-----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, Sr80I4Zy8yEduMGrsxEu3sFPsb/1vUqcaNmkogpknjObm7iG0jHIdUnJCxR+WC1l v2q9pAiHlFSZOd79yuTYgA== 0001019056-99-000457.txt : 19990812 0001019056-99-000457.hdr.sgml : 19990812 ACCESSION NUMBER: 0001019056-99-000457 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990627 FILED AS OF DATE: 19990811 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-Q SEC ACT: SEC FILE NUMBER: 001-07553 FILM NUMBER: 99684055 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-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: JUNE 27, 1999 ------------- Commission file number: 1-7553 KNIGHT-RIDDER, INC. --------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) FLORIDA 38-0723657 ------------------------------- ------------------------------------ (State of Incorporation) (I.R.S. Employer Identification No.) 50 W. SAN FERNANDO ST. SUITE 1500, SAN JOSE, CA 95113 --------------------------------------------------------------------------- (Address of principal executive offices) (408) 938-7700 --------------------------------------------------------------------------- (Registrant's telephone number, including area code) --------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date. Common Stock, $.02 1/12 Par Value 81,023,095 shares as of July 30, 1999. Table of Contents for Form 10-Q Page ---- PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Consolidated Balance Sheet 3-4 Consolidated Statement of Income 5 Consolidated Statement of Cash Flows 6-7 Notes to Consolidated Financial Statements 8-10 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 11-16 Item 3. Quantitative and Qualitative Disclosures about Market Risk 16 PART II. OTHER INFORMATION Item 1. Legal Proceedings 17 Item 4. Submission of Matters to a Vote of Security Holders 17-18 Item 6. Exhibits and Reports on Form 8-K 18 SIGNATURE 19 EXHIBIT 20
PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEET (UNAUDITED IN THOUSANDS OF DOLLARS, EXCEPT SHARE DATA) June 27, December 27, June 28, 1999 1998 1998 ------------- ------------- ------------- ASSETS Current Assets Cash, including short-term cash investments of $4,047 in June 1999, $4,159 in December 1998, and $75,237 in June 1998 $ 28,813 $ 26,836 $ 96,554 Accounts receivable, net of allowances of $16,508 in June 1999, $15,738 in December 1998, and $16,124 in June 1998 380,920 386,455 340,210 Inventories 47,494 59,109 62,725 Prepaid expense 4,903 14,078 7,829 Other current assets 37,587 39,213 36,959 ------------- ------------- ------------- Total Current Assets 499,717 525,691 544,277 ------------- ------------- ------------- Investments and Other Assets Equity in unconsolidated companies and joint ventures 202,890 201,120 195,058 Other 199,726 243,586 226,071 ------------- ------------- ------------- Total Investments and Other Assets 402,616 444,706 421,129 ------------- ------------- ------------- Property, Plant and Equipment Land and improvements 94,083 93,781 93,762 Buildings and improvements 486,057 484,367 439,657 Equipment 1,190,948 1,175,044 1,153,546 Construction and equipment installations in progress 111,292 84,559 136,534 ------------- ------------- ------------- 1,882,380 1,837,751 1,823,499 Less accumulated depreciation (812,004) (764,750) (756,242) ------------- ------------- ------------- Net Property, Plant and Equipment 1,070,376 1,073,001 1,067,257 Excess of Cost Over Net Assets Acquired and Other Intangibles Less accumulated amortization of $297,562 in June 1999 $264,001 in December 1998, and $230,487 in June 1998 2,204,186 2,213,699 2,238,822 ------------- ------------- ------------- Total $ 4,176,895 $ 4,257,097 $ 4,271,485 ============= ============= =============
3
CONSOLIDATED BALANCE SHEET (CONT.) (UNAUDITED IN THOUSANDS OF DOLLARS, EXCEPT SHARE DATA) June 27, December 27, June 28, 1999 1998 1998 ------------- ------------- ------------- LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Accounts payable $ 117,963 $ 164,558 $ 194,021 Accrued expenses and other liabilities 125,772 111,088 111,328 Accrued compensation and amounts withheld from employees 105,378 112,827 97,069 Federal and state income taxes 9,494 75,486 Deferred revenue 70,862 67,006 67,021 Short-term borrowings and current portion of long-term debt 99,591 198,277 289,429 ------------- ------------- ------------- Total Current Liabilities 529,060 653,756 834,354 ------------- ------------- ------------- Noncurrent Liabilities Long-term debt 1,245,499 1,329,001 1,247,559 Deferred federal and state income taxes 291,583 293,015 291,883 Postretirement benefits other than pensions 149,888 147,118 152,522 Employment benefits and other noncurrent liabilities 156,102 168,974 161,756 ------------- ------------- ------------- Total Noncurrent Liabilities 1,843,072 1,938,108 1,853,720 ------------- ------------- ------------- Minority Interests in Consolidated Subsidiaries 4,560 2,502 2,377 Commitments and Contingencies (Note 6) Shareholders' Equity Preferred stock, $1.00 par value; shares authorized- 2,000,000; shares issued - 1,654,930 in June 1999, 1,754,930 in December 1998 and June 1998 1,655 1,755 1,755 Common stock, $.02 1/12 par value; shares authorized - 250,000,000; shares issued - 80,047,987 in June 1999, 78,374,195 in December 1998 and 78,843,842 in June 1998 1,668 1,633 1,643 Additional capital 935,185 908,078 911,251 Retained earnings 843,223 735,132 658,922 Accumulated other comprehensive income 20,950 18,738 10,211 Treasury stock, at cost, 44,382 shares in June 1999, 46,667 in December 1998, and 48,973 in June 1998 (2,478) (2,605) (2,748) ------------- ------------- ------------- Total Shareholders' Equity 1,800,203 1,662,731 1,581,034 ------------- ------------- ------------- $ 4,176,895 $ 4,257,097 $ 4,271,485 ============= ============= ============= See "Notes to Consolidated Financial Statements."
4 PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS CONSOLIDATED STATEMENT OF INCOME (UNAUDITED, IN THOUSANDS OF DOLLARS, EXCEPT SHARE DATA)
Quarter Ended Two Quarters Ended Four Quarters Ended ------------------------ ------------------------- ----------------------- June 27, June 28, June 27, June 28, June 27, June 28, 1999 1998 1999 1998 1999 1998 ----------- ----------- ----------- ----------- ----------- ----------- OPERATING REVENUE Advertising Retail $ 266,146 $ 267,382 $ 514,732 $ 507,927 $ 1,096,078 $ 1,083,314 General 81,100 65,353 155,957 129,037 288,751 262,225 Classified 271,720 263,122 533,624 523,877 1,021,502 1,017,569 ----------- ----------- ----------- ----------- ----------- ----------- Total 618,966 595,857 1,204,313 1,160,841 2,406,331 2,363,108 Circulation 145,183 147,647 291,940 296,244 583,225 597,530 Other 45,517 35,788 84,212 66,090 159,653 126,836 ----------- ----------- ----------- ----------- ----------- ----------- Total Operating Revenue 809,666 779,292 1,580,465 1,523,175 3,149,209 3,087,474 OPERATING COSTS Labor and employee benefits 308,493 302,582 613,592 594,499 1,220,074 1,198,138 Newsprint, ink and supplements 121,945 133,973 248,815 264,607 513,362 527,363 Other operating costs 175,244 168,910 341,259 331,278 679,095 670,982 Depreciation and amortization 48,499 46,702 95,652 92,479 191,225 179,797 ----------- ----------- ----------- ----------- ----------- ----------- Total Operating Costs 654,181 652,167 1,299,318 1,282,863 2,603,756 2,576,280 ----------- ----------- ----------- ----------- ----------- ----------- OPERATING INCOME 155,485 127,125 281,147 240,312 545,453 511,194 ----------- ----------- ----------- ----------- ----------- ----------- OTHER INCOME (EXPENSE) Interest expense (24,038) (26,875) (48,802) (54,836) (99,902) (118,841) Interest expense capitalized 1,006 1,251 3,323 2,401 5,438 4,628 Interest income 1,110 1,265 1,540 2,883 2,073 5,602 Equity in earnings of unconsolidated companies and joint ventures 3,960 8,496 8,828 12,835 19,302 19,862 Minority interests in earnings of consolidated subsidiaries (2,860) (2,549) (5,459) (5,030) (11,178) (11,136) Other, net 9,810 4,407 8,910 86,160 11,492 152,014 ----------- ----------- ----------- ----------- ----------- ----------- Total (11,012) (14,005) (31,660) 44,413 (72,775) 52,129 ----------- ----------- ----------- ----------- ----------- ----------- Income before income taxes 144,473 113,120 249,487 284,725 472,678 563,323 Income taxes 57,887 46,195 100,034 116,363 185,956 234,865 ----------- ----------- ----------- ----------- ----------- ----------- Income from continuing operations 86,586 66,925 149,453 168,362 286,722 328,458 Gain on sales of discontinued BIS operations, net of applicable income taxes of $43,752 for the quarter and two quarters ended 1998 and applicable income taxes of $52,117 for the four quarters ended 1998 60,042 60,042 75,303 Income/(loss) from discontinued BIS operations, net of applicable income taxes/(benefits) of $133 for the two quarters ended 1998 and $1,483 for the four quarters ended 1998 184 1,810 ----------- ----------- ----------- ----------- ----------- ----------- Net income $ 86,586 $ 126,967 $ 149,453 $ 228,588 $ 286,722 $ 405,571 =========== =========== =========== =========== =========== =========== EARNINGS PER SHARE Basic: Income from continuing operations attributable to common stock (Note 5) $ 1.04 $ 0.81 $ 1.80 $ 2.04 $ 3.46 $ 3.82 Net gain on sale of discontinued BIS operations 0.76 0.76 0.92 Income from discontinued BIS operations, net 0.02 ----------- ----------- ----------- ----------- ----------- ----------- Net income attributable to common stock (Note 5) $ 1.04 $ 1.57 $ 1.80 $ 2.80 $ 3.46 $ 4.76 =========== =========== =========== =========== =========== =========== Diluted: Income from continuing operations $ 0.88 $ 0.68 $ 1.53 $ 1.70 $ 2.94 $ 3.22 Net gain on sale of discontinued BIS operations 0.61 0.61 0.74 Income from discontinued BIS operations, net 0.02 ----------- ----------- ----------- ----------- ----------- ----------- Net income $ 0.88 $ 1.29 $ 1.53 $ 2.31 $ 2.94 $ 3.98 =========== =========== =========== =========== =========== =========== DIVIDENDS DECLARED PER COMMON SHARE $ 0.23 $ 0.20 $ 0.43 $ 0.40 $ 0.83 $ 0.80 =========== =========== =========== =========== =========== =========== AVERAGE SHARES OUTSTANDING (000s) Basic 79,000 78,600 78,713 79,275 78,601 82,253 =========== =========== =========== =========== =========== =========== Diluted 97,847 98,159 97,583 98,859 97,538 101,879 =========== =========== =========== =========== =========== ===========
