SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended June 26, 1994
or
Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ______________ to
_____________.
Commission file number 1-6961
GANNETT CO., INC.
(Exact name of registrant as specified in its charter)
Delaware 16-0442930
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1100 Wilson Boulevard, Arlington, Virginia 22234
(Address of principal executive offices) (Zip Code)
(703) 284-6000
(Registrant's telephone number, including area code)
_________________________________________________________________
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No ____
The number of shares outstanding of the issuer's Common Stock, Par Value
$1.00, as of June 26, 1994 was 147,139,039.
PART I. FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS
1994 Acquisition
On May 3, 1994, the Company purchased Nursing Spectrum, which
publishes a group of biweekly periodicals specializing in
advertising for nursing employment. The acquisition did not
materially affect results of operations or financial condition.
Operating Summary
Income from operations for the second quarter of 1994 rose $29.6
million or 15%, reflecting significant performance gains by the
Company's newspaper and broadcast divisions. For newspapers,
stronger demand for classified advertising coupled with modest
growth in costs contributed to a 12% earnings gain. Improved
broadcast earnings, which rose 29%, resulted principally from
television advertising revenue growth at presently owned stations.
Operating income for the first six months of 1994 rose $51.9
million or 16%.
Newspapers
Newspaper publishing revenues rose $31.4 million or 4% in the
second quarter of 1994 and $63.1 million or 4% for the year-to-
date. Newspaper advertising revenue rose $26.9 million or 5% for
the quarter and $54.1 million or 6% for the first six months,
reflecting continued gains in classified advertising. Help-
wanted advertising has contributed to higher classified revenues
at most of the Company's local newspapers.
The tables below provide, on a pro forma basis, further details
of newspaper ad revenue and linage for the second quarter and
year-to-date periods of 1994 and 1993:
Advertising revenue, in thousands of dollars (pro forma)
Second quarter 1994 1993 % Change
Local $195,080 $193,670 1
National 80,272 78,515 2
Classified 180,902 159,913 13
Total Run-
of-Press 456,254 432,098 6
Preprint
and other
advertising 83,896 81,830 3
Total ad
revenue $540,150 $513,928 5
Advertising linage, in thousands of inches (pro forma)
Second quarter 1994 1993 % Change
Local 7,898 8,055 (2)
National 581 559 4
Classified 8,251 7,635 8
Total Run-
of-Press 16,730 16,249 3
Preprint 16,754 16,464 2
Total ad
linage 33,484 32,713 2
Advertising revenue, in thousands of dollars (pro forma)
Year-to-date 1994 1993 % Change
Local $ 376,417 $ 372,785 1
National 154,765 149,109 4
Classified 341,149 303,699 12
Total Run-
of-Press 872,331 825,593 6
Preprint
and other
advertising 160,063 154,264 4
Total ad
revenue $1,032,394 $979,857 5
Advertising linage, in thousands of inches (pro forma)
Year-to-date 1994 1993 % Change
Local 15,127 15,397 (2%)
National 1,082 1,027 5%
Classified 15,551 14,449 8%
Total Run-
of-Press 31,760 30,873 3%
Preprint 30,533 29,531 3%
Total ad
linage 62,293 60,404 3%
Newspaper circulation revenues rose $2.8 million or 1% for the
quarter and $4.9 million or 1% for the first six months. Net
paid daily and Sunday circulation for the Company's local
newspapers fell slightly for the quarter and for the year-to-
date. USA TODAY reported an average daily paid circulation of
2,025,250 in the ABC Publisher's statement for the six months
ended March 27, 1994, which, subject to audit, was down less than
1% from the comparable period a year ago.
Operating costs in total for the newspaper segment rose $10.8
million or 2% for the quarter and $30.8 million or 3% for the
year-to-date. Newsprint costs declined 6% for the quarter and 3%
for the year-to-date, reflecting lower prices from a year ago,
partly offset by higher consumption. The Company expects
newsprint prices to trend higher than year ago levels for the
remainder of 1994. Payroll costs rose 2% for the quarter and for
the year-to-date.
