<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED: June 30, 1996
-------------
COMMISSION FILE NUMBER: 1-7553
------
KNIGHT-RIDDER, INC.
-------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
FLORIDA 38-0723657
-------------------------------------------------------------------------
(State of Incorporation) (I.R.S. Employer Identification No.)
ONE HERALD PLAZA, MIAMI, FLORIDA 33132
-------------------------------------------------------------------------
(Address of principal executive offices)
(305) 376-3800
-------------------------------------------------------------------------
Registrant's telephone number, including area code)
NOT APPLICABLE
-------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date. Common Stock, $.02 1/12 Par
Value - 95,843,630 shares as of August 4, 1996.
-1-
<PAGE> 2
Table of Contents for Form 10-Q
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Statement of Income 3
Consolidated Balance Sheet 4
Consolidated Statement of Cash Flows 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7-10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURE
Exhibit 27 Financial Data Schedule (for SEC use only) 12-13
Exhibit 99 Additional Exhibits 14
</TABLE>
2
<PAGE> 3
PART I- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED, IN THOUSANDS OF DOLLARS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
QUARTER ENDED TWO QUARTERS ENDED FOUR QUARTERS ENDED
-------------------- -------------------------- --------------------------
JUNE 30 JUNE 25 JUNE 30 JUNE 25 JUNE 30 JUNE 25
1996 1995 1996 1995 1996 1995
-------- -------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
OPERATING REVENUE
Newspapers
Advertising
Retail................................. $200,651 $200,091 $ 382,702 $ 381,876 $ 808,584 $ 805,486
General................................ 51,101 46,951 97,337 94,322 185,531 186,257
Classified............................. 197,687 175,390 393,253 342,489 733,460 647,834
-------- -------- ---------- ---------- ---------- ----------
Total................................ 449,439 422,432 873,292 818,687 1,727,575 1,639,577
Circulation.............................. 125,837 123,046 252,691 245,638 502,368 487,904
Other.................................... 20,305 20,248 40,354 38,534 83,717 74,300
-------- -------- ---------- ---------- ---------- ----------
Total Newspapers..................... 595,581 565,726 1,166,337 1,102,859 2,313,660 2,201,781
Business Information Services.............. 121,401 121,729 248,306 259,195 490,763 516,821
-------- -------- ---------- ---------- ---------- ----------
Total Operating Revenue.............. 716,982 687,455 1,414,643 1,362,054 2,804,423 2,718,602
-------- -------- ---------- ---------- ---------- ----------
OPERATING COSTS
Labor and employee benefits................ 278,959 274,485 562,274 554,079 1,136,174 1,107,117
Newsprint, ink and supplements............. 127,643 107,953 254,163 202,782 498,222 379,372
Other operating costs...................... 187,103 183,155 381,440 374,712 791,846 755,501
Depreciation and amortization.............. 42,827 37,148 85,704 74,760 162,556 149,726
-------- -------- ---------- ---------- ---------- ----------
Total Operating Costs................ 636,532 602,741 1,283,581 1,206,333 2,588,798 2,391,716
-------- -------- ---------- ---------- ---------- ----------
OPERATING INCOME............................. 80,450 84,714 131,062 155,721 215,625 326,886
-------- -------- ---------- ---------- ---------- ----------
OTHER INCOME (EXPENSE)
Interest expense........................... (19,175) (12,612) (38,802) (25,013) (73,361) (47,414)
Interest expense capitalized............... 1,384 366 2,579 611 3,857 1,022
Interest income............................ 2,094 2,270 4,675 4,403 9,414 7,858
Equity in earnings of unconsolidated
companies and joint ventures............. 8,815 7,393 16,570 8,344 28,887 15,564
Minority interests in earnings of
consolidated subsidiaries................ (2,567) (2,369) (4,150) (3,983) (8,515) (8,530)
Other, net................................. 343 82,778 246 84,104 (118) 81,947
-------- -------- ---------- ---------- ---------- ----------
Total................................ (9,106) 77,826 (18,882) 68,466 (39,836) 50,447