See "Notes to Consolidated Financial Statements." 5
Consolidated Statement of Cash Flows (Unaudited, in thousands of dollars) Quarter Ended Two Quarters Ended Four Quarters Ended ------------------- ----------------------- ----------------------- June 27, June 28, June 27, June 28, June 27, June 28, 1999 1998 1999 1998 1999 1998 --------- --------- ----------- ----------- ----------- ----------- CASH PROVIDED BY (REQUIRED FOR) OPERATING ACTIVITIES Net income $ 86,586 $ 126,967 $ 149,453 $ 228,588 $ 286,722 $ 405,571 Noncash items deducted from (included in) income: Gains on sale of investee/subsidiaries (75,251) (136,576) Net gain on sale of discontinued BIS operations (60,042) (60,042) (75,303) Depreciation 28,671 27,114 56,464 53,041 105,373 102,228 Amortization of excess of cost over net assets acquired 16,854 16,157 33,561 32,521 67,075 63,512 Amortization of other assets 2,974 3,431 5,627 6,917 18,777 14,057 Deferred tax benefit (2,187) (1,538) (3,856) (2,779) (9,521) (17,943) Provision for bad debt 6,389 4,905 11,830 10,124 22,560 24,334 Earnings from investees in excess of distributions (3,258) (9,047) (7,375) (12,544) (16,687) (23,053) Minority interests in earnings of consolidated subsidiaries 2,860 2,549 5,459 5,030 11,178 11,136 Other items, net (518) 3,849 5,231 7,247 16,560 34,478 Change in certain assets and liabilities: Accounts receivable (33,651) (10,594) (3,331) 15,466 (58,724) (29,172) Inventories 9,523 2,731 11,748 (12,974) 15,324 (3,593) Other current assets 3,712 4,362 6,474 10,001 (231) (444) Accounts payable (8,565) 10,588 (44,259) 13,335 (77,893) 21,929 Federal and state income taxes (23,377) (53,703) 15,640 12,733 (49,327) (36,894) Other liabilities 66 (6,271) 7,915 (35,486) 20,619 13,496 --------- --------- ----------- ----------- ----------- ----------- Net Cash Provided by Operating Activities 86,079 61,458 250,581 195,927 351,805 367,763 --------- --------- ----------- ----------- ----------- ----------- CASH PROVIDED BY (REQUIRED FOR) INVESTING ACTIVITIES Proceeds from sales of businesses 58,125 108,616 Proceeds from sale of discontinued BIS operations 125,000 125,000 541,983 Change in net noncurrent assets of discontinued BIS operations 520 (3,353) Acquisition of businesses (2,303) (32,741) (1,250) (32,766) (3,350) Acquisition of other investments (10,052) (3,251) (22,653) (4,240) (55,284) (20,798) Proceeds from sales of securities available for sale 21,942 2,511 30,760 2,511 32,568 113,426 Proceeds from sale of other investments 43,316 43,316 43,316 Additions to property, plant and equipment (24,264) (46,839) (49,422) (77,533) (103,914) (123,486) Other items, net 8,059 4,040 7,183 2,277 7,410 15,637 --------- --------- ----------- ----------- ----------- ----------- Net Cash Provided by (Required for) Investing Activities 36,698 81,461 (23,557) 105,410 (108,670) 628,675 --------- --------- ----------- ----------- ----------- ----------- CASH PROVIDED BY (REQUIRED FOR) FINANCING ACTIVITIES Proceeds from sale of commercial paper, notes payable and senior notes payable 388,066 885,060 1,338,921 885,060 1,368,787 1,391,944 Payment of total debt (785,497) (989,947) (1,539,872) (1,017,325) (1,579,733) (1,684,947) --------- --------- ----------- ----------- ----------- ----------- Net Change in Total Debt (397,431) (104,887) (200,951) (132,265) (210,946) (293,003) Payment of common and preferred cash dividends (22,176) (19,204) (41,362) (38,718) (79,796) (80,077) Sale of common stock to employees 13,874 9,168 23,063 22,475 44,999 51,242 Purchase of treasury stock (7,904) (207,529) (48,004) (587,178) Other items, net (15,046) (3,792) (5,797) (9,037) (17,129) (19,426) --------- --------- ----------- ----------- ----------- ----------- Net Cash (Required for) Financing Activities (420,779) (126,619) (225,047) (365,074) (310,876) (928,442) --------- --------- ----------- ----------- ----------- ----------- Net Increase (Decrease) in Cash (298,002) 16,300 1,977 (63,737) (67,741) 67,996 Cash and short-term cash investments at beginning of the period 326,815 80,254 26,836 160,291 96,554 28,558 --------- --------- ----------- ----------- ----------- ----------- Cash and short-term cash investments at end of the period $ 28,813 $ 96,554 $ 28,813 $ 96,554 $ 28,813 $ 96,554 ========= ========= =========== =========== =========== ===========
6
Consolidated Statement of Cash Flows (CONT.) (Unaudited, in thousands of dollars) Quarter Ended Two Quarters Ended Four Quarters Ended ------------------- ----------------------- ----------------------- June 27, June 28, June 27, June 28, June 27, June 28, 1999 1998 1999 1998 1999 1998 --------- --------- ----------- ----------- ----------- ----------- SUPPLEMENTAL CASH FLOW INFORMATION: Non cash investing activities Securities received as proceeds on the sale of investee $ 37,678 $ 37,678 Non cash financing activities Conversion of preferred stock held by Disney to common stock Preferred Stock $ (100) $ (100) $ (100) Additional Capital (37,508) (37,508) (37,508) Issuance of common stock upon conversion of preferred stock Common Stock 21 21 21 Additional Capital 37,587 37,587 37,587 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 1 - BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the quarter, two quarters and four quarters ended June 27, 1999 are not necessarily indicative of the results that may be expected for the year ending December 26, 1999. For further information, refer to the consolidated financial statements and footnotes thereto included in the Registrant Company and Subsidiaries' annual report on Form 10-K for the year ended December 27, 1998. Certain amounts in 1998 have been reclassified to conform to the 1999 presentation. NOTE 2 - COMPREHENSIVE INCOME The following table sets forth the computation of comprehensive income (in thousands):
Quarter Ended Two Quarters Ended Four Quarters Ended ---------------------- ---------------------- ---------------------- June 27, June 28, June 27, June 28, June 27, June 28, 1999 1998 1999 1998 1999 1998 --------- --------- --------- --------- --------- --------- Net income $ 86,586 $ 126,967 $ 149,453 $ 228,588 $ 286,722 $ 405,571 Unrealized gains(losses) on securities available for sale: Change in unrealized gains, net of related taxes (1,351) 7,302 11,394 10,954 13,660 10,379 Less: reclassification adjustment for gains realized in net income (6,911) (743) (9,182) (743) (2,921) (3,678) --------- --------- --------- --------- --------- --------- Other comprehensive income (8,262) 6,559 2,212 10,211 10,739 6,701 --------- --------- --------- --------- --------- --------- Total comprehensive income $ 78,324 $ 133,526 $ 151,665 $ 238,799 $ 297,461 $ 412,272 ========= ========= ========= ========= ========= =========
8
NOTE 3 - DEBT (In Thousands of Dollars) Effective Interest Balance At Rate At --------------------------------------------------- June 27, June 27, December 27, June 28, 1999 1999 1998 1998 --------- ----------- ----------- ----------- Commercial paper, net of discount (a) 5.1% $ 438,179 $ 917,533 $ 887,667 Debentures, net of discount (b) 10.0% 198,381 198,299 198,216 Debentures, net of discount (c) 7.6% 94,483 94,386 94,288 Debentures, net of discount (d) 7.0% 296,743 Notes payable, net of discount (e) 8.5% 119,857 119,777 159,697 Notes payable, net of discount (f) 6.8% 98,092 97,978 97,865 Senior notes, net of discount (g) 6.3% 99,355 99,305 99,255 ----------- ----------- ----------- Total Debt (h) 6.9% 1,345,090 1,527,278 1,536,988 Less amounts classified as current 99,591 198,277 289,429 ----------- ----------- ----------- Total long-term debt 6.9% $ 1,245,499 $ 1,329,001 $ 1,247,559 =========== =========== ===========
(a) Commercial paper is supported by $900 million of revolving credit and term loan agreements, $500 million of which matures on June 22, 2003 and $400 million of which matures June 22, 2000. (b) Represents $200 million of a 20-year 9 7/8% debenture due in 2009. (c) Represents $100 million of a 7.15% debenture due in 2027. (d) Represents $300 million of a 6.875% debenture due in 2029. (e) Represents $120 million of 8 1/2% notes payable at June 1999 and December 1998, and $160 million at June 1998. These notes are subject to mandatory annual repayments, commencing in 1998 through maturity in 2001. Annual maturities are represented under current liabilities. (f) Represents $100 million of a 6.625% note due in 2007. (g) Represents $100 million of 10 year 6.3% senior notes due in 2005. (h) Interest payments for the six months ended June 1999 and June 1998 were $43.3 million and $69.0 million, respectively. NOTE 4 - INCOME TAX PAYMENTS Income tax payments for the two quarters ended June 27, 1999 and June 28, 1998, were $90.0 million and $112.6 million, respectively. Payments in 1998 include the tax impact resulting from one-time gains on the sale of the balance of the company's jointly owned cable systems and its newspaper in Gary, Indiana. 9 NOTE 5 - EARNINGS PER SHARE The following table sets forth the computation of basic and diluted earnings per share from continuing operations (in thousands, except per share data):
Quarter Ended Two Quarters Ended Four Quarters Ended ------------------- ------------------- ------------------- June 27, June 28, June 27, June 28, June 27, June 28, 1999 1998 1999 1998 1999 1998 -------- -------- -------- -------- -------- -------- Income from continuing operations $ 86,586 $ 66,925 $149,453 $168,362 $286,722 $328,458 Less dividends on preferred stock 4,036 3,510 7,546 7,020 14,566 14,039 -------- -------- -------- -------- -------- -------- Income from continuing operations attributable to common stock $ 82,550 $ 63,415 $141,907 $161,342 $272,156 $314,419 ======== ======== ======== ======== ======== ======== Average shares outstanding (basic) 79,000 78,600 78,713 79,275 78,601 82,253 -------- -------- -------- -------- -------- -------- Effect of dilutive securities: Convertible preferred stock 17,383 17,549 17,465 17,549 17,507 17,549 Stock options 1,464 2,010 1,405 2,035 1,430 2,077 -------- -------- -------- -------- -------- -------- Average shares outstanding (diluted) 97,847 98,159 97,583 98,859 97,538 101,879 -------- -------- -------- -------- -------- -------- Earnings per share from continuing operations (basic) $ 1.04 $ 0.81 $ 1.80 $ 2.04 $ 3.46 $ 3.82 ======== ======== ======== ======== ======== ======== Earnings per share from continuing operations (diluted) $ 0.88 $ 0.68 $ 1.53 $ 1.70 $ 2.94 $ 3.22 ======== ======== ======== ======== ======== ========
