UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended DECEMBER 25, 1994 Commission file number 1-7553
KNIGHT-RIDDER, INC.
(Exact name of registrant as specified in its charter)
A Florida corporation NO. 38-0723657
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
One Herald Plaza Miami, Florida 33132
(Address of principal executive offices)
Registrant's telephone number, including area code (305) 376-3800
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock, $.02 1/12 Par Value New York Stock Exchange
Tokyo Stock Exchange
Frankfurt Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
none
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
-3-
<PAGE>
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendments to
this Form 10-K. [ ]
State the aggregate market value of the voting stock held by non-affiliates
of the registrant. (The aggregate market value is computed by reference to the
price at which the stock was sold as of February 26,1995: $2,445,400,722.
Indicate the number of shares outstanding of each of the registrant's classes
of common stock, as of the latest practicable date: February 26, 1995 -
51,479,820 one class Common Stock, $.02 1/12 Par Value
DOCUMENTS INCORPORATED BY REFERENCE
(1) Portions of definitive Proxy Statement dated March 24, 1995, in
connection with the Annual Meeting of Shareholders to be held on May 5, 1995,
are incorporated into Part III.
-4-
<PAGE>
Table of Contents for 1994 10-K
Page
PART I
Item 1. Business 6-40
Item 2. Properties 6-40
Item 3. Legal Proceedings 40-41
Item 4. Submission of Matters to a Vote
of Security Holders 41
PART II
Item 5. Market for Registrant's Common Stock
and Related Stockholder Matters 41-44
Item 6. Selected Financial Data 45-50
Item 7. Management's Discussion and Analysis
of Financial Condition and Results of Operations 51-73
Item 8. Financial Statements and Supplementary Data 43-44,74-106
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 106
PART III
Item 10. Directors and Executive Officers of the Registrant 106-113
Item 11. Executive Compensation 114
Item 12. Security Ownership of Certain Beneficial Owners and
Management 114
Item 13. Certain Relationships and Related Transactions 114
PART IV
Item 14. Exhibits, Financial Schedule and Reports
on Form 8-K 115-117
SIGNATURES 118-122
SCHEDULES 123-125
EXHIBITS 126-162
-5-
<PAGE>
PART I
ITEM 1 & 2: Business/Properties
<TABLE>
Business Segment Information
(In thousands)
<CAPTION>
1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
OPERATING REVENUE
Newspapers $2,134,922 $2,012,823 $1,944,090
Business Information Services 514,039 438,525 385,439
--------- --------- ---------
$2,648,961 $2,451,348 $2,329,529
========= ========= =========
OPERATING INCOME
Newspapers $350,856 $298,767 $ 290,522
Business Information Services 23,110 23,405 22,069
Corporate (42,705) (37,315) (34,080)
--------- --------- ---------
$331,261 $284,857 $ 278,511
========= ========= =========
IDENTIFIABLE ASSETS
Newspapers $1,553,160 $1,578,935 $1,602,373
Business Information Services 589,147 548,266 466,456
Corporate 304,882 304,231 389,230
--------- --------- ---------
$2,447,189 $2,431,432 $2,458,059
========= ========= =========
DEPRECIATION AND AMORTIZATION
Newspapers $94,927 $94,600 $ 88,033
Business Information Services 52,714 45,525 38,556
Corporate 1,686 1,633 1,632
--------- --------- ---------
$149,327 $141,758 $ 128,221
========= ========= =========
-6-
<PAGE>
CAPITAL EXPENDITURES
Newspapers $32,896 $27,971 $ 74,213
Business Information Services 33,470 40,329 25,991
Corporate 744 1,241 789
--------- --------- ---------
$67,110 $69,541 $ 100,993
========= ========= =========
</TABLE>
----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Source Of Knight-Ridder Operating Revenue 1994 1993 1992
----------------------------------------- ---- ---- ----
<S> <C> <C> <C>
The Philadelphia Inquirer and
Philadelphia Daily News.................... 17% 18% 18%
The Miami Herald............................... 12 13 12
San Jose Mercury News.......................... 9 9 9
Detroit Free Press*............................ 9 9 9
The Charlotte Observer......................... 5 5 5
Saint Paul Pioneer Press....................... 4 4 4
Akron Beacon Journal........................... 3 3 3
(Long Beach) Press Telegram.................... 2 2 3
The (Columbia) State........................... 2 2 3
The Wichita Eagle.............................. 2 2 3
All other newspapers........................... 16 15 15
Business Information Services.................. 19 18 16
---- ---- ----
100% 100% 100%
==== ==== ====
*Knight-Ridder portion of Detroit Newspapers
</TABLE>
-7-
<PAGE>
Newspapers
Knight-Ridder's Newspaper Division had 28 daily newspapers and three
nondaily newspapers at the end of 1994. The Journal of Commerce, the
company's 29th daily, is part of the Business Information Services Division.
Newspaper operating revenue is derived primarily from the sale of
newspaper advertising. Due to seasonal factors such as heavier retail selling
during the winter and spring holiday seasons, advertising income fluctuates
significantly throughout the year. Consecutive quarterly results are not
uniform or comparable and are not indicative of the results over an entire
year.
Each of Knight-Ridder's newspapers is operated on a substantially
autonomous basis by local management appointed by corporate headquarters in
Miami. Each newspaper is free to manage its own news coverage, set its own
editorial policies and establish most business practices. Basic business
policies, however, are set by the corporate staff in Miami. Editorial
services and quality control also are provided by the corporate staff.
Each newspaper is served by the company-owned news bureau in Washington,
D.C. A supplemental news service provided by KRT Information Services, a
partnership between Knight-Ridder and Tribune Co., distributes editorial
material produced by all Knight-Ridder newspapers and by 19 foreign
correspondents. The service also distributes editorial computer graphics via
the Knight-Ridder-owned PressLink electronic network and provides a deadline
photo service to hundreds of newspapers around the world as a commercial
venture.
All of the company's newspapers compete for advertising and readers'
time and attention with broadcast and cable television, radio, magazines,
nondaily suburban newspapers, free shoppers, billboards and direct mail. In
many cases, the newspapers also compete with other newspapers published in
nearby cities and towns. With the exception of papers published in Detroit,
Fort Wayne and St. Paul, company-owned newspapers are the only daily and
Sunday papers of general circulation published in their communities.
The newspapers rely on local sales operations for local retail and
classified advertising. The larger papers are assisted by Newspapers First
and by the Newspaper National Network, a sales force created by a group of
some 50 major newspapers, in obtaining national or general advertising in
such areas as travel, automobiles, cigarettes, pharmaceuticals and beer.
The table on the preceding page presents the relative percentage
contributions by individual papers to the company's overall operating revenue
for the three years ended Dec. 25, 1994. The percentage contributions of each
paper to operating revenue are not indicative of contributions to operating
profit.
-8-
<PAGE>
NEWSPRINT : Newsprint is the primary raw material used in publishing
newspapers, and in 1994, Knight-Ridder was one of the largest consumers in
the United States. Approximately 12.3% of the company's total operating
expenses during the year were for newsprint. Purchases are made under
long-term agreements with a wide variety of newsprint producers.
Knight-Ridder purchases approximately 70% of its annual consumption from
United States mills, with the remainder purchased from Canada. In the opinion
of management, sources are adequate to meet current demands.
Approximately 76% of the newsprint consumed by the company contained
some recycled fiber; the average content was 47% recycled fiber.
A tightening market is anticipated for 1995 and the foreseeable future.
This tightened market will allow prices to increase dramatically for 1995.
Knight-Ridder is a one-third partner with Cox Enterprises, Inc., and
Media General, Inc., in Southeast Paper Manufacturing Co., a newsprint mill
in Dublin, Ga. The mill's full capacity exceeds 445,000 metric tonnes of
newsprint annually, using recycled newsprint as the principal raw material
and coal as the primary energy source. Because of recycling considerations
and as part of an agreement among the partners, Knight-Ridder purchased
approximately 125,000 metric tonnes in 1994. The partnership commitment is to
purchase a major share of any unsold surplus up to a maximum annual total of
90,000 metric tonnes.
In addition, Knight-Ridder owns a 13.5% equity share of Ponderay
Newsprint Company in Usk, Wash., which produces approximately 225,000 metric
tonnes annually. Knight-Ridder purchases approximately 28,400 metric tonnes
annually from Ponderay for its western newspapers.
PROPERTIES: The company has daily newspaper printing and publishing
facilities in 26 cities located in 16 states. These production facilities
vary in size from 7,300 square feet at The Florida Keys Keynoter operation in
Marathon, Fla., to 2.0 million square feet in Philadelphia. In total, the
company's newspaper facilities occupy about 8.6 million square feet.
Approximately 1.6 million of the total square feet is leased from others.
Virtually all the owned property is owned in fee. The company owns
substantially all of its production equipment, although certain office
equipment is leased. The company also owns land for future expansion in
Columbus and Macon, Ga., Detroit and San Jose.
The company's properties are maintained in excellent operating condition
and are suitable for present and foreseeable publishing operations. During
the three years ended Dec. 25, 1994, the company spent approximately $237.6
million for capital additions and improvements to its existing properties.
-9-
<PAGE>
TECHNOLOGY: Knight-Ridder moved ahead with a number of technology
initiatives in an ongoing effort to improve the quality of products and
services. The company made significant investments in replacing outdated
publishing systems. A new editorial and ad production system was installed in
Duluth. Long Beach completed installation of new editorial and classified
systems, and is now in the process of implementing full pagination. State
College began installation of new editorial and ad production systems, and
Wichita received approval to purchase new editorial, classified, ad
production and pagination systems.
PressLink Explorer was launched in October, allowing users to rapidly
browse, search and access downloaded material while working within another
application, such as QuarkXPress.
A multiyear effort to migrate all newspapers to state-of-the-art RISC
(Reduced Instruction Set Computing) technology was completed. Programming was
completed on a project to enhance Collier-Jackson's circulation software.
Installation of the system, which provides more than 100 new features, will
begin in 1995.
Support for flexible employee benefits was completed and went live on
the CYBORG Human Resources System Jan. 1, 1994. Conversion of local HR
systems to CYBORG is expected to be completed in 1995.
The Charlotte Observer press expansion project remains on schedule. Ink
and washwater systems have been installed and minor construction has begun.
The two new presses are scheduled to be operational in the fourth quarter of
1995 and the second quarter of 1996.
The company made investments to upgrade press equipment in a number of
our newspaper operations. The Tallahassee Democrat and The (Milledgeville)
Union-Recorder each added an additional press unit to their press line.
Funding was approved to rebuild the commercial printing presses at the
Bradenton Herald and The Union-Recorder.
During 1994, formal quality audits were completed for all of our
newspapers. Audits included review of standard procedures, calibration of
equipment, printing press tests, recommendations and appropriate follow-up.
Major improvements were made to the facilities of many of our
newspapers, including newsroom renovations at The Miami Herald and the
Post-Tribune in Gary. The San Jose Mercury News will undertake a building
renovation project in 1995 to improve areas of the newsroom, advertising and
circulation. Knight-Ridder Information, Inc., (formerly Dialog Information
Services, Inc.) moved into a headquarters office facility in early 1995.
-10-
<PAGE>
GENERAL ADVERTISING SALES: Knight-Ridder newspapers depend most heavily
on three agents for the sale of general advertising.
Newspapers First is an advertising sales cooperative formed in 1990 with
the merger of Knight-Ridder Newspaper Sales and Times Mirror Million Markets.
In 1994, Times Mirror withdrew from the arrangement, leaving Newspapers First
the primary sales representative for the larger Knight-Ridder newspapers,
Detroit Newspapers and several leading independents. Through Newspapers
First, a customer can place an ad in a combination of papers owned by
different companies, rather than dealing with each one separately.
Newspaper National Network (NNN), Knight-Ridder's second general sales
agent, was established last year as a three-year experiment in focused
national selling on behalf of the newspaper industry. It represents all the
Knight-Ridder newspapers, plus over 500 others. Like Newspapers First, it
makes the purchase of newspaper advertising a "one-stop shopping" prospect;
the agent handles placement and billing. Through NNN, the industry hopes to
rekindle interest among certain categories of general advertisers who have
not been in newspapers in a significant way for years (i.e., pharmaceuticals,
beverages). Currently, about $80 billion annually is spent in general
measured media; newspapers get no more than 5% of that - and would like to do
better.
The primary difference between Newspapers First and NNN insofar as
Knight-Ridder papers are concerned is the degree of attention: Newspapers
First is focused on a relatively few papers and can provide each of them with
considerable care. While it will go after the same new revenue as NNN, it
will do whatever else benefits its members as well. NNN, by dint of its large
membership, is necessarily spread more thinly - but is more closely focused
on expanding the revenue base.
Knight-Ridder's third agent for general sales is Landon Associates,
Inc., a private company that sells sales-representative services for medium
to small markets. In addition to helping with general buys for our medium to
small newspapers, Landon will help with regional retail.
The Miami Herald
The Miami Herald, the only metropolitan morning newspaper published in
Dade County, Fla., has the largest circulation of any daily newspaper in the
southeastern United States. Circulated primarily in Dade County (Miami
Metropolitan Statistical Area) and in adjacent Broward and Monroe counties,
The Herald also has considerable circulation elsewhere in Florida.
-11-
<PAGE>
In 1994, The Herald produced six daily and eight Sunday editions and
seven zoned Neighbors editions and four zoned Hometown Herald editions twice
weekly, and four local zoned news sections serving Dade, Broward, Palm Beach
and Monroe counties. The Herald added five new customized, cable-specific TV
books in Dade and Broward. The Herald's International edition was distributed
daily in 30 cities throughout Latin America and the Caribbean.
El Nuevo Herald, The Herald's Spanish-language publication, marked its
seventh anniversary. Since its inception in 1987, El Nuevo Herald's
circulation has grown to 100,973 daily and 126,057 Sunday. It is available on
request for Herald home-delivery customers for a 10-cent daily delivery
charge and in special racks in nearby counties.
In 1994, South Florida's economy pushed ahead of national trends and
grew slightly due to the lingering impact of Hurricane Andrew. Retail and
classified revenue stayed ahead of last year's hurricane-recovery pace,
fueled by national accounts, department stores, financial institutions and
travel in retail; real estate in classified. Most categories continued to
perform well. New retailers who opened or plan to open stores in South
Florida include Incredible Universe, Dillard's and Best Buy. With advertiser
input, The Herald began a zoned tabloid real estate section in May that
increased linage by 37.5%. That same month, The Herald hired 16
commission-only sales associates. By year end, that group had generated $1.0
million in new business.
The Herald continued its commitment to developing new, nontraditional
revenue sources. Book titles included The 1994 Almanac of Florida Politics,
Enchanted Ground and Crime Proof. The company also sponsored its second
successful International Women's Show.
Population in Dade and Broward counties grew 2.9% from 1990 to 1993, the
latest year for which statistics are available. The area's population is
expected to grow 42.2% between 1993 and 2015, compared with the U.S. average
of 22.9%.
Daily circulation declined by 6,008, or 1.5%, and Sunday circulation
decreased 8,193, or 1.6%, compared with the previous year. In Dade County,
The Herald's daily circulation household penetration rate in 1994 was 36%;
Sunday circulation penetration was 47%. Daily coverage of Broward households
was 18%; Sunday coverage was 22%. Home-delivered papers accounted for 73% of
total daily circulation and 64% of total Sunday circulation.
Cox Newspapers and The Miami Herald Publishing Co. are parties to a
joint operating agreement that runs until the year 2021, covering the
publication of The Herald and The Miami News, which ceased publication Dec.
31, 1988.
-12-
<PAGE>
This table presents average audited circulation for The Miami Herald and
El Nuevo Herald for the years ended June 26, 1994, 1993 and 1992. Advertising
linage, preprints inserted and revenue amounts are for the fiscal years.
Largest contributor
to Knight-Ridder profits.
1994 revenue - $317.0 million
1993 revenue - $306.9 million
Metro Market* - 9th-largest in U.S.
Population* - 3.3 million
Penetration:*
Daily 27.9% - Sunday 35.9%
*(Miami-Fort Lauderdale)
<PAGE>
<TABLE>
The Miami Herald
<CAPTION>
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Average Circulation
Daily........................................ 395,725 401,733 405,779
Sunday....................................... 518,038 526,231 527,658
Average Linage (In 000s of six-column inches)
ROP Full-Run
Retail...................................... 1,101.0 1,100.7 1,022.6
General..................................... 245.5 225.4 257.7
Classified.................................. 1,016.0 999.7 914.1
------- ------- -------
Total...................................... 2,362.5 2,325.8 2,194.4
======= ======= =======
ROP Factored
Part-Run.................................... 644.8 675.3 566.4
Preprints- Full-Run......................... 650.4 667.7 669.7
Part-Run......................... 1,622.9 1,265.3 987.6
Total Preprints Inserted (In 000s)............. 595,671 571,914 520,200
-13-
<PAGE>
Advertising Revenue (In 000s)
Retail....................................... $ 116,461 $ 112,878 $ 110,665
General...................................... 42,622 38,911 43,154
Classified................................... 100,354 97,483 85,618
------- ------- -------
Total........................................ $ 259,437 $ 249,272 $ 239,437
======= ======= =======
Circulation Revenue (In 000s).................. $ 48,467 $ 48,603 $ 48,473
======= ======= =======
</TABLE>
-14-
<PAGE>
San Jose Mercury News
The San Jose Mercury News, located in California's seventh-largest metro
area, reaches a much larger community than the businesses and homes of the
Silicon Valley. Under the guidance of new publisher Jay Harris, the Mercury
News continues to break new ground in information technology, marketing and
journalistic excellence.
Mercury Center, which carries the newspaper's full editorial content to
subscribers through an online computer service, in 1994 developed a World
Wide Web site on the Internet and introduced a low-cost personalized
electronic clipping service. The World Wide Web makes Mercury Center
accessible to any computer user on the Internet, even if the user is not a
member of a commercial online service - tremendously increasing the number of
potential users. NewsHound, an online clipping service, uses a profile of
keywords entered by a subscriber to search thousands of articles from the
Mercury News and wire services. Stories that match the profile are retrieved
as electronic mail.
Melding technology with community service and event marketing, the
Mercury News launched the Electronic Learning Fair (ELF) in December. ELF
provided a hands-on glimpse of how technology can enhance education.
Attracting such well-known corporate sponsors as Microsoft, Intel and Apple,
ELF drew thousands to view equipment and software demonstrated by students
whose schools shared in the event proceeds.
In October, the Mercury News became the first U.S. newspaper to open a
bureau in post-war Vietnam. Correspondent Kristin Huckshorn reports news from
the homeland of some 90,000 Vietnamese-Americans living in the San Jose area.
Huckshorn joins Pulitzer-winner Lew Simons in Tokyo and Esther Schrader in
Mexico City in covering areas of vital interest to the multicultural Bay Area
population and to the international businesses of the Pacific Rim.
Another initiative in 1994 involved a team approach to developing and
launching new revenue-generating products. The Mercury News Revenue Team
researched success stories at newspapers across the country, then distilled
the results into an eight-point plan. The revenue growth will more than
offset the substantial increase in newsprint costs in 1995 and lead to
continued positive financial performance in San Jose, where circulation and
advertising showed solid growth throughout the year.
The population of the San Jose Metropolitan Statistical Area (MSA),
which includes only Santa Clara County, is expected to grow 33.5% between
1993 and 2015, compared with the U.S. average of 22.9%.
Daily circulation increased by 6,096, or 2.2%, and Sunday circulation
increased 5,971, or 1.8%, compared with 1993.
-15-
<PAGE>
The following table presents average unaudited circulation for the year
ended Sept. 30, 1994, and average audited circulation for San Jose for the
two years ended Sept. 30, 1993, and 1992. Advertising linage, preprints
inserted and revenue amounts are for the fiscal years.
Second-largest contributor
to Knight-Ridder profits.
1994 revenue - $230.1 million
1993 revenue - $212.9 million
Metro Market - 31st-largest in U.S.
Population - 1.6 million
Penetration (MSA):
Daily 44.2% - Sunday 52.9%
<TABLE>
San Jose Mercury News
<CAPTION>
1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
Average Circulation
Daily............................................. 284,414 * 278,318 269,286
Sunday............................................ 345,494 * 339,523 332,080
Average Linage (In 000s of six-column inches)
ROP Full-Run
Retail....................................... 1,178.7 1,144.3 1,183.0
General...................................... 263.6 252.1 255.5
Classified................................... 1,368.4 1,315.3 1,299.1
--------- --------- ---------
Total.................................... 2,810.7 2,711.7 2,737.6
========= ========= =========
ROP Factored
Part-Run..................................... 44.8 50.9 49.3
Preprints - Full-Run......................... 1,528.5 1,561.8 1,664.8
Part-Run......................... 833.0 602.2 1,583.8
Total Preprints Inserted (In 000s).................... 431,493 434,877 471,794
-16-
<PAGE>
Advertising Revenue (In 000s)
Retail............................................ $ 72,816 $ 70,490 $ 73,047
General........................................... 22,286 21,406 20,622
Classified........................................ 98,950 88,083 82,556
--------- --------- ---------
Total........................................ $ 194,052 $ 179,979 $ 176,225
========= ========= =========
Circulation Revenue (In 000s)......................... $ 32,851 $ 30,502 $ 29,566
========= ========= =========
*unaudited
</TABLE>
-17-
<PAGE>
The Philadelphia Inquirer and Philadelphia Daily News
Philadelphia Newspapers, Inc., publisher of The Philadelphia Inquirer
and Philadelphia Daily News, strengthened its core business with reader- and
advertiser-related improvements to both newspapers, while also pursuing new
media opportunities.
The Inquirer introduced a new Sports Final street-sales edition with
later sports scores, more prominent Page One headlines and more photographs.
The new edition, aimed at single-copy purchasers throughout the city,
followed the successful introduction of a second daily zoned section for
suburban readers in the Main Line/Delaware County area.
The new Sports Final, tighter zoning, enhanced sectioning capabilities
and improved use of color are improvements for customers made possible by
Philadelphia's new printing plant.
The Inquirer introduced a Health and Science section that features an
expanded Kids Talk column answering science questions from young readers.
Readers can communicate directly with the newspaper by e-mail.
The Inquirer also introduced a new 30-minute weekly television program,
The Inquirer High School Sportshow, on WPHL-TV. The program features coverage
of more than 300 regional high school sports teams. WPHL-TV is the same
station on which KR Video's new nightly Inquirer News Tonight is broadcast.
The Philadelphia Daily News, a tabloid noted for its clever headlines,
strong sports, local news and entertainment coverage, and for its attractive
use of color, continued to show strength as a principally single-copy-sales
newspaper. The Daily News reaches young people in their own language with the
weekly Fresh Ink section, which has strong youth involvement in the content.
In 1994, the newspaper added a monthly, free-standing, advertising-supported
70,000-copy edition of Fresh Ink for free distribution in malls and other
locations.
Car shoppers can now reach the classifieds by calling AutoLine and
specifying the year, make and model, and color of the used car they're
seeking. Response can be delivered by telephone, fax or e-mail.
To ensure that The Inquirer and Daily News become full participants in
the multimedia future, a group of PNI managers worked to develop a strategy
for involvement in online services and other electronic information services.
PNI entered the show marketing business in 1994 as part of its
augmentation strategy with a highly successful International Women's Show
presented in the new Pennsylvania Convention Center. Attendance far exceeded
expectations, and vendors requested a 1995 show. A first-time home decor show
also was successful and will be repeated in 1995.
-18-
<PAGE>
The Inquirer's daily circulation was down 16,137, or 3.2%, from 1993.
Sunday circulation was down 19,441, or 2.0%, from 1993, according to
unaudited ABC reports. Daily News circulation was up 3,673, or 1.9%, from
1993.
The following table presents the average unaudited circulation for The
Philadelphia Inquirer and Philadelphia Daily News for the year ended March
31, 1994, and average audited circulation for the years ended March 31, 1993,
and 1992. Advertising linage, preprints inserted and revenue amounts are for
the fiscal years.
Third-largest contributor
to Knight-Ridder profits.
1994 revenue - $455.5 million
1993 revenue - $431.5 million
Metro Market - 4th-largest in U.S.
Population - 5.0 million
Penetration (MSA):
Inquirer 24.6% Daily News 10.3%
Sunday 47.2%
-19-
<PAGE>
<TABLE>
The Philadelphia Inquirer and Philadelphia Daily News
<CAPTION>
1994 1993 1992
---------------------------- ---------------------------- --------------------------
Inquirer Daily News Inquirer Daily News Inquirer Daily News
--------- ---------- --------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Average Circulation
Daily............................... 486,291 * 198,809 * 502,428 195,136 502,136 196,715
Sunday.............................. 945,491 * 964,932 976,223
Average Linage (In 000s of six-column
inches)
ROP Full-Run
Retail......................... 1,055.1 338.3 1,056.0 368.3 1,029.8 348.4
General........................ 227.2 67.7 203.9 44.5 210.2 46.1
Classified..................... 827.3 325.6 760.7 311.4 788.8 315.9
--------- ---------- --------- ---------- --------- ----------
Total...................... 2,109.6 731.6 2,020.6 724.2 2,028.8 710.4
========= ========== ========= ========== ========= ==========
ROP Factored
Part-Run....................... 91.8 93.1 79.0
Preprints - Full-Run........... 324.3 6.5 287.1 41.0 327.1 59.3
Part-Run........... 2,001.8 58.0 1,932.7 51.0 1,630.2 111.2
Combined Combined Combined
-------- -------- --------
Total Preprints Inserted (In 000s)...... 762,601 752,429 787,440
Advertising Revenue (In 000s)
Retail.............................. $152,096 $148,082 $145,485
General............................. 56,660 49,119 50,845
Classified.......................... 113,885 101,284 98,687
------- ------- -------
Total...................... $322,641 $298,485 $295,017
======= ======= =======
Circulation Revenue (In 000s)........... $128,238 $128,801 $126,738
======= ======= =======
* unaudited -20-
</TABLE>
<PAGE>
The Charlotte Observer
The Charlotte Observer, the only daily newspaper published in
Mecklenburg County, has the largest circulation of any daily in North and
South Carolina. Its primary market is a 15-county region in North and South
Carolina. It also distributes in major metropolitan and vacation areas across
the Carolinas.
