View:
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 27, 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 March 27, 1994 was 147,170,645.
PART I. FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS
Operating Summary
Income from operations for the first quarter of 1994 rose $22.3
million or 19%, reflecting significant performance gains by the
Company's newspaper and broadcast divisions. For newspapers,
stronger demand for classified advertising contributed to a 9%
earnings gain. Improved broadcast earnings, which rose 134%,
resulted principally from radio and television advertising
revenue growth and lower costs. Broadcast earnings comparisons
with 1993 were also favorably affected by the recent sale of four
radio stations and the Company's television station in Boston.
Newspapers
Newspaper publishing revenues rose $31.7 million or 4% in the
first quarter of 1994. Newspaper advertising revenue rose $27.2
million or 6% in the quarter, reflecting continued gains in
classified, particularly in the employment category. Pro forma
advertising linage rose 4%. "Run-of-press" (ROP) advertising
rose 3%, as classified and national linage each rose 7%. Local
linage declined 2%, as demand by major retailers continued soft.
Preprint linage rose 6% for the quarter.
The tables below provide, on a pro forma basis, further details
of newspaper ad revenue and linage for the first quarters of 1994
and 1993:
Advertising revenue, in thousands of dollars (Pro Forma)
First quarter 1994 1993 % Change
Local $181,339 $179,117 1
National 74,493 70,594 6
Classified 160,244 143,786 11
Total Run-
of-Press 416,076 393,497 6
Preprint
and other
advertising 76,168 72,434 5
Total ad
revenue $492,244 $465,931 6
Advertising linage, in thousands of inches (Pro Forma)
First quarter 1994 1993 % Change
Local 7,228 7,340 (2)
National 501 468 7
Classified 7,285 6,790 7
Total Run-
of-Press 15,014 14,598 3
Preprint 13,756 13,020 6
Total ad
linage 28,770 27,618 4
Newspaper circulation revenues for the quarter rose $2.1 million
or 1%. Net paid daily and Sunday circulation for the Company's
local newspapers fell slightly for the quarter. USA TODAY
reported an average daily paid circulation of 2,025,250 in the
ABC Publisher's statement for the six months ended March 27,
1994, which, subject to audit, was down less than 1% from the
comparable period a year ago.
Operating costs in total for the newspaper segment rose $20.1
million or 3% for the quarter. Newsprint costs declined
slightly, reflecting lower prices from a year ago, partly offset
by higher consumption. The Company expects newsprint prices to
rise later in 1994. Payroll costs rose 2%. Other production
related costs rose from prior year levels, and employee benefit
costs were also higher, particularly for health care and
pensions.
Newspaper operating income rose $11.6 million or 9% for the first
quarter, due principally to the improved ad revenue environment.
Most of the Company's local newspapers reported improved ad
revenues and operating income results, with the larger papers
posting the strongest gains. At USA Today, operating results
were lower for the quarter. Revenues were even while operating
costs rose slightly.
Broadcast
Broadcast revenues rose $1.1 million or 1% for the quarter, while
operating costs declined $11 million or 15%. On a pro forma
basis, broadcast revenues increased 14% and operating costs
declined 1%.
On a pro forma basis, local television revenues increased 12%
while national revenues increased 15%. Winter Olympics
advertising at the Company's two CBS affiliates contributed to
the overall growth in television revenues. Pro forma radio
revenues increased 27%.
Operating income rose $12.1 million or 134%, reflecting strong
gains at most of the Company's television stations and all of the
Company's radio stations. Broadcast earnings were also favorably
affected by the recent sale of four radio stations in Kansas City
and St. Louis, Missouri and the Company's television station in
Boston.
Outdoor
Outdoor revenues declined $0.9 million or 2% for the quarter,
while operating costs were down slightly. The Outdoor group
reported a seasonal operating loss of $4.7 million in the first
quarter, compared to a loss of $4.1 million in the first quarter
of 1993.
Non-operating income and expense
Interest expense was up slightly for the first quarter,
reflecting higher average interest rates, partially offset by
lower average borrowings.
Net Income
Net income rose $12.4 million or 19% for the quarter. Net income
per share rose to $0.54 from $0.46 in 1993, an increase of 17%.
The weighted average number of shares outstanding totaled
147,123,000 for the first quarter of 1994 compared with
145,789,000 for 1993. The increase in shares outstanding is due
principally to the effect of shares issued in connection with the
acquisition of the Honolulu Advertiser in 1993 and shares issued
in connection with employee stock awards.