-------- -------- ---------- ---------- ---------- ----------
Income before income taxes................... 71,344 162,540 112,180 224,187 175,789 377,333
Income taxes................................. 28,992 68,420 46,310 94,394 72,330 157,133
-------- -------- ---------- ---------- ---------- ----------
INCOME BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE............. 42,352 94,120 65,870 129,793 103,459 220,200
Cumulative effect of change in
accounting principle for contributions... (7,320) (7,320)
-------- -------- ---------- ---------- ---------- ----------
Net income........................... $ 42,352 $ 94,120 $ 65,870 $ 122,473 $ 103,459 $ 212,880
======== ======== ========== ========== ========== ==========
EARNINGS PER COMMON AND
COMMON EQUIVALENT SHARE
Income before cumulative effect of
change in accounting principle (1)...... $ 0.43 $ 0.94 $ .67 $ 1.27 $ 1.05 $ 2.10
Cumulative effect of change
in accounting principle (1)............. (0.07) (0.07)
-------- -------- ---------- ---------- ---------- ----------
Net income (1)...................... $ 0.43 $ 0.94 $ .67 $ 1.20 $ 1.05 $ 2.03
======== ======== ========== ========== ========== ==========
DIVIDENDS DECLARED PER COMMON SHARE (1)..... $ 0.20 $ 0.18 1/2 $ 0.38 1/2 $ 0.37 $ 0.75 1/2 $ 0.74
======== ======== ========== ========== ========== ==========
AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING (OOOs)(1)..... 99,014 100,123 98,980 101,945 98,714 104,633
======== ======== ========== ========== ========== ==========
</TABLE>
(1) Amounts have been restated to reflect a two-for-one stock split in the form
of a 100% common stock dividend, effective July 31, 1996.
See "Notes to Consolidated Financial Statements" on page 6.
3
<PAGE> 4
CONSOLIDATED BALANCE SHEET
(UNAUDITED, IN THOUSANDS OF DOLLARS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31 JUNE 25
1996 1995 1995
---------- ----------- ----------
<S> <C> <C> <C>
ASSETS
- ------
CURRENT ASSETS
Cash, including short-term cash invest-
ments of $50 in 1996, $50 in December
1995, and $5,824 in June 1995................... $ 31,230 $ 26,012 $ 23,055
Accounts receivable, net of allowances
of $14,875 in 1996, $14,348 in
December 1995 and $13,990 in
June 1995....................................... 356,409 339,264 311,861
Inventories....................................... 76,717 73,349 51,747
Other current assets.............................. 87,258 64,297 76,826
---------- ----------- ----------
Total Current Assets.......................... 551,614 502,922 463,489
---------- ----------- ----------
INVESTMENTS AND OTHER ASSETS
Equity in unconsolidated companies
and joint ventures.............................. 340,987 321,658 312,721
Other............................................. 221,375 285,666 201,006
---------- ----------- ----------
Total Investments and Other Assets........... 562,362 607,324 513,727
---------- ----------- ----------
PROPERTY, PLANT AND EQUIPMENT
Land and improvements............................. 80,597 80,616 66,891
Buildings and improvements........................ 404,305 401,093 380,128
Equipment......................................... 1,228,033 1,223,838 1,182,106
Construction and equipment
installations in progress....................... 103,554 57,644 28,594
---------- ----------- ----------
1,816,489 1,763,191 1,657,719
Less accumulated depreciation..................... 860,163 831,544 843,404
---------- ----------- ----------
Net Property, Plant and Equipment............. 956,326 931,647 814,315
---------- ----------- ----------
EXCESS OF COST OVER NET ASSETS ACQUIRED
Less accumulated amortization of
$221,079 in 1996, $205,608 in December
1995 and $193,495 in June 1995.................... 943,782 963,817 691,128
---------- ----------- ----------
Total......................................... $3,014,084 $ 3,005,710 $2,482,659
========== =========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES
Accounts payable.................................. $ 134,073 $ 127,532 $ 136,453
Accrued expenses and other liabilities............ 112,408 105,317 90,742
Accrued compensation and amounts
withheld from employees......................... 90,219 101,357 84,061
Federal and state income taxes 195 37,833
Deferred revenue.................................. 72,816 72,134 64,620
