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 25, 2000 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 25, 2000 was 263,633,808.
PART I. FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
OPERATIONS
ACQUISITIONS
On May 5, 2000, Gannett U.K. Limited ("Gannett UK"), a wholly
owned subsidiary of Gannett Co., Inc. ("the company"), made a
cash offer to acquire the entire issued and to be issued
share capital of News Communications & Media PLC ("Newscom").
Pursuant to the Offer, Newscom shareholders elected to
receive 1800 pence (US $28.44) per share in cash or Loan
Notes, valuing the entire issued share capital of Newscom at
approximately 444 million British pounds (US $702 million).
Gannett UK also financed the repayment of Newcom's existing
debt. On June 5, 2000, pursuant to the Offer Document,
Gannett UK declared the Offer unconditional in all respects,
and shortly thereafter, Gannett UK effectively owned 100% of
Newscom shares. The acquisition was recorded under the
purchase method of accounting and Newscom's results of
operations are included in the company's second quarter
financial statements from June 5, 2000, onward.
On July 21, 2000, the company concluded the acquisition of 19
daily newspapers as well as numerous weekly and niche
publications from Thomson Newspapers Inc. for an aggregate
purchase price of $1.036 billion. The company acquired
strategic marketing groups in Wisconsin (eight dailies) and
Central Ohio (eight dailies), and acquired single daily
newspapers in Lafayette, LA; Salisbury, MD; and St. George,
UT. This acquisition will be accounted for under the
purchase method of accounting beginning in the third quarter.
On June 28, 2000, the company and Central Newspapers, Inc.
("Central"), announced that they had entered into a definitive
agreement for the company's acquisition of Central for an
approximate cash purchase price of $2.6 billion. In
connection with the acquisition, a subsidiary of the company
made a cash tender offer to purchase any and all of Central's
Class A and B stock at prices of $64.00 and $6.40 per share,
respectively. The company also agreed to assume or retire
all of Central's existing debt of approximately $206
million. On August 1, 2000, the company announced that it
had assumed control of Central's operations. Approximately
98.1% of the Class A stock and 99.9% of the Class B stock
were validly tendered prior to the expiration of the
company's tender offer, and all such shares have been
accepted for purchase in accordance with the terms of the
offer. This acquisition will be accounted for under the
purchase method of accounting beginning in the third quarter.
EARNINGS SUMMARY
Quarter
Operating income from continuing operations for the second
quarter of 2000 rose $51.6 million or 13%. Newspaper
publishing earnings were up $48.7 million or 15% for the
quarter, reflecting continued strong classified and national
advertising demand and the positive impact of Newsquest plc
("Newsquest") and Newscom, U.K. based newspaper companies
acquired in July 1999 and June 2000, respectively. Television
earnings were up $2.8 million or 3% for the quarter.
Results in the second quarter of 1999 included a $55 million
net pre-tax gain from the exchange of KVUE-TV in Austin,
Texas, for KXTV-TV in Sacramento, California, plus other
consideration.
Income from continuing operations excluding this gain was up
$30.9 million or 13% for the quarter, and earnings per share
(diluted) rose to $1.00 from $0.84, a 19% increase. A
presentation of second quarter earnings excluding the net
non-operating gain from the television exchange and
excluding discontinued operations follows:
Earnings Summary Excluding
1999 Net Non-operating Gain
and Discontinued Operations
Thirteen weeks ended % Inc
June 25, 2000 June 27, 1999 (Dec)
Operating income $ 454,681 $ 403,111 12.8
Non-operating income (expense):
Interest expense (22,666) (13,852) 63.6
Other 7,947 775 ---
------------- ------------- ----
Total (14,719) (13,077) 12.6
------------- ------------- ----
Income before income taxes 439,962 390,034 12.8
Provision for income taxes 174,200 155,200 12.2
------------- ------------- ----
Income from continuing
operations $ 265,762 $ 234,834 13.2
============ ============ ====
Earnings from continuing
operations per share basic $1.01 $0.84 20.2
===== ===== ====
Earnings from continuing
operations per share diluted $1.00 $0.84 19.0
===== ===== ====
Year-to-date
Operating income from continuing operations for the first six
months of 2000 rose $112.5 million or 16%. Newspaper
publishing earnings were up $108.5 million or 19%, and
television earnings were up $3.2 million or 2%.
