-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UyHFgme+mlr5jgQHhJaqSNhgCRlml2nu0bFRitKnxHawTTfqZR70a44v5mYnEYZz uWuSXNNHZjnBCQQGO7I5FA== 0000205520-95-000019.txt : 19951124 0000205520-95-000019.hdr.sgml : 19951124 ACCESSION NUMBER: 0000205520-95-000019 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19950924 FILED AS OF DATE: 19951107 SROS: BSE SROS: CSE SROS: CSX SROS: NYSE SROS: PHLX FILER: COMPANY DATA: COMPANY CONFORMED NAME: KNIGHT RIDDER INC CENTRAL INDEX KEY: 0000205520 STANDARD INDUSTRIAL CLASSIFICATION: 2711 IRS NUMBER: 380723657 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-07553 FILM NUMBER: 95587874 BUSINESS ADDRESS: STREET 1: ONE HERALD PLZ CITY: MIAMI STATE: FL ZIP: 33132 BUSINESS PHONE: 3053763800 MAIL ADDRESS: STREET 1: ONE HERALD PLZ CITY: MIAMI STATE: FL ZIP: 33132 FORMER COMPANY: FORMER CONFORMED NAME: KNIGHT RIDDER NEWSPAPERS INC /FL/ DATE OF NAME CHANGE: 19860707 10-Q 1 KNIGHT-RIDDER, INC. FORM 10-Q 9/24/95 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR QUARTER ENDED September 24, 1995 ------------------ COMMISSION FILE NUMBER 1-7553 ------ KNIGHT-RIDDER, INC. - - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) FLORIDA 38-0723657 - - -------------------------------------------------------------------------------- (State of Incorporation) (I.R.S. Employer Identification No.) ONE HERALD PLAZA, MIAMI, FLORIDA 33132 ---------------------------------------- (Address of principal executive offices) (305) 376-3800 - - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) NOT APPLICABLE - - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report.) 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, and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date. Common Stock, $.02 1/12 Par Value - 48,514,399 shares as of October 29, 1995. -2- 2 Table of Contents for 10-Q
Page ---- PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Consolidated Statement of Income 4 Consolidated Balance Sheet 5 Consolidated Statement of Cash Flows 6 Notes to Consolidated Financial Statements 7-8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9-11 PART II. OTHER INFORMATION Item 6 - Exhibits and Reports on 8-K 12 SIGNATURE 12 Exhibit 11 Statement Re: Computation of Per Share Earnings 13 Exhibit 27 Financial Data Schedule 14 Exhibit 99 Additional Exhibits 15-17
-3- 3 Consolidated Statement Of Income (Unaudited, in thousands of dollars, except share data)
Quarter Ended Three Quarters Ended Four Quarters Ended -------------------- --------------------- --------------------- Sept. 24 Sept. 25 Sept. 24 Sept. 25 Sept. 24 Sept. 25 1995 1994 1995 1994 1995 1994 ---- ---- ---- ---- ---- ---- OPERATING REVENUE Newspapers Advertising Retail $172,606 $182,220 $ 554,482 $ 551,086 $ 795,872 $ 781,011 General 37,729 40,337 132,051 132,871 183,649 177,506 Classified 167,433 155,511 509,922 456,594 659,756 587,110 -------- -------- ---------- ---------- ---------- ---------- Total 377,768 378,068 1,196,455 1,140,551 1,639,277 1,545,627 Circulation 117,549 120,475 363,187 362,790 484,978 483,616 Other 20,658 15,990 59,192 47,192 78,968 62,873 -------- -------- ---------- ---------- ---------- ---------- Total Newspapers 515,975 514,533 1,618,834 1,550,533 2,203,223 2,092,116 Business Information Services 122,019 128,080 381,214 384,493 510,760 495,558 -------- -------- ---------- ---------- ---------- ---------- Total Operating Revenue 637,994 642,613 2,000,048 1,935,026 2,713,983 2,587,674 -------- -------- ---------- ---------- ---------- ---------- OPERATING COSTS Labor and employee benefits 269,529 269,568 823,608 805,947 1,107,078 1,069,623 Newsprint, ink and supplements 111,295 81,801 314,077 241,113 408,866 328,664 Other operating costs 200,771 178,539 575,483 540,804 777,733 710,460 Depreciation and amortization 37,318 37,428 112,078 111,789 149,616 146,936 -------- -------- ---------- ---------- ---------- ---------- Total Operating Costs 618,913 567,336 1,825,246 1,699,653 2,443,293 2,255,683 -------- -------- ---------- ---------- ---------- ---------- OPERATING INCOME 19,081 75,277 174,802 235,373 270,690 331,991 -------- -------- ---------- ---------- ---------- ---------- OTHER INCOME (EXPENSE) Interest expense (12,791) (11,394) (37,804) (33,578) (48,811) (45,280) Interest expense capitalized 496 249 1,107 312 1,269 364 Interest income 2,252 1,510 6,655 4,125 8,600 5,370 Equity in earnings of unconsolidated companies and joint ventures 5,592 733 13,936 925 20,423 3,948 Minority interests in earnings of consolidated subsidiaries (2,007) (2,292) (5,990) (7,395) (8,245) (10,327) Other, net (528) (997) 83,576 248 82,416 421 -------- -------- ---------- ---------- ---------- ---------- Total (6,986) (12,191) 61,480 (35,363) 55,652 (45,504) -------- -------- ---------- ---------- ---------- ---------- Income before income taxes 12,095 63,086 236,282 200,010 326,342 286,487 Income taxes 5,505 25,843 99,899 82,274 136,795 117,546 -------- -------- ---------- ---------- ---------- ---------- INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 6,590 37,243 136,383 117,736 189,547 168,941 Cumulative effect of change in accounting principle for contributions (7,320) (7,320) -------- -------- ---------- ---------- ---------- ---------- Net income $ 6,590 $ 37,243 $ 129,063 $ 117,736 $ 182,227 $ 168,941 ======== ======== ========== ========== ========== ========== EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE Income before cumulative effect of change in accounting principle $ 0.13 $ 0.69 $2.71 $ 2.16 $ 3.70 $ 3.09 Cumulative effect of change in accounting principle (0.15) (0.14) -------- -------- ---------- ---------- ---------- ---------- Net income $ 0.13 $ 0.69 $ 2.56 $ 2.16 $ 3.56 $ 3.09 ======== ======== ========== ========== ========== ========== DIVIDENDS DECLARED PER COMMON SHARE $ 0.37 $ 0.37 * $ 1.11 $ 1.09 $ 1.48 $ 1.44 ======== ======== ========== ========== ========== ========== AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING (000s) 49,414 53,825 50,453 54,535 51,213 54,688 ======== ======== ========== ========== ========== ==========
* Excludes dividend of $.37 per common share which was declared June 28, 1994, and was presented in the interim financial information for the quarter ended June 26, 1994. See "Notes to Consolidated Financial Statements" and statistical data on pages 7 and 8. -4- 4 Consolidated Balance Sheet (Unaudited, in thousands of dollars, except share data)
September 24 December 25 September 25 1995 1994 1994 ---- ---- ---- ASSETS CURRENT ASSETS Cash, including short-term cash investments of $150 in 1995, $150 in December 1994 and $1,498 in September 1994 $ 17,653 $ 9,253 $ 15,853 Accounts receivable, net of allowances of $14,053 in 1995, $13,728 in December 1994 and $15,038 in September 1994 310,470 317,687 285,773 Inventories 63,357 39,555 40,278 Other current assets 87,541 56,309 69,764 ----------- ----------- ----------- Total Current Assets 479,021 422,804 411,668 ----------- ----------- ----------- INVESTMENTS AND OTHER ASSETS Equity in unconsolidated companies and joint ventures 307,258 293,205 287,762 Other 242,545 190,515 185,435 ----------- ----------- ----------- Total Investments and Other Assets 549,803 483,720 473,197 ----------- ----------- ----------- PROPERTY, PLANT AND EQUIPMENT Land and improvements 66,918 66,950 66,977 Buildings and improvements 379,967 383,696 378,976 Equipment 1,183,398 1,209,360 1,196,908 Construction and equipment installations in progress 45,236 17,099 18,976 ----------- ----------- ----------- 1,675,519 1,677,105 1,661,837 Less accumulated depreciation 862,050 844,593 827,392 ----------- ----------- ----------- Net Property, Plant and Equipment 813,469 832,512 834,445 ----------- ----------- ----------- EXCESS OF COST OVER NET ASSETS ACQUIRED Less accumulated amortization of $198,514 in 1995, $182,402 in December 1994 and $176,885 in September 1994 685,635 708,153 712,794 ----------- ----------- ----------- Total $ 2,527,928 $ 2,447,189 $ 2,432,104 =========== =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 146,830 $ 136,817 $ 115,560 Accrued expenses and other liabilities 109,271 98,993 102,671 Accrued compensation and amounts withheld from employees 87,244 96,917 83,864 Federal and state income taxes 4 1,368 12,722 Deferred revenue 66,494 66,953 63,178 Dividends payable 18,000 19,593 19,789 Short-term borrowings and current portion of long-term debt 10,008 ----------- ----------- ----------- Total Current Liabilities 427,843 420,641 407,792 ----------- ----------- ----------- NONCURRENT LIABILITIES Long-term debt 593,479 411,504 409,038 Deferred federal and state income taxes 149,816 138,611 150,811 Postretirement benefits other than pensions 165,536 166,682 169,469 Employment benefits and other noncurrent liabilities 101,670 84,264 70,590 ----------- ----------- ----------- Total Noncurrent Liabilities 1,010,501 801,061 799,908 ----------- ----------- ----------- MINORITY INTERESTS IN CONSOLIDATED SUBSIDIARIES 859 833 2,189 ----------- ----------- ----------- COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY Common Stock, $.02 1/12 par value; shares authorized - 250,000,000; shares issued - 48,733,249 in 1995, 52,892,720 in December 1994 and 53,502,640 in September 1994 1,015 1,102 1,115 Additional capital 297,674 326,392 331,274 Retained earnings 767,812 897,160 889,826 Unrealized gains on investments 22,224 ----------- ----------- ----------- Total Shareholders' Equity 1,088,725 1,224,654 1,222,215 ----------- ----------- ----------- Total $ 2,527,928 $ 2,447,189 $ 2,432,104 =========== =========== ===========
