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 25, 1994
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 25, 1994 was 139,199,000.
PART I. FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS
1994 Acquisition
On May 3, 1994, the Company purchased Nursing Spectrum, which
publishes a group of biweekly periodicals specializing in
advertising for nursing employment. The acquisition did not
materially affect results of operations or financial condition.
In September 1994, the Company reached an agreement to purchase a
tenth television station, KTHV-TV in Little Rock, a CBS affiliate.
This acquisition is expected to be completed in the fourth quarter
of 1994.
Operating Summary
Income from operations for the third quarter of 1994 rose $24.3
million or 15%, reflecting significant performance gains across all
three divisions. Newspapers posted a 10% earnings gain, reflecting
advertising revenue growth in all major categories. Classified
revenue continued to be very strong. Improved broadcast earnings,
which rose 48%, reflected strong television and radio advertising
revenue growth. Outdoor profits grew 25% from gains in local and
national advertising.
Operating income for the first nine months of 1994 rose $76.2
million or 16%, reflecting sustained earnings growth by newspaper
and broadcasting operations.
Newspapers
Newspaper publishing revenues rose $47 million or 6% in the third
quarter of 1994 and $110.2 million or 5% for the year-to-date.
Advertising revenue rose $46.4 million or 10% for the quarter and
$100.5 million or 7% for the first nine months. Classified ad
revenues were again particularly strong, led by significantly
higher help-wanted advertising. National ad revenue was also up
sharply for the quarter.
The tables below provide, on a pro forma basis, further details of
newspaper ad revenue and linage for the third quarter and year-to-
date periods of 1994 and 1993:
Advertising revenue, in thousands of dollars (pro forma)
Third Quarter 1994 1993 % Change
Local $189,088 $183,918 3
National 70,560 61,275 15
Classified 180,844 158,798 14
Total Run-
of-Press 440,492 403,991 9
Preprint
and other
advertising 79,179 75,725 5
Total ad
revenue $519,671 $479,716 8
Advertising linage, in thousands of inches (pro forma)
Third Quarter 1994 1993 % Change
Local 7,487 7,517 -
National 514 467 10
Classified 8,120 7,496 8
Total Run-
of-Press 16,121 15,480 4
Preprint 15,436 14,821 4
Total ad
linage 31,557 30,301 4
Advertising revenue, in thousands of dollars (pro forma)
Year-to-date 1994 1993 % Change
Local $ 573,567 $ 564,455 2
National 225,325 210,384 7
Classified 522,017 462,497 13
Total Run-
of-Press 1,320,909 1,237,336 7
Preprint
and other
advertising 239,628 230,521 4
Total ad
revenue $1,560,537 $1,467,857 6
Advertising linage, in thousands of inches (pro forma)
Year-to-date 1994 1993 % Change
Local 22,612 22,912 (1)
National 1,596 1,494 7
Classified 23,677 21,956 8
Total Run-
of-Press 47,885 46,362 3
Preprint 45,951 44,352 4
Total ad
linage 93,836 90,714 3
Newspaper circulation revenues rose $3.2 million or 2% for the
quarter and $8.1 million or 1% for the first nine months. Net paid
daily circulation for the Company's local newspapers was even for
the quarter, and Sunday circulation was down slightly. For the
year-to-date, daily and Sunday circulation declined slightly. USA
TODAY reported an average daily paid circulation of 2,009,523 in
the ABC Publisher's statement for the six months ended September
25, 1994, which, subject to audit, is a 2% increase over the year-
ago period.
Operating costs in total for the newspaper segment rose $32.1
million or 6% for the quarter and $62.9 million or 4% for the year-
to-date. Newsprint costs increased 2% for the quarter reflecting
higher consumption, with prices down slightly. For the first nine
months, newsprint expense was down 2%, reflecting lower prices from
a year ago, partly offset by higher consumption. The Company
expects newsprint prices to trend higher than year ago levels for
the remainder of 1994, and price increases are expected to continue
in 1995. Payroll costs rose 3% for the quarter and year-to-date.
Selling costs, employee benefits and facilities and equipment costs
at several of the Company's newspaper operations were higher in the
quarter.
