-----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, Jxh4UGwD0WrPhrtgwEtj/BG8RrGFO4uQoh+OJseeKceCbsZpKJvd9QEKZD8+v/nl oENudV33xGomSlVFCqME4Q== 0000950144-96-007847.txt : 19961113 0000950144-96-007847.hdr.sgml : 19961113 ACCESSION NUMBER: 0000950144-96-007847 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960926 FILED AS OF DATE: 19961112 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: NEWSPAPERS: PUBLISHING OR PUBLISHING & PRINTING [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: 96658404 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 09/29/96 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 29, 1996 ------------------ 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 -93,808,505 shares as of November 3, 1996. -1- 2 Table of Contents for Form 10-Q
Page ---- PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Consolidated Statement of Income 3 Consolidated Balance Sheet 4 Consolidated Statement of Cash Flows 5 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7-10 PART II. OTHER INFORMATION Item 1. Legal Proceedings 11 Item 6. Exhibits and Reports on Form 8-K 11 SIGNATURE Exhibit 27 Financial Data Schedule 12 Exhibit 99 Additional Exhibits 13
2 3 PART I- FINANCIAL INFORMATION ITEM 1- FINANCIAL STATEMENTS CONSOLIDATED STATEMENT OF INCOME (UNAUDITED, IN THOUSANDS OF DOLLARS, EXCEPT SHARE DATA)
QUARTER ENDED THREE QUARTERS ENDED FOUR QUARTERS ENDED --------------------- ------------------------ ---------------------- SEPT. 29 SEPT. 24 SEPT. 29 SEPT. 24 SEPT. 29 SEPT. 24 1996 1995 1996 1995 1996 1995 -------- -------- --------- --------- --------- --------- OPERATING REVENUE Newspapers Advertising Retail ............................. $188,534 $172,606 $ 571,236 $ 554,482 $ 824,512 $ 795,872 General ............................. 46,920 37,729 144,257 132,051 194,722 183,649 Classified ......................... 197,217 167,433 590,470 509,922 763,244 659,756 -------- -------- --------- --------- --------- --------- Total ............................. 432,671 377,768 1,305,963 1,196,455 1,782,478 1,639,277 Circulation ........................... 123,722 117,549 376,413 363,187 508,541 484,978 Other ................................. 20,495 20,658 60,849 59,192 83,554 78,968 -------- -------- --------- --------- --------- --------- Total Newspapers ................. 576,888 515,975 1,743,225 1,618,834 2,374,573 2,203,223 Business Information Services ........... 76,908 122,019 325,214 381,214 445,652 510,760 -------- -------- --------- --------- --------- --------- Total Operating Revenue ........... 653,796 637,994 2,068,439 2,000,048 2,820,225 2,713,983 -------- -------- --------- --------- --------- --------- OPERATING COSTS Labor and employee benefits ............. 258,878 269,529 821,152 823,608 1,125,523 1,107,078 Newsprint, ink and supplements ......... 114,486 111,295 368,649 314,077 501,413 408,866 Other operating costs ................... 168,828 200,771 550,268 575,483 759,903 777,733 Depreciation and amortization ........... 39,990 37,318 125,694 112,078 165,228 149,616 -------- -------- --------- --------- --------- --------- Total Operating Costs ............. 582,182 618,913 1,865,763 1,825,246 2,552,067 2,443,293 -------- -------- --------- --------- --------- --------- OPERATING INCOME ......................... 71,614 19,081 202,676 174,802 268,158 270,690 -------- -------- --------- --------- --------- --------- OTHER INCOME (EXPENSE) Interest expense ....................... (17,650) (12,791) (56,452) (37,804) (78,220) (48,811) Interest expense capitalized ........... 1,819 496 4,398 1,107 5,180 1,269 Interest income ......................... 750 2,252 5,425 6,655 7,912 8,600 Equity in earnings of unconsolidated companies and joint ventures ......... 5,621 5,592 22,191 13,936 28,916 20,423 Minority interests in earnings of consolidated subsidiaries ............. (1,993) (2,007) (6,143) (5,990) (8,501) (8,245) Other, net ............................. 161,271 (528) 161,517 83,576 161,681 82,416 -------- -------- --------- --------- --------- --------- Total ............................. 