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 24, 1995 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 Identification No.)
incorporation or organization)
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 24, 1995 was 140,205,796.
PART I. FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS
Operating Summary
Income from operations for the third quarter of 1995 declined
$17.8 million or 10%, reflecting costs associated with a strike
against the Company's newspaper in Detroit . Newspaper earnings,
which fell $31.3 million or 19%, were adversely affected both by
the strike and by continuing increases in newsprint costs.
Broadcast earnings rose 41%,reflecting strong television and
radio advertising revenue growth. Outdoor division earnings were
significantly improved, rising 39% over the comparable period a
year ago.
Operating income for the first nine months of 1995 rose $12.6
million or 2%.
Newspapers
Newspaper publishing revenues declined $11.2 million or 1% in the
third quarter of 1995, and rose $37.6 million or 2% for the year-to-date.
Newspaper advertising revenue fell $13.1 million or 3%
in the quarter, reflecting lower revenues in Detroit because of the
strike, partially offset by continued gains in classified
advertising, particularly in employment and automotive. Excluding
Detroit, newspaper advertising revenues for the quarter rose $6.4
million or 1%. For the first nine months of 1995, newspaper
advertising revenue grew $38.4 million or 2%.
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 1995 and 1994:
Advertising revenue, in thousands of dollars (pro forma)
Third quarter 1995 1994 % Change
Local $176,563 $185,170 (5)
National 72,860 71,526 2
Classified 182,287 178,815 2
Total Run-of-Press 431,710 435,511 (1)
Preprint and
other advertising 77,192 78,051 (1)
Total ad revenue $508,902 $513,562 (1)
Advertising linage, in thousands of inches (pro forma)
Third quarter 1995 1994 % Change
Local 7,095 7,366 (4)
National 499 502 (1)
Classified 8,165 7,990 2
Total Run-of-Press 15,759 15,858 (1)
Preprint 15,003 15,204 (1)
Total ad linage 30,762 31,062 (1)
Advertising revenue, in thousands of dollars (pro forma)
Year-to-date 1995 1994 % Change
Local $ 561,190 $ 561,868 -
National 240,889 228,306 6
Classified 549,486 515,853 7
Total Run-of-Press 1,351,565 1,306,027 3
Preprint and
other advertising 241,131 236,328 2
Total ad revenue $1,592,696 $1,542,355 3
Advertising linage, in thousands of inches (pro forma)
Year-to-date 1995 1994 % Change
Local 21,890 22,240 (2)
National 1,610 1,561 3
Classified 24,178 23,296 4
Total Run-of-Press 47,678 47,097 1
Preprint 46,368 45,245 2
Total ad linage 94,046 92,342 2
Excluding Detroit, pro forma newspaper advertising volume was
flat for the quarter, reflecting a 3% decline in local because of
reduced spending by larger retailers. Advertising revenues
excluding Detroit were 3% higher, including a 6% gain in
classified.
Newspaper circulation revenues were down slightly for the quarter
and for the year-to-date. Net paid daily circulation for the
Company's local newspapers was down 3% for the quarter and 2% for
the first nine months of 1995. Sunday circulation declined 4%
for the quarter and 2% for the year-to-date. Daily and Sunday
circulation for the quarter and year-to-date periods of 1995
reflect lower volume in Detroit because of the strike. Excluding
Detroit, daily circulation declined 2% for the quarter and 1% for
the year-to-date, while Sunday circulation was down 2% for the
quarter and 1% for the year-to-date. USA TODAY reported an
average daily paid circulation of 2,059,017 in the ABC
Publisher's statement for the six months ended September 24,
1995, which, subject to audit, is a 2% increase from the
comparable period a year ago.
Operating costs in total for the newspaper segment rose $20.1
million or 3% for the quarter and $55.6 million or 3% for the
year-to-date. Newsprint expense increased 39% for the quarter
and 29% for the first nine months, reflecting significantly
higher prices from a year ago. The impact of newsprint price
increases was partially offset by newsprint conservation efforts,
as consumption was below 1994 levels for the quarter and year-to-date
periods, and by cost controls in other areas. The Company
expects further newsprint price increases in 1995, which together
with recent increases, will significantly affect newsprint
expense comparisons for the remainder of 1995 and into 1996.
