-----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, LKkM9n47q1oX7Ic6VWKIJaWbETg6rqwPpArXT6ZyJccqMMAhAznJC03u55QI713q mXcegoAsAt7W+DNYYt+EwA== 0001019056-01-500014.txt : 20010329 0001019056-01-500014.hdr.sgml : 20010329 ACCESSION NUMBER: 0001019056-01-500014 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010328 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: 1227 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-07553 FILM NUMBER: 1582022 BUSINESS ADDRESS: STREET 1: 50 W SAN FRANCISCO ST CITY: SAN JOSE STATE: CA ZIP: 95113 BUSINESS PHONE: 4089387700 MAIL ADDRESS: STREET 1: 50 W SAN FRANCISCO ST CITY: SAN JOSE STATE: CA ZIP: 95113 FORMER COMPANY: FORMER CONFORMED NAME: KNIGHT RIDDER NEWSPAPERS INC /FL/ DATE OF NAME CHANGE: 19860707 10-K 1 file001.txt FORM 10-K 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 31, 2000 Commission file number 1-7553 KNIGHT-RIDDER, INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) Florida 38-0723657 38-0723657 - ----------------------------- ------------------------------------ (State or other jurisdiction) (I.R.S. Employer Identification No.) 50 W. San Fernando St., San Jose, CA 95113 ------------------------------------------ (Address of principal executive offices) (408) 938-7700 ---------------------------------------------------- (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered Common Stock, $.02 1/12 Par Value New York Stock Exchange Frankfurt Stock Exchange Philadelphia Stock Exchange Chicago Stock Exchange Boston Stock Exchange Pacific Exchange Cincinnati Stock Exchange Securities registered pursuant to Section 12(g) of the Act: none 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 [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K 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 amendments to this Form 10-K. [ ] State the aggregate market value of the voting stock held by non-affiliates of the registrant. (The aggregate market value is computed by reference to the price at which the stock was sold as of March 20, 2001: $3,980,940,123.) Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date: March 20, 2001 - 73,851,611 one class Common Stock, $.02 1/12 Par Value DOCUMENTS INCORPORATED BY REFERENCE (1) Portions of Registrant's definitive Proxy Statement, in connection with the Annual Meeting of Shareholders to be held on April 24, 2001 are incorporated by reference into Part III. Table of Contents for 2000 Form 10-K Page PART I Item 1. Business 2 Item 2. Properties 5 Item 3. Legal Proceedings 5 Item 4. Submission of Matters to a Vote of Security Holders 5 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters 9 Item 6. Selected Financial Data 10 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 12 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 17 Item 8. Financial Statements and Supplementary Data 18 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 36 PART III Item 10. Directors and Executive Officers of the Registrant 36 Item 11. Executive Compensation 36 Item 12. Security Ownership of Certain Beneficial Owners and Management 36 Item 13. Certain Relationships and Related Transactions 36 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 37 SIGNATURES 39 SCHEDULES 41 EXHIBITS 41 PART I ITEM 1. BUSINESS THE COMPANY Knight-Ridder, Inc. was formed in 1974 by a merger between Knight Newspapers, Inc. and Ridder Publications, Inc. In 1903, Charles Landon Knight purchased the Akron Beacon Journal. Knight Newspapers was founded by John S. Knight, who inherited the Beacon Journal from his father in 1933. Ridder Publications was founded in 1892 when Herman Ridder acquired the German-language StaatsZeitung in New York. Both groups flourished, each taking its stock public in 1969. The merger created a company with operations coast to coast. Knight-Ridder, Inc., incorporated in Florida in 1976, is headquartered in San Jose, California, and employs about 22,000 people. NEWSPAPERS Knight Ridder had 32 daily and 25 nondaily newspapers at the end of 2000. Newspaper operating revenue is derived primarily from the sale of newspaper advertising. Due to seasonal factors such as heavier retail selling during Christmas and Easter, advertising income fluctuates significantly throughout the year. Consecutive quarterly results are not uniform or comparable and are not indicative of the results over an entire year. Each of Knight Ridder's newspapers is operated on a substantially autonomous basis by local management appointed by executive management in San Jose. Each newspaper is free to manage its own news coverage, set its own editorial policies and establish most business practices. Basic business policies, however, are set by the corporate staff in San Jose. Editorial and quality control assistance is also provided by the corporate staff. Each newspaper is served by the company-owned news bureau in Washington, D.C. Supplemental news, graphic and photographic services provided by Knight Ridder Tribune Information Services ("KRT"), a partnership between Knight Ridder and Tribune Co., include editorial material produced by all Knight Ridder newspapers, by Knight Ridder's 15 foreign correspondents and by a number of other newspapers. The supplemental news, graphic and photographic services are distributed through another Knight Ridder and Tribune Co. partnership. All of the company's newspapers compete for advertising and readers' time and attention with broadcast, satellite and cable television, the Internet and other computer services, radio, magazines, nondaily suburban newspapers, free shoppers, billboards and direct mail. In some cases, the newspapers also compete with other newspapers published in nearby cities and towns - particularly in Miami, St. Paul and Fort Worth. In Detroit and Fort Wayne, Knight Ridder has joint operating agreements with a second newspaper. The rest of Knight Ridder's newspapers are the only daily and Sunday papers of general circulation published in their communities. The newspapers rely on local sales operations for local retail and classified advertising. The larger papers are assisted by Newspapers First and by the Newspaper National Network in obtaining national or general advertising. The table below presents the relative percentage contributions by individual papers to the company's overall operating revenue in 2000, 1999 and 1998. The percentage contributions of each paper to operating revenue are not necessarily indicative of contributions to operating profit.
2000 1999 1998 - ----------------------------------------------------------------------------------------- Sources of Knight Ridder Newspaper Operating Revenue The Philadelphia Inquirer and Philadelphia Daily News 18.3% 18.8% 18.8% The Miami Herald and el Nuevo Herald 10.3 10.4 10.6 San Jose Mercury News 10.3 9.5 9.3 The Kansas City Star 8.6 8.5 8.8 Fort Worth Star-Telegram 7.4 7.3 7.1 The Charlotte Observer 5.8 6.1 6.0 Contra Costa Newspapers 4.5 4.1 3.9 Saint Paul Pioneer Press 3.8 4.0 4.0 Akron Beacon Journal 3.2 3.3 3.3 All other 27.8 28.0 28.2 - ----------------------------------------------------------------------------------------- 100.0% 100.0% 100.0% - -----------------------------------------------------------------------------------------
2 NEWSPAPERS Revenue figures discussed in this section are presented on a 52-week basis, unless otherwise noted. NEWSPRINT Knight Ridder consumed approximately 761,700 metric tons of newsprint in 2000, excluding Detroit (see page 25, Detroit Newspapers). Approximately 15.3% of the company's total operating expenses during the year was for newsprint. Purchases are made under long-term agreements with 15 newsprint producers. In 2000, Knight Ridder purchased approximately 65% of its consumption from 15 mills in the United States and 35% from 17 mills in Canada. Management believes that current sources are more than adequate to meet current demands. Approximately 81% of the newsprint consumed by the company contained some recycled content; the average content of these rolls was 48.6% recycled fiber. This translates into an overall recycled newsprint average of 39.4%. Knight Ridder is a one-third partner with Cox Enterprises and Media General, Inc., in SP Newsprint Co., formerly Southeast Paper Manufacturing Co ("SP"). It is the fourth-largest newsprint manufacturing company in North America. SP's mill in Dublin, Ga., produces more than 500,000 metric tons per year of 100% recycled-content newsprint. Its plant in Newberg, Ore., produces more than 363,000 metric tons per year of newsprint with at least 40% recycled content. SP provides recycled-content newsprint to its owners and more than 200 publishers and commercial printers. Its SP Recycling Corp. subsidiary recycles more than 1.2 million short tons of recovered material annually. Knight Ridder also owns a 13.5% equity share of Ponderay Newsprint Company in Usk, Wash., which produced more than 242,000 metric tons of newsprint in 2000. Knight Ridder expects that its purchases from these two newsprint companies will represent approximately 40% of its annual consumption for 2001, providing an important hedge against price volatility and a secure source of supply. TECHNOLOGY The focus in 2000 was on defining the vision for technology in the areas of circulation, advertising, marketing and data warehousing. Strategic planning and organizational structure were developed for the corporate Technology Department to enable the company to quickly adapt new technology and reap the associated benefits. The Miami Herald and Fort Worth Star-Telegram installed data warehousing systems that put significantly improved information in the hands of the newspapers' marketing people. GENERAL ADVERTISING SALES Knight Ridder newspapers depend most heavily on two agents for the sale of general advertising. Newspapers First, a national advertising sales cooperative, is the primary sales representative for many of Knight Ridder's newspapers, many of the other leading newspaper groups and several leading independents. It acts as an interface to national advertisers across the country. Newspaper National Network, Knight Ridder's second general sales agent, was established in 1994 to focus national selling on behalf of the newspaper industry. It represents all Knight Ridder newspapers and more than 500 others. Like Newspapers First, it offers "one-stop shopping" and "one-order, one-bill." KNIGHT RIDDER/TRIBUNE KRT, a joint venture of Knight Ridder and Tribune Co., offers stories, graphics, illustrations, photos and paginated pages for print publishers; news animations for TV broadcasters; and Web packages for online publishers. In 2000, KRT improved its profitability by improving margins for its business, general news and photo services and by reducing the cost of delivering its products through the Web. THE PHILADELPHIA INQUIRER AND PHILADELPHIA DAILY NEWS Philadelphia Newspapers, Inc. (PNI), publishes two of the nation's most respected newspapers: The Philadelphia Inquirer and the Philadelphia Daily News. They are sold in nine counties in Pennsylvania and southern New Jersey. The 3 weekly net cumulative penetration of the newspapers is 63% of all adults in the region. Together, the papers have won 20 Pulitzer Prizes. Operating revenue in 2000 was $604.3 million. The Philadelphia Primary Metropolitan Statistical Area (PMSA) population is expected to grow 0.3% between 2000 and 2005; the U.S. average is 4.5%. In 2000, Philadelphia had income per capita 14.6% above the U.S. average; by 2005 it is projected to be 15.1% above. THE MIAMI HERALD/EL NUEVO HERALD The Miami Herald, Florida's largest newspaper. El Nuevo Herald is America's premier newspaper in Spanish. Both are published by the Miami Herald Publishing Company (MHPC). The Miami Herald is sold in South Florida and in 28 Latin American and Caribbean countries, primarily through its International Edition. El Nuevo Herald serves the growing Spanish-speaking population of Miami-Dade and Broward counties. Operating revenue in 2000 was $310.2 million for The Miami Herald and $27.8 million for the el Nuevo Herald. The Miami-Fort Lauderdale combined market population is expected to grow 6.1% between 2000 and 2005. In 2000, the area had income per capita 10.8% below the U.S. average; by 2005 it is projected to be 17.9% below. SAN JOSE MERCURY NEWS The San Jose Mercury News, the newspaper of Silicon Valley, serves one of the most prosperous markets in the nation. Circulation is concentrated in Santa Clara County, which encompasses San Jose - California's third-largest city - and surrounding communities. The region is the world leader in high technology and ranks fourth nationally in exports. Operating revenue in 2000 was $341.4 million. The population of the San Jose Primary Metropolitan Statistical Area is expected to grow 5.8% between 2000 and 2005. In 2000, San Jose had income per capita that was 54.8% above the U.S. average; by 2005 it is projected to be 58.4% above the U.S. average. THE KANSAS CITY STAR The Kansas City Star serves the Kansas City metropolitan area. The Star's primary market consists of 11 counties in Kansas and Missouri. Operating revenue in 2000 was $284.4 million. The Kansas City Metropolitan Statistical Area population is expected to grow 4.5% between 2000 and 2005, equivalent to the projected growth for the United States. Kansas City in 2000 had income per capita 7.1% above the U.S. average; by 2005 it is projected to be 8.7% above the U.S. average. FORT WORTH STAR-TELEGRAM The Star-Telegram serves the western portion of the Dallas/Fort Worth market. The four-county Fort Worth/Arlington market is the third largest in Texas and is projected to be the nation's fifth-fastest-growing major metropolitan area over the next five years. Operating revenue in 2000 was $242.9 million. Fort Worth/Arlington's population is expected to grow 11.4% between 2000 and 2005, compared with 4.5% for the United States. In 2000, Fort Worth/Arlington had income per capita 8.2% above the U.S. average; by 2005 it is projected to be 10.1% above the U.S. average. DETROIT FREE PRESS The Detroit Free Press, Michigan's largest daily newspaper, is sold primarily in the six-county area surrounding Detroit. It is sold throughout the state, in Windsor, Ontario, and in Toledo, Ohio. The Detroit Free Press is published in combination with The Detroit News by Detroit Newspapers (DN), a joint operating agency formed in 1989 to combine the business operations of the two partners, Knight Ridder and Gannett Co. The profits (or losses) are split equally. The Free Press, owned by Knight Ridder, is a morning paper; The News, owned by Gannett, is an evening paper. On weekends and holidays, they publish combined editions. The Sunday edition ranks seventh in circulation in the nation. The population of the Detroit Primary Metropolitan Statistical Area is expected to grow 0.7% between 2000 and 2005. Detroit in 2000 had per capita income 7.2% above the U.S. average; in 2005 it is projected to be 6.0% above the U.S. average. 4 THE CHARLOTTE OBSERVER The Charlotte Observer, the largest-circulation daily between Washington D.C., and Atlanta, is sold primarily in a 15-county region across the two Carolinas. Operating revenue in 2000 was $192.2 million. Population in the Charlotte Metropolitan Statistical Area is projected to grow 7.1% between 2000 and 2005. Charlotte in 2000 had per capita income 10.4% in 2005 it is projected to be 15.0% above the U.S. average. ONLINE ACTIVITIES During the first quarter of 2000, the company consolidated all its Internet operations under a new business unit, KnightRidder.com. Previously, Knight Ridder's Internet activities were reported and managed as a part of the company's newspaper operations. KnightRidder.com controls all of Knight Ridder's online efforts, including the Web sites previously operated by the newspapers. KnightRidder.com operates and manages the Real Cities Network, which consists of all Knight Ridder Web sites and those of several other media affiliates. ITEM 2. PROPERTIES Knight Ridder has daily newspaper facilities in 28 markets situated in 17 states. These facilities vary in size from 8,000 square feet at The Buyer's Guide in Warner Robins, Ga., to 2.9 million square feet in Philadelphia. In total, they occupy about 8.1 million square feet. Approximately 1.7 million of the total square footage is leased from others. The company owns substantially all of its production equipment, although certain office equipment is leased. The company also owns land for future expansion in Columbus and Macon, Ga., and Detroit, MI. Knight Ridder properties are maintained in excellent condition and are suitable for current and foreseeable operations. During the three years ended December 31, 2000, the company spent approximately $320 million for additions to property, plant and equipment. ITEM 3. LEGAL PROCEEDINGS On July 13, 1995, six unions struck the Detroit Free Press, The Detroit News and Detroit Newspapers (DN), which operates both newspapers. Subsequently, the unions filed numerous unfair labor practice charges against the newspapers and DN. In June 1997, after a long trial, a National Labor Relations Board (NLRB) administrative judge ruled that the strike was caused by the unfair labor practices of DN and The Detroit News and ordered that DN and the newspapers reinstate all strikers, displacing permanent replacements if necessary. DN and the newspapers appealed the decision to the NLRB. On Aug. 27, 1998, the NLRB affirmed certain unfair labor practice findings against The Detroit News and DN and reversed certain findings of unfair labor practices against DN. DN and the newspapers filed a motion to reconsider with the NLRB, which was denied on March 4, 1999. The unions and DN filed appeals to the U.S. Court of Appeals for the District of Columbia Circuit.. The U.S. Court of Appeals, on July 7, 2000, unanimously reversed the NLRB, holding that the strike was an economic strike. Thus, the NLRB order to reinstate and pay back pay to the strikers was also set aside. The time to appeal has expired and no appeal was filed. Various libel and copyright infringement actions and environmental and other legal proceedings that have arisen in the ordinary course of business are pending against the company and its subsidiaries. In the opinion of management, the ultimate liability to the company and its subsidiaries as a result of all legal proceedings will not be material to its financial position or results of operations on a consolidated basis. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to the vote of security holders of Knight-Ridder, Inc. during the three months ended December 31, 2000. EXECUTIVE OFFICERS OF KNIGHT RIDDER MANAGEMENT COMMITTEE* JERRY CEPPOS, 54 Vice president/news since 1999. Oversees news operations of Knight Ridder's 32 daily newspapers; responsible for the Knight Ridder Washington Bureau and the content of Knight Ridder/Tribune Information Services. Served as vice president and executive editor, San Jose Mercury News, 1995 to 1999; managing editor 1983 to 1995; various editing positions 1981 to 1983. B.S., journalism, University of Maryland, 1969. MARY JEAN CONNORS, 48 Senior vice president/human resources since 1996; vice president/human resources 1989 to 1996. Oversees human resources for Knight Ridder; manages annual strategy and goal-setting. Served as vice president/human resources, Philadelphia Newspapers, Inc., 1988 to 1989; assistant to the senior vice president/news, Knight Ridder, 1988; assistant managing editor/personnel, The Miami Herald, 1985 to 1988. Stanford Executive Program, Stanford University, 1999; B.A., English, Miami University in Oxford, Ohio, 1973. 5 FRANK MCCOMAS, 55 Senior vice president/operations since 1996; vice president/operations 1995 to 1996. Oversees operations for newspapers in Akron, Bradenton, Charlotte, Columbia, Columbus, Detroit, Fort Wayne, Lexington, Macon, Miami, Myrtle Beach, Tallahassee and Warner Robins; publishers report to him. Served as publisher, The (Columbia) State, 1988 to 1995; publisher, Bradenton Herald, 1980 to 1988. Advanced Management Program, Harvard Business School, 1994; B.B.A., business administration, Kent State University, 1968. JEAN H. MORDO, 56 Senior vice president and chief financial officer of the company since March 7, 2001. Previously, he served as group executive vice president of Scotts Company, Inc. from 1998 to 2000, and as executive vice president/chief financial officer from 1997 to 1999. From 1992 through December 1996, he served as Senior Vice President and Chief Financial Officer of Pratt and Whitney Aircraft, a division of United Technologies Corporation. P. ANTHONY RIDDER, 60 Chairman of the Management Committee since 1995; Knight Ridder chairman and CEO since 1995. Served as president 1989 to 1995; president of the Newspaper Division 1986 to 1995. Served as publisher, San Jose Mercury News, 1977 to 1986; general manager 1975 to 1977. B.A., economics, University of Michigan, 1962. STEVEN B. ROSSI, 51 President/Newspaper Division since February 2001. Responsible for all Knight Ridder newspaper operations; oversees newspapers in Contra Costa, Fort Worth, Kansas City, Olathe, Philadelphia, St. Paul, San Jose and Wichita; publishers report to him. Served as senior vice president/operations Knight Ridder, 1998 to 2001; executive vice president and general manager, Philadelphia Newspapers, Inc., 1992 to 1998. M.B.A., The Wharton School of the University of Pennsylvania, 1974; B.A., economics, Ursinus College, 1971. GORDON YAMATE, 45 Vice president and general counsel since September 2000. Manages companywide legal affairs. Served as vice president, general counsel and corporate secretary at Liberate Technologies, 1999 to 2000; partner in the law firm of McCutchen, Doyle, Brown & Enersen, LLP, in Palo Alto and San Jose, 1988 to 1999; associate 1983 to 1988. J.D., Santa Clara University School of Law, 1980; B.A., economics and political science, University of California, Davis, 1977. OFFICERS* MARSHALL W. ANSTANDIG, 52 Vice president/senior labor and employment counsel since 1998. Advises and assists Knight Ridder and its companies on legal matters related to labor relations and employment law. Served as partner in the law firm of Brown & Bain, P.A., 1996 to 1998; managing partner in law firm of Bryan Cave in Phoenix, 1990 to 1996. J.D., Detroit College of Law, Michigan State University, 1974; B.A., political science, Hope College, 1971. ARDEN DICKEY, 47 Assistant vice president/circulation and regional call centers since April 2000. Oversees circulation operations at all newspapers and directly manages Knight Ridder's two regional customer service centers. Served as vice president/circulation, Miami Herald Publishing Company, 1992 to 2000; circulation director, Knight Ridder, 1997; various circulation roles, Miami Herald Publishing Company, 1971 to 1992. M.B.A., University of Miami, 1987; B.B.A., corporate management, Florida Atlantic University, 1985. GARY R. EFFREN, 44 Vice president/controller since 1995. Responsible for all financial reporting, corporate accounting, risk management and financial aspects of benefit plans. Served as assistant vice president/assistant treasurer 1993 to 1995; assistant to the vice president/finance and treasurer 1989 to 1993; director of corporate accounting 1986 to 1989; business manager, Viewdata Corporation of America, 1984 to 1986. M.B.A., University of Miami, 1989; B.S., accounting, Rider College, 1978; CPA. VIRGINIA DODGE FIELDER, 52 Vice president/research since 1989. Responsible for market research for Knight Ridder, including its annual reader, advertiser and Internet surveys; consults with the newspapers on local research projects. Served as vice president/news and circulation research 1986 to 1989; director/news and circulation research 1981 to 1985; editorial research manager, Chicago Sun-Times, 1979 to 1981. Ph.D., mass communications, Indiana University, 1976; M.A., journalism, Indiana University, 1974; B.A., psychology, Transylvania University, 1970. 6 DAN FINNIGAN, 37 Vice president since 1999 and president of KnightRidder.com. Heads the company's Internet operations and helps lead the company's interactive strategies and investments. Served as president and CEO, SBC Interactive, 1998 to 1999; held various positions at SBC Communications, Inc., 1995 to 1998; group manager for product development, ESS Ventures, LLC, 1994 to 1995. M.B.A., finance and marketing, The Wharton School of the University of Pennsylvania, 1993; B.A., communication studies, University of California, Los Angeles, 1984. STEVE HANNAH, 42 Vice president/technology since April 2000. Responsible for creating the vision for technology while setting the standards in implementing new technology. Served as vice president/technology and Chief Information Officer, Gazette Communications, 1996 to 2000; director of management information systems 1993 to 1996; computer services manager, Journal/Sentinel, Inc., 1986 to 1993. B.A., business administration, Eastern Michigan University, 1982. LYNDA HAUSWIRTH, 38 Assistant vice president/taxation since 1998. Responsible for all tax-related items, including income, sales/use and property taxes, tax planning and research; assists individual companies with audits and filing requirements. Served as senior tax manager, Ernst & Young LLP, 1996 to 1998; senior associate, BDO Seidman, 1995 to 1996; various other tax positions 1987 to 1995. B.S., business administration/accounting, University of Vermont, 1983; CPA. POLK LAFFOON IV, 55 Vice president/corporate relations since 1994 and corporate secretary since 1999. Oversees the investor relations, public and media relations and corporate secretary functions, including contact with the financial community. Served as assistant to the president 1992 to 1994; assistant circulation director/distribution, The Miami Herald, 1991 to 1992. Served as director and vice president/investor relations, Taft Broadcasting Co., 1982 to 1987. M.B.A., marketing, The Wharton School of the University of Pennsylvania, 1970; B.A., English, Yale, 1967. ADRIENNE LILLY, 30 Assistant vice president/assistant general counsel since February 2001; assistant general counsel since 1999. Assists in the management of companywide legal affairs. Served as corporate, commercial and securities lawyer at Fredrikson & Byron, P.A., in Minneapolis, 1995 to 1999. J.D., University of California at Berkeley, Boalt Hall School of Law, 1995; B.A., history, University of Notre Dame, 1992. MARIO R. LOPEZ, 61 Assistant vice president/internal audit since 1993. Oversees the internal audit function for Knight Ridder and its subsidiary companies; reports directly to the Audit Committee of the Knight Ridder Board of Directors on these matters. Served as partner, Deloitte & Touche, 1978 to 1993. B.S., business administration, Saint Joseph's University, 1962; CPA. LARRY D. MARBERT, 47 Vice president/production and facilities since 1998. Oversees capital investments in facilities and manufacturing systems; tracks and promotes advances in newspaper production technology and acts as an internal consultant. Served as vice president/technology, Knight Ridder, 1994 to 1998; senior vice president/operations, Philadelphia Newspapers, Inc., 1991 to 1994; vice president/operations research and planning 1988 to 1991; vice president/production 1986 to 1988. M.S., management science, Auburn University, 1977; B.S., University of North Carolina, business administration, 1976. JACQUI LOVE MARSHALL, 52 Vice president/human resources/diversity and development since October 2000. Oversees recruiting, corporate learning and diversity. Served as assistant vice president/human resources 1996 to 2000; vice president/ human resources, Miami Herald Publishing Company, 1993 to 1996; various roles, The Washington Post, 1986 to 1993. Ed.M., educational counseling, Harvard University, 1970; B.A., education, Trenton State College, 1969. LARRY OLMSTEAD, 43 Assistant vice president/news since February 2001. Oversees news operations of some daily newspapers; assists with recruiting and some newsroom functions. Served as managing editor, The Miami Herald, 1996 to 2001; Knight Ridder assistant vice president/human resources/diversity 1993 to 1996; special projects editor, The New York Times, 1993. Attended George Washington University. MIKE ROGERS, 49 Vice president/marketing since 1999. Oversees planning and implementation of strategic marketing initiatives, including sales, branding efforts, reader and advertising research, new product initiatives and database marketing across the company. Served in various capacities, including president and publisher of Computerworld, Inc., and executive vice president of International Data Group Marketing Services Division in Boston, 1992 to 1999; senior vice president, Ammirati Puris Lintas advertising agency in New York, 1986 to 1992. M.B.A., marketing, University of Denver, 1978; B.S., management, New Mexico State University, 1973. 7 ALAN G. SILVERGLAT, 54 Vice president/treasurer since 1995. Manages the merger and acquisition process and is responsible for taxation, capital structure of the company and related debt ratings. Also assists in the review and oversight of minority investments. Served as senior vice president/finance and planning for Knight Ridder Business Information Services, 1983 to 1995. B.S., business administration, University of Missouri, 1968; CPA. STEVEN J. STEIN, 47 Vice president/human resources/compensation and benefits since October 2000. Oversees benefits, compensation and human resources information systems, and works with companies on succession planning, organizational development and employee research activities. Served as assistant vice president/human resources 1995 to 2000; vice president/human resources for Knight Ridder Business Information Services, 1989 to 1995. Ph.D., psychology, University of Florida, 1981; B.A., psychology, George Washington University, 1974. STEVE STONE, 48 Assistant vice president since March 2000. Leads the Knight Ridder Shared Services Center (SSC), which consolidates the routine financial transactions, general ledger, accounts payable, fixed assets, purchasing and vendor management activities of all Knight Ridder companies. A member of the group that created the SSC, he served as general manager 1995 to 2000; vice president/finance and CFO, The Charlotte Observer, 1992 to 1995; director/finance and controller, The Miami Herald, 1987 to 1992. B.A., business administration, Southwestern College, 1974. JOSEPH (CHIP) VISCI, 47 Vice president/operations since March 2000 and assistant to the chairman and CEO since 1996. Oversees operations for newspapers in Aberdeen, Belleville, Biloxi, Duluth, Grand Forks, Monterey, San Luis Obispo, State College and Wilkes-Barre; publishers report to him. Served as managing editor, Detroit Free Press, 1996, and in various newsroom positions 1978 to 1996. M.A., journalism, Ohio State University, 1977; B.A., journalism, Ohio Wesleyan University, 1975. *Ages as of February 1, 2001 8 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS KRI STOCK Knight Ridder common stock is listed on the New York Stock Exchange and the Frankfurt Stock Exchange under the symbol KRI. The stock is also traded on exchanges in Philadelphia, Chicago, Boston, San Francisco, Los Angeles and Cincinnati and through the Intermarket Trading System. Options are traded on the Philadelphia Exchange. The company's 73.9 million shares outstanding at March 20, 2001 were held in all 50 states by 9,860 shareholders of record. MARKET PRICE OF COMMON STOCK The last closing price of the company's common stock prior to the preparation of this report was $54.45 on March 20, 2001. The average stock trading volume of shares per day for the years 2000, 1999 and 1998 was 398,000, 417,000 and 242,000, respectively. The following table presents the high and low sales price of the company's common stock by fiscal quarter for the two most recent fiscal years: 2000 1999 ---------------------- ----------------------- Quarter High Low High Low - ------- ---- --- ---- --- 1st 59 13/16 44 3/16 53 1/8 46 2nd 55 7/8 45 7/8 56 15/16 48 7/16 3rd 56 11/16 49 3/8 56 9/16 52 11/16 4th 57 5/8 44 1/8 65 52 5/8 TREASURY STOCK PURCHASES The table below is a summary of treasury stock purchases since 1989: Shares Cost Purchased (000S) --------- ------ 2000 9,048,895 $464,835 1999 3,703,817 210,141 1998 4,725,000 255,533 1997 13,824,300 643,375 1996 6,219,100 221,768 1995 11,508,600 319,363 1994 5,044,600 136,977 1993 1,500,000 40,693 1992 - - 1991 - - 1990 5,325,400 129,909 1989 5,522,200 131,885 Dividends Common stock dividend history and policy appears in Item 6, "11 Year Financial Highlights" and Item 8, "Financial Statements and Supplementary Data", Note 6 to the consolidated financial statements. 9 ITEM 6. SELECTED FINANCIAL HIGHLIGHTS 11-YEAR FINANCIAL HIGHLIGHTS The following information was compiled from the consolidated financial statements of Knight Ridder and its subsidiaries. All years reflect the reclassification of DN's results in accordance with EITF 00-1. In addition, certain elements of other revenue were reclassified to advertising revenue to conform with industry practice. The consolidated financial statements and related notes and discussions for the year ended December 31, 2000, (pages 18 through 34) should be read to obtain a better understanding of this information.