149,818 (6,986) 130,936 61,480 116,968 55,652 -------- -------- --------- --------- --------- --------- Income before income taxes ............... 221,432 12,095 333,612 236,282 385,126 326,342 Income taxes ............................. 95,175 5,505 141,485 99,899 162,000 136,795 -------- -------- --------- --------- --------- --------- INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE ......... 126,257 6,590 192,127 136,383 223,126 189,547 Cumulative effect of change in accounting principle for contributions ........... (7,320) (7,320) -------- -------- --------- --------- --------- --------- Net income ....................... $126,257 $ 6,590 $ 192,127 $ 129,063 $ 223,126 $ 182,227 ======== ======== ========= ========= ========= ========= EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE Income before cumulative effect of change in accounting principle (1) ... $ 1.31 $ 0.07 $ 1.96 $ 1.35 $ 2.27 $ 1.85 Cumulative effect of change in accounting principle (1) ........... (0.07) (0.07) -------- -------- --------- --------- --------- --------- Net income (1) ................... $ 1.31 $ 0.07 $ 1.96 $ 1.28 $ 2.27 $ 1.78 ======== ======== ========= ========= ========= ========= DIVIDENDS DECLARED PER COMMON SHARE(1) ... $ 0.20 $ 0.18 1/2 $ 0.58 1/2 $ 0.55 1/2 $ 0.77 $ 0.74 ======== ======== ========= ========= ========= ========= AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING (OOOs)(1) ... 96,385 98,827 98,115 100,906 98,104 102,427 ======== ======== ========= ========= ========= =========
(1) Amounts have been restated to reflect a two-for-one stock split in the form of a 100% common stock dividend, effected July 31, 1996. See "Notes to Consolidated Financial Statements" on page 6. 3 4 CONSOLIDATED BALANCE SHEET (UNAUDITED, IN THOUSANDS OF DOLLARS, EXCEPT SHARE DATA)
Sept. 29 Dec. 31 Sept. 24 1996 1995 1995 ---------- ---------- ---------- ASSETS - ------ CURRENT ASSETS Cash, including short-term cash investments of $50 in 1996, $50 in December 1995, and $150 in September 1995 ................................. $ 22,160 $ 26,012 $ 17,653 Accounts receivable, net of allowances of $13,013 in 1996, $14,348 in December 1995 and $14,053 in September 1995 ................................... 326,924 339,264 310,470 Inventories ......................................................... 52,607 73,349 63,357 Other current assets ............................................... 59,567 64,297 87,541 ---------- ---------- ---------- Total Current Assets ............................................. 461,258 502,922 479,021 ---------- ---------- ---------- INVESTMENTS AND OTHER ASSETS Equity in unconsolidated companies and joint ventures ............... 330,490 321,658 307,258 Other ............................................................. 212,625 285,666 242,545 ---------- ---------- ---------- Total Investments and Other Assets ........................... 543,115 607,324 549,803 ---------- ---------- ---------- PROPERTY, PLANT AND EQUIPMENT Land and improvements ............................................... 77,606 80,616 66,918 Buildings and improvements ......................................... 390,954 401,093 379,967 Equipment ........................................................... 1,088,313 1,223,838 1,183,398 Construction and equipment installations in progress ............... 113,111 57,644 45,236 ---------- ---------- ---------- 1,669,984 1,763,191 1,675,519 Less accumulated depreciation ....................................... 759,493 831,544 862,050 ---------- ---------- ---------- Net Property, Plant and Equipment ........................... 910,491 931,647 813,469 ---------- ---------- ---------- EXCESS OF COST OVER NET ASSETS ACQUIRED Less accumulated amortization of $215,739 in 1996, $205,608 in December 1995 and $198,514 in September 1995 ........................... 913,775 963,817 685,635 ---------- ---------- ---------- Total ....................................................... $2,828,639 $3,005,710 $2,527,928 ========== ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------ CURRENT LIABILITIES Accounts payable ................................................... $ 128,374 $ 127,532 $ 146,830 Accrued expenses and other liabilities ............................. 