Knight Ridder Reports First Quarter Results

Apr 19, 2001, 01:00 ET from Knight Ridder

    SAN JOSE, Calif., April 19 /PRNewswire/ -- Knight Ridder (NYSE:   KRI)
 earned $.56 per diluted share for the first quarter, down 24.3% from the
 record of $.74 earned in 2000, excluding gains and losses on investments from
 both years.
     Including those items, diluted earnings per share were $.47 in 2001, down
 73.0% from $1.74 per diluted share in the same period last year.
     The 2001 diluted earnings per share reflect an $11.5 million pre-tax loss
 on the final sales of certain Internet investments that the company had held
 since the first quarter of 2000. These were, principally, stock in InfoSpace,
 Inc., and GoTo.com, Inc., both of which were received in connection with the
 first-quarter 2000 sales of the company's investments in Cadabra, Inc., and
 Prio, Inc. These had resulted in a gain of $154 million pre-tax, or $1.00 per
 share in the first quarter last year.
     Total operating revenue for the quarter was down 3.1%. Operating profit
 for the quarter was $116.5 million, down $28.9 million, or 19.9%, from the
 first quarter of 2000.
     Net income for the quarter, excluding gains and losses from Internet
 investments in both years, was $47.8 million, down 30.6% from $68.9 million
 last year. The decrease in net income was proportionately greater than the
 decrease in operating income due to slightly higher interest expense and
 dilution from the CareerBuilder acquisition. EBITDA for the quarter was
 $163.4 million, down 15.1% from $192.4 million in the same period last year.
     Commenting on the results, Tony Ridder, Knight Ridder chairman and CEO,
 said, "It was a disappointing quarter, as anticipated. Economists may debate
 whether we are in a recession as they classically define it, but for those of
 us in the business of publishing newspapers, this is the real thing.
     "Three of our largest markets, Philadelphia, San Jose and Detroit,
 experienced overall advertising revenue decreases in the high single digits.
 Charlotte and Contra Costa were down in the low single digits. Help wanted
 revenue, which was teetering in January, toppled dramatically in February and
 March. For the quarter, it was down 18% overall, and in largest markets, it
 was down in the high teens to the mid twenties. Total online revenue was up
 just 4.8%, reflecting softness in print help wanted, a corresponding dearth of
 'upsells' onto our Web sites and a drop in banner ads.
     "On top of that we lost a total of $.08 per share, equally spread between
 two equity investments. The first was Seattle Times Company, where a poor
 performance was exacerbated by last year's strike. The second was
 CareerBuilder, an Internet recruitment service acquired last September. As
 anticipated, CareerBuilder continues to be dilutive.
     "On the good news side of the ledger, retail revenue climbed 3.1% for the
 quarter, including increases in Miami, San Jose, Kansas City, Fort Worth and
 Charlotte. Real estate advertising, which had been anemic throughout 2000,
 surged back with an increase of 22.4%.
     "Total operating costs were up 0.9%, with the per ton cost of newsprint up
 19.8% in the quarter. Non-newsprint costs were down 1.1%.  San Jose's cost
 control was especially disappointing in the quarter; however, new leadership
 is quickly remedying the problem.
     "Looking ahead, we do not see revenue improvement in April, nor is there
 any significant near-term growth visibility. Although there are easier
 comparisons in the second half, we remain cautious, now believing that ad
 revenue for the year will be down low-to-mid single digits, and earnings per
 share -- as best we can foresee at this point -- will be down also -- with a
 percentage decline in the mid-single digits.
 