Payroll costs declined 1% for the quarter and were up slightly
for the year-to-date.
Newspaper operating income declined $31.3 million or 19% for the
third quarter and $18 million or 4% for the first nine months,
reflecting significantly higher newsprint costs and losses in
Detroit because of the strike. Excluding the impact of the strike,
newspaper profits would have risen 3% for the quarter and 4% for
the year-to-date. Most of the Company's local newspapers
reported improved ad revenues and operating income. At USA
TODAY, revenues improved for the quarter and for the year-to-date,
but higher newsprint costs caused operating income to
decline for the quarter and for the first nine months.
Broadcast
Broadcast revenues increased $9.6 million or 10% for the third
quarter and $36 million or 13% for the first nine months, while
operating costs declined $1.7 million or 2% for the quarter and
were up $11.7 million or 6% for the year-to-date. Operating costs
for the year-to-date period include certain program costs related
to the September affiliation change at the Company's Denver TV
station.
On a pro forma basis, broadcast revenues increased 7% for the
quarter and 10% for the year-to-date, reflecting strong demand
for television advertising. Pro forma operating costs declined
5% for the quarter and increased 3% for the first nine months.
Pro forma local television ad revenues grew 10% for the quarter
and for the year-to-date, while national revenues increased 2% for
the quarter and 8% for the first nine months. Radio revenues
increased 10% for the quarter and 9% for the year-to-date.
Operating income rose $11.2 million or 41% for the quarter and
$24.2 million or 28% for the year-to-date, reflecting strong
gains at most of the Company's television and radio stations.
Outdoor
Outdoor revenues increased $1.5 million or 2% for the quarter and
$10.5 million or 6% for the year-to-date. Poster and bulletin
sales were higher for the quarter and for the year-to-date.
Operating costs declined $1.2 million or 2% for the quarter and
were up $3 million or 2% for the first nine months. Operating
income for Outdoor grew $2.7 million or 39% for the quarter and
$7.5 million or 72% for the year-to-date.
Non-operating Income and Expense
Interest expense fell $1.2 million or 12% for the quarter and $0.5
million or 1% for the year-to-date, reflecting higher average
interest rates, offset by lower average borrowings.
Net Income
Net income fell $9.4 million or 9% for the quarter and increased
$5.7 million or 2% for the first nine months. Net income per
share was $.69 in the third quarter, down from $0.74 in the 1994
quarter. For the year-to-date, net income per share increased 6%
to $2.30 from $2.17 in 1994. The weighted average number of
shares outstanding totaled 140,181,000 for the third quarter of
1995, compared with 143,465,000 for the third quarter of 1994.
Average shares outstanding for the year-to-date totaled
140,103,000 for 1995 and 145,919,000 for 1994. The decline in
the number of shares outstanding for the quarter and year-to-date
periods reflects shares purchased under the Company's share
repurchase program during the second and third quarters of 1994.
Liquidity and Capital Resources
Cash flow from operating activities totaled $396 million for the
first nine months of 1995, compared with $512 million a year ago.
Principal uses of cash flow in 1995 were for capital
expenditures, reduction of debt, dividends and pension funding.
Capital expenditures for the year-to-date totaled $106.4 million
in 1995, compared with $95.6 million in 1994. Long-term debt
(commercial paper obligations) was reduced by $167 million.
The Company declared regular quarterly dividends of $0.34 per
share in the first and second quarters of 1995 and $0.35 for the
third quarter. Dividends declared totaled $144.3 million.
Other Matters
On July 24, 1995, the Company entered into an agreement to
acquire Multimedia, Inc. Multimedia publishes 11 daily and 49
non-daily newspapers and operates five network-affiliated
television stations and two radio stations. The company also
owns cable television franchises, a security alarm business, and
produces first-run syndicated television programming and News
Talk Television for cable TV. The acquisition is expected to be
completed by the end of the year, at a purchase price in excess
of $1.7 billion. The Company will assume or retire Multimedia's
existing debt. Pro forma financial information regarding the
Multimedia transaction has been filed on a Form 8-K dated
October 23, 1995.