See "Notes to Consolidated Financial Statements" and statistical data on pages 7 and 8. -5- 5 Consolidated Statement of Cash Flows (Unaudited, in thousands of dollars)
Quarter Ended Three Quarters Ended Four Quarters Ended -------------------- --------------------- --------------------- Sept. 24 Sept. 25 Sept. 24 Sept. 25 Sept. 24 Sept. 25 1995 1994 1995 1994 1995 1994 -------- --------- --------- --------- --------- --------- CASH PROVIDED BY (REQUIRED FOR) OPERATING ACTIVITIES Net income $ 6,590 $ 37,243 $ 129,063 $ 117,736 $ 182,227 $ 168,941 Noncash items deducted from (included in) income: Cumulative effect of change in accounting principle 7,320 7,320 Depreciation 26,078 26,819 78,893 80,042 104,627 105,703 Amortization of excess of cost over net assets acquired 5,521 5,484 16,614 16,339 22,132 21,358 Amortization of other assets 5,719 5,125 16,571 15,408 22,857 19,875 Provision for noncurrent deferred taxes (5) 4,747 (9) 14,832 (12,209) 24,178 Distributions from investees in excess of (less than) earnings 2,145 (2,749) 5,026 (2,045) (467) (10,621) Gain on sale of subsidiary (92,698) (92,698) Other items, net 6,048 8,486 25,800 27,124 43,373 30,650 Change in certain assets and liabilities: Accounts receivable 1,333 5,442 (3,216) (9,222) (35,129) (17,358) Inventories (11,610) (759) (23,915) 1,144 (23,192) 7,489 Other current assets (9,719) (12,214) (34,470) (9,473) (22,893) 10,227 Accounts payable 10,377 (16,297) 5,990 (9,379) 26,468 (8,270) Federal and state income taxes (37,829) (2,251) (1,364) 12,711 (12,717) 17,539 Other current liabilities 25,040 28,803 3,408 24,536 12,675 40,246 -------- --------- --------- --------- --------- --------- Net cash provided by operating activities 29,688 87,879 133,013 279,753 222,374 409,957 -------- --------- --------- --------- --------- --------- CASH PROVIDED BY (REQUIRED FOR) INVESTING ACTIVITIES Additions to property, plant and equipment (24,793) (17,275) (62,126) (47,317) (81,919) (61,644) Other items, net (11,335) (9,012) 60,999 (49,890) 49,876 (70,438) -------- --------- --------- --------- --------- --------- Net cash required for investing activities (36,128) (26,287) (1,127) (97,207) (32,043) (132,082) -------- --------- --------- --------- --------- --------- CASH PROVIDED BY (REQUIRED FOR) FINANCING ACTIVITIES Proceeds from sale of commercial paper and bank borrowings 156,200 65,107 515,779 272,520 618,567 324,412 Reduction of loan debt (96,930) (103,475) (333,804) (304,549) (444,134) (422,063) -------- --------- --------- --------- --------- --------- Net change in total debt 59,270 (38,368) 181,975 (32,029) 174,433 (97,651) Payment of cash dividends (18,210) (19,849) (56,378) (58,153) (76,167) (77,283) Sale of common stock to employees 24,220 3,957 41,812 19,674 48,035 29,447 Purchase of treasury stock and stock tendered under stock option plans (59,101) (13,761) (274,243) (99,621) (311,599) (99,621) Other items, net (5,141) (554) (16,652) (19,576) (23,233) (28,777) -------- --------- --------- --------- --------- --------- Net cash provided by (required for) financing activities 1,038 (68,575) (123,486) (189,705) (188,531) (273,885) -------- --------- --------- --------- --------- --------- Net Increase (Decrease) in Cash (5,402) (6,983) 8,400 (7,159) 1,800 3,990 Cash and short-term cash Investments at beginning of the period 23,055 22,836 9,253 23,012 15,853 11,863 -------- --------- --------- --------- --------- --------- Cash and short-term cash Investments at end of the period $ 17,653 $ 15,853 $ 17,653 $ 15,853 $ 17,653 $ 15,853 ======== ========= ========= ========= ========= ========= Working capital at end of the period $ 51,178 $ 3,876 $ 51,178 $ 3,876 $ 51,178 $ 3,876 ======== ========= ========= ========= ========= =========
