-----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, CWMLVCPPMoSnQSTulroNoBX4hQcvthp/QGadB5+I/gUdAkBFB77JKIEH/SF2j7ph w06kMcRsmU0JYQ1/WmAQLg== 0000039899-98-000017.txt : 19981113 0000039899-98-000017.hdr.sgml : 19981113 ACCESSION NUMBER: 0000039899-98-000017 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19980927 FILED AS OF DATE: 19981112 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: 98744975 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 September 27, 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 September 27, 1998, was 281,604,254. PART I. FINANCIAL INFORMATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS EARNINGS SUMMARY Quarter - ------- Operating income for the third quarter of 1998 rose $28.0 million or 10%. Newspaper publishing earnings were up $31.0 million or 14% for the quarter, reflecting continued strong advertising demand, better results at The Detroit News, and the positive impact of recent newspaper acquisitions. Broadcasting earnings were down $5.4 million or 7% for the quarter, due to the Company's sale of its five remaining radio stations on the first day of fiscal 1998, which had been previously reported in this segment. Earnings from Cable operations 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 the following sections of this report. Net income for the third quarter rose $24.1 million or 16%. Net income per share was $.62 (diluted), up 17%. Year-to-Date - ------------ Operating income for the first nine months of 1998 rose $87.7 million or 10%. Non-operating income for the first nine 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 this gain rose $76.3 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 Sept. 27, 1998 Sept. 28, 1997 (Dec) Operating income $ 990,768 $ 903,041 9.7 ----------- ----------- ------ Non-operating income (expense): Interest expense (60,767) (73,819) (17.7) Other 2,450 (7,665) --- ----------- ----------- ------ Total (58,317) (81,484) (28.4) ----------- ----------- ------ Income before income taxes 932,451 821,557 13.5 Provision for income taxes 373,880 339,300 10.2 ----------- ----------- ------ Net income $ 558,571 $ 482,257 15.8 =========== =========== ====== Net income per share-basic $1.96 $1.70 15.3 ===== ===== ==== Net income per share-diluted $1.95 $1.69 15.4 ===== ===== ==== NEWSPAPERS Reported newspaper publishing revenues rose $91.0 million or 10% in the third quarter of 1998, which included a $74.3 million or 12% gain in advertising revenues. Newspaper publishing revenues were up $315.5 million or 12% for the year-to-date, including advertising gains of $241.1 million or 13%. These revenue increases include the impact of recent newspaper acquisitions. The tables below provide, on a pro forma basis, details of newspaper ad revenue and linage and preprint distribution for the third quarter and year-to-date periods of 1998 and 1997: Advertising revenue, in thousands of dollars (pro forma) Third Quarter 1998 1997 % Change - ------------- ---- ---- -------- Local $ 217,318 $ 210,443 3 National 114,778 112,340 2 Classified 267,074 250,874 6 --------- --------- --- Total Run-of-Press 599,170 573,657 4 Preprint and other advertising 112,938 101,740 11 --------- --------- --- Total ad revenue $ 712,108 $ 675,397 5 ========= ========= === Advertising linage, in thousands of inches, and preprint distribution, in millions (pro forma) Third Quarter 1998 1997 % Change - ------------- ---- ---- -------- Local 8,335 8,027 4 National 746 693 8 Classified 11,050 10,177 9 ------ ------ --- Total Run-of-Press linage 20,131 18,897 7 ====== ====== === Preprint distribution 1,739 1,614 8 ====== ====== === Advertising revenue, in thousands of dollars (pro forma) Year-to-Date 1998 1997 % Change - ------------- ---- ---- -------- Local $ 660,516 $ 640,141 3 National 365,562 345,782 6 Classified 788,093 728,644 8 --------- --------- --- Total Run-of-Press 1,814,171 1,714,567 6 Preprint and other advertising 321,959 296,530 9 --------- --------- --- Total ad revenue $2,136,130 $2,011,097 6 ========= ========= === Advertising linage, in thousands of inches, and preprint distribution, in millions (pro forma) Year-to-Date 1998 1997 % Change - ------------- ---- ---- -------- Local 25,015 24,280 3 National 2,213 2,098 5 Classified 31,771 29,058 9 ------ ------ --- Total Run-of-Press linage 58,999 55,436 6 ====== ====== === Preprint distribution 5,212 4,846 8 ====== ====== === Pro forma newspaper advertising revenues rose 5% for the quarter and 6% for the year-to-date. Local ad