SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended
March 31, 2002 or
_ Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from
_______ to _________
Commission file number 1-6961
GANNETT CO., INC.
(Exact name of registrant as specified in its charter)
Delaware 16-0442930
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7950 Jones Branch Drive, McLean, VA 22107
(Address of principal executive offices) (Zip Code)
(703) 854-6000
(Registrant's telephone number, including area code)
Former address: n/a
(Former name, former address and former fiscal year, if
changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No __
The number of shares outstanding of the issuer's Common Stock,
Par Value $1.00, as of March 31, 2002, was 266,617,545.
PART I. FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS
OPERATING SUMMARY
Earnings per diluted share were 91 cents for the first quarter of 2002
versus 85 cents per share on a comparable basis for the first quarter
of 2001, a 7% increase, despite continued challenging operating
conditions.
At the beginning of 2002, the company adopted Statement of Financial
Accounting Standards (SFAS) No. 142 ("Statement"), which changed the
accounting rules for goodwill and intangible assets. The previously
reported diluted earnings per share of 66 cents for the first quarter
of 2001 included $0.19 per share for goodwill amortization expense, net
of tax, that would not have been required had the new Statement been in
effect. Note 2 to the Condensed Consolidated Financial Statements
provides additional information on the impact of this new Statement.
Operating revenues declined by $50.3 million or 3% for the first
quarter mainly due to a decline in newspaper advertising revenues.
Operating income decreased by $23.0 million or 5%, on a comparable
basis for the first quarter. Newspaper publishing earnings decreased
by $31.2 million or 8% for the quarter, on a comparable basis,
resulting from a continued decline in advertising revenues partially
offset by stringent cost controls and significantly lower newsprint
expense. Television earnings, on a comparable basis, were up $8.1
million or 12% for the quarter benefiting from Winter Olympics-related
advertising.
Net income increased by $18.1 million or 8%, on a comparable basis,
reflecting significantly lower interest expense in the period versus
the same quarter in 2001.
As noted in the pro forma newspaper revenue discussions below, all
major ad categories were lower for the quarter. Domestic classified
revenues, especially employment advertising, experienced the sharpest
decline, although the rate of decline for many of the U.S. newspapers
narrowed in the first quarter of 2002.
Television revenue comparisons for the first quarter were favorable
reflecting solid Winter Olympics-related advertising on the company's
NBC-affiliated stations.
NEWSPAPERS
Reported newspaper publishing revenues declined $61.9 million or 4%
for the quarter. Newspaper advertising revenues decreased $51.1
million or 5% for the quarter reflecting generally soft domestic
advertising demand. Refer to Note 6 of the Condensed Consolidated
Financial Statements for Business Segment Information.
The tables below provide, on a pro forma basis, details of newspaper
ad revenue for the first quarter of 2002 and 2001. Advertising linage
and preprint distribution details are also provided below; however,
linage and preprint distribution for U.K. publications are not
included. This pro forma presentation is defined as operating results
as if all properties owned at the end of the first quarter of 2002
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.
Advertising revenue, in thousands of dollars (pro forma)
First Quarter 2002 2001 % Change
----------- ----------- --------
Local $ 428,499 $ 434,841 (1)
National 167,056 175,313 (5)
Classified 419,663 457,953 (8)
----------- ----------- -----
Total ad revenue $ 1,015,218 $ 1,068,107 (5)
=========== =========== =====
Advertising linage, in thousands of inches, and preprint distribution,
in millions (pro forma)
First Quarter 2002 2001 % Change
----------- ----------- --------
Local 9,049 9,130 (1)
National 920 906 1
Classified 13,331 13,138 1
----------- ----------- --------
Total Run-of-Press
linage 23,300 23,174 1
=========== =========== ========
Preprint distribution 2,475 2,436 2
=========== =========== ========
Pro forma newspaper advertising revenues decreased 5% for the quarter.
Local ad revenues decreased 1% on a 1% decrease in volume for the
quarter. National ad revenues decreased 5% for the quarter on a
volume increase of 1%. Classified ad revenues decreased 8% for the
quarter on a volume increase of 1%. Revenue results reflect a
continuing challenging advertising environment, particularly in the
employment advertising category. The company's U.K. operations also
experienced softer help-wanted advertising in the first quarter of
2002; however, overall classified results for U.K. properties continue
to be stronger than domestic results. USA TODAY advertising revenues
declined 9% for the quarter primarily reflecting the continued
diminished demand for travel-related advertising.
Reported newspaper circulation revenues decreased $2.3 million or less
than 1% for the quarter. Pro forma newspaper circulation revenues
also decreased less than 1% for the quarter. Pro forma net paid daily
circulation for the company's local domestic newspapers was flat for
the first quarter, while Sunday circulation was down 1%. USA TODAY
reported an average daily paid circulation of 2,209,813 in the ABC
Publisher's Statement for the 26 weeks ended March 31, 2002, a 3%
decrease over the comparable period a year ago. The decline is primarily
due to reduced travel in the U.S. after the events of September 11th.
