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
July 1, 2001 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 July 1, 2001 was 264,772,128.
PART I. FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS
OPERATING SUMMARY
Recent acquisitions continued to have a significant impact on operating
results comparisons for the second quarter of 2001 versus the second quarter
of 2000. The company completed the Newscom acquisition in June 2000; the
Thomson acquisition in July 2000; and the Central acquisition in August
2000.
Operating revenues rose by $179.4 million or 12% for the second quarter and
$433.1 million or 16% for the year-to-date . Operating income from
continuing operations fell by $8.3 million or 2% for the second quarter and
increased by $2.2 million, less than 1%, for the year-to-date. Newspaper
publishing earnings were up $14.9 million or 4% for the quarter and $36.3
million or 5% for the year-to-date, reflecting the positive impact from the
recently acquired Newscom, Thomson and Central operations, tempered by lower
ad revenues in U.S. markets and higher newsprint prices. Television
earnings were down $24.9 million or 24% for the quarter and were down $36.7
million or 22% for the year-to-date due to advertising revenue declines.
Income from continuing operations declined by $32.3 million or 12% for the
quarter and $60.8 million or 13% for the year-to-date. Earnings per share
(diluted) from continuing operations were $0.88 for the second quarter and
$1.53 for the year-to-date, down 12% for each period.
Income from continuing operations for the second quarter and year-to-date was
adversely impacted by the softening of newspaper and television advertising
revenue. As noted in the pro forma newspaper revenue discussions below, all
major ad categories were down for the quarter and the year-to-date.
Classified revenues (principally employment) show the sharpest decline. The
company does not foresee changes in the general economic environment that are
likely to lead to an improvement in the newspaper revenue outlook for the
coming months.
Likewise, television revenue comparisons have suffered because of weak
demand. For the balance of 2001, television revenue comparisons are expected
to deteriorate further as the second half of 2000 benefited from strong
political advertising and the Olympics.
Because of the current revenue outlook, the company does not expect to reach
the earnings level reported for the third and fourth quarters of 2000.
NEWSPAPERS
Reported newspaper publishing revenues rose $206.1 million or 17% for the
quarter and $471.0 million or 20% for the year-to-date, reflecting increased
revenues from the newly acquired properties, tempered by softer domestic
advertising demand. Newspaper advertising revenues increased $146.0 million
or 16% for the quarter and $336.6 million or 19% for the year-to-date.
Refer to Note 6 for Business Segment Information.
The tables below provide, on a pro forma basis, details of newspaper ad
revenue, including revenues from the Newscom, Thomson and Central
properties, for the second quarter and the first six months of 2001 and
2000. Advertising linage and preprint distribution details are also
provided below; however, linage and preprint distribution for the U.K.
publications are not included.
Advertising revenue, in thousands of dollars (pro forma)
Second Quarter 2001 2000 % Change
-------- ------- --------
Local $ 463,421 $ 478,591 (3)
National 189,241 212,433 (11)
Classified 454,318 498,865 (9)
-------- -------- -----
Total ad revenue $1,106,980 $1,189,889 (7)
========= ======== =====
Advertising linage, in thousands of inches, and preprint distribution,
in millions (pro forma)
Second Quarter 2001 2000 % Change
-------- -------- --------
Local 9,996 10,394 (4)
National 1,036 1,171 (12)
Classified 13,987 14,542 (4)
-------- -------- -----
Total Run-of-Press
linage 25,019 26,107 (4)
======== ======== =====
Preprint distribution 2,482 2,565 (3)
======== ======== =====
Advertising revenue, in thousands of dollars (pro forma)
Year-to-date 2001 2000 % Change
-------- ------- --------
Local $ 899,132 $ 915,270 (2)
National 364,669 408,472 (11)
Classified 913,317 974,423 (6)
-------- -------- -----
Total ad revenue $2,177,118 $2,298,165 (5)
========= ======== =====
Advertising linage, in thousands of inches, and preprint distribution,
in millions (pro forma)
Year-to-date 2001 2000 % Change
-------- -------- --------
Local 19,284 20,275 (5)
National 1,947 2,239 (13)
Classified 27,293 28,189 (3)
-------- -------- -----
Total Run-of-Press
linage 48,524 50,703 (4)
======== ======== =====
Preprint distribution 4,905 4,957 (1)
======== ======== =====
Pro forma newspaper advertising revenues decreased 7% for the quarter and 5%
for the year-to-date. Local ad revenues decreased 3% on a 4% decrease in
volume for the quarter and decreased 2% on a 5% decline in volume for the
year-to-date. National ad revenues decreased 11% for the quarter on a
volume decrease of 12%, with year-to-date revenues down by 11% on a volume
decrease of 13%. Classified ad revenues decreased 9% for the quarter on a
volume decrease of 4%, with year-to-date revenues down by 6% on a volume
decrease of 3%. Advertising results reflect advertiser reluctance to
spend in an uncertain economic environment, and the continuing economic
downturn adversely impacted revenues at most domestic Gannett operations,
particularly in the classified employment category. USA TODAY advertising
revenues declined 19% for the quarter and for the year-to-date. Reported
revenues from the company's U.K. operations benefited from strong
advertising demand, but were unfavorably impacted by a decline in the
exchange rate for Sterling. If the exchange rate had remained constant
year-over-year, total company pro forma advertising revenues would have
declined 6% for the quarter and 4% for the year-to-date.
