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PHILADELPHIA - Under scrutiny as it negotiates with would-be buyers, Knight Ridder Inc. on Tuesday reported flat revenue and lower earnings for the fourth quarter.
Strong help wanted, real estate and discount chain store ads weren't quite enough to overcome declines in department store and car ads. Senior vice president Hilary Schneider and other executives told analysts in a conference call that they expect ad sales to rise this year, and that the drop in car ads was temporary.
Expenses were also nearly flat, as health care expenses were lower than the San Jose, Calif.-based newspaper chain had projected. The company, the country's second-largest newspaper chain and parent of The Philadelphia Inquirer, made up for higher newsprint costs by using less newsprint.
Shares fell $1.16, or 1.8 percent, to $62.29 Tuesday on the New York Stock Exchange, a slightly better performance for the day than Gannett Co. Inc., the largest U.S. newspaper chain, which reported earnings Friday. Shares in Gannett fell $1.53, or 2.4 percent, to $61.77 Tuesday on the New York Stock Exchange.
Knight Ridder shares are likely to respond to investors' views of the company's potential sale rather than its recent profits, said Steven Barlow, a Prudential Equity Group analyst. He expects that a consortium of investment firms and newspaper operators will announce a deal to buy Knight Ridder for around $68 a share, perhaps as soon as next month.
Asked about reports that Knight Ridder is urging potential purchasers to consider job cuts and other expense reductions, Knight Ridder chairman P. Anthony Ridder told analysts that talks with unidentified buyers had focused on advertising and profit projections. "Those are the numbers you should look to," Ridder said. "You should not get carried away with rumors that appear in non-Knight Ridder newspapers."
For the quarter ended Dec. 25, Knight Ridder earned $83.3 million, or $1.24 per share, down from $107.2 million, or $1.38 per share, a year earlier.
The company said income from continuing operations fell to $83.3 million, or $1.24 a share, from $97 million, or $1.26 a share, a year earlier. The per-share results benefited from the repurchase or retirement of more than 10 million shares in the last fiscal year.
Operating revenue in the quarter rose to $819.9 million from $795.5 million a year earlier, thanks largely to the acquisition of three newspapers in the Pacific Northwest.
In Philadelphia, Knight Ridder faces a drop in retail ad sales due to the consolidation of the May and Federated department store chains, senior vice president Arthur Brisbane said. Advertising by the Acme grocery chain, whose parent is in the process of being sold, has also been down. But online ads were up sharply, the company said.
Brisbane said the company has "substantially enhanced our ad department" in Philadelphia and expects "some growth in our small and midsize accounts" for a better-performing year in Philadelphia.
Asked by a Lehman Bros. analyst, Craig Huber, whether he thought The Inquirer and Philadelphia Daily News would lose readers after 100 newsroom jobs were bought out last fall, Brisbane said current staffing is "more than adequate."
In a note to investors, Merrill Lynch analyst Lauren Rich Fine called the results "pretty remarkable given all the distractions" related to the company's negotiations with potential buyers. But she remained neutral on the stock, whose private-market value she estimates around $70 a share.
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(c) 2006, The Philadelphia Inquirer. Distributed by Knight Ridder/Tribune News Service.
