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
March 31, 1996 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 March 31, 1996 was 140,797,505.
PART I. FINANCIAL INFORMATION
OPERATING SUMMARY
Income from operations for the first quarter of 1996 rose $40.7
million or 26% reflecting in part earnings from Multimedia properties
acquired in December, 1995. Earnings from broadcasting rose
sharply, up $23.8 million or 91%. Multimedia television stations
contributed to this growth along with significant earnings gains
from the Company's other stations as a group. The Company's new
cable business reported operating income of $10.9 million.
Newspaper publishing earnings were down slightly for the quarter.
Incremental earnings from the Multimedia newspaper group were
offset by the effects of higher newsprint costs and a loss at The
Detroit News, where six unions have been on strike since July 1995.
Income from the Company's other businesses was $8.8 million greater
than a year ago, reflecting the results of the alarm security and
entertainment businesses acquired with the Multimedia purchase.
NEWSPAPERS
Newspaper publishing revenues rose $60.7 million or 8% in the first
quarter of 1996 reflecting in part revenues reported by Multimedia
newspapers. Newspaper advertising revenue rose $40.1 million or
8%.
The tables below provide, on a pro forma basis, further details of
newspaper ad revenue and linage for the first quarters of 1996 and
1995:
Advertising revenue, in thousands of dollars (pro forma)
First quarter 1996 1995 % Change
Local $ 190,561 $ 194,047 (2)
National 90,507 80,835 12
Classified 192,870 186,762 3
Total Run-of-Press 473,938 461,644 3
Preprint and
Other advertising 82,947 82,071 1
Total ad revenue $ 556,885 $ 543,715 2
Advertising linage, in thousands of inches (pro forma)
First Quarter 1996 1995 % Change
Local 7,395 7,844 (6)
National 532 528 1
Classified 8,392 8,393 -
Total Run-of-Press 16,319 16,765 (3)
Preprint 14,124 14,273 (1)
Total ad linage 30,443 31,038 (2)
In the pro forma presentation above, total advertising revenues for
the Company's newspapers rose 2% for the first quarter. Local ad
revenues declined due to the effects of the strike in Detroit and
because revenue from certain of the Company's larger retail
customers was soft in the quarter. National ad revenue rose 12%,
reflecting a 26% gain by USA TODAY. Gains in classified
advertising, up 3%, were experienced across the newspaper group
(except Detroit), with improvement in the employment, auto and real
estate categories.
Reported newspaper circulation revenues for the quarter rose 8%.
On a pro forma basis, circulation revenues were up 4% from 1995.
Net paid daily circulation for the Company's local newspapers was
down 4%, while Sunday circulation declined 5%. The decline in
local daily and Sunday circulation was due principally to the
effect of the strike in Detroit. USA TODAY reported an average
daily paid circulation of 2,113,881 in the ABC Publisher's
statement for the six months ended March 31, 1996, which, subject
to audit, is a 3% increase over the comparable period a year ago.
Operating costs in total for the newspaper segment rose $64.0
million or 11% for the quarter, reflecting added costs from the
Multimedia newspapers. Higher newsprint prices again had a
significant effect on costs. In total, reported newsprint expense
rose more than 50% due to higher prices. Consumption was even with
1995, including the added usage of Multimedia newspapers. Pro
forma consumption was down 2%. Newsprint prices have softened
slightly in 1996. It's not certain at this time what changes may
occur in newsprint prices in the coming months. However, because
of the carryover effect of price increases over the last year,
newsprint expense comparisons with 1995 are likely to be adversely
affected through much of this year.
Newspaper operating income declined $3.3 million or 2% for the
quarter reflecting higher newsprint costs and the impact of the
strike in Detroit.
BROADCASTING
Broadcast revenues increased $44.7 million or 46% for the quarter,
while operating costs were up $20.9 million or 30%. Results for
the first quarter of 1996 include 5 televisions stations and 1
radio station included in the Multimedia purchase. On a pro forma
basis, broadcast revenues increased 8%, reflecting a continuation
of a strong growth pattern by the Company's television group.
