Knight Ridder

founded: 1974 variant name: kri

Contact Information:

headquarters: 50 w. san fernando street
san jose, ca 95113 phone: (408)938-7700 fax: (408)938-7766 url: http://www.kri.com/

OVERVIEW

Knight Ridder, the third largest newspaper publisher in the United States, operates a number of the country's most distinguished newspapers, including the Philadelphia Inquirer, the Miami Herald, and the San Jose Mercury News. The company's Newspaper Division oversees the publication of 32 daily newspapers in 28 U.S. markets. The circulation of these daily properties totals 8.7 million readers daily and 12.9 million on Sunday. In addition, Knight Ridder publishes 26 non-daily newspapers as well as special publications and shoppers.

In 2001, 17.3 percent of the company's newspaper operating revenue was accounted for by its Philadelphia properties, the Philadelphia Inquirer and the Philadelphia Daily News; the Miami Herald and its Spanish-language sister publication, el Nuevo Herald, brought in 10.9 percent; and the Kansas City Star accounted for 9 percent of newspaper operating revenue in 2001. Other major newspaper properties and their share of total newspaper operating revenue in 2001 include the San Jose Mercury News, 8.7 percent; Fort Worth Star-Telegram, 7.7 percent; Charlotte Observer, 6 percent; Contra Costa Newspapers, 4.4 percent; St. Paul Pioneer Press, 3.9 percent; and Akron Beacon Journal, 3.1 percent.

Knight Ridder Digital, the company's other major division, is responsible for Knight Ridder's online ventures, the most prominent of which is the Real Cities Network, 58 regional Web sites that offer extensive local coverage. Among the Web sites in the Real Cities Network are 16 in the nation's top 25 markets. Each of the Real Cities sites offers a broad range of services, including classified advertising, local news, weather, sports, entertainment guides, directories of local civic institutions and businesses, and job postings.

COMPANY FINANCES

An advertising recession and the terrorist attack on America combined to sharply depress revenue and income at Knight Ridder—as well as the newspaper industry in general—in 2001. The company posted 2001 net income of $184.8 million on revenue of $2.9 billion, plummeting sharply from income of $314.4 million on revenue of $3.2 billion in 2000. The company's performance in 2000 was down slightly from its results in 1999 when it posted net income of $339.9 million on revenue of just over $3.2 billion. Total advertising revenue for 2001 was down 8.5 percent. Although retail advertising was up modestly, at least until the terrorist acts of September 11, help wanted and general advertising were particularly hard hit. With unemployment rising throughout the year, help wanted advertising revenue fell almost 36 percent. The company reported that the impact of the help wanted advertising slump was particularly hard in some of its larger markets, including Philadelphia and San Jose.

Despite the company's disappointing financial performance in 2001, Knight Ridder stock outperformed all other companies in its publishing peer group, climbing just over 14 percent over the year as a whole. By mid-February 2002, its stock had hit an all-time high of $68.73. The company's online division, Knight Ridder Digital, experienced substantial growth in 2001, adding 19 sites to its Real Cities Network.

ANALYSTS' OPINIONS

Although the prolonged downturn in the advertising market, stretching from 2001 into the early months of 2002, affected all newspaper publishers across the board, there were some security analysts who suggested that Knight Ridder was struggling even more than some of its industry peers. One of the most prominent of that fraternity, Michael Beebe of Goldman, Sachs & Co., downgraded the company's stock in mid-2001, indicating that he expected a tough second-half 2001 and little recovery in 2002. At the same time, Beebe downgraded the stock of two other prominent newspaper publishers, the Gannett Company and the Tribune Company. However, he singled out the New York Times Company, Pulitzer Publishing Company, and Dow Jones as likely "market outperformers." Beebe expressed some doubt about Knight Ridder's projected earnings for 2001, suggesting that the company was perhaps relying too heavily on cost cuts to make up some of the anticipated shortfall in revenue.