103,399 105,317 109,271 Accrued compensation and amounts withheld from employees ......................................... 89,720 101,357 87,244 Federal and state income taxes ..................................... 62,830 195 4 Deferred revenue ................................................... 71,294 72,134 66,494 Dividends payable ................................................... 18,814 17,978 18,000 Short-term borrowings and current portion of long-term debt ....................................... 13,129 ---------- ---------- ---------- Total Current Liabilities ................................... 474,431 437,642 427,843 ---------- ---------- ---------- NONCURRENT LIABILITIES Long-term debt ..................................................... 810,270 1,000,721 593,479 Deferred federal and state income taxes ............................. 147,559 165,045 149,816 Postretirement benefits other than pensions ......................... 171,562 169,672 165,536 Employment benefits and other noncurrent liabilities ........................................... 113,120 120,817 101,670 ---------- ---------- ---------- Total Noncurrent Liabilities ................................. 1,242,511 1,456,255 1,010,501 ---------- ---------- ---------- MINORITY INTERESTS IN CONSOLIDATED SUBSIDIARIES ....................... 2,200 843 859 ---------- ---------- ---------- COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY Common stock, $.02 1/12 par value; shares authorized - 250,000,000; shares issued - 94,092,701 in 1996, 97,196,308 in December 1995 and 97,466,498 in September 1995(1) ......................... 1,960 2,024 2,030 Additional capital ................................................. 310,150 295,360 297,674 Retained earnings ................................................... 772,192 770,644 766,797 Unrealized gains on investments ..................................... 25,195 42,942 22,224 ---------- ---------- ---------- Total Shareholders' Equity ....................................... 1,109,497 1,110,970 1,088,725 ---------- ---------- ---------- Total ....................................................... $2,828,639 $3,005,710 $2,527,928 ========== ========== ==========
(1) Amounts have been restated to reflect a two-for-one stock split in the form of a 100% common stock dividend, effected July 31, 1996. See "Notes to Consolidated Financial Statements" on page 6. 4 5 CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED, IN THOUSANDS OF DOLLARS)
THREE FOUR QUARTER ENDED QUARTERS ENDED QUARTERS ENDED ------------------ ------------------- ------------------- SEPT. 29 SEPT. 24 SEPT. 29 SEPT. 24 SEPT. 29 SEPT. 24 1996 1995 1996 1995 1996 1995 -------- -------- -------- --------- --------- -------- CASH PROVIDED BY (REQUIRED FOR) OPERATING ACTIVITIES Net income ....................................................... $126,257 $ 6,590 $192,127 $129,063 $ 223,126 $182,227 Noncash items deducted from (included in) income: Cumulative effect of change in accounting principle .............. 7,320 7,320 Depreciation ..................................................... 23,948 26,078 80,392 78,893 106,285 104,627 Amortization of excess of cost over net assets acquired ......... 7,456 5,521 22,927 16,614 30,021 22,132 Amortization of other assets ..................................... 8,586 5,719 22,375 16,571 28,922 22,857 Provision for noncurrent deferred taxes ......................... (1,791) (5) (4,635) (9) (122) (12,209) Distributions from investees in excess of (less than) earnings ... 1,151 2,145 (12,291) 5,026 (33,567) (467) Gain on sale of subsidiary ....................................... (160,886) (160,886) (92,698) (160,886) (92,698) Other items, net ................................................. 9,226 6,048 22,710 25,800 42,874 43,373 Change in certain assets and liabilities: Accounts receivable ............................................. (20,425) 1,333 (25,157) (3,216) (40,561) (35,129) Inventories ..................................................... 