Income from continuing operations attributable to common stock for the two quarters and the four quarters ended June 28, 1998 and the quarter ended March 28, 1999 have been restated to separately identify dividends on preferred stock. Related amounts were previously included with dividends on common stock. The Walt Disney Company received 1.75 million shares of series B convertible preferred stock in payment for the newspapers the company purchased from them on May 9, 1997. During June 1999, Walt Disney Company converted 100,000 of these shares into 1.0 million common shares. In July 1999, Walt Disney Company converted an additional 100,000 shares of series B convertible preferred stock into common stock. NOTE 6 - COMMITMENTS AND CONTINGENCIES On July 13, 1995, six unions struck the Detroit Free Press, The Detroit News and the Detroit Newspaper Agency, which operates both newspapers. Subsequently, the unions filed numerous unfair labor practice charges against the newspapers and the Agency. In June 1997, after a lengthy trial, a National Labor Relations Board (NLRB) administrative judge ruled that the strike was caused by the unfair labor practices of the Agency and The Detroit News and ordered that the Agency and the newspapers reinstate all strikers, displacing permanent replacements if necessary. The Agency and the newspapers appealed the decision to the NLRB. On August 27, 1998, the NLRB affirmed certain unfair labor practice findings against The Detroit News and the Agency, and reversed certain findings of unfair labor practices against the Agency. The Agency and the newspapers filed a motion to reconsider with the NLRB, which was denied on March 4, 1999. The Agency, the newspapers and the unions filed appeals to the U.S. Court of Appeals for the District of Columbia Circuit. The case is pending in the U.S. Court of Appeals. There is no briefing schedule yet, nor has a hearing date been set for oral argument. Various libel 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, including Detroit, will not be material to its financial position or results of operations, on a consolidated basis. 10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE SECOND QUARTER SECOND QUARTER 1999 COMPARED WITH SECOND QUARTER 1998 AND THE YEAR TO DATE RESULTS ENDED JUNE 27, 1999 COMPARED WITH THE YEAR TO DATE RESULTS ENDED JUNE 28, 1998. Diluted earnings per share from continuing operations was $.88, up $.20, or 29.4%, from the $.68 reported last year. Excluding one-time gains on investments, relocation and severance costs and other non-recurring items in both 1999 and 1998, earnings per share from continuing operations for the second quarter of 1999 was $.83, up $.10, or 13.7% from $.73 per diluted share in 1998. Non-recurring items for the second quarter of 1999 included investment gains totaling $.07 per share on the sale of Zip2 Corp. and AT&T stock, net of adjustments to the carrying value of certain investments and severance costs of $.02 per share. Non-recurring items in 1998 included corporate relocation costs of $.07 per share and settlements on 1997 newspaper sales of $.02 per share. Diluted earnings per share from continuing operations for the first two quarters of 1999 was $1.53, down $.17, or 10.0%, from $1.70 for the first two quarters of 1998. Excluding non-recurring items, earnings per share from continuing operations was $1.49, up $.19, or 14.6%, from $1.30 for the first two quarters of 1998. Non-recurring items for the first two quarters of 1999 included investment gains totaling $.07 per share and severance costs of $.03 per share. For 1998, non-recurring items consisted of investment gains of $0.45 per share on the sale of the balance of the company's cable investment and its newspaper business in Gary, Indiana, corporate relocation costs of $.07 per share and settlements on 1997 newspaper sales of $.02 per share. Net income from continuing operations in the second quarter was $86.6 million, up $19.7 million, or 29.4%, from the same period last year. Excluding non-recurring items, net income from continuing operations for the second quarter was $81.3 million, up 13.0% from 1998, and for the year to date, was $145.5 million, down $17.1 million, or 13.3%. OPERATING REVENUE Advertising revenue increased $23.1 million, or 3.9% from the second quarter last year and $43.5 million, or 3.7%, year to date. This reflected improvements in the general and classified categories for the quarter and all advertising revenue categories year to date. General advertising revenue was up $15.7 million, or 24.1%, from the second quarter last year. General revenue improved in most markets with strong gains in Philadelphia, San Jose, Miami, Fort Worth, and Saint Paul, up $4.3 million, $2.7 million, $2.2 million, $1.5 million and $1.3 million, respectively. Year to date general advertising revenue was up $26.9 million, or 20.9%. National automotive, telecommunications, Internet, and travel advertising contributed to the growth. 11 Classified advertising revenue improved $8.6 million, or 3.3%, from the second quarter last year and $9.7 million, or 1.9% year to date. All classified revenue categories were above the prior year, with the exception of help wanted, which was down 0.2% for the quarter and 1.6% year to date. Retail advertising revenue decreased by $1.2 million, or 0.5%, from second quarter 1998, but increased $6.8 million, or 1.3%, from year to date 1998. The largest declines for the quarter were in Miami and Detroit, down $1.6 million and $1.1 million respectively. Retail advertising results were mixed for the first two quarters of the year with the strongest gains in Fort Worth, Contra Costa, and Charlotte, up $2.5 million, $2.0 million and $1.8 million, respectively. The largest declines year to date were in Kansas City and Miami, down $1.7 and $1.3 million, respectively. Circulation revenue for the second quarter was down $2.5 million, or 1.7%, from 1998, and decreased $4.3 million, or 1.5%, for the year to date. For the quarter, there was a 2.3% decrease in seven-day circulation, offset by a 0.7 % increase in average rate. For the year to date, there was a 2.3% decrease in seven-day circulation, offset by a 0.9% increase in average rate. Other revenue increased by $9.7 million, or 27.2%, from the prior year quarter and $18.1 million, or 27.4%, from year to date 1998. The improvement for the second quarter and year to date was due to greater specialized publication and on-line revenue. The increase in specialized publication revenues was a result of Philadelphia's acquisition of ProMedia in the first quarter of 1999. OPERATING COSTS Labor and employee benefit costs increased $5.9 million, or 2.0%, from the second quarter 1998 and $19.1 million, or 3.2%, for the year to date. Excluding 1999 severance costs and 1998 corporate relocation costs, labor and employee benefit costs increased $14.7 million, or 5.0% from second quarter 1998. The average wage rate increased 2.4% compared to the second quarter of 1998 while the workforce remained flat compared to the prior year. The remainder of the increase was due to increases in employee benefit expense and bonuses. On this same basis, year to date labor and employee benefit costs were up $25.6 million, or 4.4%, higher than 1998, on a 2.5% increase in the average wage rate and a 0.2% decrease in the workforce. Newsprint, ink and supplement costs decreased $12.0 million, or 9.0% from second quarter on a 9.7% decrease in the average newsprint price, offset in part by a 0.2% increase in newsprint consumption. Year to date costs were down $15.8 million, or 6.0%, on a 5.7% decrease in the average newsprint price and a 0.4% decrease in newsprint consumption. Other operating costs increased $6.3 million, or 3.8%, from second quarter 1998 and $10.0 million, or 3.0%, year to date. These increases were primarily attributable to new event marketing, special publication, and circulation initiatives in Philadelphia. Depreciation and amortization increased $1.8 million, or 3.9%, from second quarter 1998 and $3.2 million, or 3.4%, year to date 1998. The increase was due to the accelerated writedown of equipment in Miami related to the installation of new presses. 