Newspaper operating income rose $15 million or 10% for the quarter
and $47.2 million or 10% for the first nine months, due principally
to the improved ad revenue environment. Most of the Company's local
newspapers reported improved ad revenues and operating income
results. At USA TODAY, ad revenues rose 11% in the third quarter
and 4% for the year-to-date. Operating results at USA TODAY
improved for the quarter and for the year-to-date.
Broadcast
Broadcast revenues rose $3 million or 3% for the third quarter and
$2.6 million or 1% for the first nine months. Operating costs
declined $5.8 million or 8% for the quarter and $27.3 million or
12% for the year-to-date. On a pro forma basis, broadcast
revenues increased 16% for the quarter and 13% for the year-to-
date, while operating costs increased 7% for the quarter and 2% for
the first nine months.
Pro forma local television ad revenues increased 17% for the
quarter and 12% for the year to date, while national revenues
increased 17% for the quarter and were up 14% for the year-to-date.
Pro forma radio revenues increased 15% for the quarter and 19% for
the first nine months.
Operating income for the broadcast division rose $8.8 million or
48% for the quarter and $29.8 million or 51% for the year-to-date,
reflecting strong gains at most of the Company's television and
radio stations. For the quarter and year-to-date periods,
broadcast earnings comparisons were also favorably affected by the recent
sale of four radio stations in Kansas City and St. Louis, Mo., and the
Company's television station in Boston.
Outdoor
Outdoor revenues increased $5.9 million or 10% for the quarter and
$4.2 million or 2% for the year-to-date, reflecting improved demand
for local and national advertising. Operating costs rose 8% for
the quarter, reflecting higher sales activity. For the
first nine months, costs rose 3%. Operating income for Outdoor
rose $1.4 million or 25% for the quarter and was even for the first
nine months.
Non-operating income and expense
Interest expense declined $3.3 million or 24% for the quarter and
$5.9 million or 16% for the year-to-date. Average borrowings were
lower during the first nine months of 1994, but average interest
rates on borrowed funds were higher than a year ago.
Net Income
Net income rose $16.8 million or 19% for the quarter and $47.2
million or 18% for the first nine months. Net income per share was
$0.74 for the quarter compared to $0.61 in 1993, an increase of
21%. For the year-to-date, net income per share rose to $2.17 from
$1.84 in 1993, an 18% increase. The weighted average number of
shares outstanding totaled 143,465,000 for the third quarter of
1994, compared with 146,676,000 for the third quarter of 1993.
Average shares outstanding for the year-to-date totaled
145,919,000 for 1994 and 146,364,000 for 1993. At the end of the
third quarter, 139,199,000 shares were outstanding. The decrease
in shares outstanding is due principally to share repurchases as
discussed below.
Liquidity and capital resources
In May 1994, the Company announced it would resume a share
repurchase program originally authorized in 1988 for 7.5 million
shares. Approximately 4.5 million shares had been purchased prior
to 1994. The Company has purchased the remaining 3 million
shares, and the program was expanded by an additional 5 million
shares, which were purchased in August and September. The total
cost of the share repurchase program in 1994 was $399 million.
Cash flow from operating activities totaled $512 million for the
first nine-months of 1994, compared with $419.9 million a year ago.
Working capital totaled $109.1 million, down from $302.8 million at
the end of 1993.
Capital expenditures for the year-to-date totaled $95.6 million,
compared with $89.8 million in 1993. Long-term debt totaled $916.3
million at the end of the third quarter, up from $850.7 million at
the end of 1993. The increase in long-term debt reflects
borrowings to finance the share repurchases as discussed above.
