Exhibit 13
COMPANY PROFILE
Gannett Co., Inc. is a diversified news and information company that publishes
newspapers, operates broadcasting stations and is engaged in marketing,
commercial printing, a newswire service, data services and news programming.
Gannett is an international company with headquarters in McLean, Va., and
operations in 43 states, the District of Columbia, Guam, the United Kingdom,
Belgium, Germany, Italy and Hong Kong.
Gannett is the USA's largest newspaper group in terms of circulation. The
company's 95 U.S. daily newspapers have a combined daily paid circulation of 7.7
million. They include USA TODAY, the nation's largest-selling daily newspaper,
with a circulation of approximately 2.3 million. In addition, Gannett owns a
variety of non-daily publications and USA WEEKEND, a weekly newspaper
magazine.
Newsquest plc, a wholly owned Gannett subsidiary acquired in mid-1999, is
one of the largest regional newspaper publishers in the United Kingdom with a
portfolio of more than 300 titles. Its publications include 15 daily newspapers
with a combined circulation of approximately 600,000. Newsquest also publishes a
variety of non-daily publications, including Berrow's Worcester Journal, the
oldest continuously published newspaper in the world.
The company owns and operates 22 television stations covering 17.7 percent
of the USA.
Gannett was founded by Frank E. Gannett and associates in 1906 and
incorporated in 1923. The company went public in 1967. Its more than 265 million
shares of common stock are held by approximately 13,700 shareholders of record
in all 50 states and several foreign countries. The company has approximately
51,500 employees.
BOARD OF DIRECTORS
Douglas H. McCorkindale
Chairman, president and chief executive officer, Gannett Co., Inc. Formerly:
President, chief executive officer and vice chairman, Gannett Co., Inc.
(2000-January 2001), Vice chairman and president, Gannett Co., Inc. (1997-2000),
Vice chairman and chief financial and administrative officer, Gannett Co., Inc.
(1985-1997). Other directorships: Continental Airlines, Inc.; Lockheed Martin
Corporation; and funds that are part of the Prudential group of mutual funds.
Age 62. (b,d,e,f)
H. Jesse Arnelle
Of counsel to Winston-Salem, N.C., law firm of Womble, Carlyle, Sandridge &
Rice. Other directorships: FPL Group, Inc.; Textron Corporation; Eastman
Chemical Co.; Armstrong World Industries; Waste Management, Inc.; Metropolitan
Life Series Fund. Age 68. (a,e)
Meredith A. Brokaw
Founder, Penny Whistle Toys, Inc., New York City, and author of children's
books. Other directorships: Conservation International, Washington, D.C. Age 61.
(d,e)
James A. Johnson
Vice chairman, Perseus LLC. Other directorships: Cummins Engine Co.; Goldman
Sachs Group, Inc.; Target Corporation; Temple-Inland Corporation; UnitedHealth
Group; KB Home Corporation; Chairman, John F. Kennedy Center for the Performing
Arts; Chairman, board of trustees, The Brookings Institution. Age 58. (b,c,d)
- 12 -
Stephen P. Munn
Chairman and director, Carlisle Companies, Inc. Other directorships: funds that
are part of the Prudential group of mutual funds. Age 59. (a,c)
Samuel J. Palmisano
President and chief executive officer, International Business Machines
Corporation; and a trustee of The Johns Hopkins University. Age 50. (a,c)
Donna E. Shalala
President, University of Miami. Other directorships: UnitedHealth Group; Lennar
Corporation. Age 61. (d,e)
Karen Hastie Williams
Partner of Washington, D.C., law firm of Crowell & Moring. Other directorships:
The Chubb Corporation; Continental Airlines, Inc.; SunTrust Banks, Inc.;
Washington Gas Light Company; and a trustee of the Fannie Mae Foundation. Age
57. (a,b,c)
(a) Member of Audit Committee.
(b) Member of Executive Committee.
(c) Member of Executive Compensation Committee.
(d) Member of Management Continuity Committee.
(e) Member of Public Responsibility and Personnel Practices Committee.
(f) Member of Gannett Management Committee.
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Company and Divisional Officers
Gannett's principal management group is the Gannett Management Committee, which
coordinates overall management policies for the company. The Gannett Newspaper
Operating Committee oversees operations of the company's newspaper division. The
Gannett Broadcasting Operating Committee coordinates management policies for the
company's television stations. The members of these three groups are identified
at right. The managers of the company's various local operating units enjoy
substantial autonomy in local policy, operational details, news content and
political endorsements. Gannett's headquarters staff includes specialists who
provide advice and assistance to the company's operating units in various phases
of the company's operations. At right is a listing of the officers of the
company and the heads of its national and regional divisions. Officers serve for
a term of one year and may be re-elected. Information about the officer who
serves as a director (Douglas H. McCorkindale) can be found on page 12.
Christopher W. Baldwin
Vice president, taxes. Age 58.
James T. Brown
Non-executive chairman, Newsquest. Age 66.
Thomas L. Chapple
Senior vice president, general counsel and secretary. Age 54.(1)
Richard L. Clapp
Senior vice president, human resources. Age 61.(1)
Susan Clark-Johnson
Chairman and CEO, Phoenix Newspapers, Inc., Senior group president, Gannett
Pacific Newspaper Group. Age 55.(2)
Michael J. Coleman
Senior group president, Gannett South Newspaper Group, and president and
publisher, FLORIDA TODAY at Brevard County. Age 58. (2)
Robert T. Collins
President, New Jersey Newspaper Group, and president and publisher, Asbury Park
Press. Age 59. (2)
Thomas Curley
Senior vice president, administration, Gannett, and president and publisher, USA
TODAY. Age 53.(1)
Philip R. Currie
Senior vice president, news, Newspaper Division. Age 61.(2)
Paul Davidson
Chief executive, Newsquest. Age 47.(1)
Ardyth R. Diercks
Senior vice president, Gannett Television, and president and general manager,
WUSA-TV, Washington, D.C. Age 47.(3)
Craig A. Dubow
President and CEO, Gannett Broadcasting. Age 47.(1)(3)
Daniel S. Ehrman, Jr.
Vice president, planning and development. Age 55.
Millicent A. Feller
Senior vice president, public affairs and government relations. Age 54.(1)
Lawrence P. Gasho
Vice president, financial analysis. Age 59.
George R. Gavagan
Vice president and controller. Age 55.
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Denise H. Ivey
President, Gannett Gulf Coast Newspaper Group, and president and publisher,
Pensacola (Fla.) News Journal. Age 51.(2)
John B. Jaske
Senior vice president, labor relations and assistant general counsel. Age 57.(1)
Richard A. Mallary
Senior vice president, Gannett Television. Age 59.(2)
Gracia C. Martore
Senior vice president, finance and treasurer. Age 50.
Larry F. Miller
Executive vice president, operations, and chief financial officer. Age 63.(1)
Craig A. Moon
President, Gannett Piedmont Newspaper Group, and president and publisher, The
Tennessean, Nashville. Age 52.(2)
Roger Ogden
Senior vice president, Gannett Television, and president and general manager,
KUSA-TV, Denver, Colo. Age 56.(3)
W. Curtis Riddle
Senior group president, Gannett East Newspaper Group, and president and
publisher, The News Journal, Wilmington, Del. Age 51.(2)
Gary F. Sherlock
President, Gannett Atlantic Newspaper Group, and president and publisher, The
Journal News, Westchester County, N.Y. Age 56.(2)
Mary P. Stier
Senior group president, Gannett Midwest Newspaper Group, and president and
publisher, The Des Moines Register. Age 45.(2)
Wendell J. Van Lare
Vice president, senior labor counsel. Age 57.
Frank J. Vega
President and CEO, Detroit Newspapers. Age 53.(2)
Barbara W. Wall
Vice president, senior legal counsel. Age 47.
Gary L. Watson
President, Gannett Newspaper Division. Age 56.(1)(2)
(1) Member of the Gannett Management Committee.
(2) Member of the Gannett Newspaper Operating Committee.
(3) Member of the Gannett Broadcasting Operating Committee.
SPECIAL THANKS
Cecil Walker, chairman and CEO of Gannett Broadcasting, retired from Gannett on
Dec. 31, 2001.
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Gannett Common stock prices
High-low range by quarters based on NYSE-composite closing prices.
Year Quarter Low High
---- ------- --- ----
1991 First $ 17.88 $ 21.32
Second $ 19.88 $ 22.19
Third $ 19.69 $ 23.32
Fourth $ 17.94 $ 21.13
1992 First $ 21.13 $ 23.94
Second $ 20.75 $ 24.57
Third $ 21.94 $ 24.13
Fourth $ 23.00 $ 26.82
1993 First $ 25.32 $ 27.69
Second $ 23.75 $ 27.38
Third $ 23.88 $ 25.69
Fourth $ 23.75 $ 29.07
1994 First $ 26.69 $ 29.19
Second $ 25.32 $ 27.44
Third $ 24.19 $ 25.82
Fourth $ 23.38 $ 26.69
1995 First $ 25.07 $ 27.50
Second $ 26.00 $ 27.88
Third $ 26.50 $ 27.75
Fourth $ 26.44 $ 32.19
1996 First $ 29.63 $ 35.38
Second $ 32.25 $ 35.82
Third $ 32.00 $ 35.07
Fourth $ 34.75 $ 39.25
1997 First $ 35.81 $ 44.75
Second $ 40.50 $ 50.66
Third $ 48.00 $ 53.00
Fourth $ 51.13 $ 61.81
1998 First $ 57.25 $ 69.94
Second $ 65.13 $ 74.69
Third $ 55.81 $ 73.56
Fourth $ 48.94 $ 68.06
1999 First $ 61.81 $ 70.25
Second $ 61.81 $ 75.44
Third $ 66.81 $ 76.94
Fourth $ 68.81 $ 79.31
2000 First $ 61.75 $ 83.25
Second $ 59.25 $ 72.13
Third $ 49.25 $ 60.06
Fourth $ 48.69 $ 63.06
2001 First $ 56.50 $ 67.74
Second $ 59.58 $ 69.38
Third $ 55.55 $ 69.11
Fourth $ 58.55 $ 71.10
2002 First $ 65.03 $ 77.10*
* Through March 7, 2002
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MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS
The management of the company has prepared and is responsible for the
consolidated financial statements and related financial information included in
this report. These financial statements were prepared in accordance with
accounting principles generally accepted in the United States of America. These
financial statements necessarily include amounts determined using management's
best judgments and estimates.
The company's accounting and other control systems provide reasonable
assurance that assets are safeguarded and that the books and records reflect the
authorized transactions of the company. Underlying the concept of reasonable
assurance is the premise that the cost of control not exceed the benefit
derived. Management believes that the company's accounting and other control
systems appropriately recognize this cost/benefit relationship.
The company's independent accountants, PricewaterhouseCoopers LLP,
provide an independent assessment of the degree to which management meets its
responsibility for fairness in financial reporting. They regularly evaluate the
company's system of internal accounting controls and perform such tests and
other procedures as they deem necessary to reach and express an opinion on the
financial statements. The PricewaterhouseCoopers LLP report appears on page 47.
The Audit Committee of the Board of Directors is responsible for
reviewing and monitoring the company's financial reports and accounting
practices to ascertain that they are appropriate in the circumstances. The Audit
Committee consists of four non-management directors, and meets to discuss audit
and financial reporting matters with representatives of financial management,
the internal auditors and the independent accountants. The internal auditors and
the independent accountants have direct access to the Audit Committee to review
the results of their examinations, the adequacy of internal accounting controls
and the quality of financial reporting.
Douglas H. McCorkindale Larry F. Miller
Chairman, President and Executive Vice
Chief Executive Officer President/Operations and
Chief Financial Officer
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
POSITION
Basis of reporting
Following is a discussion of the key factors that have affected the company's
business over the last three fiscal years. This commentary should be read in
conjunction with the company's financial statements, the 11-year summary of
operations and the Form 10-K information that appear in the following sections
of this report.
Critical accounting policies and the use of estimates: The company
prepares its financial statements in accordance with generally accepted
accounting principles which require the use of estimates and assumptions that
affect the reported amount of assets, liabilities, revenues and expenses and
related disclosure of contingent matters. The company bases its estimates on
historical experience, actuarial studies and other assumptions, as appropriate,
concerning the carrying values of its assets and liabilities and disclosure of
contingent matters. The company re-evaluates its estimates on an ongoing basis.
Actual results could differ from these estimates.
Critical accounting policies for the company involve its assessment of
the recoverability of its long-lived assets, including goodwill and other
intangible assets, which are based on such factors as estimated future cash
flows and current fair value estimates of business units. The company's
accounting for pension and retiree medical benefits requires the use of various
estimates concerning the work force, interest rates, plan investment return, and
involves the use of advice from consulting actuaries. The company's accounting
for income taxes in the U.S. and foreign jurisdictions is sensitive to
interpretation of various laws and regulations therein, and to company policy
and expectations as to the repatriation of earnings from foreign sources.
Please refer to page 35 of this report for a more complete discussion of
all of the company's significant accounting policies.
The company's fiscal year ends on the last Sunday of the calendar year.
The company's 2001 fiscal year ended on December 30, 2001, and encompassed a
52-week period. The company's 2000 fiscal year encompassed a 53-week period and
its 1999 fiscal year covered a 52-week period.
Business Acquisitions, Exchanges and Dispositions
2001
During 2001, the company purchased the remaining 36% interest in WKYC-TV,
Cleveland, that it did not previously own. Additionally, the company purchased
several small non-daily publications in the U.S. and in the U.K. These
acquisitions, which had an aggregate purchase price of approximately $186
million, were accounted for under the purchase method of accounting. The company
contributed its Marietta (Ohio) Times newspaper to the Gannett Foundation in May
2001. The Gannett Foundation is a not-for-profit, private foundation that makes
charitable awards in the communities in which Gannett operates its newspapers
and television stations. The company sold its daily newspaper in Lansdale, Pa.,
in September 2001. These business acquisitions and dispositions did not
materially affect the company's financial position or results of operations.
- 19 -
2000
In June 2000, Gannett acquired the entire share capital of News Communications &
Media plc ("Newscom") for approximately 444 million British pounds (U.S. $702
million). Gannett also financed the repayment of Newscom's existing debt. With
the Newscom acquisition, Newsquest (which includes Newscom) now publishes more
than 300 titles in the United Kingdom, including 15 daily newspapers.
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 eight daily newspapers in Wisconsin, eight daily newspapers in central
Ohio, and daily newspapers in Lafayette, La.; Salisbury, Md.; and St. George,
Utah (collectively, "Thomson").
The company completed its acquisition of Central Newspapers, Inc.
("Central"), on Aug. 1, 2000, for an approximate cash purchase price of $2.6
billion. The company also retired Central's existing debt of approximately $206
million. Central's properties include The Arizona Republic; The Indianapolis
Star; three other dailies in Indiana and one daily in Louisiana; a direct
marketing business; CNI Ventures, an Internet and technology investment
management group; and other related media and information businesses.
In March 2000, the company completed the acquisition of WJXX-TV, the ABC
affiliate in Jacksonville, Fla. Gannett continues to own and operate WTLV-TV,
the NBC affiliate in Jacksonville.
The Newscom, Thomson, Central and WJXX-TV acquisitions were recorded
under the purchase method of accounting.
The aggregate purchase price, including liabilities assumed, for
businesses and assets acquired in 2000, including Newscom, Thomson, Central,
WJXX-TV and certain smaller newspaper publishing operations, totaled
approximately $4.8 billion.
The sale of the assets of the company's cable division for $2.7 billion
was completed on Jan. 31, 2000. Upon closing, an after-tax gain of approximately
$745 million or $2.77 per diluted share was recognized which, along with the
cable segment operating results, is reported as discontinued operations in the
company's financial statements.
Early in the fourth quarter of 2000, the company contributed the assets
of its newspapers, the Marin Independent Journal and the Classified Gazette, to
the California Newspapers Partnership (a partnership that includes 20 daily
California newspapers) in exchange for an increased ownership interest in the
partnership. The company now has a 19.49% ownership interest in the partnership.
1999
In July 1999, Gannett acquired the stock of Newsquest plc ("Newsquest") for a
total price of approximately 922 million British pounds (U.S. $1.5 billion).
Gannett also financed the repayment of Newsquest's existing debt. Newsquest's
principal activities are publishing and printing regional and local newspapers
in England with a portfolio of more than 180 titles that includes paid-for daily
and weekly newspapers and free weekly newspapers. The acquisition was recorded
under the purchase method of accounting.
In June 1999, the company completed a broadcast station transaction
under which it exchanged its ABC affiliate KVUE-TV in Austin, Texas, and
received KXTV-TV, the ABC affiliate in Sacramento, Calif., plus cash
consideration. For financial reporting purposes, the company recorded the
exchange as two simultaneous but separate events; that is, a sale of its Austin
TV station for which a non-operating gain was recognized and the acquisition of
the Sacramento station accounted for under the purchase method. In its second
quarter, the company reported a net non-operating gain of $55 million ($33
million after tax) principally as a result of this transaction.
The aggregate purchase price, including liabilities assumed, for
businesses and assets acquired in 1999, including Newsquest, KXTV-TV and certain
smaller non-daily newspaper publishing operations, totaled approximately $1.8
billion.
In March 1999, the company contributed The San Bernardino County Sun to
the California Newspapers Partnership in exchange for a partnership interest.
Results of continuing operations
Consolidated summary
A consolidated summary of the company's results is presented below. Note that
this summary separates from ongoing results the second quarter 1999 net
non-operating gain of $55 million ($33 million after tax) principally from an
exchange of a television station.
In millions of dollars, except per share amounts
- ----------------------------------------------------------------------------------------------------------------------
2001 Change 2000 Change 1999 Change
- ----------------------------------------------------------------------------------------------------------------------
Operating revenues $ 6,344 2% $ 6,222 22% $ 5,095 8%
- ----------------------------------------------------------------------------------------------------------------------
Operating expenses $ 4,754 8% $ 4,405 25% $ 3,532 6%
- ----------------------------------------------------------------------------------------------------------------------
Operating income $ 1,590 (13%) $ 1,817 16% $ 1,563 13%
- ----------------------------------------------------------------------------------------------------------------------
Income from continuing $ 831 (14%) $ 972 10% $ 886 13%
operations, excluding gain
on exchange of properties
- ----------------------------------------------------------------------------------------------------------------------
After-tax gain on exchange $ 33
of properties
- ----------------------------------------------------------------------------------------------------------------------
Income from continuing $ 831 (14%) $ 972 6% $ 919 (5%)
operations, as reported
- ----------------------------------------------------------------------------------------------------------------------
Earnings per share from
continuing operations,
excluding gain on exchange
of properties
Basic $ 3.14 (14%) $ 3.65 15% $ 3.18 15%
Diluted $ 3.12 (14%) $ 3.63 15% $ 3.15 15%
- ----------------------------------------------------------------------------------------------------------------------
Earnings per share from
gain on exchange of
properties
Basic $ 0.11
Diluted $ 0.11
- ----------------------------------------------------------------------------------------------------------------------
Earnings per share from
continuing operations, as
reported
Basic $ 3.14 (14%) $ 3.65 11% $ 3.29 (4%)
Diluted $ 3.12 (14%) $ 3.63 11% $ 3.26 (4%)
- ----------------------------------------------------------------------------------------------------------------------
- 20 -
A discussion of operating results of the company's newspaper and
broadcasting segments, along with other factors affecting net income follows.
Operating cash flow amounts presented with business segment information
represent operating income plus depreciation and amortization of intangible
assets. Such cash flow amounts vary from net cash flow from operating activities
presented in the audited Consolidated Statements of Cash Flows because cash
payments for interest and taxes are not reflected therein, nor are the cash flow
effects of non-operating items and discontinued operations.
Newspapers
In addition to its domestic local newspapers, the company's newspaper publishing
operations include USA TODAY, USA WEEKEND, Newsquest (including Newscom
operations acquired in 2000), which publishes daily and non-daily newspapers in
the United Kingdom, and Gannett Offset commercial printing. The newspaper
segment in 2001 contributed 90% of the company's revenues and 88% of its
operating income.
The reported financial results of the newspaper segment for 2001 were
materially impacted by four principal factors. Reported revenues and operating
income were favorably affected by the carryover effect of the three major
acquisitions in mid-2000. The year 2001 reflects a full year of these operations
compared to approximately half of 2000. Offsetting the added business from the
2000 acquisitions were pervasive advertising revenue declines, particularly in
the classified category for nearly all domestic newspapers, and the 53rd week in
2000. Further, newsprint prices on a yearly average basis were up 10% in 2001.
Newspaper operating results were as follows:
In millions of dollars
- -----------------------------------------------------------------------------------------------------------------------
2001 Change 2000 Change 1999 Change
- -----------------------------------------------------------------------------------------------------------------------
Revenues $ 5,682 5% $ 5,434 24% $ 4,367 10%
- -----------------------------------------------------------------------------------------------------------------------
Expenses $ 4,281 9% $ 3,912 27% $ 3,075 7%
- -----------------------------------------------------------------------------------------------------------------------
Operating income $ 1,401 (8%) $ 1,522 18% $ 1,292 16%
- -----------------------------------------------------------------------------------------------------------------------
Operating cash flow $ 1,770 (3%) $ 1,825 22% $ 1,499 16%
- -----------------------------------------------------------------------------------------------------------------------
Newspaper operating revenues: Newspaper operating revenues are derived
principally from advertising and circulation sales, which accounted for 73% and
22%, respectively, of total newspaper revenues in 2001. Ad revenues also include
those derived from advertising placed with newspaper Internet products. Other
newspaper publishing revenues are mainly from commercial printing businesses and
also include earnings from the company's 50% owned joint operating agencies in
Detroit and Tucson. The table below presents these components of reported
revenues for the last three years.
Newspaper publishing revenues:
In millions of dollars
- ----------------------------------------------------------------------------------------------------------------------
2001 Change 2000 Change 1999 Change
- ----------------------------------------------------------------------------------------------------------------------
Advertising $ 4,120 4% $ 3,973 28% $ 3,115 12%
- ----------------------------------------------------------------------------------------------------------------------
Circulation $ 1,233 10% $ 1,121 15% $ 971 1%
- ----------------------------------------------------------------------------------------------------------------------
Commercial
printing and other $ 329 (3%) $ 340 21% $ 281 9%
- ----------------------------------------------------------------------------------------------------------------------
Total $ 5,682 5% $ 5,434 24% $ 4,367 10%
- ----------------------------------------------------------------------------------------------------------------------
The advertising and circulation revenue increases shown above reflect
new business from the 2000 acquisitions, offset by overall ad revenue softness
at most domestic newspapers in 2001.
In the tables that follow, newspaper advertising linage, circulation
volume statistics and related revenue results are presented on a pro forma
basis. Pro forma basis means that these results are presented as if all
properties owned at the end of 2001 were owned throughout the periods presented.
The tables and related commentary also include the portion of revenue and linage
data for the company's newspapers participating in joint operating agencies,
consistent with prior years.
For Newsquest, advertising and circulation revenues are fully reflected
in the amounts below, as are daily paid circulation volumes. Advertising linage
for Newsquest is not reflected, however.
Advertising revenues, in millions of dollars (pro forma)
- -----------------------------------------------------------------------------------------------------------------
2001 Change 2000 Change 1999 Change
- -----------------------------------------------------------------------------------------------------------------
Local $ 1,249 (6%) $ 1,322 2% $ 1,297 1%
- -----------------------------------------------------------------------------------------------------------------
National $ 669 (15%) $ 788 10% $ 717 13%
- -----------------------------------------------------------------------------------------------------------------
Classified $ 1,700 (9%) $ 1,873 5% $ 1,777 7%
- -----------------------------------------------------------------------------------------------------------------
Total Run-of-Press $ 3,618 (9%) $ 3,983 5% $ 3,791 6%
- -----------------------------------------------------------------------------------------------------------------
Preprint and other advertising $ 691 (2%) $ 703 12% $ 628 7%
- -----------------------------------------------------------------------------------------------------------------
Total ad revenue $ 4,309 (8%) $ 4,686 6% $ 4,419 6%
- -----------------------------------------------------------------------------------------------------------------
Advertising linage, in millions of inches, and preprint distribution (pro forma)
- --------------------------------------------------------------------------------------------------------------------------------
2001 Change 2000 Change 1999 Change
- --------------------------------------------------------------------------------------------------------------------------------
Local 39.5 (7%) 42.3 (1%) 42.7 -
- --------------------------------------------------------------------------------------------------------------------------------
National 3.8 (15%) 4.5 9% 4.1 16%
- --------------------------------------------------------------------------------------------------------------------------------
Classified 54.5 (4%) 56.6 6% 53.6 9%
- --------------------------------------------------------------------------------------------------------------------------------
Total Run-of-Press 97.8 (5%) 103.4 3% 100.4 5%
- --------------------------------------------------------------------------------------------------------------------------------
Preprint distribution (millions) 10,401 (3%) 10,741 9% 9,839 4%
- --------------------------------------------------------------------------------------------------------------------------------
Reported newspaper advertising revenues for 2001 were $147 million
greater than in 2000, a 4% increase, while pro forma revenues presented above
reflect an 8% decline. Reported newspaper ad revenues in 2001 are higher
principally because of the major acquisitions in mid-2000. Pro forma revenues
declined in all categories, reflecting a soft and very uncertain general U.S.
economy which was worsened by the attacks of Sept. 11. In addition, both
reported and pro forma newspaper revenue comparisons are negatively impacted by
the additional 53rd week in 2000 and an overall decline in the exchange rate for
sterling. If the exchange rate had remained constant year-over-year, pro forma
local, national and classified ad revenues would have decreased 4%, 14% and 8%,
respectively.
Pro forma local ad revenues were down 6% in 2001 with linage down 7% for
the full year. Ad spending by some of the largest retailers continued to decline
in 2001, reflecting closings and consolidations. These revenue declines were
partially offset by revenue increases from some small- and medium-sized
advertisers through expanded sales and marketing efforts.
- 21 -
Pro forma national ad revenues and linage were down 15% in 2001. Most of
the national revenue loss was at USA TODAY, which reported a 22% decrease in
revenues and 24% decrease in linage. Advertising revenues at USA TODAY were
adversely affected by the absence of year-earlier Olympics-related ad spending,
lower demand by dot-com advertisers and significantly lower demand for
travel-related advertising following the terrorist attacks.
Pro forma classified revenues in 2001 decreased 9% on a 4% decrease in
linage. Employment ad revenues fell 21% for the year as job market conditions in
the U.S. continued to worsen. The company's U.K. properties experienced stronger
classified results than in the U.S., particularly in help-wanted.
Advertising and other revenue from Internet activities for the newspaper
segment totaled approximately $69 million in 2001, $62 million in 2000 and $39
million in 1999. The company has Web sites at nearly all of its newspapers and
other operating properties within the newspaper segment.
Newspaper advertising revenues in millions, as reported.
92 $1773
93 $1847
94 $1982
95 $2078
96 $2281
97 $2480
98 $2773
99 $3115
00 $3973
01 $4120
Looking to 2002, for our domestic newspapers, modest ad revenue and
volume growth are anticipated in most categories depending on the health of the
U.S. economy and the extent of further closings or consolidations within certain
key industries, particularly retail. Changes in national economic levels,
consumer confidence, and unemployment rates and the level of general economic
growth will impact revenues at all of the company's newspapers. Modest price
increases are generally planned at most properties, and the company will
continue to expand and refine marketing and sales efforts. Modest ad revenue
growth is anticipated in 2002 for our Newsquest properties, depending on the
health of the United Kingdom's economy.
Newspaper circulation revenues rose $112 million or 10% in 2001, due to
incremental circulation revenues from the 2000 acquisitions. On a pro forma
basis, circulation revenues decreased 2% in 2001.
For local newspapers, morning circulation accounts for approximately 79%
of total daily volume, while evening circulation accounts for 21%. On a pro
forma basis, local morning circulation was flat with 2000 while evening and
Sunday circulation volumes declined 2%. Selected circulation price increases
were implemented in 2001 at certain newspapers.
USA TODAY's average daily circulation for 2001 declined 1% to 2,255,348.
USA TODAY reported an average daily paid circulation of 2,243,843 in the ABC
Publisher's Statement for the six months ended Sept. 30, 2001, a 1% decrease
over the comparable period a year ago.
Newspaper circulation revenues in millions, as reported.
92 $763
93 $781
94 $789
95 $816
96 $873
97 $903
98 $958
99 $971
00 $1121
01 $1233
The company expects modest circulation revenue growth at many of its
newspaper properties in 2002 with circulation price increases planned at a few
newspapers.
Pro forma circulation volume for the company's local newspapers is
summarized in the table below:
Average net paid circulation volume, in thousands (pro forma)
- ---------------------------------------------------------------------------------------------------------------------------------
2001 Change 2000 Change 1999 Change
- ---------------------------------------------------------------------------------------------------------------------------------
Local Newspapers
- ---------------------------------------------------------------------------------------------------------------------------------
Morning 4,752 -- 4,773 (1%) 4,799 (2%)
- ---------------------------------------------------------------------------------------------------------------------------------
Evening 1,249 (2%) 1,275 (2%) 1,294 (2%)
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Total daily 6,001 (1%) 6,048 (1%) 6,093 (2%)
- ---------------------------------------------------------------------------------------------------------------------------------
Sunday 7,045 (2%) 7,160 (1%) 7,260 (2%)
- ---------------------------------------------------------------------------------------------------------------------------------
Reported newspaper advertising revenues for 2000 were $858 million
greater than in 1999, a 28% increase, while pro forma revenues presented above
reflect a 6% increase. The variance in these two comparisons relates principally
to the full year effect of the Newsquest acquisition in 1999 and the Newscom,
Thomson and Central acquisitions in 2000. Reported and pro forma newspaper
revenue comparisons were positively impacted by the additional 53rd week in
2000.
Pro forma local ad revenues in 2000 were up 2% with linage down 1%. Ad
spending by some of the largest retailers declined in 2000, reflecting closings
and consolidations. These revenue declines were partially offset by revenue
increases from small- and medium-sized advertisers as a result of expanded sales
and marketing efforts.