23,911 (11,610) 20,809 (23,915) 12,432 (23,192) Other current assets ............................................. 16,724 (9,719) (3,762) (34,470) 21,177 (22,893) Accounts payable ................................................. 14,123 10,377 20,648 5,990 (4,577) 26,468 Federal and state income taxes.................................... 63,997 (37,829) 63,802 (1,364) 49,021 (12,717) Other current liabilities ........................................ 10,487 25,040 4,334 3,408 3,932 12,675 -------- ------- -------- -------- --------- -------- Net cash provided by operating activities ................... 122,764 29,688 243,393 133,013 278,077 222,374 -------- ------- -------- -------- --------- -------- CASH PROVIDED BY(REQUIRED FOR) INVESTING ACTIVITIES Acquisition of Contra Costa Newspapers, Inc. ..................... (335,755) Additions to property, plant and equipment ....................... (26,109) (24,793) (104,288) (62,126) (163,187) (81,919) Other items, net ................................................. 259,391 (11,335) 270,898 60,999 257,302 49,876 -------- ------- -------- -------- --------- -------- Net cash provided by (required for) investing activities ... 233,282 (36,128) 166,610 (1,127) (241,640) (32,043) -------- ------- -------- -------- --------- -------- CASH PROVIDED BY (REQUIRED FOR) FINANCING ACTIVITIES Proceeds from sale of commercial paper and senior notes payable ... 103,356 156,200 436,979 515,779 1,013,820 618,567 Reduction of total debt ........................................... (347,142) (96,930) (640,559) (333,804) (797,029) (444,134) -------- ------- -------- -------- --------- -------- Net change in total debt ................................... (243,786) 59,270 (203,580) 181,975 216,791 174,433 Payment of cash dividends ......................................... (19,316) (18,210) (55,449) (56,378) (73,448) (76,167) Sale of common stock to employees ................................. 7,643 24,220 54,913 41,812 88,538 48,035 Purchase of treasury stock ....................................... (100,105) (59,101) (174,481) (274,243) (219,601) (311,599) Other items, net ................................................. (9,552) (5,141) (35,258) (16,652) (44,210) (23,233) -------- ------- -------- -------- --------- -------- Net cash provided by (required for) financing activities ... (365,116) 1,038 (413,855) (123,486) (31,930) (188,531) -------- ------- -------- -------- --------- -------- Net Increase (Decrease) in Cash ............................. (9,070) (5,402) (3,852) 8,400 4,507 1,800 Cash and short-term cash investments at beginning of the period ..... 31,230 23,055 26,012 9,253 17,653 15,853 -------- ------- -------- -------- --------- -------- Cash and short-term cash investments at end of the period ........... $ 22,160 $17,653 $ 22,160 $ 17,653 $ 22,160 $ 17,653 ======== ======= ======== ======== ========= ======== Working capital at end of the period ............................... $(13,173) $51,178 $(13,173) $ 51,178 $ (13,173) $ 51,178 ======== ======= ======== ======== ========= ========
See "Notes to Consolidated Financial Statements" on page 6. 5 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 quarter, three quarters and four quarters ended September 29, 1996 are not necessarily indicative of the results that may be expected for the year ending December 29, 1996. 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 31, 1995. NOTE 2 - DEBT (IN THOUSANDS OF DOLLARS)
Effective Interest BALANCE AT Rate at --------------------------------------- Sept. 29 Sept. 29 Dec. 31 Sept. 24 1996 1996 1995 1995 --------- -------- ---------- -------- Commercial paper, net of discount ............... 5.5% $353,888 $ 557,698 $236,497 Notes payable, net of discount (a) ............. 8.5 159,402 159,274 159,231 Debentures, net of discount (b) ................. 10.0 197,902 197,789 197,751 Senior notes, net of discount (c) ............... 6.4 99,078 99,089 -------- ---------- -------- Total debt (d) ......................... 7.3 810,270 1,013,850 593,479 Less amounts classified as current ............. 13,129 -------- ---------- -------- Total long-term debt ................... 7.3% $810,270 $1,000,721 $593,479 ======== ========== ========
