-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FSIsldXQYzR8cYvzNEXcpzjP9BXbPMTsVfgEtGyyyxCUPliR+pGcywpbN/ExMoeE IP6UUa6h0nmFvUEiaMYb4g== 0000039899-98-000015.txt : 19980813 0000039899-98-000015.hdr.sgml : 19980813 ACCESSION NUMBER: 0000039899-98-000015 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19980628 FILED AS OF DATE: 19980812 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: GANNETT CO INC /DE/ CENTRAL INDEX KEY: 0000039899 STANDARD INDUSTRIAL CLASSIFICATION: NEWSPAPERS: PUBLISHING OR PUBLISHING & PRINTING [2711] IRS NUMBER: 160442930 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-06961 FILM NUMBER: 98683113 BUSINESS ADDRESS: STREET 1: 1100 WILSON BLVD CITY: ARLINGTON STATE: VA ZIP: 22234 BUSINESS PHONE: 7032846000 MAIL ADDRESS: STREET 1: 1100 WILSON BLVD 28TH FLOOR CITY: ARLINGTON STATE: VA ZIP: 22234 10-Q 1 10-Q REPORT SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) X Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended June 28, 1998 or _ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from _______ to _________ Commission file number 1-6961 GANNETT CO., INC. (Exact name of registrant as specified in its charter) Delaware 16-0442930 (state or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1100 Wilson Boulevard, Arlington, Virginia 22234 (Address of principal executive offices) (Zip Code) (703) 284-6000 (Registrant's telephone number, including area code) (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No __ The number of shares outstanding of the issuer's Common Stock, Par Value $1.00, as of June 28, 1998, was 284,595,002. PART I. FINANCIAL INFORMATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS EARNINGS SUMMARY Quarter - ------- Operating income for the second quarter of 1998 rose $32.3 million or 9%. Newspaper publishing earnings were up $24.0 million or 9% for the quarter, reflecting strong advertising demand, better results at The Detroit News, and the positive impact of 1997 newspaper acquisitions. Broadcasting earnings were up $7.6 million or 8% for the quarter, reflecting continued strong demand for TV advertising. Cable segment results were higher, but the comparisons with last year are tempered by the sale in March 1998 of the alarm security business which was previously reported in this segment. Pro forma operating results for each business segment are discussed in following sections of this report. Net income for the second quarter rose $28.1 million or 14%. Net income per share was $.78 (diluted), up 15%. Year-to-date - ------------ Operating income for the first six months of 1998 rose $59.8 million or 10%. Non-operating income for the first six months included a first quarter net pre-tax gain of $306.5 million ($183.6 million after tax) primarily from the disposition of the Company's five remaining radio stations and its alarm security business. Net income excluding the gain rose $52.3 million or 16% for the year- to-date. A presentation of year-to-date earnings excluding the net non-operating gain follows. Earnings Summary Excluding 1998 Net Non-operating Gain Year-to-date ended % Inc June 28, 1998 June 29, 1997 (Dec) Operating income $ 678,102 $ 618,340 9.7 ------------- ------------ ----- Non-operating income (expense): Interest expense (43,577) (50,401) (13.5) Other 3,327 (6,092) --- ------------- ------------ ----- Total (40,250) (56,493) (28.8) ------------- ------------ ----- Income before income taxes 637,852 561,847 13.5 Provision for income taxes 255,800 232,050 10.2 ------------- ------------ ----- Net income $ 382,052 329,797 15.8 ============= ============ ===== Net income per share-basic $1.34 $1.17 14.5 ===== ===== ==== Net income per share-diluted $1.33 $1.16 14.7 ===== ===== ==== NEWSPAPERS Reported newspaper publishing revenues rose $113.9 million or 12% in the second quarter of 1998, which included a $90.4 million or 14% gain in advertising revenues. Newspaper publishing revenues were up $224.4 million or 12% for the year-to-date, including advertising gains of $166.8 million or 13%. These revenue increases include the impact of newspaper publishing acquisitions in 1997. The tables below provide, on a pro forma basis, details of newspaper ad revenue and linage and preprint distribution for the second quarter and year-to-date periods of 1998 and 1997: Advertising revenue, in thousands of dollars (pro forma) Second Quarter 1998 1997 % Change - -------------- ---- ---- -------- Local $233,015 $222,449 5 National 134,237 124,535 8 Classified 267,220 247,840 8 -------- -------- --- Total Run-of-Press 634,472 594,824 7 Preprint and other advertising 114,281 104,731 9 -------- -------- --- Total ad revenue $748,753 $699,555 7 ======== ======== === Advertising linage, in thousands of inches, and preprint distribution, in millions (pro forma) Second Quarter 1998 1997 % Change - -------------- ---- ---- -------- Local 8,821 8,467 4 National 798 739 8 Classified 10,959 9,964 10 ------ ----- -- Total Run-of-Press linage 20,578 19,170 7 ====== ====== == Preprint distribution 1,796 1,683 7 ====== ====== == Advertising revenue, in thousands of dollars (pro forma) Year-to-Date 1998 1997 % Change - ------------ ---- ---- -------- Local $ 439,854 $ 426,578 3 National 250,581 233,209 7 Classified 514,391 471,846 9 ---------- ---------- -- Total Run-of-Press $1,204,826 $1,131,633 6 Preprint and other advertising 211,388 195,110 8 ---------- ---------- -- Total ad revenue $1,416,214 $1,326,743 7 ========== ========== == Advertising linage, in thousands of inches, and preprint distribution, in millions (pro forma) Year-to-Date 1998 1997 % Change - ------------ ---- ---- -------- Local 16,680 16,253 3 National 1,467 1,405 4 Classified 20,720 18,882 10 ------ ------ -- Total Run-of-Press linage 38,867 36,540 6 ====== ====== == Preprint distribution 3,473 3,232 7 ====== ====== == Pro forma newspaper advertising revenues rose 7% for the quarter and for the year-to-date. Local ad revenues increased 5% for the quarter and 3% for the first six months. National ad revenues rose 8% for the quarter and 7% for the year-to-date. Classified ad revenues increased 8% for the quarter and 9% for the year-to-date. Most of the Company's newspapers, including The Detroit News and USA TODAY, recorded solid gains in advertising revenue and