In 1994, The Observer produced four daily and Sunday editions. It also
published four zoned Mecklenburg Neighbors sections twice weekly; two zoned
daily and Sunday sections; two twice-weekly zoned sections; and two
thrice-weekly sections.
Charlotte expects to continue the healthy growth it experienced in 1994.
Employment growth in the first eight months of 1994 was 2.5% over the
comparable period in 1993. Unemployment was below national and state
averages. Retail sales in Mecklenburg County were up 9.4% through June 1994,
the latest date for which figures were available. Retail sales in key
regional counties also showed healthy growth.
The success of the NBA Charlotte Hornets and the awarding of the NFL
Carolina Panthers franchise (which begins play in 1995) have brought
increased national attention. Diversified economic development is expected to
continue at a strong pace through 1995 with several more large-scale new
companies arriving. In 1994, Sealand, Transamerica Insurance and General Tire
announced plans to relocate corporate offices to Charlotte.
-21-
<PAGE>
The Observer published two weekly tabloids - Break Magazine, aimed at
the entertainment market, and Employment Weekly. Four monthly publications -
Lake Norman Magazine, University City Magazine, Realtor Reflections Magazine
and Community Pride Magazine - target specific audiences. Foothills Magazine
publishes 15 issues per year. In 1995, The Observer will introduce The
Insider's Guide to the North Carolina Mountains.
The Observer's alternate delivery operation, KPCDelivery, provides
targeted delivery of retail advertising and samples across Mecklenburg
County. Its commercial research business, KPC Research, provides market
research services. KPC Photography provides a wide range of commercial
photography services. Observer Transportation Co., a subsidiary, is a common
carrier trucking firm that delivers The Observer across the Carolinas and
provides general commodity service to much of the Southeast.
In 1994, The Observer began a $35.0 million press conversion to expand
its color capacity and convert to 100% Flexographic printing.
Population in the Charlotte Metropolitan Statistical Area (MSA) grew
6.2% from 1990 to 1993. The area's population is expected to grow 33.7%
between 1993 and 2015, compared with the U.S. average of 22.9%.
Daily circulation increased by 2,566, or 1.1%, and Sunday circulation
increased 3,719, or 1.2%, compared with the previous year. Home-delivered
newspapers accounted for 86.2% of total daily circulation and 74.9% of total
Sunday circulation.
This table presents average audited circulation for The Charlotte
Observer for the years ended March 27, 1994, 1993 and 1992. Advertising
linage, preprints inserted and revenue amounts are for the fiscal years.
Fourth-largest contributor to Knight-Ridder profits.
1994 revenue - $132.2 million
1993 revenue - $121.5 million
Metro Market - 43rd-largest in U.S.
Population - 1.3 million
Penetration (MSA):
Daily 36.9% Sunday 45.2%
-22-
<PAGE>
<TABLE>
The Charlotte Observer
<CAPTION>
1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
Average Circulation
Daily............................................. 234,860 232,294 231,722
Sunday............................................ 302,595 298,876 297,548
Average Linage (In 000s of six-column inches)
ROP Full-Run
Retail....................................... 790.1 770.1 791.2
General...................................... 82.3 66.4 64.8
Classified................................... 665.8 616.1 606.5
--------- --------- ---------
Total.................................... 1,538.2 1,452.6 1,462.5
========= ========= =========
ROP Factored
Part-Run..................................... 223.2 230.2 225.3
Preprints - Full-Run......................... 223.6 210.9 217.0
Part-Run......................... 692.7 754.7 707.1
Total Preprints Inserted (In 000s).................... 261,052 247,702 221,791
Advertising Revenue (In 000s)
Retail............................................ $ 51,295 $ 48,585 $ 47,663
General........................................... 8,316 6,948 6,643
Classified........................................ 43,539 38,125 35,920
--------- --------- ---------
Total........................................ $ 103,150 $ 93,658 $ 90,226
========= ========= =========
Circulation Revenue (In 000s)......................... $ 24,611 $ 24,084 $ 23,661
========= ========= =========
</TABLE>
-23-
<PAGE>
Detroit Free Press
The Detroit Free Press in 1994 continued its long tradition of serving
readers across Michigan through public service journalism, youth literacy and
high-tech presentations of information.
An extraordinary six-part series, Our Values, Our Lives, set the tone
for the year. Thousands of readers called and wrote to share their views.
Children First continued its 2-year-old campaign to focus attention on
children's needs.
Free Press Plus, a phone, fax and computer medium for reaching the
newspaper, attracted more than 10,000 members to its area on CompuServe.
Users can subscribe to the paper, write letters to the editor, read articles
and view photographs. Free Press Plus has begun combining video clips with
text and graphics to create downloadable multimedia documents.
In July, Detroit Newspapers began side-by-side production and
distribution of the outstate and single-copy editions of the Detroit Free
Press and The Detroit News. Home delivery of The News is restricted to the
afternoon edition. The side-by-side plan has produced significant operational
savings, primarily in transportation costs. Since the change, The News has
recorded slight gains in the outlying state area.
Single-copy price for the Free Press in the six-county Metropolitan
Statistical Area (MSA) remained at 35 cents daily; daily home delivery prices
remained at 25 cents. Sunday single-copy prices and home delivery prices for
weekend-only subscribers increased from $1.25 to $1.50 in March 1994.
The Detroit Free Press is the largest newspaper in Michigan. More than
78% of its daily circulation is in the six-county Detroit metro area, which
contains 45.4% of the state's population.
On Nov. 27, 1989, business operations of the Free Press and The Detroit
News, owned by Gannett Co., were transferred to the Detroit Newspaper Agency
(DNA), now called Detroit Newspapers - a partnership owned equally by the
Detroit Free Press and The Detroit News under the terms of a joint operating
agreement (JOA) between Knight-Ridder and Gannett. Under the agreement, the
Free Press publishes in the morning, Monday through Friday. The News,
formerly an all-day paper, publishes on an afternoon cycle. On weekends, the
newspapers publish combined morning editions under the name The Detroit News
and Free Press. On Saturdays, the Free Press provides news, sports and
business and The News provides features. On Sundays, those roles reverse.
-24-
<PAGE>
Knight-Ridder received 45% of any profit of the agency through the first
three years, with Gannett receiving 55%. In the fourth year, Knight-Ridder
received 47% of the DNA profit and, beginning Dec. 27, 1993, received 49%. As
of Dec. 26, 1994, profits are split equally through the end of the 100-year
JOA.
Average audited circulation of just under 1.2 million ranked the Sunday
Detroit News and Free Press third in the nation. Free Press daily circulation
decreased by 23,756, or 4.1%, while Detroit News daily circulation declined
31,901, or 8.1%. Sunday circulation decreased 10,247, or 0.9%, compared with
the previous year.
The following table shows average audited circulation for the years
ended March 31, 1994, 1993 and 1992. Advertising linage, preprints inserted
and revenue amounts are for the fiscal years.
Fifth-largest contributor
to Knight-Ridder profits.*
1994 revenue* - $228.7 million
1993 revenue* - $214.3 million
Metro Market - 6th-largest in U.S.
Population - 4.3 million
Penetration (MSA):
Free Press 27.2%
Detroit News 20.0%
Sunday 59.9%
*(Knight-Ridder portion of the
Detroit Newspaper Agency).
-25-
<PAGE>
<PAGE>
<TABLE>
Detroit Free Press
<CAPTION>
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Average Circulation
Morning (Detroit Free Press).............. 552,603 576,359 592,502
Evening (The Detroit News) ............... 359,867 391,768 434,181
Combined editions
Saturday.................................. 859,893 869,613 897,762
Sunday.................................... 1,170,258 1,180,505 1,195,497
Average Linage* (In 000s of six-column inches)
ROP Full-Run
Retail............................... 601.5 623.3 596.1
General.............................. 89.6 79.4 88.2
Classified........................... 500.7 420.0 407.4
-------- -------- --------
Total............................ 1,191.8 1,122.7 1,091.7
======== ======== ========
ROP Factored
Part-Run.................................. 90.3 73.0 62.6
Preprints - Full-Run..................... 401.4 347.8 280.4
Part-Run..................... 555.0 522.2 496.0
Total Preprints Inserted* (In 000s)........... 500,098 495,338 448,665
Advertising Revenue* (In 000s)
Retail.................................... $ 94,973 $ 93,241 $ 87,458
General................................... 19,472 18,897 20,568
Classified................................ 54,694 45,181 41,174
-------- -------- --------
Total............................ $ 169,139 $ 157,319 $ 149,200
======== ======== ========
Circulation Revenue* (In 000s)................ $ 57,782 $ 55,694 $ 53,626
======== ======== ========
*Under the joint operating agreement, Knight-Ridder reports 50 percent of total linage,
preprints inserted and revenue for Free Press and Detroit News advertising , which is handled by the
Detroit News Agency.
</TABLE>
-26-
<PAGE>
The Newspapers
The following table presents for each of the daily newspapers the average
daily and Sunday circulation for the 1994 audit year, the advertising linage
and household coverage through Dec. 25, 1994, and the percentage
population growth for each area from 1990 through 1993.
<TABLE>
<CAPTION>
-27-
<PAGE>
Advertising Volume
----------------------------------
(in 000s of Six-Column Inches)
----------------------------------
Run-of-Press
---------------------------------- 1990 to
Circulation* Full-Run Daily ABC 1993
-------------------- -------------------------- City Zone % Change
Factored Household in Popu-
Publication Daily Sunday Retail General Classified Part-Run Coverage lation
------------------------ -------- -------- ------ ------ -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Aberdeen American News-AM 18,501 20,142 293.1 7.9 151.6 17.6 76.6% (0.4)(a)
Akron Beacon Journal-AM 157,824 225,569 572.8 50.9 740.7 30.7 57.7% 2.5
Biloxi Sun Herald-AM 49,209 # 53,623 # 491.9 19.4 402.9 4.8 52.7% 4.7
Boca Raton News-AM 22,332 26,299 (b) 573.0 84.2 444.1 0.0 28.4% 6.4(a)
-----------------------------------------------------------------------------------------------------------------------------
Boulder Daily Camera-AM 34,812 # 43,316 # 604.4 28.1 582.5 13.9 54.0% 9.6
Bradenton Herald-AM 43,195 # 55,150 # 520.4 9.7 398.9 1.8 42.8% 4.7
Charlotte Observer-AM 234,860 302,595 790.1 82.3 665.8 223.2 57.0% 6.2
Columbia State-AM 134,103 169,365 650.1 51.0 549.5 15.5 53.8% 3.4
-----------------------------------------------------------------------------------------------------------------------------
Columbus Ledger-Enquirer-AM 52,838 67,014 398.6 15.9 351.4 17.4 46.9% 4.9
Detroit Free Press-AM 552,603 1,170,258 601.5 89.6 500.7 90.3 24.6% 1.0
Duluth News-Tribune-AM 55,965 83,682 335.0 13.5 362.8 33.2 62.0% (0.1)
Fort Wayne News-Sentinel-PM (c) 53,098 # 828.3 33.9 728.0 71.0 36.7% 3.4
-----------------------------------------------------------------------------------------------------------------------------
Gary Post-Tribune-AM 72,490 83,088 487.3 14.3 499.1 107.6 45.4% 2.9(a)
Grand Forks Herald-AM 39,697 40,785 299.3 12.1 241.9 4.0 68.4% 0.1(a)
Lexington Herald-Leader-AM 121,463 # 165,535 # 582.3 14.8 378.8 25.1 54.0% 5.3
Long Beach Press-Telegram-AD 123,474 139,852 503.2 79.9 511.9 143.4 32.8% 3.0(a)
-----------------------------------------------------------------------------------------------------------------------------
Macon Telegraph-AM 75,447 104,713 389.7 20.0 292.4 32.8 54.2% 3.6
Miami Herald-AM 395,725 518,038 1,101.0 245.5 1,016.0 644.8 36.1% 2.9(a)
Milledgeville Union-Recorder-AM 8,480 (b) 132.9 7.6 66.5 48.9 56.0% 2.5(a)
Myrtle Beach Sun News-AM 39,334 # 48,354 # 560.9 13.5 527.0 15.4 69.8% 9.4(a)
-----------------------------------------------------------------------------------------------------------------------------
Philadelphia Inquirer-AM 486,291 # 945,491 # 1,055.1 227.2 827.3 91.8 26.7% 1.2
Philadelphia Daily News-PM 198,809 # 338.3 67.7 325.6 0.0 22.8% 1.2
Saint Paul Pioneer Press-AM 212,648 276,941 610.4 67.2 509.4 12.1 41.8% 5.2(a)
San Jose Mercury News-AD 284,414 # 345,494 # 1,178.7 263.6 1,368.4 44.8 44.2% 3.2
-----------------------------------------------------------------------------------------------------------------------------
-28-
<PAGE>
State College Centre Daily Times-AM 25,712 # 34,358 # 434.7 6.2 288.1 13.9 50.2% 2.8
Tallahassee Democrat-AM 58,230 80,258 703.2 18.0 594.4 49.8 54.1% 6.1
Wichita Eagle-AM 113,609 # 189,196 # 466.7 22.3 485.4 76.0 48.3% 3.7
-----------------------------------------------------------------------------------------------------------------------------
U.S.A. Average = +3.5%
*On the average, 71.8% of daily circulation and 67.3% of Sunday circulation was home-delivered in 1994.
# Subject to audit.
(a) Company definition of newspaper market because this community is not a separate Metropolitan Statistical Area.
(b) Company circulation data.
(c) In addition to the circulation of the News-Sentinel, the JOA partner (The Journal-Gazette) had circulation
of 62,598 daily and 136,572 Sunday. Linage statistics include both newspapers.
</TABLE>
BUSINESS INFORMATION SERVICES
Knight-Ridder Business Information Services (BIS) produces, distributes
and facilitates the use of finance, general business, science, technology,
transportation and other information by global business and professional
users. BIS represented 19.4% of total Knight-Ridder operating revenue in
1994. Since its 1983 inception, it has been the fastest-growing Knight-Ridder
division. BIS revenue has grown at a compound annual rate of 22.6% over the
past 10 years on the strength of acquisitions, new product development and
global market expansion.
During 1994, BIS consisted of four operations: Knight-Ridder
Information, Inc. (formerly Dialog Information Services, Inc.), Knight-Ridder
Financial, Journal of Commerce and Technimetrics.
Knight-Ridder Information, Inc. - KRII is the leading online source for
global business and professional information, serving subscribers in more
than 100 countries.
Principal KRII products are the DIALOG, Data-Star and Infomart DIALOG
online services, the KRII OnDisc CD-ROM product series and SourceOne, a
fax-based document delivery service. DIALOG provides online and on-site
library services to the U.S. and Latin American newspaper industry.
-29-
<PAGE>
The DIALOG online service and on-site products provide access to over
490 online databases and 70 CD-ROM products, including abstracts and the full
text of leading publications covering science and technology, general
business (products and markets, people, company fundamentals), legal issues
and news. In addition, users can retrieve patent and chemical substructure
information from the DIALOG online service. The Data-Star online service
provides access to more than 300 medical, business, pharmaceutical and
European directory databases.
KRII subscribers are business and professional information specialists
and end-users interested in scientific research, competitive intelligence,
technology, industry and market developments and general business and
financial information. Subscribers for these services include business
executives, research chemists, engineers, lawyers, doctors and educators.
During 1994, KRII added 60 new databases to the DIALOG and Data-Star
online services, increasing the amount of information available by 40%. KRII
currently provides access to more than three terabytes (the equivalent of
more than 700 million typed pages) of information from thousands of
publications in addition to two terabytes of document image data in optical
storage. The databases include information from other Knight-Ridder
companies, including Knight-Ridder Financial (MoneyCenter), the Journal of
Commerce (PIERS) and 12 Knight-Ridder newspapers. DIALOG published 17 new
CD-ROM titles during 1994.
Several companies compete with KRII, including Reed-Elsevier's
Lexis/Nexis and Scientific and Technical Information Network (STN), offered
by the American Chemical Society.
Knight-Ridder Financial - KRF provides real-time and historical news and
price information to the global financial community. In addition, KRF
delivers print and CD-ROM-based historical price information and market
commentary to more than 15,000 subscribers in 100 countries.
KRF offers real-time and historical access to market-moving news, cash
market and exchange prices, expert third-party market analyses and technical
analysis features developed by KRF and others. Subscribers to KRF information
include traders, brokers and analysts in leading financial institutions,
agricultural companies and industry throughout the world. KRF customers have
access to real-time and historic price and other pertinent information for
more than 87,000 financial instruments.
-30-
<PAGE>
KRF provides information products to subscribers on the following
platforms:
* Digital Datafeed and Digital Page Server provide full access to KRF
information on systems currently in use at most leading financial
institutions around the world.
* MoneyCenter for Windows (Trademark) delivers KRF information and
functionality on industry-standard Local Area Networks (LANs) and offers
real-time links to electronic spreadsheets and graphics software.
* MoneyCenter for UNIX (MCU) provides a UNIX-based information delivery
platform and charting tool on customer-owned LANs with Motif or Open Look
graphical user interfaces. MCU subscribers can configure client workstations
to operate as a single system or to operate on a LAN driven by a server or
another client workstation. In addition to fixed-format pages, there is a
scrolling ticker, more advanced expressions and several new chart study
types.
* TradeCenter II and ProfitCenter provide sophisticated technical analysis
tools for real-time decision support, including flexible software to view
and analyze time series information ranging from trade-to-trade to over 20
years of historical data. TradeCenter II operates in the UNIX environment.
* CommodityCenter addresses the need of the U.S.-based commodities markets
for advanced, low-priced products. The CommodityCenter platform allows KRF to
deliver real-time exchange and market price information, real-time news and
weather data to the agricultural commodities customer.
* Equinet provides access to real-time and historic Australian and New
Zealand equities and option price information and related analytic features.
Equinet operates in a Windows (Trademark) environment and is interactive.
KRF also operates the world's largest print chart and market analysis
information service, with principal products of Commodity Perspective and
Commodity Research Bureau (CRB). KRF also publishes KR-CRB Infotech, a CD-ROM
product that offers access to more than 50 years of KR-CRB market commentary
and price information.
KRF competes with a number of financial information services, including
Bloomberg, Dow Jones/Telerate and Reuters.
Journal of Commerce - JoC provides print and electronic products geared
to businesses involved in international trade and transportation. The
168-year-old daily Journal of Commerce has a circulation of 20,900. The JoC
also publishes a monthly International Edition delivered to more than 14,000
subscribers on a controlled basis. In addition, it produces news and places
-31-
<PAGE>
advertising in special monthly editions that appear in leading Chinese and
Latin American newspapers. The Journal of Commerce also publishes Traffic
World, Florida Shipper and Gulf Shipper, three leading transportation weekly
magazines.
JoC offers a series of electronic products, including Port Import/Export
Reporting Service (PIERS), Rapid Access Tariff Expediting Service (RATES),
Shiprate and Traderate. PIERS provides access to a comprehensive database
containing information on all maritime-borne products entering or leaving
United States and leading Latin American ports. RATES provides access to
steamship tariff information in page format. Shiprate and Traderate allow
steamship companies to maintain and access tariff databases in page or
FMC-ATFI formats, respectively. In addition, JoC provides technology
consulting services to the transportation and logistics industries. In
early 1995, Knight-Ridder reached an agreement in principle to sell the
Journal of Commerce. The sale is expected to be completed in April 1995.
Technimetrics - This diversified information services company
specializes in the creation of global financial databases.
Technimetrics' research revolves around four core proprietary databases:
* Institutional Investors Database provides detailed information on worldwide
equity and fixed income influentials (portfolio managers, securities
analysts, research directors), focusing on their industry specialization,
individual investment style and geographic area of expertise.
* Shareholder Database tracks the securities holdings of financial
institutions around the world using highly accurate disclosure information
gathered from public company proxies, 13(f), 13(d), and 13(g) SEC filings,
global mutual fund portfolios and overseas stock exchanges.
* Stockholder Database provides information on over 65,000 registered
stockbrokers and branch managers at the leading brokerage firms in North
America.
* Finex Database of Business Decision-Makers identifies nearly 300,000
executives in more than 50,000 global organizations, both public and private,
by functional responsibility.
Technimetrics' information is used by investor relations and marketing
professionals in America's leading corporations for communications programs,
audience targeting and direct marketing. It also is used by brokerage firms
for research distribution to buy-side institutions and account management.
Data are provided on hard copy, tape or diskette; Anamate, a proprietary
software product; and, through Share/World, an online service available
through third-party vendors.
-32-
<PAGE>
During 1994, Technimetrics expanded its sales efforts, adding Latin
American investor relations and brokerage clients. A new Tokyo office
officially opened in December. Technimetrics also enhanced its financial
database products with global mutual fund information and introduced a
Macintosh version of its industry-preferred investor relations software
product.
Technimetrics responds to customized requests for precise and
hard-to-obtain information, offering breadth of information and an
exceptionally high degree of accuracy.
PROPERTIES: BIS maintains production, news and sales facilities
throughout the world. Of the 642,600 square feet of office and production
capacity currently utilized, approximately 85% is leased under operating
leases that expire between 1995 and 2007. During the three years ended Dec.
25, 1994, BIS spent approximately $100 million for capital additions and
improvements to its existing properties.
TECHNOLOGY: BIS operations utilize industry standard data processing
and communications equipment. BIS uses internal staff resources to develop
data storage, access and display applications, but operates with a
preference for open-architecture systems, which facilitate the broadest
possible use of BIS information.
During 1994, BIS enhanced products by expanding data offerings and
improving subscriber access and analysis. Some of these enhancements are:
Knight-Ridder Information, Inc.: KRII now offers an impressive array of
delivery methods, including the Internet, fax, a variety of e-mail options
and, for large-volume users, DIALOG SitePrints.
The new DIALOG ERA service allows customers to archive and distribute
search results throughout the organization while complying with the copyright
requirements of most databases.
KRII SourceOne was introduced in January 1994 as a worldwide fax-based
delivery system for full-source copies of U.S. patents and articles from
selected business journals. This service has since been expanded to European
patents.
DIALOG DIRECT uses corporate e-mail systems to automatically deliver
titles and selected full-text documents to professionals who need to track
the latest news from the pharmaceutical, health care and agrochemical
industries.
-33-
<PAGE>
The DIALOG/Data-Star telecommunications link allows users to pass easily
from one system to the other.
Knight-Ridder Financial: KRF increased its real-time and historical
price information database to include more than 87,000 instruments.
KRF introduced MoneyCenter for UNIX in the U.S. in March 1994. MCU
provides a UNIX-based information delivery platform and charting tool on
customer-owned LANs with Motif or Open Look graphical user interface.
KRF improved network performance in 1994 by implementing actions to
increase network band-width. As a result, it has been able to accommodate
more data contributors, increase transmission speed of information to users
and upgrade communication links from analog to digital.
Journal of Commerce - In 1994, JoC added information on maritime cargo
entering and leaving Mexico and Latin America to the U.S. information already
present in the PIERS database.
With the formation of Transax Systems in 1994, a joint venture between
JoC and America Systems, Inc., technology consulting and new
workstation-based products are offered by Transax to ship lines and shippers.
Technimetrics - In 1994, Technimetrics introduced a Macintosh version of
its investor relations software product. In 1995, it will introduce a
UNIX-based database system that will support an expanded series of products.
INVESTMENTS: KRII acquired a small share of Helix, a software developer
for laboratory groupware solutions, and participated in the joint development
of systems designed to deliver research information directly to scientists.
KRII acquired Article Express International, a full-service document
delivery operation, in the last quarter of 1994. This operation, in addition
to the SourceOne service, has positioned KRII to become a leading provider of
source documents.
Through a joint venture with the Canadian newspaper company Southam,
DIALOG and Southam's Infomart business news service combined to form INFOMART
DIALOG, the leading information service for the Canadian market.
JoC formed Transax Systems in 1994 as a joint venture between Transax
Data and Americas Systems, Inc., a privately held firm that specialized in
software development.
In 1994, JoC acquired Gulf Shipper, a weekly magazine covering shipping
to and from the Gulf States with special focus on local trade routes. Florida
Shipper covers similar information for the Florida and Caribbean area.
-34-
<PAGE>
PARTIALLY OWNED COMPANIES
Knight-Ridder owns 49.5% of the voting common stock and 65% of the
nonvoting common stock of the Seattle Times Company, which publishes The
Seattle Times in Seattle, Wash., the Walla Walla Union-Bulletin in Walla
Walla, Wash., and the Yakima Herald-Republic in Yakima, Wash.
Knight-Ridder is an equal partner with Media General and Cox Enterprises
in Southeast Paper Manufacturing Co., which operates a newsprint mill in
Dublin, Ga.
Knight-Ridder is a 13.5% owner, with eight partners, of Ponderay
Newsprint Company, a 225,000-metric-tonne newsprint mill in Usk, Wash. The
managing partner, with 40% ownership, is Lake Superior Forest Products, Inc.
TKR Cable Company, jointly owned with Tele-Communications, Inc.,
currently operates cable television systems in New York and New Jersey.
In addition, Knight-Ridder also owns 15% of a partnership which operates
cable television systems in Kentucky, Texas, Alabama, Georgia, and Florida.
In 1989, business operations of the Detroit Free Press were merged with
those of The Detroit News to form the Detroit Newspaper Agency, a joint
venture between Knight-Ridder and Gannett Co., Inc. The news and editorial
functions of the two newspapers are separate and independent.
Knight-Ridder owns 33.33% of the voting stock of Newspapers First; the
balance is owned by a group of major-market independents. Newspapers First
is responsible for the sale and service of general, retail and national
classified advertising accounts for a number of newspapers.
In 1994, Knight-Ridder Information, Inc., purchased 50.2% of the voting
and 49.8% of the nonvoting common stock of a joint venture with Southam,
Inc., that combined the Canadian electronic business information operations
of the two companies. The new company is called Infomart DIALOG.
Transax Data, a wholly owned subsidiary of Journal of Commerce, Inc.,
and Americas Systems, Inc., formed a partnership called Transax Systems, in
which Journal of Commerce, Inc., has a 51% interest.
TRAINING AND ORGANIZATIONAL DEVELOPMENT
Recognizing that Knight-Ridder's greatest asset is its people, the
company places a premium on human resources development. Knight-Ridder is
dedicated to helping employees realize their full potential while sharpening
their focus on serving their internal and external customers.