Dividends payable................................. 19,315 17,978 18,216
Short-term borrowings and current
portion of long-term debt....................... 49,922 13,129
---------- ----------- ----------
Total Current Liabilities..................... 478,753 437,642 431,925
---------- ----------- ----------
NONCURRENT LIABILITIES
Long-term debt.................................... 1,004,134 1,000,721 534,209
Deferred federal and state income taxes........... 150,298 165,045 138,607
Postretirement benefits other than pensions....... 170,928 169,672 166,060
Employment benefits and other
noncurrent liabilities.......................... 112,886 120,817 97,790
---------- ----------- ----------
Total Noncurrent Liabilities.................. 1,438,246 1,456,255 936,666
---------- ----------- ----------
MINORITY INTERESTS IN
CONSOLIDATED SUBSIDIARIES........................... 1,275 843 1,282
---------- ----------- ----------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common stock, $.02 1/12 par value; shares
authorized - 250,000,000; shares issued -
96,756,312 in 1996, 97,196,308 in December
1995 and 98,570,960 in June 1995................ 1,008 1,012 1,027
Common stock dividend distributable............... 1,008
Additional capital................................ 330,490 295,360 301,855
Retained earnings................................. 736,816 771,656 809,904
Unrealized gains on investments................... 26,488 42,942
---------- ----------- ----------
Total Shareholders' Equity...................... 1,095,810 1,110,970 1,112,786
---------- ----------- ----------
Total......................................... $3,014,084 $ 3,005,710 $2,482,659
========== =========== ==========
</TABLE>
See "Notes to Consolidated Financial Statements" on page 6.
4
<PAGE> 5
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited, in thousands of dollars)
<TABLE>
<CAPTION>
QUARTER ENDED TWO QUARTERS ENDED FOUR QUARTERS ENDED
---------------------- ---------------------- ------------------------
JUNE 30 JUNE 25 JUNE 30 JUNE 25 JUNE 30 JUNE 25
1996 1995 1996 1995 1996 1995
--------- --------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
CASH PROVIDED BY (REQUIRED FOR)
OPERATING ACTIVITIES
Net income.............................. $ 42,352 $ 94,120 $ 65,870 $ 122,473 $ 103,459 $ 212,880
Noncash items included in income:
Cumulative effect of change in
accounting principle................ 7,320 7,320
Depreciation.......................... 27,749 26,260 56,444 52,815 108,415 105,368
Amortization of excess of cost
over net assets acquired............ 7,818 5,506 15,471 11,093 28,086 22,095
Amortization of other assets.......... 7,260 5,382 13,789 10,852 26,055 22,263
Provision for noncurrent deferred
taxes............................... (2,849) (4) (2,844) (4) 1,664 (7,457)
Distributions from investees in
excess of (less than) earnings...... (9,391) 2,293 (13,442) 2,881 (32,573) (5,361)
Gain on sale of subsidiary............ (92,698) (92,698) (92,698)
Other items, net...................... 7,048 10,235 13,484 19,752 39,696 45,811
Change in certain assets
and liabilities:
Accounts receivable................... (7,439) (16,193) (4,732) (4,549) (18,803) (31,020)
Inventories........................... 16,826 (3,506) (3,102) (12,305) (23,089) (12,341)
Other current assets.................. (25,618) 15,687 (20,486) (24,751) (5,266) (25,388)
Accounts payable...................... 15,000 (6,000) 6,525 (4,387) (8,323) (206)
Federal and state income taxes........ 15,130 (195) 36,465 (52,805) 22,861
Other current liabilities............. 17,046 (3,073) (6,153) (21,632) 18,485 16,438
--------- --------- --------- --------- ---------- ---------
Net cash provided by
operating activities............ 95,802 53,139 120,629 103,325 185,001 280,565
--------- --------- --------- --------- ---------- ---------
CASH PROVIDED BY(REQUIRED FOR)
INVESTING ACTIVITIES
Acquisition of Contra Costa
Newspapers, Inc. ..................... (335,755)
Additions to property,
plant and equipment................... (33,668) (19,382) (78,179) (37,333) (161,871) (74,401)
Other items, net........................ 21,024 81,173 11,507 72,334 (13,424) 52,199
--------- --------- --------- --------- ---------- ---------