volume. Classified gains were strongest in the employment category. Reported newspaper circulation revenues rose 9% for the quarter and for the first six months, reflecting the 1997 acquisitions. Pro forma net paid daily circulation for the Company's local newspapers was up 2% for the quarter and the year-to-date, while Sunday circulation was lower by 2% for the quarter and 1% for the year-to-date. USA TODAY reported an average daily paid circulation of 2,226,443 in the ABC Publisher's statement for the 26 weeks ended March 29, 1998, a 3% increase over the comparable period a year ago. Operating costs for the newspaper segment increased $89.9 million or 13% for the quarter and $181.7 million or 14% for the first six months. Higher newsprint prices and consumption, along with other incremental costs from the 1997 acquisitions, contributed to the increase. In total, newsprint expense increased 28% for the quarter and the year- to-date. Newsprint consumption rose 10% for the second quarter and 12% for the year-to-date, including consumption by recently acquired businesses. Year-to-year newsprint price comparisons for the third and fourth quarters of 1998 are expected to be more favorable. Newspaper operating income increased $24.0 million or 9% for the quarter and $42.7 million or 9% for the first six months, reflecting strong advertising gains throughout the group, a favorable comparison year to year at The Detroit News and the impact of the October 1997 acquisition of New Jersey Press, Inc. In early fiscal 1998, the Company sold its newspaper in St. Thomas, Virgin Islands, and contributed its newspaper in Saratoga Springs, New York, to the Gannett Foundation. In July 1998, the Company sold five daily newspapers in Ohio, Illinois and West Virginia and completed the acquisition of several newspapers in New Jersey, including The Daily Record in Morristown and the Ocean County Observer in Toms River. These third quarter transactions, which were structured in a tax efficient manner, are not expected to materially affect operating income results for the remainder of 1998. BROADCASTING Early in the first quarter, the Company sold its five remaining radio stations (in Chicago, Dallas and Houston) and purchased two television stations, WCSH-TV (NBC) in Portland, Maine, and WLBZ-TV (NBC) in Bangor, Maine. In late April 1998, the Company purchased WLTX-TV (CBS) in Columbia, South Carolina. These transactions were structured in a tax efficient manner. The Company's broadcast group now includes 21 television stations reaching 16.6 percent of U.S. television homes. These acquisitions did not materially affect results of operations for the second quarter or for the year-to-date. Reported broadcast revenues increased $9.6 million or 5% for the second quarter and $19.6 million or 6% for the year-to- date, while operating costs rose $1.9 million or 2% for the quarter and $3.4 million or 2% for the year-to-date. Pro forma local ad revenues increased 10% for the quarter and 11% for the year-to-date. Pro forma national television ad revenues increased 7% for the quarter and 9% for the year-to- date. Reported broadcast operating income rose $7.6 million or 8% for the quarter and $16.2 million or 10% for the first six months. Continued growth in demand for TV advertising resulted in higher earnings at most of the Company's television stations. CABLE AND SECURITY Operating income for the business segment rose $.7 million or 5% for the quarter and $1.2 million or 5% for the year-to- date. However, in early March 1998, the Company sold its alarm security business, which affects operating results comparisons. Excluding the alarm security business, cable revenues rose $4.1 million or 8% for the second quarter and $8.9 million or 9% for the year-to-date. Operating income from cable rose $1.6 million or 13% for the quarter and $2.9 million or 12% for the year-to-date. The number of basic cable subscribers at quarter end increased 2% and the number of pay subscribers increased 1%. In December 1997, the Company announced an agreement to acquire cable systems in Kansas from Tele-Communications, Inc., in exchange for the Company's cable systems in suburban Chicago. This transaction is subject to regulatory approval and is expected to close late in the third quarter. NON-OPERATING INCOME AND EXPENSE Interest expense declined $4.4 million or 18% for the quarter and $6.8 million or 14% for the year-to-date, reflecting the pay-down of long-term debt from operating cash flow and proceeds from the sale of certain businesses. Non-operating income for the year-to-date included a net pre- tax first quarter gain of $306.5 million ($183.6 million after tax), as discussed in the Earnings Summary above. PROVISION FOR INCOME TAXES The Company's effective income tax rate was 40.1% for the quarter and year-to-date periods of 1998 versus 41.3% for the same periods last year. The decrease in the effective tax rate reflects the diminished impact of the amortization of non-deductible intangible assets on expected higher earnings in 1998. NET INCOME Net income for the second quarter rose $28.1 million to $222.8 million, a 14% increase. Basic earnings per share rose to $0.78 from $0.69, an increase of 13%, and diluted earnings per share rose to $0.78 from $0.68, an increase of 15%. Net income for the year-to-date, excluding the $183.6 million net non-operating after-tax gain discussed above, rose $52.3 million or 16%. Basic earnings per share excluding the net non-operating gain rose to $1.34 from $1.17, an increase of 15%, while diluted earnings per share excluding the net non- operating gain rose to $1.33 from $1.16, an increase of 15%. Net income was $565.7 million for the year-to-date, including the first quarter net non-operating gain. Year-to-date basic earnings per share from net income were $1.99, and diluted earnings per share were $1.97. The weighted average number of basic and diluted shares outstanding for the quarter and year-to-date increased slightly over the same periods last year due to the issuance of shares upon the exercise of stock options and the settlement of stock incentive rights. Exhibit 11 of this Form 10-Q presents the weighted average number of basic and diluted shares outstanding for each period. LIQUIDITY AND CAPITAL