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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED September 24, 1995
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COMMISSION FILE NUMBER 1-7553
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KNIGHT-RIDDER, INC.
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(Exact name of registrant as specified in its charter)
FLORIDA 38-0723657
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(State of Incorporation) (I.R.S. Employer Identification No.)
ONE HERALD PLAZA, MIAMI, FLORIDA 33132
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(Address of principal executive offices)
(305) 376-3800
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(Registrant's telephone number, including area code)
NOT APPLICABLE
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(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
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date. Common Stock, $.02 1/12 Par
Value - 48,514,399 shares as of October 29, 1995.
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Table of Contents for 10-Q
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Page
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Statement of Income 4
Consolidated Balance Sheet 5
Consolidated Statement of Cash Flows 6
Notes to Consolidated Financial Statements 7-8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9-11
PART II. OTHER INFORMATION
Item 6 - Exhibits and Reports on 8-K 12
SIGNATURE 12
Exhibit 11 Statement Re: Computation of Per Share Earnings 13
Exhibit 27 Financial Data Schedule 14
Exhibit 99 Additional Exhibits 15-17
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Consolidated Statement Of Income (Unaudited, in thousands of dollars, except
share data)
<TABLE>
<CAPTION>
Quarter Ended Three Quarters Ended Four Quarters Ended
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Sept. 24 Sept. 25 Sept. 24 Sept. 25 Sept. 24 Sept. 25
1995 1994 1995 1994 1995 1994
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<S> <C> <C> <C> <C> <C> <C>
OPERATING REVENUE
Newspapers
Advertising
Retail $172,606 $182,220 $ 554,482 $ 551,086 $ 795,872 $ 781,011
General 37,729 40,337 132,051 132,871 183,649 177,506
Classified 167,433 155,511 509,922 456,594 659,756 587,110
-------- -------- ---------- ---------- ---------- ----------
Total 377,768 378,068 1,196,455 1,140,551 1,639,277 1,545,627
Circulation 117,549 120,475 363,187 362,790 484,978 483,616
Other 20,658 15,990 59,192 47,192 78,968 62,873
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Total Newspapers 515,975 514,533 1,618,834 1,550,533 2,203,223 2,092,116
Business Information Services 122,019 128,080 381,214 384,493 510,760 495,558
-------- -------- ---------- ---------- ---------- ----------
Total Operating Revenue 637,994 642,613 2,000,048 1,935,026 2,713,983 2,587,674
-------- -------- ---------- ---------- ---------- ----------
OPERATING COSTS
Labor and employee benefits 269,529 269,568 823,608 805,947 1,107,078 1,069,623
Newsprint, ink and supplements 111,295 81,801 314,077 241,113 408,866 328,664
Other operating costs 200,771 178,539 575,483 540,804 777,733 710,460
Depreciation and amortization 37,318 37,428 112,078 111,789 149,616 146,936
-------- -------- ---------- ---------- ---------- ----------
Total Operating Costs 618,913 567,336 1,825,246 1,699,653 2,443,293 2,255,683
-------- -------- ---------- ---------- ---------- ----------
OPERATING INCOME 19,081 75,277 174,802 235,373 270,690 331,991
-------- -------- ---------- ---------- ---------- ----------
OTHER INCOME (EXPENSE)
Interest expense (12,791) (11,394) (37,804) (33,578) (48,811) (45,280)
Interest expense capitalized 496 249 1,107 312 1,269 364
Interest income 2,252 1,510 6,655 4,125 8,600 5,370
Equity in earnings of unconsolidated
companies and joint ventures 5,592 733 13,936 925 20,423 3,948
Minority interests in earnings of
consolidated subsidiaries (2,007) (2,292) (5,990) (7,395) (8,245) (10,327)
Other, net (528) (997) 83,576 248 82,416 421
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Total (6,986) (12,191) 61,480 (35,363) 55,652 (45,504)
-------- -------- ---------- ---------- ---------- ----------
Income before income taxes 12,095 63,086 236,282 200,010 326,342 286,487
Income taxes 5,505 25,843 99,899 82,274 136,795 117,546
-------- -------- ---------- ---------- ---------- ----------
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE 6,590 37,243 136,383 117,736 189,547 168,941
Cumulative effect of change in
accounting principle for contributions (7,320) (7,320)
-------- -------- ---------- ---------- ---------- ----------
Net income $ 6,590 $ 37,243 $ 129,063 $ 117,736 $ 182,227 $ 168,941
======== ======== ========== ========== ========== ==========
EARNINGS PER COMMON AND
COMMON EQUIVALENT SHARE
Income before cumulative effect of
change in accounting principle $ 0.13 $ 0.69 $2.71 $ 2.16 $ 3.70 $ 3.09
Cumulative effect of change in accounting principle (0.15) (0.14)
-------- -------- ---------- ---------- ---------- ----------
Net income $ 0.13 $ 0.69 $ 2.56 $ 2.16 $ 3.56 $ 3.09
======== ======== ========== ========== ========== ==========
DIVIDENDS DECLARED
PER COMMON SHARE $ 0.37 $ 0.37 * $ 1.11 $ 1.09 $ 1.48 $ 1.44
======== ======== ========== ========== ========== ==========
AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING (000s) 49,414 53,825 50,453 54,535 51,213 54,688
======== ======== ========== ========== ========== ==========
</TABLE>
* Excludes dividend of $.37 per common share which was declared June 28, 1994,
and was presented in the interim financial information for the quarter ended
June 26, 1994.