The Company has filed a registration statement with the
Securities and Exchange Commission for the proposed shelf
registration of $1.5 billion of debt securities. Proceeds from
the sale of the securities are expected to be used for general
corporate purposes and to finance part of the Multimedia
acquisition purchase price. In addition, the Company has arranged
for an amendment to its Revolving Credit Agreement to increase
the commitments to $3 billion. The Company has adequate resources
to meet its liquidity requirements, including all obligations
related to the Multimedia transaction.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
Sept. 24, 1995 Dec. 25, 1994
---------------- -----------------
ASSETS
Cash $ 14,249,000 $ 44,229,000
Marketable securities 21,288,000 23,000
Trade receivables, less allowance
(1995 - $16,373,000; 1994 - $15,846,000) 468,278,000 487,615,000
Other receivables 32,474,000 29,745,000
Inventories 101,042,000 53,047,000
Prepaid expenses 38,276,000 36,178,000
---------------- -----------------
Total current assets 675,607,000 650,837,000
---------------- -----------------
Property, plant and equipment:
Cost 2,904,052,000 2,814,456,000
Less accumulated depreciation (1,490,266,000) (1,386,312,000)
---------------- -----------------
Net property, plant and equipment 1,413,786,000 1,428,144,000
---------------- -----------------
Intangible and other assets:
Excess of cost of subsidiaries over
net tangible assets acquired, less amortization
(1995 - $476,284,000, 1994 - $442,166,000) 1,442,304,000 1,472,002,000
Other assets 193,859,000 156,069,000
---------------- -----------------
Total intangible and other assets 1,636,163,000 1,628,071,000
---------------- -----------------
Total assets $ 3,725,556,000 $ 3,707,052,000
================ =================
LIABILITIES & SHAREHOLDERS' EQUITY
Current portion of long-term debt $ 59,824,000 $ 1,026,000
Accounts payable and current portion of film
contracts payable 223,062,000 215,885,000
Compensation, interest and other accruals 166,094,000 148,506,000
Dividend payable 49,158,000 47,739,000
Income taxes 18,612,000 37,618,000
Deferred income 78,389,000 76,280,000
---------------- -----------------
Total current liabilities 595,139,000 527,054,000
---------------- -----------------
Deferred income taxes 151,522,000 164,691,000
Long-term debt, less current portion 541,536,000 767,270,000
Postretirement medical and life
insurance liabilities 308,714,000 306,863,000
Other long-term liabilities 108,776,000 118,936,000
---------------- -----------------
Total liabilities 1,705,687,000 1,884,814,000
---------------- -----------------
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, issued 162,211,456 shares 162,211,000 162,212,000
Additional paid-in capital 73,336,000 76,604,000
Retained earnings 2,815,295,000 2,639,440,000
Foreign currency translation adjustment (10,196,000) (12,894,000)
---------------- -----------------
Total 3,040,646,000 2,865,362,000
---------------- -----------------
Less treasury stock - 22,005,660 shares and
22,444,480 shares respectively, at cost (986,660,000) (1,008,199,000)
Deferred compensation related to ESOP (34,117,000) (34,925,000)
---------------- -----------------
Total shareholders' equity 2,019,869,000 1,822,238,000
---------------- -----------------
Total liabilities and shareholders' equity $ 3,725,556,000 $ 3,707,052,000
================ =================
CONSOLIDATED STATEMENT OF INCOME (Unaudited)
Thirteen weeks ended Thirty-nine weeks ended
Sept. 24, 1995 Sept. 25, 1994 Sept. 24, 1995 Sept. 25, 1994
-------------- -------------- -------------- ---------------
Net Operating Revenues:
Newspaper advertising $508,821,000 $521,938,000 $ 1,592,697,000 $ 1,554,332,000
Newspaper circulation 209,445,000 210,724,000 635,454,000 635,809,000
Broadcasting 104,787,000 95,189,000 322,650,000 286,689,000
Outdoor advertising 67,398,000 65,929,000 186,562,000 176,031,000
Other 41,810,000 38,647,000 122,639,000 123,072,000
----------- ----------- ------------- -------------
Total 932,261,000 932,427,000 2,860,002,000 2,775,933,000
----------- ---------- ------------- -------------
Operating Expenses:
Cost of sales and operating expenses,
exclusive of depreciation 546,196,000 524,016,000 1,622,790,000 1,556,523,000
Selling, general and administrative
expenses, exclusive of depreciation 166,953,000 167,447,000 513,536,000 501,850,000
Depreciation 38,336,000 42,203,000 116,578,000 123,204,000
Amortization of intangible assets 11,362,000 11,506,000 34,118,000 33,961,000
----------- ----------- ------------- -------------
Total 762,847,000 745,172,000 2,287,022,000 2,215,538,000
----------- ----------- ------------- -------------