Pro forma national ad revenues for 2000 rose 10% with linage up 9%,
driven principally by USA TODAY, which reported a 12% gain in revenues on an 8%
linage gain. National ad revenue growth was also strong in Phoenix and at
several other larger daily newspaper properties.
Pro forma classified revenues in 2000 rose 5% on a 6% linage gain.
Employment ad revenue gains were the strongest, followed by real estate and
automotive. The continued strong economy throughout most of the year and tight
labor market in the U.S. and the U.K. were key factors in these revenue gains,
along with added marketing and sales resources.
Revenues from the company's U.K. operations were unfavorably impacted by
the decline in the exchange rate for sterling during 2000. If the exchange rate
had remained constant year-over-year, pro forma local, national and classified
ad revenues would have increased 2%, 11% and 6%, respectively.
Newspaper circulation revenues rose $150 million or more than 15% in
2000, due to incremental circulation revenues from
- 22 -
the 1999 and 2000 acquisitions. On a pro forma basis, circulation revenues
increased 2% in 2000.
For local newspapers, morning circulation accounts for approximately 79%
of total daily volume, while evening circulation accounts for 21%. On a pro
forma basis, local morning and Sunday circulation volumes declined 1%, while
evening circulation declined 2%. Selected circulation price increases were
implemented in 2000 at certain newspapers. Also during 2000, the Green Bay
(Wis.) Press-Gazette converted from an evening to a morning publication.
USA TODAY's average daily circulation for 2000 rose 0.4% to 2,284,024.
USA TODAY reported an average daily paid circulation of 2,257,774 in the ABC
Publisher's Statement for the six months ended Sept. 24, 2000, a 1% increase
over the comparable period a year ago.
Reported newspaper advertising revenues for 1999 were $342 million
greater than in 1998, a 12% increase, while pro forma revenues presented above
reflect a 6% increase. The variance in these two comparisons relates principally
to the Newsquest properties acquired in July 1999.
Pro forma local ad revenues and linage were up slightly for 1999. Ad
spending by the larger retailers declined for the year, reflecting closings and
consolidations, but this was mostly offset by greater revenue from expanded
sales and marketing efforts directed toward small- and medium-sized advertisers.
Pro forma national ad revenues and linage for 1999 rose 13% and 16%,
respectively, driven principally by USA TODAY, which reported a 19% gain in
revenues on a 14% linage gain. National ad revenue growth was also strong at USA
WEEKEND and at several large daily newspaper properties.
Pro forma classified revenue in 1999 rose 7% on a 9% linage gain.
Employment ad revenue gains were the strongest, followed by automotive and then
real estate. The continued strong economy and the tight labor market were key
factors in these revenue gains, along with added marketing and sales resources.
Newspaper circulation revenues rose $13 million or slightly more than 1%
in 1999. Incremental circulation revenues from Newsquest offset declines in
domestic circulation revenue. On a pro forma basis, circulation revenues
remained even.
Pro forma local morning circulation declined 2% in 1999, evening
circulation declined 2% and Sunday circulation declined 2%. Circulation price
increases were implemented in 1999 at certain newspapers. During 1999, the St.
Cloud (Minn.) Times and The Daily Journal at Vineland, N.J., converted from
evening to morning publications.
USA TODAY's average daily circulation for 1999 rose 0.1% to 2,274,621.
USA TODAY reported an average daily paid circulation of 2,235,808 in the ABC
Publisher's Statement for the six months ended Sept. 26, 1999, a 1% increase
over the comparable period in 1998.
Newspaper operating expense:
Newspaper operating costs rose $369 million, or 9%, in 2001. The increase was
primarily due to incremental costs from the 2000 acquisitions and higher
newsprint prices, which were 10% higher on average over 2000. Cost control
efforts at all newspaper properties continued as a very high management priority
and employee reductions have been achieved at most properties. As a result, on a
pro forma basis, overall operating costs decreased 4%. Newsprint expense
decreased 2% in 2001, due to lower consumption partially offset by higher
average newsprint prices. The consumption added from recent acquisitions was
tempered by a large number of newspapers converting to the new 50-inch web width
during 2001 and 2000 and an overall decline in advertising demand. Payroll costs
for newspaper operations rose 8% in 2001, primarily due to the newly acquired
properties.
For 2002, newsprint consumption is expected to increase modestly.
Consumption in 2002 will be tempered by the full year impact of web width
reductions implemented in 2001 and planned web width reductions for 2002. For
2002, newsprint prices are expected to be significantly lower on average than in
2001. Employee count reductions will also benefit cost comparisons in 2002.
Newspaper operating costs rose $837 million, or 27%, in 2000. The
increase was primarily due to incremental costs from the 1999 and 2000
acquisitions. Newsprint expense for the year, including the effect of
acquisitions, was 20% higher in 2000. Both consumption and average newsprint
prices were higher by 17% and 3%, respectively. The increase in consumption was
tempered by a large number of newspapers converting to the new 50-inch web width
format. Generally, a conversion from a 54-inch web width to a 50-inch web width
will result in a more than 7% savings in newsprint consumption. Payroll costs
for newspaper operations rose 26% in 2000, primarily due to the newly acquired
properties and the impact of the 53rd week in 2000.
Newspaper operating expenses rose $197 million, or 7%, in 1999. The
increase was caused principally by incremental costs from Newsquest properties
acquired in July 1999. Newsprint expense for the year, including the effect of
acquisitions, was 6% lower than in 1998. While consumption rose nearly 7% (due
principally to Newsquest), average newsprint prices declined 12%.
Payroll costs for newspaper operations rose 10% in 1999, in part because
of the Newsquest acquisition but also because of staffing increases in marketing
and ad sales and modest pay increases.
Newspaper operating income:
Operating profit decreased $121 million or 8%. The
decrease in operating profits is due largely to declining advertising revenues
and higher newsprint prices for U.S. newspapers during much of 2001. Most of the
company's domestic newspapers reported lower results in 2001.
Newsquest operating income improved but financial results were
translated from British pounds to U.S. dollars using a weighted average rate of
$1.44 for 2001, as compared to $1.50 in 2000, which mitigated some of the
earnings growth in the U.K.
For 2002, newspaper operating profits are expected to show modest
growth, reflecting revenue gains, the benefit of further web width reductions
and lower newsprint prices, and growth in savings from ongoing cost control
efforts, including employee count reductions.
The company's newspapers produced record earnings in 2000. Operating
profit rose $231 million or 18%. The increases were due largely to contributions
from the Newsquest, Newscom, Thomson and Central acquisitions. However, many
other U.S. local newspapers reported earnings gains as well.
Newsquest financial results were translated from British pounds to U.S.
dollars using a weighted average rate of $1.50 for 2000, as compared to $1.62 in
1999, which mitigated some of the strong earnings growth.
- 23 -
Newspaper operating profit rose $182 million or 16% in 1999. The
Newsquest properties acquired in July 1999 contributed to the profit gain.
Earnings were strong at Detroit, the company's New Jersey Group and at USA
WEEKEND. Most of the company's local U.S. newspapers reported earnings gains as
did USA TODAY. Newsquest financial results were translated from British pounds
to U.S. dollars using a weighted average rate of $1.62 for the period it was
owned in 1999.
Broadcasting
The company's broadcasting operations at the end of 2001 included 22 television
stations in markets reaching 17.7 percent of U.S. television homes.
Over the last three years, reported broadcasting revenues, expenses,
operating income and operating cash flows were as follows:
In millions of dollars
- ------------------------------------------------------------------------------------------------------
2001 Change 2000 Change 1999 Change
- ------------------------------------------------------------------------------------------------------
Revenues $663 (16%) $789 8% $729 1%
- ------------------------------------------------------------------------------------------------------
Expenses $413 (4%) $429 10% $391 4%
- ------------------------------------------------------------------------------------------------------
Operating income $250 (31%) $360 7% $338 (2%)
- ------------------------------------------------------------------------------------------------------
Operating cash flow $317 (25%) $425 6% $400 (1%)
- ------------------------------------------------------------------------------------------------------
Total broadcast revenues declined $126 million or 16% for 2001. The
revenue decline reflects a generally soft broadcasting advertising environment
and challenging comparisons with 2000, which benefited from Olympic and strong
political ad spending and an additional week. The third quarter of 2001 was also
affected by several days of commercial-free coverage in the wake of the Sept. 11
attacks. The negative effects of Sept. 11 on advertising demand continued
throughout the fourth quarter of 2001. Local and national advertising revenues
decreased 10% and 25%, respectively, from 2000.
Reported operating expenses were down by 4% due to stringent cost
controls. Headcount reductions have been made at most properties. Payroll
expense decreased 3% in 2001.
For 2002, television revenues and earnings are expected to improve with
impetus from the Winter Olympics on our NBC stations and political advertising.
Total broadcast revenues rose $60 million or 8% for 2000. Revenues were
bolstered by strong political and issue advertising, revenues from the Summer
Olympics in Australia on our NBC stations and the impact of the 53rd week. Local
and national advertising revenues increased 2% and 19%, respectively, over 1999.
Political and issue advertising in key states contributed to the increase in
national revenues.
Reported operating expenses for broadcast were up 10% in 2000 due to the
WJXX-TV acquisition and the full year impact of the 1999 Austin/Sacramento
station exchange. On a pro forma basis, operating costs were up 7%. Pro forma
payroll was up 6%.
Total broadcast reported revenues rose $7 million or 1% for 1999.
However, on a pro forma basis, giving effect to the Austin/Sacramento station
exchange, total station revenues were down 1% for the year. Pro forma local
revenues rose 5% for the year, while national revenues were down 7%. The decline
in national ad revenue in comparison with 1998 reflects in part revenue gains in
1998 on CBS stations for the Winter Olympics, on NBC affiliates for the Super
Bowl and the Seinfeld program, and from political and issue advertising.
Reported operating expenses for broadcast were up 4% in 1999, reflecting
the impact of the Austin/Sacramento station exchange. On a pro forma basis,
operating costs were down slightly. Pro forma payroll was up 1%.
Broadcasting revenues in millions, as reported.
92 $371
93 $397
94 $407
95 $466
96 $687
97 $704
98 $721
99 $729
00 $789
01 $663
Consolidated operating expenses
Over the last three years, the company's consolidated operating expenses were as
follows:
Consolidated operating expenses, in millions of dollars
- ------------------------------------------------------------------------------------------------------------------------
2001 Change 2000 Change 1999 Change
- ------------------------------------------------------------------------------------------------------------------------
Cost of sales $3,320 9% $3,057 24% $2,460 4%
- ------------------------------------------------------------------------------------------------------------------------
Selling, general and admin. expenses $ 990 2% $ 972 23% $ 792 12%
- ------------------------------------------------------------------------------------------------------------------------
Depreciation $ 202 4% $ 195 15% $ 169 3%
- ------------------------------------------------------------------------------------------------------------------------
Amortization of intangible assets $ 241 34% $ 180 63% $ 111 23%
- ------------------------------------------------------------------------------------------------------------------------
Cost of sales for 2001 increased $263 million or 9%, reflecting the
full-year effect of the Newscom, Thomson and Central acquisitions, and higher
average newsprint prices which were up 10%. These cost increases were tempered
by stringent cost controls and the absence of a 53rd week in 2001.
SG&A increased $18 million or 2%, due primarily to the acquisitions
completed in 2000.
Depreciation expense increased 4% and amortization of intangibles
increased 34%, primarily due to the businesses acquired in 2000.
For 2002, the company expects substantial savings from lower average
newsprint costs and from cost control measures taken to date, including employee
reductions at most properties. Medical benefit costs will be higher in 2002, due
to inflation.
During 2001, the company's retirement plan assets declined in market
value, as did the principal equity and other investment markets in the U.S. and
overseas. As a result of this investment performance and the use of a lower
discount rate to value plan liabilities at the end of 2001, total retirement
plan obligations grew to exceed plan assets. To reduce this under-funding, the
company made a $300 million tax-deductible contribution to the plan in December
2001, and may consider making additional contributions in 2002.
- 24 -
For 2002, the company's pension expense will increase by more than $50
million, which reflects the impact of unfavorable investment return in 2001 and
the lower discount rate at the end of 2001, partially offset by the favorable
impact of the 2001 contribution to the plan. For further information regarding
the company's retirement plan, see Note 5 to the Financial Statements, beginning
on page 39 of this report.
As further discussed on page 29 of this report, amortization of goodwill
will cease upon the company's adoption of the Statement of Financial Accounting
Standards No. 142 (SFAS No. 142) "Goodwill and Other Intangible Assets" in the
first quarter of 2002. At that time, amortization expense will decline to
approximately $7.3 million annually, covering certain identified newspaper
intangible assets.
Cost of sales for 2000 was up $598 million or 24%, reflecting the
full-year effect of the 1999 Newsquest acquisition, increased costs from the
Newscom, Thomson and Central acquisitions and the impact of an extra week in
2000 over 1999. Newsprint expense increased 20% due primarily to a 17% increase
in consumption, principally from acquisitions. Average newsprint prices
increased 3% compared to 1999.
SG&A was up 23% for the year also due primarily to the new businesses
acquired in 1999 and 2000 and the extra week in 2000.
Depreciation expense increased 15% during 2000 as a result of the
Newsquest, Newscom, Thomson and Central acquisitions. Likewise, amortization of
intangibles rose $70 million or 63% due to the 1999 and 2000 acquisitions.
Cost of sales for 1999 was up $95 million or 4%, reflecting increased
costs from businesses acquired in 1998 and 1999, particularly Newsquest.
Newsprint expense decreased 6% despite a 7% increase in consumption (including
acquisitions). Average newsprint prices dropped 12% as compared to 1998.
SG&A was up 12% for 1999 due primarily to the Newsquest acquisition and
generally higher newspaper advertising expenses.
Depreciation expense for 1999 increased 3% as a result of the Newsquest
acquisition. Amortization of intangibles rose $21 million or 23% due to 1998 and
1999 acquisitions, principally Newsquest.
Payroll and newsprint costs (along with certain other production
material costs), the largest elements of the company's operating expenses, are
presented below, expressed as a percentage of total pre-tax operating expenses.
- -------------------------------------------------------------------------------------
2001 2000 1999
- -------------------------------------------------------------------------------------
Payroll and employee benefits 43.4% 44.0% 45.0%
- -------------------------------------------------------------------------------------
Newsprint and other production material 19.4% 18.2% 19.2%
- -------------------------------------------------------------------------------------
Non-operating income and expense
For the full year, interest expense rose $3 million to approximately $222
million. Most of the company's debt is in commercial paper for which the daily
average outstanding balance was $5.2 billion during 2001 and $3.1 billion during
2000. The weighted average interest rate was 4.1% for 2001 and 6.5% for 2000.
The decrease in the average interest rates almost entirely offset the increase
in interest expense as a result of the full-year impact of increased commercial
paper borrowings to fund the Newscom acquisition in June 2000, the Thomson and
Central acquisitions in the third quarter of 2000 and share repurchases made in
2000.
The company reduced its commercial paper balance by $528 million during
2001. Because of that and lower interest rates, interest expense comparisons
turned positive in the third quarter of 2001. In the fourth quarter, interest
expense was below that of 2000 by $69 million or 69%, in part due to the
additional week in 2000. If the current interest rate environment prevails, and
in the absence of major acquisitions or stock repurchases, interest expense will
decline significantly in 2002.
Interest income declined to approximately $4.7 million, a more normal
level for the company, compared to 2000 when substantially greater interest was
earned on the proceeds of the sale of the cable business in the first half of
the year.
Interest expense in 2000 increased $125 million due to significant
commercial paper borrowings to fund the 1999 Newsquest acquisition, the Newscom
acquisition in June 2000, the Thomson and Central acquisitions in the third
quarter of 2000, and share repurchases. Higher interest rates in 2000,
particularly in the second half of the year, also contributed to the increase.
The increase, however, was tempered by the pay down of commercial paper
borrowings from the net proceeds on the sale of the cable business in the first
quarter of 2000 and from operating cash flows. Interest income in 2000 increased
$21 million over 1999 due primarily to interest earned on marketable securities
from cable sale proceeds in the first half of the year. Non-operating expense in
2000 includes costs associated with minority investments in Internet businesses.
Interest expense for 1999 increased $15 million or 19%, reflecting
significantly increased commercial paper borrowings in the second half of 1999
to finance the Newsquest acquisition.
The company's financing activities are discussed further in the
financial position section of this report.
In all years shown, non-operating income and expense includes charges
for the write-down of certain minority interest investments in online/new
technology businesses as well as gains from the sale of certain properties.
Other non-operating income for 1999 includes the second quarter net
non-operating gain of $55 million principally from the exchange of television
stations discussed on page 20 of this report.
Provision for income taxes
The company's effective income tax rate for continuing operations was 39.4% in
2001, 39.6% in 2000, and 39.8% in 1999. The decrease in the effective tax rate
each year reflects lower state taxes and lower taxes on foreign operations. Due
to the adoption of SFAS No. 142 (see discussion on page 29), the company expects
its effective rate to be slightly below 35% in 2002.
Income from continuing operations
In 2001, the company reported income from continuing operations of $831 million
or $3.12 per diluted share. Operating income from both business segments was
lower in 2001 and net non-operating costs were higher, principally because of
greater interest expense.
- 25 -
In 2000, the company reported income from continuing operations of $972
million or $3.63 per diluted share, both record highs, up 10% and 15%,
respectively, from record results in 1999 (excluding the 1999 net non-operating
gain principally from the television station exchange transaction discussed on
page 20). The company's operating income was $1.817 billion for the year, an
increase of $254 million or 16%. Each of the company's segments reported higher
earnings for the year, with interest expense up $125 million over 1999 as
previously discussed.
In 1999, the company reported income from continuing operations of $919
million or $3.26 per diluted share. However, this reflects the net non-operating
gain principally from the television station exchange transaction discussed on
page 20. This net gain totaled $55 million pre-tax ($33 million after tax or
$.11 per diluted share).
For purposes of evaluating the company's earnings progress from ongoing
operations, the earnings summary below excludes the effect of the non-operating
gain in 1999 and discontinued cable operations.
In millions of dollars, except per share amounts.
Earnings summary excluding 1999 net non-operating gain:
- -----------------------------------------------------------------------------------------------------------------
2001 Change 2000 Change 1999 Change
- -----------------------------------------------------------------------------------------------------------------
Operating income $ 1,590 (13%) $ 1,817 16% $ 1,563 13%
- -----------------------------------------------------------------------------------------------------------------
Non-operating expense
- -----------------------------------------------------------------------------------------------------------------
Interest expense (222) 1% (219) 132% (95) 19%
- -----------------------------------------------------------------------------------------------------------------
Other 3 (76%) 11 159% 4 --
- -----------------------------------------------------------------------------------------------------------------
Total (219) 5% (208) 130% (91) 12%
- -----------------------------------------------------------------------------------------------------------------
Income before income taxes 1,371 (15%) 1,609 9% 1,472 13%
- -----------------------------------------------------------------------------------------------------------------
Provision for income taxes 540 (15%) 637 9% 586 12%
- -----------------------------------------------------------------------------------------------------------------
Income from continuing operations $ 831 (14%) $ 972 10% $ 886 13%
- -----------------------------------------------------------------------------------------------------------------
Earnings per share from continuing
operations - diluted $ 3.12 (14%) $ 3.63 15% $ 3.15 15%
- -----------------------------------------------------------------------------------------------------------------
Excluding non-recurring items, the company's reported earnings from
continuing operations in 1999 were $886 million, a 13% increase, with diluted
earnings per share at $3.15, up 15%; operating income reached $1.563 billion, an
increase of $177 million or 13%. The strong, record showing in operating income
and after-tax results for 1999 came from newspapers. Broadcast earnings were
down 2%. Interest expense was 19% higher.
Income from continuing operations in millions, as reported.
92 $341*
93 $389
94 $455
95 $457
96 $503+
97 $681
98 $782+
99 $886+
00 $972
01 $831
+ Before net non-recurring gains from sale/exchange of businesses
* Before effect of accounting principle changes
Discontinued operations
As part of the Multimedia purchase in 1995, the company acquired cable
television operations. On Jan. 31, 2000, the company completed the sale of its
cable division for $2.7 billion. Upon closing, an after-tax gain of
approximately $745 million or $2.77 per diluted share was recognized, which,
along with the cable segment operating results, are reported as discontinued
operations in the company's financial statements.
After-tax earnings from the cable business for the period it was owned,
up to the date of sale, are also reported as income from discontinued operations
and amounted to $2.4 million or $.01 per diluted share in 2000 and $38.5 million
or $.14 per diluted share in 1999.
Net income
The company reported net income of $831 million or $3.12 per diluted share in
2001.
Average diluted shares outstanding for 2001 totaled 266,833,000,
compared to 268,118,000 in 2000. Basic shares totaled 264,821,000 for 2001 and
266,426,000 for 2000.
The company's return on shareholders' equity, before non-recurring gains
and accounting principle changes, is presented in the table below.
Return on shareholders' equity (before non-recurring gains and accounting
principle changes) in percentages
92 21.9
93 22.3
94 24.4
95 23.0
96 19.8
97 21.3
98 21.0
99 20.6
00 20.0
01 15.3
The percentage return on equity for 2001, 2000 and 1999 has declined
from the prior years because non-recurring gains from the sale/exchange of
businesses are included in shareholders' equity, but are excluded from the
amount of earnings from continuing operations used in the calculation. The
return on equity in 2001 is lower than in 2000 due to lower earnings and higher
equity. The Consolidated Statements of Changes in Shareholders' Equity appears
on page 34.
- 26 -
FINANCIAL POSITION
Liquidity and capital resources
The principal changes in the company's financial position for 2001 include the
net pay down of debt by $668 million using operating cash flow. Changes in
property, plant and equipment in 2001 reflect capital spending of $325 million,
which includes costs associated with the new USA TODAY and Corporate
headquarters facility, completed in the fourth quarter of 2001. The increase in
other assets reflects a $300 million tax deductible contribution to the Gannett
Retirement Plan in late 2001. The company also paid $186 million for several
small acquisitions and additional share purchases of WKYC-TV.
The company's current income tax liability is $179 million greater at
the end of 2001 than at the end of 2000. Under the Economic Growth and Tax
Relief Reconciliation Act of 2001, the company's estimated federal income tax
payment normally due on Sept. 15 was deferred until Oct. 1, 2001. However,
subsequent to the attacks of Sept. 11, Internal Revenue Service Rule 2001-61 was
issued, which permitted a further deferral of the company's third quarter
estimated tax payment and its fourth quarter estimated tax payment until Jan.
15, 2002.
The company's foreign currency translation adjustment, related to
Newsquest (including the newly acquired Newscom properties in June 2000) and
reported as part of shareholders' equity, totaled $104.9 million net of tax, at
Dec. 30, 2001. This reflects the weakening of the pound against the U.S. dollar
since the Newsquest and Newscom acquisition dates. Newsquest's assets and
liabilities were translated from British pounds to U.S. dollars at the Dec. 30,
2001, exchange rate of $1.45.
The company's consolidated operating cash flow (defined as operating
income plus depreciation and amortization of intangible assets) totaled $2.034
billion in 2001 compared to $2.193 billion in 2000 and $1.843 billion in 1999.
The 7% decrease in operating cash flow reflects the decrease in advertising
revenues and earnings for newspapers and television. The table below presents
operating cash flow as a percent of revenue over the last 10 years.
Operating cash flow, as a percent of revenue
92 25.5
93 27.6
94 29.0
95 28.7
96 30.9
97 34.7
98 34.8
99 36.2
00 35.2
01 32.1
The increase in the income tax liability account, as discussed above,
results in a significant decrease in working capital. Working capital was $50.5
million at the end of 2001, compared with working capital of $128.3 million at
the end of 2000. Certain key measurements of the elements of working capital for
the last three years are presented in the following chart:
Working capital measurements
- -----------------------------------------------------------------------------
2001 2000 1999
- -----------------------------------------------------------------------------
Current ratio 1.0-to-1 1.1-to-1 1.2-to-1
- -----------------------------------------------------------------------------
Accounts receivable turnover 7.6 7.4 7.0
- -----------------------------------------------------------------------------
Newsprint inventory turnover 6.8 7.3 7.3
- -----------------------------------------------------------------------------
The company's operations have historically generated strong positive
cash flow, which, along with the company's program of issuing commercial paper
and maintaining bank revolving credit agreements, has provided adequate
liquidity to meet the company's requirements, including those for acquisitions.
The company regularly issues commercial paper for cash requirements and
maintains revolving credit agreements equal to or in excess of any commercial
paper outstanding. The company's commercial paper has been rated A-1 and P-1 by
Standard & Poor's and Moody's Investors Service, respectively. The company's
senior unsecured long-term debt is rated A by Standard & Poor's and A2 by
Moody's Investors Service. The company has a shelf registration statement with
the Securities and Exchange Commission under which up to $1.5 billion of
additional debt securities may be issued. The company's Board of Directors has
established a maximum aggregate level of $7 billion for amounts which may be
raised through borrowings or the issuance of equity securities.
Long-term debt
The long-term debt of the company is summarized below.
In thousands of dollars
- -------------------------------------------------------------------------
Dec. 30, 2001 Dec. 31, 2000
- -------------------------------------------------------------------------
Unsecured promissory notes $ 4,932,813 $ 5,461,205
- -------------------------------------------------------------------------
Other indebtedness 147,212 286,651
- -------------------------------------------------------------------------
Total long-term debt $ 5,080,025 $ 5,747,856
- -------------------------------------------------------------------------
The unsecured promissory notes at Dec. 30, 2001, were due from Jan. 3, 2002, to
Feb. 1, 2002, with rates varying from 1.75% to 2.00%.
The unsecured promissory notes at Dec. 31, 2000, were due from Jan. 4,
2001, to March 23, 2001, with rates varying from 6.4% to 6.63%.
At Dec. 30, 2001, the unsecured promissory notes were supported by the
$6.06 billion revolving credit agreements discussed below and, therefore, are
classified as long-term debt.
The maximum amount of such promissory notes outstanding at the end of
any period during 2001 and 2000 was $5.4 billion and $5.7 billion, respectively.
The daily average outstanding balance was $5.2 billion during 2001 and $3.1
billion during 2000. The weighted average interest rate was 4.1% for 2001 and
6.5% for 2000.
Other indebtedness includes the loan notes issued by the company in the
U.K. to the former shareholders of Newsquest, Newscom and Dimbleby in connection
with their acquisitions as more fully discussed in Note 2 to the Financial
Statements. The Newsquest and Newscom notes ($21.8 million and $90.1 million,
- 27 -
respectively) bear interest at .5% below the London Interbank Offered Rate
(LIBOR), subject to a cap of 6.5% and 6.75%, respectively. The Dimbleby notes
($18.3 million) bear interest at the LIBOR rate minus 1%. Interest is payable
semi-annually on all notes. The Newsquest and Newscom notes are due on Dec. 31,
2006, and Dec. 31, 2007, respectively, but may be redeemed by the company on
each interest payment date. The Newsquest and Newscom noteholders are entitled
to require the company to repay all or part of the notes on any interest payment
date by giving 30 days' written notice. The Dimbleby notes may be redeemed by
the company, in whole or in part, at any time after June 30, 2003. The Dimbleby
noteholders are entitled to require the company to repay all or part of the
principal amount of the notes by giving the company 30 days' written notice any
time after six months of issue of the notes. Should a noteholder exercise that
right, it is the company's intention to exchange the notes for cash. The
remaining other indebtedness at Dec. 30, 2001, consists primarily of industrial
revenue bonds with maturities in 2008 and 2009 at variable interest rates (1.9%
at Dec. 30, 2001).
At Dec. 30, 2001, the company had $6.06 billion of credit available
under two revolving credit agreements. The agreements provide for revolving
credit periods which permit borrowings from time to time to the maximum
commitments. The 1998 $3.0 billion agreement revolving credit period extends to
July 1, 2003. The 2000 $3.06 billion agreement consists of a $1.53 billion
364-day facility which extends to July 2002 and a $1.53 billion 5-year facility
which extends to July 2005. At the end of the 364-day period, any borrowings
outstanding under the 364-day credit facility are convertible into a 2-year term
loan at Gannett's option.
The commitment fee rate for the 1998 revolving credit agreement may
range from .07% to .175%, depending on Standard & Poor's or Moody's credit
rating of the company's senior unsecured long-term debt. The rate in effect on
Dec. 30, 2001, was .09%. At the option of the company, the interest rate on
borrowings under this agreement may be at the prime rate, at rates ranging from
.13% to .35% above the LIBOR or at rates ranging from .255% to .50% above a
certificate of deposit-based rate. The prime rate was 4.75% at the end of 2001
and 9.5% at the end of 2000. The percentages that apply depend on Standard &
Poor's or Moody's credit rating of the company's senior unsecured long-term
debt.
The commitment fee rates for the 2000 revolving credit agreement may
range from .05% to .09%, depending on Standard & Poor's or Moody's credit rating
of the company's senior unsecured long-term debt. The rates in effect on Dec.
30, 2001, were .05% for the 364-day facility and .07% for the 5-year facility.
At the option of the company, the interest rate on borrowings under this
agreement may be at .13% to .24% above the prime rate, the Eurodollar base rate
or the Federal Funds Effective Rate plus .50%. The percentages that apply depend
on Standard & Poor's or Moody's credit rating of the company's senior unsecured
long-term debt.
The revolving credit agreements contain a restrictive provision that
requires the maintenance of net worth of at least $2.5 billion. At Dec. 30,
2001, and Dec. 31, 2000, net worth was $5.7 billion and $5.1 billion,
respectively.
Approximate annual maturities of long-term debt, assuming that the
company had used the $6.06 billion revolving credit agreements as of the balance
sheet date to refinance existing unsecured promissory notes on a long-term basis
and assuming the company's other indebtedness was paid on its scheduled pay
dates, are as follows:
In thousands of dollars
- -------------------------------------------------
2002 --
- -------------------------------------------------
2003 $ 3,018,416
- -------------------------------------------------
2004 402,813
- -------------------------------------------------
2005 1,530,000
- -------------------------------------------------
2006 21,838
- -------------------------------------------------
Later years 106,958
- -------------------------------------------------
Total $ 5,080,025
- -------------------------------------------------
In mid-March 2002, the company issued three series of unsecured global
notes; $600 million at 4.95% due 2005, $700 million at 5.50% due 2007, and $500
million at 6.375% due 2012. The net proceeds from these notes were used to
repay outstanding commercial paper obligations. Also in mid-March 2002, the
company entered into a $2.75 billion revolving credit agreement providing for up
to $1.385 million in 364-day revolving credit loans and up to $1.365 billion in
5-year revolving credit loans. The company terminated its $3.0 billion
revolving credit agreement, and its $1.53 billion revolving credit agreement
which was to expire in July 2002.