12 NON-OPERATING ITEMS Interest expense, net of interest income and capitalized interest, decreased $2.4 million, or 10.0%, from second quarter 1998, and decreased $5.6 million, or 11.3%, for the year to date. The quarter's decrease was due to decreased debt levels and lower interest rates resulting from the second quarter 1998 debt refinancing. The average debt balance for the quarter decreased $23.7 million, or 1.6%, from the second quarter of last year and $126.1 million, or 8.0%, from year to date 1998. Equity in earnings of unconsolidated companies and joint ventures was down $4.5 million in the second quarter and down $4.0 million year to date. The quarter's decrease was due to lower earnings from the company's newsprint mill investments, down $1.5 million, lower earnings from The Seattle Times, down $1.3 million, and a $1.8 million decline in earnings from Infinet. The newsprint mill investments were affected by lower newsprint prices in 1999. The "Other, net" line of the non-operating section reflects an increase of $5.4 million from the second quarter of 1998. The increase included 1999 net gains on the sale of investments of $11.2 million, offset by a $3.1 million settlement recorded in 1998. Excluding these items from 1999 and 1998, "Other, net" declined $2.7 million for the second quarter 1999. Year to date, "Other, net" was down $77.3 million. The decline was primarily due to the investment gains of $75.3 million on the sale of the balance of the company's cable investment and its newspaper in Gary, Indiana. The effective tax rate on continuing operations was 40.1% in the quarter ended June 27, 1999 compared to 40.8% for the comparable quarter in 1998. The effective tax rate on continuing operations for the year to date was 40.1% in 1999 compared to 40.9% in 1998. Excluding one-time gains in 1998, the effective tax rate was 41.1%. OTHER The company did not repurchase any common stock during the first and second quarters of 1999. The company has authorization to repurchase approximately 3.2 million shares and will consider market opportunities for share repurchases. During June 1999, The Walt Disney Company (Disney) converted 100,000 shares of the company's series B convertible preferred stock into common stock, which Disney subsequently sold. Disney received 1,754,930 shares of the company's series B convertible preferred stock pursuant to the company's acquisition of four newspapers from Disney on May 9, 1997. LIQUIDITY Net cash provided by operating activities increased by $24.6 million in the second quarter of 1999 from $61.5 million in the second quarter of 1998. The increase was attributed to higher earnings, excluding the gain on the sale of discontinued operations in 1998. Net cash provided by investing activities decreased by $44.8 million from the second quarter of 1998, largely due to proceeds from the 1998 sale of Technimetrics, Inc. Cash and short term cash investments were down $67.7 million from June 28, 1998, but up $2.0 million from year-end 1998. Total debt decreased $182.2 million from December 27, 1998 and declined $191.9 million from June 28, 1998. Total-debt-to-total-capital ratio was 42.8% compared to 47.9% at year end and 49.3% in June 1998. Approximately $460.0 million in aggregate unused credit lines remained at the end of the quarter. The ratio of current assets to current liabilities was 0.9:1 at June 27, 1999, 0.8:1 at December 27, 1998, and 0.7:1 at June 28, 1998. 13 YEAR 2000 READINESS DISCLOSURE All Year 2000 statements in this Form 10-Q are Year 2000 Readiness Disclosures under the Year 2000 Information and Readiness Disclosure Act (the "Act"). The Year 2000 ("Y2K") issue results from computer programs using two digits rather than four to define the applicable year. Computer programs that have time-sensitive software may recognize a date using "00" as the year 1900 rather than the year 2000. This could result in a system failure, disruption of operations, and/or a temporary inability to conduct normal business activities. In the spring of 1997, the company initiated a comprehensive project to address Y2K issues. The Y2K project has been divided into five phases: Scope Definition, Impact Assessment, Conversion, Testing and Implementation. To implement this project, the company established a Y2K Project Management Office ("PMO") to act as a central point of coordination for Y2K activity, chaired by the vice president and chief information officer, who reports directly to the chief executive officer. The PMO team includes executive management and employees with expertise from various disciplines. At each business unit, a Y2K coordinator has been appointed to direct all local Y2K activities. The Y2K coordinator works closely with the PMO team and local executive management and employees. Organization-wide support is also provided through special forums for Y2K coordinators. The company also engaged experts to assist in developing work plans and cost estimates to complete remediation activities. The company's Internal Audit Department also reviews periodically the project status at the business units. The Scope Definition Phase, completed in June 1997, determined that the Y2K project would encompass both Information Technology ("IT") and non-IT assets (embedded chips), including: software, microprocessor-based hardware (including embedded chips found in facilities and production environments) and significant suppliers, customers and other relevant third parties. The Impact Assessment Phase included a comprehensive inventory of both internally developed software and vendor products, as well as microprocessor-based hardware. These inventoried systems were evaluated for Y2K issues, if any, and a preliminary assessment on replacement or remediation was developed to make these systems Y2K capable, as necessary. The company also developed a central database repository that contains each Y2K project prioritized on the basis of perceived business risk. This phase was completed in November 1997. Conversion, Testing and Implementation Phases have been ongoing since mid 1997. Software, hardware, third-party interfaces and related items for all critical systems are being tested to determine Y2K capability under various circumstances. A majority of the software used by the company's business units is vendor-packaged. Y2K testing will be performed for all critical 14 systems prior to implementation. When possible, previously created test cases are run and results are compared to the baseline results. For systems developed in-house, regression and other Y2K data testing is done as appropriate after Y2K remediation is complete. Results of regression testing are documented and compared to previous baseline results. Upon successful completion of the Testing Phase, the systems will be implemented in the live production environment (Implementation Phase). As of June 30, 1999 the Conversion, Testing and Implementation Phases were 80% complete, and the company expects that the balance will be completed no later than September 30, 1999. All significant suppliers, customers and other relevant third parties have been contacted to determine the extent to which interfaces with company systems are vulnerable if these third parties fail to remediate their own Y2K issues. There can be no assurance that these third-party systems will be converted on a timely basis. The failure of any critical third-party systems could have a material adverse impact on operations. However, the company is monitoring vendor compliance and will consider alternatives if vendors cannot meet the company's Y2K requirements. Generally, the company's business units are not dependent on a single source for any products or services, except for products or services supplied by public utilities. In the event a significant supplier or other vendor is unable to provide products or services to the company due to a Y2K failure, the company believes there are adequate alternative sources for such products or services. There is no guarantee, however, that such alternative products or services would be available on the same terms and conditions, or that the company's business units would not experience some adverse effects as a result of switching to alternative sources. The total cost of the Y2K project currently is estimated to range from $55 million to $65 million and is being funded with operating cash flows. Approximately 65% of the total will relate to purchased hardware and software, which will be capitalized. The remainder will be expensed as incurred. Expenditures through June 27, 1999 totaled $47.4 million, of which approximately 65% has been capitalized. In certain cases, an expedited system replacement schedule will also bring enhanced functionality and should serve to reduce future capital requirements. The company believes that the acceleration of certain projects has not resulted in the deferral of other IT projects, which would have a material impact on the financial condition and results of operation. At this time there can be no assurance that these cost estimates will not be exceeded, and actual costs may differ significantly from those projected. Some factors that may cause actual expenditures to differ include the availability and cost of trained personnel, and the ability to locate and correct all relevant computer problems. As part of normal business practices, the company maintains site-specific emergency publication plans to be followed during emergency circumstances. Emergency publication plans are being reviewed and updated with Y2K contingency considerations in mind. This effort, plus additional contingency planning activities to minimize potential disruption to operations, especially from externally interfaced systems over which the company has limited or no control, will be completed before year end 1999. 15 Based on a recent assessment of its internal operations, those over which the company has direct control, the company believes that with modifications to existing software and conversions to new software, the Y2K issue will not pose significant operational problems. The remediation or replacement of these systems is well under way. Furthermore, the contingency plan will outline alternative solutions in the event that they are required. However, if such modifications and conversions are not made or are not completed timely, the Y2K issue could have a material adverse impact on the operations of the company. OUTLOOK FOR THE REMAINDER OF THE YEAR Looking ahead to the third quarter and the full year, the company anticipates advertising growth will be moderately above 1998. The cost of newsprint is lower than originally anticipated as the expected price increases look to be smaller and are occurring later than previously thought. Certain statements contained herein 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 may 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 may 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 which may cause revenue declines or increased labor 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. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The company has no material changes to the disclosure made on this matter in the company's annual report on Form 10-K for the year ended December 27, 1998. 