided between those media companies operating west of the Mississippi River and those that are east of it. For the year ended December 29, 2019, no single media company represented more than 11.5% of our total revenues.

Our fiscal year ends on the last Sunday in December of each calendar year. The fiscal years ended December 29, 2019, and December 30, 2018, consisted of 52-week periods.

Strategy

Our mission is to deliver strong, independent journalism and information. To accomplish this goal, we are committed to a three‑pronged strategy to grow our businesses and total revenues as a leading local media company:

· First, to maintain our position as ~~the~~a leading local media company in each of our markets by providing independent journalism and advertising information essential to our communities on digital platforms and in our printed newspapers; and to grow these audiences for the benefit of our advertisers and our communities; and

· Second, to ~~grow~~improve digital advertising and audience revenues as we transition to a digitally focused, digitally driven media company. This strategy includes being a leader of local digital businesses in each of our markets, growing our digital subscriptions and digital audiences in general by providing compelling websites, e-editions of the printed newspaper, mobile applications, e‑mail products, mobile services, video products and other electronic media; and

Table of Contents

Third, to extend these franchises by supplementing the reach of the digital and printed newspaper and other digital businesses with direct marketing, niche publications and events and direct mail products so advertisers can capture both mass and targeted audiences with one‑stop shopping.

To assist us with these strategies, we continually improve existing digital products and develop new ones, reengineer our operations to reduce legacy costs and strengthen areas driving performance in news, audience, advertising and digital growth. As a result of our efforts, we saw a 1441.84% growth in ~~total~~ digital-only ~~revenues~~subscriptions inand ~~2018, which~~an ~~includes~~47.5% growth ~~digital~~in digital-only ~~advertising and~~ audience revenues in 2019. We continued our focus ~~on driving results in direct marketing and audience revenues, while continuing~~ to drive operating expenses down.

Business Initiatives

Our local media companies continue to undergo tremendous structural and cyclical change. To strengthen our position as a leading local media company in the markets we serve and implement our strategies, we are focused on the following five major business initiatives:

3Broadening Total Revenues

~~Table~~Revenue ofinitiatives ~~Contents~~over the last several years have included aligning ourselves for digital growth by revamping and centralizing certain departments and focusing on digital marketing; digital audience growth through new audiences and digital subscribers; organizing our technology groups to help us better serve our customers; and developing innovation teams that help us implement additional customer-focused approaches to running our businesses. In 2019, we continued to expand our full-service digital agency, excelerate®, which provides customized digital marketing plans for our customers.

~~Increasing~~Our strategy has been to focus on growing revenue sources that include digital and ~~Broadening~~direct ~~Total~~marketing ~~Revenues~~advertising, audience and other non-traditional revenues. Management expects newspaper print advertising to continue to be a smaller share of total revenues in the future, but that audience revenues will reflect a more stable source of revenues. In fact, in 2019 audience revenues were nearly equal to advertising revenues and exceeded advertising revenues in some periods during the year. We continue to look for opportunities to expand our advertiser base, including advertisers outside of our markets using our excelerate® agency services.

~~Revenue~~Advertising ~~initiatives~~revenues ~~over~~were ~~the~~47.5% ~~last~~and ~~couple~~51.6% of ~~years~~total ~~have~~revenues ~~included~~in ~~aligning~~2019 ~~ourselves~~and ~~for~~2018, ~~digital~~respectively. ~~growth~~Our bysales ~~revamping~~force ~~and~~is ~~centralizing~~responsible ~~certain~~for ~~departments~~delivering ~~and~~to ~~focusing~~advertisers ona ~~digital~~broad ~~marketing;~~array ~~digital~~of ~~audience~~advertising ~~growth~~products, ~~through~~including ~~new audiences and~~ digital ~~subscribers;~~marketing ~~organizing~~solutions ~~our~~and ~~technology~~print ~~groups to help us better serve our customers; growing our video market share~~ and ~~developing~~direct ~~innovation~~marketing ~~teams~~solutions. ~~that~~Our ~~help~~advertisers usrange ~~implement~~from ~~additional~~large ~~customer-focused~~national ~~approaches~~retail tochains ~~running our businesses. In 2018, we continued~~ to ~~expand~~regional ~~our~~automobile ~~full-service~~dealerships ~~digital~~and ~~agency,~~grocers ~~excelerate®, which provides customized digital marketing plans for our customers. We also continued~~ to ~~expand~~small ~~our~~local ~~video~~businesses ~~efforts to improve storytelling~~ and ~~generate~~even ~~additional advertising revenues~~individuals.

~~Our~~Video ~~strategy~~revenues ~~has~~were ~~been to focus on growing revenue sources that include digital and direct marketing advertising, audience and other non-traditional revenues~~$9.1 ~~Management~~million ~~expects newspaper print advertising to continue to be a smaller share of total revenues~~ in ~~the future~~2019, ~~due~~compared ~~in part~~ to ~~expected~~$9.5 ~~strong~~million ~~growth~~ in ~~digital-only~~2018. ~~advertising~~During ~~revenues~~2019, ~~and~~more ~~certain~~than ~~areas~~513 ofmillion ~~direct~~video ~~marketing~~views ~~advertising,~~were ~~and~~recorded ~~more~~across ~~stable~~our ~~performance~~digital ~~in audience revenues. However~~platforms, weincluding ~~continue~~those toon ~~look~~social ~~for~~media ~~opportunities~~platforms toand ~~expand~~distribution ~~our advertiser base~~partners, ~~including~~up ~~advertisers~~4.0% ~~outside~~from of493 ~~our~~million ~~markets~~video ~~using~~views ~~our~~in ~~excelerate® agency services~~2018.

~~Currently~~Increasingly, ~~advertising revenues represent a majority of~~ our ~~total~~emphasis ~~revenues. Advertising~~has ~~revenues~~been ~~were~~on ~~51.6%~~growing ~~and~~the ~~55.2%~~breadth of ~~total~~products ~~revenues~~offered into ~~2018~~advertisers, ~~and~~particularly ~~2017,~~our ~~respectively.~~digital ~~Our~~marketing ~~sales~~products, ~~force~~while isexpanding ~~responsible~~our ~~for~~relationships ~~delivering~~with tocurrent advertisers aand ~~broad~~growing ~~array~~new ofaccounts. ~~advertising~~For ~~products~~2019, ~~including~~total digital ~~marketing solutions,~~ and ~~print and~~ direct marketing ~~solutions.~~advertising ~~Our~~revenues ~~advertisers~~combined ~~range~~represented ~~from~~63.6% ~~large~~of ~~national~~total ~~retail~~advertising ~~chains~~revenues compared to ~~regional~~62.6% ~~automobile~~in 2018. ~~dealerships~~Our ~~and~~digital ~~grocers~~products toare ~~small~~discussed ~~local~~in ~~businesses~~more ~~and~~detail ~~even individuals~~below.

~~Increasingly~~Audience revenues were 45.4% and 42.1% of consolidated total revenues in 2019 and 2018, ~~our~~respectively. ~~emphasis~~Audience ~~has~~revenues have been ona ~~growing~~more ~~the~~stable ~~breadth~~revenue ofsource ~~products~~than ~~offered~~advertising as we have leveraged technology to ~~advertisers,~~increase ~~particularly~~the ~~our~~number of digital ~~marketing~~ products, ~~while~~we ~~expanding~~offer and better understand our ~~relationships~~digital ~~with~~audience. ~~current~~As ~~advertisers~~a ~~and~~result, ~~growing~~digital-only ~~new~~audience ~~accounts~~revenues grew 47.5% ~~For~~in ~~2018~~2019, ~~total~~while the number of digital ~~and~~subscribers ~~direct~~grew ~~marketing~~by ~~advertising~~63,700 ~~revenues~~as ~~combined~~of ~~represented~~December 6229, 2019, up 41.60% from the end of ~~total~~2018. ~~advertising~~See ~~revenues compared~~Broadening toOur ~~55.1%~~Audience in ~~2017.~~ Our ~~digital~~Local ~~products~~Markets ~~are~~below ~~discussed~~for a greater description of our efforts in ~~more~~digital ~~detail~~audience ~~below~~growth.

Audience revenues were 42.1% and 40.2% of consolidated total revenues in 2018 and 2017, respectively. Our subscription packages have helped to drive growth in digital audience revenues. Audience revenues have been a more stable revenue source than advertising as we have leveraged technology to increase the number of digital products we offer and better understand our digital audience. As a result, digital only audience revenues grew 34.8% in 2018, while the number of digital subscribers grew by 52,600 as of December 30, 2018, up 51.1% from the end of 2017. See Broadening Our Audience in Our Local Markets below for a greater description of our efforts in digital audience growth.

Expanding Our Digital Business

~~We continue to be a leader among local media providers in digital advertising revenues.~~ In ~~2018~~2019, ~~43.3%~~ ~~of advertising revenues came from digital products compared to 34~~37.75% ~~in 2017.~~ ~~In 2018, 84.2%~~ of ~~our~~total ~~digital advertising~~ revenues came from digital~~-only~~ ~~advertisements~~products ~~(where the online buy was not bundled with a print buy)~~ compared to 7735.2% in ~~2017~~2018. Digital-only advertising revenues ~~grew~~declined 1316.51%, to $~~151~~127.73 million in ~~2018~~2019 from $~~133~~151.7 million in ~~2017. We believe this independent advertising revenue stream positions us well for the future of our digital business. During~~ 2018, ~~total~~as ~~digital~~we ~~advertising~~and ~~revenues~~the ~~increased~~rest ~~4.1% compared to a decrease~~ of ~~0.6%~~the inindustry ~~2017. Total~~faced ~~digital~~the advertising revenues grew at a lower growth rate than digital-only advertising primarily due to a decline in print advertising that is associated with bundled print/digital products and because of our continued focus on growing our digital-only advertising in 2018.

Our media companies’ websites and mobile applications, e‑mail products, video and mobile services and other electronic media enable us to engage our readers with real‑time news and information that matters to them. As discussed below in Maintaining Our Commitment to Public Service Journalism, our storytelling capability is not only contributing to our growth in digital subscribers, but also to our digital advertising revenue growth. During 2018, our websites attracted an average of approximately 66.4 million unique visitors per month. Although this figure is down 6.7%, compared to 2017, this decline reflects both the changing elements of news coverage (i.e., Hurricane Irma, a significant news event sparking an extraordinary growth in unique visitors coming to our sites in late 2017 versus no similar event in late 2018), and our focus on enforcing stricter pay walls in 2018, which resulted in strong growth in digital subscriptions as discussed above. We had 3.9 billion page views of our digital products for both the full years of 2018 and 2017. In addition, our average mobile traffic accounted for 65.8% of all digital traffic we received on a monthly basis in 2018 compared to 61.3% in 2017.5

Table of Contents

~~We,~~headwinds ~~along~~of competing with ~~Gannett~~large ~~Co.,~~platform ~~Inc.,~~companies ~~Hearst,~~in ~~and Tribune Publishing Company (formerly tronc, Inc.), own Nucleus Marketing Solutions, LLC (“Nucleus”). This marketing solutions provider connects national advertisers with~~ the ~~top 30 U.S. local publishers’ highly engaged audiences across existing and emerging~~ digital ~~platforms.~~advertising ~~We believe Nucleus has improved our reach with national advertisers and will continue to do so in 2019 and beyond~~arena.

WeOur ~~continue~~media tocompanies’ ~~pursue~~websites ~~new~~and ~~digital~~mobile applications, e‑mail products, video and ~~offerings.~~mobile Inservices ~~2018,~~and weother ~~continued~~electronic media enable us to ~~expand~~engage our ~~concept~~readers ofwith ~~comprehensive~~real‑time ~~digital~~news ~~marketing~~and ~~solutions~~information ~~for~~that ~~local~~matters ~~businesses~~to ~~via~~them. ~~our~~As ~~digital~~discussed ~~marketing~~below ~~agency~~in Maintaining ~~called~~Our ~~excelerate®. We~~Commitment ~~also~~to ~~continued~~Public toService ~~expand~~Journalism, our ~~the~~storytelling ~~footprint~~capability ofis ~~excelerate®~~contributing to ~~markets~~our ~~beyond~~growth ~~those~~in ~~served~~digital bysubscribers. During 2019, our ~~media~~websites ~~companies~~attracted an average of approximately 55.7 million ~~Offering~~unique ~~advertisers~~visitors ~~integrated~~per ~~packages~~month. ~~including~~Although ~~website~~this ~~customization~~figure is down 16.1% compared to 2018, ~~search~~this ~~engine~~decline ~~marketing~~reflects ~~and~~our ~~optimization~~focus on enforcing stricter pay walls in 2019, ~~social~~which ~~media~~resulted ~~presence~~in ~~and~~strong ~~marketing~~growth ~~services~~in digital subscriptions, as discussed above and ~~other~~changes ~~multi‑~~made by platform ~~advertising~~companies ~~opportunities,~~that ~~excelerate®~~previously ~~helps~~linked ~~businesses~~to ~~improve~~our websites. We had 3.4 billion page views of our digital products for the ~~effectiveness~~full year of ~~their~~2019 ~~marketing~~compared ~~efforts~~to 3.9 billion page views in 2018.

InWe ~~2018, we~~ continued to expand our ~~advertising~~concept ~~efforts~~of oncomprehensive ~~third-party~~digital ~~advertising~~marketing ~~exchanges.~~solutions ~~Our~~for ~~real-time,~~local ~~programmatic~~businesses ~~buying~~via ~~and~~our ~~selling of~~ digital ~~advertising~~marketing ~~inventory~~agency –called ~~often~~excelerate®. We ~~targeting~~also ~~very~~continued ~~specific~~to ~~audiences~~expand atthe ~~very~~footprint ~~specific~~of ~~times~~excelerate® ~~– grew 10.2% in 2018 compared~~ to ~~2017.~~markets ~~Our~~beyond ~~growth~~those ~~continues~~served ~~to be strengthened~~ by our ~~participation~~media incompanies. ~~the~~Offering ~~Local~~advertisers ~~Media~~integrated ~~Consortium~~packages ~~(“LMC”)~~including ~~and~~website ~~its more than 84 member companies representing more than 2~~customization,~~600~~ ~~daily~~search ~~newspapers,~~engine ~~broadcast~~marketing and ~~online-only~~optimization, ~~local~~social media ~~outlets.~~presence ~~The~~and ~~LMC’s~~marketing ~~mission~~services, isand toother ~~provide~~multi‑platform ~~economic~~advertising ~~benefit to its members by negotiating partnerships that deliver cost savings or new revenue~~ opportunities~~. In addition~~, ~~LMC~~excelerate® ~~offers~~helps abusinesses ~~private~~improve ~~advertising~~the ~~exchange~~effectiveness of ~~high-quality~~their ~~advertising~~marketing ~~inventory from member publishers providing advertisers with access to more than 19 billion ad impressions monthly~~efforts.

~~Video~~In ~~revenue~~2019, ~~increased~~we 47continued to expand our advertising efforts on third-party advertising exchanges.5 Our real-time, programmatic revenues from the buying and selling of digital advertising inventory – often targeting very specific audiences at very specific times – grew 27.0% in ~~2018~~2019 compared to ~~2017,~~2018. Our ~~due~~growth continues to be strengthened by our ~~focus~~participation onin the ~~use~~Local ofMedia ~~video~~Consortium in(“LMC”) ~~our~~and ~~digital~~its ~~products~~more tothan ~~enhance~~89 ~~the~~member ~~content~~companies ~~that~~representing wemore ~~bring~~than to3,000 ~~readers~~daily ~~and viewers~~newspapers, broadcast and ~~also~~online-only tolocal ~~compete~~media ~~for~~outlets. aThe ~~growing~~LMC ~~advertising~~mission ~~stream.~~is ~~During~~to ~~2018,~~provide ~~more~~economic ~~than~~benefit ~~493~~to ~~million~~its ~~video~~members ~~views~~by ~~were~~negotiating ~~recorded~~partnerships ~~across~~that ~~our~~deliver ~~digital~~cost ~~platforms,~~savings ~~including~~or ~~those~~new onrevenue ~~social~~opportunities. ~~media~~In ~~platforms~~addition, ~~and~~the ~~distribution~~LMC ~~partners,~~offers upa ~~nearly~~private ~~35%~~advertising exchange of high-quality advertising inventory from ~~366~~member ~~million~~publishers ~~video~~providing ~~views~~advertisers inwith ~~2017~~access to more than 19 billion advertising impressions monthly.

~~All~~More ofthan ~~our~~513 ~~markets~~million ~~offer~~video ~~audience~~views ~~subscription~~were ~~packages~~recorded ~~for~~across digital content. The packages include a combined digital and print subscription or a digital‑only subscription. Digital‑only subscriptions grew to approximately 155,500, an increase of 51.1% at the end of 2018 compared to 102,900 subscriptions at the end of 2017. We have not only increased the number of our digital~~-only~~ ~~subscriptions~~platforms, ~~but~~including ~~we have grown ways in which~~ those ~~subscribers~~on ~~are~~social ~~acquired.~~media ~~For~~platforms ~~instance,~~and ~~some~~distribution ~~of our growth is driven by a new sports-only subscription product branded as SportsPass™~~partners, ~~which~~up ~~was launched in 11 of our markets during 2018~~4.0% Itfrom ~~was~~493 ~~first~~million ~~introduced~~video inviews ~~our Miami market, just before the start of the NFL preseason. Since then we have expanded it to the other ten markets. In addition,~~ in ~~May~~ 2018~~, we partnered with Google to offer a way for readers to purchase a subscription to each of our digital brands~~. Consumers are able to link our subscription account with their Google accounts, which allows for a better user experience. We continue to improve our technology to know our customers better, to identify areas of interest that allows us to target and retarget potential subscribers and to provide new products to all subscribers.

All of our markets offer audience subscription packages for digital content. The packages include a combined digital and print subscription or a digital‑only subscription. Digital‑only subscriptions grew 41.0% to 219,200 subscribers in 2019 from 155,500 subscribers in 2018. When coupled with combination print/digital subscriptions, for which customers have activated their digital products, total paid digital customer relationships were approximately 535,300 at the end of 2019, up 21.4% from a year earlier.

In early 2019, we conducted a trial in four of our smaller markets by providing our Saturday newspaper in digital format only, which was primarily accessed via our e-edition by combination print/digital subscribers. In addition to expanded digital content, readers enjoy additional print content added to the Friday and Sunday printed newspapers. We saw digital engagement increase in each of these markets and the change has been well-accepted by almost all subscribers and advertisers. As a result, in the fourth quarter of 2019 we launched another nine markets, and we are seeing wide acceptance of digital Saturdays among our subscribers in the markets. We launched digital Saturdays to all of our markets by the end of the first quarter of 2020.

We have not only increased the number of our digital-only subscriptions, we have also grown ways in which those subscribers are acquired. For instance, some of our growth is driven by a sports-only subscription product branded as SportsPass™, which is available in 11 of our markets. In addition, we have partnered with Google to offer a way for readers to purchase a subscription to each of our digital brands. Consumers are able to link our subscription account with their Google accounts, which allows for a better user experience. We continue to improve our technology to know our customers better, to identify areas of interest that allow us to target and retarget potential subscribers and to provide new products to all subscribers.

Maintaining Our Commitment to Public Service Journalism

We believe that independent journalism in the public interest is critical to our democracy. It is also the underpinning of our success as a business.

We are committed to producing best‑in‑class journalism and local content in every community we serve. Each of our newsrooms is expected to improve annually; whether measured by growth in readership, loyalty of readers, our own assessments of journalistic strengths, or recognition by peers and others. And each of our newsrooms is expected to serve our core public service mission – holding leaders and institutions accountable and making our communities better places in which to live.

During the digital transition that has reshaped the industry over the past decade, we have moved quickly to expand our digital reach and deliver news to readers where they want it and when they want it. Our company-wide “Newsroom Reinvention” initiative places an intense focus on what our readers want and need from us in a fast-changing news landscape. We continue to produce ground-breaking accountability journalism – from the Miami Herald’s investigation of a billionaire sex abuser who received a sweetheart deal, to The Fresno Bee’s deep exploration of a controversial congressman, to dogged reporting on failures that lead to a fatal bridge collapse in Florida, to a tragic tourist boat accident in Missouri, and the Star-Telegram’s investigation of hundreds of sex abuse allegations in fundamental Baptist churches. Meanwhile, our Washington, D.C. bureau continues to work closely with our local newsrooms while being a significant source of news on the national stage.

Table of Contents

Our heritage of public service journalism is the foundation of our business, and the work of our journalists received significant recognition in 2018. Journalists from the Miami Herald were finalists for the 2018 Pulitzer Prize for investigative reporting for their in-depth report on abuses in the juvenile justice system in Florida. Journalists at The Kansas City Star were finalists for the 2018 Pulitzer Prize in the public service category for their expose on secrecy in state government. We have been honored with 54 Pulitzer Prize wins and our impressive streak of being a Pulitzer winner or finalist every year for more than a decade.

Our video journalists continued to produce ambitious stories around breaking news, projects and series that have gained industry recognition. A podcast series on Rae Carruth, who spent more than 18 years in prison for the killing of his girlfriend while he played for the NFL’s Carolina Panthers, was named Best Podcast of 2018 by Sports Illustrated. Our industry-leading approach to drone journalism has seen more than 50 pilots trained, licensed and routinely flying for daily news coverage across our company, including The Sacramento Bee’s haunting aerials from the devastating Camp Fire in California.

These are just a few of the hundreds of examples of our powerful journalism published across the company. We intend to build on our legacy in the years ahead, propelled by the success of our ongoing digital transformation. For instance, the digital replica edition of each of our daily newspapers includes stories from our 30 newsrooms and other journalistic organizations that on many days more than doubles the news that could be found in the daily newspaper delivered to subscribers’ doorsteps. This additional content, known as “Extra Extra” and “SportsXtra,” has been well received by readers of our digital products.

Broadening Our Audience in Our Local Markets

Each of our media companies has the largest print circulation of any news media source serving its respective community, and, coupled with its local website and other digital platforms in each community, reaches a broad audience in each market. We believe that our broad reach in each market is of primary importance in attracting advertising, which is currently an important source of revenues.

Our digital audience continues to be strong. Our digital audience comes from traffic on our websites, social media and other digital platforms. During 2018, average monthly unique visitors to our digital sites declined 6.7% compared to 2017. As discussed above, this decline reflects both the changing elements of news coverage (i.e., Hurricane Irma, a significant news event sparking an extraordinary growth in unique visitors coming to our sites in late 2017 versus no similar event in late 2018), and our focus on enforcing stricter pay walls in 2018, which resulted in strong growth in digital subscriptions as discussed above.

In 2018, our monthly mobile traffic was up 0.2% as compared to 2017 and accounted for 65.8% of all monthly digital traffic we received. Additionally, 493 million video views were recorded across our digital platforms, including those on social media platforms and distribution partners, up nearly 35% from 2017. We work hard to appeal to our mobile audience. We have invested in new digital publishing systems to better serve these mobile readers, and we continually update all of our news websites to be responsive to changes in technology, such as to automatically resize to optimize the viewing experience on the user’s screen, whether it is on a smartphone, a tablet or desktop.

Our news and information follow readers continuously. To start their day, we reach our readers who can check out our latest headlines and stories on their mobile phones or with the morning newspaper. Our news websites, updated frequently throughout the day, are available to readers via their desktop computers and optimized for all of their different mobile devices.

Daily newspapers paid circulation volumes for 2018 were down 11.1% compared to 2017. The declines in daily circulation reflect the fragmentation of audiences faced by all media companies, including our own digital‑only subscriptions, as available media outlets proliferate, and readership trends change. Our Sunday circulation volumes were down 9.8% in 2018 compared to 2017.

We also reach audiences through our direct marketing products. In 2018, we distributed approximately 626,000 Sunday Select packages per week, which are packages of preprinted advertisements generally delivered on Sunday to non‑newspaper subscribers who have interest in circulars. We also distribute thousands of e-mail messages each day, including editorial and advertising content, as well as other alerts to subscribers and non‑subscribers in our markets which supplement the reach of our print and digital subscriptions.

Table of Contents

Toassessments ~~remain~~of ~~the~~journalistic ~~leading local media company for the communities we serve and a must‑buy for advertisers~~strengths, weor ~~are~~recognition ~~focused~~by onpeers ~~maintaining a broad reach of print~~ and ~~digital~~others. ~~audiences~~And in each of our ~~markets.~~newsrooms Weis ~~will~~expected ~~continue~~ to ~~refine~~serve ~~and strengthen~~ our ~~print~~core ~~platform,~~public ~~but~~service ~~our~~mission ~~growth~~– ~~increasingly~~holding ~~comes~~leaders ~~from~~and ~~our~~institutions ~~digital~~accountable ~~products~~ and ~~the~~making ~~beneficial~~our ~~impact~~communities ~~those~~better ~~products~~places ~~have~~in onwhich ~~the~~to ~~total audience we deliver for our advertisers~~live.

During the digital transition that has reshaped the industry over the past decade, we have moved to expand our digital reach and deliver news to readers where they want it and when they want it. All of our newsrooms place an intense focus on what our readers want and need from us in a fast-changing news landscape. We continue to produce ground-breaking accountability journalism – from the Miami Herald’s ongoing investigation of the influential figures who enabled a billionaire sex abuser, to The Kansas City Star’s deep, ground-breaking exploration of a foster care system whose failures create a pathway to prison for teenagers, to in-depth reporting by The Wichita Eagle into the mayor’s decision to go against a panel’s advice and award a multi-million-dollar contract to a friend, to the Lexington Herald Leader’s dogged reporting on the water crisis in Appalachia that is stirring a public debate and prompting calls to fix a long-failing infrastructure. Meanwhile, our Washington, D.C. bureau continues to deliver unparalleled exclusives that are locally relevant and have national impact, most recently exemplified by an investigation that uncovered elevated rates of cancers among service members who served in Iraq and Afghanistan.

Our heritage of public service journalism is the foundation of our business, and the work of our journalists received significant recognition. We have been honored with 54 Pulitzer Prize wins and an impressive streak of being a Pulitzer winner or finalist every year for more than a decade. In 2019, journalists from the Miami Herald were finalists for the Pulitzer Prize for investigative reporting for their in-depth report detailing how drug lords make billions smuggling gold to Miami. The Kansas City Star was a finalist for the Pulitzer Prize in commentary, and won the Mike Royko Award for Commentary and Column Writing in the 2019 News Leaders Association Awards. The Online News Association recognized McClatchy for “Since Parkland,” a project that documented every child lost to gun violence over the year that followed the mass shooting at Marjory Stoneman Douglas High School in Florida. The Miami Herald’s ongoing investigation of a sexual predator continues to be recognized nationally and internationally, winning a Polk award and the Hillman Prize for Journalism in the Common Good, among many others. The Wichita Eagle won a Polk Award for political reporting, and our sports reporting teams were recognized nationwide, with eight McClatchy newsrooms winning 30 Associated Press Sports Editors awards. Also, Aminda Marques Gonzalez, president, publisher and editor of the Miami Herald and el Nuevo Herald, has been recognized by the National Press Foundation as the Benjamin C. Bradlee Editor of the Year.

Our video journalists continued to produce ambitious stories around breaking news, projects and series that have gained industry recognition. Our High Impact team earned four Emmys for third season of “Titletown, TX” as well as first place in the Online News Awards and first place in the White House News Photographer Association honors. A podcast series on Rae Carruth, who spent more than 18 years in prison for the killing of his girlfriend while he played for the NFL’s Carolina Panthers, earned an Editor and Publisher Award, known as an EPPY, and the AP Sports Editors Award for Best Podcast.

These are just a few of the hundreds of examples of our powerful journalism we have published across the country. We intend to build on our legacy in the years ahead, propelled by the recent success of our ongoing digital transformation. For instance, the digital replica edition of each of our daily newspapers includes stories from our 30 newsrooms and other journalistic organizations that on many days more than doubles the news that could be found in the daily newspaper delivered to subscribers’ doorsteps. This additional content, known as “Extra Extra” and “SportsXtra,” has been well received by readers of our digital products.

Broadening and Deepening Our Audience in Our Local Markets

Each of our media companies’ print circulation, coupled with its local website and other digital platforms, reaches a broad and deep audience in each market. We believe that our broad reach in each market is of primary importance in attracting advertising, which is an important source of revenues.

We remain strongly committed to independent local journalism in the public interest. And that commitment goes beyond markets where we own a masthead. In October 2019, we launched Mahoning Matters, a digital-only news outlet serving Ohio's Mahoning Valley as a part of our Compass Experiment. The Compass Experiment is a local news laboratory founded by McClatchy and funded by Google News Initiative's Local Experiments Project where we intend to launch digital-only news outlets in three localities with 60,000 to 300,000 residents and limited sources of local news.

Our news and information follow readers continuously. To start their day, we reach our readers who can check out our

Table of Contents

latest headlines and stories on their mobile phones or with the morning newspaper. Our news websites, updated frequently throughout the day, are available to readers via their desktop computers and optimized for all of their different mobile devices.

Daily newspapers’ paid circulation volumes for 2019 were down 7.6% compared to 2018. The declines in daily circulation reflect the fragmentation of audiences faced by all media companies, including our own digital‑only subscriptions, as available media outlets proliferate, and readership trends change. Our Sunday circulation volumes were down 16.4% in 2019 compared to 2018.

We also reach audiences through our direct marketing products. In 2019, we distributed approximately 410,000 preprinted advertisements to non‑newspaper subscribers who have interest in circulars. We also distribute thousands of e-mail messages each day, including editorial and advertising content, as well as other alerts to subscribers and non‑subscribers in our markets, which supplement the reach of our print and digital subscriptions.

To remain a leading local media company for the communities we serve and a must‑buy for advertisers, we are focused on maintaining a broad reach of print and digital audiences in each of our markets. We will continue to refine and strengthen our print platform, but our growth increasingly comes from our digital products and the beneficial impact those products have on the total audience we deliver for our advertisers.

Focusing on Cost Efficiencies While Investing for the Future

While continuing to maintain our core business in news, advertising and audience revenues and digital media, we pay particular attention to cost efficiencies. Our cost initiatives in ~~2018~~2019 were focused on continuing to reduce legacy costs from our traditional print business, and we have realized significant savings from these efforts, primarily in postage, newsroom and advertising regionalization/consolidation, distribution and ~~outsourced~~ printing costs. In 2018, we achieved reductions in costs to help protect our profitability in a period of declining print advertising. Compensation, newsprint, supplements and printing expenses and other operating expenses, declined $41.2 million in 2018 compared to 2017. This decline was net of investments made in 2018 intended to generate future savings or that were necessary to invest in revenue generating strategies and technology. The ongoing structural and cyclical changes in our markets demand that we respond by reengineering our operations, as needed, to achieve an efficient and sustainable cost structure. Over the past several years, we have substantially lowered our cost structure by reducing our workforce, optimizing technology and maximizing printing, distribution and content efficiencies.

In 2018, in order to ensure a more collaborative enterprise, we began the process of regionalizing certain areas of our operations, including newsrooms and advertising departments. We had previously regionalized our publisher and editorial leadership functions and ~~those transitions continued into 2018. We~~ have ~~previously~~since centralized certain functional areas, like audience operations, revenue accounting and other smaller functions. We will continue to outsource, regionalize and consolidate operations to achieve a more streamlined and efficient cost structure. For instance, in early 2019 we announced a more centralized structure for advertising operations that will be rolled out during the following year. These changes will result in cost savings in future years, while giving our operating executives, in our Eastern and Western operating segments (see discussion of segments below in “Other Operational Information”) and in each market, the ability to focus more of their time on our growing digital and direct marketing media businesses.

AsIn ofthe ~~December~~first ~~30,~~quarter ~~2018~~of 2019, we ~~have~~announced ~~outsourced~~an ~~the~~early ~~printing~~retirement ~~operations~~program atthat 22resulted ofin ~~our~~savings 30of ~~media~~approximately ~~companies~~$12 ~~and~~million ~~announced that~~ in ~~early~~ 2019,. weDuring ~~would outsource an additional newspaper in~~ the ~~Northwest.~~second ~~With~~quarter ~~this accomplished,~~ we ~~now~~rolled ~~have~~out 23a ofnew ~~our~~advertising 30structure ~~newspapers~~aligned ~~being~~around ~~printed~~channels byto ~~centers~~reduce ~~outside~~redundancies, ofcreate ~~their~~a more ~~markets.~~digital ~~These~~focus, ~~newspapers~~standardize ~~are~~and ~~printed~~streamline ~~through~~our ~~arrangements~~processes ~~with~~and ~~nearby~~procedures ~~newspapers~~and ~~owned~~generally bymake us ormore ~~third-party~~efficient ~~companies~~and effective. InThese ~~markets~~changes ~~where~~resulted wein ~~continue~~some toworkforce ~~operate~~reductions, ~~our~~but ~~own~~they ~~printing~~have ~~presses~~also wecreated ~~in‑source~~additional ~~the~~positions ~~printing~~and ofcapabilities, ~~nearby~~including ~~newspapers~~a ~~for~~new ~~other~~centralized ~~companies~~call center. ~~This~~The ~~allows~~changes, uscoupled towith ~~maximize~~ the ~~use~~impact of our ~~existing~~early ~~press~~retirement ~~capacity~~program ~~and~~in ~~generate~~the ~~additional~~advertising ~~revenues. Five markets (Charlotte~~department, ~~Columbia,~~have ~~Kansas~~resulted ~~City,~~in ~~Miami~~$20.0 ~~and~~million ~~Sacramento)~~in ~~have~~savings, ~~become~~most ~~hubs~~of ~~for~~which ~~in-sourced~~started ~~printing~~ in ~~their~~the ~~areas~~second quarter.

We further focused on efficiencies as we outsourced our printing operations in Tacoma, Washington in early 2019, bringing the total number of our newspapers now printed outside of their markets to 23. In 2020, we announced the outsourcing of our newspaper printing in State College, Pennsylvania and in Miami, Florida.

Although, we have reduced our ranks over the years, we have maintained a strong editorial department. For instance, at the end of 2019 our editorial staff made up 30.9% of our total full-time equivalent employees, the largest department within the Company. In addition, our newsrooms have improved their efficiency, which is evidenced by a 69.9% increase in page views per newsroom dollar spent from when we began measuring this key performance index in 2015.