     Comment on Operations
     Jean Mordo, Knight Ridder's chief financial officer, said, "Advertising
 revenue for the quarter was down 2.5%, with January about flat, February down
 2.7% and March down 6.0%. Both general and classified ended the quarter in
 negative territory, and within classified, both help wanted and auto were also
 soft.
     "Classified was down 7.6% overall. The six largest markets (excluding
 Detroit) were all down, the worst of them being Philadelphia, San Jose and
 Charlotte, down 15.2%, 12.2% and 9.0%, respectively. Echoing the high-teens
 fall-off in help wanted was a 4.9% drop in auto advertising, with Philadelphia
 showing the worst decline. Contrarily, all of our large markets showed
 positive increases in real estate:  San Jose led the pack, with a 72% rise
 over the same period last year.
     "General advertising, which has shown solid increases in each of the past
 three years, declined 2.1% from its year-earlier performance. Individual
 markets varied in their results. While San Jose, Philadelphia and Contra Costa
 were down in a range of 7% to more than 37%, Kansas City, Fort Worth and
 Charlotte were up between 11% and 24%. Although many of the traditional
 general categories were soft, telecom was up 18.6% and computers were up
 7.3%. Even dot-com image advertising did not die out entirely; it ran at a
 level of about 20% of what it was in the same quarter last year.
     "Retail was the bright note, up 3.1% for the quarter. And unlike the other
 categories, it improved month to month, up 1.6% in January, up 2.8% in
 February and up 5.0% in March. While weak in Philadelphia, retail was robust
 in Miami and Kansas City, up 6.4% and 5.9%, respectively. Newspapers
 performing well in this category reported a variety of reasons for their
 numbers, including strong preprints, increased schedules from food and
 department stores, and the increased use of color.
     "The drop in 'other revenue' reflects (1) the decline in Detroit's
 profitability, now included as a net amount in other revenue, and (2) the
 absence in 2001 of Professional Exchange, Media Stream and Cable Connection,
 all of which were sold in 2000.
     "Total average daily circulation was down 2.0%; Sunday circulation was
 down 2.8%.
     "Costs were up just under 1%, despite a 19.8% rise in the per-ton price of
 newsprint. Labor was up 0.5% and other operating costs were down
 4.2%. Newsprint consumption was down 5.8%. Losses from equity investments
 increased by about $3.6 million.
     "During the quarter, we repurchased about 1.5 million shares, leaving
 84.4 million shares outstanding at quarter's end. We intend to continue share
 repurchases at approximately the 3 million shares-per-year level.
     "Total debt at the quarter's end was $1.68 billion. Cash and equivalents
 were $39.9 million. The effective tax rate was 40.3%.
     "As we look to the second quarter, we now believe the revenue decline will
 be somewhat worse than in the first, and that earnings per share will be down
 about the same as we were in the first quarter.  We believe cost control will
 be proportionately better in the second quarter."
 
     Certain statements contained in this report are forward-looking. They are
 based on management's current knowledge of factors affecting Knight Ridder's
 business, and the company assumes no obligation to update any forward-looking
 information. Actual results could differ materially from those currently
 anticipated, depending upon -- but not limited to -- the effects of interest
 rates, of national and local economies on revenue, of the evolution of the
 Internet, of unforeseen changes in the price of newsprint and of negotiations
 and relations with labor unions.
 
     The Knight Ridder Q1 conference call with its financial analysts at
 11:00 a.m. (PDT) on April 19, 2001 will be broadcast live via Webcast and will
 be accessible through the Investing section of Knight Ridder's Web site,
 www.kri.com, America Online, Motley Fool and a variety of other services,
 including CCBN's Individual Investor Center and CCBN's StreetEvents for
 institutional investors. Knight Ridder will continue to make the Webcast
 version of the conference call available at www.kri.com for seven days after
 the call.
     A limited number of dial-in lines for the Knight Ridder Q1 conference call
 will be available on a listen-only basis. To access the conference call, dial
 800-230-1093 at least 10 minutes prior to the scheduled start of the call.
 Telephonic replays of the conference call will be available for seven days
 after the call.  Call 800-475-6701. (International callers, dial
 320-365-3844.)  The access code for the telephonic replay is 576545.
     Knight Ridder is the nation's second-largest newspaper publisher, with
 products in print and online. The company publishes 32 daily newspapers in
 28 U.S. markets, with a readership of 8.5 million daily and 12.6 million
 Sunday. Knight Ridder also has investments in a variety of Internet and
 technology companies and two newsprint companies. The company's Internet
 operation, KnightRidder.com, creates and maintains a variety of online
 services, including RealCities.com, a national network of city and regional
 destination sites in 40 U.S. markets. Knight Ridder and KnightRidder.com are
 located in San Jose, Calif.
 