Pro forma local television ad revenues grew 10% while national
revenues increased 11%. Radio revenues were even for the quarter.
Operating income rose $23.8 million or 91%. Earnings from the new
Multimedia stations were supplemented by improved results from the
Company's other television stations. The Company's nine NBC
affiliates reported substantial year-over-year earnings gains.
CABLE
The Company's cable television business, acquired as part of the
Multimedia purchase, serves approximately 461,000 basic
subscribers, representing 62% of homes passed. Pay subscribers
totaled 334,000. Cable revenue totaled $47.2 million and on a pro
forma basis rose 13% for the quarter. Operating income from cable
totaled $10.9 million and operating cash flow was nearly $24.0
million.
OTHER BUSINESSES
The principal businesses included in this segment are outdoor
advertising, and the television entertainment programming and alarm
security businesses acquired in the Multimedia purchase.
The entertainment programming business and the alarm security
business were both profitable for the quarter. The revenue and
earnings for the alarm security business are growing, however,
competition in the entertainment business continues to adversely
affect its revenue and earnings levels.
NON-OPERATING INCOME AND EXPENSES
Interest expense rose $27.8 million or 237%, reflecting interest on
commercial paper borrowings to finance the Multimedia acquisition
in December 1995.
PROVISION FOR INCOME TAXES
The Company's effective income tax rate was 43.0% in 1996 and 40.5%
in 1995. The increase in the effective tax rate for 1996 is
attributable to amortization of non-deductible intangible assets
recorded in connection with the Multimedia acquisition.
NET INCOME
Net income rose $3.1 million, or 4%, for the quarter. Net income
per share rose to $0.64 from $0.62, a 3% increase. The weighted
average number of shares outstanding totaled 140,680,000 for the
first quarter of 1996, compared with 140,011,000 for the first
quarter of 1995. The increase in the number of shares outstanding
is due mainly to the exercise of stock options.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow from operating activities as reported in the accompanying
Consolidated Statements of Cash Flow, totaled $190.1 million for
the first quarter of 1996 and $124.1 million for the first quarter
of 1995. Principal uses of cash flow in the first quarter were
capital expenditures, reduction of debt and dividends.
Capital expenditures for the quarter totaled $53.2 million,
compared with $26.6 million in 1995. The increase reflects capital
spending for the newly acquired Multimedia businesses, particularly
cable and alarm security.
The Company's long-term debt was reduced by $89 million from
operating cash flow in the first quarter of 1996. The Company's
regular quarterly dividend of $0.35 per share, totaling $49.3
million was declared in the first quarter and paid on April 1,
1996.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
Mar. 31, 1996 Dec. 31, 1995
ASSETS
Cash $ 50,851,000 $ 46,962,000
Marketable securities 25,000 23,000
Trade receivables, less allowance
(1996 - $22,032,000 ; 1995 - $22,182,000) 518,173,000 587,896,000
Other receivables 41,003,000 33,663,000
Inventories 119,162,000 111,653,000
Prepaid expenses 69,626,000 73,887,000
Total current assets 798,840,000 854,084,000
Property, plant and equipment:
Cost 3,601,677,000 3,559,666,000
Less accumulated depreciation (1,534,868,000) (1,488,979,000)
Net property, plant and equipment 2,066,809,000 2,070,687,000
Intangible and other assets:
Excess of acquisition cost over the value
of assets acquired, less amortization
(1996 - $539,902,000; 1995 - $491,743,000) 3,361,793,000 3,386,600,000
Investments and other assets 211,253,000 192,429,000
Total intangible and other assets 3,573,046,000 3,579,029,000
Total assets $ 6,438,695,000 $ 6,503,800,000
