Knight Ridder profit declines sharply

CHICAGO (MarketWatch) - Newspaper publisher Knight Ridder on Monday reported a sharp drop in first-quarter earnings from those of a year ago on higher interest expense, fees related to its exploration of strategic options, the expensing of stock-based compensation and the absence of certain publications that were sold during 2005.

San Jose, Calif.-based Knight Ridder (KRIKnight-Ridder, Inc. KRI agreed in March to be sold to McClatchy Co. (MNI McClatchy Newspapers, Inc. for $6.5 billion.

"The quarter was challenging," said Tony Ridder, Knight Ridder's chairman, in a statement. "With total ad revenue up only 1%, and with the persistence of the soft revenue patterns across the industry for many months now (employment and real estate excepted), we continue to look to the second half for improvement." Knight Ridder said it earned $28.4 million, or 42 cents a share, compared with a year-ago profit of $60.5 million, or 79 cents a share.

The figure in the latest three months includes 6 cents a share in expenses related to the company's exploration of strategic alternatives, which culminated in the sale to McClatchy, as well as 5 cents a share in expenses related to stock-based compensation.

Excluding these items, the company would have earned 53 cents a share in the latest quarter.

Knight Ridder also saw interest expense soar about 74% to $32.8 million, due to increased borrowing and ongoing hikes in interest rates.

The year-earlier quarter includes 4 cents a share in earnings from the Detroit Free Press and the Tallahassee (Fla.) Democrat, both of which have since been sold, as well as 10 cents a share on a tax benefit.

Revenue rose to $739.9 million from $711.8 million. Analysts polled by Thomson First Call were expecting a profit of 59 cents a share on revenue of $732.8 million.

On a pro forma basis, excluding the Detroit and Tallahassee papers and assuming Knight Ridder had otherwise owned the same assets in both quarters, operating revenue was up just 0.5%, with total advertising revenue up 1%.

Circulation was down 1.2%, also on a pro forma basis. Advertising patterns for Knight Ridder were in line with the newspaper industry's lackluster performance over the past several quarters, and echoed much of what newspaper companies said last week when they reported first-quarter results.

National ad revenue fell 9% from the first quarter of 2005, with much of the damage coming from Knight Ridder's largest markets. Telecommunications, which accounts for about 28% of the national category, dipped 6.1%. National auto ad sales plunged 36% on a decline in spending by automaker General Motors (GMGeneral Motors Corporation Entertainment was down 17%, while airlines plummeted 30%.

Retail was down 0.8%, as gains in home furnishings, grocery and office supply ads were offset by declines in department store, home electronics and general merchandise sales.

Classified was up 7.3%, as help-wanted revenue climbed 15% and real estate revenue was better by 22%.

Sounds like UPI entered oblivion or hell at least for liberals in May of 2000.

http://www.rickross.com/reference/unif/unif74.html

Washington Times Owner Buys UPI
Washington Post, May 16, 2000
By Yuki Noguchi

Nearly bankrupt and with only a skeletal staff, once-venerated United Press International found a financial savior yesterday in News World Communications Inc., owner of the Washington Times, which purchased the wire service's assets for an undisclosed amount.

UPI was a formidable competitor to the Associated Press until the 1980s, when it had 1,500 reporters and 200 bureaus around the globe. Since 1992, it has been owned by six Saudi Arabian families and now has 157 employees in Washington, London, Latin America and Asia--and few clients.

The wire service's new owner is controlled by the Rev. Sun Myung Moon, founder of the Unification Church and the conservative voice behind the Times's editorials.

"UPI is saved from bankruptcy and can look to the future optimistically," said Arnaud de Borchgrave, former editor in chief of the Times, who became UPI's president and chief executive in December 1998. De Borchgrave will retain the same titles and "total editorial independence" as part of the merged organization, he said.

United Press International Inc. entertained offers from about 10 suitors--including former CNN anchor Lou Dobbs, Canadian newspaper mogul Conrad Black and even Internet service provider PSINet Inc.--about potential buyouts since the beginning of the year, said de Borchgrave. He said his previous relationship with the Times had no bearing on the deal.

De Borchgrave, who was editor in chief at the Washington Times from 1985 to 1991, got his first job at UPI in 1946. "I have come full circle at the Times and at UPI," he said.

UPI, which still boasts its most famous staff writer, Helen Thomas, the grande dame of White House reporting, has faced three decades of steady decline in staff size and prestige. The United Press was founded in 1907 and became UPI in 1958 when it merged with William Randolph Hearst's International News Service. It competed against its nonprofit counterpart, the AP, which it famously beat on Nov. 22, 1963, when it reported the assassination of President John F. Kennedy. But within four years of its inception, UPI started bleeding money, and it hasn't been able to stanch the flow, losing market share to television, AP and a shrinking base of newspapers.

In 1982, Tennessee entrepreneurs Douglas Ruhe and William Geissler took over the news service from the owners of the Scripps Howard newspaper chain. Under their ownership, UPI continued to lose money, eventually filing for Chapter 11 bankruptcy protection.

"Clearly, UPI has been in a downward spiral for 30 years," said John Morton, president of Morton Research Inc., a Silver Spring-based media consulting firm. UPI, like the Times, has been in the red for a long time, "but the Unification Church doesn't do these things to make money," he said.

Gary Arlen, president of Arlen Communications Inc. in Bethesda, called the purchase "a perplexing deal" that "sustains the agony of keeping UPI" alive. What the Times gets out of the deal is unclear, he said.

Newspaper consolidation and cutbacks in newsroom budgets have steadily "reduced the demand for what UPI offers," Arlen said. Even before the Internet exploded as a medium to distribute news, UPI was looking for an online presence, "but again they lost to the AP," he said.

UPI failed to differentiate itself over time the way Reuters was able to succeed by specializing in financial news, Arlen said. "Unless UPI gets very specialized or finds a specific niche to serve, it becomes a very peripheral wire service," he said.

De Borchgrave said UPI relies entirely on its Web-based presence, something the Times may try to utilize for its own Internet strategy. UPI's current reach is difficult to determine because the service is resold through various vendors such as the Kyodo News Service in Japan, which in turn resells it to other organizations, he said.

Larry Moffitt, assistant to Dong Moon Joo, president of News World Communications, said "the Washington Times has a lot of assets that dovetail very well with a global network." UPI, the Times and News World's other publications will be able to carry content over a combined Internet presence, he said.

The Times, a 100,000-circulation daily newspaper that competes with The Washington Post, is one of a host of business holdings owned by the Unification Church, which is famous for marrying its followers in mass wedding ceremonies. In 1997, owners of the Times told The Washington Post they had lost $1 billion over 15 years.

In addition to the Times, which has been a money-losing venture since its inception in 1982, church officials own Insight magazine, the Middle East Times and Zambezi Times, as well as hotels, small publishing operations and a collection of spiritual and educational workshops.

In the Washington area, Moon's organization own an estimated $300 million in commercial and political property, including a church on 16th Street in Northwest Washington.

Staff writer Howard Kurtz contributed to this report.

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