- ----------------------------------------------------------------------------------------------------------------------------------- Compound Growth Rate Dec. 31 Dec. 26 Dec. 27 (In Thousands, Except Per Share Data and Ratios) 5-Year 10-Year 2000 1999 1998 - ----------------------------------------------------------------------------------------------------------------------------------- SUMMARY OF OPERATIONS Operating Revenue Advertising 10.3% 5.9% $ 2,507,836 $ 2,353,520 $ 2,222,597 Circulation 3.3 4.0 523,856 525,686 533,340 Other 40.6 21.1 180,075 154,569 139,617 - ---------------------------------------------------- ------------------------------------------------------ Total Operating Revenue 9.8 6.0 3,211,767 3,033,775 2,895,554 - ---------------------------------------------------- ------------------------------------------------------ Operating Costs Labor, newsprint and other operating costs 6.8 5.2 2,355,398 2,229,410 2,209,819 Depreciation and amortization 15.3 8.0 187,597 182,943 181,112 - ---------------------------------------------------- ------------------------------------------------------ Total Operating Costs 7.3 5.4 2,542,995 2,412,353 2,390,931 - ---------------------------------------------------- ------------------------------------------------------ Operating Income 24.0 9.0 668,772 621,422 504,623 Interest expense 14.4 5.0 (116,652) (97,444) (105,936) Other, net 13.8 4.7 (26,830) 44,037 109,229 Income taxes, net 23.7 9.1 (210,927) (228,076) (202,285) - ---------------------------------------------------- ------------------------------------------------------ Income from continuing operations 23.4 8.4 314,363 339,939 305,631 Discontinued BIS operations(1) 60,226 Cumulative effect of changes in accounting principles(2) - ----------------------------------------------------------------------------------------------------------------------------------- Net Income 14.5 7.7 $ 314,363 $ 339,939 $ 365,857 =================================================================================================================================== Operating income percentage (profit margin) 20.8% 20.5% 17.4% - ----------------------------------------------------------------------------------------------------------------------------------- SHARE DATA Basic weighted-average number of shares 75,370 80,025 78,882 Diluted weighted-average number of shares 89,105 97,460 98,176 Earnings per share Basic: Continuing operations 29.4 11.1 $ 4.02 $ 4.07 $ 3.70 Discontinued BIS operations(1) 0.77 Cumulative effect of changes in accounting principles(2) Net income 20.1 10.4 4.02 4.07 4.47 Diluted: Continuing operations 26.3 9.8 $ 3.53 $ 3.49 $ 3.11 Discontinued BIS operations(1) 0.62 Cumulative effect of changes in accounting principles(2) Net income 17.1 9.2 3.53 3.49 3.73 Dividends declared per common share(3) 4.5 3.2 0.92 0.89 0.80 Common stock price: High 59 13/16 65 59 5/8 Low 44 1/8 46 40 1/2 Close 56 7/8 58 15/16 50 13/16 Shareholders' equity per common share 9.6 7.2 $ 18.09 $ 19.07 $ 17.33 Price/earnings ratio(4) 16.1 16.9 13.6 Adjusted price/earnings ratio(5) 15.4 17.9 19.3 - ----------------------------------------------------------------------------------------------------------------------------------- OTHER FINANCIAL DATA Treasury Stock Purchases: Number of shares 9,049 3,704 4,725 Cost $ 464,835 $ 210,141 $ 255,533 Payment of cash dividends 81,002 85,526 77,152 Ratio of earnings to fixed charges(6) 5.6 6.2 5.3 At year end Total assets $ 4,243,526 $ 4,192,334 $ 4,257,097 Long-term debt (excluding current maturities) 1,591,910 1,260,814 1,329,001 Total debt 1,672,272 1,300,754 1,527,278 Shareholders' equity 1,541,470 1,780,684 1,662,731 Return on average shareholders' equity(7) 18.3% 19.7% 22.8% Current ratio 1.1 1.1 0.8 Total debt/total capital ratio 52.0% 42.2% 47.9%
(1) Results of operations of the company's Business Information Services (BIS) Division (discontinued in 1997) and the gains on the sales of BIS companies are presented as "discontinued BIS operations." (2) For 1995, the cumulative effect of change in accounting principle relates to the implementation of FAS 116-Accounting for Contributions Received and Contributions Made. For 1992, the cumulative effect of change in accounting principle relates to the implementation of FAS 109-Accounting for Income Taxes and FAS 106-Accounting for Postretirement Benefits Other Than Pensions. (3) On January 28, 1997, the Board of Directors declared a $.20 per share dividend. The quarterly dividend previously paid in January was paid on February 24, 1997, to shareholders of record as of the close of business on February 12, 1997. (4) Price/earnings ratio is computed by dividing closing market price by diluted earnings per share. 10
- --------------------------------------------------------------------------------------------------------------------------- Dec. 28 Dec. 29 Dec. 31 Dec. 25 Dec. 26 Dec. 27 Dec. 29 Dec. 30 1997 1996 1995 1994 1993 1992 1991 1990 - --------------------------------------------------------------------------------------------------------------------------- $ 2,060,772 $ 1,659,336 $ 1,534,761 $ 1,414,343 $ 1,324,312 $ 1,294,944 $ 1,284,748 $ 1,409,149 521,135 457,306 444,506 426,799 418,726 406,388 386,363 355,174 103,515 65,913 32,789 91,818 69,689 47,747 35,100 26,471 - --------------------------------------------------------------------------------------------------------------------------- 2,685,422 2,182,555 2,012,056 1,932,960 1,812,727 1,749,079 1,706,211 1,790,794 - --------------------------------------------------------------------------------------------------------------------------- 2,029,587 1,735,639 1,691,655 1,534,496 1,460,563 1,408,480 1,401,750 1,420,426 149,802 113,778 92,134 90,310 90,712 84,144 81,375 86,946 - --------------------------------------------------------------------------------------------------------------------------- 2,179,389 1,849,417 1,783,789 1,624,806 1,551,275 1,492,624 1,483,125 1,507,372 - --------------------------------------------------------------------------------------------------------------------------- 506,033 333,138 228,267 308,154 261,452 256,455 223,086 283,422 (102,662) (73,137) (59,512) (44,216) (44,403) (52,358) (68,806) (71,784) 290,481 50,208 14,062 1,799 2,987 13,855 35,820 17,007 (297,348) (124,829) (72,861) (106,493) (83,281) (82,496) (67,965) (88,076) - --------------------------------------------------------------------------------------------------------------------------- 396,504 185,380 109,956 159,244 136,755 135,456 122,135 140,569 16,511 82,493 57,426 11,656 11,334 10,630 9,933 8,476 (7,320) (105,200) - --------------------------------------------------------------------------------------------------------------------------- $ 413,015 $ 267,873 $ 160,062 $ 170,900 $ 148,089 $ 40,886 $ 132,068 $ 149,045 =========================================================================================================================== 18.8% 15.3% 11.3% 15.9% 14.4% 14.7% 13.1% 15.8% - --------------------------------------------------------------------------------------------------------------------------- 88,475 96,021 99,451 107,888 109,702 108,948 102,586 100,098 101,314 97,420 100,196 108,551 110,663 110,356 103,594 101,366 $ 4.40 $ 1.93 $ 1.11 $ 1.48 $ 1.25 $ 1.24 $ 1.19 $ 1.40 0.19 0.86 0.57 0.10 0.10 0.11 0.10 0.09 (0.07) (0.97) 4.59 2.79 1.61 1.58 1.35 0.38 1.29 1.49 $ 3.91 $ 1.90 $ 1.10 $ 1.47 $ 1.24 $ 1.22 $ 1.18 $ 1.39 0.17 0.85 0.57 0.10 0.10 0.10 0.09 0.08 (0.07) (0.95) 4.08 2.75 1.60 1.57 1.34 0.37 1.27 1.47 0.80 0.58 1/2 0.74 0.73 0.70 0.70 0.70 0.67 57 1/8 42 33 5/16 30 1/2 32 1/2 32 1/16 28 3/4 29 35 3/4 29 7/8 25 1/8 23 1/4 25 5/16 25 3/8 21 7/8 18 1/2 50 3/16 39 1/4 31 1/4 25 7/16 29 11/16 29 1/16 25 3/8 22 15/16 $ 15.65 $ 12.12 $ 11.43 $ 11.58 $ 11.33 $ 10.75 $ 10.72 $ 9.05 12.3 14.3 19.5 16.2 22.2 78.5 20.0 15.6 21.8 21.6 28.4 17.3 23.9 23.8 21.5 16.5 - --------------------------------------------------------------------------------------------------------------------------- 13,824 6,219 11,509 5,045 1,500 5,325 $ 643,375 $ 221,768 $ 319,363 $ 136,977 $ 40,693 $ -- $ -- $ 129,909 78,335 74,262 74,377 77,942 76,787 75,992 71,087 66,422 7.1 4.0 3.2 5.2 4.4 3.8 2.8 3.3 $ 4,355,142 $ 2,860,907 $ 2,966,321 $ 2,409,239 $ 2,399,067 $ 2,431,307 $ 2,305,731 $ 2,244,919 1,599,133 771,335 1,000,721 411,504 410,388 495,941 556,797 803,914 1,668,830 821,335 1,013,850 411,504 451,075 560,245 606,840 823,958 1,551,673 1,131,508 1,110,970 1,224,654 1,243,169 1,181,812 1,148,620 894,913 30.8% 23.9% 14.3% 13.9% 12.2% 12.0% 12.9% 16.5% 1.1 1.0 1.1 1.0 1.0 1.1 1.1 1.2 51.8% 42.1% 47.7% 25.2% 26.6% 32.2% 34.6% 47.9%
(5) Adjusted price/earnings ratio is computed by dividing closing market price by diluted earnings per share from continuing operations. For comparability purposes, diluted earnings per share from continuing operations was adjusted to exclude relocation and severance costs and gains and losses on sales, exchange and write-down of investments. (6) The ratio of earnings to fixed charges is computed by dividing earnings (as adjusted for fixed charges and undistributed equity income from unconsolidated subsidiaries) by fixed charges for the period. Fixed charges include the interest on debt (before capitalized interest), the interest component of rental expense, and the proportionate share of interest expense on guaranteed debt of certain equity-method investees and on debt of 50%-owned companies. (7) Return on average shareholders' equity is computed by dividing net income before the cumulative effect of changes in accounting principles in 1995 and 1992, including the results of discontinued operations in 1988 through 1998, by average shareholders' equity. Average shareholders' equity is the average of shareholders' equity on the first day and the last day of the fiscal year. 11 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS FORWARD-LOOKING STATEMENTS Certain statements in this annual report on Form 10-K are forward-looking statements. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results and events to differ materially from those anticipated. Potential risks and uncertainties that could adversely affect the company's ability to obtain these results include, without limitations, the following factors: (a) increased consolidation among major retailers or other events that might adversely affect business operations of major customers and depress the level of local and national advertising; (b) an economic downturn in some or all of the company's principal newspaper markets that might lead to decreased circulation or decreased local or national advertising; (c) a decline in general newspaper readership patterns as a result of competitive alternative media or other factors; (d) an increase in newsprint costs over the levels anticipated; (e) labor disputes that might cause revenue declines or increased costs; (f) acquisitions of new businesses or dispositions of existing businesses; (g) increases in interest or financing costs; and (h) rapid technological changes and frequent new product introductions prevalent in electronic publishing, including the evolution of the Internet. Knight Ridder is the nation's second-largest newspaper publisher, with products in print and online. The company publishes 32 daily newspapers in 28 U.S. markets, with a readership of 8.5 million daily and 12.6 million Sunday. Knight Ridder also has investments in a variety of Internet and technology companies and two newsprint production companies. The company's Internet operation, KnightRidder.com, creates and manages a variety of online services, including the Real Cities Network of regional hubs in 38 U.S. markets. In 2000, the gross revenue from these businesses was about $3.2 billion. GLOSSARY OF NEWSPAPER ADVERTISING TERMS The following definitions may be helpful when reading Management's Discussion and Analysis of Operations. RETAIL Display advertising from local merchants, such as department and grocery stores, selling goods and services to the public. GENERAL Display advertising by national advertisers that promotes products or brand names on a nationwide basis. CLASSIFIED Locally placed ads listed together and organized by category, such as real estate sales, employment opportunities or automobile sales, and display-type advertisements in these same categories. FULL-RUN Advertising appearing in all editions of a newspaper. PART-RUN Advertising appearing in select editions or zones of a newspaper's market. Part-run advertising is translated into full-run equivalent linage (referred to as factored) based on the ratio of the circulation in a particular zone to the total circulation of a newspaper. RUN-OF-PRESS (ROP) All advertising printed on Knight Ridder presses and appearing within a newspaper. PREPRINT Advertising supplements prepared by advertisers and inserted into a newspaper. ANALYSIS BY SEGMENT The following sections discuss the segment results of the company's principal lines of business, newspaper and online. Online results are included in the "Other Revenue" line of total revenue and primarily consist of Web banner, classified and recruitment advertising. Newspaper revenue is derived principally from advertising and newspaper sales. Advertising revenue accounted for about 78.1% of consolidated revenue in 2000. This revenue comes from the three basic categories of advertising - retail, general and classified. Newspaper advertising volume is categorized as either run-of-press (ROP) or preprint. Volume for ROP advertising is measured in terms of either full-run or part-run advertising linage. By using part-run advertising, advertisers can target their messages to selected geographically zoned market segments. Circulation revenue results from the sale of newspapers. Circulation of daily and Sunday newspapers accounted for 16.3% of consolidated revenue in 2000. It is reported at the net wholesale price for newspapers delivered or sold by independent contractors and at the retail price for newspapers delivered or sold by employees and by delivery agents who are paid a fee for delivery of the newspapers. Other revenue comes from commercial job printing, niche and book publications, online services, newsprint waste sales, audiotext and other miscellaneous sources. SUMMARY OF OPERATIONS A summary of the company's operations, certain share data and other financial information for the past 11 years is provided on pages 10 and 11. Compound growth rates for the past five- and 10-year periods are also included, if applicable. A review of this summary and of the supplemental information on pages 2 through 5 will provide a better understanding of the following discussion and analysis of operating results and of the financial statements as a whole. The supplemental information contains financial data for the company's largest newspapers and information regarding the company's properties, technology and raw materials used in operations. 12 RESULTS OF OPERATIONS: 2000, 1999 AND 1998 The company's fiscal year ends on the last Sunday of the calendar year. Results for 2000 are for the 53 weeks ended December 31, and results for 1999 and 1998 are for the 52 weeks ended December 26 and December 27, respectively. The following tables set forth the results of operations for the periods ended December 31, 2000, December 26, 1999, and December 27, 1998, which are discussed in more detail on pages 14 and 15.
Change (In Thousands of Dollars, --------------- Except Per Share AmountS) 2000 1999 1998 00-99 99-98 - ---------------------------------------------------------------------------------------------------------------------- Operating revenue $ 3,211,767 $ 3,033,775 $ 2,895,554 5.9% 4.8% Operating income 668,772 621,422 504,623 7.6% 23.1% Income Continuing operations Before gains (losses) on investments and assets, Severance and relocation costs 329,436 321,146 273,162 2.6% 17.6% Gains (losses) on investments and assets, severance and relocation costs (15,073) 18,793 32,469 Discontinued operations 60,226 ---------------------------------------- Net income $ 314,363 $ 339,939 $ 365,857 (7.5)% (7.1)% ======================================== Diluted earnings per share Continuing operations Before gains (losses) on investments and assets, Severance and relocation costs 3.70 3.30 2.78 12.1% 18.7% Gains (losses) on investments and assets, severance and relocation costs (0.17) 0.19 0.33 Discontinued operations 0.62 ---------------------------------------- Net income $ 3.53 $ 3.49 $ 3.73 1.1% (6.4)% ========================================
Knight Ridder earned $3.70 per diluted share from continuing operations in 2000, up $0.40, or 12.1%, from the $3.30 earned in 1999, excluding one-time gains and losses on investments and assets and severance from both years. On a comparable basis, the company's earnings per diluted share was $3.30 in 1999, up $.52, or 18.7%, from the $2.78 earned in 1998. NEWSPAPER DIVISION OPERATING REVENUE The following table summarizes the results of Operating Revenue of the Newspaper Division and related full-run ROP linage statistics for the periods ended December 31, 2000, December 26, 1999 and December 27, 1998.
2000 Change ----------------------- -------------- In Thousands 53 Weeks 52 Weeks 1999 1998 00-99* 99-98 - ---------------------------------------------------------------------------------------------- Operating revenue Advertising Retail $1,104,767 $1,081,188 $1,065,971 $1,026,926 1.4% 3.8% General 336,613 331,010 289,894 240,258 14.2% 20.7% Classified 1,066,457 1,052,956 997,656 955,413 5.5% 4.4% ------------------------------------------------- Total 2,507,837 2,465,154 2,353,521 2,222,597 4.7% 5.9% ------------------------------------------------- Circulation 523,856 514,053 525,686 533,340 (2.2)% (1.4)% Other 134,896 133,733 123,172 121,713 8.6% 1.2% ------------------------------------------------- Total operating revenue $3,166,589 $3,112,940 $3,002,379 $2,877,650 3.7% 4.3% ================================================= Average circulation(1) Daily 3,911 -- 3,932 3,998 (0.5)% (1.7)% Sunday 5,308 -- 5,400 5,507 (1.7)% (1.9)% Advertising linage(1) Full-run Retail 18,231 -- 18,355 18,518 (0.7)% (0.9)% General 3,432 -- 2,730 2,172 25.7% 25.7% Classified 20,798 -- 19,847 19,026 4.8% 4.3% ------------------------------------------------- Total full-run 42,461 -- 40,932 39,716 3.7% 3.1% =================================================
* Excluding the 53rd week in 2000 for revenue amounts only (1) Circulation and linage statistics were not restated on a 52-week basis. 13 Retail advertising was up 1.4% in 2000 from 1999 on a full-run ROP linage decrease of 0.7%. The weak results were due primarily to consolidations and bankruptcies in many major markets. In 1999, retail advertising was up 3.8% from 1998 on a 0.9% decrease in full-run ROP linage. General advertising revenue had strong growth in 2000, up 14.2% from 1999 on a full-run ROP linage increase of 25.7%. This increase was due largely to a surge of e-commerce and Internet-related advertising and strength in telecommunications, financial and travel advertising. In 1999, general advertising was up 20.7% from 1998 on a 25.7% increase in full-run ROP linage. Classified advertising was up 5.5% in 2000 from 1999 on a full-run ROP linage increase of 4.8%. This increase reflected a relatively strong first half of 2000, up 7.8%. In 1999, classified was up 4.4% from 1998 on a 4.3% increase in full-run ROP linage. Help wanted contributed significantly to the classified growth in both years. Circulation revenue decreased 2.2% in 2000 from 1999 on a 0.5% decrease in daily circulation and a 1.7% decrease in Sunday circulation. The decline in circulation came primarily from a few large markets, and the company expects circulation to remain essentially flat in 2001. In 1999, circulation revenue decreased by $7.7 million, or 1.4% from 1998. Daily circulation decreased 1.7% and Sunday circulation decreased 1.9% during the same period. OPERATING COSTS The following table summarizes operating costs for the Newspaper Division for the periods ended December 31, 2000, December 26, 1999 and December 27, 1998.
2000 Change --------------------------- --------------- In Thousands 53 Weeks 52 Weeks 1999 1998 00-99* 99-98 - --------------------------------------------------------------------------------------------------------------------- Operating costs Labor and employee benefits $ 1,166,308 $ 1,132,693 $ 1,099,932 $ 1,089,976 3.0% 0.9% Newsprint, ink and supplements 473,724 465,534 449,577 478,239 3.5% (6.0)% Other operating costs 604,758 597,652 593,208 573,736 0.7% 3.4% Depreciation and amortization 179,243 179,167 176,340 175,960 1.6% 0.2% ----------- ----------- ----------- ----------- Total operating costs $ 2,424,033 $ 2,375,046 $ 2,319,057 $ 2,317,911 2.4% 0.0% =========== =========== =========== ===========
* Excluding the 53rd week in 2000 The increase in labor and employee benefits in 2000 from 1999 resulted from a 4.5% increase in the average wage per employee, and an increase of 0.5% in the number of full-time-equivalent employees. Bonus and incentive costs were down 2.5% while benefit costs were up 12.3% from 1999. The increase in benefit costs was due to higher health and welfare claims. During 2000, the company incurred $17.2 million in severance costs. In 1999, the company incurred $4.7 million in newspaper severance and corporate relocation costs. The relocation costs resulted from the move of the company headquarters from Miami to San Jose. Without these severance and relocation costs, labor and employee benefits increased 1.8% in 2000 from 1999. On a comparable basis and excluding corporate relocation and newspaper severance costs, labor and employee benefits were up $20.3 million, or 4.9%, in 1999 from 1998, on a 1.2% decrease in the work force and an average wage rate increase of 3.8%, offset by a decline in employee benefit costs. The increase in the cost of newsprint, ink and supplements in 2000 was due primarily to a 3.3% increase in the average cost per ton of newsprint and an increase of 2.0% in newsprint consumption from 1999. For 1999 compared to 1998, the decrease in newsprint, ink and supplements was due to a 12.3% decrease in the average cost per ton of newsprint, offset slightly by a 0.7% increase in newsprint consumption. Other operating costs remained relatively constant from 1999 to 2000, increasing 0.7%. The increase was due to strike preparation and outside service costs in San Jose, and circulation promotion costs at various newspapers. In addition, bankruptcies resulted in an increase in the reserve for bad debt expense. Offsetting these unfavorable variances was a decrease in legal fees as a result of a settlement in Detroit. The increase in other operating expenses from 1998 to 1999 was due primarily to an increase in the cost of contract services and legal fees and an increase in the reserve for bad debt expense. For 2000, depreciation and amortization expense increased 1.6% from 1999. The increase in depreciation resulted from a slightly larger asset base. 14 ONLINE DIVISION GLOSSARY OF ONLINE TERMS UNIQUE VISITORS Number of persons who visited a site or network of sites at least once in the month. Visitors to multiple sites in a network in a given month are counted only once as a unique visitor for that network. In separate, individual site tallies, they are counted once as a unique visitor for each site visited. PAGE VIEWS Total requests for HTML pages or unique screens of information as presented to the user, including co-branded pages from partner sites. ONLINE ACTIVITIES During the first quarter of 2000, the company consolidated all its Internet operations under a new business unit, KnightRidder.com. Previously, Knight Ridder's Internet activities were reported and managed as a part of the company's newspaper operations. KnightRidder.com controls all of Knight Ridder's online efforts, including the Web sites previously operated by the newspapers. KnightRidder.com operates and manages the Real Cities Network, which consists of all Knight Ridder Web sites and those of several other media affiliates. The company expects significant growth from these operations in 2001.
Change -------------- (In Thousands) 2000 1999 1998 00-99 99-98 - --------------------------------------------------------------------------------------------------- Operating costs Labor and employee benefits $ 39,901 $ 27,279 $ 23,491 46.3% 16.1% Other operating costs 48,643 26,339 14,300 84.7% 84.2% Depreciation and amortization 2,655 1,819 1,288 46.0% 41.2% ------------------------------------- Total operating costs $ 91,199 $ 55,437 $ 39,079 64.5% 41.9% ===================================== Operating revenue $ 45,178 $ 31,396 $ 17,904 43.9% 75.4% Unique visitors 47,148 37,001 25,875 27.4% 43.0% Average monthly page views 153,541 104,246 61,351 47.3% 69.9%
The increase in labor and employee benefits was due primarily to increases in full-time employees. Other operating costs increased primarily as a result of increased promotion-related expenses and volume-related fees paid to advertising and content providers. Depreciation and amortization expense increased due to the acquisition of additional equipment. NON-OPERATING ITEMS Net interest expense increased $23.1 million, or 25.7%, in 2000 from 1999 as a result of higher debt levels and an increase in the average effective interest rate. For 1999, net interest expense decreased $8.2 million from 1998, or 8.4%, due to lower debt levels. The average debt balance increased $371.5 million in 2000. It decreased $180.9 million from 1998 to 1999. The increase in debt during 2000 was due to share repurchases and the acquisition of Career Holdings, Inc. From 1999 to 2000, equity in earnings of unconsolidated companies and joint ventures decreased $21.1 million due to losses from CareerBuilder, Inc., and a decrease in earnings from investments in the Seattle Times Company and newsprint mills. From 1998 to 1999, equity in earnings of unconsolidated companies decreased $10.8 million, due to a decrease in earnings from newsprint mill investments, InfiNet Company and various other investments. The "Other, Net "line of the non-operating section decreased $45.1 million or 126% in 2000 from 1999. The decline was due almost entirely to gains on the sale of assets and the write-down of certain Internet-related investments in 2000. The results in 2000 include gains from the sale of two companies the company had minority investments in - Cadabra, Inc., and Prio, Inc. The write-down of Internet-related investments was for other than temporary declines in the market value of InfoSpace, Inc., GoTo.com, Inc., and Webvan Group, inc. Results in 1999 included a gain on the sale of shares of AT&T Corporation, Zip2 Corp. and SportsLine USA, Inc., partially offset by adjustments in the carrying value of certain other assets. ACQUISITIONS In August 2000, Career Holdings, Inc., a company jointly controlled by KnightRidder.com and Tribune Co., completed the acquisitions of CareerBuilder, Inc., and CareerPath.com, Inc., respectively. In the CareerBuilder acquisition, a wholly owned subsidiary of Career Holdings made a tender offer for all of CareerBuilder's common stock at a price of $8 per share in cash. The tender offer, which began on July 25, 2000, and expired on August 21, 2000, was followed by the merger of the subsidiary into CareerBuilder on August 24, 2000. The CareerPath.com acquisition was accomplished by the merger of a wholly owned subsidiary of Career Holdings into CareerPath.com on August 31, 2000. Knight Ridder's share of the total purchase price for the CareerBuilder and CareerPath.com acquisitions was approximately $250 million. The company, through KnightRidder.com, currently owns a 46.4% interest in Career Holdings, Inc. 15 DISPOSITIONS On March 18, 1998, the company closed on the sale of its remaining interest in a cable system jointly owned with Tele-Communications, Inc. (TCI). On February 2, 1998, the company sold the Post-Tribune in Gary, Ind., to Hollinger International, Inc. The proceeds from these sales were $95.8 million, consisting of $58.1 million in cash and TCI stock with an aggregate market value of $37.7 million. The pretax and after-tax gains on the sales were $75.3 million and $45.0 million, respectively. LIQUIDITY AND CAPITAL RESOURCES Cash flow from operations is the company's primary source of liquidity. Management is focused on growing cash flow and on managing cash effectively. In addition, the company uses financial leverage to minimize the overall cost of capital and maintain adequate operating and financial flexibility. Management monitors leverage through its interest coverage and cash-flow-to-debt ratios. The following schedule summarizes these ratios for the years ended December 31, 2000, and December 26, 1999: 2000 1999 - ---------------------------------------------------------- Interest coverage ratio(a) 7.3:1 8.3:1 Cash flow to debt(b) 30.0% 40.2% (a) Defined as operating income plus depreciation and amortization divided by interest expense (b) Defined as net income plus depreciation and amortization divided by debt The company's interest coverage ratio and cash flow to debt ratio decreased in 2000 from 1999 primarily due to the $254.7 million increase in treasury stock purchases in 2000 over 1999 as well as the acquisition of other business and investments in 2000, including Career Holdings Inc. (CareerBuilder), for approximately $194.5 million. The company's financial position remained strong throughout 2000, with cash and cash equivalents and short-term investments of $41.7 million at December 31, 2000, compared with $34.1 million at December 26, 1999. During 2000, cash flows from operating activities were used to fund treasury stock purchases of $464.8 million. In addition, the company paid dividends of $81.0 million during 2000. Cash provided by operating activities was $417.2 million in 2000, compared with $505.7 million in 1999. The decrease in 2000 was partially attributed to lower net income, exclusive of gains on sales of investments in both years and the gain on the sale of a building in 2000. At December 31, 2000, working capital was $67.7 million, compared with $73.2 million at December 26, 1999. The decrease in working capital from 1999 to 2000 was due primarily to a $40.4 million increase in short-term borrowings, partially offset by decreases in accounts payable of $21.2 million and accrued compensation of $11.7 million. Cash required for investing activities was primarily for the purchase of $108.0 million of property and equipment and $194.5 million for the acquisition of businesses and other investments, including Career Holdings, Inc. (CareerBuilder) in August 2000, partially offset by proceeds of $15.7 million from the sale of certain assets. The company invests excess cash in short- and long-term investments, depending on projected cash needs from operations, capital expenditures and other business purposes. The company supplements internally generated cash flow with a combination of short- and long-term borrowings. Average outstanding commercial paper during the year was $638.4 million, with an average effective interest rate of 6.0%. At December 31, 2000, the company's revolving credit and term loan agreements, which back up the commercial paper outstanding, had a remaining availability of $157.0 million. The 364-day revolving credit and term loan portion of the facility matures in June 2001; however, the company has the option and intention to renew this facility for an additional term through June 2002. In February 2000, Moody's upgraded the company's short- and long-term debt to P1 and A2, respectively. At year end, Standard & Poor's and Fitch continued to rate the company's short- and long-term debt at A-1 and A, and F1 and A, respectively. The company believes it has adequate access to the capital debt markets to meet its short- and long-term capital needs. Such access includes the company's $1 billion commercial paper and its $200 million extendable commercial notes. During 2000, the company repurchased 9.0 million common shares at a total cost of $464.8 million and an average cost of $51.37 per share. At year end, authorization remained to purchase 2.5 million shares. The company's operations have historically generated strong positive cash flow, which, along with the company's commercial paper program, revolving credit lines and ability to issue public debt, has provided adequate liquidity to meet the company's short- and long-term cash requirements, including requirements for working capital and capital expenditures. 16 The company's capital spending program includes normal replacements, productivity improvements, capacity increases, building construction and expansion and printing press equipment. Over the past three years, capital expenditures, excluding the discontinued BIS operations, have totaled $320.1 million for additions and improvements to properties. Additions to property, plant and equipment increased by $15.4 million to $108.0 million in 2000 from $92.6 million in 1999, due primarily to higher expenditures for year 2000 capital projects. Expenditures in 2000 included $7.6 million for press projects in Fort Worth and Miami. The $37.8 million Fort Worth press expansion was completed during 2000, and the $109.2 million Miami press expansion is scheduled to be completed in 2001. During 2000, $10.4 million was spent on a $27.2 million press project at The Wichita Eagle that is scheduled for completion in 2003. These press replacement projects are expected to significantly improve reliability, speed, print quality and page and color capacity, and reduce waste. Also during 2000, $3.3 million was spent to begin an $11.8 million mailroom and insertion facility project in Lexington, to be completed by the end of 2002. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS BORROWINGS By balancing the mix of variable- versus fixed-rate borrowings, the company manages the interest-rate risk of its debt portfolio. Note 3 to the Consolidated Financial Statements includes information related to the contractual interest rates and fair value of the individual borrowings within the portfolio. A hypothetical 10% change in interest rates would increase interest expense associated with both fixed- and variable-rate borrowings by approximately $11.4 million. This hypothetical interest rate change would also decrease the fair value of the fixed debt by $64.6 million. NEWSPRINT The company consumed approximately 761,700 metric tons of newsprint in 2000, excluding Detroit. This represents 15.3% of the company's 2000 total operating expenses. Under the caption "Newsprint" on page 3, the company has included information on its suppliers, the long-term purchase agreements used to manage the related risk of price increases, and natural hedges the company has in place through its investment in newsprint mills. COLLECTIVE BARGAINING AGREEMENTS About 37% of the company's 22,000 employees are represented by approximately 70 local unions and work under multi-year collective bargaining agreements. These agreements are typically renegotiated in the years in which they expire. During 2001, there will be negotiations to extend collective bargaining agreements with a single union at each of six newspapers. Individual newspapers that are unionized to a greater or lesser degree include those in Akron, Detroit, Duluth, Fort Wayne, Grand Forks, Kansas City, Lexington, Monterey, Philadelphia, St. Paul, San Jose, State College and Wichita. EFFECT OF CHANGING PRICES The Consumer Price Index, a widely used measure of the impact of changing prices, has increased only moderately in recent years, up between 2% and 3% each year since 1991. Historically, when inflation was at higher levels, the impact on the company's operations was not significant. The principal effect of inflation on the company's operating results is to increase costs. Subject to normal competitive conditions, the company generally has demonstrated the ability to raise sales prices to offset these cost increases. 17 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Selected quarterly financial data is presented in Note 8 of Notes to Consolidated Financial Statements. Schedule II - Valuations and Qualifying Accounts is included in Item 14 of this report and incorporated herein by reference.