Reported newspaper circulation revenues increased $54.5 million or 22% for
the quarter and $113.4 million or 22% for the year-to-date, reflecting the
impact of the acquisitions. On a pro forma basis, newspaper circulation
revenues decreased 1% for the quarter and for the year-to-date. Pro forma
net paid daily circulation for the company's local domestic newspapers
decreased 2% for the second quarter and 1% for the first half of the year,
with Sunday circulation down 2% for both the quarter and the year-to-date.
USA TODAY reported an average daily paid circulation of 2,291,297 in the ABC
Publisher's statement for the 27 weeks ended April 1, 2001, a 0.4% increase
over the comparable period a year ago.
Operating costs for the newspaper segment increased $191.2 million or 22%
for the quarter and $434.7 million or 25% for the year-to-date, largely due
to the added costs from the new properties and higher newsprint prices,
offset by tight cost controls. Total pro forma newspaper segment expense,
excluding newsprint, declined approximately 7% for the quarter and 6% for
the year-to-date. In total, newsprint expense increased by 27% for the
quarter and 31% for the year-to-date due to a 6% and 9% increase in
consumption for the quarter and year-to-date, respectively, reflecting usage
by the new properties, and substantially higher year-over-year prices. The
company expects newsprint prices to remain higher for the rest of 2001 as
compared to the prior year, but the year-over-year increases are expected
to be at a reduced level.
Newspaper operating income increased $14.9 million or 4% for the second
quarter and $36.3 million or 5% for the year-to-date, reflecting the
positive impact of earnings from recently acquired properties, partially
offset by softer domestic advertising demand and higher newsprint prices.
TELEVISION
Reported television revenues decreased $26.7 million or 13% for the second
quarter and $37.9 million or 10% for the year-to-date, mainly due to the
reluctance of advertisers, principally national advertisers, to spend in
this uncertain economic environment. National advertising revenues
decreased 21% for the quarter and 18% for the year-to-date, while local
advertising revenues decreased 8% for the quarter and 6% for the year-to-
date.
Television operating costs for the quarter decreased $1.9 million or 2% and
decreased $1.2 million or 1% for the year-to-date. Reported television
operating income declined by $24.9 million or 24% for the quarter and $36.7
million or 22% for the year-to-date.
NON-OPERATING INCOME AND EXPENSE/PROVISION FOR INCOME TAXES
Interest expense was $61.7 million in the second quarter of 2001 versus
$22.7 million in the second quarter of 2000 and was $142.2 million for the
first half of 2001 versus $42.8 million for the first half of 2000 due to
increased commercial paper borrowings for the 2000 acquisitions and share
repurchases, tempered by lower interest rates. The daily average commercial
paper outstanding balance was $5.31 billion during the second quarter of
2001 and $1.25 billion during the second quarter of 2000. For the first
half of 2001 and 2000, the daily average commercial paper outstanding
balance was $5.36 billion and $1.18 billion, respectively. The weighted
average interest rate was 4.4% for the second quarter of 2001 and 6.4% for the
second quarter of 2000. For the first half of 2001 and 2000, the weighted
average interest rate was 5.16% and 6.13%, respectively.
The company's effective income tax rate was 39.4% for the second quarter of
2001 versus 39.6% for the same period last year, reflecting lower state taxes
and lower taxes on foreign operations.