Income from continuing operations excluding the gain from the
exchange of television stations referred to above rose $64.0
million or 16% for the year-to-date, and earnings per share
(diluted) rose to $1.73 from $1.43, a 21% increase.
After-tax income from the operation of the cable division,
which was sold on January 31, 2000, was $2.4 million, and the
after-tax gain from the sale of the cable division was $744.7
million. In total, discontinued operations contributed $2.75
per share (diluted). Net income for the year-to-date was
$4.48 per share (diluted). A presentation of year-to-date
earnings excluding the net non-operating gain from the
television exchange and excluding discontinued operations follows:
Earnings Summary Excluding
1999 Net Non-operating Gain
and Discontinued Operations
Twenty-six weeks ended % Inc
June 25, 2000 June 27, 1999 (Dec)
Operating income $ 812,199 $ 699,703 16.1
Non-operating income (expense):
Interest expense (42,841) (30,444) 40.7
Other 6,621 3,143 110.7
------------- ------------- ----
Total (36,220) (27,301) 32.7
------------- ------------- ----
Income before income taxes 775,979 672,402 15.4
Provision for income taxes 307,200 267,600 14.8
------------- ------------- ----
Income from continuing
operations $ 468,779 $ 404,802 15.8
============ ============ ====
Earnings from continuing
operations per share basic $1.74 $1.44 20.8
===== ===== ====
Earnings from continuing
operations per share diluted $1.73 $1.43 21.0
===== ===== ====
NEWSPAPERS
The company completed the acquisition of Newsquest and
Newscom in July 1999 and June 2000, respectively. These
acquisitions have had a significant impact on operating
results comparisons for the first six months of 2000 versus
the first six months of 1999.
Reported newspaper publishing revenues rose $199.6 million or
18% in the second quarter and $372.6 million or 18% for the
year-to-date, reflecting strong domestic advertising demand
and the impact of revenues at the Newsquest and Newscom
properties. Newspaper advertising revenues increased $168.6
million or 21% for the second quarter and $321.9 million or
21% for the year-to-date.
The tables below provide, on a pro forma basis, details of
newspaper ad revenue, including the newly acquired Newsquest
and Newscom properties, for the second quarter and the first
six months of 2000 and 1999. Advertising linage and preprint
distribution details are also provided below; however, linage
and preprint distribution for Newsquest and Newscom
publications are not included.
Advertising revenue, in thousands of dollars (pro forma)
Second quarter: 2000 1999 % Change
- --------------- -------- -------- --------
Local $262,534 $257,891 2
National 183,445 167,670 9
Classified 405,394 388,570 4
-------- -------- ----
Total Run-of-Press 851,373 814,131 5
Preprint and other
advertising 132,346 118,851 11
-------- -------- ----
Total ad revenue $983,719 $932,982 5
======== ======== ====
Advertising linage, in thousands of inches, and preprint
distribution, in millions (pro forma)
Second quarter: 2000 1999 % Change
- --------------- -------- -------- --------
Local 8,547 8,604 (1)
National 993 866 15
Classified 12,441 11,804 5
-------- -------- ----
Total Run-of-Press
linage 21,981 21,274 3
======== ======== ====
Preprint distribution 1,958 1,805 8
======== ======== ====
Advertising revenue, in thousands of dollars (pro forma)
Year-to-date: 2000 1999 % Change
- ------------- -------- -------- --------
Local $503,821 $502,319 0
National 352,062 313,938 12
Classified 788,572 744,434 6
--------- --------- ----
Total Run-of-Press 1,644,455 1,560,691 5
Preprint and other
advertising 250,075 227,770 10
--------- --------- ----
Total ad revenue $1,894,530 $1,788,461 6
========= ========= ====
Advertising linage, in thousands of inches, and preprint
distribution, in millions (pro forma)
Year-to-date: 2000 1999 % Change
- ------------- -------- -------- --------
Local 16,456 16,596 (1)
National 1,907 1,649 16
Classified 23,813 22,213 7
-------- -------- ----
Total Run-of-Press
linage 42,176 40,458 4
======== ======== ====
Preprint distribution 3,748 3,505 7
======== ======== ====
Pro forma newspaper advertising revenues rose 5% for the
quarter and 6% for the year-to-date. Local ad revenues
increased 2% on a volume decrease of 1% for the quarter.