-35-
<PAGE>
The most comprehensive commitment to employee and organizational
development is the "attitude and opinion" survey, used on a regular cycle at
each company to get employee feedback about workplace issues that concern
them. Significant concerns are surfaced, explored and resolved.
Knight-Ridder executives work together to conduct annual management
development reviews (MDRs) at each company. The MDRs assess bench strength,
identify candidates of exceptional promise and recommend growth
opportunities.
Special development programs are created to meet particular needs. For
example, the new Marketing Leadership Development program prepares a dozen
diverse, high-potential advertising and circulation managers for significant
division-executive roles. Participants work with local and corporate
executives to address important marketing issues facing the company and to
gain specific experiences targeted in their personal development plans.
An intensive five-day General Executive Development program focuses
development planning for high-potential mid-career executives. Specifically
tailored experiences and corporate sponsorships prepare them for key
leadership roles.
The Executive Leadership Program, targeted to key executives, is a
25-day educational experience conducted over the course of one year. This
extended commitment to leadership development is unique in corporate
executive education.
Learning and leading change are increasingly critical abilities for
Knight-Ridder people at all levels. Executive team-building is an ongoing
practice that supports efforts at the individual company level. In addition,
specific programs support key initiatives. Strategic Newsroom Management and
Strategic Change Leadership are five-day workshops for middle managers who
have exhibited career flexibility and a passion for leadership.
Every Knight-Ridder company is engaged in frontline supervisory skills
and employee skills training to enhance their individual and team
effectiveness in serving customers.
Each year, Knight-Ridder funds and delivers the industry's most
intensive newspaper-specific sales training for every new field salesperson.
Advanced courses strengthen the partnership between advertising category
salespeople, managers and customers.
In 1995, a four-day marketing and research program will be delivered for
circulation managers at every newspaper.
In a supplementary program, Knight-Ridder supports local company efforts
to accelerate individual and organizational development. To that end,
matching funds add $3 to every dollar spent at the local level.
-36-
<PAGE>
Knight-Ridder has a long-standing commitment to increasing the role of
women and minorities in its businesses, reflecting the diversity of the
communities it serves. Growth in the percentage of minority and female
employees has continued uninterrupted for the past decade. Managers are
evaluated on the progress they make toward significantly increasing the pool
of women and minority members who are qualified to fill key positions.
The Minority Hiring Program assists companies in funding positions for
talented minority group members in those cases where such support otherwise
would not exist.
In the past six years, thousands of employees have participated in
discrimination awareness efforts. In 1994, the company began preparing new
diversity training to reach all employees.
Knight-Ridder is an equal opportunity employer. Specific policies
prohibit discrimination and harassment of any kind, including sexual
harassment.
Knight-Ridder is committed to positive, productive employee relations.
Approximately 42% of the 21,000 full-time employees are represented by nearly
100 local unions under collective bargaining agreements that expire and are
renegotiated at varying times every few years. These agreements conform with
the pattern of labor agreements in the American newspaper industry.
OTHER
The company's business is such that the dollar amount of the backlog of
orders would not be of any significance to the understanding of its
operations.
The company does not anticipate that compliance with the federal, state
or local provisions regulating the discharge of materials into the
environment will have a material effect upon its capital expenditures,
earnings or competitive position.
SOURCES OF INFORMATION
Population and household figures for 1990 are from the U.S. Bureau of
the Census, while estimates for Dec. 31, 1993, are from the Sales & Marketing
Management Survey of Buying Power, Aug. 30, 1994. Metropolitan Statistical
Areas, as defined by the U.S. Office of Management and Budget, are used for
newspaper markets unless otherwise indicated. Population estimates for 2015
are from the National Planning Association Data Services, Inc. (93-R-1 & 2).
Newspaper households and circulation data for 1994 are from the latest
available annual audit reports from the Audit Bureau of Circulations.
-37-
<PAGE>
Advertising linage is from company records. Where necessary, certain
previously reported statistics have been restated to be consistent with
measurement guidelines currently used.
The Company
Knight-Ridder,Inc., was formed in 1974 by a merger between Knight
Newspapers and Ridder Publications, Inc.
In 1903, Charles Landon Knight purchased the Akron Beacon Journal.
Knight Newspapers was founded by John S. Knight, who inherited the Beacon
Journal from his father in 1933. Ridder Publications was begun in 1892
when Herman Ridder acquired the German-language Staats-Zeitung in New York.
Both groups flourished, each taking its stock public in 1969. The merger
created a company with operations coast to coast.
The Business Information Services Division was formally established in
1983, although Knight-Ridder owned the Journal of Commerce and Commodity
News services prior to that time. Dialog Information Services, Inc. (now
Knight-Ridder Information, Inc.), was acquired in 1988.
Knight-Ridder, Inc. was incorporated in Ohio in 1974. Headquartered
in Miami, the Company was reincorporated in Florida in 1976.
<TABLE>
Newsprint Consumption
(In thousands of metric tonnes)
<CAPTION>
Year Amount
---- -------
<C> <C>
1984 635
1985 612
1986 642
1987 685
1988 687
1989 693
1990 667
1991 619
1992 618
1993 639
1994 650
Knight-Ridder's newsprint consumption increased 1.7% over 1993 as a result of
increased linage.
-38-
<PAGE>
</TABLE>
<TABLE>
Average Daily Circulation For Knight-Ridder Newspapers
(In thousands of copies)
<CAPTION>
Year Amount
---- -------
<C> <C>
1984 3,827
1985 3,749
1986 3,731
1987 3,978
1988 3,945
1989 3,955
1990 3,872
1991 3,745
1992 3,678
1993 3,654
1994 3,602
Total circulation of Knight-Ridder's daily newspapers decreased 1.4%.
</TABLE>
-39-
<PAGE>
<TABLE>
Average Sunday Circulation For Knight-Ridder Newspapers
(In thousand of copies)
<CAPTION>
Year Amount
---- -------
<C> <C>
1984 4,593
1985 4,545
1986 4,556
1987 4,817
1988 4,844
1989 4,919
1990 4,808
1991 4,782
1992 4,774
1993 4,760
1994 4,715
Total circulation of Knight-Ridder's Sunday newspapers decreased 0.9%.
</TABLE>
ITEM 3. Legal Proceedings
The Comprehensive Environmental Response, Compensation and Liability
Act (Superfund) establishes a fund to clean up deposits and spills of
hazardous substances. The Company has been identified by certain regulatory
agencies as one of several potentially responsible parties in connection
with the generation of allegedly hazardous substances which may have been
disposed of or reclaimed by third-party contractors at sites in New Jersey,
Maryland, South Carolina, North Carolina, Pennsylvania, and Kansas. The
Company, certain other potentially responsible parties and the United States
Environmental Protection Agency (EPA) have entered into consent orders
relating to the sites in New Jersey, South Carolina, and North Carolina
providing for remedial investigations and feasibility studies or remediation
to be performed.
The Company does not anticipate that any liability arising from
ultimate relief secured by regulatory agencies or other persons will have a
material effect on the Company's business or financial condition. The
Company is cooperating with the appropriate regulatory agencies with respect
to compliance with environmental laws.
-40-
<PAGE>
In 1990, a verdict was rendered against the company's subsidiary,
Philadelphia Newspapers, Inc. (PNI), publisher of The Philadelphia Inquirer
and Philadelphia Daily News, in a libel action entitled Sprague v.
Philadelphia Newspapers, Inc., for $2.5 million in compensatory damages and
$31.5 million in punitive damages. Following entry of the judgment on Sept.
15, 1992, PNI appealed the judgment to the Pennsylvania Superior Court. The
Superior Court has affirmed the $2.5 million in compensatory damages and
vacated the $31.5 million award of punitive damages. The court remanded the
case to the trial court, which will either hold a new trial solely on the
issue of punitive damages or reduce the punitive damages judgment to $21.5
million. PNI believes that substantial grounds exist for a decision by an
appellate court to grant a new trial on all issues.
In the opinion of management, the ultimate liability to the company and
its subsidiaries as a result of this and other legal proceedings will not be
material.
ITEM 4. Submission of matters to a vote of security holders.
None.
PART II
ITEM 5. Market for registrant's common stock and related stockholder matters
-------------------------------------------------------------------
KRI STOCK
Knight-Ridder common stock is listed on the New York Stock Exchange and
the Frankfurt Stock Exchange under the symbol KRI and on the Tokyo Stock
Exchange with the designation 9491. The stock also is traded on exchanges in
Philadelphia, Chicago, Boston, San Francisco, Los Angeles and Cincinnati, as
well as through the Intermarket Trading System. Options are traded in the
Philadelphia Exchange.
-41-
<PAGE>
<TABLE>
Market Price of Common Stock
The last closing price of the Company's common stock prior to the preparation of this report
was $53 on Jan. 30, 1995. The number of shareholders of record at Dec. 25, 1994, was 10,727.
The following market data is reported by Knight-Ridder Financial Services:
<CAPTION>
1994 1993 1992
--------------------- ------------------ ------------------
Quarter High Low High Low High Low
-------- ------- ------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
1st............ 61 54 7/8 65 56 1/2 60 7/8 50 3/4
2nd............ 60 1/4 52 58 3/4 51 1/8 64 1/8 55
3rd............ 54 5/8 49 1/2 55 1/2 50 5/8 63 1/4 57 1/8
4th............ 52 1/2 46 1/2 61 3/4 52 61 3/4 54 7/8
</TABLE>
<TABLE>
<CAPTION>
Treasury Stock Purchases
The table below is a summary of treasury stock purchases since 1984:
<CAPTION>
Shares Cost
Purchased (000s)
---------- ----------
<S> <C> <C>
1994....................... 2,522,300 $ 136,977
1993....................... 750,000 40,693
1992....................... - -
1991....................... - -
1990....................... 2,662,700 129,909
1989....................... 2,761,100 131,885
1988....................... 4,549,600 198,279
1987....................... 1,000,000 38,728
1986....................... - -
1985....................... 9,500,000 332,308
1984....................... - -
</TABLE>
<TABLE>
-42-
<PAGE>
QUARTERLY OPERATIONS
The company's largest source of revenue, retail advertising, is seasonal and tends to fluctuate with retail sales in
markets served. Historically, retail advertising is higher in the second and fourth quarters. General advertising,
while not as seasonal as retail, is lower during the summer months. Classified advertising revenue has in the past been
a reflection of the overall economy and has not been significantly affected by seasonal trends. The following table
summarizes the company's unaudited quarterly results of operations (in thousands, except per share data):
<CAPTION>
QUARTER
--------------------------------------------------
First Second Third Fourth
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Description
1994
Operating revenue................................. $ 630,863 $ 661,550 $ 642,613 $ 713,935
Operating income.................................. 64,810 95,286 75,277 95,888
Net income........................................ 30,372 50,121 37,243 53,164
Net income per common and common
equivalent share .............................. .55 .92 .69 .99
Dividends declared per common share............... .35 .37 * .37 .37
1993
Operating revenue................................. $583,894 $621,682 $593,124 $652,648
Operating income.................................. 53,680 76,245 58,314 96,618
Net income........................................ 23,136 42,497 31,251 51,205
Net income per common and common
equivalent share (1)........................... .42 .77 .57 .93
Dividends declared per common share............... .35 .35 .35 .35
1992
Operating revenue................................. $555,438 $590,531 $564,854 $618,706
Operating income.................................. 50,360 79,049 61,058 88,044
Income before cumulative effect of
changes in accounting principles............... 25,006 46,090 31,392 43,598
Cumulative effect of changes in
accounting principles for:
Income taxes................................ 25,800
Postretirement benefits other than pensions. (131,000)
Net income (loss)................................. (80,194) 46,090 31,392 43,598
-43-
<PAGE>
Net income (loss) per common and common
equivalent share (1):
Income before cumulative effect
of changes in accounting principles...... .46 .84 .57 .79
Cumulative effect of changes
in accounting principles................. (1.93)
Net income (loss)........................... (1.47) .84 .57 .79
Dividends declared per common share............... .35 .35 .35 .35
(1) Amounts do not total to the annual earnings per share because each quarter and the year are calculated
separately based on average outstanding shares during that period.
* The second quarter ended June 26, 1994. These dividends were declared June 28, 1994, and recorded in the third quarter.
</TABLE>
-44-
<PAGE>
ITEM 6. Selected Financial Data
-----------------------
<TABLE>
11-Year Financial Highlights (In thousands, except per share data and ratios)
The following data were compiled from the consolidated financial statements of Knight-Ridder, Inc., and subsidiaries.
The consolidated financial statements and related notes and discussions for the year ended Dec. 25, 1994,
Items 7 & 8 also should be read in order to obtain a better understanding of this data.
<CAPTION>
Compound Growth
Rate
----------------- Dec. 25 Dec. 26 Dec. 27 Dec. 29 Dec.30
5-Year(1) 10-Year 1994 1993 1992 1991 1990
------ ------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Operating Revenue
Newspapers
Advertising........................ 0.1 % 2.9 % $ 1,583,373 $ 1,481,631 $ 1,444,144 $ 1,429,661 $ 1,556,932
Circulation........................ 4.7 4.8 484,581 474,420 460,014 439,029 403,188
Other.............................. 15.8 10.7 66,968 56,772 39,932 35,127 31,981
--------- --------- --------- --------- ---------
Total Newspapers....................... 1.4 3.5 2,134,922 2,012,823 1,944,090 1,903,817 1,992,101
Business Information Services.......... 12.2 22.6 514,039 438,525 385,439 354,361 332,628
Other..................................
--------- --------- --------- --------- ---------
Total Operating Revenue........ 3.0 5.2 2,648,961 2,451,348 2,329,529 2,258,178 2,324,729
--------- --------- --------- --------- ---------
-45-
<PAGE>
Operating Costs
Depreciation & amortization ........ 3.8 10.1 149,327 141,758 128,221 124,055 127,772
Other operating costs 3.4 5.2 2,168,373 2,024,733 1,922,797 1,890,850 1,896,331
--------- --------- --------- --------- ---------
Total Operating Costs......... 3.4 5.4 2,317,700 2,166,491 2,051,018 2,014,905 2,024,103
--------- --------- --------- --------- ---------
Operating Income....................... 0.6 3.4 331,261 284,857 278,511 243,273 300,626
Interest expense................... (12.0) 16.4 (44,585) (45,112) (52,375) (68,843) (71,803)
Other, net......................... (43.2) (14.2) 3,394 3,656 13,580 35,940 17,119
Income taxes, net.................. 0.7 0.7 (119,170) (95,312) (93,630) (78,302) (96,897)
--------- --------- --------- --------- ---------
Net Income from continuing operations. (1.0) 2.7 170,900 148,089 146,086 132,068 149,045
Discontinued broadcast operations (2).
Cumulative effect of changes
in accounting principles (3)...... (105,200)
--------- --------- --------- --------- ---------
Net income........................... (7.1) 2.0 $ 170,900 $ 148,089 $ 40,886 $ 132,068 $ 149,045
========= ========= ========= ========= =========
Operating Income Percentage (Profit margin) 12.5% 11.6% 12.0% 10.8% 12.9%
---------------------------------------------------------------------------------------------------------------------------
SHARE DATA
Average number of common and
common equivalent shares outstanding 54,275 55,332 55,178 51,797 50,683
Income per common and
common equivalent share............
Continuing operations.............. (1.7) 4.6 $ 3.15 $ 2.68 $ 2.65 $ 2.55 $ 2.94
Discontinued broadcast operations (2)
Cumulative effect of changes
in accounting principles (3). (1.91)
Net income......................... 3.15 2.68 0.74 2.55 2.94
Cash dividends per common share......... 3.2 8.1 1.46 1.40 1.40 1.40 1.34
Common stock price
High................................ 61 65 64 1/8 57 1/2 58
Low................................. 46 1/2 50 5/8 50 3/4 43 3/4 37
Close............................... 50 7/8 59 3/8 58 1/8 50 3/4 45 7/8
Shareholders' equity per common share... 5.4 5.0 $ 23.15 $ 22.67 $ 21.50 $ 21.44 $ 18.09
Price/Earnings Ratio (4)................ 16.2:1 22.2:1 21.9:1 19.9:1 15.6:1
-46-
<PAGE>
---------------------------------------------------------------------------------------------------------------------------
OTHER FINANCIAL DATA
Net change in total debt................... $ (39,571)$ (109,170)$ (46,595)$ (217,118)$ 111,018
Common stock acquired...................... 136,977 40,693 129,909
Payment of cash dividends.................. 77,942 76,787 75,992 71,087 66,422
Ratio of Earnings to Fixed Charges (5)..... 5.2:1 4.5:1 3.9:1 2.9:1 3.4:1
At Year End
Total assets.......................... 2,447,189 2,431,432 2,458,059 2,332,751 2,270,459
Working capital...................... 2,163 (5,180) 55,669 34,023 75,396
Long-term debt (excluding current
maturities)..................... 411,504 410,388 495,941 556,797 803,914
Total debt........................... 411,504 451,075 560,245 606,840 823,958
Shareholders' Equity................. 1,224,654 1,243,169 1,181,812 1,148,620 894,913
Current ratio........................ 1.01:1 1.0:1 1.1:1 1.1:1 1.2:1
Total debt/total capital ratio....... 25.2 % 26.6 % 32.2 % 34.6 % 47.9 %
Long-term debt/equity ratio.......... 33.6 % 33.0 % 42.0 % 48.5 % 89.8 %
See Notes on Pages 49 and 50.
</TABLE>
<TABLE>
-47-
<PAGE>
11-Year Financial Highlights (In thousands, except per share data and ratios)
The following data were compiled from the consolidated financial statements of Knight-Ridder, Inc., and subsidiaries.
The consolidated financial statements and related notes and discussions for the year ended Dec. 25, 1994,
Items 7 & 8 also should be read in order to obtain a better understanding of this data.
<CAPTION>
Dec. 31 Dec. 31 Dec. 31 Dec. 31 Dec. 31 Dec. 31
1989 1988 1987 1986 1985 1984
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Operating Revenue
Newspapers
Advertising..............................$ 1,577,449 $ 1,523,030 $ 1,464,447 $ 1,332,820 $ 1,220,534 $ 1,186,559
Circulation................................ 385,214 370,898 357,553 334,670 312,988 302,281
Other...................................... 32,212 29,743 28,578 25,362 25,873 24,235
--------- --------- --------- --------- --------- ---------
Total Newspapers....................... 1,994,875 1,923,671 1,850,578 1,692,852 1,559,395 1,513,075
Business Information Services.................. 289,585 159,659 99,260 88,904 80,095 66,961
Other.......................................... 18,344 26,338 24,871 21,938
--------- --------- --------- --------- --------- ---------
Total Operating Revenue................ 2,284,460 2,083,330 1,968,182 1,808,094 1,664,361 1,601,974
--------- --------- --------- --------- --------- ---------
Operating Costs
Depreciation & Amortization................... 123,810 104,576 92,425 81,901 70,752 57,096
Other operating costs........................ 1,838,656 1,707,991 1,580,664 1,467,543 1,372,840 1,308,741
--------- --------- --------- --------- --------- ---------
Total Operating costs................ 1,962,466 1,812,567 1,673,089 1,549,444 1,443,592 1,365,837
--------- --------- --------- --------- --------- ---------
Operating Income................................. 321,994 270,763 295,093 258,650 220,769 236,137
Interest Expense............................. (84,622) (62,465) (49,583) (33,248) (21,624) (9,723)
Other, net................................... 57,381 26,515 20,061 20,172 21,866 15,718
Income taxes, net............................ (114,917) (88,038) (116,837) (113,000) (96,577) (110,741)
--------- --------- --------- --------- --------- ---------
Net Income from continuing operations........... 179,836 146,775 148,734 132,574 124,434 131,391
Discontinued broadcast operations (2)........... 67,366 9,608 6,429 7,465 8,290 9,419
Cumulative effect of changes
in accounting principles (3)................
--------- --------- --------- --------- --------- ---------
Net income................................... $ 247,202 $ 156,383 $ 155,163 $ 140,039 $ 132,724 $ 140,810
========= ========= ========= ========= ========= =========
Operating Income Percentage (Profit margin) 14.1% 13.0% 15.0% 14.3% 13.3% 14.7%
-48-
<PAGE>
SHARE DATA
Average number of common and
common equivalent shares outstanding....... 52,439 56,703 58,646 58,202 60,732 65,578
Income per common and
common equivalent share....................
Continuing operations.................... $ 3.43 $ 2.59 $ 2.54 $ 2.28 $ 2.05 $ 2.00
Discontinued broadcast operations (2).... 1.28 .17 .11 .13 .14 .15
Cumulative effect of changes
in accounting principles (3).........
Net income.............................. 4.71 2.76 2.65 2.41 2.19 2.15
Cash dividends per common share................. 1.24 1/2 1.14 1/2 1.03 0.91 0.79 0.67
Common stock price
High........................................ 58 3/8 47 3/4 61 1/4 57 7/8 41 3/8 31
Low......................................... 42 7/8 35 3/4 33 1/4 37 1/2 28 21 1/4
Close....................................... 58 3/8 45 3/8 40 1/8 46 7/8 39 7/8 29 1/4
Shareholders' equity per common share........... $ 17.83 $ 15.47 $ 15.85 $ 14.28 $ 12.38 $ 14.17
Price/Earnings Ratio (4)........................ 20.4:1 17.5:1 15.1:1 19.5:1 18.2:1 13.6:1
----------------------------------------------------------------------------------------------------------------------------
OTHER FINANCIAL DATA
Net change in total debt..................... .$ (324,135) $ 483,840 (115,026)$ 360,041 $ 240,597 $ (1,883)
Common stock acquired........................... 131,885 198,279 38,728 332,308
Payment of cash dividends....................... 63,260 62,990 57,426 49,877 46,077 41,344
Ratio of Earnings to Fixed Charges (5).......... 3.6:1 3.7:1 5.1:1 6.4:1 8.6:1 16.6:1
At Year End
Total assets............................... 2,134,626 2,357,040 1,919,875 1,906,459 1,355,480 1,312,804
Working capital........................... 70,269 83,695 48,835 74,429 90,019 133,585
Long-term debt (excluding current
maturities)....................... 660,900 727,043 508,203 620,389 263,058 67,612
Total debt................................ 712,940 1,037,075 553,235 668,261 308,220 67,623
Shareholders' Equity...................... 917,145 821,625 901,498 815,982 696,576 921,569
Current ratio............................. 1.2:1 1.1:1 1.2:1 1.2:1 1.3:1 1.6:1
Total debt/total capital ratio............ 43.7 % 55.8 % 38.0 % 45.0 % 30.7 % 6.9 %
Long-term debt/equity ratio.............. 72.1 % 88.5 % 56.4 % 76.0 % 37.8 % 7.3 %
NOTES
(1) The five-year compound growth rate is calculated using 1989 as the base year, which includes the gain on the sale of broadcast
assets and results of operations of the company's Broadcast Division and the gain on the sale of the Pasadena Star-News.
(2) Results of operations of the company's Broadcast Division (sold in 1989) and the gain on the sale of broadcast assets
are presented as "discontinued broadcast operations."
(3) For 1992, the cumulative effect of changes in accounting principles represents adjustments from the implementation of
FAS109 - Accounting for Income Taxes and FAS 106-Accounting for Postretirement Benefits Other Than Pensions.
-49-
<PAGE>
(4) Price/Earnings Ratio is computed by dividing closing market price by earnings for the trailing 12-month period. 1992 earnings
exclude the effects of changes in accounting principles. For 1989 and 1988, the earnings represent continuing operations. 1989
earnings also exclude the gain on the sale of the Pasadena Star-News.
(5) The ratio of earnings to fixed charges is computed by dividing earnings (as adjusted for fixed charges and undistributed equity
income from unconsolidated subsidiaries) by fixed charges for the period. Fixed charges include interest on debt
(before capitalized interest), interest component of rental expense, the proportionate share of interest expense on
guaranteed debt of certain equity-method investees and on debt of 50%-owned companies.
</TABLE>
-50-
<PAGE>
ITEM 7. Management's Discussion and Analysis of Financial Condition
-----------------------------------------------------------
and Results of Operations
-------------------------
Knight-Ridder is an international information and communications company
engaged in newspaper publishing, business news and information services,
electronic retrieval services and news, graphics and photo services.
In 1994, the gross revenue from these businesses was more than $2.6
billion. The company also is involved in other newspaper businesses, cable
television and newsprint manufacturing through business arrangements,
including joint ventures and partnerships.
The charts at the end of this section illustrate the approximate
relative percentages of the components of operating revenue and of operating
costs as a percentage of operating revenue.
Glossary of Newspaper Advertising Terms
The following definitions may be helpful when reading the Management's
Discussion and Analysis of Operations.
RETAIL - Display advertising from local merchants, such as department
and grocery stores, selling goods and services to the public.
GENERAL - Display advertising by national advertisers who promote
products or brand names on a nationwide basis.
CLASSIFIED - Small, locally placed ads listed together and organized by
category, such as real estate sales, employment opportunities, automobile
sales and display type advertisements in these categories.
FULL-RUN - Advertising appearing in all editions of a newspaper.
PART-RUN - Advertising appearing in select editions or zones of a
newspaper's market. Part-run advertising is translated into full-run
equivalent linage (referred to as factored) based on the ratio of the
circulation in a particular zone to the total circulation of a newspaper.
RUN-OF-PRESS (ROP) - All advertising printed on Knight-Ridder presses
and appearing within a newspaper.
PREPRINT - Advertising supplements prepared by advertisers and inserted
into a newspaper.
-51-
<PAGE>
NEWSPAPER revenue is derived principally from advertising and newspaper
copy sales. Newspaper advertising currently accounts for about 60% of
consolidated revenue. This revenue comes from the three basic categories of
advertising - retail, general and classified - discussed above.
Newspaper advertising volume is categorized as either run-of-press (ROP)
or preprint. Volume for ROP advertising is measured in terms of either
full-run or part-run advertising linage and reported in six-column inches. A
six-column inch consists of one inch of advertising in one column of a
newspaper page when that page is divided into six columns of equal size. By
using part-run advertising, advertisers can direct their messages to selected
market segments.
Circulation revenue results from the sale of newspapers. Circulation of
daily and Sunday newspapers currently accounts for 18% of consolidated
revenue. It is reported at the net wholesale price for newspapers delivered
or sold by independent contractors and at the retail price for newspapers
delivered or sold by employees.