NET INCOME
Income from continuing operations was down $32.3 million or 12% for the
quarter and $60.8 million or 13% for the first half of 2001. Diluted
earnings per share from continuing operations decreased to $0.88 from $1.00
for the second quarter and to $1.53 from $1.73 for the first half of the
year, both 12% declines.
In the first half of 2000, after-tax income from the operation of the
discontinued cable business of $2.4 million and an after-tax gain from the
sale of the cable business of $744.7 million contributed $2.75 per share
(diluted).
The weighted average number of diluted shares outstanding in the second
quarter of 2001 totaled 266,754,000, compared to 266,294,000 for the second
quarter of 2000. The weighted average number of diluted shares outstanding
in the first half of 2001 totaled 266,585,000, compared to 271,234,000 for the
first half of 2000.
In February 2000, the company announced authorizations to repurchase up to
$1 billion of its common stock and 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. There were no stock repurchases during
the first half of 2001. 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 $556.9 million for the
second quarter of 2001, compared with $537.1 million for the same period of
2000, a 4% increase. The company's consolidated operating cash flow for the
year-to-date totaled $1,037.5 million for the first half of 2001, compared with
$975.0 million for the first half of 2000, a 6% increase. The increase in
cash flow reflects the solid operating cash flow contributions from the
recently acquired properties and lower interest rates on related borrowings.
Capital expenditures totaled $146.4 million for the first half of 2001,
compared to $122.2 million for the first half of 2000. During the first
half of 2001, the company made payments of $133.0 million related to several
small acquisitions and additional share purchases of WKYC-TV. The company's
debt decreased by $330.7 million during the first six months of 2001,
reflecting the pay-down of commercial paper borrowings from operating cash
flow.
The company's foreign currency translation adjustment, included in
accumulated other comprehensive income and reported as part of shareholders'
equity, totaled ($134.5 million) at the end of the second quarter versus ($66.4
million) at the end of 2000, reflecting a weakening of Sterling against the
U.S. dollar since the end of the year 2000. Newsquest's assets and
liabilities at July 1, 2001 were translated from Sterling to U.S. dollars at
an exchange rate of $1.42 versus $1.49 at the end of 2000. Newsquest's
financial results were translated at an average rate of $1.42 for the second
quarter of 2001 versus $1.54 for the second quarter of 2000, and at an
average rate of $1.44 for the first half of 2001 versus $1.57 for the first
half of 2000.
The company's regular quarterly dividend of $0.22 per share was declared in
the second quarter of 2001, totaling $58.2 million.
OTHER MATTERS
Refer to Note 2 for a discussion of new accounting standards.
CERTAIN FACTORS AFFECTING FORWARD-LOOKING STATEMENTS
Certain statements in the company's 2000 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 that 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) a continued 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; (i) an increase in interest rates; (j) a
weakening in the Sterling to U.S. dollar exchange rate; and (k) general
economic and business conditions.
CONSOLIDATED BALANCE SHEETS
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands of dollars
July 1, 2001 Dec. 31, 2000
---------------- ---------------
<s> <c> <c>
ASSETS
Cash $ 72,648 $ 69,954
Marketable securities 78,010 123,242
Trade receivables, less allowance 802,318 875,363
(2001 - $33,569; 2000 - $37,465)
Inventories 138,883 128,321
Prepaid expenses and other receivables 93,236 105,456
---------------- ---------------
Total current assets 1,185,095 1,302,336
---------------- ---------------
Property, plant and equipment
Cost 4,264,050 4,135,201
Less accumulated depreciation (1,773,173) (1,673,802)
---------------- ---------------
Net property, plant and equipment 2,490,877 2,461,399
---------------- ---------------
Intangible and other assets
Excess of acquisition cost over the value of
assets acquired, less amortization 8,634,739 8,740,804
Investments and other assets 483,475 475,872
---------------- ---------------
Total intangible and other assets 9,118,214 9,216,676
---------------- ---------------
Total assets $ 12,794,186 $ 12,980,411
================ ===============
LIABILITIES & SHAREHOLDERS' EQUITY