Local ad revenues remained level for the year-to-date on a
volume decrease of 1%. National ad revenues rose 9% on a
volume increase of 15% for the quarter and rose 12% on a
volume increase of 16% for the year-to-date. Classified ad
revenues increased 4% on a volume increase of 5% for the
quarter and rose 6% on a volume increase of 7% for the year-
to-date. Most of the company's newspapers, including USA
TODAY, recorded solid gains in advertising revenue.
Classified gains were strongest in the employment category.
Reported newspaper circulation revenues increased by $15.4
million or 6% for the second quarter and $29.1 million or 6%
for the year-to-date, reflecting the impact of the Newsquest
and Newscom acquisitions. Pro forma net paid daily
circulation for the company's local newspapers declined by
less than 1% for the quarter and for the year-to-date.
Sunday circulation was lower by 2% for the quarter and by 1%
for the year-to-date. USA TODAY reported an average daily
paid circulation of 2,282,072 in the ABC Publisher's
statement for the 26 weeks ended March 26, 2000, a 1.5 %
increase over the comparable period a year ago.
Operating costs for the newspaper segment increased $150.9
million or 20% for the second quarter and $264.1 million or
17% for the year-to-date, largely due to the added costs from
the Newsquest and Newscom properties. In total, newsprint
expense increased by 9% for the quarter and 3% for the year-
to-date due to a 14% increase in consumption for the quarter
and year-to-date, resulting primarily from usage related to
the company's U.K. acquisitions. Newsprint prices were lower
than in 1999 for both the quarter and year-to-date. However,
the company expects a rise in newsprint prices, which will
result in higher newsprint prices for the second half of 2000
versus the second half of 1999.
Newspaper operating income increased $48.7 million or 15% for
the quarter and $108.5 million or 19% for the year-to-date,
reflecting strong advertising gains throughout the group,
particularly in national and classified advertising, lower
newsprint prices, and the positive impact of the recently
acquired Newsquest and Newscom properties.
TELEVISION
Reported television revenues increased $10.9 million or 6%
for the second quarter, while operating costs increased $8.1
million or 8%. Television revenues increased $16.5 million
or 5% for the year-to-date, and operating costs increased
$13.3 million or 7%. Reported results include the March 2000
acquisition of WJXX-TV, the ABC affiliate in Jacksonville,
Florida. On a pro forma basis, television station revenues
increased 5% for the quarter and 4% for the year-to-date.
Pro forma local revenues increased 2% for the quarter and
decreased 1% for the year-to-date, while national revenues
increased 12% for the quarter and 11% for the year-to-date.
Reported television operating income increased $2.8 million
or 3% for the quarter and $3.2 million or 2% for the year-to-
date. Television comparisons continue to be impacted by the
exchange of Gannett's station in Austin, TX, for a station in
Sacramento, CA, plus other consideration, which occurred in
June 1999. Gannett Television now consists of 22 television
stations reaching 17.4 percent of the U.S. television market.
NON-OPERATING INCOME AND EXPENSE/PROVISION FOR INCOME TAXES
Interest expense increased $8.8 million or 64% for the second
quarter and $12.4 million or 41% for the year-to-date,
reflecting increased commercial paper borrowings due to the
1999 Newsquest acquisition, the Newscom acquisition in the
second quarter of 2000, and share repurchases. The increase,
however, was tempered by the pay-down of commercial paper
borrowings during the first half of 2000 from the net proceeds
on the sale of the cable division and from operating cash flows.
Other non-operating income in the second quarter of 1999 reflected
the $55 million net pre-tax gain resulting from the exchange
of television stations discussed above.
The company's effective income tax rate was 39.6% for the
second quarter and year-to-date, versus 39.8% for the same
periods last year, reflecting lower state taxes and the
diminished impact of the amortization of non-deductible
intangible assets.