Net cash provided by
(required for) investing
activities..................... (12,644) 61,791 (66,672) 35,001 (511,050) (22,202)
--------- --------- --------- --------- ---------- ---------
CASH PROVIDED BY (REQUIRED FOR)
FINANCING ACTIVITIES
Proceeds from sale of commercial
paper and senior notes payable......... 171,084 137,323 333,623 359,579 1,066,664 527,474
Reduction of total debt................. (171,202) (168,680) (293,417) (236,874) (546,817) (450,679)
--------- --------- --------- --------- ---------- ---------
Net change in total debt.......... (118) (31,357) 40,206 122,705 519,847 76,795
Payment of cash dividends............... (18,155) (18,575) (36,133) (38,168) (72,342) (77,806)
Sale of common stock to employees....... 14,035 9,812 47,270 17,592 105,115 27,772
Purchase of treasury stock.............. (67,309) (62,911) (74,376) (215,142) (178,597) (266,259)
Other items, net........................ (19,456) (5,103) (25,706) (11,511) (39,799) (18,646)
--------- --------- --------- --------- ---------- ---------
Net cash provided by (required
for) financing activities...... (91,003) (108,134) (48,739) (124,524) 334,224 (258,144)
--------- --------- --------- --------- ---------- ---------
Net increase (decrease) in Cash... (7,845) 6,796 5,218 13,802 8,175 219
Cash and short-term cash investments
at beginning of the period........ 39,075 16,259 26,012 9,253 23,055 22,836
--------- --------- --------- --------- ---------- ---------
Cash and short-term cash investments
at end of the period.............. $ 31,230 $ 23,055 $ 31,230 $ 23,055 $ 31,230 $ 23,055
========= ========= ========= ========= ========== =========
Working capital at end of the period...... $ 72,861 $ 31,564 $ 72,861 $ 31,564 $ 72,861 $ 31,564
========= ========= ========= ========= ========== =========
</TABLE>
See "Notes to Consolidated Financial Statements" on page 6.
5
<PAGE> 6
Notes to Consolidated Financial Statements
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. Operating results for the quarter, two
quarters and four quarters ended June 30, 1996 are not necessarily indicative
of the results that may be expected for the year ending December 29, 1996. For
further information, refer to the consolidated financial statements and
footnotes thereto included in the Registrant Company and Subsidiaries' annual
report on Form 10-K for the year ended December 31, 1995.
NOTE 2 - DEBT
<TABLE>
<CAPTION>
(IN THOUSANDS OF DOLLARS) EFFECTIVE
INTEREST BALANCE AT
RATE AT ---------------------------------------
JUNE 30 JUNE 30 DECEMBER 31 JUNE 25
1996 1996 1995 1995
---- ---------- ---------- --------
<S> <C> <C> <C> <C>
Commercial paper, net of discount...... 5.5% $ 597,780 $ 557,698 $177,308
Notes payable, net of discount (a)..... 8.5 159,359 159,274 159,188
Debentures, net of discount (b)........ 10.0 197,864 197,789 197,713
Senior notes, net of discount (c)...... 6.4 99,053 99,089
---------- ---------- --------
Total debt (d)................. 6.9 1,054,056 1,013,850 534,209
Less amounts classified as current..... 5.5 49,922 13,129
---------- ---------- --------
Total long-term debt........... 7.0% $1,004,134 $1,000,721 $534,209
========== ========== ========
</TABLE>
(a) Represents $160 million of 8 1/2% Notes subject to mandatory pro rata
amortization of 25% annually commencing 1998 through maturity in 2001.
(b) Represents $200 million of 20-year 9 7/8% debentures due in 2009.
(c) Represents $100 million of 10-year 6.3% senior notes due in 2005.
(d) At June 30, 1996, and June 25, 1995, interest payments of $37.7
million and $21.8 million had been made for the year-to-date,
respectively.
NOTE 3 - INCOME TAX PAYMENTS
Income tax payments for the two quarters ended June 30, 1996, and June 25,
1995, were $42.7 million and $55.6 million, respectively.
NOTE 4 - COMMON STOCK AND DIVIDENDS DECLARED
On June 21, 1996, the Board of Directors of the company declared a two-for-one
stock split in the form of a 100% common stock dividend effective July 31,
1996. All share and per share data, except as otherwise indicated, have been
restated giving retroactive effect to the stock split. Dividends declared per
common share have been restated giving retroactive effect to the two-for-one
stock split effective July 31, 1996.