Other newspaper revenue comes from alternate delivery systems,
commercial job printing, niche publications, book publishing, audiotext,
newsprint scrap sales, newspaper trucking services, and other miscellaneous
sources.
BUSINESS INFORMATION SERVICES (BIS) revenue includes operations of
Knight-Ridder Information, Inc. (KRII, formerly known as the Dialog Group),
Knight-Ridder Financial (KRF), Journal of Commerce and Technimetrics.
KRII products include DIALOG, Data-Star and Infomart DIALOG, an archival
information service provided through a 1994 joint venture with Southam, Inc.
KRII serves more than 150,000 customers in more than 100 countries and offers
more than 600 databases. Subscribers are charged according to amount of time
they spend online, information procured and which databases they access.
Knight-Ridder Financial products include real-time and archival
information services focusing on global sovereign debt, foreign exchange,
money markets and futures instruments. Information displayed on these
products consists of news, quotations, charts and a variety of other
analytical services. The group generates revenue from subscribers in more
than 30 countries.
Journal of Commerce publishes The Journal of Commerce, a daily newspaper
that focuses on global trade and transportation issues, and several
periodicals. It also provides access to electronic databases on imports,
exports and steamship tariffs and provides tariff filings and retrieval
services.
Technimetrics, a January 1994 acquisition, is a leading publisher of
investor information and global investment listings of business executives
and professionals.
-52-
<PAGE>
SUMMARY OF OPERATIONS A summary of the company's operations, certain
share data and other financial data for the past 11 years is provided in
Item 6. Compound growth rates for the past five- and 10-year periods
are also included, if applicable. A review of this summary and of the
supplemental information section (Items 1 & 2) will provide a better
understanding of the following discussion and analysis of operating results
and of the financial statements as a whole. The supplemental information
contains financial data for the company's operations by line of business and
includes discussions of the company's largest newspapers and information
regarding the company's properties, technology and the raw materials used in
operations.
RESULTS OF OPERATIONS: 1994 vs. 1993 Knight-Ridder, Inc., earnings per
share was $3.15, up $.47, or 17.5%, from $2.68 per share in 1993.
Operating income increased 16.3% on an 8.1% increase in revenue in
1994. Operating income as a percentage of revenue was 12.5% compared with
11.6% in 1993.
NEWSPAPERS The Newspaper Division's operating income increased $52.1
million, or 17.4%, to $350.9 million. The increase resulted from a 6.1%
revenue improvement that was partially offset by fourth quarter charges
related to buyout and separation charges and nonrecurring charges for
litigation and environmental matters.
Overall, newspaper advertising revenue increased by $101.7 million, or
6.9%, in 1994 on a full-run ROP linage increase of 3.1%. The following table
summarizes the percentage change in revenue and full-run ROP linage from
1993.
Percent Gain
Percent Gain in Full-Run
Advertising Category in Revenue ROP Linage
--------------------- ------------ ------------
Retail 3.4 0.3
General 9.3 11.1
Classified 10.9 5.5
Total 6.9 3.1
Retail advertising revenue improved $26.4 million, or 3.4%. The
improvement resulted from a 0.3% increase in full-run ROP linage, increases
in full-run ROP average rates and preprint revenue.
General advertising revenue increased by $15.7 million, or 9.3%, from
1993 on an 11.1% increase in full-run ROP general linage, partially offset by
a decrease in preprint revenue.
-53-
<PAGE>
Classified revenue improved by $59.7 million, or 10.9%, on a 5.5%
increase in full-run ROP volume and a 4.9% increase in full-run average
rates. Most of the increase was due to the strength of employment
advertising, which was up 23.4% for the year and 32.1% in the last quarter.
Circulation revenue increased $10.2 million, or 2.1%, despite a decline
in average number of copies. Morning circulation declined 41,600 copies, or
1.3% and afternoon circulation declined 10,900 copies, or 2.4%. Sunday
circulation declined 45,300 copies, or 0.9%.
Other newspaper revenue increased $10.2 million, or 18.0%, during 1994,
primarily due to increased revenue from lines of business developed to
augment the revenue of our core newspaper business.
BUSINESS INFORMATION SERVICES In 1994, BIS contributed 19.4% of
consolidated revenue, compared with 17.9% in 1993. Operating income was $23.1
million, down $295,000, or 1.3%, from 1993 on a 17.2% increase in revenue.
The decline in divisional operating income resulted from a fourth quarter
KRII separation charge. Excluding the impact of acquisitions, revenue would
have been up almost 9%.
The graph at the end of this section illustrates the 22.6% compound
growth rate for BIS revenue from 1984.
EXPENSES Labor and employee benefit costs were up $65.2 million, or
6.4%, with a 1.4% increase in the work force resulting from expansion and
acquisitions in the BIS Division, which was partly offset by work force
reductions in the Newspaper Division. Other factors in the increase were a
4.4% increase in the average labor and employee benefit cost, and a fourth
quarter charge for buyouts and separation charges.
Newsprint, ink and supplements cost increased by $859,000, or 0.3%, due
to a 1.7% increase in consumption and a slight decrease in average newsprint
prices from the prior year.
Depreciation and amortization expense increased 5.3%, or $7.6 million,
due to BIS expansion and acquisitions.
Other operating costs increased 11.7% from 1993 due partially to
increases in volume-related BIS royalty and exchange fee expenses and other
cost increases related to BIS expansion and acquisitions. A fourth quarter
charge for environmental and litigation matters accounted for part of the
increase.
NON-OPERATING ITEMS Net interest expense decreased $1.2 million, or
3.2%, from 1993, due primarily to lower debt levels.
INCOME TAXES The effective income tax rate for 1994 was 41.1%, up from
39.2% in 1993. The increase was mostly due to 1993 favorable adjustments of
tax reserves resulting from settlement of IRS audits of prior years and other
prior year state tax issues.
-54-
<PAGE>
RESULTS OF OPERATIONS: 1993 vs. 1992 Knight-Ridder, Inc., earnings per
share was $2.68, up $.03, or 1.1%, from $2.65 per share before the cumulative
effect of changes in accounting principles in 1992.
Operating income increased 2.3% on a 5.2% increase in revenue in 1993.
Operating income as a percentage of revenue was 11.6% compared with 12.0% in
1992.
A 20.7% increase in net interest expense resulted from a reduction in
capitalization of interest related to the Philadelphia plant. This was
partially offset by higher earnings from our cable investment.
NEWSPAPERS The Newspaper Division's operating income increased $8.2
million, or 2.8%, to $298.8 million. The increase resulted from improved
revenue, which more than offset a 3.4% increase in the average price of
newsprint, and increased costs due to the transition to the new plant in
Philadelphia.
Overall, newspaper advertising revenue increased by $37.5 million, or
2.6%, in 1993 on a full-run ROP linage increase of 1.3%. The following table
summarizes the percentage change in revenue and full-run ROP linage from
1992.
Percent
Percent Gain
Gain (Decline)
(Decline) in Full-Run
Advertising Category in Revenue ROP Linage
-------------------- ---------- ----------
Retail 1.0 (1.0)
General (3.4) (7.8)
Classified 7.0 5.3
Total 2.6 1.3
Retail advertising revenue improved $7.6 million, or 1.0%. A 1.9%
increase in full-run average rates and an increase in part-run ROP revenue
was partially offset by a 1.0% decrease in full-run ROP linage.
General advertising revenue declined by $6.0 million, or 3.4%, from 1992
on a 7.8% decline in full-run ROP general linage, partially offset by an
increase in preprint revenue.
Classified revenue improved by $35.9 million, or 7.0%, on a 5.3%
increase in full-run ROP volume.
Circulation revenue increased $14.4 million, or 3.1%, despite a decline
in average number of copies. Morning circulation declined 11,300 copies, or
0.4% and afternoon circulation declined 11,800 copies, or 2.5%. Sunday
circulation declined 14,300 copies, or 0.3%.
-55-
<PAGE>
Other newspaper revenue increased $16.8 million, or 42.2%, during 1993,
primarily due to efforts to augment the revenue of our core newspaper
business.
BUSINESS INFORMATION SERVICES In 1993, BIS contributed 17.9% of
consolidated revenue, compared with 16.5% in 1992. Operating income was $23.4
million, up $1.3 million, or 6.1%, from 1992 on a 13.8% increase in revenue.
About half of the revenue growth was due to the first quarter acquisition of
Data-Star, a Europe-based online operation. Excluding Data-Star revenue, BIS
revenue was up 6.5% from the prior year.
EXPENSES Labor and employee benefit costs were up $33.9 million, or
3.4%, with 141, or 0.7%, more employees resulting from expansion and
acquisitions in the BIS Division. The average wage per employee increased
3.9%. Included in 1992 results were $10.5 million in severance and buyout
costs related to a Detroit joint operating agreement (JOA) labor settlement.
Newsprint, ink and supplements cost increased by $18.2 million, or 5.8%,
due to a 3.4% increase in consumption and average newsprint prices from the
prior year.
Depreciation and amortization expense increased 10.6%, or $13.5 million,
due to the completion of the new Philadelphia printing plant and BIS
expansion.
Other operating costs increased 8.1% from 1992, due partially to a $21.7
million increase in volume-related BIS royalty and exchange fee expenses.
NON-OPERATING ITEMS Net interest expense increased $6.7 million, or
20.7%, from 1992 as a result of the $14.6 million reduction in capitalized
interest. This was partially offset by a reduction of interest expense
reserves related to prior year tax audits and the call of $100.0 million of
8.0% notes, replaced by lower rate commercial paper. Average interest rates
on commercial paper decreased from 4.3% in 1992 to 3.2% in 1993.
Other non-operating items improved to a $2.2 million loss, a $4.1
million improvement from 1992. Most of the improvement came from our cable
investments, which contributed an additional $3.5 million to our pre-tax
income.
INCOME TAXES The effective income tax rate for 1993 was 39.2%, up 0.1%
from 39.1% in 1992. Income tax expense included the $5.1 million unfavorable
effect of the retroactive and current impact of the tax rate change in the
Omnibus Budget Reconciliation Act of 1993. It was mostly offset by favorable
adjustments of tax reserves and deferred tax assets resulting from settlement
of IRS audits of prior years and resolution of other state tax issues.
-56-
<PAGE>
RESULTS OF OPERATIONS: 1992 vs. 1991 Knight-Ridder, Inc., earnings per
share before the cumulative effect of changes in accounting principles was
$2.65, up $.10, or 3.9%, from $2.55 per share in 1991. The company recorded
a nonrecurring net charge of $105.2 million ($1.91 per share) related to the
adoption of Financial Accounting Standards (FAS) 106 (Postretirement Benefits
Other Than Pensions) and FAS 109 (Accounting For Income Taxes).
The cumulative effect of adoption of FAS 106, relating to postretirement
benefits other than pensions, was an after-tax reduction in earnings of
$131.0 million, or $2.37 per share. This represents the unrecognized net
obligation based on plans in place at the beginning of 1992. The company
chose to recognize this "transition" amount immediately, rather than
prospectively. In the second quarter, the company announced medical plan
changes effective Jan. 1, 1993, that placed a maximum annual dollar cap for
medical premiums that the company would pay for most future non-union
retirees. Additionally, coverage after the age of 65 was eliminated for most
future non-union retirees. The result of this announced plan change was a
reduction in the prior service cost, which will be amortized over future
years. The full-year operating profit reduction resulting from the recurring
additional costs related to FAS 106 was $6.6 million, or an after-tax $.07
reduction in earnings per share.
The adoption of FAS 109, which relates to accounting for deferred income
taxes, resulted in an increase to 1992 net income of $25.8 million, or almost
$.47 per share.
Operating income increased 14.5% on a 3.2% increase in revenue in 1992.
Operating income as a percentage of revenue improved to 12.0% from 10.8% in
1991. Revenue gains and a decline in the cost of newsprint contributed
positively to operating income.
A decline in net interest expense and higher earnings from our cable
investment helped to offset the decline in earnings from our newsprint
manufacturing investments.
NEWSPAPERS The Newspaper Division's operating income increased $30.9
million, or 11.9%, to $290.5 million. The increase resulted from improved
revenue and a decline in the cost of newsprint. Newspaper Division operating
costs increased $9.3 million.
Overall, newspaper advertising revenue increased by $14.5 million, or
1.0%, in 1992 on a full-run ROP linage decline of 1.5%. The following table
summarizes the percentage change in revenue and full-run ROP linage from
1991.
-57-
<PAGE>
Percent Gain
Percent Gain (Decline)
(Decline) in Full-Run
Advertising Category in Revenue ROP Linage
-------------------- ------------ ------------
Retail (0.1) (2.8)
General 1.0 (7.9)
Classified 2.7 1.1
Total 1.0 (1.5)
Retail advertising revenue was down $520,000, or 0.1%. A 2.8% decline in
volume was partially offset by a 1.5% increase in full-run average rates and
an increase in preprint and part-run revenue.
General advertising revenue increased by $1.8 million, or 1.0%, from
1991 on the strength of an 8.2% increase in rates and an increase in preprint
and part-run revenue. General full-run ROP linage declined 7.9% from 1991.
Classified revenue improved by $13.2 million, or 2.7%, on
a 1.1% increase in full-run ROP volume and a 1.7% increase in full-run
average rates.
Circulation revenue increased $21.0 million, or 4.8%, due
to a 6.4% increase in average rates. Morning circulation declined 26,400
copies, or 0.8%, and afternoon circulation declined 40,900 copies, or 7.9%.
Sunday circulation declined 7,200 copies, or 0.2%.
BUSINESS INFORMATION SERVICES In 1992, BIS contributed 16.5% of
consolidated revenue, compared with 15.7% in 1991. Operating income was $22.1
million, up $1.9 million, or 9.3%, from 1991 on an 8.8% increase in revenue.
EXPENSES Labor and employee benefit costs were up $47.9 million, or 5.1%,
with 83, or 0.4%, fewer employees. The average wage per employee increased
5.2%. Included in 1992 results were $10.5 million in severance and buyout
costs related to a Detroit JOA labor settlement in the first half of the
year.
Newsprint, ink and supplements cost declined by $63.0 million, or 16.6%,
due to a 17.8% decrease in average newsprint prices from the prior year.
Newsprint consumption was 0.1% less than 1991 as a result of shifting the
printing of The Journal of Commerce to an outside company. Supplements cost
decreased by $4.8 million, or 10.6%.
Depreciation and amortization expense increased 3.4%, or $4.2 million,
due to the start-up of the new Philadelphia printing plant and BIS expansion.
-58-
<PAGE>
Other operating costs increased 8.3% from 1991 due partially to an $11.8
million increase in volume-related BIS royalty and exchange fee expenses, and
increased circulation promotion costs. Additionally, Knight-Ridder increased
its level of contributions to help with the aftermath of Hurricane Andrew.
NON-OPERATING ITEMS Net interest expense declined $7.7 million, or
19.2%, from 1991 as a result of lower average debt balances and lower
interest rates. Average interest rates on commercial paper decreased from
6.4% in 1991 to 4.3% in 1992.
Other non-operating items decreased to a $6.2 million loss, a $13.6
million decline from 1991. The major reason for the decline was unfavorable
results from our investments in newsprint manufacturing, which suffered from
soft newsprint prices in 1992. Our cable investments performed well, but this
was not enough to offset other non-operating losses.
INCOME TAXES The effective income tax rate for 1992 was 39.1%, up 1.9%
from 1991's 37.2%, as a result of the resolution of prior year tax issues.
EARLIER YEARS 1990 was the first full year of operations after entering
the joint operating agreement between the Detroit Free Press and The Detroit
News (owned by Gannett Co., Inc.), creating the Detroit Newspaper Agency
(DNA), now doing business as Detroit Newspapers. DNA performs the newspapers'
production, sales and distribution functions, while the two papers maintain
separate and independent newsrooms. This resulted in significantly improved
bottom-line results from our Detroit operation.
In October 1989, Knight-Ridder completed the sale of its eight
television stations for an after-tax gain of $66.9 million, or $1.07 per
share. In November 1989, the DNA was formed.
Knight-Ridder purchased Dialog Information Services in
midyear 1988 for approximately $353.0 million, and an effective 7-1/2%
interest in SCI Holdings, Inc. (parent of Storer Communication) in November
1988. Despite the $.13 per share dilutive impact of these acquisitions, the
company's earnings per share from continuing operations increased 2.0% over
1987.
In 1987, the company's newspaper operations received a boost from strong
classified advertising and a full year of operations from the State-Record
Company acquisition. The acquisition, however, cost the company approximately
$.15 in earnings per share dilution. Excluding the State-Record newspapers,
newspaper advertising revenue increased 4.9% on a 0.4% decline in full-run
ROP linage.
-59-
<PAGE>
In 1986, Knight-Ridder acquired State-Record Company with six daily
newspapers in South Carolina and Mississippi. It later sold two of the
newspapers. The company closed its Viewdata operation and sold the assets of
TelAir Network, Inc. Newspaper advertising revenue increased 9.2% on a 0.5%
gain in full-run ROP linage. Excluding the impact of a 46-day strike in
Philadelphia in 1985, linage declined 1.2%, due to softness in Miami and
various airline mergers.
Consistent with the company's experience, newspaper advertising,
particularly retail and classified, mirrored the general state of the economy
in 1984 and 1985. In 1985, newspaper advertising revenue increased 2.9% on a
2.4% decline in full-run ROP linage. The linage decline resulted from the
strike in Philadelphia and softness in Miami. Fueled by a strengthening
economy in 1984, full-run advertising revenue was up 14.7% on a 4.6% increase
in full-run linage.
A Look Ahead
We are optimistic for continued strong revenue growth for the company's
newspapers and for the BIS Division.
The average price of newsprint for 1995 is expected to be at least 40%
higher than in 1994, and all of the company's operations are identifying and
targeting new sources of revenue and ways to reduce other costs and operate
more efficiently to help offset the increase.
The company expects to continue its share repurchase program in 1995,
should the share price continue to be the relative bargain we found it to be
at the end of 1994. Share repurchases would increase debt and interest and
have a slightly favorable impact on the company's earnings per share.
The newsprint production companies that we partially own will show
significant improvement in 1995 as a result of recent and expected newsprint
price increases.
Recent Acquisitions/Investments
1994 - In January, the company acquired the assets of Technimetrics, a
leading publisher of investor information and business executives and global
investment professional listings.
Also in January, Knight-Ridder Information, Inc., (KRII) entered into a
joint venture with Southam Electronic Publishing, creating a new archival
information service called Infomart Dialog.
Effective April 1994, Knight-Ridder Financial purchased its former agent
in Germany, Real Time Information GmbH, today known as Knight-Ridder
Financial-Germany (KRF Germany). KRF Germany is a real-time financial news
and pricing provider.
-60-
<PAGE>
In the second quarter, Journal of Commerce (JoC) formed a joint venture
partnership with American Systems, Inc., which specializes in the development
of customer software solutions for the transportation industry. The joint
venture, Transax Systems, provides tariff filings and retrieval products.
At the end of the third quarter, KRII acquired the remaining shares of
Article Express International (AEI), a leading document delivery supplier.
AEI is now a wholly owned subsidiary and is included in the operating results
of the BIS Division.
JoC also purchased Gulf Shipper, a magazine responsible for the
publication of shipping schedules.
Capital Spending Program
The company's capital spending program includes normal replacements,
productivity improvements, capacity increases, building construction and
expansion, and printing press equipment. Over the past three years,
expenditures have totaled $237.6 million for these items.
Construction of the 693,000-square-foot production facility in
Philadelphia began in 1989. The $299.5 million plant became fully operational
in 1993.
Also included in capital expenditures is the Charlotte press project
that began in 1994. The $35.0 million press expansion is expected to be
completed during 1996, when the second of two new presses becomes
operational. 1994 investment in our BIS Division included mainframe computer
equipment enhancements of $3.6 million at Knight-Ridder Information, Inc.,
and subscriber equipment purchases of $14.0 million at Knight-Ridder
Financial.
Financial Position and Liquidity
1994 vs. 1993 During 1994, net cash provided by operating activities
increased $39.1 million to $369.1 million. The increase was attributed to
higher earnings and increased distributions from investees. The ratio of
current assets to current liabilities was 1.0:1 at year end.
Cash and short-term investments were $9.3 million at the end of 1994,
a $13.8 million decrease from last year.
During 1994, the company repurchased 2.5 million of its shares in the
open market for an aggregate price of $137.0 million.
In January 1994, $40.0 million in 9.05% notes payable matured. Total
debt at year-end 1994 was $39.6 million less than in 1993. As a result, the
total-debt-to-total-capital ratio improved from 26.6% in 1993 to 25.2% in
1994. Standard & Poor's and Moody's rate the company's commercial paper A1+
and P1 and long-term bonds AA- and A1, respectively.
-61-
<PAGE>
Average outstanding commercial paper during the year was $101.0 million
with an average effective interest rate of 4.0%. At year-end 1994, commercial
paper outstanding was $54.8 million and aggregate unused credit lines were
$445.2 million.
Various libel actions, 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 these actions
and proceedings will not be material.
In early 1995, the company reached an agreement in principle with The
Economist Group in London to sell the Journal of Commerce for $115 million.
The sale is expected to be completed in April 1995. The after-tax proceeds of
the sale will be utilized primarily for debt reduction and share repurchases.
1993 vs. 1992 During 1993, net cash provided by operating activities
decreased 2.5% from 1992 to $330.0 million. Cash and short-term cash
investments were $23.0 million at year end, down $74.1 million from the prior
year. The decrease in cash and short-term cash investments was due primarily
to the acquisition of Data-Star and Equinet, the repurchase of treasury
shares and the prepayment of debt.
During 1993, the company acquired 750,000 shares of its common stock in
the open market for an aggregate price of $40.7 million.
Approximately $100 million in notes payable, bearing 8.0% interest and
maturing in 1996, were early retired in April 1993. Total debt at year-end
1993 was $109.2 million less than at year-end 1992. This resulted in a
reduced total-debt-to-total-capital ratio of 26.6% from 32.2%.
Average outstanding commercial paper during the year was $97.4 million
with an average effective interest rate of 3.2%. At the end of 1993,
commercial paper outstanding was $54.0 million.
1992 vs. 1991 During 1992, net cash provided by continuing operations
was $338.5 million, an increase of $32.5 million from 1991 due to investee
distributions being less than investee earnings and net changes in working
capital. Cash and short-term cash investments of $97.1 million were $70.9
million more than the prior year.
Net cash required for investing activities decreased $9.9 million, or
5.1%, from 1991 levels, due to completion of the Philadelphia plant.
Total debt declined $46.6 million from 1991 levels. This resulted in a
reduced total-debt-to-total-capital ratio from 34.6% to 32.2%. These ratios
improved despite the FAS 106 and FAS 109 net cumulative charge of $105.2
million.
-62-
<PAGE>
Average outstanding commercial paper during the year was $54.6 million
with an average effective interest rate of 4.3%. At the end of 1992,
commercial paper outstanding was $62.3 million.
Effect of Changing Prices
The Consumer Price Index, a widely used measure of the impact of
changing prices, has increased only moderately in recent years, up between 3%
and 6% each year since 1983. Historically, when inflation was at higher
levels, the impact on the company's operating costs was not significant.
Historical cost depreciation charges may not accurately reflect the economic
cost of replacing capital assets, but depreciation expense represents less
than 5% of total operating costs. Newsprint expense represents a significant
percentage of total costs, but it is a relatively current cost as inventory
levels normally fluctuate between a 30- and 45-day supply. Labor and other
operating costs are, by their very nature, current costs.
The principal effect of inflation on the company's operating results is
to increase reported costs. Historically, the company has demonstrated the
ability to raise sales prices to offset these cost increases.
<TABLE>
Operating Revenue
<CAPTION>
Type Percent
----- -------
<S> <C>
Newspaper Retail 30 %
Newspaper General 7 %
Newspaper Classified 23 %
Newspaper Circulation 18 %
Newspaper Other 3 %
BIS 19 %
</TABLE>
-63-
<PAGE>
<TABLE>
Operating Costs
(As a percentage of operating revenue)
<CAPTION>
Components Percent
------------ -------
<S> <C>
Labor and Employee Benefits 41 %
Newsprint, Ink and Suppleme 13 %
Other Operating Costs 28 %
Depreciation and Amortization 6 %
Operating Income 12 %
</TABLE>
<TABLE>
Newspaper Advertising Revenue
(In millions of dollars)
<CAPTION>
Year General Classified Retail Total
---- ------- ---------- ------ -----
<C> <C> <C> <C> <C>
1984 170 390 627 1,187
1985 170 412 639 1,221
1986 182 454 697 1,333
1987 186 527 751 1,464
1988 179 579 765 1,523
1989 187 594 796 1,577
1990 185 580 792 1,557
1991 173 498 759 1,430
1992 175 511 758 1,444
1993 169 547 766 1,482
1994 184 606 793 1,583
Newspaper advertising revenue increased in all categories over 1993.
Classified revenue represented nearly half ($59.7 million) of the total advertising increase.
</TABLE>
-64-
<PAGE>
<TABLE>
Business Information Services Revenue
(In millions of dollars)
<CAPTION>
Year Amount
----- -------
<C> <C>
1984 67
1985 80
1986 89
1987 99
1988 160
1989 290
1990 333
1991 354
1992 385
1993 439
1994 514
BIS revenue increased 17.2% over 1993, partially due to acquisitions.
</TABLE>
-65-
<PAGE>
<TABLE>
Circulation Revenue
(In millions of dollars)
<CAPTION>
Year Amount
----- -------
<C> <C>
1984 302
1985 313
1986 335
1987 358
1988 371
1989 385
1990 403
1991 439
1992 460
1993 474
1994 485
Circulation revenue increased by 2.1% over 1993, due to pricing.
</TABLE>
-66-
<PAGE>
<TABLE>
Total Debt
(In millions of dollars)
<CAPTION>
Year Amount
----- -------
<C> <C>
1984 68
1985 308
1986 668
1987 553
1988 1,037
1989 713
1990 824
1991 607
1992 560
1993 451
1994 412
Total debt was reduced by $39.6 million as a result of strong internal cash flow.