 
     KNIGHT RIDDER
     CONSOLIDATED STATEMENT OF INCOME
     (Unaudited in thousands of dollars, except per share data)
 
 
                                                         Quarter  Ended
                                                   April 1,         March 26,
                                                     2001              2000
     OPERATING  REVENUE
         Advertising
             Retail                                $246,353          $238,857
             General                                 79,784            81,509
             Classified                             247,019           267,318
               Total                                573,156           587,684
         Circulation                                129,141           131,190
         Other                                       33,101            39,693
               Total Operating  Revenue             735,398           758,567
 
     OPERATING COSTS
         Labor and employee benefits                292,592           291,119
         Newsprint, ink and supplements             116,196           104,917
         Other operating costs                      162,945           170,171
         Depreciation and amortization               47,156            46,938
               Total Operating Costs                618,889           613,145
 
     OPERATING INCOME                               116,509           145,422
 
     OTHER INCOME (EXPENSE)
         Interest expense                           (28,220)          (26,049)
         Interest expense capitalized                   481               561
         Interest income                                285               329
         Losses of unconsolidated companies
          and joint ventures                         (4,777)           (1,127)
         Minority interests                          (2,938)           (2,605)
         Other, net                                 (13,067)          152,372
               Total                                (48,236)          123,481
 
     Income before income taxes                      68,273           268,903
     Income taxes                                    27,536           108,048
               Net Income                           $40,737          $160,855
 
     NET INCOME PER SHARE
 
         Basic                                        $0.52             $2.03
         Diluted                                      $0.47             $1.74
 
     DIVIDENDS DECLARED PER COMMON SHARE              $0.25             $0.23
 
     AVERAGE SHARES OUTSTANDING (000s)
         Basic                                       73,382            77,779
 
         Diluted                                     86,064            92,668
 
 
                                        Knight Ridder
                                 Business Segment Information
                                  (in thousands of dollars)
 
                                                         Quarter Ended
                                                    April 1,         March 26,
                                                     2001               2000
 
 
               Operating revenue
                   Newspapers                      $725,033           $748,675
                   Online                            10,365              9,892
 
                                                   $735,398           $758,567
 
               Operating income (loss)
                   Newspapers                      $134,350           $163,029
                   Online                           (11,097)            (8,204)
                   Corporate                         (6,744)            (9,403)
 
                                                   $116,509           $145,422
 
               Depreciation and
                amortization
                   Newspapers                       $44,912            $44,799
                   Online                               747                578
                   Corporate                          1,497              1,561
 
                                                    $47,156            $46,938
 
     Prior year amounts have been reclassified to conform to the current year's
 presentation
 
 

SOURCE Knight Ridder
    SAN JOSE, Calif., April 19 /PRNewswire/ -- Knight Ridder (NYSE:   KRI)
 earned $.56 per diluted share for the first quarter, down 24.3% from the
 record of $.74 earned in 2000, excluding gains and losses on investments from
 both years.
     Including those items, diluted earnings per share were $.47 in 2001, down
 73.0% from $1.74 per diluted share in the same period last year.
     The 2001 diluted earnings per share reflect an $11.5 million pre-tax loss
 on the final sales of certain Internet investments that the company had held
 since the first quarter of 2000. These were, principally, stock in InfoSpace,
 Inc., and GoTo.com, Inc., both of which were received in connection with the
 first-quarter 2000 sales of the company's investments in Cadabra, Inc., and
 Prio, Inc. These had resulted in a gain of $154 million pre-tax, or $1.00 per
 share in the first quarter last year.
     Total operating revenue for the quarter was down 3.1%. Operating profit
 for the quarter was $116.5 million, down $28.9 million, or 19.9%, from the
 first quarter of 2000.
     Net income for the quarter, excluding gains and losses from Internet
 investments in both years, was $47.8 million, down 30.6% from $68.9 million
 last year. The decrease in net income was proportionately greater than the
 decrease in operating income due to slightly higher interest expense and
 dilution from the CareerBuilder acquisition. EBITDA for the quarter was
 $163.4 million, down 15.1% from $192.4 million in the same period last year.
     Commenting on the results, Tony Ridder, Knight Ridder chairman and CEO,
 said, "It was a disappointing quarter, as anticipated. Economists may debate
 whether we are in a recession as they classically define it, but for those of
 us in the business of publishing newspapers, this is the real thing.
     "Three of our largest markets, Philadelphia, San Jose and Detroit,
 experienced overall advertising revenue decreases in the high single digits.
 Charlotte and Contra Costa were down in the low single digits. Help wanted
 revenue, which was teetering in January, toppled dramatically in February and
 March. For the quarter, it was down 18% overall, and in largest markets, it
 was down in the high teens to the mid twenties. Total online revenue was up
 just 4.8%, reflecting softness in print help wanted, a corresponding dearth of
 'upsells' onto our Web sites and a drop in banner ads.
     "On top of that we lost a total of $.08 per share, equally spread between
 two equity investments. The first was Seattle Times Company, where a poor
 performance was exacerbated by last year's strike. The second was
 CareerBuilder, an Internet recruitment service acquired last September. As
 anticipated, CareerBuilder continues to be dilutive.
     "On the good news side of the ledger, retail revenue climbed 3.1% for the
 quarter, including increases in Miami, San Jose, Kansas City, Fort Worth and
 Charlotte. Real estate advertising, which had been anemic throughout 2000,
 surged back with an increase of 22.4%.
     "Total operating costs were up 0.9%, with the per ton cost of newsprint up
 19.8% in the quarter. Non-newsprint costs were down 1.1%.  San Jose's cost
 control was especially disappointing in the quarter; however, new leadership
 is quickly remedying the problem.
     "Looking ahead, we do not see revenue improvement in April, nor is there
 any significant near-term growth visibility. Although there are easier
 comparisons in the second half, we remain cautious, now believing that ad
 revenue for the year will be down low-to-mid single digits, and earnings per
 share -- as best we can foresee at this point -- will be down also -- with a
 percentage decline in the mid-single digits.
 