Operating costs for the newspaper segment declined $30.7 million or 3%
for the quarter, on a comparable basis, largely due to lower newsprint
expense and tight cost controls. Reported newsprint expense decreased
by 18% for the quarter as a result of significantly lower prices and a
3% decline in consumption. Newsprint prices for the remainder of
2002 are expected to be significantly lower on average than in 2001.
Recent employee count reductions are also expected to benefit cost
comparisons in 2002.
Excluding the positive impact of SFAS No. 142, newspaper operating income
declined $31.2 million or 8% resulting from a continued decline in
advertising revenues partially offset by stringent cost controls and
significantly lower newsprint expense. The impact of SFAS No. 142 on
the newspaper segment was to improve operating income by $47.1
million.
TELEVISION
Reported television revenues increased $11.6 million or 7% for the
first quarter. Television revenues benefited from Winter Olympics-
related advertising on our thirteen NBC-affiliated stations.
National advertising revenues increased 9% for the quarter while local
advertising revenues increased 8%. Operating costs increased $3.5
million or 4% on a comparable basis for the quarter. Excluding the
positive impact of SFAS No. 142, television operating income increased
by $8.1 million or 12% for the quarter. The impact of SFAS No. 142 on the
television segment was to improve operating income by $10.4 million.
NON-OPERATING INCOME AND EXPENSE/PROVISION FOR INCOME TAXES
Interest expense was $28.8 million in the first quarter of 2002 versus
$80.4 million in the first quarter of 2001 due to significantly lower
interest rates and lower debt levels. The daily average commercial
paper balance outstanding was $4.5 billion during the first quarter of
2002 and $5.4 billion during the first quarter of 2001. The weighted
average interest rate on commercial paper was 1.8% for the first
quarter of 2002 and 5.9% for the first quarter of 2001. In March
2002, the company issued $1.8 billion aggregate principal amount of
unsecured global notes. These notes consist of $600 million aggregate
principal amount of 4.95% notes due 2005, $700 million aggregate
principal amount of 5.50% notes due 2007 and $500 million aggregate
principal amount of 6.375% notes due 2012. The net proceeds of the
offering were used to pay-down commercial paper borrowings. The
company's average borrowing rates are expected to be higher for the
remainder of 2002 over the first quarter average due to the fixed rate
notes. However, overall interest expense for the second and third
quarters of 2002 is expected to be below prior year levels because of
the favorable spread in commercial paper borrowing rates and lower
debt levels.
The company's effective income tax rate was 34.4% for the first
quarter of 2002 versus 39.4% for the same period last year, reflecting
the adoption of SFAS No. 142 and lower state taxes. On a comparable
basis, the effective tax rate for the first quarter of 2001 would have
been 34.8%.
NET INCOME
Net income, on a comparable basis, increased $18.1 million or 8% for
the quarter, while diluted earnings per share increased to $0.91 from
$0.85, a 7% increase. The earnings for the first quarter of 2001 used
in these comparisons includes a positive adjustment of $0.19 per share
(diluted) for goodwill amortization expense, net of tax, that would
not have been required had SFAS No. 142 been in effect that year.
The weighted average number of diluted shares outstanding for the
first quarter of 2002 totaled 268,546,000, compared to 266,415,000 for
the first quarter of 2001. Exhibit 11 of this Form 10-Q presents the
weighted average number of basic and diluted shares outstanding and
the earnings per share for each period.
LIQUIDITY AND CAPITAL RESOURCES
The company's consolidated operating cash flow (defined as operating
income plus depreciation and amortization of intangible assets), as
reported in the accompanying Business Segment Information, totaled
$457.7 million for the first quarter of 2002, compared with $480.7
million for the same period of 2001, a 5% decrease. The operating
cash flow results reflect lower newspaper advertising revenues,
partially offset by reduced newspaper expenses and an increase in the
television segment advertising revenues and earnings. The company's
consolidated after-tax cash flow (defined as after-tax income plus
depreciation and amortization) increased $11.6 million or 4%
reflecting the operating factors discussed above, along with
significantly lower interest expense.
Capital expenditures totaled $57.8 million for the first three months
of 2002, compared to $64.1 million for the first three months of 2001.
In March 2002, as discussed above, the company issued $1.8 billion
aggregate principal amount of unsecured global notes in an
underwritten public offering. The net proceeds of the offering were
used to repay outstanding commercial paper obligations. In total, the
company's long term debt decreased by $230.5 million during the first
quarter of 2002, reflecting the pay-down of commercial paper
borrowings from operating cash flows. Significantly lower interest
rates on commercial paper borrowings contributed favorably to first
quarter cash flows.