As we transition to a more digital company, we continue to realize savings in newsprint and third-party printing costs. Our newsprint savings are coming from volume declines resulting from circulation declines and strategic changes we have made, such as reorganizing our print product and moving to digital-only editions on Saturdays in our markets. Our newsprint costs in 2019 comprised only about 3.6% of our total cost structure, substantially lower than historical amounts.

Compensation, newsprint, supplements and printing expenses, and other operating expenses combined, were down $76.7 million or 10.7% in 2019 compared to 2018. We will continue to outsource, regionalize and consolidate operations to achieve a more streamlined and efficient cost structure.

Other Operational Information

Historically, each of our media companies was largely autonomous in its local advertising and editorial operations in order to meet the needs of the particular community it served. However, we continue to regionalize or centralize certain operations across our local markets to strengthen our local media companies’ ability to collaborate and increase their performance in news, audience, advertising and digital growth.

We have two operating segments that are aggregated into a single reportable segment. Each operating segment consists primarily of a group of local media companies with similar economic characteristics, products, customers and distribution methods. Both operating segments report to one segment manager. One of our operating segments (“Western Segment”) consists of our media operations in the West and Central regions, while the other operating segment (“Eastern Segment”) consists of media operations in the Carolinas and East regions. Regional publishers or local publishers/general managers of the media companies make day‑to‑day decisions and report to the segment manager, who is responsible for implementing the operating and financial plans at each operation within the respective operating segment. The corporate managers, including executive officers, set the basic business, accounting, financial and reporting policies.8

Our media companies also work together to consolidate functions and share resources regionally and across operating segments that lend themselves to such efficiencies, such as certain regional or national sales efforts, certain editorial functions, accounting functions, digital publishing systems and products, information technology functions and others. These efforts are often coordinated through the senior executives and corporate personnel.

Table of Contents

~~Our~~to ~~business~~meet isthe ~~somewhat~~needs ~~seasonal,~~of ~~with~~the ~~peak~~particular ~~revenues~~community ~~and~~it ~~profits~~served. ~~generally~~However, we ~~occurring~~continue into ~~the~~regionalize ~~fourth~~or ~~quarter~~centralize ofcertain ~~each~~operations ~~year,~~across ~~reflecting~~our ~~the~~local ~~Thanksgiving~~markets ~~and~~to ~~Christmas~~strengthen ~~holidays.~~our ~~The~~local ~~other~~media ~~quarters,~~companies’ ~~when~~ability ~~holidays~~to ~~are~~collaborate ~~not~~and asimprove their ~~prevalent,~~performance ~~are~~in ~~historically~~news, ~~the~~audience, ~~slower~~advertising ~~quarters for revenues~~ and ~~operating~~digital ~~profits~~growth.

We have two operating segments that are aggregated into a single reportable segment. Each operating segment consists primarily of a group of local media companies with similar economic characteristics, products, customers and distribution methods. The ~~following~~operating ~~table~~segments ~~summarizes~~report to two segment managers. One of our operating segments (“Western Segment”) consists of our media operations in California, Washington and the Central region of the United States, while the other operating segment (“Eastern Segment”) consists of media operations in the Carolinas and the East and Southeast regions of the United States. Local publishers/general managers of the media companies make day‑to‑day decisions and report to the segment managers, ~~their~~who ~~digital~~are ~~platforms~~responsible for working with the functional leaders of advertising, ~~newspaper~~editorial, ~~circulation~~audience, product and ~~total~~technology, ~~unique~~finance ~~visitors:~~and people organizations to implement the operating and financial plans at each operation within the respective operating segment. The corporate managers, including executive officers, set the basic business, accounting, financial and reporting policies.

				Total	Circulation (1)
Media Company	Website	Location		UV (2)	Daily	Sunday
Miami Herald	www.miamiherald.com	Miami, FL		10,523,000	78,786	122,944
The Kansas City Star	www.kansascity.com	Kansas City, MO		4,912,000	98,046	137,517
Star-Telegram	www.star-telegram.com	Fort Worth, TX		4,161,000	181,289	169,300
The Charlotte Observer	www.charlotteobserver.com	Charlotte, NC		4,078,000	75,329	108,372
The Sacramento Bee	www.sacbee.com	Sacramento, CA		4,042,000	103,283	205,946
The News & Observer	www.newsobserver.com	Raleigh, NC		3,732,000	77,043	100,286
The State	www.thestate.com	Columbia, SC		3,084,000	41,650	91,929
El Nuevo Herald	www.elnuevoherald.com	Miami, FL		3,133,000	23,948	31,960
Lexington Herald-Leader	www.kentucky.com	Lexington, KY		2,231,000	46,268	70,370
The News Tribune	www.thenewstribune.com	Tacoma, WA		1,782,000	36,187	84,424
The Wichita Eagle	www.kansas.com	Wichita, KS		1,722,000	35,642	80,139
The Fresno Bee	www.fresnobee.com	Fresno, CA		1,694,000	55,713	92,982
McClatchy DC Bureau	www.mcclatchydc.com			1,519,000	N/A	N/A
Idaho Statesman	www.idahostatesman.com	Boise, ID		1,497,000	31,894	56,312
The Modesto Bee	www.modbee.com	Modesto, CA		1,332,000	33,426	58,175
Belleville News-Democrat	www.bnd.com	Belleville, IL		978,000	19,333	49,503
The Tribune	www.sanluisobispo.com	San Luis Obispo, CA		882,000	17,079	27,520
The Telegraph	www.macon.com	Macon, GA		806,000	19,169	23,716
The Island Packet	www.islandpacket.com	Hilton Head, SC		766,000	15,436	16,528
The Herald	www.heraldonline.com	Rock Hill, SC		762,000	9,672	12,100
Tri-City Herald	www.tri-cityherald.com	Kennewick, WA		762,000	18,255	29,487
The Bradenton Herald	www.brandenton.com	Bradenton, FL		695,000	17,825	22,311
Ledger-Enquirer	www.ledger-enquirer.com	Columbus, GA		595,000	14,573	17,355
Sun Herald	www.sunherald.com	Biloxi, MS		590,000	20,833	30,016
The Sun News	www.thesunnews.com	Myrtle Beach, SC		578,000	21,144	27,167
Centre Daily Times	www.centredaily.com	State College, PA		577,000	11,399	14,415
The Bellingham Herald	www.bellinghamherald.com	Bellingham, WA		563,000	10,124	13,214
The Olympian	www.theolympian.com	Olympia, WA		516,000	12,314	27,685
Merced Sun-Star	www.mercedsunstar.com	Merced, CA		481,000	9,993	—
The Herald-Sun	www.heraldsun.com	Durham, NC		371,000	8,177	8,613
The Beaufort Gazette	www.beaufortgazette.com	Beaufort, SC	(3)	N/A	4,738	5,068
				59,364,000	1,148,568	1,735,354

Our media companies also work together to consolidate functions and share resources across operating segments that lend themselves to such efficiencies, such as certain regional or national sales efforts, certain editorial functions, accounting functions, digital publishing systems and products, information technology functions and others. These efforts are often coordinated through senior executives and corporate personnel.

~~(1)~~ Our ~~Circulation~~business ~~figures~~is ~~are~~somewhat ~~reported~~seasonal, aswith ofpeak revenues and profits generally occurring in the ~~end~~fourth quarter of ~~our~~each ~~fiscal~~ year, ~~2018~~reflecting the Thanksgiving and Christmas holidays. The other quarters, when holidays are not ~~meant~~as toprevalent, ~~reflect~~are ~~Alliance~~historically ~~for~~slower ~~Audited~~quarters ~~Media~~for ~~(“AAM”)~~revenues ~~reported~~and ~~figures~~operating profits.

~~(2) Total monthly unique visitors for December 2018 according to Adobe Analytics.~~ 9

Table of Contents

The following table summarizes our media companies, their digital platforms, total circulation (print copies and digital subscriptions) and total unique visitors:


				Total	Circulation (1)
Media Company	Website	Location		UV (2)	Daily	Sunday
Miami Herald	www.miamiherald.com	Miami, FL		12,066,000	75,297	111,769
The Sacramento Bee	www.sacbee.com	Sacramento, CA		6,110,000	92,733	164,041
Fort Worth Star-Telegram	www.star-telegram.com	Fort Worth, TX		4,764,000	179,339	155,981
The Charlotte Observer	www.charlotteobserver.com	Charlotte, NC		4,756,000	68,241	95,328
The Kansas City Star	www.kansascity.com	Kansas City, MO		4,639,000	93,484	122,115
The News & Observer	www.newsobserver.com	Raleigh, NC		3,210,000	70,413	91,164
El Nuevo Herald	www.elnuevoherald.com	Miami, FL		4,589,000	19,533	24,753
Lexington Herald-Leader	www.kentucky.com	Lexington, KY		2,473,000	44,811	66,810
The State	www.thestate.com	Columbia, SC		2,426,000	39,215	56,550
The News Tribune	www.thenewstribune.com	Tacoma, WA		1,960,000	32,714	62,560
The Fresno Bee	www.fresnobee.com	Fresno, CA		1,722,000	48,266	67,417
The Wichita Eagle	www.kansas.com	Wichita, KS		1,576,000	32,373	71,068
Idaho Statesman	www.idahostatesman.com	Boise, ID		1,527,000	29,021	50,568
The Modesto Bee	www.modbee.com	Modesto, CA		1,041,000	29,729	37,616
McClatchy DC Bureau	www.mcclatchydc.com			1,000,000	N/A	N/A
Belleville News-Democrat	www.bnd.com	Belleville, IL		959,000	15,450	44,257
Sun Herald	www.sunherald.com	Biloxi, MS		942,000	16,578	18,806
The Tribune	www.sanluisobispo.com	San Luis Obispo, CA		846,000	15,876	19,206
The Bradenton Herald	www.brandenton.com	Bradenton, FL		815,000	16,867	21,174
The Bellingham Herald	www.bellinghamherald.com	Bellingham, WA		778,000	9,520	12,613
The Telegraph	www.macon.com	Macon, GA		749,000	15,824	20,086
The Island Packet	www.islandpacket.com	Hilton Head, SC		692,000	15,766	16,889
The Sun News	www.thesunnews.com	Myrtle Beach, SC		692,000	18,269	24,244
The Olympian	www.theolympian.com	Olympia, WA		628,000	12,014	20,604
Tri-City Herald	www.tri-cityherald.com	Kennewick, WA		607,000	16,895	21,993
Centre Daily Times	www.centredaily.com	State College, PA		598,000	11,279	14,277
Ledger-Enquirer	www.ledger-enquirer.com	Columbus, GA		519,000	12,536	15,196
The Herald	www.heraldonline.com	Rock Hill, SC		495,000	9,339	11,818
Merced Sun-Star	www.mercedsunstar.com	Merced, CA		340,000	8,345	—
The Herald-Sun	www.heraldsun.com	Durham, NC		259,000	7,113	7,956
The Beaufort Gazette	www.beaufortgazette.com	Beaufort, SC	(3)	N/A	4,018	4,423
				63,778,000	1,060,858	1,451,282

⁽¹⁾

Circulation figures are reported as of the end of our fiscal year 2019 and are not meant to reflect Alliance for Audited Media (“AAM”) reported figures.

⁽²⁾

Total monthly unique visitors for December 2019 according to Adobe Analytics.

⁽³⁾

The Beaufort Gazette unique visitor activity is included in The Island Packet activity.

Other Operations

On September 13, 2018, we sold our remaining 3.0% ownership interest in CareerBuilder, LLC (“CareerBuilder”) and received gross proceeds of $5.3 million. During 2018, we also received other distributions totaling approximately $2.8 million from CareerBuilder. In July 2017, we sold a majority of our interest in CareerBuilder, which reduced our ownership interest from 15.0% to approximately 3.0%.

We own 49.5% of the voting stock and 70.6% of the nonvoting stock of The Seattle Times Company. The Seattle Times Company owns The Seattle Times newspaper, weekly newspapers in the Puget Sound area and daily newspapers located in Walla Walla and Yakima, Washington, and their related websites and mobile applications.

In addition, three of our wholly- owned subsidiaries own a combined 27.0% interest in Ponderay Newsprint Company (“Ponderay”), a general partnership that owns and operates a newsprint mill in the state of Washington. In connection with the Chapter 11 Cases we expect to abandon our interest in Ponderay, as long-term ownership of the mill is not anticipated to create or maximize value in the future and is thus inconsistent with our overall restructuring strategy.

Table of Contents

We also own a 25.0% interest in Nucleus, a marketing solutions provider as described above.

Raw Materials

During ~~2018~~2019, we consumed approximately 5038,~~700~~600 metric tons of newsprint for all of our operations compared to 6750,~~000~~700 metric tons in ~~2017~~2018. The decrease in tons consumed was primarily due to changes in our print products at numerous media companies, as well as lower print advertising sales and print circulation volumes.

~~During 2018, our consumed newsprint was purchased through a third-party intermediary, of which approximately 12,700 metric tons of those purchases were newsprint from Ponderay.~~10

~~Our~~Table earnings are somewhat sensitive to changes in newsprint prices, albeit substantially less sensitive as our digital business continues to grow. In 2018 and 2017, newsprint expense accounted for 4.0% and 4.4%, respectively, of ~~total operating expenses, excluding impairments and other asset write-downs.~~ Contents

During 2019, the newsprint we consumed was purchased through a third-party intermediary and approximately 10,300 metric tons of this newsprint was produced by Ponderay, as compared to 12,700 metric tons in 2018.

Our earnings are somewhat sensitive to changes in newsprint prices, albeit substantially less sensitive as our digital business continues to grow. In 2019 and 2018, newsprint expense accounted for 3.6% and 4.0%, respectively, of total operating expenses, excluding impairments and other asset write-downs.

Competition

Our newspapers, direct marketing programs, websites and mobile content compete for advertising revenues and readers’ time with television, radio, other media websites, social network sites and mobile applications, direct mail companies, free shoppers, ~~suburban~~billboard companies, and neighborhood and national newspapers and other publications, ~~and billboard companies,~~ among others. In some of our markets, our newspapers also compete with other newspapers published in nearby cities and towns. Competition for advertising is generally based upon digital and print readership levels and demographics, advertising rates, internet usage and advertiser results, while competition for circulation and readership (digital and print) is generally based upon ~~the~~ content, journalistic quality, service, competing news sources and the price of the newspaper or digital service.

~~Our~~In each of our major daily markets, our media companies’ internet sites are generally a leading local ~~website~~news ~~in each of our major daily markets~~website. We have continued to shift advertising to digital advertising to stay current with reader trends. ~~Our~~Each of our media companies ~~are~~ also has the largest print circulation of any printed news media source in ~~each~~its ~~of their~~ respective ~~markets~~market. However, our media companies have experienced difficulty maintaining print circulation levels because of a number of factors. These include increased competition from other publications and other forms of media ~~technologies~~technology, including the internet and other new media formats that are often free for users; and a proliferation of news outlets that fragments audiences. We face greater competition from online competitors, particularly in the areas of employment, automotive and real estate advertising~~, from online competitors~~.

To address the structural shift to digital media, we reengineered our operations to strengthen areas driving performance in news, audience, advertising and digital growth. Our newsrooms also provide editorial content on a wide variety of platforms and formats from our daily newspaper to leading local websites; on social network sites such as Facebook and Twitter; on smartphones and on e‑readers; on websites and blogs; in niche online publications and in e‑mail newsletters; and mobile applications. Upgrades are continually made to our mobile applications and websites.

Employees — Labor

As of December 3029, ~~2018~~2019, we had approximately 32,~~500~~800 full and part‑time employees (equating to approximately 32,~~300~~700 full‑time equivalent employees), of whom approximately 58.01% were represented by unions. Most of our union‑represented employees are currently working under labor agreements with expiration dates through ~~2020~~2021. We have unions at 5six of our 30 media companies.

While our media companies have not had a strike for decades, and we do not currently anticipate a strike occurring, we cannot preclude the possibility that a strike may occur at one or more of our media companies when future negotiations take place. We believe that in the event of a strike we would be able to continue to publish and deliver to subscribers, a capability that is critical to retaining revenues from advertising and audience, although there can be no assurance that we will be able to continue to publish in the event of a strike.

Compliance with Environmental Laws

We use appropriate waste disposal techniques for hazardous materials. To the best of our knowledge, as of December 3029, ~~2018~~2019, we have complied with all applicable environmental certifications with various state environmental agencies and the U.S. Environmental Protection Agency related to existing underground storage tanks. We do not believe that we currently have any significant environmental issues and, in 2019 and 2018, had no significant expenses or capital expenditures related to environmental control facilities.

Table of Contents

currently have any significant environmental issues and, in 2018 and 2017, had no significant expenses or capital expenditures related to environmental control facilities.

Available Information

Our Annual Report on Form 10‑K, Quarterly Reports on Form 10‑Q, Current Reports on Form 8‑K, and amendments to reports filed pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are made available, free of charge, on our website at www.mcclatchy.com, as soon as reasonably practicable after we file or furnish them with the U.S. Securities and Exchange Commission (the “SEC”).

Table of Contents

ITEM 1A. RISK FACTORS

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this Item.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

Our corporate headquarters are located at 2100 Q Street, Sacramento, California. At December 3029, ~~2018~~2019, we had newspaper production facilities in 87 markets in 76 states. Our facilities vary in size and in total occupy about 43.18 million square feet. Approximately 23.70 million of the total square footage is leased from others, while we own the properties for the remaining square footage. We own substantially all of our production equipment, although certain office equipment is leased.

We maintain our properties in good condition and believe that our current facilities are adequate to meet the present needs of our media companies.

ITEM 3. LEGAL PROCEEDINGS

See Part II, Item 8, (i) the description of the Chapter 11 Cases in Note 92, Chapter 11 Bankruptcy Filing, and (ii) Note 11, Commitments and Contingencies to the consolidated financial statements included as part of this Annual Report on Form 10-K.

ITEM 4. MINE SAFETY DISCLOSURES

None.

1012

Table of Contents

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

~~Since~~On September 129, ~~2017~~2019, ~~our~~we ~~Class A~~received ~~Common~~a ~~Stock~~notice ~~has~~from ~~been listed on~~ the NYSE American ~~under~~notifying ~~the~~us ~~symbol~~that ~~MNI.~~we ~~Prior~~were tonot ~~that~~in ~~time,~~compliance ~~our~~with ~~Class~~the Astockholders’ ~~Common~~equity ~~Stock~~requirements ~~was~~set ~~listed~~forth onin ~~the~~Sections ~~New~~1003(a)(i) ~~York~~and ~~Stock~~1003(a)(ii) of ~~Exchange~~the ~~under~~NYSE ~~the~~American ~~same~~Company ~~symbol~~Guide. At Athe ~~small~~time, ~~amount~~we ofhad ~~Class A~~reported ~~Common~~stockholders’ ~~Stock~~deficit isof ~~also~~$372.5 ~~traded~~million onas ~~other~~of ~~exchanges.~~June ~~Our~~30, ~~Class B~~2019 ~~Common~~and ~~Stock~~net islosses ~~not~~in ~~publicly~~each ~~traded.~~of Asthe offour ~~March~~most 1,recent ~~2019,~~fiscal ~~there~~years ~~were~~ended ~~approximately~~December 330,~~255~~ ~~and~~2018. We 15submitted ~~record~~a ~~holders~~plan ofto ~~our~~the ~~Class A~~NYSE ~~and~~American ~~Class~~to regain Bcompliance with ~~Common~~Sections ~~Stock,~~1003(a)(i) ~~respectively.~~and We1003(a)(ii) ~~believe~~of ~~that~~ the ~~total~~Company ~~number~~Guide ofon ~~holders~~October of9, ~~our~~2019, ~~Class A~~and ~~Common~~on ~~Stock~~December is13, ~~much~~2019, ~~higher~~the ~~since~~NYSE ~~many~~American ~~shares~~notified ~~are~~us ~~held~~that inthey ~~street~~had ~~name.~~accepted our compliance plan.

On February 13, 2020, the NYSE American suspended the trading of our Class A Common Stock upon our filing the Chapter 11 petitions, and our Class A Common Stock has been quoted “over-the-counter” on the OTC Pink Market, operated by OTC Markets Group, under the symbol MNIQQ. On February 21, 2020, the NYSE American filed a Form 25 with the SEC to delist our Class A Common Stock from the NYSE American. The delisting was effective 10 days after the Form 25 was filed. The deregistration of the Common Stock under Section 12(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), will become effective 90 days after the filing date of the Form 25. Our Class B Common Stock is not publicly traded.

Under our Chapter 11 restructuring we expect that our Class A and Class B Common Stock will be eliminated and that we will emerge from Chapter 11 as a privately held company.

Securities traded in the over-the-counter market generally have significantly less liquidity than securities traded on a national securities exchange. Over-the-counter market quotations may reflect inter-dealer prices, without any retail mark-up, mark-down or commission and may not necessarily represent actual transactions. As of March 25, 2020, there were approximately 3,011 and 15 record holders of our Class A and Class B Common Stock, respectively.

Dividends:

In 2009, we suspended our quarterly dividend~~; therefore~~, and we have not paid any cash dividends since the first quarter of 2009. Under the indenture for the 2026 Notes, dividends are allowed if the consolidated leverage ratio (as defined in the indenture) is less than 5.25 to 1.00 and we have sufficient amounts under our restricted payments basket (as determined pursuant to the indenture), or if we use other available exceptions provided for under the indenture. However, the payment and amount of future dividends remain within the discretion of the Board of Directors and will depend upon our future earnings, financial condition, and other factors considered relevant by the Board of Directors.

Equity Securities:

During the year ended December 3029, ~~2018~~2019, we did not repurchase any equity securities and we did not sell any equity securities of the Company that were not registered under the Securities Act of 1933, as amended.

Effects of the Chapter 11 Cases on the Class A Common Stock:

Pursuant to the terms of the proposed restructuring plan, we expect that our existing equity interests will be cancelled and discharged in connection with the Chapter 11 Cases and the holders of those equity interests, including the holders of our outstanding shares of Class A Common Stock, will be entitled to no recovery relating to those equity interests.

ITEM 6. SELECTED FINANCIAL DATA

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this Item.

1113

Table of Contents

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Reference is made to Part I, Item 1 “Forward‑Looking Statements.” Except for historical information, the matters discussed in this section are forward looking statements that involve risks and uncertainties and are based upon judgments concerning various factors that are beyond ~~the~~our ~~Company’s~~ control. Consequently, and because forward-looking statements are inherently subject to risks and uncertainties, the actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements. In addition, the following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand our results of operations and financial condition. MD&A should be read in conjunction with our audited consolidated financial statements and accompanying notes to the consolidated financial statements (“Notes”) as of and for each of the two years ended December 3029, ~~2018~~2019 and December 3130, ~~2017~~2018, included elsewhere in this Annual Report on Form 10‑K.

Bankruptcy Filing and Going Concern

As a result of the commencement of the Chapter 11 Cases on February 13, 2020, we are operating as a debtor-in-possession pursuant to the authority granted under Chapter 11 of the Bankruptcy Code. Pursuant to the Chapter 11 Cases, we intend to de-lever our balance sheet and reduce overall indebtedness. Additionally, as a debtor-in-possession, certain of our activities are subject to review and approval by the Bankruptcy Court, including, among other things, the incurrence of secured indebtedness, material asset dispositions, and other transactions outside the ordinary course of business. There can be no guarantee we will successfully agree upon a viable plan of reorganization with our various stakeholders, or that any such agreement will be reached in the time frame that is acceptable to the Bankruptcy Court.

We have concluded that our financial condition and our projected operating results, contribution amounts required on our qualified defined benefit pension plan (“Pension Plan”), the defaults under our debt agreements subsequent to December 29, 2019, and the risks and uncertainties surrounding our Chapter 11 Cases raise substantial doubt as to our ability to continue as a going concern.

See Note 2 for further discussion.

Debtor-In-Possession Financing

To ensure sufficient liquidity throughout the Chapter 11 Cases, we have obtained new $50.0 million debtor-in-possession financing under a credit agreement (“DIP Credit Agreement”) from Encina Business Credit, LLC. This DIP Credit Agreement, coupled with our normal operating cash flows, is providing liquidity for McClatchy and all of our local news outlets to operate as usual and fulfill ongoing commitments to stakeholders.

The DIP Credit Agreement, which replaces our former asset based loan (“ABL”) revolver from Wells Fargo, N.A. (see Note 7 for further discussion of our debt), provides for a secured debtor-in-possession credit facility (the “DIP Facility”) consisting of a new revolving loan facility in an aggregate principal amount up to $50 million, which is in the form of revolving loans or, subject to a sub-limit of $3.5 million, in the form of letters of credit. Our obligations under the DIP Facility will be guaranteed by all of our assets, whether now existing or hereafter acquired. The scheduled maturity date of the DIP Facility will be the eighteen-month anniversary following the Closing Date (as defined in the DIP Credit Agreement).

The DIP Credit Agreement contains customary representations, warranties and covenants that are typical and customary for debtor-in-possession facilities of this type, including, but not limited to specified restrictions on indebtedness, liens, guarantee obligations, mergers, acquisitions, consolidations, liquidations and dissolutions, sales of assets, leases, payment of dividends and other restricted payments, voluntary payments of other indebtedness, investments, loans and advances, transactions with affiliates, sale and leaseback transactions and compliance with case milestones. The DIP Credit Agreement also contains customary events of default, including as a result of certain events occurring in the Chapter 11 Cases. The DIP Credit Agreement was subject to approval by the Bankruptcy Court and is subject to customary conditions precedent.

Delisting of our Common Stock from the NYSE American

Our Class A Common Stock was previously listed on the NYSE American under the symbol MNI. On February 13, 2020,

Table of Contents

the NYSE American suspended the trading of our Class A Common Stock upon our filing the Chapter 11 Cases, and our Class A Common Stock has been quoted “over-the-counter” on the OTC Pink Market under the symbol MNIQQ. On February 21, 2020, the NYSE American filed a Form 25 with the SEC to delist our Class A Common Stock from the NYSE American. The delisting was effective 10 days after the Form 25 was filed. The deregistration of the Common Stock under Section 12(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), will become effective 90 days after the filing date of the Form 25.

Overview

We operate 30 media companies in 14 states, ~~providing~~ each ofproviding its ~~communities~~community with high-quality news and advertising services in a wide array of digital and print formats. We are a publisher of well-respected brands such as the Miami Herald, The Kansas City Star, The Sacramento Bee, The Charlotte Observer, The (Raleigh) News & Observer, and the (Fort Worth) Star-Telegram. ~~We are headquartered in Sacramento, California, and our Class A Common Stock is listed on the NYSE American under the symbol MNI.~~

Our fiscal year ends on the last Sunday in December. of each calendar year. The fiscal ~~year~~years ended December 3029, ~~2018~~2019, ~~consisted~~and ~~of a 52-week period. Fiscal year ended~~ December 3130, ~~2017~~2018, consisted of a ~~53‑~~52-week ~~period~~periods.

The following table reflects our sources of revenues as a percentage of total revenues for the periods presented:

	Years Ended
	December 30,		December 31,
	December 29,		December 30,
	2018		2017
	2019		2018
Revenues:
Advertising	5147.65	%	5551.26	%
Audience	4245.14	%	4042.21	%
Other	67.31	%	4.6.3	%
Total revenues	100.0	%	100.0	%

Our primary sources of revenues are digital and print advertising and audience subscriptions. ~~All~~Advertising ~~categories~~revenues ~~(retail,~~include ~~national and classified) of~~ advertising ~~discussed~~delivered ~~below include both~~ digital-only, ~~and print~~ advertising. ~~Retail~~carried ~~advertising revenues (from retail clients) include advertising delivered~~ digitally and~~/or~~ ~~advertising~~bundled ~~carried~~ as a part of newspapers (run of press (“ROP”) advertising), and/or advertising inserts placed in newspapers (“preprint” advertising”). Audience revenues include either digital-only subscriptions, or bundled subscriptions, which include ~~both~~ digital and print. Our print newspapers are delivered by large distributors and independent contractors. Other revenues include, ~~among others,~~ commercial printing and distribution revenues.

See “Results of Operations” section below for a discussion of our revenue performance and contribution by category for ~~2018~~2019 and ~~2017~~2018.

Table of Contents

Recent Developments

~~Debt~~Coronavirus ~~Repurchases,~~(COVID-19) ~~Redemptions and Refinancing~~ Pandemic

On ~~July~~January 1630, ~~2018~~2020, wethe ~~closed~~World onHealth Organization declared that the ~~previously~~recent ~~announced~~coronavirus ~~offering~~disease of2019 ~~$310~~(“COVID-19”) outbreak was a global health emergency.0 ~~million~~On ~~aggregate~~March ~~principal~~11, ~~amount~~2020, ofthe ~~our~~World ~~2026~~Health ~~Notes~~Organization raised the COVID-19 outbreak to “pandemic” status. ~~The~~Our ~~2026~~advertising ~~Notes~~revenues are ~~guaranteed~~dependent byon ~~certain~~general ofeconomic and business conditions in our ~~subsidiaries.~~markets ~~The~~or ~~2026~~those ~~Notes~~impacting our customers, including from natural disasters and ~~the~~public ~~guarantees~~health ~~are~~emergencies, ~~secured~~such byas aCOVID-19. ~~first~~COVID-~~priority~~19 ~~lien~~was onfirst ~~certain~~detected in China in late 2019 and subsequently spread globally. The transmission of ~~our~~COVID-19 ~~subsidiary~~and ~~guarantors’~~efforts ~~assets~~to contain its spread have resulted in international, ~~stock~~national ofand ~~certain~~local ~~subsidiaries~~border closings and byother ~~second-priority liens~~significant ontravel ~~certain~~restrictions ofand ~~our~~disruptions, ~~subsidiary~~significant ~~guarantor’s~~disruptions to business operations, supply chains and customer activity, event cancellations and restrictions, service cancellations, reductions and other ~~assets~~changes, significant challenges in healthcare service preparation and delivery, quarantines and related government actions and policies, as well as general concern and uncertainty that has negatively affected the economic environment.

12In many of the states in which we operate, the governors have issued stay-at-home orders, which restrict the movements of residents except for essential tasks or to go to work in essential businesses. These restrictions have caused challenges to our business operations and have increased the risk factors listed above. And while, the news media industry has generally been designated as essential businesses thus far, if significant portions of our workforce are unable to work effectively, our operations, including the printing and delivery of print newspapers, will likely be impacted. We may be unable to perform fully on our contracts and our costs may increase. These cost increases may not be fully recoverable or adequately covered by insurance. Furthermore, the outbreak of COVID-19 has severely impacted global economic activity and caused significant volatility and negative pressure in the financial markets. In addition to disrupting our operations, these developments may adversely affect our access to capital and/or financing. As such, we expect the majority of the COVID-19 pandemic disruptions to impact our business operations, employee costs, single copy newspaper revenues (4.2% of 2019 total revenues) and total advertising revenues (47.5% of 2019 total revenues), with a greater impact to revenues than costs. We continue to monitor the situation, to assess further possible implications to our business and customers, and to take actions in an effort to mitigate adverse consequences. We are unable to quantify the impact on our business at this time, but it could have a material adverse effect on our business, financial position, results of operations and/or cash flows in the future.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law. Key provisions of the CARES Act include one-time payments to individuals, strengthened unemployment insurance, additional health-care funding, loans and grants to certain businesses, and temporary amendments to the Internal Revenue Code. While we do not qualify for any of the business loans or grants under the CARES Act, modifications to the tax rules for the carryback of net operating losses and business interest limitations may result in a federal tax refund of approximately $9.0 million.

Non-Cash Impairment Charges

Our financial operating results for 2019 include $335.7 million of non-cash impairment charges, which primarily includes a reduction of the carrying value of goodwill for $285.0 million and of intangible newspaper mastheads for $49.9 million. See Critical Accounting Policies below and Notes 3 and 6 for additional discussion regarding the goodwill and masthead impairments.

Asset sales and leasebacks

During 2019, we recognized gains totaling $3.3 million related to the sale of land and buildings in Belleville, Illinois, Kennewick, Washington and Miami, Florida.

In May 2019, we closed a sale and leaseback of real property in Kansas City, Missouri. The transaction resulted in net proceeds of $29.7 million. We are leasing back the Kansas City property under a 15-year lease with initial annual payments totaling approximately $2.8 million. The lease includes a repurchase clause allowing us to repurchase the property after the 15-year lease term. Accordingly, the lease is being treated as a financing obligation, and we continue to depreciate the carrying value of the property in our financial statements. No gain or loss was recognized on the transfer of the property to the buyer and no gain or loss will be recognized until the transaction qualifies for sale accounting.

Table of Contents

OnDebt ~~July~~Redemption ~~16,~~and ~~2018,~~extinguishment ~~the Notes Trustee, at our direction, delivered a notice~~ of full redemption to the holder of the $344.1 million aggregate principal amount of our outstanding 2022 Notes. The 2022 Notes were redeemed on August 15, 2018, at a premium, together with accrued and unpaid interest. debt

OnIn ~~July~~accordance ~~16,~~with ~~2018,~~our we2026 ~~entered~~Notes ~~into a Junior Term Loan Agreement~~Indenture, ~~which~~we ~~provided~~are ~~for~~required ~~$157.1~~to ~~million~~redeem ~~Tranche~~the A2026 ~~Junior~~Notes ~~Term~~from ~~Loans~~the ~~and~~net ~~$193.5~~cash ~~million~~proceeds ~~Tranche~~of Bcertain ~~Junior~~asset ~~Term~~dispositions ~~Loans.~~and ~~The~~from ~~Tranche~~a Aportion ~~Junior~~of ~~Term~~our ~~Loans~~excess ~~are~~cash ~~due~~flow on(as ~~July~~defined ~~15,~~in ~~2030 and~~ the ~~Tranche~~2026 BNotes ~~Junior~~Indenture). ~~Term~~During ~~Loans are due on July 15~~2019, ~~2031.~~in ~~Our~~accordance ~~obligations~~with ~~under the Junior Term Loan Agreement are guaranteed by~~ our ~~subsidiaries that guarantee the~~ 2026 Notes. ~~In December 2018~~Indenture, ~~the~~we redeemed $~~193~~41.58 million ofaggregate ~~Tranche~~principal Bamount ~~Junior~~of ~~Term~~our ~~Loans~~2026 ~~were~~Notes ~~exchanged~~from by the ~~holder~~net ~~for~~proceeds ~~the~~from ~~Notes~~asset ~~due~~dispositions ~~on July 15, 2031 (“2031 Notes”). These 2031 Notes are of substantially similar character~~ and ~~terms~~from as2018 ~~the~~excess ~~Tranche~~cash ~~B Junior Term Loan~~flows. As ~~such~~a ~~the~~result, we ~~Tranche~~recorded Ba ~~Junior~~loss ~~Term~~on ~~Loans~~extinguishment ~~were~~of ~~fully~~debt ~~extinguished~~of at$2.3 ~~the~~million ~~end~~in ~~of 2018~~2019.