The company has a capital expenditure program (not including business
acquisitions) of approximately $300 million planned for 2002, including
approximately $35 million for land and buildings or renovation of existing
facilities, $243 million for machinery and equipment, and $22 million for
vehicles and other assets. Management reviews the capital expenditure program
periodically and modifies it as required to meet current business needs. It is
expected that the 2002 capital program will be funded from operating cash flow.
The company has a 13.5% general partnership interest in Ponderay
Newsprint Company. The company, on a several basis, is a guarantor of 13.5% of
the principal and interest on a term loan that totals $125 million held by
Ponderay.
Capital stock
In 2000, the company announced authorizations to repurchase up to $1 billion of
its common stock and during 2000, the company repurchased approximately 14.7
million shares of common stock at a cost of $967 million. In 1999, the company
purchased approximately 2.4 million shares of its common stock at a cost of $163
million. The company currently has no plans to repurchase additional shares.
Certain of the shares previously acquired by the company have been reissued in
settlement of employee stock awards.
An employee 401(k) Savings Plan was established in 1990, which includes
a company matching contribution in the form of Gannett stock. To fund the
company's matching contribution, an Employee Stock Ownership Plan (ESOP) was
formed which acquired 2,500,000 shares of Gannett stock from the company for $50
million. The stock purchase was financed with a loan from the company.
The company's common stock outstanding at Dec. 30, 2001, totaled
265,797,212 shares, compared with 264,271,861 shares at Dec. 31, 2000.
- 28 -
Dividends
Dividends declared on common stock amounted to $238 million in 2001, compared
with $228 million in 2000, reflecting an increase in the dividend rate partially
offset by a decrease in shares outstanding in 2001.
Dividends declared per share.
92 $.63
93 $.65
94 $.67
95 $.69
96 $.71
97 $.74
98 $.78
99 $.82
00 $.86
01 $.90
In October 2001, the quarterly dividend was increased from $.22 to $.23
per share.
- ---------------------------------------------------------------------
Cash dividends Payment date Per share
- ---------------------------------------------------------------------
2001 4th Quarter Jan. 2, 2002 $.23
- ---------------------------------------------------------------------
3rd Quarter Oct. 1, 2001 $.23
- ---------------------------------------------------------------------
2nd Quarter July 2, 2001 $.22
- ---------------------------------------------------------------------
1st Quarter April 2, 2001 $.22
- ---------------------------------------------------------------------
2000 4th Quarter Jan. 2, 2001 $.22
- ---------------------------------------------------------------------
3rd Quarter Oct. 2, 2000 $.22
- ---------------------------------------------------------------------
2nd Quarter July 3, 2000 $.21
- ---------------------------------------------------------------------
1st Quarter April 3, 2000 $.21
- ---------------------------------------------------------------------
Effects of inflation and changing prices and other matters
The company's results of operations and financial condition have not been
significantly affected by inflation and changing prices. In both of its
principal businesses, subject to normal competitive conditions, the company
generally has been able to pass along rising costs through increased selling
prices. Further, the effects of inflation and changing prices on the company's
property, plant and equipment and related depreciation expense have been reduced
as a result of an ongoing capital expenditure program and the availability of
replacement assets with improved technology and efficiency.
The company is exposed to foreign exchange rate risk primarily due to
its ownership of Newsquest, which uses the British pound as its functional
currency which is then translated into U.S. dollars.
Effective Jan. 1, 2001, the company adopted SFAS No. 133, "Accounting
for Derivative Instruments and Hedging Activities," as amended. The adoption of
this standard did not have any effect on the company's results of operations or
financial position. At Dec. 30, 2001, the company is not a party to any
derivative contracts.
On July 1, 2001, the company adopted Statement of Financial Accounting
Standards No. 141 (SFAS No. 141), "Business Combinations." In accordance with
SFAS No. 141, the company ceased amortizing goodwill for acquisitions after July
1, 2001.
In July 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 142 (SFAS No. 142), "Goodwill
and Other Intangible Assets." 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 adopted SFAS No. 142 effective Dec.
31, 2001, the first day of its fiscal year 2002. Upon adoption, the company
ceased amortizing goodwill. Based on the current levels of goodwill, this will
increase net income by approximately $216 million annually ($.80 per share based
on average diluted shares outstanding in 2001) beginning in 2002.
The following table summarizes, on an unaudited, pro forma basis, the
results of operations of the company as though SFAS No. 142 was effective on the
first day of fiscal year 1999:
In millions, except per share amounts (pro forma and unaudited)
- ------------------------------------------------------------------------------
Fiscal year 2001 2000 1999
- ------------------------------------------------------------------------------
Net income* $1,047 $1,879 $1,068
- ------------------------------------------------------------------------------
Income per share* - Basic $ 3.95 $ 4.25 $ 3.69
- ------------------------------------------------------------------------------
Income per share* - Diluted $ 3.92 $ 4.22 $ 3.65
- ------------------------------------------------------------------------------
* from continuing operations
In August 2001, the FASB issued Statement of Financial Accounting
Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets." The company does not believe that the adoption of the statement will
have a material impact on its financial position or results of operations.
Certain factors affecting forward-looking statements
Certain statements in the company's 2001 Annual Report to Shareholders and its
Annual Report on Form 10-K 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; (i)
an increase in interest rates; (j) a weakening in the British pound to U.S.
dollar exchange rate; and (k) general economic, political and business
conditions.
- 29 -
CONSOLIDATED BALANCE SHEETS
In thousands of dollars
- ----------------------------------------------------------------------------------------------------------------------------------
Assets Dec. 30, 2001 Dec. 31, 2000
- ----------------------------------------------------------------------------------------------------------------------------------
Current assets
- ----------------------------------------------------------------------------------------------------------------------------------
Cash $ 73,905 $ 69,954
- ----------------------------------------------------------------------------------------------------------------------------------
Marketable securities, at cost, which approximates market 66,724 123,242
- ----------------------------------------------------------------------------------------------------------------------------------
Trade receivables (less allowance for doubtful receivables
of $39,138 and $37,465, respectively) 805,746 875,363
- ----------------------------------------------------------------------------------------------------------------------------------
Other receivables 65,923 56,469
- ----------------------------------------------------------------------------------------------------------------------------------
Inventories 104,848 128,321
- ----------------------------------------------------------------------------------------------------------------------------------
Prepaid expenses 61,052 48,987
- ----------------------------------------------------------------------------------------------------------------------------------
Total current assets 1,178,198 1,302,336
- ----------------------------------------------------------------------------------------------------------------------------------
Property, plant and equipment
- ----------------------------------------------------------------------------------------------------------------------------------
Land 237,485 216,049
- ----------------------------------------------------------------------------------------------------------------------------------
Buildings and improvements 1,243,363 1,101,696
- ----------------------------------------------------------------------------------------------------------------------------------
Machinery, equipment and fixtures 2,609,706 2,525,182
- ----------------------------------------------------------------------------------------------------------------------------------
Construction in progress 116,520 292,274
- ----------------------------------------------------------------------------------------------------------------------------------
Total 4,207,074 4,135,201
- ----------------------------------------------------------------------------------------------------------------------------------
Less accumulated depreciation (1,741,604) (1,673,802)
- ----------------------------------------------------------------------------------------------------------------------------------
Net property, plant and equipment 2,465,470 2,461,399
- ----------------------------------------------------------------------------------------------------------------------------------
Intangible and other assets
- ----------------------------------------------------------------------------------------------------------------------------------
Intangible assets and excess of acquisition cost over the value of assets acquired
(less accumulated amortization of $1,183,722 and $947,855, respectively) 8,684,359 8,740,804
- ----------------------------------------------------------------------------------------------------------------------------------
Investments and other assets 768,074 475,872
- ----------------------------------------------------------------------------------------------------------------------------------
Total intangible and other assets 9,452,433 9,216,676
- ----------------------------------------------------------------------------------------------------------------------------------
Total assets $ 13,096,101 $ 12,980,411
- ----------------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial
statements.
- 30 -
CONSOLIDATED BALANCE SHEETS
In thousands of dollars
- ----------------------------------------------------------------------------------------------------------------
Liabilities and shareholders' equity Dec. 30, 2001 Dec. 31, 2000
- ----------------------------------------------------------------------------------------------------------------
Current liabilities
- ----------------------------------------------------------------------------------------------------------------
Accounts payable
- ----------------------------------------------------------------------------------------------------------------
Trade $ 320,280 $ 455,390
- ----------------------------------------------------------------------------------------------------------------
Other 34,342 37,853
- ----------------------------------------------------------------------------------------------------------------
Accrued liabilities
- ----------------------------------------------------------------------------------------------------------------
Compensation 120,015 144,535
- ----------------------------------------------------------------------------------------------------------------
Interest 2,178 4,051
- ----------------------------------------------------------------------------------------------------------------
Other 112,900 177,318
- ----------------------------------------------------------------------------------------------------------------
Dividend payable 60,947 58,118
- ----------------------------------------------------------------------------------------------------------------
Income taxes 323,481 144,599
- ----------------------------------------------------------------------------------------------------------------
Deferred income 153,594 152,137
- ----------------------------------------------------------------------------------------------------------------
Total current liabilities 1,127,737 1,174,001
- ----------------------------------------------------------------------------------------------------------------
Deferred income taxes 503,397 274,829
- ----------------------------------------------------------------------------------------------------------------
Long-term debt 5,080,025 5,747,856
- ----------------------------------------------------------------------------------------------------------------
Post-retirement medical and life insurance liabilities 409,052 403,528
- ----------------------------------------------------------------------------------------------------------------
Other long-term liabilities 239,968 276,787
- ----------------------------------------------------------------------------------------------------------------
Total liabilities 7,360,179 7,877,001
- ----------------------------------------------------------------------------------------------------------------
Shareholders' equity
- ----------------------------------------------------------------------------------------------------------------
Preferred stock, par value $1: Authorized, 2,000,000 shares:
Issued, none
- ----------------------------------------------------------------------------------------------------------------
Common stock, par value $1: Authorized, 800,000,000 shares:
Issued, 324,420,732 shares, as to both years 324,421 324,421
- ----------------------------------------------------------------------------------------------------------------
Additional paid-in capital 210,256 170,715
- ----------------------------------------------------------------------------------------------------------------
Retained earnings 7,589,069 6,995,965
- ----------------------------------------------------------------------------------------------------------------
Accumulated other comprehensive loss (103,287) (66,274)
- ----------------------------------------------------------------------------------------------------------------
8,020,459 7,424,827
- ----------------------------------------------------------------------------------------------------------------
Less Treasury stock, 58,623,520 shares and 60,148,871 shares,
respectively, at cost (2,275,737) (2,307,793)
- ----------------------------------------------------------------------------------------------------------------
Deferred compensation related to ESOP (8,800) (13,624)
- ----------------------------------------------------------------------------------------------------------------
Total shareholders' equity 5,735,922 5,103,410
- ----------------------------------------------------------------------------------------------------------------
Commitments and contingent liabilities
- ----------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 13,096,101 $ 12,980,411
- ----------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial
statements.
- 31 -
CONSOLIDATED STATEMENTS OF INCOME
In thousands of dollars
- -------------------------------------------------------------------------------------------------------------------------------
Fiscal year ended Dec. 30, 2001 Dec. 31, 2000 Dec. 26, 1999
- -------------------------------------------------------------------------------------------------------------------------------
Net operating revenues
- -------------------------------------------------------------------------------------------------------------------------------
Newspaper advertising $ 4,119,773 $ 3,972,936 $ 3,115,250
- -------------------------------------------------------------------------------------------------------------------------------
Newspaper circulation 1,233,106 1,120,991 971,114
- -------------------------------------------------------------------------------------------------------------------------------
Broadcasting 662,652 788,767 728,642
- -------------------------------------------------------------------------------------------------------------------------------
All other 328,714 339,624 280,356
- -------------------------------------------------------------------------------------------------------------------------------
Total 6,344,245 6,222,318 5,095,362
- -------------------------------------------------------------------------------------------------------------------------------
Operating expenses
- -------------------------------------------------------------------------------------------------------------------------------
Cost of sales and operating expenses, exclusive of
depreciation 3,320,161 3,057,252 2,459,749
- -------------------------------------------------------------------------------------------------------------------------------
Selling, general and administrative expenses, exclusive
of depreciation 990,472 971,895 792,421
- -------------------------------------------------------------------------------------------------------------------------------
Depreciation 202,456 195,428 169,460
- -------------------------------------------------------------------------------------------------------------------------------
Amortization of intangible assets 241,321 180,487 110,631
- -------------------------------------------------------------------------------------------------------------------------------
Total 4,754,410 4,405,062 3,532,261
- -------------------------------------------------------------------------------------------------------------------------------
Operating income 1,589,835 1,817,256 1,563,101
- -------------------------------------------------------------------------------------------------------------------------------
Non-operating income (expense)
- -------------------------------------------------------------------------------------------------------------------------------
Interest expense (221,854) (219,228) (94,619)
- -------------------------------------------------------------------------------------------------------------------------------
Interest income 4,676 27,209 5,739
- -------------------------------------------------------------------------------------------------------------------------------
Other (2,060) (16,397) 52,966
- -------------------------------------------------------------------------------------------------------------------------------
Total (219,238) (208,416) (35,914)
- -------------------------------------------------------------------------------------------------------------------------------
Income before income taxes 1,370,597 1,608,840 1,527,187
- -------------------------------------------------------------------------------------------------------------------------------
Provision for income taxes 539,400 636,900 607,800
- -------------------------------------------------------------------------------------------------------------------------------
Income from continuing operations 831,197 971,940 919,387
- -------------------------------------------------------------------------------------------------------------------------------
Discontinued operations
- -------------------------------------------------------------------------------------------------------------------------------
Income from the operation of discontinued operations,
net of income taxes of $0, $1,598 and $27,700, respectively 2,437 38,541
- -------------------------------------------------------------------------------------------------------------------------------
Gain on sale of cable business, net of income taxes of $889,300 744,700
- -------------------------------------------------------------------------------------------------------------------------------
Net income $ 831,197 $ 1,719,077 $ 957,928
- -------------------------------------------------------------------------------------------------------------------------------
Earnings per share - basic
- -------------------------------------------------------------------------------------------------------------------------------
Earnings from continuing operations $3.14 $3.65 $3.29
- -------------------------------------------------------------------------------------------------------------------------------
Earnings from discontinued operations:
- -------------------------------------------------------------------------------------------------------------------------------
Discontinued operations, net of tax .01 .14
- -------------------------------------------------------------------------------------------------------------------------------
Gain on sale of cable business, net of tax 2.79
- -------------------------------------------------------------------------------------------------------------------------------
Net income per share - basic $3.14 $6.45 $3.43
- -------------------------------------------------------------------------------------------------------------------------------
Earnings per share - diluted
- -------------------------------------------------------------------------------------------------------------------------------
Earnings from continuing operations $3.12 $3.63 $3.26
- -------------------------------------------------------------------------------------------------------------------------------
Earnings from discontinued operations:
- -------------------------------------------------------------------------------------------------------------------------------
Discontinued operations, net of tax .01 .14
- -------------------------------------------------------------------------------------------------------------------------------
Gain on sale of cable business, net of tax 2.77
- -------------------------------------------------------------------------------------------------------------------------------
Net income per share - diluted $3.12 $6.41 $3.40
- -------------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial
statements.
- 32 -
CONSOLIDATED STATEMENTS OF CASH FLOWS
In thousands of dollars
- -----------------------------------------------------------------------------------------------------------------------
Fiscal year ended Dec. 30, 2001 Dec. 31, 2000 Dec. 26, 1999
- -----------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities
- -----------------------------------------------------------------------------------------------------------------------
Net income $ 831,197 $1,719,077 $ 957,928
- -----------------------------------------------------------------------------------------------------------------------
Adjustments to reconcile net income to
operating cash flows
- -----------------------------------------------------------------------------------------------------------------------
Discontinued operations, net of tax (747,137) (38,541)
- -----------------------------------------------------------------------------------------------------------------------
Income taxes on sale of cable business (889,300)
- -----------------------------------------------------------------------------------------------------------------------
Depreciation 202,456 195,428 169,460
- -----------------------------------------------------------------------------------------------------------------------
Amortization of intangibles 241,321 180,487 110,631
- -----------------------------------------------------------------------------------------------------------------------
Deferred income taxes 228,568 (169,290) 21,983
- -----------------------------------------------------------------------------------------------------------------------
Other, net, including gains on sales (9,461) (4,484) (49,269)
- -----------------------------------------------------------------------------------------------------------------------
Decrease (increase) in receivables 67,035 39,850 (70,014)
- -----------------------------------------------------------------------------------------------------------------------
Decrease (increase) in inventories 22,457 (16,091) (7,624)
- -----------------------------------------------------------------------------------------------------------------------
(Decrease) increase in accounts payable (103,195) 8,833 (34,805)
- -----------------------------------------------------------------------------------------------------------------------
Increase in interest and taxes payable 177,950 186,133 11,555
- -----------------------------------------------------------------------------------------------------------------------
Change in other assets and liabilities, net (339,331) (1,179) 75,582
- -----------------------------------------------------------------------------------------------------------------------
Net cash flow from operating activities 1,318,997 502,327 1,146,886
- -----------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities
- -----------------------------------------------------------------------------------------------------------------------
Purchase of property, plant and equipment (324,579) (350,580) (258,443)
- -----------------------------------------------------------------------------------------------------------------------
Payments for acquisitions, net of cash acquired (186,201) (4,264,214) (1,496,649)
- -----------------------------------------------------------------------------------------------------------------------
Change in other investments (42,637) (78,531) (10,383)
- -----------------------------------------------------------------------------------------------------------------------
Proceeds from sale of certain assets 38,539 2,714,362 38,450
- -----------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (514,878) (1,978,963) (1,727,025)
- -----------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities
- -----------------------------------------------------------------------------------------------------------------------
(Payments of) proceeds from long-term debt (667,831) 2,799,161 915,865
- -----------------------------------------------------------------------------------------------------------------------
Dividends paid (235,472) (228,391) (226,274)
- -----------------------------------------------------------------------------------------------------------------------
Cost of common shares repurchased (967,242) (163,228)
- -----------------------------------------------------------------------------------------------------------------------
Proceeds from issuance of common stock 48,780 21,225 33,681
- -----------------------------------------------------------------------------------------------------------------------
Net cash (used for) provided by financing activities (854,523) 1,624,753 560,044
- -----------------------------------------------------------------------------------------------------------------------
Effect of currency exchange rate change (2,163) (1,081) 68
- -----------------------------------------------------------------------------------------------------------------------
(Decrease) increase in cash and cash equivalents (52,567) 147,036 (20,027)
- -----------------------------------------------------------------------------------------------------------------------
Balance of cash and cash equivalents at beginning of year 193,196 46,160 66,187
- -----------------------------------------------------------------------------------------------------------------------
Balance of cash and cash equivalents at end of year $ 140,629 $ 193,196 $ 46,160
- -----------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial
statements.
- 33 -
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
In thousands of dollars
- ------------------------------------------------------------------------------------------------------------------------------------
Fiscal years ended Common Accumulated Deferred
December 26, 1999, stock Additional other compensation
December 31, 2000 $1 par paid-in Retained comprehensive Treasury related
and December 30, 2001 value capital earnings income (loss) stock to ESOP Total
- ------------------------------------------------------------------------------------------------------------------------------------
Balance: Dec. 27, 1998 $ 324,421 $ 126,045 $ 4,775,313 $(1,223,077) $ (22,878) $ 3,979,824
- ------------------------------------------------------------------------------------------------------------------------------------
Net income, 1999 957,928 957,928
- ------------------------------------------------------------------------------------------------------------------------------------
Foreign currency translation
adjustment, net of taxes of
$9,130 $ 14,280 14,280
- ------------------------------------------------------------------------------------------------------------------------------------
Unrealized gain on securities,
net of taxes of $7,095 11,097 11,097
- ------------------------------------------------------------------------------------------------------------------------------------
Total comprehensive income 983,305
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends declared,
1999: $.82 per share (228,781) (228,781)
- ------------------------------------------------------------------------------------------------------------------------------------
Treasury stock acquired (163,228) (163,228)
- ------------------------------------------------------------------------------------------------------------------------------------
Stock options exercised 7,916 23,490 31,406
- ------------------------------------------------------------------------------------------------------------------------------------
Stock issued under
incentive plan (2,154) 3,552 1,398
- ------------------------------------------------------------------------------------------------------------------------------------
Tax benefit derived from
stock incentive plans 21,460 21,460
- ------------------------------------------------------------------------------------------------------------------------------------
Compensation expense
related to ESOP 3,912 3,912
- ------------------------------------------------------------------------------------------------------------------------------------
Tax benefit from ESOP 350 350
- ------------------------------------------------------------------------------------------------------------------------------------
Balance: Dec. 26, 1999 $ 324,421 $ 153,267 $ 5,504,810 $ 25,377 $(1,359,263) $ (18,966) $ 4,629,646
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Net income, 2000 1,719,077 1,719,077
- ------------------------------------------------------------------------------------------------------------------------------------
Foreign currency translation
adjustment, net of tax
benefit of $51,555 (80,638) (80,638)
- ------------------------------------------------------------------------------------------------------------------------------------
Unrealized loss on securities,
net of reclassification
adjustments during the period,
net of tax benefit of $7,041 (11,013) (11,013)
- ------------------------------------------------------------------------------------------------------------------------------------
Total comprehensive income 1,627,426
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends declared,
2000: $.86 per share (228,212) (228,212)
- ------------------------------------------------------------------------------------------------------------------------------------
Treasury stock acquired (967,242) (967,242)
- ------------------------------------------------------------------------------------------------------------------------------------
Stock options exercised 6,467 13,261 19,728
- ------------------------------------------------------------------------------------------------------------------------------------
Stock issued under
incentive plan 41 5,451 5,492
- ------------------------------------------------------------------------------------------------------------------------------------
Tax benefit derived from
stock incentive plans 10,940 10,940
- ------------------------------------------------------------------------------------------------------------------------------------
Compensation expense
related to ESOP 5,342 5,342
- ------------------------------------------------------------------------------------------------------------------------------------
Tax benefit from ESOP 290 290
- ------------------------------------------------------------------------------------------------------------------------------------
Balance: Dec. 31, 2000 $ 324,421 $ 170,715 $ 6,995,965 $ (66,274) $(2,307,793) $ (13,624) $ 5,103,410
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Net income, 2001 831,197 831,197
- ------------------------------------------------------------------------------------------------------------------------------------
Foreign currency translation
adjustment, net of tax
benefit of $21,851 (38,540) (38,540)
- ------------------------------------------------------------------------------------------------------------------------------------
Unrealized gain on securities,
net of reclassification
adjustments during the period,
net of taxes of $933 1,527 1,527
- ------------------------------------------------------------------------------------------------------------------------------------
Total comprehensive income 794,184
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends declared,
2001: $.90 per share (238,301) (238,301)
- ------------------------------------------------------------------------------------------------------------------------------------
Stock options exercised 17,751 30,278 48,029
- ------------------------------------------------------------------------------------------------------------------------------------
Stock issued under
incentive plan 2,937 1,778 4,715
- ------------------------------------------------------------------------------------------------------------------------------------
Tax benefit derived from
stock incentive plans 18,853 18,853
- ------------------------------------------------------------------------------------------------------------------------------------
Compensation expense
related to ESOP 4,824 4,824
- ------------------------------------------------------------------------------------------------------------------------------------
Tax benefit from ESOP 208 208
- ------------------------------------------------------------------------------------------------------------------------------------
Balance: Dec. 30, 2001 $ 324,421 $ 210,256 $ 7,589,069 $ (103,287) $(2,275,737) $ (8,800) $ 5,735,922
- ------------------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial
statements.
- 34 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1
Summary of significant accounting policies
Fiscal year: The company's fiscal year ends on the last Sunday of the calendar
year. The company's 2001 fiscal year ended on Dec. 30, 2001, and encompassed a
52-week period. The company's 2000 fiscal year encompassed a 53-week period and
its 1999 fiscal year covered a 52-week period.
Consolidation: The consolidated financial statements include the
accounts of the company and its wholly and majority owned subsidiaries after
elimination of all significant intercompany transactions and profits.
Critical accounting policies and the use of estimates: The company
prepares its financial statements in accordance with generally accepted
accounting principles which require the use of estimates and assumptions that
affect the reported amount of assets, liabilities, revenues and expenses and
related disclosure of contingent matters. The company bases its estimates on
historical experience, actuarial studies and other assumptions, as appropriate,
concerning the carrying values of its assets and liabilities and disclosure of
contingent matters. The company re-evaluates its estimates on an ongoing basis.
Actual results could differ from these estimates.
Critical accounting policies for the company involve its assessment of
the recoverability of its long-lived assets, including goodwill and other
intangible assets, which are based on such factors as estimated future cash
flows and current fair value estimates of business units. The company's
accounting for pension and retiree medical benefits requires the use of various
estimates concerning the work force, interest rates, plan investment return, and
involves the use of advice from consulting actuaries. The company's accounting
for income taxes in the U.S. and foreign jurisdictions is sensitive to
interpretation of various laws and regulations therein, and to company policy
and expectations as to the repatriation of earnings from foreign sources.
A more complete discussion of all of the company's significant
accounting policies follows.
Operating agencies: Certain of the company's newspaper subsidiaries are
participants in joint operating agencies. Each joint operating agency performs
the production, sales and distribution functions for the subsidiary and another
newspaper publishing company under a joint operating agreement. The company's
operating results in the Detroit and Tucson joint operating agencies are
accounted for under the equity method, reported as a single net amount in other
operating revenues. The company also participates in a newspaper publishing
partnership. Operating results for this partnership are accounted for under the
equity method and reported as a single net amount in other operating revenues.
Inventories: Inventories, consisting principally of newsprint, printing
ink, plate material and production film for the company's newspaper publishing
operations, are valued primarily at the lower of cost (first-in, first-out) or
market.
Property and depreciation: Property, plant and equipment is recorded at
cost, and depreciation is provided generally on a straight-line basis over the
estimated useful lives of the assets. The principal estimated useful lives are:
buildings and improvements, 10 to 40 years; and machinery, equipment and
fixtures, four to 30 years. Major renewals and improvements and interest
incurred during the construction period of major additions are capitalized.
Expenditures for maintenance, repairs and minor renewals are charged to expense
as incurred.
Intangible assets and excess of acquisition cost over fair value of
assets acquired: Intangible assets and the excess of acquisition cost over the
fair value of assets acquired represent the cost of intangible assets at the
time operating properties were purchased. In accordance with Opinion 17 of the
Accounting Principles Board of the American Institute of Certified Public
Accountants, intangible assets and the excess acquisition cost of operating
properties arising from acquisitions accounted for as purchases since Oct. 31,
1970, ($9.81 billion at Dec. 30, 2001) are being amortized generally over 15-40
years on a straight-line basis.
Valuation of Long-Lived Assets: The company evaluates the carrying value
of long-lived assets to be held and used, including the excess of acquisition
cost over fair value of assets acquired, whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. The
carrying value of a long-lived asset, including the excess of acquisition cost
over fair value of assets acquired, is considered impaired when the projected
undiscounted future cash flows from the related reporting unit are less than its
carrying value. The company measures impairment based on the amount by which the
carrying value exceeds the fair market value. Fair market value is determined
primarily using the projected future cash flows discounted at a rate
commensurate with the risk involved. Losses on long-lived assets to be disposed
of are determined in a similar manner, except that fair market values are
reduced for the cost to dispose.
Investments and other assets: Investments in non-public businesses in
which the company does not have control are carried at cost and losses resulting
from periodic evaluations of the carrying value of these investments are
included as a non-operating expense. At Dec. 30, 2001, and Dec. 31, 2000, such
investments aggregated $20 million and $57 million, respectively. Investments in
public equity securities are available for sale with related gains and losses
included in equity as other comprehensive income.
The company's television stations are parties to program broadcast
contracts. These contracts are recorded at the gross amount of the related
liability when the programs are available for telecasting. Program assets are
classified as current (as a prepaid expense) or noncurrent (as an other asset)
in the Consolidated Balance Sheets, based upon the expected use of the programs
in succeeding years. The amount charged to expense appropriately matches the
cost of the programs with the revenues associated with them. The liability for
these contracts is classified as current or noncurrent in accordance with the
payment terms of the contracts. The payment period generally coincides with the
period of telecast for the programs, but may be shorter.
- 35 -
Revenue recognition: The company's revenues include amounts charged to
customers for space purchased in the company's newspapers, ads placed on its
Internet Web sites and for advertising broadcast on the company's television
stations. Newspaper revenues also include circulation revenues for newspapers
purchased by readers or distributors. Advertising revenues are recognized, net
of agency commissions, in the period when advertising is printed, placed on Web
sites or broadcast, and circulation revenues are recognized when purchased
newspapers are distributed. Amounts received from customers in advance of
revenue recognition are deferred as liabilities.
Retirement plans: Pension costs under the company's retirement plans are
actuarially computed. The company's policy is to fund costs accrued under its
qualified pension plans.
Postretirement benefits other than pensions: The company recognizes the
cost of postretirement medical and life insurance benefits on an accrual basis
over the working lives of employees expected to receive such benefits.
Income taxes: The company accounts for certain income and expense items
differently for financial reporting purposes than for income tax reporting
purposes. Deferred income taxes are provided in recognition of these temporary
differences.
Per share amounts: The company reports earnings per share on two bases,
basic and diluted. All basic income per share amounts are based on the weighted
average number of common shares outstanding during the year. The calculation of
diluted earnings per share also considers the assumed dilution from the exercise
of stock options and from stock incentive rights.