16 PART II - OTHER INFORMATION Item 1. Legal Proceedings Refer to Part 1, Item 1, Note 6, incorporated herein by reference, for a discussion of legal proceedings relating to the Detroit Free Press. Item 4. Submission of Matters to a Vote of Security Holders (a) The Company's Annual Meeting of Shareholders was held on May 12, 1999. The results of the voting with respect to matters presented at the Annual Meeting were as follows: Common Stock Voted ---------------------------- For Against Withheld --- ------- -------- (b) Election of Directors For a three- year term ending 2002: James I. Cash, Jr. 71,284,121 0 1,082,122 P. Anthony Ridder 71,164,379 0 1,201,864 Randall L. Tobias 71,289,063 0 1,077,180 Continuing Directors: Joan Ridder Challinor Alvah H. Chapman, Jr. Gonzalo F. Valdes-Fauli Kathleen Foley Feldstein Thomas P. Gerrity Barbara Barnes Hauptfuhrer M. Kenneth Oshman John L. Weinberg 17 (c) Ratification of the appointment of Ernst & Young LLP as independent auditors of the company for the year 1999: Common Stock Voted ----------------------------------------------------------- For Against Abstained Broker Non-votes --- ------- --------- ---------------- 71,850,006 294,612 221,625 None Approval of an amendment of the Employees Stock Option Plan to increase the number of shares of Common Stock available for grant: Common Stock Voted ----------------------------------------------------------- For Against Abstained Broker Non-votes --- ------- --------- ---------------- 55,227,214 14,725,915 339,239 2,073,875 Approval of an amendment of the Employees Stock Purchase Plan to increase the number of shares of Common Stock available for purchase: Common Stock Voted ----------------------------------------------------------- For Against Abstained Broker Non-votes --- ------- --------- ---------------- 68,662,170 1,334,366 295,832 2,073,875 Vote on shareholder proposal concerning executive compensation: Common Stock Voted ----------------------------------------------------------- For Against Abstained Broker Non-votes --- ------- --------- ---------------- 12,463,209 56,951,992 877,167 2,073,875 Item 6. Exhibits and Reports of Form 8-K (a) Exhibits Filed No. 3 (ii) By-Laws (As Amended through May 12, 1999) No. 27 - Financial Data Schedule (b) Reports on Form 8-K There were no reports on Form 8-K filed during the quarter ended June 27, 1999. 18 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. KNIGHT-RIDDER, INC. (Registrant) Date: August 11, 1999 /s/ GARY R. EFFREN ----------------------------------- Gary R. Effren Vice President/Controller (Chief Accounting Officer and Duly Authorized Officer of Registrant) 19 EX-3.II 2 EXHIBIT 3(II) Exhibit 3(ii) BYLAWS OF KNIGHT-RIDDER, INC. ------------------- (As Amended Through May 12, 1999) ARTICLE I Shareholders ------------ SECTION 1 - ANNUAL MEETING: The annual meeting of the shareholders of the Company for the election of directors and for the transaction of such other business as may properly come before the meeting, shall be held at the principal office of the Company or at such other place as may be designated by the Board of Directors and specified in the notice of such meeting, at such time and upon such date during the months of April or May in each year as the Board of Directors may determine. SECTION 2 - SPECIAL MEETING: Special meetings of the shareholders of the Company may be held on any business day, when called by the Chairman of the Board, the Vice Chairman of the Board, the President, or a Vice President, or by the Board acting at a meeting, or by a majority of the directors acting without a meeting, or by persons who hold ten percent (10%) of all shares outstanding and entitled to vote thereat. Upon request in writing, delivered either in person or by registered mail to the Chairman of the Board, the Vice Chairman of the Board, the President, or the Secretary, by any persons entitled to call a meeting of shareholders, which request shall state the objects for which the meeting is to be called, and the business considered and transacted at any such meeting called on the request of shareholders shall be confined to the objects stated in such request, such officer shall forthwith cause to be given to the shareholders entitled thereto notice of a meeting to be held on a date not less than ten (10) nor more than sixty (60) days after the receipt of such request, as such officer may fix. If such notice is not given within fifteen (15) days after the delivery or mailing of such request, the persons calling the meeting may fix the time of the meeting and give notice thereof in the manner provided by law or as provided in these Bylaws, or cause such notice to be given by any designated representative. Each special meeting shall be called to convene between 9:00 o'clock A.M. and 4:00 o'clock P.M. and shall be at the principal office of the Company in San Jose, California, unless the same is called by the directors, acting with or without a meeting, in which case such meeting may be 2 held at any place either within or without the State of Florida designated by the directors and specified in the notice of such meeting. SECTION 3 - NOTICE OF MEETINGS: Not less than ten (10) nor more than sixty (60) days before the date fixed for a meeting of shareholders, written notice stating the time, place and purposes of such meeting shall be given by or at the direction of the Secretary or an Assistant Secretary, or any other person or persons required or permitted by law to give such notice. The notice shall be given by personal delivery or by first-class mail to each shareholder entitled to notice of the meeting who is of record as of the day preceding the day on which notice is given or, if a record date therefor is duly fixed, of record as of said date, if mailed, the notice shall be addressed to the shareholders at their respective addresses as they appear on the records of the Company. Notice of the time, place and purpose of any meeting of shareholders may be waived in writing, either before or after the holding of such meeting by any shareholder, which writing shall be filed with or entered upon the records of the meeting. SECTION 4 - QUORUM: ADJOURNMENT: Except as may be otherwise provided by law or by the Articles of Incorporation, at any meeting of the shareholders, the holders of shares entitling them to exercise a majority of the voting power of the Company present in person or by proxy shall constitute a quorum for such meeting; provided, however, that no action required by law, the Articles, or these Bylaws to be authorized or taken by a designated proportion of the shares of the Company may be authorized or taken by a lesser proportion; and, provided further, that the holders of a majority of the voting shares represented thereat, whether or not a quorum is present, may adjourn such meeting from time to time; if any meeting is adjourned, notice of such adjournment need not be given if the time and place which is adjourned are fixed and announced at such meeting unless a new record date is established, in which event a new notice for the adjourned meeting shall be given in accordance with Section 3 of this Article. SECTION 5 - PROXIES: Any shareholder entitled to vote or express his consent or dissent at a meeting of the shareholders may do so in person or may be represented by proxy, appointed by an instrument in writing, signed by the shareholder or by his duly authorized attorney-in-fact. SECTION 6 - APPROVAL AND RATIFICATION OF ACTS OF OFFICERS AND BOARD: Except as otherwise provided by the Articles of Incorporation or by law, any 3 contract, act, or transaction, prospective or past, of the Company, or of the Board, or of the officers may be approved or ratified by the affirmative vote at a meeting of the shareholders of the holders of shares entitling them to exercise a majority of the voting power of the Company, and such approval or ratification shall be as valid and binding as though affirmatively voted for by every shareholder of the Company." SECTION 7 - NOTIFICATION OF SHAREHOLDER BUSINESS: All business properly brought before an annual meeting shall be transacted at such meeting. Business shall be deemed properly brought only if it is (i) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (ii) otherwise properly brought before the meeting by or at the direction of the Board of Directors or (iii) brought before the meeting by a shareholder of record entitled to vote at such meeting if written notice of such shareholder's intent to bring such business before such meeting is delivered to, or mailed, postage prepaid, and received by, the Secretary of the Company at the principal office of the Company in San Jose, California not later than one hundred twenty (120) days prior to the anniversary date of the Company's proxy statement relating to the immediately preceding annual meeting. Each notice given by such shareholder shall set forth: (A) a brief description of the business desired to be brought before the meeting and the reasons for conducting such business at the meeting; (B) the name and address of the shareholder who intends to propose such business; (C) a representation that the shareholder is a holder of record of stock of the Company entitled to vote at such meeting (or if the record date for such meeting is subsequent to the date required for such shareholder notice, a representation that the shareholder is a holder of record at the time of such notice and intends to be a holder of record on the record date for such meeting), setting forth the number and class of shares so held, and intends to appear in person or by proxy at such meeting to propose such business; and (D) any material interest of the shareholder in such business. The Chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting in accordance with the provisions of this Section 7; and, if the Chairman should so determine and declare, any such business not properly brought before the meeting shall not be transacted. ARTICLE II Shares ------ SECTION 1 - FORM OF CERTIFICATES AND SIGNATURES: The shares of the Company shall be represented by certificates unless the Board shall by 4 resolution provide that some or all of any class or series of stock shall be uncertified shares. Any