See "Notes to Consolidated Financial Statements" and statistical data on pages
7 and 8.
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Consolidated Balance Sheet (Unaudited, in thousands of dollars, except share
data)
<TABLE>
<CAPTION>
September 24 December 25 September 25
1995 1994 1994
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ASSETS
CURRENT ASSETS
Cash, including short-term cash investments of $150
in 1995, $150 in December 1994 and $1,498
in September 1994 $ 17,653 $ 9,253 $ 15,853
Accounts receivable, net of allowances of $14,053 in
1995, $13,728 in December 1994 and $15,038
in September 1994 310,470 317,687 285,773
Inventories 63,357 39,555 40,278
Other current assets 87,541 56,309 69,764
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Total Current Assets 479,021 422,804 411,668
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INVESTMENTS AND OTHER ASSETS
Equity in unconsolidated companies and joint ventures 307,258 293,205 287,762
Other 242,545 190,515 185,435
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Total Investments and Other Assets 549,803 483,720 473,197
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PROPERTY, PLANT AND EQUIPMENT
Land and improvements 66,918 66,950 66,977
Buildings and improvements 379,967 383,696 378,976
Equipment 1,183,398 1,209,360 1,196,908
Construction and equipment installations in progress 45,236 17,099 18,976
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1,675,519 1,677,105 1,661,837
Less accumulated depreciation 862,050 844,593 827,392
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Net Property, Plant and Equipment 813,469 832,512 834,445
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EXCESS OF COST OVER NET ASSETS ACQUIRED
Less accumulated amortization of $198,514 in 1995,
$182,402 in December 1994 and $176,885 in September 1994 685,635 708,153 712,794
----------- ----------- -----------
Total $ 2,527,928 $ 2,447,189 $ 2,432,104
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 146,830 $ 136,817 $ 115,560
Accrued expenses and other liabilities 109,271 98,993 102,671
Accrued compensation and amounts withheld from employees 87,244 96,917 83,864
Federal and state income taxes 4 1,368 12,722
Deferred revenue 66,494 66,953 63,178
Dividends payable 18,000 19,593 19,789
Short-term borrowings and current portion of long-term
debt 10,008
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Total Current Liabilities 427,843 420,641 407,792
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NONCURRENT LIABILITIES
Long-term debt 593,479 411,504 409,038
Deferred federal and state income taxes 149,816 138,611 150,811
Postretirement benefits other than pensions 165,536 166,682 169,469
Employment benefits and other noncurrent liabilities 101,670 84,264 70,590
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Total Noncurrent Liabilities 1,010,501 801,061 799,908
----------- ----------- -----------
MINORITY INTERESTS IN CONSOLIDATED SUBSIDIARIES 859 833 2,189
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COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common Stock, $.02 1/12 par value; shares authorized -
250,000,000; shares issued - 48,733,249 in 1995,
52,892,720 in December 1994 and 53,502,640 in September 1994 1,015 1,102 1,115
Additional capital 297,674 326,392 331,274
Retained earnings 767,812 897,160 889,826
Unrealized gains on investments 22,224
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Total Shareholders' Equity 1,088,725 1,224,654 1,222,215
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Total $ 2,527,928 $ 2,447,189 $ 2,432,104
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</TABLE>
See "Notes to Consolidated Financial Statements" and statistical data on pages
7 and 8.
