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Knight Ridder earnings sink in 1st quarter

Updated:
NEW YORK (AP) _ Knight Ridder Inc., the newspaper publisher being sold to McClatchy Co., posted sharply lower first-quarter earnings Monday on weaker advertising, particularly at three of the 12 newspapers McClatchy is not keeping, and other factors including higher interest costs.

Knight Ridder earned $28.4 million, or 42 cents per share, down from $60.5 million, or 79 cents per share, a year ago, although those figures were affected by several one-time factors, including costs associated with finding a buyer for the company in the most recent quarter and profits in the year-ago period from newspapers that have since been sold.

The earnings also were lowered by higher interest expenses and new accounting rules requiring companies to record costs for stock-based compensation. Knight Ridder said the 42 cents-per-share figure included costs of 5 cents per share in stock-based compensation, and 6 cents per share in costs associated with finding a buyer.

Analysts polled by Thomson Financial had been expecting earnings of 59 cents per share, including the costs for stock compensation.

In the year-ago period, the results included 4 cents per share in profits from papers in Detroit and Tallahassee, Fla., that the company doesn't own anymore.

Revenue rose 3.9 percent to $739.9 million, although those results included three newspapers in Washington and Idaho that the company didn't own in the same period a year ago.

Assuming Knight Ridder owned the same set of newspapers in both periods, total revenues rose 0.5 percent, while advertising revenues rose 1 percent.

On the same basis, operating profit fell 20.4 percent, or 10.5 percent excluding the costs of finding a buyer and stock-based compensation.

In a statement, Knight Ridder Chairman Tony Ridder called the first quarter ``challenging,'' and said the downturn in operating profits was largely due to ``particularly weak'' results at the Akron Beacon Journal and at The Philadelphia Inquirer and the Philadelphia Daily News.

Ad revenues fell 10.8 percent in Akron and 5.5 percent at the Philadelphia papers, Ridder said, accounting for more than half of the decline in adjusted operating profit. Those three papers are among the 12 that McClatchy intends to sell as part of its acquisition of Knight Ridder. McClatchy plans to keep the other 20 papers.

At the papers McClatchy is keeping, which include The Miami Herald, The Charlotte Observer and The Kansas City Star, advertising revenues rose 2.3 percent, while at the 12 it is selling ad sales fell 0.4 percent.

Ridder also said earnings per share took the biggest hit from a 73.6 percent rise in interest expense, to $32.8 million from $18.9 million a year ago, as the company increased borrowing and also faced higher interest rates.

Knight Ridder was forced into selling itself following a revolt from its three largest shareholders, who were dissatisfied with the company's stock performance. Last year the company raised its dividend and said it would buy back additional shares of its own stock.

The total impact on the company's costs from higher interest expenses, costs associated with selling the company, and stock compensation expense, came to about 25 cents per share in the most recent period, costs which the company didn't have in the same period a year ago, Ridder said.

The company does not intend to have a conference call to discuss the earnings.
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