CONSOLIDATED BALANCE SHEET (In thousands, except share data) Dec. 31, 2000 Dec. 26, 1999 - ---------------------------------------------------------------------------------------------------------------------- ASSETS CURRENT ASSETS Cash, including short-term cash investments of $7,001 in 2000 and $5,598 in 1999 $ 41,661 $ 34,084 Accounts receivable, net of allowances of $20,238 in 2000 and $15,917 in 1999 416,498 423,016 Inventories 52,786 39,238 Prepaids 30,767 32,246 Other current assets 34,382 41,720 - ---------------------------------------------------------------------------------------------------------------------- Total Current Assets 576,094 570,304 - ---------------------------------------------------------------------------------------------------------------------- INVESTMENTS AND OTHER ASSETS Equity in unconsolidated companies and joint ventures 304,486 206,880 Other 202,951 181,583 - ---------------------------------------------------------------------------------------------------------------------- Total Investments and Other Assets 507,437 388,463 - ---------------------------------------------------------------------------------------------------------------------- PROPERTY, PLANT AND EQUIPMENT Land and improvements 96,925 93,995 Buildings and improvements 460,770 484,163 Equipment 1,265,866 1,244,110 Construction and equipment installations in progress 57,694 67,922 - ---------------------------------------------------------------------------------------------------------------------- 1,881,255 1,890,190 Less accumulated depreciation (841,812) (831,041) - ---------------------------------------------------------------------------------------------------------------------- Net Property, Plant and Equipment 1,039,443 1,059,149 - ---------------------------------------------------------------------------------------------------------------------- GOODWILL AND OTHER IDENTIFIED INTANGIBLE ASSETS Less accumulated amortization of $396,307 in 2000 and $331,504 in 1999 2,120,552 2,174,418 - ---------------------------------------------------------------------------------------------------------------------- Total $ 4,243,526 $ 4,192,334 - ----------------------------------------------------------------------------------------------------------------------
See "Notes to Consolidated Financial Statements." 18
Dec. 31, 2000 Dec. 26, 1999 - ---------------------------------------------------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 121,300 $ 142,460 Accrued expenses and other liabilities 101,660 100,668 Accrued compensation and amounts withheld from employees 114,810 126,529 Federal and state income taxes 16,928 16,039 Deferred revenue 73,300 71,505 Short-term borrowings and current portion of long-term debt 80,362 39,940 - ---------------------------------------------------------------------------------------------------------------------- Total Current Liabilities 508,360 497,141 - ---------------------------------------------------------------------------------------------------------------------- NONCURRENT LIABILITIES Long-term debt 1,591,910 1,260,814 Deferred federal and state income taxes 269,702 306,636 Postretirement benefits other than pensions 137,791 145,143 Employment benefits and other noncurrent liabilities 191,847 197,045 - ---------------------------------------------------------------------------------------------------------------------- Total Noncurrent Liabilities 2,191,250 1,909,638 - ---------------------------------------------------------------------------------------------------------------------- MINORITY INTERESTS IN CONSOLIDATED SUBSIDIARIES 2,446 4,871 COMMITMENTS AND CONTINGENCIES (Note 11) SHAREHOLDERS' EQUITY Preferred stock, $1.00 par value; shares authorized - 20,000,000; shares issued - 1,110,500 in 2000 and 1,374,100 in 1999 1,111 1,374 Common stock, $.02 1/12 par value; shares authorized - 250,000,000; shares issued - 74,036,046 in 2000 and 79,654,493 in 1999 1,542 1,659 Additional capital 919,582 938,969 Retained earnings 622,801 798,971 Accumulated other comprehensive income (loss) (1,301) 42,084 Treasury stock, at cost; 41,009 shares in 2000 and 42,510 shares in 1999 (2,265) (2,373) - ---------------------------------------------------------------------------------------------------------------------- Total Shareholders' Equity 1,541,470 1,780,684 - ---------------------------------------------------------------------------------------------------------------------- Total $ 4,243,526 $ 4,192,334 ======================================================================================================================
See "Notes to Consolidated Financial Statements." 19
CONSOLIDATED STATEMENT OF INCOME (In thousands, except per share data) Year Ended Dec. 31, 2000 Dec. 26, 1999 Dec. 27, 1998 - ------------------------------------------------------------------------------------------------------------------------------ OPERATING REVENUE Advertising Retail $ 1,104,766 $ 1,065,970 $ 1,026,926 General 336,613 289,894 240,258 Classified 1,066,457 997,656 955,413 - ------------------------------------------------------------------------------------------------------------------------------ Total 2,507,836 2,353,520 2,222,597 Circulation 523,856 525,686 533,340 Other 180,075 154,569 139,617 - ------------------------------------------------------------------------------------------------------------------------------ Total Operating Revenue 3,211,767 3,033,775 2,895,554 - ------------------------------------------------------------------------------------------------------------------------------ OPERATING COSTS Labor and employee benefits 1,220,221 1,152,432 1,109,242 Newsprint, ink and supplements 460,463 437,054 488,802 Other operating costs 674,714 639,924 611,775 Depreciation and amortization 187,597 182,943 181,112 - ------------------------------------------------------------------------------------------------------------------------------ Total Operating Costs 2,542,995 2,412,353 2,390,931 - ------------------------------------------------------------------------------------------------------------------------------ OPERATING INCOME 668,772 621,422 504,623 - ------------------------------------------------------------------------------------------------------------------------------ OTHER INCOME (EXPENSE) Interest expense (116,652) (97,444) (105,936) Interest expense capitalized 2,230 5,197 4,516 Interest income 1,553 2,425 3,411 Equity in earnings (losses) of unconsolidated companies and joint ventures (8,506) 12,571 23,309 Minority interests in earnings of consolidated subsidiaries (12,814) (11,984) (10,749) Other, net (9,293) 35,828 88,742 - ------------------------------------------------------------------------------------------------------------------------------ Total (143,482) (53,407) 3,293 - ------------------------------------------------------------------------------------------------------------------------------ Income before income taxes 525,290 568,015 507,916 Income taxes 210,927 228,076 202,285 - ------------------------------------------------------------------------------------------------------------------------------ INCOME FROM CONTINUING OPERATIONS 314,363 339,939 305,631 Net gain on sale of discontinued BIS operations, net of applicable income taxes of $43,752 in 1998 60,042 Income from discontinued BIS operations, net of applicable income taxes of $133 in 1998 184 - ------------------------------------------------------------------------------------------------------------------------------ Net Income $ 314,363 $ 339,939 $ 365,857 ============================================================================================================================== EARNINGS PER SHARE Basic: Income from continuing operations $ 4.02 $ 4.07 $ 3.70 Net gain on sale of discontinued BIS operations .76 Income from discontinued BIS operations, net .01 - ------------------------------------------------------------------------------------------------------------------------------ Net Income $ 4.02 $ 4.07 $ 4.47 ============================================================================================================================== Diluted: Income from continuing operations $ 3.53 $ 3.49 $ 3.11 Net gain on sale of discontinued BIS operations .61 Income from discontinued BIS operations, net .01 - ------------------------------------------------------------------------------------------------------------------------------ Net Income $ 3.53 $ 3.49 $ 3.73 ============================================================================================================================== AVERAGE SHARES OUTSTANDING (000S) Basic 75,370 80,025 78,882 Diluted 89,105 97,460 98,176
See "Notes to Consolidated Financial Statements." 20
CONSOLIDATED STATEMENT OF CASH FLOWS (In thousands of dollars) Year Ended Dec. 31, 2000 Dec. 26, 1999 Dec. 27, 1998 - --------------------------------------------------------------------------------------------------------------------------------- CASH PROVIDED BY (REQUIRED FOR) OPERATING ACTIVITIES $ 314,363 $ 339,939 $ 365,857 Net income Noncash items deducted from (included in) income: Depreciation 111,124 101,444 94,503 Amortization of goodwill 68,567 67,503 66,496 Amortization of other intangibles 7,906 13,996 20,113 Losses (gains) on sales, exchange and write-down of investments 19,401 (37,655) (75,251) Net gain on sale of discontinued BIS operations (60,042) Benefit for deferred taxes (8,759) (1,895) (8,444) Provision for bad debts 27,070 24,440 20,439 Earnings (losses) from investees less distributions 1,505 2,506 (21,856) Minority interests in earnings of consolidated subsidiaries 12,814 11,984 10,749 Other items, net 15,200 7,913 25,931 Change in certain assets and liabilities: Accounts receivable (20,767) (64,221) (39,927) Inventories (13,548) 19,871 (9,398) Other assets (97,390) (22,452) 3,296 Accounts payable (21,160) (22,098) (20,299) Federal and state income taxes 3,976 16,176 (52,234) Other liabilities (3,062) 48,253 (22,782) - --------------------------------------------------------------------------------------------------------------------------------- Net Cash Provided by Operating Activities 417,240 505,704 297,151 - --------------------------------------------------------------------------------------------------------------------------------- CASH PROVIDED BY (REQUIRED FOR) INVESTING ACTIVITIES Proceeds from sales of investments 35,058 119,810 62,444 Proceeds from sale of discontinued BIS operations 125,000 Proceeds from sale of building 15,694 Change in net noncurrent assets of discontinued BIS operations 520 Acquisition of businesses (194,476) (38,403) Other investments (38,227) Additions to property and equipment (107,956) (92,563) (132,025) Other items, net 23,685 33,205 (35,642) - --------------------------------------------------------------------------------------------------------------------------------- Net Cash Provided by (Required for) Investing Activities (227,995) (16,178) 20,297 - --------------------------------------------------------------------------------------------------------------------------------- CASH PROVIDED BY (REQUIRED FOR) FINANCING ACTIVITIES Proceeds from sale of commercial paper, notes payable and senior notes payable 3,953,248 2,397,615 914,926 Payment of total debt (3,625,691) (2,624,906) (1,057,186) - --------------------------------------------------------------------------------------------------------------------------------- Net Change in Total Debt excluding amortization of discounts 327,557 (227,291) (142,260) Payment of cash dividends (81,002) (85,526) (77,152) Issuance of common stock to employees and directors 29,867 50,335 44,411 Purchase of treasury stock (464,835) (210,141) (255,533) Other items, net 6,745 (9,655) (20,369) - --------------------------------------------------------------------------------------------------------------------------------- Net Cash Required for Financing Activities (181,668) (482,278) (450,903) - --------------------------------------------------------------------------------------------------------------------------------- Net Increase (Decrease) in Cash 7,577 7,248 (133,455) Cash and short-term cash investments at beginning of year 34,084 26,836 160,291 - --------------------------------------------------------------------------------------------------------------------------------- Cash and short-term cash investments at end of year $ 41,661 $ 34,084 $ 26,836 ================================================================================================================================= SUPPLEMENTAL CASH FLOW INFORMATION Noncash investing activities Securities received on the sale of investees $ 195,624 $ -- $ 37,678 Write-down of Internet-related investments (167,827) Unrealized gains (net of tax) on investments available for sale 109,442 23,346 18,738 Noncash financing activities Conversion of preferred stock held by Disney to common stock Preferred stock (263) (381) Additional capital (98,872) (142,842) Issuance of common stock upon conversion to preferred stock Preferred stock 55 79 Additional capital 99,080 143,144
See "Notes to Consolidated Financial Statements." 21
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (In thousands of dollars, except share data) Preferred Common Treasury Shares Shares Shares - -------------------------------------------------------------------------------------------------------------------------------- BALANCE AT DEC. 28, 1997 1,754,930 81,597,631 -- Issuance of common shares under stock option plan 369,372 Issuance of common shares under stock purchase plan 81,672 Issuance of treasury shares under stock option plan 638,420 Issuance of treasury shares under stock purchase plan 267,927 Issuance of treasury shares to nonemployee directors 3,333 Issuance of treasury shares 94,173 Purchase of treasury shares (4,725,000) Retirement of treasury shares (3,674,480) 3,674,480 Tax benefits arising from employee stock plans Comprehensive income: Net income Change in unrealized gains on securities available for sale, net of tax of $12,492 Comprehensive income Cash dividends declared - -------------------------------------------------------------------------------------------------------------------------------- BALANCE AT DEC. 27, 1998 1,754,930 78,374,195 (46,667) Issuance of common shares under stock option plan 840,375 Issuance of common shares under stock purchase plan 336,001 Conversion of preferred shares (380,830) 3,808,300 Issuance of treasury shares to nonemployee directors 4,157 Purchase of treasury shares (3,704,378) Retirement of treasury shares (3,704,378) 3,704,378 Tax benefits arising from employee stock plans Comprehensive income: Net income Change in unrealized gains on securities available for sale, net of tax of $15,564 Comprehensive income Cash dividends declared - -------------------------------------------------------------------------------------------------------------------------------- BALANCE AT DEC. 26, 1999 1,374,100 79,654,493 (42,510) Issuance of common shares under stock option plan 447,453 Issuance of common shares under stock purchase plan 344,800 Conversion of preferred shares (263,600) 2,636,000 Issuance of treasury shares to nonemployee directors 3,696 Purchase of treasury shares (9,048,895) Retirement of treasury shares (9,046,700) 9,046,700 Tax benefits arising from employee stock plans Comprehensive income: Net income Change in unrealized losses on securities available for sale, net of tax of $28,923 Comprehensive income Cash dividends declared - -------------------------------------------------------------------------------------------------------------------------------- Balance at Dec. 31, 2000 1,110,500 74,036,046 (41,009) ================================================================================================================================
See "Notes to Consolidated Financial Statements." 22
Accumulated Other Preferred Common Additional Retained Comprehensive Treasury Stock Stock Capital Earnings Income (Loss) Stock Total - ------------------------------------------------------------------------------------------------------------------------ $ 1,755 $ 1,700 $ 911,572 $ 636,646 $ - $ - $ 1,551,673 7 10,185 10,192 2 3,966 3,968 (14,422) 32,797 18,375 (1,352) 13,228 11,876 (13) 186 173 5,021 5,021 (255,533) (255,533) (76) (11,401) (190,219) 201,696 9,543 9,543 365,857 365,857 18,738 18,738 -------- 384,595 (77,152) (77,152) - ------------------------------------------------------------------------------------------------------------------------ $ 1,755 $ 1,633 $ 908,078 $ 735,132 $ 18,738 $ (2,605) $ 1,662,731 17 25,893 25,910 7 14,996 15,003 (381) 79 302 232 232 (210,141) (210,141) (77) (19,490) (190,574) 210,141 9,190 9,190 339,939 339,939 23,346 23,346 -------- 363,285 (85,526) (85,526) - ------------------------------------------------------------------------------------------------------------------------ $ 1,374 $ 1,659 $ 938,969 $ 798,971 $ 42,084 $ (2,373) $ 1,780,684 9 14,672 14,681 7 14,991 14,998 (263) 55 208 (18) 206 188 (464,835) (464,835) (188) (53,345) (409,531) 464,737 1,673 4,105 4,105 314,363 314,363 (43,385) (43,385) --------- 270,978 (81,002) (81,002) - ------------------------------------------------------------------------------------------------------------------------ $1,111 $1,542 $919,582 $ 622,801 $ (1,301) $ (2,265) $ 1,541,470 ========================================================================================================================
23 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The company reports on a fiscal year ending on the last Sunday in the calendar year. Results are for the 53 weeks ended December 31, 2000, and the 52 weeks ended December 26, 1999, and December 27, 1998, respectively. The Basis of Consolidation is to include in the consolidated financial statements all the accounts of Knight Ridder and its more-than-50%-owned subsidiaries. All significant intercompany transactions and account balances have been eliminated. Certain elements of other revenue have been reclassified as advertising revenue to conform with industry practice. Revenue Recognition varies by source. Advertising revenue is recognized when ads are published. Circulation revenue is recognized when the newspaper is delivered to the customer. Other revenue is recognized when the related product or service has been delivered. The company is a 50% partner in Detroit Newspapers (DN), a joint operating agency between Detroit Free Press, Inc., a wholly owned subsidiary of Knight Ridder, and The Detroit News, Inc., a wholly owned subsidiary of Gannett Co., Inc. In 1989, business operations of the Free Press and The Detroit News were transferred to DN under a joint operating agreement that expires in 2089. Previously, the company consolidated its share of revenue and expenses on a pro rata basis. In 2000, new rules issued by the Financial Accounting Standards Board no longer permit this practice. The company now shows its share of revenue and expenses as a net amount in the "Other Revenue" line. All prior-year amounts have been restated to conform to this presentation. Investments in companies in which Knight Ridder has an equity interest of at least 20% but not more than 50% are accounted for under the equity method. The company records its share of earnings as income and increases the investment by the equivalent amount. Dividends and losses are recorded as a reduction in the investment. The investment caption "Equity in Unconsolidated Companies and Joint Ventures" in the Consolidated Balance Sheet represents the company's equity in the net assets of DN; Seattle Times Company and subsidiaries; Newspapers First, a company responsible for the sales and servicing of general, retail and classified advertising accounts for a group of newspapers; SP Newsprint Co. and Ponderay Newsprint Company, two newsprint mill partnerships; InfiNet Company, a joint venture that provides Web-hosting services; and Career Holdings, Inc., a company in the business of providing recruitment services through the Internet via its wholly owned subsidiary, CareerBuilder, Inc. The company owns 49.5% of the voting common stock and 65% of the nonvoting common stock of the Seattle Times Company; 31.1% of the voting stock of Newspapers First; a 46.4% equity share of Career Holdings, Inc.; a 13.5% equity share of Ponderay Newsprint Company; and 33.3% of the voting stock and 50% of the nonvoting stock of Infinet Company. It is a one-third partner in the SP Newsprint Co. The company owns a 55% equity interest in Fort Wayne Newspapers, Inc. and consolidates 100% of its revenues and expenses. The minority shareholders' interest in the net income of this subsidiary has been reflected as an expense in the Consolidated Statement of Income in the caption "Minority Interests in Earnings of Consolidated Subsidiaries." Also included in this caption is a contractual minority interest resulting from a Joint Operating Agreement that runs through 2021 between The Miami Herald Publishing Co. and Cox Newspapers, Inc., covering the publication of The Herald and of The Miami News, which ceased publication in 1988. The related effects are included in the Consolidated Balance Sheet caption "Minority Interests in Consolidated Subsidiaries." "Cash and Short-Term Cash Investments" includes currency and checks on hand, demand deposits at commercial banks, overnight repurchase agreements of government securities, and investment-grade commercial paper. Cash and short-term investments are recorded at cost. Due to the short-term nature of marketable securities, cost approximates market value. Most of the company's "Accounts Receivable" as of December 31, 2000, and December 26, 1999, is from advertisers, newspaper subscribers and information users. Credit is extended based on the evaluation of the customer's financial condition, and generally collateral is not required. Credit losses are provided for in the financial statements and are written off to a reserve account at the time they are deemed uncollectible. The company uses a combination of the percentage of sales and the aging of accounts receivable to establish reserves for losses on accounts receivable. Credit losses have historically been within management's expectations. "Inventories" are priced at the lower of cost (first-in, first-out FIFO method) or market value. Most of the inventory is newsprint, ink and other supplies used in printing newspapers. "Other Assets" includes investments in companies in which Knight Ridder owns less than a 20% interest. These investments are reviewed for appropriate classification at the time of purchase and re-evaluated as of each balance sheet date. In the fourth quarter of 2000, the company reviewed its investment portfolio and determined that an other than temporary decline in value for certain Internet-related investments had occurred. Accordingly, a charge of $168 million relating to this unrealized loss was recorded in that period. Investments available for sale are carried on the balance sheet at fair market value, with the unrealized gains/losses (net of tax) reported as "Accumulated Other Comprehensive Income/Loss," a separate component of shareholders' equity. Upon the sale of an investment, the gain/loss 24 is calculated based on the original cost less the proceeds from the sale. Investments are classified as "held to maturity" when the company has the positive intent and ability to hold the investment to maturity. "Property, Plant and Equipment" is recorded at cost, and the provision for depreciation for financial statement purposes is computed principally by the straight-line method over the estimated useful lives of the assets as follows: Type of Asset Depreciation or Amortization Period - -------------------------------------------------------------------------------- Buildings and improvements 10 to 40 years Machinery, equipment and fixtures Three to 20 years Automobile and trucks Three to eight years Software Three to seven years, not to exceed the remaining useful life of the related hardware The company capitalizes interest costs as part of the cost of constructing major facilities and equipment. Expenditures for maintenance, repairs and minor renewals are charged to expense as incurred. "Goodwill" includes the unamortized excess of cost over the fair market value on the purchase of at least a 50% interest in a company's net tangible and intangible assets. The goodwill is amortized over a 40-year period on a straight-line basis, unless management concludes that a shorter term is more appropriate. Identified acquired intangibles of approximately $400 million consisting of trademarks, subscriber and advertiser lists, and mastheads are amortized on a straight-line basis over periods ranging from five to 40 years, with a weighted-average life of 25.7 years. If, in the opinion of management, an impairment in value occurs, any additional write-down of assets will be charged to expense. Management uses the undiscounted cash flow method to determine impairment. "Deferred Revenue" arises as a normal part of business from advance subscription payments for newspapers. Revenue is recognized in the period in which it is earned. "Short-term Borrowings and Current Portion of Long-term Debt" includes the carrying amounts of commercial paper and other short-term borrowings with original maturities of less than one year that management does not intend to refinance, and the portion of long-term debt payable within 12 months. The carrying amounts of short-term borrowings approximate fair value. "Long-term Debt" represents the carrying amounts of debentures, notes payable, other indebtedness with maturities longer than one year, and commercial paper backed by two revolving credit and term loan agreements that management intends to refinance at maturity. Fair values, disclosed in Note 3, are estimated using the discounted cash flow analysis based on the company's current incremental borrowing rates for similar types of borrowing arrangements. In accordance with FAS 121 - Accounting for the Impairment of Long-lived Assets and for Long-lived Assets to be Disposed of, the company reviews long-lived assets and related intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be fully recoverable. To date, no such impairment has been indicated. If this review indicates that the carrying value of these assets would not be recoverable as measured based on estimated undiscounted cash flows over their remaining life, the carrying amount would be adjusted to fair value. The cash flow estimates used contain management's best estimates, using appropriate and customary assumptions and projections. The company accounts for Stock-based Compensation plans under the provisions of APB 25 - Accounting for Stock Issued to Employees and discloses the general and pro forma financial information required by FAS 123. See Note 6. Under FAS 128 - Earnings Per Share (EPS), "Basic Earnings Per Share" is computed by dividing net income attributable to common stock (net income less preferred stock dividends) by the weighted-average number of common shares outstanding. Net income attributable to common shares was $303.0 million in 2000, $325.7 million in 1999 and $351.8 million in 1998. "Diluted Earnings Per Share" is computed by dividing net income by the weighted-average number of common and common equivalent shares outstanding. See Note 6. The following table sets forth the calculation of basic and diluted weighted-average shares outstanding (in thousands).