Also in March 2002, the company entered into a $2.775 billion revolving
credit agreement providing for up to $1.41 billion 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 facility
which was due to expire in July 2002. At March 31, 2002, the
company had $4.3 billion of credit available under two
revolving credit agreements.
Under a shelf registration that became effective with the Securities
and Exchange Commission in April 2002, an additional $2.5 billion of
unsecured debt securities can be issued. Any proceeds from the sale
of such securities could be used for general corporate purposes,
including capital expenditures, working capital, securities repurchase
programs, repayment of long term and short term debt and the financing
of future acquisitions. The company may also invest funds that are
not required immediately in short term marketable securities.
The company's foreign currency translation adjustment, included in
accumulated other comprehensive income and reported as part of
shareholders' equity, totaled ($126.4 million) at the end of the first
quarter versus ($104.9 million) at the end of 2001, reflecting a
weakening of Sterling against the U.S. dollar since the end of the
year 2001. Newsquest's assets and liabilities at March 31, 2002 were
translated from Sterling to U.S. dollars at an exchange rate of $1.43
versus $1.45 at the end of 2001. Newsquest's financial results were
translated at an average rate of $1.43 for the first quarter of 2002
versus $1.46 for the first quarter of 2001.
The company's regular quarterly dividend of $0.23 per share was
declared in the first quarter of 2002, totaling $61.5 million and paid
on April 1, 2002. In May 2002, the company also declared a quarterly
dividend of $0.23 per share payable on July 1, 2002.
OTHER MATTERS
Refer to Note 2 of the Condensed Consolidated Financial Statements for
further discussion of new accounting standards and their impact on
reporting of earnings beginning in 2002.
CERTAIN FACTORS AFFECTING FORWARD-LOOKING STATEMENTS
Certain statements in the company's 2001 Annual Report to
Shareholders, its Annual Report on Form 10-K, and in this Quarterly
Report contain forward-looking information. The words "expect",
"intend", "believe", "anticipate", "likely", "will" and similar
expressions generally identify forward-looking statements. These
forward-looking statements are subject to certain risks and
uncertainties that could cause actual results and events to differ
materially from those anticipated in the forward-looking statements.
Potential risks and uncertainties which could adversely affect the
company's ability to obtain these results include, without limitation,
the following factors: (a) increased consolidation among major
retailers or other events which may adversely affect business
operations of major customers and depress the level of local and
national advertising; (b) a continued economic downturn in some or all
of the company's principal newspaper or television markets leading to
decreased circulation or local, national or classified advertising;
(c) a decline in general newspaper readership patterns as a result of
competitive alternative media or other factors; (d) an increase in
newsprint or syndication programming costs over the levels
anticipated; (e) labor disputes which may cause revenue declines or
increased labor costs; (f) acquisitions of new businesses or
dispositions of existing businesses; (g) a decline in viewership of
major networks and local news programming; (h) rapid technological
changes and frequent new product introductions prevalent in electronic
publishing; (i) an increase in interest rates; (j) a weakening in the
Sterling to U.S. dollar exchange rate; and (k) general economic,
political and business conditions.
CONDENSED CONSOLIDATED BALANCE SHEETS
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands of dollars
March 31, 2002 Dec. 30, 2001
---------------- ---------------
<s> <c> <c>
ASSETS
Cash $ 66,195 $ 73,905
Marketable securities 44,035 66,724
Trade receivables, less allowance
(2002 - $39,927; 2001 - $39,138) 729,190 805,746
Inventories 87,519 104,848
Prepaid expenses and other receivables 109,348 126,975
---------------- ---------------
Total current assets 1,036,287 1,178,198
---------------- ---------------
Property, plant and equipment
Cost 4,254,651 4,207,074
Less accumulated depreciation (1,792,164) (1,741,604)
---------------- ---------------
Net property, plant and equipment 2,462,487 2,465,470
---------------- ---------------
Other assets
Goodwill, less amortization 8,546,838 8,578,025
Other intangible assets, less amortization 104,501 106,334
Investments and other assets 743,935 768,074
---------------- ---------------
Total other assets 9,395,274 9,452,433
---------------- ---------------
Total assets $ 12,894,048 $ 13,096,101
================ ===============
LIABILITIES & SHAREHOLDERS' EQUITY
Accounts payable and current portion of film
contracts payable $ 305,175 $ 354,622
Compensation, interest and other accruals 237,058 235,093
Dividend payable 61,569 60,947
Income taxes 192,786 323,481
Deferred income 161,142 153,594
---------------- ---------------
Total current liabilities 957,730 1,127,737
---------------- ---------------
Deferred income taxes 526,696 503,397
Long-term debt 4,849,563 5,080,025
Postretirement medical and life insurance liabilities 404,016 409,052
Other long-term liabilities 223,175 239,968
---------------- ---------------
Total liabilities 6,961,180 7,360,179
---------------- ---------------
Shareholders' Equity
Preferred stock of $1 par value per share. Authorized
2,000,000 shares; issued - none.