The Company declared regular quarterly dividends of $0.33 per share
in the first and second quarters of 1994 and $0.34 for the third
quarter. Dividends declared totaled $146.1 million.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
ASSETS Sept. 25, 1994 Dec. 26, 1993
- ------ --------------- ---------------
Current Assets:
Cash............................... $ 6,328,000 $ 32,461,000
Marketable securities.............. 18,951,000 43,034,000
Trade receivables, less allowance
(1994 - $16,748,000 ; 1993 -
$13,915,000)....................... 442,241,000 449,063,000
Other receivables.................. 29,383,000 135,036,000
Inventories (materials and supplies) 55,237,000 53,094,000
Prepaid expenses................... 61,550,000 45,269,000
--------------- ---------------
Total current assets............. 613,690,000 757,957,000
--------------- ---------------
Property, plant and equipment:
Cost............................... 2,859,541,000 2,794,610,000
Less accumulated depreciation...... (1,415,898,000) (1,316,341,000)
--------------- ---------------
Net property, plant and equipment.. 1,443,643,000 1,478,269,000
--------------- ---------------
Intangible and other assets:
Excess of cost of subsidiaries over
net tangible assets acquired, less
amortization (1994 - $430,333,000 ;
1993 - $396,915,000).............. 1,495,393,000 1,501,102,000
Other assets....................... 160,279,000 86,470,000
--------------- ---------------
Total intangible and other assets 1,655,672,000 1,587,572,000
--------------- ---------------
Total assets..................... $ 3,713,005,000 $ 3,823,798,000
=============== ===============
LIABILITIES & SHAREHOLDERS' EQUITY
- ----------------------------------
Current Liabilities:
Current portion of long-term debt... $ 69,000 $ 164,000
Accounts payable and current portion
of film contracts payable......... 204,044,000 187,208,000
Compensation, interest and other
accruals.......................... 172,656,000 140,457,000
Dividend payable................... 48,981,000 48,399,000
Income taxes....................... 2,563,000 5,760,000
Deferred income.................... 76,299,000 73,151,000
--------------- ---------------
Total current liabilities....... 504,612,000 455,139,000
Deferred income taxes.............. 186,398,000 205,314,000
Long-term debt, less current portion 916,303,000 850,686,000
Retiree medical and life insurance
liabilities....................... 314,203,000 308,024,000
Other long-term liabilities........ 100,346,000 96,715,000
--------------- ---------------
Total liabilities.................. 2,021,862,000 1,915,878,000
--------------- ---------------
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
shares; issued 162,211,590 shares.. 162,212,000 162,212,000
Additional paid-in capital......... 69,436,000 70,938,000
Retained earnings.................. 2,535,152,000 2,366,246,000
Foreign currency translation
adjustment....................... (9,474,000) (9,442,000)
--------------- ---------------
Total.............................. 2,757,326,000 2,589,954,000
Less treasury stock - 23,012,416
shares and 15,244,733 shares,
respectively, at cost............. (1,030,288,000) (643,787,000)
Deferred compensation related to
ESOP.............................. (35,895,000) (38,247,000)
--------------- ---------------
Total shareholders' equity...... 1,691,143,000 1,907,920,000
Total liabilities and --------------- ---------------
shareholders' equity............ $ 3,713,005,000 $ 3,823,798,000
=============== ===============
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Thirteen weeks ended Thirty-nine weeks ended
Sept. 25, 1994 Sept 26, 1993 Sept. 25, 1994 Sept 26, 1993
-------------- ------------- --------------- ---------------
Net Operating Revenues:
Newspaper advertising............... $521,938,000 $475,509,000 $1,554,332,000 $1,453,807,000
Newspaper circulation............... 210,724,000 207,558,000 635,809,000 627,735,000
Broadcasting........................ 95,189,000 92,207,000 286,689,000 284,100,000
Outdoor advertising................. 65,929,000 60,063,000 176,031,000 171,875,000
Other............................... 38,647,000 41,195,000 123,072,000 121,514,000
-------------- ------------- --------------- ---------------
Total............................... 932,427,000 876,532,000 2,775,933,000 2,659,031,000
-------------- ------------- --------------- ---------------
Operating Expenses:
Cost of sales and operating expenses,
exclusive of depreciation.......... 524,016,000 507,291,000 1,556,523,000 1,534,609,000
Selling, general and administrative
expenses, exclusive of depreciation 167,447,000 154,499,000 501,850,000 483,748,000
Depreciation........................ 42,203,000 40,687,000 123,204,000 122,732,000
Amortization of intangible assets... 11,506,000 11,114,000 33,961,000 33,797,000
-------------- ------------- --------------- ---------------
Total............................... 745,172,000 713,591,000 2,215,538,000 2,174,886,000
-------------- ------------- --------------- ---------------
Operating income.................... 187,255,000 162,941,000 560,395,000 484,145,000
-------------- ------------- --------------- ---------------