2000 1999 1998 - ---------------------------------------------------------------------------------------- Basic weighted-average shares outstanding 75,370 80,025 78,882 Effect of dilutive securities: Assumed conversion of convertible preferred stock 12,597 15,948 17,549 Treasury stock effect of outstanding stock options 1,138 1,487 1,745 - ---------------------------------------------------------------------------------------- Diluted weighted-average shares outstanding 89,105 97,460 98,176 ========================================================================================
Under FAS 130 - Reporting Comprehensive Income, the company presents unrealized gains or losses on the company's available-for-sale securities as an element of "Accumulated Other Comprehensive Income," a separate component of shareholders' equity. See Note 9. 25 The company is a newspaper company with products in print and online. It maintains operations and local management in the markets it serves, including the metropolitan areas of Philadelphia, Miami, San Jose, Kansas City, Fort Worth, Detroit and Charlotte. Revenue is earned through the sale of advertising and circulation and related activities. Newspapers are distributed in print through local distribution channels, as well as online through KnightRidder.com's Real Cities Network (see "Management's Discussion and Analysis of Operations: Online Activities" on page 15). Beginning in the quarter ended March 26, 2000, although not required to do so, the company elected to begin reporting its online operations as a separate reportable business segment from its newspaper operations pursuant to FAS 131 - Disclosures About Segments of an Enterprise and Related Information. See Note 5. Use of Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. In 2001, the company will adopt FAS 133 - Accounting for Derivative Instruments And Hedging Activities. FAS 133's effective date was deferred until fiscal years beginning after June 15, 2000, by FAS 137. Based on current circumstances, the company does not believe the effect of adoption will be material. 2. INCOME TAXES The company's income tax expense is determined under the provisions of Statement of Financial Accounting Standards 109, Accounting for Income Taxes, which requires the use of the liability method in adjusting previously deferred taxes for changes in tax rates. Substantially all of the company's earnings are subject to domestic taxation. No material foreign income taxes have been imposed on reported earnings. Federal, state and local income taxes (benefits) consist of the following (in thousands):
2000 1999 1998 --------------------------- -------------------------- ------------------------- Current Deferred Current Deferred Current Deferred - ------------------------------------------------------------------------------------------------------------------- Federal income taxes $ 191,635 $ (3,241) $ 203,101 $ (6,447) $ 213,161 $ (4,479) State and local income taxes 28,051 (5,518) 26,870 4,552 39,953 (2,465) - ------------------------------------------------------------------------------------------------------------------- Total $ 219,686 $ (8,759) $ 229,971 $ (1,895) $ 253,114 $ (6,944) - ------------------------------------------------------------------------------------------------------------------- Provision for: Continuing operations $ 219,686 $ (8,759) $ 229,971 $ (1,895) $ 210,729 $ (8,444) Discontinued operations 42,385 1,500 - ------------------------------------------------------------------------------------------------------------------- Total $ 219,686 $ (8,759) $ 229,971 $ (1,895) $ 253,114 $ (6,944) ===================================================================================================================
Cash payments of income taxes for the years 2000, 1999 and 1998 were $209.9 million, $213.1 million and $262.7 million, respectively. Payments in 1998 included the tax impact resulting from the sale of the Gary, Ind., paper and Technimetrics. The differences between income tax expense for continuing operations shown in the financial statements and the amounts determined by applying the federal statutory rate of 35% in each year are as follows (in thousands):
2000 1999 1998 - --------------------------------------------------------------------------------------------------------------------- Federal statutory income tax $ 183,851 $ 198,805 $ 177,771 State and local income taxes, net of federal benefit 14,664 20,425 17,033 Statutory rate applied to nondeductible amortization of the excess of cost over net assets acquired 15,058 15,016 15,123 Other items, net (2,646) (6,170) (7,642) - --------------------------------------------------------------------------------------------------------------------- Total $ 210,927 $ 228,076 $ 202,285 =====================================================================================================================
The deferred tax asset and liability at the fiscal year end consist of the following components (in thousands):
2000 1999 - -------------------------------------------------------------------------------------------------------------------- Deferred Tax Asset Postretirement benefits other than pensions (including amounts Related to partnerships in which the company participates) $ 80,812 $ 84,286 Accrued interest 8,885 6,476 Other nondeductible accruals 80,498 71,307 - -------------------------------------------------------------------------------------------------------------------- Gross deferred tax asset $ 170,195 $ 162,069 - -------------------------------------------------------------------------------------------------------------------- Deferred Tax Liability Depreciation and amortization $ 354,239 $ 356,726 Compensation and benefit accruals 20,068 (965) Equity in partnerships and investees 36,806 55,408 Unrealized appreciation in equity securities (867) 28,056 Other 40 623 - -------------------------------------------------------------------------------------------------------------------- Gross deferred tax liability 410,286 439,848 - -------------------------------------------------------------------------------------------------------------------- Net deferred tax liability $ 240,091 $ 277,779 - --------------------------------------------------------------------------------------------------------------------
26 The components of deferred taxes included in the Consolidated Balance Sheet are as follows (in thousands): 2000 1999 - ------------------------------------------------------------------------ Current asset $ 29,611 $ 28,857 Noncurrent liability 269,702 306,636 - ------------------------------------------------------------------------ Net deferred tax liability $ 240,091 $ 277,779 - ------------------------------------------------------------------------ 3. DEBT Debt consisted of the following (in thousands):
Dec. 31 Dec. 26 2000 1999 - ------------------------------------------------------------------------------------------------------------------------ Commercial paper due at various dates through March 14, 2001, at an effective interest rate of 6.55% as of Dec. 31, 2000. Amounts are net of unamortized discounts of $2,951 in 2000 and $4,004 in 1999(a) $ 843,027 $ 433,796 Debentures due on April 15, 2009, bearing interest at 9.875%, net of unamortized discount of $1,370 in 2000 and $1,536 in 1999 198,630 198,464 Debentures due on Nov. 1, 2027, bearing interest at 7.15%, net of unamortized discount of $5,269 in 2000 and $5,466 in 1999 94,731 94,534 Debentures due on March 15, 2029, bearing interest at 6.875%, net of Unamortized discount of $3,436 in 2000 and $3,557 in 1999 296,564 296,443 Notes payable, bearing interest at 8.5%, subject to mandatory pro rata amortization of 25% annually commencing Sept. 1, 1998, through maturity on Sept. 1, 2001, net of unamortized discount of $32 in 2000 and $97 in 1999 39,969 79,903 Notes payable due on Nov. 1, 2007, bearing interest at 6.625%, net of unamortized discount of $1,562 in 2000 and $1,791 in 1999 98,438 98,209 Senior notes payable due on Dec. 15, 2005, bearing interest at 6.3%, net of unamortized discount of $495 in 2000 and $595 in 1999 99,505 99,405 Notes payable, other 1,408 - ------------------------------------------------------------------------------------------------------------------------ 1,672,272 1,300,754 Less amounts payable in one year 80,362 39,940 - ------------------------------------------------------------------------------------------------------------------------ Total long-term debt $ 1,591,910 $ 1,260,814 ========================================================================================================================
(a) Commercial paper is supported by $1 billion of revolving credit and term loan agreements, $500 million of which matures on June 22, 2003, and $500 million of which matures on June 18, 2001. The company has the option and intention to renew the commercial paper prior to maturity on June 18, 2001, for an additional 364-day term through June 2002. Interest payments during 2000 and 1999 were $100.6 million and $90.6 million, respectively. The carrying amounts and fair values of debt as of December 31, 2000, are as follows (in thousands): Carrying Fair Amount Value - -------------------------------------------------------------------------- Commercial paper $ 843,027 $ 843,027 9.875% Debentures 198,630 233,810 7.15% Debentures 94,731 92,121 6.875% Debentures 296,564 265,211 8.5% Notes payable 39,969 40,506 6.625% Notes payable 98,438 97,906 6.3% Senior notes payable 99,505 98,655 Notes payable, other 1,408 1,408 - -------------------------------------------------------------------------- Total $ 1,672,272 $ 1,672,644 ========================================================================== The following table presents the approximate annual maturities of debt for the years after 2000 (in thousands): 2001 $80,362 2002 864 2003 803,178 2004 - 2005 99,505 2006 and thereafter 688,363 - ---------------------------------------------- Total $1,672,272 - ---------------------------------------------- 27 4. UNCONSOLIDATED COMPANIES AND JOINT VENTURES Summary financial information for the company's unconsolidated companies and joint ventures that are accounted for under the equity method is as follows (in thousands):
2000 1999 1998 - ------------------------------------------------------------------------------------------------- Current assets $ 307,945 $ 226,155 $ 246,940 Property, plant and equipment and other assets 1,627,313 1,458,029 1,260,996 Current liabilities 192,030 199,114 170,856 Long-term debt and other noncurrent liabilities 669,911 645,555 518,560 Net sales 996,845 807,825 782,893 Gross profit 95,692 20,627 90,719 Net income (loss) 9,830 (8,899) 56,201 Company's share of: Net assets 304,486 206,880 201,120 Net income (8,506) 12,571 23,309
In 1989, the Detroit Free Press and The Detroit News began operating under a joint operating agreement as Detroit Newspapers (DN). Balance sheet amounts for DN at December 31, 2000, December 26, 1999, and December 27, 1998, are included above, and the net assets contributed to DN are included in "Equity in Unconsolidated Companies and Joint Ventures" in the Consolidated Balance Sheet. Excluding DN, the company's investment in unconsolidated subsidiaries includes $292.0 million of net assets accumulated since the investment dates. Dividends and cash distributions received from unconsolidated companies and joint ventures (excluding DN) were $9.5 million in 2000, $10.8 million in 1999 and $6.6 million in 1998. In January 1997, the company and Tele-Communications, Inc., closed on the sale of Knight Ridder's interest in all but one of their jointly owned cable systems. The sale of the balance of the cable system was completed in March 1998. 5. BUSINESS SEGMENTS Financial data for the company's segments are as follows (in thousands): 2000 1999 1998 - ------------------------------------------------------------------------------ Operating revenue Newspapers $ 3,166,589 $ 3,002,379 $ 2,877,650 Online 45,178 31,396 17,904 - ------------------------------------------------------------------------------ $ 3,211,767 $ 3,033,775 $ 2,895,554 ============================================================================== Operating income (loss) Newspapers $ 742,556 $ 683,322 $ 559,739 Online (46,021) (24,041) (21,175) Corporate (27,763) (37,859) (33,941) - ------------------------------------------------------------------------------ $ 668,772 $ 621,422 $ 504,623 ============================================================================== Depreciation and amortization Newspapers $ 179,243 $ 176,340 $ 175,960 Online 2,655 1,819 1,288 Corporate 5,699 4,784 3,864 - ------------------------------------------------------------------------------ $ 187,597 $ 182,943 $ 181,112 ============================================================================== 6. CAPITAL STOCK Shareholders authorized 20 million shares of preferred stock for future issuance. In 1997, the Board of Directors authorized 1,758,242 shares of Series B preferred stock, $1.00 par value per share, and issued 1,754,930 preferred shares in connection with the acquisition of four newspapers that were indirectly owned by The Walt Disney Company. Each share of Series B preferred stock is convertible into 10 shares of common stock. During 2000 and 1999, 263,600 and 380,830 shares of preferred stock were converted into 2.6 million and 3.8 million common shares, respectively. If and when dividends and other distributions are declared by the Board of Directors, holders of the Series B preferred stock are entitled to receive the dividends or other distribution paid on the number of shares of the corporation's common stock into which each share of this series is convertible. Each holder of this series is entitled to vote with respect to all matters upon which holders of the corporation's common stock are entitled to vote. The holder of Series B preferred stock has two votes for each preferred share. The company has a stock rights agreement. The agreement grants each holder of a common share a right, under certain conditions, to purchase from the company a unit consisting of one one-hundredth of a share of preferred stock at a price of $150, subject to adjustment. The rights provide that in the event the company is a surviving corporation in a merger, each holder of a right will be entitled to receive, upon exercise, common shares having a value equal to two times the exercise price of the right. In the event the company engages in a merger or other business combination transaction in which the company is not the surviving corporation, the rights agreement provides that proper provision shall be made so that each holder of a right will be entitled to receive, upon the exercise 28 thereof at the then-current exercise price of the right, common stock of the acquiring company having a value equal to two times the exercise price of the right. No rights certificates will be distributed until 10 days following a public announcement that a person or group of affiliated or associated persons has acquired, or obtained the right to acquire, beneficial ownership of 20% or more of the company's outstanding common stock, or 10 business days following the commencement of a tender offer or exchange offer for 20% or more of the company's outstanding stock. Until such time, the rights are evidenced by the common share certificates of the company. The rights are not exercisable until distributed and will expire on July 10, 2006, unless earlier redeemed or exchanged by the company. The company has the option to redeem the rights in whole, but not in part, at a price of $.01 per right, subject to adjustment. The company's Board of Directors has reserved 1,500,000 preferred shares for issuance upon exercise of the rights. In 2000, 1999 and 1998, the Series B preferred stock, each share of which is convertible into 10 shares of common stock, and shares of common stock issuable upon exercise of stock options are included in the diluted EPS calculation, but excluded from the basic EPS calculation. The 2000, 1999 and 1998 diluted EPS calculations include 12,596,170, 15,947,916 and 17,549,300 weighted-average shares of Series B convertible preferred stock, respectively, and 1,138,199, 1,487,231 and 1,744,887 weighted-average shares of common stock issuable upon exercise of stock options, respectively. The Employees Stock Purchase Plan provides for the sale of common stock to employees of the company and its subsidiaries at a price equal to 85% of the market value at the end of each purchase period. Participants under the plan received 344,800 shares in 2000, 336,001 shares in 1999 and 349,599 shares in 1998. The purchase price of shares issued in 2000 under this plan ranged from $39.60 to $46.83, and the market value on the purchase dates of such shares ranged from $46.59 to $55.09. The Employee Stock Option Plan provides for the issuance of nonqualified stock options and incentive stock options. Options are issued at prices not less than market value at date of grant. Options granted vest in one year or three years from the date of grant. Options vesting over three years vest annually in three equal installments. Options expire no later than 10 years from the date of grant. The option plan provides for the discretionary grant of stock appreciation rights (SARs) in tandem with previously granted options, which allow a holder to receive in cash, stock or combinations thereof the difference between the exercise price and the fair market value of the stock at date of exercise. Shares of common stock relating to options outstanding under this plan are reserved at the date of grant. Transactions under the Employee Stock Option Plan are summarized as follows: Weighted-average Number of Exercise Price Shares Per Share - ----------------------------------------------------------------------------- Outstanding Dec. 28, 1997 6,257,534 $35.74 1998: Exercised (1,007,792) 28.35 Expired (25,230) 33.88 Forfeited (90,224) 55.61 Granted 1,481,750 49.72 Outstanding Dec. 27, 1998 6,616,038 39.74 1999: Exercised (840,375) 30.88 Expired (24,907) 43.38 Forfeited (140,295) 45.55 Granted 1,652,850 57.82 Outstanding Dec. 26, 1999 7,263,311 44.75 2000: EXERCISED (448,447) 32.75 EXPIRED (26,849) 55.45 FORFEITED (237,571) 53.66 GRANTED 3,578,075 54.64 OUTSTANDING DECEMBER 31, 2000 10,128,519 48.59 The company maintains a Long-Term Incentive Plan. The plan rewards participants whose leadership helps the company reach levels of total shareholder return, as defined. The plan originally covered a three-year performance period from January 1, 1997, through December 31, 1999. Participants received grants, net of forfeitures, of 314,925 in restricted shares outstanding at December 26, 1999, and December 27, 1998, and 322,286 at December 28, 1997. There were no shares vested as of December 26, 1999, since the company's total shareholder return did not reach the performance goals. The plan was extended for an additional three-year period beginning on January 1, 2000, with an initial grant of 342,012 shares, and ending on December 31, 2002. The grants of common stock are restricted, as the vesting of these shares is triggered upon the occurrence of certain performance goals. As of December 31, 2000, 120,837 shares were included as contingently issuable based on shareholder return performance as of year end. 29 The company also maintains a Compensation Plan for Nonemployee Directors. The purpose of the plan is to attract and retain the services of qualified individuals who are not employees of the company to serve as members of the Board of Directors. Part of the compensation plan includes the issuance of stock options. Options vest in three equal installments over a three-year period and expire no later than 10 years from the date of grant. In 1997, 200,000 shares were authorized for issuance as options under the plan. Participants were granted 32,000, 20,000 and 24,000 options in 2000, 1999 and 1998, respectively. In addition, 3,696 and 4,157 shares were awarded under the plan as retainer payments to nonemployee directors in 2000 and 1999, respectively. Proceeds from the issuance of shares under these plans are included in shareholders' equity and do not affect income. At December 31, 2000, shares of the company's authorized but unissued common stock were reserved and available for issuance as follows: Shares - ----------------------------------------------------- Employee Stock Option Plan 11,668,886 Employees Stock Purchase Plan 1,390,706 Nonemployee Directors Plan 100,000 - ----------------------------------------------------- Total 13,159,592 ===================================================== As required by FAS 123, pro forma information regarding net income and earnings per share has been determined as if the company had accounted for its stock options under the fair value method of that statement. The fair value for these options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions for 2000, 1999 and 1998, respectively: risk-free rates of 6.1%, 6.2% and 4.7%; dividend yields of 1.8%, 1.5% and 1.6%; volatility factors of the expected market price of the company's common stock of 0.20, 0.16 and 0.17; and a weighted-average expected life of the option of 4.0, 5.6 and 6.4 years. The weighted-average fair values of the stock options for 2000, 1999 and 1998 were $11.29, $14.67 and $11.58, respectively. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions, including the expected stock price volatility. Because the company's stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, the existing models, in management's opinion, do not necessarily provide a reliable single measure of the fair value of its stock options. For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting period. In addition, the 15% discount in market value under the Employees Stock Purchase Plan is treated as compensation expense for pro forma purposes. The company's 2000, 1999 and 1998 pro forma information follows (in thousands, except for earnings per share information): 2000 1999 1998 - -------------------------------------------------------------------------- Pro forma net income $ 288,408 $ 329,689 $ 356,777 Pro forma basic earnings per share 3.68 3.94 4.52 Pro forma diluted earnings per share 3.24 3.38 3.63 The pro forma effect on net income is not necessarily representative of the effect in future years because it does not take into consideration pro forma compensation expense related to grants made prior to 1995. The exercise price of options outstanding at December 31, 2000, ranged from $23.28 to $57.97. The weighted-average remaining contractual life of those options for 2000, 1999 and 1998 is 7.8, 7.5 and 7.3 years, respectively. The weighted-average exercise price of those options for 2000, 1999 and 1998 is $48.64, $44.75 and $39.74, respectively. The number of options exercisable at the end of 2000, 1999 and 1998 were 5,132,541, 4,262,694 and 3,882,661, respectively. 30 7. PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS A summary of the components of net periodic benefit cost for the defined benefit plans and postretirement benefit plans (other benefits) is presented here, along with the total amounts charged to pension expense for multi-employer union defined benefit plans, defined contribution plans and other agreements (in thousands):
Pension Benefits Other Benefits --------------------------------------- ----------------------------------- 2000 1999 1998 2000 1999 1998 - -------------------------------------------------------------------------------------------------------------------------- Defined benefit plans: Service cost and plan expenses $ 42,324 $ 36,340 $ 41,082 $ 1,271 $ 2,516 $ 2,266 Interest cost 75,897 71,900 65,754 8,186 7,812 7,114 Expected return on plan assets (102,917) (93,141) (85,058) (702) (805) (778) Recognized net actuarial (gain) loss (10,508) 1,380 (791) (519) (48) (829) Amortization of prior service cost 6,733 6,596 6,225 (4,104) (4,103) (4,104) Amortization of transition asset (3,128) (3,865) (3,706) - -------------------------------------------------------------------------------------------------------------------------- Net 8,401 19,210 23,506 4,132 5,372 3,669 Multi-employer union plans 11,218 10,860 10,508 Defined contribution plans 12,534 11,741 11,378 Other 1,413 1,812 1,729 - -------------------------------------------------------------------------------------------------------------------------- Net periodic benefit cost $33,566 $ 43,623 $ 47,121 $ 4,132 $ 5,372 $ 3,669 ==========================================================================================================================
Service cost in 1998 and 2000 included approximately $7.0 million and $15.0 million, respectively, related to accelerating the retirement of certain employees. Weighted-average assumptions used each year in accounting for defined benefit plans and postretirement benefits were:
Pension Benefits Other Benefits ------------------------------- ------------------------------ 2000 1999 1998 2000 1999 1998 - ------------------------------------------------------------------------------------------------------------------- Discount rate as of year end 7.8% 7.8% 6.8% 7.8% 7.8% 6.8% Return on plan assets 9.0 9.0 8.8 6.5 6.5 6.5 Rate of compensation increase 4.3 3.5 4.5 4.5 3.5 4.5 Medical trend rate: Projected 5.5 6.0 7.0 Reducing to this percentage in 2001 and thereafter 5.5 5.5 5.5
The assumed health-care-cost trend rate has a significant effect on the amounts reported. A one-percentage-point change in the assumed health-care-cost trend rate would have the following effects: One-Percentage- One-Percentage- Point Increase Point Decrease - ------------------------------------------------------------------------------ Effect on total of service and interest cost components in 2000 $ 676 $ (576) Effect on postretirement benefit obligation as of Dec. 31, 2000 $4,541 $(3,987) 31 The following table sets forth the funded status and amounts recognized in the Consolidated Balance Sheet for the company's benefit plans (excluding liabilities of Detroit Newspapers that are reported net in the Consolidated Balance Sheet under the caption "Equity in Unconsolidated Companies and Joint Ventures") (in thousands):
Pension Benefits Other Benefits ---------------------------------------- ---------------------------------------- 2000 1999 1998 2000 1999 1998 - ---------------------------------------------------------------------------------------------------------------------------------- CHANGE IN BENEFIT OBLIGATION Benefit obligation at beginning of year $ 940,990 $ 1,020,113 $ 923,734 $ 120,819 $ 121,229 $ 132,618 Service cost 40,717 35,143 37,318 1,271 2,516 2,266 Interest cost 75,897 71,900 65,754 8,186 7,812 7,114 Plan participants' contributions 1,297 1,102 1,216 Amendments 3,820 4,361 5,666 (868) Actuarial (gain) loss 54,912 (136,868) 35,143 3,272 (1,575) (11,788) Benefits paid (52,645) (53,659) (47,502) (12,850) (10,265) (9,329) - ---------------------------------------------------------------------------------------------------------------------------------- Benefit obligation at end of year $ 1,063,691 $ 940,990 $ 1,020,113 $ 121,995 $ 120,819 $ 121,229 =================================================================================================================================== CHANGE IN PLAN ASSETS Fair value of plan assets at beginning of year $ 1,171,546 $ 1,090,569 $ 1,009,187 $ 11,623 $ 12,701 $ 12,386 Actual return on plan assets 65,878 120,730 119,955 1,027 520 916 Company contributions 15,573 15,570 8,930 10,706 7,565 7,512 Plan participants' contributions 1,297 1,102 1,216 Benefits paid and administrative costs (55,034) (55,323) (47,503) (12,850) (10,265) (9,329) - ---------------------------------------------------------------------------------------------------------------------------------- Fair value of plan assets at end of year $ 1,197,963 $ 1,171,546 $ 1,090,569 $ 11,803 $ 11,623 $ 12,701 =================================================================================================================================== Funded status of plan (underfunded) $ 134,272 $ 230,556 $ 70,456 $ (110,192) $ (109,196) $(108,528) Unrecognized net actuarial gain (177,783) (273,818) (106,716) (16,292) (19,758) (18,297) Unrecognized prior service cost 43,369 40,693 41,265 (12,085) (16,189) (20,293) Unrecognized transition obligation (asset) 306 (2,920) (6,606) - ---------------------------------------------------------------------------------------------------------------------------------- Net prepaid (accrued) benefit cost $ 164 $ (5,489) $ (1,601) $ (138,569) $ (145,143) $ (147,118) ===================================================================================================================================
Amounts recognized in the Consolidated Balance Sheet consist of:
Pension Benefits Other Benefits --------------------------------------- --------------------------------------- 2000 1999 1998 2000 1999 1998 - -------------------------------------------------------------------------------------------------------------------------------- Prepaid benefit cost $ 51,926 $ 44,263 $ 41,321 Accrued benefit liability (51,762) (49,752) (42,922) $ (138,569) $ (145,143) $ (147,118) Additional minimum liability (9,282) (9,200) Intangible asset 9,282 9,200 - -------------------------------------------------------------------------------------------------------------------------------- Net prepaid (accrued) benefit cost $ 164 $ (5,489) $ (1,601) $ (138,569) $ (145,143) $ (147,118) ================================================================================================================================
Amounts applicable to the company's pension plans with accumulated benefit obligations in excess of plan assets are as follows: 2000 1999 1998 - -------------------------------------------------------------------------------- Projected benefit obligation $ 122,878 $ 37,666 $ 119,794 Accumulated benefit obligation 106,057 26,462 106,092 Fair value of plan assets 79,552 68,988 - -------------------------------------------------------------------------------- Unfunded accumulated benefit obligation $ 26,505 $ 26,462 $ 37,104 ================================================================================ Of the plans whose accumulated benefit obligations exceed plan assets, the amounts applicable to qualified plans are as follows (none in 1999): 2000 1999 1998 - -------------------------------------------------------------------------------- Projected benefit obligation $ 85,838 $ -- $ 79,800 Accumulated benefit obligation 82,239 75,211 Fair value of plan assets 79,552 68,988 - -------------------------------------------------------------------------------- Unfunded accumulated benefit obligation $ 2,687 $ -- $ 6,223 ================================================================================ Net pension assets are included in "Other" noncurrent assets, and net pension liabilities are included in "Employment Benefits and Other Noncurrent Liabilities." Substantially all of the assets of the company-administered plans are invested in listed stocks and bonds. In the fourth quarter of 1998, the company changed the method of accounting used to determine the market-related value of pension plan assets, effective December 29, 1997. The method was changed to: (1) align the method of calculating the return component of net periodic pension costs with the related plans' investment strategy, and (2) minimize significant year-to-year fluctuations in pension cost caused by financial market volatility. The effect of this change on results of operations, including the cumulative effect of prior years, was not material. 32 EMPLOYEE LABOR ARRANGEMENTS About 37% of the company's 22,000 employees are represented by approximately 70 local unions and work under multi-year collective bargaining agreements. These agreements are renegotiated in the years in which they expire. A six-year extension of all labor contracts in Philadelphia was negotiated in January 2001 and ratified by all unions shortly thereafter. 8. QUARTERLY OPERATIONS (Unaudited) The company's largest source of revenue, retail advertising, is seasonal and tends to fluctuate with retail sales in markets served. Historically, retail advertising is higher in the second and fourth quarters. General advertising, while not as seasonal as retail, is lower during the summer months. Classified advertising revenue has in the past been a reflection of the overall economy and has not been significantly affected by seasonal trends. In 2000, new Financial Accounting Standards Board rules for partially owned operations affected how Knight Ridder accounts for Detroit Newspapers. All quarters have been restated to reflect this change. See "Notes to Consolidated Financial Statements." The following table summarizes the company's quarterly results of operations (in thousands, except per share data):
Quarter -------------------------------------------------------------- Description First Second Third Fourth - ------------------------------------------------------------------------------------------------------------------------------- 2000 Operating revenue $ 758,567 $ 806,168 $ 769,234 $ 877,798 Operating income 145,423 179,712 154,837 188,800 Net income (loss) 160,855 (a) 96,273 (b) 76,106 (18,871) (c) Earnings per share Basic: Net income 2.03 1.23 0.99 (0.29) Diluted: Net income 1.74 1.08 0.87 (0.29) Dividends declared per common share 0.23 0.23 0.23 0.23 - ------------------------------------------------------------------------------------------------------------------------------- 1999 Operating revenue $ 720,568 $ 758,107 $ 737,201 $ 817,899 Operating income 125,664 152,653 150,980 192,125 Net income 62,867 (d) 86,586 (e) 76,209 114,277 (f) Earnings per share Basic: Net income 0.76 1.04 0.90 1.37 Diluted: Net income 0.65 0.88 0.78 1.18 Dividends declared per common share 0.20 0.23 0.23 0.23 - ------------------------------------------------------------------------------------------------------------------------------- 1998 Operating revenue $ 694,037 $ 728,783 $ 704,119 $ 768,615 Operating income 113,191 127,125 111,630 152,677 Income from continuing operations 101,437 (g) 66,925 (h) 56,983 (j) 80,286 (k) Net gain on sale of BIS operations 60,042 (i) Income from BIS operations, net 184 Net income 101,621 126,967 56,983 80,286 Earnings per share Basic: Income from continuing operations 1.22 0.81 0.68 0.98 Net gain on sale of BIS operations 0.76 Income from BIS operations, net 0.01 Net income 1.23 1.57 0.68 0.98 Diluted: Income from continuing operations 1.02 0.68 0.58 0.83 Net gain on sale of BIS operations 0.61 Income from BIS operations, net Net income 1.02 1.29 0.58 0.83 Dividends declared per common share 0.20 0.20 0.20 0.20
(a) Includes after-tax gain of $92 million related to InfoSpace, Inc.'s, acquisition of Prio, Inc., and GoTo.com, Inc.'s, acquisition of Cadabra, Inc. (b) Includes after-tax gain of $5.7 million on sale of a building in Philadelphia. (c) Includes after-tax severance costs of $10.4 million and after-tax loss of $103.3 million on the write-down of investments primarily in InfoSpace, Inc., and GoTo.com, Inc. (d) Includes after-tax severance costs of $1.3 million and an after-tax gain of $2.3 million on the sale of SportsLine USA, Inc. (e) Includes after-tax severance costs of $1.4 million and after-tax gains on the sale of Zip2 Corp. and AT&T Corporation stock (net of adjustments to certain investments to write down permanent declines in their market value) of $6.7 million. (f) Includes an after-tax gain of $14.7 million on the sale of AT&T Corporation stock. (g) Includes the after-tax gain of $45.0 million on the sales of the balance of cable systems jointly owned with Tele-Communications, Inc., and the newspaper in Gary, Ind. (h) Includes after-tax corporate relocation costs, net of settlement adjustments on 1997 newspaper sales totaling $5.1 million. (i) Gain on the sale of Technimetrics, Inc. (j) Includes after-tax corporate relocation costs of $4.4 million. (k) Includes after-tax corporate relocation costs and other severance costs of $3.2 million. 33 9. COMPREHENSIVE INCOME The following table presents the components of other comprehensive income for 2000, 1999 and 1998 as shown in the Statement of Shareholders' Equity (in thousands):
2000 1999 1998 - ------------------------------------------------------------------------------------------------------------------------- Net income $ 314,363 $ 339,939 $ 365,857 Total gains (losses) on securities available for sale, net of taxes (144,559) 47,462 18,738 Less: reclassification adjustment for realized losses (gains), net of taxes 101,174 (24,116) 0 - ------------------------------------------------------------------------------------------------------------------------- Change in accumulated comprehensive income (43,385) 23,346 18,738 - ------------------------------------------------------------------------------------------------------------------------- Comprehensive income $ 270,978 $ 363,285 $ 384,595 =========================================================================================================================