See "Notes to Consolidated Financial Statements" and statistical data on pages 7 and 8. -6- 6 Notes to Consolidated Financial Statements (Unaudited) Note 1 - Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month period and four quarters ended September 24, 1995 are not necessarily indicative of the results that may be expected for the year ended December 31, 1995. For further information, refer to the consolidated financial statements and footnotes thereto included in the Registrant Company and Subsidiaries' annual report on Form 10-K for the year ended December 25, 1994. The Company adopted the provisions of Financial Accounting Standard (FAS) 115 - "Accounting for Certain Investments in Debt and Equity Securities" for investments held as of or acquired after January 1, 1994. The Company has certain equity investments, classified as assets held for sale. These investments are carried on the balance sheet at fair market value, with the related unrealized gains (net of tax), reported as a separate component of shareholders' equity, which resulted in an unrealized gain (net of tax), of $22.2 million at September 24, 1995. In the first quarter of 1995, the Company adopted Financial Accounting Standard (FAS) 116 - "Accounting For Contributions Received and Contributions Made." The adoption of FAS 116 resulted in a $7.3 million charge (net of tax) to operations, or $.14 per share, and was recorded as a cumulative effect adjustment. -7- 7 Note 2 - Debt (Unaudited, in thousands of dollars)
Effective Interest Balance at Rate at ---------------------------------- Sept. 24 Sept. 24 December 25 Sept. 25 1995 1995 1994 1994 ---- ---- ---- ---- Commercial paper, net of discount 5.9 % $236,497 $ 54,764 $ 62,393 Notes payable, net of discount (a) 8.5 159,231 159,103 159,060 Debentures, net of discount (b) 10.0 197,751 197,637 197,593 -------- -------- -------- Total debt (c) 8.0 593,479 411,504 419,046 Less amounts classified as current 10,008 -------- -------- -------- Total long-term debt 8.0 % $593,479 $411,504 $409,038 ======== ======== ========
(a) Represents $160 million of 8 1/2% Notes subject to mandatory pro rata amortization of 25% annually commencing 1998 through maturity in 2001. (b) Represents $200 million of 20-year 9 7/8% debentures due in 2009. (c) At Sept. 24, 1995 and Sept. 25, 1994, interest payments of $31.7 million and $29.5 million had been made for the year-to-date, respectively. Note 3 - Income Tax Payments Income tax payments for the three quarters ended Sept. 24, 1995 and Sept. 25, 1994, were $110.9 million and $45.5 million, respectively. -8- 8 MANAGEMENT'S DISCUSSION AND ANALYSIS OF THIRD QUARTER Third Quarter 1995 Compared With Third Quarter 1994 Earnings per share for third quarter 1995 were $.13, down $.56 from the $.69 per share reported in 1994, due primarily to the impact of the Detroit strike, which began July 13th and is still in effect. The strike represented $.50 of the $.56 EPS shortfall. The remainder of the shortfall was due to the increase in newsprint prices from 1994, costs associated with our efforts to streamline our financial, purchasing and administrative functions and certain severance costs. These additional costs were offset by earnings from our equity investments and the favorable impact of share repurchases. For the year to date, earnings per share were $2.56, after the cumulative effect of change in accounting principle for contributions, compared with $2.16 in 1994, an 18.5% improvement, reflecting the $1.07 gain on the sale of the Journal of Commerce (JoC), which was recognized in the second quarter of 1995. Net income for the quarter was $6.6 million, down 82.3% from 1994. For the year to date, net income was up $11.3 million, or 9.6%, again reflecting the gain on the sale of the JoC. Total operating revenue for the quarter was $638.0 million, down 0.7%, from 1994. Excluding Detroit, total operating revenue was up 3.1% from 1994. Operating income declined from $75.3 million in 1994 to $19.1 million in 1995. Operating income, excluding Detroit, was down 20.2% from 1994, primarily as a result of higher newsprint costs in 1995. For the year to date, total operating revenue for the quarter rose 3.4% to $2.0 billion. Operating income was $174.8 million, down 25.7% from 1994. Total year-to-date operating revenue, excluding Detroit, was up 4.7% from 1994, but operating income was down 7.7%. OPERATING REVENUE Newspaper advertising revenue decreased 0.1% from the third quarter last year, on a full-run ROP linage decrease of 2.4%. Excluding Detroit, newspaper advertising revenue increased 5.7% from 1994, on a full-run ROP linage decrease of 1.3%. Year to date, newspaper advertising revenue increased 4.9% over 1994, on a full-run ROP linage decrease of 0.2%. Newspaper