Foreign currency translation: The income statement of Newsquest
operations has been translated to U.S. dollars using the average currency
exchange rates in effect during the relevant period. Newsquest's balance sheet
has been translated using the currency exchange rate as of the end of the
accounting period. The impact of currency exchange rate changes on the
translation of Newsquest's balance sheet is included in comprehensive income,
net of tax, and is classified as accumulated other comprehensive income (loss)
in shareholders' equity.
Discontinued operations: In connection with the sale of the cable
business in early fiscal 2000, the cable operating results are presented in the
consolidated statements of income and related discussions as discontinued
operations.
New accounting pronouncements: Effective Jan. 1, 2001, the company
adopted Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" as amended. The adoption of this
standard did not have any effect on the company's results of operations or
financial position.
On July 1, 2001, the Company adopted Statement of Financial Accounting
Standards No. 141 (SFAS No. 141), "Business Combinations." In accordance with
SFAS No. 141, the company ceased amortizing goodwill for acquisitions after July
1, 2001.
In July 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 142 (SFAS No. 142), "Goodwill
and Other Intangible Assets." 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 adopted SFAS No. 142 effective Dec.
31, 2001, the first day of its fiscal year 2002. Upon adoption, the company
ceased amortizing goodwill. Based on the current levels of goodwill, this
accounting change will increase net income by approximately $216 million
annually ($.80 per share based on average diluted shares outstanding in 2001)
beginning in 2002.
In August 2001, the FASB issued Statement of Financial Accounting
Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets." The company does not believe that the adoption of the statement will
have a material impact on its financial position or results of operations.
NOTE 2
Acquisitions, exchanges and dispositions
2001: During 2001, the company purchased the remaining 36% interest in WKYC-TV,
Cleveland, that it did not previously own. Additionally, the company purchased
several small non-daily publications in the U.S. and in the U.K. In connection
with the acquisition of several non-daily publications in the U.K. ("Dimbleby"),
the company issued loan notes totaling approximately 12.7 million British pounds
(U.S. $18.3 million) to the shareholders of Dimbleby. These acquisitions, which
had an aggregate purchase price of approximately $186 million, were accounted
for under the purchase method of accounting. The company contributed its
Marietta (Ohio) Times newspaper to the Gannett Foundation in May 2001. The
Gannett Foundation is a not-for-profit, private foundation that makes charitable
awards in the communities in which Gannett operates its newspapers and
television stations. The company sold its daily newspaper in Lansdale, Pa., in
September 2001. These business acquisitions and dispositions did not materially
affect the company's financial position or results of operations.
2000: In June 2000, Gannett acquired the entire share capital of News
Communications & Media plc ("Newscom") for approximately 444 million British
pounds (U.S. $702 million). Gannett also financed the repayment of Newscom's
existing debt. With the Newscom acquisition, the company now publishes more than
300 titles in the United Kingdom, including 15 daily newspapers.
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 eight daily newspapers in Wisconsin, eight daily newspapers in central
Ohio, and single daily newspapers in Lafayette, La.; Salisbury, Md.; and St.
George, Utah (collectively, "Thomson").
The company completed its acquisition of Central Newspapers, Inc.
("Central") on Aug. 1, 2000, for an approximate cash purchase price of $2.6
billion. The company also retired Central's existing debt of approximately $206
million. Central's properties include The Arizona Republic; The Indianapolis
Star; three other dailies in Indiana and one daily in Louisiana; a direct
marketing business; CNI Ventures, an Internet and technology investment
management group; and other related media and information businesses.
- 36 -
In March 2000, the company completed the acquisition of WJXX-TV, the ABC
affiliate in Jacksonville, Fla. Gannett continues to own and operate WTLV-TV,
the NBC affiliate in Jacksonville.
The Newscom, Thomson, Central and WJXX-TV acquisitions were recorded
under the purchase method of accounting.
The aggregate purchase price, including liabilities assumed, for
businesses and assets acquired in 2000, including Newscom, Thomson, Central,
WJXX-TV and certain smaller newspaper publishing operations, totaled
approximately $4.8 billion, of which $4.4 billion represents identified
intangible assets and excess of acquisition cost over fair value of assets
acquired.
The sale of the assets of the company's cable division for $2.7 billion
was completed on Jan. 31, 2000. Upon closing, an after-tax gain of approximately
$745 million or $2.77 per diluted share was recognized which, along with the
cable segment operating results, is
reported as discontinued operations in the company's financial statements.
In the fourth quarter of 2000, the company contributed the assets of its
newspapers, the Marin Independent Journal and the Classified Gazette, to the
California Newspapers Partnership (a partnership that includes 20 daily
California newspapers) in exchange for an increased ownership interest in the
partnership. The company now has a 19.49% ownership interest in the partnership.
1999: In July 1999, Gannett acquired the stock of Newsquest plc
("Newsquest") for a total price of approximately 922 million British pounds
(U.S. $1.5 billion). Gannett also financed the repayment of Newsquest's existing
debt. Newsquest's principal activities are publishing and printing regional and
local newspapers in England with a portfolio of more than 180 titles that
include paid-for daily and weekly newspapers and free weekly newspapers. The
acquisition was recorded under the purchase method of accounting.
In June 1999, the company completed a broadcast station transaction
under which it exchanged its ABC affiliate KVUE-TV in Austin, Texas, and
received KXTV-TV, the ABC affiliate in Sacramento, Calif., plus cash
consideration. For financial reporting purposes, the company recorded the
exchange as two simultaneous but separate events; that is, a sale of its Austin
TV station for which a non-operating gain was recognized and the acquisition of
the Sacramento station accounted for under the purchase method. In its second
quarter, the company reported a net non-operating gain of $55 million ($33
million after tax) principally as a result of this transaction.
The aggregate purchase price, including liabilities assumed, for
businesses and assets acquired in 1999 including Newsquest, the Sacramento
television station and certain smaller non-daily newspaper publishing
operations, totaled approximately $1.8 billion.
In March 1999, the company contributed The San Bernardino County Sun to
the California Newspapers Partnership in exchange for a partnership interest.
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 fiscal year 2000 acquisitions and dispositions noted above were made
at the beginning of 2000. The 2001 transactions were not material for pro forma
purposes. On this basis, these transactions would have resulted in a pro forma
decrease in income per diluted share from continuing operations of $.12 in 2000.
However, this pro forma combined statement does not necessarily reflect the
results of operations as they would have been if the combined businesses had
constituted a single entity during those years.
In millions, except per share amounts (pro forma and unaudited)
- ------------------------------------------------------------------------
Fiscal year 2001 2000
- ------------------------------------------------------------------------
Operating revenues* $6,344 $6,902
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
Income before taxes* $1,371 $1,556
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
Income* $ 831 $ 940
- ------------------------------------------------------------------------
Income per share* - Basic $ 3.14 $ 3.53
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
Income per share* - Diluted $ 3.12 $ 3.51
- ------------------------------------------------------------------------
*from continuing operations
- ------------------------------------------------------------------------
- 37 -
NOTE 3
Consolidated statements of cash flows
For purposes of this statement, the company considers its marketable securities,
which are readily convertible into cash (with original maturity dates of less
than 90 days) and consist of short-term investments in government securities,
commercial paper and money market funds, as cash equivalents.
Cash paid in 2001, 2000 and 1999 for income taxes and for interest (net
of amounts capitalized) was as follows:
In thousands of dollars
- -------------------------------------------------------------------------------
2001 2000 1999
- -------------------------------------------------------------------------------
Income taxes $138,688 $1,454,465 $596,873
- -------------------------------------------------------------------------------
Interest $223,691 $ 209,240 $100,547
- -------------------------------------------------------------------------------
Interest in the amount of $8.6 million, $11.1 million and $5.7 million
was capitalized in 2001, 2000 and 1999, respectively.
The income taxes paid by the company for 2001 are below typical levels.
Under the Economic Growth and Tax Relief Reconciliation Act of 2001, the
company's estimated federal income tax payment normally due on Sept. 15 was
deferred until Oct. 1, 2001. However, subsequent to the attacks of September 11,
Internal Revenue Service Rule 2001-61 was issued which permitted a further
deferral of the company's third quarter estimated tax payment and its fourth
quarter estimated tax payment until January 15, 2002.
The 2000 income taxes paid amount includes amounts paid in connection
with the company's sale of the cable business.
No significant liabilities were assumed in connection with the 2001
acquisitions. Liabilities assumed in connection with 2000 acquisitions totaled
$578 million, with $485 million related to Newscom and Central outstanding debt
obligations. Liabilities assumed in connection with 1999 acquisitions totaled
approximately $365 million, with $181 million related to Newsquest outstanding
debt obligations.
In 2001 and 2000, the company issued 86,544 and 161,152 shares of common
stock, respectively, in settlement of previously granted stock incentive rights
for the four year period 1998-2001 and the compensation liability of $7.0
million and $6.3 million, respectively, for these rights was transferred to
shareholders' equity.
NOTE 4
Long-term debt
The long-term debt of the company is summarized below.
In thousands of dollars
- ----------------------------------------------------------------------------------------------
Dec. 30, 2001 Dec. 31, 2000
- ----------------------------------------------------------------------------------------------
Unsecured promissory notes $4,932,813 $5,461,205
- ----------------------------------------------------------------------------------------------
Other indebtedness 147,212 286,651
- ----------------------------------------------------------------------------------------------
Total long-term debt $5,080,025 $5,747,856
- ----------------------------------------------------------------------------------------------
The unsecured promissory notes at Dec. 30, 2001, were due from Jan. 3, 2002, to
Feb. 1, 2002, with rates varying from 1.75% to 2.00%.
The unsecured promissory notes at Dec. 31, 2000, were due from Jan. 4,
2001, to March 23, 2001, with rates varying from 6.4% to 6.63%.
At Dec. 30, 2001, the unsecured promissory notes were supported by the
$6.06 billion of revolving credit agreements discussed below and, therefore, are
classified as long-term debt.
The maximum amount of such promissory notes outstanding at the end of
any period during 2001 and 2000 was $5.4 billion and $5.7 billion, respectively.
The daily average outstanding balance was $5.2 billion during 2001 and $3.1
billion during 2000. The weighted average interest rate was 4.1% for 2001 and
6.5% for 2000.
Other indebtedness includes the loan notes issued by the company in the
U.K. to the former shareholders of Newsquest, Newscom and Dimbleby in connection
with their acquisitions as more fully discussed in Note 2. The Newsquest and
Newscom notes ($21.8 million and $90.1 million, respectively) bear interest at
.5% below the London Interbank Offered Rate (LIBOR), subject to a cap of 6.5%
and 6.75%, respectively. The Dimbleby notes ($18.3 million) bear interest at the
LIBOR rate minus 1%. Interest is payable semi-annually on all notes. The
Newsquest and Newscom notes are due on Dec. 31, 2006, and Dec. 31, 2007,
respectively, but may be redeemed by the company on each interest payment date.
The Newsquest and Newscom noteholders are entitled to require the company to
repay all or part of the notes on any interest payment date by giving 30 days'
written notice. The Dimbleby notes may be redeemed by the company or the
noteholders, in whole or in part, at any time after June 30, 2003. The Dimbleby
noteholders are entitled to require the company to repay all or part of the
principal amount of the notes by giving the company 30 days' written notice any
time after six months of issue of the notes. Should a noteholder exercise that
right, it is the company's intention to exchange the notes for cash. The
remaining other indebtedness at Dec. 30, 2001, consists primarily of industrial
revenue bonds with maturities in 2008 and 2009 at variable interest rates (1.9%
at Dec. 30, 2001).
At Dec. 30, 2001, the company had $6.06 billion of credit available
under two revolving credit agreements. The agreements provide for revolving
credit periods which permit borrowings from time to time to the maximum
commitments. The 1998 $3.0 billion agreement revolving credit period extends to
- 38 -
July 1, 2003. The 2000 $3.06 billion agreement consists of a $1.53 billion
364-day facility which extends to July 2002 and a $1.53 billion 5-year facility
which extends to July 2005. At the end of the 364-day period, any borrowings
outstanding under the 364-day credit facility are convertible into a 2-year term
loan at Gannett's option.
The commitment fee rate for the 1998 revolving credit agreement may
range from .07% to .175%, depending on Standard & Poor's or Moody's credit
rating of the company's senior unsecured long-term debt. The rate in effect on
Dec. 30, 2001, was .09%. At the option of the company, the interest rate on
borrowings under this agreement may be at the prime rate, at rates ranging from
.13% to .35% above the LIBOR or at rates ranging from .255% to .50% above a
certificate of deposit-based rate. The prime rate was 4.75% at the end of 2001
and 9.5% at the end of 2000. The percentages that apply depend on Standard &
Poor's or Moody's credit rating of the company's senior unsecured long-term
debt.
The commitment fee rates for the 2000 revolving credit agreement may
range from .05% to .09%, depending on Standard & Poor's or Moody's credit rating
of the company's senior unsecured long-term debt. The rates in effect on Dec.
30, 2001, were .05% for the 364-day facility and .07% for the 5-year facility.
At the option of the company, the interest rate on borrowings under this
agreement may be at .13% to .24% above the prime rate, the Eurodollar base rate
or the Federal Funds Effective Rate plus .50%. The percentages that apply depend
on Standard & Poor's or Moody's credit rating of the company's senior unsecured
long-term debt.
The revolving credit agreements contain a restrictive provision that
requires the maintenance of net worth of at least $2.5 billion. At Dec. 30,
2001, and Dec. 31, 2000, net worth was $5.7 billion and $5.1 billion,
respectively.
Approximate annual maturities of long-term debt, assuming that the
company had used the $6.06 billion revolving credit agreements as of the balance
sheet date to refinance existing unsecured promissory notes on a long-term basis
and assuming the company's other indebtedness was paid on its scheduled pay
dates, are as follows:
In thousands of dollars
- ------------------------------------------------------------------
2002 --
- ------------------------------------------------------------------
2003 $3,018,416
- ------------------------------------------------------------------
2004 402,813
- ------------------------------------------------------------------
2005 1,530,000
- ------------------------------------------------------------------
2006 21,838
- ------------------------------------------------------------------
Later years 106,958
- ------------------------------------------------------------------
Total $5,080,025
- ------------------------------------------------------------------
At Dec. 30, 2001, and Dec. 31, 2000, the company estimates that the
amount reported on the balance sheet for financial instruments, including
long-term debt, cash and cash equivalents, trade and other receivables, and
other long-term liabilities, approximates fair value.
NOTE 5
Retirement plans
The company and its subsidiaries have various retirement plans, including plans
established under collective bargaining agreements, under which substantially
all full-time employees are covered. The Gannett Retirement Plan is the
company's principal retirement plan and covers most U.S. employees of the
company and its subsidiaries. Benefits under the Gannett Retirement Plan are
based on years of service and final average pay. The company's retirement plan
assets include marketable securities such as common stocks, bonds and U.S.
government obligations and interest-bearing deposits. The tables below also
include the assets and obligations of the former Central Newspapers, Inc.
Retirement Plan, which was merged into the Gannett Retirement Plan effective
Dec. 31, 2000, and Newsquest's Retirement Plans.
The company's pension costs for 2001, 2000 and 1999 are presented in the
following table:
In thousands of dollars
- ----------------------------------------------------------------------------------------
2001 2000 1999
- ----------------------------------------------------------------------------------------
Service cost - benefits earned
during the period $ 70,643 $ 61,905 $ 60,834
- ----------------------------------------------------------------------------------------
Interest cost on benefit obligation 150,935 129,601 103,412
- ----------------------------------------------------------------------------------------
Expected return on plan assets (217,796) (194,010) (146,168)
- ----------------------------------------------------------------------------------------
Amortization of transition asset (68) (28) (984)
- ----------------------------------------------------------------------------------------
Amortization of prior
service credit (18,908) (9,498) (3,754)
- ----------------------------------------------------------------------------------------
Amortization of actuarial loss (gain) 824 (4,306) 1,407
- ----------------------------------------------------------------------------------------
Pension expense for company-
sponsored retirement plans (14,370) (16,336) 14,747
- ----------------------------------------------------------------------------------------
Union and other pension cost 6,404 7,432 5,071
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
Pension cost $ (7,966) $ (8,904) $ 19,818
- ----------------------------------------------------------------------------------------
- 39 -
In December 2001, the company contributed $300 million to the Gannett
Retirement Plan.
The following table provides a reconciliation of benefit obligations,
plan assets and funded status of the company's retirement plans. The related
amounts that are recognized in the Consolidated Balance Sheets for the company's
retirement plans also are provided.
In thousands of dollars
- --------------------------------------------------------------------------------------------
Dec. 30, 2001 Dec. 31, 2000
- --------------------------------------------------------------------------------------------
Change in benefit obligation
- --------------------------------------------------------------------------------------------
Net benefit obligation at
beginning of year $ 2,046,283 $ 1,470,403
- --------------------------------------------------------------------------------------------
Service cost 70,643 61,905
- --------------------------------------------------------------------------------------------
Interest cost 150,935 129,601
- --------------------------------------------------------------------------------------------
Plan participants' contributions 6,559 6,080
- --------------------------------------------------------------------------------------------
Actuarial loss 32,636 45,636
- --------------------------------------------------------------------------------------------
Acquisitions/plan mergers 4,308 444,522
- --------------------------------------------------------------------------------------------
Gross benefits paid (129,062) (111,864)
- --------------------------------------------------------------------------------------------
Net benefit obligation at
end of year $ 2,182,302 $ 2,046,283
- --------------------------------------------------------------------------------------------
Change in plan assets
- --------------------------------------------------------------------------------------------
Fair value of plan assets at
beginning of year $ 2,309,968 $ 1,763,141
- --------------------------------------------------------------------------------------------
Actual return on plan assets (511,625) 29,546
- --------------------------------------------------------------------------------------------
Plan participants' contributions 6,559 6,080
- --------------------------------------------------------------------------------------------
Employer contributions 308,015 8,471
- --------------------------------------------------------------------------------------------
Acquisitions/plan mergers 6,549 614,594
- --------------------------------------------------------------------------------------------
Gross benefits paid (129,062) (111,864)
- --------------------------------------------------------------------------------------------
Fair value of plan assets at
end of year $ 1,990,404 $ 2,309,968
- --------------------------------------------------------------------------------------------
Funded status at end of year $ (191,898) $ 263,685
- --------------------------------------------------------------------------------------------
Unrecognized net actuarial loss (gain) 738,079 (6,024)
- --------------------------------------------------------------------------------------------
Unrecognized prior service credit (176,799) (197,324)
- --------------------------------------------------------------------------------------------
Unrecognized net transition asset (146) (200)
- --------------------------------------------------------------------------------------------
Net amount recognized at end of year $ 369,236 $ 60,137
- --------------------------------------------------------------------------------------------
Amounts recognized in
Consolidated Balance Sheets
- --------------------------------------------------------------------------------------------
Prepaid benefit cost $ 461,743 $ 142,807
- --------------------------------------------------------------------------------------------
Accrued benefit cost $ 92,507 $ 82,670
- --------------------------------------------------------------------------------------------
The net benefit obligation was determined using an assumed discount rate of
7.25% and 7.625% at the end of 2001 and 2000, respectively. The assumed rate of
compensation increase was 4.0% and 4.5% at the end of 2001 and 2000,
respectively. The assumed long-term rate of return on plan assets used in
determining pension cost was 10%. Retirement plan assets include approximately
1,242,300 shares of the company's common stock valued at approximately $84
million and $78 million at the end of 2001 and 2000, respectively.
NOTE 6
Postretirement benefits other than pensions
The company provides health care and life insurance benefits to certain retired
employees who meet age and service requirements. Most of the company's retirees
contribute to the cost of these benefits and retiree contributions are increased
as actual benefit costs increase. The cost of providing retiree health care and
life insurance benefits is actuarially determined and accrued over the service
period of the active employee group.
Postretirement benefit cost for health care and life insurance for 2001,
2000 and 1999 included the following components:
In thousands of dollars
- --------------------------------------------------------------------------------------------
2001 2000 1999
- --------------------------------------------------------------------------------------------
Service cost - benefits earned
during the period $ 6,512 $ 5,247 $ 3,796
- --------------------------------------------------------------------------------------------
Interest cost on net benefit
obligation 24,674 19,865 14,901
- --------------------------------------------------------------------------------------------
Amortization of prior
service credit (7,728) (7,018) (8,478)
- --------------------------------------------------------------------------------------------
Amortization of actuarial (gain) loss (10) (240) 20
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
Net periodic postretirement $ 23,448 $ 17,854 $ 10,239
benefit cost
- --------------------------------------------------------------------------------------------
The table below provides a reconciliation of benefit obligations and funded
status of the company's postretirement benefit plans:
In thousands of dollars
- ----------------------------------------------------------------------------------------------
Dec. 30, 2001 Dec. 31, 2000
- ----------------------------------------------------------------------------------------------
Change in benefit obligation
- ----------------------------------------------------------------------------------------------
Net benefit obligation at
beginning of year $ 363,767 $ 215,593
- ----------------------------------------------------------------------------------------------
Service cost 6,512 5,247
- ----------------------------------------------------------------------------------------------
Interest cost 24,674 19,865
- ----------------------------------------------------------------------------------------------
Plan participants' contributions 8,204 5,626
- ----------------------------------------------------------------------------------------------
Plan amendment (58,009) 0
- ----------------------------------------------------------------------------------------------
Actuarial loss 13,095 40,801
- ----------------------------------------------------------------------------------------------
Acquisitions/plan mergers 0 102,000
- ----------------------------------------------------------------------------------------------
Gross benefits paid (33,912) (25,365)
- ----------------------------------------------------------------------------------------------
Net benefit obligation at
end of year $ 324,331 $ 363,767
- ----------------------------------------------------------------------------------------------
Change in plan assets
- ----------------------------------------------------------------------------------------------
Fair value of plan assets at
beginning of year 0 0
- ----------------------------------------------------------------------------------------------
Employer contributions 25,708 19,739
- ----------------------------------------------------------------------------------------------
Plan participants' contributions 8,204 5,626
- ----------------------------------------------------------------------------------------------
Gross benefits paid (33,912) (25,365)
- ----------------------------------------------------------------------------------------------
Fair value of plan assets at
end of year 0 0
- ----------------------------------------------------------------------------------------------
Benefit obligation at end of year $ 324,331 $ 363,767
- ----------------------------------------------------------------------------------------------
Unrecognized net actuarial (loss) (18,949) (19,950)
- ----------------------------------------------------------------------------------------------
Unrecognized prior service credit 103,670 59,711
- ----------------------------------------------------------------------------------------------
Accrued postretirement benefit cost $ 409,052 $ 403,528
- ----------------------------------------------------------------------------------------------
- 40 -
At Dec. 30, 2001, the accumulated postretirement benefit obligation was
determined using a discount rate of 7.25% and a health care cost trend rate of
7% for pre-age 65 benefits, decreasing to 5% in the year 2004 and thereafter.
For post-age 64 benefits, the health care cost trend rate used was 10%,
declining to 5% in the year 2005 and thereafter.
At Dec. 31, 2000, the accumulated postretirement benefit obligation was
determined using a discount rate of 7.625% and a health care cost trend rate of
8% for pre-age 65 benefits, decreasing to 5% in the year 2005 and thereafter.
For post-age 64 benefits, the health care cost trend rate used was 12%,
decreasing to 5% in the year 2005 and thereafter.
The company's policy is to fund the above-mentioned benefits as claims
and premiums are paid.
The effect of a 1% increase in the health care cost trend rate used
would result in increases of approximately $27 million in the 2001
postretirement benefit obligation and $3 million in the aggregate service and
interest components of the 2001 expense. The effect of a 1% decrease in the
health care cost trend rate used would result in decreases of approximately $23
million in the 2001 postretirement benefit obligation and $3 million in the
aggregate service and interest components of the 2001 expense.
NOTE 7
Income taxes
The provision for income taxes on income from continuing operations consists of
the following:
In thousands of dollars
- ------------------------------------------------------------------------------------
2001 Current Deferred Total
- ------------------------------------------------------------------------------------
Federal $ 241,713 $ 200,065 $ 441,778
- ------------------------------------------------------------------------------------
State and other 34,437 28,504 62,941
- ------------------------------------------------------------------------------------
Foreign 34,681 0 34,681
- ------------------------------------------------------------------------------------
Total $ 310,831 $ 228,569 $ 539,400
- ------------------------------------------------------------------------------------
In thousands of dollars
- ------------------------------------------------------------------------------------
2000 Current Deferred Total
- ------------------------------------------------------------------------------------
Federal $ 518,413 $ 13,414 $ 531,827
- ------------------------------------------------------------------------------------
State and other 75,865 1,963 77,828
- ------------------------------------------------------------------------------------
Foreign 25,041 2,204 27,245
- ------------------------------------------------------------------------------------
Total $ 619,319 $ 17,581 $ 636,900
- ------------------------------------------------------------------------------------
In thousands of dollars
- ------------------------------------------------------------------------------------
1999 Current Deferred Total
- ------------------------------------------------------------------------------------
Federal $ 505,902 $ 14,791 $ 520,693
- ------------------------------------------------------------------------------------
State and other 72,927 2,132 75,059
- ------------------------------------------------------------------------------------
Foreign 10,863 1,185 12,048
- ------------------------------------------------------------------------------------
Total $ 589,692 $ 18,108 $ 607,800
- ------------------------------------------------------------------------------------
In addition to the income tax provision presented above for continuing
operations, the company also recorded federal and state income taxes payable on
discontinued operations of $891 million in 2000 and $28 million in 1999.
The provision for income taxes on continuing operations exceeds the U.S.
federal statutory tax rate as a result of the following differences:
- -------------------------------------------------------------------------------
Fiscal year 2001 2000 1999
- -------------------------------------------------------------------------------
U.S. statutory tax rate 35.0% 35.0% 35.0%
- -------------------------------------------------------------------------------
Increase in taxes resulting from:
- -------------------------------------------------------------------------------
State/other income taxes net
of federal income tax benefit 3.0 3.1 3.2
- -------------------------------------------------------------------------------
Goodwill amortization not
deductible for tax purposes 3.8 2.2 1.7
- -------------------------------------------------------------------------------
Other, net (2.4) (0.7) (0.1)
- -------------------------------------------------------------------------------
Effective tax rate 39.4% 39.6% 39.8%
- -------------------------------------------------------------------------------
The company has not provided for U.S. taxes on a portion of earnings
from its U.K. operations which it considers permanently invested in these
operations.
- 41 -
Deferred income taxes reflect temporary differences in the recognition
of revenue and expense for tax reporting and financial statement purposes.
Deferred tax liabilities and assets were composed of the following at
the end of 2001 and 2000:
In thousands of dollars
- --------------------------------------------------------------------------------------
Dec. 30, 2001 Dec. 31, 2000
- --------------------------------------------------------------------------------------
Liabilities
- --------------------------------------------------------------------------------------
Accelerated depreciation $ 338,941 $ 341,786
- --------------------------------------------------------------------------------------
Accelerated amortization of
deductible intangibles 142,748 117,302
- --------------------------------------------------------------------------------------
Pension 149,388 26,858
- --------------------------------------------------------------------------------------
Other 134,577 109,963
- --------------------------------------------------------------------------------------
Total deferred tax liabilities 765,654 595,909
- --------------------------------------------------------------------------------------
Assets
- --------------------------------------------------------------------------------------
Accrued compensation costs (59,724) (75,411)
- --------------------------------------------------------------------------------------
Postretirement medical and life (156,770) (157,737)
- --------------------------------------------------------------------------------------
Other (45,763) (87,932)
- --------------------------------------------------------------------------------------
Total deferred tax assets (262,257) (321,080)
- --------------------------------------------------------------------------------------
Net deferred tax liabilities $ 503,397 $ 274,829
- --------------------------------------------------------------------------------------
NOTE 8
Capital stock, stock options, incentive plans
The company's earnings per share from continuing operations (basic and diluted)
for 2001, 2000 and 1999 are presented below:
In thousands, except per share amounts
- ---------------------------------------------------------------------------------------------------
2001 2000 1999
- ---------------------------------------------------------------------------------------------------
Income from continuing
operations $831,197 $971,940 $919,387
- ---------------------------------------------------------------------------------------------------
Weighted average number
of common shares
outstanding (basic) 264,821 266,426 279,048
- ---------------------------------------------------------------------------------------------------
Effect of dilutive securities
- ---------------------------------------------------------------------------------------------------
Stock options 1,761 1,557 2,217
- ---------------------------------------------------------------------------------------------------
Stock incentive rights 251 135 343
- ---------------------------------------------------------------------------------------------------
Weighted average number
of common shares
outstanding (diluted) 266,833 268,118 281,608
- ---------------------------------------------------------------------------------------------------
Earnings per share from
continuing operations (basic) $3.14 $3.65 $3.29
- ---------------------------------------------------------------------------------------------------
Earnings per share from
continuing operations (diluted) $3.12 $3.63 $3.26
- ---------------------------------------------------------------------------------------------------
The 2001, 2000 and 1999 diluted earnings per share amounts exclude the
effects of approximately 10.6 million, 5.4 million and 3.2 million stock options
outstanding, respectively, as their inclusion would be antidilutive.
In 1998, the Board authorized the company to repurchase up to $750
million of company stock and in 2000, the Board approved an authorization for
the repurchase of up to an additional $1 billion in common stock. The company
purchased approximately 6 million shares of common stock in 1998 for $329
million, approximately 2.4 million shares in 1999 for $163 million, and
approximately 14.7 million shares in 2000 for $967 million.
In May 2000, the company's shareholders approved an amendment to the
company's certificate of incorporation to increase the authorized number of
shares to 802,000,000, of which 800,000,000 shares shall be common stock and
2,000,000 shares shall be preferred stock, both with a $1 par value.