Of Knight Ridder CEO Tony Ridder's attempts to keep costs down even if it meant cuts in editorial staffing, most analysts have been generally positive, although some have suggested that even more could be done. Wrote Merrill Lynch analyst Lauren Fine: "There are any number of their papers that are incredibly overstaffed. Yet employees are sitting there complaining that Tony's cutting costs. It's just one of the great ironies-these guys don't realize how great they have it." Echoing her sentiments was Bear Stearns analyst Kevin Gruneich, who said, "I think newspapers are a special business as long as they are not asking Wall Street for capital. If they want Wall Street capital, they have to play by the rules. If they don't, they can try to take themselves private."

HISTORY

Knight Ridder, Inc., was formed in 1974 through the merger of Knight Newpapers, Inc. and Ridder Publications, Inc. Both of the merging newspaper publishing companies had enjoyed long and prestigious histories before the merger. Ridder Publications was born in 1892 when Herman Ridder purchased New York City's German-language Staats-Zeitung, while Knight Newspapers was founded in 1933 when John S. Knight inherited the Akron Beacon Journal from his father, Charles Landon Knight, who had founded the paper in 1903. Both newspaper chains grew quickly, and both Knight and Ridder took their stock public in 1969. Although Knight Ridder was originally incorporated in Ohio in 1974, it was rein-corporated in 1976 in Florida, home of the company's headquarters in Miami.

Knight Ridder stock split two for one in 1978 and a year later, the company became a partner with Cox Newspapers and Media General in the ownership of a newsprint mill in Dublin, Georgia. The merged company continued to expand, acquiring new properties throughout the late 1970s and 1980s. Among its more notable acquisitions during this period were television stations in Providence, Rhode Island, Albany, New York, and Flint, Michigan in 1978; book publisher HPBooks in Tucson, Arizona in 1979; the Fort Wayne News-Sentinel in 1980; American Quotation Systems in 1981; Tradecenter, Inc., in 1984; and Dialog Information Services, Inc. in 1988. In the late 1980s, the company sold all eight of the television stations under its control as well as the Pasadena Star-News. During this same period, Knight Ridder launched Viewtron, America's first full-scale consumer videotext system, but abandoned the project three years later.

During the latter half of the 1990s, Knight Ridder moved aggressively to capitalize on the opportunities presented by the Internet while continuing to selectively expand its newspaper chain into new markets. By 1996, most Knight Ridder daily newspapers had launched their own Web sites. The following year, the company acquired four of the Walt Disney Company's newspaper properties: the Kansas City Star, Fort Worth Star-Telegram; Belleville (IL) News-Democrat, and Wilkes-Barre (PA) Times Leader. That same year, Knight Ridder swapped Boulder (CO) Camera for two of E. W. Scripps Company's California newspapers, the San Luis Obispo Telegram-Tribune and Monterey County Herald. KnightRidder.com, launched in 2000 as a separate division responsible for the company's online ventures, was renamed Knight Ridder Digital in 2001.

STRATEGY

Knight Ridder's corporate strategy focuses on "the two Vs: Vision and Value." Recognizing consumer demand for ever-increasing value, particularly now that technology has made possible a constant flow of new services and products, Knight Ridder seeks to be "preeminent" in advertising, information technology, and news delivery in all its markets. According to its strategy statement, "We will do this by developing our own high-value products and service to complement our traditional businesses. In our markets, we will grow reader and advertising share every year; we will reach a majority of adults every day; and we will have the dominant share of local online consumer and advertiser business. We will grow revenue, profit, and economic value added."

Knight Ridder has not lost sight of its historic mission, informing the communities in which it operates. The company looks upon this mission as "a privilege, responsibility, and source of competitive strength." It considers its commitment to its own employees and its customers fundamental to the company's success and has pledged to strive to reflect the diversity of the markets it serves in both content of its products and the makeup of its work force.

FAST FACTS: About Knight Ridder

Ownership: Knight Ridder is a publicly owned company traded on the New York and Frankfurt Stock Exchanges.