revenues increased 3% for the quarter and for the year-to-date. National ad revenues rose 2% for the quarter and 6% for the year-to-date. Classified ad revenues increased 6% for the quarter and 8% for the year-to-date. Most of the Company's newspapers, including The Detroit News and USA TODAY, recorded solid gains in advertising revenue. Classified gains were strongest in the employment category. Reported newspaper circulation revenues rose 7% for the quarter and 8% for the first nine months, reflecting recent acquisitions. Pro forma net paid daily circulation for the Company's local newspapers was up 1% for the quarter and 2% for 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 2,213,255 in the ABC Publisher's statement for the 26 weeks ended September 27, 1998, a 2% increase over the comparable period a year ago. Operating costs for the newspaper segment increased $60.0 million or 9% for the quarter and $241.7 million or 12% for the first nine months. Higher newsprint prices and consumption, along with other incremental costs from recent acquisitions, contributed to the increase. In total, newsprint expense increased 15% for the quarter and 23% for the year-to-date. Newsprint consumption rose 8% for the quarter and 10% for the year-to-date, including consumption by recently acquired businesses. Year- to-year newsprint price comparisons for the fourth quarter of 1998 are expected to be more favorable. Newspaper operating income increased $31.0 million or 14% for the quarter and $73.7 million or 11% for the first nine months, reflecting strong advertising gains throughout the group, a favorable comparison year to year at The Detroit News and the impact of recent acquisitions. 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 transactions did not materially affect newspaper operating results for the third quarter. BROADCASTING Early in the first quarter of 1998, 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 acquisitions did not materially affect results of operations for the third quarter or for the year-to-date. The Company's broadcast group now includes 21 television stations reaching 16.6 percent of U.S. television homes. Reported broadcast revenues decreased $5.8 million or 4% for the third quarter and increased $13.9 million or 3% for the year-to-date. Operating costs were flat for the quarter and increased $3.0 million or 1% for the year-to-date. On a pro forma basis, television station revenues increased by 1% for the quarter and 7% for the year-to-date. Advertising demand was tempered by the General Motors strike in the third quarter. Pro forma local television ad revenues remained relatively flat for the quarter and increased 8% for the year-to-date. Pro forma national television ad revenues increased 2% for the quarter and 7% for the year-to-date. Reported broadcast operating income declined $5.4 million or 7% for the quarter but rose $10.8 million or 5% for the first nine months. These results were tempered by the Company's sale of its five remaining radio stations on the first day of fiscal 1998, which had been previously reported in this segment. On a pro forma basis, operating income increased 1% for the quarter and 12% for the year-to-date. Third quarter results were adversely affected by the General Motors strike. CABLE AND SECURITY Operating income for the business segment rose $1.6 million or 13% for the quarter and $2.8 million or 7% for the year-to-date. In early March 1998, the Company sold its alarm security business, previously reported with this segment, and in late August 1998, completed an exchange of its cable systems in the Chicago area (93,000 subscribers) for the TCI Communications, Inc. systems in Kansas (128,000 subscribers). On a pro forma basis, giving effect to these transactions, cable revenues rose $4.8 million or 9% for the third quarter and $13.3 million or 8% for the year-to-date. Pro forma operating income from cable rose $2.1 million or 17% for the quarter and $4.4 million or 11% for the year-to-date. The number of basic cable subscribers at quarter end increased 9% and the number of pay subscribers decreased 2%, as compared to the prior year. NON-OPERATING INCOME AND EXPENSE Interest expense declined $6.2 million or 27% for the quarter and $13.1 million or 18% 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 third quarter rose $24.1 million to $176.5 million, a 16% increase. Basic earnings per share rose to $0.62 from $0.54, an increase of 15%, and diluted earnings per share rose to $0.62 from $0.53, an