6
<PAGE> 7
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE SECOND QUARTER
SECOND QUARTER 1996 COMPARED WITH SECOND QUARTER 1995
Earnings per share for the second quarter of 1996 were $.43, up $.03
per share, or 7.5%, from the $.40 per share earned in 1995, after restatement
for the two-for-one stock split declared on June 21st. The 1995 results are
before a $.54 gain on the sale of the Journal of Commerce (JoC), but after a
$.06 charge for the adjustment of the carrying value of certain investments.
Earnings per share for the first two quarters of 1996 were $.67, down $.06, or
8.2%, from the $.73 earned in 1995, excluding the gain on the sale of the JoC
and the cumulative effect of the change in accounting principle.
Net income in the second quarter of 1996 was $42.4 million, up $2.0
million, or 4.9%, from the same period last year, exclusive of the gain on the
sale of the JoC, on a 4.3% operating revenue increase from second quarter 1995.
For the year-to-date, net income was $65.9 million, down $10.2 million, or
13.4% from 1995, exclusive of the gain on the sale of the JoC, on an operating
revenue increase of 3.9%.
OPERATING REVENUE
Certain comparisons exclude Detroit from both years, due to the
distortive impact of the strike which began on July 13, 1995, and reflect
Contra Costa Newspapers (acquired from Lesher Communications on Oct. 31, 1995)
as if we owned them during the same period last year (pro forma basis).
Newspaper advertising revenue increased 6.4% over the second quarter
last year, on a full-run ROP linage increase of 12.6%. Excluding Detroit, but
including the operations of Contra Costa Newspapers (CCN) as if owned in the
second quarter of 1995, newspaper advertising revenue increased 4.0% from 1995,
on a full-run ROP linage decrease of 0.4%. Year-to-date, on this same basis,
newspaper advertising revenue increased 4.7% from 1995, on a full-run ROP
linage decrease of 0.5%.
Classified advertising revenue increased 12.7% over second quarter
last year, on a 16.8% full-run ROP linage increase. This is the 16th
consecutive quarter of year-over-year classified revenue growth. The employment
category showed the largest gain, posting a 24.8% revenue improvement, with
linage up 17.0% from 1995. Classified revenue growth remains strong, even
though employment advertising is no longer reflecting the exceptional
year-over-year increases that it did during the last two quarters. On a pro
forma basis for CCN, but excluding Detroit, classified advertising revenue
increased 9.9% from 1995. On this same basis, year-to-date classified
advertising revenue increased 12.8% from 1995.
For the quarter, retail advertising revenue improved by $560,000, or
0.3%, over last year. On a pro forma basis for CCN, but excluding Detroit,
retail revenue was down 2.6% from the prior year. Retail results were soft in
most of our major markets, due partly to a number of out of business and
customer bankruptcy situations. On a pro forma basis for CCN, but excluding
Detroit, year-to-date retail revenue was down 2.3% from 1995.
7
<PAGE> 8
General advertising revenue was up $4.2 million, or 8.8%, from second
quarter 1995. On a pro forma basis for CCN, but excluding Detroit, general
advertising revenue was up $4.0 million, or 9.3% from 1995. General advertising
revenue was stronger than it had been in the last two quarters, principally as
a result of airlines, telecommunications and factory automotive categories. On
this same basis, for the first two quarters of 1996, general advertising
revenue was up 3.1% from the prior year.
Circulation revenue increased $2.8 million, or 2.3% from second
quarter 1995. On a pro forma basis for CCN, but excluding Detroit, circulation
revenue increased by $2.2 million, or 2.0%, on an average daily circulation
decrease of 4.8% and average Sunday circulation decrease of 3.3%, offset by a
6.5% increase in the average rate. On a pro forma basis for CCN, but excluding
Detroit, circulation revenue was up 2.7% so far this year.
Other newspaper revenue increased by $57,000, or 0.3%, from 1995 for
the quarter. On a pro forma basis for CCN, but excluding Detroit, other
newspaper revenue decreased by $2.0 million in the second quarter and
year-to-date, primarily due to reduced newsprint waste sale revenue caused by
softening newsprint prices.