INCOME FROM CONTINUING OPERATIONS/NET INCOME
Income from continuing operations, excluding the 1999 gain
from the exchange of television stations discussed above,
increased $30.9 million or 13% for the quarter and $64.0 or
16% for the year-to-date. Diluted earnings per share from
continuing operations excluding the 1999 gain rose to $1.00
from $0.84 for the second quarter, a 19% increase, and to
$1.73 from $1.43 for the year-to-date, a 21% increase.
Net income totaled $265.8 million for the second quarter and
$1,215.9 million for the year-to-date. Net income per share
(diluted), including discontinued operations, was $1.00 for
the quarter compared to $0.98 in 1999 and $4.48 for the year-
to-date compared to $1.62 in 1999.
The weighted average number of diluted shares outstanding in
the second quarter totaled 266,294,000, compared to
282,212,000 for the second quarter of 1999. The weighted
average number of diluted shares outstanding for the first
six months of 2000 totaled 271,234,000, compared to
281,949,000 for the first six months of 1999.
On February 1, 2000, the company announced that its Board
approved a new $500 million share repurchase authorization.
On February 23, 2000, having used a substantial portion of
that authorization, the Board approved an additional $500
million for share repurchases. During the first six months
of 2000, the company repurchased approximately 14.7 million
shares of common stock at a cost of approximately $967.2
million. These stock repurchases were partially offset by
shares issued upon the exercise of stock options and
settlement of stock incentive rights. Exhibit 11 of this
Form 10-Q presents the weighted average number of basic and
diluted shares outstanding and the earnings per share 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 $537.1 million for the second
quarter of 2000, compared with $468.4 million for the same
period of 1999, a 15% increase, and $975.0 million for the
first six months of 2000, compared with $830.6 million for
the first six months of 1999, a 17% increase, reflecting
strong overall operating results and the acquisitions of
Newsquest and Newscom.
Capital expenditures totaled $78.0 million for the second
quarter and $122.2 million for the year-to-date, compared to
$62.8 million for the second quarter of 1999 and $103.7
million for the first six months of 1999. The company's debt
decreased by $113.1 million during the first six months of
2000, reflecting the use of operating cash flows and net
proceeds from the sale of the cable division, net of borrowings
for the Newscom acquisition and significant share repurchases.
The company's debt increased significantly early in the third
quarter of 2000 as a result of the acquisition of
publications from Thomson Newspapers, Inc., and the
acquisition of Central Newspapers, Inc. These acquisitions
were funded with commercial paper, backed up by a $3 billion
Competitive Advance and Revolving Credit Agreement, which is
attached to this Form 10-Q as an exhibit.
The cable division sale and the Newscom acquisition resulted
in significant changes in the company's excess of acquisition
cost over the value of assets acquired and its property,
plant and equipment. The company's assets were also
significantly impacted early in the third quarter of 2000 by
the acquisition of publications from Thomson Newspapers,
Inc., and the acquisition of Central Newspapers, Inc.
The company's foreign currency translation adjustment,
included in accumulated other comprehensive income and
reported as part of shareholders' equity, totaled ($57.6
million) at the end of the second quarter versus $14.3
million at the end of 1999, reflecting a weakening of the
British pound against the U.S. dollar since the end of the
year. Newsquest and Newscom assets and liabilities at June
25, 2000, were translated from British pounds to U.S. dollars
at an exchange rate of $1.50. Newsquest and Newscom
operating results were translated at an average rate of $1.54
for the second quarter and $1.57 for the year-to-date.
The company's regular quarterly dividend of $0.21 per share
was declared in the second quarter of 2000. Dividends
declared totaled $55.4 million for the second quarter and
$112.2 million for the year-to-date.
CERTAIN FACTORS AFFECTING FORWARD-LOOKING STATEMENTS
Certain statements in the company's 1999 Annual Report to
Shareholders, its Annual Report on Form 10-K, its first
quarter Report on Form 10-Q, 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, national or classified 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; (h) rapid technological changes and
frequent new product introductions prevalent in electronic
publishing; and (i) a weakening in the British pound to U.S.
dollar exchange rate.