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Consolidated Statement of Cash Flows (Unaudited, in thousands of dollars)
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Quarter Ended Three Quarters Ended Four Quarters Ended
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Sept. 24 Sept. 25 Sept. 24 Sept. 25 Sept. 24 Sept. 25
1995 1994 1995 1994 1995 1994
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CASH PROVIDED BY (REQUIRED FOR) OPERATING ACTIVITIES
Net income $ 6,590 $ 37,243 $ 129,063 $ 117,736 $ 182,227 $ 168,941
Noncash items deducted from (included in) income:
Cumulative effect of change in accounting principle 7,320 7,320
Depreciation 26,078 26,819 78,893 80,042 104,627 105,703
Amortization of excess of cost over
net assets acquired 5,521 5,484 16,614 16,339 22,132 21,358
Amortization of other assets 5,719 5,125 16,571 15,408 22,857 19,875
Provision for noncurrent deferred taxes (5) 4,747 (9) 14,832 (12,209) 24,178
Distributions from investees in excess
of (less than) earnings 2,145 (2,749) 5,026 (2,045) (467) (10,621)
Gain on sale of subsidiary (92,698) (92,698)
Other items, net 6,048 8,486 25,800 27,124 43,373 30,650
Change in certain assets and liabilities:
Accounts receivable 1,333 5,442 (3,216) (9,222) (35,129) (17,358)
Inventories (11,610) (759) (23,915) 1,144 (23,192) 7,489
Other current assets (9,719) (12,214) (34,470) (9,473) (22,893) 10,227
Accounts payable 10,377 (16,297) 5,990 (9,379) 26,468 (8,270)
Federal and state income taxes (37,829) (2,251) (1,364) 12,711 (12,717) 17,539
Other current liabilities 25,040 28,803 3,408 24,536 12,675 40,246
-------- --------- --------- --------- --------- ---------
Net cash provided by operating activities 29,688 87,879 133,013 279,753 222,374 409,957
-------- --------- --------- --------- --------- ---------
CASH PROVIDED BY (REQUIRED FOR) INVESTING ACTIVITIES
Additions to property, plant and equipment (24,793) (17,275) (62,126) (47,317) (81,919) (61,644)
Other items, net (11,335) (9,012) 60,999 (49,890) 49,876 (70,438)
-------- --------- --------- --------- --------- ---------
Net cash required for investing activities (36,128) (26,287) (1,127) (97,207) (32,043) (132,082)
-------- --------- --------- --------- --------- ---------
CASH PROVIDED BY (REQUIRED FOR) FINANCING ACTIVITIES
Proceeds from sale of commercial paper
and bank borrowings 156,200 65,107 515,779 272,520 618,567 324,412
Reduction of loan debt (96,930) (103,475) (333,804) (304,549) (444,134) (422,063)
-------- --------- --------- --------- --------- ---------
Net change in total debt 59,270 (38,368) 181,975 (32,029) 174,433 (97,651)
Payment of cash dividends (18,210) (19,849) (56,378) (58,153) (76,167) (77,283)
Sale of common stock to employees 24,220 3,957 41,812 19,674 48,035 29,447
Purchase of treasury stock and stock tendered
under stock option plans (59,101) (13,761) (274,243) (99,621) (311,599) (99,621)
Other items, net (5,141) (554) (16,652) (19,576) (23,233) (28,777)
-------- --------- --------- --------- --------- ---------
Net cash provided by (required for)
financing activities 1,038 (68,575) (123,486) (189,705) (188,531) (273,885)
-------- --------- --------- --------- --------- ---------
Net Increase (Decrease) in Cash (5,402) (6,983) 8,400 (7,159) 1,800 3,990
Cash and short-term cash
Investments at beginning of the period 23,055 22,836 9,253 23,012 15,853 11,863
-------- --------- --------- --------- --------- ---------
Cash and short-term cash
Investments at end of the period $ 17,653 $ 15,853 $ 17,653 $ 15,853 $ 17,653 $ 15,853
======== ========= ========= ========= ========= =========
Working capital at end of the period $ 51,178 $ 3,876 $ 51,178 $ 3,876 $ 51,178 $ 3,876
======== ========= ========= ========= ========= =========
</TABLE>
See "Notes to Consolidated Financial Statements" and statistical data on
pages 7 and 8.
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Notes to Consolidated Financial Statements
(Unaudited)
Note 1 - Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. Operating results for the three month
period and four quarters ended September 24, 1995 are not necessarily
indicative of the results that may be expected for the year ended December 31,
1995. For further information, refer to the consolidated financial statements
and footnotes thereto included in the Registrant Company and Subsidiaries'
annual report on Form 10-K for the year ended December 25, 1994.
The Company adopted the provisions of Financial Accounting Standard (FAS)
115 - "Accounting for Certain Investments in Debt and Equity Securities" for
investments held as of or acquired after January 1, 1994. The Company has
certain equity investments, classified as assets held for sale. These
investments are carried on the balance sheet at fair market value, with the
related unrealized gains (net of tax), reported as a separate component of
shareholders' equity, which resulted in an unrealized gain (net of tax), of
$22.2 million at September 24, 1995.
In the first quarter of 1995, the Company adopted Financial Accounting Standard
(FAS) 116 - "Accounting For Contributions Received and Contributions Made."