OnDebt ~~July~~Issuance ~~16, 2018, the Junior Term Loans were exchanged for $82.1 million in aggregate principal amount of 2027 Debentures~~ and ~~$193.5 million in aggregate principal amount of 2029 Debentures. The Junior Term Loans included $75 million principal of new debt issued at a discount of $15 million.~~ Exchange

OnIn ~~July~~March 162019, ~~2018,~~ we ~~entered~~converted ~~into~~approximately an$75.0 ~~ABL~~million ~~Credit~~aggregate ~~Agreement,~~principal ~~which~~amount ~~provides~~of ~~for~~2029 aDebentures ~~$65.0~~to ~~million~~additional ~~secured~~2031 ~~asset-backed~~Notes. ~~revolving~~The ~~credit~~additional ~~facility~~2031 ~~with~~Notes ahave ~~letter~~identical ofterms ~~credit~~to ~~subfacility~~our ~~and~~senior asecured ~~swing~~junior ~~line~~lien ~~subfacility.~~2031 ~~In addition~~Notes, ~~the~~other ~~ABL~~than ~~Credit~~with ~~Agreement~~respect ~~provides~~to ~~for~~the adate ~~$35.0~~of ~~million~~issuance, ~~cash~~and ~~secured~~will ~~letter~~be oftreated ~~credit~~as ~~facility.~~a ~~The~~single ~~commitments~~class ~~under~~for ~~the~~all ~~ABL~~purposes ~~Credit~~under ~~Agreement~~the ~~expire~~applicable ~~July~~indenture. ~~16,~~See ~~2023~~Note 7.

WeEarly ~~used~~Retirement ~~the~~Incentive net proceeds of the 2026 Notes offering, together with cash available under the ABL Credit Agreement, junior lien term loan financing and cash on hand, to fund our refinancing transaction and related expenses and the satisfaction and discharge and redemption of all of our outstanding 2022 Notes. Program

~~During~~In ~~2018~~February 2019, ~~excluding~~we ~~the~~announced ~~transactions~~a ~~discussed~~one-time ~~above,~~voluntary weEarly ~~redeemed~~Retirement orIncentive ~~repurchased~~Program ~~$95~~(“ERIP”) that was offered to approximately 450 employees.5 ~~million~~The ~~aggregate~~ERIP ~~principal~~allowed ~~amount~~the employees to accept a special termination benefit based on years of continuous service and the option to take their vested benefits under our ~~2022~~frozen ~~Notes~~Pension ~~and~~Plan ~~$5.3~~in ~~million~~a ~~aggregate~~lump ~~principal~~sum ~~amount~~payment. Nearly 50% of ~~our~~the ~~2026~~employees ~~Notes~~opted into the program.

~~Extinguishment~~Lump sum pension and termination payments made under the ERIP totaled approximately $35.1 million, decreasing both the benefit obligation and the fair value of ~~Debt~~plan assets. Due to the significance of this program, we remeasured the retirement plan assets and benefit obligations as of March 22, 2019, resulting in a net reduction to the pension liability, the recognition of a one-time non-cash charge of $6.8 million for the special termination benefits and an increase in our total 2019 benefit pension costs by approximately $1.5 million. See Note 9 for additional information.

During 2018, we recorded a net gain on the extinguishment of debt of $30.6 million, as a result of the following transactions. As a result of the debt refinancing discussed above, we redeemed $344.1 million of our 2022 Notes and we executed a non-cash exchange of most of our Debentures for new Tranche A and Tranche B Junior Term Loans. We also redeemed or repurchased $95.5 million of our 2022 Notes and $5.3 million of our 2026 Notes. As a result of these transactions, we recorded any applicable premiums that were paid, wrote off unamortized discounts and debt issuance costs, and recorded a fair market value adjustment on the exchange. See Note 5 for further discussion.

Asset Sales and Leasebacks

During 2018, we recognized a net gain of $4.1 million related to the sale of land and buildings in several of our markets. We also have various sales agreements or letters of intent to sell other properties that may close in 2019.

On April 23, 2018, we closed a sale and leaseback of real property in Columbia, South Carolina. The transaction resulted in net proceeds of $15.7 million. We are leasing back the Columbia property under a 15-year lease with initial annual payments totaling approximately $1.6 million. The lease includes a repurchase clause allowing us to repurchase the property after the 15-year lease term. Accordingly, the lease is being treated as a financing lease, and we continue to depreciate the carrying value of the property in our financial statements. No gain or loss will be recognized on the sale and leaseback of the property until we no longer have a continuing involvement in the property.

Under the 2022 Notes Indenture we were required to use the net after tax proceeds of $13.0 million from the Columbia transaction to reinvest in the Company within 365 days from the date of the sale or to make an offer to the holders of the 2022 Notes to purchase their notes at 100% of the principal amount plus accrued and unpaid interest. On April 25, 2018, we announced an offer to purchase $13.0 million of the 2022 Notes using the net after tax proceeds from the Columbia transaction at par plus accrued and unpaid interest. The offer expired on May 22, 2018, and $0.5 million principal amount of the 2022 Notes were tendered in the offer and redeemed by us at par.

Table of Contents

Sale of interest in CareerBuilder

On September 13, 2018, we sold our remaining 3.0% ownership interest in CareerBuilder and received gross proceeds of $5.3 million. Under the 2026 Notes Indenture we are required to use the net cash proceeds of $5.3 million from the sale of CareerBuilder to redeem our 2026 Notes. In November 2018 we redeemed these notes at par plus accrued and unpaid interest.

Early retirement incentive program

On February 1, 2019 we announced a voluntary retirement incentive plan that was offered to approximately 450 employees. The plan would allow them to accept a supplemental benefit based on years of service that included a severance package and their vested benefits under the company’s frozen defined benefit plan in a lump sum payment. Nearly 50% of the employees have opted into the program which is expected to result in approximately $12 million to $13 million of savings over the remainder of 2019.

Results of Operations

The following table reflects our financial results on a consolidated basis for ~~2018~~2019 and ~~2017~~2018:

	Years Ended
	December 30,		December 31,
	December 29,		December 30,
(in thousands, except per share amounts)	~~2018~~2019		~~2017~~2018
Net loss	$	(79411,~~757~~107)	$	(~~332~~79,~~358~~757)
Net loss per diluted common share	$	(1051.2797)	$	(4310.5527)

The ~~decrease~~increase in net loss in ~~2018~~2019 compared to ~~2017~~2018 was primarily due to ~~the timing and amounts of~~ non-cash ~~deferred~~impairment ~~tax~~charges ~~valuation~~totaling ~~allowance~~$335.7 ~~other~~million ~~non-cash~~for ~~impairment~~in ~~charges~~2019 ~~and~~compared ~~the~~to ~~operating~~$37.3 ~~loss~~million in 2018 ~~compared~~(see Notes ~~with~~3 ~~operating~~and ~~income in 2017~~6). In ~~2018~~addition, we ~~recorded~~recognized a ~~non-cash charge of~~ $2030.46 million ~~for~~gain ~~the~~on ~~deferred~~extinguishment ~~tax~~of ~~valuation~~debt ~~allowance~~during ~~and~~2018 acompared ~~pre-tax~~to ~~non-cash~~a ~~impairment charge of~~ $~~37.~~2.3 million ~~for~~loss ~~intangible~~on ~~newspaper~~extinguishment ~~mastheads.~~of Indebt ~~2017,~~in ~~pre-tax impairment charges were $193~~2019.4 ~~million,~~During ~~primarily~~2019 ~~related~~we toalso recorded a ~~$168.2~~non-cash ~~million~~charge ~~impairment~~ of ~~our CareerBuilder equity investment and a~~ $236.48 million ~~impairment~~related ofto ~~our~~the ~~intangible~~ERIP ~~newspaper~~(see ~~mastheads,~~Note 9) and a non-cash ~~charges that established the~~ deferred tax valuation allowance charge of $~~192~~28.35 million. In addition, while advertising revenues were lower during 2019 compared to 2018, ~~which~~the lower revenues were ~~partially~~largely offset by alower ~~decrease~~operating in expenses, asexcluding ~~described~~goodwill ~~more~~and ~~fully~~other ~~below~~asset write-downs.

~~2018~~2019 Compared to ~~2017~~2018

Revenues

During 2019, total revenues decreased 12.1% compared to 2018, primarily due to the continued decline in demand for advertising. The ~~following~~decline ~~table~~in ~~summarizes~~print advertising was primarily a result of large retail advertisers continuing to reduce preprinted inserts and printed ROP advertising in favor of digital products. We expect this trend to continue for the foreseeable future and particularly in light of our ~~revenues~~Chapter by11 ~~category~~filing. In addition, ~~which~~we ~~compares~~experienced ~~2018~~lower page views in 2019 compared to ~~2017:~~2018, resulting in a decline in digital advertising revenues, primarily impacting programmatic revenues in the national advertising category, as discussed below.

	Years Ended
	December 30,		December 31,		$		%
(in thousands)	2018		2017		Change		Change
Advertising:
Retail	$	191,043	$	236,130	$	(45,087)	(19.1)
National		42,273		40,338		1,935	4.8
Classified		102,635		120,586		(17,951)	(14.9)
Direct marketing and other		80,769		101,585		(20,816)	(20.5)
Total advertising		416,720		498,639		(81,919)	(16.4)
Audience		339,506		363,497		(23,991)	(6.6)
Other		51,000		41,456		9,544	23.0
Total revenues	$	807,226	$	903,592	$	(96,366)	(10.7)

During 2018, total revenues decreased 10.7% compared to 2017 primarily due to the continued decline in demand for print advertising. Consistent with the end of 2017, the decline in print advertising was primarily a result of large retail advertisers continuing to reduce preprinted insert and in-newspaper ROP advertising. The decline in print advertising revenues is the result of the desire of advertisers to reach customers directly through online advertising, and the secular shift in advertising demand from print to digital products. We expect these trends to continue for the foreseeable future. The decrease in total revenues was exacerbated by the 53rd week in 2017 (compared to a 52-week year in 2018). The

Table of Contents

~~additional~~ The ~~week~~following intable ~~2017~~summarizes ~~provided~~our anrevenues ~~estimated~~by ~~additional $6.6 million in advertising revenues~~category, ~~$6.7~~which ~~million~~compares in2019 ~~audience~~to ~~revenues and $14.0 million in total revenues.~~2018:


	Year Ended
	December 29,		December 30,		$		%
(in thousands)	2019		2018		Change		Change
Advertising
Digital-only	$	127,255	$	151,733	$	(24,478)	(16.1)
Digital bundled with print		27,111		28,517		(1,406)	(4.9)
Total digital		154,366		180,250		(25,884)	(14.4)
Print		122,593		155,701		(33,108)	(21.3)
Direct marketing and other		60,151		80,769		(20,618)	(25.5)
Total advertising		337,110		416,720		(79,610)	(19.1)
Total audience		321,782		339,506		(17,724)	(5.2)
Other revenues		50,624		51,000		(376)	(0.7)
Total revenues	$	709,516	$	807,226	$	(97,710)	(12.1)

Supplemental advertising detail:
Retail	$	155,944	$	191,043	$	(35,099)	(18.4)
National		31,927		42,273		(10,346)	(24.5)
Classified		89,088		102,635		(13,547)	(13.2)
Direct marketing and other		60,151		80,769		(20,618)	(25.5)
Total advertising	$	337,110	$	416,720	$	(79,610)	(19.1)

Advertising Revenues

Total advertising revenues decreased 1619.41% during ~~2018~~2019 compared to ~~2017, including the impact of one less week in~~ 2018. We experienced declines in all ~~advertising~~of ~~revenue categories, except national advertising, primarily due to declines in print advertising revenues. The decreases in print advertising revenues were partially offset by increases in~~ our ~~national and digital classified~~ advertising revenue categories, as discussed below.

Digital advertising can come in many forms, including banner ads, video, search advertising and/or liner ads, while print advertising is typically display advertising, or in the case of classified, display and/or liner advertising. Advertising printed directly in the newspaper is considered ROP advertising while preprint advertising consists of preprinted advertising inserts delivered with the newspaper or delivered to non-subscribers as direct marketing products.

The following table reflects the category of advertising revenues as a percentage of total advertising revenues for the periods presented:

	Years Ended
	Year Ended
	December 30,		December 31,
	December 29,		December 30,
	2018		2017
	2019		2018
Advertising:
Retail	45.9	%	47.3	%
Total digital	45.8	%	43.2	%
National	10.1	%	8.1	%
Print	36.4	%	37.4	%
Classified	24.6	%	24.2	%
Direct marketing and other	17.8	%	19.4	%
Direct marketing and other	19.4	%	20.4	%
Total advertising	100.0	%	100.0	%

We categorize advertising revenues as follows:

· ~~Retail~~Digital –advertising ~~local~~- ~~retailers,~~can ~~local~~come ~~stores~~in ofmany ~~national retailers~~forms, ~~department~~including ~~and~~banner ~~furniture~~ads, ~~stores~~video, ~~restaurants~~search advertising and/or ~~other~~liner ~~consumer‑related~~ads, ~~businesses.~~while ~~Retail~~print advertising ~~also~~is ~~includes~~typically ~~revenues~~display ~~from preprinted~~ advertising, ~~inserts~~or ~~distributed~~ in the ~~newspaper~~case of classified, display and/or liner advertising.

· ~~National~~Print –advertising ~~national~~- ~~and~~directly ~~major~~in ~~accounts~~the ~~such~~newspaper asis ~~telecommunications~~considered ~~companies,~~ROP ~~financial institutions, movie studios, airlines and other national companies and most of our programmatic digital~~ advertising.

· Classified – local auto dealers, employment, real estate and other classified advertising, which includes remembrances, legal advertisements and other miscellaneous advertising.

Direct Marketing and Other – primarily preprint advertisements in direct mail, shared mail and niche publications, events programs, total market coverage publications and other miscellaneous advertising not included in the daily newspaper. These products are generally delivered to non-subscribers of our daily newspapers.

~~Retail~~Digital:

~~During~~Total ~~2018,~~digital ~~retail~~ advertising revenues decreased 1914.14% ~~compared~~during toyear ~~2017.~~ended InDecember 29, ~~2018~~2019, ~~the~~compared ~~decrease in retail advertising revenues was primarily due~~ to ~~decreases~~the ofsame ~~25.2%~~period in ~~print~~2018. ~~ROP~~Digital advertising ~~revenues~~constituted ~~and 35~~45.48% inof ~~preprint~~total advertising revenues in 2019 compared to ~~2017~~43.2% ~~The~~in ~~overall~~2018. ~~decreases~~Total indigital ~~retail~~ advertising ~~revenues~~includes ~~for~~digital-only ~~2018~~advertising ~~were~~and ~~spread~~digital ~~among~~advertising ~~ROP~~bundled ~~and~~with ~~preprint~~print.

~~National:~~18

National advertising revenues increased 4.8% during 2018 compared to 2017. We experienced an increase of 11.6% in digital national advertising offset partially by a 10.4% decrease in print national advertising during 2018 compared to 2017. Overall, the increase in digital national advertising revenues during 2018 was largely led by programmatic digital advertising, including mobile and video revenues.

Table of Contents

~~Classified:~~Digital-only advertising is defined as digital advertising sold on a stand-alone basis or as the primary advertising buy. Digital-only advertising revenues decreased 16.1% in 2019 compared to 2018, largely due to lower page views. As expected, the decline in digital-only advertising continued due to lower audience traffic compared to 2018, largely the result of a strategic tightening of website paywalls that accelerated paid digital subscriptions and a change in algorithms by a large platform company in the last half of 2018 that impacted us and the rest of the industry during all of 2019. In addition, we restructured our advertising function during the second quarter of 2019, which temporarily impacted sales in the second quarter, and to a lesser extent, the third quarter of 2019.

~~During~~Digital ~~2018, classified~~ advertising revenues ~~decreased~~bundled ~~14.9%~~with ~~compared~~print toproducts ~~2017.~~declined ~~Automotive, employment and real estate categories combined accounted for 50~~4.~~2% of our classified advertising revenues during 2018 compared to 54.~~9% in ~~2017. Other classified advertising revenue includes legal, remembrance and celebration notices and miscellaneous classified advertising. During 2018~~ 2019 compared to ~~2017,~~2018 weas ~~experienced~~a anresult ~~8.3%~~of ~~increase~~lower inprint ~~digital classified~~ advertising ~~led~~sales ~~by other classified advertising~~ and a ~~33.5%~~decline ~~decrease~~ in ~~print~~digital ~~classified advertising~~sales.

~~During~~The ~~the~~newspaper ~~first~~industry ~~quarter~~continues ofto ~~2018,~~experience wea ~~revisited~~secular ~~the~~shift ~~sales activity~~ in ~~remembrance/obituary~~advertising ~~sales~~demand ~~noting~~from ~~that~~print to digital products as advertisers look for multiple advertising ~~has,~~channels ~~over~~to ~~time,~~reach ~~become~~their ~~the~~customers ~~predominate~~and ~~source~~are ofincreasingly ~~obituary~~focused ~~sales~~on online customers. AsWhile aour ~~result,~~product weofferings ~~revised~~and ~~the~~collaboration ~~classification~~efforts ofin ~~such~~digital ~~sales,~~advertising ~~which~~have ~~allocates~~steadily agrown, ~~greater~~we ~~amount~~expect ofto ~~obituary~~continue ~~sales~~to ~~from~~face ~~print/digital~~intense ~~bundled~~competition ~~advertising~~in tothe digital~~-only~~ advertising space. ~~See~~We ~~definition~~will ofcontinue ~~digital-only~~to ~~below.~~adjust ~~Additionally~~our content, targeting and paywalls as we ~~continued~~pursue tothe ~~see~~best aexperience ~~shift~~for ~~from~~our ~~other~~digital ~~print~~customers, ~~classified~~knowing that it may impact the mix of digital advertising toand digital ~~platforms.~~audience revenues.

~~Digital Advertising~~Print:

~~Digital~~Print advertising ~~revenues,~~decreased ~~which~~21.3% during ~~are~~the ~~included~~year inended ~~each~~December 29, of2019, compared to the ~~advertising~~same ~~categories~~period ~~discussed~~in ~~above~~2018. In 2019, ~~constituted~~the ~~43.3%~~decrease ofin ~~total~~print advertising revenues ~~during~~was ~~2018~~primarily ~~compared~~due to ~~34.7%~~decreases ~~during~~of ~~2017~~20.2% ~~Total~~in ~~digital~~retail ROP advertising ~~includes~~revenues, ~~digital-only~~22.3% in preprint advertising revenues, and ~~digital~~20.9% in classified advertising, ~~bundled~~compared ~~with~~to ~~print~~the ~~and~~same ~~digital-only~~period ~~advertising~~in 2018.

Digital-only advertising is defined as digital advertising sold on a stand-alone basis or as the primary advertising buy with print sold as an “up-sell.” Digital-only advertising revenues increased 13.5% to $151.7 million in 2018 compared to 2017. In 2018, total digital advertising revenues increased 4.1% to $180.2 million compared to 2017 partially reflecting a change in allocation from print/digital bundled sales to digital-only sales as discussed above.

Digital advertising revenues bundled with print products declined 27.6% to $28.5 million in 2018 compared to 2017 as a result of fewer print advertising sales. The newspaper industry continues to experience a secular shift in advertising demand from print to digital products as advertisers look for multiple advertising channels to reach their customers and are increasingly focused on online customers. While our product offerings and collaboration efforts in digital advertising have grown, we expect to continue to face intense competition in the digital advertising space.

Direct Marketing and Other:

Direct marketing and other advertising revenues decreased 2025.5% during ~~2018~~the year ended December 29, 2019, compared to ~~2017~~the same period in 2018. The decrease was largely due to declines in ~~preprint~~insert advertising byin ~~large~~our ~~retail~~total ~~customers~~market ~~that~~coverage ~~are~~(“TMC”) ~~delivered~~products toby ~~non-subscribers~~large asretail ~~described~~customers ~~above~~ and tofrom aeliminating ~~lesser~~certain ~~extent,~~unprofitable toTMC ~~decreases~~programs inor ~~our~~ niche and direct marketing products.

Audience Revenues

~~Audience~~Total audience revenues decreased 65.62% during ~~2018~~the ~~compared~~year toended ~~2017.~~December 29, As2019, ~~noted~~compared ~~above,~~to the ~~53rd~~same ~~week~~period in ~~2017~~2018. ~~contributed~~Total anaudience ~~estimated~~revenues $6represented 45.74% ~~million~~of inthe ~~audience~~total revenues ~~exacerbating~~during 2019 compared to 42.1% in the ~~year-over-year~~same ~~decline~~period of 2018.

Overall, digital audience revenues increased 27.68% ~~during~~in ~~2018~~2019 ~~and~~compared ~~digital~~to 2018. Digital-only audience revenues increased 3447.85% in ~~2018~~2019 compared to ~~2017~~the same period in 2018. The increase in digital-only audience revenues during ~~2018~~2019 was largely a result of a 5141.10% increase in our digital-only subscribers to ~~155~~219,~~500~~200 asat of the end of ~~2018~~2019 compared to ~~2017.~~155,500 at the end of 2018.

Print audience revenues decreased 10.29% in ~~2018~~2019 compared to ~~2017~~the same period in 2018, primarily due to lower print circulation volumes ~~and the 53rd week of 2017~~ that were partially offset by pricing adjustments. ~~We have a dynamic pricing model for our traditional print subscriptions for which pricing is constantly being adjusted.~~ Print circulation volumes continue to decline as a result of fragmentation of audiences faced by our industry as available media outlets proliferate and readership trends change. To help reduce potential attrition due to the increased pricing, we increased our subscription-related marketing and promotion efforts.

Operating Expenses

Total operating expenses ~~decreased~~increased 323.61% in ~~2018~~the year ended December 29, 2019, compared to ~~2017.~~the ~~The~~same ~~decrease~~period ~~during~~in 2018, ~~was~~ primarily due to ~~changes~~increases in ~~compensation~~goodwill and ~~newsprint~~other ~~expenses,~~asset write-offs. This was partially offset by ~~other~~decreases ~~operating~~in ~~expenses~~compensation and ~~other~~amortization ~~asset~~expenses, ~~write-downs~~ as ~~compared~~discussed ~~to 2017~~below. Our total operating expenses, excluding goodwill and other asset write-~~downs~~offs, ~~reflect~~decreased 13.5% and reflects our continued effort to reduce costs through streamlining processes to gain efficiencies. ~~Our operating expenses for 2017 also include a~~

1619

Table of Contents

~~53rd~~ The ~~week,~~following ~~which~~table ~~resulted~~summarizes inour ~~higher~~operating expenses, ~~during~~which ~~2017~~compares ~~than in~~2019 ~~2018.~~to 2018:

The following table summarizes our operating expenses, which compares 2018 to 2017:


	Years Ended
	December 29,		December 30,		$		%
(in thousands)	2019		2018		Change		Change
Compensation expenses	$	251,677	$	298,033	$	(46,356)	(15.6)
Newsprint, supplements and printing expenses		45,617		54,592		(8,975)	(16.4)
Depreciation and amortization expenses		46,021		76,242		(30,221)	(39.6)
Other operating expenses		342,631		364,038		(21,407)	(5.9)
Other asset write-downs		335,676		37,274		298,402	nm
	$	1,021,622	$	830,179	$	191,443	23.1

	Years Ended
	December 30,		December 31,		$		%
(in thousands)	2018		2017		Change		Change
Compensation expenses	$	298,033	$	338,588	$	(40,555)	(12.0)
Newsprint, supplements and printing expenses		54,592		66,438		(11,846)	(17.8)
Depreciation and amortization expenses		76,242		80,129		(3,887)	(4.9)
Other operating expenses		364,038		352,830		11,208	3.2
Other asset write-downs		37,274		23,442		13,832	59.0
	$	830,179	$	861,427	$	(31,248)	(3.6)

_________________

Compensation expenses, which included both payroll and fringe benefit costs, decreased 12.0% in 2018 compared to 2017. Payroll expenses declined 13.6% during 2018 compared to 2017, reflecting a 14.8% decline in average full-time equivalent employees. Fringe benefits costs decreased 3.2% in 2018 compared to 2017 primarily due to decreases in health benefit costs and other fringe benefit costs, such as the employer portion of taxes, due to the reduction of headcount. These decreases were partially offset by the implementation of a 401(k) employer match resulting in costs of $2.5 million in 2018 with no comparable expense in 2017. _____________________

~~Newsprint,~~nm ~~supplements~~– ~~and~~not printing expenses decreased 17.8% in 2018 compared to 2017. Newsprint expense declined 14.8% during 2018 compared to 2017. The newsprint expense declines reflect a decrease in newsprint tonnage used of 25.5% during 2018, offset by an increase in newsprint prices of 14.3% during 2018 compared to 2017. The newsprint price increase in 2018 reflect, in part, the temporary impact of U.S. tariffs on Canadian newsprint sold to U.S. newspapers in 2018 that have since been removed. During these same periods, printing expenses, which are primarily outsourced printing costs, decreased 22.1%.meaningful

~~Depreciation~~Compensation expenses, which included both payroll and ~~amortization~~fringe ~~expenses~~benefit costs, decreased 415.96% in ~~2018~~the year ended December 29, 2019, compared to ~~2017.~~the ~~Depreciation~~same ~~expense~~period ~~decreased~~in $22018.2 ~~million~~Payroll inexpenses ~~2018~~declined 14.8% during 2019 compared to ~~2017,~~the assame aperiod ~~result~~in of2018, ~~assets~~primarily ~~becoming~~due ~~fully~~to ~~depreciated~~the reduction in ~~previous periods~~headcount. ~~Amortization~~Average ~~expense~~full-time ~~decreased~~equivalent 3employees declined 19.37% in ~~2018~~2019 compared to ~~2017~~in ~~primarily~~2018, ~~due~~partially toreflecting ~~some~~the ~~intangible~~ERIP ~~assets~~we ~~becoming~~discussed ~~fully~~above ~~amortized~~ in ~~2018.~~Recent WeDevelopments, ~~expect~~as awell ~~significant~~as ~~portion~~the restructuring of ~~the~~our ~~remaining~~advertising ~~long~~function in mid-~~lived~~2019. ~~intangible~~Fringe ~~assets~~benefit tocosts bedecreased ~~fully~~19.4% ~~amortized~~in 2019 compared to in ~~the~~2018, ~~first~~which ~~two~~is ~~quarters~~consistent ofwith ~~2019~~the decreases in payroll expenses.

~~Other~~Newsprint, ~~operating~~supplements and printing expenses ~~increased~~decreased 316.24% in ~~2018~~the ~~compared~~year toended ~~2017.~~December 29, ~~Other~~2019, ~~operating~~compared ~~expenses~~to ~~included~~the asame ~~$4.1~~period ~~million~~in ~~gain~~2018. onNewsprint ~~the~~expense ~~disposal~~declined of22.3% ~~property~~during ~~and~~2019 ~~equipment in 2018~~ compared to ~~$23.6~~the ~~million~~same period in ~~2017~~2018. ~~This~~The ~~change~~newsprint inexpense ~~the~~decline ~~gain~~reflects ~~was~~a ~~partially~~decrease ~~offset~~in bynewsprint ~~cost~~tonnage ~~savings~~used ~~initiatives~~of ~~and~~21.3% ~~other~~in ~~efforts~~2019 compared to ~~reduce~~in ~~operational costs~~2018. WeNewsprint ~~have~~prices ~~had~~decreased ~~decreases~~1.3% induring ~~various~~2019 ~~categories,~~compared ~~such~~to as2018. ~~travel,~~During ~~bad~~these ~~debt,~~same ~~postage~~periods, ~~circulation~~printing ~~delivery costs and other miscellaneous~~ expenses, ~~that~~which ~~were~~are ~~partially~~primarily ~~offset~~costs byassociated ~~increases~~with ~~for~~outsourced ~~software~~printing ~~for~~to ~~various~~third parties, ~~enterprise-wide~~decreased ~~information technology related projects and the 53rd week in 2017~~14.9%.

~~Other~~Depreciation ~~asset~~and ~~write-downs~~amortization inexpenses ~~2018~~decreased ~~include~~39.6% anin ~~impairment~~the ~~charge~~year ofended ~~$37.2~~December ~~million~~29, ~~related~~2019, compared to ~~intangible~~the ~~newspaper~~same ~~mastheads,~~period ~~and~~in a2018. ~~write~~Depreciation ~~down~~expense ofdecreased $06.17 million ~~related~~or 23.5% in 2019 compared to ~~classifying~~the ~~certain~~same ~~land~~period ~~and~~in ~~buildings~~2018, as ~~assets~~a ~~held~~result ~~for~~of ~~sale~~assets ~~during~~becoming ~~the~~fully ~~first~~depreciated ~~quarter~~in ofprevious ~~2018~~periods. ~~Other~~Amortization ~~asset~~expense ~~write-downs~~decreased 49.3% in ~~2017~~2019 ~~include~~compared anto ~~impairment~~in ~~charge~~2018. A majority of ~~$21.5~~the ~~million~~intangible ~~related~~assets subject to ~~intangible~~amortization ~~newspaper~~became ~~mastheads~~fully ~~and~~amortized ain ~~write~~the ~~down~~second quarter of ~~$2.0~~2019 ~~million~~and oftherefore ~~non-newsprint~~amortization ~~inventory~~expense during the ~~first~~remainder ~~quarter~~ of ~~2017. See~~2019 ~~Notes~~and 1in ~~and~~future 4years ~~for~~will ~~additional~~be ~~discussion~~significantly lower.

Other operating expenses decreased 5.9% in the year ended December 29, 2019, compared to the same period in 2018. The decrease was primarily a result of cost savings initiatives and other efforts to reduce operational costs, as well as the timing of gains on the sale of property and equipment. During 2019, compared to 2018, we had decreases in various categories, such as bad debt, postage, travel, outsourcing costs, circulation delivery costs and other miscellaneous expenses. These decreases were partially offset by an increase other professional services and the change in gain on sale of property and equipment. Other professional services include the legal counsel and financial consultants engaged to advise us through the negotiations with stakeholders and to prepare for the Chapter 11 proceedings, as discussed above. The change in the gain on sale of property and equipment includes a $4.1 million gain on the disposal of property and equipment, which reduced operating expenses in 2018, with similar transactions for $2.6 million in 2019.

Goodwill and other asset write-downs include charges of $335.7 million in the year ended December 29, 2019, compared to $37.3 million in the same period in 2018. These write-downs in 2019 are primarily due to impairment charges to goodwill of $285.0 million and intangible newspaper mastheads of $49.9 million. The write-downs in 2018 are due to impairment charges related to intangible newspaper mastheads. During 2019 and 2018, goodwill and other asset write-downs also includes impairment charges recognized upon classifying certain land and buildings as assets held for sale during the applicable periods.

Non‑Operating Items

Interest Expense:

Total interest expense decreased ~~less than 0~~3.10% in ~~2018 compared to 2017. While~~ the ~~first~~year ~~six~~ended ~~months~~December 29, of2019, ~~2018~~compared ~~experienced lower overall debt balances due~~ to ~~repurchases~~the ofsame ~~debt~~period ~~made~~in ~~during 2017 and early~~ 2018,. inDuring ~~third quarter of 2018~~2019, interest expense related to debt balances ~~increased~~decreased $0.5 ~~This~~million ~~increase~~compared ~~was primarily related~~ to the ~~amortization~~same ofperiod ~~debt~~in ~~issuance~~2018, ~~costs~~primarily ~~resulting~~related ~~from~~to ~~the~~lower ~~refinancing~~overall ~~and~~debt anbalances ~~extra~~resulting ~~month~~from ofredemptions ~~interest~~made ~~expense~~in ~~we paid on our 2022 Notes while~~ the ~~funds~~first ~~were~~half ~~being held by the trustee until the redemption date~~ of ~~August 15, 2018~~2019.

1720

Table of Contents

In ~~2018~~2019, the ~~increase~~decrease in total interest expense was also due to ~~increase~~a decrease in our non-cash imputed interest of $52.31 million related to our financing obligations due to ~~the~~differences ~~sales and leasebacks of our Columbia, South Carolina real property~~ in the ~~second~~relevant interest ~~quarter~~rates ~~of 2018 and our Sacramento, California real property~~ in ~~the~~2019 ~~third~~as ~~quarter~~compared ofto ~~2017~~2018.

Equity Income (Loss) in Unconsolidated Companies, Net:

During 2018, we recorded equity income of $0.6 million compared to losses of $1.7 million in 2017. Our positive income in 2018 resulted from distributions of earnings from our investment in CareerBuilder.

Impairments Related to Investments in Unconsolidated Companies, Net:

As described more fully in Note 3, during 2017, we recorded $2.4 million in impairment charges related to certain other unconsolidated equity investments and $168.2 million in impairment charges related to our equity investment in CareerBuilder. We had no impairment charges related to equity investments during 2018.

Gains Related to Investments in Unconsolidated Companies:

AsDuring ~~described more fully in Note 3, during~~ 2018, we recorded $1.7 million gain on the sale of our investment in CareerBuilder. We had no such related transactions during ~~2017~~2019.