Newspaper operating income rose $20.7 million or 12% for the
quarter and $32.3 million or 10% for the first six months, due
principally to the improved ad revenue environment and lower
newsprint costs. Most of the Company's local newspapers reported
improved ad revenues and operating income results. At USA Today,
operating results improved for the quarter and were down slightly
for the year-to-date. Revenues were up 1% for the quarter and
were even for the first six months.
Broadcast
Broadcast revenues were down $1.5 million or 1% for the second
quarter and were even for the first six months, while operating
costs declined $10.4 million or 13% for the quarter and $21.4
million or 14% for the year-to-date. On a pro forma basis,
broadcast revenues increased 10% for the quarter and 12% for the
year-to-date, while operating costs increased 3% for the quarter
and 2% for the first six months.
On a pro forma basis, local television ad revenues increased 8%
for the quarter and 10% for the year to date. Pro forma national
revenues increased 12% for the quarter and 13% for the year-to-
date. Pro forma radio revenues increased 18% for the quarter and
22% for the first six months, reflecting improved market shares
at key radio stations. Operating income rose $8.9 million or 29%
for the quarter and $21 million or 53% for the year-to-date,
reflecting strong gains at most of the Company's television and
radio stations. For the year-to-date period, broadcast earnings
were also favorably affected by the recent sale of four radio
stations in Kansas City and St. Louis, Mo., and the Company's
television station in Boston.
Outdoor
Outdoor revenues declined $0.8 million or 1% for the quarter and
$1.7 million or 2% for the year-to-date, while operating costs
were flat for the quarter and year-to-date. Operating income for
Outdoor declined $0.7 million or 8% for the quarter and $1.4
million or 29% for the year-to-date.
Non-operating income and expense
Interest expense declined $2.8 million or 21% for the quarter and
$2.7 million or 11% for the year-to-date. Average borrowings
were lower during the first half of 1994, but average interest
rates on borrowed funds were higher than a year ago.
Net Income
Net income rose $18.1 million or 16% for the quarter and $30.5
million or 17% for the first six months. Net income per share
was $0.90 for the quarter compared to $0.78 in 1993, an increase
of 15%. For the year-to-date, net income per share rose to $1.43
from $1.23 in 1993, a 16% increase. The weighted average number
of shares outstanding totaled 147,169,000 for the second quarter
of 1994 compared with 146,628,000 for the second quarter of 1993.
Average shares outstanding for the year-to-date totaled
147,146,000 for 1994 and 146,208,000 for 1993. The increase in
shares outstanding is due principally to the effect of shares
issued in connection with the acquisition of the Honolulu
Advertiser in 1993.
Liquidity and capital resources
Cash flow from operating activities totaled $358.3 million for
the first half of 1994 compared with $258.7 million a year ago.
Working capital totaled $103.7 million, down from $302.8 million
at the end of 1993.
Capital expenditures for the year-to-date totaled $68 million,
compared with $64 million in 1993. The Company's long-term debt
(commercial paper obligations) was reduced by $223 million from
operating cash flows in the first half of 1994. The Company's
regular quarterly dividend of $0.33 per share was declared in the
first and second quarters of 1994 and totaled $97.1 million.
