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 26, 1995 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 March 26, 1995 was 140,088,867.
PART I. FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS
Operating Summary
Income from operations for the first quarter of 1995 rose $14.7
million or 10%, reflecting gains in all three divisions.
Newspaper earnings rose 6%, despite sharp increases in newsprint
costs, due to continued strength in classified advertising
coupled with cost containment efforts. Improved broadcast
earnings, which rose 24%, resulted principally from television
advertising revenue growth. The outdoor division also improved,
reducing its first quarter seasonal loss by 40% from the
comparable period a year ago.
Newspapers
Newspaper publishing revenues rose $20.5 million or 3% in the
first quarter of 1995. Newspaper advertising revenue rose $24.5
million or 5% in the quarter, reflecting continued gains in
classified advertising, particularly in employment and
automotive.
The tables below provide, on a pro forma basis, further details
of newspaper ad revenue and linage for the first quarters of 1995
and 1994:
Advertising revenue, in thousands of dollars (pro forma)
First quarter 1995 1994 % Change
Local $183,577 $181,001 1
National 80,048 75,758 6
Classified 177,314 158,245 12
Total Run-of-Press 440,939 415,004 6
Preprint and
other advertising 75,803 75,340 1
Total ad revenue $516,742 $490,344 5
Advertising linage, in thousands of inches (pro forma)
First quarter 1995 1994 % Change
Local 7,072 7,106 0
National 509 491 4
Classified 7,649 7,183 6
Total Run-of-Press 15,230 14,780 3
Preprint 13,863 13,561 2
Total ad linage 29,093 28,341 3
Newspaper circulation revenues for the quarter declined slightly.
Net paid daily circulation for the Company's local newspapers was
down less than 1%, while Sunday circulation declined 2%. USA
TODAY reported an average daily paid circulation of 2,055,809 in
the ABC Publisher's statement for the six months ended March 26,
1995, which, subject to audit, is a 2% increase over the
comparable period a year ago.
Operating costs in total for the newspaper segment rose $12.5
million or 2% for the quarter. Newsprint expense increased 14%,
reflecting significantly higher prices from a year ago. The
impact of newsprint price increases was partially offset by
newsprint conservation efforts, as consumption was below 1994
levels for the comparable period, and by cost controls in other
areas. Newsprint conservation efforts will continue, however,
the Company expects further newsprint price increases in
1995, which together with recent increases, will significantly
affect newsprint expense comparisons for the remainder of 1995.
Payroll costs rose 1% for the quarter.
Newspaper operating income rose $8.1 million or 6% for the first
quarter, due principally to ad revenue gains. Most of the
Company's local newspapers reported improved ad revenues and
operating income results. At USA TODAY, operating results were
even with last year.
Broadcast
Broadcast revenues increased $13 million or 15% for the quarter,
while operating costs were up $7.9 million or 13%. Operating
costs include certain program costs for the Company's Denver
television station related to its pending affiliation change to
NBC in July. On a pro forma basis, broadcast revenues increased
12% while operating costs increased 9%.
Pro forma local television ad revenues grew 11% while national
revenues increased 13%. Radio revenues increased 13%. Operating
income rose $5.1 million or 24%, reflecting strong gains at most
of the Company's television and radio stations.
Outdoor
Outdoor revenues increased $3.7 million or 8% for the quarter,
as strong demand boosted poster and bulletin sales and occupancy
rates. Operating costs were up $1.8 million or 3%. The outdoor
group reported a seasonal loss of $2.8 million, which was 40%
below 1994's first quarter loss of $4.7 million. Most of the
Company's outdoor operations reported improved earnings for the
quarter.
Non-operating Income and Expense
Interest expense increased $0.6 million or 5% for the first
quarter, reflecting higher average interest rates, partially
offset by lower average borrowings.
Net Income
Net income rose $7.5 million or 10% for the quarter. Net income
per share rose to $0.62 from $0.54, an increase of 15%. The
weighted average number of shares outstanding totaled 140,011,000
for the first quarter of 1995 compared with 147,123,000 for the
first quarter of 1994. The decline in the number of shares
outstanding reflects shares purchased under the Company's share
repurchase program during the second and third quarters of 1994.