Ticker Symbol: KRI

Officers: P. Anthony (Tony) Ridder, Chmn. and CEO, 61, 2001 base salary $935,720; Stephen B. Rossi, Pres. Newspaper Division, 52, 2001 base salary $613,250; Mary Jean Connors, SVP Human Resources, 49, 2001 base salary $518,533

Employees: 19,000

Principal Subsidiary Companies: Knight Ridder's major subsidiaries include Career Builders, Inc. and Classified Ventures, Inc. Career Builders, Inc., jointly owned with the Tribune Company, operates an online network of more than 60 career-oriented Web sites that operate as forums where employers and potential employees can make contact with each other. Classified Ventures, Inc., a joint venture operated with six other publishers, seeks to capitalize on the revenue growth in the online classified advertising categories of automotive, apartments and rentals, and real estate. Knight Ridder, partnered with the Gannett Company and Landmark Communications, Inc., also owns one third of InfiNet Company, a Web hosting and application service provider for online publishers.

Chief Competitors: As the nation's third largest newspaper publisher, Knight Ridder's major competitors are the Gannett Company, Inc., publisher of USA Today and more than 90 other newspapers with a combined circulation of close to 8 million, and the Tribune Company, which publishes the Chicago Tribune and Los Angeles Times. Another significant Knight Ridder competitor in the newspaper industry is Cox Enterprises, which publishes 18 daily newspapers, including the Atlanta Journal-Constitution.

INFLUENCES

One of the biggest challenges facing Knight Ridder in recent years has been the prolonged slump in advertising sales that began in the latter part of 2000 and continued into the early months of 2002. There were few bright spots in a generally gloomy advertising outlook, although prior to the September 11, 2001 attack on America, retail advertising had shown some modest gains. Those were wiped away after the terrorist attack as Americans across the country sharply cut back their shopping, forcing many retailers to cancel scheduled advertising.

For Knight Ridder newspapers as a group, general advertising—including telecommunications, national automotive, dot-coms, airlines, and finance—was down 10.3 percent in 2001, and the decline was greatest in the larger urban markets. Hardest hit among the advertising sectors was help-wanted advertising, which plummeted 35.9 percent in the company's Newspaper Division. Again, the larger urban markets were hardest hit. With the national jobless rate rising from 4 percent in December 2001 to 5.8 percent in December 2001, it was inevitable that job listings would tumble precipitously, but that knowledge hardly eased the pain.

Knight Ridder's response to the sharp decline in advertising revenue was to aggressively cut back on its costs. CEO Tony Ridder's decision to reduce the company's work force won him few friends but helped to stanch the flow of red ink onto the company's books. A couple of the company's most widely respected publishers quit in protest over the cuts, particularly those in the newsrooms of the chain's newspapers. On the other side of the coin, several Wall Street analysts suggested that the cuts had not been nearly deep enough.

CURRENT TRENDS

The phenomenal growth of the Internet over the last several years has not been lost on Knight Ridder executives who early on positioned the company to take full advantage of this new market. By 1996, almost all of the chain's daily newspapers had Web sites up and running.

Even more ambitious in scope is Knight Ridder Digital, which is responsible for all of the company's Internet operations; and by far the most ambitious of those operations is the Real Cities Network of regional Web sites serving 58 major U.S. markets. The goal of the Real Cities Network, according to Dan Finnigan, president of Knight Ridder Digital, is to take the lead in local news and information service on the Internet. Real Cities sites were visited by 9.6 million unique Web surfers in the month of December 2001 alone. As 2001 ended, the Real Cities Network was second only to the combined online properties of AOL Time Warner.

Knight Ridder's presence on the Internet extends beyond its newspapers' sites and the Real Cities Network to include the operations of CareerBuilder, Inc. and Classified Ventures. CareerBuilder, jointly owned with the Tribune Company, operates a network of more than 60 career Web sites that supplement their own job listings with the local help wanted ads of all Knight Ridder and Tribune newspaper markets, as well as additional ads from other cooperating newspaper publishers. Classified Ventures, Inc., a joint venture operated with six other publishers, concentrates on the online classified advertising categories of automotive, apartments and rentals, and real estate.