CONSOLIDATED BALANCE SHEETS
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands of dollars
June 25, 2000 Dec. 26, 1999
---------------- ---------------
ASSETS
Cash $ 54,329 $ 46,148
Marketable securities 263,326 12
Trade receivables, less allowance
(2000 - $34,539; 1999 - $30,694) 779,393 800,682
Inventories 102,325 95,014
Prepaid expenses and other receivables 84,316 133,366
---------------- ---------------
Total current assets 1,283,689 1,075,222
---------------- ---------------
Property, plant and equipment
Cost 3,664,950 3,883,912
Less accumulated depreciation (1,635,844) (1,660,060)
---------------- ---------------
Net property, plant and equipment 2,029,106 2,223,852
---------------- ---------------
Intangible and other assets
Excess of acquisition cost over the value of
assets acquired, less amortization 5,270,574 5,398,227
Investments and other assets 340,799 309,145
---------------- ---------------
Total intangible and other assets 5,611,373 5,707,372
---------------- ---------------
Total assets $ 8,924,168 $ 9,006,446
================ ===============
LIABILITIES & SHAREHOLDERS' EQUITY
Accounts payable and current portion of film
contracts payable $ 390,125 $ 348,589
Compensation, interest and other accruals 247,456 271,495
Dividend payable 55,560 58,297
Income taxes 178,796 77,553
Deferred income 117,297 127,844
---------------- ---------------
Total current liabilities 989,234 883,778
---------------- ---------------
Deferred income taxes 326,932 479,547
Long-term debt, less current portion 2,350,107 2,463,250
Postretirement medical and life insurance liabilities 303,500 304,400
Other long-term liabilities 254,965 245,825
---------------- ---------------
Total liabilities 4,224,738 4,376,800
---------------- ---------------
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 155,818 153,267
Retained earnings 6,608,550 5,504,810
Accumulated other comprehensive income (54,170) 25,377
---------------- ---------------
Total 7,034,619 6,007,875
---------------- ---------------
Less treasury stock - 60,786,924 shares and
46,494,301 shares respectively, at cost (2,318,739) (1,359,263)
Deferred compensation related to ESOP (16,450) (18,966)
---------------- ---------------
Total shareholders' equity 4,699,430 4,629,646
---------------- ---------------
Total liabilities and shareholders' equity $ 8,924,168 $ 9,006,446
================ ===============
CONSOLIDATED STATEMENTS OF INCOME
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands of dollars (except per share amounts)
Thirteen weeks ended % Inc
June 25, 2000 June 27, 1999 (Dec)
Net Operating Revenues:
Newspaper advertising $ 956,895 $ 788,274 21.4
Newspaper circulation 264,165 248,812 6.2
Television 205,413 194,480 5.6
Other 63,727 48,052 32.6
------------- ------------- ------
Total 1,490,200 1,279,618 16.5
Operating Expenses:
Cost of sales and operating expenses,
exclusive of depreciation (1) 715,655 615,083 16.4
Selling, general and administrative
expenses, exclusive of
depreciation (1) 237,415 196,124 21.1
Depreciation 47,070 42,130 11.7
Amortization of intangible assets 35,379 23,170 52.7
------------- ------------- ------
Total 1,035,519 876,507 18.1
------------- ------------- ------
Operating income 454,681 403,111 12.8
Non-operating income (expense):
Interest expense (22,666) (13,852) 63.6
Other (2) 7,947 55,305 ----
------------- ------------- ------
Total (14,719) 41,453 ----
------------- ------------- ------
Income before income taxes 439,962 444,564 (1.0)
Provision for income taxes 174,200 176,950 (1.6)
------------- ------------- ------
Income from continuing operations $ 265,762 $ 267,614 (0.7)
Discontinued Operations:
Income from the operation of
discontinued operations, net of tax 9,356 ----
------------- ------------- ------
Net income $ 265,762 $ 276,970 (4.0)
============= ============= ======
Earnings from continuing
operations per share-basic $1.01 $0.96 5.2
Earnings from discontinued operations:
Discontinued operations per
share-basic $0.03 ----
----- ----- ------
Net income per share-basic $1.01 $0.99 2.0
===== ===== ======
Earnings from continuing
operations per share-diluted $1.00 $0.95 5.3
Earnings from discontinued operations:
Discontinued operations per
share-diluted $0.03 ----
----- ----- ------
Net income per share-diluted $1.00 $0.98 2.0
===== ===== ======
Dividends per share $0.21 $0.20 5.0
===== ===== ======
(1) Certain 1999 amounts have been reclassified to conform with the current year
presentation.