Common stock of $1 par value per share. Authorized
800,000,000; issued, 324,420,732 shares. 324,421 324,421
Additional paid-in capital 228,678 210,256
Retained earnings 7,771,108 7,589,069
Accumulated other comprehensive loss (125,187) (103,287)
---------------- ---------------
Total 8,199,020 8,020,459
---------------- ---------------
Less treasury stock - 57,803,187 shares and
58,623,520 shares respectively, at cost (2,258,496) (2,275,737)
Deferred compensation related to ESOP (7,656) (8,800)
---------------- ---------------
Total shareholders' equity 5,932,868 5,735,922
---------------- ---------------
Total liabilities and shareholders' equity $ 12,894,048 $ 13,096,101
================ ===============
The accompanying notes are an integral part of these condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands of dollars (except per share amounts)
Thirteen weeks ended % Inc
March 31, 2002 April 1, 2001 (Dec)
-------------- -------------
<s> <c> <c> <c>
Net Operating Revenues:
Newspaper advertising $ 969,803 $ 1,020,934 (5.0)
Newspaper circulation 310,712 313,009 (0.7)
Television 167,186 155,613 7.4
Other 76,907 85,392 (9.9)
------------- ------------- ------
Total 1,524,608 1,574,948 (3.2)
------------- ------------- ------
Operating Expenses:
Cost of sales and operating
expenses, exclusive of
depreciation 818,566 839,547 (2.5)
Selling, general and
administrative expenses,
exclusive of depreciation 248,331 254,738 (2.5)
Depreciation 53,369 53,281 0.2
Amortization of intangible
assets 1,833 59,343 (96.9)
------------- ------------- ------
Total 1,122,099 1,206,909 (7.0)
------------- ------------- ------
Operating income 402,509 368,039 9.4
------------- ------------- ------
Non-operating income
(expense):
Interest expense (28,754) (80,442) (64.3)
Other (2,292) 448 (611.6)
------------- ------------- ------
Total (31,046) (79,994) (61.2)
------------- ------------- ------
Income before income taxes 371,463 288,045 29.0
Provision for income taxes 127,900 113,500 12.7
------------- ------------- ------
Net income $ 243,563 $ 174,545 39.5
============= ============= ======
Net income per share-basic $0.92 $0.66 39.4
===== ===== ======
Net income per share-diluted $0.91 $0.66 37.9
===== ===== ======
Dividends per share $0.23 $0.22 4.5
===== ===== ======
The accompanying notes are an integral part of these condensed consolidated financial
statements.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands of dollars
Thirteen weeks ended
March 31, 2002 April 1, 2001
-------------- --------------
<s> <c> <c>
Cash flows from operating activities
Net income $ 243,563 $ 174,545
Adjustments to reconcile net income to
operating cash flows:
Depreciation 53,369 53,281
Amortization of intangibles 1,833 59,343
Deferred income taxes 23,299 (16,876)
Other, net (62,052) 36,913
--------- ---------
Net cash flow from operating activities 260,012 307,206
--------- ---------
Cash flows from investing activities
Purchase of property, plant and equipment (57,755) (64,076)
Payments for acquisitions, net of cash acquired (3,200) (17,775)
Change in other investments 31,523 (3,086)
Proceeds from sale of certain assets 2,243 0
--------- ---------
Net cash used for investing activities (27,189) (84,937)
--------- ---------
Cash flows from financing activities
Payment of long-term debt and debt issuance costs (236,928) (217,030)
Dividends paid (60,903) (58,062)
Proceeds from issuance of common stock 35,635 8,801
--------- ---------
Net cash used for financing activities (262,196) (266,291)
--------- ---------
Effect of currency exchange rate change (1,026) (4,256)
--------- ---------
Net decrease in cash and cash equivalents (30,399) (48,278)
Balance of cash and cash equivalents at
beginning of year 140,629 193,196
--------- ---------
Balance of cash and cash equivalents at
end of first quarter $ 110,230 $ 144,918
========= =========
The accompanying notes are an integral part of these condensed consolidated financial statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2002
1. Basis of Presentation
The accompanying unaudited consolidated condensed financial
statements have been prepared in accordance with the instructions
for Form 10-Q and, therefore, do not include all information and
footnotes which are normally included in the Form 10-K and annual
report to shareholders. The financial statements covering the 13-week
period ended March 31, 2002, and the comparative period of 2001, reflect
all adjustments which, in the opinion of the company, are necessary for
a fair statement of results for the interim periods and reflect all normal
and recurring adjustments which are necessary for a fair presentation of
the company's financial position, results of operations and cash flows
as of the dates and for the periods presented.