increase of 17%. Net income for the year-to-date, excluding the $183.6 million net non-operating after-tax gain discussed above, rose $76.3 million or 16%. Basic earnings per share excluding the net non-operating gain rose to $1.96 from $1.70, an increase of 15%, while diluted earnings per share excluding the net non-operating gain rose to $1.95 from $1.69, an increase of 15%. Net income was $742.2 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 $2.61, and diluted earnings per share were $2.59. The weighted average number of basic and diluted shares outstanding for the quarter and for the 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. During the third quarter, the Company's Board of Directors authorized the repurchase of up to $250 million of Company common stock and on September 30, the Board authorized an additional $500 million for Company common stock repurchases. Approximately 3.1 million shares were purchased by the end of the third quarter with a total cost of $177.7 million. 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 $1,223.9 million for the first nine months of 1998, compared with $1,127.4 million for the same period of 1997, a 9% increase, reflecting strong overall operating results. Capital expenditures for the year-to-date totaled $144 million, compared to $142 million in 1997. The Company's long-term debt was reduced by $471 million during the first nine months of 1998 from operating cash flow and proceeds from the sale of certain businesses. The Company's regular quarterly dividend of $0.19 per share was declared in the first and second quarters and $0.20 per share was declared in the third quarter. Dividends declared totaled $165 million for the first nine months. On July 1, 1998, the Company amended its Revolving Credit Agreement to extend its expiration date to July 1, 2003 and to increase the maintenance of net worth provision to $2.0 billion. YEAR 2000 General - ------- The "Year 2000 Issue" is the result of computer programs that were written using two digits rather than four to define the applicable year. If the Company's computer programs with date-sensitive functions are not Year 2000 compliant, they may recognize a date using "00" as the Year 1900 rather than the Year 2000. This could result in a system failure or miscalculations causing disruptions of operations, including, among other things, temporary stoppage of newspaper, broadcast and/or cable operations and the inability to process transactions, send invoices or engage in similar normal business activities. Project - ------- The Company has developed a plan to ensure that all of its key computer systems will be Year 2000 compliant in advance of December 31, 1999. The plan encompasses all operating properties, corporate headquarters and, where necessary, computer applications that directly interface elements of the company's business with business partners, customers, suppliers and service providers. The plan structure includes several phases: inventory, assessment, detailed analysis, implementation/remediation, audit and contingency planning. The first three phases of inventory, assessment and detailed analysis are complete. At this time, the Company's efforts are concentrated on implementation/remediation which will be essentially completed by the end of the first quarter of 1999. Audit and contingency planning efforts are also underway and are expected to be completed in the first quarter of 1999, but will continue to be refined up to the Year 2000. The Company has over 125 business units which generally operate independently and therefore have separate computer systems and various production and administrative equipment with embedded computer systems. Much of the hardware and software used at the business unit level is standardized and supported centrally. For these systems, Year 2000 issues are being addressed by a centrally managed Information Technology Group. Other Year 2000 issues are being addressed by local personnel at the individual business units with guidance where necessary from headquarters staff or consulting specialists. At the end of the third quarter of 1998, the Company has achieved Year 2000 compliance in many critical systems areas. The Company's business systems (i.e., marketing, sales support, customer billing and accounts receivable, accounting, accounts payable and payroll) at the majority of its local operating properties and at its headquarters are already Year 2000 compliant. This has been achieved through a systematic