(2) 1999 results include a net non-operating gain principally from the
exchange of KVUE-TV in Austin, Texas for KXTV-TV in Sacramento, California.
See Management's Discussion and Analysis of Operations for earnings summary
excluding net non-operating gain.
CONSOLIDATED STATEMENTS OF INCOME
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands of dollars (except per share amounts)
Twenty-six weeks ended % Inc
June 25, 2000 June 27, 1999 (Dec)
Net Operating Revenues:
Newspaper advertising $ 1,830,684 $ 1,508,825 21.3
Newspaper circulation 531,227 502,169 5.8
Television 372,202 355,674 4.6
Other 120,530 98,889 21.9
------------- ------------- ------
Total 2,854,643 2,465,557 15.8
Operating Expenses:
Cost of sales and operating expenses,
exclusive of depreciation (1) 1,416,351 1,244,964 13.8
Selling, general and administrative
expenses, exclusive of
depreciation (1) 463,270 389,961 18.8
Depreciation 93,678 84,845 10.4
Amortization of intangible assets 69,145 46,084 50.0
------------- ------------- ------
Total 2,042,444 1,765,854 15.7
------------- ------------- ------
Operating income 812,199 699,703 16.1
Non-operating income (expense):
Interest expense (42,841) (30,444) 40.7
Other (2) 6,621 57,673 ----
------------- ------------- ------
Total (36,220) 27,229 ----
------------- ------------- ------
Income before income taxes 775,979 726,932 6.7
Provision for income taxes 307,200 289,350 6.2
------------- ------------- ------
Income from continuing operations $ 468,779 $ 437,582 7.1
Discontinued Operations:
Income from the operation of
discontinued operations, net of tax 2,437 18,281 (86.7)
Gain on sale of cable business,
net of tax 744,700 ----
------------- ------------- ------
Net income $ 1,215,916 $ 455,863 166.7
============= ============= ======
Earnings from continuing
operations per share-basic $1.74 $1.56 11.5
Earnings from discontinued operations:
Discontinued operations per
share-basic $0.01 $0.07 (85.7)
Gain on sale of cable division
per share-basic $2.77 ----
----- ----- ------
Net income per share-basic $4.52 $1.63 ----
===== ===== ======
Earnings from continuing
operations per share-diluted $1.73 $1.55 11.6
Earnings from discontinued operations:
Discontinued operations per
share-diluted $0.01 $0.07 (85.7)
Gain on sale of cable division
per share-diluted $2.74 ----
----- ----- ------
Net income per share-diluted $4.48 $1.62 ----
===== ===== ======
Dividends per share $0.42 $0.40 5.0
===== ===== ======
(1) Certain 1999 amounts have been reclassified to conform with the current year
presentation.
(2) 1999 results include a net non-operating gain principally from the
exchange of KVUE-TV in Austin, Texas for KXTV-TV in Sacramento, California.