Extinguishment of Debt:

~~During~~In ~~2018,~~accordance wewith ~~recorded~~our a2026 ~~net~~Notes ~~gain~~Indenture, onwe ~~the~~are ~~extinguishment~~required ofto ~~debt~~redeem of2026 ~~$30.6~~Notes ~~million~~from ~~as a result of~~ the ~~following~~net ~~transactions:~~cash weproceeds ~~redeemed $344.1 million~~ of ~~our~~certain ~~2022~~asset ~~Notes~~dispositions and wefrom ~~executed~~ a ~~non-cash~~portion ~~exchange~~ of ~~most of~~ our ~~Debentures~~excess ~~for~~cash ~~new~~flow ~~Tranche~~(as Adefined ~~and~~in ~~Tranche~~the B2026 ~~Junior~~Notes ~~Term Loans~~Indenture). ~~Also,~~During ~~during 2018~~2019, wein ~~redeemed~~accordance orwith ~~repurchased $95.5 million of~~ our ~~2022~~2026 Notes ~~and~~Indenture, we redeemed $541.38 million aggregate principal amount of our 2026 Notes. Asfrom athe ~~result~~net ofproceeds ~~these~~from ~~transactions,~~asset wedispositions ~~recorded~~and ~~any~~from ~~applicable~~2018 ~~premiums~~excess ~~that~~cash ~~were~~flows. ~~paid,~~As ~~wrote~~a ~~off unamortized discounts and debt issuance costs~~result, ~~and~~we recorded a ~~gain~~loss ~~based~~ on ~~the~~extinguishment ~~relative fair market~~ of ~~the new~~ debt ~~issued as compared to the carrying value~~ of ~~the debt that was extinguished~~$2. ~~See~~3 ~~Recent~~million ~~Developments~~in ~~above and Note 5 for further discussion~~2019.

During ~~2017,~~the wefirst ~~retired~~quarter of 2019, ~~repurchased~~our orexchange ~~redeemed~~of $6875.70 million ~~aggregate principal amount~~ of ~~various~~the ~~series~~2029 ofDebentures ~~our~~to ~~outstanding~~additional ~~notes.~~2031 WeNotes ~~repurchased~~did ~~some~~not ofresult ~~these~~in ~~notes at~~ a ~~price~~gain ~~higher~~or ~~than par value and redeemed some at par value. We wrote off historical debt issuance costs and as a result, we recorded a~~ loss on ~~the~~ extinguishment of debt. ofSee ~~$2.~~Note 7 ~~million~~for ~~during~~further ~~2017~~discussion.

During 2018, we recorded a net gain on the extinguishment of debt of $30.6 million as a result of the following transactions: we redeemed $344.1 million of our 2022 Notes and we executed a non-cash exchange of most of our Debentures for new Tranche A and Tranche B Junior Term Loans. Also, during 2018, we redeemed or repurchased $95.5 million of our 2022 Notes and we redeemed $5.3 million of our 2026 Notes. As a result of these transactions, we recorded any applicable premiums that were paid, wrote off unamortized discounts and debt issuance costs, and recorded a gain based on the relative fair market of the new debt issued as compared to the carrying value of the debt that was extinguished.

Income Taxes:

In ~~2018~~the year ended December 29, 2019, we recorded an income tax benefit of $26.23 million. As discussed more fully in Note 13 under Income Taxes, during ~~2018~~2019, we recorded acharges ~~charge~~ of $2028.45 million related to the current period impact of the valuation allowance on deferred ~~taxes~~tax assets. The remaining income tax benefit differed from the expected federal tax amounts primarily due to the inclusion of state income taxes, ~~and~~ certain permanently non-deductible expenses and the impact of non-tax deductible charges related to intangibles and goodwill.

In ~~2017~~2018, we recorded an income tax ~~expense~~benefit of $~~105~~2.52 million. As discussed more fully in Note ~~1 (~~3 under Income Taxes~~) and Note 6~~, during ~~2017~~2018, we recorded a charge of $~~192~~20.34 million ~~valuation allowance~~ related to ~~our~~the ~~deferred~~current ~~tax~~period ~~assets~~impact ~~because~~of wethe ~~determined~~valuation ~~that~~allowance iton ~~is not more-likely-than-not that we will realize such~~ deferred ~~tax assets~~taxes. The remaining income tax benefit differed from the expected federal tax amounts primarily due to the inclusion of state income taxes, ~~the tax impact of stock compensation, the benefit from the reduced federal tax rate as a result of the Tax Act on our deferred tax liabilities,~~ and certain permanently non-deductible expenses.

Liquidity and Capital Resources

~~Sources~~As a result of the commencement of the Chapter 11 Cases on February 13, 2020, we are operating as a debtor-in-possession pursuant to the authority granted under Chapter 11 of the Bankruptcy Code. Pursuant to the Chapter 11 filings, we intend to de-lever our balance sheet and ~~Uses~~reduce overall indebtedness upon completion of ~~Liquidity~~that process. Additionally, as a debtor-in-possession, certain of our activities are subject to review and ~~Capital~~approval ~~Resources:~~by the Bankruptcy Court, including, among other things, the incurrence of secured indebtedness, material asset dispositions, and other transactions outside the ordinary course of business. There can be no guarantee we will successfully agree upon a viable plan of reorganization with our various stakeholders or reach any such agreement in the time frame that is acceptable to the Bankruptcy Court. See Note 2 for additional information.

~~Our~~We ~~cash~~have ~~and~~entered ~~cash~~into ~~equivalents~~a new ~~were~~ $2150.90 million asDIP ofCredit ~~December~~Agreement with ~~30,~~Encina ~~2018~~which, ~~compared~~coupled towith ~~$99.4~~our ~~million~~normal ofoperating cash ~~and cash equivalents at December 31~~flows, ~~2017.~~is ~~Our~~providing ~~cash~~liquidity ~~balance~~for atMcClatchy ~~the end of 2017 reflected the receipt of sales proceeds from the sale or sale~~ and ~~leaseback~~all of ~~some of~~ our ~~buildings~~local ~~and~~news ~~land~~outlets ~~during~~to ~~2017,~~operate ~~the~~as ~~remaining~~usual ~~proceeds~~and ~~received~~fulfill ~~from~~ongoing ~~sale~~commitments ofto ~~a portion of our investment in CareerBuilder in the third quarter of 2017, and cash from operations~~stakeholders. ~~In January 2018 we~~

18 We have concluded that our financial condition and projected operating results, the minimum required contribution amounts to the Pension Plan, the defaults under our debt agreements subsequent to December 29, 2019, and the risks and uncertainties surrounding our Chapter 11 proceedings raise substantial doubt as to our ability to continue as a going

Table of Contents

~~used~~concern. As a ~~significant~~result ~~portion~~ of the ~~cash~~substantial ondoubt ~~hand~~about our ability to ~~redeem~~continue ~~$75.0~~as ~~million~~a ~~aggregate~~going ~~principal~~concern ~~amount~~for ofthe next twelve months, and the associated steps that have been undertaken to restructure our ~~2022~~balance ~~Notes~~sheet, asour ~~announced~~expected cash outflows related to interest payments on our debt in ~~December~~2020 ~~2017~~are difficult to predict at this time. We ~~repurchased~~expect anto ~~additional~~make ~~$20.0~~interest ~~million~~payments ~~aggregate~~under ~~principal~~the ~~amount~~DIP ofCredit Agreement and our ~~2022~~first ~~Notes~~lien notes during 2020 in ~~February~~accordance ~~2018,~~with ~~and~~the $5Bankruptcy Court order approving the DIP Credit Agreement but do not expect to make interest payments on our other notes.3 ~~million~~We ~~aggregate~~plan ~~principal~~to ~~amount~~fund ofour ongoing operations through available borrowings under our ~~2026~~DIP ~~Notes~~Credit inAgreement ~~December~~as ~~2018~~well as cash generated from operations.

~~For~~We ~~the~~are ~~foreseeable~~unable ~~future,~~to wepredict ~~expect~~when ~~that~~we ~~most~~will ofemerge ~~our~~from ~~cash~~Chapter ~~and~~11 ~~cash~~because ~~equivalents,~~it ~~and~~is ~~our~~contingent ~~cash~~upon ~~generated~~numerous ~~from~~factors, ~~operations~~many ~~will~~of bewhich ~~used~~are toout ~~(i)~~of ~~repay~~our ~~debt,~~control. ~~(ii)~~Major ~~pay~~factors ~~income~~include ~~taxes,~~obtaining ~~(iii)~~the ~~fund~~Bankruptcy ~~our~~Court’s ~~capital~~approval ~~expenditures,~~of ~~(iv)~~a ~~invest~~Chapter in11 ~~new~~plan ~~revenue~~of ~~initiatives~~reorganization, ~~digital~~which ~~investments~~will ~~and~~enable ~~enterprise-wide~~us ~~operating systems, (v) make required contributions~~ to ~~the~~transition ~~Pension~~from ~~Plan,~~Chapter ~~and~~11 ~~(vi)~~into ~~fund~~ordinary ~~other~~course ~~corporate~~operations ~~uses~~outside asof ~~determined~~bankruptcy. byWe ~~management~~also ~~and~~may ~~our~~need ~~Board~~to ofobtain ~~Directors.~~a Asnew ofcredit ~~December 30~~facility, ~~2018,~~or we“exit ~~had~~financing.” ~~approximately~~Our ~~$745.1~~ability ~~million~~to inobtain ~~total~~such ~~aggregate~~approval ~~principal~~and ~~amount~~financing ofwill ~~debt~~depend ~~outstanding~~on, ~~consisting~~among ofother ~~$304.7 million of our 2026 Notes~~things, ~~$89.9~~the ~~million~~timing ofand ~~our~~outcome ~~Debentures, $157.1 million~~ of ~~our~~various ~~Tranche~~ongoing Amatters ~~and~~related ~~$193.5~~to ~~million~~the ofChapter ~~our~~11 ~~2031~~Cases ~~Notes.~~as Aswell ofas ~~December~~the ~~30,~~general ~~2018,~~global weeconomic ~~were~~downturn ~~not~~due ~~permitted~~ to ~~incur~~the ~~additional~~recent ~~pari~~outbreak ~~passu~~of ~~obligations~~COVID-19. ~~under~~The ~~the~~plan ~~limitation~~of onreorganization ~~indebtedness~~will ~~incurrence~~determine ~~test~~the asrights ~~defined~~and insatisfaction ~~the~~of ~~2026~~claims ~~Notes~~of ~~Indenture.~~various ~~See~~creditors ~~Note~~and 5security holders, and ~~Recent~~is ~~Developments~~subject ~~above,~~to ~~regarding~~ the ~~transactions~~ultimate weoutcome ~~entered~~of ~~into~~negotiations inand ~~July~~Bankruptcy ~~2018~~Court ~~related~~decisions toongoing through the ~~restructuring~~date ~~and~~on ~~refinancing~~which ofsuch ~~certain~~plan ofis ~~our debt~~confirmed.

We ~~expect~~are toa ~~continue~~highly toleveraged ~~opportunistically~~company. ~~repurchase~~Our orprimary ~~restructure~~sources ~~our~~of ~~debt~~liquidity ~~from time to time if market conditions~~ are ~~favorable,~~cash ~~whether~~flows ~~through~~generated ~~privately negotiated repurchases of debt using cash~~ from operations, orand ~~other~~availability ~~types~~under ofour ~~tender~~DIP ~~offers~~Credit ~~or exchange offers or other means~~Agreement. WeSubsequent ~~may~~to ~~refinance~~and orduring ~~restructure~~pendency ~~a significant portion~~ of ~~this debt prior to~~ the ~~scheduled~~Chapter ~~maturity~~11 ~~of such debt. However~~Cases, we ~~may~~expect ~~not~~that beour ~~able~~primary toliquidity dorequirements ~~so on terms favorable to us or at all. We~~ will be ~~required~~ to ~~redeem~~fund ~~the~~operations ~~2026~~and ~~Notes~~make ~~from~~required ~~the~~payments ~~net~~under ~~cash~~our ~~proceeds~~DIP ofCredit ~~certain~~Agreement. ~~asset~~Our ~~dispositions~~ability ~~and~~to ~~from~~meet athe ~~portion~~requirements of our ~~excess~~DIP ~~cash~~Credit ~~flow~~Agreement ~~(as~~will ~~defined~~be independent ~~the~~on ~~2026 Notes Indenture). We believe that~~ our ~~cash~~ability ~~from~~to ~~operations~~generate is sufficient ~~to satisfy our liquidity needs over the next 12 months, while maintaining adequate~~ cash ~~and~~flows ~~cash~~from ~~equivalents to fund our~~ operations.

Based on current financial projections, we expect to be able to continue to generate cash flows from operations in amounts sufficient to fund our operations, satisfy our interest and principal payment obligations on our DIP Credit Agreement and pay administrative expenses including professional fees while under Chapter 11. However, should the Chapter 11 Cases take longer than anticipated or should our financial results be materially and negatively impacted by the coronavirus pandemic, we may be required to seek additional sources of liquidity. There can be no assurance that we will be able to obtain such liquidity on terms favorable to us, if at all.

At December 29, 2019, we had $703.3 million aggregate principal amount of outstanding debt consisting of $262.9 million of our 2026 Notes, $157.1 million of our Junior Term Loan, $268.4 million of our senior secured junior lien 2031 Notes and $14.9 million of our unsecured Debentures.

Pension Matters:

For our Pension Plan, the net retirement obligations in excess of the retirement plan assets were $526.3 million as of December 29, 2019. We will seek the Bankruptcy Court’s authority to terminate our Pension Plan, and appoint the PBGC as the plan’s trustee. Under a plan termination, the PBGC would continue to pay the Pension Plan participants their benefits, subject to federal statutory limits. Under current regulations, we believe that such a solution would not have an adverse impact on qualified pension benefits for substantially all plan participants.

Sources and Uses of Liquidity and Capital Resources:

Our cash and cash equivalents were $10.5 million as of December 29, 2019, compared to $21.9 million of cash and cash equivalents at December 30, 2018.

The following table summarizes our cash flows:

	Years Ended
	December 30,		December 31,
	December 29,		December 30,
(in thousands)	~~2018~~2019		~~2017~~2018
Cash flows provided by (used in)
Operating activities	$	25(6,~~919~~763)	$	1925,~~123~~919
Investing activities		~~(374)~~7,219		~~102,506~~(374)
Financing activities		(~~106~~13,~~344~~848)		(26106,~~523~~344)
Increase (decrease) in cash, cash equivalents and restricted cash	$	(8013,~~799~~392)	$	95(80,~~106~~799)

Table of Contents

Operating Activities:

We ~~generated~~ used $256.9 8 million of cash from operating activities in ~~2018,~~ 2019 compared to generating $1925.19 million of cash in ~~2017~~2018. The ~~change~~decrease in operating cash ~~generated~~flows ~~from~~reflects ~~operating~~a ~~activities~~contribution ~~was~~of ~~primarily~~$3.1 ~~due~~million to ~~the~~our ~~timing~~Pension ofPlan ~~collections~~in of2019 ~~accounts~~(no ~~receivable,~~contribution ~~which~~was ~~were~~made ~~higher~~in by2018), a $513.23 million change in our accounts payable balances and an $18.8 million change in our accrued interest balances in 2019 compared to the same period in 2018. This was partially offset by the timing of income tax payments ofin ~~accounts~~2019 ~~payable~~compared to 2018. In 2019, ~~which~~we ~~were~~had ~~lower~~net byincome tax payments of $107.65 million compared to net income tax payments of $13.9 million during the same period in 2018. The remaining changes in operating activities ~~related~~relate to miscellaneous timing differences in ~~other~~various ~~receipts~~payments and ~~payments or~~ receipts.

Pension Plan Matters

We made no cash contributions to the Pension Plan during 2018 and 2017. After applying credits, which resulted from contributing more than the Pension Plan’s minimum required contribution amounts in prior years, we did not have a required cash contribution for 2018. We expect to have a required pension contribution of approximately $3.0 million under the Employee Retirement Income Security Act in fiscal year 2019, and we expect to have material contributions in the future.

Investing Activities:

We ~~used~~ generated $07.42 million of cash from investing activities in ~~2018~~2019. We received proceeds from the sale of property, plant and equipment (“PP&E”) of $58.78 million and from the ~~sale~~redemption of antime ~~investment~~deposits of $52.30 million. These amounts were offset by the purchase of PP&E for $~~11.1 million, net purchases of and proceeds from redemptions of certificates of deposit, which net to a $~~2.37 million ~~use of cash~~ and contributions to equity investments of $20.58 million.

19We used $0.4 million of cash from investing activities in 2018. We received proceeds from the sale of PP&E of $5.7 million, from the sale of an investment of $5.3 million and from the net purchases of and proceeds from redemptions of certificates of deposit, which net to a $2.3 million source of cash. These amounts were offset by the purchase of PP&E for $11.1 million and contributions to equity investments of $2.5 million.

Table of Contents

We generated $102.5 million of cash from investing activities in 2017, which was primarily due to the sale of our interest in equity investments of $66.9 million and $7.3 million in distributions from our equity investments that exceeded the cumulative earnings from the investee and such amounts were considered a return of investment. We also sold property plan and equipment which generated $43.9 million of cash in 2017.

Financing Activities:

We used $~~106~~13.38 million of cash for financing activities in ~~2018, compared to using $26~~2019.5 ~~million 2017.~~ During ~~2018~~2019, we ~~repurchased or~~ redeemed $~~439~~41.68 million principal amount of our ~~2022~~2026 Notes ~~for~~at ~~$459~~par.5 ~~million~~See inNote ~~cash and incurred financing costs of $17.~~7 ~~million~~for ~~related~~further ~~to the refinancing of our debt~~discussion. ~~Those~~These ~~amounts~~redemptions were partially offset by ~~cash proceeds of $361.4 million for~~ the ~~issuance of~~ $~~310~~29.07 million principal amount of the 2026 Notes and $75.0 million principal amount of the Junior Term Loans (which represents the excess from the exchange of debt, as more fully described in Note 5). We also had an increase ~~of $15.7 million~~ in our ~~financing~~financial obligations as a result of the sale and leaseback of one of our real properties, as described in Recent Developments ~~previously~~.

We used $26106.53 million of cash ~~from~~for financing activities in ~~2017,~~ ~~primarily related to the repurchase of debt~~2018. During ~~2017~~2018, we repurchased ator ~~maturity~~redeemed ~~a total of~~ $16439.96 million principal amount of our ~~5.75%~~2022 Notes ~~due~~for $459.6 million in ~~2017~~cash, ~~and~~ we ~~repurchased or~~ redeemed $515.83 million principal amount of our ~~2022~~2026 Notes ~~for~~at anpar, ~~aggregate~~and incurred financing costs of $7017.7 million inrelated ~~cash~~to the refinancing of our debt. ~~These~~Those ~~repurchases~~amounts were ~~partially~~ offset by cash proceeds of $361.4 million for the issuance of $44310.0 million principal amount of the 2026 Notes and $75.0 million principal amount of the Junior Term Loans (which represents the excess from the exchange of debt, as more fully described in Note 7). We also had an increase of $15.7 million in our ~~financial~~financing obligations as a result of the sale and leaseback of one of our real properties.

Off‑Balance‑Sheet Arrangements

As of December 3029, ~~2018~~2019, we did not have any significant off‑balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S‑K.

Critical Accounting Policies

This MD&A is based upon our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. These estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We base our estimates and judgments on historical experience and on various other assumptions that we believe are reasonable under the circumstances. However, future events are subject to change and the best estimates and judgments routinely require adjustment. The most significant areas involving estimates and assumptions are amortization and/or impairment of goodwill and other intangibles, pension and post‑retirement expenses, and our accounting for income taxes. We believe the following critical accounting policies in particular, affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.

Goodwill Impairment:

Goodwill consists of the excess of cost of acquired enterprises over the sum of the amounts assigned to identifiable assets acquired less liabilities assumed. An impairment loss is recognized when the carrying amount of the reporting unit’s net assets exceed the estimated fair value of the reporting unit. We assess goodwill for impairment on an annual basis at a reporting unit level, and we have identified two reporting units. One reporting unit (“Western” reporting unit) consists of operations in our West and Central regions and the other reporting unit (“Eastern” reporting unit) consists of operations primarily in our Carolinas and East regions. Goodwill is assessed between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. These events or circumstances could include a significant change in the business climate, a change in strategic direction, legal factors, operating performance indicators, a change in the competitive environment, the sale or disposition of a significant portion of a reporting unit, or future economic factors such as unfavorable changes in our stock price and market capitalization or in the estimated future discounted cash flows of our reporting units. Our annual test is performed at our fiscal year end.

We test for goodwill impairment using an equal weighting of a market approach and an income approach. We used market multiples derived from a set of competitors or companies with comparable market characteristics to establish fair values for a reporting unit (market approach). We also estimate fair value using discounted projected cash flow analysis (income approach. This analysis requires significant judgments, including future cash flows, which is dependent on 23

Table of Contents

~~internal~~assets ~~forecasts,~~exceed the ~~long‑term~~estimated ~~rate~~fair value of ~~growth~~the ~~for~~reporting ~~our~~unit. ~~business,~~We ~~estimation~~assess ofgoodwill ~~the~~for ~~useful~~impairment ~~life~~on ~~over~~an ~~which~~annual ~~cash~~basis ~~flows~~at ~~will~~a ~~occur~~reporting unit level, and ~~determination~~we ofhave ~~our~~identified ~~weighted~~two ~~average~~reporting ~~cost~~units. ofOne ~~capital.~~reporting ~~Changes~~unit (“Western” reporting unit) consists of operations in ~~these~~California, ~~estimates~~Washington and ~~assumptions~~the ~~could~~Central ~~materially~~region ~~affect~~and the ~~determination~~other reporting unit (“Eastern” reporting unit) consists of ~~fair~~operations ~~value~~primarily in the Carolinas and ~~goodwill~~East ~~impairment~~and ~~for~~Southeast ~~each~~regions. Goodwill is assessed between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. InThese ~~addition,~~events ~~financial~~or ~~and~~circumstances ~~credit~~could ~~market~~include ~~volatility~~a ~~directly~~significant ~~impacts~~change ~~our~~in ~~fair~~the ~~value~~business ~~measurement~~climate, ~~through~~a ~~our~~change ~~weighted~~in ~~average~~strategic ~~cost~~direction, oflegal ~~capital~~factors, ~~used~~operating toperformance ~~determine~~indicators, ~~our~~a ~~discount~~change ~~rate~~in the competitive environment, ~~and~~the ~~through~~sale ~~our~~or ~~stock~~disposition ~~price~~of a significant portion of a reporting unit, ~~used~~or tofuture ~~determine~~economic factors such as unfavorable changes in our stock price and market capitalization. Weor ~~may~~in bethe ~~required~~estimated tofuture ~~recognize~~discounted ~~impairment~~cash flows of ~~goodwill~~our ~~based~~reporting onunits. ~~future~~Our ~~economic~~annual ~~factors~~test is performed at our fiscal year end.

AsWe test for goodwill impairment using an equal weighting of ~~December~~a ~~30,~~market ~~2018,~~approach ~~the~~and ~~amount~~an income approach. We used market multiples derived from a set of ~~goodwill~~competitors ~~allocated~~or companies with comparable market characteristics to ~~the~~establish ~~Eastern~~fair values for a reporting unit ~~was~~(market ~~$240~~approach).6 ~~million~~We ~~and~~also ~~the~~estimate ~~amount~~fair ~~allocated~~value tousing ~~the~~discounted ~~Western~~projected ~~reporting~~cash ~~unit~~flow ~~was~~analysis ~~$464.5~~(income ~~million~~approach. We This ~~performed~~analysis ~~the~~requires ~~annual~~significant ~~goodwill~~judgments, ~~impairment~~including ~~tests~~future ~~using~~cash aflows, ~~terminal~~which ~~growth~~is dependent on internal forecasts, the long‑term rate of ~~1.0%~~growth for our business, estimation of the useful life over which cash flows will occur, and adetermination ~~discount~~of ~~rate~~our weighted average cost of 10capital.5% ~~for~~Changes in these estimates and assumptions could materially affect the ~~income~~determination ~~approach~~of fair value and ~~comparable~~goodwill ~~market~~impairment ~~multiples~~for ~~from~~each ~~eight~~reporting ~~companies~~unit. In addition, financial and acredit ~~20%~~market ~~control~~volatility ~~premium~~directly impacts our fair value measurement through our weighted average cost of capital, used to ~~reflect~~determine ~~McClatchy’s~~our ~~two-tiered~~discount ~~ownership~~rate, ~~structure~~and asthrough ~~inputs~~our ~~for~~stock ~~the~~price, used to determine our market ~~approach~~capitalization. We may be required to recognize impairment of goodwill based on future economic factors.

~~The~~We ~~results~~performed ofinterim ~~the~~and annual goodwill impairment ~~test~~tests ~~for~~in ~~2018 indicated that an impairment was not required~~2019. ~~However,~~As ~~the risk of~~ a ~~future~~result ~~goodwill impairment for the Western reporting unit has increased. The fair value~~ of our ~~Eastern reporting unit exceeded the carrying value by 58.2%~~testing, ~~and~~we ~~the~~recorded ~~fair~~total ~~value~~impairment ofcharges ~~our Western reporting unit exceeded the carrying value by approximately 6.1%. Sensitivity analysis~~ of ~~the inputs to the indicated equity value of the Western reporting unit shows that decreasing the terminal growth rate or increasing the discount rate by 0~~$285.5%0 ~~reduces the excess of fair value over the carrying value to 4.2% and 2.8%~~million, ~~respectively. A reduction~~ of ~~the~~which ~~control~~a ~~premium~~majority bywas 5%recorded ~~would~~as ~~reduce the excess~~ of ~~fair value over~~ the ~~carrying~~third ~~value~~quarter of ~~the~~2019. No ~~Western~~goodwill ~~reporting~~impairments ~~unit~~were torecorded 4during 2018.~~2%.~~

NoAs of December 29, 2019, the amount of goodwill ~~impairments~~allocated ~~were~~to ~~recorded~~the ~~during~~Eastern ~~2017~~reporting unit was $174. 4 million and the amount allocated to the Western reporting unit was $245.8 million. We performed the annual goodwill impairment tests using a terminal growth rate of 0.0% and a discount rate of 9.6% for the income approach and comparable market multiples from seven companies as an input for the market approach.

After the impairments, the fair value of our Eastern reporting unit is equal to its carrying value and the fair value of our Western reporting unit exceeded its carrying value by approximately 3.1%. An increase of 50 basis points in the discount rate would result in an additional impairment charge of approximately $6.3 million in the Eastern reporting unit and an impairment charge of $0.3 million in the Western reporting unit.

Mastheads:

We performed interim and annual masthead impairment tests in ~~2018~~2019 and ~~2017~~2018. As a result of our testing, we recorded total impairment charges of $3749.29 million and $2137.52 million in ~~2018~~2019 and ~~2017~~2018, respectively.

Other Intangible Assets:

Long‑lived assets such as other intangible assets subject to amortization (primarily advertiser and subscriber lists) are tested for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. The carrying amount of each asset group is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use of such asset group. No impairment loss was recognized on intangible assets subject to amortization in ~~2018~~2019 or ~~2017~~2018.

Pension and Post‑Retirement Benefits:

We have significant pension and post‑retirement benefit costs and credits that are developed from actuarial valuations. Inherent in these valuations are key assumptions including discount rates and expected returns on plan assets. We are required to consider current market conditions, including changes in interest rates, in establishing these assumptions. Changes in the related pension and post‑retirement benefit costs or credits may occur in the future because of changes resulting from fluctuations in our employee headcount and/or changes in the various assumptions.

Current standards of accounting for defined benefit pension plans and post‑retirement benefit plans require recognition of (1) the funded status of a pension plan (difference between the plan assets at fair value and the projected benefit obligation) and (2) the funded status of a post‑retirement plan (difference between the plan assets at fair value and the accumulated benefit obligation), as an asset or liability on the balance sheet. At December 30, 2018 and December 31, 2017, we had a total pension and post-retirement obligation of $661.0 million and $602.1 million, respectively.24

We maintain a qualified defined benefit pension plan (“Pension Plan”), which covers certain eligible employees. Benefits are based on years of service that continue to count toward early retirement calculations and vesting previously earned. No new participants may enter the Pension Plan and no further benefits will accrue. For our Pension Plan, the net

Table of Contents

~~retirement~~Inherent ~~obligations~~ in ~~excess~~these ofvaluations ~~the~~are ~~retirement~~key ~~plan~~assumptions ~~assets~~including ~~were~~discount ~~$548.2~~rates ~~million~~ and ~~$476~~expected returns on plan assets.7 ~~million~~We asare ofrequired ~~December~~to ~~30,~~consider ~~2018~~current market conditions, ~~and~~including ~~December~~changes ~~31,~~in ~~2017~~interest rates, ~~respectively.~~in Weestablishing ~~used~~these aassumptions. ~~discount~~Changes ~~rate~~in ofthe ~~3.91%~~related pension and anpost‑retirement ~~assumed~~benefit ~~long‑term~~costs ~~return~~or oncredits ~~assets~~may occur in the future because of ~~7.75%~~changes toresulting ~~calculate~~from fluctuations in our ~~retirement~~employee ~~plan~~headcount ~~expenses~~and/or changes in ~~2018~~the various assumptions.

WeCurrent ~~also~~standards ~~have~~of aaccounting ~~limited~~for ~~number~~defined ofbenefit ~~supplemental~~pension plans and post-‑retirement benefit plans torequire ~~provide~~recognition ~~certain~~of ~~key~~(1) the ~~employees~~funded ~~and~~status ~~retirees~~of ~~with~~a ~~additional~~pension ~~retirement~~plan ~~benefits.~~(difference ~~These~~between ~~plans~~the ~~are~~plan ~~funded~~assets onat afair ~~pay‑as‑you‑go~~value ~~basis.~~and ~~For~~the ~~these~~projected ~~non‑qualified~~benefit ~~plans~~obligation) ~~that~~and do(2) the ~~not~~funded ~~have~~status ~~assets,~~of ~~the~~a post-‑retirement ~~obligations~~plan ~~were~~(difference ~~$112.8~~between ~~million~~the plan assets at fair value and ~~$125.4~~the ~~million~~accumulated benefit obligation), as ofan asset or liability on the balance sheet. At December 3029, ~~2018,~~2019 and December 3130, ~~2017~~2018, ~~respectively.~~we Wehad ~~used~~a ~~discount~~total ~~rates~~pension ofand ~~3.67%~~post-retirement toobligation 3of $645.~~89%~~5 tomillion ~~calculate~~and ~~our~~$661.0 ~~retirement~~million, ~~plan expenses in 2018~~respectively.

~~For~~We ~~2018~~maintain a Pension Plan, ~~for~~which covers certain eligible employees. Benefits are based on years of service that continue to count toward early retirement calculations and vesting previously earned. No new participants may enter the Pension Plan and no further benefits will accrue. For our Pension Plan, the ~~non-qualified~~net ~~post-~~retirement ~~plans~~obligations ~~combined~~in excess of the retirement plan assets were $526.3 million and $548.2 million as of December 29, 2019, and December 30, 2018, respectively. At December 29, 2019, we used a ~~change~~discount rate of 4.42% and an assumed long‑term return on assets of 7.75% to calculate our retirement plan expenses in ~~the~~2019. ~~weighted~~We ~~average~~also ~~rates~~performed ~~would~~a ~~have~~remeasurement ~~had~~on March 22, 2019, as a result of the ~~following~~Early ~~impact~~Retirement Incentive Program (see Note 9 for more information) and used a discount rate of 4.10% and an assumed long-term return on ~~our~~assets ~~net~~of ~~benefit~~7.75%. ~~cost:~~

· We Aalso ~~decrease~~have a limited number of 50supplemental ~~basis~~and ~~points~~post-retirement inplans ~~the~~to ~~long~~provide certain key employees and retirees with additional retirement benefits. These plans are funded on a pay‑~~term~~as‑you‑go ~~rate~~basis. ofFor ~~return~~these ~~would~~non‑qualified plans that do not have ~~increased~~assets, ~~our~~the ~~net~~post-retirement ~~benefit~~obligations ~~cost~~were by$119.2 ~~approximately~~million and $6112.8 million; as of December 29, 2019, and December 30, 2018, respectively. We used discount rates of 4.30% to 4.45% to calculate our retirement plan expenses in 2019. We used discount rates of 3.67% and 3.89% to calculate our retirement plan expenses in 2018.

For 2019, for the Pension Plan and the non-qualified post-retirement plans combined, a change in the weighted average rates would have had the following impact on our net benefit cost:

A decrease of 50 basis points in the long‑term rate of return would have increased our net benefit cost by approximately $6.4 million; and

A decrease of 25 basis points in the discount rate would have decreased our net benefit cost by approximately $0.3 million.

Income Taxes:

Our current and deferred income tax provisions are calculated based on estimates and assumptions that could differ from the actual results reflected in income tax returns filed during the subsequent year. These estimates are reviewed and adjusted, if needed, throughout the year. Adjustments between our estimates and the actual results of filed returns are recorded when identified.

The amount of income taxes paid is subject to periodic audits by federal and state taxing authorities, which may result in proposed assessments. These audits may challenge certain aspects of our tax positions such as the timing and amount of deductions and allocation of taxable income to the various tax jurisdictions. Income tax contingencies require significant judgment in estimating final outcomes. Actual results could materially differ from these estimates and could significantly affect the effective tax rate and cash flows in future periods.

We account for income taxes using the liability method. Under this method, deferred tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse.

~~During~~As ~~2018, we finalized the impacts~~ of ~~the~~December ~~Tax~~30, ~~Act~~2018, ~~and~~our ~~noted~~valuation noallowance ~~material~~against ~~adjustments~~a tomajority of our ~~previously~~deferred ~~recorded~~tax ~~balances~~assets ~~and~~was ~~results~~$143. ~~Additionally,~~8 wemillion. We reviewed the overall valuation allowance as of December 3029, ~~2018~~2019, and we determined that we needed to increase our valuation allowance by $3432.03 million ~~as a result of the changes to our deferred tax asset balances associated with the masthead and other intangible balances, tax amortizable goodwill and pension~~.