Non-operating income (expense):
Interest expense.................... (10,307,000) (13,590,000) (32,204,000) (38,139,000)
Other............................... (217,000) 3,429,000 2,224,000 6,769,000
-------------- ------------- --------------- ---------------
Total............................... (10,524,000) (10,161,000) (29,980,000) (31,370,000)
-------------- ------------- --------------- ---------------
Income before income taxes.......... 176,731,000 152,780,000 530,415,000 452,775,000
Provision for income taxes.......... 71,200,000 64,000,000 214,400,000 184,000,000
-------------- ------------- --------------- ---------------
Net income.......................... $105,531,000 $88,780,000 $316,015,000 $268,775,000
============== ============= =============== ===============
Net income per share................ $0.74 $0.61 $2.17 $1.84
====== ====== ====== ======
Dividends per share................. $0.34 $0.33 $1.00 $0.97
====== ====== ====== ======
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Thirty-nine weeks ended
Sept. 25, 1994 Sept. 26, 1993
-------------- --------------
Cash Flows From Operating Activities:
Net income................................. $316,015,000 $268,775,000
Adjustments to reconcile net income
to operating cash flows:
Depreciation............................. 123,204,000 122,732,000
Amortization of intangibles.............. 33,961,000 33,797,000
Deferred income taxes.................... (12,916,000) (11,182,000)
Gain on sale of assets................... (5,614,000) (1,003,000)
Other, net............................... 29,571,000 9,775,000
Changes in other assets & liabilities, net 27,765,000 (3,010,000)
------------- --------------
Net cash flow from operating activities.... 511,986,000 419,884,000
------------- --------------
Cash Flows From Investing Activities:
Purchase of property, plant and equipment.. (95,630,000) (89,821,000)
Payments for acquisitions, net of cash
acquired.................................. (30,910,000) (5,175,000)
Increase in other investments.............. (24,458,000)
Proceeds from sale of assets............... 54,946,000 14,157,000
Collection of long-term receivables........ 1,012,000 1,321,000
------------- --------------
Net cash used by investing activities...... (95,040,000) (79,518,000)
------------- --------------
Cash Flows From Financing Activities:
Proceeds from long-term debt............... 64,741,000 525,000,000
Payments of long-term debt................. (738,425,000)
Dividends paid............................. (146,310,000) (140,058,000)
Common stock transactions, net............. (385,196,000) 7,286,000
------------- --------------
Net cash used for financing activities..... (466,765,000) (346,197,000)
------------- --------------
Effect of currency exchange rate change.... (397,000) (2,473,000)
------------- --------------
Net decrease in cash and cash equivalents.. (50,216,000) (8,304,000)
Balance of cash and cash equivalents
at beginning of year...................... 75,495,000 73,329,000
------------- --------------
Balance of cash and cash equivalents
at end of third quarter................... $25,279,000 $65,025,000
============= ==============
BUSINESS SEGMENT INFORMATION
Thirteen weeks ended Thirty-nine weeks ended
Sept. 25, 1994 Sept. 26, 1993 Sept. 25, 1994 Sept. 26, 1993
-------------- -------------- --------------- ---------------
OPERATING REVENUES:
Newspaper publishing............. $771,309,000 $724,262,000 $2,313,213,000 $2,203,056,000
Broadcasting..................... 95,189,000 92,207,000 286,689,000 284,100,000
Outdoor advertising.............. 65,929,000 60,063,000 176,031,000 171,875,000
-------------- -------------- --------------- ---------------
$932,427,000 $876,532,000 $2,775,933,000 $2,659,031,000
============== ============== =============== ===============
OPERATING INCOME (net of depreciation
and amortization):
Newspaper publishing............. $167,691,000 $152,738,000 $510,447,000 $463,219,000
Broadcasting..................... 27,243,000 18,438,000 87,902,000 58,057,000
Outdoor advertising.............. 7,006,000 5,623,000 10,462,000 10,495,000
Corporate........................ (14,685,000) (13,858,000) (48,416,000) (47,626,000)
-------------- -------------- --------------- ---------------
$187,255,000 $162,941,000 $560,395,000 $484,145,000
============== ============== =============== ===============
DEPRECIATION AND AMORTIZATION:
Newspaper publishing............. $38,920,000 $36,400,000 $114,063,000 $110,144,000
Broadcasting..................... 7,381,000 7,910,000 21,470,000 23,679,000
Outdoor advertising.............. 4,998,000 4,639,000 14,238,000 14,126,000
Corporate........................ 2,410,000 2,852,000 7,394,000 8,580,000
-------------- -------------- --------------- ---------------
$53,709,000 $51,801,000 $157,165,000 $156,529,000
============== ============== =============== ===============
NOTE TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
September 25, 1994
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
25, 1994, and the comparative periods of 1993, reflect all adjustments
which, in the opinion of the Company, are necessary for a fair
statement of results for the interim periods.