10. ACQUISITIONS AND DISPOSITIONS ACQUISITIONS In August 2000, Career Holdings, Inc., a company jointly controlled by KnightRidder.com and Tribune Co., completed the acquisitions of CareerBuilder, Inc., and CareerPath.com, Inc., respectively. In the CareerBuilder acquisition, a wholly owned subsidiary of Career Holdings made a tender offer for all of CareerBuilder's common stock at a price of $8 per share in cash. The tender offer, which began on July 25, 2000, and expired on August 21, 2000, was followed by the merger of the subsidiary into CareerBuilder on August 24, 2000. The CareerPath.com acquisition was accomplished by the merger of a wholly owned subsidiary of Career Holdings into CareerPath.com on August 31, 2000. The total purchase price for the CareerBuilder and CareerPath.com acquisitions was approximately $250 million. The company, through KnightRidder.com, currently owns a 46.4% interest in Career Holdings, Inc. DISPOSITIONS RELATED TO CONTINUING OPERATIONS: On March 18, 1998, the company closed on the sale of its remaining interest in a cable system jointly owned with Tele-Communications, Inc. (TCI). On February 2, 1998, the company sold the Post-Tribune in Gary, Ind., to Hollinger International, Inc. The proceeds from these sales were $95.8 million, consisting of $58.1 million in cash and TCI stock with an aggregate market value of $37.7 million. The pretax and after-tax gains on the sales were $75.3 million and $45.0 million, respectively. RELATED TO DISCONTINUED OPERATIONS: In 1997, the company announced its intention to sell the remaining Business Information Services (BIS) Division subsidiaries. This decision resulted in the reclassification of the former BIS segment as discontinued operations. The company fully divested the BIS segment with the sale of Technimetrics, Inc., its global diversified information subsidiary, in 1998. On April 13, 1998, the company closed on the sale of Technimetrics, Inc., to an operating unit of The Thomson Corporation. The proceeds from the sale were $125.0 million and resulted in pretax and after-tax gains of $103.8 million and $60.0 million, respectively. 11. COMMITMENTS AND CONTINGENCIES At December 31, 2000, the company had lease commitments currently estimated to aggregate approximately $94.7 million that expire from 2001 through 2051 as follows (in thousands): 2001 $ 20,151 2002 17,098 2003 14,072 2004 11,668 2005 9,118 2006 and thereafter 22,610 - ------------------------------------------ Total $ 94,717 ========================================== Payments under the lease contracts were $23.1 million in 2000, $24.7 million in 1999 and $19.3 million in 1998. In connection with the company's insurance program, letters of credit are required to support certain projected worker compensation obligations. At December 31, 2000, the company had approximately $50 million of undrawn letters of credit outstanding. On July 13, 1995, six unions struck the Detroit Free Press, The Detroit News and Detroit Newspapers (DN), which operates both newspapers. Subsequently, the unions filed numerous unfair labor practice charges against the newspapers and DN. In June 1997, after a long trial, a National Labor Relations Board (NLRB) administrative judge ruled that the strike was caused by the unfair labor practices of DN and The Detroit News and ordered that DN and the newspapers reinstate all strikers, displacing permanent replacements if necessary. DN and the newspapers appealed the decision to the NLRB. On Aug. 27, 1998, the NLRB affirmed certain unfair labor practice findings against The Detroit News and DN and reversed certain findings of unfair labor practices against DN. DN and the newspapers filed a motion to reconsider with the NLRB, which was denied on March 4, 1999. The unions and DN filed appeals to the U.S. Court of Appeals for the District of Columbia Circuit.. The U.S. Court of Appeals, on July 7, 2000, unanimously reversed the NLRB, holding that the strike was an economic strike. Thus, the NLRB order to reinstate and pay back pay to the strikers was also set aside. The time to appeal has expired and no appeal was filed. Various libel and copyright infringement actions and environmental and other legal proceedings that have arisen in the ordinary course of business are pending against the company and its subsidiaries. In the opinion of management, the ultimate liability to the company and its subsidiaries as a result of all legal proceedings will not be material to its financial position or results of operations on a consolidated basis. 34 REPORT OF INDEPENDENT AUDITORS Shareholders Knight-Ridder, Inc. We have audited the accompanying consolidated balance sheets of Knight-Ridder, Inc., as of December 31, 2000, and December 26, 1999, and the related consolidated statements of income, cash flows and shareholders' equity for each of the three years in the period ended December 31, 2000. Our audits also included the financial statement schedule listed in the index of Item 14(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and schedule based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Knight-Ridder, Inc., at December 31, 2000, and December 26, 1999, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. --------------------- /s/ Ernst & Young LLP San Jose, California January 24, 2001 35 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. Not applicable PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT In addition to the information set forth under the caption "Executive Officers of Knight Ridder" in Part I of this Form 10-K, the information required by this section is incorporated by reference from the Proxy Statement for the 2001 Annual Meeting under the captions "Item 1: Election of Directors - Nominees for Election for Three Year Terms Ending 2004," "Directors Continuing in Office Until 2003," "Directors Continuing in Office Until 2002" and "Section 16(a) Beneficial Ownership Reporting Compliance." ITEM 11. EXECUTIVE COMPENSATION The information required by this item is incorporated by reference from the Proxy Statement for the 2001 Annual Meeting under the captions "Item 1: Election of Directors - How the Company Compensates Directors" and "Executive Compensation." ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this item is incorporated by reference from the Proxy Statement for the 2001 Annual Meeting under the captions "Principal Holders of the Company's Stock" and Stock Ownership of Directors and Officers" under the heading "Information About Knight Ridder Stock Ownership." ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by this item is incorporated by reference from the Proxy Statement for the 2001 Annual Meeting under the captions "Compensation Committee Interlocks and Insider Participation" and "Certain Relationships and Related Transactions." 36 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) 1. The following consolidated financial statements of Knight-Ridder, Inc. and subsidiaries, included in the annual report of the registrant to its shareholders for the year ended December 31, 2000, are included in Item 8: Consolidated Balance Sheet - December 31, 2000 and December 26, 1999 Consolidated Statement of Income - Years ended December 31, 2000, December 26,1999, and December 27, 1998 Consolidated Statement of Cash Flows - Years ended December 31, 2000, December 26,1999, and December 27, 1998 Consolidated Statement of Shareholders' Equity - Years ended December 31, 2000, December 26,1999, and December 27, 1998 Notes to consolidated financial statements - December 31, 2000 2. The following consolidated financial statement schedule of Knight-Ridder, Inc and subsidiaries is included in Item 14(d): Schedule II - Valuation and qualifying accounts All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions, or are inapplicable, or have been shown in the consolidated financial statements or notes thereto, and therefore have been omitted from this section. 3. Exhibits No. 2 Disposition of Assets is incorporated by reference to the Company's Form 8-K dated as of March 18, 1998, filed March 31, 1998. No. 3(i) - Amended and Restated Articles of Incorporation of Knight-Ridder, Inc. (amended and restated as of February 3, 1998) are incorporated by reference to the Company's Form 10-K filed March 13, 1998. (ii) - Bylaws of Knight-Ridder, Inc. (as amended July 25, 2000), are incorporated by reference to the Company's Form 10-Q filed August 9, 2000. 37 No. 4. - Indenture, dated as of April 6, 1989, is incorporated by reference to the Company's Registration Statement on Form S-3, effective April 7, 1989. (No. 33-28010) Rights Agreement, dated as of June 21, 1996, is incorporated by reference to the Company's Form 8-K filed July 9, 1996. Indenture, dated as of October 9, 1997, is incorporated by reference to the Company's Registration Statement on Form S-3, effective October 10, 1997 (No. 333-37603). No. 10 (a) Knight-Ridder, Inc. Employee Stock Option Plan (as amended through October 24, 2000.)* (b) Knight-Ridder, Inc. Compensation Plan for Nonemployee Directors effective July 1, 1997 (as amended through October 24, 2000.)* (c) Knight Ridder Annual Incentive Plan as amended and restated effective January 1, 2001.* (d) Knight Ridder Long-Term Incentive Plan (as amended effective January 1, 2000) is incorporated by reference to the company's Form 10-K/A filed April 12, 2000.* (e) Executive Officer's Retirement Agreement dated December 19, 1991, is incorporated by reference to the Company's Form 10-K filed on March 23, 1994. (f) Executive Income Security Agreement (as amended effective October 24, 2000.)* No. 11 Statement re Computation of Per Share Earnings is filed herein. No. 12 Statement re Computation of Earnings to Fixed Charges Ratio From Continuing Operations is filed herein. No. 21 Subsidiaries of the Registrant is filed herein. No. 23 Consent of Independent Auditors is filed herein. No. 24 Powers of Attorney. 38 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. Dated March 23, 2001 /s/ P. ANTHONY RIDDER - --------------------- ----------------------------------------- By P. Anthony Ridder Chairman and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Dated March 23, 2001 /s/ P. ANTHONY RIDDER - --------------------- ----------------------------------------- P. Anthony Ridder Chairman and Chief Executive Officer Dated March 23, 2001 /s/ JEAN MORDO - --------------------- ----------------------------------------- Jean Mordo Chief Financial Officer and Senior Vice President/Finance Dated March 23, 2001 /s/ GARY R. EFFREN - --------------------- ----------------------------------------- Gary R. Effren Vice President/Controller (Chief Accounting Officer) 39 /s/ JAMES I. CASH, JR.* ----------------------------------------- James I. Cash, Jr. Director /s/ JOAN RIDDER CHALLINOR * ----------------------------------------- Joan Ridder Challinor Director /s/ KATHLEEN FOLEY FELDSTEIN* ----------------------------------------- Kathleen Foley Feldstein Director /s/ THOMAS P. GERRITY* ----------------------------------------- Thomas P. Gerrity Director /s/ BARBARA BARNES HAUPTFUHRER* ----------------------------------------- Barbara Barnes Hauptfuhrer Director /s/ M. KENNETH OSHMAN* ----------------------------------------- M. Kenneth Oshman Director /s/ P. ANTHONY RIDDER* ----------------------------------------- P. Anthony Ridder Director /s/ RANDALL L. TOBIAS* ----------------------------------------- Randall L. Tobias Director /s/ GONZALO F. VALDES-FAULI* ----------------------------------------- Gonzalo F. Valdes-Fauli Director /s/ JOHN L. WEINBERG* ----------------------------------------- John L. Weinberg Director Dated March 23, 2001 By: /s/ JEAN MORDO - -------------------- ----------------------------------------- Jean Mordo Attorney-in-fact 40 EXHIBIT INDEX (a) 1. The following consolidated financial statements of Knight-Ridder, Inc. and subsidiaries, included in the annual report of the registrant to its shareholders for the year ended December 31, 2000, are included in Item 8: Consolidated Balance Sheet - December 31, 2000 and December 26, 1999 Consolidated Statement of Income - Years ended December 31, 2000, December 26, 1999, and December 27, 1998 Consolidated Statement of Cash Flows - Years ended December 31, 2000, December 26, 1999, and December 27, 1998 Consolidated Statement of Shareholders' Equity - Years ended December 31, 2000 December 26, 1999, December 27, 1998 Notes to consolidated financial statements - December 31, 2000 2. The following consolidated financial statement schedule of Knight-Ridder, Inc. and subsidiaries is included in Item 14(d): Schedule II - Valuation and qualifying accounts All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions, or are inapplicable, or have been shown in the consolidated financial statements or notes thereto, and therefore have been omitted from this section. 3. Exhibits No. 2 Disposition of Assets is incorporated by reference to the Company's Form 8-K dated as of March 18, 1998, filed March 31, 1998. No. 3 (i) - Amended and Restated Articles of Incorporation of Knight-Ridder, Inc. (amended and restated as of February 3, 1998) are incorporated by reference to the Company's Form 10-K filed March 13, 1998. (ii) - Bylaws of Knight-Ridder, Inc. (as amended July 25, 2000), are incorporated by reference to the Company's Form 10-Q filed August 9, 2000. No. 4 - Indenture, dated as of April 6, 1989, is incorporated by reference to the Company's Registration Statement on Form S-3, effective April 7, 1989. (No. 33-28010) Rights Agreement, dated as of June 21, 1996, is incorporated by reference to the Company's Form 8-K filed July 9, 1996. Indenture, dated as of October 9, 1997, is incorporated by reference to the Company's Registration Statement on Form S-3, effective October 10, 1997 (No. 333-37603). No. 10 (a) - Knight-Ridder, Inc. Employee Stock Option Plan (as amended through October 24, 2000).* (b) - Knight-Ridder, Inc. Compensation Plan for Nonemployee Directors effective July 1, 1997 (as amended through October 24, 2000).* 41 (c) - Knight Ridder Annual Incentive Plan as amended and restated effective January 1, 2001.* (d) - Knight Ridder Long-Term Incentive Plan (as amended effective January 1, 2000) is incorporated by reference to the company's Form 10-K/A filed April 12, 2000).* (e) - Executive Officer's Retirement Agreement dated December 19, 1991, is incorporated by reference to the Company's Form 10-K filed on March 23, 1994. (f) - Executive Income Security Agreement (as amended effective October 24, 2000).* No. 11 - Statement re Computation of Per Share Earnings is filed herein. No. 12 - Statement re Computation of Earnings to Fixed Charges Ratio From Continuing Operations is filed herein. No. 21 - Subsidiaries of the Registrant is filed herein. No. 23 - Consent of Independent Auditors is filed herein. No. 24 - Powers of Attorney. * Denotes a management contract or compensatory plan or arrangement. 42 EX-10.A 2 file002.txt EXHIBIT 10 A EXHIBIT 10 (a) KNIGHT-RIDDER, INC. EMPLOYEE STOCK OPTION PLAN (As amended through October 24, 2000) 1. PURPOSE The purpose of this Stock Option Plan (hereinafter referred to as the "Plan") is to attract and retain key employees of Knight-Ridder, Inc. (hereinafter referred to as the "Company") and its subsidiaries, by the grant of options and stock appreciation rights. "Subsidiaries" as used herein shall mean corporations (other than Knight-Ridder, Inc.) or partnerships in an unbroken chain of corporations and/or partnerships beginning with Knight-Ridder, Inc. if, at the time of the granting of the option or stock appreciation right, each of the corporations and partnerships other than the last corporation or partnership in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in a corporation in such chain or at least a 50% partnership interest in such chain. The term "fair market value" of a share of common stock as of any date shall be the mean between the highest and lowest sales price of a share of common stock on the date in question as reported on the composite tape for issues listed on the New York Stock Exchange. If no transaction was reported on the composite tape in the common stock on such date, the prices used shall be the prices reported on the nearest day preceding the date in question. If the common stock is not then quoted on the composite tape, "fair market value" shall be the closing sales price or the mean between the closing bid and asked prices on the date in question, as applicable, as furnished by any member firm of the New York Stock Exchange selected from time to time for that purpose by the Compensation Committee. 2 The term "incentive stock option" shall mean an option described in Section 422(b) of the Internal Revenue Code of 1986, as amended. 2. ADMINISTRATION OF THE PLAN The Plan shall be administered by a committee as appointed from time to time by the Board of Directors of the Company, which committee shall consist of not less than three (3) members of such Board of Directors, all of whom shall be "nonemployee directors" within the meaning of Rule 16b-3 promulgated under the Securities Exchange Act of 1934. Said committee shall be called the "Compensation Committee." In administering the Plan, the Compensation Committee may adopt rules and regulations for carrying out the Plan. The interpretation and decision with regard to any question arising under the Plan made by the Committee shall, unless overruled or modified by the Board of Directors of the Company, be final and conclusive on all employees of the Company and its subsidiaries participating or eligible to participate in the Plan. 3. STOCK The stock which may be issued and sold pursuant to the exercise of options or stock appreciation rights granted under the Plan may be authorized and unissued common stock or shares of common stock reacquired by the Company and held in treasury of a total number not exceeding 39,200,000 shares. 3 The shares deliverable under the Plan shall be fully paid and nonassessable shares. Any shares, in respect of which an option is granted under the Plan which shall have for any reason expired or terminated, may be again allotted under the Plan. Any shares covered by options which have been canceled by reason of the exercise of related stock appreciation rights as provided in the immediately following paragraph or which are used to exercise other options or to satisfy tax withholding obligations shall not be available for other options under the Plan. The exercise of options with respect to which stock appreciation rights shall have been granted shall cause a corresponding cancellation of such stock appreciation rights, and the exercise of stock appreciation rights issued in respect of options shall cause a corresponding cancellation of such options. Each option and stock appreciation right granted under the Plan shall be subject to the requirement and condition that if the Board of Directors shall determine that the listing, registration or qualification upon any securities exchange or under any state or federal law, or the approval or consent of any governmental body is necessary or desirable as a condition of granting such option or stock appreciation right, or the issue or purchase of any shares thereunder, then no such option or stock appreciation right may be exercised in whole or in part unless or until such listing, registration, qualification, approval or consent has been obtained, free of any conditions which are not acceptable to the Board of Directors of the Company. 4. ELIGIBILITY Options and stock appreciation rights will be granted only to persons who are employees of the Company and its subsidiaries (including officers and directors except for persons acting as directors only). The Compensation and Corporate Governance Committee of the Board of Directors of the Company shall determine in its sole discretion the employees to be granted options, the number of shares subject to each option, the employees to be 4 granted stock appreciation rights and the options with respect to which such stock appreciation rights shall be granted. Subject to the provisions of Section 13 of the Plan, the maximum number of shares with respect to which options or stock appreciation rights, or a combination thereof, may be granted under the Plan to any person in any calendar year is 300,000. 5. PRICE The purchase price under each option shall be determined by the Compensation Committee subject to approval by the Board of Directors of the Company, but such price shall not be less than one hundred percent (100%) of the fair market value of the common stock at the time such option is granted. 6. THE PERIOD OF THE OPTION AND THE EXERCISE OF THE SAME Each option granted under the Plan shall expire no later than ten (10) years from the date such option is granted, but the Compensation Committee may prescribe a shorter period for any individual option or options. The shares subject to the option may be purchased from time to time during the option period, subject to any waiting period or vesting schedule the Compensation Committee may specify for any individual option or options. In order to exercise the option or any part thereof, the employee shall give notice in writing to the Company of his or her intention to purchase all or part of the shares subject to the option, and in said notice the employee shall set forth the number of shares as to which he or she desires to exercise such option, and shall pay for such shares at the time of exercise of such option. Such payment may be made in such manner as the Compensation Committee may specify, which may include cash, delivery to the Company of shares of common stock of the Company, delivery of proceeds of the sale of the option 5 shares by the Company's designated broker on behalf of the employee, and any other manner permitted by law specified by the Committee. At the time of granting an option, the Committee may impose conditions on the right to exercise an option. Except as specified in Sections 10 and 11 below, no option may be exercised except by the Optionee personally while the Optionee e is in the employ of the Company or its subsidiaries. No Optionee or his or her legal representative, legatees or distributees, as the case may be, shall be or have any of the rights and privileges of a shareholder of the Company by reason of such option unless and until the shares are issued to him or her under the terms of the Plan. 7. MERGER; REORGANIZATION; ACCELERATION In the event that the Company is a party to a merger or other reorganization, outstanding Options shall be subject to the agreement of merger or reorganization. Such agreement may provide, without limitation, for the assumption of outstanding Options by the surviving corporation, or a parent or subsidiary of such corporation ("Successor Corporation"), for their continuation by the Company (if the Company is a surviving corporation), for accelerated vesting or for their cancellation with or without consideration, in all cases without the consent of the Optionee. Upon a Change in Control, all Options granted under the Plan and held by Optionees whose employment with the Company has not terminated shall vest and become exercisable as to all Shares subject to such Option in accordance with the following provisions: 6 (i) If any of the Optionee's outstanding Options are assumed or an equivalent option is substituted by a Successor Corporation, or if any of the Optionee's outstanding Options are continued by the Company (if the Company is a surviving corporation), then the entire unvested portion of any Option shall remain subject to the vesting schedule in effect for such Option immediately prior to the Change in Control; UNLESS, within one year of the Change in Control, (A) the Optionee is terminated without cause (as provided in Section 10), or (B) the Optionee Resigns for Good Reason, in which case, the entire unvested portion of any Option shall be deemed to have vested and become fully exercisable immediately prior to any such termination or resignation. (ii) If any of the Optionee's outstanding options are not assumed or an equivalent option is not substituted by the Successor Corporation, and if any of the Optionee's outstanding Options are not continued by the Company (if the Company is a surviving corporation), all of the then unvested portion of the Option shall be deemed to have vested immediately prior to the Change in Control. "Change in Control" means the occurrence of any of the following: (i) The consummation of a merger or consolidation of the Company with or into another entity or any other corporate reorganization, if more than 65% of the combined voting power of the continuing or surviving entity's securities outstanding immediately 7 after such merger, consolidation or other reorganization is owned by persons who were not stockholders of the Company immediately prior to such merger, consolidation or other reorganization; (ii) The sale, transfer or other disposition of all or substantially all of the Company's assets; (iii) A change in the composition of the Board of Directors of the Company, as a result of which fewer that one-half of the incumbent directors are directors who either (i) had been directors of the Company on the date 24 months prior to the date of the event that may constitute a Change in Control (the "original directors") or (ii) were elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the aggregate of the original directors who were still in office at the time of the election or nomination and the directors whose election or nomination was previously so approved; or (iv) Any transaction as a result of which any person is the "beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Act of 1934), directly or indirectly, of securities of the Company representing at least 20% of the total voting power represented by the Company's then outstanding voting securities. For purposes of this subparagraph, the term "person" shall have the same meaning as when used in sections 13(d) and 14(d) of the Securities Exchange Act of 1934 but shall exclude: 8 (A) trustee or other fiduciary holding securities under an employee benefit plan of the Company or a subsidiary of the Company; and (B) corporation owned directly or indirectly by the shareholders of the Company in substantially the same proportions as their ownership of the common stock of the Company. A transaction shall not constitute a Change in Control if its sole purpose is to change the state of the Company's incorporation or to create a holding company that will be owned in substantially the same proportions by the persons who held the Company's securities immediately before such transactions. "Resignation for Good Reason" means the Optionee's resignation due to (i) a material diminution of Optionee's duties without Optionee's consent, (ii) a diminution of Optionee's base salary in effect immediately prior to a Change in Control, or (iii) a requirement that Optionee's commute distance increase by more than fifty (50) miles without Optionee's consent.Notwithstanding the above provisions of this Section 7, if any agreement between the Optionee and the Company provides greater rights to the Optionee than does this Section 7 upon the occurrence of one or more of the events described in this Section 7, the provisions of such other agreement shall govern and shall supersede this Section 7. 9 8. PROVISIONS REGARDING STOCK APPRECIATION RIGHTS A stock appreciation right granted under the Plan shall entitle the holder thereof to receive from the Company, upon surrender of the related option, payment of an amount, in cash, shares of common stock or a combination thereof, as determined by the Compensation Committee, equal in value to (A) the excess of the fair market value of a share of common stock on the date the stock appreciation right is exercised over the option price provided for in the related option, multiplied by (B) the number of shares with respect to which the stock appreciation right was exercised. A stock appreciation right shall be exercisable during the period commencing on a date specified by the Compensation Committee and ending on the date on which the related option expires or is earlier canceled or terminated. Notwithstanding the preceding sentence, the Compensation Committee may provide for the grant of a stock appreciation right which may be exercised only within a sixty-day period following certain events specified by the Compensation Committee in the grant of such stock appreciation right. Moreover, the Compensation Committee may provide that such stock appreciation right shall be payable only in cash and that, in addition to payment of the amount otherwise due upon exercise of such stock appreciation right, the holder thereof shall receive (unless such stock appreciation right is in tandem with an incentive stock option), an amount equal to the excess of the highest price paid for a share of common stock in the open market or otherwise over the sixty-day period prior to exercise over the fair market value of a share of common stock on the date the stock appreciation right is exercised. In order to exercise the stock appreciation right or any part thereof, the employee shall give notice in writing to the Company of his or her intention to exercise such right, and in said notice the employee shall set 10 forth the number of shares as to which such employee desires to exercise the stock appreciation right, provided that such right may not be exercised with respect to a number of shares in excess of the number for which the related option could then be exercised. Any limitations on the right to exercise the related option shall also apply to the stock appreciation right. No holder of a stock appreciation right or such holder's legal representatives, legatees or distributees, as the case may be, shall be or have any of the rights and privileges of a shareholder of the Company by reason of such stock appreciation right unless and until the shares are issued to such holder under the terms of the Plan. 9. NON-TRANSFERABILITY OF OPTION AND STOCK APPRECIATION RIGHT No option or stock appreciation right granted under the Plan to an employee shall be transferred by him or her otherwise than by will or by the laws of descent and distribution, and such option or stock appreciation right shall be exercisable during the employee's lifetime only by him or her. 10. TERMINATION OF EMPLOYMENT All options granted less than one year before an Optionee's termination of employment shall terminate immediately upon such Optionee's termination of employment. The remaining provisions of this Section 10 shall apply to options granted one year or more before an Optionee's termination of employment. Except as provided below, if an Optionee shall cease to be employed by the Company or one of its subsidiaries, as the case may be, for any reason other than death, disability or retirement pursuant to a retirement plan of the Company or one of its subsidiaries, any option theretofore granted to the Optionee which has not been exercised shall forthwith cease and terminate. The 11 Compensation Committee may provide in the grant of any option or in an amendment of such grant that in the event of any such termination of employment (except termination for "cause" as defined below), such option shall be exercisable (solely to the extent it was exercisable on the date of the Optionee's termination of employment) within the ninety days after the Optionee's termination, but in no event after the expiration of the term of said option prescribed pursuant to Section 6. The Company or any of its subsidiaries shall have "cause" to terminate the Optionee's employment only on the basis of the Optionee's having been guilty of fraud, misappropriation, embezzlement or any other act or acts of dishonesty constituting a felony and resulting or intended to result directly or indirectly in a substantial gain or personal enrichment to the Optionee at the expense of the Company or any of its subsidiaries. Notwithstanding the foregoing, the Optionee shall not be deemed to have been terminated for cause unless and until there shall have been delivered to the Optionee a copy of a resolution (i) duly adopted by three-quarters (3/4) of the entire membership of the Compensation Committee, or of the Board of Directors of the Company, at a meeting called and held for such purpose after reasonable notice to the Optionee and an opportunity for the Optionee, together with the Optionee's counsel, to be heard before such Committee or Board, as the case may be, and (ii) finding that in the good faith opinion of such Committee or Board, as the case may be, the Optionee was guilty of conduct described in the preceding sentence of this paragraph and specifying the particulars of such conduct in detail. However, an Optionee's right to exercise his outstanding options shall automatically be suspended from the moment the Optionee is notified that the Company has commenced an investigation into whether there are grounds for terminating the Optionee's employment for "cause" until a determination has been made that no such grounds exist. 12 In the case of an Optionee employed by any of the subsidiaries of the Company that were sold during 1997 or 1998 and whose employment with the group consisting of the Company and its subsidiaries ceased as a result of such sale, any option (other than an incentive stock option) theretofore granted to the Optionee which has not been exercised as of the Optionee's termination of employment shall become 100% vested and shall be exercisable within one (1) year after the date of the subsidiary's sale by the Company, but in no event after the expiration of the term of said option prescribed pursuant to Section 6. In the case of any Optionee employed at the Miami, Florida headquarters of the Company at the time of the May 1998 announcement of the reorganization of the Company who terminates employment with the Company because (i) the Optionee's position is eliminated as a result of the reorganization or (ii) the Optionee declines employment at the Company's new headquarters in San Jose, California, any option (other than an incentive stock option) theretofore granted to the Optionee which has not been exercised as of the Optionee's termination of employment shall become 100% vested and shall be exercisable within three (3) years following termination of employment, but in no event after the expiration of the term of said option prescribed pursuant to Section 6. 11. RETIREMENT, DISABILITY OR DEATH All options granted less than one year before an Optionee's retirement, disability, or death shall terminate immediately upon such Optionee's retirement, disability, or death. The remaining provisions of this Section 11 shall apply to options granted one year or more before an Optionee's retirement, disability, or death. In the event of the retirement of an Optionee pursuant to a retirement plan of the Company or one of its subsidiaries, as the case may be, the options theretofore granted to the Optionee shall be exercisable during such 13 period of time as the Compensation Committee shall specify in the option grant either at the time of grant or by amendment, which period shall not exceed the first to expire of: (i) one (1) year after the date of such retirement with respect to incentive stock options, (ii) three (3) years after the date of such retirement for Optionees whose retirement date is prior to July 1, 1997, (iii) five (5) years after the date of such retirement for Optionees whose retirement date is on or after July 1, 1997, and (iv) the expiration of the term of said option prescribed pursuant to Section 6. Options not exercisable on the date of an Optionee's retirement shall continue to become exercisable during such period in accordance with the schedule specified by the Compensation Committee pursuant to Section 6; provided that no additional options shall become exercisable following an Optionee's death. In the event of the disability or death of an Optionee while in the employ of the Company or one of its subsidiaries, or during the post-employment period referred to in the immediately preceding paragraph, the options theretofore granted to him shall be exercisable during such period of time as the Compensation Committee shall specify in the option grant either at the time of grant or by amendment, which period shall not exceed the first to expire of the following: (i) one (1) year after the date of such disability or death, with respect to incentive stock options, (ii) three (3) years after the date of such disability if the date of such disability is prior to July 1, 1997, (iii) five (5) years after the date of such disability if the date of such disability is on or after July 1, 1997, (iv) three (3) years after the date of such death, (v) the applicable post-retirement period as set forth in the preceding paragraph, and (vi) the expiration of the term of said option prescribed pursuant to Section 6. Options not exercisable on the date of an Optionee's termination of employment by reason of disability shall continue to become exercisable during such period in accordance with the schedule specified by the Compensation Committee pursuant to Section 6; provided that no additional options shall become exercisable following an Optionee's death. 14 Such option (or the related stock appreciation right) may only be exercised by the personal representative of such decedent or by the person or persons to whom such employee's rights under the option shall pass by such employee's Will or by the laws of Descent and Distribution of the state of such employee's domicile at the time of death, and then only as and to the extent that such employee was entitled to exercise the option on the date of death. 12. WRITTEN AGREEMENT Within a reasonable time after the date of grant of an option, an option and stock appreciation right, or a stock appreciation right related to a previously granted option, a written agreement in a form approved by the Compensation Committee shall be duly executed and delivered to the Optionee. 13. ADJUSTMENT BY REASON OF RECAPITALIZATION, STOCK SPLITS, STOCK DIVIDENDS, ETC. If, after the effective date of this Plan, there shall be any changes in the common stock structure of the Company by reason of the declaration of stock dividends, recapitalization resulting in stock split-ups, or combinations or exchanges of shares by reason of merger, consolidation, or by any other means, then the number of shares available under the Plan, the shares subject to any outstanding options, and the maximum number of shares with respect to which options may be granted to any person shall be equitably and appropriately adjusted by the Board of Directors of the Company as in its sole and uncontrolled discretion shall seem just and reasonable in the light of all the circumstances pertaining thereto. 15 14. RIGHT TO TERMINATE EMPLOYMENT The Plan shall not confer upon any employee any right with respect to being continued in the employ of the Company and its subsidiaries or interfere in any way with the right of the Company and its subsidiaries to terminate his or her employment at any time, nor shall it interfere in any way with the employee's right to terminate his or her employment. 