In 2017, we recorded a valuation allowance related to our deferred tax assets of $192.3 million. As a result of the Tax Act, principally the change that allows an indefinite carryforward period of net operating losses, we reassessed our analysis and decreased our related valuation allowance by $53.6 million during 2017. Due to the adjustments in ~~2018~~2019 noted above, our effective tax rate for ~~2018~~2019 is not comparable to the effective tax rate for ~~2017~~2018. See Note 68 for further discussion

The timing of recording or releasing a valuation allowance requires significant judgment. The development of these expectations involves the use of estimates such as operating profitability. The weight given to the evidence is commensurate with the extent to which it can be objectively verified. We will continue to maintain a valuation allowance against our deferred tax assets until sufficient positive evidence arises in future that provides an indication that all or a portion of the deferred tax assets meet the more likely than not standard that these assets will be realized in the future. If sufficient positive evidence, such as three-year cumulative pre-tax income, arises in the future that provides an indication that all or a portion of the deferred tax assets meet the more-likely-than-not standard, the valuation allowance may be reversed, in whole or in part, in the period that such determination is made. 25

Table of Contents

Recent Accounting Pronouncements

For information regarding the impact of certain recent accounting pronouncements, see Note 13.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this Item.

2326

Table of Contents

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Report of Independent Registered Public Accounting Firm		2528
Consolidated Statements of Operations		2729
Consolidated Statements of Comprehensive Income (Loss)		2830
Consolidated Balance Sheets		2931
Consolidated Statements of Cash Flows		3032
Consolidated Statements of Stockholders’ Equity (Deficit)		3133
Notes to Consolidated Financial Statements		3234

2427

Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors of The McClatchy Company:

~~Opinions~~Opinion on the Financial Statements ~~and Internal Control over Financial Reporting~~

We have audited the accompanying consolidated balance sheets of The McClatchy Company and subsidiaries (the “"Company”") as of December 3029, ~~2018~~2019 and December 3130, ~~2017~~2018, ~~and~~ the related consolidated statements of operations, comprehensive loss, stockholders' ~~equity (~~deficit), and cash flows, for each of the two years in the period ended December 3029, ~~2018~~2019, and the related notes (collectively referred to as the "financial statements"). WeIn ~~also~~our ~~have~~opinion, ~~audited~~ the ~~Company’s~~financial ~~internal~~statements ~~control~~present ~~over~~fairly, in all material respects, the financial ~~reporting~~position of the Company as of December 29, 2019 and December 30, 2018, ~~based~~and onthe ~~criteria~~results ~~established~~of inits ~~Internal~~operations ~~Control~~and —its ~~Integrated~~cash ~~Framework~~flows ~~(2013)~~for ~~issued~~each byof the ~~Committee~~two ofyears ~~Sponsoring~~in ~~Organizations~~the ofperiod ended December 29, 2019, in conformity with accounting principles generally accepted in the ~~Treadway~~United ~~Commission~~States ~~(COSO)~~of America.

InGoing our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 30, 2018 and December 31, 2017, and the results of its operations and its cash flows for each of the two years in the period ended December 30, 2018, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 30, 2018, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO. Concern

~~Basis~~The ~~for~~accompanying ~~Opinions~~financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Notes 1 and 2 to the financial statements, the Company’s financial condition and its projected operating results, contribution amounts required on its qualified defined benefit pension plan, the defaults under its debt agreements subsequent to December 29, 2019, and the risks and uncertainties surrounding its Chapter 11 Cases raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to this matter are also described in Notes 1 and 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

~~The~~Bankruptcy Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying “Management Report on Internal Control over Financial Reporting.” Our responsibility is to express an opinion on these financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.Proceedings

WeAs ~~conducted~~discussed ~~our~~in ~~audits~~Note in2 ~~accordance~~to ~~with~~the financial statements, the ~~standards~~Company has filed for reorganization under Chapter 11 of the ~~PCAOB~~U.S. ~~Those~~Bankruptcy ~~standards~~Code. ~~require~~The ~~that~~accompanying wefinancial ~~plan~~statements ~~and~~do ~~perform~~not ~~the~~purport ~~audits~~ to ~~obtain~~reflect ~~reasonable~~or ~~assurance~~provide ~~about~~for ~~whether~~the consequences of the bankruptcy proceedings. In particular, such financial statements ~~are~~do ~~free~~not ofpurport ~~material~~to ~~misstatement,~~show ~~whether~~(1) ~~due~~as to ~~error~~assets, their realizable value on a liquidation basis or ~~fraud~~their availability to satisfy liabilities; (2) as to prepetition liabilities, the settlement amounts for allowed claims, or the status and ~~whether~~priority ~~effective~~thereof; ~~internal~~(3) ~~control~~as ~~over~~to ~~financial~~stockholder ~~reporting~~accounts, ~~was~~the ~~maintained~~effect of any changes that may be made in ~~all~~the ~~material~~capitalization ~~respects.~~of the Company; or (4) as to operations, the effect of any changes that may be made in its business.

~~Our~~Basis audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for ~~our opinions.~~ Opinion

~~Definition~~These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and ~~Limitations~~are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of ~~Internal~~the ~~Control~~Securities ~~over~~and ~~Financial~~Exchange ~~Reporting~~Commission and the PCAOB.

AWe ~~company’s~~conducted ~~internal~~our ~~control~~audits ~~over~~in ~~financial~~accordance ~~reporting~~with ~~is a process designed to provide reasonable assurance regarding~~ the ~~reliability~~standards of ~~financial reporting and~~ the ~~preparation~~PCAOB. ofThose ~~financial~~standards ~~statements~~require ~~for~~that ~~external~~we ~~purposes~~plan inand ~~accordance~~perform ~~with~~the ~~generally~~audit ~~accepted~~to ~~accounting~~obtain ~~principles.~~reasonable Aassurance ~~company’s~~about ~~internal~~whether ~~control~~the ~~over~~ financial ~~reporting~~statements ~~includes~~are ~~those~~free ~~policies~~of ~~and~~material ~~procedures~~misstatement, ~~that~~whether ~~(1)~~due ~~pertain~~ to ~~the~~error ~~maintenance~~or offraud. ~~records~~The ~~that,~~Company inis ~~reasonable~~not ~~detail,~~required ~~accurately~~to ~~and~~have, ~~fairly~~nor ~~reflect~~were ~~the~~we ~~transactions~~engaged ~~and~~to ~~dispositions~~perform, ofan ~~the~~audit ~~assets~~ of ~~the~~its ~~company;~~internal ~~(2)~~control ~~provide~~over ~~reasonable~~financial ~~assurance~~reporting. ~~that~~As ~~transactions~~part ~~are recorded as necessary to permit preparation~~ of ~~financial~~our ~~statements~~audits, inwe ~~accordance~~are ~~with~~required ~~generally~~to ~~accepted~~obtain ~~accounting~~an ~~principles,~~understanding ~~and that receipts and expenditures~~ of ~~the~~internal ~~company~~control ~~are~~over ~~being~~financial ~~made~~reporting ~~only~~but innot ~~accordance~~for ~~with~~the ~~authorizations~~purpose of ~~management~~expressing ~~and~~an ~~directors~~opinion ofon the ~~company;~~effectiveness ~~and (3) provide reasonable assurance regarding prevention or timely detection~~ of ~~unauthorized acquisition, use, or disposition of~~ the ~~company~~Company’s ~~assets~~internal ~~that~~control ~~could~~over ~~have~~financial areporting. ~~material~~Accordingly, ~~effect~~we onexpress ~~the~~no ~~financial~~such ~~statements~~opinion.

25Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Table of Contents

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Deloitte & Touche LLP

Sacramento, California

March 830, ~~2019~~2020

We have served as the Company’s auditor since at least 1984; however, an earlier year could not be reliably determined.

2628

Table of Contents

THE MCCLATCHY COMPANY

CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands, except per share amounts)

	Years Ended
	December 30,		December 31,
	December 29,		December 30,
	2018		2017
	2019		2018
	(52 weeks)		(53 weeks)
REVENUES — NET:
Advertising	$	~~416~~337,~~720~~110	$	~~498~~416,~~639~~720
Audience		~~339~~321,~~506~~782		~~363~~339,~~497~~506
Other		5150,~~000~~624		4151,~~456~~000
		807,226		903,592
		709,516		807,226
OPERATING EXPENSES:
Compensation		~~298~~251,~~033~~677		~~338~~298,~~588~~033
Newsprint, supplements and printing expenses		5445,~~592~~617		6654,~~438~~592
Depreciation and amortization		7646,~~242~~021		8076,~~129~~242
Other operating expenses		~~364~~342,~~038~~631		~~352~~364,~~830~~038
Other asset write-downs		37,274		23,442
Goodwill and other asset write-downs (see Notes 3 and 6)		335,676		37,274
		830,179		861,427
		1,021,622		830,179
OPERATING INCOME (LOSS)		(22,953)		42,165
OPERATING LOSS		(312,106)		(22,953)
NON-OPERATING INCOME (EXPENSE):
Interest expense		(8178,~~397~~970)		(81,~~501~~397)
Interest income		640		558
Equity income (loss) in unconsolidated companies, net		(1,039)		592
Equity income (loss) in unconsolidated companies, net		592		(1,698)
Gains related to investments in unconsolidated companies		—		1,721
Impairments related to investments in unconsolidated companies, net		—		(170,007)
Gain (loss) on extinguishment of debt, net		(2,272)		30,577
Gains related to investments in unconsolidated companies		1,721		—
Retirement benefit expense		(23,715)		(11,114)
Gain (loss) on extinguishment of debt, net		30,577		(2,700)
Other — net		716		647
Retirement benefit expense		(11,114)		(13,404)
		(105,280)		(58,974)
Other — net		7		(312)
Loss before income taxes		(417,386)		(81,927)
		(58,974)		(269,064)
Income tax benefit		(6,279)		(2,170)
Loss before income taxes		(81,927)		(226,899)
NET LOSS	$	(411,107)	$	(79,757)
Income tax (benefit) expense		(2,170)		105,459
NET LOSS	$	(79,757)	$	(332,358)
Net loss per common share:
Basic	$	(1051.2797)	$	(4310.5527)
Diluted	$	(1051.2797)	$	(4310.5527)
Weighted average number of common shares:
Basic		7,~~768~~911		7,~~632~~768
Diluted		7,~~768~~911		7,~~632~~768

See notes to consolidated financial statements.

2729

Table of Contents

THE MCCLATCHY COMPANY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Amounts in thousands)

	Years Ended
	December 30,		December 31,
	December 29,		December 30,
	2018		2017
	2019		2018
	(52 weeks)		(53 weeks)
NET LOSS	$	(411,107)	$	(79,757)
NET LOSS	$	(79,757)	$	(332,358)
OTHER COMPREHENSIVE INCOME (LOSS):
Pension and post retirement plans: (1)
Change in pension and post-retirement benefit plans		~~(56~~28,~~530)~~150		8(56,~~100~~530)
Investment in unconsolidated companies: (1)
Other comprehensive income (loss)		28,150		(56,530)
Other comprehensive income (loss)		—		4,046
Comprehensive loss	$	(382,957)	$	(136,287)
Other comprehensive income (loss)		(56,530)		12,146
Comprehensive loss	$	(136,287)	$	(320,212)

_____________________

(1) There is no income tax benefit associated with the years ended December 3029, ~~2018~~2019 and December 3130, ~~2017~~2018, due to the recognition of a valuation allowance.

See notes to consolidated financial statements.

2830

Table of Contents

THE MCCLATCHY COMPANY

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except share and per share amounts)

	December 30,		December 31,
	December 29,		December 30,
	2018		2017
	2019		2018
ASSETS
Current assets:
Cash and cash equivalents	$	2110,~~906~~514	$	9921,~~387~~906
Trade receivables (net of allowances of $3,008 and $3,225)		81,709		101,081
Trade receivables (net of allowances of $1,754 and $3,008)		56,096		81,709
Other receivables		128,~~198~~348		1112,~~556~~198
Newsprint, ink and other inventories		95,~~115~~297		79,~~918~~115
Assets held for sale		914,~~920~~170		69,~~332~~920
Other current assets		1520,~~505~~087		1915,~~000~~505
		150,353		245,274
		114,512		150,353
Property, plant and equipment, net		~~233~~203,~~692~~575		~~257~~233,~~639~~692
Intangible assets:
Identifiable intangibles — net		~~143~~69,~~347~~253		~~228~~143,~~222~~347
Goodwill		~~705~~420,~~174~~178		705,174
		848,521		933,396
		489,431		848,521
Investments and other assets:
Investments in unconsolidated companies		32,~~888~~726		73,~~172~~888
Other assets		58,847		62,437
Operating lease right-of-use assets		45,128		—
		62,735		69,609
Other assets		55,883		58,847
	$	1,295,301	$	1,505,918
		103,737		62,735
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
	$	911,255	$	1,295,301
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Current portion of long-term debt	$	~~4,312~~—	$	744,~~140~~312
Accounts payable		3729,~~521~~758		3137,~~856~~521
Accrued pension liabilities		11124,~~510~~200		811,~~941~~510
Accrued compensation		2018,~~481~~932		2420,~~050~~481
Income taxes payable		~~6,535~~—		106,~~133~~535
Unearned revenue		5855,~~340~~155		6058,~~436~~340
Accrued interest		2625,~~037~~307		726,~~954~~037
Financing obligation, current		10,417		9,143
Financing obligation		13,027		10,417
Other accrued liabilities		5,385		9,689
Current portion of operating lease liabilities		8,105		—
		180,538		236,342
Other accrued liabilities		5,146		5,385
		279,630		180,538
Non-current liabilities:
Long-term debt		~~633~~607,~~383~~672		~~707~~633,~~252~~383
Deferred income taxes		2015,~~775~~027		2820,~~062~~775
Pension and postretirement obligations		~~655~~526,~~310~~010		~~599~~655,~~763~~310
Financing obligations		~~108~~132,~~252~~278		91108,~~905~~252
Other long-term obligations		38,708		46,926
Operating lease liabilities		46,733		—
		1,456,428		1,473,908
Other long-term obligations		27,361		38,708
		1,355,081		1,456,428
Commitments and contingencies
Stockholders’ equity (deficit):
Stockholders’ deficit:
Common stock $.01 par value:
Class A (authorized 200,000,000 shares, issued 5,384,303 shares and 5,256,325 shares)		53		52
Class A (authorized 200,000,000 shares, issued 5,506,030 shares and 5,384,303 shares)		55		53
Class B (authorized 60,000,000 shares, issued 2,428,191 shares and 2,443,191 shares)		24		24
Class B (authorized 60,000,000 shares, issued 2,428,191 shares and 2,428,191 shares)		24		24
Additional paid-in-capital		2,~~216~~217,~~681~~823		2,~~215~~216,~~109~~681
Accumulated deficit		(12,~~954~~365,~~132~~216)		(1,~~970~~954,~~097~~132)
Treasury stock at cost, 252 shares and 3,157 shares		(2)		(51)
Treasury stock at cost, 608 shares and 252 shares		(3)		(2)
Accumulated other comprehensive loss		(~~604~~576,~~289~~139)		(~~449~~604,~~369~~289)
		(341,665)		(204,332)
		(723,456)		(341,665)
	$	1911,~~295,301~~255	$	1,~~505~~295,~~918~~301

See notes to consolidated financial statements.

2931

Table of Contents

THE MCCLATCHY COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

	Years Ended
	December 30,		December 31,
	December 29,		December 30,
	2018		2017
	2019		2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(79411,~~757~~107)	$	(~~332~~79,~~358~~757)
Reconciliation to net cash provided by (used in) operating activities:
Depreciation and amortization		7646,~~242~~021		8076,~~129~~242
Gain on disposal of property and equipment (excluding other asset write-downs)		(42,~~092~~554)		(234,~~590~~092)
Retirement benefit expense		11,114		13,404
Contribution to qualified defined benefit pension plan		(3,088)		—
Stock-based compensation expense		2,057		2,475
Retirement benefit expense		23,715		11,114
Deferred income taxes		(7,287)		86,400
Stock-based compensation expense		1,504		2,057
Equity (income) loss in unconsolidated companies		(592)		1,698
Deferred income taxes		(5,748)		(7,287)
Gains related to investments in unconsolidated companies		(1,721)		—
Equity (income) loss in unconsolidated companies		1,039		(592)
Impairments related to investments in unconsolidated companies, net		—		170,007
Gains related to investments in unconsolidated companies		—		(1,721)
Distributions of income from investments in unconsolidated companies		21,~~876~~295		—2,876
(Gain) loss on extinguishment of debt, net		~~(30~~2,~~577)~~272		2(30,~~700~~577)
Other asset write-downs		37,274		23,442
Goodwill and other asset write-downs		335,676		37,274
Bond fees and other debt-related items		6,215		3,243
Amortization of bond fees and other debt-related items		9,980		6,215
Other		(5,755)		(9,468)
Noncash lease expense		6,449		—
Other		80		3,766
Changes in certain assets and liabilities:
Trade receivables		1625,~~704~~613		1116,~~502~~704
Inventories		(13,~~197)~~818		4(1,~~064~~197)
Other assets		(2,~~475~~598)		~~(605)~~2,475
Accounts payable		5(7,~~665~~637)		(45,~~966)~~665
Accrued compensation		(31,~~577~~326)		(13,~~472~~577)
Income taxes		(36,~~058~~419)		2(3,~~211~~058)
Accrued interest		~~18,083~~(730)		~~(648)~~18,083
Other liabilities		(15,173)		(9,045)
Postretirement obligations and other liabilities		(23,018)		(24,694)
Net cash provided by operating activities		25,919		19,123
Net cash provided by (used in) operating activities		(6,763)		25,919
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment		(112,~~120~~729)		(11,~~114~~120)
Proceeds from sale of property, plant and equipment and other		58,~~679~~773		435,~~944~~679
Purchase of certificates of deposit		~~(28,651)~~—		(428,~~040~~651)
Proceeds from redemption of certificates of deposit		302,~~957~~000		330,~~433~~957
Distributions from equity investments		—		7,318
Contributions to cost and equity investments		(825)		(2,540)
Contributions to cost and equity investments		(2,540)		(3,937)
Proceeds from sale of unconsolidated companies and other-net		—		5,301
Proceeds from sale of unconsolidated companies and other-net		5,301		66,913
Net cash provided by (used in) investing activities		7,219		(374)
Other-net		—		(11)
Net cash provided by (used in) investing activities		(374)		102,506
CASH FLOWS FROM FINANCING ACTIVITIES:
Repurchase of notes and related expenses		(~~464~~41,~~870~~873)		(70464,~~715~~870)
Proceeds from issuance of debt		~~361,449~~—		—361,449
Payment of financing costs		(~~17,684~~28)		—(17,684)
Proceeds from sale-leaseback financing obligations		1529,~~749~~743		4315,~~971~~749
Purchase of treasury shares		(~~436~~361)		(~~508~~436)
Other		(~~552~~1,329)		~~729~~(552)
Net cash used in financing activities		(~~106~~13,~~344~~848)		(26106,~~523~~344)
Increase (decrease) in cash, cash equivalents and restricted cash		(80,799)		95,106
Decrease in cash, cash equivalents and restricted cash		(13,392)		(80,799)
Cash, cash equivalents and restricted cash at beginning of period		~~131~~50,~~354~~555		36131,~~248~~354
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD	$	5037,~~555~~163	$	~~131~~50,~~354~~555

See notes to consolidated financial statements.

3032

Table of Contents

THE MCCLATCHY COMPANY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ ~~EQUITY (~~ DEFICIT)

(Amounts in thousands, except share and per share amounts)

	Common Stock								Accumulated
	Class A		Class B		Additional				Other
	$.01 par		$.01 par		Paid-In		Accumulated		Comprehensive		Treasury
	value		value		Capital		Deficit		Income (Loss)		Stock		Total
Balance at December 25, 2016	$	51	$	24	$	2,213,098	$	(1,637,739)	$	(461,515)	$	(6)	$	113,913
Balance at December 31, 2017	$	52	$	24	$	2,215,109	$	(1,970,097)	$	(449,369)	$	(51)	$	(204,332)
Net loss		—		—		—		(332,358)		—		—		(332,358)
Cumulative effect adjustment of Topic 606		—		—		—		(2,668)		—		—		(2,668)
Other comprehensive income		—		—		—		—		12,146		—		12,146
Net loss		—		—		—		(79,757)		—		—		(79,757)
Issuance of 172,781 Class A shares under stock plans		2		—		(2)		—		—		—		—
Other comprehensive income		—		—		—		—		(56,530)		—		(56,530)
Stock compensation expense		—		—		2,475		—		—		—		2,475
Conversion of 15,000 Class B shares to Class A shares		—		—		—		—		—		—		—
Purchase of 51,996 shares of treasury stock		—		—		—		—		—		(508)		(508)
Issuance of 162,824 Class A shares under stock plans		2		—		(1)		—		—		—		1
Retirement of 48,873 shares of treasury stock		(1)		—		(462)		—		—		463		—
Stock compensation expense		—		—		2,057		—		—		—		2,057
Balance at December 31, 2017		52		24		2,215,109		(1,970,097)		(449,369)		(51)		(204,332)
Purchase of 46,941 shares of treasury stock		—		—		—		—		—		(436)		(436)
Cumulative effect adjustment of Topic 606		—		—		—		(2,668)		—		—		(2,668)
Retirement of 49,846 shares of treasury stock		(1)		—		(484)		—		—		485		—
Net loss		—		—		—		(79,757)		—		—		(79,757)
Reclassification of accumulated other comprehensive income (loss) tax effects		—		—		—		98,390		(98,390)		—		—
Other comprehensive income		—		—		—		—		(56,530)		—		(56,530)
Balance at December 30, 2018	$	53	$	24	$	2,216,681	$	(1,954,132)	$	(604,289)	$	(2)	$	(341,665)
Issuance of 162,824 Class A shares under stock plans		2		—		(1)		—		—		—		1
Cumulative effect adjustment of Topic 842		—		—		—		23		—		—		23
Stock compensation expense		—		—		2,057		—		—		—		2,057
Net loss		—		—		—		(411,107)		—		—		(411,107)
Purchase of 46,941 shares of treasury stock		—		—		—		—		—		(436)		(436)
Other comprehensive income		—		—		—		—		28,150		—		28,150
Retirement of 49,846 shares of treasury stock		(1)		—		(484)		—		—		485		—
Issuance of 182,635 Class A shares under stock plans		3		—		(3)		—		—		—		—
Reclassification of accumulated other comprehensive income (loss) tax effects		—		—		—		98,390		(98,390)		—		—
Stock compensation expense		—		—		1,504		—		—		—		1,504
Balance at December 30, 2018	$	53	$	24	$	2,216,681	$	(1,954,132)	$	(604,289)	$	(2)	$	(341,665)
Purchase of 61,264 shares of treasury stock		—		—		—		—		—		(361)		(361)
Retirement of 60,908 shares of treasury stock		(1)		—		(359)		—		—		360		—
Balance at December 29, 2019	$	55	$	24	$	2,217,823	$	(2,365,216)	$	(576,139)	$	(3)	$	(723,456)

See notes to consolidated financial statements.

3133

Table of Contents

THE MCCLATCHY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 3029, ~~2018~~2019 AND DECEMBER 3130, ~~2017~~2018

1. ~~SIGNIFICANT~~ BUSINESS ~~ACCOUNTING~~AND ~~POLICIES~~BASIS OF ACCOUNTING

The McClatchy Company (the “Company,” “we,” “us” or “our”) provides strong, independent local journalism to 30 communities with operations in 14 states, as well as selected national news coverage through our Washington D.C. based bureau. We also provide a full suite of digital marketing services, both through our local sales teams based in the communities we serve, as well as through excelerate®, our national digital marketing agency. We are a publisher of brands such as the Miami Herald, The Kansas City Star, The Sacramento Bee, The Charlotte Observer, The (Raleigh) News & Observer, and the (Fort Worth) Star-Telegram. We are headquartered in Sacramento, California~~, and our Class A Common Stock is listed on the NYSE American under the symbol MNI~~.

Our fiscal year ends on the last Sunday in December in each calendar year. The fiscal ~~year~~years ended December 3029, ~~2018~~2019, ~~consisted~~and ~~of a 52-week period. The fiscal year ended~~ December 3130, ~~2017~~2018, consisted of ~~a 53~~ 52-week ~~period~~periods.

Preparation of the financial statements in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”) and pursuant to the rules and regulation of the Securities and Exchange Commission (“SEC”) requires management to make estimates and assumptions that affect the reported amounts of 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 materially from those estimates. The consolidated financial statements include the Company and our subsidiaries. Intercompany items and transactions are eliminated.

Reclassifications

Certain amounts in the accompanying consolidated statement of cash flows for the year ended December 30, 2018, have been reclassified to conform to the year ended December 29, 2019, presentation.

Going Concern

We have concluded our financial condition and our projected operating results, contribution amounts required on our qualified defined benefit pension plan (“Pension Plan”) (as described below), the defaults under our debt agreements subsequent to December 29, 2019, and the risks and uncertainties surrounding our Chapter 11 Cases (see Note 2) raise substantial doubt as to our ability to continue as a going concern.

As of December 29, 2019, we faced liquidity challenges relating to the minimum required contributions in fiscal year 2020 to our Pension Plan. These required contributions were estimated to be approximately $124.2 million, which would be paid in installments beginning in January 2020 with the majority of those payments due on or subsequent to September 15, 2020. At December 29, 2019, we had $703.3 million aggregate principal amount of outstanding debt consisting of $262.9 million of our Senior Secured Notes due 2026 (“2026 Notes” or “First Lien Notes”), $157.1 million of our Junior Term Loan, $268.4 million of our senior secured junior lien 2031 Notes and $14.9 million of our Debentures.

In January 2020, we entered into a Standstill Agreement with the Pension Benefit Guaranty Corporation (“PBGC”), pursuant to which the PBGC agreed not to exercise the remedies available to it as a result of our not making the scheduled qualified pension contribution of $4.0 million due in January 2020. The payment obligations to the PBGC were further stayed when we filed for reorganization under Chapter 11 in February 2020.

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

NYSE American Continued Listing Status

Our Class A Common Stock was previously listed on the NYSE American under the symbol MNI. On February 13, 2020, the NYSE American suspended the trading of our Class A Common Stock upon our filing the Chapter 11 petitions, and our Class A Common Stock has been quoted “over-the-counter” on the OTC Pink Market, operated by OTC Markets Group, under the symbol MNIQQ. On February 21, 2020, the NYSE American filed a Form 25 with the SEC to delist our Class A Common Stock from the NYSE American. The delisting was effective 10 days after the Form 25 was filed. The deregistration of the Common Stock under Section 12(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), will become effective 90 days after the filing date of the Form 25.

Table of Contents

THE MCCLATCHY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 29, 2019 AND DECEMBER 30, 2018

Coronavirus (COVID-19) Pandemic

Subsequent to December 29, 2019, the World Health Organization declared that the recent coronavirus disease 2019 (“COVID-19”) outbreak was a global health emergency and then in March 2020, they raised the COVID-19 outbreak to “pandemic” status. The transmission of COVID-19 and efforts to contain its spread have resulted in international, national and local border closings and other significant travel restrictions and disruptions, significant disruptions to business operations, supply chains and customer activity, event cancellations and restrictions, service cancellations, reductions and other changes, significant challenges in healthcare service preparation and delivery, quarantines and related government actions and policies, as well as general concern and uncertainty that has negatively affected the economic environment. We are unable to predict the duration or extent of the business disruption, or any potential financial impact. We have concluded that the COVID-19 outbreak has negatively impacted the collectability of our accounts receivables outstanding as of December 29, 2019; however, we estimate this impact to be immaterial.

2. CHAPTER 11 BANKRUPTCY FILING (Subsequent Event)

Bankruptcy Petitions

On February 13, 2020 (“Petition Date”), McClatchy and each of our 53 wholly owned subsidiaries filed voluntary petitions (“Chapter 11 Cases”) for reorganization under Chapter 11 of the U.S. Bankruptcy Code (“Bankruptcy Code”) in the U.S. Bankruptcy Court for the Southern District of New York (“Bankruptcy Court”). The Chapter 11 Cases are being jointly administered under the caption In re: The McClatchy Company, et al., Case No. 20-10418.

Operation and Implications of the Bankruptcy Filing

We and our 30 local media companies will continue to operate our businesses as “debtors-in-possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. We intend to continue to operate our businesses in the ordinary course during the pendency of the Chapter 11 Cases.

Debtor-In-Possession Financing

To ensure sufficient liquidity throughout the Chapter 11 Cases, we have obtained new $50.0 million debtor-in-possession financing under a credit agreement (“DIP Credit Agreement”) from Encina Business Credit, LLC (“Encina”). This DIP Credit Agreement, coupled with our normal operating cash flows, is providing liquidity for McClatchy and all of our local news outlets to operate as usual and fulfill ongoing commitments to stakeholders.

Table of Contents

THE MCCLATCHY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 29, 2019 AND DECEMBER 30, 2018

DIP Facility will be guaranteed by all of our assets, whether now existing or hereafter acquired. The scheduled maturity date of the DIP Facility will be the eighteen-month anniversary following the Closing Date (as defined in the DIP Credit Agreement).

Ongoing Negotiations on Proposed Plan of Reorganization

The Chapter 11 Cases provides immediate protection to the Company, which will continue to operate in the ordinary course of business as it pursues approval of a proposed restructuring plan with its secured lenders, bondholders, and the Pension Benefit Guaranty Corporation (“PBGC”). We have included lenders holding approximately 87% of our First Lien Notes in these confidential discussions.

In summary, our proposed plan of reorganization, which has been submitted to creditors for approval, provides:

Our existing First Lien Notes will be exchanged for new first lien notes in an amount not more than a principal balance of $217.9M, secured by the same collateral, having the same maturity and accruing interest at a rate of 10% per annum;

Our largest holder of secured debt, including First Lien Notes, the loans made under our Junior Lien Term Loan Credit Agreement dated as of July 16, 2018 (“Second Lien Term Loans”), and the 6.875% Senior Secured Junior Lien Notes due 2031 (“Third Lien Notes”) will receive $81.0 million of secured debt subordinate to the new first lien notes in exchange for a portion of its existing First Lien Notes and a commitment to provide us with $30.0 million of exit financing (such subordinated debt to accrue payment-in-kind interest of 12.5% or cash-pay interest of 10%, depending on our ratio of leverage to adjusted EBITDA);

Our existing Second Lien Term Loans and Third Lien Notes will be extinguished in exchange for 97% of the equity ownership of the Company, subject to dilution for management incentives and certain warrants for up to 2.5% of the equity ownership of the Company;

Certain creditors who are no longer part of our go-forward operations will share, pro rata, in a pool of $3 million or warrants to acquire up to 2.5% of the equity ownership of the Company;

Our existing Class A and Class B Common Stock will be cancelled; and

We will seek the Bankruptcy Court’s authority to terminate our Pension Plan and appoint the PBGC as the plan’s trustee. Under a plan termination, the PBGC would continue to pay the Pension Plan participants their benefits, subject to federal statutory limits. Under current regulations, we believe that such a solution would not have an adverse impact on qualified pension benefits for substantially all plan participants. We have proposed to settle our liabilities in connection with the Pension Plan by paying the PBGC $3.3 million each year for ten years and 3% of the equity ownership of the Company.

The terms of the plan described above represent our good faith proposal to restructure our existing obligations. As previously announced, we have been negotiating such proposals with our largest stakeholders for some time. Certain issues, summarized below, represent the most recent bargaining position of certain of those parties.

First, while the PBGC has not indicated that it disputes that the Pension Plan satisfies the standards for termination, the PBGC has requested a materially larger stream of cash payments over ten years and a materially

Table of Contents

THE MCCLATCHY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 29, 2019 AND DECEMBER 30, 2018

larger percentage of equity ownership in the Company in settlement of the PBGC’s claims relating to termination of the qualified pension plan; and

Second, the parties continue to negotiate the final details surrounding governance and senior management.

Confirmation of a plan of reorganization could materially alter the classifications and amounts reported in our consolidated financial statements. The financial statements as of and for the year ended December 29, 2019, do not give effect to any adjustments to the carrying values of assets or amounts of liabilities that might be necessary as a consequence of confirmation of a plan of reorganization or other arrangement, or the effect of any operational changes that may be implemented.

3. SIGNIFICANT ACCOUNTING POLICIES

Fair value of financial instruments

We account for certain assets and liabilities at fair value. The hierarchy below lists three levels of fair value based on the extent to which inputs used in measuring fair value are observable in the market. We categorize each of our fair value measurements in one of these three levels based on the lowest level input that is significant to the fair value measurement in its entirety. These levels are:


Level 1	—	Unadjusted quoted prices available in active markets for identical investments as of the reporting date.
Level 2	—	Observable inputs to the valuation methodology are other than Level 1 inputs and are either directly or indirectly observable as of the reporting date and fair value can be determined through the use of models or other valuation methodologies.
Level 3	—	Inputs to the valuation methodology are unobservable inputs in situations where there is little or no market activity for the asset or liability, and the reporting entity makes estimates and assumptions related to the pricing of the asset or liability including assumptions regarding risk.

Our policy is to recognize significant transfers between levels at the actual date of the event or circumstance that caused the transfer. During 2018, as a result of the refinancing transactions discussed in Note 7, we transferred our Debentures (as defined in Note 7) from Level 2 to Level 3 in the fair value hierarchy. No similar transactions occurred in 2019.

The following methods and assumptions were used to estimate the fair value of each class of financial instruments:

Cash and cash equivalents, accounts receivable and accounts payable. As of December 29, 2019, and December 30, 2018, the carrying amount of these items approximates fair value because of the short maturity of these financial instruments.

Long‑term debt. At December 29, 2019 the carrying value and the estimated fair value of our 2026 Notes (as defined in Note 7) was $249.8 million and $240.5 million, respectively. As of December 30, 2018, the carrying value and the estimated fair value of the 2026 Notes was $287.2 million and $302.4 million, respectively. The fair value of our 2026 Notes as described above was determined using quoted market prices. These are considered to be Level 2 inputs under the fair value measurements and disclosure guidance and may not be representative of actual value.

At December 29, 2019, the carrying value and the estimated fair value of our Debentures, Junior Term Loan and 2031 Notes (as defined in Note 7), was $357.9 million and $213.3 million, respectively. At December 30, 2018, the carrying value and the estimated fair value of our Debentures, Junior Term Loan and 2031 Notes, was $350.4 million and $296.5 million, respectively. Market evidence was not available or reliable to value our Debentures, Junior Term Loan and 2031 Notes. The fair value was based on the net present value of the future cash flows using interest rates derived from market inputs and a Treasury yield curve in effect at December 29, 2019. These are considered to be Level 3 inputs under the fair value measurements and disclosure guidance and may not be representative of actual value.