RESOURCES The Company's consolidated operating cash flow (defined as operating income plus depreciation and amortization of intangible assets) as reported in the accompanying Business Segment Information totaled $834.2 million for the first half of 1998, compared with $767.8 million in the first half of 1997, a 9% increase, reflecting strong overall operating results. Capital expenditures for the year-to-date totaled $90 million, compared to $92 million in 1997. The Company's long-term debt was reduced by $585 million in the first half of 1998 from operating cash flow and proceeds from the sale of certain businesses. The Company's regular quarter dividend of $0.19 per share was declared in the first and second quarters and totaled $108 million. On July 1, 1998, the Company amended its Revolving Credit Agreement to extend its expiration date to July 1, 2003. The Agreement is attached to this report as Exhibit 4-9. CERTAIN FACTORS AFFECTING FORWARD LOOKING STATEMENTS Certain statements in the Company's 1997 Annual Report to Shareholders, its Annual Report on Form 10-K and in this Quarterly Report contain forward-looking information. The words "expect," "intend," "believe," "anticipate," "likely," "will," and similar expressions generally identify forward- looking statements. These forward-looking statements are subject to certain risks and uncertainties which could cause actual results and events to differ materially from those anticipated in the forward-looking statements. Potential risks and uncertainties which could adversely affect the Company's ability to obtain these results include, without limitation, the following factors: (a) increased consolidation among major retailers or other events which may adversely affect business operations of major customers and depress the level of local and national advertising; (b) an economic downturn in some or all of the Company's principal newspaper or television markets leading to decreased circulation or local or national advertising; (c) a decline in general newspaper readership patterns as a result of competitive alternative media or other factors; (d) an increase in newsprint or syndication programming costs over the levels anticipated; (e) labor disputes which may cause revenue declines or increased labor costs; (f) acquisitions of new businesses or dispositions of existing businesses; (g) a decline in viewership of major networks and local news programming; and (h) rapid technological changes and frequent new product introductions prevalent in electronic publishing. CONSOLIDATED BALANCE SHEETS Gannett Co., Inc. and Subsidiaries Unaudited, in thousands of dollars
June 28, 1998 Dec. 28, 1997 --------------- --------------- ASSETS Cash $ 40,801 $ 45,059 Marketable securities 15,133 7,719 Trade receivables, less allowance (1998 - $18,034; 1997 - $18,020) 612,272 638,311 Other receivables 53,012 45,316 Inventories 103,380 101,080 Prepaid expenses 43,958 47,149 --------------- --------------- Total current assets 868,556 884,634 --------------- --------------- Property, plant and equipment Cost 3,688,483 3,754,837 Less accumulated depreciation (1,606,614) (1,562,795) --------------- --------------- Net property, plant and equipment 2,081,869 2,192,042 --------------- --------------- Intangible and other assets Excess of acquisition cost over the value of assets acquired, less amortization 3,665,962 3,584,393 Investments and other assets 207,432 229,282 --------------- --------------- Total intangible and other assets 3,873,394 3,813,675 --------------- --------------- Total assets $ 6,823,819 $ 6,890,351 =============== =============== LIABILITIES & SHAREHOLDERS' EQUITY Current maturities of long-term debt $ $ 18,375 Accounts payable and current portion of film contracts payable 237,883 300,260 Compensation, interest and other accruals 282,518 263,599 Dividend payable 54,061 53,915 Income taxes 44,839 12,893 Deferred income 117,574 118,459 --------------- --------------- Total current liabilities 736,875 767,501 --------------- --------------- Deferred income taxes 454,651 402,254 Long-term debt, less current portion 1,174,249 1,740,534 Postretirement, medical and life insurance liabilities 311,202 312,082 Other long-term liabilities 190,027 188,244 --------------- --------------- Total liabilities 2,867,004 3,410,615 --------------- --------------- Shareholders' Equity Preferred stock of $1 par value per share. Authorized 2,000,000 shares; issued - none. Common stock of $1 par value per share. Authorized 400,000,000; issued, 324,420,732 shares. 324,421 324,421 Additional paid-in capital 106,121 104,366 Retained earnings 4,453,287 3,995,712 --------------- --------------- Total 4,883,829 4,424,499 --------------- --------------- Less treasury stock - 39,825,730 shares and 40,546,253 shares respectively, at cost (901,809) (916,708) Deferred compensation related to ESOP (25,205) (28,055) --------------- --------------- Total shareholders' equity 3,956,815 3,479,736 --------------- --------------- Total liabilities and shareholders' equity $ 6,823,819 $ 6,890,351 =============== ===============
CONSOLIDATED STATEMENTS OF INCOME Gannett Co., Inc. and Subsidiaries Unaudited, in thousands of dollars (except per share amounts)
Thirteen weeks ended % Inc June 28, 1998 June 29, 1997 (Dec) Net Operating Revenues: Newspaper advertising $ 746,675 $ 656,306 13.8 Newspaper circulation 252,762 232,237 8.8 Broadcasting 198,799 189,245 5.0 Cable and Security 57,228 64,363 (11.1) Other 48,673 45,676 6.6 -------------- -------------- ------- Total 1,304,137 1,187,827 9.8 -------------- -------------- ------- Operating Expenses: Cost of sales and operating expenses, exclusive of depreciation 646,755 575,646 12.4 Selling, general and administrative expenses, exclusive of depreciation 190,905 179,787 6.2 Depreciation 50,365 49,976 0.8 Amortization of intangible assets 26,253 24,898 5.4 -------------- -------------- ------- Total 914,278 830,307 10.1 -------------- -------------- ------- Operating income 389,859 357,520 9.0 -------------- -------------- ------- Non-operating income (expense): Interest expense (20,348) (24,783) (17.9) Other 2,498 (1,004) ---- -------------- -------------- ------- Total (17,850) (25,787) (30.8) -------------- -------------- ------- Income before income taxes 372,009 331,733 12.1 Provision for income taxes 149,200 137,000 8.9 -------------- -------------- ------- Net income $ 222,809 $ 194,733 14.4 ============== ============== ======= Net income per share - basic $0.78 $0.69 13.0 ============== ============== ======= Net income per share - diluted $0.78 $0.68 14.7 ============== ============== ======= Dividends per share $0.19 $0.18 5.6 ============== ============== =======