Accounts payable and current portion of film
contracts payable $ 316,132 $ 493,243
Compensation, interest and other accruals 273,317 325,904
Dividend payable 58,294 58,118
Income taxes 296,351 144,599
Deferred income 149,521 152,137
---------------- ---------------
Total current liabilities 1,093,615 1,174,001
---------------- ---------------
Deferred income taxes 268,046 274,829
Long-term debt 5,417,192 5,747,856
Postretirement medical and life insurance liabilities 403,241 403,528
Other long-term liabilities 265,499 276,787
---------------- ---------------
Total liabilities 7,447,593 7,877,001
---------------- ---------------
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 176,123 170,715
Retained earnings 7,287,524 6,995,965
Accumulated other comprehensive loss (132,940) (66,274)
---------------- ---------------
Total 7,655,128 7,424,827
---------------- ---------------
Less treasury stock - 59,648,604 shares and
60,148,871 shares respectively, at cost (2,297,279) (2,307,793)
Deferred compensation related to ESOP (11,256) (13,624)
---------------- ---------------
Total shareholders' equity 5,346,593 5,103,410
---------------- ---------------
Total liabilities and shareholders' equity $ 12,794,186 $ 12,980,411
================ ===============
CONSOLIDATED STATEMENTS OF INCOME
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands of dollars (except per share amounts)
Thirteen weeks ended % Inc
July 1, 2001 June 25, 2000 (Dec)
<s> <c> <c> <c>
Net Operating Revenues:
Newspaper advertising $ 1,057,899 $ 911,949 16.0
Newspaper circulation 306,019 251,524 21.7
Television 178,692 205,413 (13.0)
Other 84,622 78,921 7.2
------------- ------------- ------
Total 1,627,232 1,447,807 12.4
------------- ------------- ------
Operating Expenses:
Cost of sales and operating
expenses, exclusive of
depreciation 824,030 683,084 20.6
Selling, general and
administrative expenses,
exclusive of depreciation 246,324 227,593 8.2
Depreciation 51,059 47,070 8.5
Amortization of intangible assets 59,457 35,379 68.1
------------- ------------- ------
Total 1,180,870 993,126 18.9
------------- ------------- ------
Operating income 446,362 454,681 (1.8)
------------- ------------- ------
Non-operating income (expense):
Interest expense (61,728) (22,666) 172.3
Other 528 7,947 (93.4)
------------- ------------- ------
Total (61,200) (14,719) 315.8
------------- ------------- ------
Income before income taxes 385,162 439,962 (12.5)
Provision for income taxes 151,700 174,200 (12.9)
------------- ------------- ------
Net income $ 233,462 $ 265,762 (12.2)
============= ============= ======
Net income per share-basic $0.88 $1.01 (12.9)
===== ===== ======
Net income per share-diluted $0.88 $1.00 (12.0)
===== ===== ======
Dividends per share $0.22 $0.21 4.8
===== ===== ======
CONSOLIDATED STATEMENTS OF INCOME
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands of dollars (except per share amounts)
<caption>
Twenty-six weeks ended % Inc
July 1, 2001 June 25, 2000 (Dec)
<s> <c> <c> <c>
Net Operating Revenues:
Newspaper advertising $ 2,078,833 $ 1,742,199 19.3
Newspaper circulation 619,028 505,670 22.4
Television 334,305 372,202 (10.2)
Other 170,014 149,056 14.1
------------- ------------- ------
Total 3,202,180 2,769,127 15.6
------------- ------------- ------
Operating Expenses:
Cost of sales and operating
expenses, exclusive of
depreciation 1,663,577 1,350,570 23.2
Selling, general and
administrative expenses,
exclusive of depreciation 501,062 443,535 13.0
Depreciation 104,340 93,678 11.4
Amortization of intangible assets 118,800 69,145 71.8
------------- ------------- ------
Total 2,387,779 1,956,928 22.0
------------- ------------- ------
Operating income 814,401 812,199 0.3
------------- ------------- ------
Non-operating income (expense):
Interest expense (142,170) (42,841) 231.9
Other 976 6,621 (85.3)
------------- ------------- ------
Total (141,194) (36,220) 289.8
------------- ------------- ------
Income before income taxes 673,207 775,979 (13.2)
Provision for income taxes 265,200 307,200 (13.7)
------------- ------------- ------
Income from continuing operations 408,007 468,779 (13.0)
------------- ------------- ------
Discontinued Operations:
Income from the operation of
discontinued operations, net
of tax 2,437 --
Gain on sale of cable business,
net of tax 744,700 --
------------- ------------- ------
Net income $ 408,007 $ 1,215,916 (66.4)
============= ============= ======
Earnings from continuing
operations per share-basic $1.54 $1.74 (11.5)
Earnings from discontinued
operations:
Discontinued operations per