     Comment on Operations
     Jean Mordo, Knight Ridder's chief financial officer, said, "Advertising
 revenue for the quarter was down 2.5%, with January about flat, February down
 2.7% and March down 6.0%. Both general and classified ended the quarter in
 negative territory, and within classified, both help wanted and auto were also
 soft.
     "Classified was down 7.6% overall. The six largest markets (excluding
 Detroit) were all down, the worst of them being Philadelphia, San Jose and
 Charlotte, down 15.2%, 12.2% and 9.0%, respectively. Echoing the high-teens
 fall-off in help wanted was a 4.9% drop in auto advertising, with Philadelphia
 showing the worst decline. Contrarily, all of our large markets showed
 positive increases in real estate:  San Jose led the pack, with a 72% rise
 over the same period last year.
     "General advertising, which has shown solid increases in each of the past
 three years, declined 2.1% from its year-earlier performance. Individual
 markets varied in their results. While San Jose, Philadelphia and Contra Costa
 were down in a range of 7% to more than 37%, Kansas City, Fort Worth and
 Charlotte were up between 11% and 24%. Although many of the traditional
 general categories were soft, telecom was up 18.6% and computers were up
 7.3%. Even dot-com image advertising did not die out entirely; it ran at a
 level of about 20% of what it was in the same quarter last year.
     "Retail was the bright note, up 3.1% for the quarter. And unlike the other
 categories, it improved month to month, up 1.6% in January, up 2.8% in
 February and up 5.0% in March. While weak in Philadelphia, retail was robust
 in Miami and Kansas City, up 6.4% and 5.9%, respectively. Newspapers
 performing well in this category reported a variety of reasons for their
 numbers, including strong preprints, increased schedules from food and
 department stores, and the increased use of color.
     "The drop in 'other revenue' reflects (1) the decline in Detroit's
 profitability, now included as a net amount in other revenue, and (2) the
 absence in 2001 of Professional Exchange, Media Stream and Cable Connection,
 all of which were sold in 2000.
     "Total average daily circulation was down 2.0%; Sunday circulation was
 down 2.8%.
     "Costs were up just under 1%, despite a 19.8% rise in the per-ton price of
 newsprint. Labor was up 0.5% and other operating costs were down
 4.2%. Newsprint consumption was down 5.8%. Losses from equity investments
 increased by about $3.6 million.
     "During the quarter, we repurchased about 1.5 million shares, leaving
 84.4 million shares outstanding at quarter's end. We intend to continue share
 repurchases at approximately the 3 million shares-per-year level.
     "Total debt at the quarter's end was $1.68 billion. Cash and equivalents
 were $39.9 million. The effective tax rate was 40.3%.
     "As we look to the second quarter, we now believe the revenue decline will
 be somewhat worse than in the first, and that earnings per share will be down
 about the same as we were in the first quarter.  We believe cost control will
 be proportionately better in the second quarter."
 