BIS revenue in the second quarter of 1996 decreased $328,000, or 0.3%,
reflecting a modest decline in Knight-Ridder Financial results. On a
year-to-date basis, BIS revenue decreased $10.9 million, or 4.2%, reflecting
the absence of the JoC. Excluding the impact of the JoC sale and acquisitions,
BIS operating revenue decreased 1.4% from last year.
OPERATING COSTS
Labor and employee benefit costs rose $4.5 million, or 1.6%, above
second quarter 1995. On a pro forma basis for CCN, but excluding Detroit,
labor and employee benefits were $1.2 million, or 0.4%, below 1995. On this
same basis, year-to-date labor and employee benefits were $3.1 million, or
0.6%, below 1995. Excluding CCN and Detroit, the work force decreased 4.0% in
the quarter and 5.0% for the year-to-date, primarily as a result of last year's
fourth quarter buyouts in a number of locations, including Miami, Philadelphia
and San Jose.
Newsprint, ink and supplement costs increased $19.7 million, or 18.2%
from second quarter 1995, on a 27.5% increase in the average newsprint price
and a 4.9% decrease in newsprint consumption. These costs were up $51.4
million, or 25.3%, for the year-to-date, on a 36.1% increase in the average
newsprint price and a 4.7% decrease in consumption. Although there were no
price increases in 1996, the quarter and year were impacted by the newsprint
price increases imposed in 1995.
Other operating costs rose $3.9 million, or 2.2% over second quarter
1995. On a pro forma basis for CCN, but excluding Detroit, other operating
costs were $4.2 million, or 2.4%, below second quarter 1995 and $11.8 million,
or 3.3%, below year-to-date 1995, due to good cost controls.
Depreciation and amortization increased $5.7 million, or 15.3% over
second quarter 1995 and $10.9 million, or 14,6%, for the year-to-date,
primarily due to the acquisition of CCN. Excluding the impact of acquisitions,
depreciation and amortization increased by 3.5% for the quarter and 3.2% for
the year-to-date.
8
<PAGE> 9
NON-OPERATING ITEMS
Interest expense, net of interest income and interest expense
capitalized, increased $5.7 million over second quarter 1995 and $11.5 million
for the year-to-date, due to higher debt levels. The average debt balance
increased $517.2 million from the second quarter of last year, due largely to
the financing of the CCN acquisition and share repurchases.
Equity in earnings of unconsolidated companies and joint ventures
increased by $1.4 million for the quarter and $8.2 million for the
year-to-date, due to earnings improvements from our newsprint mill investments,
which are benefiting from the rise in newsprint prices over last year.
"Other, net" was $82.4 million below second quarter 1995 and $83.9
million below year-to-date 1995, due to the gain on the sale of the JoC
recorded in the second quarter of 1995.
OTHER
On July 26, 1996, the company announced the completion of the sale of
Knight-Ridder Financial to Global Financial Information for $275 million.
The Board of Directors of the company declared a two-for-one stock
split in the form of a 100% common stock dividend on June 21, 1996, payable on
July 31, 1996, to shareholders of record, as of the close of business on July
10, 1996. The Board of Directors also approved an 8.1% increase in the
company's quarterly dividend from $.18 1/2 to $.20 per share (after giving
effect to the previously mentioned stock split).
On June 10, 1996, the company announced that Technimetrics, Inc., had
entered into an agreement to purchase Grabill-Bloom, Inc., a stock surveillance
firm that helps companies track their shareholders on a real-time basis.
In March 1996, the company announced that Tele-Communications, Inc.
(TCI), had agreed to purchase all of Knight-Ridder's interests in the jointly
owned cable properties for a price of $420 million in cash and TCI common
stock. The two companies are equal owners of TKR Cable Company, which owns and
operates systems in New Jersey and New York, as well as a 15% interest in
another TCI Cable venture that operates cable systems in five Southern states.
The sale is expected to close later this year.
During the second quarter of 1996, the company purchased approximately
1.9 million shares (post-split) of Knight-Ridder common stock. The company has
remaining authorization to repurchase 3.9 million shares (post-split) and plans
to repurchase additional shares. A portion of the proceeds from the sale of
both KRF and our cable investment will be used to repurchase stock.
9
<PAGE> 10
LIQUIDITY
Net cash provided by operating activities increased to $95.8 million
from $53.1 million in the second quarter of 1995. The increase was attributed
to the 1995 gain on the JoC sale, since the net cash from the sale was included
in investing activities, rather than operating activities.