The adoption of FAS 116 resulted in a $7.3 million charge (net of tax) to
operations, or $.14 per share, and was recorded as a cumulative effect
adjustment.
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Note 2 - Debt (Unaudited, in thousands of dollars)
<TABLE>
<CAPTION>
Effective
Interest Balance at
Rate at ----------------------------------
Sept. 24 Sept. 24 December 25 Sept. 25
1995 1995 1994 1994
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Commercial paper, net of discount 5.9 % $236,497 $ 54,764 $ 62,393
Notes payable, net of discount (a) 8.5 159,231 159,103 159,060
Debentures, net of discount (b) 10.0 197,751 197,637 197,593
-------- -------- --------
Total debt (c) 8.0 593,479 411,504 419,046
Less amounts classified as current 10,008
-------- -------- --------
Total long-term debt 8.0 % $593,479 $411,504 $409,038
======== ======== ========
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(a) Represents $160 million of 8 1/2% Notes subject to mandatory pro
rata amortization of 25% annually commencing 1998 through maturity
in 2001.
(b) Represents $200 million of 20-year 9 7/8% debentures due in 2009.
(c) At Sept. 24, 1995 and Sept. 25, 1994, interest payments of $31.7
million and $29.5 million had been made for the year-to-date,
respectively.
Note 3 - Income Tax Payments
Income tax payments for the three quarters ended Sept. 24, 1995 and Sept. 25,
1994, were $110.9 million and $45.5 million, respectively.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF THIRD QUARTER
Third Quarter 1995 Compared With Third Quarter 1994
Earnings per share for third quarter 1995 were $.13, down $.56 from the
$.69 per share reported in 1994, due primarily to the impact of the Detroit
strike, which began July 13th and is still in effect. The strike represented
$.50 of the $.56 EPS shortfall. The remainder of the shortfall was due to the
increase in newsprint prices from 1994, costs associated with our efforts to
streamline our financial, purchasing and administrative functions and certain
severance costs. These additional costs were offset by earnings from our equity
investments and the favorable impact of share repurchases. For the year to date,
earnings per share were $2.56, after the cumulative effect of change in
accounting principle for contributions, compared with $2.16 in 1994, an 18.5%
improvement, reflecting the $1.07 gain on the sale of the Journal of Commerce
(JoC), which was recognized in the second quarter of 1995.
Net income for the quarter was $6.6 million, down 82.3% from 1994. For
the year to date, net income was up $11.3 million, or 9.6%, again reflecting the
gain on the sale of the JoC.
Total operating revenue for the quarter was $638.0 million, down 0.7%,
from 1994. Excluding Detroit, total operating revenue was up 3.1% from 1994.
Operating income declined from $75.3 million in 1994 to $19.1 million in 1995.
Operating income, excluding Detroit, was down 20.2% from 1994, primarily as a
result of higher newsprint costs in 1995.
For the year to date, total operating revenue for the quarter rose 3.4%
to $2.0 billion. Operating income was $174.8 million, down 25.7% from 1994.
Total year-to-date operating revenue, excluding Detroit, was up 4.7% from 1994,
but operating income was down 7.7%.
OPERATING REVENUE Newspaper advertising revenue decreased 0.1% from the third
quarter last year, on a full-run ROP linage decrease of 2.4%. Excluding
Detroit, newspaper advertising revenue increased 5.7% from 1994, on a full-run
ROP linage decrease of 1.3%. Year to date, newspaper advertising revenue
increased 4.9% over 1994, on a full-run ROP linage decrease of 0.2%. Newspaper
advertising revenue for the year, excluding Detroit, increased 6.9% from 1994.
Despite the Detroit strike, classified advertising revenue reflected a
7.7% increase over the third quarter last year, on a 1.7% full-run ROP linage
increase. This is the thirteenth consecutive quarter of classified revenue
year-over-year improvement. The employment category showed the largest gain,
posting a 19.3% improvement, with linage up 10.5%. Classified revenue, excluding
Detroit, increased 13.2% from 1994. For the year to date, classified revenue was
up 11.7%, on a 3.3% full-run ROP linage improvement. Excluding Detroit,
classified revenue was up 13.7% for the year.
Retail advertising revenue was $172.6 million, down 5.3%, from last year
on a 6.4% decrease in full-run ROP linage. Excluding Detroit, retail
advertising revenue was up 1.1% from third quarter 1994. Retail revenue was up
0.6% for the year to date on a 3.7% decrease in full-run ROP linage. Retail
revenue, excluding Detroit, was up 2.6% for the year, on a 3.6% decrease in
full-run ROP linage.