CONSOLIDATED STATEMENTS OF INCOME Gannett Co., Inc. and Subsidiaries Unaudited, in thousands of dollars (except per share amounts)
Twenty-six weeks ended % Inc June 28, 1998 June 29, 1997 (Dec) Net Operating Revenues: Newspaper advertising $ 1,416,669 $ 1,249,858 13.3 Newspaper circulation 506,841 465,607 8.9 Broadcasting 359,491 339,851 5.8 Cable and Security 121,290 125,909 (3.7) Other 99,756 83,359 19.7 -------------- -------------- ------- Total 2,504,047 2,264,584 10.6 -------------- -------------- ------- Operating Expenses: Cost of sales and operating expenses, exclusive of depreciation 1,289,735 1,142,168 12.9 Selling, general and administrative expenses, exclusive of depreciation 380,111 354,578 7.2 Depreciation 103,395 99,758 3.6 Amortization of intangible assets 52,704 49,740 6.0 -------------- -------------- ------- Total 1,825,945 1,646,244 10.9 -------------- -------------- ------- Operating income 678,102 618,340 9.7 -------------- -------------- ------- Non-operating income (expense): Interest expense (43,577) (50,401) (13.5) Other* 309,854 (6,092) ---- -------------- -------------- ------- Total 266,277 (56,493) ---- -------------- -------------- ------- Income before income taxes 944,379 561,847 68.1 Provision for income taxes 378,720 232,050 63.2 -------------- -------------- ------- Net income $ 565,659 $ 329,797 71.5 ============== ============== ======= Net income per share - basic $1.99 $1.17 70.1 ============== ============== ======= Net income per share - diluted $1.97 $1.16 69.8 ============== ============== ======= Dividends per share $0.38 $0.36 5.6 ============== ============== ======= * 1998 results include a net non-operating gain principally from the disposition of several businesses including Radio and Alarm Security. See Management's Discussion and Analysis of Operations for earnings summary excluding net non-operating gain.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Gannett Co., Inc. and Subsidiaries Unaudited, in thousands of dollars
Twenty-six weeks ended June 28, 1998 June 29, 1997 ------------- ------------- Cash flows from operating activities Net income $ 565,659 $ 329,797 Adjustments to reconcile net income to operating cash flows: Depreciation 103,395 99,758 Amortization of intangibles 52,704 49,740 Deferred income taxes 52,398 (8,988) Other, net (380,010) 920 --------- --------- Net cash flow from operating activities 394,146 471,227 --------- --------- Cash flows from investing activities Purchase of property, plant and equipment (89,743) (92,128) Payments for acquisitions, net of cash acquired (203,812) (50,041) Change in other investments (1,291) (4,553) Proceeds from sale of certain assets 567,556 8,199 Collection of long-term receivables 14,110 3,448 --------- --------- Net cash provided by (used for) investing activities 286,820 (135,075) --------- --------- Cash flow from financing activities Payments of long-term debt (584,660) (228,376) Dividends paid (107,937) (102,069) Proceeds from issuance of common stock 14,787 19,802 --------- --------- Net cash used for financing activities (677,810) (310,643) --------- --------- Net increase in cash and cash equivalents 3,156 25,509 Balance of cash and cash equivalents at beginning of year 52,778 31,202 --------- --------- Balance of cash and cash equivalents at end of second quarter $ 55,934 $ 56,711 ========= =========
BUSINESS SEGMENT INFORMATION Gannett Co., Inc. and Subsidiaries Unaudited, in thousands of dollars
Thirteen weeks ended % Inc June 28, 1998 June 29, 1997 (Dec) Operating Revenues: Newspaper publishing $ 1,048,110 $ 934,219 12.2 Broadcasting 198,799 189,245 5.0 Cable and Security 57,228 64,363 (11.1) ----------- ----------- ------ Total $ 1,304,137 $ 1,187,827 9.8 =========== =========== ====== Operating Income (net of depreciation and amortization): Newspaper publishing $ 287,570 $ 263,584 9.1 Broadcasting 104,630 96,991 7.9 Cable and Security 14,563 13,884 4.9 Corporate (16,904) (16,939) 0.2 ----------- ----------- ------ Total $ 389,859 $ 357,520 9.0 =========== =========== ====== Depreciation and Amortization: Newspaper publishing $ 46,113 $ 41,363 11.5 Broadcasting 15,038 14,682 2.4 Cable and Security 13,245 16,659 (20.5) Corporate 2,222 2,170 2.4 ----------- ----------- ------ Total $ 76,618 $ 74,874 2.3 =========== =========== ====== Operating Cash Flow: Newspaper publishing $ 333,683 $ 304,947 9.4 Broadcasting 119,668 111,673 7.2 Cable and Security 27,808 30,543 (9.0) Corporate (14,682) (14,769) 0.6 ----------- ----------- ------ Total $ 466,477 $ 432,394 7.9 =========== =========== ====== NOTES: Operating Cash Flow represents operating income for each of the Company's business segments plus related depreciation and amortization expense. In the first quarter of 1998, the Company sold its Alarm Security business which had been reported in the Cable and Security business segment. On a pro forma basis for the second quarter, giving effect to this sale, cable operations reported gains in revenue of 8%, operating income of 13%, and operating cash flow of 6%. On a year-to-date basis, pro forma cable operations reflect a 9% revenue gain, a 12% improvement in operating income and a 6% gain in operating cash flow. On the first day of fiscal 1998, the Company sold its five remaining radio stations, which had been reported in the Broadcasting business segment. The Company also purchased two television stations in Maine in early fiscal 1998 and a television station in Columbia, South Carolina, in April 1998. On a pro forma basis for the second quarter, giving effect to these transactions, television operations reported gains in revenue of 8%, operating income of 13% and operating cash flow of 11%. On a year-to-date basis, pro forma television operations reflect a 10% revenue gain, a 16% improvement in operating income and a 13% gain in operating cash flow.