During the second quarter, the Company announced it would resume
a 7.5 million share repurchase program, originally authorized in
1988. Approximately 4.5 million shares had been purchased prior
to 1994; more than one million shares have been purchased
recently.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
ASSETS June 26, 1994 Dec. 26, 1993
- ------ -------------- --------------
Current Assets:
Cash............................... $ 27,919,000 $ 32,461,000
Marketable securities.............. 15,550,000 43,034,000
Trade receivables, less allowance
(1994 - $16,319,000 ; 1993 -
$13,915,000)....................... 449,130,000 449,063,000
Other receivables.................. 31,786,000 135,036,000
Inventories (materials and supplies) 39,342,000 53,094,000
Prepaid expenses................... 51,060,000 45,269,000
------------- -------------
Total current assets............. 614,787,000 757,957,000
------------- -------------
Property, plant and equipment:
Cost............................... 2,841,029,000 2,794,610,000
Less accumulated depreciation...... (1,382,133,000) (1,316,341,000)
------------- -------------
Net property, plant and equipment.. 1,458,896,000 1,478,269,000
------------- -------------
Intangible and other assets:
Excess of cost of subsidiaries over
net tangible assets acquired, less
amortization (1994 - $419,123,000 ;
1993 - $396,915,000).............. 1,505,278,000 1,501,102,000
Other assets....................... 167,993,000 86,470,000
------------- -------------
Total intangible and other assets 1,673,271,000 1,587,572,000
------------- -------------
Total assets..................... $ 3,746,954,000 $ 3,823,798,000
============= =============
LIABILITIES & SHAREHOLDERS' EQUITY
- ----------------------------------
Current Liabilities:
Current portion of long-term debt.. $ 90,000 $ 164,000
Accounts payable and current portion
of film contracts payable......... 177,370,000 187,208,000
Compensation, interest and other
accruals.......................... 152,866,000 140,457,000
Dividend payable................... 48,495,000 48,399,000
Income taxes....................... 56,844,000 5,760,000
Deferred income.................... 75,409,000 73,151,000
------------- -------------
Total current liabilities....... 511,074,000 455,139,000
Deferred income taxes.............. 192,683,000 205,314,000
Long-term debt, less current portion 627,012,000 850,686,000
Retiree medical and life insurance. 312,157,000 308,024,000
Other long-term liabilities........ 85,294,000 96,715,000
------------- -------------
Total liabilities.................. 1,728,220,000 1,915,878,000
------------- -------------
Shareholders' Equity:
Preferred stock of $1 par value
per share. Authorized 2,000,000
shares, issued - none
Common stock of $1 par value per
share. Authorized 400,000,000
shares; issued 162,211,590 shares.. 162,212,000 162,212,000
Additional paid-in capital......... 69,504,000 70,938,000
Retained earnings.................. 2,478,548,000 2,366,246,000
Foreign currency translation
adjustment....................... (11,643,000) (9,442,000)
------------- -------------
Total.............................. 2,698,621,000 2,589,954,000
Less treasury stock - 15,072,551
shares and 15,244,733 shares,
respectively, at cost............. (643,198,000) (643,787,000)
Deferred compensation related to
ESOP.............................. (36,689,000) (38,247,000)
------------- -------------
Total shareholders' equity...... 2,018,734,000 1,907,920,000
Total liabilities and ------------- -------------
shareholders' equity........... $ 3,746,954,000 $ 3,823,798,000
============= =============
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Thirteen weeks ended Twenty-six weeks ended
June 26, 1994 June 27, 1993 June 26, 1994 June 27, 1993
------------- ------------- ------------- -------------
Net Operating Revenues:
Newspaper advertising............... $ 540,150,000 $ 513,226,000 $1,032,394,000 $ 978,298,000
Newspaper circulation............... 212,945,000 210,124,000 425,085,000 420,177,000
Broadcasting........................ 107,493,000 109,017,000 191,500,000 191,893,000
Outdoor advertising................. 63,181,000 63,987,000 110,102,000 111,812,000
Other............................... 43,112,000 41,415,000 84,425,000 80,319,000
----------- ----------- ------------- -------------
Total............................... 966,881,000 937,769,000 1,843,506,000 1,782,499,000
----------- ----------- ------------- -------------
Operating Expenses:
Cost of sales and operating expenses,
exclusive of depreciation.......... 516,083,000 517,941,000 1,032,507,000 1,027,318,000
Selling, general and administrative
expenses, exclusive of depreciation 168,458,000 166,242,000 334,403,000 329,249,000
Depreciation........................ 40,511,000 41,098,000 81,001,000 82,045,000
Amortization of intangible assets... 11,145,000 11,404,000 22,455,000 22,683,000
----------- ----------- ------------- -------------
Total............................... 736,197,000 736,685,000 1,470,366,000 1,461,295,000
----------- ----------- ------------- -------------