such resolution shall not apply to shares represented by a certificate until the certificate is surrendered to the company. Notwithstanding the adoption of any resolution providing for uncertificated shares, each holder of shares is entitled to one or more certificates, signed by the Chairman of the Board, the Vice Chairman of the Board, the President or a Vice President and by the Secretary or an Assistant Secretary of the Company, which shall certify the number and class of shares held by him in the company, but no certificate for shares shall be executed or delivered until such shares are fully paid. When such a certificate is countersigned by an incorporated transfer agent or registrar, the signature of any of said officers of the Company may be facsimile, engraved, stamped or printed. In case any officer who signed or whose facsimile signature has been placed upon such certificate shall have ceased to be such officer before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer at the date of its issuance. SECTION 2 - TRANSFER OF SHARES: Shares of the Company shall be transferable upon the books of the Company by the holders thereof, in person, or by a duly authorized attorney, and, where represented by certificates, upon surrender and cancellation of certificates for a like number of shares of the same class or series, with duly executed assignment and power of transfer endorsed thereon or attached thereto, and with such proof of the authenticity of the signatures to such assignment and power of transfer as the Company or its agents may reasonably require. SECTION 3 - LOST, STOLEN, OR DESTROYED CERTIFICATES: The Company may issue a new certificate for shares in place of any certificate theretofore issued by it and alleged to have been lost, stolen, or destroyed or claimed as abandoned property by an appropriate governmental representative and the Board may, in its discretion, require the owner or high legal representatives, to give the Company a bond continuing such terms as the Board may require to protect the Company or any person injured by the execution and delivery of a new certificate. SECTION 4 - TRANSFER AGENTS AND REGISTRARS: The Board may appoint, or revoke the appointment of, transfer agents and registrars and may require all certificates for shares to bear the signatures of such transfer agents and registrars, or any of them. The Board shall have the authority to make all such 5 rules and regulations as it may deem expedient concerning the issue, transfer, and registration of certificates for shares of the Company. SECTION 5 - FIXING A RECORD DATE: For any lawful purpose, including without limitation, the determination of the shareholders who are entitled to: (1) Receive notice of or to vote at a meeting of shareholders, (2) Receive payment of any dividend or distribution, (3) Receive or exercise rights of purchase of or subscription for, or exchange or conversion of, shares or other securities, subject to contract rights with respect thereto, or (4) Participate in the execution of waivers or releases, the Board may fix a record date which shall not be more than sixty (60) days (nor less than ten (10) days in the case provided by the clause (1) above) preceding the date of the meeting of shareholders or the date fixed for the payment of any dividend or distribution, or the date fixed for the receipt or the exercise of rights, as the case may be. The record date for the purpose of the determination of the shareholders who are entitled to receive notice of or to vote at a meeting of shareholders shall continue to be the record date for all adjournments of such meetings, unless the Board or the persons who shall have fixed the original record date shall, subject to the limitations set forth in this Article, fix another date and, in case a new record date is so fixed, notice thereof and of the date to which the meeting shall have been adjourned shall be given to shareholders of record as of such date in accordance with the same requirements as those applying to a meeting newly called. SECTION 6 - CONTROL SHARE REDEMPTION: The Company is authorized to redeem control shares acquired in a control-share acquisition to the fullest extent permitted by Section 607.109 of the Florida General Corporation Act as the same now exists or as it may be hereafter amended from time to time. Any such redemption shall be made at the direction of, and in the manner prescribed by, the Board of Directors. For purposes of this Section 6, the terms 'control shares' and 'control-share acquisition' shall have the meanings ascribed to them by Section 607.109 of the Florida General Corporation Act. 6 ARTICLE III Board of Directors ------------------ SECTION 1 - AUTHORITY: Except where the law, the Articles of Incorporation, or these Bylaws require action to be authorized or taken by the shareholders, all of the authority of the Company shall be exercised by the directors. SECTION 2 - NUMBER OF; QUALIFICATIONS: The Board of Directors of the Company shall consist of such number of directors as may be determined from time to time by resolution adopted by the Board of Directors, except that such number shall not be less than (10) nor more than twenty (20); no reduction in the number of directors shall of itself have the effect of shortening the term of an incumbent member. SECTION 3 - ELECTION OF DIRECTORS; VACANCIES: The directors shall be elected at each annual meeting of shareholders or at a special meeting called for the purpose of electing directors. At a meeting of shareholders, at which directors are to be elected, only persons nominated as candidates shall be eligible for election as directors, and the candidates receiving the greatest number of votes shall be elected. In the event of the occurrence of any vacancy or vacancies in the Board, however caused, the remaining directors, though less than a majority of the whole authorized number of directors, may, by the vote of a majority of their number, fill any such vacancy for the unexpired term. SECTION 4 -_NOTIFICATION OF NOMINATIONS: Subject to the rights of the holders of any one or more series of Preference Stock then outstanding, nominations for the election of directors may be made by the Board of Directors or by any shareholder entitled to vote for the election of directors. Any shareholder entitled to vote for the election of directors at an annual meeting or a special meeting called for the purpose of electing directors may nominate persons for election as directors at such meeting only if written notice of such shareholder's intent to make such nomination is delivered to, or mailed, postage prepaid, and received by, the Secretary of the Company at the principal office of the Company in San Jose, California not later than (i) in the case of an annual meeting, one hundred twenty (120) days prior to the anniversary date of the Company's proxy statement relating to the immediately preceding annual meeting and (ii) in the case of a special meeting, the close of business on the tenth day following the date on which the Company first makes public disclosure of the date of the special meeting. Each notice given by such shareholder shall set forth: (A) the name and address of the shareholder who intends to make the 7 nomination and of the person or persons to be nominated; (B) a representation that the shareholder is a holder of record of stock of the Company entitled to vote at such meeting (or if the record date for such meeting is subsequent to the date required for such shareholder notice, a representation that the shareholder is a holder of record at the time of such notice and intends to be a holder of record on the record date for such meeting), setting forth the number and class of shares so held, and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (C) a description of all arrangements or understandings between the shareholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the shareholder; (D) such other information regarding each nominee proposed by such shareholder as would have been required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission had each nominee been nominated, or intended to be nominated, by the Board of Directors; and (E) the consent of each nominee to serve as a director of the Company if so elected. The Chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the provisions of this Section 4; and, if the Chairman should so determine and declare, the defective nomination shall be disregarded. SECTION 5 - TERM OF OFFICE; RESIGNATIONS: Directors shall hold office until the next annual meeting of shareholders and until their successors are elected and qualified, or until their earlier resignation, removal from office, or death. Any director may resign at any time, by oral statement to that effect made at a meeting of the Board or in a writing to that effect delivered to the Secretary, such resignation to take effect immediately or at such other time as the director may specify. SECTION 6 - MEETINGS: Immediately after each annual meeting of the shareholders, the newly elected directors shall hold an organization meeting for the purpose of electing officers and transacting any other business. Other meetings of the Board may be held at any time within or without the State of Florida in accordance with the resolutions or other action by the Board. The Secretary shall give written notice of the time and place of all meetings of the Board of Directors, other than the organization meetings, to each member of the Board at least two (2) days before the meeting. SECTION 7 - QUORUM; ADJOURNMENT: A quorum of the Board shall consist of a majority of the directors then in office; provided that a majority of the 8 directors present at a meeting duly held, whether or not a quorum is present, may adjourn such meeting from time to time; if any meeting is adjourned, notice of adjournment need not be given if the time and place to which it is adjourned are fixed and announced at such meeting. At each meeting of the Board at which a quorum is present, all questions and business shall be determined by a majority vote of those present except