- Growth rate has been stunted in the employment category due to the revised CareerBuilder affiliate agreements.
- Excluding online employment advertising, online advertising revenue grew 13%, reflecting the underlying strength of this business.
- Online advertising represented 8.8% of total advertising revenues and through the first six months of the year.

- The company continues to roll out new and innovative products and content on its websites, which are well-received by users as reflected by growing audiences.
- Average monthly unique visitors grew 22% and page views were up 23.4%.

Direct marketing advertising revenues declined 3.9%, reflecting the overall slow advertising environment.

- The company extends newspaper franchises by supplementing the mass reach of the newspaper with direct marketing and direct mail products so that advertisers can both achieve broad appeal and capture targeted audiences with one-stop shopping.
- The company believes it will have growth in direct marketing advertising as the overall advertising environment improves, and through this June these revenues represent 8% of total advertising revenues.

- On a pro forma basis, daily circulation declined 3.7% and Sunday was down 4.4% as the company continues to cull out third-party and outlying circulation that is not valued by advertisers.
- Strategy is aimed at growing and retaining quality circulation at newspapers while rapidly expanding the audiences served online. This integrated approach results in growth in total audience throughout markets and means the company delivers a greater reach to serve advertisers.

Total cash expenses were down $59 million, or 12.2% on a pro forma basis, as the company continues to reign in costs during this tough revenue environment and as it realizes synergies from the acquisition.

Synergies accounted for less than half of expense decline.

- Compensation costs on a pro forma basis were down 12.5%.
- Salaries declined 12.4% and FTEs were down 6.9%.
- Various accruals made by Knight Ridder in the June 2006 period have affected the pro forma comparisons. So while compensation will continue to trend down, this rate is not the run-rate that you could expect going forward.

Newsprint and supplement costs were down 17% on a pro forma basis, reflecting both lower newsprint prices and usage and finally all other expenses decreased 8.6% on a pro forma basis.

- Depreciation and amortization expense increased $28.4 million, due primarily to the additional assets and purchase price accounting related to the acquisition.
- Net interest costs from continuing operations were $49.6 million.

- The company’s net debt balance at the end of the quarter was $2.68 billion, down $79 million from the end of the first quarter.
- Effective interest rate was about 6.4%.

- The company is in the midst of several deleveraging transactions related to the sale of certain assets and property. With these transactions and free cash flow generated by operations, it expects to reduce debt by approximately $600 million to $700 million over the next 18 months.

Third Quarter 2007 Outlook

- The company expects continued declines in real estate advertising, particularly in California and the Florida newspapers.
- The company expects no substantial improvement in advertising trends before the fourth quarter of 2007 and expects that revenues will likely still be negative in that quarter.

Fiscal 2007 Outlook

- The company is working hard to offset the impact of revenue declines by exerting strong cost discipline. The company expects to record losses from equity investments that reflect the impact of lower newsprint prices and higher raw material prices on the results of both SP Newsprint Company and Ponderay Newsprint Company.
- The company expects total equity losses to equate to 7 cents per share in the third quarter largely from these equity investments. As a result of the recently announced strategic alternative review at SP Newsprint, the company is seeking to monetize this asset for shareholders and end the equity losses from that investment.

Key questions from the second quarter earnings call conducted by The McClatchy Company on July 19, 2007.

John Janedis (Wachovia): Can you give a sense of the percentage of revenues in Florida and California that are related to the real estate weakness?

Gary B. Pruitt: The real estate has a ripple effect beyond just real estate itself.

Frank Whittaker: There are other categories that are directly related to the real estate slump, notably in retail, home improvement and furniture categories. We do not have good data on Florida because as we have included them in our financial systems it will take a full year before we have that a year-over-year comparison. In California, furniture is down almost 17% or $800,000 and the category of home improvement is down almost 16%, or $600,000.