PRODUCTS

Knight Ridder's principal product is information, delivered in its daily and non-daily newspaper products as well as on line through its Real Cities Network and other ventures on the World Wide Web. The company is justifiably proud of its reputation for quality journalism, which has won for the newspapers of the chain more than 80 Pulitzer Prizes as well as numerous honors.

CHRONOLOGY: Key Dates for Knight Ridder

1974:

Merger of Knight Newspapers and Ridder Publications creates Knight-Ridder Newspapers, Inc.

1978:

Entrance into television business with purchase of 3 TV stations.

1979:

Acquisition of HPBooks of Tucson, Arizona

1983:

Knight Ridder forms Business Information Services division

1985:

Launches Knight-Ridder Graphics

1987:

Sells HPBooks

1988:

Acquires Dialog Information Services Inc.

1989:

Sells off all television stations

1996:

Web sites launched by most Knight Ridder newspapers

1998:

Corporate name changed to Knight Ridder

2001:

KnightRidder.com renamed Knight Ridder Digital

CORPORATE CITIZENSHIP

All of Knight Ridder's local newspaper properties take an active role in the affairs of the communities in which they operate, as does the company itself. In addition to active participation in charitable causes through in-house fundraising, employee volunteerism, and corporate donations, the Knight Ridder Promise pledges the company "to contribute to the quality of life. . .of the communities that sustain us" and ensure that its employees enjoy "a clean and safe workplace."

GLOBAL PRESENCE

Although Knight Ridder correspondents staff news bureaus in the major capitals of the world, most of Knight Ridder's business is domestic. As its online products evolve and grow, it can be expected that the company's international presence will eventually expand.

BALANCING QUALITY WITH PROFITABILITY

Knight Ridder's somewhat controversial response to 2001's sharp decline in advertising revenue was to pare the company's workforce, including cuts in editorial staffing. Not surprisingly, the move produced howls of protest from journalists, who had somehow adopted the notion that the newsroom was sacrosanct and unlikely to feel the sorts of cutbacks suffered by other departments when times got tough. Unhappily for CEO Tony Ridder, those newsroom howls of protest were not the only criticism of his moves to cut costs. Wall Street analysts and investors complained that the cuts should have been even deeper. Writing in the company's 2001 annual report, Jerry Ceppos, vice president of news, sought to clarify the company's struggle to balance quality with profitability. He observed: "The 'balance' we seek is to generate enough profit to keep the newspapers and Knight Ridder healthy and growing but not so 'healthy' that product is subordinated to profit. We seek margins that are in the first tier of newspaper companies, but not out in front. Balance requires a generous news hole, ample staffing and support for a challenging agenda, but also a recognition that in a year such as the one just concluded, less-than-tight operations could imperil the whole enterprise."

EMPLOYMENT

Knight Ridder's employees totaled 19,000 at the end of 2001, a decline of 13.6 percent from December 31, 2000.

SOURCES OF INFORMATION

Bibliography

knight ridder 2001 annual report. san jose, ca: knight ridder, 2002.

knight ridder home page, 2002. available at http://www.kri.com.

"knight ridder inc." hoover's online. available at http://www.hoovers.com.

mullins, robert and sharon simonson. "knight fighting talk of a major slump." silicon valley/san jose business journal, 29 june 2001.

"newspapers stung in fourth quarter by sagging ad market." reuters business report, 24 january 2002.

pasick, adam. "knight-ridder says ad slump to hurt earnings." reuters business report, 16 november 2001.

——. "knight ridder, washington post feel ad market pain." reuters business report, 25 january 2002.

For an annual report:

on the internet at: http://www.kri.comor write: knight ridder, corporate relations, suite 1500, 50 w. san fernando st., san jose, ca 95113

For additional industry research:

investigate companies by their standard industrial classification codes, also known as sics. knight ridder's primary sics are:

2711 newspapers

7375 information retrieval services

7383 news syndicates

also investigate companies by their north american industrial classification system codes, also known as naics codes. knight ridder's primary naics codes are:

511110 newspaper publishers

514110 news syndicates

514191 online information services