advertising revenue for the year, excluding Detroit, increased 6.9% from 1994. Despite the Detroit strike, classified advertising revenue reflected a 7.7% increase over the third quarter last year, on a 1.7% full-run ROP linage increase. This is the thirteenth consecutive quarter of classified revenue year-over-year improvement. The employment category showed the largest gain, posting a 19.3% improvement, with linage up 10.5%. Classified revenue, excluding Detroit, increased 13.2% from 1994. For the year to date, classified revenue was up 11.7%, on a 3.3% full-run ROP linage improvement. Excluding Detroit, classified revenue was up 13.7% for the year. Retail advertising revenue was $172.6 million, down 5.3%, from last year on a 6.4% decrease in full-run ROP linage. Excluding Detroit, retail advertising revenue was up 1.1% from third quarter 1994. Retail revenue was up 0.6% for the year to date on a 3.7% decrease in full-run ROP linage. Retail revenue, excluding Detroit, was up 2.6% for the year, on a 3.6% decrease in full-run ROP linage. General advertising revenue was $37.7 million, down 6.5%, from last year on a 2.9% decrease in full-run ROP linage. General advertising revenue, excluding Detroit, was down 3.1% from 1994, on a 1.2% decrease in full-run ROP linage. For the year to date, general revenue was down 0.6% on a 1.0% rise in full-run ROP linage. Excluding Detroit, general revenue was up 0.4% for the year to date, on a 1.5% increase in full-run ROP linage. Circulation revenue decreased 2.4% to $117.5 million. Circulation revenue, excluding Detroit, increased 1.4%, due to a 3.3% increase in average rates, offset by a 1.8% decline in average seven-day circulation. Circulation revenue was up 0.1%, so far this year. Excluding Detroit, circulation revenue was up 1.6% for the year to date. -9- 9 Other newspaper revenue increased by $4.7 million, or 29.2%. This improvement resulted primarily from increased newsprint waste revenue and the growth in augmentation revenue, as a result of continued efforts to augment traditional newspaper revenue with new related sources of revenue. Other revenue was up 25.4% for the year to date. Business Information Services (BIS) operating revenue in the third quarter declined 4.7% to $122.0 million, reflecting the absence of JoC revenue. Excluding the JoC, operating revenue would have been up 7.5% from third quarter 1994. Knight-Ridder Financial contributed significantly to the revenue growth, posting a $5.2 million, or 11.4%, improvement over the prior year. Knight-Ridder Information operating revenue grew moderately during the quarter, up 4.3% from 1994. BIS revenue was down 0.9% for the year to date, again due to the absence of revenue from the JoC. Excluding the JoC and acquisitions, operating revenue would have been up 7.2% for the year to date. OPERATING COSTS Labor and employee benefit costs were flat with third quarter 1994, on a 4.3% decline in the workforce and a 3.4% increase in average wage rate, reflecting the Detroit strike impact and the sale of the JoC. For the year to date, labor and employee benefits rose 2.2%, on a 1.9% decrease in the work force and a 3.7% increase in average wages. Newsprint, ink and supplement costs increased $29.5 million, or 36.1%, on a 4.4% decrease in newsprint consumption and a 47.4% increase in the average newsprint price. These costs were up 30.3% on a 0.6% decrease in newsprint consumption and a 34.9% increase in the average newsprint price per tonne. Newsprint consumption for the quarter and year to date reflected the lower linage and circulation related to the Detroit strike. Other operating costs rose 12.5% to $200.8 million from third quarter 1994 and 6.4% for the year to date. The increase resulted primarily from Detroit strike costs. Excluding Detroit and the JoC, other operating costs increased 1.5% in the third quarter and 3.9% for the year to date. The increase in operating costs, absent Detroit, was partly due to volume-related costs associated with BIS operations. Depreciation and amortization decreased 0.3% from third quarter 1994 primarily due to the JoC sale. Excluding JoC, depreciation and amortization would have been up 1.3% from third quarter 1994. NON-OPERATING ITEMS AND INCOME TAXES Interest expense, net of interest income and interest expense capitalized, increased $408,000 over third quarter 1994, due to higher debt levels during the quarter. The average debt balance for the quarter was up $94.9 million from the third quarter of last year, reflecting the