Cash and short term cash investments were up $8.2 million from June
25, 1995, and up $5.2 million from year end. Total debt increased $519.8
million from second quarter 1995 and increased $40.2 million from Dec. 31,
1995, due to the CCN acquisition, the 11.5 million shares (post-split)
repurchased in 1995 and the 2.1 million shares (post-split) repurchased in
1996.
The total-debt-to-total-capital ratio was 49.0%, up from 47.7% at year
end and 32.4% in June 1995. Management intends to use some portion of the
proceeds from the sale of KRF and our cable investment to reduce debt before
year end. Approximately $200.0 million in aggregate unused credit lines
remained at the end of the quarter.
The ratio of current assets to current liabilities was 1.2:1 at June
30, 1996, and 1.1:1 at June 25, 1995, and Dec. 31, 1995.
OUTLOOK FOR THE REMAINDER OF THE YEAR
As we look ahead to the second half of the year, we continue to
anticipate a year of strong earnings growth. While we are concerned about the
lackluster retail performance and Northern California's market, classified
revenue continues to do well, albeit not as strong as in the first quarter. The
continuing decline in newsprint prices and the cycling through of the Detroit
strike will positively impact the second half of the year. 1995's newsprint
increases will still cause year-over-year increases of between 10% and 15% in
1996, but this is significantly less than initially anticipated.
10
<PAGE> 11
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
As reported on Part I, Item 2, of the Company's Form 10-Q for the quarter ended
March 31, 1996, on April 1, 1996 the Company announced that a libel suit filed
by Richard A. Sprague against the Philadelphia Inquirer in 1973 had been
settled.
Item 6. Exhibits and Reports of Form 8-K
(a) Exhibits
No. 4 - Rights Agreement dated June 21, 1996, incorporated by
reference to the Company's Form 8-A filed electronically
July 10, 1996.
No. 27 - Financial Data Schedule (for SEC use only).
No. 99 - Additional Exhibits.
(b) Reports on Form 8-K
Form 8-K dated July 9, 1996.
Item 5 - Other Events.
Item 7 - Exhibits; no financial statements filed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
KNIGHT-RIDDER, INC.
(Registrant)
Date: August 12, 1996
Ross Jones
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer and Duly
Authorized Officer of Registrant)
11
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENT OF INCOME, THE CONSOLIDATED BALANCE SHEET, THE
CONSOLIDATED STATEMENT OF CASH FLOWS AND THE NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-29-1996
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 31,230
<SECURITIES> 0
<RECEIVABLES> 371,284
<ALLOWANCES> 14,875
<INVENTORY> 76,717
<CURRENT-ASSETS> 551,614
<PP&E> 1,816,489
<DEPRECIATION> 860,163
<TOTAL-ASSETS> 3,014,084
<CURRENT-LIABILITIES> 478,753
<BONDS> 456,276
0
0
<COMMON> 1,008
<OTHER-SE> 1,094,802
<TOTAL-LIABILITY-AND-EQUITY> 3,014,084
<SALES> 716,982
<TOTAL-REVENUES> 716,982
<CGS> 127,643<F1>
<TOTAL-COSTS> 636,532
<OTHER-EXPENSES> 9,106<F2>
<LOSS-PROVISION> 4,521
<INTEREST-EXPENSE> 19,175
<INCOME-PRETAX> 71,344
<INCOME-TAX> 28,992
<INCOME-CONTINUING> 42,352
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 42,352
<EPS-PRIMARY> .43
<EPS-DILUTED> .43
<F1>COST OF GOODS SOLD CONSISTS OF NEWSPRINT, INK & SUPPLEMENTS.
<F2>OTHER EXPENSES CONSIST OF ALL NON-OPERATING COSTS, NET, EXCLUDING INCOME TAXES.
AMOUNT INCLUDES INTEREST EXPENSE, NET OF INTEREST INCOME AND OTHER
NON-OPERATING COSTS, NET OF NON-OPERATING INCOME.