     Certain statements contained in this report are forward-looking. They are
 based on management's current knowledge of factors affecting Knight Ridder's
 business, and the company assumes no obligation to update any forward-looking
 information. Actual results could differ materially from those currently
 anticipated, depending upon -- but not limited to -- the effects of interest
 rates, of national and local economies on revenue, of the evolution of the
 Internet, of unforeseen changes in the price of newsprint and of negotiations
 and relations with labor unions.
 
     The Knight Ridder Q1 conference call with its financial analysts at
 11:00 a.m. (PDT) on April 19, 2001 will be broadcast live via Webcast and will
 be accessible through the Investing section of Knight Ridder's Web site,
 www.kri.com, America Online, Motley Fool and a variety of other services,
 including CCBN's Individual Investor Center and CCBN's StreetEvents for
 institutional investors. Knight Ridder will continue to make the Webcast
 version of the conference call available at www.kri.com for seven days after
 the call.
     A limited number of dial-in lines for the Knight Ridder Q1 conference call
 will be available on a listen-only basis. To access the conference call, dial
 800-230-1093 at least 10 minutes prior to the scheduled start of the call.
 Telephonic replays of the conference call will be available for seven days
 after the call.  Call 800-475-6701. (International callers, dial
 320-365-3844.)  The access code for the telephonic replay is 576545.
     Knight Ridder is the nation's second-largest newspaper publisher, with
 products in print and online. The company publishes 32 daily newspapers in
 28 U.S. markets, with a readership of 8.5 million daily and 12.6 million
 Sunday. Knight Ridder also has investments in a variety of Internet and
 technology companies and two newsprint companies. The company's Internet
 operation, KnightRidder.com, creates and maintains a variety of online
 services, including RealCities.com, a national network of city and regional
 destination sites in 40 U.S. markets. Knight Ridder and KnightRidder.com are
 located in San Jose, Calif.
 
 
     KNIGHT RIDDER
     CONSOLIDATED STATEMENT OF INCOME
     (Unaudited in thousands of dollars, except per share data)
 
 
                                                         Quarter  Ended
                                                   April 1,         March 26,
                                                     2001              2000
     OPERATING  REVENUE
         Advertising
             Retail                                $246,353          $238,857
             General                                 79,784            81,509
             Classified                             247,019           267,318
               Total                                573,156           587,684
         Circulation                                129,141           131,190
         Other                                       33,101            39,693
               Total Operating  Revenue             735,398           758,567
 
     OPERATING COSTS
         Labor and employee benefits                292,592           291,119
         Newsprint, ink and supplements             116,196           104,917
         Other operating costs                      162,945           170,171
         Depreciation and amortization               47,156            46,938
               Total Operating Costs                618,889           613,145
 
     OPERATING INCOME                               116,509           145,422
 
     OTHER INCOME (EXPENSE)
         Interest expense                           (28,220)          (26,049)
         Interest expense capitalized                   481               561
         Interest income                                285               329
         Losses of unconsolidated companies
          and joint ventures                         (4,777)           (1,127)
         Minority interests                          (2,938)           (2,605)
         Other, net                                 (13,067)          152,372
               Total                                (48,236)          123,481
 
     Income before income taxes                      68,273           268,903
     Income taxes                                    27,536           108,048
               Net Income                           $40,737          $160,855
 
     NET INCOME PER SHARE
 
         Basic                                        $0.52             $2.03
         Diluted                                      $0.47             $1.74
 
     DIVIDENDS DECLARED PER COMMON SHARE              $0.25             $0.23
 
     AVERAGE SHARES OUTSTANDING (000s)
         Basic                                       73,382            77,779
 
         Diluted                                     86,064            92,668
 
 
                                        Knight Ridder
                                 Business Segment Information
                                  (in thousands of dollars)
 
                                                         Quarter Ended
                                                    April 1,         March 26,
                                                     2001               2000
 
 
               Operating revenue
                   Newspapers                      $725,033           $748,675
                   Online                            10,365              9,892
 
                                                   $735,398           $758,567
 
               Operating income (loss)
                   Newspapers                      $134,350           $163,029
                   Online                           (11,097)            (8,204)
                   Corporate                         (6,744)            (9,403)
 
                                                   $116,509           $145,422
 
               Depreciation and
                amortization
                   Newspapers                       $44,912            $44,799
                   Online                               747                578
                   Corporate                          1,497              1,561
 
                                                    $47,156            $46,938
 
     Prior year amounts have been reclassified to conform to the current year's
 presentation
 
 SOURCE  Knight Ridder