2. Accounting Standards
On the first day of its fiscal year, December 31, 2001, the company
adopted Statement of Financial Accounting Standards No. 144, "Accounting
for the Impairment or Disposal of Long-Lived Assets." SFAS No. 144 did
not have a material impact on the company's financial position or
results of operations.
On December 31, 2001, the company adopted SFAS No. 142, "Goodwill and
Other Intangible Assets", which eliminated the amortization of goodwill
and other intangibles with indefinite useful lives. The company performed
an impairment test of its goodwill and determined that no impairment of the
recorded goodwill existed. SFAS No. 142 requires that goodwill be tested
for impairment at least annually and more frequently if an event
occurs which indicates the goodwill may be impaired. The company expects to
perform its impairment testing during the fourth quarter on an annual basis.
Goodwill and other intangible assets are as follows:
(in thousands of dollars) March 31, 2002 Dec. 30, 2001
-------------- -------------
Accumulated Accumulated
Cost Amortization Cost Amortization
---------- ------------ ---------- ------------
Amortized intangible assets:
Subscriber lists $ 110,000 $ 5,499 $ 110,000 $ 3,666
Unamortized intangible assets:
Goodwill 9,724,952 1,178,114 9,758,081 1,180,056
---------- ---------- ---------- ----------
Total $9,834,952 $1,183,613 $9,868,081 $1,183,722
========== ========== ========== ==========
As of March 31, 2002, Newspaper goodwill, net of amortization, was $7.0 billion
and Television goodwill, net of amortization, was $1.5 billion.
Amortization expense for subscriber lists was $1.8 million in the quarter
ended March 31, 2002. Subscriber lists are amortized on a straight-line basis
over 15 years. For each of the next five years, amortization expense relating
to the identified intangibles is expected to be $7.3 million.
As required by SFAS 142, the results for the first quarter of 2001 have not
been restated. A reconciliation of net income for that period and a comparison
to the first quarter of 2002, as if SFAS 142 had been adopted at the beginning
of 2001, is presented below.
Thirteen weeks ended
(dollars in thousands) March 31, 2002 April 1, 2001
-------------- -------------
Reported net income $243,563 $174,545
Add back: goodwill amortization,
net of tax 50,910
-------- --------
Adjusted net income $243,563 $225,455
======== ========
Basic earnings per share:
Reported net income $0.92 $0.66
Goodwill amortization, net of tax 0.19
----- -----
Adjusted net income $0.92 $0.85
===== =====
Diluted earnings per share:
Reported net income $0.91 $0.66
Goodwill amortization, net of tax 0.19
----- -----
Adjusted net income $0.91 $0.85
===== =====
3. Long-term debt
In March 2002, the company issued $1.8 billion aggregate principal
amount of unsecured global notes in an underwritten public offering.
These notes consist of $600 million aggregate principal amount of
4.95% notes due 2005, $700 million aggregate principal amount of 5.50%
notes due 2007 and $500 million aggregate principal amount of 6.375%
notes due 2012. The net proceeds of the offering were used to pay-
down commercial paper borrowings. The company also entered into a
$2.775 billion revolving credit agreement in March 2002 which consists
of a $1.41 billion 364-day facility which extends to March 2003 and a
$1.365 billion 5-year facility which extends to March 2007. At the
end of the 364-day period, any borrowings outstanding under the 364-
day credit facility are convertible into a one-year term loan at the
company's option. During the first quarter of 2002, the company
terminated its $3.0 billion revolving credit agreement. The company
also terminated its $1.53 billion 364-day revolving credit facility
which was due to expire in July 2002 and under which any outstanding
borrowings were convertible into a two-year term loan. At December 30,
2001, the company had $6.06 billion of credit available under two
revolving credit agreements. At March 31, 2002, the company had $4.3
billion of credit available under two revolving credit agreements.
Under a shelf registration that became effective with the Securities
and Exchange Commission in April 2002, an additional $2.5 billion of
unsecured debt securities can be issued. Any proceeds from the sale
of such securities could be used for general corporate purposes,
including capital expenditures, working capital, securities repurchase
programs, repayment of long term and short term debt and the financing
of future acquisitions. The company may also invest funds that are
not required immediately in short term marketable securities.
Approximate annual maturities of long-term debt, assuming that the
company had used the $4.3 billion revolving credit agreements 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 March 31, 2002
--------------
2003 $ 0
2004 36,096
2005 2,128,944
2006 21,442
2007 2,060,016
Later years 603,065
--------------
Total $ 4,849,563
==============
4. Comprehensive Income
Comprehensive income for the company includes net income, foreign
currency translation adjustments and unrealized gains or losses on available-
for-sale securities, as defined under SFAS No. 115, "Accounting for
Certain Investments in Debt and Equity Securities."