15. WITHHOLDING AND OTHER TAXES The Company or one of its subsidiaries shall have the right to withhold from salary or otherwise or to cause an Optionee (or the executor or administrator of the Optionee's estate or his legatees or distributees) to make payment of any Federal, State, or other (to the extent permitted by applicable law, rule or regulation) taxes required to be withheld with respect to any exercise of a stock option or a stock appreciation right. An Optionee may elect to have the withholding tax obligation or, if the Compensation Committee so determines, any additional tax obligation with respect to any exercise of a stock option or stock appreciation right satisfied by (a) having the Company or one of its subsidiaries withhold shares otherwise deliverable to the Optionee with respect to such exercise, or (b) delivering shares of common stock to the Company. 16. AMENDMENT TO THE PLAN The Board of Directors shall have the right to amend, suspend or terminate the Plan at any time; provided, however, that no such action shall affect or in any way impair the rights of the holder of any option or stock appreciation right theretofore granted under the Plan; and provided further, that unless first duly approved by the common shareholders of the Company entitled to vote thereon at a meeting (which may be the annual meeting) duly called and held for such purpose, no amendment or change shall be made in the Plan (a) increasing the total number of shares which may be purchased or 16 transferred upon exercise of options or stock appreciation rights under the Plan by all employees; (b) changing the minimum purchase price hereinbefore specified for the optioned shares; (c) changing the maximum option period; (d) increasing the amount that may be received upon exercise of a stock appreciation right; or (e) allowing a stock appreciation right to be exercised after the expiration date of the related option. 17. EFFECTIVE DATE OF THE PLAN The Plan shall be effective as of February 24, 1971. 18. SAVINGS CLAUSE Each option and stock appreciation right shall be governed by the terms of the Plan as in effect on the date of its grant unless the option or stock appreciation right is expressly amended to include one or more Plan provisions adopted after the date of grant. The Compensation Committee shall have authority to amend outstanding options to include any provisions permitted by the Plan as in effect at the time of such amendment. STOCK OPTION GRANT UNDER KNIGHT-RIDDER, INC. EMPLOYEE STOCK OPTION PLAN ------------- THIS STOCK OPTION GRANT dated ____________ __, ____ is made by KNIGHT-RIDDER, INC., hereinafter called the "Company," to ______________, hereinafter called the "Optionee." WITNESSETH, THAT: WHEREAS, the Company, by action of its shareholders, adopted and approved an Employee Stock Option Plan, effective February 24, 1971 and subsequently amended by the shareholders or the Board of Directors or the Executive Committee of the Board from time to time (the "Plan"). WHEREAS, the purpose of the Plan is to enable the Company and its subsidiaries to attract and retain key employees. NOW THEREFORE, the Company hereby grants a non-qualified option under the Plan to the Optionee on the following terms and conditions: 1. AMOUNT OF STOCK SUBJECT TO OPTION: The Company hereby grants to the Optionee the right to purchase _______ shares of authorized and unissued Common Stock of the Company or shares reacquired by the Company and held in Treasury, which stock is to be issued by the Company upon the exercise of this option as hereinafter set forth. This option shall NOT be an incentive stock option as defined in Section 422 of the Internal Revenue Code. 2 2. PURCHASE PRICE/TAXES: The purchase price per share for this option shall be ________________ ($________), one hundred percent (100%) of the fair market value (as defined in the Plan) of the Common Stock at the time the option is granted. Upon or before the exercise of this option or any part thereof, the Optionee will also be required to pay to the Company or make arrangements satisfactory to the Company for the payment of the appropriate amount of federal, state, local and foreign taxes required to be withheld in connection with the exercise before the purchased shares will be issued. The Optionee shall have the right to satisfy applicable withholding obligations by having the Company withhold shares otherwise deliverable to the Optionee upon exercise of the option. 3. PERIOD OF OPTION AND EXERCISE THEREOF: (a) Subject to paragraph 5 below, one-third of the shares subject to this option (rounded up to the nearest whole share) may be purchased at any time following the first anniversary of the date of this grant, an additional one-third of the shares subject to this option (rounded up to the nearest whole share) may be purchased at any time following the second anniversary of the date of this grant, and the remaining shares subject to this option may be purchased at any time following the third anniversary of the date of this grant; provided, however, that in no event may any part of this option be exercised following the ___ day of __________________, 200__. (b) In order to exercise this option or any part thereof, the Optionee shall give notice in writing to the Company of the Optionee's intention to purchase all or part of the shares subject to this option, and in said notice 3 the Optionee shall set forth the number of shares as to which he or she desires to exercise the option, and he or she shall pay for such shares in full at the time of the exercise of such option. Such payment may be made in cash, through the delivery to the Company of shares of common stock of the Company which the Optionee has owned for at least six months with a value equal to the total option price, or through a combination of cash and such shares, and any shares so delivered shall be valued at their fair market value on the date on which the option is exercised. Payment of the purchase price may also be made through the delivery to the Company of the sale proceeds of all or part of the shares of common stock of the Company that are the subject of this option; provided that the Optionee instructs the Company's designated broker (the "Designated Broker") to effect on the date such instruction is given to the Designated Broker (which shall be deemed to be the date of exercise) or as early as practicable thereafter the sale of such number of such shares "at the market" in a broker's transaction (within the meaning of Section 4(4) of the Securities Act of 1933, as amended), the proceeds of which shall be at least equal to the purchase price of this option plus the amount of taxes required to be withheld plus transaction costs. In accordance with these instructions, the Designated Broker shall sell such shares, deliver to the Company the portion of the proceeds of such sale which equals the purchase price of this option plus the amount of taxes required to be withheld and remit the remaining sale proceeds (net of transaction costs), to the Optionee. The notice of exercise must be delivered or, if mailed, postmarked on or before the date on which the right to exercise this option expires. No shares shall be issued to the Optionee until final payment for said shares has been made, and the Optionee shall have none of the rights of a shareholder until said shares are issued to the Optionee. 4 4. NON-TRANSFERABILITY OF OPTION: This option is not transferable otherwise than by Will or by the laws of descent and distribution, and this option shall be exercisable during the Optionee's lifetime only by the Optionee. 5. TERMINATION OF EMPLOYMENT, RETIREMENT OR DEATH OF OPTIONEE: If the Optionee shall cease to be employed by the Company or one of its subsidiaries, as the case may be, for any reason other than (1) death, disability, or retirement pursuant to a retirement plan of the Company or one of its subsidiaries, or (2) the termination of the Optionee's employment for "cause" (as defined below) by the Company or one of its subsidiaries, this option, if not theretofore exercised, shall be exercisable only within three months after such termination, but in no event after the expiration of the term of this option set forth in paragraph 3 above. Notwithstanding the preceding sentence or any other provision of this option grant, if the Optionee's termination of employment for any reason (including death, disability or retirement) occurs within one year of the date of grant of this option, the option shall terminate immediately upon the Optionee's termination of employment. In each case where the option may be exercised for a period following the Optionee's termination of employment other than termination by reason of the Optionee's retirement or disability, the option may be exercised during such period solely to the extent it could have been exercised on the date of the Optionee's termination of employment. In the event that the Optionee's termination of employment is for "cause", this option shall forthwith cease and terminate. The Company or any of its subsidiaries shall have cause to terminate the Optionee's employment only 5 on the basis of the Optionee's having been guilty of fraud, misappropriation, embezzlement or any other act or acts of dishonesty constituting a felony and resulting or intended to result directly or indirectly in a substantial gain or personal enrichment to the Optionee at the expense of the Company or any of its subsidiaries. Notwithstanding the foregoing, the Optionee shall not be deemed to have been terminated for cause unless and until there shall have been delivered to the Optionee a copy of a resolution (i) duly adopted by three quarters (3/4) of the entire membership of the Compensation Committee of the Board of Directors, or of the Board of Directors of the Company, at a meeting called and held for such purpose after reasonable notice to the Optionee and an opportunity for the Optionee, together with the Optionee's counsel, to be heard before such Committee or the Board of Directors of the Company, as the case may be, and (ii) finding that in the good faith opinion of such Committee or the Board of Directors of the Company, as the case may be, the Optionee was guilty of conduct described in the preceding sentence and specifying the particulars of such conduct in detail. However, the Optionee's right to exercise this option shall be automatically suspended from the moment the Optionee is notified that the Company has commenced an investigation into whether there are grounds for terminating the Optionee's employment for "cause" until a determination has been made that no such grounds exist. In the event of the retirement of the Optionee pursuant to a retirement plan of the Company or one of its subsidiaries, as the case may be, this option shall be exercisable for five (5) years after the date of such retirement, but in no event after the expiration of the term of this option set forth in paragraph 3 above. Options not exercisable on the date of the Optionee's retirement shall continue to become exercisable during such period in accordance with the schedule set forth in paragraph 3(a), but no additional options shall become exercisable following the Optionee's death. 6 In the event of the disability or death of the Optionee while in the employ of the Company or one of its subsidiaries or during any post-employment period during which this option is otherwise exercisable under the Plan and this grant, this option shall be exercisable at any time prior to the expiration of the earliest of (i) five (5) years after the date of such disability, (ii) three (3) years after the date of such death, (iii) five (5) years after the date of the Optionee's retirement, and (iv) the end of the otherwise applicable post-employment exercise period, but in no event after the expiration of the term of this option set forth in paragraph 3 above. Options not exercisable on the date of the Optionee's termination of employment by reason of disability shall continue to become exercisable during such period in accordance with the schedule set forth in paragraph 3(a), but no additional options shall become exercisable following the Optionee's death. In the event of the Optionee's death, this option may only be exercised by the personal representative of the Optionee, or by the person or persons to whom the rights under this option have passed by the Optionee's Will or by the laws of descent and distribution of the state in which the Optionee was domiciled at the time of the Optionee's death, and then this option may only be exercised to the extent that the Optionee was entitled to exercise the same at the time of the Optionee's death. 6. CHANGE IN CAPITAL: If prior to the expiration of this option, there shall be any changes in the Common Stock structure of the Company by reason of the declaration of stock dividends, recapitalization resulting in stock split-ups or 7 combinations or exchanges of shares by reason of merger, consolidation, or by any other means, then the number of shares subject to this option and the purchase price per share shall be equitably and appropriately adjusted by the Board of Directors of the Company as in its sole and uncontrolled discretion shall seem just and reasonable in the light of all the circumstances pertaining thereto. 7. THE RIGHT TO TERMINATE EMPLOYMENT: This option shall not confer upon the Optionee any right with respect to being continued in the employ of the Company and its subsidiaries or interfere in any way with the right of the Company and its subsidiaries to terminate the Optionee's employment at any time, nor shall it interfere in any way with the right of the Optionee to terminate the Optionee's employment. 8. REGISTRATION AND OTHER REQUIREMENTS: This option is subject to the requirement and condition that if the Board of Directors of the Company shall determine that the listing, registration or qualification upon any securities exchange or under any state or federal law, or the approval or consent of any governmental body, or the Optionee's satisfaction of applicable tax withholding obligations or agreement with respect to the disposition of the shares purchased hereunder is necessary or desirable as a condition to the issuance or purchase of any shares subject to this option, then this option may not be exercised in whole or in part unless or until such listing, registration, qualification, approval, consent, satisfaction, or agreement has been obtained, free of any conditions which are not acceptable to the Board of Directors of the Company, and the sale and delivery of stock hereunder is also subject to the above requirements and conditions. 8 9. INTERPRETATION OF STOCK OPTION GRANT: The interpretation and decision with regard to all questions arising under the Plan or this stock option grant shall be made by the Compensation Committee of the Company's Board of Directors and, unless overruled or modified by the Board of Directors, shall be final and conclusive on the Optionee and the persons to whom the Optionee's rights under this option pass upon his or her death. /s/ POLK LAFFOON /s/ P. ANTHONY RIDDER - -------------------------------- ------------------------------------ Polk Laffoon P. Anthony Ridder Vice President & Secretary Chairman and Chief Executive Officer KNIGHT-RIDDER, INC. KNIGHT-RIDDER, INC. [October 24, 2000] EX-10 3 zkri-ex10b.txt EXHIBIT 10(B) EXHIBIT 10(b) ================================================================================ KNIGHT-RIDDER, INC. COMPENSATION PLAN FOR NONEMPLOYEE DIRECTORS EFFECTIVE JULY 1, 1997 AS AMENDED THROUGH OCTOBER 24, 2000 ================================================================================ KNIGHT-RIDDER, INC. COMPENSATION PLAN FOR NONEMPLOYEE DIRECTORS TABLE OF CONTENTS Page ARTICLE I PURPOSE AND INTENT OF PLAN.....................................1 ARTICLE II DEFINITIONS....................................................1 ARTICLE III ANNUAL RETAINER FEE............................................3 3.1 Time and Form of Payment.......................................3 3.2 Election to Receive Stock......................................3 3.3 Determination of Number of Shares of Stock.....................3 3.4 Registration of Stock..........................................3 ARTICLE IV BOARD MEETING AND COMMITTEE FEES...............................4 4.1 Board Meeting Fee..............................................4 4.2 Committee Meeting Fee..........................................4 4.3 Committee Chairperson Fee......................................4 ARTICLE V ANNUAL OPTION GRANTS...........................................4 5.1 Grant of Options...............................................4 5.2 Vesting of Options; Expiration.................................4 5.3 Exercise of Options Following Termination of Service...........5 5.4 Time and Manner of Exercise of Options.........................5 5.5 Restrictions on Transfer.......................................6 5.6 Acceleration of Vesting........................................7 ARTICLE VI SPECIAL PROVISIONS FOR OUTSIDE DIRECTORS.......................9 6.1 Outside Directors Eligible for Phantom Share Grant.............9 6.2 Outside Directors Eligible for Retirement Plan.................9 ARTICLE VII SHARES AVAILABLE UNDER PLAN....................................9 ARTICLE VIII RECAPITALIZATION OR REORGANIZATION............................10 8.1 Authority of the Company and Shareholders.....................10 8.2 Change in Capitalization......................................10 -i- ARTICLE IX TERMINATION AND AMENDMENT OF THE PLAN.........................10 9.1 Termination...................................................10 9.2 General Power of Board........................................11 9.3 When Director Consent Required................................11 ARTICLE X ADMINISTRATION OF PLAN........................................11 ARTICLE XI MISCELLANEOUS.................................................11 11.1 Tax Withholding...............................................11 11.2 No Right to Reelection........................................11 11.3 Unfunded Plan.................................................11 11.4 Other Compensation Arrangements...............................12 11.5 Securities Law Restrictions...................................12 11.6 Compliance with Rule 16b-3....................................12 11.7 Expenses......................................................12 11.8 Governing Law; Venue..........................................12 -ii- KNIGHT-RIDDER, INC. COMPENSATION PLAN FOR NONEMPLOYEE DIRECTORS (AS AMENDED THROUGH OCTOBER 24, 2000) The KNIGHT-RIDDER, INC. COMPENSATION PLAN FOR NONEMPLOYEE DIRECTORS is hereby established by Knight-Ridder, Inc. effective July 1, 1997. ARTICLE I PURPOSE AND INTENT OF PLAN The purpose of the Plan is to attract and retain the services of qualified individuals who are not employees of the Company to serve as members of the Board. This Plan sets forth the terms of compensation to be provided to such Directors for their services as members of the Board of the Company. Articles III, IV and V provide for different types of compensation payable to all Directors. Article VI provides for grants of Phantom Share Units to certain Outside Directors and for participation in the Company's Retirement Plan for other Outside Directors. This Plan and the Retirement Plan reflect all compensation programs in effect for Directors. ARTICLE II DEFINITIONS As used in this Plan, the following terms shall have the meaning hereinafter set forth: 2.1 "Annual Retainer Fee" means the annual fee payable to a Director for service on the Board. The Annual Retainer Fee currently in effect is set forth on Appendix One hereto, which the Board may amend from time to time. The Annual Retainer Fee shall be pro-rated on a quarterly basis for a Board member who serves less than an entire calendar year. 2.2 "Beneficiary" means the person designated by the Director to receive benefits hereunder following the death of the Director or, if the Director fails to so designate, the Director's estate. 2.3 "Board" means the Board of Directors of the Company. 2.4 "Code" means the Internal Revenue Code of 1986, as amended. 2.5 "Common Stock" means the Common Stock of the Company, par value $.02 1/12 per share. 2.6 "Company" means Knight-Ridder, Inc., a Florida corporation, or any successor legal entity. 2.7 "Disability" means a Director's physical or mental condition which is expected to render the Director unable to perform his or her usual duties or any comparable duties for the Company. The determination of a Director's Disability will be made by the Board in its sole discretion. 2.8 "Director" means a member of the Board who is not an employee of the Company or any of its subsidiaries or affiliates. 2.9 "Effective Date" means July 1, 1997. 2.10 "Exchange Act" means the Securities Exchange Act of 1934, as amended. 2.11 "Fair Market Value" means the mean between the highest and lowest sales price of a share of Common Stock on the date in question as reported on the composite tape for issues listed on the New York Stock Exchange. If no transaction was reported on the composite tape in the Common Stock on such date, the prices used shall be the prices reported on the nearest day preceding the date in question. If the Common Stock is not then quoted on the composite tape, "fair market value" shall be the closing sales price on the mean between the closing bid and asked prices on the date in question, as applicable, as furnished by any member firm of the New York Stock Exchange selected from time to time for that purpose by the Board. 2.12 "Option" means an option to purchase shares of Common Stock awarded to a Director pursuant to the Plan, which option shall not be intended to qualify, and shall not be treated, as an "incentive stock option" within the meaning of Section 422 of the Code. 2.13 "Outside Director" means any Director who is not, and never was, an employee of the Company or any of its subsidiaries or affiliates. 2.14 "Phantom Share Unit" means a bookkeeping unit representing one share of Common Stock. 2.15 "Plan" means this Knight-Ridder, Inc. Compensation Plan for Nonemployee Directors. 2.16 "Retirement" means the Termination of Service of a Director at or after age sixty-five (65). 2.17 "Retirement Plan" means the Knight-Ridder, Inc. Retirement Plan for Outside Directors, a copy of which is attached hereto as Appendix Three. -2- 2.18 "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. 2.19 "Termination of Service" shall mean cessation of service as a Director of the Company. ARTICLE III ANNUAL RETAINER FEE 3.1 TIME AND FORM OF PAYMENT. The Annual Retainer Fee is payable in equal quarterly payments on the date of the Board's regularly scheduled quarterly meeting, except as provided in Section 3.3 concerning payment in Common Stock. Through the date of the first quarterly meeting in 1998, each Director shall receive his or her quarterly payment of the Annual Retainer Fee entirely in cash. Effective with the date of the second quarterly meeting in 1998, one-half of the quarterly payment of the Annual Retainer Fee shall be paid in Common Stock. The balance of the quarterly payment of the Annual Retainer Fee shall be paid in cash or, if the Director elects, in the manner described below, in Common Stock or a combination of cash and Common Stock. 3.2 ELECTION TO RECEIVE STOCK. On or before April 1, 1998, any Director who desires to receive any portion of the balance of each quarterly payment of the Annual Retainer Fee due for the remainder of 1998 in Common Stock shall so indicate on a written election form filed with the Secretary of the Company. On or before November 30 of any year, any Director who desires to receive any portion of the balance of the Annual Retainer Fee due for the succeeding calendar year in Common Stock shall so indicate on a written election form filed with the Secretary of the Company. A newly elected Director may make such an election with respect to one-half of his or her pro-rated Annual Retainer Fee for the remainder of the calendar year within one month following his or her election to the Board. Any such election shall remain in effect for each succeeding calendar year unless the Director has amended or revoked the election in writing on or before November 30 of the preceding calendar year. 3.3 DETERMINATION OF NUMBER OF SHARES OF STOCK. The number of shares of Common Stock to be paid to each Director shall be determined by dividing the amount of the Annual Retainer Fee to be paid in Common Stock by the Fair Market Value of a share of Common Stock on the date of payment, described in the next sentence. The date of payment of that portion of the Annual Retainer Fee to be paid in Common Stock shall be the fifth business day before the date of the regularly scheduled quarterly meeting of the Board. -3- 3.4 REGISTRATION OF STOCK. The appropriate number of shares of Common Stock shall be registered in the name of the Director and shall be delivered to the Director by paperless transfer effected through records maintained by the Depository Trust Company (the "DTC"). Such registration shall occur as soon as possible after the date for payment of such Common Stock, as provided above. Upon registration, the Director shall have all the rights and privileges of a stockholder as to such shares, including the right to receive dividends and the right to vote such shares. The shares of Common Stock paid to the Director hereunder are immediately vested upon payment, are not forfeitable to the Company for any reason and shall not be subject to any restrictions on transfer (other than those imposed under applicable law or under any trading policy of the Company). ARTICLE IV BOARD MEETING AND COMMITTEE FEES 4.1 BOARD MEETING FEE. Each Director also shall receive a fee for attendance, either in person or by electronic medium, at each meeting of the Board. The Board meeting fee currently in effect is set forth on Appendix One hereto, which the Board may amend from time to time. The Board meeting fee shall be paid in cash on the date of the Board meeting. 4.2 COMMITTEE MEETING FEE. Each Director also shall receive a fee for attendance, either in person or by electronic medium, at each meeting of a committee of the Board on which the Director serves. The committee meeting fee currently in effect is set forth on Appendix One hereto, which the Board may amend from time to time. The committee meeting fee shall be paid in cash on the date of the committee meeting. 4.3 COMMITTEE CHAIRPERSON FEE. Each Director who serves as chairperson of a committee of the Board shall receive an additional fee for such service. The annual committee chairperson fee currently in effect is set forth on Appendix One hereto, which the Board may amend from time to time. The committee chairperson fee shall be paid in quarterly installments in cash on the date of each regularly scheduled quarterly meeting of the Board. The committee chairperson fee shall be pro-rated on a quarterly basis for service as chairperson of a committee for less than a full year. -4- ARTICLE V ANNUAL OPTION GRANTS 5.1 GRANT OF OPTIONS. Beginning with December 1997, an annual option grant will be made by the Compensation Committee of the Board to each Director to purchase such number of shares of Common Stock of the Company as may be established by the Board. The number of options to be granted on an annual basis is set forth on Appendix One hereto, which the Board may amend from time to time. Such Option shall have a per share exercise price equal to the Fair Market Value of the Common Stock on the date of grant, which shall be determined by the Compensation Committee of the Board, and shall be subject to the vesting schedule provided in Section 5.2 and to the other terms and conditions provided for herein. 5.2 VESTING OF OPTIONS; EXPIRATION. One-third of the Options granted in any year shall vest and become exercisable on the first, second and third annual anniversaries of the date of grant. Each Option granted hereunder shall expire no later than ten (10) years after the date the Option is granted, but may expire before such date as provided in Section 5.3. 5.3 EXERCISE OF OPTIONS FOLLOWING TERMINATION OF SERVICE. (a) EXERCISE FOLLOWING TERMINATION OF SERVICE DUE TO DISABILITY OR RETIREMENT. If a Director ceases to be a member of the Board by reason of Disability or Retirement, all Options granted to such Director may be exercised by the Director at any time within five years after the date of Termination of Service. Options not exercisable at the beginning of the five-year period will become exercisable during such five-year period as if the Director had not Terminated Service, in accordance with Section 5.2, above. At the end of such five-year period, all Options not exercised shall expire. (b) EXERCISE FOLLOWING TERMINATION OF SERVICE DUE TO DEATH. If a Director ceases to be a member of the Board by reason of death, or if a former Director dies during the five-year period following Termination of Service due to Disability or Retirement, all Options granted to such Director may be exercised by such Director's estate, personal representative or beneficiary, as the case may be, at any time within the first to expire of the following periods: (i) three years after the date of the Director's death or (ii) five years after the date of the Director's Termination of Service. Options not exercisable at the date of death will become exercisable during such post-Termination period as if the Director had not died, in accordance with Section 5.2, above. At the end of such period, all Options not exercised shall expire. (c) EXERCISE FOLLOWING OTHER TERMINATIONS OF SERVICE. If a Director ceases to be a member of the Board for any reason other than Disability, Retirement or Death, then (i) the Director shall have the right, -5- subject to the terms and conditions hereof, to exercise the Option, to the extent it has vested as of the date of such Termination of Service, at any time within three months after the date of such termination, and (ii) the unvested portion of any Options awarded to the Director shall be forfeited as of the date of Termination of Service. 5.4 TIME AND MANNER OF EXERCISE OF OPTIONS. (a) NOTICE OF EXERCISE. Subject to the other terms and conditions hereof, a Director (or other person exercising such options) may exercise any Options, to the extent such Options are vested, by giving written notice of exercise to the Company; provided, however, that in no event shall an Option be exercisable for a fractional share. The date of exercise of an Option shall be the later of (i) the date on which the Company receives such written notice or (ii) the date on which the conditions provided in Section 5.4(b) are satisfied. (b) PAYMENT. Payment for the shares of Common Stock to be received upon the exercise of Options must be made at the date of exercise of such Options and may be made in cash or by delivery to the Company of shares of Common Stock already owned by the Director (or other person exercising such Options) the Fair Market Value of which on the date of exercise is equal to the total exercise price, or in a combination of cash and shares. Payment of the exercise price in shares of Common Stock shall be made by (i) delivering to the Company the share certificate(s) or other evidence of ownership representing the required number of shares, with the Director (or other person exercising such Options) signing his or her name on the back, (ii) attaching executed stock powers to such share certificate(s) or (iii) paperless transfer of the required number of shares effected through records maintained by the DTC. Such shares shall be endorsed to the Company. The signature of the Director or other owner must be guaranteed by a commercial bank or trust company or by a brokerage firm having membership on the New York Stock Exchange. Payment of the purchase price may also be made through the delivery to the Company of the sale proceeds of all or part of the shares of common stock of the Company that are the subject of this option; provided that the Optionee instructs the Company's Designated Broker to effect on the date such instruction is given to the Company's Designated Broker (which shall be deemed to be the date of exercise) or as early as practicable thereafter the sale of such number of such shares "at the market" in a broker's transaction (within the meaning of Section 4(4) of the Securities Act of 1933, as amended), the proceeds of which shall be at least equal to the purchase price of this option plus the amount of taxes required to be withheld plus transaction costs. In accordance with these instructions, the Company's Designated Broker shall sell such shares, deliver to the Company the portion of the proceeds of such sale which equals the purchase price of this option plus the amount of taxes required to be withheld and remit the remaining sale proceeds (net of transaction costs), to the Optionee. Exercise of any Options shall comply with Rule 16b-3 of the Exchange Act. -6- (c) STOCKHOLDER RIGHTS. A Director shall have no rights as a stockholder with respect to any shares of Common Stock issuable upon exercise of an Option until the shares have been issued to the Director, by delivery of stock certificates or by paperless transfer pursuant to Section 5.4(e), and no adjustment shall be made for dividends or distributions or other rights in respect of any share for which the record date is prior to the date upon which the Director shall become the holder of record thereof. (d) LIMITATION ON EXERCISE. No Option shall be exercisable unless the Common Stock subject thereto has been registered under the Securities Act and qualified under applicable state "blue sky" laws in connection with the offer and sale thereof, or the Company has determined that an exemption from registration under the Securities Act and from qualification under such state "blue sky" laws is available. (e) ISSUANCE OF SHARES. Subject to the foregoing conditions, as soon as is reasonably practicable after its receipt of a proper notice of exercise and payment of the exercise price of the Option for the number of shares with respect to which the Option is exercised, the Company shall deliver to the Director (or such other person who exercised the Option), at the principal office of the Company or at such other location as may be acceptable to the Company and the Director (or such other person), one or more stock certificates for the appropriate number of shares of Common Stock issued in connection with such exercise. Alternatively, the Company may effect such issuance of Shares by paperless transfer through records maintained by the DTC. Such shares shall be fully paid and nonassessable and shall be issued in the name of the Director (or such other person). 5.5 RESTRICTIONS ON TRANSFER. An Option may not be transferred, pledged, assigned, or otherwise disposed of, except by will or by the laws of descent and distribution provided, however, that the Board may, subject to such terms and conditions as the Board shall specify, permit the transfer of an Option to a Director's family members or to one or more trusts established solely for the benefit of one or more of such family members. The Option shall be exercisable, during the Director's lifetime, only by the Director or by the person to whom the Option has been transferred in accordance with the previous sentence. A transferee's rights under an Option shall be no greater than the rights held by the Director under said Option. No assignment or transfer of the Option, or of the rights represented thereby, whether voluntary or involuntary, by operation of law or otherwise, except by will or the laws of descent and distribution, or as permitted under this Section, shall vest in the assignee or transferee any interest or right in the Option, but immediately upon any attempt to assign or transfer the Option the same shall terminate and be of no force or effect. 5.6 ACCELERATION OF VESTING. All options granted hereunder to Directors who have not ceased to be a member of the Board shall become fully vested and exercisable upon a `Change of Control' of the Company. Change of Control means the occurrence of any of the following: -7- (a) The consummation of a merger or consolidation of the Company with or into another entity or any other corporate reorganization, if more than 65% of the combined voting power of the continuing or surviving entity's securities outstanding immediately after such merger, consolidation or other reorganization is owned by persons who were not stockholders of the Company immediately prior to such merger, consolidation or other reorganization; (b) The sale, transfer or other disposition of all or substantially all of the Company's assets; (c) A change in the composition of the Board of Directors of the Company, as a result of which fewer that one-half of the incumbent directors are directors who either (i) had been directors of the Company on the date 24 months prior to the date of the event that may constitute a Change in Control (the "original directors") or (ii) were elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the aggregate of the original directors who were still in office at the time of the election or nomination and the directors whose election or nomination was previously so approved; or (d) Any transaction as a result of which any person is the "beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Act of 1934), directly or indirectly, of securities of the Company representing at least 20% of the total voting power represented by the Company's then outstanding voting securities. For purposes of this subparagraph (d), the term "person" shall have the same meaning as when used in sections 13(d) and 14(d) of the Securities Exchange Act of 1934 but shall exclude: (i) A trustee or other fiduciary holding securities under an employee benefit plan of the Company or a subsidiary of the Company; and (ii) A corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of the common stock of the Company. A transaction shall not constitute a Change in Control if its sole purpose is to change the state of the Company's incorporation or to create a holding company that will be owned in substantially the same proportions by the persons who held the Company's securities immediately before such transactions. -8- ARTICLE VI SPECIAL PROVISIONS FOR OUTSIDE DIRECTORS 6.1 OUTSIDE DIRECTORS ELIGIBLE FOR PHANTOM SHARE GRANT. Each Outside Director shall receive grants of Phantom Share Units as described in Appendix Two to this Plan provided that such Outside Director either (i) was a Board member as of July 1, 1996 and was under age sixty-five on that date or (ii) began service as a Director of the Company on or after July 1, 1996. The Outside Directors who are eligible to receive grants of Phantom Share Units are referred to in the Plan, including Appendix Two, as "Eligible Outside Directors." 