Liquidity and capital resources
Cash flow from operating activities totaled $142 million for the
first quarter of 1994 compared with $164.8 million a year ago.
Working capital at the end of the first quarter totaled $169.3 million,
down from $302.8 million at the end of 1993, due mainly to payment of
long-term debt, pension funding and expenditures for capital equipment
and other investments.
Capital expenditures for the quarter totaled $28.1 million,
compared with $32 million in 1993. The Company's long-term debt
(commercial paper obligations) was reduced by $109 million from
operating cash flows in the first quarter of 1994. The Company's
regular quarterly dividend of $0.33 per share, totaling $48.6
million, was declared in the first quarter and paid on April 1,
1994.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
ASSETS March 27, 1994 Dec. 26, 1993
------ -------------- --------------
Current Assets:
Cash............................... $ 16,716,000 $ 32,461,000
Marketable securities.............. 12,721,000 43,034,000
Trade receivables, less allowance
(1994 - $15,539,000; 1993 -
$13,915,000)....................... 403,568,000 449,063,000
Other receivables.................. 110,274,000 135,036,000
Inventories (materials and supplies) 46,903,000 53,094,000
Prepaid expenses................... 48,926,000 45,269,000
------------- -------------
Total current assets............. 639,108,000 757,957,000
------------- -------------
Property, plant and equipment:
Cost............................... 2,817,436,000 2,794,610,000
Less accumulated depreciation...... (1,354,086,000) (1,316,341,000)
------------- -------------
Net property, plant and equipment.. 1,463,350,000 1,478,269,000
------------- -------------
Intangible and other assets:
Excess of cost of subsidiaries over
net tangible assets acquired, less
amortization (1994 - $408,228,000;
1993 - $396,915,000).............. 1,489,530,000 1,501,102,000
Other assets....................... 159,235,000 86,470,000
------------- -------------
Total intangible and other assets 1,648,765,000 1,587,572,000
------------- -------------
Total assets..................... $ 3,751,223,000 $ 3,823,798,000
============= =============
LIABILITIES & SHAREHOLDERS' EQUITY
----------------------------------
Current Liabilities:
Current portion of long-term debt.. $ 117,000 $ 164,000
Accounts payable and current portion
of film contracts payable......... 159,994,000 187,208,000
Compensation, interest and other
accruals.......................... 136,240,000 140,457,000
Dividend payable................... 48,506,000 48,399,000
Income taxes....................... 48,196,000 5,760,000
Deferred income.................... 76,769,000 73,151,000
------------- -------------
Total current liabilities....... 469,822,000 455,139,000
Deferred income taxes.............. 197,180,000 205,314,000
Long-term debt, less current portion 741,748,000 850,686,000
Retiree medical and life insurance. 310,647,000 308,024,000
Other long-term liabilities........ 87,090,000 96,715,000
------------- -------------
Total liabilities.................. 1,806,487,000 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......... 69,616,000 70,938,000
Retained earnings.................. 2,395,344,000 2,366,246,000
Foreign currency translation
adjustment....................... (12,590,000) (9,442,000)
------------- -------------
Total.............................. 2,614,582,000 2,589,954,000
Less treasury stock - 15,040,945
shares and 15,244,733 shares,
respectively, at cost............. (632,340,000) (643,787,000)
Deferred compensation related to
ESOP.............................. (37,506,000) (38,247,000)
------------- -------------
Total shareholders' equity...... 1,944,736,000 1,907,920,000
Total liabilities and ------------- -------------
shareholders' equity........... $ 3,751,223,000 $ 3,823,798,000
============= =============
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Thirteen weeks ended
March 27, 1994 March 28, 1993
-------------- --------------
Net Operating Revenues:
Newspaper advertising............... $492,244,000 $465,072,000
Newspaper circulation............... 212,140,000 210,053,000
Broadcasting........................ 84,007,000 82,876,000
Outdoor advertising................. 46,921,000 47,825,000
Other............................... 41,313,000 38,904,000
------------ ------------
Total............................... 876,625,000 844,730,000
------------ ------------
Operating Expenses:
Cost of sales and operating expenses,
exclusive of depreciation.......... 516,424,000 509,377,000
Selling, general and administrative
expenses, exclusive of depreciation 165,945,000 163,007,000
Depreciation........................ 40,490,000 40,947,000
Amortization of intangible assets... 11,310,000 11,279,000
------------ ------------
Total............................... 734,169,000 724,610,000
------------ ------------