(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) Represents $100 million of 10-year 6.3% senior notes due in 2005. (d) At Sept. 29, 1996, and Sept. 24, 1995, interest payments of $53.3 million and $31.7 million had been made for the year-to-date, respectively. NOTE 3 - INCOME TAX PAYMENTS Income tax payments for the three quarters ended Sept. 29, 1996, and Sept. 24, 1995, were $61.9 million and $110.9 million, respectively. NOTE 4 - COMMON STOCK On June 21, 1996, the Board of Directors of the company declared a two-for-one stock split in the form of a 100% common stock dividend effected July 31, 1996. All share and per share data and dividends declared per common share have been restated for the stock split. 6 7 ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE THIRD QUARTER THIRD QUARTER 1996 COMPARED WITH THIRD QUARTER 1995 Earnings per share for the third quarter of 1996 were $1.31, up $1.24 from the $.07 per share earned in 1995, reflecting the $.94 gain on the sale of Knight-Ridder Financial (KRF). Excluding the gain on the sale of KRF, earnings per share for the third quarter were $.37, up $.30 from 1995. The improvement from 1995 was due primarily to strong results in our major newspaper markets and, particularly, Detroit Newspapers, where results of this year's third quarter were dramatically better than the same period last year when the now 16-month-old strike against Detroit Newspapers began. Earnings per share for year-to-date 1996 were $1.03, up $.22, or 27.2%, from the $.81 earned in 1995, excluding the gain on the July 1996 sale of KRF and the April 1995 sale of the Journal of Commerce (JoC) from their respective periods. This was also prior to the cumulative effect of the 1995 change in accounting principles. Net income in the third quarter of 1996 was $35.4 million, up $28.8 million from the same period last year, exclusive of the gain on the sale of KRF, on a 2.5% operating revenue increase from third quarter 1995. For the year to date, net income was $101.2 million, up $18.6 million, or 22.5%, from 1995, exclusive of the gain on the sale of KRF and the JoC from their respective periods, on an operating revenue increase of 3.4%. OPERATING REVENUE Certain comparisons: (1) exclude Detroit from both years, due to the distortive impact of the strike that began on July 13, 1995; (2) exclude KRF 1995 results due to the July 26 sale; and (3) reflect Contra Costa Newspapers (acquired from Lesher Communications on Oct. 31, 1995) as if it were owned during the same period last year (pro forma basis). On this basis, total operating revenue increased 4.0% from third quarter 1995 and 3.7% from year-to-date 1995. Newspaper advertising revenue increased 14.5% over the third quarter last year, on a full-run ROP linage increase of 17.1%. Excluding Detroit, but including the operations of Contra Costa Newspapers (CCN) as if owned in the third quarter of 1995, newspaper advertising revenue increased 6.1% from 1995 on a full-run ROP linage increase of 3.5%. This was the strongest quarterly comparison this year. Year to date, on this same basis, newspaper advertising revenue increased 5.2% from 1995 on a full-run ROP linage increase of 0.8%. Classified advertising revenue increased $29.8 million, or 17.8%, over third quarter last year on a 20.5% full-run ROP linage increase. This is the 17th consecutive quarter of year-over-year classified revenue growth. The employment category showed the largest gain, posting a 25.7% revenue improvement, with linage up 18.0% from 1995. Classified revenue growth remained strong, even though it was compared to exceptional growth in the prior year. On a pro forma basis for CCN, but excluding Detroit, classified advertising revenue increased 9.6% from the third quarter 1995. On this same basis, year-to-date classified advertising revenue increased 11.7% from 1995. For the quarter, retail advertising revenue improved by $16.0 million, or 9.2%, over last year. On a pro forma basis for CCN, but excluding Detroit, retail revenue was up 0.3% from the prior year, the best quarterly comparison of 1996. On a pro forma basis for CCN, but excluding Detroit, year-to-date retail revenue was down 1.4% from 1995. 