In May 2001, the company's shareholders approved the adoption of the
Omnibus Incentive Compensation Plan (the Plan), which replaced the 1978
Long-Term Executive Incentive Plan (1978 Plan). The Plan, which will be
administered by the Executive Compensation Committee of the Board of Directors,
as was the 1978 Plan, provides for the issuance of up to 12 million shares of
Company common stock for awards granted on or after May 7, 2001. No more than
1,500,000 of the authorized shares may be granted in the aggregate in the form
of Restricted Stock, Performance Shares and/or Performance Units. The Plan
provides for the granting of stock options, stock appreciation rights,
restricted stock and other equity-based and cash-based awards. Awards may be
granted to employees of the company and members of the board of directors. The
1978 Plan did not provide for granting awards to members of the board. The Plan
provides that shares of common stock subject to awards granted under the Plan
become available again for issuance under the Plan if such awards are canceled
or forfeited. A similar feature existed under the 1978 plan but with the
adoption of the Omnibus Plan, canceled or forfeited shares subject to grants
under the 1978 plan are permanently retired.
Stock options may be granted as either non-qualified stock options or
incentive stock options. The options are granted to purchase common stock of the
company at not less than 100% of the fair market value on the day the option is
granted. Options are exercisable at such times and subject to such terms and
conditions as the Executive Compensation Committee determines but generally the
exercise period is ten years and the options become exercisable at 25% per year
after a one-year waiting period. Under the 1978 Plan, options issued prior to
1996 had an eight-year exercise period. The Plan restricts the granting of stock
options to any participant in any fiscal year to no more than 1,000,000 shares.
The limit under the 1978 Plan was 350,000 shares.
- 42 -
A Stock Appreciation Right (SAR) is a right to receive an amount in any
combination of cash or common stock equal in value to the excess of the fair
market value of the shares covered by such SAR on the date of exercise over the
aggregate exercise price of the SAR for such shares. SARs may be granted in
tandem with related options or freestanding. The exercise price of a SAR is
equal to the fair market value of a share of common stock on the date the SAR is
granted. No more than 1,000,000 shares of common stock may be granted in the
form of SARs to any participant in any fiscal year. No SARs have been granted as
of Dec. 30, 2001.
Restricted Stock is an award of common stock that is subject to
restrictions and such other terms and conditions as the Executive Compensation
Committee determines. Under the 1978 Plan, such awards could be issued in the
form of Stock Incentive Rights. These rights entitle an employee to receive one
share of common stock at the end of a four-year incentive period conditioned on
the employee's continued employment with the company. The Plan continues to
permit the issuance of such awards but also allows restrictions other than the
incentive period. Additionally, under the Plan, no more than 500,000 restricted
shares may be granted to any participant in any fiscal year. Under the 1978 Plan
there was no limit. No restricted stock awards have been issued since July 2000
but previously granted awards will continue to mature over their original
four-year period.
The Executive Compensation Committee may grant other types of awards
that are valued in whole or in part by reference to or that are otherwise based
on fair market value of the Company's common stock or other criteria established
by the Executive Compensation Committee and the achievement of performance
goals. The maximum aggregate grant of performance shares that may be awarded to
any participant in any fiscal year shall not exceed 500,000 shares of common
stock. The maximum aggregate amount of performance units or cash-based awards
that may be awarded to any participant in any fiscal year shall not exceed
$10,000,000.
In the event of a change in control, as defined in the Plan (1) all
outstanding options and SARs will become immediately exercisable in full, (2)
all restricted periods and restrictions imposed on non-performance based
restricted stock awards will lapse and (3) target payment opportunities
attainable under all outstanding awards of performance-based restricted stock,
performance units and performance shares will be paid on a prorated basis as
specified in the Plan. The Plan does not provide for the grant of option
surrender rights in tandem with stock options, as was the case under the 1978
Plan, and has eliminated the requirement under the 1978 Plan that awards that
were accelerated as a result of a change in control could only be exercised
during certain window periods.
A summary of the status of the company's stock option awards as of Dec.
30, 2001, Dec. 31, 2000, and Dec. 26, 1999, and changes thereto during the years
then ended is presented below:
- -----------------------------------------------------------------------------------------
2001 Stock Option Activity Weighted
average
Shares exercise price
- -----------------------------------------------------------------------------------------
Outstanding at beginning of year 16,767,813 $54.19
- -----------------------------------------------------------------------------------------
Granted 5,945,245 69.21
- -----------------------------------------------------------------------------------------
Exercised (1,438,807) 33.92
- -----------------------------------------------------------------------------------------
Canceled (748,187) 65.09
- -----------------------------------------------------------------------------------------
Outstanding at end of year 20,526,064 59.57
- -----------------------------------------------------------------------------------------
Options exercisable at year end 9,018,580 53.08
- -----------------------------------------------------------------------------------------
Weighted average fair value of
Options granted during the year $22.58
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
2000 Stock Option Activity Weighted
average
Shares exercise price
- -----------------------------------------------------------------------------------------
Outstanding at beginning of year 12,406,841 $52.57
- -----------------------------------------------------------------------------------------
Granted 5,714,830 55.07
- -----------------------------------------------------------------------------------------
Exercised (846,478) 30.18
- -----------------------------------------------------------------------------------------
Canceled (507,380) 64.44
- -----------------------------------------------------------------------------------------
Outstanding at end of year 16,767,813 54.19
- -----------------------------------------------------------------------------------------
Options exercisable at year end 7,478,603 45.85
- -----------------------------------------------------------------------------------------
Weighted average fair value of
Options granted during the year $19.63
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
1999 Stock Option Activity Weighted
average
Shares exercise price
- -----------------------------------------------------------------------------------------
Outstanding at beginning of year 10,572,736 $43.59
- -----------------------------------------------------------------------------------------
Granted 3,180,365 74.21
- -----------------------------------------------------------------------------------------
Exercised (1,158,304) 30.04
- -----------------------------------------------------------------------------------------
Canceled (187,956) 52.47
- -----------------------------------------------------------------------------------------
Outstanding at end of year 12,406,841 52.57
- -----------------------------------------------------------------------------------------
Options exercisable at year end 6,236,725 38.43
- -----------------------------------------------------------------------------------------
Weighted average fair value of
options granted during the year $25.04
- -----------------------------------------------------------------------------------------
- 43 -
Further information about stock options outstanding at Dec. 30, 2001,
follows:
- -------------------------------------------------------------------------------------------------------------------------
Weighted
average
Number remaining
Range of outstanding at contractual life Weighted average Number exercisable Weighted average
exercise prices 12/30/01 (yrs) exercise price at 12/30/01 exercise price
- -------------------------------------------------------------------------------------------------------------------------
$23-28 663,690 1.0 $23.68 663,690 $23.68
- -------------------------------------------------------------------------------------------------------------------------
32-38 2,453,376 3.8 $35.22 2,453,376 $35.22
- -------------------------------------------------------------------------------------------------------------------------
41-49 27,760 5.0 $45.93 27,760 $45.93
- -------------------------------------------------------------------------------------------------------------------------
50-60 6,576,595 8.3 $55.84 2,611,279 $57.29
- -------------------------------------------------------------------------------------------------------------------------
61-70 8,119,378 9.1 $68.05 1,869,170 $65.36
- -------------------------------------------------------------------------------------------------------------------------
71-75 2,685,265 9.9 $74.28 1,393,305 $74.27
- -------------------------------------------------------------------------------------------------------------------------
20,526,064 8.1 $59.57 9,018,580 $53.08
- -------------------------------------------------------------------------------------------------------------------------
Stock Incentive Rights
The company has not granted stock incentive rights since July 2000. Stock
incentive rights awarded earlier in 2000 and in 1999 were as follows:
- -------------------------------------------------------------------------
2000 1999
- -------------------------------------------------------------------------
Awards granted 10,700 169,290
- -------------------------------------------------------------------------
Awards for 1999 and 2000 are for the four-year incentive period
2000-2003.
In 2001, 86,544 shares of common stock were issued in settlement of
previously granted stock incentive rights for the incentive period ended
December 2001.
Remaining shares available under the 1978 Plan, which totaled
approximately 11,700,000 shares, were moved into the Plan and are thereby
included in the 12,000,000 shares originally authorized under the Plan. Shares
available for future grants under the Plan totaled 6,392,105 at Dec. 30, 2001.
SFAS No. 123, "Accounting for Stock-Based Compensation," establishes a
fair value-based method of accounting for employee stock-based compensation
plans and encourages companies to adopt that method. However, it also allows
companies to continue to apply the intrinsic value-based method currently
prescribed under Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" (APB 25). The company has chosen to continue to
report stock-based compensation in accordance with APB 25, and provides the
following pro forma disclosure of the effects of applying the fair value method
to all applicable awards granted. Under APB 25 and related interpretations, no
compensation cost has been recognized for the company's stock options. The
compensation cost has been charged against income for stock incentive rights.
Those charges were based on the grant price of the stock incentive rights
recognized over the four-year earnout periods. Had compensation cost for the
company's stock options been determined based on the fair value at the grant
date for those awards as permitted (but not required) under the alternative
method of SFAS No. 123, the company's results of operations and related per
share amounts would have been reduced to the pro forma amounts indicated below:
In thousands, except per share amounts
- ---------------------------------------------------------------------------------------------------
2001 2000 1999
- ---------------------------------------------------------------------------------------------------
Net income
- ---------------------------------------------------------------------------------------------------
As reported $831,197 $1,719,077 $957,928
- ---------------------------------------------------------------------------------------------------
Pro forma $796,402 $1,693,339 $942,733
- ---------------------------------------------------------------------------------------------------
Income from continuing operations
- ---------------------------------------------------------------------------------------------------
As reported $831,197 $971,940 $919,387
- ---------------------------------------------------------------------------------------------------
Pro forma $796,402 $946,202 $904,192
- ---------------------------------------------------------------------------------------------------
Net income per share - basic
- ---------------------------------------------------------------------------------------------------
As reported $3.14 $6.45 $3.43
- ---------------------------------------------------------------------------------------------------
Pro forma $3.01 $6.36 $3.38
- ---------------------------------------------------------------------------------------------------
Net income per share - diluted
- ---------------------------------------------------------------------------------------------------
As reported $3.12 $6.41 $3.40
- ---------------------------------------------------------------------------------------------------
Pro forma $2.98 $6.32 $3.35
- ---------------------------------------------------------------------------------------------------
Income from continuing operations per
share - basic
- ---------------------------------------------------------------------------------------------------
As reported $3.14 $3.65 $3.29
- ---------------------------------------------------------------------------------------------------
Pro forma $3.01 $3.55 $3.24
- ---------------------------------------------------------------------------------------------------
Income from continuing operations per
share - diluted
- ---------------------------------------------------------------------------------------------------
As reported $3.12 $3.63 $3.26
- ---------------------------------------------------------------------------------------------------
Pro forma $2.98 $3.53 $3.21
- ---------------------------------------------------------------------------------------------------
The fair value of each option is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 2001, 2000 and 1999, respectively: dividend yield
of 1.33%, 1.26% and 1.38%; expected volatility of 26.37%, 27.04% and 22.31%;
risk-free interest rates of 4.60%, 5.63%, and 6.34%; and expected lives of seven
years each.
SFAS No. 123 applies to stock compensation awards granted in fiscal
years that began after Dec. 15, 1994. Options are granted by the company
primarily in December and begin vesting over a four-year period. Options granted
in December 1995 and thereafter are subject to the pronouncement. To calculate
the pro forma amounts shown above, compensation cost was recognized over the
four-year period of service during which the options will be earned. As a
result, options granted in December of each year (beginning with December 1995)
impact pro forma amounts for following years but not the year in which they were
granted.
401(k) Savings Plan
In 1990, the company established a 401(k) Savings Plan (the Plan). Substantially
all employees of the company (other than those covered by a collective
bargaining agreement) who are scheduled to work at least 1,000 hours during each
year of employment are eligible to participate in the Plan. Employees could
elect to save up to 15% of compensation on a pre-tax basis subject to certain
limits. This limit was increased to 20% in 2002. The company matches with
company common stock 50% of the first 6% of employee contributions. In 2002,
Plan participants are able to fully diversify their company matched stock at
- 44 -
any time. To fund the company's matching contribution, an Employee Stock
Ownership Plan (ESOP) was formed in 1990 which acquired 2,500,000 shares of
Gannett stock from the company for $50 million. The stock purchase was financed
with a loan from the company, and the shares are pledged as collateral for the
loan. The company makes monthly contributions to the ESOP equal to the ESOP's
debt service requirements less dividends. All dividends received by the ESOP are
used to pay debt service. As the debt is paid, shares are released as collateral
and are available for allocation to participants.
The company follows the shares allocated method in accounting for its
ESOP. The cost of shares allocated to match employee contributions or to replace
dividends that are used for debt service are accounted for as compensation
expense. The cost of unallocated shares is reported as deferred compensation in
the financial statements. The company, at its option, may repurchase shares from
employees who leave the Plan. The shares are purchased at fair market value, and
the difference between the original cost of the shares and fair market value is
expensed at the time of purchase. All of the shares initially purchased by the
ESOP are considered outstanding for earnings per share calculations. Dividends
on allocated and unallocated shares are recorded as reductions of retained
earnings.
Compensation expense for the 401(k) match and repurchased shares was
$9.7 million in 2001, $9.1 million in 2000 and $8.9 million in 1999. The ESOP
shares as of the end of 2001 and 2000 were as follows:
- ------------------------------------------------------------------------------------------------
2001 2000
- ------------------------------------------------------------------------------------------------
Allocated shares 2,088,238 1,825,911
- ------------------------------------------------------------------------------------------------
Shares released for allocation 43,650 44,332
- ------------------------------------------------------------------------------------------------
Unreleased shares 368,112 629,757
- ------------------------------------------------------------------------------------------------
Shares distributed to terminated participants (87,346) (72,337)
- ------------------------------------------------------------------------------------------------
ESOP shares 2,412,654 2,427,663
- ------------------------------------------------------------------------------------------------
In May 1990, the Board of Directors declared a dividend distribution of
one Preferred Share Purchase Right (Right) for each common share held, payable
to shareholders of record on June 8, 1990. The Rights become exercisable when a
person or group of persons acquires or announces an intention to acquire
ownership of 15% or more of the company's common shares. Holders of the Rights
may acquire an interest in a new series of junior participating preferred stock,
or they may acquire an additional interest in the company's common shares at 50%
of the market value of the shares at the time the Rights are exercised. The
Rights are redeemable by the company at any time prior to the time they become
exercisable, at a price of $.01 per Right.
In May 2000, the company announced that its Board of Directors approved
an amendment to its Shareholder Rights Plan to extend the expiration date of the
Rights to May 31, 2010, and increase the initial exercise price of each
preferred stock purchase right to $280.
In November 1999, the Board authorized 2,000,000 shares of common stock
to be registered in connection with a savings related share option plan,
available to eligible employees of Newsquest.
NOTE 9
Commitments and contingent liabilities
Litigation: The company and a number of its subsidiaries are defendants in
judicial and administrative proceedings involving matters incidental to their
business. The company's management does not believe that any material liability
will be imposed as a result of these matters.
Leases: Approximate future minimum annual rentals payable under
non-cancelable operating leases, primarily real estate related, are as follows:
In thousands of dollars
- -----------------------------------------------
2002 $ 40,718
- -----------------------------------------------
2003 35,746
- -----------------------------------------------
2004 30,349
- -----------------------------------------------
2005 23,155
- -----------------------------------------------
2006 19,942
- -----------------------------------------------
Later years 85,956
- -----------------------------------------------
Total $ 235,866
- -----------------------------------------------
Total minimum annual rentals have not been reduced for future minimum
sublease rentals aggregating approximately $7 million. Total rental costs
reflected in continuing operations were $69 million for 2001, $62 million for
2000 and $48 million for 1999.
Program broadcast contracts: The company has commitments under program
broadcast contracts totaling $114.0 million for programs to be available for
telecasting in the future.
The company has a 13.5% general partnership interest in Ponderay
Newsprint Company. The company, on a several basis, is a guarantor of 13.5% of
the principal and interest on a term loan that totals $125 million held by
Ponderay.
In December 1990, the company adopted a Transitional Compensation Plan
(the Plan). The Plan provides termination benefits to key executives whose
employment is terminated under certain circumstances within two years following
a change in control of the company. Benefits under the Plan include a severance
payment of up to three years' compensation and continued life and medical
insurance coverage. The Board of Directors amended and restated this plan in
October 2001.
- 45 -
NOTE 10
Business operations and segment information
The company has determined that its reportable segments based on its management
and internal reporting structure are newspaper publishing, which is the largest
segment of its operations; and broadcasting (television). The cable division's
operating results, identifiable assets and capital expenditures have been
retroactively excluded from the segment data presented herein, since as
discussed in Note 1, the division has been reclassified in the statements of
income and related discussions as discontinued operations.
The newspaper segment at the end of 2001 consisted of 95 U.S. daily
newspapers in 40 states and one U.S. territory, including USA TODAY, a national,
general-interest daily newspaper; and USA WEEKEND, a magazine supplement for
newspapers. The newspaper segment also includes Newsquest (including Newscom,
acquired in 2000) which is a regional newspaper publisher in the United Kingdom
with a portfolio of more than 300 titles that includes 15 paid-for daily
newspapers, paid-for weekly newspapers, free weekly newspapers and other
publications. The newspaper segment in the U.S. also includes over 300 non-daily
publications, a nationwide network of offset presses for commercial printing,
newspaper related online businesses and several smaller businesses. Newsprint,
which is the principal product used in newspaper publishing, has been and may
continue to be subject to significant price changes from time to time.
As discussed in Note 1, the company accounts for its 50% owned joint
operating agencies in Detroit and Tucson on the equity method of accounting (as
a single net amount in other operating revenue for the newspaper segment). The
newspaper segment also reflects a minority interest in a newspaper publishing
partnership and a newsprint production partnership.
The broadcasting segment's activities for 2001 include the operation of
22 U.S. television stations reaching 17.7 percent of U.S. television homes.
The company's foreign revenues in 2001 and 2000 totaled approximately
$773 million and $694 million, respectively, principally from publications
distributed in the United Kingdom. The company's long-lived assets in foreign
countries totaled approximately $2.3 billion at Dec. 30, 2001, principally in
the United Kingdom.
Separate financial data for each of the company's business segments is
presented in the table which follows. The accounting policies of the segments
are those described in Note 1. The company evaluates the performance of its
segments based on operating income and operating cash flow. Operating income
represents total revenue less operating expenses, including depreciation and
amortization of intangibles. In determining operating income by industry
segment, general corporate expenses, interest expense, interest income, and
other income and expense items of a non-operating nature are not considered, as
such items are not allocated to the company's segments. Operating cash flow
represents operating income plus depreciation and amortization of intangible
assets. Upon adoption of SFAS No. 142 beginning with fiscal year 2002, the
company ceased amortizing goodwill.
See Note 1 for a further discussion of this accounting change. Corporate
assets include cash and marketable securities, certain investments, long-term
receivables and plant and equipment primarily used for corporate purposes.
Interest capitalized has been included as a corporate capital expenditure for
purposes of segment reporting.
Business segment financial information, in thousands of dollars
- --------------------------------------------------------------------------------------------------------
2001 2000 1999
- --------------------------------------------------------------------------------------------------------
Operating revenues
- --------------------------------------------------------------------------------------------------------
Newspaper publishing $ 5,681,593 $ 5,433,551 $ 4,366,720
- --------------------------------------------------------------------------------------------------------
Broadcasting 662,652 788,767 728,642
- --------------------------------------------------------------------------------------------------------
$ 6,344,245 $ 6,222,318 $ 5,095,362
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
Operating income
- --------------------------------------------------------------------------------------------------------
Newspaper publishing $ 1,400,609 $ 1,522,350 $ 1,291,665
- --------------------------------------------------------------------------------------------------------
Broadcasting 249,783 359,955 337,537
- --------------------------------------------------------------------------------------------------------
Corporate (1) (60,557) (65,049) (66,101)
- --------------------------------------------------------------------------------------------------------
$ 1,589,835 $ 1,817,256 $ 1,563,101
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
Depreciation and amortization
- --------------------------------------------------------------------------------------------------------
Newspaper publishing $ 369,044 $ 302,544 $ 207,720
- --------------------------------------------------------------------------------------------------------
Broadcasting 67,639 65,210 62,861
- --------------------------------------------------------------------------------------------------------
Corporate (1) 7,094 8,161 9,510
- --------------------------------------------------------------------------------------------------------
$ 443,777 $ 375,915 $ 280,091
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
Operating cash flow (2)
- --------------------------------------------------------------------------------------------------------
Newspaper publishing $ 1,769,653 $ 1,824,894 $ 1,499,385
- --------------------------------------------------------------------------------------------------------
Broadcasting 317,422 425,165 400,398
- --------------------------------------------------------------------------------------------------------
Corporate (1) (53,463) (56,888) (56,591)
- --------------------------------------------------------------------------------------------------------
$ 2,033,612 $ 2,193,171 $ 1,843,192
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
Identifiable assets (3)
- --------------------------------------------------------------------------------------------------------
Newspaper publishing $ 10,558,641 $ 10,608,191 $ 5,748,018
- --------------------------------------------------------------------------------------------------------
Broadcasting 2,004,486 1,923,422 1,841,699
- --------------------------------------------------------------------------------------------------------
Corporate (1) 532,974 448,798 304,202
- --------------------------------------------------------------------------------------------------------
$ 13,096,101 $ 12,980,411 $ 7,893,919
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
Capital expenditures (4)
- --------------------------------------------------------------------------------------------------------
Newspaper publishing $ 230,223 $ 242,885 $ 190,259
- --------------------------------------------------------------------------------------------------------
Broadcasting 21,602 49,829 24,831
- --------------------------------------------------------------------------------------------------------
Corporate (1) 72,754 57,866 30,055
- --------------------------------------------------------------------------------------------------------
$ 324,579 $ 350,580 $ 245,145
- --------------------------------------------------------------------------------------------------------
(1) Corporate amounts represent those not directly related to the company's two
business segments.
(2) Operating cash flow amounts represent operating income plus depreciation and
amortization of intangible assets.
(3) Excludes assets related to discontinued operations totaling $1,112,527 in
1999.
(4) Excludes capital expenditures made for discontinued operations totaling
$13,298 for 1999.
- 46 -
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Gannett Co., Inc.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, of cash flows and of changes in shareholders'
equity present fairly, in all material respects, the financial position of
Gannett Co., Inc. and its subsidiaries at Dec. 30, 2001 and Dec. 31, 2000, and
the results of their operations and their cash flows for each of the three years
in the period ended Dec. 30, 2001 in conformity with accounting principles
generally accepted in the United States of America. These financial statements
are the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
PRICEWATERHOUSECOOPERS LLP
McLean, Va.
February 7, 2002
- 47 -
11-year summary
In thousands of dollars, except per share amounts
2001 2000 1999 1998 1997
------------ ----------- ----------- ------------ -----------
Net operating revenues
Newspaper advertising $ 4,119,773 $ 3,972,936 $ 3,115,250 $ 2,773,247 $ 2,479,828
Newspaper circulation 1,233,106 1,120,991 971,114 958,456 903,309
Broadcasting 662,652 788,767 728,642 721,298 703,558
All other 328,714 339,624 280,356 256,030 221,470
------------ ------------ ----------- ----------- ------------
Total (Notes a and b, see page 50) 6,344,245 6,222,318 5,095,362 4,709,031 4,308,165
------------ ------------ ----------- ----------- ------------
Operating expenses
Costs and expenses 4,310,633 4,029,147 3,252,170 3,069,754 2,812,218
Depreciation 202,456 195,428 169,460 163,776 152,964
Amortization of intangible assets 241,321 180,487 110,631 89,687 80,741
------------ ------------ ----------- ----------- ------------
Total 4,754,410 4,405,062 3,532,261 3,323,217 3,045,923
------------ ------------ ----------- ----------- ------------
Operating income 1,589,835 1,817,256 1,563,101 1,385,814 1,262,242
Non-operating (expense) income
Interest expense (221,854) (219,228) (94,619) (79,412) (98,242)
Other 2,616 10,812 58,705 (11) 305,323 (9) (9,047)
------------ ------------ ----------- ----------- ------------
Income before income taxes 1,370,597 1,608,840 1,527,187 1,611,725 1,154,953
Provision for income taxes 539,400 636,900 607,800 645,300 473,600
------------ ------------ ----------- ----------- ------------
Income from continuing operations 831,197 971,940 919,387 (11) 966,425 (9) 681,353
------------ ------------ ----------- ----------- ------------
Discontinued operations:
Income from the operation of
discontinued businesses
(net of income taxes) (12) 2,437 38,541 33,488 31,326
Gain on sale of discontinued
businesses (net of income taxes) (13) 744,700
------------ ------------ ----------- ----------- ------------
Total 747,137 38,541 33,488 31,326
------------ ------------ ----------- ----------- ------------
Income before cumulative effect of
accounting principle changes 831,197 1,719,077 957,928 999,913 712,679
Cumulative effect on prior years of
accounting principle changes for:
Income taxes
Retiree health and life insurance
benefits
------------ ------------ ----------- ----------- ------------
Net income $ 831,197 $ 1,719,077 $ 957,928 $ 999,913 $ 712,679
============ ============ =========== =========== ============
Operating cash flow (5) $ 2,033,612 $ 2,193,171 $ 1,843,192 $ 1,639,277 $ 1,495,947
------------ ------------ ----------- ----------- ------------
Per share amounts (1)
Income from continuing operations
before cumulative effect of accounting
principle changes: basic / diluted $3.14/$3.12 $3.65/$3.63 $3.29/$3.26 (11) $3.41/$3.38 (9) $2.41/$2.39
Net income: basic / diluted $3.14/$3.12 $6.45/$6.41 $3.43/$3.40 $3.53/$3.50 $2.52/$2.50
Dividends declared (2) .90 .86 .82 .78 .74
Weighted average number of common shares
outstanding in thousands (2):
basic 264,821 266,426 279,048 283,097 283,360
diluted 266,833 268,118 281,608 285,711 285,610
Financial position
Working capital $ 50,461 $ 128,335 $ 191,444 $ 178,418 $ 146,057
Long-term debt excluding current
maturities 5,080,025 5,747,856 2,463,250 1,306,859 1,740,534
Shareholders' equity 5,735,922 5,103,410 4,629,646 3,979,824 3,479,736
Total assets 13,096,101 12,980,411 9,006,446 6,979,480 6,890,351
Selected financial percentages and ratios
Percentage increase (decrease)
Earnings from continuing operations,
after tax (4) (14.5%) 9.6% 13.3%(10) 14.9%(8) 35.4%
Earnings from continuing operations,
after tax, per share:basic/diluted (4) (14.0%)/(14.1%) 14.8%/15.2% 14.9%/14.9%(10) 14.5%/14.6%(8) 36.9%/34.3%
Dividends declared per share 4.7% 4.9% 5.1% 5.4% 4.2%
Return on equity (3) 15.3% 20.0% 20.6% 21.0% 21.3%
Credit ratios
Long-term debt to shareholders' equity 88.6% 112.6% 53.2% 32.8% 50.0%
Times interest expense earned 7.2X 8.3X 17.1X 21.3X 12.8X
- 48 -
1996 1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- ----------- -----------
Net operating revenues
Newspaper advertising $ 2,281,071 $ 2,078,190 $ 1,982,260 $ 1,846,791 $ 1,773,460 $ 1,747,118
Newspaper circulation 872,969 816,474 789,375 781,205 762,729 733,943
Broadcasting 686,936 466,187 406,608 397,204 370,613 357,383
All other 177,237 144,636 218,000 202,040 184,035 149,489
----------- ----------- ----------- ----------- ----------- -----------
Total (Notes a and b, see page 50) 4,018,213 3,505,487 3,396,243 3,227,240 3,090,837 2,987,933
----------- ----------- ----------- ----------- ----------- -----------
Operating expenses
Costs and expenses 2,776,171 2,499,696 2,410,404 2,336,668 2,303,468 2,265,948
Depreciation 147,721 141,151 146,054 147,248 139,080 139,268
Amortization of intangible assets 75,043 47,509 44,110 43,771 39,197 39,621
----------- ----------- ----------- ----------- ----------- -----------
Total 2,998,935 2,688,356 2,600,568 2,527,687 2,481,745 2,444,837
----------- ----------- ----------- ----------- ----------- -----------
Operating income 1,019,278 817,131 795,675 699,553 609,092 543,096
Non-operating (expense) income
Interest expense (135,563) (52,175) (45,624) (51,250) (50,817) (71,057)
Other 155,825 (7) 3,754 14,945 5,350 7,814 14,859
----------- ----------- ----------- ----------- ----------- -----------
Income before income taxes 1,039,540 768,710 764,996 653,653 566,089 486,898
Provision for income taxes 442,900 312,084 309,600 264,400 224,900 194,400
----------- ----------- ----------- ----------- ----------- -----------
Income from continuing operations 596,640 (7) 456,626 455,396 389,253 341,189 292,498
----------- ----------- ----------- ----------- ----------- -----------
Discontinued operations:
Income from the operation of
discontinued businesses
(net of income taxes) (12) 51,867 20,636 10,003 8,499 4,491 9,151
Gain on sale of discontinued
businesses (net of income taxes) (13) 294,580
----------- ----------- ----------- ----------- ----------- -----------
Total 346,447 20,636 10,003 8,499 4,491 9,151
----------- ----------- ----------- ----------- ----------- -----------
Income before cumulative effect of
accounting principle changes 943,087 477,262 465,399 397,752 345,680 301,649
Cumulative effect on prior years of
accounting principle changes for:
Income taxes 34,000
Retiree health and life insurance
benefits (180,000)
----------- ----------- ----------- ----------- ----------- -----------
Net income $ 943,087 $ 477,262 $ 465,399 $ 397,752 $ 199,680 $ 301,649
=========== =========== =========== =========== =========== ===========
Operating cash flow (5) $ 1,242,042 $ 1,005,791 $ 985,839 $ 890,572 $ 787,369 $ 721,985
----------- ----------- ----------- ----------- ----------- -----------
Per share amounts (1)
Income from continuing operations
before cumulative effect of accounting
principle changes: basic / diluted $2.12/$2.11(7) $1.63/$1.62 $1.58/$1.57 $1.33/$1.32 $1.18/$1.18 $.97/$.96
Net income: basic / diluted $3.35/$3.33 $1.70/$1.69 $1.61/$1.60 $1.36/$1.35 $.69/$.69 $1.00/$.99
Dividends declared (2) .71 .69 .67 .65 .63 .62
Weighted average number of common shares
outstanding in thousands (2):
basic 281,782 280,312 288,552 292,948 288,296 301,566
diluted 283,426 282,323 290,148 294,659 290,174 303,267
Financial position
Working capital $ 47,609 $ 41,312 $ 123,783 $ 302,818 $ 199,896 $ 192,266
Long-term debt excluding current
maturities 1,880,293 2,767,880 767,270 850,686 1,080,756 1,335,394
Shareholders' equity 2,930,818 2,145,648 1,822,238 1,907,920 1,580,101 1,539,487
Total assets 6,349,597 6,503,800 3,707,052 3,823,798 3,609,009 3,684,080
Selected financial percentages and ratios
Percentage increase (decrease)
Earnings from continuing operations,
after tax (4) 10.2%(6) 0.3% 17.0% 14.1% 16.6% (17.5%)
Earnings from continuing operations,
after tax, per share:basic/diluted (4) 8.0%/9.9%(6) 3.2%/3.2% 18.8%/18.9% 12.3%/11.9% 22.0%/22.9% (12.4%)/(12.7%)
Dividends declared per share 2.9% 3.0% 3.1% 3.2% 1.6% 2.5%
Return on equity (3) 19.8% 23.0% 24.4% 22.3% 21.9% 16.2%
Credit ratios
Long-term debt to shareholders' equity 64.2% 129.0% 42.1% 44.6% 68.4% 86.7%
Times interest expense earned 8.7X 15.7X 17.8X 13.8X 12.1X 7.9X
(1) Per share amounts have been based upon average number of shares
outstanding during each year, giving retroactive effect to adjustment
in (2).