6.2 OUTSIDE DIRECTORS ELIGIBLE FOR RETIREMENT PLAN. An Outside Director who was age sixty-five or over on July 1, 1996 is not eligible to receive a grant of a Phantom Share Unit but is eligible to participate in the Retirement Plan. ARTICLE VII SHARES AVAILABLE UNDER PLAN Subject to the provisions of Article VIII of the Plan, the maximum number of shares of Common Stock which may be issued under the Plan in payment of a Director's Annual Retainer Fee or upon exercise of Stock Options shall not exceed 200,000 shares (the "Share Limit"). Either authorized and unissued shares of Common Stock or treasury shares may be delivered pursuant to the Plan. For purposes of determining the number of shares that remain available for issuance under the Plan, the following rules shall apply: (a) the number of shares granted under the Plan or subject to any Option granted under the Plan shall be charged against the Share Limit; and (b) the Share Limit (as reduced under clause (a)) shall be increased by: (i) the number of shares subject to an Option which lapses, expires or is otherwise terminated without the issuance of such shares, (ii) the number of shares tendered to pay the exercise price of an Option, and (iii) the number of shares withheld to satisfy any tax withholding obligations of a Director with respect to any shares or other payments hereunder. -9- ARTICLE VIII RECAPITALIZATION OR REORGANIZATION 8.1 AUTHORITY OF THE COMPANY AND SHAREHOLDERS. The existence of the Plan shall not affect or restrict in any way the right or power of the Company or the shareholders of the Company to make or authorize any adjustment, recapitalization, reorganization or other change in the Company's capital structure or its business, any merger or consolidation of the Company, any issue of stock or of options, warrants or rights to purchase stock or of bonds, debentures, preferred or prior preference stocks whose rights are superior to or affect the Common Stock or the rights thereof or which are convertible into or exchangeable for Common Stock, or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise. 8.2 CHANGE IN CAPITALIZATION. Notwithstanding any other provision of the Plan, in the event of any change in the outstanding Common Stock by reason of a stock dividend, recapitalization, reorganization, merger, consolidation, stock split, combination or exchange of shares or any other significant corporate event affecting the Common Stock, the Board in its discretion, may make (i) such proportionate adjustments as it considers appropriate (in the form determined by the Board in its sole discretion) to prevent diminution or enlargement of the rights of Directors under the Plan with respect to the aggregate number of shares of Common Stock authorized for payment as Annual Retainer Fee under the Plan, for grants of Options under the Plan, the number of shares of Common Stock covered by each outstanding Option and the exercise prices in respect thereof, the number of shares of Common Stock covered by future Option grants and the number of Phantom Share Units credited to a Director's Phantom Share Account and/or (ii) such other adjustments as it deems appropriate. The Board's determination as to what, if any, adjustments shall be made shall be final and binding on the Company and all Directors. ARTICLE IX TERMINATION AND AMENDMENT OF THE PLAN 9.1 TERMINATION. The Plan shall terminate at such date as determined by the Board in its sole discretion. Termination of the Plan will not result in accelerated vesting of Options previously granted or payment of an Outside Director's Phantom Share Account before the date provided for in Appendix Two. Vesting of Options shall continue as described in Article V and payment of the Phantom Share Account will occur as provided in Appendix Two. -10- 9.2 GENERAL POWER OF BOARD. Notwithstanding anything herein to the contrary, the Board may at any time and from time to time terminate, modify, suspend or amend the Plan in whole or in part; provided, however, that no such termination, modification, suspension or amendment shall be effective without shareholder approval if such approval is required to comply with any applicable law or stock exchange rule. 9.3 WHEN DIRECTOR CONSENT REQUIRED. The Board may not alter, amend, suspend, or terminate the Plan without the consent of any Director to the extent that such action would adversely affect his or her rights with respect to Common Stock or Options that have previously been granted or with respect to the amount then credited to the Outside Director's Phantom Share Account, including the right to continued crediting of dividend equivalents. ARTICLE X ADMINISTRATION OF PLAN The Board will be responsible for administering the Plan. The Board will have authority to adopt such rules as it may deem appropriate to carry out the purposes of the Plan, and shall have authority to interpret and construe the provisions of the Plan and any agreements and notices under the Plan and to make determinations pursuant to any Plan provision. Each interpretation, determination or other action made or taken by the Board pursuant to the Plan shall be final and binding on all persons. ARTICLE XI MISCELLANEOUS 11.1 TAX WITHHOLDING. The Company shall have the right to withhold from payments made to a Director or Beneficiary (under the Plan or otherwise), or to cause a Director or Beneficiary to pay or make arrangements satisfactory to the Company for the payment of any federal, state, local or foreign taxes required to be withheld with respect to any award or payment under the Plan. 11.2 NO RIGHT TO REELECTION. Nothing in the Plan shall be deemed to create any obligation on the part of the Board to nominate any of its members for reelection by the Company's stockholders, nor confer upon any Director the right to remain a member of the Board for any period of time, or at any particular rate of compensation. 11.3 UNFUNDED PLAN. This Plan is unfunded. Amounts payable under the Plan will be satisfied solely out of the general assets of the Company subject to the claims of the Company's creditors. No Director, Beneficiary or any other -11- person shall have any interest in any fund or in any specific asset of the Company by reason of any amount credited to him hereunder, nor shall any Director, Beneficiary or any other person have any right to receive any distribution under the Plan except as, and to the extent, expressly provided in the Plan. 11.4 OTHER COMPENSATION ARRANGEMENTS. Payments received by a Director under any grant made pursuant to the provisions of the Plan shall not be included in, nor have any effect on, the determination of benefits under any other arrangement provided by the Company, including the Retirement Plan. 11.5 SECURITIES LAW RESTRICTIONS. The Company may require each Director purchasing or acquiring shares of Common Stock pursuant to the Plan to agree with the Company in writing that such Director is acquiring the shares for investment and not with a view to the distribution thereof. All certificates for shares of Common Stock delivered under the Plan shall be subject to such stock-transfer orders and other restrictions as the Company may deem advisable under the rules, regulations, and other requirements of the Securities and Exchange Commission or any exchange upon which the Common Stock is then listed, and any applicable federal or state securities law, and the Company may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions. No shares of Common Stock shall be issued hereunder unless the Company shall have determined that such issuance is in compliance with, or pursuant to an exemption from, all applicable federal and state securities laws. 11.6 COMPLIANCE WITH RULE 16B-3. The Plan is intended to comply with Rule 16b-3 under the Exchange Act and the Company shall interpret and administer the provisions of the Plan in a manner consistent therewith. 11.7 EXPENSES. The costs and expenses of administering the Plan shall be borne by the Company. 11.8 GOVERNING LAW; VENUE. The Plan shall be construed in accordance with the laws of the State of Florida. Any legal action or proceeding hereunder may be initiated only in Santa Clara County, California. -12- KNIGHT-RIDDER, INC. COMPENSATION PLAN FOR NONEMPLOYEE DIRECTORS APPENDIX ONE AMOUNTS OF COMPENSATION AS OF OCTOBER 24, 2000 PLAN SECTION NUMBER FORM OF COMPENSATION AMOUNT 2.1 Annual Retainer Fee $40,000 4.1 Board Meeting Fee $ 1,500 4.2 Committee Meeting Fee $ 1,000 4.3 Committee Chairperson Annual Fee $ 5,000 5.1 Annual Option Grant 4,000 Options Appendix Two, Annual Phantom Share Grant, Section C Outside Directors 600 Share Units EX-10 4 zkri-ex10c.txt EXHIBIT 10.C EXHIBIT 10 (c) KNIGHT RIDDER ANNUAL INCENTIVE PLAN As Amended and Restated Effective January 1, 2001 INTRODUCTION This Amended and Restated Knight Ridder Annual Incentive Plan (the "Plan") is intended to motivate and reward corporate executives and top management at individual operating units who contribute significantly to Knight Ridder's success. Specific Plan objectives include the following: o Focus participants on achieving key annual objectives o Link rewards to results relative to financial and non-financial goals at the corporate and business unit levels o Provide participants the opportunity to earn competitive compensation commensurate with performance The Plan provides participants the opportunity to earn cash awards each year based on the performance of the corporation and/or the business unit in which they work. Awards are earned on a calendar year basis (the "Plan Year") and are paid in cash following the end of the Plan Year. This amendment and restatement is intended to make the Plan comply with Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code") with respect to covered employees under such Code section. Accordingly, individuals who may be covered employees under the Code will be designated as "Covered Employees". PLAN ADMINISTRATION The Plan will be administered by the Compensation and Corporate Governance Committee of the Knight Ridder Board of Directors (the "Committee"). The Committee has the authority to interpret the provisions of the Plan and to make any rules and regulations necessary to administer the Plan. The Committee's decision is final in all matters of judgment pertaining to the Plan, and the Committee may, without notice, amend, suspend or revoke the Plan. ELIGIBILITY Employees in the following categories are eligible to participate in the Plan as determined by the Committee: corporate officers and certain director-level corporate employees; newspaper publishers and other business unit operating heads who report directly to top officers; top editors, general managers and all division directors; and selected other positions that can have significant impact on results. Operating unit heads should present proposed changes in eligible positions to the appropriate Vice President Operations and then to the Knight Ridder senior Human Resources officer. PLAN OVERVIEW BONUS AMOUNTS PAYABLE FOR MEETING GOALS Each plan participant will have a potential target bonus award that is payable for meeting goals. The size of this potential award varies by salary range. The bonus potential for each salary range is stated as a percentage of the annual salary earned during the year. Therefore, the dollar amount of an individual's opportunity is computed by multiplying the applicable percentage times the salary. The potential bonus payable for meeting goals for each salary range (other than for Knight Ridder's Chief Executive Officer whose target award shall be set annually by the Committee and shall be 115% of salary for the 2001 Plan Year) is as follows: Base Salary Range Target Award ----------------- ------------ $250,000 and above 85.0% $150,000 to $249,999 75.0% $100,000 to $149,999 65.0% $50,000 to $99,999 55.0% Up to $49,999 40.0% TYPES OF PERFORMANCE MEASURES AND THEIR WEIGHTINGS Each participant's bonus will be determined based on measures of how well the corporation or the business unit in which the individual works performed relative to two type of goals: Financial Performance and Non-financial Performance. The potential award for meeting goals will be divided between the two types of measures in the following way: 80% of each participant's potential award for meeting goals will be based on Financial Performance, and 20% will be based on Non-financial Performance, as shown in the following table: Base Salary Potential Award ----------- ---------------------------------------------------- Total Financial Non-financial ----- --------- ------------- $250,000 and above 85.0% 68.0% 17.0% $150,000 to $249,999 75.0% 60.0% 15.0% $100,000 to $149,999 65.0% 52.0% 13.0% $50,000 to $99,999 55.0% 44.0% 11.0% Up to $49,999 40.0% 32.0% 8.0% 2 As a general rule, the measurement will be based on the organizational level at which the individual is employed: corporate performance for those at the corporate level and business unit performance for those in a newspaper or other business unit. However, the Knight Ridder CEO may determine that the measures for selected individuals (other than Covered Employees) will consist of a specified mix of two or more bases, or that those in a business unit will have awards based on corporate performance. PERFORMANCE MEASUREMENT FINANCIAL PERFORMANCE MEASURE Financial performance will be evaluated relative to budgeted goals set at the beginning of the Plan Year, subject to approved adjustments during the year. Unless otherwise determined by the Committee, the financial measure will be operating profit. The financial performance measure and the goals for the year for covered employees shall be established by the Committee within the time period required by Code Section 162 (m). The financial performance measures and goals will be communicated to participants by the early part of each year. NON-FINANCIAL PERFORMANCE MEASURES At the beginning of each Plan Year, Knight Ridder and each of the business units will establish non-financial goals that represent major elements of their strategies. Quantifiable measures are preferred, and measures that are redundant with the financial goal should be avoided. There should be no more than eight measures. The non-financial performance measures may include the following items: (i) market share, (ii) customer knowledge, (iii) market driven strategy, (iv) content, (v) brand management, and (vi) technology. Such corporate measures and goals will be approved by the Knight Ridder CEO, and business unit measures and goals will be approved by the appropriate Knight Ridder Vice President. All participants at corporate and in each of the business units will have the non-financial component of their awards based on the measures selected for their unit. However, the weightings of these measures may vary among participants to reflect each individual's impact on the achievement of the goals. The weightings assigned to all measures must total 100 points for each of the participants. The achievement of a goal will result in target awards being paid for that goal. Awards for performance on the non-financial measures cannot exceed 100% of target, but standards for partial achievement of goals (and therefore payouts below 100%) as well as threshold standards for achieving any award should be established. The non-financial measures for Covered Employees shall be objective and quantifiable and shall be established solely by the Committee within the time period required by Code Section 162(m). 3 DETERMINING AND PAYING AWARDS OVERVIEW Each participant's award will be determined by adding together the award earned based on financial performance and the award earned based on non-financial performance. An award may be paid for one type of measure even if no award was earned for the other type of measure. The only constraint is that a corporate performance threshold must be achieved for any award to be payable. Normally this threshold requirement will be that corporate operating income, as reported in the annual report, must equal at least 80% of prior year operating income, although the Committee reserves the right to adjust the threshold. The Committee shall have the discretion to decrease (but not increase) awards to Covered Employees. If a Plan participant's base salary changes during the Plan Year, the potential award is calculated on a prorata basis, based on the amount of base salary earned at each salary level. DETERMINING FINANCIAL AWARDS Financial awards will be based on actual operating profit performance compared to goal for each participant's unit (either corporate or business unit). Individual unit operating profit goals have been set to support the overall Knight Ridder operating profit goal. Threshold and maximum operating profit performance are set as a percent of target operating profit (i.e., plus or minus 10% of target). Actual financial awards can range between 0% and 200% of target award opportunity. The "Actual Achievement vs Goal" is calculated to one decimal place. Awards percentages should be interpolated for achievement between amounts show in the table below. ----------------------------------------------------------------------- Actual Achievement vs Award Percentage Goal (80% of total potential award) ----------------------------------------------------------------------- 110.0% 200% ----------------------------------------------------------------------- 100.0% 100% ----------------------------------------------------------------------- 99.0% 75% ----------------------------------------------------------------------- 98.0% 50% ----------------------------------------------------------------------- 97.0% 43.75% ----------------------------------------------------------------------- 96.0% 37.5% ----------------------------------------------------------------------- 95.0% 31.25% ----------------------------------------------------------------------- 94.0% 25% ----------------------------------------------------------------------- 92.0% 12.5% ----------------------------------------------------------------------- 91.0% 6.25% ----------------------------------------------------------------------- 90.0% 0% ----------------------------------------------------------------------- Exhibit 1 illustrates calculation of the financial award payout for two scenarios. 4 DETERMINING NON-FINANCIAL AWARDS A performance score will be determined for each of the non-financial measures at corporate and each of the business units. A score will be 100% of the points assigned if the goal was achieved, zero if threshold performance was not achieved, and between 0 and 100% if performance was above threshold and the goal was partially achieved. An individual's non-financial award will equal the sum of the scores on each of the measures times the weighting given to that measure for that individual. Awards can range from 100% of the non-financial target if all goals were achieved, to zero if performance on all goals was below threshold. OTHER PLAN FEATURES AWARD PAYMENT Awards will be paid in cash following the end of the Plan Year, unless deferral has been elected under the annual incentive deferral plan, upon completion of the computation of results. Required tax amounts will be withheld. Notwithstanding anything to the contrary, the maximum award payable for a Plan Year to any individual under the Code shall not exceed $2,500,000. PARTIAL YEAR PARTICIPANTS AND CHANGES IN POSITION Individuals who are hired or promoted into positions that qualify for Plan participation will be eligible for a pro rata award based on the amount of salary earned while a participant and the performance levels achieved. If a participant's responsibilities change during a year and a different part of the company's performance is used in computing awards for the two positions, then ordinarily the award will be determined on a pro rata basis relative to the time spent in the two positions, although exceptions may be made on a case by case basis. TERMINATION In the event of death, permanent disability (as defined by Knight Ridder's disability plan) or retirement (as defined in a retirement plan of Knight Ridder or one of its subsidiaries) prior to the date of payment, a participant (or the participant's estate) will be entitled to receive a pro rata award based on the time employed during the year. Pro-rated payments will be made following the end of the Plan Year and computation of results. Required tax amounts will be withheld. In the event of resignation or termination for other reasons at any time during the Plan Year, no award will be paid. EMPLOYMENT RIGHTS The Plan does not constitute a contract of employment, nor does participation in one Plan Year guarantee participation in another Plan Year. 5 Exhibit 1 EXAMPLE FINANCIAL AWARD CALCULATIONS* --------------------------------------------------------------------- OPERATING PROFIT PERFORMANCE FINANCIAL AWARD PAYOUT OPPORTUNITY --------------------------------------------------------------------- 110% of Target 200% of Potential Financial Award 109% of Target 190% of Potential Financial Award 108% of Target 180% of Potential Financial Award 107% of Target 170% of Potential Financial Award 106% of Target 160% of Potential Financial Award 105% of Target 150% of Potential Financial Award 104% of Target 140% of Potential Financial Award 103% of Target 130% of Potential Financial Award 102% of Target 120% of Potential Financial Award 101% of Target 110% of Potential Financial Award 100% of Target 100% of Potential Financial Award 99% of Target 75% of Potential Financial Award 98% of Target 50% of Potential Financial Award 97% of Target 43.75% of Potential Financial Award 96% of Target 37.5% of Potential Financial Award 95% of Target 31.25% of Potential Financial Award 94% of Target 25% of Potential Financial Award 93% of Target 18.75% of Potential Financial Award 92% of Target 12.5% of Potential Financial Award 91% of Target 6.25% of Potential Financial Award 90% of Target 0% of Potential Financial Award --------------------------------------------------------------------- *Exhibit 1 outlines financial portion only. Does not reflect non-financial portion. 6 - -------------------------------------------------------------------------------- Example 1: Operating Profit Equals 104.5% of Target Performance - -------------------------------------------------------------------------------- PARTICIPANT EARNS A SALARY OF: $90,000 AWARD PAYOUT OPPORTUNITY AT TARGET: 55% OF SALARY OR $49,500 AT TARGET BROKEN DOWN BY COMPONENTS: 80% FINANCIAL PERFORMANCE OR $39,600 20% NON-FINANCIAL PERFORMANCE OR $9,900 EXAMPLE: OPERATING PROFIT ACHIEVEMENT: 104.5% OF TARGET NON-FINANCIAL ACHIEVEMENT: 100% OF GOALS FINANCIAL PORTION OF AWARD: $39,600 X 145% = $57,420 NON-FINANCIAL PORTION OF AWARD: $9,900 X 100% = $ 9,900 ------- TOTAL AWARD PAYOUT: $67,320 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Example 2: Operating Profit Equals 95% of Target Performance - -------------------------------------------------------------------------------- PARTICIPANT EARNS A SALARY AS FOLLOWS: 1/1/2001 - 6/30/2001 $45,000 (6 MONTHS @ $90,000 ANNUAL BASE) 7/1/2001 - 12/31/2001 $49,000 (6 MONTHS @ $98,000 ANNUAL BASE) ------- $94,000 TOTAL ANNUAL SALARY AWARD PAYOUT OPPORTUNITY AT TARGET: 55% OF SALARY OR $51,700 BROKEN DOWN BY COMPONENTS: 80% FINANCIAL PERFORMANCE OR $41,360 20% NON-FINANCIAL PERFORMANCE OR $10,340 EXAMPLE: OPERATING PROFIT ACHIEVEMENT: 95% OF TARGET NON-FINANCIAL ACHIEVEMENT: 100% OF GOALS FINANCIAL PORTION OF AWARD: $41,360 X 31.25% = $12,925 NON-FINANCIAL PORTION OF AWARD: $10,340 X 100% = $10,340 ------- TOTAL AWARD PAYOUT: $23,265 - ------------------------------------------------------------------- 7 BONUS AS A PERCENTAGE OF BASE SALARY FINANCIAL PORTION ONLY EXHIBIT 2 INTERPOLATION MATRIX
- ------------------------------------------------------------------------------------------------------------ FINANCIAL $250,000 AND $150,000 TO $100,000 TO $50,000 TO UP TO $49,000 PERFORMANCE ABOVE $249,999 $149,999 $99,999 AS % OF TARGET - ------------------------------------------------------------------------------------------------------------ MAXIMUM 110.0% 136.0% 120.0% 104.0% 88.0% 64.0% 109.0% 129.2% 114.0% 98.8% 83.6% 60.8% 108.0% 122.4% 108.0% 93.6% 79.2% 57.6% 107.0% 115.6% 102.0% 88.4% 74.8% 54.4% 106.0% 108.8% 96.0% 83.2% 70.4% 51.2% 105.0% 102.0% 90.0% 78.0% 66.0% 48.0% 104.0% 95.2% 84.0% 72.8% 61.6% 44.8% 103.0% 88.4% 78.0% 67.6% 57.2% 41.6% 102.0% 81.6% 72.0% 62.4% 52.8% 38.4% 101.0% 74.8% 66.0% 57.2% 48.4% 35.2% TARGET 100.0% 68.0% 60.0% 52.0% 44.0% 32.0% 99.0% 51.0% 45.0% 39.0% 33.0% 24.0% 98.0% 34.0% 30.0% 26.0% 22.0% 16.0% 97.0% 29.8% 26.3% 22.8% 19.3% 14.0% 96.0% 25.5% 22.5% 19.5% 16.5% 12.0% 95.0% 21.3% 18.8% 16.3% 13.8% 10.0% 94.0% 17.0% 15.0% 13.0% 11.0% 8.0% 93.0% 12.8% 11.3% 9.7% 8.2% 6.0% 92.0% 8.5% 7.5% 6.5% 5.5% 4.0% 91.0% 4.2% 3.7% 3.2% 2.7% 2.0% THRESHOLD 90.0% 0.0% 0.0% 0.0% 0.0% 0.0% - ------------------------------------------------------------------------------------------------------------
8 EX-10.F 5 file007.txt EXHIBIT 10 F EXHIBIT 10 (f) EXECUTIVE INCOME SECURITY AGREEMENT AGREEMENT dated as of __________________, by and between Knight Ridder, a Florida corporation having its principal offices at 50 W. San Fernando Street, San Jose, California, 95113 (the "Company"), and _____________ (the "Executive"). The Company considers the continued services of key executives of the Company to be in the best interests of the Company and its shareholders. The Company desires to assure, and has determined that it is appropriate and in the best interests of the Company and its shareholders to reinforce and encourage, the continued attention and dedication of key executives of the Company to their duties of employment without personal distraction or conflict of interest in circumstances arising from the possibility or occurrence of a change in control of the Company. The Compensation Committee of the Board of Directors of the Company (the "Committee") has authorized the Company to enter into agreements with those key executives of the Company who are designated by the Committee, such agreements to set forth the severance compensation which the Company agrees under certain circumstances to pay such executives. The Executive is a key executive of the Company and has been designated by the Committee as an executive to be offered such a severance compensation agreement with the Company. In consideration of the premises and the covenants and agreements contained herein, and other good and valuable consideration, the Company and the Executive agree as follows: 1. CHANGE IN CONTROL OF THE COMPANY. For purposes of this Agreement, a "Change in Control of the Company" shall be deemed to have occurred if: (a) individuals who, as of the date of this Agreement, constitute the entire Board of Directors of the Company ("Incumbent Directors") cease for any reason to constitute at least a majority of the Board of Directors of the Company (the "Board"); PROVIDED, HOWEVER, that any individual becoming a director subsequent to the date of this Agreement whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the then Incumbent Directors (other than any such individual whose initial assumption of office is the result of an actual or threatened election contest relating to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Company) shall also be an Incumbent Director; (b) any merger, consolidation or reorganization of the Company (or, if the capital stock of the Company is affected, any Subsidiary (as defined below)) or any sale, lease, or other disposition (in one transaction or a series of transactions contemplated or arranged by any party as a single plan) of all or substantially all of the assets of the Company (each of the foregoing being an "Acquisition Transaction") shall have been effected and (A) the shareholders of the Company immediately prior to such Acquisition Transaction do not immediately after such Acquisition Transaction beneficially own, directly or indirectly, shares representing in the aggregate more than 65% of (I) the then-outstanding common stock of the corporation surviving or resulting from such merger, consolidation or recapitalization or acquisition of such assets of the Company, as the case may be (the "Surviving Corporation") (or of its ultimate parent corporation, if any) and (II) the Combined Voting Power (as defined below) of the then outstanding Voting Securities (as defined below) of the Surviving Corporation (or of its ultimate parent corporation, if any); (B) the Incumbent Directors at the time of the initial approval of such Acquisition Transaction do not immediately after such Acquisition Transaction constitute a majority of the Board of Directors of the Surviving Corporation (or of its ultimate parent corporation, if any); or (C) any Person (including any corporation resulting from such Acquisition Transaction and any employee benefit plan (or related trust) of such corporation) beneficially owns, directly or indirectly, 20% or more of either (i) the then-outstanding shares of common stock of the corporation resulting from such Acquisition Transaction or (ii) the Combined Voting Power of all then-outstanding Voting Securities of the Surviving Corporation except to the extent that such ownership existed prior to the Acquisition Transaction; or (c) the shareholders of the Company shall approve any plan or proposal for the liquidation or dissolution of the Company; or (d) any Person (as defined below) shall become the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, as amended (the "Exchange Act")), directly or indirectly, of securities of the Company representing in the aggregate 20% or more of either (i) the then outstanding shares of Company Common Stock ("Common Stock"), or (ii) the Combined Voting Power of all then outstanding Voting Securities of the Company; PROVIDED, HOWEVER, that notwithstanding the foregoing, a Change in Control of the Company shall not be deemed to have occurred for purposes of this clause (d) solely as the result of: (A) an acquisition of securities by the Company which, by reducing the number of shares of Common Stock or other Voting Securities outstanding, increases (I) the proportionate number of shares of Common Stock beneficially owned by any Person to 20% or more of the shares of Common Stock then outstanding or (II) the proportionate voting power represented by the Voting Securities beneficially owned by any Person to 20% or more of the Combined Voting Power of all then outstanding Voting Securities; or (B) an acquisition of securities directly from the Company, except that this subsection (B) shall not apply to: (I) any conversion or exercise of a security that was not acquired directly from the Company; or (II) any acquisition of securities if the Incumbent Directors at the time of the initial approval of such acquisition would not immediately after (or otherwise as a result of) such acquisition constitute a majority of the Board; PROVIDED, HOWEVER, that if any Person referred to in subsections (A) or (B) of this clause (d) shall thereafter become the beneficial owner of any additional shares of Company Common Stock or other Voting Securities of the Company (other than pursuant to a stock split, stock dividend or similar transaction or an acquisition exempt under such subsection (B)), then a Change in Control of the Company shall be deemed to have occurred for purposes of this clause (d). (e) Notwithstanding anything contained in this Agreement to the contrary, if the Executive's employment is terminated prior to a Change in Control of the Company and the Executive reasonably demonstrates that such termination (i) was at the request of a Third Party (as defined below) or (ii) otherwise occurred in connection with or in anticipation of a Change in Control of the Company, then for all purposes of the Agreement, the date of such Change in Control of the Company shall mean the date immediately prior to the date of such termination of the Executive's employment. (f) For purposes of this Agreement: (i) "Person" shall mean any individual, entity (including, without limitation, any corporation, partnership, trust, joint venture, association or governmental body and any successor to any such entity) or group (as defined in Sections 13(d)(3) or 14(d)(2) of the Exchange Act and the rules and regulations thereunder); PROVIDED, HOWEVER, that Person shall not include the Executive, the Company, any of its Subsidiaries, any employee benefit plan (or related trust) of the Company or its Subsidiaries or any entity organized, 2 appointed or established by the Executive, the Company or any of its Subsidiaries for or pursuant to the terms of any such plan, or any of their affiliates; (ii) "Voting Securities" shall mean all securities of a corporation having the right under ordinary circumstances to vote in an election of the board of directors of such corporation; and (iii) "Combined Voting Power" shall mean the aggregate votes entitled to be cast generally in the election of directors of a corporation by holders of then outstanding Voting Securities of such corporation. (iv) "Third Party" shall mean a third party who has indicated an intention, or taken steps reasonably calculated, to effect a Change in Control of the Company. 