</TABLE>
-67-
<PAGE>
<TABLE>
Stock Trading Volume
<CAPTION>
Year Amount
----- -----------
<C> <C>
1984 15,790,900
1985 18,547,800
1986 25,206,600
1987 35,042,800
1988 27,201,300
1989 23,269,400
1990 18,186,000
1991 24,749,100
1992 24,915,500
1993 29,768,600
1994 32,102,600
Knight-Ridder stock trading volume rose 7.8% in 1994.
</TABLE>
-68-
<PAGE>
<TABLE>
Stock Price History
<CAPTION>
Stock Price
---------------------------
Year Low Close High
----- ------ ------ ------
<C> <C> <C> <C>
1984 21 1/4 29 1/4 31
1985 28 39 7/8 41 3/8
1986 37 1/2 46 7/8 57 7/8
1987 33 1/4 40 1/8 61 1/4
1988 35 3/4 45 3/8 47 3/4
1989 42 7/8 58 3/8 58 3/8
1990 37 45 7/8 58
1991 43 3/4 50 3/4 57 1/2
1992 50 3/4 58 1/8 64 1/8
1993 50 5/8 59 3/8 65
1994 46 1/2 50 7/8 61
Knight-Ridder's stock price reached a high of $61 during 1994.
</TABLE>
-69-
<PAGE>
<TABLE>
Net Cash Provided By Operating Activities
(In millions of dollars)
<CAPTION>
Year Amount
----- -------
<C> <C>
1984 194
1985 204
1986 265
1987 269
1988 230
1989 280
1990 325
1991 306
1992 338
1993 330
1994 369
Net cash provided by operating activities increased 11.9% from 1993.
</TABLE>
-70-
<PAGE>
<TABLE>
Shareholders' Equity
(In millions of dollars)
<CAPTION>
Year Amount
----- -------
<C> <C>
1984 922
1985 697
1986 816
1987 901
1988 822
1989 917
1990 895
1991 1,149
1992 1,182
1993 1,243
1994 1,225
Shareholders' equity decreased 1.5% to $1.225 billion due to the repurchase of
2.5 million of the company's shares.
</TABLE>
-71-
<PAGE>
<TABLE>
Common Shareholders' Equity Per Share
<CAPTION>
Year Amount
----- ------
<C> <C>
1984 $14.17
1985 $12.38
1986 $14.28
1987 $15.85
1988 $15.47
1989 $17.83
1990 $18.09
1991 $21.44
1992 $21.50
1993 $22.67
1994 $23.15
Shareholders' equity per share increased by 2.1% over 1993.
</TABLE>
-72-
<PAGE>
<TABLE>
% Earned On Invested Capital
(Return on Average Shareholders' Equity)
(1992 excludes the cumulative effect of changes in accounting principles)
<CAPTION>
Including
Continuing Discontinued
Year Operations Operations
----- ---------- ---------
<C> <S> <S>
1984 15.2 % 16.3 %
1985 15.4 % 16.4 %
1986 17.5 % 18.5 %
1987 17.3 % 18.1 %
1988 17.0 % 18.2 %
1989 20.7 % 28.4 %
1990 16.5 % 16.5 %
1991 12.9 % 12.9 %
1992 12.5 % 12.5 %
1993 12.2 % 12.2 %
1994 13.9 % 13.9 %
Return on average shareholders' equity was 13.9% in 1994 from 12.2% in 1993.
</TABLE>
-73-
<PAGE>
ITEM 8. Financial statements and supplementary data
-------------------------------------------
See Quarterly Operations in Item 5
<TABLE>
Consolidated Balance Sheet
(In thousands of dollars, except share data)
<CAPTION> Dec. 25 Dec. 26 Dec. 27
1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash, including short-term cash investments of $150
in 1994, $7,638 in 1993 and $87,758 in 1992 ............... $ 9,253 $ 23,012 $ 97,104
Accounts receivable, net of allowances of $13,728 in
1994, $14,554 in 1993 and $14,450 in 1992.................. 317,687 274,391 262,541
Inventories......................................................... 39,555 41,422 37,474
Other current assets.............................................. 56,309 62,491 63,654
--------- --------- ---------
Total Current Assets.......................................... 422,804 401,316 460,773
--------- --------- ---------
INVESTMENTS AND OTHER ASSETS
Equity in unconsolidated companies and joint ventures ......... 293,205 289,986 277,193
Other............................................................... 190,515 175,058 145,008
--------- --------- ---------
Total Investments and Other Assets.......................... 483,720 465,044 422,201
--------- --------- ---------
PROPERTY, PLANT AND EQUIPMENT
Land and improvements............................................. 66,950 66,885 62,638
Buildings and improvements........................................ 383,696 379,556 372,021
Equipment........................................................... 1,209,360 1,168,054 1,053,364
Construction and equipment installations in progress............ 17,099 13,100 91,225
--------- --------- ---------
1,677,105 1,627,595 1,579,248
Less accumulated depreciation................................... 844,593 766,474 697,507
--------- --------- ---------
Net Property, Plant and Equipment........................... 832,512 861,121 881,741
--------- --------- ---------
-74-
<PAGE>
EXCESS OF COST OVER NET ASSETS ACQUIRED
Less accumulated amortization of $182,402 in 1994,
$160,545 in 1993 and $140,791 in 1992....................... 708,153 703,951 693,344
--------- --------- ---------
Total........................................................... $ 2,447,189 $2,431,432 $2,458,059
========= ========= =========
Liabilities and Shareholders' Equity
CURRENT LIABILITIES
Accounts payable................................................... $ 136,817 $ 124,620 $ 109,317
Accrued expenses and other liabilities.......................... 98,993 82,149 75,563
Accrued compensation and amounts withheld from employees....... 96,917 79,736 80,297
Federal and state income taxes.................................. 1,368 10 1,286
Deferred revenue................................................... 66,953 60,095 55,099
Dividends payable.................................................. 19,593 19,199 19,238
Short-term borrowings and current portion of long term debt.... 0 40,687 64,304
--------- --------- ---------
Total Current Liabilities..................................... 420,641 406,496 405,104
--------- --------- ---------
NON-CURRENT LIABILITIES
Long-term debt.................................................... 411,504 410,388 495,941
Deferred federal and state income taxes........................... 138,611 135,979 114,199
Postretirement benefits other than pensions....................... 166,682 174,331 172,763
Employment benefits and other non-current liabilities............. 84,264 57,816 85,395
--------- --------- ---------
Total Non-Current Liabilities................................. 801,061 778,514 868,298
--------- --------- ---------
MINORITY INTERESTS IN CONSOLIDATED SUBSIDIARIES....................... 833 3,253 2,845
--------- --------- ---------
COMMITMENTS AND CONTINGENCIES - (NOTE J)
SHAREHOLDERS' EQUITY
Common Stock, $.02 1/12 par value; shares authorized -
250,000,000; shares issued - 52,892,720 in 1994,
54,847,486 in 1993 , and 54,965,671 in 1992...................... 1,102 1,143 1,145
Additional capital................................................ 326,392 342,201 321,034
Retained earnings................................................. 897,160 899,825 859,633
--------- --------- ---------
Total Shareholders' Equity.................................... 1,224,654 1,243,169 1,181,812
--------- --------- ---------
Total......................................................... $ 2,447,189 $2,431,432 $2,458,059
========= ========= =========
See "Notes to Consolidated Financial Statements."
</TABLE> -75-
<PAGE>
<TABLE>
Consolidated Statement Of Income
(In thousands of dollars, except per share data)
<CAPTION>
Year Ended
---------------------------------------------------
Dec. 25 Dec. 26 Dec. 27
1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
OPERATING REVENUE
Newspapers
Advertising
Retail............................................. $ 792,476 $ 766,105 $ 758,496
General............................................ 184,469 168,773 174,750
Classified......................................... 606,428 546,753 510,898
--------- --------- ---------
Total............................................ 1,583,373 1,481,631 1,444,144
Circulation.......................................... 484,581 474,420 460,014
Other................................................ 66,968 56,772 39,932
--------- --------- ---------
Total Newspapers................................ 2,134,922 2,012,823 1,944,090
Business Information Services........................ 514,039 438,525 385,439
--------- --------- ---------
Total Operating Revenue........................ 2,648,961 2,451,348 2,329,529
--------- --------- ---------
OPERATING COSTS
Labor and employee benefits......................... 1,089,417 1,024,181 990,254
Newsprint, ink and supplements...................... 335,902 335,043 316,814
Other operating costs................................ 743,054 665,509 615,729
Depreciation and amortization........................ 149,327 141,758 128,221
--------- --------- ---------
Total Operating Costs.......................... 2,317,700 2,166,491 2,051,018
--------- --------- ---------
OPERATING INCOME........................................ 331,261 284,857 278,511
--------- --------- ---------
-76-
<PAGE>
OTHER INCOME (EXPENSE)
Interest expense...................................... (44,585) (45,112) (52,375)
Interest expense capitalized......................... 474 120 14,746
Interest income....................................... 6,070 5,712 5,078
Equity in earnings of unconsolidated companies
and joint ventures............................... 7,412 7,254 3,940
Minority interests in earnings
of consolidated subsidiaries..................... (9,650) (9,863) (9,795)
Other, net............................................ (912) 433 (389)
--------- --------- ---------
Total............................................ (41,191) (41,456) (38,795)
--------- --------- ---------
Income before income taxes............................ 290,070 243,401 239,716
Income taxes............................................ 119,170 95,312 93,630
--------- --------- ---------
INCOME BEFORE CUMULATIVE EFFECT
OF CHANGES IN ACCOUNTING PRINCIPLES.................. 170,900 148,089 146,086
Cumulative effect of changes in accounting principles for:
Income taxes....................................... 25,800
Postretirement benefits other than pensions........ (131,000)
--------- --------- ---------
Net income......................................... $ 170,900 $ 148,089 $ 40,886
========= ========= =========
EARNINGS PER COMMON AND COMMON AND COMMON EQUIVALENT SHARE
Income before cumulative effect of changes
in accounting principles......................... $ 3.15 $ 2.68 $ 2.65
Cumulative effect of changes in
accounting principles............................ (1.91)
--------- --------- ---------
Net income......................................... $ 3.15 $ 2.68 $ 0.74
========= ========= =========
AVERAGE COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING (In 000s).......................... 54,275 55,332 55,178
========= ========= =========
See "Notes to Consolidated Financial Statements".
-77-
<PAGE>
</TABLE>
<PAGE>
<TABLE>
Consolidated Statement of Cash Flows
(In thousands of dollars)
<CAPTION>
Year Ended
--------------------------------
Dec. 25 Dec. 26 Dec. 27
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
CASH PROVIDED BY (REQUIRED FOR) OPERATING ACTIVITIES
Net income.................................................... $ 170,900 $ 148,089 $ 40,886
Non-cash items included in income:
Cumulative effect of changes in accounting principles..... 105,200
Depreciation.............................................. 105,776 104,314 93,838
Amortization of excess of cost over net assets acquired... 21,857 19,754 18,892
Amortization of other assets.............................. 21,694 17,690 15,491
Provision for non-current deferred taxes.................. 2,632 21,780 20,498
Earnings of investees in excess of distributions.......... (7,538) (22,802) (13,996)
Other items, net.......................................... 44,697 29,584 26,708
Change in certain assets and liabilities:
Accounts receivable....................................... (41,135) (3,377) (15,323)
Inventories............................................... 1,867 (3,801) 5,065
Other current assets...................................... 2,104 3,086 (13,082)
Accounts payable.......................................... 11,099 7,197 36,546
Federal and state income taxes............................ 1,358 3,542 195
Other current liabilities................................. 33,803 4,947 17,541
-------- -------- --------
Net cash provided by operating activities......... 369,114 330,003 338,459
-------- -------- --------
-78-
<PAGE>
CASH REQUIRED FOR INVESTING ACTIVITIES
Additions to property, plant and equipment.................... (67,110) (69,541) (100,993)
Other items, net.............................................. (61,013) (81,046) (82,010)
-------- -------- --------
Net cash required for investing activities........ (128,123) (150,587) (183,003)
-------- -------- --------
CASH PROVIDED BY (REQUIRED FOR) FINANCING ACTIVITIES
Proceeds from sale of commercial paper and bank borrowings.... 375,308 307,983 157,900
Reduction of total debt....................................... (414,879) (417,153) (204,495)
-------- -------- --------
Net reduction in total debt....................... (39,571) (109,170) (46,595)
Payment of cash dividends..................................... (77,942) (76,787) (75,992)
Sale of common stock to employees............................. 25,897 30,709 68,785
Purchase of treasury stock.................................... (136,977) (40,693)
Other items, net.............................................. (26,157) (57,567) (30,794)
-------- -------- --------
Net cash required for financing activities........ (254,750) (253,508) (84,596)
-------- -------- --------
Net Increase (Decrease) in Cash............... (13,759) (74,092) 70,860
Cash and short-term cash investments at beginning of the year..... 23,012 97,104 26,244
-------- -------- --------
Cash and short-term cash investments at end of the year........... $ 9,253 $ 23,012 $ 97,104
======== ======== ========
Working capital at end of the year................................ $ 2,163 $ (5,180) $ 55,669
======== ======== ========
See "Notes to Consolidated Financial Statements."
</TABLE>
-79-
<PAGE>
<PAGE>
<TABLE>
Consolidated Statement of Shareholders' Equity
(In thousands of dollars, except share data)
<CAPTION>
Common
Shares Common Additional Retained Treasury
Outstanding Stock Capital Earnings Stock
---------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C>
BALANCES AT DEC. 29, 1991............................. 53,571,282 $ 1,116 $ 252,278 $ 895,226 $ -
Issuance of common shares under
stock option plans........................... 1,155,062 24 49,503
Issuance of common shares under
stock purchase plan.......................... 240,022 5 12,154
Tender of shares as payment
for options excercised....................... (695) (40)
Tax benefits arising from employee stock plans... 7,139
Net income....................................... 40,886
Cash dividends declared on
common stock - $1.40 per share............... (76,479)
---------- ---------- ---------- ---------- --------
BALANCES AT DEC. 27, 1992............................. 54,965,671 $ 1,145 $ 321,034 $ 859,633 $ -
Issuance of common shares under
stock option plans............................ 323,894 7 12,883
Issuance of treasury shares under
stock option plans............................ 29,670 (525) (1,612)
Issuance of common shares under
stock purchase plan........................... 207,223 4 10,078
Issuance of treasury shares under
stock purchase plans.......................... 71,028 (596) (4,007)
Purchase of treasury shares ...................... (750,000) 40,693
Retirement of 649,302 treasury shares ............ (13) (3,912) (31,148) (35,074)
Tax benefits arising from employee stock plans.... 3,239
Net income........................................ 148,089
Cash dividend declared on
common stock - $1.40 per share................ (76,749)
---------- ---------- ---------- ---------- --------
BALANCES AT DEC. 26, 1993.............................. 54,847,486 $ 1,143 $ 342,201 $ 899,825 $ -
-80-
<PAGE>
Issuance of common shares under
stock option plans............................ 29,600 1,104
Issuance of treasury shares under
stock option plans............................ 227,811 (3,562) (12,571)
Issuance of treasury shares under
stock purchase plan .......................... 310,123 (2,767) (16,835)
Purchase of treasury shares ...................... (2,522,300) 136,977
Retirement of 1,984,366 treasury shares .......... (41) (12,300) (95,229) (107,571)
Tax benefits arising from employee stock plans.... 1,716
Net income....................................... 170,900
Cash dividend declared on
common stock - $1.46 per share................ (78,336)
---------- ---------- ---------- ---------- --------
BALANCES AT DEC. 25, 1994.............................. 52,892,720 $ 1,102 $ 326,392 $ 897,160 $ -
========== ========== ========== ========== ========
See "Notes to Consolidated Financial Statements."
</TABLE>
Notes to Consolidated Financial Statements
Note A
Summary of Significant Accounting Policies
A description of the company's business and the nature and scope of its
operations are set forth in items 1 & 2. Reading this information is
recommended for a more complete understanding of the financial statements.
The company reports on a fiscal year, ending the last Sunday in the
calendar year. Results for 1994, 1993 and 1992 are for the 52 weeks ended
Dec. 25, Dec. 26 and Dec. 27, respectively.
The basis of consolidation is to include in the consolidated financial
statements all the accounts of Knight-Ridder, Inc., and its
more-than-50%-owned subsidiaries. All significant intercompany transactions
and account balances have been eliminated in consolidation.
The company is a 50% partner in the Detroit Newspaper Agency (DNA), a
joint operating agency between Detroit Free Press, Inc., a wholly owned
subsidiary of Knight-Ridder, Inc., and The Detroit News, Inc., a wholly owned
subsidiary of Gannett Co., Inc. The Consolidated Statement of Income includes
on a line-by-line basis the company's pro rata share of the revenue and
expense generated by the operation of the agency.
-81-
<PAGE>
Investments in companies in which Knight-Ridder, Inc., has an equity
interest of at least 20% but not more than 50% are accounted for under the
equity method. Under this method, the company records its share of earnings
as income and increases the investment by the equivalent amount. Dividends
are recorded as a reduction in the investment. All other investments are
recorded at the lower of cost or net realizable value, and the company
recognizes income from such investments upon receipt of a dividend.
The investment caption "Equity in unconsolidated companies and joint
ventures" in the Consolidated Balance Sheet represents the company's equity
in the net assets of the Detroit Newspaper Agency, the Seattle Times Company
and subsidiaries, a company responsible for the sales and services of
general, retail and classified advertising accounts for a group of
newspapers, two newsprint mill partnerships, a cable television joint venture
and a joint venture that offers full-service copies of original journal
articles. The company owns 49-1/2% of the voting common stock and 65% of the
nonvoting common stock of the Seattle Times Company, owns 33-1/3% of the
voting stock of Newspapers First, is a one-third partner in the Southeast
Paper Manufacturing Co., owns a 13-1/2% equity share of Ponderay Newsprint
Company, and jointly owns TKR Cable Company and TKR Cable Partners. Effective
December 1992, after a restructuring, the company has a 15% interest in
TCI/TKR Limited Partnership through TKR Cable Partners. Prior to December
1992, the company held a 7-1/2% interest in SCI Holdings, Inc., the holding
company for Storer Communications, Inc. Knight-Ridder Information, Inc., a
Knight-Ridder subsidiary, in October 1994 acquired additional shares of
Article Express International, Inc. (AEI), in which it previously held a
minority ownership, resulting in AEI becoming a wholly owned subsidiary. The
impact is not material. The investment in unconsolidated companies and joint
ventures at Dec. 25, 1994, includes $68.4 million representing the company's
share of undistributed earnings (excluding the DNA) accumulated since the
investment dates. The company's share of the earnings of the unconsolidated
companies (except for the DNA) of $7.4 million in 1994, $7.3 million in 1993
and $3.9 million in 1992 is included in the caption "Equity in earnings of
unconsolidated companies and joint ventures" in the Consolidated Statement of
Income. Dividends and cash distributions received from the unconsolidated
companies and joint ventures (excluding the DNA) were $3.1 million in 1994,
$3.0 million in 1993 and $2.8 million in 1992 and were offset against the
investment account.
-82-
<PAGE>
Fort Wayne Newspapers, Inc., Infomart Dialog and Transax Systems are
the only consolidated subsidiaries and joint ventures that have a minority
ownership interest. The minority shareholder's interest in the net income of
these subsidiaries has been provided for as an expense in the Consolidated
Statement of Income in the caption "Minority interests in earnings of
consolidated subsidiaries." Also included in this caption is a contractual
minority interest resulting from a Joint Operating Agreement between Miami
Herald Publishing Co. and Cox Newspapers. The company's liability to the
minority interest shareholders is included in the Consolidated Balance Sheet
caption, "Minority Interests in Consolidated Subsidiaries."
"Cash and short-term cash investments" includes currency and checks on
hand, demand deposits at commercial banks, overnight repurchase agreements of
government securities and investment-grade commercial paper with maturities
of fewer than 90 days. Cash and short-term investments are recorded at cost.
Due to the short-term nature of marketable securities, cost approximates
market value. In 1994, the company adopted Statement of Financial Accounting
Standards (FAS) 115, Accounting for Certain Investments in Debt and Equity
Securities, the impact of which was not material.
"Inventories" are priced at the lower of cost (first-in, first-out FIFO
method), or market. Most of the inventory is newsprint, ink and other
supplies used in printing newspapers.
"Property, plant and equipment" is recorded at cost and the provision
for depreciation for financial statement purposes is computed principally by
the straight-line method over the estimated useful lives of the assets. The
company capitalizes interest expense as part of the cost of major
construction projects.
"Excess of cost over net assets acquired" arises from the purchase of at
least a 50% interest in a company for a price higher than the fair market
value of the net tangible assets. Intangible assets of this type arising from
acquisitions accounted for as purchases and occurring subsequent to Oct. 31,
1970, totaled approximately $799.5 million at Dec. 25, 1994. They are
generally being amortized over a 40-year period on a straight-line basis,
unless management has concluded a shorter term is more appropriate. If, in
the opinion of management, an impairment in value occurs, based on the
undiscounted cash flow method, any necessary additional write-downs will be
charged to expense.
"Deferred revenue" arises as a normal part of business from advance
subscription payments for newspapers and business information services.
Revenue is recognized in the period in which it is earned.
-83-
<PAGE>
"Short-term borrowings" represents the carrying amounts of commercial
paper and other short-term borrowings that approximate fair value. "Long-term
debt" represents the carrying amounts of debentures and notes payable. Fair
values, disclosed in Note C, are estimated using discounted cash flow
analyses based on the company's current incremental borrowing rates for
similar types of borrowing arrangements.
In 1992, the company adopted FAS 106, Accounting For Postretirement
Benefits Other Than Pensions, and FAS 109, Accounting For Income Taxes. The
effects of adoption are described in Notes I and B, respectively. In 1994,
the company adopted FAS 112, Employers' Accounting for Postemployment
Benefits. The adoption of FAS 112 did not materially impact the consolidated
financial statements. In 1995, the company plans to adopt FAS 116, Accounting
For Contributions Received and Contributions Made. The impact on the
consolidated financial statements will not be material.
Earnings per share is computed by dividing net income by the weighted
average number of common and common equivalent shares outstanding. Quarterly
earnings per share may not add to the total for the year, since each quarter
and the year are calculated separately based on average outstanding shares
during the period.
Certain amounts in 1993 and 1992 have been reclassified to conform to
the 1994 presentation.
Note B
Income Taxes
The company's income tax expense is determined under the provisions of
Statement of Financial Accounting Standards 109, Accounting for Income Taxes,
which was adopted in 1992. This accounting standard requires the use of the
liability method in adjusting previously deferred taxes for changes in tax
rates. The company chose to reflect the cumulative effect of adopting this
standard as a change in accounting principle as of the beginning of 1992. The
adoption resulted in a credit to earnings of $25.8 million. Prior years'
financial statements were not restated.
Substantially all of the company's earnings are subject to domestic
taxation. No material foreign income taxes have been imposed on reported
earnings.
-84-
<PAGE>
<PAGE>
<TABLE>
Note B - Income Taxes
Federal, state and local income taxes before cumulative effect of changes in accounting principles consist of the following
(in thousands):
<CAPTION>
1994 1993 1992
---------------------- --------------------- --------------------
Current Deferred Current Deferred Current Deferred
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Federal income taxes................ $97,824 $2,501 $53,422 $38,231 $65,968 $11,725
State and local income taxes........ 18,791 54 11,702 (8,043) 12,936 3,001
-------- -------- -------- -------- -------- --------
Total.......................... $116,615 $2,555 $65,124 $30,188 $78,904 $14,726
======== ======== ======== ======== ======== ========
</TABLE>
Cash payments of income taxes for the years 1994, 1993 and 1992 were $104.5
million, $82.7 million and $60.2 million, respectively. Payments in 1993
include the payment and settlement of prior year state and federal income tax
examinations.
-85-
<PAGE>
<PAGE>
<TABLE>
Effective Income Tax Rates
The differences between income tax expense shown in the financial statements and the amounts determined by applying the federal
statutory rate of 35% in 1994 and 1993 and 34% in 1992 are as follows (in thousands):
<CAPTION>
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Federal statutory income tax .......................................................... $101,525 $85,190 $81,505
State and local income taxes, net of federal benefit................................... 12,249 10,913 10,518
Statutory rate applied to nondeductible amortization
of the excess of cost over net assets acquired....................................... 7,650 6,914 6,418
Change in deferred tax asset valuation allowance....................................... (6,695)
Other items, net....................................................................... (2,254) (1,010) (4,811)
------- ------- -------
Total............................................................................. $119,170 $95,312 $93,630
======== ======= =======
</TABLE>
-86-
<PAGE>
The deferred tax asset and liability at the fiscal year end is comprised of
the following components (in thousands):
<PAGE>
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Deferred Tax Assets
Postretirement benefits other than pensions (including amounts
relating to partnerships in which the company participates)............... $ 84,833 $ 87,199 $ 82,971
Compensation and benefit accruals........................................... 17,130 11,238 19,182
Accrued interest............................................................ 5,135 3,439 8,563
Other nondeductible accruals................................................ 28,127 33,900 10,027
------- ------- -------
Gross deferred tax assets................................................. $ 135,225 $ 135,776 $ 120,743
======= ======= =======
Deferred Tax Liability
Depreciation and Amortization............................................... $ 173,500 $ 147,115 $ 132,413
Equity in partnerships and investees........................................ 46,715 49,141 37,516
Deferred intercompany transactions.......................................... 16,343 17,054 16,617
Research and experimental expenditures...................................... 9,379 6,145 4,468
Other....................................................................... 5,412 29,890 13,110
------- ------- -------
Gross deferred tax liability.............................................. $ 251,349 $ 249,345 $ 204,124
------- ------- -------
Net deferred tax liability................................................ $ 116,124 $ 113,569 $ 83,381
======= ======= =======
</TABLE>
-87-
<PAGE>
The components of deferred taxes included in the Consolidated Balance Sheet
are as follows (in thousands):
<PAGE>
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Current asset....................... $22,487 $22,410 30,818
Non-current liability............... (138,611) (135,979) (114,199)
-------- -------- --------
Net deferred tax liability.......... $(116,124) $(113,569) $ (83,381)
======== ======== ========
</TABLE>
-88-
<PAGE>
<PAGE>
<TABLE>
Note C - Debt
Debt consisted of the following (in thousands):
<CAPTION>
Dec. 25 Dec. 26 Dec. 27
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Commercial paper due at various dates through Jan. 20, 1995
at an effective interest rate of 6.13% as of Dec. 25, 1994.