as in these Bylaws otherwise expressly provided. SECTION 8 - APPOINTMENT OF COMMITTEES: The Board of Directors may appoint such committees, in addition to the Executive Committee, as it may consider proper, and such committees shall exercise such powers and duties as the Board from time to time may prescribe, subject to the Articles of Incorporation, these Bylaws, and applicable law. SECTION 9 - CONTRACTS: No contracts or other transaction between the Company and one or more of its directors or any other corporation, firm, association, or entity shall be made void or voidable by the fact that directors of the Company are financially interested in, or are directors or officers of such other corporation, firm, association, or entity if, at the meeting of the Board, or of the committee of the Company making, authorizing, or confirming such contract or transaction, the fact of such relationship or interest is disclosed or known to the Board of Directors or committee which authorizes, approves, or ratifies such contract or transaction by a vote or consent sufficient for the purpose without counting the vote or consent of such interested director; or, if the fact of such relationship or interest is disclosed or known to shareholders entitled to vote and they authorize, approve, or ratify such contract or transaction by vote; or, the contract or transaction is fair and reasonable as to the Company at the time it is authorized by the Board, committee, or the shareholders. The interested director or directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or committee thereof which authorizes, approves, or ratifies such contract or transaction. ARTICLE IV Executive Committee ------------------- SECTION 1 - MEMBERSHIP; APPOINTMENT: The Board may appoint not less than three (3) directors, one of whom shall be the Chief Executive Officer, who together shall constitute the Executive Committee. The directors may appoint one or more directors as alternate members of the Committee, who may take the place of any absent member or members at any meeting of the Committee. Vacancies in the Executive Committee may be filled at any meeting of the Board. 9 SECTION 2 - POWERS: DUTIES: The Executive Committee shall advise with and aid the officers of the Company in all matters concerning its interests and the management of its business. When the Board is not in session, the Executive Committee shall have and may exercise all the powers of the Board, so far as such may be delegated legally, with reference to the conduct of the business of the Company, except that the Executive Committee shall not take any action to: (a) Approve or recommend to shareholders actions or proposals required by law to be approved by shareholders. (b) Designate candidates for the office of director, for purposes of proxy solicitation or otherwise. (c) Fill vacancies on the Board of Directors or any committee thereof. (d) Amend the Bylaws. (e) Authorize or approve the reacquisition of shares unless pursuant to a general formula or method specified by the Board of Directors. (f) Authorize or approve the issuance or sale of, or any contract to issue or sell, shares or designate the terms of a series of a class of shares, except that the Board of Directors having acted regarding general authorization for the issuance or sale of shares, or any contract therefor, and, in the case of a series, the designation thereof, may pursuant to a general formula or method specified by the Board by resolution or by adoption of a stock option or other plan, authorize the Executive Committee to fix the terms of any contract for the sale of the share and to fix the terms upon which such shares may be issued or sold, including, without limitation, the price, the rate or manner of payment of dividends, provisions for redemption, sinking fund, conversion, and voting or preferential rights, and provisions for other features of a class of shares, or a series of a class of shares, with full power in such committee to adopt any final resolution setting forth all the terms thereof and to authorize the statement of the terms of a series for filing with the Department of State under the applicable law. 10 SECTION 3 - MEETINGS: Regular meetings of the Executive Committee may be held without call or notice at such times and places as the Executive Committee from time to time may fix. Other meetings of the Executive Committee may be called by any member thereof either by oral, telegraphic or written notice not later than the day prior to the date set for such meeting. Such notice shall state the time and place of the meeting and if by telegraph or in writing shall be addressed to each member at his address as shown by the records of the Secretary. Upon request by any member, the Secretary shall give the required notice calling the meeting. SECTION 4 - QUORUM: At any meeting of the Executive Committee, three (3) members shall constitute a quorum. Any action of the Executive Committee to be effective must be authorized by the affirmative vote of a majority of the members thereof present and, in any event, shall require not less than three (3) affirmative votes. SECTION 5 - RECORD OF MEETINGS: The Executive Committee shall appoint its Secretary who shall keep the minutes of the meetings of the Executive Committee and cause them to be recorded in a book kept at his office for that purpose. These minutes shall be presented to the Board from time to time for their information. ARTICLE V Officers -------- SECTION 1 - ELECTION AND DESIGNATION OF OFFICERS: The executive officers of the Company shall be a Chairman of the Board, a Vice Chairman of the Board, a President, one or more Vice Presidents, a Secretary, a Treasurer and Controller, all of whom shall be elected by the Board at its annual meeting. The Chairman of the Board, the Vice Chairman of the Board or the President shall be the Chief Executive Officer of the Company as shall be determined by the Board of Directors from time to time. There may also be one or more Assistant Secretaries, Assistant Treasurers, Assistant Controllers, and such other officers as may from time to time be elected by the Board. The Chairman of the Board, the Vice Chairman of the Board and the President shall be directors, but no one of the other officers need be a director. Any two (2) or more such offices may be held by the same person, but no officer shall execute, acknowledge, or verify any instrument in more than one capacity, if such instrument is required to be executed, acknowledged, or verified by two (2) or more officers. 11 SECTION 2 - TERM OF OFFICE: VACANCIES: The officers of the Company shall hold office until the next organization meeting of the Board and until their successors are elected, except in case of resignation, death, or removal. The Board, without prejudice to the contract rights of such officer, may remove any officer at any time with or without cause by a two-thirds (2/3) vote of the members of the Board then in office. The Board may fill any vacancy in any office occurring from whatever reason, may delegate to one (1) or more officers any of the duties of any officer or officers and prescribe the duties of any officer. SECTION 3 - CHIEF EXECUTIVE OFFICER - DUTIES: The Chief Executive Officer of the Company shall have general charge of the business affairs, and property of the Company and control over its officers, agents, and employees. He shall, in general, perform all duties and have all powers incident to the position of Chief Executive Officer and shall perform such other duties and have such other powers as from time to time may be prescribed to him by these Bylaws or by the Board of Directors. SECTION 4 - CHAIRMAN OF THE BOARD - DUTIES: The Chairman of the Board shall preside at all meetings of the shareholders and of the Board and shall have such duties and powers as may be prescribed for him from time to time by the Board of Directors. SECTION 5 - VICE CHAIRMAN OF THE BOARD - DUTIES: The Vice Chairman of the Board shall perform such duties as may be prescribed for him from time to time by the Board of Directors or by the Chief Executive Officer of the Company. SECTION 6 - PRESIDENT - DUTIES: The President shall perform such duties as may be prescribed for him from time to time by the Board of Directors or by the Chief Executive Officer of the Company. SECTION 7 - VICE PRESIDENT - DUTIES: Each Vice President shall have the powers and duties incident to that office and shall have such other duties as may be prescribed from time to time by the Board of Directors or Chief Executive Officer. In case of the absence or disability of the President, or when circumstances prevent the President from acting, a Vice President of the Company shall perform all the duties and possess all the authority of the President, and shall have priority in the performance of such duties and exercise of such authority in the order of their election by the Board. Each Vice President may sign and execute on behalf and in the name of the Company bonds, contracts, instruments and documents authorized by the Board. 