roll-out of Year 2000 compliant software where it was necessary. For those few properties which still operate business systems that are not Year 2000 compliant, the Company has already purchased or developed the necessary software and will be installing it through the first three quarters of 1999 according to plan. By the end of 1998, more than 85% of these business applications will be Year 2000 compliant. For newspaper operations, critical systems also include publishing systems (i.e., front-end editorial and classified, networks, press and mailroom/distribution systems) and other facility/administrative systems. The majority of the Company's newspapers now have publishing systems that are Year 2000 compliant, and by the end of 1998 more than 80% of such systems will be Year 2000 compliant. The remaining few newspapers will complete installation of publishing systems in the first half of 1999, apart from one to be completed in the third quarter. Facility/administrative systems for the newspaper group are expected to be Year 2000 compliant by the end of 1998, with the exception of a few isolated systems that will be made compliant in the first quarter of 1999. The Company's 21 television stations generally use standard purchased software and systems for production and broadcasting. Each station operates these systems independently on separate hardware platforms. Nearly all critical television station systems have been modified or upgraded as necessary for Year 2000 compliance. For the few remaining systems, compliance will be achieved in mid-1999 when the desired technology becomes available for purchase and installation. For the cable television business, most business applications and other critical systems for production, distribution and administration are now Year 2000 compliant, and the remainder will be made compliant by the first quarter of 1999. The Company has requested confirmation of compliance from its third party vendors and, in important cases, has or will run tests to verify compliance. Costs - ----- The Company's efforts to address potential Year 2000 problems began within its central Information Technology Group in 1995 and were broadened to include all departments/operations in 1997. The costs specifically associated with efforts to achieve Year 2000 compliance are expected to be less than $25 million in the aggregate (exclusive of software and hardware that has been or will be replaced or upgraded in the normal course of business), and more than 90% of such costs have been incurred and reported through the third quarter of 1998. Year 2000 compliance costs are not material to the Company's financial position or to operating results for any of the years involved and compliance efforts have not significantly affected progress of other information technology plans or programs. Risks - ----- The business risks the Company would face if it were unable to achieve Year 2000 compliance for its critical systems could vary significantly in degree of seriousness, depending on the system and the business unit affected. The Company may be unable to publish certain of its newspapers, broadcast from certain of its television stations and/or deliver programming in certain cable markets. If this occurred, it would most likely be due to Year 2000 related failure of the Company's utility, telecommunications or content service providers, not from internal company system failure. The Company continues to work directly with these vendors to evaluate risk levels. If the Company's operations were affected in this manner, revenue losses would result which would not be fully recovered when normal operations resumed. Incremental repair and start up costs might also be incurred. Given the present state of its Year 2000 compliance program and its plans to complete it as described above, the Company does not expect that a significant number of its business units would be unable to operate, and even if certain units were unable to operate, it would be for a limited time. Consequently, management does not believe possible disruptions of this nature would have a material effect on the Company's financial condition or results of operations. While the Company believes its Year 2000 plan will ensure functionality of all key systems, each business unit and corporate headquarters are also preparing contingency plans. CERTAIN FACTORS AFFECTING FORWARD LOOKING STATEMENTS Certain statements in the Company's 1997 Annual Report to Shareholders, its Annual Report on Form 10-K, its first and second 1998 Quarterly Reports on Form 10-Q 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