Amounts are net of unamortized discounts of $136 in 1994,
$15 in 1993 and $74 in 1992 (a)............................................ $ 54,764 $ 53,985 $ 62,326
Debentures due on April 15, 2009, bearing interest at 9 7/8%,
net of unamortized discount of $2,363 in 1994, $2,528 in 1993,
and $2,693 in 1992......................................................... 197,637 197,472 197,307
Notes payable on April 15, 1996, bearing interest at 8%,
retired in April 1993, net of unamortized discount of $338
in 1992.................................................................... 99,662
Notes payable on Jan. 15, 1994, bearing interest at 9.05%,
retired in January 1994, net of unamortized discount
of $1 in 1993 and $35 in 1992.............................................. 39,999 39,965
Notes payable, bearing interest at 8 1/2%, subject to
mandatory pro rata amortization of 25% annually commencing Sept. 1, 1998
through maturity on Sept. 1, 2001, net of unamortized discount of $897
in 1994, $1,069 in 1993, $1,240 in 1992.................................... 159,103 158,931 158,760
Other indebtedness............................................................ 688 2,225
------- ------- -------
411,504 451,075 560,245
Less amounts payable in one year (b).......................................... 40,687 64,304
------- ------- -------
Total long-term debt..................................................... $ 411,504 $ 410,388 $ 495,941
======= ======= =======
(a) Commercial paper is backed by $500.0 million of revolving credit agreements, which require no principal payment until
maturity on April 9, 1998.
(b) The revolving credit and term loan agreements backing commercial paper is "long-term" in that no principal
repayments are required during the next 12 months. As such, approximately $54.8 million of commercial paper is
classified as "noncurrent" since the company intends to maintain total outstanding commercial paper of at least
this amount during the next 12 months.
-89-
<PAGE>
Interest payments during 1994, 1993 and 1992 were $40.2 million, $41.2 million and $52.7 million, respectively.
</TABLE>
The following table presents the approximate annual maturities of long-term
debt for the five years after 1994 (in thousands):
<TABLE>
<S> <C>
1995 $ -
1996 -
1997 -
1998 94,540
1999 39,776
2000 and thereafter 277,188
-------
$ 411,504
=======
</TABLE>
The carrying amounts and fair values of debt as of
Dec. 25, 1994, are as follows (in thousands):
<TABLE>
<CAPTION>
Carrying Fair
Amount Value
------- -------
<S> <C> <C>
Commercial paper $ 54,764 $ 54,764
9 7/8 % Debentures 197,637 219,160
8 1/2 % Notes payable 159,103 160,848
------- -------
Total $ 411,504 $ 434,772
======= =======
</TABLE>
-90-
<PAGE>
Note D - Unconsolidated Companies and Joint Ventures
<PAGE>
<TABLE>
Summary financial information for the company's unconsolidated companies and joint ventures that are accounted
for by the equity method is as follows (in thousands):
<CAPTION>
1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
Current assets................................................. $ 206,128 $ 202,397 $ 191,966
Property, plant and equipment and other assets................. 1,619,548 1,647,083 1,656,851
Current liabilities............................................ 199,975 180,891 148,060
Long-term debt and other noncurrent liabilities................ 905,039 961,488 1,016,957
Net sales...................................................... 682,175 656,311 638,328
Gross profit................................................... 147,842 118,050 185,554
Net loss....................................................... (15,705) (22,096) (29,909)
Company's share of:
Net assets................................................. 293,205 289,986 277,193
Net income................................................. $ 7,412 $ 7,254 $ 3,940
</TABLE>
At the end of the third quarter 1994, the company purchased the
remaining shares of Article Express International (AEI). As a wholly owned
subsidiary, AEI's 1994 financial information is reported in the consolidated
financial statements and is excluded from above except for the company's
share of AEI's net income prior to acquisition.
In 1989, the Detroit Free Press and The Detroit News began operating
under a joint operating agreement as the Detroit Newspaper Agency (DNA).
Balance sheet amounts for the DNA at Dec. 25, 1994, Dec. 26, 1993, and Dec.
27, 1992, are included above and the net assets contributed to the DNA are
included in "Equity in unconsolidated companies and joint ventures" in the
Consolidated Balance Sheet.
-91-
<PAGE>
Note E
Capital Stock
In 1991, shareholders authorized 20.0 million shares of preferred stock
for future issuance. Common stock authorized for issuance is 250.0 million
shares at par value $.02-1/12 per share.
The Employees Stock Purchase Plan provides for the sale of common stock
to employees of the company and its subsidiaries at a price equal to 85% of
the market value at the end of each purchase period. Participants under the
plan received 310,123 shares in 1994, 278,251 shares in 1993 and 240,022
shares in 1992. The purchase price of shares issued in 1994 under this plan
ranged between $41.23 and $48.72, and the market value on the purchase dates
of such shares ranged from $48.50 to $57.31.
The Employee Stock Option Plan provides for the issuance of nonqualified
stock options and incentive stock options. Options are issued at prices not
less than market value at date of grant and until 1994 were exercisable at
issue date. Options granted in 1994 are exercisable in three equal
installments vesting over a three-year period from the date of grant. There
is no expiration date for the granting of options, but options must expire no
later than 10 years from the date of grant. The option plan provides for the
discretionary grant of stock appreciation rights (SARs) in tandem with
previously granted options, which allow a holder to receive in cash, stock or
combinations thereof the difference between the exercise price and the fair
market value of the stock at date of exercise. The value of stock
appreciation rights is charged to compensation expense. When options and
stock appreciation rights are granted in tandem, the exercise of one cancels
the exercise right of the other.
Proceeds from the issuance of shares under these plans are included in
shareholders' equity and do not affect income.
-92-
<PAGE>
Transactions under the Employee Stock Option Plan are summarized as follows:
<PAGE>
<TABLE>
<CAPTION>
Number Average
of Price
Shares Per Share
--------- ---------
<S> <C> <C>
Outstanding
Dec. 29, 1991......................................... 3,933,529 $44.61
Exercised......................................... (1,155,062) 42.74
Canceled.......................................... (11,800) 48.49
Granted........................................... 714,295 58.60
---------
Outstanding
Dec. 27, 1992......................................... 3,480,962 48.09
Exercised......................................... (353,564) 39.47
Canceled.......................................... (900) 58.63
Granted........................................... 739,925 58.88
---------
Outstanding
Dec. 26, 1993......................................... 3,866,423 50.94
Exercised......................................... (257,411) 39.10
Canceled.......................................... (6,100) 55.57
Granted........................................... 720,450 49.24
---------
Outstanding
Dec. 25, 1994......................................... 4,323,362 $51.36
=========
</TABLE>
-93-
<PAGE>
The exercise price of the shares issued upon exercise of stock options
in 1994 ranged between $28.75 and $58.63.
In 1993, shareholders voted in favor of a proposal amending the Employee
Stock Option Plan to make an additional 3.5 million shares of the company's
common stock available for options. In addition, shareholders voted in favor
of an amendment to make 1.5 million shares of common stock available for
purchase under the Employees Stock Purchase Plan.
At Dec. 25, 1994, shares of the companys authorized but unissued common
stock were reserved for issuance as follows:
Shares
---------
Employee stock option plans 2,855,468
Employees stock purchase plan 1,430,966
---------
Total 4,286,434
=========
Since 1984, the company has purchased 23.7 million shares of its own
stock for approximately $1.0 billion. See Treasury Stock Purchases in Item 5.
Each holder of a common share has been granted a right, under certain
conditions, to purchase from the company one common share at a price of $200,
subject to adjustment. The rights provide that in the event the company is a
surviving corporation in a merger, each holder of a right will be entitled to
receive common shares having a value equal to two times the exercise price of
the right. In the event the company engages in a merger or other business
combination transaction in which the company is not the surviving
corporation, the rights agreement provides that proper provision shall be
made so that each holder of a right will be entitled to receive common stock
of the acquiring company having a value equal to two times the exercise price
of the right. The rights agreement also provides that in the event any person
acquires 20% or more of the company's outstanding common stock (other than
pursuant to an offer for all outstanding stock that the board determines is
fair and in the best interests of the company and stockholders), each right
(other than rights held by the person who has acquired such 20% or larger
block) will entitle its holder to purchase common stock of the company having
a value equal to twice the exercise price of the right. No rights
certificates will be distributed until 10 days following a public
-94-
<PAGE>
announcement that a person or group has acquired beneficial ownership of 20%
or more of the company's outstanding common stock, or 10 days following the
commencement of a tender offer or exchange offer for 20% or more of the
company's outstanding stock. Until such time, the rights are evidenced by the
common share certificates of the company. The rights are not exercisable
until distributed and will expire on July 10, 1996, unless earlier redeemed.
The company has the option to redeem the rights in whole, but not in part, at
a price of $.05 per right.
Note F
Retirement Plans
The company and its subsidiaries have several company-administered
noncontributory defined benefit plans covering most non-union employees.
These plans provide benefits that are based on the employees' compensation
during various times before retirement. The funding policy for these plans is
to contribute annually an amount that is intended to provide the projected
benefit earned during the year for the covered employees. The company also
contributes to certain union-administered, company-administered and jointly
administered negotiated plans covering union employees. The funding policy
for these plans is to make annual contributions in accordance with applicable
agreements.
The company also sponsors certain defined contribution plans established
pursuant to Section 401(k) of the Internal Revenue Code. Subject to certain
dollar limits, employees may contribute a percentage of their salaries to
these plans, and the company will match a portion of the employees'
contributions.
-95-
<PAGE>
A summary of the components of net periodic pension cost for the defined
benefit plans (both company-administered non-negotiated and single-employer
negotiated plans) is presented here, along with the total amounts charged to
pension expense for multi-employer union plans, defined contribution plans
and other agreements (in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Defined benefit plans:
Service cost............. $23,699 $18,961 $18,162
Interest cost............ 48,559 45,961 42,638
Actual return on
plan assets........... 20,553 (78,805) (43,699)
Net amortization
and deferral.......... (78,037) 25,632 (7,133)
------ ------ ------
Net................ 14,774 11,749 9,968
Multi-employer
union plans................. 13,640 12,713 12,226
Defined contribution
plans....................... 10,415 9,139 7,617
Other.......................... 2,129 2,454 2,300
------ ------ ------
Net periodic
pension cost.... $40,958 $36,055 $32,111
====== ====== ======
</TABLE>
-96-
<PAGE>
<TABLE>
<CAPTION>
Assumptions used each year in accounting for defined
benefit plans were:
1994 1993 1992
------ --------- ---------
<S> <C> <C> <C>
Discount rate as of
year end.................... 8.5 % 5.75-7.5% 7.5-8.5%
Expected long-term rate
of return on assets
assumed in determining
pension expense............. 8.0-8.5 8.0-8.5 8.5
Rate of increase in
compensation levels
as of year end.............. 3.5-4.5 3.5-4.5 4.0-7.0
</TABLE>
-97-
<PAGE>
The following table sets forth the funded status and amounts recognized in the
Consolidated Balance Sheet for the defined benefit plans
(in thousands):
<PAGE>
<TABLE>
<CAPTION>
Dec. 25, 1994 Dec. 26, 1993 Dec. 27, 1992
------------------------- -------------------------- -------------------------
Plans Whose Plans Whose Plans Whose Plans Whose Plans Whose Plans Whose
Assets Exceed Accumulated Assets Exceed Accumulated Assets Exceed Accumulated
Accumulated Benefits Accumulated Benefits Accumulated Benefits
Benefits Exceed Assets Benefits Exceed Assets Benefits Exceed Assets
(19 plans) (8 plans) (17 plans) (9 plans) (21 plans) (5 plans)
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Actuarial present value of
benefit obligations:
Vested benefit obligations........ ($459,237) ($49,613) ($485,172) ($51,583) ($378,523) ($38,848)
========== ========= ========== ========= ========== =========
Accumulated benefit obligations... ($468,205) ($51,217) ($495,682) ($54,205) ($386,238) ($40,668)
========== ========= ========== ========= ========== =========
Projected benefit obligation............ ($539,832) ($58,989) ($579,162) ($64,329) ($488,852) ($44,709)
Plan assets at fair value............... 612,776 32,380 648,468 36,955 571,477 29,247
---------- --------- ---------- --------- ---------- ---------
Projected benefit obligation
less than (in excess of) plan assets. 72,944 (26,609) 69,306 (27,374) 82,625 (15,462)
Unrecognized net (gain) loss............ (37,278) 1,220 (31,764) 5,464 (54,642) 826
Prior service cost not yet recognized
in net periodic pension cost......... 28,408 13,685 30,305 13,054 36,561 6,383
Unrecognized net (asset)
obligation at the date FAS 87
was adopted, net of amortization..... (29,122) 2,523 (33,511) 2,962 (38,600) 3,166
Adjustment required to recognize
minimum liability.................... (10,199) (11,357) (6,333)
---------- --------- ---------- --------- ---------- ---------
Net pension asset (liability) recognized
in the Consolidated Balance Sheet.... $34,952 ($19,380) $34,336 ($17,251) $25,944 ($11,420)
========== ========= ========== ========= ========== =========
</TABLE> -98-
<PAGE>
Of the eight plans whose Accumulated Benefits exceed assets, four are
nonqualified pension plans. These unfunded plans have total Accumulated
Benefits of $13.6 million.
Net pension assets are included in "Other" noncurrent assets and net
pension liabilities are included in "Employment benefits and other noncurrent
liabilities." Substantially all of the assets of the company-administered
plans are invested in listed stocks and bonds.
Note G
Segment Information
The company is a diversified information and communications company with
two principal business segments: Newspapers and Business Information
Services. Financial data regarding the company's business segments are
presented in Items 1 & 2 in the supplemental information.
Operating revenue by industry segment includes sales to unaffiliated
customers, as reported in the company's consolidated income statement.
Operating income is operating revenue less operating expenses, including
depreciation expense and amortization of intangibles. General corporate
expenses are not allocated to the Newspaper or Business Information Services
divisions. Equity in earnings of unconsolidated companies and joint ventures,
minority interests in earnings of consolidated subsidiaries, interest income,
net interest expense, other non-operating income and expense items, as well
as income taxes, have not been included in the amounts reflected as operating
income by segment.
Identifiable assets by segment are all assets employed in the individual
operations of each business segment and excess of cost over net assets
acquired associated with acquisitions in each segment. General corporate
assets include cash and equivalents, other investments, net assets of
unconsolidated companies and joint ventures (other than the Detroit Newspaper
Agency, which is included in Newspaper Division assets), and property, plant
and equipment used primarily for corporate purposes. Investments in
unconsolidated companies and joint ventures are discussed in Notes A and D.
Note H
Acquisitions
In January 1994, the company (through its wholly owned subsidiary
Knight-Ridder Business Information Services, Inc.) acquired all of the assets
of Technimetrics. Technimetrics is a leading publisher of investor relation
information and business executive and institutional investor holdings
information.
-99-
<PAGE>
In April 1994, Knight-Ridder Financial purchased Real Time Information
GmbH, a provider of real-time financial news and pricing.
During July 1994, the company purchased all the assets of Gulf Shipper,
a publisher of ship schedules.
At the end of the 1994 third quarter, Knight-Ridder Information, Inc.,
(KRII) purchased the remaining stock of Article Express International (AEI).
KRII previously held a minority interest in AEI, which is a leading document
delivery supplier.
The acquisitions were accounted for as purchases and, accordingly, the
accompanying financial statements include the results of their operations
from the acquisition dates. The cost of acquisitions is included in the
caption "Other items, net" in the "Cash Required For Investing Activities"
section of the Consolidated Statement of Cash Flows. The effect on operations
and pro forma results of operations was not material.
Note I
Postretirement Benefits Other Than Pensions
The company and its subsidiaries have defined postretirement benefit
plans that provide medical and life insurance for retirees and eligible
dependents. Effective with the beginning of fiscal year 1992, the company
implemented, on the immediate recognition basis, Statement of Financial
Accounting Standards (FAS) 106, Employers' Accounting for Postretirement
Benefits Other Than Pensions. This statement requires that the cost of these
benefits, which are primarily for health care and life insurance, be
recognized in the financial statements throughout the employees' active
working careers. The company's previous practice was to expense these costs
on a cash basis, principally after retirement.
The cumulative effect of adopting FAS 106 on the immediate recognition
basis, as of the beginning of 1992, was to reduce net income by $131.0
million (net of income taxes of $80.3 million), or $2.37 per share. This
charge includes a previously unrecognized accumulated postretirement benefit
obligation of $211.3 million, including $47.2 million related to the
company's share of the Detroit Newspaper Agency (DNA). This obligation was
based on plans in place at the beginning of 1992. The 1992 after-tax impact
of FAS 106 (excluding the cumulative effect of adoption) was to reduce
earnings by $4.0 million, or $.07 per share.
-100-
<PAGE>
The company valued the accumulated postretirement benefit obligation using
the following assumptions:
<TABLE>
<CAPTION>
1994 1993 1992
------ ------ -----
<S> <C> <C> <C>
Discount rate at the end of the year........................... 8.5% 7.5% 8.5%
Return on plan assets.......................................... 8.5 8.5 8.5
Annual rate of increase in salaries............................ 4.5 4.5 5.0
Medical trend rate:
Projected.................................................. 11.0 12.0 14.0
Reducing to this percentage in 2001 & thereafter........... 5.5 5.5 6.5
</TABLE>
In 1992, the company announced several changes to its retiree non-union
benefit plans that established a maximum annual dollar cap for medical
premiums the company would pay and eliminated coverage for future retirees
after the age of 65. During 1993 and 1994, many of the company's unions
adopted similar changes to their retiree benefit plans. These plan amendments
resulted in an unrecognized reduction in prior service cost, which is being
amortized over future years. Most current retirees will keep their current
plans. 1993 and 1994 reflect full-year amortization for the reduction in
prior service cost.
The following tables present the funded status of the company's benefit
plans (excluding liabilities of the DNA that are reported in the Consolidated
Balance Sheet under the investment caption "Equity in unconsolidated
companies and joint ventures") and the components of 1994, 1993 and 1992
periodic expense (in thousands):
<PAGE>
<TABLE>
<CAPTION>
-101-
<PAGE>
1994 1993 1992
------------------------- ------------------------------ --------------------------
Life Life Life
Insurance Insurance Insurance
Medical and Other Medical and Other Medical and Other
Plans Plans Plans Plans Plans Plans
-------- --------- --------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulated postretirement
benefit obligation:
Retirees.................. $ 64,244 $ 11,194 $ 71,550 $ 13,619 $ 54,504 $ 13,375
Fully eligible active
plan participants...... 11,673 4,467 12,375 5,267 22,293 3,030
Other active plan
participants........... 13,554 15,454 19,667 17,679 26,411 18,558
------- ------- ------- ------- ------- -------
Total..................... 89,471 31,115 103,592 36,565 103,208 34,963
Fair value of assets............ - - - - - -
------- ------- ------- ------- ------- -------
Accumulated benefit
obligation in excess
of plan assets............... 89,471 31,115 103,592 36,565 103,208 34,963
Unrecognized net
reduction (increase) in prior
service costs................ 35,752 (222) 34,331 (169) 34,592 -
Unrecognized net
gain (loss).................. 1,628 8,938 (2,900) 2,912 - -
------- ------- ------- ------- ------- -------
Accrued liability recognized
in the balance sheet......... $ 126,851 $ 39,831 $ 135,023 $ 39,308 $137,800 $ 34,963
======= ======= ======= ======= ======= =======
Net periodic postretirement
benefit cost includes
the following components:
Service cost.............. $ 3,081 $ 3,911 $ 4,647
Interest cost............. 11,203 13,184 13,434
Amortization.............. (4,810) (3,558) (1,947)
------ ------ ------
Net periodic
postretirement
benefit cost........... $ 9,474 $ 13,537 $16,134
====== ====== ======
-102-
<PAGE>
Impact of one percent increase
in medical trend rate:
Aggregate impact on 1994
service cost and
interest cost.............. $ 1,116
======
Increase in Dec. 25, 1994,
accumulated postretirement
benefit obligation......... $ 6,914
======
</TABLE>
Note J
Commitments and Contingencies
At Dec. 25, 1994, the company had lease commitments currently estimated to
aggregate approximately $106.1 million that expire from 1995 through 2051 as
follows (in thousands):
<TABLE>
<S> <C>
1995 $ 22,560
1996 18,117
1997 15,375
1998 12,194
1999 10,600
2000 and thereafter 27,254
-------
Total $106,100
=======
</TABLE>
Payments under the lease contracts were $27.0 million in 1994, $25.4
million in 1993 and $25.2 million in 1992.
Various libel actions, environmental and other legal proceedings that
have arisen in the ordinary course of business are pending against the
company and its subsidiaries.
-103-
<PAGE>
In 1990, a verdict was rendered against the company's subsidiary,
Philadelphia Newspapers, Inc. (PNI), publisher of The Philadelphia Inquirer
and Philadelphia Daily News, in a libel action entitled Sprague v.
Philadelphia Newspapers, Inc., for $2.5 million in compensatory damages and
$31.5 million in punitive damages. Following entry of the judgment on Sept.
15, 1992, PNI appealed the judgment to the Pennsylvania Superior Court. The
Superior Court has affirmed the $2.5 million in compensatory damages and
vacated the $31.5 million award of punitive damages. The court remanded the
case to the trial court, which will either hold a new trial solely on the
issue of punitive damages or reduce the punitive damages judgment to $21.5
million. PNI believes that substantial grounds exist for a decision by an
appellate court to grant a new trial on all issues.
In the opinion of management, the ultimate liability to the company and
its subsidiaries as a result of this and other legal proceedings will not be
material.
Management's Responsibility for Financial Statements
Shareholders:
The consolidated financial statements and other financial information
were prepared by management in conformity with generally accepted accounting
principles applied on a consistent basis throughout the periods. The manner
of presentation, the selection of accounting policies and the integrity of
the financial information are the responsibility of management. Some of the
amounts included in the financial statements are estimates based on
management's best judgment of current conditions and circumstances.
To fulfill its responsibilities, management has developed and continues
to maintain a system of internal accounting controls. We believe the controls
in use are adequate to provide reasonable assurance that assets are
safeguarded from loss or unauthorized use, and that the financial records are
reliable for preparing the financial statements and maintaining
accountability for assets. These systems are augmented by written policies,
organizational structures providing for division of responsibilities,
qualified financial officers at each operating unit, careful selection and
training of financial personnel and a program of internal audits. There are,
however, inherent limitations in any control system, in that the cost of
maintaining a control system should not exceed the benefits to be derived.
The Audit Committee of the Board of Directors is composed of outside
directors and meets periodically with management, internal auditors and
independent auditors, both separately and together, to review and discuss the
auditors' findings and other financial and accounting matters. Both the
independent and internal auditors have free access to the committee.
-104-
<PAGE>
The consolidated financial statements have been audited by the company's
independent auditors and their report is presented below. The independent
auditors are elected each year at the annual shareholders meeting based on a
recommendation by the Audit Committee and the Board of Directors.
James K. Batten
-----------------
James K. Batten
Chairman and
Chief Executive Officer
Ross Jones
----------------
Ross Jones
Senior Vice President/Finance
and Chief Financial Officer
Report of Independent Certified Public Accountants
Shareholders
Knight-Ridder, Inc.
We have audited the accompanying consolidated balance sheet of
Knight-Ridder, Inc., and subsidiaries as of Dec. 25, 1994, Dec. 26, 1993, and
Dec. 27, 1992, and the related consolidated statements of income, cash flows
and shareholders' equity for the years then ended. Our audits also included
the financial statement schedule listed in the index at Item 14(a). These
financial statements and schedule are the responsibility of the company's
management. Our responsibility is to express an opinion on these consolidated
financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Knight-Ridder, Inc., and subsidiaries at Dec. 25, 1994, Dec. 26, 1993, and
-105-
<PAGE>
Dec. 27, 1992, and the consolidated results of their operations and their
cash flows for the years then ended in conformity with generally accepted
accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
As discussed in Notes B and I to the financial statements, in 1992 the
company changed its method of accounting for income taxes and postretirement
benefits other than pensions.
Ernst & Young LLP
Miami, Florida
January 31, 1995
ITEM 9. Changes in and Disagreements with Accountants on Accounting and
---------------------------------------------------------------
Financial Disclosure.
---------------------
Not Applicable
PART III
Item 10. Directors and Executive Officers of the Registrant
--------------------------------------------------
1995 Proxy Statement page 2, "Election of Directors"; page 3, "Nominees
for Election as Directors for Terms Ending 1998"; page 3, "Nominees for
Election as Directors for Terms Ending 1996"; page 15, "Certain
Relationships and Reports of Certain Stock Transactions"; page 7,
"Compensation Committee Interlocks and Insider Participation."
-106-
<PAGE>
Knight-Ridder Executive Committee
James K. Batten, 59, chairman since 1989 and chief executive officer
since 1988. Served as president 1982 to 1989; senior vice president 1980 to
1982; vice president/news 1975 to 1980; Charlotte Observer executive editor
1972 to 1975. Advanced Management Program, Harvard Business School, 1981;
M.P.A., public affairs, Princeton University, 1962; B.S., chemistry/biology,
Davidson College, 1957.
Alvah H. Chapman Jr., 73, chairman of the Executive Committee since
1984. Served as chairman of the board 1982 to 1989; chief executive officer
1976 to 1988; president 1973 to 1982; executive vice president 1967 to 1973;
vice president 1966 to 1967; Miami Herald general manager 1962 to 1969. B.S.,
business administration, The Citadel, 1942.
Mary Jean Connors, 42, vice president/human resources since 1989. Served
as Philadelphia Newspapers, Inc., vice president/human resources 1988 to
1989; assistant to the senior vice president/news for Knight-Ridder 1988; The
Miami Herald assistant managing editor/personnel 1985 to 1988; held various
editing positions at The Miami Herald 1980 to 1985. B.A., English, Miami
University in Oxford, Ohio, 1973.
John C. Fontaine, 63, executive vice president since 1994; senior vice
president 1987 to 1993; general counsel 1980 to 1993. Formerly a partner with
Hughes Hubbard & Reed. LL.B., Harvard Law School, 1956; B.A., political
science, University of Michigan, 1953.