Table of Contents

THE MCCLATCHY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 29, 2019 AND DECEMBER 30, 2018

Pension plan. As of December 29, 2019, and December 30, 2018, we had assets related to our Pension Plan measured at fair value. The required disclosures, including assets valued with Level 3 inputs, are presented in Note 9.

Certain assets are measured at fair value on a nonrecurring basis; that is, they are subject to fair value adjustments only in certain circumstances (for example, when there is evidence of impairment). Our non‑financial assets that are measured at fair value on a nonrecurring basis are assets held for sale, goodwill, intangible assets not subject to amortization and cost or equity method investments. All of these are measured using Level 3 inputs. We utilize valuation techniques that seek to maximize the use of observable inputs and minimize the use of unobservable inputs. The significant unobservable inputs include, but are not limited to, the expected cash flows and the discount rates that we estimate market participants would seek for bearing the risk associated with such assets. See goodwill and intangible asset discussion below regarding valuation inputs and impairments recorded during 2019. We incurred impairment charges during 2018 on our newspaper masthead intangible assets. See below in Note 3 and Note 6 for further information.

Revenue recognition

We recognize revenues when control of the promised goods is transferred to our customers or when the services are performed, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. All revenue recognized on the consolidated statements of operations are the result of contracts with customers, except for revenues associated with lease income where we are the lessor through a sublease arrangement, as these are outside the scope of Topic 606. ~~Also~~ ~~see~~See Note 24.

Concentrations of credit risks

Financial instruments, which potentially subject us 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. As of December 3029, ~~2018~~2019, substantially all of our cash and cash equivalents are in excess of the FDIC insured limits. We have not experienced any losses related to amounts in excess of FDIC limits. We routinely assess the financial strength of significant customers and this assessment, combined with the large number and geographic diversity of our customers, limits our concentration of risk with respect to trade accounts receivable.

Allowance for doubtful accounts

We maintain an allowance account for estimated losses resulting from the risk that our customers will not make required payments. At certain of our media companies, we establish our allowances based on collection experience, aging of our receivables and significant individual account credit risk. At the remaining media companies, we use the aging of accounts receivable, reserving for all accounts due 90 days or longer, to establish allowances for losses on accounts receivable; however, if we become aware that the financial condition of specific customers has deteriorated, additional allowances are provided.

We provide an allowance for doubtful accounts as follows:

	Years Ended
	December 30,		December 31,
	December 29,		December 30,
(in thousands)	~~2018~~2019		~~2017~~2018
Balance at beginning of year	$	3,~~225~~008	$	3,~~254~~225
Charged to costs and expenses		87,~~995~~134		108,~~870~~995
Amounts written off		(98,~~212~~388)		(109,~~899~~212)
Balance at end of year	$	31,~~008~~754	$	3,~~225~~008

3238

Table of Contents

THE MCCLATCHY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 3029, ~~2018~~2019 AND DECEMBER 3130, ~~2017~~2018

Newsprint, ink and other inventories

Newsprint, ink and other inventories are stated at the lower of cost (based principally on the first‑in, first‑out method) and net realizable value. ~~During 2017, we recorded a $2.0 million write‑down of non-newsprint inventory, which was reflected in the other asset write-downs line on our consolidated statement of operations.~~ There ~~were~~have been no ~~similar~~ write-downs of newsprint, ink or other inventories during 2019 or 2018.

Property, plant and equipment

Property, plant and equipment (“PP&E”) are recorded at cost. Additions and substantial improvements, as well as interest expense incurred during construction, are capitalized. Capitalized interest was not material in ~~2018~~2019 or ~~2017~~2018. Expenditures for maintenance and repairs are charged to expense as incurred. When PP&E is sold or retired, the asset and related accumulated depreciation are removed from the accounts and the associated gain or loss is recognized.

Property, plant and equipment consisted of the following:

December 30,

December 31,

Estimated

December 29,

December 30,

Estimated

(in thousands)

~~2018~~2019

~~2017~~2018

Useful Lives

Land

3227,~~335~~869

3632,~~491~~335

Building and improvements

~~268~~245,~~157~~748

~~289~~268,~~574~~157

years

Equipment

~~506~~462,~~307~~449

~~555~~506,~~204~~307

years

(1)

Construction in process

~~1,890~~324

21,~~696~~890

808,689

883,965

736,390

808,689

Less accumulated depreciation

(~~574~~532,~~997~~815)

(~~626~~574,~~326~~997)

Property, plant and equipment, net

~~233~~203,~~692~~575

~~257~~233,~~639~~692

⁽¹⁾

Presses are 9 - 25 years and other equipment is 2 - 15 years

We record depreciation using the straight‑line method over estimated useful lives. The useful lives are estimated at the time the assets are acquired and are based on historical experience with similar assets and anticipated technological changes. Our depreciation expense was $2821.69 million and $3028.86 million in ~~2018~~2019 and ~~2017~~2018, respectively.

During ~~2018~~2019 and ~~2017~~2018, we incurred $0.63 million and $0.36 million, respectively, in accelerated depreciation related to production equipment that was no longer needed due to outsourcing of our printing process at certain of our media companies.

We review the carrying amount of long‑lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Events that result in an impairment review include the decision to close a location or a significant decrease in the operating performance of the long‑lived asset. Long‑lived assets are considered impaired if the estimated undiscounted future cash flows of the asset or asset group are less than the carrying amount. For impaired assets, we recognize a loss equal to the difference between the carrying amount of the asset or asset group and its estimated fair value, which is recorded in operating expenses in the consolidated statements of operations. The estimated fair value of the asset or asset group is based on the discounted future cash flows of the asset or asset group. The asset group is defined as the lowest level for which identifiable cash flows are available.

Assets held for sale

~~Assets~~As ~~held~~of ~~for~~December ~~sale~~29, ~~includes~~2019, we have land and/or ~~building~~buildings classified as assets held for sale at ~~three~~five of our media companies ~~that~~compared to only three as of December 30, 2018. During 2019, we began to actively ~~marketed~~market for sale ~~during~~five ~~2018~~properties, which includes land and/or buildings, at four of our media companies. In connection with classifying ~~these~~ properties as assets held for the sale, we reduce the carrying value of the land and building ~~at one of the properties was reduced~~ to its estimated fair value less selling costs, asif ~~determined based on the current market conditions and the estimated selling price~~applicable. As a result, during ~~2018~~2019, we recorded a $0.17 million impairment charge at one of our properties which is included in goodwill and other asset write-downs on our consolidated statement of operations. ~~The~~ land and building at this property were subsequently sold during the third quarter of 2018 with no gain or additional loss. Additionally, one of the other properties that was classified as assets held for sale in 2018 was sold for a gain of $0.5 million.

33During the year ended December 29, 2019, we sold land and buildings in Kennewick, Washington, Belleville, Illinois, and Miami, Florida. We recorded gains of $3.3 million, which are included in other operating expenses on our consolidated statements of operations.

Table of Contents

THE MCCLATCHY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 3029, ~~2018~~2019 AND DECEMBER 3130, ~~2017~~2018

Investments in unconsolidated companies

We have accounted for non-marketable equity investments under the equity or cost method. Investments through which we exercise significant influence but do not have control over the investee are accounted for under the equity method. Investments through which we are not able to exercise significant influence over the investee are accounted for under the cost method. See Note 3 for discussion of investments in unconsolidated companies.

Financial obligations

Financial obligations consist of contributions of real properties to the Pension Plan in 2016 and 2011 (see Note 7), and real property previously owned by The Sacramento Bee that was sold and leased back during the third quarter of 2017, and real property previously owned by The State in Columbia, South Carolina that we sold and leased back during the second quarter of 2018.

Segment reporting

We operate 30 media companies, providing each of our communities with high-quality news and advertising services in a wide array of digital and print formats. We have two operating segments that we aggregate into a single reportable segment because each has similar economic characteristics, products, customers and distribution methods. Our operating segments are based on how our chief executive officer, who is also our Chief Operating Decision Maker (“CODM”), makes decisions about allocating resources and assessing performance. The CODM is provided discrete financial information for the two operating segments. Each operating segment consists of a group of media companies and both operating segments report to the same segment manager. One of our operating segments (“Western Segment”) consists of our media companies’ operations in the West and Central, while the other operating segment (“Eastern Segment”) consists primarily of media company operations in the Carolinas and East.

Goodwill and intangible impairment

Goodwill represents the excess of cost of a business acquisition over the fair value of the net assets acquired. In accordance with FASB ASC 350 " Intangibles - Goodwill and Other " goodwill is not amortized. An impairment loss is recognized when the carrying amount of the reporting unit's net assets exceed the estimated fair value of the reporting unit. We test for impairment of goodwill annually, at year‑end, or whenever events occur, or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. We perform this testing on operating segments, which are also considered our reporting units. One reporting unit (“Western” reporting unit) consists of operations in ~~our~~California, ~~West~~Washington and the Central ~~regions~~region and the other reporting unit (“Eastern” reporting unit) consists of operations primarily in ~~our~~the Carolinas and the East and Southeast regions

We test for goodwill impairment using an equal weighting of a market approach and an income approach. We use market multiples derived from a set of competitors or companies with comparable market characteristics to establish fair values for a reporting unit (market approach). We also estimate fair value using discounted projected cash flow analysis (income approach). This analysis requires significant judgments, including estimation of future cash flows, which is dependent on internal forecasts, the long‑term rate of growth for our business, ~~the useful life over which cash flows will occur,~~ and determination of our weighted average cost of capital. Changes in these estimates and assumptions could materially affect the determination of fair value and goodwill impairment for each reporting unit. InWe ~~2018,~~performed weinterim ~~considered the challenging business conditions~~ and ~~the~~annual ~~resulting~~impairment ~~weakness~~tests induring ~~our~~2019 ~~stock~~and ~~price~~only ~~in our~~ annual impairment ~~analysis;~~tests ~~however,~~for ~~no impairment was recognized~~2018. See InNote 6 ~~2017,~~for wediscussion ~~also~~of ~~concluded~~our nogoodwill impairment ~~charge~~testing ~~was required~~results. ~~Also see Note 4.~~

Newspaper mastheads (newspaper titles and website domain names) are not subject to amortization and are tested for impairment annually, at year‑end, or more frequently if events or changes in circumstances indicate that the asset might be impaired. The impairment test consists of a comparison of the fair value of each newspaper masthead with its carrying amount. We use a relief-from-royalty approach which utilizes a discounted cash flow model to determine the fair value of each newspaper masthead. ~~We performed interim and annual impairment tests during 2018.~~ Individual newspaper masthead fair values were estimated using the present value of expected future cash flows, using estimates, judgments and assumptions discussed above that we believe were appropriate in the circumstances. We Asperformed ainterim ~~result,~~and weannual ~~recorded an intangible newspaper masthead~~ impairment ~~charges~~tests ofduring ~~$14.1~~2019 ~~million in the third quarter,~~ and ~~$37~~2018.2 ~~million~~See ~~for~~Note ~~the~~6 ~~full~~for ~~year~~discussion ~~ending~~of ~~December~~our ~~30,~~newspaper ~~2018.~~masthead ~~In 2017, we recorded~~ impairment ~~charges~~testing ~~of $21~~results.~~5 million. Also see Note 4.~~

34Long‑lived assets, such as intangible assets subject to amortization (primarily advertiser and subscriber lists), are tested for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. The carrying amount of each asset group is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use of such asset group. We had no impairments of long‑lived assets subject to amortization during 2019 or 2018.

Investments in unconsolidated companies

Investments in unconsolidated companies are accounted for using either the equity method or measurement alternative method. Investments through which we exercise significant influence but do not have control over the investee are accounted for under the equity method. Investments through which we are not able to exercise significant influence over the investee are accounted for under the measurement alternative method as these investments do not have readily determinable fair values. The measurement alternative method was elected for investments without readily determinable fair values formerly accounted for under the cost method. The measurement alternative value represents cost minus any impairments, if any, plus or minus any observable price changes. There were no impairments of our investments in unconsolidated companies during 2019 or 2018.

In the year ended December 29, 2019, we received distributions totaling $1.3 million, which primarily relates to cost or equity method investees who are winding down their operations.

On September 13, 2018, we sold our remaining 3.0% ownership interest in CareerBuilder, LLC (“CareerBuilder”) and received gross proceeds of $5.3 million. As a result of this sale, we recognized a gain on sale of investments in unconsolidated companies of $1.7 million in the year ended December 30, 2018. In the year ended December 30, 2018, we also received distributions totaling approximately $2.8 million from CareerBuilder, which relate to returns of earnings. Our 3.0% ownership interest in CareerBuilder was accounted for under the cost method.

Table of Contents

THE MCCLATCHY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 3029, ~~2018~~2019 AND DECEMBER 3130, ~~2017~~2018

~~Long‑lived~~Financial assets, such as intangible assets subject to amortization (primarily advertiser and subscriber lists), are tested for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. The carrying amount of each asset group is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use of such asset group. We had no impairments of long‑lived assets subject to amortization during 2018 or 2017. obligations

Financial obligations (also known as failed sale and leaseback transactions) consist of contributions of real properties to the Pension Plan in 2016 and 2011 (see Note 9), real property previously owned by The Sacramento Bee in Sacramento, California that was sold and leased back during the third quarter of 2017, real property previously owned by The State in Columbia, South Carolina that we sold and leased back during the second quarter of 2018, and real property previously owned by The Kansas City Star in Kansas City, Missouri that was sold and leased back during the second quarter of 2019.

Segment reporting

We have two operating segments that we aggregate into a single reportable segment because each has similar economic characteristics, products, customers and distribution methods. Our operating segments are based on how our chief executive officer, who is also our Chief Operating Decision Maker (“CODM”), makes decisions about allocating resources and assessing performance. The CODM is provided discrete financial information for the two operating segments. Each operating segment consists of a group of media companies and during 2019 and 2018, both operating segments reported to the same segment manager. One of our operating segments (“Western Segment”) consists of our media companies’ operations in California, Washington and the Central region, while the other operating segment (“Eastern Segment”) consists primarily of media company operations in the Carolinas and the East and Southeast regions.

Stock‑based compensation

All stock‑based compensation, including grants of stock appreciation rights, restricted stock units and common stock under equity incentive plans, ~~are~~is recognized in the financial statements based on their fair values. At December 3029, ~~2018~~2019, we had two stock‑based compensation plans. See Note 1012.

Income taxes

OnDuring ~~December 22~~2018, ~~2017,~~we ~~the~~elected ~~Tax~~to ~~Cuts~~early ~~and~~adopt ~~Jobs~~new ~~Act~~guidance ofthat ~~2017~~allowed ~~(“Tax~~for ~~Act”)~~certain ~~was~~stranded ~~enacted. The Tax Act makes broad and complex changes to the U.S.~~ tax ~~code,~~effects ~~including,~~resulting ~~but~~from ~~not limited to, (i) reducing~~ the ~~U.S.~~Tax ~~federal~~Cuts ~~corporate~~and ~~rate~~Jobs ~~from~~Act ~~35%~~of to2017 ~~21%;~~ (~~ii) eliminating the corporate alternative minimum tax (~~“~~AMT~~Tax Act”) ~~and~~to ~~changing how existing AMT credits can~~ be ~~realized;~~reclassified ~~(iii)~~from ~~creating~~accumulated aother ~~new~~comprehensive ~~limitation~~income ~~on deductible interest expense; (iv) changing rules related~~ to ~~uses~~retained ~~and~~earnings. ~~limitations~~As ~~of net operating loss carryforwards created in tax years beginning after December 31~~such, ~~2017;~~we ~~(v)~~recorded ~~bonus~~a ~~depreciation~~reclass ~~that~~of ~~will~~$98.4 ~~allow~~million ~~for full expensing~~ of ~~qualified~~stranded ~~property;~~tax ~~and~~effects ~~(vi)~~from ~~limitations~~accumulated onother ~~the~~comprehensive ~~deductibility~~income ofto ~~certain~~retained ~~executive~~earnings ~~compensation~~in 2018.

The SEC staff issued Staff Accounting Bulletin 118 (“SAB 118”) in December 2017, which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides that the measurement period for the tax effects of the Tax Act should not extend more than one year from the date the Tax Act was enacted. During 2018, we finalized the impacts of the Tax Act and noted no material adjustments to our previously recorded balances and results. The FASB also issued ASU 2018-02, see below in Note 1, which allowed for certain stranded tax effects resulting from the Tax Act to be reclassified from accumulated other comprehensive income to retained earnings. We elected to early adopt this standard and as such recorded a reclass of $98.4 million of stranded tax effects from accumulated other comprehensive income to retained earnings in 2018.

A tax valuation allowance is required when it is more-likely-than-not that all or a portion of deferred tax assets may not be realized. The timing of recording or releasing a valuation allowance requires significant judgment. Establishment and removal of a valuation allowance requires us to consider all positive and negative evidence and to make a judgmental decision regarding the amount of valuation allowance required as of a reporting date. The assessment considers expectations of future taxable income or loss, available tax planning strategies and the reversal of temporary differences. The development of these expectations involves the use of estimates such as operating profitability. The weight given to the evidence is commensurate with the extent to which it can be objectively verified.

We ~~performed~~perform our assessment of the deferred tax assets ~~during the third and fourth quarters of 2017~~quarterly, weighing the positive and negative evidence as outlined in ASC 740-10, Income Taxes. As we had incurred three years of cumulative pre-tax losses, such objective negative evidence limits our ability to give significant weight to other positive subjective evidence, such as projections for future growth and profitability. We will continue to maintain a valuation allowance against our deferred tax assets until we believe it is more likely than not that these assets will be realized in the future. If sufficient positive evidence arises in the future that provides an indication that all of or a portion of the deferred tax assets meet the more likely than not standard, the valuation allowance may be reversed, in whole or in part, in the period that such determination is made.

Current generally accepted accounting principles prescribe a recognition threshold and measurement of a tax position taken or expected to be taken in an enterprise’s tax returns. We also evaluate any uncertain tax positions and recognize a liability for the tax benefit associated with an uncertain tax position if it is more likely than not that the tax position will

3541

Table of Contents

THE MCCLATCHY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 3029, ~~2018~~2019 AND DECEMBER 3130, ~~2017~~2018

not be sustained on examination by the taxing authorities upon consideration of the technical merits of the position. The tax benefits recognized in the financial statements from such positions are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. We record a liability for uncertain tax positions taken or expected to be taken in a tax return. Any change in judgment related to the expected ultimate resolution of uncertain tax positions is recognized in earnings in the period in which such change occurs. We record accrued interest related to unrecognized tax benefits in interest expense. Accrued penalties are recorded as ~~part~~a component of income ~~taxes~~tax expense.

Fair value of financial instruments

Level 1	—	Unadjusted quoted prices available in active markets for identical investments as of the reporting date.
Level 2	—	Observable inputs to the valuation methodology are other than Level 1 inputs and are either directly or indirectly observable as of the reporting date and fair value can be determined through the use of models or other valuation methodologies.
Level 3	—	Inputs to the valuation methodology are unobservable inputs in situations where there is little or no market activity for the asset or liability, and the reporting entity makes estimates and assumptions related to the pricing of the asset or liability including assumptions regarding risk.

Our policy is to recognize significant transfers between levels at the actual date of the event or circumstance that caused the transfer. During 2018, as a result of the refinancing transactions discussed in Note 5, we transferred our Debentures (as defined in Note 5) from Level 2 to Level 3 in the fair value hierarchy.

The following methods and assumptions were used to estimate the fair value of each class of financial instruments:

Cash and cash equivalents, accounts receivable and accounts payable. As of December 30, 2018, and December 31, 2017, the carrying amount of these items approximates fair value because of the short maturity of these financial instruments.

Long‑term debt. At December 30, 2018 the carrying value and the estimated fair value of our 2026 Notes (as defined in Note 5) was $287.2 million and $302.4 million, respectively. As of December 31, 2017, the carrying value and the estimated fair value of the long-term debt, including the current portion of long-term debt, was $781.4 million and $810.7 million, respectively. The fair value of our 2026 Notes as described above was determined using quoted market prices, including the current market activity of our publicly-traded notes and bank debt, trends in investor demand for debt and market values of comparable publicly-traded debt. These are considered to be Level 2 inputs under the fair value measurements and disclosure guidance and may not be representative of actual value.

At December 30, 2018, the carrying value and the estimated fair value of our Debentures, Junior Term Loan and 2031 Notes (as defined in Note 5), was $350.4 million and, $296.5 million, respectively. The fair values of our Debentures, Junior Term loan, and 2031 Notes were estimated based on quoted market prices. When market evidence was not available or reliable, the fair value was based on the net present value of the future cash flows using interest rates derived from market inputs and a Treasury yield curve in effect at December 30, 2018. These are considered to be Level 3 inputs under the fair value measurements and disclosure guidance and may not be representative of actual value.

Pension plan. As of December 30, 2018, and December 31, 2017, we had assets related to our qualified defined benefit pension plan measured at fair value. The required disclosures regarding such assets are presented in Note 7.

Table of Contents

THE MCCLATCHY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 30, 2018 AND DECEMBER 31, 2017

Certain assets are measured at fair value on a nonrecurring basis; that is, they are subject to fair value adjustments only in certain circumstances (for example, when there is evidence of impairment). Our non‑financial assets that are measured at fair value on a nonrecurring basis are assets held for sale, goodwill, indefinite or finite lived intangible assets and equity method investments. All of these are measured using Level 3 inputs. We utilize valuation techniques that seek to maximize the use of observable inputs and minimize the use of unobservable inputs. The significant unobservable inputs include our expected cash flows and the discount rate that we estimate market participants would seek for bearing the risk associated with such assets. We incurred impairment charges during 2018 and 2017 on our newspaper masthead intangible assets (see above in Note 1).

Accumulated other comprehensive loss

We record changes in our net assets from non‑owner sources in our consolidated statements of stockholders’ equity (deficit). Such changes relate primarily to valuing our pension liabilities, net of tax effects.

Our accumulated other comprehensive loss (“AOCL”) and reclassifications from AOCL, net of tax, consisted of the following:

			Other
	Minimum		Comprehensive
	Pension and		Loss
	Post-		Related to
	Retirement		Equity
(in thousands)	Liability		Investments		Total
Balance at December 25, 2016	$	(450,506)	$	(11,009)	$	(461,515)
Other comprehensive income (loss) before reclassifications		—		4,046		4,046
Amounts reclassified from AOCL		8,100		—		8,100
Other comprehensive income		8,100		4,046		12,146
Balance at December 31, 2017	$	(442,406)	$	(6,963)	$	(449,369)
Amounts reclassified from AOCL		(153,414)		(1,506)		(154,920)
Other comprehensive loss		(153,414)		(1,506)		(154,920)
Balance at December 30, 2018	$	(595,820)	$	(8,469)	$	(604,289)

	Amount Reclassified from AOCL (in thousands)
	Year Ended		Year Ended
	December 30,		December 31,		Affected Line in the
AOCL Component	2018		2017		Consolidated Statements of Operations
Minimum pension and post-retirement liability	$	(56,530)	$	8,100	Retirement benefit expense (1)
Reclassification of AOCL tax effects		(98,390)		—	Retained earnings (2)
	$	(154,920)	$	8,100	Net of tax

_____________________

(1) There is no income tax benefit associated with the years ended December 30, 2018 and December 31, 2017, due to the recognition of a valuation allowance.

(2) See Recently adopted accounting pronouncements below

Table of Contents

THE MCCLATCHY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 30, 2018 AND DECEMBER 31, 2017

Earnings per share (EPS)

Basic EPS excludes dilution from common stock equivalents and reflects income divided by the weighted average number of common shares outstanding for the period. Diluted EPS is based upon the weighted average number of outstanding shares of common stock and dilutive common stock equivalents in the period. Common stock equivalents arise from dilutive stock appreciation rights and restricted stock units and are computed using the treasury stock method. Anti-dilutive common stock equivalents are excluded from diluted EPS. The weighted average anti‑dilutive common stock equivalents that could potentially dilute basic EPS in the future, but were not included in the weighted average share calculation, consisted of the following:

	Years Ended
	December 30,	December 31,
(shares in thousands)	2018	2017
Anti-dilutive common stock equivalents	199	278

Recently Adopted Accounting Pronouncements

In ~~May~~February ~~2014~~2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) ~~No. 2014~~2016-0902, “Leases” (“Topic ~~606~~842”), ~~“Revenue~~which ~~from~~replaces ~~Contracts with Customers.” Topic 606 supersedes~~ the ~~revenue~~existing ~~recognition~~guidance ~~requirements~~ in ~~Topic~~ASC ~~605 "Revenue Recognition." ASU 2014-09 outlines a new~~840, ~~single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance~~“Leases.” Topic ~~606~~842 requires ~~revenue~~the recognition ~~to depict the transfer~~ of ~~promised~~lease ~~goods~~assets orand ~~services~~lease toliabilities ~~customers~~by inlessees ~~an amount that reflects the consideration a company expects to receive in exchange~~ for those ~~goods~~leases orclassified ~~services.~~as Inoperating ~~2016~~leases ~~and~~under ~~2017,~~previous ~~the~~guidance. ~~FASB~~We ~~issued~~adopted ~~additional~~Topic ~~updates~~842 ~~and~~as ~~these~~of ~~updates~~December ~~provided~~31, ~~further~~2018, ~~guidance~~without ~~and~~restating ~~clarification~~periods onprior ~~specific~~to ~~items within~~ the ~~previously~~adoption ~~issued~~date ~~update.~~using Wea ~~adopted~~modified ~~Topic~~retrospective ~~606~~transition method, as ofallowed ~~January~~under 1,ASU 2018-11, ~~using~~“Targeted ~~the~~Improvements ~~modified~~to ~~retrospective~~ASC ~~transition method~~842.” ~~See Note 2 for further details.~~

InAs ~~January~~a ~~2016,~~result of the ~~FASB~~adoption ~~issued~~of ~~ASU~~Topic ~~No.~~842, ~~2016-01~~on December 31, ~~“Financial~~2018, ~~Instruments~~we –recorded ~~Overall~~operating ~~(Subtopic~~lease ~~825~~right-10of-use (“ROU”): ~~Recognition~~assets of $51.6 million and ~~Measurement~~lease liabilities of ~~Financial~~$61.2 ~~Assets~~million. ~~and~~Finance ~~Financial~~leases ~~Liabilities.”~~were ~~ASU~~not ~~2016-01~~impacted ~~addresses~~by ~~certain~~the ~~aspects~~adoption of ~~recognition,~~Topic ~~measurement~~842, ~~presentation,~~as ~~and~~capital ~~disclosure~~lease ofliabilities ~~financial~~and ~~instruments.~~the Wecorresponding ~~adopted~~assets ~~ASU~~were ~~2016-01~~already asrecorded ofin ~~January~~the 1,balance ~~2018,~~sheet onunder athe ~~prospective~~ASC ~~basis,~~840 ~~but~~guidance. itThe ~~did~~adoption ~~not~~of ~~have~~Topic 842 had an inconsequential impact on our consolidated ~~financial~~statement ~~statements~~of operations and consolidated statement of cash flows in 2019.

InThe ~~August~~new ~~2016,~~standard ~~the~~provides ~~FASB~~a ~~issued~~number ~~ASU~~of Nooptional practical expedients that we adopted. ~~2016-15,~~We elected the “~~Statement~~package of ~~Cash~~practical ~~Flows~~expedients” ~~(Topic~~which ~~230):~~permitted ~~Classification~~us ofnot ~~Certain~~to ~~Cash~~reassess ~~Receipts~~under the new standard our prior conclusions about lease identification, lease classification and ~~Cash~~initial ~~Payments~~direct costs.” ~~ASU~~The ~~2016-15~~new ~~addresses~~standard ~~eight~~also ~~specific~~provides ~~cash~~expedients ~~flow~~for ~~issues~~our ~~and~~ongoing isaccounting. ~~intended~~We toelected ~~reduce~~the ~~diversity~~short-term inlease ~~practice~~recognition inexemption ~~how~~for ~~certain~~all ~~cash~~leases ~~receipts~~that ~~and~~qualify. ~~cash~~For ~~payments~~those ~~are~~leases ~~presented~~that ~~and~~qualified, ~~classified~~we indid ~~the~~not ~~statement~~recognize ofROU ~~cash~~assets ~~flows~~or liabilities. We ~~adopted~~also ~~ASU~~elected ~~2016~~the practical expedient allowing us to combine lease and non-15lease ascomponents offor ~~January~~our 1,real ~~2018,~~estate ~~retrospectively,~~leases. ~~but~~Additional itinformation ~~did~~and ~~not~~disclosures ~~have~~required anby ~~impact~~this onnew ~~our~~standard ~~consolidated~~are ~~financial~~contained ~~statements~~in Note 5.

In ~~November~~August ~~2016~~2018, the FASB issued ASU ~~No. 2016~~2018-1815, “~~Statement~~Intangibles-Goodwill ofand ~~Cash~~Other-Internal ~~Flows~~-Use Software (~~Topic~~Subtopic ~~230~~350-40): ~~Restricted~~Customer’s ~~Cash.”~~Accounting ~~ASU~~for ~~2016-18~~Implementation ~~addresses~~Costs ~~the~~Incurred ~~presentation~~in ofa ~~restricted~~Cloud ~~cash~~Computing inArrangement ~~the~~That ~~statement~~Is ofa ~~cash~~Service ~~flows~~Contract.” ~~The~~ASU ~~standard~~2018-15 ~~requires~~aligns anthe ~~entity~~requirements tofor ~~include~~capitalizing ~~restricted~~implementation ~~amounts~~costs ~~with~~incurred ~~cash and cash equivalents~~ in ~~the~~a ~~statement~~hosting ofarrangement ~~cash~~that ~~flows.~~is Ana ~~entity~~service ~~will~~contract nowith ~~longer~~the ~~present~~requirements ~~transfers~~for ~~between~~capitalizing ~~cash~~implementation ~~and~~costs ~~cash~~incurred ~~equivalents~~to ~~and~~develop ~~restricted~~or ~~amounts~~obtain oninternal-use ~~the~~software ~~statement~~(and ofhosting ~~cash~~arrangements ~~flows.~~that Weinclude ~~adopted~~an ~~ASU 2016~~internal-18use assoftware oflicense). ~~January~~It 1,is ~~2018,~~effective ~~using~~for ~~the~~us ~~retrospective~~for ~~transition~~interim ~~method~~and toannual ~~each~~reporting ~~period~~periods ~~presented.~~beginning Asafter aDecember ~~result~~15, of2019, ~~the~~with early adoption, ~~net~~permitted. ~~cash~~We ~~provided~~early byadopted ~~operating~~this ~~activities~~standard ~~during~~as ~~2017~~of ~~increased~~April $1.0, ~~million to exclude the changes in restricted cash~~2019, and ~~this~~it ~~amount~~did isnot ~~reflected~~have inan impact on our consolidated ~~cash~~financial ~~flow statement~~statements.

In February 2018, the FASB issued ASU No. 2018-02, “Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.” ASU 2018-02 allows for reclassification of stranded tax effects resulting from the Tax Act from accumulated other comprehensive income to retained earnings. Consequently, the standard eliminates the stranded tax effects resulting from the Tax Act and will improve the usefulness of information reported to financial statement users. However, because the standard only relates to the reclassification of the income tax effects of the Tax Act, the underlying guidance that requires that the effect of a change in tax laws or rates be included in income from continuing operations is not affected. This standard also requires certain disclosures about the stranded tax effects. It is effective for us for interim and annual reporting periods beginning after December 15, 2018, and early adoption is permitted. During the fourth quarter of 2018, we elected to early adopt

Table of Contents

THE MCCLATCHY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 30, 2018 AND DECEMBER 31, 2017

this standard. As a result of the adoption, we reclassified $98.4 million of stranded tax effects to accumulated deficit. These previously had been recorded in accumulated other comprehensive income.

Recently Issued Accounting Pronouncements Not Yet Adopted

In ~~February~~June 2016, the FASB issued ASU No. 2016-0213, “~~Leases~~Financial Instruments – Credit Losses (Topic ~~842~~326): Measurement of Credit Losses on Financial Instruments.” ~~and~~ASU it2016-13 ~~replaces~~requires that financial assets measured at amortized cost be presented at the ~~existing~~net ~~guidance~~amount inexpected ~~Topic~~to ~~840,~~be ~~“Leases~~collected.” The ~~Topic~~measurement ~~842~~of ~~requires~~expected ~~lessees~~credit losses is to ~~recognize~~be ~~most~~based ~~leases~~upon ona ~~their~~broad ~~balance~~set ~~sheets~~of asinformation ~~lease~~to ~~liabilities~~include ~~with~~historical ~~corresponding~~experience, ~~right-of-use~~current ~~(ROU)~~conditions, ~~assets.~~and ~~The~~reasonable ~~new~~and ~~lease~~supportable ~~standard~~forecasts ~~does~~that ~~not~~affect ~~substantially~~the ~~change~~collectability ~~lessor~~of ~~accounting~~the reported amount. ~~Topic~~ASU ~~842~~2016-13 has been amended by ~~ASUs~~ASU’s ~~No.~~ 2018-0119, ~~2018~~2019-~~10,~~04 ~~2018-11~~ and ~~2018~~2019-2005, which provide further guidance and clarification on specific items within the previously issued update. ItIn isNovember 2019, the FASB issued ASU 2019-11, that grants private companies, not-for-profit organizations and certain small public companies an effective date delay for its credit loss standard. As a result, ASU 2016-13 and the subsequent updates will be effective for us for interim and annual reporting periods beginning after December 15, ~~2018,~~2022. ~~with~~We ~~early~~are currently in the process of evaluating the impact of the adoption ~~permitted.~~on our consolidated financial statements.