share-basic $0.01 --
Gain on sale of cable business
per share-basic $2.77 --
----- ----- -------
Net income per share-basic $1.54 $4.52 (65.9)
===== ===== =======
Earnings from continuing
operations per share-diluted $1.53 $1.73 (11.6)
Earnings from discontinued
operations:
Discontinued operations per
share-diluted $0.01 --
Gain on sale of cable business
per share-diluted $2.74 --
----- ----- -------
Net income per share-diluted $1.53 $4.48 (65.8)
===== ===== =======
Dividends per share $0.44 $0.42 4.8
===== ===== =======
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands of dollars
Twenty-six weeks ended
July 1, 2001 June 25, 2000
-------------- --------------
<s> <c> <c>
Cash flows from operating activities
Net income $ 408,007 $ 1,215,916
Adjustments to reconcile net income to
operating cash flows:
Discontinued operations 0 (747,137)
Income taxes on sale of cable division 0 (889,301)
Depreciation 104,340 93,678
Amortization of intangibles 118,800 69,145
Deferred income taxes (6,783) (165,565)
Other, net 56,876 153,822
--------- ---------
Net cash flow provided by
(used for) operating activities 681,240 (269,442)
--------- ---------
Cash flows from investing activities
Purchase of property, plant and equipment (146,443) (122,206)
Payments for acquisitions, net of cash acquired (133,041) (543,110)
Change in other investments (8,564) (42,969)
Proceeds from sale of certain assets 0 2,714,362
Collection of long-term receivables 0 1,900
--------- ---------
Net cash (used for) provided by investing activities (288,048) 2,007,977
--------- ---------
Cash flows from financing activities
Payment of long-term debt (330,664) (392,588)
Dividends paid (116,271) (114,913)
Cost of common shares repurchased 0 (967,242)
Proceeds from issuance of common stock 15,922 8,697
--------- ---------
Net cash used for financing activities (431,013) (1,466,046)
--------- ---------
Effect of currency exchange rate change (4,717) (994)
--------- ---------
Net (decrease) increase in cash and cash equivalents (42,538) 271,495
Balance of cash and cash equivalents at
beginning of year 193,196 46,160
--------- ---------
Balance of cash and cash equivalents at
end of second quarter $ 150,658 317,655
========= =========
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
July 1, 2001
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-week
and 26-week periods ended July 1, 2001, and the comparative periods of
2000, reflect all adjustments which, in the opinion of the company,
are necessary for a fair statement of results for the interim periods
and reflect all normal and recurring adjustments which are necessary
for a fair presentation of the company's financial position, results
of operations and cash flows as of the dates and for the periods
presented.
2. Accounting Standards
In July 2001, the Financial Accounting Standards Board issued Statements
of Financial Accounting Standards No. 141 (SFAS No. 141), "Business
Combinations", and No. 142 (SFAS No. 142), "Goodwill and Other Intangible
Assets." SFAS No. 141 addresses financial accounting and reporting for
goodwill and other intangible assets acquired in a business combination.
SFAS No. 141 requires the purchase method of accounting to be used for all
business combinations initiated after June 30, 2001, and establishes specific
criteria for the recognition of intangible assets separately from goodwill.
SFAS No. 141 is effective for all business combinations initiated after
June 30, 2001, and for all business combinations accounted for by the
purchase method for which the date of acquisition is after June 30, 2001.
SFAS No. 142 addresses financial accounting and reporting for goodwill
and other intangible assets subsequent to their acquisition. SFAS No. 142
provides that goodwill and intangible assets which have indefinite useful
lives will not be amortized but rather will be tested at least annually
for impairment. The company will adopt SFAS No. 142 effective
December 31, 2001, the first day of its fiscal year 2002. The company is
currently evaluating the provisions of this standard and has not yet
determined the effects of these changes on the company's financial
position or results of operations but expects a substantial reduction to
its amortization expense beginning in 2002.
3. Comprehensive Income
Comprehensive income for the company includes net income, foreign
currency translation adjustments and unrealized gains or losses on available-
for-sale securities, as defined under SFAS No. 115, "Accounting for
Certain Investments in Debt and Equity Securities."