2. TERMINATION FOLLOWING CHANGE IN CONTROL OF THE COMPANY. (a) GENERAL. If a Change in Control of the Company shall have occurred while the Executive is an employee of the Company, the Executive shall be entitled to the compensation provided in Section 3 hereof upon the subsequent termination of the Executive's employment with the Company at any time during the Term (as defined below) of this Agreement, whether such termination is effected by the Executive or by the Company, unless such termination occurs as a result of (i) the Executive's death, (ii) the Executive's Disability (as defined below), (iii) the Executive's Retirement (as defined below), (iv) the termination by the Company of the employment of the Executive for Cause (as defined below), or (v) the termination by the Executive of his employment other than for Good Reason (as defined below). (b) DISABILITY. For purposes of this Agreement, "Disability" shall mean a physical or mental infirmity which has rendered the Executive unable to substantially perform his or her duties (such term to include performance of the Executive's part-time duties if the Executive is employed on a part-time basis) with the Company for a period of 180 consecutive days, unless within 30 days after the date a Notice of Termination (as defined below) is given by the Company after an absence for such period the Executive shall have returned to the full-time performance of such duties. (c) RETIREMENT. For purposes of this Agreement, "Retirement" shall mean termination, whether by the Company or by the Executive, of the Executive's employment with the Company on or after the Executive's early retirement date or normal retirement date, as the case may be, under the Company's retirement policy then generally applicable to its salaried employees or in accordance with any retirement plan or arrangement with respect to the Executive established by the Company with the Executive's consent. (d) CAUSE. For purposes of this Agreement, the Company shall have "Cause" to terminate the Executive's employment only if the Executive (i) has willfully engaged in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company, (ii) has engaged in fraud, misappropriation, embezzlement or any other act or acts of dishonesty resulting or intended to result directly or indirectly in a substantial gain or personal enrichment to the Executive at the expense of the Company, or (iii) has willfully and continually failed substantially to perform his or her duties with the Company (other than a failure resulting from the Executive's incapacity due to physical or mental illness), which failure has continued for a period of at least 30 days after a written notice of demand for substantial performance has been delivered to the Executive specifying in reasonable detail the manner in which the Executive has failed to substantially perform. Notwithstanding the foregoing, the Executive shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to the Executive a copy of a resolution (x) duly adopted by three-quarters (3/4) of the entire membership of the Committee, or of the Board, at a meeting called and held for such purpose after reasonable notice to the Executive and an opportunity for the Executive, together with the Executive's counsel, to be heard before the Committee or the Board, as the case may be, and (y) finding that in the good faith opinion of the Committee or the Board, as the case may be, the Executive was guilty of conduct described in the first sentence of this Section 2(d) and specifying the particulars of such conduct in detail. For purposes of this provision, no act or failure to act, on the part of the Executive, shall be considered "willful" unless it is done, or omitted to be done, by the Executive in bad faith or 3 without reasonable belief that the Executive's action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board, or, for any Executive other than the Chief Executive Officer of the Company, upon the instructions of the Chief Executive Officer of the Company, or based upon the advice of counsel for the Company, shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Company. (e) GOOD REASON. For purposes of this Agreement, "Good Reason" shall mean the occurrence after a Change in Control of the Company of any of the following without the Executive's express written consent. (i) The assignment to the Executive by the Company of duties or responsibilities inconsistent in some material respect with the Executive's title, position, duties, responsibilities and status with the Company immediately prior to a Change in Control of the Company, or a change in the Executive's titles or offices with the Company from those held by the Executive immediately prior to a Change in Control of the Company, excluding for these purposes an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive, or any removal of the Executive from or any failure to reelect or reappoint the Executive to any of such positions except in connection with the termination of the Executive's employment as a result of the Executive's death, Disability or Retirement, by the Company for Cause or by the Executive other than for Good Reason; (ii) Any reduction by the Company in the Executive's base salary as in effect on the date hereof or as such base salary may be increased from time to time during the Term of this Agreement or any failure to pay the Executive any compensation or benefits to which he is entitled within five days of the date due; (iii) Any failure by the Company either to continue in effect any benefit plan or arrangement (including, without limitation, the Company's Employees Stock Purchase Plan, Section 401(k) plan, Retirement Plan for Employees, Retirement Benefit Restoration Plan, or substitute plans adopted by the Company prior to a Change in Control of the Company, group life insurance plan and medical, dental, accident and disability plans) in which the Executive shall be participating at the time of a Change in Control of the Company or to provide other plans or arrangements providing the Executive with substantially similar benefits, or the taking by the Company of any action which would directly or indirectly materially adversely affect the Executive's participation in or materially reduce the Executive's benefits under any such benefit plan or arrangement or deprive the Executive of any material fringe benefit enjoyed by the Executive at the time of a Change in Control of the Company. (iv) Any failure by the Company either to continue in effect any incentive or compensation plan or arrangement (including, without limitation, the Company's Incentive Compensation Plan and Employee Stock Option Plan, or substitute plans adopted by the Company prior to a Change in Control of the Company) in which the Executive shall be participating at the time of a Change in Control of the Company, or to provide other plans or arrangements providing the Executive with substantially similar benefit levels and/or reward opportunities, or the taking by the Company of any action which would directly or indirectly materially adversely affect the Executive's participation (including the level of the Executive's participation relative to other participants and the terms of benefit levels and/or reward opportunities) or materially reduce the Executive's benefits under any such plan or arrangement; (v) Any relocation of the Executive's base of employment to a location more than 20 miles away from the location at which the Executive performed the Executive's duties of employment prior to a Change in Control of the Company, except for required travel by the Executive on business of the Company to an extent substantially consistent with the Executive's business travel obligations at the time of a Change in Control of the Company; 4 (vi) Any failure by the Company to provide the Executive with the number of paid vacation days per year to which the Executive is entitled at the time of a Change in Control of the Company; (vii) Any material breach by the Company of any provision of this Agreement; (viii) Any failure by the Company to obtain from any successor to the Company a satisfactory agreement to assume and perform this Agreement, as contemplated by Section 8(a) hereof; (ix) The insolvency or the filing (by any party, including the Company) of a petition for bankruptcy of the Company, which petition is not dismissed within sixty days; and (x) Any purported termination of the Executive's employment by the Company, other than as a result of the Executive's death, which is not effected pursuant to a Notice of Termination satisfying the requirements of Section 2(f) hereof (and, if applicable, Section 2(d) hereof). Any event or condition described in subsections (i) through (x) above which occurs prior to a Change in Control of the Company but which the Executive reasonably demonstrates (A) was at the request of a Third Party, or (B) otherwise arose in connection with, or in anticipation of, a Change in Control of the Company, shall constitute Good Reason for purposes of this Agreement, notwithstanding that it occurred prior to the Change in Control of the Company. (f) NOTICE OF TERMINATION. Any purported termination of the Executive's employment with the Company other than as a result of the Executive's death shall be communicated by a Notice of Termination to the Executive, if such termination is by the Company, or to the Company, if such termination is by the Executive. For purposes of this Agreement, "Notice of Termination" shall mean a written notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated. For purposes of this Agreement, no purported termination of the Executive's employment with the Company other than as a result of the Executive's death shall be effective without such a Notice of Termination having been given. (g) DATE OF TERMINATION. For purposes of this Agreement, "Date of Termination" shall mean: (i) if the Executive's employment by the Company is terminated by the Company for Disability, the thirtieth day after the date on which the Notice of Termination is given, provided that the Executive shall not have returned to the full-time performance of the Executive's duties of employment during such 30-day period; (ii) if the Executive's employment by the Company is terminated by the Executive for Good Reason, such date as shall be specified in the Notice of Termination (which date shall not be fewer than 20 nor more than 60 days after the date on which the Notice of Termination is given); or (iii) if the Executive's employment by the Company is terminated for any other reason, the twentieth day after the date on which the Notice of Termination is given. 3. COMPENSATION UPON TERMINATION AFTER A CHANGE IN CONTROL OF THE COMPANY. (a) If after a Change in Control of the Company the Executive's employment by the Company shall terminate at any time during the Term of this Agreement for any reason other than (a) the Executive's death, (b) the Executive's Disability, (c) the Executive's Retirement, (d) the termination by the Company of the Executive's employment for Cause, or (e) the termination by the Executive of his employment other than for Good Reason, then not later than the fifth business day following the Date of Termination, the Company shall (subject only to any applicable payroll and other taxes required to be withheld) pay or cause to be paid to the Executive a lump sum cash payment (the "Severance Payment") equal to three times the greater of (i) the sum of the salary and cash bonus payable to the Executive for the last full calendar year preceding the Severance Payment or (ii) the sum of the Executive's annualized salary and the maximum cash bonus the Executive could have earned for the then current calendar year. 5 (b) THREE YEARS OF LIFE INSURANCE AND HEALTH PLAN COVERAGE. The coverage described in this subsection (b) shall be provided for a "Continuation Period" beginning on the Date of Termination and ending on the earlier of (1) the third anniversary of the Date of Termination or (2) the date of the Executive's death. During the Continuation Period, the Executive (and, where applicable, the Executive's dependents) shall be entitled to continue participation in the group term life insurance plan and in the health care plan for Executives maintained by the Company as if the Executive were still an Executive of the Company. The coverage provided under this subsection (b) shall run concurrently with and shall be offset against any continuation coverage under Part 6 of Title I of the Employee Retirement Income Security Act of 1974, as amended. Where applicable, the Executive's compensation for purposes of such plans shall be deemed to be equal to the Executive's compensation (as defined in such plans) in effect on the Date of Termination. To the extent that the Company finds it undesirable to cover the Executive under the group life insurance and health plans of the Company, the Company shall provide the Executive (at its own expense) with the same level of coverage under individual policies. (c) ACCELERATED VESTING. All stock and stock options issued or granted to the Executive shall vest according to the provisions of the Knight-Ridder, Inc. Employee Stock Option Plan. 4. ADDITIONAL PAYMENTS. (a) In the event that any payment or benefit (within the meaning of Section 280G(b)(2) of the Internal Revenue Code of 1986, as amended (the "Code")), to the Executive or for his or her benefit paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise in connection with, or arising out of, his or her employment (a "Payment" or "Payments"), would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Executive will be entitled to receive from the Company an additional payment (a "Gross-Up Payment") in an amount such that after payment by the Executive of all taxes (including any interest or penalties, other than interest and penalties imposed by reason of the Executive's failure to file timely a tax return or pay taxes shown due on his or her return), imposed with respect to such Gross-Up Payment, including any Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. (b) An initial determination as to whether a Gross-Up Payment is required pursuant to this Agreement and the amount of such Gross-Up Payment shall be made at the Company's expense by an accounting firm selected by the Company and reasonably acceptable to the Executive which is designated as one of the five largest accounting firms in the United States (the "Accounting Firm"). The Accounting Firm shall provide its determination (the "Determination"), together with detailed supporting calculations and documentation, to the Company and the Executive within five days of the Date of Termination if applicable, or such other time as requested by the Company or by the Executive (provided the Executive reasonably believes that any of the Payments may be subject to the Excise Tax) and if the Accounting Firm determines that no Excise Tax is payable by the Executive with respect to a Payment or Payments, it shall furnish the Executive with an opinion reasonably acceptable to the Executive that no Excise Tax will be imposed with respect to any such Payment or Payments. Within ten days of the delivery of the Determination to the Executive, the Executive shall have the right to dispute the Determination (the "Dispute"). The Gross-Up Payment, if any, as determined pursuant to this Section 4(b) shall be paid by the Company to the Executive within five days of the receipt of the Determination. The existence of the Dispute shall not in any way affect the Executive's right to receive the Gross-Up Payment in accordance with the Determination. If there is no Dispute, the Determination shall be binding, final and conclusive upon the Company and the Executive subject to the application of Section 4(c) below. (c) As a result of the uncertainty in the application of Sections 4999 and 280G of the Code, it is possible that a Gross-Up Payment (or a portion thereof) will be paid which should not have been paid (an "Excess Payment") or a Gross-Up Payment (or a portion thereof) which should have been paid will not have been paid (an "Underpayment"). An Underpayment shall be deemed to have occurred (i) upon notice (formal or informal) to the Executive from any governmental taxing authority that the Executive's tax liability (whether in respect of the Executive's current taxable year or in respect of any prior taxable year) may be increased by reason of the imposition of the Excise 6 Tax on a Payment or Payments with respect to which the Company has failed to make a sufficient Gross-Up Payment, (ii) upon a determination by a court, (iii) by reason of determination by the Company (which shall include the position taken by the Company, together with its consolidated group, on its federal income tax return) or (iv) upon the resolution of the Dispute to the Executive's satisfaction. If an Underpayment occurs, the Executive shall promptly notify the Company and the Company shall promptly, but in any event, at least five days prior to the date on which the applicable government taxing authority has requested payment, pay to the Executive an additional Gross-Up Payment equal to the amount of the Underpayment plus any interest and penalties (other than interest and penalties imposed by reason of the Executive's failure to file timely a tax return or pay taxes shown due on the Executive's return) imposed on the Underpayment. An Excess Payment shall be deemed to have occurred upon a Final Determination (as hereinafter defined) that the Excise Tax shall not be imposed upon a Payment or Payments (or portion thereof) with respect to which the Executive had previously received a Gross-Up Payment. A Final Determination shall be deemed to have occurred when the Executive has received from the applicable government taxing authority a refund of taxes or other reduction in the Executive's tax liability by reason of the Excise Payment and upon either (x) the date a determination is made by, or an agreement is entered into with, the applicable governmental taxing authority which finally and conclusively binds the Executive and such taxing authority, or in the event that a claim is brought before a court of competent jurisdiction, the date upon which a final determination has been made by such court and either all appeals have been taken and finally resolved or the time for all appeals has expired or (y) the statute of limitations with respect to the Executive's applicable tax return has expired. If an Excess Payment is determined to have been made, the amount of the Excess Payment shall be treated as a loan by the Company to the Executive and the Executive shall pay to the Company on demand (but not less than 10 days after the determination of such Excess Payment and written notice has been delivered to the Executive) the amount of the Excess Payment plus interest at an annual rate equal to the Applicable Federal Rate provided for in Section 1274(d) of the Code from the date the Gross-Up Payment (to which the Excess Payment relates) was paid to the Executive until the date of repayment to the Company. (d) Notwithstanding anything contained in this Agreement to the contrary, in the event that, according to the Determination, an Excise Tax will be imposed on any Payment or Payments, the Company shall pay to the applicable government taxing authorities as Excise Tax withholding, the amount of the Excise Tax that the Company has actually withheld from the Payment or Payments. 5. NO MITIGATION; OBLIGATIONS ABSOLUTE; NO EFFECT ON OTHER RIGHTS (a) The Executive shall not be required to mitigate the amount of any payment provided for in Section 3 hereof by seeking other employment or otherwise; nor shall the amount of any payment or benefits provided for in Section 3 hereof be reduced by any compensation or benefits earned by the Executive as the result of employment by another employer, or by retirement benefits, after the effective date of termination of the Executive's employment with the Company or otherwise. (b) The obligations of the Company to make the payments to the Executive, and to make the arrangements provided for herein shall be absolute and unconditional and shall not be reduced by any circumstances, including without limitation any setoff, counterclaim, recoupment, defense or other right which the Company may have against the Executive or any third party at any time. (c) The provisions of this Agreement, and any payment provided for herein, shall not supersede or in any way limit the rights, benefits, duties or obligations which the Executive may now or in the future have under any benefit, incentive or other plan or arrangement of the Company or any other agreement with the Company. (d) Except as required by law, no right to receive payments under this Agreement shall be subject to anticipation, commutation, alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation or to execution, attachment, levy, or similar process or assignment by operation of law, and any attempt, voluntary or involuntary, to effect any such action shall be null, void and of no effect. 7 6. NOT AN EMPLOYMENT AGREEMENT. This Agreement is not, and nothing herein shall be deemed to create, a contract of employment between the Executive and the Company. The Company may terminate the employment of the Executive by the Company at any time, subject to the terms of any employment agreement between the Company and the Executive that may then be in effect. 7. TERM OF AGREEMENT. The term of this Agreement (the "Term") shall commence on the date hereof and shall continue through the third following December 31st; PROVIDED, HOWEVER, that commencing on the first December 31st after the date hereof, and on each anniversary of such first December 31st (such date and each anniversary thereof shall be hereinafter referred to as the "Renewal Date"), unless previously terminated, the Agreement shall be automatically extended so as to terminate three years from such Renewal Date, unless at 60 days prior to the Renewal Date the Company shall give Notice to the Executive that the Term will not be extended. Notwithstanding any such notice not to extend the Term, if a Change in Control of the Company shall have occurred during the original or extended Term of this Agreement, this Agreement shall continue in effect for a period of not less than 36 months beyond the date of such Change in Control of the Company. 8. SUCCESSORS; BINDING AGREEMENT; ASSIGNMENT (a) This Agreement shall be binding upon and shall inure to the benefit of the Company, its successors and assigns. Neither this Agreement nor any right or interest hereunder shall be assignable or transferable by the Company other than to a successor. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company, by agreement in form and substance reasonably satisfactory to the Executive, expressly, absolutely and unconditionally to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean (i) the Company as hereinbefore defined, and (ii) any successor to all or substantially all of the Company's business or assets which executes and delivers an agreement provided for in this Section 8(a) or which otherwise become bound by all the terms and provisions of this Agreement by operation of law. (b) This Agreement shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive should die while any amount would be payable to the Executive hereunder if the Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Executive's devisee, legatee or other designee or, if there be no such designee, to the Executive's estate. Neither this Agreement nor any right or interest arising hereunder may be assigned or transferred by the Executive or his or her heirs, beneficiaries or legal representatives. In the event of the Executive's death or a judicial determination of his or her incompetence, reference in this Agreement to the Executive shall be deemed, where appropriate, to refer to the Executive's executor, heirs or other legal representative. 9. NOTICES. For purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed by United States certified or registered mail, return receipt requested, postage prepaid, addressed to (i) the respective addresses set forth in this Agreement, provided that all notices to the Company shall be directed to the attention of the Committee with a copy directed to the Secretary of the Company, or (ii) such other address for a party as such party may have furnished to the other in writing in accordance with this Section 9; except that notices of change of address shall be effective only upon receipt. 10. CONFIDENTIALITY. The Executive shall retain in confidence any and all confidential information concerning the Company or any of its Subsidiaries and their respective businesses which is now or hereafter becomes known to the Executive, except information (i) ascertainable or obtained from public information, (ii) received by the Executive at any time after the Executive's employment by the Company shall have terminated from a third party not employed by or otherwise affiliated with the Company or under an obligation to the Company to maintain the confidentiality of that information, or (iii) which is or becomes known to the public by any means other than a breach of this Section 10. 8 11. SUBSIDIARY. For purposes of this Agreement, "Subsidiary" shall mean any corporation, partnership or other entity, at least 50% of the outstanding voting power for the election of directors or other management is then owned, directly or indirectly, by the Company or another Subsidiary of the Company. 12. MODIFICATION; WAIVER OR DISCHARGE. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in a writing signed by the Executive and the Company. No waiver by either party at any time of any breach by the other party of, or of compliance by the other party with, any condition or provision of this Agreement to be performed or complied with by such other party shall be deemed a waiver of any similar or dissimilar provision or condition of this Agreement or any other breach of or failure to comply with the same condition or provision at the same time or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. 13. GOVERNING LAW. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Florida without giving effect to its conflict of laws rules. 14. HEADINGS OF NO EFFECT. The Section headings contained in this Agreement are included solely for convenience of reference and shall not in any way affect the meaning or interpretation of any of the provisions of this Agreement. 15. FEES AND EXPENSES. The Company shall pay all legal fees and related expenses (including the costs of experts, evidence and counsel) incurred by the Executive as they become due as a result of (i) termination of the Executive's employment after a Change in Control of the Company (including all such fees and expenses, if any, incurred in contesting or disputing any such termination of employment), (ii) the Executive seeking to obtain or enforce any right or benefit provided by (x) this Agreement (including, but not limited to, any such fees and expenses incurred in connection with the dispute) or (y) any other plan or arrangement maintained by the Company under which the Executive is or may be entitled to receive benefits, and (iii) the Executive's hearing before the Board as contemplated by the definition of Cause. 16. DISPUTE CONCERNING TERMINATION. (a) If within 20 days after any Notice of Termination is given or, if later, prior to the Date of Termination (as determined without regard to this Section 16(a)), the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, the Date of Termination shall be the date on which the dispute is finally resolved, either by mutual written agreement of the parties or by a final judgment, order or decree of a court of competent jurisdiction (which is not appealable or with respect to which the time of appeal therefrom has expired and no appeal has been perfected); PROVIDED that the Date of Termination shall be extended by a notice of dispute only if such notice is given in good faith and the party giving such notice pursues the resolution of such dispute with reasonable diligence. (b) In the event of any dispute between the Company and the Executive with respect to the subject matter of this Agreement and the enforcement of rights hereunder, the Executive may, in his or her sole discretion by notice to the Company, require such dispute or difference to be submitted to arbitration. The arbitrator or arbitrators shall be selected by agreement of the parties or, if they cannot agree on an arbitrator or arbitrators within 30 days after the Executive has notified the Company of the submission of the question for settlement by arbitration, then the arbitrator or arbitrators shall be selected by the American Arbitration Association (the "AAA") in San Jose, California, upon the application of the Executive. The determination reached in such arbitration shall be final and binding on both parties without any right of appeal or further dispute. Execution of the determination by such arbitrator may be sought in any court of competent jurisdiction. The arbitrators shall not be bound by judicial formalities and may abstain from following the strict rules of evidence and shall interpret this Agreement as an honorable engagement and not merely as a legal obligation. Unless otherwise agreed by the parties, any such arbitration shall take place in San Jose, California, and shall be conducted in accordance with the Rules of AAA. The Company shall pay all costs of the arbitration. 9 (c) If a purported termination occurs following a Change in Control of the Company and during the Term of this Agreement, and such termination is disputed in accordance with Section 16(a) , the Company shall continue to pay the Executive the full compensation in effect when the notice giving rise to the dispute was given (including, but not limited to, salary) and continue the Executive as a participant in all compensation, benefit and insurance plans in which the Executive was participating when the notice giving rise to the dispute was given, until the dispute is finally resolved in accordance with Section 16(a). Amounts paid under this Section 16(c) are in addition to all other amounts due under this Agreement and shall not be offset against or reduce any other amounts due under this Agreement. 17. SEVERABILITY. If any one or more of the provisions of this Agreement shall be held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions of this Agreement shall not be affected thereby. To the extent permitted by applicable law, each party hereto waives any provision of law which renders any provision of this Agreement invalid, illegal or unenforceable in any respect. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. KNIGHT-RIDDER, INC. By: /s/ P. ANTHONY RIDDER ------------------------------------- P. Anthony Ridder Chairman and Chief Executive Officer ------------------------------------- [Name of Executive] [Address] 10
SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS KNIGHT-RIDDER, INC. AND SUBSIDIARIES (IN THOUSANDS OF DOLLARS) COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E - ---------- ---------- --------------------------- ---------- ---------- ADDITIONS -------------------------- BALANCE AT CHARGED CHARGED BEGINNING TO COSTS TO BALANCE DESCRIPTION OF AND OTHER AT END PERIOD EXPENSES ACCOUNTS DEDUCTIONS OF PERIOD ---------- ---------- ---------- ---------- ---------- YEAR ENDED DECEMBER 31, 2000: RESERVES AND ALLOWANCES DEDUCTED FROM ASSET ACCOUNT: ACCOUNTS RECEIVABLE ALLOWANCES $ 15,917 $ 27,070 $ 22,749 (2) $ 20,238 ---------- ---------- ---------- ---------- ---------- $ 15,917 $ 27,070 $ 0 $ 22,749 $ 20,238 ========== ========== ========== ========== ========== YEAR ENDED DECEMBER 26, 1999: RESERVES AND ALLOWANCES DEDUCTED FROM ASSET ACCOUNT: ACCOUNTS RECEIVABLE ALLOWANCES $ 15,738 $ 25,135 $ 24,956 (2) $ 15,917 ---------- ---------- ---------- ---------- ---------- $ 15,738 $ 25,135 $ 0 $ 24,956 $ 15,917 ========== ========== ========== ========== ========== YEAR ENDED DECEMBER 27, 1998: RESERVES AND ALLOWANCES DEDUCTED FROM ASSET ACCOUNT: ACCOUNTS RECEIVABLE ALLOWANCES $ 14,963 $ 20,854 (9)(1) $ 20,070 (2) $ 15,738 ---------- ---------- ---------- ---------- ---------- $ 14,963 $ 20,854 ($9) $ 20,070 $ 15,738 ========== ========== ========== ========== ==========
(1) Represents amounts from the former BIS division included under "Income (loss) from discontinued BIS operations" in the Consolidated Statement of Income. (2) Represents uncollectible accounts written-off, net of recoveries, and dispositions of subsidiaries' balances. EX-11 6 file003.txt EXHIBIT 11 EXHIBIT 11
COMPUTATION OF PER SHARE EARNINGS (IN THOUSANDS, EXCEPT PER SHARE DATA) Year Ended - ---------------------------------------------------------------------------------------- Dec. 31, Dec. 26, Dec. 27, 2000 1999 1998 -------- -------- -------- Income from continuing operations $314,363 $339,939 $305,631 Less dividends on preferred stock 11,351 14,075 14,040 -------- -------- -------- Income from continuing operations attributable to common stock $303,012 $325,864 $291,591 ======== ======== ======== Average shares outstanding (basic) 75,370 80,025 78,882 -------- -------- -------- Effect of dilutive securities: Convertible preferred stock 12,597 15,948 17,549 Stock options 1,138 1,487 1,745 -------- -------- -------- Average shares outstanding (diluted) 89,105 97,460 98,176 ======== ======== ======== Earnings per share from continuing operations (basic) $ 4.02 $ 4.07 $ 3.70 ======== ======== ======== Earnings per share from continuing operations (diluted) $ 3.53 $ 3.49 $ 3.11 ======== ======== ========
EX-12 7 file005.txt EXHIBIT 12
COMPUTATION OF EARNINGS TO FIXED CHARGES RATIO Exhibit 12 FROM CONTINUING OPERATIONS (IN THOUSANDS OF DOLLARS, EXCEPT RATIO DATA) YEAR ENDED ------------------------------------------------------------------------ December 31, December 26, December 27, December 28, December 29, 2000 1999 1998 1997 1996 ------------ ------------ ------------ ------------ ------------ FIXED CHARGES COMPUTATION INTEREST EXPENSE: NET INTEREST EXPENSE $ 114,422 $ 92,247 $ 101,420 $ 97,286 $ 66,740 PLUS CAPITALIZED INTEREST 2,230 5,197 4,516 5,376 6,397 ------------ ------------ ------------ ------------ ------------ GROSS INTEREST EXPENSE 116,652 97,444 105,936 102,662 73,137 PROPORTIONATE SHARE OF INTEREST EXPENSE OF 50% OWNED PERSONS 1,948 17,941 INTEREST COMPONENT OF RENT EXPENSE 8,774 8,229 7,688 6,671 5,787 ------------ ------------ ------------ ------------ ------------ TOTAL FIXED CHARGES $ 125,426 $ 105,673 $ 113,624 $ 111,281 $ 96,865 ============ ============ ============ ============ ============ EARNINGS COMPUTATION PRETAX EARNINGS $ 525,290 $ 568,015 $ 507,916 $ 693,852 $ 310,209 ADD: FIXED CHARGES 125,426 105,673 113,624 111,281 96,865 LESS: CAPITALIZED INTEREST (2,230) (5,197) (4,516) (5,376) (6,397) LESS: DISTRIBUTIONS IN EXCESS OF (LESS THAN) EARNINGS OF INVESTEES 55,315 (8,934) (16,693) (7,675) (12,962) ------------ ------------ ------------ ------------ ------------ TOTAL EARNINGS AS ADJUSTED $ 703,801 $ 659,557 $ 600,331 $ 792,082 $ 387,715 ============ ============ ============ ============ ============ RATIO OF EARNINGS TO FIXED CHARGES 5.6:1 6.2:1 5.3:1 7.1:1 4.0:1 ============ ============ ============ ============ ============
EX-21 8 file004.txt EXHIBIT 21 EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT
COMPANY NAME STATE COUNTRY OF INCORPORATION Knight-Ridder, Inc Florida Aberdeen News Company Delaware Aboard Publishing, Inc. Florida Bay Area Media, Inc. Delaware The Beacon Journal Publishing Company Ohio The Bradenton Herald, Inc. Florida Circom Corporation Pennsylvania Contra Costa Newspapers, Inc. California Cypress Media, Inc. New York Cypress Media, LLC (1) Delaware Mail Advertising Corporation of Abilene Texas Belleville News-Democrat * Kansas City Star * Keltatim Publishing Company, Inc. Kansas HLB Newspapers, Inc. and Subs * Belton Publishing Company, Inc. Missouri Cass County Publishing Company, Inc. Missouri Lee's Summit Journal, Inc. Missouri Nor-Tex Publishing, Inc. Texas Wilkes-Barre Times Leader * Quad County Publishing, Inc. (1) Illinois Star-Telegram Operating, Ltd. (1) (partnership) Texas Ft. Worth Star-Telegram * Dagren, Inc. Florida Detroit Free Press, Incorporated Michigan Detroit Newspaper Agency (partnership) Michigan Dialog Information Europe, Inc. California Double A Publishing, Inc. Florida Gables Publishing Company, Inc. Florida Grand Forks Herald, Incorporated Delaware Gulf Publishing Company, Inn. Mississippi Herald Custom Publishing, Inc. Florida The Hills Newspapers, Inc. California KR Net Ventures, Inc. Delaware KR Newsprint Company Florida KRI Properties, Inc. Florida KR Publication Services, Inc. Delaware KR Video, Inc. Delaware Keynoter Publishing Company, Inc. Florida Knight News Services, Inc. Michigan Knight-Ridder Tribune Information Services (partnership) District of Columbia The Knight Publishing Co. Delaware Knight-Ridder Business Information Svcs, Inc. Delaware KnightRidder.com, Inc. Delaware Knight-Ridder Financial/Japan, Inc. Delaware Knight-Ridder International, Inc. Delaware KR U.S.A., Inc. Delaware Knight-Ridder Investment Company Delaware Seattle Times Company - 49% Interest Delaware
COMPANY NAME STATE COUNTRY OF INCORPORATION Knight-Ridder Leasing Company Florida Knight-Ridder Newspaper Sales, Inc. New York Knight-Ridder Shared Services, Inc. Florida Knight-Ridder Resources, Inc. Florida Knight Ridder Ventures, LLC (LLC) Delaware Lexington Herald-Leader Co.(2) Kentucky Lexington Press Inc. (2) Kentucky LEXHL Ltd. Partnership (2) (partnership) Kentucky MHPC International, Inc. Florida The Macon Telegraph Publishing Company Georgia MediaStream, Inc. Delaware The Miami Herald Publishing Company * Monterey Newspapers, Inc. Colorado The Monterey County Herald * San Luis Obispo Tribune * News Publishing Company Indiana Fort Wayne Newspapers, Inc. Indiana Fort Wayne Newspapers Agency (partnership) Indiana Nittany Printing and Publishing Company Pennsylvania Northwest Publications, Inc. Delaware Duluth News-Tribune & Herald * Saint Paul Pioneer Press * The Observer Transportation Company North Carolina Philadelphia Media Corporation Pennsylvania Philadelphia Newspapers, Inc. Pennsylvania Consumer and Community Publishing, Inc. Delaware ITHR, Inc. Delaware The Professional Exchange, LLC Pennsylvania Marketplace Advertising, Inc. Pennsylvania Philly Tech Pennsylvania Promedia Publishing Company Pennsylvania Philadelphia Online, Inc. Delaware The R.W. Page Corporation Georgia Richwood, Inc. Florida Ridder Publications, Inc. Delaware KR Land Holding Corporation Delaware Runways Pub., Inc. Delaware San Jose Mercury News, Inc. California Silicon Valley D.A.T.A, Inc. California The State-Record Company, Inc. Delaware Sun Publishing Company, Inc. South Carolina Tallahassee Democrat, Inc. Florida Tribune Newsprint Company Utah Twin Cities Newspaper Services, Inc. Minnesota Warner Robins Shopper, Inc. f/k/a Newberry Publishing Company, Inc. South Carolina The Warner Robins Daily Sun f/k/a Drinnon, Inc. Georgia Wichita Eagle and Beacon Publishing Company, Inc. Kansas
(1) Star-Telegram Operating, Ltd. is owned 90% by Quad County Publishing, Inc. and 10% by Cypress Media, LLC (2) LEXHL Ltd. Partnership is owned 99% by Lexington Herald-Leader Co. and 1% by Lexington Press, Inc. * indicates that the company name listed is a division, not a legal entity. EX-23 9 zkri-ex23.txt EXHIBIT 23 EXHIBIT 23 Consent of Independent Auditors We consent to the incorporation by reference in Registration Statement No. 33-11021 on Form S-3 dated December 22, 1986, in Registration Statement No. 33-28010 on Form S-3 dated April 7, 1989, in Registration Statement No. 33-31747 on Form S-8 dated October 30, 1989, in Registration Statement No. 33-69206 on Form S-8 dated May 18, 1993, in Registration Statement No.333-37603 on Form S-3 dated October 9, 1997, in Registration Statement No. 333-68171 on Form S-8 dated December 1, 1998, in the Registration Statement No. 333-79025 on Form S-8 dated March 17, 2000, in the Registration Statement No. 33-80163 on Form S-8 dated June 7, 1999 of Knight-Ridder, Inc. and in the related Prospectuses, of our report dated January 24, 2001, with respect to the consolidated financial statements and schedule of Knight-Ridder, Inc. included in this Annual Report (Form 10-K) for the year ended December 31, 2000. /s/ Ernst & Young LLP San Jose, California March 22, 2001 EX-24 10 file006.txt EXHIBIT 24 EXHIBIT 24 POWER OF ATTORNEY The undersigned member of the Board of Directors of Knight-Ridder, Inc., does hereby constitute and appoint Jean Mordo, Gary R. Effren, Gordon Yamate and Polk Laffoon, and each of them, his/her true and lawful attorney-in-fact and agents, with full power of substitution and resubstitution for him/her in his/her name, place and stead in any and all capacities to sign any and all Reports on Form 10-K (Annual Report pursuant to the Securities Exchange Act of 1934) and any amendments thereto and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission granting unto said attorneys-in-fact and agents and each of them full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or the undersigned substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEROF, the undersigned has signed his/her name hereto on the date set forth opposite his or her name. March 19, 2001 /s/ JAMES I. CASH, JR.* --------------------------------------- James I. Cash, Jr. March 19, 2001 /s/ JOAN RIDDER CHALLINOR * --------------------------------------- Joan Ridder Challinor March 19, 2001 /s/ KATHLEEN FOLEY FELDSTEIN* --------------------------------------- Kathleen Foley Feldstein March 19, 2001 /s/ THOMAS P. GERRITY* --------------------------------------- Thomas P. Gerrity March 19, 2001 /s/ BARBARA BARNES HAUPTFUHRER* --------------------------------------- Barbara Barnes Hauptfuhrer March 19, 2001 /s/ M. KENNETH OSHMAN* --------------------------------------- M. Kenneth Oshman March 19, 2001 /s/ P. ANTHONY RIDDER* --------------------------------------- P. Anthony Ridder March 19, 2001 /s/ RANDALL L. TOBIAS* --------------------------------------- Randall L. Tobias March 19, 2001 /s/ GONZALO F. VALDES-FAULI* --------------------------------------- Gonzalo F. Valdes-Fauli March 19, 2001 /s/ JOHN L. WEINBERG* --------------------------------------- John L. Weinberg -----END PRIVACY-ENHANCED MESSAGE-----