WeIn ~~plan~~August ~~to adopt ASC 842 in our next fiscal year beginning December 31,~~ 2018, ~~using~~ the ~~modified~~FASB ~~retrospective~~issued ~~approach,~~ASU ~~and to apply the new standard to existing leases on the effective date of the standard~~No. ~~Our leases are made up of mostly real estate~~2018-13, ~~vehicle~~“Fair ~~and~~Value ~~other~~Measurement ~~equipment~~(Topic ~~leases.~~820): AsDisclosure aFramework-Changes ~~result, we anticipate that ASC 842 will have a material impact on our consolidated balance sheets due~~ to the ~~recognition~~Disclosure ofRequirements ~~ROU assets and lease liabilities~~ for ~~operating~~Fair ~~leases~~Value Measurement.” WeASU ~~expect~~2018-13 ~~our~~adds, ~~accounting~~removes ~~for capital leases to remain substantially unchanged~~ and domodifies ~~not~~various ~~expect~~disclosure ~~that~~requirements ~~adoption~~within ~~will~~Topic ~~have a material impact on our consolidated statements of operations~~820. ~~Upon~~ ~~adoption,~~It weis ~~expect~~effective tofor ~~recognize~~us ~~additional~~for ~~operating~~interim ~~lease~~and ~~liabilities~~annual ofreporting ~~approximately~~periods ~~$61.0~~beginning ~~million~~after ~~with corresponding ROU assets of approximately $52.0 million.~~

The new standard provides a number of optional practical expedients in transition. We expect to elect the “package of practical expedients”, which permits us not to reassess under the new standard our prior conclusions about lease identification, lease classification and initial direct costs. The new standard also provides practical expedients for our ongoing accounting. We expect to elect the short-term lease recognition exemption for all leases that qualify. For those leases that qualify, we will not recognize ROU assets or lease liabilities, and this includes not recognizing ROU assets or lease liabilities for existing short-term leases in transition. We also expect to elect the practical expedient allowing us combine lease and non-lease components for our real estate leases.42

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” ASU 2016-13 requires that financial assets measured at amortized cost be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis. The income statement reflects the measurement of credit losses for newly recognized financial assets, as well as the expected credit losses during the period. The measurement of expected credit losses is based upon historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. In 2018, the FASB issued additional guidance update 2018-19 which clarifies the scope of the guidance was not meant to include receivables arising from operating leases. ASU 2016-13 and the subsequent update are effective for us for interim and annual reporting periods beginning after December 15, 2019, and early adoption is permitted for interim or annual reporting periods beginning after December 15, 2018. We are currently in the process of evaluating the impact of the adoption on our consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement.” ASU 2018-13 adds, removes and modifies various disclosure requirements within Topic 820. It is effective for us for interim and annual reporting periods beginning after December 15, 2019. An entity is permitted to early adopt any removed or modified disclosures upon issuance of this guidance and delay adoption of the additional disclosures until their effective date. We are currently in the process of evaluating the impact of the adoption on our consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-14, “Compensation-Retirement Benefits-Defined Benefit Plan-General (Subtopic 715-20): Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans.” ASU 2018-14 adds, removes or clarifies various disclosure requirements within guidance. It is effective for us for annual reporting periods beginning after December 15, 2020, and early adoption is permitted. We are currently in the process of evaluating the impact of the adoption on our consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-15, “Intangibles-Goodwill and Other-Internal -Use Software (Subtopic

Table of Contents

THE MCCLATCHY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 3029, ~~2018~~2019 AND DECEMBER 3130, ~~2017~~2018

~~350-40):~~December ~~Customer’s~~15, ~~Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract~~2019.” ~~ASU~~An ~~2018-15~~entity ~~aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that~~ is apermitted ~~service~~to ~~contract~~early ~~with~~adopt ~~the~~any ~~requirements~~removed ~~for~~or ~~capitalizing~~modified ~~implementation~~disclosures ~~costs~~upon ~~incurred~~issuance toof ~~develop~~this orguidance ~~obtain internal-use software (~~and ~~hosting~~delay ~~arrangements~~adoption ~~that~~of ~~include~~the anadditional ~~internal-use~~disclosures ~~software~~until ~~license).~~their ~~It is~~ effective ~~for us for interim and annual reporting periods beginning after December 15, 2019, and early adoption is permitted~~date. We are currently in the process of evaluating the impact of the adoption on our consolidated financial statements.

2In August 2018, the FASB issued ASU No. ~~REVENUES~~2018-14, “Compensation-Retirement Benefits-Defined Benefit Plan-General (Subtopic 715-20): Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans.” ASU 2018-14 adds, removes or clarifies various disclosure requirements within guidance. It is effective for us for annual reporting periods beginning after December 15, 2020, and early adoption is permitted. We are currently in the process of evaluating the impact of the adoption on our consolidated financial statements.

~~Adoption~~4. ofREVENUES ~~ASC 2014-09 (Topic 606), “Revenue from Contracts with Customers”~~

On January 1, 2018, we adopted Topic 606 using the modified retrospective method applied to those contracts which were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018, are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historical accounting under Topic 605.

We recorded a net increase to opening accumulated deficit of $2.7 million as of January 1, 2018, due to the cumulative impact of adopting Topic 606, with the impact primarily related to our audience revenues. The impact to revenues as a result of applying Topic 606 was less than $0.1 million for the year ended December 30, 2018 compared to applying Topic 605.

Revenue Recognition

Revenues are recognized when control of the promised goods or services is transferred to our customers ~~or services are performed~~, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.

All revenues recognized on the consolidated statements of operations are the result of contracts with customers, except for revenues associated with lease income where we are the lessor through a sublease arrangement~~, as these are outside the scope of Topic 606~~.

Advertising Revenues

We generate revenues primarily by delivering advertising on our digital media sites, on our partners’ websites and in our newspapers. These advertising revenues are generated through digital and print performance obligations that are included in contracts with customers, which are typically one year or less in duration or commitment. There are no differences in the treatment of digital and print advertising performance obligations or the recognition of revenues for retail, national, classified, and direct marketing revenue categories ~~under Topic 606~~.

We generate advertising revenues through digital products that are sold on cost-per-thousand impressions (“CPM”) which means that an advertiser pays based upon number of times their ad is displayed on our owned and operated websites and apps, our partners’ websites, ad exchanges, in a video pre-roll or a programmatic bidding exchange. Such revenues are recognized according to the timing outlined in the contract.

~~There~~In ~~are~~addition to the advertising sold on a CPM basis, we also sell monthly marketing campaigns ~~which~~to ~~may~~some of our clients. Monthly marketing campaigns include multiple products ~~such~~some asof ~~items~~which are sold byas a CPM, ~~reputation~~basis ~~management,~~and ~~search~~other ~~engine~~– ~~marketing~~like reputation management and search engine optimization. In– ~~these~~which ~~arrangements~~are asnot. The ~~well~~contracted asgoods inand aservices ~~CPM~~offered ~~sale,~~as ~~the~~part ~~contracted~~of ~~goods~~monthly ~~and~~marketing ~~services~~campaigns are performed over the specific contract term and the transfer of the performance obligation occurs as the benefits are consumed by the customer. As such, revenue is recognized daily regardless of the performance obligations classification of timing of being point in time or overtime.

Print advertising is advertising that is printed in a publication, inserted into a publication, or physically mailed to a customer. Our performance obligations for print products are directly associated with the inclusion of the advertisement in the final publication and delivery of the product on the contracted distribution day. Revenues are recognized at the point in time that the newspaper publication is delivered, and distribution of the advertisement is satisfied.

Certain customers may receive cash-based incentives or credits, which are accounted for as variable consideration. We estimate these amounts based on the expected value approach.

40For advertisements placed on our partners’ websites or selling a product hosted or managed by partners, we evaluate whether we are the principal or agent. Generally, we report advertising revenues for ads placed on our partners’ websites or for the resale of their products on a gross basis; that is, the amounts billed to our customers are recorded as revenues, and amounts paid to our partners for their products or advertising space are recorded as operating expenses. If we are determined to be the principal, we are primarily responsible to our customers for fulfillment of the contract goals though, from time to time, we use third-party goods or services. Our control is further supported by our level of discretion in establishing price and in some cases, controlling inventory before it is transferred to the customer.

Table of Contents

THE MCCLATCHY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 3029, ~~2018~~2019 AND DECEMBER 3130, ~~2017~~2018

~~estimate~~ Most ~~these~~products, ~~amounts~~including ~~based~~the printed newspaper advertising product, banner advertisements on ~~the~~our ~~expected~~websites ~~value~~and ~~approach~~video advertisements on our owned and operated player are reported on a gross basis. However, there are some third-party products and services that we offer to customers and various revenue share arrangements, such as exchange platforms, that are reported on a net revenue basis. Revenues are earned through being a reseller of a product or participating in an exchange where control over the service provided is limited and costs of the arrangement are net of revenues received.

For ads placed on our partners’ websites or selling a product hosted or managed by partners, we evaluate whether we are the principal or agent. Generally, we report advertising revenues for ads placed on our partners’ websites or for the resale of their products on a gross basis; that is, the amounts billed to our customers are recorded as revenues, and amounts paid to our partners for their products or advertising space are recorded as operating expenses. Where we are the principal, we are primarily responsible to our customers for fulfillment of the contract goals though, from time to time, we use third-party goods or services. Our control is further supported by our level of discretion in establishing price and in some cases, controlling inventory before it is transferred to the customer.

Most products, including the printed newspaper advertising product, banner ads on our websites and video ads on our owned and operated player are reported on a gross basis. However, there are some third-party products and services that we offer to customers and various revenue share arrangements, such as exchange platforms, that are reported on a net revenue basis. When revenues are earned through a reseller of a product or participating in an exchange where control over the service provided is limited, revenues are presented net of the costs of the arrangement.

Audience Revenues

Audience revenues include digital and print subscriptions or a combination of both at various frequencies of delivery. Our subscribers typically pay us in advance of when their subscriptions start or shortly thereafter. Our performance obligation to subscribers of our digital products is the real-time access to news and information delivered through multiple digital platforms. Our performance obligation to our traditional print subscribers is delivery of the physical newspaper according to their subscription plan. Revenues related to digital and print subscriptions are recognized ratably each day that a product is delivered to the subscriber.

Digital subscriptions may be purchased for a day, month, quarter, or year, and revenue is reported daily over the term of the contract.

Traditional print subscriptions may have various frequencies of delivery based upon each subscriber’s delivery preference. Revenues are recognized based upon each delivery, therefore at a point in time.

Certain subscribers may enter into a grace period (“grace”) after their previous contract term has expired but before payment has been received on the renewal. Grace is granted as a continuation of the subscription contract, so that service is not disrupted, and the extension is accounted for as variable consideration. We estimate these revenue amounts based on the expected amount to be received, considering the expected discontinuation of service or nonpayment based on historical experience.

Other Revenues

The largest revenue streams within other revenues are for commercial printing and distribution. The commercial print agreements are between us and third-party publishers to print and make available for distribution their finished products. Commercial print contracts are for a daily finished product and each day’s product is unique, or a separate performance obligation. Revenue is recorded at a point in time upon completion of each day’s print project.

The performance obligation for distribution revenues is the transportation of third-party published products to their subscribers or stores for resale. Distribution is performed substantially the same over the life of the contract and revenue is recognized at the point in time each performance obligation is completed.

We report distribution revenues from the third-party publishers on a gross basis. That is, the amounts that we bill to third party publishers to deliver their finished product to their customers are recorded as revenues, and the amounts paid to our independent carriers to deliver the third-party product are recorded as operating expenses.

Other revenues also include revenues from subleasing contracts and grant and sponsorship revenue received through our Community Funding Initiatives and the Compass Experiment. Revenues received from subleasing are discussed in Note 5. Grants and sponsorships are accounted for in accordance with ASC Subtopic 958-605, Not-for-Profit Entities – Revenue Recognition, and revenues are recorded when funds are received, and no conditions exist, or conditions have been met.

Arrangements with Multiple Performance Obligations

Our contracts with customers may include multiple performance obligations. For such arrangements, we allocate revenue to each performance obligation based on its stand-alone selling price. We generally determine stand-alone selling prices for audience revenue contracts based upon observable market values and the adjusted market assessment. For advertising revenue contracts with multiple performance obligations, stand-alone selling price is based on the prices charged to

4144

Table of Contents

THE MCCLATCHY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 3029, ~~2018~~2019 AND DECEMBER 3130, ~~2017~~2018

revenue to each performance obligation based on its stand-alone selling price. We generally determine stand-alone selling prices for audience revenue contracts based upon observable market values and the adjusted market assessment. For advertising revenue contracts with multiple performance obligations, stand-alone selling price is based on the prices charged to customers or on an adjusted market assessment.

Unearned Revenues

We record unearned revenues when cash payments are received or due in advance of our performance, including amounts which are refundable.

Our payment terms vary for advertising and subscriber customers. Subscribers generally pay in advance of up to one year. Advertiser payments are due within 30 days of invoice issuance and therefore amounts paid in advance are not significant. For advertisers that are considered to be at a higher risk of collectability due to payment history or credit processing, we require payment before the products or services are delivered to the customer.

~~Practical Expedients and Exemptions~~5. LEASES

We ~~expense~~determine ~~sales~~if ~~commissions~~a ~~when~~contract ~~incurred~~is ~~because~~a lease at the ~~amortization~~inception ~~period~~of ~~would~~the ~~have~~arrangement. ~~been~~If an operating lease is identified, it is classified as one ~~year~~of three asset classes: building and land, vehicles or ~~less~~equipment. ifWe ~~capitalized~~lease space under non-cancelable operating leases for general office facilities, distribution centers, a training center and a call center. ~~These~~We ~~costs~~also ~~are~~have ~~recorded~~operating ~~within~~leases ~~compensation~~for ~~expenses~~vehicles that consist mainly of tractor trailers and box trucks to transport newspapers from printing facilities to distribution centers, as well as office equipment consisting mostly of copiers.

WeCertain ~~record~~leases ~~usage-based~~have ~~royalties~~rent ~~promised~~holidays inor ~~exchange~~leasehold improvement incentives which account for ~~use~~the difference between the ROU assets and the lease liabilities. Many of our ~~intellectual~~leases ~~property,~~include ~~including~~lease ~~but~~components ~~not~~(e.g., ~~limited~~fixed torent ~~photographs~~payments) and ~~articles~~non-lease components (e.g., ~~These~~common-area ~~royalty~~or ~~revenues~~other ~~are~~maintenance ~~accrued~~costs, ~~when~~utilities, ~~estimates~~or ofother ~~usage~~lease ~~and~~costs ~~recoverability~~imposed) which are ~~made.~~accounted ~~These~~for ~~revenues~~as ~~are~~a ~~recorded~~single ~~within~~lease ~~other~~component, ~~revenues~~because we have elected the practical expedient to group lease and non-lease components for all leases.

WeNone ~~do not disclose the value~~ of ~~unsatisfied~~our ~~performance~~leases ~~obligations~~contain ~~for~~contingent ~~(i)~~rent ~~contracts~~provisions ~~with~~or anconcessions, ~~original~~residual ~~expected~~value ~~length~~guarantees ~~of one year~~ or ~~less~~restrictive ~~and~~covenants. ~~(ii)~~Our ~~contracts~~leases ~~for~~have ~~which~~remaining weterms ~~recognize~~of ~~revenue~~less atthan ~~the~~one ~~amount~~year to ~~which~~nine weyears, ~~have~~except ~~the~~for ~~right~~one toparking ~~invoice~~lot ~~for~~lease ~~services~~with ~~performed~~43 years remaining.

3Some of our distribution center, vehicle, and equipment leases have a combination of cancelable month-to-month lease terms and non-cancelable lease terms of less than one year. ~~INVESTMENTS~~ INWe ~~UNCONSOLIDATED~~have ~~COMPANIES~~elected the practical expedient to exclude these short-term leases from our ROU assets and lease liabilities.

~~CareerBuilder~~Most leases include escalating lease payments, ~~LLC~~and many include one or more options to renew or terminate the lease. The exercise of lease renewal options is typically at our sole discretion; therefore, the renewals to extend the lease terms are not included in our ROU assets and lease liabilities as they are not reasonably certain of exercise. We regularly evaluate the renewal options and when they are reasonably certain of exercise, we include the renewal period in our lease term.

OnWe ~~September~~have ~~13,~~one ~~2018,~~financing welease ~~sold~~(formerly ~~our~~known ~~remaining~~as ~~3.0%~~a ~~ownership~~capital ~~interest~~lease which is not included in ~~CareerBuilder,~~Financing ~~LLC~~Obligations ~~(“CareerBuilder”~~discussed above in Note 3) for office furniture and ~~received~~fixtures ~~gross~~located ~~proceeds~~at one of our office facilities. The total financing lease payments are calculated to be approximately $51.30 million. Asand a$1.1 ~~result~~million as of ~~this sale~~December 29, 2019, weand ~~recognized~~December a30, ~~gain~~2018, onrespectively. ~~sale~~As of ~~investments~~December 29, 2019, inthe ~~unconsolidated~~payments ~~companies~~run over the course of $1the remaining 5.79 ~~million~~years inand ~~2018.~~are ~~During~~not ~~2018,~~material weto ~~also~~the ~~received~~future ~~distributions~~lease ~~totaling~~payments ~~approximately~~schedules $2presented below.8 ~~million~~The ~~from~~finance ~~CareerBuilder,~~lease ~~which~~asset ~~relate~~is torecorded within the ~~return~~other assets line item of ~~earnings.~~the ~~Our~~consolidated 3balance sheet.0% ~~ownership~~The ~~interest~~finance inlease ~~CareerBuilder~~short-term ~~was~~and ~~accounted~~long-term ~~for~~obligations ~~under~~are ~~the~~recorded ~~cost~~within ~~method~~other ~~(measurement~~accrued ~~alternative~~liabilities ~~under~~and ~~ASU~~other ~~2016~~long-~~01)~~term liabilities line items of the consolidated balance sheet, respectively.

OnAs ~~June~~our ~~19,~~lease ~~2017,~~contracts wedo ~~along~~not ~~with~~provide ~~the~~an ~~then~~implicit ~~existing~~interest ~~ownership~~rate, ~~group~~for of2019, ~~CareerBuilder announced that~~ we ~~had~~used ~~entered~~the ~~into~~effective anyield ~~agreement~~of toour ~~sell~~secured adebt ~~majority~~that ofwe ~~the~~refinanced ~~collective ownership interest~~ in ~~CareerBuilder~~July to2018 anas ~~investor~~our ~~group~~secured ~~led~~incremental byborrowing ~~investment~~rate ~~funds~~for ~~managed~~leases ~~by affiliates of Apollo Management Group along~~ with ~~the~~an ~~Ontario~~8-year ~~Teachers' Pension Plan Board~~tenure. The ~~transaction~~secured ~~closed~~incremental onborrowing ~~July~~rate ~~31,~~was ~~2017.~~adjusted Weusing ~~received~~the ~~$73.9~~treasury ~~million~~yield ~~from~~curve ~~the~~at ~~closing of~~ the ~~transaction,~~transition ~~consisting~~date ofto ~~approximately~~determine ~~$7.3~~the ~~million~~present invalue ~~normal distributions and $66.6 million~~ of ~~gross~~each ~~proceeds. After the close~~ of the ~~transaction,~~future ~~our ownership interest in CareerBuilder was reduced to approximately 3~~payments.~~0% from 15.0%. We recorded a total of $168.2 million in pre-tax impairment charges on our equity investment in CareerBuilder during 2017 related to this transaction.~~

~~Write-downs~~45

During 2018 and 2017, excluding the CareerBuilder impairments noted above, we recorded write‑downs of zero and $2.4 million, respectively. The write-downs in 2017 were related to various investments and were recorded in impairments related to equity investments in the consolidated statement of operations.

Table of Contents

THE MCCLATCHY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 3029, ~~2018~~2019 AND DECEMBER 3130, ~~2017~~2018

~~Other~~The cost components of our operating and financing leases were as follows:

Three of our wholly-owned subsidiaries have a combined 27.0% general partnership interest in Ponderay Newsprint Company (“Ponderay”). The carrying value of the investment in Ponderay is zero as a result of a write off in 2014 and accumulative losses exceeding our carrying value. No future income or losses from Ponderay will be recorded until our carrying value on our balance sheet is restored through future earnings by Ponderay.


	Year Ended
	December 29,
(in thousands)	2019
Financing lease costs:
Amortization of ROU asset	$	96
Interest on lease liabilities		78
Operating lease costs		13,624
Short-term lease cost		2,119
Variable lease cost		2,444
Sublease income		(5,931)
Total lease costs	$	12,430

WeVariable ~~have~~lease acosts ~~49.5%~~for ~~ownership~~our ~~interest~~leased infacilities ~~The~~consist ~~Seattle~~primarily ~~Times~~of ~~Company~~taxes ~~(“STC”).~~and ~~The~~insurance, ~~carrying~~as ~~value~~well ofas ~~our~~common ~~investment~~area inmaintenance ~~STC~~true-up isassessments ~~zero~~which asare apaid ~~result~~based ofon ~~accumulative~~actual ~~losses~~costs inincurred ~~previous~~by ~~years~~the ~~exceeding~~lessor. We also incur variable mileage costs related to our ~~carrying~~leased ~~value.~~vehicles Noand ~~future~~variable ~~income~~usage orcosts ~~losses~~related ~~from~~to ~~STC~~leased ~~will~~equipment. beVariable ~~recorded~~lease ~~until~~costs ~~our~~also ~~carrying~~include ~~value~~annual onchanges ~~our~~in ~~balance~~monthly ~~sheet~~rent iscosts, ~~restored~~mainly ~~through~~based ~~future~~on ~~earnings~~the byconsumer ~~STC~~price index.

We ~~also~~sublease ~~incur~~office ~~expenses~~space ~~related~~ to ~~the~~other ~~purchase~~companies ofunder ~~products~~non-cancelable ~~and services provided by these companies~~agreements. WeThere ~~purchased~~are ~~some~~no ofresidual ~~our~~value ~~newsprint~~guarantees ~~supply~~or ~~from~~restrictions ~~Ponderay~~or ~~through~~covenants aimposed ~~third-party~~as ~~intermediary~~part ~~and~~of inthese ~~2017~~sublease arrangements, weexcept ~~incurred~~that ~~wholesale~~the ~~fees~~subtenant ~~from~~may ~~CareerBuilder~~not ~~for~~transfer the ~~uploading~~assignment ~~and~~of ~~hosting~~the ofsublease ~~online~~without ~~advertising~~prior onpermission ~~behalf~~or ofpermit ~~our~~liens ~~media~~against ~~companies’~~the ~~advertisers~~office space. WeSome ~~recorded~~sublease ~~these~~agreements ~~expenses~~included ~~for~~options ~~CareerBuilder~~to asrenew aor ~~reduction~~terminate to the ~~associated~~lease, ~~digital~~but ~~classified~~only ~~advertising~~within ~~revenues~~the ~~and~~term ~~expenses~~of ~~related~~the tomaster ~~Ponderay~~lease ~~were~~arrangement ~~recorded~~held inby ~~newsprint expenses~~us.

~~The~~As ~~following~~of ~~table~~December 29, 2019, ~~summarizes~~the ~~expenses~~aggregate ~~incurred~~future ~~for~~lease ~~products~~payments ~~and~~for ~~services~~operating ~~provided~~leases byare ~~unconsolidated~~as ~~companies~~follows:

	Years Ended
	Operating
	December 30,		December 31,
(in thousands)	Leases
(in thousands)	2018		2017
2020		12,879
CareerBuilder, LLC	$	—	$	354
2021		10,776
Ponderay (general partnership)		7,975		9,162
2022		10,947
2023		10,350
2024		9,004
Thereafter		21,858
Total undiscounted cash flows		75,814
Less imputed interest		(20,976)
Total lease liability	$	54,838

~~4. INTANGIBLE~~Our ~~ASSETS~~future ~~AND~~minimum ~~GOODWILL~~lease commitments, net of sub-lease rental income, as of December 30, 2018, under ASC 840, the predecessor to Topic 842, was as follows:


	Operating		Sublease		Net Lease
(in thousands)	Leases		Income		Obligation
2019	$	16,408	$	(4,044)	$	12,364
2020		11,921		(1,306)		10,615
2021		9,797		(379)		9,418
2022		10,178		(334)		9,844
2023		10,160		(232)		9,928
Thereafter		31,139		—		31,139
Total	$	89,603	$	(6,295)	$	83,308

Table of Contents

THE MCCLATCHY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 29, 2019 AND DECEMBER 30, 2018

The weighted average remaining lease terms and discount rates for all of our operating and financing leases were as follows:


	December 29, 2019
	Operating		Financing
	Leases		Lease
Weighted average remaining lease term (years)	6.90		5.84
Weighted average discount rate	9.19	%	10.50	%

Supplemental cash flow information related to our operating and financing leases was as follows:


	Year Ended
	December 29,
(in thousands)	2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflow from operating leases	$	14,198
Operating cash outflow from financing lease		78
Financing cash outflow from financing lease		71
ROU assets obtained in exchange for new operating lease liabilities		3,154

As of December 29, 2019, we do not have any new financing leases or significant additional operating leases that have not yet commenced.

6. INTANGIBLE ASSETS AND GOODWILL

Changes in identifiable intangible assets and goodwill consisted of the following:

	December 31,				Disposition		Impairment		Amortization		December 30,
	December 30,		Disposition		Impairment		Amortization		December 29,
(in thousands)	~~2017~~2018		~~Additions~~Adjustment		~~Adjustment~~Charges		~~Charges~~Expense		~~Expense~~2019		~~2018~~
Intangible assets subject to amortization	$	~~839~~838,~~284~~336	$	—	$	~~(948)~~—	$	—	$	—838,336	$	~~838,336~~
Accumulated amortization		(~~761~~807,~~013~~725)		—		~~948~~—		—(24,153)		(47831,~~660~~878)		~~(807,725)~~
		78,271		—		—		—		(47,660)		30,611
		30,611		—		—		(24,153)		6,458
Mastheads		~~149~~112,~~951~~736		—		—(49,941)		~~(37,215)~~—		—62,795		~~112,736~~
Goodwill		705,174		—		—(284,996)		—		—420,178		~~705,174~~
Total	$	~~933~~848,~~396~~521	$	—	$	—(334,937)	$	(3724,~~215~~153)	$	~~(47~~489,~~660)~~431	$	~~848,521~~

	December 25,				Disposition		Impairment		Amortization		December 31,
	December 31,		Disposition		Impairment		Amortization		December 30,
(in thousands)	~~2016~~2017		~~Additions~~Adjustment		~~Adjustment~~Charges		~~Charges~~Expense		~~Expense~~2018		~~2017~~
Intangible assets subject to amortization	$	839,~~273~~284	$	11(948)	$	—	$	—	$	—838,336	$	~~839,284~~
Accumulated amortization		(~~711~~761,~~723~~013)		—948		—		—(47,660)		(49807,~~290~~725)		~~(761,013)~~
		127,550		11		—		—		(49,290)		78,271
		78,271		—		—		(47,660)		30,611
Mastheads		~~171~~149,~~436~~951		—		—(37,215)		~~(21,485)~~—		—112,736		~~149,951~~
Goodwill		705,174		—		—		—		—705,174		~~705,174~~
Total	$	1933,~~004,160~~396	$	11—	$	—(37,215)	$	(2147,~~485~~660)	$	~~(49~~848,~~290)~~521	$	~~933,396~~

AsImpairment ~~discussed~~of ~~more~~Goodwill ~~fully in Note 1, based on our interim~~ and ~~annual~~Intangible impairment testing of intangible newspaper mastheads we recorded a total of $37.2 million in masthead impairments during 2018. These impairment charges were recorded in other asset write-downs line item on our consolidated statements of operations. Assets

~~Based~~During onthe ~~our~~year ~~annual~~ended ~~impairment~~December 29, 2019, we performed an interim and annual testing of impairment of goodwill and intangible newspaper mastheads atdue ~~December 31~~to the continuing challenging business conditions and changes in our assessment of profitability in future years. The fair values of our reporting units for goodwill impairment testing and individual newspaper mastheads were estimated using the present value of expected future cash flows, ~~2017~~using estimates, judgments and assumptions (see Note 3) that we believe were appropriate in the circumstances. As a result, we recorded goodwill impairment charges of $21258.51 million inand $285.0 million during the third quarter and the full year ended December 29, 2019, respectively. We also recorded an intangible newspaper masthead ~~impairments~~impairment charges of $37.2 million and $49.9 million in third quarter and full year ended December 29, ~~which~~2019, respectively. These impairments were recorded in the goodwill ~~impairment~~ and other asset write-downs line item on our consolidated statements of operations. ~~We had no goodwill impairments as a result of our annual~~

4347

Table of Contents

THE MCCLATCHY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 3029, ~~2018~~2019 AND DECEMBER 3130, ~~2017~~2018

During the third quarter and full year ended December 30, 2018, based on our interim and annual impairment testing as of ~~December~~intangible 31newspaper mastheads, ~~2017~~we recorded $14. 1 million and $37.2 million, respectively, in masthead impairments. These impairment charges were recorded in other asset write-downs line item on our consolidated statements of operations. There were no goodwill impairment charges during 2018.

Accumulated changes in indefinite lived intangible assets and goodwill as of December 3029, ~~2018~~2019, and December 3130, ~~2017~~2018, consisted of the following:

	December 30, 2018						December 31, 2017
	December 29, 2019						December 30, 2018
	Original Gross		Accumulated		Carrying		Original Gross		Accumulated		Carrying
(in thousands)	Amount		Impairment		Amount		Amount		Impairment		Amount
Mastheads	$	684,500	$	(~~571~~621,~~764~~705)	$	~~112~~62,~~736~~795	$	684,500	$	(~~534~~571,~~549~~764)	$	~~149~~112,~~951~~736
Goodwill		3,571,111		(23,~~865~~150,~~937~~933)		~~705~~420,~~174~~178		3,571,111		(2,865,937)		705,174
Total	$	4,255,611	$	(3,~~437~~772,~~701~~638)	$	~~817~~482,~~910~~973	$	4,255,611	$	(3,~~400~~437,~~486~~701)	$	~~855~~817,~~125~~910

Amortization expense was $4724.72 million and $4947.37 million in ~~2018~~2019 and ~~2017~~2018, respectively. A majority of the intangible assets subject to amortization became fully amortized in the second quarter of 2019 and therefore amortization expense during the last six months of 2019 was significantly lower. The estimated amortization expense for the five succeeding fiscal years is as follows:

	Amortization
	Expense
Year	(in thousands)
2019	$	24,095
2020	$	803
2020		803
2021		680
2022		655
2023		667
2024		640

57. LONG‑TERM DEBT

~~All~~In ofconnection ~~our~~with ~~long‑term~~the ~~debt~~Chapter is11 ~~in fixed rate obligations. As of December 30~~Cases, ~~2018,~~we ~~and~~entered ~~December~~into ~~31,~~the ~~2017,~~DIP ~~our~~Credit ~~outstanding long‑term debt consisted of senior secured notes, unsecured notes, and loans~~Agreement. ~~They~~See ~~are~~Note ~~stated net of unamortized debt issuance costs and unamortized discounts, if applicable, totaling $109.~~2 ~~million and $23~~.~~7 million~~ The asDIP ofCredit ~~December~~Agreement ~~30,~~replaces ~~2018,~~the ~~and~~ABL ~~December~~Credit 31Agreement, ~~2017,~~defined ~~respectively. The unamortized discounts include; fair value adjustments on unsecured debt acquired in 2006~~below, asexcept ~~well~~for ascertain ~~the~~provisions ~~Junior~~related ~~Term~~to ~~Loans and~~ the ~~2026~~letters ~~Notes~~of ~~that~~credit ~~included~~under ~~original issue discounts from~~ the ~~2018~~LOC ~~debt~~Facility ~~refinancing~~(defined ~~discussed~~ below).

The commencement of the Chapter 11 Cases constituted an event of default under, and caused the automatic and immediate acceleration of all debt outstanding under or in respect of, a number of our debt agreements. However, any efforts to enforce payment obligations under the debt agreements are automatically stayed as a result of the filing of the Chapter 11 Cases, and the creditors’ rights of enforcement in respect of the debt agreements are subject to the applicable provisions of the Bankruptcy Code.

As of December 29, 2019, all of our long‑term debt is in fixed rate obligations. As of December 29, 2019, and December 30, 2018, our outstanding long‑term debt consisted of senior secured notes, unsecured notes, and loans. They are stated net of unamortized debt issuance costs and unamortized discounts, if applicable, totaling $95.6 million and $107.4 million as of December 29, 2019, and December 30, 2018, respectively. The unamortized discounts include; fair value adjustments on unsecured debt acquired in 2006, as well as the Junior Term Loans and the 2026 Notes that included original issue discounts from the 2018 debt refinancing discussed below. Our ABL Credit Agreement has unamortized debt issuance costs of $1.4 million and $1.8 million as of December 29, 2019, and December 30, 2018, respectively, that are included in other assets on our consolidated balance sheets.

The face values of the notes, as well as the carrying values are as follows:

	Face Value at		Carrying Value
	December 30,		December 30,		December 31,
(in thousands)	2018		2018		2017
ABL Credit Agreement	$	—	$	—	$	—
Notes:
9.000% senior secured notes due in 2022		—		—		433,819
9.000% senior secured notes due in 2026		304,700		287,249		—
7.795% tranche A junior term loan due in 2030		157,083		123,213		—
6.875% senior secured junior lien notes due in 2031		193,466		141,447		—
7.150% debentures due in 2027		7,105		6,824		85,262
6.875% debentures due in 2029		82,764		78,962		262,311
Long-term debt	$	745,118	$	637,695	$	781,392
Less current portion		4,575		4,312		74,140
Total long-term debt, net of current	$	740,543	$	633,383	$	707,252

Table of Contents

THE MCCLATCHY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 3029, ~~2018~~2019 AND DECEMBER 3130, ~~2017~~2018


	Face Value at		Carrying Value
	December 29,		December 29,		December 30,
(in thousands)	2019		2019		2018
ABL Credit Agreement	$	—	$	—	$	—
Notes:
9.000% senior secured notes due in 2026		262,851		249,793		287,249
7.795% junior term loan due in 2030		157,083		126,148		123,213
6.875% senior secured junior lien notes due in 2031		268,423		217,392		141,447
7.150% debentures due in 2027		7,105		6,855		6,824
6.875% debentures due in 2029		7,807		7,484		78,962
Long-term debt	$	703,269	$	607,672	$	637,695
Less current portion		—		—		4,312
Total long-term debt, net of current	$	703,269	$	607,672	$	633,383

Debt Maturities, Repurchases, Redemptions and Extinguishment of Debt

~~During~~In ~~2018~~March ~~and 2017~~2019, we ~~redeemed~~issued or$75.0 ~~repurchased~~million ~~our~~aggregate ~~outstanding~~principal ~~debt~~amount of additional 6.875% senior secured junior lien notes due in 2031 (“2031 Notes”). The additional 2031 Notes were issued in exchange for an equal principal amount of the unsecured 6.875% debentures due in 2029 (“2029 Debentures”). See Junior Lien Term Loan Agreement section below for additional discussion. This exchange was accounted for as ~~follows:~~a modification of debt with no gain or loss recorded in earnings.