impact of our share repurchase program. Equity in earnings of unconsolidated companies and joint ventures increased by $4.9 million and $13.0 million year to date, due primarily to earnings improvements from our newsprint mill investments, which are benefiting from the increased newsprint prices over last year. For the year to date, the "Other, Net" line of the non-operating section reflects an $83.3 million increase over 1994 as a result of the sale of the JoC, offset by the reduction in the carrying value of certain investments, primarily Ponderay Newsprint Company. The effective tax rate was 45.5%, compared with 41.0% in the third quarter of 1994, as a result of the strike impact on pre-tax income which increased the relative mix of non-deductible tax items, primarily goodwill amortization. OTHER During the third quarter, Knight-Ridder, Inc., and Lesher Communications, Inc., reached an agreement for Knight-Ridder to purchase the Lesher business for $360 million. Lesher, a privately held newspaper company based in Walnut Creek, Calif., publishes four daily newspapers in contiguous Contra Costa and eastern Alameda County markets in the East Bay area of northern California. The purchase closed on Oct. 31st. -10- 10 In August, the company announced that it would acquire a 100% interest in The CARL Corporation, a leading provider of library automation services. In a related announcement, the company announced that it would acquire total interest in The UnCover Company, a joint partnership of The CARL Corporation and Blackwell Limited. Both acquisitions closed in October 1995. Also in August, the company acquired a minority investment in Teltech Resource Network Corporation, the leading independent provider of technical research, analysis and information management services to U.S. industry. During the third quarter of 1995, the company purchased slightly over one million shares of Knight-Ridder common stock. The company has remaining authorization to repurchase 3.7 million shares and plans to repurchase additional shares should Knight-Ridder stock remain at an attractive price. The company adopted the provisions of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities" for investments held as of or acquired after Jan. 1, 1994. The company has certain equity investments classified as assets held for sale. These investments are carried on the balance sheet at fair value, with related unrealized gains reported as a separate component of shareholders' equity. In the first quarter of 1995, the company adopted Financial Accounting Standard (FAS) 116 _ "Accounting For Contributions Received and Contributions Made." The adoption of FAS 116 resulted in a $7.3 million charge to operations, or $.14 per share cumulative effective adjustment (net of tax). LIQUIDITY Net cash provided by operating activities decreased to $29.7 million from $87.9 million in the third quarter of 1994. This was due largely to the strike-related decrease in operating income, a decrease in federal and state income taxes due to the timing of federal tax payments for the JoC sale, and other changes in working capital. Cash and short-term cash investments were up $1.8 million from Sept. 25, 1994, and up $8.4 million from year end. Total debt increased $174.4 million from third quarter 1994 and increased $182.0 million from Dec. 25, 1994. Debt was up due to the repurchase of slightly over one million shares of the company's stock in the quarter and 5.8 million shares during the 12 months, offset by the proceeds from the sale of the JoC. The total-debt-to-total-capital ratio was 35.3%, up from 25.2% at year end and 25.5% in September 1994. Approximately $264 million in aggregate unused credit lines remained at the end of the quarter. The ratio of current assets to current liabilities was 1.1:1 at Sept. 24, 1995, 1.0:1 at Sept. 25, 1994, and Dec. 25, 1994. The company increased its revolving credit and term loan agreement, which is used to back up the commercial paper program from $500 milion to $800 million in October 1995. OUTLOOK FOR THE REMAINDER OF THE YEAR The third quarter of 1995 was a difficult one for Knight-Ridder because of the financial impact of the Detroit strike. As we look ahead to the fourth quarter and the year, we believe that classified advertising revenue will remain sufficiently strong to maintain overall advertising increases at their current levels. Detroit operating losses will be substantially reduced in the fourth quarter, positioning us for steady upward momentum as we look