Ross Jones, 52, senior vice president and chief financial officer since
1993. Served as vice president/finance in 1993; vice president and treasurer
of Reader's Digest Association, Inc., 1985 to 1993 and in other positions
there 1977 to 1985. Served as manager at Brown Brothers Harriman & Co. 1970
to 1977. M.B.A., finance, Columbia University Business School, 1970; B.A.,
classics, Brown University, 1965.
Bernard H. Ridder Jr., 78, former chairman of the board 1979 to 1982;
former chairman of the Executive Committee 1976 to 1984; former vice chairman
of the board 1974 to 1979. Served as president and chief executive officer of
Ridder Publications, Inc., 1969 to 1974. B.A., history, Princeton University,
1938.
-107-
<PAGE>
P. Anthony Ridder, 54, president since 1989; president of the Newspaper
Division since 1986; chairman of the Operating Committee since 1985. Served
as publisher of the San Jose Mercury News 1977 to 1986; general manager 1975
to 1977; business manager 1969 to 1975. B.A., economics, University of
Michigan, 1962.
Patrick J. Tierney, 49, chief executive officer and president of
Knight-Ridder Information, Inc., since 1991. Served as vice president and
general manager of the information services division of TRW, Inc. M.B.A.,
University of Colorado, 1970; B.S., business, University of Colorado, 1967.
Other Officers
Marty Claus, 46, vice president/news since 1993. Served as Detroit Free
Press managing editor/business and features from 1987 to 1992; held various
editing positions at the Free Press 1977 to 1987. Held various writing and
editing positions at the San Bernardino (Calif.) Sun-Telegram 1970 to 1977.
B.A., journalism, Michigan State University Honors College, 1970.
Gary R. Effren, 38, vice president/controller since February 1995.
Served as assistant vice president/ assistant treasurer 1993 to 1995;
assistant to the vice president/finance and treasurer 1989 to 1993; director
of corporate accounting 1986 to 1989; business manager of Viewdata Corp. of
America 1984 to 1986; manager of financial reporting 1983 to 1984. M.B.A.,
University of Miami, 1989; B.S., accounting, Rider College, 1978; CPA.
-108-
<PAGE>
Virginia Dodge Fielder, 46, vice president/research since 1989. Served
as vice president/news and circulation research 1986 to 1989. Served as
director/news and circulation research 1981 to 1985; editorial research
manager, Chicago Sun-Times 1979 to 1981; held various positions at Lexington
Herald-Leader 1976 to 1979. Ph.D., mass communications, Indiana University,
1976; M.A., journalism, Indiana University, 1974; B.A., psychology,
Transylvania University, 1970.
Douglas C. Harris, 55, vice president and secretary since 1986. Served
as vice president/personnel 1977 to 1985; director/personnel 1972 to 1977.
Formerly with Peat, Marwick, Mitchell and Co. as director of college and
special recruiting. Advanced Management Program, Harvard Business School,
1987; Ed.D., counseling and guidance, Indiana University, 1968; M.S., student
personnel, Indiana University, 1964; B.S., business administration, Murray
State University, 1961.
Clark Hoyt, 52, vice president/news since 1993. Served as chief of the
Knight-Ridder Washington Bureau 1987 to 1993; news editor 1985 to 1987;
managing editor, The Wichita Eagle 1981 to 1985; various editing positions,
Detroit Free Press 1977 to 1981; various reporting positions, the Detroit
Free Press and Washington Bureau. B.A., English literature, Columbia College,
1964.
Robert D. Ingle, 55, vice president/new media since January 1995. Served
as president and executive editor of the San Jose Mercury News since 1981;
managing editor, The Miami Herald 1977 to 1981; various editing positions,
The Miami Herald 1962 to 1977. B.A., journalism and political science,
University of Iowa, 1962.
-109-
<PAGE>
Polk Laffoon IV, 49, vice president/corporate relations since 1994.
Served as assistant to the president 1992 to 1994; assistant circulation
director/distribution, The Miami Herald, 1991 to 1992; executive assistant to
the vice president/marketing 1989 to 1991; Living Today editor, 1987 to 1989.
Served as director and vice president/investor relations, Taft Broadcasting
Co., 1982 to 1987. M.B.A., marketing, Wharton School, 1970; B.A., English,
Yale, 1967.
Tally C. Liu, 44, vice president/finance and administration since
December. Served as vice president/finance and controller 1993 to 1994; vice
president and controller 1990 to 1993. Served as San Jose Mercury News vice
president and chief financial officer 1987 to 1990; chief financial officer
1986 to 1987; controller 1983 to 1986; Boca Raton News controller 1980 to
1983; assistant controller 1978 to 1980. M.B.A., Florida Atlantic University,
1977; B.S., business administration, National Chen-Chi University, 1973; CPA.
Larry D. Marbert, 41, vice president/technology since 1994. Served as
Philadelphia Newspapers, Inc., senior vice president/operations 1991 to 1994;
vice president/operations research and planning 1988 to 1991; vice
president/production 1986 to 1988; Knight-Ridder director of
production/Newspaper Division 1981 to 1986; various production positions, The
Miami Herald 1977 to 1981. M.S., management science, Auburn University, 1977;
B.S., University of North Carolina, business administration, 1976.
Frank McComas, 49, vice president/operations since February 1995. Served
as publisher, The (Columbia) State, 1988 to 1995; publisher, Bradenton
Herald, 1980 to 1988; held various positions at The Miami Herald and The
Charlotte Observer, 1970 to 1980. B.B.A. in business administration, Kent
State University, 1968.
-110-
<PAGE>
Cristina Lagueruela Mendoza, 48, vice president/general counsel since
1993; vice president/associate general counsel 1992 to 1993; associate
general counsel 1990 to 1992. Served as a partner in Murai, Wald, Biondo,
Moreno & Mendoza, P.A., 1988 to 1990; associate 1984 to 1988. J.D.,
University of Miami Law School, 1982; M.A., political science, University of
Miami, 1967; B.A., political science, Chatham College, 1966.
Peter E. Pitz, 53, vice president/operations since 1994. Served as vice
president/technology 1989 to 1994; San Jose Mercury News vice
president/operations 1987 to 1989; Detroit Free Press director of operations
1983 to 1987; Denver Post operations manager 1974 to 1983. M.B.A., Denver
University, 1979; B.S., business administration, Northern Illinois
University, 1963.
David K. Ray, 53, president of Business Information Services Division
since 1983; Knight-Ridder vice president since 1980. Formerly a vice
president, LIN Broadcasting Co. M.B.A., University of Chicago, 1965; B.A.,
liberal arts, Colgate University, 1963.
Sharon Studer, 43, vice president/new ventures since October. Served as
partner in KPMG Peat Marwick in London 1990 to 1994. Ph.D., social psychology
and research, University of Minnesota, 1978; B.S., psychology, University of
Minnesota, Morris, 1973.
Homer E. Taylor, 52, vice president/supply since 1987. Formerly vice
president/manufacturing and supply with Scripps Howard. B.S., business, West
Virginia Institute of Technology, 1973; A.S., electrical engineering, West
Virginia Institute of Technology, 1970.
-111-
<PAGE>
Jerome S. Tilis, 52, vice president/marketing since 1987. Served as
president of the Detroit Free Press 1985 to 1989; senior vice president of
Philadelphia Newspapers, Inc., 1980 to 1985; vice president of advertising
sales and marketing 1979 to 1980; advertising director 1977 to 1979. Advanced
Management Program, Harvard Business School, 1984; B.S., chemistry, Hunter
College, 1964.
Knight-Ridder Board
The Knight-Ridder Board of Directors is composed of members who represent
a wide cross-section of American business and journalism. The group includes
highly experienced investment and commercial bankers, leaders of top American
corporations, senior executives and retired executives of the company and
members of the Knight and Ridder families. The group is the central governing
body of the company.
James K. Batten, 59, chairman and chief executive officer, a director
since 1981; advanced Management Program, Harvard Business School, 1981;
M.P.A., public affairs, Princeton University, 1962; B.S., chemistry/biology,
Davidson College, 1957.
P. Anthony Ridder, 54, president of Knight-Ridder and of the Newspaper
Division, a director since 1987; B.A., economics, University of Michigan,
1962.
Gonzalez F. Valdes-Fauli, 48, regional chief executive: Latin America of
Barclays Bank PLC, a director since 1992; master's in international finance,
Thunderbird Graduate School for International Management, 1970; B.S.,
economics, Spring Hill College, 1968.
Joan Ridder Challinor, 67, a director since 1989; Ph.D., U.S. history,
The American University in Washington, D.C., 1982; M.A., U.S. history/ancient
history, The American University, 1974; B.A., history, The American
University, 1971.
Barbara Barnes Hauptfuhrer, 66, director of several public companies, a
Knight-Ridder director since 1979; B.A., sociology and economics, Wellesley
College, 1949.
-112-
<PAGE>
Eric Ridder, 76, publisher emeritus of The Journal of Commerce, a
director since 1983; attended Harvard University.
John L. Weinberg, 70, senior chairman of Goldman, Sachs & Co., a
director since 1969; M.B.A., business administration, Harvard University,
1950; B.A., economics, Princeton University, 1948.
Thomas L. Phillips, 70, retired chairman and chief executive officer of
Raytheon Co., a director since 1983; M.S., electrical engineering, Virginia
Polytechnic Institute, 1948; B.S., electrical engineering, Virgina
Polytechnic, 1947.
Alvah H. Chapman Jr., 73, chairman of the Executive Committee and former
chairman of the board and chief executive officer, a director since 1962;
B.S., business administration, The Citadel, 1942.
Peter C. Goldmark Jr., 54, president of The Rockefeller Foundation, a
director since 1990; B.A., government, Harvard College, 1962.
Randall L. Tobias, 52, chairman and chief executive officer of Eli Lilly
and Company, a director since March 1994; B.S., business, Indiana University,
1964.
William S. Lee, 65, chairman emeritus of Duke Power, a director since
1990; B.S., civil engineering, Princeton University, 1951.
Ben R. Morris, 72, former president of The State-Record Company, a
director since 1986; B.S., textile engineering, North Carolina State
University, 1948.
Barbara Knight Toomey, 57, experienced in management consulting, data
retrieval and storage, resort management and library science, a director
since 1989; B.A., geography and zoology, Boston University, 1959.
Jesse Hill Jr., 68, chairman and chief executive officer of Atlanta Life
Insurance Co., a director since 1980; M.B.A., actuarial science, University
of Michigan, 1949; B.S., mathematics and physics, Lincoln University, 1947.
C. Peter McColough, 72, former chairman and CEO of Xerox Corp., a
director since 1982; LL.B., law, Dalhousie University (Nova Scotia), 1947;
M.B.A., Harvard University, 1949.
-113-
<PAGE>
11. Executive Compensation
----------------------
1995 Proxy Statement, pages 7 and 8, "Compensation Committee Interlocks
and Insider Participation"; pages 8 through 10, "Compensation Committee
Report"; page 8, "Executive Compensation"; page 11, "Senior Executive
Compensation"; page 12, "Stock Options Granted"; pages 12 and 13,
"Stock Options Exercised"; page 13, "Pension Benefits"; page 14
"Performance of the Company's Stock"; and page 15, "Compensation of
Directors"
12. Security Ownership of Certain Beneficial Owners and Management
--------------------------------------------------------------
1995 Proxy Statement page 1, "Common Stock Outstanding and Principal
Holders" and page 6, "Security Ownership of Management"
See Note E in Item 8.
13. Certain Relationships and Related Transactions
----------------------------------------------
1995 Proxy Statement page 15, "Certain Relationships and
Reports of Certain Stock Transactions"; page 7, "Compensation
Committee Interlocks and Insider Participation"; page 1, "Common
Stock Outstanding and Principal Holders"
-114-
<PAGE>
PART IV
14. Exhibits, Financial Statement Schedules, and Reports on Form
------------------------------------------------------------
8-K.
----
(a)
1. The following consolidated financial statements of Knight-Ridder, Inc.
and subsidiaries, included in the annual report of the registrant to
its shareholders for the year ended December 25, 1994, are included in
Item 8:
Consolidated Balance Sheet - December 25, 1994, December 26, 1993 and
December 27, 1992
Consolidated Statement of Income - Years ended December 25, 1994,
December 26, 1993 and December 27, 1992
Consolidated Statement of Cash Flows - Years ended December 25, 1994,
December 26, 1993 and December 27, 1992
Consolidated Statement of Shareholders' Equity - Years ended December 25,
1994, December 26, 1993 and December 27, 1992
Notes to consolidated financial statements - December 25, 1994
2. The following consolidated financial statement schedule of Knight-
Ridder, Inc. and subsidiaries are included in Item 14(d):
Schedule II - Valuation and qualifying accounts
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under
the related instructions, or are inapplicable, or have been shown in the
consolidated financial statements or notes thereto, and therefore have been
omitted from this section.
-115-
<PAGE>
3. Exhibits Filed
No. 3 - Articles of Incorporation and Bylaws are incorporated by reference
to the Company's 10K filed in March, 1981.
No. 4 - Indenture, dated as of April 6, 1989, is incorporated by reference
to the Company's Registration Statement on Form S-3, effective
April 7, 1989. (No. 33-28010)
No. 10 - Knight-Ridder Annual Incentive Plan description is incorporated
herein on pages 126-134,
- Amendment to the Employee Stock Option Plan is incorporated by
reference to the Company's Form 10K filed electronically on
March 23, 1994.
- Director's Pension Plan dated January 1, 1994 is incorporated by
reference to the Company's Form 10K filed electronically on
March 23, 1994.
- Executive Officer's Retirement Agreement dated July 19, 1993 is
incorporated by reference to the Company's Form 10K filed
electronically on March 23, 1994.
- Executive Officer's Retirement Agreement dated December 19, 1991
is incorporated by reference to the Company's Form 10-K
filed electronically on March 23, 1994.
- Executive Officer's Consulting/Retirement Agreement dated
September 20, 1989 is incorporated herein on pages 135-137.
No. 11 - Statement re Computation of Per Share Earnings is filed herein on
pages 137-138.
No. 12 - Statement re Computation of Earnings to Fixed Charges Ratio From
Continuing Operations is filed herein on pages 139-140.
No. 21 - Subsidiaries of the registrant is filed herein on pages 141-143.
-116-
<PAGE>
No. 23 - "Consent of Independent Certified Public Accountants" is filed
herewith on page 144.
No. 24 - "Power of Attorneys" for all members of the Board of Directors, is
filed herein on pages 145-160.
No. 27 - "Finanical Data Schedule" is filed herein on pages 161-162.
(b) Reports on Form 8-K
None were filed during the fourth quarter of 1994.
(c) Exhibits
The response to this portion of Item 14 is submitted as a separate
section of this report.
(d) Financial Statement Schedules
The response to this portion of Item 14 is submitted as a separate
section of this report.
-117-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
KNIGHT-RIDDER, INC.
Dated March 24, 1995 By P. Anthony Ridder
-------------------- -------------------------------
P. Anthony Ridder
President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Dated March 24, 1995 P. Anthony Ridder
---------------------- -------------------------------
P. Anthony Ridder
President and
Chief Executive Officer
Dated March 24, 1995 Ross Jones
---------------------- -------------------------------
Ross Jones
Chief Financial Officer and
Senior Vice President/Finance
-118-
<PAGE>
Dated March 24, 1995 Gary R. Effren
---------------------- -------------------------------
Gary R. Effren
Vice President/Controller
(Chief Accounting Officer)
/s/ James K. Batten*
--------------------------------
James K. Batten
Director
/s/ Alvah H. Chapman, Jr.*
--------------------------------
Alvah H. Chapman, Jr.
Director
/s/ Joan Ridder Challinor *
-------------------------------
Joan Ridder Challinor
Director
/s/ Peter C. Goldmark, Jr.*
-------------------------------
Peter C. Goldmark, Jr.
Director
-119-
<PAGE>
/s/ Barbara Barnes Hauptfuhrer*
-------------------------------
Barbara Barnes Hauptfuhrer
Director
/s/ Jesse Hill, Jr.*
-------------------------------
Jesse Hill, Jr.
Director
/s/ William S. Lee*
-------------------------------
William S. Lee
Director
/s/ C. Peter McColough*
-------------------------------
C. Peter McColough
Director
/s/ Ben R. Morris*
-------------------------------
Ben R. Morris
Director
/s/ Thomas L. Phillips*
-------------------------------
Thomas L. Phillips
Director
-120-
<PAGE>
/s/ P. Anthony Ridder*
-------------------------------
P. Anthony Ridder
Director
/s/ Eric Ridder*
-------------------------------
Eric Ridder
Director
/s/ Randall L. Tobias*
-------------------------------
Randall L. Tobias
Director
/s/ Barbara Knight Toomey *
-------------------------------
Barbara Knight Toomey
Director
-121-
<PAGE>
/s/ Gonzalo F. Valdes-Fauli*
-------------------------------
Gonzalo F. Valdes-Fauli
Director
/s/John L. Weinberg*
-------------------------------
John L. Weinberg
Director
Dated March 24, 1995 *By Ross Jones
---------------------- ----------------------------
Ross Jones
Attorney-in-fact
-122-
<PAGE>
ANNUAL REPORT ON FORM 10-K
ITEM 14 (a) (2), (c) and (d)
SUPPLEMENTARY DATA
CERTAIN EXHIBITS
YEAR ENDED DECEMBER 25, 1994
KNIGHT-RIDDER, INC.
AND SUBSIDIARIES
MIAMI, FLORIDA
-123-
<PAGE>
<PAGE>
<TABLE>
SCHEDULE II
------------
VALUATION AND QUALIFYING ACCOUNTS
KNIGHT-RIDDER, INC. AND SUBSIDIARIES
(IN THOUSANDS OF DOLLARS)
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
--------- --------- --------- --------- ---------
ADDITIONS
----------------------
BALANCE AT CHARGED CHARGED
BEGINNING TO COSTS TO BALANCE
OF AND OTHER AT END
DESCRIPTION PERIOD EXPENSES ACCOUNTS DEDUCTIONS OF PERIOD
------------ ---------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 25, 1994:
RESERVES AND ALLOWANCES
DEDUCTED FROM ASSET ACCOUNT:
ACCOUNTS RECEIVABLE
ALLOWANCES $ 14,554 $17,818 $ 18,644(1) $ 13,728
VALUATION ALLOWANCE FOR
DEFERRED TAXES 3,985 - - 3,985
-------- ------- --------- -------- ---------
$ 18,539 $17,818 $ 18,644 $ 17,713
-124-
<PAGE>
YEAR ENDED DECEMBER 26, 1993:
RESERVES AND ALLOWANCES
DEDUCTED FROM ASSET ACCOUNT:
ACCOUNTS RECEIVABLE
ALLOWANCES $ 14,450 $18,519 $ 18,415(1) $ 14,554
VALUATION ALLOWANCE FOR
DEFERRED TAXES 10,980 - 6,995(2) 3,985
-------- ------- --------- -------- ---------
$ 25,430 $18,519 $ 25,410 $ 18,539
YEAR ENDED DECEMBER 27, 1992:
RESERVES AND ALLOWANCES
DEDUCTED FROM ASSET ACCOUNT:
ACCOUNTS RECEIVABLE
ALLOWANCES $ 12,305 $22,093 $ 19,948(1) $ 14,450
VALUATION ALLOWANCE FOR
DEFERRED TAXES - 10,980 - 10,980
-------- ------- --------- -------- ---------
$ 12,305 $33,073 $ 19,948 $ 25,430
(1) Represents uncollectible accounts written-off, net of recoveries.
(2) Represents net reduction in valuation allowance which is determined to be
no longer required.
</TABLE>
-125-
<PAGE>
EXHIBIT 10
----------
GENERAL DESCRIPTION
KNIGHT-RIDDER, INC.
ANNUAL INCENTIVE PLAN (DESCRIPTION)
INTRODUCTION
The Knight-Ridder Annual Incentive Plan (the "Plan") is intended to motivate
and reward corporate executives and top management at individual operating
units who contribute significantly to Knight-Ridder's success. Specific Plan
objectives include:
- Focus participants on achieving key annual objectives
- Link rewards to results relative to goals at the corporate, business unit
and individual levels
-126-
<PAGE>
- Provide participants the opportunity to earn competitive compensation
commensurate with performance
The Plan provides participants the opportunity to earn cash awards each year
based on their individual performance and the performance of the corporation
and/or the business unit in which they work. Awards are earned on a calendar
year basis (the "Plan Year") and are paid in cash following the end of the
Plan Year.
The first year in which the Plan will be in effect will be 1994. This plan
replaces the Knight-Ridder, Inc. Executive MBO Program, which was introduced
in 1977 and revised in 1989.
PLAN ADMINISTRATION
The Plan will be administered by the Compensation Committee of the Knight-
Ridder, Inc. Board of Directors (the "Committee"). The Committee has the
authority to interpret the provisions of the Plan and to make any rules and
regulations necessary to administer the Plan. The Committee's decision is
final in all matters of judgment pertaining to the Plan, and the Committee
may, without notice, amend, suspend or revoke the Plan.
ELIGIBILITY
Employees in the following categories are eligible to participate in the
Plan: corporate officers and certain director-level corporate employees;
newspaper publishers and other business unit operating heads who report
directly to corporate officers top editors, general managers and all
division directors; and selected other positions that can have significant
impact on results. Participants will be approved each year by the Committee.
PLAN OVERVIEW
Bonus Amounts Payable for Meeting Goals
Each plan participant will have a potential bonus award which is payable for
meeting goals. The size of this potential award varies by salary range. The
bonus potential for each salary range is stated as a percentage of the salary
earned during the year. Therefore, the dollar amount of an individual's
opportunity is computed by multiplying the applicable percentage by the
salary. The potential bonus payable for meeting goals for each salary range
is as follows:
-127-
<PAGE>
<TABLE>
<CAPTION>
Salary Range Potential Award
------------- ----------------
<S> <C>
$250,000 and above 50.0%
$150,000 to $249,999 45.0%
$100,000 to $149,999 40.0%
$50,000 to $99,999 32.5%
Up to $49,999 25.0%
</TABLE>
Types of Performance Measures and Their Weightings
Each participant's bonus will be determined based on performance on two types
of measures: how well the individual performed relative to his or her goals
for the year ("Personal Performance"); and how well the business unit in
which the individual works performed relative to financial goals for the year
("Financial Performance").
The potential award for meeting goals will be divided between the two types
of measures in the following way: 35% of each participant's potential award
for meeting goals will be based on Personal Performance, and 65% will be
based on Financial Performance, as shown in the following table:
<TABLE>
<CAPTION>
Potential Award
---------------------------------
Salary Range Total Personal Financial
------------ ------ -------- ---------
<S> <C> <C> <C>
$250,000 and above 50.0% 17.5% 32.5%
$150,000 to $249,999 45.0% 15.75% 29.25%
$100,000 to $149,999 40.0% 14.00% 26.00%
$50,000 to $99,999 32.5% 11.375% 21.125%
Up to $49,999 25.0% 8.75% 16.25%
</TABLE>
-128-
<PAGE>
As a general rule, the Financial Performance measurement will be based on the
organizational level at which the individual is employed: corporate
performance for those at the corporate level; divisional performance for
those in divisional positions; and business unit level for those in a
newspaper or other business unit. However, at the discretion of the
Committee, the Financial Performance measurement for selected individuals may
consist of a specified mix of two or more bases (for example, part on
corporate performance and part on divisional performance).
PERFORMANCE MEASUREMENT
Financial Performance Measures
Financial performance will be evaluated relative to budgeted goals set at the
beginning of the Plan Year. In most cases the financial performance measure
will be operating profit. However, the plan provides the flexibility to
include additional measures of financial success, such as revenue, where
Knight-Ridder management and the Committee conclude this is appropriate. The
financial performance measures and the goals for the year will be
communicated to participants by the early part of each year.
Personal Performance Measures
Personal performance will be evaluated relative to individual goals
established at the beginning of the Plan Year and agreed upon by the
participant and the participant's manager. It is expected that individual
goals will be set to be challenging.
Goals ideally should not number more than six to eight. Each goal should be
well-defined in terms of what is to be accomplished and how results will be
assessed. Each goal will be given a weight, based on its relative
importance, with the combined weightings equaling 100.
At the end of the year, each participant's manager will evaluate performance
on each goal relative to the objectives, determine the degree to which the
goal was achieved and assign it a number of points. For example, if a goal
was weighted 10 points and half of it was achieved, it would receive five
points. The points received on all goals will be added to determine the
total rating, up to a maximum of 100 points.
-129-
<PAGE>
DETERMINING AND PAYING AWARDS
Each participant's award will be determined by adding together the award
earned based on Financial Performance and the award earned based on Personal
Performance. An award may be paid for one type of measure even if no award
was earned for the other type of measure. The only constraint is that a
corporate performance threshold must be achieved for any award to be payable.
Normally this threshold requirement will be that corporate operating income,
as reported in the Annual Report, must equal at least 80% of prior year
operating income, although the Committee reserves the right to adjust the
threshold.
For Personal Performance, the award is determined by multiplying the
percentage of the total possible 100 Personal Performance points that were
earned by the individual's potential award for fully achieving all personal
goals.
For Financial Performance, the award is determined by actual results compared
to budgeted results. Awards can vary from zero all the way up to 150% of the
amount payable for meeting budget, using the following schedule:
If actual results are equal to budget, 100% of the Financial Performance
award will be paid.
-130-
<PAGE>
If actual results are at or below 90% of budgeted results, no award will be
paid for Financial Performance.
If actual results are above 90% of budget, but below 100% of budget, then the
award will be less than the amount payable for meeting budget, with each 1%
shortfall in performance versus budget resulting in a 10% reduction of the
amount payable for meeting budget, as follows:
<TABLE>
<CAPTION>
Actual Award
vs. Budget Percentage
---------- ----------
<S> <C>
100% 100%
99% 90%
98% 80%
97% 70%
96% 60%
95% 50%
94% 40%
93% 30%
92% 20%
91% 10%
90% 0%
</TABLE>
-131-
<PAGE>
If actual results are above 100% of budget, then the award will be greater
than the amount payable for meeting budget. Each 1% improvement in
performance versus budget will result in an incremental award equal to 5% of
the amount payable for meeting budget, up to a maximum of 150% of the
financial portion of the award for performance that is at or above 110% of
budget:
(The portion of the award that is based on financial performance is 65% of
the total potential. So, if actual performance is 110% of budget, the
financial award will be 97.5% (65% x 150%) of total potential.)