General advertising revenue was $37.7 million, down 6.5%, from last year
on a 2.9% decrease in full-run ROP linage. General advertising revenue,
excluding Detroit, was down 3.1% from 1994, on a 1.2% decrease in full-run ROP
linage. For the year to date, general revenue was down 0.6% on a 1.0% rise in
full-run ROP linage. Excluding Detroit, general revenue was up 0.4% for the
year to date, on a 1.5% increase in full-run ROP linage.
Circulation revenue decreased 2.4% to $117.5 million. Circulation
revenue, excluding Detroit, increased 1.4%, due to a 3.3% increase in average
rates, offset by a 1.8% decline in average seven-day circulation. Circulation
revenue was up 0.1%, so far this year. Excluding Detroit, circulation revenue
was up 1.6% for the year to date.
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Other newspaper revenue increased by $4.7 million, or 29.2%. This
improvement resulted primarily from increased newsprint waste revenue and the
growth in augmentation revenue, as a result of continued efforts to augment
traditional newspaper revenue with new related sources of revenue. Other revenue
was up 25.4% for the year to date.
Business Information Services (BIS) operating revenue in the third
quarter declined 4.7% to $122.0 million, reflecting the absence of JoC revenue.
Excluding the JoC, operating revenue would have been up 7.5% from third quarter
1994. Knight-Ridder Financial contributed significantly to the revenue growth,
posting a $5.2 million, or 11.4%, improvement over the prior year. Knight-Ridder
Information operating revenue grew moderately during the quarter, up 4.3% from
1994. BIS revenue was down 0.9% for the year to date, again due to the absence
of revenue from the JoC. Excluding the JoC and acquisitions, operating revenue
would have been up 7.2% for the year to date.
OPERATING COSTS Labor and employee benefit costs were flat with third quarter
1994, on a 4.3% decline in the workforce and a 3.4% increase in average wage
rate, reflecting the Detroit strike impact and the sale of the JoC. For the
year to date, labor and employee benefits rose 2.2%, on a 1.9% decrease in the
work force and a 3.7% increase in average wages.
Newsprint, ink and supplement costs increased $29.5 million, or 36.1%,
on a 4.4% decrease in newsprint consumption and a 47.4% increase in the average
newsprint price. These costs were up 30.3% on a 0.6% decrease in newsprint
consumption and a 34.9% increase in the average newsprint price per tonne.
Newsprint consumption for the quarter and year to date reflected the lower
linage and circulation related to the Detroit strike.
Other operating costs rose 12.5% to $200.8 million from third quarter
1994 and 6.4% for the year to date. The increase resulted primarily from Detroit
strike costs. Excluding Detroit and the JoC, other operating costs increased
1.5% in the third quarter and 3.9% for the year to date. The increase in
operating costs, absent Detroit, was partly due to volume-related costs
associated with BIS operations.
Depreciation and amortization decreased 0.3% from third quarter 1994
primarily due to the JoC sale. Excluding JoC, depreciation and amortization
would have been up 1.3% from third quarter 1994.
NON-OPERATING ITEMS AND INCOME TAXES Interest expense, net of interest income
and interest expense capitalized, increased $408,000 over third quarter 1994,
due to higher debt levels during the quarter. The average debt balance for the
quarter was up $94.9 million from the third quarter of last year, reflecting
the impact of our share repurchase program.
Equity in earnings of unconsolidated companies and joint ventures
increased by $4.9 million and $13.0 million year to date, due primarily to
earnings improvements from our newsprint mill investments, which are benefiting
from the increased newsprint prices over last year.
For the year to date, the "Other, Net" line of the non-operating section
reflects an $83.3 million increase over 1994 as a result of the sale of the JoC,
offset by the reduction in the carrying value of certain investments, primarily
Ponderay Newsprint Company.
The effective tax rate was 45.5%, compared with 41.0% in the third
quarter of 1994, as a result of the strike impact on pre-tax income which
increased the relative mix of non-deductible tax items, primarily goodwill
amortization.
OTHER During the third quarter, Knight-Ridder, Inc., and Lesher Communications,
Inc., reached an agreement for Knight-Ridder to purchase the Lesher business
for $360 million. Lesher, a privately held newspaper company based in Walnut
Creek, Calif., publishes four daily newspapers in contiguous Contra Costa and
eastern Alameda County markets in the East Bay area of northern California. The
purchase closed on Oct. 31st.
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<PAGE> 10
In August, the company announced that it would acquire a 100% interest
in The CARL Corporation, a leading provider of library automation services. In a
related announcement, the company announced that it would acquire total interest
in The UnCover Company, a joint partnership of The CARL Corporation and
Blackwell Limited. Both acquisitions closed in October 1995.
Also in August, the company acquired a minority investment in Teltech
Resource Network Corporation, the leading independent provider of technical
research, analysis and information management services to U.S. industry.