(2) Shares outstanding and dividends declared have been converted to a
comparable basis by reflecting retroactively the 2-for-1 stock split
effective Oct. 6, 1997.
(3) Based upon average shareholders' equity (and income from continuing
operations before non-recurring gains and accounting principle changes).
(4) Before cumulative effect of accounting principle changes.
(5) Operating cash flow represents operating income plus depreciation and
amortization of intangible assets. This measure varies from the audited
Consolidated Statements of Cash Flows.
(6) Excludes 1996 after-tax gain on exchange of broadcast stations of $93
million or $.33 per share.
(7) Includes pre-tax gain on exchange of broadcast stations of $158 million
(after-tax gain of $93 million or $.33 per share).
(8) Excludes 1998 $184 million after-tax net non-operating gain principally
from the disposition of the radio and alarm security businesses
($.65 per share-basic and $.64 per share-diluted).
(9) Includes pre-tax net non-operating gain principally from the disposition
of the radio and alarm security businesses of $307 million (after-tax
gain of $184 million or $.65 per share-basic and $.64 per
share-diluted).
(10) Excludes 1999 $33 million after-tax net non-operating gain principally
from the exchange of KVUE-TV for KXTV-TV ($.11 per share).
(11) Includes pre-tax net non-operating gain principally from the exchange of
KVUE-TV for KXTV-TV of $55 million (after-tax gain of $33 million or
$.11 per share).
(12) Includes results from businesses sold and accounted for as discontinued
operations (cable - 1995 to 2000; security - 1995 to 1998;
entertainment - 1995 to 1996; outdoor - 1991 to 1996).
(13) Includes gain from businesses sold and accounted for as discontinued
operations (cable - 2000; outdoor - 1996).
- 49 -
Notes to 11-year summary
(a) The company and its subsidiaries made the acquisitions listed below
during the period. The results of operations of these acquired businesses are
included in the accompanying financial information from the date of acquisition.
Note 2 of the consolidated financial statements on page 36 contains further
information concerning certain of these acquisitions.
(b) During the period, the company sold or otherwise disposed of
substantially all of the assets or capital stock of certain other subsidiaries
and divisions of other subsidiaries. Note 2 of the consolidated financial
statements on page 36 contains further information concerning certain of these
dispositions.
Acquisitions 1991-2001
1991
Feb. 11 The Add Sheet
April 3 New Jersey Publishing Co.
Aug. 30 The Times Journal Co.,
including The Journal Newspapers,
The Journal Printing Co. (now Springfield Offset)
and Telematch
Oct. 3 Gulf Breeze Publishing Co.
1992
April 24 Graphic Publications, Inc.
1993
Jan. 30 The Honolulu Advertiser
April 24 Tulare Advance-Register
1994
May 2 Nursing Spectrum
June 9 Altoona Herald-Mitchellville Index and the Eastern ADvantage
Dec. 1 KTHV-TV, Little Rock
1995
Dec. 4 Multimedia, Inc.
1996
Dec. 9 WTSP-TV, Tampa-St. Petersburg, Fla.
1997
Jan. 31 WZZM-TV, Grand Rapids, Mich.
Jan. 31 WGRZ-TV, Buffalo, N.Y.
May 5 Printed Media Companies
May 27 KNAZ-TV, Flagstaff, Ariz.
May 27 KMOH-TV, Kingman, Ariz.
July 18 Mary Morgan, Inc.
Aug. 1 Army Times Publishing Co., Inc.
Oct. 24 New Jersey Press, Inc.
1998
Jan. 5 WCSH-TV, Portland, Maine
Jan. 5 WLBZ-TV, Bangor, Maine
April 30 WLTX-TV, Columbia, S.C.
May 31 Classified Gazette, San Rafael, Calif.
July 7 Ocean County Observer, Toms River, N.J.
July 7 Daily Record, Morristown, N.J.
July 7 Manahawkin Newspapers, Manahawkin, N.J.
Aug. 31 TCI Cable Kansas
Aug. 31 New Castle County Shopper's Guide, Brandywine Valley
Weekly and Autos plus, Wilmington, Del.
1999
March 17 The Reporter, Melbourne, Fla.
March 29 Lehigh Acres News-Star, Lehigh Acres, Fla.
June 1 Dealer Magazine, Reno, Nev.
June 1 KXTV-TV, Sacramento, Calif.
July 26 Newsquest plc, United Kingdom
Sept. 28 Tucker Communications, Inc., Westchester Co., N.Y.
Sept. 29 Pennypower Shopping News, Branson & Springfield, Mo.
2000
Jan. 3 The Pioneer Republican and other publications, Iowa
Jan. 4 Buyers' Digest, Franklin County, Vt.
Feb. 1 The Clarion, Redcar, United Kingdom
Mar. 17 WJXX-TV, Jacksonville, Fla.
Mar. 31 Mason Valley News and Fernley Leader-Dayton Courier,
Lyon Co., Nev.
Apr. 7 Brevard Technical Journal, Brevard County, Fla.
May 10 Dickson Shoppers, Middle Tennessee
June 2 Greenville Parent Magazine, Greenville County, S.C.
June 5 News Communications & Media plc, United Kingdom
June 30 Space Coast Press, Brevard County, Fla.
July 21 Certain assets of Thomson Newspapers Inc., including
8 dailies in Wisconsin; 8 dailies in central Ohio; daily
newspapers in Lafayette, La.; Salisbury, Md.; and
St. George, Utah; and numerous weeklies and niche
publications.
Aug. 1 Central Newspapers, Inc., including The Arizona Republic,
The Indianapolis Star, and other daily newspapers in
Indiana and Louisiana; and related media and information
businesses.
Sept. 7 Daily World, Opelousas, La.
Oct. 30 Windsor Beacon, Windsor, Colo.
Dec. 1 50+ Lifestyles and other monthly magazines,
Des Moines, Iowa
2001
Feb. 9 Shopping News, St. Cloud, Minn.
Feb. 16 Gatwick Life and Horley Life, Surrey/Sussex, U.K.
March 1 The Bulletin Board, Montgomery, Ala.
March 27 PMP Company, Ltd., Honolulu, Hawaii
May 29 AutoChooser, Tempe, Ariz.
June 29 The Dimbleby Newspapers, London, U.K.
Sept. 14 Honolulu Pennysaver, Honolulu, Hawaii
Sept. 21 Buy and Sell Classifieds, Honolulu, Hawaii
- 50 -
Form 10-K information
Business of the company
Gannett Co., Inc. is a diversified information company that operates primarily
in the U.S. and the United Kingdom. Approximately 88% of its revenues are from
domestic operations. In addition to operations in the United Kingdom, it has
limited foreign operations in certain European and Asian markets. Its corporate
headquarters is in McLean,Va., near Washington, D.C. It was incorporated in New
York in 1923 and was reincorporated in Delaware in 1972.
The company presently reports two principal business segments: newspaper
publishing and broadcasting (television).
The company's newspapers make up the largest newspaper group in the U.S. in
circulation. At the end of 2001, the company operated 110 daily newspapers, with
a total average daily circulation of approximately 8.3 million in the U.S. and
U.K., including USA TODAY. The company also publishes USA WEEKEND, a weekend
newspaper magazine, and in excess of 300 non-daily publications in the United
States and more than 300 non-daily publications in the United Kingdom.
The newspaper segment includes the following: Gannett News Service, which
provides news services for its newspaper operations; Gannett Retail Advertising
Group, which represents the company's local newspapers in the sale of
advertising to national and regional retailers and service providers; and
Gannett Offset, which is composed of the Gannett Offset print group and Gannett
Marketing Services Group. The Gannett Offset print group currently includes
seven non-heatset printing plants and two heatset printing facilities. Gannett
Offset's dedicated commercial printing plants are located in Atlanta, Ga.;
Chandler, Ariz.; Minneapolis, Minn.; Miramar, Fla.; Nashville, Tenn.; Norwood,
Mass.; Pensacola, Fla.; St. Louis, Mo.; and Springfield, Va. Gannett Marketing
Services Group coordinates the sale of direct-marketing services through:
Telematch, a database management and data enhancement company; Gannett Direct
Marketing Services, a direct-marketing company with operations in Louisville,
Ky.; and Gannett TeleMarketing, a telephone sales and marketing company. The
company also owns USATODAY.com, USA TODAY Careers Network and other Internet
services at most of its local newspapers and television stations; Gannett Media
Technologies International, which develops and markets software and other
products for the publishing industry; Nursing Spectrum, publisher of biweekly
periodicals specializing in advertising for nursing employment; Army Times
Publishing Company, which publishes military and defense newspapers; a 19.49%
interest in California Newspapers Partnership, a partnership that includes 20
daily California newspapers; and a 13.5% interest in Ponderay Newsprint Company
in California.
On Dec. 30, 2001, the broadcasting division included 22 television stations
in markets with more than 18.6 million households.
The company's cable business was sold on Jan. 31, 2000, and its results for
2000 and prior years are treated as discontinued operations in the company's
statements of income and related discussions elsewhere in this report.
Newspaper publishing/United States
On Dec. 30, 2001, the company operated 95 daily newspapers, including USA TODAY,
and more than 300 non-daily local publications, in 40 states and Guam. The
Newspaper Division is headquartered in McLean, Va., and on Dec. 30, 2001, it had
approximately 39,400 full- and part-time employees.
USA TODAY was introduced in 1982 as the country's first national,
general-interest daily newspaper. It is available in all 50 states and is
available to readers on the day of publication throughout the U.S.
USA TODAY is produced at facilities in McLean, Va., and is transmitted via
satellite to offset printing plants around the country. It is printed at Gannett
plants in 18 U.S. markets and under contract at offset plants in 18 other U.S.
markets. It is sold at newsstands and vending machines generally at 50 cents a
copy. Mail subscriptions are available nationwide and abroad, and home and
office delivery is offered in many markets. Approximately 65% of its net paid
circulation results from single-copy sales at newsstands or vending machines and
the remainder is from home and office delivery, mail and other sales.
For 2001, USA TODAY's advertising revenues and volume declined 22% and 24%,
respectively.
USA TODAY International is printed from satellite transmission under
contract in London, Frankfurt, Hong Kong, Milan and Belgium, and is distributed
in Europe, the Middle East, Africa and Asia. It is available in more than 60
foreign countries.
USATODAY.com reached more than 25 million visitors per month at the end of
2001.
The USA TODAY Careers Network, USATODAYCareers.com, is a national online
recruitment site that houses job listings from USA TODAY and 80 other company
newspapers across the country, and their respective Web sites. The site provides
job seekers free access to the best tools and resources for making career
decisions and finding a job as well as the latest employment news and trends.
The site also provides service for employers, including job postings and resume
searching.
Gannett News Service (GNS) is headquartered in McLean, Va., and operates
bureaus in eight other states and Washington, D.C. (see page 68 for more
information). GNS provides national and regional news coverage and sports,
features, photo and graphic services to Gannett newspapers. GNS also is
distributed by syndication to several non-Gannett newspapers, including ones in
Chicago, Salt Lake City, Boston and Seattle.
- 51 -
The newspaper publishing segment also includes USA WEEKEND, which is
distributed as a weekend newspaper magazine in 591 newspapers throughout the
country, with a total circulation of 23.6 million as of January 2002. The
general interest magazine has a readership of 48 million, the second largest
circulation publication in the nation.
Also included is Nursing Spectrum, publisher of biweekly and monthly
periodicals that advertise nursing employment. Nursing Spectrum's circulation
reaches nearly one million registered nurses each month, or almost half of the
registered nurses in the United States. By the end of 2001, Nursing Spectrum's
award-winning Web site had about 700,000 unique visitors each month.
At the end of 2001, 68 of the company's daily newspapers, including USA
TODAY, were published in the morning and 27 were published in the evening.
For local U.S. newspapers, excluding USA TODAY, morning circulation
accounts for approximately 86% of total daily volume, while evening circulation
accounts for 14%.
Individually, Gannett newspapers are the leading news and information
source with strong brand recognition in their markets. Their durability lies in
the quality of their management, their flexibility, their focus on such
customer-directed programs as Complete Community Coverage in News,
cross-branding of the daily newspaper, online, and weekly products, ADQ
(described further below), and their capacity to invest in new technology.
Collectively, they form a powerful network to distribute news and advertising
information across the nation.
In 2001, news departments across Gannett continued to emphasize coverage of
local news as the key to successful news reporting. Under the Complete Community
Coverage model developed in 2000, the vast majority of newsrooms expanded the
amount of local news on their Web sites. The objective is to enhance our
position as the primary source of local news and information, reaching more
people interested in local news in more ways.
To advance that objective in 2001, online training sessions were held for
newsroom editors and reporters and many online editors. An internal corporate
News Web site was expanded to provide further guidance for newsrooms on a
variety of topics, ranging from readership information to online delivery of
news.
To help expand the readership base, especially among younger readers, an "X
Manual" was created. It offers ideas and approaches for reaching readers ages 25
to 34. It was published in book form and also was placed on the News
Department's Web site.
All of the company's daily newspapers receive Gannett News Service. In
addition, all subscribe to The Associated Press, and some receive various
supplemental news and syndicated features services. In 2001, Gannett News
Service staffers joined with USA TODAY reporters and editors to provide Gannett
newspapers with special, localized coverage of the 2000 U.S. Census.
In the hours after the Sept. 11 attacks on America, GNS moved more than 100
stories, photographs and graphics to local newspapers, and it continued special
coverage as war events unfolded. A special information exchange, called War
Watch 2001, was established through which hundreds of coverage ideas were shared
on the department's Web site.
In 2001, the company continued to emphasize increasing its revenue from
medium and smaller advertisers in each market it serves. These efforts will
continue throughout 2002. Initiatives have focused on sales and rate management
and the construction of pre-packaged programs scalable to the company's largest
and smallest markets. Sales management initiatives increased the number and
quality of sales calls, improved sales compensation and enhanced consistent
sales training. Rate management programs focused on selling multiple advertising
insertions and reviewing rates and rate structures to ensure that they match the
opportunities in the market. The company operates an extranet site to provide
its advertising management with up-to-date information and sales programs 24
hours a day, seven days a week. The company regularly calculates market
potential and adjusts its local strategic plans accordingly. Significant efforts
will continue to be taken in 2002 to make the company's personnel increasingly
competitive in their leadership, strategic thinking and marketing skills.
The newspaper division's advertising quality initiative, known as ADQ,
produced its seventh straight year of improved ad and bill quality. ADQ has
reduced credit cost significantly since its 1995 launch.
Three principles guide online strategy at Gannett's local newspapers.
First, spending for the online business must be justified by additional
revenues, additional customers and additional profits. Second, emphasis needs to
be on serving our local markets. A key reason customers turn to a Gannett
newspaper's online site is to find local news and information. The credibility
of the local newspaper, the known and trusted information source, extends to the
company's Web sites and thus differentiates Gannett from other Internet sites.
This is a major factor that allows Gannett newspapers to compete successfully as
Internet information providers. Third, the natural synergies between the local
newspaper and local Web site should be utilized. The local content already
available, the customer relationships, the news and advertising sales forces,
and the promotional vehicle are all advantages for the newspaper. The company's
strategy is to use these advantages to create the strong and timely content,
sell packaged advertising products that serve the advertisers, hold down costs,
and leverage the known and trusted brand of the newspaper.
- 52 -
This strategy has served Gannett well in the development of our newspaper
Internet efforts. The aggressive local focus, including advertising sales
efforts, combined with effective use of national economies of scale and
standardized technology resulted in solid results in 2001.
Pro forma advertising revenue for local newspaper Web sites increased by
29% in 2001, which followed an 88% increase in 2000. Recent traffic on our sites
reached more than 40 million visitors and over 150 million page views per month.
Newsroom editorial systems were replaced in Lansing, Battle Creek and the
Wisconsin Winnebago group of six newspapers in 2001. In 2002, new editorial
systems will be installed in Rochester, Louisville, Cincinnati, St. George and
Salisbury. The newer systems have Web-conversion capabilities that make it
easier and quicker for newspapers to post stories on their Web sites.
Gannett newsrooms continue to convert to digital photography, which enables
our newspapers to provide photos with very late-breaking stories and to be more
competitive on their Web sites. By the end of 2002, more than 75 Gannett news
photo departments are expected to be 100 percent digital.
The Rate Matrix sales program was implemented at 12 Gannett newspapers in
2001 and more newspapers will follow in 2002. The Rate Matrix is a program for
selling multiple ads across multiple product lines and packaging them into one
buy for the customer. A typical Matrix package might include a retail display
ad, a classified help wanted ad, a print-and-deliver insert targeted to specific
zones, an online directory listing and an online coupon. Pricings and proposals
are done on laptop or desktop computers.
New online classified ad order entry software was installed in three
newspapers in 2001. The software allows the customer to place their classified
ad via the newspaper's Web site. It permits the customer to build both their
print and online ad using templates provided by the newspaper or to customize
the ad to meet their specific requirements. The standard software includes six
categories: employment, automotive, real estate, merchandise, obituaries and
legals. It also facilitates upsell opportunities such as bolding, attention
getters, and e-mail hyperlinks. When customers complete the design of their ads
and select a product schedule, they receive a realtime price quote. Customers
can then book their ads without further newspaper involvement. A larger rollout
is planned for 2002.
Also in 2002, Gannett will begin the rollout of it newest update to the
company's legacy software. The update will focus primarily on advertising
functionality. The highlight of the release is the new pricing engine that will
permit the packaging and selling of multiple products across multiple mediums.
This will improve the competitive position of Gannett's local newspapers in
their marketplaces, and provide the flexibility to be more creative in meeting
advertisers' changing needs.
Gannett Media Technologies International (GMTI) continued to transition
customers to its Internet-based Celebro system. Celebro aids in the creation of
new advertising products while automating the scheduling and production of real
estate ads. Newspapers are freed from production requirements. Real estate
companies are now linked directly to GMTI's database servers where Celebro's
automation software builds ads and sends complete, digitized ad files to our
newspapers for pagination and printing.
GMTI installed new systems at The Indianapolis Star and Pensacola Offset
and upgraded systems at a number of Gannett newspapers including Burlington, El
Paso, Fort Myers, Olympia and Rockford. Thirteen non-Gannett newspapers and 10
real estate companies use Celebro's ASP solution to manage their advertising.
More than 4,000 real estate companies have aggregated 500,000 property listings
in the Celebro database. Celebro produces ads for 300 publications and provides
access to more than 45,000 agents across the United States. Non-Gannett
properties purchasing Celebro.com in 2001 included the Orlando Sun-Sentinel and
the Austin (Texas) Board of Realtors.
In May 2001, GMTI acquired the AutoChooser division of Pentawave, Inc. GMTI
is blending the AutoChooser technology with Celebro's CarsPlus system to enable
newspapers to offer Web site creation/hosting and print advertising integration.
Significant non-Gannett users of AutoChooser technology include The Washington
Post, The Atlanta Journal-Constitution, and Media News Group.
GMTI continued the rollout of CelebroCityServer, its software for building
online shopping and commerce guides on Web sites, to more than 34 Gannett
properties.
The Digital Collections digital asset management system has now been
installed at USA TODAY, Gannett News Service, 69 Gannett newspapers and 25
non-Gannett newspapers. A centralized, group-wide archive system for Ottaway
Newspapers, a division of Dow Jones, Inc., and an advertising and photo
management system for Wegman's Food Markets in Rochester, N.Y., were completed
in 2001. The Wegman's installation marks the most recent use of the Digital
Collections system outside the publishing industry.
In addition to the software enhancements added to the newest system version
and the commercial release of its e-commerce integration package, GMTI entered a
strategic marketing agreement with Atex, Inc. of Bedford, Mass. Atex will market
the Digital Collections archive system as part of its editorial publishing
system in North and South America.
- 53 -
With respect to newspaper production, 68 daily newspaper plants print by
the offset process, and 12 plants print using various letterpress processes. To
date, there are 80 newspapers that have converted to the new 50-inch web width
format. Readers have found this new size to be easier to handle and use. The
50-inch format change equates to more than a seven percent savings in newsprint
consumption. More of the company's newspapers are scheduled for web width
reduction in 2002.
The company has been consolidating certain of its newspaper operations in a
number of geographic areas in order to achieve greater marketing, administrative
and production effectiveness and efficiencies. Consolidations of this type have
been made in New Jersey, upstate New York, Louisiana, Wisconsin and Ohio.
Further consolidations of this type will be made in 2002.
In recent years, improved technology for all of the newspapers has resulted
in greater speed and accuracy and in a reduction in the number of production
hours worked. The company expects this trend to continue in 2002.
The principal sources of newspaper revenues are circulation and
advertising.
Circulation: 24 of the company's local newspapers reported gains in
daily circulation in 2001, and 17 increased Sunday circulation.
Home-delivery prices for the company's newspapers are established
individually for each newspaper and range from $1.75 to $3.00 per week for
daily newspapers and from $.71 to $2.51 per copy for Sunday newspapers.
Price increases for certain elements of local circulation volume were
initiated at 36 newspapers in 2001.
Additional information about the circulation of the company's newspapers
may be found on pages 22-23, 56 and 66-68 of this annual report.
Advertising: The newspapers have advertising departments that sell retail,
classified and national advertising. The Gannett Retail Advertising Group also
sells advertising on behalf of the company's local newspapers to national and
regional retailers and service providers. The company also contracts with
outside representative firms that specialize in the sale of national
advertising. Analyses of newspaper advertising revenues are presented on pages
21 and 56 of this report.
Retail advertising is display advertising associated with local merchants,
such as department and grocery stores. Classified advertising includes ads
listed together in sequence by the nature of the ads, such as automobile sales,
real estate sales and help wanted. National advertising is display advertising
principally from advertisers who are promoting products or brand names
nationally. Retail and national advertising may appear in the newspaper itself
or in preprinted sections. Generally there are different rates for each category
of advertising, and the rates for each newspaper are set independently, varying
from city to city.
The newspapers have made continuing efforts to serve their readers and
advertisers by introducing complete market coverage programs and by targeting
specific market segments desired by many advertisers through the use of
specially zoned editions and other special publications.
Continuing and comprehensive efforts are also underway to leverage Web site
and newspaper marketing and advertising sales opportunities.
Competition: The company's newspapers compete with other media for
advertising principally on the basis of their advertising rates and their
performance in helping to sell the advertisers' products or services. They
compete for circulation principally on the basis of their content and price.
While most of the company's newspapers do not have daily newspaper competitors
that are published in the same city, in certain of the company's larger markets,
there is such direct competition. Most of the company's newspapers compete with
other newspapers published in nearby cities and towns and with free distribution
and paid advertising weeklies, as well as other print and non-print media.
The rate of development of opportunities in, and competition from, emerging
electronic communications services, including those related to the Internet, are
increasing. Through internal development programs, acquisitions and
partnerships, the company's efforts to explore new opportunities in news,
information and communications businesses have expanded and will continue to do
so.
At the end of 2001, The Cincinnati Enquirer, The Detroit News, and the
Tucson (Ariz.) Citizen were published under joint operating agreements with
non-Gannett newspapers located in the same cities. All of these agreements
provide for joint business, advertising, production and circulation operations
and a contractual division of profits. The editorial and reporting staffs of the
company's newspapers, however, are separate and autonomous from those of the
non-Gannett newspapers.
Properties: Generally, the company owns the plants that house all aspects
of the newspaper publication process. In the case of USA TODAY, at Dec. 30,
2001, 18 non-Gannett printers were used to print the newspaper in U.S. markets
where there are no company newspapers with appropriate facilities. Five
non-Gannett printers in foreign countries are used to print USA TODAY
International. USA WEEKEND and Nursing Spectrum are also printed under contracts
with commercial printing companies. Many of the company's newspapers have
outside news bureaus and sales offices, which generally are leased. In a few
markets, two or more of the company's newspapers share combined facilities; and
in certain locations, facilities are shared with other newspaper properties. The
company's newspaper properties have rail siding facilities or access to main
roads for newsprint delivery purposes and are conveniently located for
distribution purposes.
- 54 -
During the past five years, new or substantial additions or remodeling of
existing facilities have been completed or are at some stage of construction at
29 of the company's newspaper operations. Gannett continues to make significant
investments in renovations or new facilities, where the investment improves the
products for its readers and advertisers as well as productivity and operating
efficiency. The company's facilities are adequate for present operations.
Regulation: Gannett is committed to protecting the environment. The
company's goal is to ensure its facilities comply with federal, state, local and
foreign environmental laws and to incorporate appropriate environmental
practices and standards in our operations. The company employs a corporate
environmental manager responsible for overseeing not only regulatory compliance
but also preventive measures. The company is one of the industry leaders in the
use of recycled newsprint. The company increased its domestic purchases of
newsprint containing some recycled content from 42,000 metric tons in 1989 to
862,000 metric tons in 2001. The company's newspapers use inks, photographic
chemicals, solvents and fuels. The use and disposal of these substances may be
regulated by federal, state and local agencies. Through its environmental
compliance plan, the company is taking effective measures to comply with
environmental laws. Any release into the environment may create obligations to
private and governmental entities under a variety of statutes and rules
regulating the environment.
Some of the company's newspaper subsidiaries have been included among the
potentially responsible parties in connection with the alleged disposal of ink
or other chemical wastes at disposal sites that have been subsequently
identified as inactive hazardous waste sites by the U.S. Environmental
Protection Agency or comparable state agencies. Generally, the company's
subsidiaries are de minimus parties. The company provides for costs associated
with these matters in accordance with generally accepted accounting principles.
The company does not believe that these matters will have any significant impact
on its financial position or results of operations.
Additional information about the company's newspapers may be found on pages
66-69 of this report.
Newspapers/United Kingdom
Altogether, Newsquest now publishes over 300 titles in the United Kingdom,
including 15 daily newspapers. Newsquest manages its newspaper publishing
activities around geographic clusters to maximize the use of management,
finance, printing and personnel resources. This approach enables the group to
offer readers and advertisers a range of attractive products covering the
market. The clustering of titles and, usually, the publication of a free
newspaper alongside a paid-for newspaper allows cross-selling of advertising
among newspapers serving the same or contiguous markets, thus satisfying the
needs of its advertisers and audiences. At the end of 2001, Newsquest had 16
such clusters in the United Kingdom. Newsquest's policy is to produce free and
paid-for newspapers with an attractive level of quality local editorial content.
Newsquest also distributes a substantial volume of advertising leaflets in the
communities it serves and it offers a travel/vacation booking service.
Newsquest's revenues for 2001 were in excess of $700 million. As with U.S.
newspapers, advertising is the largest component of revenue, comprising
approximately 80%. Circulation revenue represents 11% of revenues and printing
activities account for much of the remainder. Compared to U.S. newspaper
operations, advertising revenue at Newsquest is a greater percent of total
revenue and circulation revenue is a lesser percent, reflecting the greater
volume and importance of free weekly publications among Newsquest's titles.
Newsquest is actively seeking to maximize the value of its local
information expertise through development of opportunities offered by the
Internet. Through internal growth and in partnership with other businesses,
Newsquest has established a number of local and national Web sites that offer
news and other information of special interest to its communities,
as well as classified and retail advertising and shopping services.
Newsquest owns certain of the plants where its newspapers are produced and
leases other facilities. Its headquarters is in Morden, Surrey. All of its
properties are adequate for present purposes. A new printing plant has come into
operation at Wingates in Lancashire to replace the existing press at Lostock and
add color capacity. A listing of Newsquest
publishing centers and key properties may be found on page 70.
- 55 -
At the end of 2001, Newsquest had approximately 8,500 full-time and
part-time employees. Newsquest employees have local staff councils for
consultation and communication with local Newsquest management. Newsquest
provides the majority of its employees with the option to participate in a
retirement plan that incorporates life insurance and a stock option linked
savings plan.
Newsquest newspapers operate in competitive markets. Their principal
competitors include other regional and national newspaper and magazine
publishers, other advertising media such as radio and billboard, and
Internet-based news, information and communication businesses.
Key revenue and expense data - for all newspapers combined
The table that follows summarizes the circulation volume and revenues of U.S.
newspapers owned by the company at the end of 2001, including USA TODAY. The
table also includes circulation revenue for all Newsquest publications and
circulation volume for Newsquest's fifteen paid daily newspapers. This table
assumes that all newspapers owned by the company at the end of 2001 were owned
during all years shown.
For purposes of presenting pro forma information, the tables and related
commentary below include net paid circulation and a pro rata portion of the
revenue and linage data for the company's newspapers participating in joint
operating agencies, consistent with prior years.