7 8 General advertising revenue was up $9.2 million, or 24.4%, from third quarter 1995. On a pro forma basis for CCN, but excluding Detroit, general advertising revenue was up $6.1 million, or 16.4%, from 1995. General advertising revenue growth for the quarter was the strongest to date and was strong in all categories. On this same basis, for the first three quarters of 1996, general advertising revenue was up 7.1% from the prior year. Circulation revenue increased $6.2 million, or 5.3%, from third quarter 1995. On a pro forma basis for CCN, but excluding Detroit, circulation revenue increased by $1.8 million, or 1.6%, on an average daily circulation decrease of 4.3% and average Sunday circulation decrease of 3.5%, offset by a 5.9% increase in the average rate. On a pro forma basis for CCN, but excluding Detroit, circulation revenue was up 2.3% so far this year. Other newspaper revenue decreased by $163,000, or 0.8%, from 1995 for the quarter. On a pro forma basis for CCN, but excluding Detroit, other newspaper revenue decreased by 5.4% in the third quarter and 4.9% for the year to date, primarily due to reduced newsprint waste sale revenue caused by softening newsprint prices. BIS revenue in the third quarter of 1996 decreased $45.1 million, or 37.0%, reflecting the absence of KRF results. Excluding KRF and the impact of acquisitions, BIS revenue decreased 0.2% from 1995. The decrease was due to slow revenue growth in Knight-Ridder Information's core business of selling to information professionals. Technimetrics had a strong quarter. On a year-to-date basis, BIS revenue decreased $56.0 million, or 14.7%, reflecting the absence of KRF and the JoC. Excluding KRF, JoC and the impact of acquisitions, BIS operating revenue increased 0.7% from last year. OPERATING COSTS Labor and employee benefit costs decreased $10.7 million, or 4.0%, from third quarter 1995. On a pro forma basis for CCN, but excluding Detroit, labor and employee benefits were $21.3 million, or 8.2%, below 1995. On this same basis, year-to-date labor and employee benefits were $24.3 million, or 3.1%, below 1995. Excluding CCN and Detroit, the work force decreased 3.1% in the quarter and 4.1% for the year to date, primarily as a result of last year's fourth quarter work force reductions in a number of locations, including Miami and Philadelphia. Newsprint, ink and supplement costs increased $3.2 million, or 2.9% from third quarter 1995, on a 2.6% increase in the average newsprint price and a 1.1% increase in newsprint consumption. These costs were up $54.6 million, or 17.4%, for the year to date on a 23.9% increase in the average newsprint price and a 2.9% decrease in consumption. Although there were no price increases in 1996, the quarter and year continue to be impacted by the newsprint price increases imposed in 1995. Comparisons to 1995 in the third quarter, however, were not as severe as in the first two quarters as newsprint prices started to soften in 1996 compared to escalating prices in 1995. Other operating costs decreased $31.9 million, or 15.9%, from third quarter 1995, reflecting an abatement of strike-related costs in Detroit and the absence of KRF. On a pro forma basis for CCN, but excluding Detroit and KRF, other operating costs were $6.8 million, or 4.6%, above third quarter 1995 and flat on a year-to-date basis with 1995. The increase from 1995 during the quarter was due primarily to volume-related costs, such as royalty expense and cost of goods sold, and higher circulation promotion costs. 