During the third quarter of 1995, the company purchased slightly over
one million shares of Knight-Ridder common stock. The company has remaining
authorization to repurchase 3.7 million shares and plans to repurchase
additional shares should Knight-Ridder stock remain at an attractive price.
The company adopted the provisions of Financial Accounting Standards No.
115, "Accounting for Certain Investments in Debt and Equity Securities" for
investments held as of or acquired after Jan. 1, 1994. The company has certain
equity investments classified as assets held for sale. These investments are
carried on the balance sheet at fair value, with related unrealized gains
reported as a separate component of shareholders' equity.
In the first quarter of 1995, the company adopted Financial Accounting
Standard (FAS) 116 _ "Accounting For Contributions Received and Contributions
Made." The adoption of FAS 116 resulted in a $7.3 million charge to operations,
or $.14 per share cumulative effective adjustment (net of tax).
LIQUIDITY Net cash provided by operating activities decreased to $29.7 million
from $87.9 million in the third quarter of 1994. This was due largely to the
strike-related decrease in operating income, a decrease in federal and state
income taxes due to the timing of federal tax payments for the JoC sale, and
other changes in working capital. Cash and short-term cash investments were up
$1.8 million from Sept. 25, 1994, and up $8.4 million from year end. Total debt
increased $174.4 million from third quarter 1994 and increased $182.0 million
from Dec. 25, 1994. Debt was up due to the repurchase of slightly over one
million shares of the company's stock in the quarter and 5.8 million shares
during the 12 months, offset by the proceeds from the sale of the JoC.
The total-debt-to-total-capital ratio was 35.3%, up from 25.2% at year
end and 25.5% in September 1994. Approximately $264 million in aggregate unused
credit lines remained at the end of the quarter. The ratio of current assets to
current liabilities was 1.1:1 at Sept. 24, 1995, 1.0:1 at Sept. 25, 1994, and
Dec. 25, 1994. The company increased its revolving credit and term loan
agreement, which is used to back up the commercial paper program from $500
milion to $800 million in October 1995.
OUTLOOK FOR THE REMAINDER OF THE YEAR The third quarter of 1995 was a difficult
one for Knight-Ridder because of the financial impact of the Detroit strike. As
we look ahead to the fourth quarter and the year, we believe that classified
advertising revenue will remain sufficiently strong to maintain overall
advertising increases at their current levels. Detroit operating losses will
be substantially reduced in the fourth quarter, positioning us for steady
upward momentum as we look towards 1996. The average price of newsprint
increased about 48% above what was paid in the third quarter of 1994 and will
be up about 50% in the fourth quarter, as the price increases work their way
through our inventory. For the full year, newsprint costs will be held to a
level about 40% above what was paid in 1994. Restructuring at certain
newspapers and BIS companies will also mandate additional severance costs
before the end of the year, but these charges will provide the framework for
substantially more efficient operations moving forward.
BIS Division results, over the balance of the year, will reflect the
absence of the Journal of Commerce, which was sold on April 3rd to The Economist
Group.
-11-
<PAGE> 11
PART II. OTHER INFORMATION
OTHER INFORMATION
Items 1, 2, 3, 4 and 5 are omitted as inapplicable, not required, or because
the information is included in the consolidated financial information.
Item 6 Exhibits and Reports on Form 8-K
a. Exhibits Filed
No. 11 - Statement Re: Computation of Per Share
Earnings
No. 27 - Financial Data Schedule (for SEC use only)
No. 99 - Additional Exhibits
b. Reports on Form 8-K
No reports were filed on Form 8-K during the
quarter ended September 24, 1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
KNIGHT-RIDDER, INC.