Operating income.................... 142,456,000 120,120,000
------------ ------------
Non-operating income (expense):
Interest expense.................... (11,168,000) (11,045,000)
Other............................... 1,023,000 1,492,000
------------ ------------
Total............................... (10,145,000) (9,553,000)
------------ ------------
Income before income taxes.......... 132,311,000 110,567,000
Provision for income taxes.......... 53,600,000 44,225,000
------------ ------------
Net income.......................... $ 78,711,000 $ 66,342,000
============ ============
Net income per share................ $0.54 $0.46
============ ============
Dividends per share................. $0.33 $0.32
============ ============
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Thirteen Weeks Ended
March 27, 1994 March 28, 1993
Cash Flows From Operating Activities:
Net income ................................ $78,711,000 $66,342,000
Adjustments to reconcile net income
to operating cash flows:
Depreciation............................. 40,490,000 40,947,000
Amortization of intangibles.............. 11,310,000 11,279,000
Deferred income taxes.................... (4,134,000) (1,418,000)
Gain on sale of assets ................. (56,000) (479,000)
Changes in assets and liabilities,
net of acquisitions:
Decrease in receivables................. 40,499,000 56,036,000
(Increase) decrease in inventories...... 6,191,000 (13,824,000)
Increase in film broadcast
rights, net of liabilities............. (1,052,000) (30,000)
Decrease in accounts payable............ (22,785,000) (10,957,000)
Increase in interest and
taxes payable.......................... 35,228,000 22,023,000
Change in pension asset................. (45,900,000)
Other changes, net...................... 3,804,000 (5,070,000)
----------- -----------
Net cash flow from operating activities.... 142,306,000 164,849,000
----------- -----------
Cash Flows From Investing Activities:
Purchase of property, plant and equipment.. (28,082,000) (31,995,000)
Increase in other investments.............. (23,529,000)
Proceeds from sale of assets............... 18,121,000 10,664,000
----------- -----------
Net cash used by investing activities...... (33,490,000) (21,331,000)
----------- -----------
Cash Flows From Financing Activities:
Proceeds from long-term debt............... 274,125,000
Payments of long-term debt................. (108,985,000) (379,635,000)
Dividends paid............................. (48,457,000) (46,202,000)
Proceeds from issuance of common shares.... 2,298,000 3,488,000
----------- -----------
Net cash used for financing activities..... (155,144,000) (148,224,000)
----------- -----------
Effect of currency exchange rate change.... 270,000 956,000
----------- -----------
Net decrease in cash and cash equivalents.. (46,058,000) (3,750,000)
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 first quarter................... $29,437,000 $69,579,000
============ ===========
BUSINESS SEGMENT INFORMATION
Thirteen weeks ended
March 27, 1994 March 28, 1993
--------------- ---------------
OPERATING REVENUES
------------------
NEWSPAPER PUBLISHING $ 745,697,000 $ 714,029,000
BROADCASTING 84,007,000 82,876,000
OUTDOOR ADVERTISING 46,921,000 47,825,000
--------------- ---------------
$ 876,625,000 $ 844,730,000
=============== ===============
OPERATING INCOME (NET OF DEPRECIATION AND AMORTIZATION)
-------------------------------------------------------
NEWSPAPER PUBLISHING $ 142,660,000 $ 131,054,000
BROADCASTING 21,173,000 9,036,000
OUTDOOR ADVERTISING (4,729,000) (4,061,000)
CORPORATE (16,648,000) (15,909,000)
--------------- ---------------
$ 142,456,000 $ 120,120,000
=============== ===============
DEPRECIATION & AMORTIZATION
---------------------------
NEWSPAPER PUBLISHING $ 37,573,000 $ 36,733,000
BROADCASTING 7,081,000 7,898,000
OUTDOOR ADVERTISING 4,572,000 4,731,000
CORPORATE 2,574,000 2,864,000
--------------- ---------------
$ 51,800,000 $ 52,226,000
=============== ===============
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.
Management contracts and compensatory plans or arrangements
are identified with asterisks 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: May 10, 1994 s/ Larry F. Miller
------------------------------
Larry F. Miller
Senior Vice President/Financial
Planning and Controller
Dated: May 10, 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 $500,000,000 Revolving Incorporated by reference to
Credit Agreement among Exhibit 4-2 to Gannett Co.,
Gannett Co., Inc. and the Inc.'s Form 10-K for the fiscal
Banks named therein. year ended December 26, 1993.
4-3 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
earnings per share. 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
March 27, 1994 March 28, 1993
Net Income .................... $ 78,711,000 $ 66,342,000
Weighted average number of
common shares outstanding.... 147,123,000 145,789,000
Net income per share.......... $0.54 $0.46