8 9 Depreciation and amortization increased $2.7 million, or 7.2%, over third quarter 1995 and $13.6 million, or 12.1%, for the year to date. The increase was primarily due to the acquisition of CCN, the investment in new presses and classified systems at several newspapers and certain write-offs associated with Knight-Ridder Information's strategic decision to focus its product development and marketing efforts on presenting information to end-users on the World Wide Web. NON-OPERATING ITEMS Interest expense, net of interest income and interest expense capitalized, increased $5.0 million over third quarter 1995 and $16.6 million for the year to date, due to higher debt levels. The average debt balance increased $344.7 million from the third quarter of last year, due largely to the financing of the CCN acquisition and the repurchase of 11.5 million shares in 1995 and 5.0 million shares in 1996. Equity in earnings of unconsolidated companies and joint ventures increased by $29,000 for the quarter and $8.3 million for the year to date, due to earnings improvements from our newsprint mill investments, which benefited from the rise in newsprint prices in 1995. The increase in the third quarter was modest due to performances in our cable and other investments and softening in the price of newsprint. "Other, net" was $161.8 million above third quarter 1995 and $77.9 million above year-to-date 1995 due to the gain on the sale of KRF recorded in the third quarter of 1996. The year-to-date comparison reflects less of a favorable variance due to the sale of the JoC in April 1995. OTHER On July 26, 1996, the company completed the sale of Knight-Ridder Financial to Global Financial Information for $275 million. The Board of Directors of the company declared a two-for-one stock split in the form of a 100% common stock dividend on June 21, 1996, payable on July 31, 1996, to shareholders of record as of the close of business on July 10, 1996. The Board of Directors also approved an 8.1% increase in the company's quarterly dividend from $.18 1/2 to $.20 per share (after giving effect to the previously mentioned stock split). On June 10, 1996, the company announced that Technimetrics, Inc., had entered into an agreement to purchase Grabill-Bloom, Inc., a stock surveillance firm that helps companies track their shareholders on a real-time basis. The acquisition was completed on July 1, 1996. 9 10 In March, the company announced that Tele-Communications, Inc. (TCI), had agreed to purchase all of Knight-Ridder's interests in the jointly owned cable properties for a price of $420 million in cash and TCI common stock. The two companies are equal owners of TKR Cable Company, which operates systems in New Jersey and New York. Knight-Ridder also has a 15% interest in another TCI Cable venture that operates cable systems in five Southern states. The sale is expected to close early next year. During the third quarter of 1996, the company purchased approximately 2.9 million shares of Knight-Ridder common stock. The company had remaining authorization to repurchase 7.0 million shares as of Sept. 29, including the additional 6.0 million share repurchase authorized by the Knight-Ridder Board of Directors on Sept. 19, 1996. A portion of the proceeds from the sale of KRF was used to repurchase stock. LIQUIDITY Net cash provided by operating activities increased to $122.8 million from $29.7 million in the third quarter of 1995. The increase was attributed to the strong earnings growth in the third quarter and other changes in working capital. Cash and short-term cash investments were up $4.5 million from Sept. 24, 1995, and down $3.9 million from year end. Total debt increased $216.8 million from third quarter 1995 due to the CCN acquisition, the 11.5 million shares repurchased in 1995 and the 5.0 million shares repurchased in 1996. Total debt decreased $203.6 million from Dec. 31, 1995, due to the use of proceeds from the sale of KRF in the third quarter to reduce debt. The total-debt-to-total-capital ratio was 42.2%, down from 47.7% at year end and up from 35.3% in September 1995. Approximately $445.1 million in aggregate unused credit lines remained at the end of the quarter. The ratio of current assets to current liabilities was 1.0:1 at