Operating income 169,414,000 187,255,000 572,980,000 560,395,000
----------- ----------- ------------- -------------
Non-operating income (expense):
Interest expense (9,113,000) (10,307,000) (31,723,000) (32,204,000)
Other 1,100,000 (217,000) (627,000) 2,224,000
----------- ------------ ------------- -------------
Total (8,013,000) (10,524,000) (32,350,000) (29,980,000)
----------- ----------- ------------- -------------
Income before income taxes 161,401,000 176,731,000 540,630,000 530,415,000
Provision for income taxes 65,300,000 71,200,000 218,900,000 214,400,000
----------- ----------- ------------- -------------
Net income $ 96,101,000 $105,531,000 $ 321,730,000 $ 316,015,000
=========== =========== ============= =============
Net income per share $0.69 $0.74 $2.30 $2.17
=========== =========== ============= =============
Dividends per share $0.35 $0.34 $1.03 $1.00
=========== =========== ============= =============
CONDENSED CONSOLIDATED STATEMEMTS OF CASH FLOWS (Unaudited)
Thirty-nine weeks ended
Sept. 24, 1995 Sept. 25, 1994
Cash flows from operating activities:
Net income $ 321,730,000 $ 316,015,000
Adjustments to reconcile net income
to operating cash flows:
Depreciation 116,578,000 123,204,000
Amortization of intangibles 34,118,000 33,961,000
Deferred income taxes (13,168,000) (12,916,000)
Gain on sale of assets (123,000) (5,614,000)
Other, net 21,011,000 29,571,000
Changes in other assets & liabilities, net (84,147,000) 27,765,000
------------- -------------
Net cash flow from operating activities 395,999,000 511,986,000
------------- -------------
Cash flows from investing activities:
Purchase of property, plant and equipment (106,376,000) (95,630,000)
Payments for acquisitions, net of
cash acquired (30,910,000)
Increase in other investments (2,320,000) (24,458,000)
Proceeds from sale of certain assets 1,622,000 54,946,000
Collection of long-term receivables 4,711,000 1,012,000
------------- -------------
Net cash used by investing activities (102,363,000) (95,040,000)
------------- -------------
Cash flows from financing activities:
Proceeds from long-term debt 64,741,000
Payments of long-term debt (166,936,000)
Dividends paid (142,915,000) (146,310,000)
Common stock transactions, net 7,227,000 (385,196,000)
------------- -------------
Net cash used for financing activities (302,624,000) (466,765,000)
------------- -------------
Effect of currency exchange rate change 273,000 (397,000)
------------- -------------
Net decrease in cash and cash equivalents (8,715,000) (50,216,000)
Balance of cash and cash equivalents at
beginning of year 44,252,000 75,495,000
------------- -------------
Balance of cash and cash equivalents at
end of third quarter $ 35,537,000 $ 25,279,000
============= =============
BUSINESS SEGMENT INFORMATION
Thirteen weeks ended Thirty-nine weeks ended
Sept. 24, 1995 Sept. 25, 1994 Sept. 24, 1995 Sept. 25, 1994
-------------- -------------- -------------- --------------
OPERATING REVENUES:
- ------------------
Newspaper publishing $ 760,075,000 $ 771,309,000 $2,350,789,000 $2,313,213,000
Broadcasting 104,787,000 95,189,000 322,650,000 286,689,000
Outdoor advertising 67,399,000 65,929,000 186,563,000 176,031,000
-------------- -------------- -------------- --------------
Total $ 932,261,000 $ 932,427,000 $2,860,002,000 $2,775,933,000
============== ============== ============== ==============
OPERATING INCOME
(NET OF DEPRECIATION AND AMORTIZATION):
- ---------------------------------------
Newspaper publishing $ 136,344,000 $ 167,691,000 $ 492,434,000 $ 510,447,000
Broadcasting 38,513,000 27,243,000 112,119,000 87,902,000
Outdoor advertising 9,723,000 7,006,000 18,007,000 10,462,000
Corporate (15,166,000) (14,685,000) (49,580,000) (48,416,000)
-------------- -------------- -------------- --------------
Total $ 169,414,000 $ 187,255,000 $ 572,980,000 $ 560,395,000
============== ============== ============== ==============
DEPRECIATION & AMORTIZATION:
- ---------------------------
Newspaper publishing $ 36,169,000 $ 38,920,000 $ 109,585,000 $ 114,063,000
Broadcasting 6,991,000 7,381,000 21,061,000 21,470,000
Outdoor advertising 4,183,000 4,998,000 12,617,000 14,238,000
Corporate 2,355,000 2,410,000 7,433,000 7,394,000
-------------- -------------- -------------- --------------
Total $ 49,698,000 $ 53,709,000 $ 150,696,000 $ 157,165,000
============== ============== ============== ==============
NOTE TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
September 24, 1995
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
24, 1995, and the comparative periods of 1994, 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 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.