Sept. 27, 1998 Dec. 28, 1997 ---------------- ---------------- ASSETS Cash $ 35,226 $ 45,059 Marketable securities 19,076 7,719 Trade receivables, less allowance (1998 - $17,847; 1997 - $18,020) 594,926 638,311 Inventories 94,510 101,080 Prepaid expenses and other receivables 153,839 92,465 --------------- --------------- Total current assets 897,577 884,634 --------------- --------------- Property, plant and equipment Cost 3,733,189 3,754,837 Less accumulated depreciation (1,640,109) (1,562,795) --------------- --------------- Net property, plant and equipment 2,093,080 2,192,042 --------------- --------------- Intangible and other assets Excess of acquisition cost over the value of assets acquired, less amortization 3,773,817 3,584,393 Investments and other assets 211,282 229,282 --------------- --------------- Total intangible and other assets 3,985,099 3,813,675 --------------- --------------- Total assets $ 6,975,756 $ 6,890,351 =============== =============== LIABILITIES & SHAREHOLDERS' EQUITY Current maturities of long-term debt $ $ 18,375 Accounts payable and current portion of film contracts payable 313,639 300,260 Compensation, interest and other accruals 284,701 234,675 Dividend payable 56,917 53,915 Income taxes 10,138 12,893 Deferred income 115,637 118,459 --------------- --------------- Total current liabilities 781,032 738,577 --------------- --------------- Deferred income taxes 464,540 402,254 Long-term debt, less current portion 1,288,183 1,740,534 Postretirement, medical and life insurance liabilities 310,745 312,082 Other long-term liabilities 229,187 217,168 --------------- --------------- Total liabilities 3,073,687 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 106,274 104,366 Retained earnings 4,572,871 3,995,712 --------------- --------------- Total 5,003,566 4,424,499 --------------- --------------- Less treasury stock - 42,816,478 shares and 40,546,253 shares respectively, at cost (1,077,597) (916,708) Deferred compensation related to ESOP (23,900) (28,055) --------------- --------------- Total shareholders' equity 3,902,069 3,479,736 --------------- --------------- Total liabilities and shareholders' equity $ 6,975,756 $ 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 Sept. 27, 1998 Sept. 28, 1997 (Dec) Net Operating Revenues: Newspaper advertising $ 707,347 $ 633,019 11.7 Newspaper circulation 251,534 235,439 6.8 Broadcasting 159,125 164,895 (3.5) Cable and Security 58,231 63,502 (8.3) Other 49,825 49,235 1.2 ------------ ------------ ------ Total 1,226,062 1,146,090 7.0 ------------ ------------ ------ Operating Expenses: Cost of sales and operating expenses, exclusive of depreciation 648,320 602,418 7.6 Selling, general and administrative expenses, exclusive of depreciation 188,076 184,092 2.2 Depreciation 49,878 49,979 (0.2) Amortization of intangible assets 27,122 24,900 8.9 ------------ ------------ ------ Total 913,396 861,389 6.0 ------------ ------------ ------ Operating income 312,666 284,701 9.8 ------------ ------------ ------ Non-operating income (expense): Interest expense (17,190) (23,418) (26.6) Other (877) (1,573) (44.2) ------------ ------------ ------ Total (18,067) (24,991) (27.7) ------------ ------------ ------ Income before income taxes 294,599 259,710 13.4 Provision for income taxes 118,080 107,250 10.1 ------------ ------------ ------ Net income $ 176,519 $ 152,460 15.8 ============ ============ ====== Net income per share - basic $0.62 $0.54 14.8 ============ ============ ====== Net income per share - diluted $0.62 $0.53 17.0 ============ ============ ====== Dividends per share $0.20 $0.19 5.3 ============ ============ ======
CONSOLIDATED STATEMENTS OF INCOME Gannett Co., Inc. and Subsidiaries Unaudited, in thousands of dollars (except per share amounts)