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 25, 2000 June 27, 1999
-------------- --------------
Cash flows from operating activities
Net income $ 1,215,916 $ 455,863
Adjustments to reconcile net income to
operating cash flows:
Discontinued operations (747,137) (18,281)
Income taxes on sale of cable division (889,301) 0
Depreciation 93,678 84,845
Amortization of intangibles 69,145 46,084
Deferred income taxes (165,565) 24,914
Other, net 153,822 (26,838)
--------- ---------
Net cash flow (used for) provided by
operating activities (269,442) 566,587
--------- ---------
Cash flows from investing activities
Purchase of property, plant and equipment (122,206) (103,680)
Payments for acquisitions, net of cash acquired (543,110) (30,915)
Change in other investments (42,969) (9,444)
Proceeds from sale of certain assets 2,714,362 38,450
Collection of long-term receivables 1,900 8,178
--------- ---------
Net cash provided by (used for) investing activities 2,007,977 (97,411)
--------- ---------
Cash flows from financing activities
Payment of long-term debt (392,588) (357,519)
Dividends paid (114,913) (111,654)
Cost of common shares repurchased (967,242) 0
Proceeds from issuance of common stock 8,697 15,645
--------- ---------
Net cash used for financing activities (1,466,046) (453,528)
--------- ---------
Effect of currency exchange rate change (994) 0
--------- ---------
Net increase (decrease) in cash and cash equivalents 271,495 15,648
Balance of cash and cash equivalents at
beginning of year 46,160 66,187
--------- ---------
Balance of cash and cash equivalents at
end of second quarter $ 317,655 $ 81,835
========= =========
BUSINESS SEGMENT INFORMATION
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands of dollars
Thirteen weeks ended % Inc
June 25, 2000 June 27, 1999 (Dec)
Operating Revenues:
Newspaper publishing $ 1,284,787 $ 1,085,138 18.4
Broadcasting 205,413 194,480 5.6
------------- ------------- ------
Total $ 1,490,200 $ 1,279,618 16.5
============= ============= ======
Operating Income
(net of depreciation and
amortization):
Newspaper publishing $ 369,231 $ 320,502 15.2
Broadcasting 101,870 99,035 2.9
Corporate (16,420) (16,426) 0.0
------------- ------------- ------
Total $ 454,681 $ 403,111 12.8
============= ============= ======
Depreciation and Amortization:
Newspaper publishing $ 63,243 $ 46,682 35.5
Broadcasting 16,909 16,068 5.2
Corporate 2,297 2,550 (9.9)
------------- ------------- ------
Total $ 82,449 $ 65,300 26.3
============= ============= ======
Operating Cash Flow:
Newspaper publishing $ 432,474 $ 367,184 17.8
Broadcasting 118,779 115,103 3.2
Corporate (14,123) (13,876) (1.8)
------------- ------------- ------
Total $ 537,130 $ 468,411 14.7
============= ============= ======
NOTE:
Operating Cash Flow represents operating income for each of the company's
business segments plus related depreciation and amortization expense.
BUSINESS SEGMENT INFORMATION
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands of dollars
Twenty-six weeks ended % Inc
June 25, 2000 June 27, 1999 (Dec)
Operating Revenues:
Newspaper publishing $ 2,482,441 $ 2,109,883 17.7
Broadcasting 372,202 355,674 4.6
------------- ------------- ------
Total $ 2,854,643 $ 2,465,557 15.8
============= ============= ======
Operating Income
(net of depreciation
and amortization):
Newspaper publishing $ 676,666 $ 568,177 19.1
Broadcasting 167,997 164,752 2.0
Corporate (32,464) (33,226) 2.3
------------- ------------- ------
Total $ 812,199 $ 699,703 16.1
============= ============= ======
Depreciation and Amortization:
Newspaper publishing $ 125,532 $ 94,379 33.0
Broadcasting 33,035 31,776 4.0
Corporate 4,256 4,774 (10.9)
------------- ------------- ------
Total $ 162,823 $ 130,929 24.4
============= ============= ======
Operating Cash Flow:
Newspaper publishing $ 802,198 $ 662,556 21.1
Broadcasting 201,032 196,528 2.3
Corporate (28,208) (28,452) 0.9
------------- ------------- ------
Total $ 975,022 $ 830,632 17.4
============= ============= ======
NOTE:
Operating Cash Flow represents operating income for each of the company's
business segments plus related depreciation and amortization expense.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
June 25, 2000
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 the Form 10-K and annual
report to shareholders. The financial statements covering the 13 and
26-week periods ended June 25, 2000, and the comparative periods of
1999, 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 1998, SFAS No. 133, "Accounting for Derivative Instruments
and Hedging Activities" was issued. It was amended in June 1999
by SFAS No. 137, which provides that the standard is effective
for all fiscal quarters of all fiscal years beginning after June 15,
2000. The adoption of this standard, as further amended by
SFAS No. 138, is not expected to have a material effect on the
company's results of operations or financial position.