Circulation: newspapers owned on Dec. 30, 2001
Circulation Daily Sunday
revenues net paid net paid
in thousands circulation circulation
------------ ----------- -----------
2001 $1,293,165 8,256,000 7,045,000
2000 $1,315,089 8,332,000 7,160,000
1999 $1,287,347 8,368,000 7,260,000
1998 $1,288,365 8,475,000 7,397,000
1997 $1,258,224 8,387,000 7,473,000
The following chart summarizes the advertising linage (in six-column
inches) and advertising revenues of the newspapers owned by the company at the
end of 2001. For Newsquest, advertising revenues are reflected, but linage is
not. The chart assumes that all of the newspapers owned at the end of 2001 were
owned during all years shown.
Advertising: newspapers owned on Dec. 30, 2001
Advertising Inches of
revenues (ROP) advertising,
in thousands excluding preprints
------------ -------------------
2001 $3,618,136 97,802,000
2000 $3,982,390 103,449,000
1999 $3,790,847 100,381,000
1998 $3,576,587 95,567,000
1997 $3,343,258 90,567,000
- 56 -
Total newspaper ad revenues on a pro forma basis declined 8% in 2001. All
advertising classifications showed declines reflecting a soft and very uncertain
general U.S. economy, which was worsened by the attacks of Sept. 11. In
addition, revenue comparisons are negatively impacted by the additional 53rd
week in 2000 and an overall decline in the exchange rate for sterling. Ad
spending by larger retailers declined for the year, reflecting closings and
consolidations, partially offset by greater revenue from small- and medium-sized
advertisers. Classified advertising revenues declined 9%. Employment ad revenues
fell 21% for the year as job market conditions in the U.S. continued to worsen.
National advertising revenues were down 15%. Most of the national revenue loss
was at USA TODAY, which reported a 22% decrease in revenues. Advertising
revenues at USA TODAY were adversely affected by the absence of year-earlier
Olympics-related ad spending and significantly lower demand for travel-related
advertising following the terrorist attacks. Preprint and other advertising
revenues declined 2%.
The company's newspaper segment advertising and other revenues from
Internet activities totaled approximately $69 million in 2001, $62 million in
2000 and $39 million in 1999.
Looking to 2002, modest ad revenue and volume growth is anticipated in most
categories. Price increases are generally planned at most properties, and the
company will continue to expand and refine sales and marketing efforts. Changes
in economic factors such as interest rates, employment levels and the rate of
general economic growth will have an impact on revenue at all of the company's
newspapers.
Raw materials: Newsprint is the basic raw material used to publish
newspapers. During 2001, the company's total newsprint consumption was 1,216,000
metric tons, including the company's portion of newsprint consumed at joint
operating agencies, consumption by USA WEEKEND, USA TODAY tonnage consumed at
non-Gannett print sites and consumption by Newsquest. Newsprint consumption was
flat with 2000 despite an increase resulting from a full year impact of the
acquired properties in 2000. Newsprint consumption savings were realized due to
reduced advertising space and web width reductions at a number of the company's
properties in the years 1999-2001. The company purchases newsprint from 20 North
American, European and other offshore suppliers under contracts that expire at
various times through 2010.
During 2001, all of the company's newspapers consumed some recycled
newsprint. For the year, more than 80% of the company's domestic newsprint
purchases contained recycled content.
In 2001, newsprint supplies were adequate. The company believes that the
available sources of newsprint, together with present inventories, will continue
to be adequate to supply the needs of its newspapers.
The average cost per ton of newsprint consumed in 2001 increased 10%
compared to the 2000 average cost.
Broadcasting
On Dec. 30, 2001, the company's television division, headquartered in McLean,
Va., included 22 television stations in markets with a total of more
than 18.6 million households.
At the end of 2001, the broadcasting division had approximately 3,000
full-time and part-time employees. Broadcasting revenues accounted for
approximately 10% of the company's reported operating revenues from continuing
operations in 2001, 13% in 2000 and 14% in 1999.
The principal sources of the company's broadcasting revenues are: 1) local
advertising focusing on the immediate geographic area of the stations; 2)
national advertising; 3) compensation paid by the networks for carrying
commercial network programs; 4) advertising on the stations' web sites; and 5)
payments by advertisers to television stations for other services, such as the
production of advertising material. The advertising revenues derived from a
station's local news programs make up a significant part of its total revenues.
Advertising rates charged by a television station are based primarily upon
the station's ability to attract viewers, demographics and the number of
television households in the area served by the station. Practically all
national advertising is placed through independent advertising representatives.
Local advertising time is sold by each station's own sales force.
Generally, a network provides programs to its affiliated television
stations, sells commercial advertising announcements within the network programs
and compensates the local stations by paying an amount based on the television
station's network affiliation agreement.
For all of its stations, the company is party to network affiliation
agreements. The company's three ABC affiliates have agreements which expire
between 2005-2007. The agreements for all of its six CBS affiliates run through
2004-2005. The company's 13 NBC affiliated stations have agreements that will
expire in December 2005.
Programming: The costs of locally produced and purchased syndicated
programming are a significant portion of television operating expenses.
Syndicated programming costs are determined based upon largely uncontrollable
market factors, including demand from the independent and affiliated stations
within the market and in some cases from cable operations. In recent years, the
company's television stations have emphasized their locally produced news and
entertainment programming in an effort to provide programs that distinguish the
stations from the competition and to better control costs.
- 57 -
Properties: The company's broadcasting facilities are adequately equipped
with the necessary television broadcasting equipment. The company owns
transmitter sites in 23 locations and leases sites in eight others.
During the past five years, new broadcasting facilities or substantial
improvements to existing facilities were completed in Phoenix, Jacksonville,
Knoxville and Columbia. A new facility was completed in December 2000 in
Cleveland. Facility expansion to accommodate Digital Television (DTV) was
completed at five sites in 1998/1999, three sites in 2000 and one site in 2001.
Twelve additional station facilities are scheduled to be converted to DTV in
2002. The company's broadcast facilities are adequate for present purposes.
Competition: In each of its broadcasting markets, the company's stations
compete for revenues with other network-affiliated and independent television
and radio broadcasters and with other advertising media, such as cable
television, newspapers, magazines and outdoor advertising. The stations also
compete in the emerging local electronic media space, which includes Internet or
Internet-enabled devices and any digital spectrum opportunities associated with
DTV. The company's broadcasting stations compete principally on the basis of
their market share, advertising rates and audience composition.
Local news is most important to a station's success, and there is a growing
emphasis on other forms of programming that relate to the local community.
Network and syndicated programming constitute the majority of all other
programming broadcast on the company's television stations, and the company's
competitive position is directly affected by viewer acceptance of this
programming. Other sources of present and potential competition for the
company's broadcasting properties include pay cable, home video and audio
recorders and video disc players, direct broadcast satellite and low power
television. Some of these competing services have the potential of providing
improved signal reception or increased home entertainment selection, and they
are continuing development and expansion.
Pursuant to the Satellite Home Viewer Improvement Act of 1999, several of
the company's television stations are currently being delivered by satellite
carriers to subscribers within the stations' market. The company has entered
into retransmission consent agreements with satellite carriers that authorize
such delivery that expire in mid-2004. This law also permits satellite carriers
to retransmit distant network television stations into areas served by local
television stations if it is determined, using FCC-approved signal strength
measurement standards, that local stations do not deliver an acceptable viewing
signal.
Regulation: The company's television stations are operated under the
authority of the Federal Communications Commission (FCC) under the
Communications Act of 1934, as amended (Communications Act), and the rules and
policies of the FCC (FCC Regulations).
Television broadcast licenses are granted for periods of eight years. They
are renewable by broadcasters upon application to the FCC and usually are
renewed except in rare cases in which a conflicting application, a petition to
deny, a complaint or an adverse finding as to the licensee's qualifications
results in loss of the license. The company believes it is in substantial
compliance with all applicable provisions of the Communications Act and FCC
Regulations.
FCC Regulations also prohibit concentrations of broadcasting control and
regulate network programming. FCC Regulations governing multiple ownership
limit, or in some cases, prohibit the common ownership or control of most
communications media serving common market areas (for example, television and
radio; television and daily newspapers; radio and daily newspapers; or
television and cable television). The FCC's broadcast ownership rules permit
common ownership of two television stations in the same market, provided eight
independently owned television stations remain in the market following the
combination and provided that at least one of the commonly owned stations is not
among the market's top four rated stations. It is under this standard that the
company acquired a second television station in the Jacksonville, Fla. The FCC
has instituted a rule-making proceeding to examine possible modifications to the
daily newspaper/television broadcast ownership restrictions.
The FCC rules permit common ownership of a number (depending on market
size) of radio stations and television stations serving the same community but
continue to prohibit a party from having attributable interests in television
stations that collectively reach more than 35 percent of all U.S. television
households. The FCC will continue to review this limitation as required by
Congress, and as it was specifically ordered to do so by a federal court in
February 2002. Constitutional challenges to these ownership restrictions are
pending in several federal courts. Presently, the company's 22 television
stations reach an aggregate of 17.7% of U.S. TV households.
Additional information about the company's television stations may be found
on page 69 of this annual report.
- 58 -
Corporate facilities
The company's headquarters and USA TODAY are located in McLean, Va. The company
also owns data processing facilities in nearby Maryland. Headquarters facilities
are adequate for present operations.
Employee relations
At the end of 2001, the company and its subsidiaries had approximately 51,500
full-time and part-time employees. Three of the company's newspapers were
published in 2001 together with non-company newspapers pursuant to joint
operating agreements, and the employment numbers above include the company's
pro-rata share of employees at those joint production and
business operations.
Approximately 14% of those employed by the company and its subsidiaries are
represented by labor unions. They are represented by 91 local bargaining units
affiliated with nine international unions under collective bargaining
agreements. These agreements conform generally with the pattern of labor
agreements in the newspaper and broadcasting industries. The company does not
engage in industrywide or companywide bargaining. The company's U.K.
subsidiaries bargain with two unions over wages and health and safety issues
only. The company strives to maintain good relationships with its employees.
The company provides competitive group life and medical insurance programs
for full-time domestic employees at each location. The company pays a
substantial portion of these costs and employees contribute the balance.
Virtually all of the company's units provide retirement or profit-sharing plans
which cover eligible full-time employees.
In 1990, the company established a 401(k) Savings Plan, which is available
to most of its domestic non-union employees.
- 59 -
Acquisitions 1997-2001
Acquisitions and dispositions 1997-2001
The growth of the company has resulted from acquisitions of businesses, as well
as from internal expansion. Its significant acquisitions since the beginning of
1997 are shown below. The company has disposed of several businesses during this
period, which are presented on the following page.
Acquisitions 1997-2001
Year acquired Name Location Publication times or business
- ------------- ----------------------------- ------------------------------- -----------------------------
1997 WZZM-TV Grand Rapids, Mich. Television station
WGRZ-TV Buffalo, N.Y. Television station
Printed Media Companies Minneapolis, Minn. Commercial printing
KNAZ-TV Flagstaff, Ariz. Television station
KMOH-TV Kingman, Ariz. Television station
Mary Morgan, Inc. Green Bay, Wis. Commercial printing
Army Times Publishing Co., Inc. Springfield, Va. Weekly and monthly periodicals
New Jersey Press, Inc. Asbury Park and East Brunswick, N.J. Two daily newspapers
1998 WCSH-TV Portland, Maine Television station
WLBZ-TV Bangor, Maine Television station
WLTX-TV Columbia, S.C. Television station
Ocean County Observer Toms River, N.J. Daily newspaper
Daily Record Morristown, N.J. Daily newspaper
Manahawkin Newspapers Manahawkin, N.J. Weekly newspapers
Classified Gazette San Rafael, Calif. Semi-weekly newspaper
New Castle County Shopper's Guide Wilmington, Del. Weekly advertising shopper
Brandywine Valley Weekly Wilmington, Del. Weekly advertising shopper
Autos plus Wilmington, Del. Weekly advertising shopper
TCI Cable Kansas Kansas Cable television systems
1999 The Reporter Melbourne, Fla. Weekly newspaper
Lehigh Acres News-Star Lehigh Acres, Fla. Weekly newspaper
Dealer Magazine Reno, Nev. Weekly magazine
KXTV-TV Sacramento, Calif. Television station
Newsquest plc United Kingdom Daily and weekly newspapers
Tucker Communications, Inc. Westchester Co., N.Y. Weekly newspaper
Pennypower Shopping News Branson & Springfield, Mo. Weekly newspaper
2000 The Pioneer Republican and Des Moines, Iowa Weekly newspapers
other publications
Buyers' Digest Franklin County, Vt. Weekly newspaper
The Clarion Redcar, United Kingdom Weekly newspaper
WJXX-TV Jacksonville, Fla. Television station
Mason Valley News, Lyon County, Nev. Weekly newspapers
Fernley Leader-Dayton Courier
Brevard Technical Journal Brevard County, Fla. Monthly magazine
Dickson Shoppers Middle Tennessee Weekly newspapers
Greenville Parent Magazine Greenville County, S.C. Monthly magazine
News Communications & Media plc United Kingdom Daily and weekly newspapers and
other publications
Space Coast Press Brevard County, Fla. Weekly newspaper
Certain assets of Wisconsin, Ohio, Louisiana, 19 daily and numerous
Thomson Newspapers Inc. Maryland, Utah weekly newspapers
Central Newspapers, Inc. Arizona, Indiana, Louisiana 6 daily newspapers; other
related businesses
Daily World Opelousas, La. Daily newspaper
Windsor Beacon Windsor, Colo. Weekly newspaper
50+ Lifestyles and other publications Des Moines, Iowa Monthly magazines
2001 Shopping News St. Cloud, Minn. Weekly newspaper
Gatwick Life, Horley Life Surrey/Sussex, U.K. Weekly newspapers
The Bulletin Board Montgomery, Ala. Weekly newspaper
The Dimbleby Newspapers London, U.K. Weekly newspapers
PMP Company Ltd. Honolulu, Hawaii Monthly and bi-monthly
publications
AutoChooser Tempe, Ariz. Software product
Honolulu Pennysaver Honolulu, Hawaii Weekly newspaper
Buy and Sell Classifieds Honolulu, Hawaii Bi-weekly newspapers
- 60 -
Dispositions 1997-2001
Year disposed Name Location Publication times or business
- ------------- ----------------------------- ------------------------------- -----------------------------
1997 WLWT-TV (4) Cincinnati, Ohio Television station
KOCO-TV (4) Oklahoma City, Okla. Television station
Niagara Gazette (1) Niagara Falls, N.Y. Daily newspaper
The Observer Moultrie, Ga. Daily newspaper
North Hills News Record North Hills, Pa. Daily newspaper
Valley News Dispatch Tarentum, Pa. Daily newspaper
1998 The Virgin Islands Daily News St. Thomas, V.I. Daily newspaper
WGCI/WGCI-FM Chicago, Ill. Radio stations
KKBQ/KKBQ-FM Houston, Texas Radio stations
KHKS-FM Dallas, Texas Radio station
The Saratogian (1) Saratoga Springs, N.Y. Daily newspaper
Multimedia Security Service Wichita, Kan. Alarm security business
Commercial-News Danville, Ill. Daily newspaper
Chillicothe Gazette Chillicothe, Ohio Daily newspaper
Gallipolis Daily Tribune Gallipolis, Ohio Daily newspaper
The Daily Sentinel Pomeroy, Ohio Daily newspaper
Point Pleasant Register Point Pleasant, W.Va. Daily newspaper
Multimedia Cable Illinois Suburban Chicago, Ill. Cable television systems
1999 The San Bernardino County Sun (2) San Bernardino, Calif. Daily newspaper
KVUE-TV (3) Austin, Texas Television station
2000 Multimedia Cable Kansas, Oklahoma, North Carolina Cable television systems
Marin Independent Journal (2) Marin, Calif. Daily newspaper
Classified Gazette (2) San Rafael, Calif. Semi-weekly newspaper
Space News Springfield, Va. Weekly newspaper
2001 The Marietta Times (1) Marietta, Ohio Daily newspaper
The Reporter Lansdale, Pa. Daily newspaper
Ocean Springs Record and
Gautier Independent Ocean Springs, Miss. Weekly newspapers
(1) These properties were contributed to the Gannett Foundation, a
not-for-profit, private foundation.
(2) Contributed for an equity interest in the California Newspaper Partnership.
(3) Exchanged for KXTV-TV in Sacramento, Calif.
(4) Exchanged for WGRZ-TV in Buffalo, N.Y. and WZZM-TV in Grand Rapids, Mich.
- 61 -
Quarterly statements of income
In thousands of dollars
Fiscal year ended December 30, 2001 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total
----------- ----------- ----------- ----------- -----------
Net operating revenues
Newspaper advertising $ 1,020,934 $ 1,057,899 $ 988,045 $ 1,052,895 $ 4,119,773
Newspaper circulation 313,009 306,019 306,139 307,939 1,233,106
Broadcasting 155,613 178,692 148,229 180,118 662,652
All other 85,392 84,622 75,515 83,185 328,714
----------- ----------- ----------- ----------- -----------
Total 1,574,948 1,627,232 1,517,928 1,624,137 6,344,245
----------- ----------- ----------- ----------- -----------
Operating expenses
Cost of sales and operating
expenses, exclusive of depreciation 839,547 824,030 824,839 831,745 3,320,161
Selling, general and administrative expenses,
exclusive of depreciation 254,738 246,324 244,308 245,102 990,472
Depreciation 53,281 51,059 50,916 47,200 202,456
Amortization of intangible assets 59,343 59,457 61,267 61,254 241,321
----------- ----------- ----------- ----------- -----------
Total 1,206,909 1,180,870 1,181,330 1,185,301 4,754,410
----------- ----------- ----------- ----------- -----------
Operating income 368,039 446,362 336,598 438,836 1,589,835
Non-operating (expense) income
Interest expense (80,442) (61,728) (48,600) (31,084) (221,854)
Other 448 528 530 1,110 2,616
----------- ----------- ----------- ----------- -----------
Total (79,994) (61,200) (48,070) (29,974) (219,238)
----------- ----------- ----------- ----------- -----------
Income before income taxes 288,045 385,162 288,528 408,862 1,370,597
Provision for income taxes 113,500 151,700 113,700 160,500 539,400
----------- ----------- ----------- ----------- -----------
Income from continuing operations 174,545 233,462 174,828 248,362 831,197
Discontinued operations
Income from discontinued operations, net
Gain on sale of cable business, net of tax
----------- ----------- ----------- ----------- -----------
Net income $ 174,545 $ 233,462 $ 174,828 $ 248,362 $ 831,197
=========== =========== =========== =========== ===========
Basic earnings per share
Basic earnings from continuing operations $ .66 $ .88 $ .66 $ .94 $ 3.14
Basic earnings from discontinued operations:
Discontinued operations, net of tax
Gain on sale of cable business, net of tax
----------- ----------- ----------- ----------- -----------
Net income per share - basic $ .66 $ .88 $ .66 $ .94 $ 3.14
=========== =========== =========== =========== ===========
Diluted earnings per share
Diluted earnings from continuing operations (1) $ .66 $ .88 $ .66 $ .93 $ 3.12
Diluted earnings from discontinued operations:
Discontinued operations, net of tax
Gain on sale of cable business, net of tax
----------- ----------- ----------- ----------- -----------
Net income per share - diluted (1) $ .66 $ .88 $ .66 $ .93 $ 3.12
=========== =========== =========== =========== ===========
(1) As a result of rounding, the total of the four quarters' earnings per share
does not equal the earnings per share for the year.
- 62 -
Quarterly statements of income
In thousands of dollars
Fiscal year ended December 31, 2000 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total
----------- ----------- ----------- ----------- -----------
Net operating revenues
Newspaper advertising $ 830,250 $ 911,949 $ 1,004,280 $ 1,226,457 $ 3,972,936
Newspaper circulation 254,146 251,524 286,890 328,431 1,120,991
Broadcasting 166,789 205,413 183,352 233,213 788,767
All other 70,135 78,921 83,998 106,570 339,624
----------- ----------- ----------- ----------- -----------
Total 1,321,320 1,447,807 1,558,520 1,894,671 6,222,318
----------- ----------- ----------- ----------- -----------
Operating expenses
Cost of sales and operating
expenses, exclusive of depreciation 667,486 683,084 788,209 918,473 3,057,252
Selling, general and administrative expenses,
exclusive of depreciation 215,942 227,593 245,735 282,625 971,895
Depreciation 46,608 47,070 51,509 50,241 195,428
Amortization of intangible assets 33,766 35,379 52,082 59,260 180,487
----------- ----------- ----------- ----------- -----------
Total 963,802 993,126 1,137,535 1,310,599 4,405,062
----------- ----------- ----------- ----------- -----------
Operating income 357,518 454,681 420,985 584,072 1,817,256
Non-operating (expense) income
Interest expense (20,175) (22,666) (75,962) (100,425) (219,228)
Other (1,326) 7,947 (260) 4,451 10,812
----------- ----------- ----------- ----------- -----------
Total (21,501) (14,719) (76,222) (95,974) (208,416)
----------- ----------- ----------- ----------- -----------
Income before income taxes 336,017 439,962 344,763 488,098 1,608,840
Provision for income taxes 133,000 174,200 136,500 193,200 636,900
----------- ----------- ----------- ----------- -----------
Income from continuing operations 203,017 265,762 208,263 294,898 971,940
Discontinued operations
Income from discontinued operations, net 2,437 2,437
Gain on sale of cable business, net of tax 744,700 744,700
----------- ----------- ----------- ----------- -----------
Net income $ 950,154 $ 265,762 $ 208,263 $ 294,898 $ 1,719,077
=========== =========== =========== =========== ===========
Basic earnings per share
Basic earnings from continuing operations (1) $ .74 $ 1.01 $ .79 $ 1.12 $ 3.65
Basic earnings from discontinued operations:
Discontinued operations, net of tax .01 .01
Gain on sale of cable business, net of tax (1) 2.72 2.79
----------- ----------- ----------- ----------- -----------
Net income per share - basic (1) $ 3.47 $ 1.01 $ .79 $ 1.12 $ 6.45
=========== =========== =========== =========== ===========
Diluted earnings per share
Diluted earnings from continuing operations (1) $ .74 $ 1.00 $ .79 $ 1.11 $ 3.63
Diluted earnings from discontinued operations:
Discontinued operations, net of tax .01 .01
Gain on sale of cable business, net of tax (1) 2.69 2.77
----------- ----------- ----------- ----------- -----------
Net income per share - diluted (1) $ 3.44 $ 1.00 $ .79 $ 1.11 $ 6.41
=========== =========== =========== =========== ===========
(1) As a result of rounding and share repurchases made during the year, the
total of the four quarters' earnings per share does not equal the earnings per
share for the year.
- 63 -
Schedules to Form 10-K information
In thousands of dollars
Property, plant and equipment
Balance at
beginning Additions Retirements Balance at
Classification of period at cost or sales Other changes end of period
------------ ---------- ----------- ------------- -------------
Dec. 26, 1999
Land $ 180,786 $ 5,901 $ 4,853 $ 304 $ 182,138
Buildings and improvements 839,210 83,975 37,189 659 886,655
Cable 413,059 13,680 1,821 (11) 424,907
Machinery, equipment and fixtures 2,123,468 308,547 171,525 (1,128) 2,259,362
Construction in progress and
deposits on contracts 110,220 21,810 1,318 138 130,850
---------- --------- --------- ----------- ----------
$3,666,743 $ 433,913 (A)(E) $ 216,706 $ (38) (D) $3,883,912
========== ========= ========= =========== ==========
Dec. 31, 2000
Land $ 182,138 $ 33,066 $ 4,374 $ 5,219 $ 216,049
Buildings and improvements 886,655 183,971 20,639 51,709 1,101,696
Cable 424,907 4 424,911 0 0
Machinery, equipment and fixtures 2,259,362 463,183 107,822 (89,541) 2,525,182
Construction in progress and
deposits on contracts 130,850 141,476 223 20,171 292,274
---------- --------- --------- ----------- ----------
$3,883,912 $ 821,700 (B)(E) $ 557,969 $ (12,442)(D) $4,135,201
========== ========= ========= =========== ==========
Dec. 30, 2001
Land $ 216,049 $ 26,548 $ 6,431 $ 1,319 $ 237,485
Buildings and improvements 1,101,696 199,825 59,483 1,325 1,243,363
Machinery, equipment and fixtures 2,525,182 263,877 166,890 (12,465) 2,609,704
Construction in progress and
deposits on contracts 292,274 (174,767) 538 (447) 116,522
---------- --------- --------- ----------- ----------
$4,135,201 $ 315,483 (C)(E) $ 233,342 $ (10,268) (D) $4,207,074
========== ========= ========= =========== ==========
Notes
(A) Includes assets at acquisition net of adjustments for prior years' acquisitions. $ 175,470
(B) Includes assets at acquisition net of adjustments for prior years' acquisitions. $ 471,120
(C) Includes assets at acquisition net of adjustments for prior years' acquisitions. $ (9,096)
(D) Principally the effect of current foreign currency translation adjustment.
(E) Includes capitalized interest of $5,707 in 1999, $11,167 in 2000 and $8,550 in 2001
(F) Generally the rates of depreciation range from 2.5% to 10% for buildings and improvements, 3.3% to 20%
for cable and 4% to 30% for machinery, equipment and fixtures.
(G) Includes depreciation expense from cable and security reflected in earnings from discontinued operations
of $2,759 in 2000 and $31,806 in 1999.