Comprehensive income totaled $234.4 million for the second quarter of 2001
and $201.7 million for the second quarter of 2000. Other comprehensive
income and losses relate to foreign currency translation adjustments and
unrealized gains or losses on available-for-sale securities, net of tax. The
accumulated other comprehensive income and losses were net of a deferred income
tax liability of $0.6 million for the second quarter of 2001 and a deferred tax
asset of $41.0 million for the second quarter of 2000.
Comprehensive income totaled $341.3 million for the first half of 2001
and $1,136.4 million for the first half of 2000. The accumulated other
comprehensive losses were net of a deferred income tax asset of $40.9 million
for the first half of 2001 and $50.9 million for the first half of 2000.
4. Acquisitions and Dispositions
The company completed the Thomson acquisition in July 2000 and the Central
acquisition in August 2000. The purchase price allocations for these
acquisitions are preliminary. The final allocations will be based on a
complete evaluation of assets acquired and liabilities assumed.
The sale of the assets of the company's cable business for $2.7 billion was
completed on January 31, 2000. Upon closing, an after-tax gain of
approximately $745 million was recognized which, along with the cable segment
operating results, are reported as discontinued operations in the company's
financial statements.
The following table summarizes, on an unaudited, pro forma basis, the
estimated combined results of operations of the company and its subsidiaries
as though the 2000 acquisitions (Newscom, Thomson and Central) and
disposition (cable business) were all made at the beginning of 2000.
However, this pro forma combined statement does not necessarily
reflect the results of operations as they would have been if the combined
companies had constituted a single entity during those years.
In millions, except per share amounts (pro forma and unaudited)
Quarter-to-date
- ---------------
2001 2000
-------- --------
Operating revenues $ 1,627 $ 1,744
Income before income taxes $ 385 $ 423
Income from continuing operations $ 233 $ 256
Income per share from continuing
operations - basic $ 0.88 $ 0.97
Income per share from continuing
operations - diluted $ 0.88 $ 0.96
Year-to-date
- ---------------
2001 2000
-------- --------
Operating revenues $ 3,202 $ 3,374
Income before income taxes $ 673 $ 738
Income from continuing operations $ 408 $ 446
Income per share from continuing
operations - basic $ 1.54 $ 1.66
Income per share from continuing
operations - diluted $ 1.53 $ 1.64
5. Outstanding Shares
The weighted average number of common shares outstanding (basic)
in the second quarter totaled 264,685,000 compared to 264,410,000 for the
second quarter of 2000. The weighted average number of diluted shares
outstanding in the second quarter totaled 266,754,000 compared to
266,294,000 for the second quarter of 2000.
The weighted average number of common shares outstanding (basic)
in the first half of 2001 totaled 264,576,000 compared to 269,184,000
for the first half of 2000. The weighted average number of diluted shares
outstanding in the first half of 2001 totaled 266,585,000 compared to
271,234,000 for the first half of 2000.
6. Business Segment Information
BUSINESS SEGMENT INFORMATION
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands of dollars
Thirteen weeks ended % Inc
July 1, 2001 June 25, 2000 (Dec)
<s> <c> <c> <c>
Operating Revenues:
Newspaper publishing $ 1,448,540 $ 1,242,394 16.6
Television 178,692 205,413 (13.0)
------------- ------------- -----
Total $ 1,627,232 $ 1,447,807 12.4
============= ============= =====
Operating Income (net of
depreciation and amortization):
Newspaper publishing $ 384,142 $ 369,231 4.0
Television 77,003 101,870 (24.4)
Corporate (14,783) (16,420) 10.0
------------- ------------- -----
Total $ 446,362 $ 454,681 (1.8)
============= ============= =====
Depreciation and Amortization:
Newspaper publishing $ 91,925 $ 63,243 45.4
Television 17,100 16,909 1.1
Corporate 1,491 2,297 (35.1)
------------- ------------- -----
Total $ 110,516 $ 82,449 34.0
============= ============= =====
Operating Cash Flow:
Newspaper publishing $ 476,067 $ 432,474 10.1
Television 94,103 118,779 (20.8)
Corporate (13,292) (14,123) 5.9
------------- ------------- -----
Total $ 556,878 $ 537,130 3.7
============= ============= =====
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
July 1, 2001 June 25, 2000 (Dec)
<s> <c> <c> <c>
Operating Revenues:
Newspaper publishing $ 2,867,875 $ 2,396,925 19.6
Television 334,305 372,202 (10.2)
------------- ------------- -----
Total $ 3,202,180 $ 2,769,127 15.6
============= ============= =====
Operating Income (net of
depreciation and amortization):
Newspaper publishing $ 712,927 $ 676,666 5.4
Television 131,269 167,997 (21.9)
Corporate (29,795) (32,464) 8.2
------------- ------------- -----
Total $ 814,401 $ 812,199 0.3
============= ============= =====
Depreciation and Amortization:
Newspaper publishing $ 186,068 $ 125,532 48.2
Television 34,083 33,035 3.2
Corporate 2,989 4,256 (29.8)
------------- ------------- -----
Total $ 223,140 $ 162,823 37.0
============= ============= =====
Operating Cash Flow:
Newspaper publishing $ 898,995 $ 802,198 12.1
Television 165,352 201,032 (17.7)
Corporate (26,806) (28,208) 5.0
------------- ------------- -----
Total $ 1,037,541 $ 975,022 6.4
============= ============= =====
NOTE:
Operating Cash Flow represents operating income for each of the company's
business segments plus related depreciation and amortization expense.