Sept. 29, 1996, and 1.1:1 at Sept. 24, 1995, and Dec. 31, 1995. OUTLOOK FOR THE REMAINDER OF THE YEAR As we look ahead to the fourth quarter, we continue to anticipate a year of strong earnings growth. While we are concerned about the lackluster retail performance, we still anticipate an excellent year. The continuing decline in newsprint prices and the cycling through of the Detroit strike will positively impact the fourth quarter. The newsprint increases that went into effect throughout 1995 will still cause year-over-year increases of between 10% and 15% in 1996, but this is significantly less than initially anticipated. 10 11 PART II - OTHER INFORMATION Item 1. Legal Proceedings As reported on Part I, Item 2, of the Company's Form 10-Q for the quarter ended March 31, 1996, on April 1, 1996 the Company announced that a libel suit filed by Richard A. Spargue against the Philadelphia Inquirer in 1973 had been settled. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 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 29, 1996. 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 12, 1996 Gary R. Effren Vice President/Controller (Principal Financial Officer and Duly Authorized Officer of Registrant) 11 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED STATEMENT OF INCOME, THE CONSOLIDATED BALANCE SHEET, AND THE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1000 9-MOS DEC-29-1996 JAN-01-1996 SEP-29-1996 22,160 0 339,937 13,013 52,607 461,258 1,669,984 759,493 2,828,639 474,431 456,382 0 0 1,960 1,107,537 2,828,639 2,068,439 2,068,439 368,649 1,865,763 (130,936) 15,087 56,452 333,612 141,485 192,127 0 0 0 192,127 1.96 1.96 COST OF GOODS SOLD CONSIST OF NEWSPRINT, INK, & SUPPLEMENTS. OTHER EXPENSES CONSIST OF ALL NON-OPERATING COSTS NET, EXCLUDING INCOME TAXES. AMOUNT INCLUDES INTEREST EXPENSE, NET OF INTEREST INCOME AND OTHER NON-OPERATING COSTS, NET OF NON-OPERATING INCOME. ALSO INCLUDES A $160.9 MILLION PRETAX GAIN ON THE SALE OF KNIGHT-RIDDER FINANCIAL RECORDED IN THE THIRD QUARTER. 12
EX-99 3 OTHER FINANCIAL INFORMATION 1 EXHIBIT 99 OTHER FINANCIAL INFORMATION - EXHIBIT 99 (UNAUDITED) BUSINESS SEGMENT INFORMATION (IN THOUSANDS OF DOLLARS)
QUARTER ENDED THREE QUARTERS ENDED FOUR QUARTERS ENDED --------------------- -------------------- --------------------- SEPT. 29 SEPT. 24 SEPT. 29 SEPT. 24 SEPT. 29 SEPT. 24 1996 1995 1996 1995 1996 1995 -------- -------- -------- -------- -------- -------- OPERATING REVENUE Newspapers ................................. $576,888 $515,975 $1,743,225 $1,618,834 $2,374,573 $2,203,223 Business Information Services ............. 76,908 122,019 325,214 381,214 445,652 510,760 -------- -------- ---------- ---------- ---------- ---------- $653,796 $637,994 $2,068,439 $2,000,048 $2,820,225 $2,713,983 ======== ======== ========== ========== ========== ========== OPERATING INCOME Newspapers ................................. $ 85,871 $ 29,309 $ 236,614 $ 201,774 $ 315,986 $ 303,256 Business Information Services ............. (2,334) 3,643 442 13,399 (935) 17,547 Corporate ................................. (11,923) (13,871) (34,380) (40,371) (46,893) (50,113) -------- -------- ---------- ---------- ---------- ---------- $ 71,614 $ 19,081 $ 202,676 $ 174,802 $ 268,158 $ 270,690 ======== ======== ========== ========== ========== ========== DEPRECIATION AND AMORTIZATION Newspapers ................................. $ 28,454 $ 23,331 $ 85,021 $ 70,805 $ 110,267 $ 94,509 Business Information Services ............. 10,397 13,351 37,628 39,551 50,948 53,018 Corporate ................................. 1,139 636 3,045 1,722 4,013 2,089 -------- -------- ---------- ---------- ---------- ---------- $ 39,990 $ 37,318 $ 125,694 $ 112,078 $ 165,228 $ 149,616 ======== ======== ========== ========== ========== ==========
KNIGHT-RIDDER SHARE TRADING*
1996 Third Quarter 1995 Third Quarter Volume Per Day High Low Close Volume Per Day High Low Close 178,075 38 32 7/16 36 1/2 79,938 29 9/16 27 5/8 29 1/4
*Restated to reflect 2-for-1 stock split effected July 31, 1996. 13 -----END PRIVACY-ENHANCED MESSAGE-----