BUSINESS SEGMENT INFORMATION Gannett Co., Inc. and Subsidiaries Unaudited, in thousands of dollars
Twenty-six weeks ended % Inc June 28, 1998 June 29, 1997 (Dec) Operating Revenues: Newspaper publishing $ 2,023,266 $ 1,798,824 12.5 Broadcasting 359,491 339,851 5.8 Cable and Security 121,290 125,909 (3.7) ----------- ----------- ----- Total $ 2,504,047 $ 2,264,584 10.6 =========== =========== ===== Operating Income (net of depreciation and amortization): Newspaper publishing $ 513,489 $ 470,778 9.1 Broadcasting 170,597 154,391 10.5 Cable and Security 28,479 27,249 4.5 Corporate (34,463) (34,078) (1.1) ----------- ----------- ----- Total $ 678,102 $ 618,340 9.7 =========== =========== ===== Depreciation and Amortization: Newspaper publishing $ 92,270 $ 82,512 11.8 Broadcasting 29,993 29,494 1.7 Cable and Security 29,399 33,152 (11.3) Corporate 4,437 4,340 2.2 ----------- ----------- ----- Total $ 156,099 $ 149,498 4.4 =========== =========== ===== Operating Cash Flow: Newspaper publishing $ 605,759 $ 553,290 9.5 Broadcasting 200,590 183,885 9.1 Cable and Security 57,878 60,401 (4.2) Corporate (30,026) (29,738) (1.0) ----------- ----------- ----- Total $ 834,201 $ 767,838 8.6 =========== =========== ===== NOTES: See the Company's Business Segment Information for the 13-week period ending June 28, 1998, on the preceding page.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS June 28, 1998 1. Basis of Presentation The accompanying unaudited consolidated condensed financial statements have been prepared in accordance with the instructions for Form 10-Q and, therefore, do not include all information and footnotes which are normally included in Form 10-K and annual report to shareholders. The financial statements covering the 13 and 26-week periods ended June 28, 1998, and the comparative periods of 1997 reflect all adjustments which, in the opinion of the Company, are necessary for a fair statement of results for the interim periods. 2. Accounting Standards In June 1997, Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS 130), and No. 131, "Disclosures about Segments of an Enterprise and Related Information" (SFAS 131), were issued. SFAS 130 is not currently applicable as the Company has no items of other comprehensive income in any period presented. SFAS 131 will not have any impact on the Company's reported financial position or results of operations. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable. PART II. OTHER INFORMATION Item 5. Other Information A shareholder who wishes to present a proposal at the Company's 1999 annual meeting of shareholders, but who does not request that the Company solicit proxies for the proposal, must submit the proposal in writing to the Company on or before February 3, 1999. The Company's by-laws provide that any shareholder who wishes to submit a proposal must notify the Company 90 days in advance of the meeting and must submit the following: (a) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (b) the name and address, as they appear on the Company's books, of the stockholder proposing such business, (c) the class and number of shares of the Company that are beneficially owned by the stockholder and (d) any material interest of the stockholder in such business. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits. See Exhibit Index for list of exhibits filed with this report. (b) Reports on Form 8-K. None. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. GANNETT CO., INC. Dated: August 12, 1998 /s/ George R. Gavagan ---------------------------------------- George R. Gavagan Vice President and Controller Dated: August 12, 1998 /s/ Thomas L. Chapple ---------------------------------------- Thomas L. Chapple Senior Vice President, General Counsel and Secretary EXHIBIT INDEX Exhibit Number Exhibit Location 3-1 Second Restated Certificate Incorporated by reference to Exhibit of Incorporation of Gannett Co., 3-1 to Gannett Co., Inc's Form 10-K Inc. for the fiscal year ended December 26, 1993 ("1993 Form 10-K"). Amendment incorporated by reference to Exhibit 3-1 to the 1993 Form 10-K. 3-2 By-laws of Gannett Co., Inc. Incorporated by reference to Exhibit (reflects all amendments 3-1 to Gannett Co., Inc.'s Form 10-Q through September 24, 1997) for the fiscal quarter ended September 28, 1997. 4-1 $1,000,000,000 Revolving Incorporated by reference to Exhibit Credit Agreement among 4-1 to the 1993 Form 10-K. Gannett Co., Inc. and the Banks named therein. 4-2 Amendment Number One Incorporated by reference to Exhibit to $1,000,000,000 Revolving 4-2 to Gannett Co., Inc.'s Form 10-Q Credit Agreement among for the fiscal quarter ended June 26, Gannett Co., Inc. and the 1994. Banks named therein. 4-3 Amendment Number Two to Incorporated by reference to Exhibit $1,500,000,000 Revolving 4-3 to Gannett Co., Inc.'s Form 10-K Credit Agreement among for the fiscal year ended Gannett Co., Inc. and the December 31, 1995. Banks named therein. 