Thirty-nine weeks ended % Inc Sept. 27, 1998 Sept. 28, 1997 (Dec) Net Operating Revenues: Newspaper advertising $ 2,124,016 $ 1,882,877 12.8 Newspaper circulation 758,375 701,046 8.2 Broadcasting 518,616 504,746 2.7 Cable and Security 179,521 189,411 (5.2) Other 149,581 132,594 12.8 -------------- -------------- --------- Total 3,730,109 3,410,674 9.4 -------------- -------------- --------- Operating Expenses: Cost of sales and operating expenses, exclusive of depreciation 1,938,055 1,744,586 11.1 Selling, general and administrative expenses, exclusive of depreciation 568,187 538,670 5.5 Depreciation 153,273 149,737 2.4 Amortization of intangible assets 79,826 74,640 6.9 -------------- -------------- --------- Total 2,739,341 2,507,633 9.2 -------------- -------------- --------- Operating income 990,768 903,041 9.7 -------------- -------------- --------- Non-operating income (expense): Interest expense (60,767) (73,819) (17.7) Other* 308,977 (7,665) ---- -------------- -------------- --------- Total 248,210 (81,484) ---- -------------- -------------- --------- Income before income taxes 1,238,978 821,557 50.8 Provision for income taxes 496,800 339,300 46.4 -------------- -------------- --------- Net income $ 742,178 $ 482,257 53.9 ============== ============== ========= Net income per share - basic $2.61 $1.70 53.5 ============== ============== ========= Net income per share - diluted $2.59 $1.69 53.3 ============== ============== ========= Dividends per share $0.58 $0.55 5.5 ============== ============== ========= * 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
Thirty-nine weeks ended Sept. 27, 1998 Sept. 28, 1997 -------------- -------------- Cash flows from operating activities Net income $ 742,178 $ 482,257 Adjustments to reconcile net income to operating cash flows: Depreciation 153,273 149,737 Amortization of intangibles 79,826 74,640 Deferred income taxes 62,286 (13,500) Other, net (432,208) (21,688) --------- --------- Net cash flow from operating activities 605,355 671,446 --------- --------- Cash flows from investing activities Purchase of property, plant and equipment (143,682) (142,062) Payments for acquisitions, net of cash acquired (369,804) (98,721) Change in other investments (1,559) (10,501) Proceeds from sale of certain assets 649,466 8,993 Collection of long-term receivables 14,649 3,828 --------- --------- Net cash provided by (used for) investing activities 149,070 (238,463) --------- --------- Cash flows from financing activities Payments of long-term debt (470,726) (290,787) Dividends paid (162,017) (152,226) Cost of common shares repurchased (137,038) Proceeds from issuance of common stock 16,880 24,952 --------- --------- Net cash used for financing activities (752,901) (418,061) --------- --------- Net increase in cash and cash equivalents 1,524 14,922 Balance of cash and cash equivalents at beginning of year 52,778 31,202 --------- --------- Balance of cash and cash equivalents at end of third quarter $ 54,302 $ 46,124 ========= =========
BUSINESS SEGMENT INFORMATION Gannett Co., Inc. and Subsidiaries Unaudited, in thousands of dollars
Thirteen weeks ended % Inc Sept. 27, 1998 Sept. 28, 1997 (Dec) Operating Revenues: Newspaper publishing $ 1,008,706 $ 917,693 9.9 Broadcasting 159,125 164,895 (3.5) Cable and Security 58,231 63,502 (8.3) --------------- --------------- -------- Total $ 1,226,062 $ 1,146,090 7.0 =============== =============== ======== Operating Income (net of depreciation and amortization): Newspaper publishing $ 248,787 $ 217,793 14.2 Broadcasting 66,507 71,884 (7.5) Cable and Security 13,883 12,323 12.7 Corporate (16,511) (17,299) 4.6 --------------- --------------- --------- Total $ 312,666 $ 284,701 9.8 =============== =============== ========= Depreciation and Amortization: Newspaper publishing $ 46,386 $ 41,065 13.0 Broadcasting 14,643 14,404 1.7 Cable and Security 13,758 17,196 (20.0) Corporate 2,213 2,214 (0.0) --------------- --------------- --------- Total $ 77,000 $ 74,879 2.8 =============== =============== ========= Operating Cash Flow: Newspaper publishing $ 295,173 $ 258,858 14.0 Broadcasting 81,150 86,288 (6.0) Cable and Security 27,641 29,519 (6.4) Corporate (14,298) (15,085) 5.2 --------------- --------------- --------- Total $ 389,666 $ 359,580 8.4 =============== =============== ========= 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. In the third quarter of 1998, the Company exchanged certain of its cable operations, resulting in increased subscribers. On a pro forma basis for the third quarter, giving effect to these transactions, cable operations reported gains in revenue of 9%, operating income of 17% and operating cash flow of 8%. On a year-to-date basis, pro forma cable operations reflect an 8% revenue gain, an 11% 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 May 1998. On a pro forma basis for the third quarter, giving effect to these transactions, television operations reported gains in revenue of 1%, operating income of 1% and even operating cash flow. On a year-to-date basis, pro forma television operations reflect a 7% revenue gain, a 12% improvement in operating income and a 9% gain in operating cash flow.