- 64 -
Schedules to Form 10-K information
In thousands of dollars
Accumulated depreciation and amortization of property, plant and equipment
Additions
Balance at charged
beginning to costs and Retirements Other Balance at
of period expenses or sales changes end of period
---------- --------- --------- ---------- ----------
Dec. 26, 1999
Buildings and improvements $ 345,891 $ 22,056 $ 16,511 $ (5,003) $ 346,433
Cable 77,675 24,862 1,243 0 101,294
Machinery, equipment and fixtures 1,179,394 154,348 126,421 5,012 1,212,333
---------- --------- --------- ---------- ----------
$1,602,960 $ 201,266 (F)(G) $ 144,175 $ 9 (D) $1,660,060
========== ========= ========= ========== ==========
Dec. 31, 2000
Buildings and improvements $ 346,433 $ 30,371 $ (6,055) $ 4,330 $ 387,189
Cable 101,294 2,697 103,991 0 0
Machinery, equipment and fixtures 1,212,333 165,119 85,976 (4,863) 1,286,613
---------- --------- --------- ---------- ----------
$1,660,060 $ 198,187 (F)(G) $ 183,912 $ (533) (D) $1,673,802
========== ========= ========= ========== ==========
Dec. 30, 2001
Buildings and improvements $ 387,189 $ 25,769 $ 49,854 $ 2,183 $ 365,287
Machinery, equipment and fixtures 1,286,613 176,687 84,336 (2,647) 1,376,317
---------- --------- --------- ---------- ----------
$1,673,802 $ 202,456 (F) $ 134,190 $ (464) (D) $1,741,604
========== ========= ========= ========== ==========
(D)(F)(G) See page 64
Valuation and qualifying accounts
Additions Additions/
Balance at charged (reductions) Balance
beginning to costs and for acquisitions/ Deductions at end
Allowance for doubtful receivables of period expenses dispositions from reserves of period
--------- -------- ------------ ------------- ---------
Year ended Dec. 26, 1999 $19,143 $26,213 $ 9,419 $24,081 $30,694
Year ended Dec. 31, 2000 $30,694 $28,072 $ 10,456 $31,757 $37,465
Year ended Dec. 30, 2001 $37,465 $32,891 $ (361) $30,857 $39,138
Supplementary income statement information (from continuing operations)
Fiscal year ended Dec. 30, 2001 Dec. 31, 2000 Dec. 26, 1999
------------- ------------- -------------
Maintenance and repairs $56,576 $51,424 $42,208
------- ------- -------
Taxes other than payroll and income tax
Property $32,041 $28,074 $23,101
Other $16,876 $12,660 $ 8,243
------- ------- -------
Total $48,917 $40,734 $31,344
------- ------- -------
- 65 -
MARKETS WE SERVE
NEWSPAPERS AND NEWSPAPER DIVISION
Daily newspapers
State Circulation Joined
Territory City Newspaper Morning Afternoon Sunday Founded Gannett (a)
- --------- ---- --------- ------- --------- ------ ------- -----------
Alabama Montgomery Montgomery Advertiser 52,068 64,598 1829 1995 (62)
Arizona Phoenix The Arizona Republic 472,416 577,744 1890 2000 (91)
Tucson Tucson Citizen 38,123 1870 1976 (30)
Arkansas Mountain Home The Baxter 11,291 1901 1995 (63)
Bulletin
California Palm Springs The Desert Sun 52,824 55,562 1927 1986 (56)
Salinas The Californian 18,896 1871 1977 (36)
Tulare Tulare Advance-Register 8,121 1882 1993 (61)
Visalia Visalia Times-Delta 21,396 1859 1977 (37)
Colorado Fort Collins Fort Collins Coloradoan 28,965 35,770 1873 1977 (38)
Connecticut Norwich Norwich Bulletin 27,413 32,796 1791 1981 (49)
Delaware Wilmington The News Journal 121,399 141,815 1871 1978 (43)
Florida Brevard County FLORIDA TODAY 86,425 108,879 1966 1966 (9)
Fort Myers The News-Press 89,567 107,522 1884 1971 (24)
Pensacola Pensacola News Journal 63,351 80,954 1889 1969 (11)
Georgia Gainesville The Times 20,343 24,429 1947 1981 (48)
Guam Hagatna Pacific Daily News 21,207 19,851 1944 1971 (23)
Hawaii Honolulu The Honolulu Advertiser 145,594 176,387 1856 1993 (60)
Idaho Boise The Idaho Statesman 65,600 87,640 1864 1971 (16)
- 66 -
MARKETS WE SERVE
NEWSPAPERS AND NEWSPAPER DIVISION
Daily newspapers
State Circulation Joined
Territory City Newspaper Morning Afternoon Sunday Founded Gannett (a)
- --------- ---- --------- ------- --------- ------ ------- -----------
llinois Rockford Rockford Register Star 69,377 80,890 1855 1967 (10)
Indiana Fishers The Daily Ledger(c) 9,900 1870 2000 (92)
Indianapolis The Indianapolis Star 253,060 364,345 1903 2000 (93)
Lafayette Journal and Courier 37,210 43,769 1829 1971 (17)
Marion Chronicle-Tribune 18,928 21,199 1867 1971 (20)
Muncie The Star Press 32,388 35,419 1899 2000 (94)
Richmond Palladium-Item 19,119 22,834 1831 1976 (29)
Vincennes Vincennes Sun-Commercial 11,973 13,864 1804 2000 (95)
Iowa Des Moines The Des Moines Register 152,567 244,395 1849 1985 (53)
Iowa City Iowa City Press-Citizen 15,227 1860 1977 (40)
Kentucky Louisville The Courier-Journal 224,679 285,538 1868 1986 (58)
Louisiana Alexandria Alexandria Daily Town Talk 35,693 40,551 1883 2000 (96)
Lafayette The Daily Advertiser 44,487 51,716 1865 2000 (72)
Monroe The News-Star 36,244 41,323 1890 1977 (42)
Opelousas Daily World 11,029 12,268 1939 2000 (97)
Shreveport The Times 66,871 82,526 1871 1977 (41)
Maryland Salisbury The Daily Times 27,326 31,482 1900 2000 (73)
Michigan Battle Creek Battle Creek Enquirer 24,962 34,002 1900 1971 (18)
Detroit The Detroit News 241,184 1873 1986 (55)
The Detroit News and Free Press 745,686
Lansing Lansing State Journal 71,141 90,439 1855 1971 (15)
Port Huron Times Herald 29,779 40,739 1900 1970 (12)
Minnesota St. Cloud St. Cloud Times 27,992 37,567 1861 1977 (35)
Mississippi Hattiesburg Hattiesburg American 22,290 26,479 1897 1982 (51)
Jackson The Clarion-Ledger 100,708 114,771 1837 1982 (50)
Missouri Springfield Springfield News-Leader 63,873 92,586 1893 1977 (34)
Montana Great Falls Great Falls Tribune 33,253 38,377 1885 1990 (59)
Nevada Reno Reno Gazette-Journal 66,681 84,048 1870 1977 (31)
New Jersey Asbury Park Asbury Park Press 167,149 227,984 1879 1997 (68)
Bridgewater Courier News 39,952 40,134 1884 1927 (5)
Cherry Hill Courier-Post 81,949 97,360 1875 1959 (7)
East Brunswick Home News Tribune 65,180 72,966 1879 1997 (69)
Morristown Daily Record 42,865 45,259 1900 1998 (70)
Toms River Ocean County Observer(b) 1850 1998 (71)
Vineland The Daily Journal 17,437 1864 1986 (57)
New York Binghamton Press & Sun-Bulletin 58,619 73,765 1904 1943 (6)
Elmira Star-Gazette 28,933 40,407 1828 1906 (1)
Ithaca The Ithaca Journal 18,624 1815 1912 (2)
Poughkeepsie Poughkeepsie Journal 40,154 51,525 1785 1977 (33)
Rochester Rochester Democrat and Chronicle 176,463 238,593 1833 1918 (3)
Utica Observer-Dispatch 45,794 54,020 1817 1922 (4)
Westchester County The Journal News 144,240 173,985 1829 1964 (8)
North Carolina Asheville Asheville Citizen-Times 55,374 68,997 1870 1995 (64)
Ohio Bucyrus Telegraph-Forum 7,197 1923 2000 (74)
Cincinnati The Cincinnati Enquirer 197,399 310,673 1841 1979 (44)
Chillicothe Chillicothe Gazette 16,340 16,220 1800 2000 (75)
Coshocton Coshocton Tribune 7,311 7,608 1842 2000 (76)
Fremont The News-Messenger 13,626 1856 1975 (27)
Lancaster Lancaster Eagle-Gazette 15,446 15,718 1807 2000 (77)
Mansfield News Journal 33,823 43,112 1885 2000 (78)
Marion The Marion Star 14,437 15,258 1880 2000 (79)
Newark The Advocate 21,868 22,781 1820 2000 (80)
Port Clinton News Herald 5,828 1864 1975 (28)
Zanesville Times Recorder 21,542 21,402 1852 2000 (81)
- 67 -
MARKETS WE SERVE
NEWSPAPERS AND NEWSPAPER DIVISION
Daily newspapers
State Circulation Joined
Territory City Newspaper Morning Afternoon Sunday Founded Gannett (a)
- --------- ---- --------- ------- --------- ------ ------- -----------
Oklahoma Muskogee Muskogee Daily Phoenix
and Times-Democrat 18,853 19,737 1888 1977 (39)
Oregon Salem Statesman Journal 57,944 66,246 1851 1974 (26)
Pennsylvania Chambersburg Public Opinion 19,616 1869 1971 (14)
South Carolina Greenville The Greenville News 95,008 128,784 1874 1995 (65)
South Dakota Sioux Falls Argus Leader 53,310 75,105 1881 1977 (32)
Tennessee Clarksville The Leaf-Chronicle 21,389 25,237 1808 1995 (66)
Jackson The Jackson Sun 36,450 41,673 1848 1985 (54)
Nashville The Tennessean 183,869 258,439 1812 1979 (45)
Texas El Paso El Paso Times 74,273 91,991 1879 1972 (25)
Utah St. George The Spectrum 21,807 22,846 1963 2000 (82)
Vermont Burlington The Burlington Free Press 49,729 60,219 1827 1971 (13)
Virginia McLean USA TODAY 2,255,348 1982 1982 (52)
Staunton The Daily News Leader 18,478 21,400 1904 1995 (67)
Washington Bellingham The Bellingham Herald 24,754 31,348 1890 1971 (21)
Olympia The Olympian 38,555 45,487 1889 1971 (19)
West Virginia Huntington The Herald-Dispatch 35,546 41,150 1909 1971 (22)
Wisconsin Appleton The Post-Crescent 53,416 69,855 1853 2000 (83)
Fond du Lac The Reporter 20,084 20,562 1870 2000 (84)
Green Bay Green Bay Press-Gazette 54,308 80,863 1915 1980 (46)
Manitowoc Herald Times Reporter 16,486 16,889 1898 2000 (85)
Marshfield Marshfield News-Herald 14,039 1927 2000 (86)
Oshkosh Oshkosh Northwestern 22,850 26,541 1868 2000 (87)
Sheboygan The Sheboygan Press 24,045 26,360 1907 2000 (88)
Stevens Point Stevens Point Journal 12,868 1873 2000 (89)
Central Wisconsin Sunday 16,035
Wausau Wausau Daily Herald 22,432 29,860 1903 1980 (47)
Wisconsin Rapids Daily Tribune 13,444 1914 2000 (90)
(a) Number in parentheses notes chronological order in which existing
newspapers joined Gannett.
(b) Became an edition of the Asbury Park Press in 2001.
(c) Becomes twice weekly The Noblesville Ledger in April 2002.
Army Times Publishing Co.
Headquarters: Springfield, Va.
Advertising offices: New York; Chicago; Los Angeles
Publications: Army Times, Navy Times, Marine Corps Times, Air Force
Times, Federal Times, Defense News
Nursing Spectrum
Offices: Falls Church, Va. (serving Washington, D.C./Baltimore); Hoffman
Estates, Ill. (serving Illinois and Indiana); Ft. Lauderdale, Fla. (serving Ft.
Lauderdale and Tampa); King of Prussia, Pa. (serving Philadelphia and the
Delaware Valley); Westbury, N.Y. (serving New York and New Jersey); Lexington,
Mass. (serving New England states)
Non-daily publications
Weekly, semi-weekly or monthly publications in Alabama, Arizona, Arkansas,
California, Colorado, Connecticut, Delaware, Florida, Georgia, Guam, Hawaii,
Idaho, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maryland, Michigan,
Minnesota, Mississippi, Missouri, Montana, Nevada, New Jersey, New York, North
Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, South Dakota,
Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin
and Juarez, Mexico
USA WEEKEND
Circulation 23.6 million in 591 newspapers
Headquarters: McLean, Va.
Advertising offices: Chicago; Detroit; Los Angeles; New York
Gannett Media Technologies International Cincinnati, Ohio
Gannett Offset
Headquarters: Springfield, Va.
Offset sites: Atlanta, Ga.; Chandler, Ariz.; Minneapolis, Minn.;
Miramar, Fla.; Nashville, Tenn.; Norwood, Mass.; St. Louis, Mo.;
Pensacola, Fla.; Springfield, Va.
Gannett Offset Marketing Services Group
Gannett Direct Marketing Services, Inc. Louisville, Ky.
Gannett TeleMarketing, Inc.
Headquarters: Springfield, Va.
Operations: Cambridge, Mass.; Cincinnati, Ohio; Columbia, Mo.;
Louisville, Ky.; Nashville, Tenn.; Silver Spring, Md.; Towson, Md.
Telematch Springfield, Va.
Gannett Retail Advertising Group Chicago, Ill.
Gannett Satellite Information Network McLean, Va.
Gannett News Service
Headquarters: McLean, Va.
Bureau: Washington, D.C.
State bureaus: Albany, N.Y.; Baton Rouge, La.; Columbus, Ohio; Indianapolis,
Ind.; Newark, N.J.; Sacramento, Calif.; Springfield, Ill.; Tallahassee, Fla.
- 68 -
USA TODAY
Headquarters: McLean, Va.
Print sites: Arlington, Texas; Atlanta; Batavia, N.Y.; Brevard County, Fla.;
Chandler, Ariz.; Chicago; Columbia, S.C.; Fort Collins, Colo.; Fort Myers, Fla.;
Gainesville, Ga.; Hattiesburg, Miss.; Kankakee, Ill.; Lansing, Mich.; Las Vegas,
Nev.; Lawrence, Kan.; Mansfield, Ohio; Marin County, Calif.; Miramar, Fla.;
Nashville, Tenn.; Newark, Ohio; Norwood, Mass.; Olympia, Wash.; Pasadena, Texas;
Port Huron, Mich.; Raleigh, N.C.; Richmond, Ind.; Rockaway, N.J.; St. Cloud,
Minn.; St. Louis; Salisbury, N.C.; Salt Lake City; San Bernardino, Calif.;
Springfield, Va.; Tarentum, Pa.; White Plains, N.Y.; Wilmington, Del.
International print sites: Charleroi, Belgium; Frankfurt, Germany; Hong Kong;
London, England; Milan, Italy
National offices: Atlanta; Boston; Buffalo; Carolinas; Chicago; Cincinnati;
Cleveland; Columbus; Dallas; Denver; Detroit; Houston; Indianapolis;Kansas City;
Las Vegas; Los Angeles; Miami; Milwaukee; Minneapolis; Nashville; New Orleans;
New York; North New Jersey; Orlando; Philadelphia; Phoenix; Pittsburgh; San
Francisco; Seattle; St. Louis; Washington, D.C.
International offices: Hong Kong; London, England; Paris, France; Singapore
Advertising offices: McLean, Va.; Atlanta; Chicago; Dallas; Detroit; London,
England; Los Angeles; New York; San Francisco
USA TODAY Baseball Weekly
Editorial offices: McLean, Va.
Advertising offices: Chicago; McLean, Va.; New York
USATODAY.com McLean, Va.
BROADCASTING
Television stations
Weekly Joined
State City Station Channel/Network Audience(a) Founded Gannett
- ----- ---- ------- --------------- ---------- ------- -------
Arizona Flagstaff KNAZ-TV Channel 2/NBC (b) 1970 1997
Kingman KMOH-TV Channel 6/NBC (b) 1988 1997
Phoenix KPNX-TV Channel 12/NBC 1,258,000 1953 1979
Arkansas Little Rock KTHV-TV Channel 11/CBS 406,000 1955 1994
California Sacramento KXTV-TV Channel 10/ABC 1,042,000 1955 1999
Colorado Denver KUSA-TV Channel 9/NBC 1,357,000 1952 1979
District
of Columbia Washington WUSA-TV Channel 9/CBS 1,895,000 1949 1986
Florida Jacksonville WJXX-TV Channel 25/ABC 387,000 1989 2000
WTLV-TV Channel 12/NBC 468,000 1957 1988
Tampa-St. Petersburg WTSP-TV Channel 10/CBS 1,265,000 1965 1996
Georgia Atlanta WXIA-TV Channel 11/NBC 1,639,000 1948 1979
Macon WMAZ-TV Channel 13/CBS 214,000 1953 1995
Maine Bangor WLBZ-TV Channel 2/NBC 126,000 1954 1998
Portland WCSH-TV Channel 6/NBC 337,000 1953 1998
Michigan Grand Rapids WZZM-TV Channel 13/ABC 397,000 1962 1997
Minnesota Minneapolis-St. Paul KARE-TV Channel 11/NBC 1,370,000 1953 1983
Missouri St. Louis KSDK-TV Channel 5/NBC 1,095,000 1947 1995
New Buffalo WGRZ-TV Channel 2/NBC 537,000 1954 1997
York
North Carolina Greensboro WFMY-TV Channel 2/CBS 582,000 1949 1988
Ohio Cleveland WKYC-TV Channel 3/NBC 1,357,000 1948 1995
South Carolina Columbia WLTX-TV Channel 19/CBS 272,000 1953 1998
Tennessee Knoxville WBIR-TV Channel 10/NBC 428,000 1956 1995
(a) Weekly audience is number of TV households reached, according to the
November 2001 Nielsen book.
(b) Audience numbers fall below minimum reporting standards.
- 69 -
NEWSQUEST PLC
Daily newspapers
Circulation Joined
City Newspaper Morning Afternoon Saturday Founded Gannett
- ---- --------- ------- -------- -------- ------- -------
Basildon Evening Echo 40,452 1969 1999
Blackburn Lancashire Evening Telegraph 41,245 35,399 1886 1999
Bolton Bolton Evening News 39,228 29,365 1867 1999
Bournemouth Daily Echo 40,493 38,460 1900 2000
Bradford Telegraph & Argus 50,793 48,789 1868 1999
Brighton The Argus 47,493 45,706 1880 1999
Colchester Evening Gazette 28,464 1970 1999
Darlington The Northern Echo 61,671* 1870 1999
Newport South Wales Argus 29,342 25,610 1892 2000
Oxford Oxford Mail 29,927 30,316 1928 1999
Southampton Southern Daily Echo 54,528 54,597 1888 2000
Swindon Evening Advertiser 25,192 21,000 1854 1999
Weymouth Dorset Echo 20,792 21,336 1921 2000
Worcester Worcester Evening News 22,088 18,655 1937 1999
York Evening Press 41,884* 1882 1999
* Monday-Saturday inclusive
Non-daily publications
Essex, London, Midlands, North East, North West, South Coast,
South East, South Wales, South West, Yorkshire
- 70 -
Gannett on the net
News and information about Gannett is available on our Web site,
www.gannett.com.
The following Gannett properties also offer online services or
informational sites on the Internet:
Newspapers and Newspaper Division
- ---------------------------------
USA TODAY www.usatoday.com
USA TODAY Baseball Weekly www.baseballweekly.com
USA WEEKEND www.usaweekend.com
Alexandria (La.) Daily Town Talk www.thetowntalk.com
The Post-Crescent, Appleton, Wis. www.postcrescent.com
Asbury Park (N.J.) Press www.app.com
Asheville (N.C.) Citizen-Times www.citizen-times.com
Battle Creek (Mich.) Enquirer www.battlecreekenquirer.com
The Bellingham (Wash.) Herald www.bellinghamherald.com
Press & Sun-Bulletin, Binghamton, N.Y. www.pressconnects.com
The Idaho Statesman, Boise www.idahostatesman.com
Telegraph-Forum, Bucyrus, Ohio www.bucyrustelegraphforum.com
FLORIDA TODAY, Brevard County www.floridatoday.com
Courier News, Bridgewater, N.J. www.c-n.com
The Burlington (Vt.) Free Press www.burlingtonfreepress.com
Public Opinion, Chambersburg, Pa. www.publicopiniononline.com
Courier-Post, Cherry Hill, N.J. www.courierpostonline.com
Chillicothe (Ohio) Gazette www.chillicothegazette.com
The Cincinnati Enquirer www.cincinnati.com
The Leaf-Chronicle, Clarksville, Tenn. www.theleafchronicle.com
Coshocton (Ohio) Tribune www.coshoctontribune.com
The Des Moines Register DesMoinesRegister.com
The Detroit News detnews.com
Home News Tribune, East Brunswick, N.J. www.injersey.com/hnt
Star-Gazette, Elmira, N.Y. www.star-gazette.com
El Paso (Texas) Times www.elpasotimes.com
The Daily Ledger, Fishers, Ind. www.topics.com
The Reporter, Fond du Lac, Wis. www.fdlreporter.com
Fort Collins Coloradoan www.coloradoan.com
The News-Press, Fort Myers, Fla. www.news-press.com
The News-Messenger, Fremont, Ohio www.thenews-messenger.com
The Times, Gainesville, Ga. www.gainesvilletimes.com
Great Falls (Mont.) Tribune www.greatfallstribune.com
Green Bay (Wis.) Press-Gazette www.greenbaypressgazette.com
The Greenville (S.C.) News greenvilleonline.com
Pacific Daily News, Hagatna, Guam www.guampdn.com
Hattiesburg (Miss.) American www.hattiesburgamerican.com
The Honolulu Advertiser www.honoluluadvertiser.com
The Herald-Dispatch, Huntington, W.Va. www.hdonline.com
The Indianapolis Star www.indystar.com
Iowa City (Iowa) Press-Citizen www.press-citizen.com
The Ithaca (N.Y.) Journal www.theithacajournal.com
The Clarion-Ledger, Jackson, Miss. www.clarionledger.com
The Jackson (Tenn.) Sun www.jacksonsun.com
Journal and Courier, Lafayette, Ind. www.jconline.com
The Daily Advertiser, Lafayette, La. www.theadvertiser.com
Lancaster (Ohio) Eagle-Gazette www.lancastereaglegazette.com
Lansing (Mich.) State Journal www.lansingstatejournal.com
The Courier-Journal, Louisville, Ky. www.courier-journal.com
Herald Times Reporter, Manitowoc, Wis. www.htrnews.com
News Journal, Mansfield, Ohio www.mansfieldnewsjournal.com
Chronicle-Tribune, Marion, Ind. www.chronicle-tribune.com
The Marion (Ohio) Star www.marionstar.com
Marshfield (Wis.) News-Herald www.marshfieldnewsherald.com
The News-Star, Monroe, La. www.thenewsstar.com
The Montgomery (Ala.) Advertiser www.montgomeryadvertiser.com
Daily Record, Morristown, N.J. www.dailyrecord.com
The Baxter Bulletin, Mountain Home, Ark. www.baxterbulletin.com
The Star Press, Muncie, Ind. www.thestarpress.com
The Tennessean, Nashville www.tennessean.com
The Advocate, Newark, Ohio www.newarkadvocate.com
Newspaper Network of Central Ohio www.centralohio.com
Norwich (Conn.)Bulletin www.norwichbulletin.com
The Olympian, Olympia, Wash. www.theolympian.com
Daily World, Opelousas, La. www.dailyworld.com
Oshkosh (Wis.) Northwestern www.thenorthwestern.com
The Desert Sun, Palm Springs, Calif. www.thedesertsun.com
Pensacola (Fla.) News Journal www.PensacolaNewsJournal.com
The Arizona Republic, Phoenix www.azcentral.com
News Herald, Port Clinton, Ohio www.portclintonnewsherald.com
Times Herald, Port Huron, Mich. www.thetimesherald.com
Poughkeepsie (N.Y.) Journal www.poughkeepsiejournal.com
Reno (Nev.) Gazette-Journal www.rgj.com
Palladium-Item, Richmond, Ind. www.pal-item.com
Rochester (N.Y.) Democrat and Chronicle www.DemocratandChronicle.com
Rockford (Ill.) Register Star www.rrstar.com
The Californian, Salinas www.californianonline.com
The Daily Times, Salisbury, Md. www.delmarvanow.com
The Sheboygan (Wis.) Press www.sheboygan-press.com
Argus Leader, Sioux Falls, S.D. www.argusleader.com
St. Cloud (Minn.) Times www.sctimes.com
The Spectrum, St. George, Utah www.thespectrum.com
Statesman Journal, Salem, Ore. www.statesmanjournal.com
The Times, Shreveport, La. www.shreveporttimes.com
Springfield (Mo.) News-Leader www.ozarksgateway.com
The Daily News Leader, Staunton, Va. www.newsleader.com
Stevens Point (Wis.) Journal www.stevenspointjournal.com
Tucson (Ariz.) Citizen www.tucsoncitizen.com
Tulare (Calif.) Advance-Register www.tulareadvanceregister.com
Observer-Dispatch, Utica, N.Y. www.uticaod.com
Vincennes (Ind.) Sun-Commercial www.vincennes.com
The Daily Journal, Vineland, N.J. www.thedailyjournal.com
Visalia (Calif.) Times-Delta www.visaliatimesdelta.com
Wausau (Wis.) Daily Herald www.wausaudailyherald.com
The Journal News, Westchester County, N.Y. www.nyjournalnews.com
The News Journal, Wilmington, Del. www.delawareonline.com
The Daily Tribune, Wisconsin Rapids, Wis. www.wisconsinrapidstribune.com
Army Times www.armytimes.com
Navy Times www.navytimes.com
Marine Corps Times www.marinetimes.com
Air Force Times www.airforcetimes.com
Federal Times www.federaltimes.com
Defense News www.defensenews.com
Military City www.militarycity.com
Nursing Spectrum www.nursingspectrum.com
Gannett Offset www.gannettoffset.com
Gannett Direct Marketing Services www.gdms.com
Gannett Media Technologies International www.gmti.com
Newsquest PLC
- -------------
Newsquest Media Group www.newsquest.co.uk
Evening Echo, Basildon www.thisisessex.co.uk
Lancashire Evening Telegraph, Blackburn www.thisislancashire.co.uk
Bolton Evening News, Bolton www.thisisbolton.co.uk
Daily Echo, Bournemouth www.thisisdorset.net
Telegraph & Argus, Bradford www.thisisbradford.co.uk
The Argus, Brighton www.thisisbrightonandhove.co.uk
Evening Gazette, Colchester www.thisisessex.co.uk
The Northern Echo, Darlington www.thisisthenortheast.co.uk
South Wales Argus, Newport www.thisisgwent.co.uk
Oxford Mail, Oxford www.thisisoxfordshire.co.uk
Southern Daily Echo, Southampton www.thisishampshire.net
Evening Advertiser, Swindon www.thisiswiltshire.co.uk
Dorset Echo, Weymouth www.thisisdorset.net
Worcester Evening News, Worcester www.thisisworcestershire.co.uk
Evening Press, York www.thisisyork.co.uk
Broadcasting
- ------------
WXIA-TV, Atlanta www.11alive.com
WLBZ-TV, Bangor, Maine www.wlbz.com
WGRZ-TV, Buffalo, N.Y. www.wgrz.com
WKYC-TV, Cleveland, Ohio www.wkyc.com
WLTX-TV, Columbia, S.C. www.wltx.com
KUSA-TV, Denver www.9news.com
WZZM-TV, Grand Rapids-Kalamazoo-
Battle Creek, Mich. www.wzzm13.com
WFMY-TV, Greensboro, N.C. www.wfmynews2.com
WTLV-TV/WJXX-TV, Jacksonville, Fla. www.firstcoastnews.com
WBIR-TV, Knoxville, Tenn. www.wbir.com
KTHV-TV, Little Rock, Ark. www.kthv.com
WMAZ-TV, Macon, Ga. www.13wmaz.com
KARE-TV, Minneapolis-St. Paul www.kare11.com
KPNX-TV, Phoenix, Ariz. www.12news.com
WCSH-TV, Portland, Maine www.wcsh6.com
KXTV-TV, Sacramento, Calif. www.kxtv.com
KSDK-TV, St. Louis, Mo. www.ksdk.com
WTSP-TV, Tampa-St. Petersburg, Fla. www.wtsp.com
WUSA-TV, Washington, D.C. www.wusatv9.com
- 71 -
Glossary of financial terms
Presented below are definitions of certain key financial and operational
terms that we hope will enhance your reading and understanding of Gannett's 2001
Annual Report.
ADVERTISING LINAGE - Measurement term for the volume of space sold as
advertising in the company's newspapers; refers to number of column inches, with
each newspaper page composed of six columns.
BALANCE SHEET - A summary statement that reflects the company's assets,
liabilities and shareholders' equity at a particular point in time.
BROADCASTING REVENUES - Primarily amounts charged to customers for commercial
advertising aired on the company's television stations as well as radio stations
prior to 1998.
CIRCULATION - The number of newspapers sold to customers each day ("paid
circulation"). The company keeps separate records of morning, evening and Sunday
circulation.
CIRCULATION REVENUES - Amounts charged to newspaper readers or distributors.
Charges vary from city to city and depend on the type of sale (i.e.,
subscription or single copy) and distributor arrangements.
COMPREHENSIVE INCOME - The change in equity (net assets) of the company from
transactions and other events from non-owner sources. Comprehensive income
comprises net income and other items previously reported directly in
shareholders' equity, principally foreign currency translation adjustment.
CURRENT ASSETS - Cash and other assets that are expected to be converted to cash
within one year.
CURRENT LIABILITIES - Amounts owed that will be paid within one year.
DEPRECIATION - A charge against the company's earnings that allocates the cost
of property, plant and equipment over the estimated useful lives of the assets.
DISCONTINUED OPERATIONS - A principal business that has been sold and is
reported separately from continuing operations in the statement of income.
DIVIDEND - Payment by the company to its shareholders of a portion of its
earnings.
EARNINGS PER SHARE (basic) - The company's earnings divided by the average
number of shares outstanding for the period.
EARNINGS PER SHARE (diluted) - The company's earnings divided by the average
number of shares outstanding for the period, giving effect to assumed dilution
from outstanding stock options and stock incentive rights.
EXCESS OF ACQUISITION COST OVER FAIR VALUE OF ASSETS ACQUIRED - In a business
purchase, this represents the excess of amounts paid over fair value of tangible
assets acquired (also referred to as goodwill). Generally this cost is written
off against operations over periods of up to 40 years. The company adopted a new
accounting standard on Dec. 31, 2001, the first day of fiscal 2002, under which
goodwill is only written off if it is considered to be impaired. (Also see
"Purchase.")
INVENTORIES - Raw materials, principally newsprint, used in the business.
NEWSPAPER ADVERTISING REVENUES - Amounts charged to customers for space
("advertising linage") purchased in the company's newspapers. There are three
major types of advertising revenue: retail ads from local merchants, such as
department stores; classified ads, which include automotive, real estate and
"help wanted"; and national ads, which promote products or brand names on a
nationwide basis.
OPERATING CASH FLOW - Operating income adjusted for major non-cash expenses,
depreciation and amortization of intangible assets.
PRO FORMA - A manner of presentation intended to improve comparability of
financial results; it assumes business purchases/dispositions were completed at
the beginning of the earliest period discussed (i.e., results are compared for
all periods but only for businesses presently owned).
PURCHASE - A business acquisition. The acquiring company records at its cost the
acquired assets less liabilities assumed. The reported income of an acquiring
company includes the operations of the acquired company from the date of
acquisition.
RESULTS OF CONTINUING OPERATIONS - A key section of the statement of income
which presents operating results for the company's principal ongoing businesses
(newspaper and broadcasting).
RETAINED EARNINGS - The earnings of the company not paid out as dividends to
shareholders.
STATEMENT OF CASH FLOWS - A financial statement that reflects cash flows from
operating, investing and financing activities, providing a comprehensive view of
changes in the company's cash and cash equivalents.
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY - A statement that reflects changes
in the common stock, retained earnings and other equity accounts.
STATEMENT OF INCOME - A financial statement that reflects the company's profit
by measuring revenues and expenses.
STOCK INCENTIVE RIGHTS - An award that gives key employees the right to receive
shares of the company's stock without payment at the end of an incentive period,
conditioned on their continued employment throughout the incentive period.
STOCK OPTION - An award that gives key employees the right to buy shares of the
company's stock, pursuant to a vesting schedule, at the market price of the
stock on the date of the award.
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Shareholder Services
Gannett stock
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Gannett Co., Inc. shares are traded on the New York Stock Exchange with the
symbol GCI.
The company's transfer agent and registrar is Wells Fargo Bank Minnesota,
N.A. General inquiries and requests for enrollment materials for the programs
described below should be directed to Wells Fargo Shareowner Services, P.O. Box
64854, St. Paul, MN 55164-0854 or by telephone at 1-800-778-3299.
Gannett is pleased to offer the following shareholder services:
Dividend reinvestment plan
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The Dividend Reinvestment Plan (DRP) provides Gannett shareholders the
opportunity to purchase additional shares of the company's common stock free of
brokerage fees or service charges through automatic reinvestment of dividends
and optional cash payments. Cash payments may range from a minimum of $10 to a
maximum of $5,000 per month.
Automatic cash investment service for the DRP
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This service provides a convenient, no-cost method of having money
automatically withdrawn from your checking or savings account each month and
invested in Gannett stock through your DRP account.
Direct deposit service
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Gannett shareholders may have their quarterly dividends electronically
credited to their checking or savings accounts on the payment date at no
additional cost.
Form 10-K
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Information provided by Gannett in its Form 10-K annual report to the
Securities and Exchange Commission has been incorporated in this report. Copies
of the complete Form 10-K annual report may be obtained by writing the
Secretary, Gannett Co., Inc., 7950 Jones Branch Drive, McLean, VA 22107.
Annual meeting
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The annual meeting of shareholders will be held at 10 a.m. Tuesday,
May 7, 2002, at Gannett headquarters.
For more information
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News and information about Gannett is available on our Web site
(www.gannett.com). Quarterly earnings information will be available
around the middle of April, July and October 2002.
Shareholders who wish to contact the company directly about their
Gannett stock should call Shareholder Services at Gannett headquarters,
703-854-6960.
Gannett Headquarters
7950 Jones Branch Drive
McLean, VA 22107
703-854-6000
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