Liquidity and capital resources
Cash flow from operating activities totaled $124.1 million for
the first quarter of 1995 compared with $142.3 million a year
ago. Principal uses of cash flow in the first quarter were for
capital expenditures, reduction of debt, dividends and pension
funding.
Capital expenditures for the quarter totaled $26.6 million,
compared with $28.1 million in 1994. The Company's long-term
debt (commercial paper obligations) was reduced by $82 million
from operating cash flow in the first quarter of 1995. Also
during the quarter, $60 million of debt payable in the first
quarter of 1996 was reclassified to current liabilities. The
Company's regular quarterly dividend of $0.34 per share, totaling
$47.6 million, was declared in the first quarter and paid on
April 1, 1995. A contribution of $45 million was made to the
Company's pension plan during the quarter.
The Company's Board of Directors previously authorized the
expenditure of up to $250 million for share repurchases.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
Mar. 26, 1995 Dec. 25, 1994
ASSETS
Cash $ 15,931,000 $ 44,229,000
Marketable securities 36,000 23,000
Trade receivables, less allowance
(1995 - $16,446,000 ; 1994 - $15,846,000) 433,550,000 487,615,000
Other receivables 30,538,000 29,745,000
Inventories 71,005,000 53,047,000
Prepaid expenses 29,529,000 36,178,000
Total current assets 580,589,000 650,837,000
Property, plant and equipment:
Cost 2,838,847,000 2,814,456,000
Less accumulated depreciation (1,424,557,000) (1,386,312,000)
Net property, plant and equipment 1,414,290,000 1,428,144,000
Intangible and other assets:
Excess of acquisition cost over the value
of assets acquired, less amortization
(1995 - $453,561,000; 1994 - $442,166,000) 1,461,314,000 1,472,002,000
Investments and other assets 196,541,000 156,069,000
Total intangible and other assets 1,657,855,000 1,628,071,000
Total assets $ 3,652,734,000 $ 3,707,052,000
LIABILITIES & SHAREHOLDERS' EQUITY
Current maturities of long-term debt $ 61,347,000 $ 1,026,000
Accounts payable and current portion of film
contracts payable 187,663,000 215,885,000
Compensation, interest and other accruals 141,898,000 148,506,000
Dividend payable 47,607,000 47,739,000
Income taxes 57,696,000 37,618,000
Deferred income 80,597,000 76,280,000
Total current liabilities 576,808,000 527,054,000
Deferred income taxes 160,208,000 164,691,000
Long-term debt, less current portion 624,842,000 767,270,000
Postretirement medical and life insurance liabilities 308,873,000 306,863,000
Other long-term liabilities 108,519,000 118,936,000
Total liabilities 1,779,250,000 1,884,814,000
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, issued 162,209,782 shares 162,210,000 162,212,000
Additional paid-in capital 74,152,000 76,604,000
Retained earnings 2,676,486,000 2,639,440,000
Foreign currency translation adjustment (11,286,000) (12,894,000)
Total 2,901,562,000 2,865,362,000
Less treasury stock - 22,120,915 shares and
22,444,480 shares respectively, at cost (993,961,000) (1,008,199,000)
Deferred compensation related to ESOP (34,117,000) (34,925,000)
Total shareholders' equity 1,873,484,000 1,822,238,000
Total liabilities and shareholders' equity $ 3,652,734,000 $ 3,707,052,000
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Thirteen weeks ended
Mar. 26, 1995 Mar. 27, 1994
Net Operating Revenues:
Newspaper advertising $ 516,742,000 $ 492,244,000
Newspaper circulation 211,964,000 212,140,000
Broadcasting 96,983,000 84,007,000
Outdoor advertising 50,596,000 46,921,000
Other 37,535,000 41,313,000
Total 913,820,000 876,625,000
Operating Expenses:
Cost of sales and operating expenses
exclusive of depreciation 534,222,000 516,424,000
Selling, general and administrative
expenses, exclusive of depreciation 171,777,000 165,945,000
Depreciation 39,259,000 40,490,000
Amortization of intangible assets 11,395,000 11,310,000
Total 756,653,000 734,169,000
Operating income 157,167,000 142,456,000
Non-operating income (expense):
Interest expense (11,732,000) (11,168,000)
Other (529,000) 1,023,000
Total (12,261,000) (10,145,000)