Operating income.................... 230,684,000 201,084,000 373,140,000 321,204,000
----------- ----------- ------------- -------------
Non-operating income (expense):
Interest expense.................... (10,729,000) (13,504,000) (21,897,000) (24,549,000)
Other............................... 1,418,000 1,848,000 2,441,000 3,340,000
----------- ----------- ------------- -------------
Total............................... (9,311,000) (11,656,000) (19,456,000) (21,209,000)
----------- ----------- ------------- -------------
Income before income taxes.......... 221,373,000 189,428,000 353,684,000 299,995,000
Provision for income taxes.......... 89,600,000 75,775,000 143,200,000 120,000,000
----------- ----------- ------------- -------------
Net income.......................... $ 131,773,000 $ 113,653,000 $ 210,484,000 $ 179,995,000
=========== =========== ============= =============
Net income per share................ $0.90 $0.78 $1.43 $1.23
=========== =========== ============= =============
Dividends per share................. $0.33 $0.32 $0.66 $0.64
=========== =========== ============= =============
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Twenty-six weeks ended
June 26, 1994 June 27, 1993
Cash Flows From Operating Activities: ------------- --------------
Net income................................. $210,484,000 $179,995,000
Adjustments to reconcile net income
to operating cash flows:
Depreciation............................. 81,001,000 82,045,000
Amortization of intangibles.............. 22,455,000 22,683,000
Deferred income taxes.................... (8,631,000) (9,064,000)
Gain on sale of assets................... (3,603,000) (1,035,000)
Other, net............................... 11,107,000 3,464,000
Changes in other assets & liabilities, net 45,438,000 (19,366,000)
------------- --------------
Net cash flow from operating activities.... 358,251,000 258,722,000
------------- --------------
Cash Flows From Investing Activities:
Purchase of property, plant and equipment.. (67,661,000) (64,035,000)
Payments for acquisitions, net of cash
acquired.................................. (29,140,000) (5,175,000)
Increase in other investments.............. (23,539,000)
Proceeds from sale of assets............... 49,958,000 13,037,000
Collection of long-term receivables........ 833,000 1,067,000
------------- --------------
Net cash used by investing activities...... (69,549,000) (55,106,000)
------------- --------------
Cash Flows From Financing Activities:
Proceeds from long-term debt............... 525,000,000
Payments of long-term debt................. (222,754,000) (645,276,000)
Dividends paid............................. (97,036,000) (93,101,000)
Common stock transactions, net............. 305,000 5,984,000
------------- --------------
Net cash used for financing activities..... (319,485,000) (207,393,000)
------------- --------------
Effect of currency exchange rate change.... (1,243,000) (179,000)
------------- --------------
Net decrease in cash and cash equivalents.. (32,026,000) (3,956,000)
Balance of cash and cash equivalents
at beginning of year...................... 75,495,000 73,329,000
------------- --------------
Balance of cash and cash equivalents
at end of second quarter.................. $43,469,000 $69,373,000
============= ==============
BUSINESS SEGMENT INFORMATION
Thirteen weeks ended Twenty-six weeks ended
June 26, 1994 June 27, 1993 June 26, 1994 June 27, 1993
------------- ------------- ------------- -------------
OPERATING REVENUES:
Newspaper publishing............. $796,207,000 $764,765,000 $1,541,904,000 $1,478,794,000
Broadcasting..................... 107,493,000 109,017,000 191,500,000 191,893,000
Outdoor advertising.............. 63,181,000 63,987,000 110,102,000 111,812,000
----------- ----------- ------------- -------------
$966,881,000 $937,769,000 $1,843,506,000 $1,782,499,000
=========== =========== ============= =============
OPERATING INCOME (net of depreciation
and amortization):
Newspaper publishing............. $200,097,000 $179,427,000 $342,756,000 $310,481,000
Broadcasting..................... 39,486,000 30,583,000 60,659,000 39,619,000
Outdoor advertising.............. 8,185,000 8,933,000 3,456,000 4,872,000
Corporate........................ (17,084,000) (17,859,000) (33,731,000) (33,768,000)
----------- ----------- ----------- -----------
$230,684,000 $201,084,000 $373,140,000 $321,204,000
=========== =========== =========== ===========
DEPRECIATION AND AMORTIZATION:
Newspaper publishing............. $37,570,000 $37,011,000 $75,143,000 $73,744,000
Broadcasting..................... 7,008,000 7,871,000 14,089,000 15,769,000
Outdoor advertising.............. 4,668,000 4,756,000 9,240,000 9,487,000
Corporate........................ 2,410,000 2,864,000 4,984,000 5,728,000
---------- ---------- ----------- -----------
$51,656,000 $52,502,000 $103,456,000 $104,728,000
========== ========== =========== ===========
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Annual Meeting of Shareholders of the Company was held on
May 3, 1994.