towards 1996. The average price of newsprint increased about 48% above what was paid in the third quarter of 1994 and will be up about 50% in the fourth quarter, as the price increases work their way through our inventory. For the full year, newsprint costs will be held to a level about 40% above what was paid in 1994. Restructuring at certain newspapers and BIS companies will also mandate additional severance costs before the end of the year, but these charges will provide the framework for substantially more efficient operations moving forward. BIS Division results, over the balance of the year, will reflect the absence of the Journal of Commerce, which was sold on April 3rd to The Economist Group. -11- 11 PART II. OTHER INFORMATION OTHER INFORMATION Items 1, 2, 3, 4 and 5 are omitted as inapplicable, not required, or because the information is included in the consolidated financial information. Item 6 Exhibits and Reports on Form 8-K a. Exhibits Filed No. 11 - Statement Re: Computation of Per Share Earnings No. 27 - Financial Data Schedule (for SEC use only) No. 99 - Additional Exhibits b. Reports on Form 8-K No reports were filed on Form 8-K during the quarter ended September 24, 1995. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. KNIGHT-RIDDER, INC. (Registrant) Date November 7, 1995 Gary R. Effren Vice President/Controller (Chief Accounting Officer and Duly Authorized Officer of Registrant) -12- EX-11 2 COMPUTATION OF PER SHARE EARNINGS 1 COMPUTATION OF PER SHARE EARNINGS EXHIBIT 11 (Unaudited, in thousands, except per share data)
Quarter Ended Three Quarters Ended --------------------- --------------------- Sept. 24 Sept. 25 Sept. 24 Sept. 25 1995 1994 1995 1994 ---- ---- ---- ---- PRIMARY Average shares outstanding 49,046 53,567 50,111 54,151 Net effect of dilutive stock options-based on the Treasury Stock method using the average market price 368 258 342 384 ------- ------- -------- -------- TOTAL 49,414 53,825 50,453 54,535 ======= ======= ======== ======== Income before cumulative effect of change in accounting principle $ 6,590 $37,243 $136,383 $117,736 Cumulative effect of change in accounting principle for contributions (7,320) ------- ------- -------- -------- Net Income $ 6,590 $37,243 $129,063 $117,736 ======= ======= ======== ======== Earnings per Common and Common Equivalent Share Income before cumulative effect of change in accounting principle $ 0.13 $ 0.69 $ 2.71 $ 2.16 Cumulative effect of change in accounting principle (0.15) ------- ------- -------- -------- Per share amount from net income $ 0.13 $ 0.69 $ 2.56 $ 2.16 ======= ======= ======== ======== FULLY DILUTED Average shares outstanding 49,046 53,567 50,111 54,151 Net effect of dilutive options - based upon Treasury Stock method using the higher of quarter-end or average market price 423 258 422 416 ------- ------- -------- -------- TOTAL 49,469 53,825 50,533 54,567 ======= ======= ======== ======== Income before cumulative effect of change in accounting principle $ 6,590 $37,243 $136,383 $117,736 Cumulative effect of change in accounting principle for contributions (7,320) ------- ------- -------- -------- Net Income $ 6,590 $37,243 $129,063 $117,736 ======= ======= ======== ======== Earnings per Common and Common Equivalent Share Income before cumulative effect of change in accounting principle $ 0.13 $ 0.69 $ 2.70 $ 2.16 Cumulative effect of change in accounting principle (0.15) ------- ------- -------- -------- Per share amount from net income $ 0.13 $ 0.69 $ 2.55 $ 2.16 ======= ======= ======== ========
-13- EX-27 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED STATEMENTS OF INCOME, THE CONSOLIDATED BALANCE SHEETS, THE CONSOLIDATED STATEMENTS OF CASH FLOWS AND THE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 1,000 3-MOS 9-MOS DEC-31-1995 DEC-31-1995 JUN-26-1995 DEC-26-1994 SEP-24-1995 SEP-24-1995 17,653 17,653 0 0 324,523 324,523 14,053 14,053 63,357 63,357 479,021 479,021 1,675,519 1,675,519 862,050 862,050 2,527,928 2,527,928 427,843 427,843 0 0 1,015 1,015 0 0 0 0 1,087,710 1,087,710 2,527,928 2,527,928 637,994 2,000,048 637,994 2,000,048 111,295 314,077 618,913 1,825,246 6,986 (61,840) 0 0 12,791 37,804 12,095 236,282 5,505 99,899 6,590 136,383 0 0 0 0 0 (7,320) 6,590 129,063 .13 2.56 .13 2.55 Cost of goods sold consists of newsprint, ink, and supplements. Other Expenses consists of all non-operating costs, excluding income taxes. Amount includes interest expense net of interest income and other non-operating costs net of other non-operating income.