12 SECTION 8 - SECRETARY - DUTIES: The Secretary shall attend all meetings of the shareholders and of the Board, and act as Secretary thereof and shall keep the minutes thereof in books of the Company provided for that purpose, and when required he shall perform like duties for the standing committees, if any, elected or appointed by the Board; he shall see that proper notice, when required, is given of all meetings of the shareholders and of the Board; he may sign with the Chairman of the Board, Vice Chairman of the Board, the President or any Vice President on behalf and in the name of the Company all contracts and other instruments authorized by the Board or the Executive Committee; he may sign or his facsimile signature may be used to sign certificates for shares of the capital stock of the Company; he shall keep in safe custody the seal of the Company and whenever authorized by the Board or the Executive Committee, shall attest and affix the seal to any contract or other instrument requiring the same; he shall keep in safe custody all contracts and such books, records and other papers as the Board of the Executive Committee may direct, all of which shall, at all reasonable times, be open to the examination of any director, upon application at the office of the Company during business hours, and he shall in general perform all the duties usually incident to the office of Secretary, subject to the control of the Board and the Executive Committee. SECTION 9 - TREASURER - DUTIES: The Treasurer shall have the care and custody of all funds and securities of the Company and deposit such funds in the name of the Company in such bank or banks as the Board or the Executive Committee may designate. The Treasurer is authorized to sign all checks, drafts, notes, bills of exchange, orders for the payment of money and any negotiable instruments of the Company, but no instruments shall be signed in blank. The Treasurer shall disburse the funds of the Company as may be ordered by the Board, the Executive Committee, or the Chief Executive Officer. The Treasurer shall give such bonds for the faithful performance of his duties as the Board or the Executive Committee or the Chief Executive Officer may determine, and shall perform such other duties as may be incident to the office of Treasurer. SECTION 10 - CONTROLLER - DUTIES: The Controller shall keep or cause to be kept books, records and accounts, which, in reasonable detail, accurately and fairly reflect the transactions and disposition of the assets of the Company in conformity with accepted methods of recording economic events and in conformity with generally accepted accounting principles. The Controller shall prescribe policies and procedures necessary to devise and maintain adequate systems of internal accounting controls. The Controller shall at all reasonable times 13 exhibit the books and accounts to any director, and also, provided the Board or Executive Committee or the Chief Executive Officer so orders, to any shareholder of the Company upon application at the office of the Company by such shareholder during business hours; and the Controller shall give such bond for the faithful performance of his duties as the Board or the Executive Committee or the Chief Executive Officer may determine, and shall perform such other duties as may be incident to the office of the Controller. SECTION 11 - OTHER OFFICERS - DUTIES: The Assistant Secretaries, the Assistant Treasurers and Assistant Controllers, if any, in addition to such authority and duties as the Board may determine shall have such authority and perform such duties as may be directed by their respective principal officers. ARTICLE VI Compensation ------------ The Board, by the affirmative vote of a majority of the directors in office, and irrespective of any personal interest of any of them, shall have authority to establish reasonable compensation which may include pension, disability and death benefits, for services to the Company by directors and officers or to delegate such authority to one or more officers and directors. ARTICLE VII Indemnification --------------- The Company shall indemnify any person who is made, or threatened to be made, a party to, or is otherwise involved in, any action, suit or other type of proceeding (whether civil, criminal, administrative or investigative, and whether formal or informal) by reason of the fact that he is or was a director or officer of the Company or, at the request of the Company, is or was serving any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise in any capacity, to the fullest extent permitted by the laws of Florida as from time to time in effect. The Company may, if it so determines in a specific case, indemnify other employees or agents of the Company in the same manner and to the same extent. Expenses (including counsel fees) incurred by an officer or director in defending any pending, threatened, or completed action, suit or other type of proceeding (whether civil, criminal, administrative or investigative, and whether formal or informal) shall be paid by the Company in advance of the determination of such officer's or director's entitlement to indemnification 14 promptly upon receipt of an undertaking by or on behalf of such officer or director to repay amounts so advanced in the event and to the extent that such officer or director is ultimately found not to be entitled to indemnification by the Company as authorized by this Article. Such amounts incurred by other employees and agents may be so paid in advance upon such terms and conditions, if any, as the Board of Directors deems appropriate. The Board of Directors may, upon approval of such officer or director, authorize the Company's counsel to represent such officer or director, in any action, suit or proceeding, whether or not the Company is a party thereto. All rights to indemnification and advances under this Article shall be deemed to be a contract between the Company and each director, officer, employee or agent of the Company who serves or served in such capacity at any time while this Article is in effect. Any repeal or modification of this Article or any repeal or modification of relevant provisions of the Florida General Corporation Law or any other applicable laws shall not in any way diminish any rights to indemnification and to such advances of such director, officer, employee or agent or the obligations of the Company arising hereunder. The provisions of this Article shall inure to the benefit of heirs, executors, administrators and personal representatives of those entitled to indemnification and to such advances and shall be binding upon any successor to the Company to the fullest extent permitted by the laws of Florida as from time to time in effect. The indemnification and advancement of expenses provided by this Article shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement may be entitled under Florida law or any bylaw, agreement, vote of shareholders or disinterested directors or otherwise. Any indemnification or advance required by this Article VII shall be made promptly, and in any event within 30 days, upon the written request of the indemnified party. The right to indemnification or advances as granted by this Article shall be enforceable by the indemnified party in any court of competent jurisdiction if the Company denies such request, in whole or in part, or if no disposition thereof is made within 30 days. The indemnified party's costs and expenses incurred in connection with successfully establishing a right of indemnification or advances, in whole or in part, in any such action shall also be indemnified by the Company. 15 ARTICLE VIII Execution of Contracts, Vouchers, and Negotiable Instruments ------------------------------------ The Board or the Executive Committee may authorize any of the officers of the Company or any other person or persons, either singly or with another such officer or person as said Board or Committee may direct, to sign, on behalf and in the name of the Company, contracts, indentures, deeds, conveyances, leases, declarations, communications and other instruments and documents, and the Board or the Executive Committee may authorize any of the officers of the Company or any other person or persons, either singly or with another such officer or person as said Board or Committee may direct, to sign, on behalf and in the name of the Company, manually or by facsimile signature, checks, drafts, notes, bonds, debentures, bills of exchange and orders for the payment of money. In case any of the officers of the Company who shall have signed, or whose facsimile signature or signatures shall have been used, as aforesaid, upon any such document, instrument or security shall cease to be such officer of the Company before such document, instrument or security shall have been delivered or issued, such document, instrument or security, upon due delivery or issuance thereof, shall be valid and effective as though the person or persons who signed or whose facsimile signature or signatures were used upon such document, instrument, or security had not ceased to be such officer of the Company. ARTICLE IX Authority to Transfer and Vote Securities ----------------------------------------- The Chairman of the Board, the Vice Chairman of the Board, the President, and each Vice President of the Company are each authorized to sign the name of the Company and to perform all acts necessary to effect a transfer of any shares, bonds, other evidences of indebtedness or obligations, subscription rights, warrants, and other securities of another corporation owned by the Company and to issue the necessary powers of attorney for the same; and each such officer is authorized, on behalf of the Company, to vote such securities, to appoint proxies with respect thereto, and to execute consents, waivers, and releases with respect thereto, or to cause any such action to be taken. ARTICLE X Amendments ---------- Except as otherwise provided by law, the Bylaws of the Company may be adopted, altered, amended, or repealed by the Board of Directors, provided, however, the shareholders may repeal, alter, or amend Bylaws adopted by the Board of Directors, may adopt new Bylaws, and may prescribe that any Bylaw made by them may not be altered, amended, or repealed by the Board of Directors. EX-27 3 FDS
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED STATEMENT OF INCOME, THE CONSOLIDATED BALANCE SHEET, AND THE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000205520 Knight-Ridder, Inc. 1,000 U.S. DOLLARS 6-MOS DEC-26-1999 DEC-28-1999 JUN-27-1999 1 24,766 4,047 397,428 16,508 47,494 499,717 1,882,380 812,004 4,176,895 529,060 906,910 0 1,655 1,668 1,796,880 4,176,895 1,580,465 1,580,465 248,815 1,299,318 31,660 11,830 48,802 249,487 100,034 149,453 0 0 0 149,453 1.80 1.53 COST OF GOODS SOLD CONSISTS OF NEWSPRINT, INK, AND SUPPLEMENTS. OTHER EXPENSES CONSISTS OF ALL NON-OPERATING INCOME AND COSTS, NET, EXCLUDING INCOME TAXES. AMOUNT INCLUDES INTEREST EXPENSE, NET OF INTEREST INCOME AND OTHER NON-OPERATING COSTS, NET OF NON-OPERATING INCOME
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