(Registrant)
Date November 7, 1995
Gary R. Effren
Vice President/Controller
(Chief Accounting Officer and Duly
Authorized Officer of Registrant)
-12-
<PAGE> 1
COMPUTATION OF PER SHARE EARNINGS EXHIBIT 11
(Unaudited, in thousands, except per share data)
<TABLE>
<CAPTION>
Quarter Ended Three Quarters Ended
--------------------- ---------------------
Sept. 24 Sept. 25 Sept. 24 Sept. 25
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
PRIMARY
Average shares outstanding 49,046 53,567 50,111 54,151
Net effect of dilutive
stock options-based on the
Treasury Stock method using the
average market price 368 258 342 384
------- ------- -------- --------
TOTAL 49,414 53,825 50,453 54,535
======= ======= ======== ========
Income before cumulative effect of
change in accounting principle $ 6,590 $37,243 $136,383 $117,736
Cumulative effect of change in
accounting principle for contributions (7,320)
------- ------- -------- --------
Net Income $ 6,590 $37,243 $129,063 $117,736
======= ======= ======== ========
Earnings per Common and Common Equivalent Share
Income before cumulative effect
of change in accounting principle $ 0.13 $ 0.69 $ 2.71 $ 2.16
Cumulative effect of change in
accounting principle (0.15)
------- ------- -------- --------
Per share amount from net income $ 0.13 $ 0.69 $ 2.56 $ 2.16
======= ======= ======== ========
FULLY DILUTED
Average shares outstanding 49,046 53,567 50,111 54,151
Net effect of dilutive
options - based upon Treasury
Stock method using the higher
of quarter-end or average
market price 423 258 422 416
------- ------- -------- --------
TOTAL 49,469 53,825 50,533 54,567
======= ======= ======== ========
Income before cumulative effect of
change in accounting principle $ 6,590 $37,243 $136,383 $117,736
Cumulative effect of change in
accounting principle for contributions (7,320)
------- ------- -------- --------
Net Income $ 6,590 $37,243 $129,063 $117,736
======= ======= ======== ========
Earnings per Common and Common Equivalent Share
Income before cumulative effect
of change in accounting principle $ 0.13 $ 0.69 $ 2.70 $ 2.16
Cumulative effect of change in
accounting principle (0.15)
------- ------- -------- --------
Per share amount from net income $ 0.13 $ 0.69 $ 2.55 $ 2.16
======= ======= ======== ========
</TABLE>
-13-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENTS OF INCOME, THE CONSOLIDATED BALANCE SHEETS, THE
CONSOLIDATED STATEMENTS OF CASH FLOWS AND THE NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1995
<PERIOD-START> JUN-26-1995 DEC-26-1994
<PERIOD-END> SEP-24-1995 SEP-24-1995
<CASH> 17,653 17,653
<SECURITIES> 0 0
<RECEIVABLES> 324,523 324,523
<ALLOWANCES> 14,053 14,053
<INVENTORY> 63,357 63,357
<CURRENT-ASSETS> 479,021 479,021
<PP&E> 1,675,519 1,675,519
<DEPRECIATION> 862,050 862,050
<TOTAL-ASSETS> 2,527,928 2,527,928
<CURRENT-LIABILITIES> 427,843 427,843
<BONDS> 0 0
<COMMON> 1,015 1,015
0 0
0 0
<OTHER-SE> 1,087,710 1,087,710
<TOTAL-LIABILITY-AND-EQUITY> 2,527,928 2,527,928
<SALES> 637,994 2,000,048
<TOTAL-REVENUES> 637,994 2,000,048
<CGS> 111,295<F1> 314,077<F1>
<TOTAL-COSTS> 618,913 1,825,246
<OTHER-EXPENSES> 6,986<F2> (61,840)<F2>
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 12,791 37,804
<INCOME-PRETAX> 12,095 236,282
<INCOME-TAX> 5,505 99,899
<INCOME-CONTINUING> 6,590 136,383
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 (7,320)
<NET-INCOME> 6,590 129,063
<EPS-PRIMARY> .13 2.56
<EPS-DILUTED> .13 2.55
<FN>
<F1>Cost of goods sold consists of newsprint, ink, and supplements.
<F2>Other Expenses consists of all non-operating costs, excluding income taxes.
Amount includes interest expense net of interest income and other non-operating
costs net of other non-operating income.
</FN>
</TABLE>
<PAGE> 1
KNIGHT-RIDDER, INC. AND SUBSIDIARIES
BUSINESS SEGMENT INFORMATION
(Unaudited, in thousands of dollars)
EXHIBIT 99
<TABLE>
<CAPTION>
Quarter Ended Three Quarters Ended Four Quarters Ended
---------------------- --------------------- ---------------------
Sept. 24 Sept. 25 Sept. 24 Sept. 25 Sept. 24 Sept. 25
1995 1994 1995 1994 1995 1994
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
OPERATING REVENUE
Newspapers $515,975 $514,533 $1,618,834 $1,550,533 $2,203,223 $2,092,116
Business Information Services 122,019 128,080 381,214 384,493 510,760 495,558
-------- -------- ---------- ---------- ---------- ----------
$637,994 $642,613 $2,000,048 $1,935,026 $2,713,983 $2,587,674
======== ======== ========== ========== ========== ==========
OPERATING INCOME
Newspapers $ 29,309 $ 79,293 $ 201,774 $ 249,374 $ 303,256 $ 349,029
Business Information Services 3,643 6,393 13,399 18,962 17,547 26,769
Corporate (13,871) (10,409) (40,371) (32,963) (50,113) (43,807)
-------- -------- ---------- ---------- ---------- ----------
$ 19,081 $ 75,277 $ 174,802 $ 235,373 $ 270,690 $ 331,991
======== ======== ========== ========== ========== ==========
DEPRECIATION AND
AMORTIZATION
Newspapers $ 23,331 $ 23,535 $ 70,805 $ 71,223 $ 94,509 $ 94,684
Business Information Services 13,351 13,470 39,551 39,247 53,018 50,512
Corporate 636 423 1,722 1,319 2,089 1,740
-------- -------- ---------- ---------- ---------- ----------
$ 37,318 $ 37,428 $ 112,078 $ 111,789 $ 149,616 $ 146,936
======== ======== ========== ========== ========== ==========
</TABLE>
-15-
<PAGE> 2
Knight-Ridder, Inc.