Comprehensive income totaled $221.7 million for the first quarter of 2002
and $107.0 million for the first quarter of 2001. Net income totaled
$243.6 million and other comprehensive losses totaled $21.9 million for
the first quarter of 2002. Net income totaled $174.5 million and
other comprehensive losses totaled $67.5 million for the first quarter of
2001. Other comprehensive income and losses relate to foreign currency
translation adjustments and unrealized gains or losses on available-for-
sale securities, net of tax. The other comprehensive losses were net of
deferred income tax benefits of $13.4 million for the first quarter of 2002
and $41.4 million for the first quarter of 2001.
5. Outstanding Shares
The weighted average number of common shares outstanding (basic)
in the first quarter totaled 266,182,000 compared to 264,468,000 for the
first quarter of 2001. The weighted average number of diluted shares
outstanding in the first quarter totaled 268,546,000 compared to
266,415,000 for the first quarter of 2001.
6. Business Segment Information
BUSINESS SEGMENT INFORMATION
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands of dollars
Thirteen weeks ended % Inc
March 31, 2002 April 1, 2001 (Dec)
-------------- ------------- -----
<s> <c> <c> <c>
Net Operating Revenues:
Newspaper publishing $ 1,357,422 $ 1,419,335 (4.4)
Television 167,186 155,613 7.4
------------- ------------- -----
Total $ 1,524,608 $ 1,574,948 (3.2)
============= ============= =====
Operating Income (net of
depreciation and
amortization):
Newspaper publishing $ 344,703 $ 328,785 4.8
Television 72,769 54,266 34.1
Corporate (14,963) (15,012) 0.3
------------- ------------- -----
Total $ 402,509 $ 368,039 9.4
============= ============= =====
Depreciation and
Amortization:
Newspaper publishing $ 45,235 $ 94,143 (52.0)
Television 6,417 16,983 (62.2)
Corporate 3,550 1,498 137.0
------------- ------------- -----
Total $ 55,202 $ 112,624 (51.0)
============= ============= =====
Operating Cash Flow (1):
Newspaper publishing $ 389,938 $ 422,928 (7.8)
Television 79,186 71,249 11.1
Corporate (11,413) (13,514) 15.5
------------- ------------- -----
Total $ 457,711 $ 480,663 (4.8)
============= ============= =====
(1) Operating Cash Flow represents operating income for each of the
company's business segments plus related depreciation and
amortization expense. This measure varies from the Condensed
Consolidated Statements of Cash Flows.
PRO FORMA BUSINESS SEGMENT INFORMATION (1)
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands of dollars
Thirteen weeks ended % Inc
March 31, 2002 April 1, 2001 (Dec)
-------------- ------------- -----
<s> <c> <c> <c>
Net Operating Revenues:
Newspaper publishing $ 1,357,422 $ 1,419,335 (4.4)
Television 167,186 155,613 7.4
------------- ------------- -----
Total $ 1,524,608 $ 1,574,948 (3.2)
============= ============= =====
Operating Income (net of
depreciation and
amortization):
Newspaper publishing $ 344,703 $ 375,856 (8.3)
Television 72,769 64,705 12.5
Corporate (14,963) (15,012) 0.3
------------- ------------- -----
Total $ 402,509 $ 425,549 (5.4)
============= ============= =====
Depreciation and
Amortization:
Newspaper publishing $ 45,235 $ 47,072 (3.9)
Television 6,417 6,544 (1.9)
Corporate 3,550 1,498 137.0
------------- ------------- -----
Total $ 55,202 $ 55,114 0.2
============= ============= =====
Operating Cash Flow (2):
Newspaper publishing $ 389,938 $ 422,928 (7.8)
Television 79,186 71,249 11.1
Corporate (11,413) (13,514) 15.5
------------- ------------- -----
Total $ 457,711 $ 480,663 (4.8)
============= ============= =====
(1) As if Statement of Financial Accounting Standards No. 142 (SFAS
No. 142) had been adopted at the beginning of 2001.
(2) Operating Cash Flow represents operating income for each of
the company's business segments plus related depreciation and
amortization expense. This measure varies from the Condensed
Consolidated Statements of Cash Flows.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The company is not subject to market risk associated with derivative commodity
instruments, as the company is not a party to any such instruments. The
company believes that its market risk from financial instruments, such as
accounts receivable, accounts payable and debt, is not material. The company is
exposed to foreign exchange rate risk primarily due to its operations in the
United Kingdom, which use Sterling as their functional currency, which is
then translated into U.S. dollars.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
See Exhibit Index for list of exhibits filed with this
report.
(b) Form 8-K
(1) Current Report on Form 8-K filed March 11, 2002, in
connection with a new revolving credit agreement.
(2) Current Report on Form 8-K filed March 14, 2002, in
connection with the sale of debt securities.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
GANNETT CO., INC.