	Year Ended
	December 30,		December 31,
	2018		2017
(in thousands)	Face Value		Face Value
9.000% senior secured notes due in 2022	$	439,630	$	51,785
5.750% notes due in 2017		—		16,865
9.000% senior secured notes due in 2026		5,300		—
Total notes matured, repurchased or redeemed	$	444,930	$	68,650

During the year ended December 29, 2019, we redeemed $41.8 million aggregate principal amount of our 9.000% senior secured notes due in 2026 (“2026 Notes”) from the net cash proceeds of certain asset dispositions and from a portion of our excess cash flow (as defined in the 2026 Notes Indenture). As a result of these transactions, we recorded a loss on extinguishment of debt of $2.3 million during the year ended December 29, 2019.

During 2018, we recorded a net gain on the extinguishment of debt of $30.6 million as a result of the following transactions that occurred in 2018, as described below.

During the quarter ended September 30, 2018, in conjunction with ~~the~~our 2018 refinancing discussed below, we redeemed $344.1 million of our 2022 senior secured notes due in 2022 (“2022 Notes”). We also executed a non-cash exchange of most of our 7.150% debentures due November 1, 2027 (“2027 Debentures”) and 6.875% debentures due March 15, 2029 (“2029 Debentures” and together with the 2027 Debentures, the “Debentures”) for new Tranche A and Tranche B Junior Term Loans (as defined below).

The non-cash exchange of the Debentures discussed above was executed with a single lender and its affiliates. We reviewed all of our debt instruments held by this lender prior to and after the refinancing and determined that the new debt instruments were substantially different from the previously held instruments. We concluded that the exchange of the Debentures for the Junior Term Loans should be accounted for as an extinguishment of the Debentures. As a result, during 2018, we recorded a gross gain of $68.7 million, which represents the difference between the carrying value of the Debentures and the fair market value of the Junior Term Loans at time of the exchange. This gain was partially offset by a $32.3 million write-off of the unamortized discounts on the Debentures, unamortized debt issuance costs on the 2022 Notes, and premiums paid on the 2022 Notes for a net gain of $30.6 million.

The net gain on extinguishment of debt recorded on the above transactions was partially offset by a loss on extinguishment of debt recorded in conjunction with our notes redemptions and repurchases during 2018. During 2018, we (i) redeemed $0.5 million of our 2022 Notes through a tender offer that expired on May 22, 2018, (ii) redeemed $75.0 million of our 2022 Notes, which we had previously announced in December 2017, (iii) repurchased $20.0 million of the 2022 Notes through a privately negotiated transaction, and (iv) redeemed $5.3 million of our 2026 Notes, which was previously announced in October 2018. We recorded any applicable premiums that were paid and wrote off the associated debt issuance costs on the above transactions.

~~During~~In December 2018, we entered into an indenture (“2031 Notes Indenture”) in the amount of $193.5 million aggregate principal amount of ~~6.875%~~our ~~Senior Secured Junior Lien Notes due~~ 2031 ~~(“2031~~ Notes”). The 2031 Notes were issued in exchange for an equal principal amount of Tranche B Junior Term Loans (as defined below). These 2031 Notes have substantially the same terms as the Tranche B Junior Term Loan. As a result of this transaction, the Tranche B Junior Term Loan has been fully extinguished.

During 2017, we recorded a loss on the extinguishment of debt of $2.7 million as a result of the following transactions. During 2017, we (i) retired $16.9 million of debt that matured on September 1, 2017; (ii) repurchased a total $50.0 million of our 2022 Notes through privately negotiated transactions; and (iii) redeemed $1.8 million of the 2022 Notes through our offer to purchase or privately negotiated transactions. The notes that matured and the notes that were redeemed as a result of our offer to purchase, were transacted at the principal amount plus accrued and unpaid interest. The 2022 Notes that we repurchased through privately negotiated transactions were repurchased at a premium, and we wrote off the associated debt issuance costs. 49

Table of Contents

THE MCCLATCHY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 3029, ~~2018~~2019 AND DECEMBER 3130, ~~2017~~2018

Debt Refinancing in July 2018

On July 16, 2018, we entered into an Indenture (“2026 Notes Indenture”), among the Company, guarantor subsidiaries of the Company and The Bank of New York Mellon Trust Company, N.A., as trustee and collateral agent (“2026 Notes Trustee”), pursuant to which we issued $310.0 million aggregate principal amount of 9.000% Senior Secured Notes due 2026 (“2026 Notes”) as described more fully under the section “2026 Senior Secured Notes and Indenture” below.

In connection with the issuance of the 2026 Notes and other junior debt instruments described below, we completed a refinancing of all of our 2022 Notes and substantially all of our Debentures, and our revolving credit facilities. On July 16, 2018, we deposited sufficient funds with The Bank of New York Mellon Trust Company, N.A., as trustee (“2022 Notes Trustee”), to pay the redemption price payable for all outstanding 2022 Notes, plus accrued and unpaid interest due on the 2022 Notes to, but excluding, the redemption date. The 2022 Notes were issued under an Indenture, dated as of December 18, 2012, among the Company, guarantor subsidiaries of the Company and the 2022 Notes Trustee (“2022 Notes Indenture”).

As a result of this refinancing, we satisfied and discharged our obligations (subject to certain exceptions) under the 2022 Notes Indenture and the related security documents in accordance with the satisfaction and discharge provisions of the 2022 Notes Indenture. Upon the satisfaction and discharge of the 2022 Notes Indenture on July 16, 2018, all of the liens on the collateral securing the 2022 Notes were released, and we and the guarantors were discharged from our respective obligations under the 2022 Notes and the guarantees thereof.

On July 16, 2018, the 2022 Notes Trustee, at our direction, delivered a notice of redemption to the holders of all $344.1 million in aggregate principal amount of outstanding 2022 Notes. The redemption to the holders was completed on August 15, 2018.

ABL Credit Agreement

OnThe ~~July~~ABL ~~16,~~Credit ~~2018,~~Agreement we entered into ain ~~credit~~July ~~agreement~~2018, among the Company, the subsidiaries of the Company party thereto, as borrowers, the lenders party thereto, and Wells Fargo Bank, N.A. (“Wells Fargo”), as administrative agent (“ABL Credit Agreement”)~~. The ABL Credit Agreement~~ provides for up to $65.0 million secured asset-backed revolving credit facility with a letter of credit subfacility and a swing line subfacility. In addition, the ABL Credit Agreement provides for a $35.0 million cash secured letter of credit facility (“LOC Facility”). The commitments under the ABL Credit Agreement expire July 16, 2023. ~~Our~~As of December 29, 2019, our obligations under the ABL Credit Agreement are guaranteed by us and by certain of our subsidiaries meeting materiality thresholds set forth in the ABL Credit Agreement as described below.

The proceeds of the loans under the ABL Credit Agreement may be used for working capital and general corporate purposes. We have the right to prepay loans under the ABL Credit Agreement in whole or in part at any time without penalty. Subject to availability under the Borrowing Base, amounts repaid may be reborrowed.

As of December 3029, ~~2018~~2019, under the ABL Credit Agreement we had $6136.06 million of available credit. The Borrowing Base is recalculated monthly and is subject to seasonality of advertising sales around year-end holiday periods (and resulting growth in advertising accounts receivable balances). As of December 3029, ~~2018~~2019, we had a $2826.7 million standby letters of credit secured under the LOC Facility. We are required to provide cash collateral equal to 100% of the aggregate undrawn stated amount of each outstanding letter of credit. Cash collateral associated with the LOC Facility is classified in our consolidated balance sheets in other assets. ~~The~~and ~~amounts~~considered ofrestricted ~~standby letters of credit declined to $26~~cash.~~7 million in January 2019.~~

Loans under the ABL Credit Agreement bear interest, at our option, at either a rate based on the London Interbank Offered Rate (“LIBOR”) for the applicable interest period or a base rate, in each case plus a margin. The base rate is the highest of Wells Fargo’s publicly announced prime rate, the federal funds rate plus 0.50% and one-month LIBOR plus 1.0%. The margin ranges from 1.75% to 2.25% for LIBOR loans and 0.75% to 1.25% for base rate loans and is determined based on average excess availability. Interest on the loans is payable quarterly in arrears with respect to base rate loans and at the end of an interest period (and at three -month intervals if the interest period exceeds three months) in the case of LIBOR loans.

Table of Contents

THE MCCLATCHY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 30, 2018 AND DECEMBER 31, 2017

The ABL Credit Agreement requires us, at any time the availability under our revolving credit facility falls below the greater of 12.5% of the total facility size or approximately $8.1 million, to maintain a minimum fixed charge coverage ratio of 1.10 to 1.00 until such time as the availability under our revolving credit facility exceeds such threshold for 30 consecutive days.

The ABL Credit Agreement contains customary affirmative covenants, including covenants regarding the payment of taxes and other obligations, maintenance of insurance, reporting requirements and compliance with applicable laws and regulations. Further, the ABL Credit Agreement contains customary negative covenants limiting our ability and the ability of our subsidiaries, among other things, to incur debt, grant liens, make investments, make certain restricted payments and sell assets, subject to certain exceptions. Upon the occurrence and during the continuance of an event of default, the lenders may declare all outstanding principal and accrued and unpaid interest under the ABL Credit Agreement immediately due and payable and may exercise the other rights and remedies provided for under the ABL Credit Agreement and related loan documents. The events of default under the ABL Credit Agreement include, subject to grace periods in certain instances, payment defaults, cross defaults with certain other indebtedness, breaches of covenants or representations and warranties, change in control of us and certain bankruptcy and insolvency events with respect to us and our subsidiaries meeting a materiality threshold set forth in the ABL Credit Agreement.

In connection with entering into the ABL Credit Agreement and the refinancing of our 2022 Notes as described above, we terminated our Third Amended and Restated Credit Agreement, which had a maturity date of December 18, 2019 and had no borrowings outstanding as of July 16, 2018, the date of termination.

2026 Senior Secured Notes and Indenture

AsWe ~~discussed~~entered ~~above,~~into onthe 2026 Notes Indenture in July 162018, ~~2018~~among the Company, weguarantor ~~entered~~subsidiaries ~~into~~of the Company and The Bank of New York Mellon Trust Company, N.A., as trustee and collateral agent (“2026 Notes ~~Indenture~~Trustee”), ~~and~~pursuant to which we issued $310.0 million aggregate principal amount of ~~the~~ 2026 Notes. inWe aare ~~private~~required ~~placement~~ to ~~qualified~~redeem ~~institutional~~the ~~buyers~~2026 inNotes from the ~~United~~net ~~States~~cash inproceeds ~~reliance~~of oncertain ~~Rule 144A~~asset ~~under~~dispositions ~~the~~and ~~Securities~~from ~~Act~~a portion of ~~1933,~~our asexcess ~~amended~~cash flow (~~“Securities~~as ~~Act”~~defined in the 2026 Notes Indenture). As of December 30, ~~and~~2018, ~~outside~~we determined the ~~United~~excess ~~States~~cash toflow ~~non-U~~due was $4.S.6 ~~persons~~million aggregate inprincipal ~~reliance~~amount onand ~~Regulation S~~as ~~under~~such the ~~Securities~~carrying ~~Act~~value of $4. 3 million was classified as current portion of long-term debt on the

The 2026 Notes mature on July 15, 2026, and bear interest at a rate of 9.000% per annum. Interest on the 2026 Notes is payable semi-annually on January 15 and July 15 of each year, commencing on January 15, 2019. 50

WeTable ~~may redeem the 2026 Notes, in whole or in part, at any time on or after July 15, 2022, at specified redemption prices and may also redeem up to 40%~~ of the aggregate principal amount of the 2026 Notes using the proceeds of certain equity offerings completed before July 15, 2021, at specified redemption prices, in each case, as set forth in the 2026 Notes Indenture. Prior to July 15, 2022, we may also redeem some or all of the 2026 Notes at a redemption price equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, up to, but excluding, the redemption date and a “make-whole” premium. Contents

WeTHE ~~are~~MCCLATCHY required to redeem the 2026 Notes from the net cash proceeds of certain asset dispositions and from a portion of our excess cash flow (as defined in the 2026 Notes Indenture). As of December 30, 2018, we determined the excess cash flow due was $4.3 million which is classified as current portion of long-term debt on the consolidated balance sheet. COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 29, 2019 AND DECEMBER 30, 2018

consolidated balance sheet. The redemption was made on April 5, 2019.

If we experience specified changes of control triggering events, we must offer to repurchase the 2026 Notes at a repurchase price equal to 101% of the principal amount of the 2026 Notes repurchased, plus accrued and unpaid interest, if any, to, but excluding the applicable repurchase date.

The 2026 Notes Indenture contains covenants that, among other things, restrict our ability and our restricted subsidiaries to:

incur certain additional indebtedness and issue preferred stock;

make certain distributions, investments and other restricted payments;

sell assets;

agree to any restrictions on the ability of restricted subsidiaries to make payments to us;

create liens;

merge, consolidate or sell substantially all of our assets, taken as a whole; and

enter into certain transactions with affiliates.

Table of Contents

THE MCCLATCHY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 30, 2018 AND DECEMBER 31, 2017

These covenants are subject to a number of other limitations and exceptions set forth in the 2026 Notes Indenture.

The 2026 Notes Indenture provides for customary events of default, including, but not limited to, failure to pay principal and interest, failure to comply with covenants, agreements, or conditions, and certain events of bankruptcy or insolvency involving us and our significant subsidiaries. In the case of an event of default arising from specified events of bankruptcy or insolvency, all outstanding 2026 Notes under the 2026 Notes Indenture will become due and payable immediately without further action or notice. If any other event of default under the 2026 Notes Indenture occurs or is continuing, the 2026 Notes Trustee or holders of at least 25% in aggregate principal amount of the then outstanding 2026 Notes under the 2026 Notes Indenture may declare all of such 2026 Notes to be due and payable immediately.

~~Fifth~~The ~~Supplemental~~2026 ~~Indenture~~Notes mature on July 15, 2026, and bear interest at a rate of 9.000% per annum. Interest on the 2026 Notes is payable semi-annually in arrears on January 15 and July 15 of each year and commenced on January 15, 2019.

On2031 ~~July~~Senior ~~13,~~Secured ~~2018,~~Junior inLien ~~connection~~Notes ~~with~~and ~~our outstanding Debentures, we entered into a Fifth Supplemental~~ Indenture (“Supplemental Indenture”) with The Bank of New York Mellon Trust Company, N.A., as trustee (“Debentures Trustee”), supplementing the original Indenture which proceeded the issuance of the Debentures in 1997.

~~The~~Under ~~Supplemental~~the ~~Indenture~~terms ~~was~~of ~~entered~~the ~~into~~Junior Term Loan Agreement (discussed below), affiliates of Chatham Asset Management, LLC (“Chatham”) could elect to convert up to $75.0 million in ~~connection~~aggregate principal amount of 2029 Debentures owned by them into an equal principal amount of Tranche B Junior Term Loans or notes with ~~our~~terms ~~refinancing~~substantially similar to the Tranche B Junior Term Loans upon written notice to us. As discussed previously, in March 2019, Chatham notified us of ~~existing~~their ~~indebtedness~~election to ~~amend~~convert ~~the~~approximately $75.0 million aggregate principal amount of 2029 Debentures ~~Indenture~~to additional 2031 Notes. The additional 2031 Notes have identical terms, other than with respect to ~~eliminate~~the ~~certain~~date ~~restrictive~~of ~~covenants~~issuance, to the 2031 Notes and will be treated as a single class for all purposes under the applicable indenture, together referred to hereafter as the 2031 Notes. These 2031 Notes have substantially the same terms as the Tranche A Junior Term Loan.

~~Junior~~We ~~Lien~~have ~~Term~~the ~~Loan~~right ~~Agreement~~to ~~and~~prepay notes under the 2031 Notes, in whole or in part, at any time, at a price equal to 100% of the principal amount thereof, plus a “make-whole” premium and accrued and unpaid interest, if any. Amounts prepaid may not be reborrowed.

OnThe ~~July~~2031 ~~16,~~Notes ~~2018,~~bear weinterest ~~entered~~at ~~into~~ a ~~Junior~~rate ~~Lien~~per ~~Term~~annum ~~Loan Credit Agreement, among the Company, the guarantors party thereto, the lenders party thereto and The Bank~~ of ~~New York Mellon, as administrative agent and collateral agent (“Junior Term Loan Agreement”)~~6. ~~The Junior Term Loan Agreement provided for a $157~~875%.1 ~~million~~Interest ~~secured~~on ~~term~~the loan ~~(“Tranche~~is Apayable ~~Junior~~semi-annually ~~Term~~in ~~Loans”)~~arrears ~~and a $193.5 million term loan (“Tranche B Junior Term Loans” and together with the Tranche A Junior Term Loans, “Junior Term Loans”). The Tranche A Junior Term Loans mature~~ on ~~July~~January 15, ~~2030~~ and ~~the Tranche B Junior Term Loans had a maturity date of~~ July 15, ~~2031. Our obligations under the Junior Term Loan Agreement are guaranteed by our subsidiaries that guarantee the 2026 Notes. Under the terms~~ of ~~the~~each ~~Junior~~year ~~Term~~and ~~Loan~~commenced ~~Agreement,~~on ~~affiliates~~January ~~of Chatham Asset Management~~15, ~~LLC may elect to convert up to $75~~2019.0 million in aggregate principal amount of 2029 Debentures owned by them into an equal principal amount of Tranche B Junior Term Loans or notes with terms substantially similar to the Tranche B Junior Term Loans upon written notice to us.

~~As noted above, in December 2018 Chatham elected to exchange the full amount of $193.5 million of the Tranche B~~ Junior ~~Term~~Lien ~~Loans for the 2031 Notes. As such the Tranche B Junior~~ Term ~~Loans~~Loan ~~were~~Agreement ~~fully extinguished at the end of 2018.~~

OnWe ~~July~~entered ~~16,~~into ~~2018,~~a ~~the~~Junior ~~$82.1~~Lien ~~million~~Term inLoan ~~aggregate~~Credit ~~principal~~Agreement ~~amount of 2027 Debentures and $193.5 million~~ in ~~aggregate~~July ~~principal~~2018, ~~amount~~among ofthe ~~2029~~Company, ~~Debentures~~the ~~were~~guarantors ~~exchanged~~party ~~for~~thereto, the ~~Junior~~lenders ~~Term~~party ~~Loans.~~thereto and The ~~cash~~Bank ~~proceeds~~of ~~from~~New ~~the~~York ~~exchange~~Mellon, ~~were~~as ~~used~~administrative toagent ~~redeem~~and acollateral ~~portion~~agent of(“Junior ~~the~~Term ~~2022~~Loan ~~Notes,~~Agreement”). ~~and~~The toJunior ~~pay~~Term ~~fees,~~Loan ~~costs,~~Agreement ~~and~~provided ~~expenses~~for ina ~~connection~~$157.1 ~~with~~million ~~our~~secured ~~debt~~term ~~refinancing.~~loan As(“Junior ~~discussed~~Term ~~above,~~Loan”) ~~we determined~~ that ~~the~~matures ~~instruments~~on ~~held~~July ~~by the single lender~~15, ~~when~~2030. ~~combined,~~Our ~~had~~obligations ~~substantially~~under ~~different~~the ~~cash~~Junior ~~flows~~Term ~~from~~Loan ~~one~~Agreement ~~another~~are ~~and~~guaranteed ~~therefore~~by weour ~~accounted~~subsidiaries ~~for~~that guarantee the ~~exchange~~2026 ~~as a debt extinguishment~~Notes.

We have the right to prepay loans under the Junior Term Loan Agreement, in whole or in part, at any time, at specified prices that decline over time, plus accrued and unpaid interest, if any, in the case of Tranche A Junior Term Loans. We have the right to prepay notes under the 2031 Notes, in whole or in part, at any time, at a price equal to 100% of the principal amount thereof, plus a “make-whole” premium and accrued and unpaid interest, if any. Amounts prepaid may not be reborrowed. 51

Tranche A Junior Term Loans and the 2031 Notes bear interest at a rate per annum equal to 7.795% and 6.875%, respectively. Interest on the loans and notes is payable semi-annually in arrears on January 15 and July 15 of each year, commencing on January 15, 2019.

The Junior Term Loan Agreement and the 2031 Notes contains customary affirmative covenants, including covenants

Table of Contents

THE MCCLATCHY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 3029, ~~2018~~2019 AND DECEMBER 3130, ~~2017~~2018

~~regarding~~ We have the ~~payment~~right ofto ~~taxes~~prepay ~~and~~loans ~~other~~under ~~obligations, maintenance of insurance, reporting requirements and compliance with applicable laws and regulations. Further,~~ the Junior Term Loan Agreement, ~~and~~in ~~2031~~whole ~~Notes~~or ~~contains~~in ~~customary negative covenants limiting the ability of us and our subsidiaries~~part, ~~among~~at ~~other~~any ~~things~~time, toat ~~incur~~specified ~~debt,~~prices ~~grant~~that ~~liens,~~decline ~~make~~over ~~investments~~time, ~~make~~plus ~~certain~~accrued ~~restricted payments~~ and ~~sell~~unpaid ~~assets~~interest, ~~subject~~if toany, ~~certain exceptions. Upon the occurrence and during the continuance~~ of ~~an event of default,~~ the ~~lenders may declare all outstanding principal and accrued and unpaid interest under the~~ Junior Term Loan. ~~Agreement~~We ~~immediately~~have ~~due and payable and may exercise~~ the ~~other~~right ~~rights~~to ~~and~~prepay ~~remedies~~notes ~~provided for~~ under the ~~Junior~~2031 ~~Term~~Notes, ~~Loan~~in ~~Agreement~~whole ~~and~~or ~~related~~in ~~loan~~part, ~~documents.~~at Inany ~~general~~time, ~~the~~at ~~affirmative~~a ~~and~~price ~~negative~~equal ~~covenants~~to 100% of the ~~Junior~~principal ~~Term~~amount ~~Loan~~thereof, ~~Agreement~~plus ~~and~~a ~~the~~“make-whole” ~~2031~~premium ~~Notes~~and ~~are~~accrued ~~substantially~~and ~~the~~unpaid ~~same~~interest, asif ~~the~~any. ~~covenants~~Amounts inprepaid ~~the~~may ~~2026~~not ~~Notes~~be ~~Indenture~~reborrowed.

The Junior Term Loan bears interest at a rate per annum equal to 7.795% payable semi-annually in arrears on January 15 and July 15 of each year, commencing on January 15, 2019.

The Junior Term Loan Agreement and the 2031 Notes contains customary affirmative covenants, including covenants regarding the payment of taxes and other obligations, maintenance of insurance, reporting requirements and compliance with applicable laws and regulations. Further, the Junior Term Loan Agreement and 2031 Notes contains customary negative covenants limiting the ability of us and our subsidiaries, among other things, to incur debt, grant liens, make investments, make certain restricted payments and sell assets, subject to certain exceptions. Upon the occurrence and during the continuance of an event of default, the lenders may declare all outstanding principal and accrued and unpaid interest under the Junior Term Loan Agreement immediately due and payable and may exercise the other rights and remedies provided for under the Junior Term Loan Agreement and related loan documents. In general, the affirmative and negative covenants of the Junior Term Loan Agreement are substantially the same as the covenants in the 2026 Notes Indenture.

Other Debt

After giving effect to the ~~Junior~~2031 ~~Term Loan Agreement~~Notes, we have $7.1 million aggregate principal amount of 2027 Debentures and $827.8 million aggregate principal amount of 2029 Debentures outstanding as of December 3029, ~~2018~~2019.

Maturities

The following table presents the approximate annual maturities of outstanding long‑term debt as of December 3029, ~~2018~~2019, based upon our required payments, for the next five years and thereafter:

	Payments
Year	(in thousands)
2019	$	4,575
2020	$	—
2020		—
2021		—
2022		—
2023		—
Thereafter		740,543
2024		—
Debt principal	$	745,118
Thereafter		703,269
Debt principal	$	703,269

68. INCOME TAXES

Income tax provision (benefit) consisted of:

	Years Ended
	December 30,		December 31,
	December 29,		December 30,
(in thousands)	~~2018~~2019		~~2017~~2018
Current:
Federal	$	~~5,546~~(24)	$	155,~~042~~546
State		(~~429~~507)		~~4,017~~(429)
Deferred:
Federal		(~~961~~4,729)		~~80,293~~(961)
State		(61,~~326~~019)		(6,~~107~~326)
Income tax provision (benefit)	$	(26,~~170~~279)	$	~~105~~(2,~~459~~170)

As of December 30, 2018, we completed our accounting for the tax effects of enactment of the Tax Act and noted no significant adjustments were required. During 2018 and 2017, we re-measured certain deferred tax assets and liabilities based on the rates at which we expect them to reverse in the future. 52

Table of Contents

THE MCCLATCHY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 3029, ~~2018~~2019 AND DECEMBER 3130, ~~2017~~2018

As of December 30, 2018, we completed our accounting for the tax effects of enactment of the Tax Act and noted no significant adjustments were required. During 2019 and 2018, we re-measured certain deferred tax assets and liabilities based on the rates at which we expect them to reverse in the future.

The effective tax rate expense (benefit) and the statutory federal income tax rate are reconciled as follows:

	Years Ended
	December 30,		December 31,
	December 29,		December 30,
	2018		2017
	2019		2018
Statutory rate	(21.0)	%	(3521.0)	%
State taxes, net of federal benefit	(40.3)1		2.(4.3)
Changes in estimates	~~0.8~~—		—0.8
Changes in unrecognized tax benefits	(40.3)		0(4.63)
Other	20.85		02.38
Impact of valuation allowance	236.05		8023.0
Impact of tax rate changes	—		~~(2.4)~~—
Stock compensation	0.3		0.6
Goodwill impairment	12.6		—
Effective tax rate	(2.7)	%	46.5	%
Stock compensation	0.1		0.3
Effective tax rate	(1.5)	%	(2.7)	%

The components of deferred tax assets and liabilities consisted of the following:

	December 30,		December 31,
	December 29,		December 30,
(in thousands)	~~2018~~2019		~~2017~~2018
Deferred tax assets:
Compensation benefits	$	~~157~~150,~~715~~893	$	~~144~~157,~~084~~715
State taxes		1,~~909~~533		21,~~861~~909
State loss carryovers		49,~~006~~398		4,~~338~~006
Investments in unconsolidated subsidiaries		4,242		4,981
Federal loss carryovers		4,899		—
Deferred interest expense		15,342		—
Investments in unconsolidated subsidiaries		4,478		4,242
Other		3,407		2,945
Deferred interest expense		33,069		15,342
Total deferred tax assets		186,621		159,209
Leases		15,564		—
Valuation allowance		(143,764)		(109,718)
Other		3,353		3,407
Net deferred tax assets		42,857		49,491
Total deferred tax assets		223,187		186,621
Valuation allowance		(176,069)		(143,764)
Net deferred tax assets		47,118		42,857
Deferred tax liabilities:
Depreciation and amortization		4528,~~239~~386		6845,~~665~~239
Debt discount		17,~~876~~874		417,~~512~~876
Deferred gain on debt		—		4,376
Leases ROU Asset		15,419		—
Other		~~517~~466		—517
Total deferred tax liabilities		6362,~~632~~145		7763,~~553~~632
Net deferred tax assets (liabilities)	$	(20,775)	$	(28,062)
Net deferred tax liabilities	$	(15,027)	$	(20,775)

The valuation allowance increased by $3432.03 million and $~~105~~34.80 million in ~~2018~~2019 and ~~2017~~2018, respectively.

The timing of recording or releasing a valuation allowance requires significant judgment. A valuation allowance is required when it is more-likely-than-not that all or a portion of deferred tax assets may not be realized. Establishment and removal of a valuation allowance requires us to consider all positive and negative evidence and to make a judgmental decision regarding the timing and amount of valuation allowance required as of a reporting date. The assessment ~~takes~~considers ~~into account~~ expectations of future taxable income or loss, available tax planning strategies and the reversal of temporary differences. The development of these expectations involves the use of estimates such as operating profitability. The weight given to the evidence is commensurate with the extent to which it can be objectively verified.

We performed an assessment of the deferred tax assets quarterly during ~~the~~2019 ~~third~~ and ~~fourth quarters of 2017~~2018, weighing the positive and negative evidence as outlined in ASC 740, Income Taxes. As we have incurred three years of cumulative pre-tax losses, such objective negative evidence limits our ability to give significant weight to other positive subjective evidence, such as projections for future growth and profitability. Accordingly, we recorded a valuation allowance charge of $192.3 million for 2017, which was recorded in income tax (benefit) expense on our consolidated statements of operations. During the quarter ended December 31, 2017, as a result of the Tax Act, principally the change to allow an indefinite carryforward period of net operating losses, we reassessed our analysis and decreased our related valuation allowance by $53.6 million. As of December 31, 2017, our valuation allowance against a majority of our net deferred tax assets was $109.7 million. As of December 30, 2018, we performed a review of our deferred tax assets and liabilities as

5053

Table of Contents

THE MCCLATCHY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 3029, ~~2018~~2019 AND DECEMBER 3130, ~~2017~~2018

~~well~~objective asnegative ~~the~~evidence ~~corresponding~~limits ~~valuation~~our ~~allowance~~ability ~~amounts. Based~~to ongive ~~this~~significant ~~review~~weight to other positive subjective evidence, wesuch ~~recorded~~as anprojections ~~additional~~for ~~$34~~future growth and profitability.0 ~~million~~As of December 30, 2018, our valuation allowance ~~due~~against toa ~~changes~~majority toof ~~the~~our deferred tax ~~balances~~assets ~~related~~was to$143.8 ~~mastheads~~million. For the year ended December 29, ~~tax~~2019, ~~amortizable~~we ~~goodwill~~recorded ~~and~~valuation ~~pension~~allowance charges of $32.3 million due to changes to the deferred tax balances. Of this amount, $2028.45 million was included as income tax expense and $133.78 million was recorded as an offset to other comprehensive income for changes related to our pension deferred tax asset . Our valuation allowance as of December 29, 2019, was $176.1 million.

We will continue to maintain a valuation allowance against our deferred tax assets until it is more-likely-than-not that these assets will be realized in the future ~~under generally accepted accounting standards~~. If sufficient positive evidence, ~~such as three-year cumulative pre-tax income,~~ arises in the future that provides an indication that all or a portion of the deferred tax assets meet the more-likely-than-not standard, the valuation allowance may be reversed, in whole or in part, in the period that such determination is made.

As of December 3029, ~~2018~~2019, we have net operating loss federal carryforwards totaling approximately $23.3 million, which do not expire. As of December 29, 2019, we have net operating loss carryforwards in various states totaling approximately $~~281~~395.32 million, which expire in various years between 2024 and 2038, if not used. We also have state tax credits of $0.54 million which expire between 2025 and 2028, if not utilized.

As of December 3029, ~~2018~~2019, we had approximately $1713.1 9 million of uncertain tax positions consisting of approximately $1311.83 million in gross unrecognized tax benefits (primarily state tax positions before the offsetting effect of federal income tax) and $32.36 million in gross accrued interest and penalties. If recognized, approximately $65.94 million of the net unrecognized tax benefits would impact the effective tax rate, with the remainder impacting other accounts, primarily deferred taxes. It is reasonably possible that up to $12.92 million reduction of unrecognized tax benefits and related interest may occur within the next 12 months as a result of the expiration of statutes of limitations.

We record interest on unrecognized tax benefits as a component of interest expense, while penalties are recorded as part of income tax expense. Related to the unrecognized tax benefits noted below, we recorded interest expense (benefit), of ($0.65) million and ($10.16) million for ~~2018~~2019 and ~~2017~~2018, respectively. We recorded penalty expense (benefit) of ($0.32) million and ($0.3) million during ~~2018~~2019 and ~~2017~~2018, respectively. Accrued interest and penalties at December 3029, ~~2018~~2019 and December 3130, ~~2017~~2018 were approximately $32.36 million and $43.3 million, respectively.

A reconciliation of the beginning and ending amount of unrecognized tax benefits consists of the following:

	Years Ended
	December 30,		December 31,
	December 29,		December 30,
(in thousands)	~~2018~~2019		~~2017~~2018
Balance at beginning of fiscal year	$	2013,~~764~~822	$	1620,~~477~~764
Increases based on tax positions in prior year		84231		~~3,299~~84
Decreases based on tax positions in prior year		(42,~~261~~296)		—(4,261)
Increases based on tax positions in current year		~~1,124~~801		1,~~642~~124
Settlements		~~(511)~~—		(~~164~~511)
Lapse of statute of limitations		(31,~~378~~277)		(~~490~~3,378)
Balance at end of fiscal year	$	1311,~~822~~281	$	2013,~~764~~822

As of December 3029, ~~2018~~2019, the following tax years and related taxing jurisdictions were open:

	Open	Years Under
Taxing Jurisdiction	Tax Year	Exam
Federal	~~2015~~2016-~~2018~~2019	—
California	~~2014~~2015-~~2018~~2019	—
Other States	2006-~~2018~~2019	—2015-2017

~~7. EMPLOYEE BENEFITS~~54

Table of Contents

THE MCCLATCHY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 3029, ~~2018~~2019 AND DECEMBER 3130, ~~2017~~2018

We also have a limited number of supplemental retirement plans to provide certain key employees and retirees with additional retirement benefits. These plans are funded on a pay‑as‑you‑go basis and the accrued pension obligation is largely included in other long‑term obligations. We paid $8.9 ~~million and $8~~.~~7 million~~ EMPLOYEE ~~in 2018 and 2017, respectively, for these plans. We also provide or subsidize certain life insurance benefits for employees.~~BENEFITS

~~The~~We ~~following~~maintain ~~tables~~a ~~provide~~

Filing Compare · MCCLATCHY CO