EX-99 4 ADDITIONAL EXHIBITS 1 KNIGHT-RIDDER, INC. AND SUBSIDIARIES BUSINESS SEGMENT INFORMATION (Unaudited, in thousands of dollars) EXHIBIT 99
Quarter Ended Three Quarters Ended Four Quarters Ended ---------------------- --------------------- --------------------- Sept. 24 Sept. 25 Sept. 24 Sept. 25 Sept. 24 Sept. 25 1995 1994 1995 1994 1995 1994 ---- ---- ---- ---- ---- ---- OPERATING REVENUE Newspapers $515,975 $514,533 $1,618,834 $1,550,533 $2,203,223 $2,092,116 Business Information Services 122,019 128,080 381,214 384,493 510,760 495,558 -------- -------- ---------- ---------- ---------- ---------- $637,994 $642,613 $2,000,048 $1,935,026 $2,713,983 $2,587,674 ======== ======== ========== ========== ========== ========== OPERATING INCOME Newspapers $ 29,309 $ 79,293 $ 201,774 $ 249,374 $ 303,256 $ 349,029 Business Information Services 3,643 6,393 13,399 18,962 17,547 26,769 Corporate (13,871) (10,409) (40,371) (32,963) (50,113) (43,807) -------- -------- ---------- ---------- ---------- ---------- $ 19,081 $ 75,277 $ 174,802 $ 235,373 $ 270,690 $ 331,991 ======== ======== ========== ========== ========== ========== DEPRECIATION AND AMORTIZATION Newspapers $ 23,331 $ 23,535 $ 70,805 $ 71,223 $ 94,509 $ 94,684 Business Information Services 13,351 13,470 39,551 39,247 53,018 50,512 Corporate 636 423 1,722 1,319 2,089 1,740 -------- -------- ---------- ---------- ---------- ---------- $ 37,318 $ 37,428 $ 112,078 $ 111,789 $ 149,616 $ 146,936 ======== ======== ========== ========== ========== ==========
-15- 2 Knight-Ridder, Inc. Third Quarter Graphs (Unaudited)
THIRD QUARTER NET INCOME THIRD QUARTER EARNINGS PER SHARE (From continuing operations, in $000s) (From continuing operations) Year Amount Year Amount --- ------ ---- ------ 1995 6,590 1995 $0.13 1994 37,243 1994 $0.69 1993 31,251 1993 $0.57 1992 31,392 1992 $0.57 1991 28,300 1991 $0.54 1990 36,588 1990 $0.73 THIRD QUARTER TOTAL OPERATING REVENUE THIRD QUARTER NEWSPAPER ADVERTISING REVENUE (From continuing operations, in $000s) (In $000s) Year Amount Year Amount ---- ------ ---- ------ 1995 637,994 1995 377,768 1994 642,613 1994 378,068 1993 593,124 1993 351,239 1992 564,854 1992 345,712 1991 544,446 1991 337,794 1990 575,437 1990 381,690
-16- 3 Average Circulation - Notes A & B (Unaudited, in thousands of copies)
Quarter Ended Three Quarters Ended -------------------------------- ---------------------------------- Sept. 24 Sept. 25 Sept. 24 Sept. 25 1995 1994 Change 1995 1994 Change ---- ---- ------ ---- ---- ------ Morning Circulation 2,982 3,088 (106) 3,076 3,146 (70) Evening Circulation 414 452 (38) 436 451 (15) ----- ----- ---- ----- ----- --- Daily Circulation 3,396 3,540 (144) 3,512 3,597 (85) ===== ===== ==== ===== ===== === Sunday Circulation 4,527 4,661 (134) 4,619 4,717 (98) ===== ===== ==== ===== ===== ===
ADVERTISING STATISTICS (UNAUDITED) - NOTES A, B & C
Quarter Ended Three Quarters Ended ---------------------------------- ------------------------------------ Sept. 24 Sept. 25 Sept. 24 Sept. 25 1995 1994 % Change 1995 1994 % Change ---- ---- --------- ---- ---- --------- LINAGE (In thousands of six-column inches) Full-run ROP Retail 3,377 3,606 (6.4) 10,486 10,893 (3.7) General 340 350 (2.9) 1,129 1,118 1.0 Classified 3,664 3,603 1.7 10,808 10,467 3.3 --------- --------- --------- --------- Total 7,381 7,559 (2.4) 22,423 22,478 (0.2) ========= ========= ========= ========= Factored Part-run ROP 520 455 14.3 1,538 1,303 18.0 ========= ========= ========= ========= Full-run Preprint 4,302 3,889 10.6 11,730 11,743 (0.1) ========= ========= ========= ========= Part-run Preprint 4,913 4,239 15.9 12,928 11,921 8.4 ========= ========= ========= ========= TOTAL PREPRINTS INSERTED (000s) 1,084,144 1,098,140 (1.3) 3,373,888 3,330,707 1.3 ========= ========= ========= =========
Note A: Average daily circulation, Sunday circulation, and total preprints inserted reflect volume declines during the Detroit newspaper strike. Note B: Where necessary, certain previously reported statistics have been restated to be consistent with measurement guidelines currently in use. Note C: Factored part-run linage represents linage in zoned editions that is translated into full-run equivalent linage based on the ratio of the circulation in a particular zone to the total circulation of the newspaper. Knight-Ridder Share Trading (As quoted by Knight-Ridder Financial Services)
1995 Third Quarter 1994 Third Quarter ------------------------------------------- ----------------------------------------------- Volume High Low Close Volume High Low Close 5,036,100 59 1/8 55 1/4 58 1/2 9,267,400 54 5/8 49 1/2 51 1/4
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