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