Third Quarter Graphs (Unaudited)
<TABLE>
<CAPTION>
THIRD QUARTER NET INCOME THIRD QUARTER EARNINGS PER SHARE
(From continuing operations, in $000s) (From continuing operations)
Year Amount Year Amount
--- ------ ---- ------
<S> <C> <C> <C>
1995 6,590 1995 $0.13
1994 37,243 1994 $0.69
1993 31,251 1993 $0.57
1992 31,392 1992 $0.57
1991 28,300 1991 $0.54
1990 36,588 1990 $0.73
<CAPTION>
THIRD QUARTER TOTAL OPERATING REVENUE THIRD QUARTER NEWSPAPER ADVERTISING REVENUE
(From continuing operations, in $000s) (In $000s)
Year Amount Year Amount
---- ------ ---- ------
<S> <C> <C> <C>
1995 637,994 1995 377,768
1994 642,613 1994 378,068
1993 593,124 1993 351,239
1992 564,854 1992 345,712
1991 544,446 1991 337,794
1990 575,437 1990 381,690
</TABLE>
-16-
<PAGE> 3
Average Circulation - Notes A & B
(Unaudited, in thousands of copies)
<TABLE>
<CAPTION>
Quarter Ended Three Quarters Ended
-------------------------------- ----------------------------------
Sept. 24 Sept. 25 Sept. 24 Sept. 25
1995 1994 Change 1995 1994 Change
---- ---- ------ ---- ---- ------
<S> <C> <C> <C> <C> <C> <C>
Morning Circulation 2,982 3,088 (106) 3,076 3,146 (70)
Evening Circulation 414 452 (38) 436 451 (15)
----- ----- ---- ----- ----- ---
Daily Circulation 3,396 3,540 (144) 3,512 3,597 (85)
===== ===== ==== ===== ===== ===
Sunday Circulation 4,527 4,661 (134) 4,619 4,717 (98)
===== ===== ==== ===== ===== ===
</TABLE>
ADVERTISING STATISTICS (UNAUDITED) - NOTES A, B & C
<TABLE>
<CAPTION>
Quarter Ended Three Quarters Ended
---------------------------------- ------------------------------------
Sept. 24 Sept. 25 Sept. 24 Sept. 25
1995 1994 % Change 1995 1994 % Change
---- ---- --------- ---- ---- ---------
<S> <C> <C> <C> <C> <C> <C>
LINAGE (In thousands of six-column inches)
Full-run ROP
Retail 3,377 3,606 (6.4) 10,486 10,893 (3.7)
General 340 350 (2.9) 1,129 1,118 1.0
Classified 3,664 3,603 1.7 10,808 10,467 3.3
--------- --------- --------- ---------
Total 7,381 7,559 (2.4) 22,423 22,478 (0.2)
========= ========= ========= =========
Factored Part-run ROP 520 455 14.3 1,538 1,303 18.0
========= ========= ========= =========
Full-run Preprint 4,302 3,889 10.6 11,730 11,743 (0.1)
========= ========= ========= =========
Part-run Preprint 4,913 4,239 15.9 12,928 11,921 8.4
========= ========= ========= =========
TOTAL PREPRINTS INSERTED (000s) 1,084,144 1,098,140 (1.3) 3,373,888 3,330,707 1.3
========= ========= ========= =========
</TABLE>
Note A: Average daily circulation, Sunday circulation, and total preprints
inserted reflect volume declines during the Detroit newspaper strike.
Note B: Where necessary, certain previously reported statistics have been
restated to be consistent with measurement guidelines currently in use.
Note C: Factored part-run linage represents linage in zoned editions that is
translated into full-run equivalent linage based on the ratio of the
circulation in a particular zone to the total circulation of the
newspaper.
Knight-Ridder Share Trading
(As quoted by Knight-Ridder Financial Services)
<TABLE>
<CAPTION>
1995 Third Quarter 1994 Third Quarter
------------------------------------------- -----------------------------------------------
Volume High Low Close Volume High Low Close
<S> <C> <C> <C> <C> <C> <C> <C>
5,036,100 59 1/8 55 1/4 58 1/2 9,267,400 54 5/8 49 1/2 51 1/4
</TABLE>
-17-