LIABILITIES & SHAREHOLDERS' EQUITY
Current maturities of long-term debt $ 123,000 $ 90,751,000
Accounts payable and current portion of film
contracts payable 231,019,000 279,594,000
Compensation, interest and other accruals 231,722,000 276,295,000
Dividend payable 49,222,000 49,208,000
Income taxes 83,909,000 15,071,000
Deferred income 109,300,000 101,853,000
Total current liabilities 705,295,000 812,772,000
Deferred income taxes 322,244,000 327,916,000
Long-term debt, less current portion 2,769,474,000 2,767,880,000
Postretirement medical and life insurance liabilities 306,710,000 305,700,000
Other long-term liabilities 138,640,000 143,884,000
Total liabilities 4,242,363,000 4,358,152,000
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 162,210,366 shares 162,210,000 162,210,000
Additional paid-in capital 77,268,000 76,811,000
Retained earnings 2,963,843,000 2,923,752,000
Foreign currency translation adjustment (12,148,000) (12,258,000)
Total 3,191,173,000 3,150,515,000
Less treasury stock - 21,412,861 shares and
21,645,721 shares respectively, at cost (963,933,000) (973,272,000)
Deferred compensation related to ESOP (30,908,000) (31,595,000)
Total shareholders' equity 2,196,332,000 2,145,648,000
Total liabilities and shareholders' equity $ 6,438,695,000 $ 6,503,800,000
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Quarter ended
Mar. 31, 1996 Mar. 26, 1995
Net Operating Revenues:
Newspaper advertising $ 556,885,000 $ 516,742,000
Newspaper circulation 229,417,000 211,964,000
Broadcasting 141,688,000 96,983,000
Cable 47,208,000 0
Other 128,962,000 88,131,000
Total 1,104,160,000 913,820,000
Operating Expenses:
Cost of sales and operating expenses
exclusive of depreciation 641,209,000 534,222,000
Selling, general and administrative
expenses, exclusive of depreciation 187,628,000 171,777,000
Depreciation 53,135,000 39,259,000
Amortization of intangible assets 24,277,000 11,395,000
Total 906,249,000 756,653,000
Operating income 197,911,000 157,167,000
Non-operating income (expense):
Interest expense (39,528,000) (11,732,000)
Other (1,583,000) (529,000)
Total (41,111,000) (12,261,000)
Income before income taxes 156,800,000 144,906,000
Provision for income taxes 67,450,000 58,700,000
Net income $ 89,350,000 $ 86,206,000
Net income per share $0.64 $0.62
Dividends per share $0.35 $0.34
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Quarter ended
Mar. 31, 1996 Mar. 26, 1995
Cash flows from operating activities:
Net income $89,350,000 $86,206,000
Adjustments to reconcile net income to
operating cash flows:
Depreciation 53,135,000 39,259,000
Amortization of intangibles 24,277,000 11,395,000
Deferred income taxes (5,672,000) (4,483,000)
(Gain) loss on sale of assets (227,000) 121,000
Other, net (9,749,000) 21,119,000
Changes in other assets & liabilities, net 38,973,000 (29,529,000)
----------- -----------
Net cash flow from operating activities 190,087,000 124,088,000
----------- -----------
Cash flows from investing activities:
Purchase of property, plant and equipment (53,180,000) (26,630,000)
Change in other investments (8,500,000) 0
Proceeds from sale of certain assets 3,907,000 1,279,000
Collection of long-term receivables 425,000 0
----------- -----------
Net cash used by investing activities (57,348,000) (25,351,000)
----------- -----------
Cash flows from financing activities:
Payments of long-term debt (89,033,000) (82,106,000)
Dividends paid (49,246,000) (48,023,000)
Common stock transactions, net 9,431,000 3,136,000
----------- -----------
Net cash used for financing activities (128,848,000) (126,993,000)
----------- -----------
Effect Of Currency Exchange Rate Change 0 (29,000)
----------- -----------
Net Increase (Decrease) in Cash and
Cash Equivalents 3,891,000 (28,285,000)
Balance of Cash and Cash Equivalents at
Beginning of Year 46,985,000 44,252,000
----------- -----------
Balance of Cash and Cash Equivalents at
End of First Quarter $50,876,000 $15,967,000