<TABLE>
<CAPTION>
Percentage of
Actual Financial Award
vs. Budget (65% of total potential)
---------- ------------------------
<S> <C>
100% 100%
101% 105%
102% 110%
103% 115%
104% 120%
105% 125%
106% 130%
107% 135%
108% 140%
109% 145%
110% 150%
> 110% 150%
</TABLE>
Results will be calculated to the nearest one-tenth of 1% of actual
performance compared to budget when computing awards, and then rounded to the
nearest full percentage point.
Two attached exhibits illustrate the award computation process. Exhibit 1
provides two hypothetical examples, while Exhibit 2 is a worksheet
participants can use to compute their own awards.
-132-
<PAGE>
OTHER PLAN FEATURES
Award Payment
Awards will be paid in cash following the end of the Plan Year and the
computation of results. Required tax amounts will be withheld.
Partial Year Participants and Changes in Position
Individuals who are hired or promoted into positions that qualify for Plan
participation by October 1 of a Plan year will be eligible for a pro rata
award based on the amount of salary earned while a participant and the
performance levels achieved.
If a participant's responsibilities change during a year and a different part
of the company's performance is used in computing Financial Awards for the
two positions, then ordinarily the financial portion of the award will be
determined on a pro rata basis relative to the time spent in the two
positions, although exceptions may be made on a case by case basis at the
discretion of the Committee. Awards based on Personal Performance during the
two parts of the year will be determined on a case by case basis.
Termination
In the event of death, permanent disability (as defined by Knight-Ridder,
Inc.'s disability plan) or retirement prior to the date of payment, a
participant (or the participant's estate) will be entitled to receive a pro
rata award based on the time employed during the year. In the event of
resignation or termination for other reasons (other than for cause), a pro
rata payment may be made at the discretion of the Committee; no award will
be paid in the event of termination for cause.
Payment will be made following the termination of employment based on
estimated results.
Employment Rights
The Plan does not constitute a contract of employment, nor does participation
in one Plan Year guarantee participation in another Plan Year.
-133-
<PAGE>
Exhibit to Knight-Ridder, Inc. Annual Incentive Plan
<TABLE>
ANNUAL INCENTIVE OPPORTUNITIES AS A PERCENTAGE OF SALARY
<CAPTION>
SALARY RANGE MEET GOALS MAXIMUM (ROUNDED)
------------ ---------- -----------------
<S> <C> <C>
$250,000 and above 50% 66%
$150,000 to $249,999 45% 60%
$100,000 to $149,999 40% 53%
$50,000 to $99,999 32.5% 43%
Up to $49,999 25% 33%
</TABLE>
-134-
<PAGE>
EXECUTIVE OFFICER'S CONSULTING/RETIREMENT AGREEMENT
EXHIBIT 10
----------
September 20, 1989
Mr. Alvah H. Chapman, Jr.
4255 Lake Road
Miami, Florida 33137
Dear Alvah:
This letter sets forth our agreement with respect to your services to
Knight-Ridder following your retirement as an officer and employee of the
Company on October 1st.
You have agreed to continue to serve as a Director of the Company and
as Chairman of its Executive Committee. I am also pleased that you have
agreed to serve as a consultant to the company for the 12 months beginning
October 1, 1989 and, thereafter, for such period as you, the Compensation
Committee and I may agree.
In consideration of your services as Chairman of the Executive
Committee and as a consultant, the Company will pay you $150,000 annually.
This agreement extends from October 1, 1989 through September 30, 1994*.
And as customary, you will be compensated as an outside director, including
meeting fees for the Board and Board Committees (including the Executive
Committee of the Company).
We have calculated that you will be entitled to an aggregate annual
pension benefit under the Knight-Ridder Retirement and Benefit Restoration
Plans of $328,670. In addition, in recognition of your contribution to the
Company and your future services to it, the Company has agreed to pay you an
additional retirement benefit of $100,000 per year for your life, in equal
monthly installments.
Although I hope to be able to take full advantage of your broad range
of experience and knowledge of the Company, it is understood between us
that we will make only reasonable demands upon your time and will seek to
schedule our requests for your counsel so as to accommodate your schedule
of other activities in retirement.
-135-
<PAGE>
The specific matters on which we will need your help necessarily will
change from time to time. I anticipate that you and I will talk at least
quarterly about your then current list of consultative duties. At the outset
we look forward to your continued participation in (a) our Detroit JOA
undertaking and I hope you will be willing to serve on the DNA Management
Committee for at least a year following implementation; (b) our ongoing
shareholder relations projects (with particular attention to the founding
families); and (c) the Miami property development project. I know that there
will be a number of other key issues where your counsel will be invaluable.
Our consulting relationship will preclude you from accepting consulting
assignments and from other companies and from other profit-making activities,
provided your other assignments and activities do not constitute a conflict
of interest with Knight-Ridder.
The Company will reimburse you, in accordance with its usual policies
and procedures, for your travel and other out of pocket expenses incurred in
connection with your Knight-Ridder consulting activities, your attending ANPA
and other industry meetings as long as you are a Knight-Ridder director, and
your activities as Chairman of the FIU Foundation, Vice Chairman of The Miami
Coalition, and other civic activities which are of benefit to KRI over the
next several years.
In accordance with our historical practice, we will provide you as a
former CEO of the Company with an office and a secretary as long as you want
them.
I am happy we will continue to work together. If I have accurately
summarized our understanding, I'd appreciate your signing and returning the
enclosed copy of this letter to me for the Company's files.
Sincerely yours,
Knight- Ridder, Inc.
By: James K. Batten
-----------------
J.K. Batten
President & CEO
-136-
<PAGE>
Agreed:
Alvah H. Chapman Jr.
--------------------
Alvah H. Chapman, Jr.
(The initial agreement was for one year and was renewed annually through
September 30, 1994. At that time the agreement was extended through
May 31, 1995.)
<TABLE>
<CAPTION>
EXHIBIT 11
-----------
COMPUTATION OF PER SHARE EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Year Ended
------------------------------------------
Dec. 25 Dec. 26 Dec. 27
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
PRIMARY
-------
Average shares outstanding 53,944 54,851 54,474
Net effect of dilutive
stock options- based upon the
Treasury Stock method
using average market price 331 481 704
-------- -------- --------
TOTAL 54,275 55,332 55,178
======== ======== ========
Income before cumulative effect of
changes in accounting principles $170,900 $148,089 $146,086
Cumulative effect of changes in
accounting principles
Income taxes 25,800
Postretirement benefits other than pensions (131,000)
-------- -------- --------
Net Income $170,900 $148,089 $40,886
======== ======== ========
-137-
<PAGE>
Earnings per common and common equivalent share
Income before cumulative effect of
changes in accounting principles $3.15 $2.68 $2.65
Cumulative effect of changes in
accounting principles (1.91)
-------- -------- --------
Net Income $3.15 $2.68 $0.74
======== ======== ========
FULLY DILUTED
--------------
Average shares outstanding 53,944 54,851 54,474
Net effect of dilutive stock
options - based upon Treasury
Stock method using the higher
of quarter-end or average
market price 365 511 806
-------- -------- --------
TOTAL 54,309 55,362 55,280
======== ======== ========
Income before cumulative effect of
changes in accounting principles $170,900 $148,089 $146,086
Cumulative effect of changes in
accounting principles
Income taxes 25,800
Postretirement benefits other than pensions (131,000)
-------- -------- --------
Net Income $170,900 $148,089 $40,886
======== ======== ========
Earnings per common and common equivalent share
Income before cumulative effect of
changes in accounting principles $3.15 $2.67 $2.64
Cumulative effect of changes in
accounting principles (1.90)
-------- -------- --------
Net Income $3.15 $2.67 $0.74
======== ======== ========
-138-
</TABLE>
<PAGE>
EXHIBIT 12
----------
<PAGE>
<TABLE>
<CAPTION>
COMPUTATION OF EARNINGS TO FIXED CHARGES RATIO
FROM CONTINUING OPERATIONS
(IN THOUSANDS OF DOLLARS, EXCEPT RATIO DATA)
YEAR ENDED
--------------------------------------------------------------
December 25 December 26 December 27 December 29 December 30
1994 1993 1992 1991 1990
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
FIXED CHARGES COMPUTATION
INTEREST EXPENSE:
NET INTEREST EXPENSE $ 44,111 $ 44,992 $ 37,629 $ 46,701 $ 61,672
PLUS CAPITALIZED INTEREST 474 120 14,746 22,142 10,131
-------- -------- -------- -------- --------
GROSS INTEREST EXPENSE 44,585 45,112 52,375 68,843 71,803
PROPORTIONATE SHARE OF INTEREST
EXPENSE OF 50% OWNED PERSONS 12,351 13,608 15,546 15,296 17,599
INTEREST COMPONENT OF
RENT EXPENSE 11,118 9,888 9,826 9,698 9,939
-------- -------- -------- -------- --------
TOTAL FIXED CHARGES $ 68,054 $ 68,608 $ 77,747 $ 93,837 $ 99,341
======== ======== ======== ======== ========
-139-
<PAGE>
EARNINGS COMPUTATION
---------------------
PRETAX EARNINGS $ 290,070 243,401 $ 239,715 $ 210,370 $ 245,942
ADD: FIXED CHARGES 68,054 68,608 77,747 93,837 99,341
LESS CAPITALIZED INTEREST (474) (120) (14,746) (22,142) (10,131)
LESS: DISTRIBUTIONS IN EXCESS
OF (LESS THAN)
EARNINGS OF INVESTEES (4,287) (4,226) (1,216) (6,330) (1,000)
-------- -------- -------- -------- --------
TOTAL EARNINGS AS ADJUSTED $ 353,363 307,663 $ 301,500 $ 275,735 $ 334,152
======== ======== ======== ======== ========
RATIO OF EARNINGS
TO FIXED CHARGES 5.2:1 4.5:1 3.9:1 2.9:1 3.4:1
======== ======== ======== ======== ========
</TABLE>
-140-
<PAGE>
SUBSIDIARIES OF THE REGISTRANT Exhibit 21
State/Country of
Incorporation
---------------
KNIGHT-RIDDER, INC.
Aberdeen News Company Delaware
The Beacon Journal Publishing Company Ohio
Boca Raton News, Inc. Florida
Boulder Publishing, Inc. Colorado
The Bradenton Herald, Inc. Florida
Circom Corporation Pennsylvania
Detroit Free Press, Incorporated Michigan
Detroit Newspaper Agency Michigan
(partnership)
Drinnon, Inc. Georgia
The Gables Publishing Company Florida
Grand Forks Herald, Incorporated Delaware
Gulf Publishing Company, Inc. Mississippi
Journal of Commerce, Inc. Delaware
Transport Group International, Inc. Delaware
Transax Systems Company New York
(partnership)
KR Newsprint Company Florida
Southeast Paper Manufacturing Co. Georgia
(partnership)
KR Video, Inc. Delaware
Keynoter Publishing Company, Inc. Florida
Knight News Services, Inc. Michigan
Knight-Ridder Tribune Information Services District of Columbia
(partnership)
The Knight Publishing Co. Delaware
Knight-Ridder Business Information Services, Inc. Delaware
Knight-Ridder Financial, Inc. Delaware
Commodity News Services (International), Inc. Delaware
-141-
<PAGE>
Knight-Ridder Financial Holding AEA Company, Inc. Delaware
Knight-Ridder Financial AEA, Inc. Delaware
Knight-Ridder Financial/JM, Inc. Delaware
Knight-Ridder Financial/Japan, Inc. Delaware
Knight-Ridder Financial/Iberica Spain
Knight-Ridder Financial Deutschland GMBH Germany
Equinet Pty, Ltd. Australia
Equinet Information (NZ) Ltd. New Zealand
RWE Australian Business News Pty. Limited Australia
Knight-Ridder Information, Inc. California
Article Express International, Inc. Delaware
Dialog Information Europe, Inc. California
Dialog Information Services Europe, Ltd. England
Infomart/DIALOG Ltd. Canada
Knight-Ridder Compania de Servicios, S.A. de C.V. Mexico
Knight-Ridder Informacion, S.A. de C.V. Mexico
Knight-Ridder Information, Ltd. England
Knight-Ridder Information SARL France
Knight-Ridder Information GMBH Germany
Knight-Ridder Information AB Sweden
Knight-Ridder Information A.G. Switzerland
Knight-Ridder Information A/S Denmark
Technimetrics, Inc. Delaware
Technimetrics England
Knight-Ridder Cablevision, Inc. Florida
KRC SNJ, Inc. Delaware
KRC-NJFT, Inc. Delaware
TKR Cable Company Colorado
(partnership)
TKR Cable Partners Colorado
(partnership)
-142-
<PAGE>
Knight-Ridder Investment Company Delaware
Seattle Times Company Delaware
Lexington Herald-Leader Co. Kentucky
MHPC International, Inc. Florida
The Macon Telegraph Publishing Company Georgia
The Miami Herald Publishing Company -
Newberry Publishing Company, Inc. South Carolina
News Publishing Company Indiana
Fort Wayne Newspapers, Inc. Indiana
Fort Wayne Newspapers Agency Indiana
(partnership)
Nittany Printing and Publishing Company Pennsylvania
Northwest Publications, Inc. Delaware
Duluth News-Tribune -
Saint Paul Pioneer Press -
The Observer Transportation Company North Carolina
Philadelphia Newspapers, Inc. Pennsylvania
Post-Tribune Publishing, Inc. Indiana
PressLink, Inc. Delaware
The R.W. Page Corporation Georgia
Ridder Publications, Inc. Delaware
KR Land Holding Corporation Delaware
San Jose Mercury News, Inc. California
Silicon Valley D.A.T.A., Inc. California
The State-Record Company, Inc. South Carolina
Sun Publishing Company, Inc. South Carolina
Tallahassee Democrat, Inc. Florida
Tribune Newsprint Company Utah
Ponderay Newsprint Company Washington
(partnership)
Twin Cities Newspaper Services, Inc. Minnesota
Twin Coast Newspapers, Inc. New York
Long Beach Press-Telegram -
P.T. Sales and Marketing, Inc. California
Wichita Eagle and Beacon Publishing Company, Inc. Kansas
Note: "-" indicates that the subsidiary listed is a division, not a
legal entity.
-143-
<PAGE>
Exhibit 23
----------
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in Registration Statement No.
33-11021 on Form S-3 dated December 22, 1986, in Registration Statement
No. 33-28010 on Form S-3 dated April 7, 1989, in Registration Statement
No. 33-31747 on Form S-8 dated October 30, 1989, in Registration
Statement No. 33-69206 on Form S-8 dated May 18, 1993, and in the related
Prospectuses, of our report dated January 31, 1995, with respect to the
consolidated financial statements and schedule of Knight-Ridder, Inc.
incorporated by reference and included in this Annual Report (Form 10-K) for
the year ended December 25, 1994.
Ernst & Young LLP
Miami, Florida
March 23, 1995
-144-
<PAGE>
Exhibit 24
----------
POWER OF ATTORNEY
The undersigned member of the Board of Directors of Knight-Ridder, Inc.
hereby constitutes and appoints John C. Fontaine, Ross Jones, and Gary R.
Effren and each of them severally, his true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution for him and in his
name, place and stead, in any and all capacities to sign any and all Reports
on Form 10-K (Annual Report pursuant to the Securities Exchange Act of 1934)
and any amendments thereto, and to file the same, with all exhibits thereto
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or
their or his substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
Gonzalo F. Valdes-Fauli Date: March 24, 1995
----------------------- ----------------------
Gonzalo F. Valdes-Fauli
-145-
<PAGE>
Exhibit 24
----------
POWER OF ATTORNEY
The undersigned member of the Board of Directors of Knight-Ridder, Inc.
hereby constitutes and appoints John C. Fontaine, Ross Jones, and Gary R.
Effren and each of them severally, his true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution for him and in his
name, place and stead, in any and all capacities to sign any and all Reports
on Form 10-K (Annual Report pursuant to the Securities Exchange Act of 1934)
and any amendments thereto, and to file the same, with all exhibits thereto
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or
their or his substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
Barbara Barnes Hauptfuhrer Date: March 24, 1995
---------------------------- ---------------------
Barbara Barnes Hauptfuhrer
-146-
<PAGE>
Exhibit 24
----------
POWER OF ATTORNEY
The undersigned member of the Board of Directors of Knight-Ridder, Inc.
hereby constitutes and appoints John C. Fontaine, Ross Jones, and Gary R.
Effren and each of them severally, his true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution for him and in his
name, place and stead, in any and all capacities to sign any and all Reports
on Form 10-K (Annual Report pursuant to the Securities Exchange Act of 1934)
and any amendments thereto, and to file the same, with all exhibits thereto
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or
their or his substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
Alvah H. Chapman, Jr. Date: March 24, 1995
---------------------- --------------------
Alvah H. Chapman, Jr.
-147-
<PAGE>
Exhibit 24
----------
POWER OF ATTORNEY
The undersigned member of the Board of Directors of Knight-Ridder, Inc.
hereby constitutes and appoints John C. Fontaine, Ross Jones, and Gary R.
Effren and each of them severally, his true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution for him and in his
name, place and stead, in any and all capacities to sign any and all Reports
on Form 10-K (Annual Report pursuant to the Securities Exchange Act of 1934)
and any amendments thereto, and to file the same, with all exhibits thereto
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or
their or his substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
Peter C. Goldmark, Jr. Date: March 24, 1995
--------------------- --------------------
Peter C. Goldmark, Jr.
-148-
<PAGE>
Exhibit 24
----------
POWER OF ATTORNEY
The undersigned member of the Board of Directors of Knight-Ridder, Inc.
hereby constitutes and appoints John C. Fontaine, Ross Jones, and Gary R.
Effren and each of them severally, his true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution for him and in his
name, place and stead, in any and all capacities to sign any and all Reports
on Form 10-K (Annual Report pursuant to the Securities Exchange Act of 1934)
and any amendments thereto, and to file the same, with all exhibits thereto
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or
their or his substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
William S. Lee Date: March 24, 1995
-------------- --------------------
William S. Lee
-149-
<PAGE>
Exhibit 24
----------
POWER OF ATTORNEY
The undersigned member of the Board of Directors of Knight-Ridder, Inc.
hereby constitutes and appoints John C. Fontaine, Ross Jones, and Gary R.
Effren and each of them severally, his true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution for him and in his
name, place and stead, in any and all capacities to sign any and all Reports
on Form 10-K (Annual Report pursuant to the Securities Exchange Act of 1934)
and any amendments thereto, and to file the same, with all exhibits thereto
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or
their or his substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
John L. Weinberg Date: March 24, 1995
----------------- ---------------------
John L. Weinberg
-150-
<PAGE>
Exhibit 24
----------
POWER OF ATTORNEY
The undersigned member of the Board of Directors of Knight-Ridder, Inc.
hereby constitutes and appoints John C. Fontaine, Ross Jones, and Gary R.
Effren and each of them severally, his true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution for him and in his
name, place and stead, in any and all capacities to sign any and all Reports
on Form 10-K (Annual Report pursuant to the Securities Exchange Act of 1934)
and any amendments thereto, and to file the same, with all exhibits thereto
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or
their or his substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
Ben R. Morris Date: March 24, 1995
--------------- ---------------------
Ben R. Morris
-151-
<PAGE>
Exhibit 24
----------
POWER OF ATTORNEY
The undersigned member of the Board of Directors of Knight-Ridder, Inc.
hereby constitutes and appoints John C. Fontaine, Ross Jones, and Gary R.
Effren and each of them severally, his true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution for him and in his
name, place and stead, in any and all capacities to sign any and all Reports
on Form 10-K (Annual Report pursuant to the Securities Exchange Act of 1934)
and any amendments thereto, and to file the same, with all exhibits thereto
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or
their or his substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
Eric Ridder Date: March 24, 1995
------------- -------------------
Eric Ridder
-152-
<PAGE>
Exhibit 24
----------
POWER OF ATTORNEY
The undersigned member of the Board of Directors of Knight-Ridder, Inc.
hereby constitutes and appoints John C. Fontaine, Ross Jones, and Gary R.
Effren and each of them severally, his true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution for him and in his
name, place and stead, in any and all capacities to sign any and all Reports
on Form 10-K (Annual Report pursuant to the Securities Exchange Act of 1934)
and any amendments thereto, and to file the same, with all exhibits thereto
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or
their or his substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
James K. Batten Date: March 24, 1995
----------------- --------------------
James K. Batten
-153-
<PAGE>
Exhibit 24
----------
POWER OF ATTORNEY
The undersigned member of the Board of Directors of Knight-Ridder, Inc.
hereby constitutes and appoints John C. Fontaine, Ross Jones, and Gary R.
Effren and each of them severally, his true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution for him and in his
name, place and stead, in any and all capacities to sign any and all Reports
on Form 10-K (Annual Report pursuant to the Securities Exchange Act of 1934)
and any amendments thereto, and to file the same, with all exhibits thereto
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or
their or his substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
Joan Ridder Challinor Date: March 24, 1995
---------------------- --------------------
Joan Ridder Challinor
-154-
<PAGE>
Exhibit 24
----------
POWER OF ATTORNEY
The undersigned member of the Board of Directors of Knight-Ridder, Inc.
hereby constitutes and appoints John C. Fontaine, Ross Jones, and Gary R.
Effren and each of them severally, his true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution for him and in his
name, place and stead, in any and all capacities to sign any and all Reports
on Form 10-K (Annual Report pursuant to the Securities Exchange Act of 1934)
and any amendments thereto, and to file the same, with all exhibits thereto
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or
their or his substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
Jesse Hill, Jr. Date: March 24, 1995
--------------- --------------------
Jesse Hill, Jr.
-155-
<PAGE>
Exhibit 24
----------
POWER OF ATTORNEY
The undersigned member of the Board of Directors of Knight-Ridder, Inc.
hereby constitutes and appoints John C. Fontaine, Ross Jones, and Gary R.
Effren and each of them severally, his true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution for him and in his
name, place and stead, in any and all capacities to sign any and all Reports
on Form 10-K (Annual Report pursuant to the Securities Exchange Act of 1934)
and any amendments thereto, and to file the same, with all exhibits thereto
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or
their or his substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
C. Peter McColough Date: March 24, 1995
------------------ ----------------------
C. Peter McColough
-156-
<PAGE>
Exhibit 24
----------
POWER OF ATTORNEY
The undersigned member of the Board of Directors of Knight-Ridder, Inc.
hereby constitutes and appoints John C. Fontaine, Ross Jones, and Gary R.
Effren and each of them severally, his true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution for him and in his
name, place and stead, in any and all capacities to sign any and all Reports
on Form 10-K (Annual Report pursuant to the Securities Exchange Act of 1934)
and any amendments thereto, and to file the same, with all exhibits thereto
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or
their or his substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
Thomas L. Phillips Date: March 24, 1995
------------------- ---------------------
Thomas L. Phillips
-157-
<PAGE>
Exhibit 24
----------
POWER OF ATTORNEY
The undersigned member of the Board of Directors of Knight-Ridder, Inc.
hereby constitutes and appoints John C. Fontaine, Ross Jones, and Gary R.
Effren and each of them severally, his true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution for him and in his
name, place and stead, in any and all capacities to sign any and all Reports
on Form 10-K (Annual Report pursuant to the Securities Exchange Act of 1934)
and any amendments thereto, and to file the same, with all exhibits thereto
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or
their or his substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
P. Anthony Ridder Date: March 24, 1995
------------------- ---------------------
P. Anthony Ridder
-158-
<PAGE>
Exhibit 24
-----------
POWER OF ATTORNEY
The undersigned member of the Board of Directors of Knight-Ridder, Inc.
hereby constitutes and appoints John C. Fontaine, Ross Jones, and Gary R.
Effren and each of them severally, his true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution for him and in his
name, place and stead, in any and all capacities to sign any and all Reports
on Form 10-K (Annual Report pursuant to the Securities Exchange Act of 1934)
and any amendments thereto, and to file the same, with all exhibits thereto
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or
their or his substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
Barbara Knight Toomey Date: March 24, 1995
---------------------- --------------------
Barbara Knight Toomey
-159-
<PAGE>
Exhibit 24
----------
POWER OF ATTORNEY
The undersigned member of the Board of Directors of Knight-Ridder, Inc.
hereby constitutes and appoints John C. Fontaine, Ross Jones, and Gary R.
Effren and each of them severally, his true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution for him and in his
name, place and stead, in any and all capacities to sign any and all Reports
on Form 10-K (Annual Report pursuant to the Securities Exchange Act of 1934)
and any amendments thereto, and to file the same, with all exhibits thereto
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or
their or his substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
Randall L. Tobias Date: March 24, 1995
------------------ ---------------------
Randall L. Tobias
-160-
<PAGE>
EXHIBIT 27
----------
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE CONSOLIDATED
STATEMENTS OF INCOME, THE CONSOLIDATED BALANCE SHEETS, THE CONSOLIDATED
STATEMENTS OF CASH FLOWS, THE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS,
AND SUPPLEMENTARY DATA.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-25-1994
<PERIOD-START> DEC-27-1993
<PERIOD-END> DEC-25-1994
<CASH> 9,253
<SECURITIES> 0
<RECEIVABLES> 331,415
<ALLOWANCES> 13,728
<INVENTORY> 39,555
<CURRENT-ASSETS> 422,804
<PP&E> 1,677,105
<DEPRECIATION> 844,593
<TOTAL-ASSETS> 2,447,189
<CURRENT-LIABILITIES> 420,641
<BONDS> 0
<COMMON> 1,102
0
0
<OTHER-SE> 1,223,552
<TOTAL-LIABILITY-AND-EQUITY> 2,447,189
<SALES> 2,648,961
<TOTAL-REVENUES> 2,648,961
<CGS> 335,902<F1>
<TOTAL-COSTS> 2,317,700
<OTHER-EXPENSES> 41,191<F2>
<PAGE>
<LOSS-PROVISION> 17,818
<INTEREST-EXPENSE> 44,585
<INCOME-PRETAX> 290,070
<INCOME-TAX> 119,170
<INCOME-CONTINUING> 170,900
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 170,900
<EPS-PRIMARY> 3.15
<EPS-DILUTED> 3.15
<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).
</FN>
</TABLE>
