The McClatchy Company (NYSE: MNI) continues to feel the negative impact of its 2006 Knight Ridder acquisition, announcing today that is writing down $1.37 billion—one-third attributed to the way stock was valued for that transaction, the rest to acknowledge declining values of its properties. The breakdown: $1.18 billion to goodwill, $250.4 million to the value of certain newspaper assets (newspaper titles and website domain names) and $84.6 million to investments in unconsolidated subsidiaries and other items.

McClatchy chairman and CEO Gary Pruitt explained the charge in a statement: “The challenging business environment, coupled with the drag on our stock price, has resulted in our taking an impairment charge to write down the value of goodwill, mastheads of certain newspapers, and other assets on the company’s balance sheet in the third quarter.” He stressed that the move does not affect operations or the ability to pay down debt.

Pruitt said the company has been harder hit than most by the real estate downturn, “because of our operations in California and Florida, the epicenters of the sub-prime lending practices.”

Q3 results: With the writedown, McClatchy reported after-tax losses from continuing operations of $1.35 billion; that works out to a loss of $16.40 a share. Revenues dropped 9 .2 percent to $540.3 million, from $595.1 million in Q306.  Advertising revenues were down 9.8 percent to $457 million, from $506.7 million in the same quarter last year. By comparison, advertising revenues in California and Florida declined 18 percent.

—Online national advertising was off $2.7 million while online classifieds increased $1.5 million, 4.8 percent. Online automotive grew 20 percent, while print automotive dropped by nearly as much. Online employment ads showed the smallest increase—just 1.7 percent—while print dropped 22.4 percent. Overall, online advertising was up a mere 1.4 percent, totaling $41.6 million.

10Q: The details of the writedown and the Q3 earnings can be found in the 10Q filed Thursday.