BUSINESS SEGMENT INFORMATION Gannett Co., Inc. and Subsidiaries Unaudited, in thousands of dollars
Thirty-nine weeks ended % Inc Sept. 27, 1998 Sept. 28, 1997 (Dec) Operating Revenues: Newspaper publishing $ 3,031,972 $ 2,716,517 11.6 Broadcasting 518,616 504,746 2.7 Cable and Security 179,521 189,411 (5.2) --------------- -------------- ------- Total $ 3,730,109 $ 3,410,674 9.4 =============== ============== ======= Operating Income (net of depreciation and amortization): Newspaper publishing $ 762,276 $ 688,569 10.7 Broadcasting 237,104 226,275 4.8 Cable and Security 42,362 39,573 7.0 Corporate (50,974) (51,376) 0.8 --------------- -------------- ------- Total $ 990,768 $ 903,041 9.7 =============== ============== ======= Depreciation and Amortization: Newspaper publishing $ 138,656 $ 123,577 12.2 Broadcasting 44,636 43,898 1.7 Cable and Security 43,157 50,348 (14.3) Corporate 6,650 6,554 1.5 --------------- -------------- ------- Total $ 233,099 $ 224,377 3.9 =============== ============== ======= Operating Cash Flow: Newspaper publishing $ 900,932 $ 812,146 10.9 Broadcasting 281,740 270,173 4.3 Cable and Security 85,519 89,921 (4.9) Corporate (44,324) (44,822) 1.1 --------------- -------------- ------- Total $ 1,223,867 $ 1,127,418 8.6 =============== ============== ======= NOTES: See the Company's Business Segment Information for the 13-week period ending September 27, 1998, on the preceding page.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS September 27, 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 39-week periods ended September 27, 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 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: November 12, 1998 /s/George R. Gavagan ---------------------------------------- George R. Gavagan Vice President and Controller Dated: November 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 Incorporated by reference to $3,000,000,000 Revolving Exhibit 4-9 to Gannett Co. Inc's Credit Agreement among Form 10-Q filed on August 12, 1998. 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-11 2 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 Thirty-nine weeks ended ---------------------- ---------------------- Sept. 27, Sept. 28, Sept. 27, Sept. 28, 1998 1997 1998 1997 ------------ ------------ ----------- --------- Basic earnings: Net income $176,519 $152,460 $742,178 $482,257 Weighted average number of common shares outstanding 284,366 283,597 284,381 283,227 Basic earnings per share $0.62 $0.54 $2.61 $1.70 Diluted earnings: Net income $176,519 $152,460 $742,178 $482,257 Weighted average number of common shares outstanding 284,366 283,597 284,381 283,227 Dilutive effect of out- standing stock options and stock incentive rights 2,557 2,361 2,692 2,092 Weighted average number of shares outstanding, as adjusted 286,923 285,958 287,073 285,319 Diluted earnings per share $0.62 $0.53 $2.59 $1.69
EX-27 3 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 9-MOS DEC-27-1998 DEC-29-1997 SEP-27-1998 35,226 19,076 612,773 17,847 94,510 897,577 3,733,189 1,640,109 6,975,756 740,369 0 324,421 0 0 3,618,311 6,975,756 3,730,109 3,730,109 1,938,055 2,739,341 (308,977) 0 60,767 1,238,978 496,800 742,178 0 0 0 742,178 2.61 2.59
EX-27 4 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 9-MOS DEC-28-1997 DEC-30-1996 SEP-28-1997 44,155 1,969 570,160 17,310 93,826 772,677 3,578,270 1,565,100 6,398,938 663,692 0 324,421 0 0 2,958,816 6,398,938 3,410,674 3,410,674 1,744,586 2,507,633 7,665 0 73,819 821,557 339,300 482,257 0 0 0 482,257 1.70 1.69
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