3. Comprehensive Income
SFAS No. 130, "Reporting Comprehensive Income" established standards for
reporting comprehensive income. Comprehensive income for the company includes
net income, foreign currency translation adjustments and unrealized gains on
available-for-sale securities, as defined under SFAS No. 115, "Accounting for
Certain Investments in Debt and Equity Securities". Comprehensive income
totaled $201.7 million for the second quarter and $1,136.4 million for the
year-to-date. Other comprehensive income relates to foreign currency
translation adjustments and unrealized gains on available-for-sale securities,
net of tax. The accumulated other comprehensive income was net of a deferred
income tax asset of $25.0 million for the second quarter and an asset of
$31.0 million for the year-to-date.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The company is not subject to market risk associated with derivative commodity
instruments, as the company is not a party to any such instruments. The
company believes that its market risk from financial instruments, such as
accounts receivable, accounts payable and debt, is not material. The company is
exposed to foreign exchange rate risk primarily due to its operations in the
United Kingdom, which use British pounds as their functional currency, which is
then translated into U.S. dollars.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Securityholders
(a) The Annual Meeting of Shareholders of Gannett Co., Inc.
was held on May 2, 2000.
(b) The following directors were elected at the meeting:
H. Jesse Arnelle Drew Lewis
Karen Hastie Williams
The following directors' terms of office continued
after the meeting:
Meredith A. Brokaw John J. Curley
Stuart T.K. Ho Douglas H. McCorkindale
Samuel J. Palmisano
(c) (i) Three directors were re-elected to the Board of
Directors. Tabulation of votes for each of the
nominees is as follows:
For Withhold Authority
H. Jesse Arnelle 227,142,778 1,446,071
Drew Lewis 227,204,101 1,384,748
Karen Hastie Williams 207,594,914 20,993,935
(ii) The proposal to elect PricewaterhouseCoopers LLP as
the company's independent auditor was approved. Tabulation
of votes for the proposal is as follows:
For Against Abstain
Election of independent
auditors 227,643,555 314,005 631,289
(iii) The proposal to increase the number of authorized
shares of the company's common stock was approved.
Tabulation of votes for the proposal is as follows:
For Against Abstain
Increase shares 205,729,773 21,940,121 918,955
(iv) The shareholder proposal concerning EEO policy and
American Indians was defeated. Tabulation of votes for
the proposal is as follows:
For Against Abstain
Shareholder proposal 26,355,100 169,789,952 12,093,477
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
See Exhibit Index for list of exhibits filed with this
report.
(b) (i) Current Report on Form 8-K dated February 15, 2000, in
connection with the company's sale of its cable business.
(ii) Current Report on Form 8-K dated May 2, 2000, in
connection with the company's amendment of its Rights
Plan Agreement.
(iii) Current Report on Form 8-K dated July 3, 2000, in
connection with the company's acquisition of Central
Newspapers, Inc.
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 9, 2000 By:/s/George R. Gavagan
---------------------------------
George R. Gavagan
Vice President and Controller
Dated: August 9, 2000 By: /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. Amendment
dated May 2, 2000, incorporated by
reference to Gannett Co., Inc.'s Form
10-Q for the fiscal quarter ended
March 26, 2000.
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.
Amendment incorporated by reference
to Gannett Co., Inc.'s Form 8-K
filed on May 2, 2000.
4-9 Amendment Number Four to Incorporated by reference to
$3,000,000,000 Revolving Exhibit 4-9 to Gannett Co., Inc.'s
Credit Agreement among Form 10-Q filed on August 12, 1998.
Gannett Co., Inc. and the
Banks named therein.
4-10 $3,000,000,000 Competitive Attached.
Advance and 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. Amendment No. 9
incorporated by reference to Exhibit
10-3 to Gannett Co., Inc.'s Form 10-Q
for the quarter ended June 27, 1999.
Amendment No. 10 attached.
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.* 10-5 to Gannett Co., Inc.'s Form 10-K
for the fiscal year ended
December 26, 1999.
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. Amendment No. 2 to January 1,
1997 Restatement incorporated by
reference to Exhibit 10-7 to
Gannett Co., Inc.'s Form 10-Q for the
quarter ended June 27, 1999.
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.
99-1 Agreement of Plan and Merger Incorporated by reference to Exhibit
dated as of June 28, 2000, 2.1 to Central Newspaper, Inc.'s
among Central Newspapers, Form 8-K dated June 29, 2000
Inc., Gannett Co., Inc., and
Pacific and Southern
Indiana Corp.
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.