12
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENT OF INCOME, THE CONSOLIDATED BALANCE SHEET, THE
CONSOLIDATED STATEMENT OF CASH FLOWS, AND THE NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-29-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 31,230
<SECURITIES> 0
<RECEIVABLES> 371,284
<ALLOWANCES> 14,875
<INVENTORY> 76,717
<CURRENT-ASSETS> 551,614
<PP&E> 1,816,489
<DEPRECIATION> 860,163
<TOTAL-ASSETS> 3,014,084
<CURRENT-LIABILITIES> 478,753
<BONDS> 456,276
0
0
<COMMON> 1,008
<OTHER-SE> 1,094,802
<TOTAL-LIABILITY-AND-EQUITY> 3,014,084
<SALES> 1,414,643
<TOTAL-REVENUES> 1,414,643
<CGS> 254,163<F1>
<TOTAL-COSTS> 1,283,581
<OTHER-EXPENSES> 18,882<F2>
<LOSS-PROVISION> 10,166
<INTEREST-EXPENSE> 38,802
<INCOME-PRETAX> 112,180
<INCOME-TAX> 46,310
<INCOME-CONTINUING> 65,870
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 65,870
<EPS-PRIMARY> .67
<EPS-DILUTED> .67
<FN>
<F1>COST OF GOODS SOLD CONSISTS OF NEWSPRINT, INK & SUPPLEMENTS.
<F2>OTHER EXPENSES CONSIST OF ALL NON-OPERATING COSTS, NET EXCLUDING INCOME TAXES.
AMOUNT INCLUDES INTEREST EXPENSE, NET OF INTEREST INCOME AND OTHER
NON-OPERATING COSTS, NET OF NON-OPERATING INCOME.
13
</FN>
</TABLE>
<PAGE> 1
EXHIBIT 99
OTHER FINANCIAL INFORMATION
(UNAUDITED)
BUSINESS SEGMENT INFORMATION
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
QUARTER ENDED TWO QUARTERS ENDED FOUR QUARTERS ENDED
--------------------------------------------------------------------------
JUNE 30 JUNE 25 JUNE 30 JUNE 25 JUNE 30 JUNE 25
1996 1995 1996 1995 1996 1995
-------- -------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
OPERATING REVENUE
Newspapers................................ $595,581 $565,726 $1,166,337 $1,102,859 $2,313,660 $2,201,781
Business Information Services............. 121,401 121,729 248,306 259,195 490,763 516,821
-------- -------- ---------- ---------- ---------- ----------
$716,982 $687,455 $1,414,643 $1,362,054 $2,804,423 $2,718,602
======== ======== ========== ========== ========== ==========
OPERATING INCOME
Newspapers................................ $ 89,497 $ 94,736 $ 150,743 $ 172,465 $ 259,424 $ 353,240
Business Information Services............. 1,803 3,072 2,776 9,756 5,042 20,297
Corporate................................. (10,850) (13,094) (22,457) (26,500) (48,841) (46,651)
-------- -------- ---------- ---------- ---------- ----------
$ 80,450 $ 84,714 $ 131,062 $ 155,721 $ 215,625 $ 326,886
======== ======== ========== ========== ========== ==========
DEPRECIATION AND AMORTIZATION
Newspapers................................ $ 28,291 $ 23,809 $ 56,567 $ 47,474 $ 105,144 $ 94,713
Business Information Services............. 13,567 12,785 27,231 26,200 53,902 53,137
Corporate................................. 969 554 1,906 1,086 3,510 1,876
-------- -------- ---------- ---------- ---------- ----------
$ 42,827 $ 37,148 $ 85,704 $ 74,760 $ 162,556 $ 149,726
======== ======== ========== ========== ========== ==========
</TABLE>
KNIGHT-RIDDER SHARE TRADING
(AS QUOTED BY KNIGHT-RIDDER FINANCIAL SERVICES)
<TABLE>
<CAPTION>
1996 SECOND QUARTER ** 1995 SECOND QUARTER **
- --------------------------------------------- ----------------------------------------------
VOLUME PER DAY HIGH LOW CLOSE VOLUME PER DAY HIGH LOW CLOSE
<S> <C> <C> <C> <C> <C> <C> <C>
378,178 38 7/16 32 11/16 36 1/4 225,130 28 7/8 26 3/16 28 7/16
</TABLE>
** Restated to reflect two-for-one stock split effective July 31, 1996.
14