Income before income taxes 144,906,000 132,311,000
Provision for income taxes 58,700,000 53,600,000
Net income $ 86,206,000 $ 78,711,000
Net income per share $0.62 $0.54
Dividends per share $0.34 $0.33
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
Thirteen weeks ended
Mar. 26, 1995 Mar. 27, 1994
Cash flows from operating activities
Net Income $ 86,206,000 $ 78,711,000
Adjustments to reconcile net income to
operating cash flows:
Depreciation 39,259,000 40,490,000
Amortization of intangibles 11,395,000 11,310,000
Deferred income taxes (4,483,000) (4,134,000)
(Gain) loss on sale of assets 121,000 (56,000)
Other, net 21,119,000 21,714,000
Changes in other assets and liabilities, net (29,529,000) (5,729,000)
Net cash flow from operating activities 124,088,000 142,306,000
Cash flows from investing activities:
Purchase of property, plant and equipment (26,630,000) (28,082,000)
Increase in other investments (23,529,000)
Proceeds from sale or collection of other assets 1,279,000 18,121,000
Net cash used by investing activities (25,351,000) (33,490,000)
Cash flows from financing activities:
Payments of long-term debt (82,106,000) (108,985,000)
Dividends paid (48,023,000) (48,457,000)
Common stock transactions, net 3,136,000 2,298,000
Net cash used for financing activities (126,993,000) (155,144,000)
Effect of currency exchange rate changes (29,000) 270,000
Net decrease in cash and cash equivalents (28,285,000) (46,058,000)
Balance of cash and cash equivalents at
beginning of year 44,252,000 75,495,000
Balance of cash and cash equivalents at
end of first quarter $ 15,967,000 $ 29,437,000
BUSINESS SEGMENT INFORMATION
Thirteen weeks ended
Mar. 26, 1995 Mar. 27, 1994
OPERATING REVENUES:
Newspaper publishing $766,241,000 $745,697,000
Broadcasting 96,983,000 84,007,000
Outdoor advertising 50,596,000 46,921,000
----------- -----------
$913,820,000 $876,625,000
=========== ===========
OPERATING INCOME:
(Net of depreciation and amortization)
Newspaper publishing $150,741,000 $142,660,000
Broadcasting 26,240,000 21,173,000
Outdoor advertising (2,828,000) (4,729,000)
Corporate (16,986,000) (16,648,000)
----------- -----------
$157,167,000 $142,456,000
=========== ===========
DEPRECIATION & AMORTIZATION:
Newspaper publishing $36,724,000 $37,573,000
Broadcasting 7,064,000 7,081,000
Outdoor advertising 4,205,000 4,572,000
Corporate 2,661,000 2,574,000
----------- -----------
$50,654,000 $51,800,000
=========== ===========
NOTE TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
March 26, 1995
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 Form
10-K and annual report to shareholders. The financial
statements covering the 13 week period ended March 26, 1995,
and the comparative period of 1994, reflect all adjustments
which, in the opinion of the Company, are necessary for a fair
statement of results for the interim periods.
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) 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: May 9, 1995 s/ Larry F. Miller
------------------
Larry F. Miller
Senior Vice President/Financial Planning
and Controller
Dated: May 9, 1995 s/ Thomas L. Chapple
--------------------
Thomas L. Chapple
Senior Vice President/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 Gannett Exhibit 4-1 to Gannett Co., Inc.'s
Co., Inc. and the Banks named Form 10-K for the fiscal year
therein. ended December 26, 1993.
4-2 Amendment Number One to Incorporated by reference to
$1,000,000,000 Revolving Credit Exhibit 4-2 to Gannett Co., Inc.'s
Agreement among Gannett Co., Inc. Form 10-Q for the fiscal quarter
and the Banks named therein. ended June 26, 1994.
4-3 Indenture dated as of March 1, 1983 Incorporated by reference to
between Gannett Co., Inc. and Exhibit 4-2 to Gannett Co., Inc.'s
Citibank, N.A., as Trustee. 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., Citibank, Form 8-K filed on November 9,
N.A., as Trustee, and Sovran Bank, 1986.
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.
11 Statement re computation of Attached.
earnings per share.
27 Financial Data Schedule. Attached.
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.