Dated: May 15, 2002 By:/s/George R. Gavagan
------------------------------
George R. Gavagan
Vice President and Controller
Dated: May 15, 2002 By:/s/Thomas L. Chapple
------------------------------
Thomas L. Chapple
Senior Vice President, General
Counsel and Secretary
EXHIBIT INDEX
Exhibit
Number Exhibit Location
3-1 Second Restated Certificate Incorporated by reference to Exhibit
of Incorporation of Gannett Co., 3-1 to Gannett Co., Inc.'s Form 10-K
Inc. for the fiscal year ended December 26,
1993 ("1993 Form 10-K"). Amendment
incorporated by reference to Exhibit
3-1 to the 1993 Form 10-K. Amendment
dated May 2, 2000, incorporated by
reference to Gannett Co., Inc.'s Form
10-Q for the fiscal quarter ended
March 26, 2000.
3-2 By-laws of Gannett Co., Inc. Incorporated by reference to
(reflects all amendments Exhibit 3-2 to Gannett Co., Inc.'s
through February 1, 2001) Form 10-K for the fiscal year ended
December 31, 2000.
4-1 Indenture dated as of March 1, Incorporated by reference to Exhibit
1983 between Gannett Co., Inc. 4-2 to Gannett Co., Inc.'s Form 10-K
and Citibank, N.A., as Trustee. for the fiscal year ended
December 29, 1985.
4-2 First Supplemental Indenture Incorporated by reference to Exhibit
dated as of November 5, 1986 4 to Gannett Co., Inc.'s Form 8-K
among Gannett Co., Inc., filed on November 9, 1986.
Citibank, N.A., as Trustee, and
Sovran Bank, N.A., as Successor
Trustee.
4-3 Second Supplemental Indenture Incorporated by reference to
dated as of June 1, 1995, Exhibit 4 to Gannett Co., Inc.'s
among Gannett Co., Inc., Form 8-K filed on June 15, 1995.
NationsBank, N.A., as Trustee,
and Crestar Bank, as Trustee.
4-4 Rights Plan. Incorporated by reference to
Exhibit 1 to Gannett Co., Inc.'s
Form 8-K filed on May 23, 1990.
Amendment incorporated by reference
to Gannett Co., Inc.'s Form 8-K
filed on May 2, 2000.
4-5 $3,000,000,000 Competitive Incorporated by reference to Exhibit
Advance and Revolving Credit 4-10 to Gannett Co., Inc.'s Form 10-Q
Agreement among Gannett Co., filed on August 9, 2000.
Inc. and the Banks named
therein.
4-6 Amendment Number One to Incorporated by reference to Exhibit
$3,000,000,000 Competitive 4-11 to Gannett Co., Inc.'s Form 10-K
Advance and Revolving Credit for the fiscal year ended December 31,
Agreement among Gannett Co., 2000.
Inc. and the Banks named
therein.
4-7 Amendment Number Two Incorporated by reference to
to $3,000,000,000 Competitive Exhibit 4-12 to Gannett Co., Inc.'s
Advance and Revolving Credit Form 10-Q for the quarter ended
Agreement among Gannett Co., July 1, 2001.
Inc. and the Banks named
therein.
4-8 Form of 4.950% Note due Incorporated by reference to Exhibit
2005. 4.13 to Gannett Co., Inc.'s Form 8-K
filed on March 14, 2002.
4-9 Form of 5.500% Note due 2007. Incorporated by reference to Exhibit
4.14 to Gannett Co., Inc.'s Form 8-K
filed on March 14, 2002.
4-10 Form of 6.375% Note due 2012. Incorporated by reference to Exhibit
4.15 to Gannett Co., Inc.'s Form 8-K
filed on March 14, 2002.
4-11 Third Supplemental Indenture, Incorporated by reference to Exhibit
dated as of March 14, 2002, 4.16 to Gannett Co., Inc.'s Form 8-K
between Gannett Co., Inc. and filed on March 14, 2002.
Wells Fargo Bank Minnesota, N.A.,
as Trustee.
4-12 Competitive Advance and Incorporated by reference
Revolving Credit Agreement to Exhibit 10.11 to Gannett
dated as of March 11, 2002 Co., Inc.'s Form 8-K filed on
among Gannett Co., Inc., the March 14, 2002.
several lenders from time to
time parties thereto,
Bank of America, N.A., as
Administrative Agent, JP Morgan
Chase Bank and Bank One NA, as
Co-Syndication Agents, and
Barclays Bank PLC, as
Documentation Agent.