4-4 Amendment Number Three to Incorporated by reference to Exhibit $3,000,000,000 Revolving 4-4 to Gannett Co., Inc.'s Form 10-Q Credit Agreement among for the fiscal quarter ended Gannett Co., Inc. and the Banks September 29, 1996. named therein. 4-5 Indenture dated as of March 1, Incorporated by reference to Exhibit 1983 between Gannett Co., Inc. 4-2 to Gannett Co., Inc.'s Form 10-K and Citibank, N.A., as Trustee. for the fiscal year ended December 29, 1985. 4-6 First Supplemental Indenture Incorporated by reference to Exhibit dated as of November 5, 1986 4 to Gannett Co., Inc.'s Form 8-K among Gannett Co., Inc., filed on November 9, 1986. Citibank, N.A., as Trustee, and Sovran Bank, N.A., as Successor Trustee. 4-7 Second Supplemental Indenture Incorporated by reference to dated as of June 1, 1995, Exhibit 4 to Gannett Co., Inc.'s among Gannett Co., Inc., Form 8-K filed on June 15, 1995. NationsBank, N.A., as Trustee, and Crestar Bank, as Trustee. 4-8 Rights Plan. Incorporated by reference to Exhibit 1 to Gannett Co., Inc.'s Form 8-K filed on May 23, 1990. 4-9 Amendment Number Four to Attached. $3,000,000,000 Revolving Credit Agreement among Gannett Co., Inc. and the Banks named therein. 10-1 Employment Agreement dated Incorporated by reference to Gannett December 7, 1992 between Co., Inc.'s Form 10-K for the fiscal Gannett Co., Inc. and John J. year ended December 27, 1992 ("1992 Curley.* Form 10-K"). 10-2 Employment Agreement dated Incorporated by reference to the 1992 December 7, 1992 between Form 10-K. Gannett Co., Inc. and Douglas H. McCorkindale.* 10-3 Gannett Co., Inc. 1978 Incorporated by reference to Exhibit Executive Long-Term Incentive 10-3 to Gannett Co., Inc.'s Form 10-K Plan* for the fiscal year ended December 28, 1980. Amendment No. 1 incorporated by reference to Exhibit 20-1 to Gannett Co., Inc.'s Form 10-K for the fiscal year ended December 27, 1981. Amendment No. 2 incorporated by reference to Exhibit 10-2 to Gannett Co., Inc.'s Form 10-K for the fiscal year ended December 25, 1983. Amendments Nos. 3 and 4 incorporated by reference to Exhibit 4-6 to Gannett Co., Inc.'s Form S-8 Registration Statement No. 33-28413 filed on May 1, 1989. Amendments Nos. 5 and 6 incorporated by reference to Exhibit 10-8 to Gannett Co., Inc.'s Form 10-K for the fiscal year ended December 31, 1989. Amendment No. 7 incorporated by reference to Gannett Co., Inc.'s Form S-8 Registration Statement No. 333-04459 filed on May 24, 1996. Amendment No. 8 incorporated by reference to Exhibit 10-3 to Gannett Co., Inc.'s Form 10-Q for the quarter ended September 28, 1997. Amendment dated December 9, 1997, incorporated by reference to Gannett Co., Inc.'s 1997 Form 10-K. 10-4 Description of supplemental Incorporated by reference to Exhibit insurance benefits.* 10-4 to the 1993 Form 10-K. 10-5 Gannett Co., Inc. Supplemental Incorporated by reference to Exhibit Retirement Plan, as amended.* 10-8 to Gannett Co., Inc's Form 10-K for the fiscal year ended December 27, 1986 ("1986 Form 10-K"). 10-6 Gannett Co., Inc. Retirement Incorporated by reference to Exhibit Plan for Directors.* 10-10 to the 1986 Form 10-K. 1991 Amendment incorporated by reference to Exhibit 10-2 to Gannett Co., Inc.'s Form 10-Q for the quarter ended September 29, 1991. Amendment to Gannett Co., Inc. Retirement Plan for Directors dated October 31, 1996, incorporated by reference to Exhibit 10-6 to the 1996 Form 10K. 10-7 Amended and Restated Incorporated by reference to Exhibit Gannett Co., Inc. 1987 10-1 to Gannett Co., Inc.'s Form 10-Q Deferred Compensation Plan.* for the fiscal quarter ended September 29, 1996. Amendment No. 5 incorporated by reference to Exhibit 10-2 to Gannett Co., Inc.'s Form 10-Q for the quarter ended September 28, 1997. 10-8 Gannett Co., Inc. Transitional Incorporated by reference to Exhibit Compensation Plan.* 10-13 to Gannett Co., Inc.'s Form 10-K for the fiscal year ended December 30, 1990. 11 Statement re computation of Attached. earnings per share. 27 Financial Data Schedules. Attached. The Company agrees to furnish to the Commission, upon request, a copy of each agreement with respect to long-term debt not filed herewith in reliance upon the exemption from filing applicable to any series of debt which does not exceed 10% of the total consolidated assets of the Company. * Asterisks identify management contracts and compensatory plans or arrangements. EX-4 2 EXH. 4-9 AMENDMENT TO REVOLVING CREDIT AGREEMENT AMENDMENT NUMBER FOUR to $3,000,000,000 REVOLVING CREDIT AGREEMENT dated as of December 1, 1993 between GANNETT CO., INC. and THE CHASE MANHATTAN BANK, THE FIRST NATIONAL BANK OF CHICAGO, MORGAN GUARANTY TRUST COMPANY, NATIONSBANK, N.A., WACHOVIA BANK, N.A., BANK OF AMERICA NT&SA, CITIBANK, N.A., MARINE MIDLAND BANK, WELLS FARGO BANK, BANK OF HAWAII, CRESTAR BANK, FIRST UNION NATIONAL BANK, MELLON BANK, N.A., THE NORTHERN TRUST COMPANY, PNC BANK, NATIONAL ASSOCIATION, THE FIRST NATIONAL BANK OF MARYLAND, FLEET BANK, N.A. and NORWEST BANK MINNESOTA, N.A. as amended GANNETT CO., INC. Amendment Number Four to $3,000,000,000 Revolving