(c) At the Annual Meeting, the following four directors were re-
elected to the Board of Directors. Tabulation of votes for each
nominee is as follows:
For Withheld
Rosalynn Carter 126,414,412 1,885,104
Thomas A. Reynolds, Jr. 127,219,120 1,080,396
Carl T. Rowan 126,775,713 1,523,803
Dolores D. Wharton 126,638,555 1,660,961
The proposal to elect Price Waterhouse as the Company's
independent auditors was approved. A shareholder proposal for
executive compensation review was defeated. Tabulation of
votes for each proposal is as follows:
Broker
For Against Abstained Nonvotes
Election of
Independent
Auditors 127,832,987 222,319 243,836 0
Executive
Compensation
Review 5,242,750 110,369,393 4,651,456 8,035,917
Item 5. Other Information
For personal business reasons, John J. Louis, Jr. resigned as a Director
of the Company effective June 1, 1994. Mr. Louis served the Company as
a Director for over 11 years and the Company is grateful for his many
valuable contributions.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
See Exhibit Index for list of exhibits filed with this report.
Management contracts and compensatory plans or arrangements
are identified with an asterisk on the Exhibit Index.
(b) Reports on Form 8-K.
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GANNETT CO., INC.
Dated: August 9, 1994 s/ Larry F. Miller
------------------
Larry F. Miller
Senior Vice President/Financial
Planning and Controller
Dated: August 9, 1994 s/ Thomas L. Chapple
--------------------
Thomas L. Chapple
General Counsel and Secretary
EXHIBIT INDEX
Exhibit
Number Title or Description Location
- ------- -------------------- --------
4-1 $1,000,000,000 Revolving Incorporated by reference to
Credit Agreement among Exhibit 4-1 to Gannett Co.,
Gannett Co., Inc. and the Inc.'s Form 10-K for the fiscal
Banks named therein. year ended December 26, 1993.
4-2 Amendment Number One to Attached.
$1,000,000,000 Revolving Credit
Agreement among Gannett Co., Inc.
and the Banks named therein.
4-3 Indenture dated as of March 1, Incorporated by reference to
1983 between Gannett Co., Inc. Exhibit 4-2 to Gannett Co.,
and Citibank, N.A., as Trustee. Inc.'s Form 10-K for the fiscal
year ended December 29, 1985.
4-4 First Supplemental Indenture Incorporated by reference to
dated as of November 5, 1986 Exhibit 4 to Gannett Co., Inc.'s
among Gannett Co., Inc., Form 8-K filed on November 9, 1986.
Citibank, N.A., as Trustee, and
Sovran Bank, N.A., as Successor
Trustee.
4-5 Rights Plan. Incorporated by reference to
Exhibit 1 to Gannett Co., Inc.'s
Form 8-K filed on May 23, 1990.
10 Amendment to Directors' Attached.
Deferred Compensation
Plan. *
11 Statement re computation of Attached.
earnings per share.
Gannett Co., Inc. agrees to furnish to the Securities and Exchange
Commission, upon request, a copy of each agreement with respect to long-
term debt not filed herewith in reliance upon the exemption from filing
applicable to any series of debt which does not exceed 10% of the total
consolidated assets of the registrant.
* Represents a management contract or compensatory plan or arrangement.