10-3 Gannett Co., Inc. 1978 Incorporated by reference to Exhibit
Executive Long-Term Incentive 10-3 to Gannett Co., Inc.'s Form 10-K
Plan* for the fiscal year ended
December 28, 1980. Amendment No. 1
incorporated by reference to
Exhibit 20-1 to Gannett Co., Inc.'s
Form 10-K for the fiscal year ended
December 27, 1981. Amendment No. 2
incorporated by reference to
Exhibit 10-2 to Gannett Co., Inc.'s
Form 10-K for the fiscal year ended
December 25, 1983. Amendments Nos. 3
and 4 incorporated by reference to
Exhibit 4-6 to Gannett Co., Inc.'s
Form S-8 Registration Statement
No. 33-28413 filed on May 1, 1989.
Amendments Nos. 5 and 6 incorporated
by reference to Exhibit 10-8 to
Gannett Co., Inc.'s Form 10-K for the
fiscal year ended December 31, 1989.
Amendment No. 7 incorporated by
reference to Gannett Co., Inc.'s
Form S-8 Registration Statement
No. 333-04459 filed on May 24, 1996.
Amendment No. 8 incorporated by
reference to Exhibit 10-3 to Gannett
Co., Inc.'s Form 10-Q for the quarter
ended September 28, 1997. Amendment
dated December 9, 1997, incorporated
by reference to Gannett Co., Inc.'s
1997 Form 10-K. Amendment No. 9
incorporated by reference to Exhibit
10-3 to Gannett Co., Inc.'s Form 10-Q
for the quarter ended June 27, 1999.
Amendment No. 10 incorporated by
reference to Exhibit 10-3 to Gannett
Co., Inc's Form 10-Q for the quarter
ended June 25, 2000. Amendment No. 11
incorporated by reference to
Exhibit 10-3 to Gannett Co., Inc.'s
Form 10-K for the fiscal year ended
December 31, 2000.
10-4 Description of supplemental Incorporated by reference to Exhibit
insurance benefits.* 10-4 to the 1993 Form 10-K.
10-5 Gannett Co., Inc. Supplemental Incorporated by reference to Exhibit
Retirement Plan, as amended.* 10-5 to Gannett Co., Inc.'s Form 10-K
for the fiscal year ended
December 26, 1999. Amendments No. 1
and 2 incorporated by reference to
Exhibit 10-5 to Gannett Co., Inc.'s
Form 10-K for the fiscal year ended
December 30, 2001.
10-6 Gannett Co., Inc. Retirement Incorporated by reference to Exhibit
Plan for Directors.* 10-10 to the 1986 Form 10-K. 1991
Amendment incorporated by reference
to Exhibit 10-2 to Gannett Co.,
Inc.'s Form 10-Q for the quarter
ended September 29, 1991. Amendment
to Gannett Co., Inc. Retirement
Plan for Directors dated October 31,
1996, incorporated by reference to
Exhibit 10-6 to the 1996 Form 10K.
10-7 Amended and Restated Incorporated by reference to Exhibit
Gannett Co., Inc. 1987 10-1 to Gannett Co., Inc.'s Form 10-Q
Deferred Compensation Plan.* for the fiscal quarter ended
September 29, 1996. Amendment No. 5
incorporated by reference to Exhibit
10-2 to Gannett Co., Inc.'s Form 10-Q
for the quarter ended September 28,
1997. Amendment No. 2 to January 1,
1997 Restatement incorporated by
reference to Exhibit 10-7 to
Gannett Co., Inc.'s Form 10-Q for the
quarter ended June 27, 1999.
Amendments Nos. 3 and 4 incorporated
by reference to Exhibit 10-7 to
Gannett Co., Inc.'s Form 10-K for the
fiscal year ended December 31, 2000.
Amendment No. 5 incorporated by
reference to Exhibit 10-7 to Gannett
Co., Inc.'s Form 10-Q for the quarter
ended July 1, 2001.
10-8 Gannett Co., Inc. Transitional Incorporated by reference to Exhibit
Compensation Plan, as amended 10-8 to Gannett Co., Inc.'s Form
and restated October 22, 2001, 10-K for the fiscal year ended
and as further amended on December 30, 2001.
December 4, 2001.*
10-9 Employment Agreement dated Incorporated by reference to Exhibit
January 1, 2001 between 10-9 to Gannett Co., Inc.'s Form 10-K
Gannett Co., Inc. and Douglas for the fiscal year ended December 31,
H. McCorkindale.* 2000.
10-10 Omnibus Incentive Compensation Incorporated by reference to Exhibit
Plan No. 4 to the Company's Registration
Statement on Form S-8 (Registration
No. 333-60402). Amendment No. 1
incorporated by reference to Exhibit
No. 10-10 to Gannett Co., Inc.'s Form
10-K for the fiscal year ended
December 30, 2001.
11 Statement re computation of Attached.
earnings per share.
The company agrees to furnish to the Commission, upon request, a copy
of each agreement with respect to long-term debt not filed herewith
in reliance upon the exemption from filing applicable to any series
of debt which does not exceed 10% of the total consolidated assets of
the company.
* Asterisks identify management contracts and compensatory plans
or arrangements.