Knight Ridder earnings drop 13.8 percent

The Associated Press
SAN JOSE, Calif. -- Knight Ridder Inc., one of the nation's largest newspaper publishers, said Thursday that second-quarter earnings fell 13.8 percent from a year ago, due in part to declines in circulation revenue as well as increased severance costs.

Net income declined to $74.4 million, or $1 per share, for the three months ended June 26 from $86.3 million, or $1.08 per share, a year ago. The latest quarter includes a 3-cent gain from the favorable resolution of prior-years' tax issues, including interest, offset by a 1-cent charge for severance in Detroit.

The year-ago quarter included gains of 10 cents per share on tax issues and favorable adjustments in Detroit, primarily post-retirement benefits. Excluding one-time items, Knight Ridder said earnings would have fallen 6.9 percent year-over-year.

Total revenue edged up to $761.5 million from $760.2 million last year. Advertising revenue rose to $604.2 million from $591.7 million in the same quarter of 2004. Circulation revenue, however, fell to $132.3 million from $136.4 million last year.

Analysts surveyed by Thomson Financial were looking for earnings of 99 cents per share on sales of $769.4 million.

Knight Ridder's shares fell 25 cents to $62.16 in afternoon trading on the New York Stock Exchange, and remain near the bottom of their 52-week range of $60.09 to $71.07.

Knight Ridder Chairman and CEO Tony Ridder said, "In a pattern that has been consistent since March, the bright spots continue to be retail, help wanted and real estate. The soft spots continue to be classified automotive and national, although national did turn positive --by one-tenth of one percent-- in June. While the June ad revenue increase of 0.9 percent was a bit lower than April and May, it is encouraging to see that July is currently running close to 3 percent, with national considerably improved."

For the quarter, Knight Ridder said costs rose 2.1 percent, with labor and employee benefits up a modest 0.4 percent and newsprint, ink and supplements up 6.2 percent. Interest expense also increased, reflecting both higher rates and higher outstanding debt. Losses from equity investments decreased, due to better results from CareerBuilder and Seattle.

And The Motley Fool reports:

There are also signs that Knight Ridder's attempt to boost its standing in digital media is working. The popular CareerBuilder job site brought in $121.3 million during Q2, a 78% increase over last year. And the Knight Ridder Digital group grew overall online ad sales by more than 52% during the quarter.

Yet even with that good news, we can't know for sure whether Knight Ridder is a budding bargain. That's because the company published neither a balance sheet nor a cash flow statement. Talk about irony: A company built around reporting on others can't seem to get it right when it comes to reporting on itself. Sheesh.

Knight Ridder isn't unique in the industry for this practice, of course. Tribune (NYSE: TRB) and Gannett (NYSE: GCI) both did the same thing over the past 24 hours. Still, it stinks. And what's the point, anyway? Shouldn't Knight Ridder want investors to have all the data they need to jump on board if the stock is indeed undervalued? You'd think so.