=========== ===========
BUSINESS SEGMENT INFORMATION
Quarter ended
Mar. 31, 1996 Mar. 26, 1995
Operating Revenues:
Newspaper publishing $ 820,372,000 $759,636,000
Broadcasting 141,688,000 96,983,000
Cable 47,208,000 0
Other businesses 94,892,000 57,201,000
------------- -----------
$1,104,160,000 $913,820,000
============= ===========
Operating Income:
(Net of depreciation and amortization)
Newspaper publishing $147,551,000 $150,856,000
Broadcasting 50,039,000 26,240,000
Cable 10,909,000 0
Other businesses 5,830,000 (2,943,000)
Corporate (16,418,000) (16,986,000)
----------- -----------
$197,911,000 $157,167,000
=========== ===========
Depreciation & Amortization:
Newspaper publishing $40,538,000 $36,450,000
Broadcasting 15,698,000 7,064,000
Cable 13,054,000 0
Other businesses 5,566,000 4,479,000
Corporate 2,556,000 2,661,000
----------- -----------
$77,412,000 $50,654,000
=========== ===========
Operating Cash Flow:
Newspaper publishing $188,089,000 $187,306,000
Broadcasting 65,737,000 33,304,000
Cable 23,963,000 0
Other businesses 11,396,000 1,536,000
Corporate (13,862,000) (14,325,000)
------------ ------------
$275,323,000 $207,821,000
============ ============
NOTES:
(1) For financial reporting purposes, at the end of 1995, the
Company established four separate segments: newspapers;
broadcasting (television and radio); cable television; and a
segment for all other business operations. Previously, the
Company's operations were reported in three segments: newspapers;
broadcasting; and outdoor advertising. Upon the completion of
the Multimedia acquisition, the Company established a separate
business segment for the acquired cable television division. At
the same time, the Company elected to group its outdoor
advertising business along with security alarm and entertainment
businesses acquired from Multimedia in its fourth "Other
Businesses" reporting segment. Additionally, certain businesses
previously reported in the newspaper segment are now reflected in
the "Other Businesses" segment. Prior year segment data has been
restated to reflect this reporting change.
(2) Operating Cash Flow represents operating income for each of
the Company's business segments plus related depreciation and
amortization expense.
NOTE TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
March 31, 1996
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 week period ended March 31, 1996,
and the comparative period of 1995, 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.
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: May 14, 1996 /s/Larry F. Miller
------------------
Larry F. Miller
Senior Vice President/Financial
Planning and Controller
Dated: May 14, 1996 /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 Amendment Number Two to Incorporated by reference
$1,500,000,000 Revolving to Exhibit 4-3 to Gannett
Credit Agreement among Co., Inc.'s Form 10-K for
Gannett Co., Inc. and the the fiscal year ended
Banks named therein. December 31, 1995.
4-4 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.
4-5 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.
4-6 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.
4-7 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.
GANNETT CO., INC.
Calculation of Earnings Per Share
Quarter ended
March 31, 1996 March 26, 1995
-------------- --------------
Net Income $89,350,000 $86,206,000
============== ==============
Weighted average
number of
common shares
outstanding 140,680,000 140,011,000
============== ==============
Net income
per share $0.64 $0.62
===== =====
5
3-MOS
DEC-29-1996
JAN-1-1996
MAR-31-1996
50,851,000
25,000
540,205,000
22,032,000
119,162,000
798,840,000
3,601,677,000
1,534,868,000
6,438,695,000
705,295,000
0
162,210,000
0
0
2,034,122,000
6,438,695,000
1,104,160,000
1,104,160,000
641,209,000
906,249,000
0
0
39,528,000
156,800,000
67,450,000
89,350,000
0
0
0
89,350,000
0.64
0