Credit Agreement This Amendment Number Four is made as of July 1, 1998 between Gannett Co., Inc., a Delaware corporation ("Gannett"), and the Banks signatory hereto (each called a "Bank" and collectively the "Banks"). Unless otherwise defined herein, all capitalized terms used herein shall have the meaning ascribed to such terms in the Agreement (as defined below). Gannett entered into a $1,000,000,000 Revolving Credit Agreement with the Banks dated December 1, 1993 (the "Agreement"). On August 1, 1994, pursuant to Amendment Number One to the Agreement, the Agreement was amended to increase the aggregate commitment to $1,500,000,000, extend the Expiration Date and modify the Facility Fee. On November 13, 1995, pursuant to Amendment Number Two to the Agreement, the Agreement was amended to increase the aggregate commitment to $3,000,000,000, extend the Expiration Date, modify the Facility Fee, adjust the Applicable Margin in effect with respect to the Money Market Rate and the Eurodollar Rate, and amend Schedule 1 to the Agreement. In August, 1996, pursuant to Amendment Number Three to the Agreement, the Agreement was amended to modify the notice requirements with respect to Alternate Rate Advances, to eliminate a certain representation regarding environmental matters as a condition to lending and to reflect a change in certain of the Banks. Gannett and the Banks wish to further amend the Agreement to modify the covenant with respect to Gannett's Total Shareholders' Equity, to extend the expiration date and to amend Schedule 1 to the Agreement. The parties hereby agree as follows: 1. The terms "this Agreement," "hereunder," "herein" and similar references in the Agreement shall be deemed to refer to the Agreement as amended hereby. 2. Section 9(c) of the Agreement shall be amended in its entirety to read as follows: 9(c). Permit Gannett's Total Shareholders' Equity at any time to be less than $2,000,000,000. -2- 3. The definition of "Expiration Date" shall be amended in its entirety to read as follows: "Expiration Date" shall mean July 1, 2003. 4. Schedule 1 shall be amended to read in its entirety as set forth in Schedule 1 hereto and all references to the Banks shall mean the Banks set forth on Schedule 1 and each of the banks that may become a party to the Agreement from time to time. 5. The terms of this Agreement shall be in addition to and shall in no way impair the full force and effect of the Agreement (except as specifically amended herein). 6. This Amendment may be executed by the parties in as many counterparts as may be deemed necessary and convenient, and by the different parties on separate counterparts, each of which, when so executed, shall be deemed an original, but all such counterparts shall constitute but one and the same instrument. 7. THIS AMENDMENT NUMBER FOUR SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. IN WITNESS WHEREOF, the parties have executed this Amendment Number Four as of the date first written above. GANNETT CO., INC. /s/Gracia C. Martore By:_________________________________ Name: Gracia C. Martore Title: Treasurer THE CHASE MANHATTAN BANK /s/John J. Huber, III By:_________________________________ Name: John J. Huber III Title: Managing Director THE FIRST NATIONAL BANK OF CHICAGO /s/Tom Dao By:_________________________________ Name: Tom Dao Title: Corporate Banking Officer -3- MORGAN GUARANTY TRUST COMPANY /s/Robert Bottamedi By:_________________________________ Name: Robert Bottamedi Title: Vice President NATIONSBANK, N.A. /s/Pamela S. Kurtzmen By:_________________________________ Name: Pamela S. Kurtzmen Title: Vice President WACHOVIA BANK, N.A. /s/Wray C. Broughton By:_________________________________ Name: Wray C. Broughton Title: Vice President BANK OF AMERICA NT&SA /s/Carl F. Salas By:_________________________________ Name: Carl F. Salas Title: Vice President CITIBANK, N.A. /s/Eric Hutner By:_________________________________ Name: Eric Hutner Title: Attorney-In-Fact MARINE MIDLAND BANK /s/Rochelle Forster By:_________________________________ Name: Rochelle Forster Title: Vice President -4- WELLS FARGO BANK. /s/Frieda Youlios By:________________________________ Name: Frieda Youlios Title: Vice President BANK OF HAWAII /s/Elizabeth O. MacLean By:_______________________________ Name: Elizabeth O. MacLean Title: Vice President CRESTAR BANK /s/Nancy R. Petrash By:_______________________________ Name: Nancy R. Petrash Title: Senior Vice President FIRST UNION NATIONAL BANK /s/Stephen H. MacNabb By:_______________________________ Name: Stephen H. MacNabb Title: Senior Vice President MELLON BANK, N.A. /s/G. Louis Ashley By:_______________________________ Name: G. Louis Ashley Title: First Vice President -5- THE NORTHERN TRUST COMPANY /s/M. D. Swanson By:_______________________________ Name: M. D. Swanson Title: Senior Vice President PNC BANK, NATIONAL ASSOCIATION /s/Daniel E. Hopkins By:_______________________________ Name: Daniel E. Hopkins Title: Vice President THE FIRST NATIONAL BANK OF MARYLAND /s/Shaun E. Murphy By:______________________________ Name: Shaun E. Murphy Title: Senior Vice President FLEET BANK, N.A. /s/Barbara T. Ruud By:_______________________________ Name: Barbara T. Ruud Title: Vice President NORWEST BANK MINNESOTA,N.A. /s/Ann C. Pifer By:_______________________________ Name: Ann C. Pifer Title: Vice President SCHEDULE 1 COMMITMENTS OF THE BANKS NAME, ADDRESS AND TELECOPY COMMITMENT AMOUNT NUMBER OF BANK SYNDICATION AGENTS The Chase Manhattan Bank $350,000,000 270 Park Avenue, 37th Floor New York, NY 10017 Telecopy: 212-270-4584 The First National Bank of Chicago $350,000,000 153 West 51st Street New York, NY 10019 Telecopy: 212-373-1388 Morgan Guaranty Trust Company $350,000,000 60 Wall Street, 25nd Floor New York, NY 10260-0060 Telecopy: 212-648-5018 NationsBank, N.A. $350,000,000 Communications Finance Division 901 Main Street, 64th Floor Dallas, TX 75202-3748 Telecopy: 214-508-9390 MANAGING AGENT Wachovia Bank, N.A. $250,000,000 1021 E. Cary Street, James Center Richmond, VA 23219 Telecopy: 804-697-7581 -2- CO-AGENTS Bank of America NT&SA $150,000,000 1850 Gateway Blvd. Concord, CA 94520 Telecopy: 510-675-7531 or 7532 With a copy to: Bank of America NT&SA 335 Madison Avenue New York, NY 10017 Telecopy: 212-503-7173 Citibank, N.A. $150,000,000 399 Park Avenue New York, NY 10043 Telecopy: 212-793-6873 Marine Midland Bank $150,000,000 140 Broadway, 4th Floor New York, NY 10005-1196 Telecopy: 212-658-5109 Wells Fargo Bank $150,000,000 Risk Analysis Division 707 Wilshire Blvd., 16th Floor MAC 2818-165 Los Angeles, CA 90017 Telecopy: 213-614-2305 With a copy to: Wells Fargo Bank National Financial Services 222 W. Adams Street, Suite 2180 Chicago, IL 60606 Telecopy: 312-845-8606 LENDERS Bank of Hawaii $100,000,000 130 Merchant Street, 20th Floor Honolulu, HI 96813 Telecopy: 602-752-8007 -3- With a copy to: Bank of Hawaii 1850 N. Central Avenue Suite 400 Phoenix, Arizona 85004 Telecopy: 602-257-2235 Crestar Bank $100,000,000 1445 New York Avenue, N.W. Corporate Division - Third Floor Washington, DC 20005 Telecopy: 202-879-6137 First Union National Bank $100,000,000 1970 Chain Bridge Road 3rd Floor (VA 1937) Mclean, VA 22102 Telecopy: 703-760-5457 Mellon Bank, N.A. $100,000,000 One Mellon Bank Center Room 4440 Pittsburgh, PA 15258 Telecopy: 412-234-6375 The Northern Trust Company $100,000,000 50 South LaSalle Street B9 Chicago, IL 60675 Telecopy: 312-444-3508 PNC Bank, National Association $100,000,000 Communications Banking Division 1600 Market Street, 21st Floor Philadelphia, PA 19103 Attn: Scott C. Meves Telecopy: 215-585-6680 The First National Bank of Maryland $ 50,000,000 601 13th Street, N.W., Suite 1000 North Washington, DC 20005 Telecopy: 202-661-7236 -4- Fleet Bank, N.A. $ 50,000,000 244 Westchester Avenue White Plains, NY 10604 Telecopy: 914-681-5045 Norwest Bank Minnesota, N.A. $ 50,000,000 Sixth and Marquette Minneapolis, MN 55479-0085 Telecopy: 612-667-2276 TOTAL $3,000,000,000 EX-11 3 EARNINGS PER SHARE CALCULATION OF EARNINGS PER SHARE Gannett Co., Inc. and Subsidiaries Unaudited, in thousands of dollars (except per share amounts) Thirteen weeks ended Twenty-six weeks ended ---------------------- ---------------------- June 28, June 29, June 28, June 29, 1998 1997 1998 1997 ------------ ------------ ----------- --------- Basic earnings: Net income $222,809 $194,733 $565,659 $329,797 Weighted average number of common shares outstanding 284,561 283,242 284,388 283,042 Basic earnings per share $0.78 $0.69 $1.99 $1.17 Diluted earnings: Net income $222,809 $194,733 $565,659 $329,797 Weighted average number of common shares outstanding 284,561 283,242 284,388 283,042 Dilutive effect of out- standing stock options and stock incentive rights 2,886 2,113 2,739 1,923 Weighted average number of shares outstanding, as adjusted 287,447 285,355 287,127 284,965 Diluted earnings per share $0.78 $0.68 $1.97 $1.16
EX-27 4 FINANCIAL DATA SCHEDULE - 1998
5 This schedule contains summary financial information extracted from the consolidated balance sheets and statements of income for Gannett Co., Inc. and is qualified in its entirety by reference to such financial statements. 1,000 6-MOS DEC-27-1998 DEC-29-1997 JUN-28-1998 40,801 15,133 630,306 18,034 103,380 868,556 3,688,483 1,606,614 6,823,819 736,875 0 324,421 0 0 3,632,394 6,823,819 2,504,047 2,504,047 1,289,735 1,825,945 (309,854) 0 43,577 944,379 378,720 565,659 0 0 0 565,659 1.99 1.97
EX-27 5 RESTATED FINANCIAL DATA SCHEDULE - 1997
5 This schedule contains summary financial information extracted from the consolidated balance sheets and statements of income for Gannett Co., Inc. and is qualified in its entirety by reference to such financial statements. 1,000 6-MOS DEC-28-1997 DEC-30-1996 JUN-29-1997 44,163 12,548 558,578 19,299 80,694 743,668 3,523,600 1,521,662 6,322,413 649,077 0 162,210 0 0 3,016,758 6,322,413 2,264,584 2,264,584 1,142,168 1,646,244 6,092 0 50,401 561,847 232,050 329,797 0 0 0 329,797 1.17 1.16
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