PART II.OTHER INFORMATION
Item 5. Other Information
Effective August 23, 1994, Josephine Peters Louis was elected to the
Company's board of directors. With her election, the board numbers
12. Mrs. Louis will serve on the board for a term that expires at the
1996 annual meeting of shareholders.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
See Exhibit Index for list of exhibits filed with this report.
Management contracts and compensatory plans or arrangements are
identified with an asterisk on the Exhibit Index.
(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 8, 1994 s/ Larry F. Miller
-------------------------------
Larry F. Miller
Senior Vice President/Financial
Planning and Controller
Dated: November 8, 1994 s/ Thomas L. Chapple
-------------------------------
Thomas L. Chapple
General Counsel and Secretary
EXHIBIT INDEX
Exhibit
Number Title or Description Location
- -------- -------------------- --------
4-1 $1,000,000,000 Revolving Incorporated by reference to
Credit Agreement among Exhibit 4-1 to Gannett Co.,
Gannett Co., Inc. and the Inc.'s Form 10-K for the fiscal
Banks named therein. year ended December 26, 1993.
4-2 Amendment Number One to Incorporated by reference to
$1,000,000,000 Revolving Exhibit 4-2 to Gannett Co.,
Credit Agreement among Inc.'s Form 10-Q for the fiscal
Gannett Co., Inc. and the quarter ended June 26, 1994.
Banks named therein.
4-3 Indenture dated as of March 1, Incorporated by reference to
1983 between Gannett Co., Inc. Exhibit 4-2 to Gannett Co.,
and Citibank, N.A., as Trustee. Inc.'s Form 10-K for the fiscal
year ended December 29, 1985.
4-4 First Supplemental Indenture Incorporated by reference to
dated as of November 5, 1986 Exhibit 4 to Gannett Co., Inc.'s
among Gannett Co., Inc., Form 8-K filed on November 9,
Citibank, N.A., as Trustee, and 1986.
Sovran Bank, N.A., as
Successor Trustee.
4-5 Rights Plan. Incorporated by reference to
Exhibit 1 to Gannett Co., Inc.'s
Form 8-K filed on May 23, 1990.
11 Statement re computation of Attached.
earnings per share.
27 Financial Data Schedule. Attached.
Gannett Co., Inc. agrees to furnish to the Securities and Exchange 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
registrant.
EXHIBIT 11
GANNETT CO., INC.
Calculation of Earnings Per Share
Thirteen weeks ended Thirty-nine weeks ended
Sept. 25, 1994 Sept. 26, 1993 Sept. 25, 1994 Sept. 26, 1993
-------------- -------------- -------------- --------------
Net Income $105,531,000 $88,780,000 $316,015,000 $268,775,000
============== ============== ============== ==============
Weighted average
number of
common shares
outstanding 143,465,000 146,676,000 145,919,000 146,364,000
============== ============== ============== ==============
Net income
per share $0.74 $0.61 $2.17 $1.84
===== ===== ===== =====
5
9-MOS
DEC-25-1994
DEC-27-1993
SEP-25-1994
6,328,000
18,951,000
458,989,000
16,748,000
55,237,000
613,690,000
2,859,541,000
1,415,898,000
3,713,005,000
504,612,000
0
162,212,000
0
0
1,528,931,000
3,713,005,000
2,775,933,000
2,775,933,000
1,556,523,000
2,215,538,000
0
0
32,204,000
530,415,000
214,400,000
316,015,000
0
0
0
316,015,000
2.17
0