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 Sterling 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 8, 2001.
(b) The following directors were elected at the meeting:
James A. Johnson Douglas H. McCorkindale
Stephen P. Munn
The following directors' terms of office continued
after the meeting:
H. Jesse Arnelle Meredith A. Brokaw
Samuel J. Palmisano Karen Hastie Williams
(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
James A. Johnson 213,039,732 9,665,969
Douglas H. McCorkindale 185,300,114 37,405,587
Stephen P. Munn 213,059,326 9,646,375
(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 220,875,192 1,021,219 809,290
(iii) The proposal to approve the Omnibus Incentive Plan
was passed. Tabulation of votes for the proposal is as
follows:
For Against Abstain
Approval of Omnibus
Incentive Plan 196,863,861 24,184,216 1,654,624
(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 20,130,489 172,146,030 6,624,732
(v) The shareholder proposal concerning the nomination of
additional director candidates was defeated. Tabulation
of votes for the proposal is as follows:
Shareholder proposal 6,110,239 190,453,035 2,337,977
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
See Exhibit Index for list of exhibits filed with this
report.
(b) 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 15, 2001 By:/s/George R. Gavagan
------------------------------
George R. Gavagan
Vice President and Controller
Dated: August 15, 2001 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
(reflects all amendments Exhibit 3-2 to Gannett Co., Inc.'s
through February 1, 2001) Form 10-K for the fiscal year ended
December 31, 2000.
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 Incorporated by reference to Exhibit
Advance and Revolving Credit 4-10 to Gannett Co., Inc.'s Form 10-Q
Agreement among Gannett Co., filed on August 9, 2000.
Inc. and the Banks named
therein.
4-11 Amendment Number One to Incorporated by reference to Exhibit
$3,000,000,000 Competitive 4-11 to Gannett Co., Inc.'s Form 10-K
Advance and Revolving Credit for the fiscal year ended December 31,
Agreement among Gannett Co., 2000.
Inc. and the Banks named
therein.
4-12 Amendment Number Two Attached.
to $3,000,000,000 Competitive
Advance and Revolving Credit
Agreement among Gannett Co.,
Inc. and the Banks named
therein.
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 incorporated by
reference to Exhibit 10-3 to Gannett
Co., Inc's Form 10-Q for the quarter
ended June 25, 2000. Amendment No. 11
incorporated by reference to
Exhibit 10-3 to Gannett Co., Inc.'s
Form 10-K for the fiscal year ended
December 31, 2000.
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.
Amendments Nos. 3 and 4 incorporated
by reference to Exhibit 10-7 to
Gannett Co., Inc.'s Form 10-K for the
fiscal year ended December 31, 2000.
Amendment No. 5 attached.
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.
10-9 Employment Agreement dated Incorporated by reference to Exhibit
January 1, 2001 between 10-9 to Gannett Co., Inc.'s Form 10-K
Gannett Co., Inc. and Douglas for the fiscal year ended December 31,
H. McCorkindale.* 2000.
10-10 2001 Omnibus Incentive Incorporated by reference to
Compensation Plan* Exhibit No. 4 to the Company's
Registration Statement on Form S-8
(Registration No. 333-60402).
11 Statement re computation of Attached.
earnings per share.
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.