A Form 8-K was filed on July 27, 1995 reporting on the
Multimedia transactions.
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, 1995 s/ Larry F. Miller
------------------
Larry F. Miller
Senior Vice President/Financial Planning
and Controller
Dated: November 7, 1995 s/ Thomas L. Chapple
--------------------
Thomas L. Chapple
Senior Vice President, General Counsel
and Secretary
EXHIBIT INDEX
Exhibit
Number Title or Description Location
- ------ -------------------- ------------
4-1 $1,000,000,000 Revolving Incorporated by reference
Credit Agreement among to Exhibit 4-1 to Gannett
Gannett Co., Inc. and the Co., Inc.'s Form 10-K for
Banks named therein. the fiscal year ended
December 26, 1993.
4-2 Amendment Number One to Incorporated by reference
$1,000,000,000 Revolving to Exhibit 4-2 to Gannett
Credit Agreement among Co., Inc.'s Form 10-Q for
Gannett Co., Inc. and the the fiscal quarter ended
Banks named therein. June 26, 1994.
4-3 Indenture dated as of Incorporated by reference
March 1, 1983 between to Exhibit 4-2 to Gannett
Gannett Co., Inc. and Co., Inc.'s Form 10-K for
Citibank, N.A., as the fiscal year ended
Trustee. December 29, 1985.
4-4 First Supplemental Incorporated by reference
Indenture to Exhibit 4 to Gannett
dated as of November 5, Co., Inc.'s Form 8-K filed
1986 on November 9, 1986.
among Gannett Co., Inc.,
Citibank, N.A., as
Trustee, and Sovran Bank,
N.A., as Successor
Trustee.
4-5 Second Supplemental Incorporated by reference
Indenture dated as of to Exhibit 4 to Gannett
June 1, 1995 among Co., Inc's Form 8-K filed
Gannett Co., Inc., June 15, 1995
NationsBank, N.A., as
Trustee, and Crestar
Bank, as Trustee.
4-6 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 Attached.
of 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. 24, 1995 Sept. 25, 1994 Sept. 24, 1995 Sept. 25, 1994
-------------- -------------- -------------- --------------
Net Income $ 96,101,000 $105,531,000 $321,730,000 $316,015,000
============== ============== ============== ==============
Weighted average
number of
common shares
outstanding 140,181,000 143,465,000 140,103,000 145,919,000
============== ============== ============== ==============
Net income
per share $0.69 $0.74 $2.30 $2.17
===== ===== ===== =====
5
9-MOS
DEC-31-1995
DEC-26-1994
SEP-24-1995
14,249,000
21,288,000
484,651,000
16,373,000
101,042,000
675,607,000
2,904,052,000
1,490,266,000
3,725,556,000
595,139,000
0
162,211,000
0
0
1,857,658,000
3,725,556,000
2,860,002,000
2,860,002,000
1,622,790,000
2,287,022,000
0
0
31,723,000
540,630,000
218,900,000
321,730,000
0
0
0
321,730,000
2.30
0
