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 30, 1997 or
_ Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from
_______ to _________
Commission file number 1-6961
GANNETT CO., INC.
(Exact name of registrant as specified in its charter)
Delaware 16-0442930
(state or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1100 Wilson Boulevard, Arlington, Virginia 22234
(Address of principal executive offices) (Zip Code)
(703) 284-6000
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if
changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No __
The number of shares outstanding of the issuer's Common Stock,
Par Value $1.00, as of March 30, 1997, was 141,548,444.
PART I. FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS
OPERATING SUMMARY
Operating income for the first quarter of 1997 rose $68.5
million or 36%. Newspaper publishing earnings were up
$60.2 million or 41% for the quarter reflecting stronger
advertising demand, lower newsprint prices, strong USA
TODAY operating results and a favorable comparison year to
year at The Detroit News.
Broadcasting earnings were up $7.4 million or 15%
reflecting strong demand for TV and radio advertising and
improved results at most of the Company's broadcasting
stations. Operating income for the Company's cable and
security businesses rose $1.6 million or 14% for the
quarter.
NEWSPAPERS
Reported newspaper publishing revenues rose $39.0 million
or 5% in the first quarter of 1997, which included a $36.7
million or 7% gain in advertising revenues. The tables
below provide, on a pro forma basis, further details of
newspaper ad revenue and linage and preprint distribution
for the first quarter of 1997 and 1996:
Advertising revenue, in thousands of dollars (pro forma)
First Quarter 1997 1996 % Change
-------- -------- --------
Local $195,510 $183,691 6
National 102,417 95,738 7
Classified 210,950 192,396 10
-------- -------- --
Total Run-of-Press 508,877 471,825 8
Preprint and
other advertising 84,277 83,084 1
-------- --------- --
Total ad revenue $593,154 $554,909 7
======== ======== ==
Advertising linage, in thousands of inches (pro forma)
First Quarter 1997 1996 % Change
------ ------ --------
Local 7,808 7,343 6
National 620 531 17
Classified 8,932 8,355 7
------ ------ --
Total Run-of-Press
linage 17,360 16,229 7
====== ====== ==
Preprint distribution 1,474 1,423 4
------ ------ --
In the pro forma presentation above, total advertising
revenues for the Company's newspapers rose 7% for the
quarter. Local ad revenues and volume increased 6% for the
quarter. Both the revenue and volume increases were broad
based with most newspapers recording gains in local
advertising. National ad revenues rose 7% for the quarter
on a volume increase of 17%. Significant gains in national
revenue were recorded by The Detroit News and USA TODAY.
Classified advertising revenues increased 10% for the
quarter on a volume increase of 7%. Most of the Company's
newspapers, including The Detroit News, recorded solid
gains in revenues and volume. Classified gains were
strongest in the employment and automotive categories.
Reported newspaper circulation revenues rose 2% for the
quarter. Net paid daily circulation for the Company's local
newspapers was down 1%, while Sunday circulation declined
2%. USA TODAY reported an average daily paid circulation
of 2,156,159 in the ABC Publisher's statement for the 26
weeks ended March 30, 1997, which, subject to audit, is a
2% increase over the comparable period a year ago.
Operating costs in total for the newspaper segment declined
$21.2 million or 3% for the quarter due to lower newsprint
prices. In total, newsprint expense declined 29% for the
quarter. Newsprint consumption rose 5%.
Newspaper operating income increased $60.2 million or 41%
for the quarter reflecting strong advertising gains
throughout the group, lower newsprint prices, strong USA
TODAY operating results and a favorable comparison year to
year at The Detroit News.
BROADCASTING
Reported broadcast revenues increased $8.9 million or 6%
for the first quarter, while operating costs were up $1.6
million or 2%.
Pro forma broadcasting revenues increased 7% for the
quarter. Pro forma local television ad revenues grew 12%,
while national revenues were even. Pro forma local radio
advertising revenues were up 19%, while national revenues
rose 30%.
Reported broadcast operating income rose $7.4 million or
15% for the quarter. Continued strong growth in demand for
TV and radio advertising, coupled with cost controls,
resulted in stronger earnings at most of the Company's
broadcasting stations.
In January, 1997 the Company concluded the transaction with
Argyle Television, Inc. to exchange WLWT-TV(NBC-Cincinnati)
and KOCO-TV(ABC-Oklahoma City) for WZZM-TV(ABC-Grand
Rapids/Kalamazoo/Battle Creek) and WGRZ-TV(NBC-Buffalo).
This exchange, which was necessary to comply with Federal
Communications Commission (FCC) cross-ownership rules, was
accounted for as a non-monetary transaction under which no
gain or loss was recognized. This exchange did not
materially affect broadcast operating results for the
quarter.
In April, 1997 the Company announced that it had entered
into an agreement to sell its remaining radio stations,
WGCI-AM/FM, Chicago, KHKS-FM, Dallas and KKBQ-AM/FM,
Houston, to Evergreen Media. The transaction is subject to
FCC and other government approvals and is expected to close
later this year.
CABLE AND SECURITY
Cable television and alarm security operating revenues rose
$4.9 million or 9% while operating expenses rose $3.3
million or 7% for the quarter. Operating income from cable
and security rose $1.6 million or 14%.
Cable revenues increased 8% as the number of basic cable
subscribers at quarter end increased 2% and the number of
pay subscribers decreased 4%. Alarm security revenue rose
12% and the number of alarm security subscribers at quarter
end increased 14%.
NON-OPERATING INCOME AND EXPENSE
Interest expense decreased $13.9 million or 35% for the
quarter reflecting the pay down of commercial paper
borrowings from operating cash flow.
PROVISION FOR INCOME TAXES
The Company's effective income tax rate was 41.3% for the
quarter versus 43.0% for the same quarter last year. The
decrease in the rate is primarily the result of the
statutory rate on expected earnings gains in 1997.
NET INCOME
Income from continuing operations rose $48.6 million or 56%
for the quarter. Earnings per share from continuing
operations rose to $0.96 from $0.62, an increase of 55%.
Net income rose $45.7 million or 51% for the quarter. Net
income per share rose to $0.96 from $0.64, an increase of
50%. In 1996, income from the discontinued outdoor and
entertainment operations was $2.9 million or $0.02 per
share.
The weighted average number of shares outstanding totaled
141,421,000 for the first quarter of 1997, compared to
140,680,000 for the first quarter of 1996. The increase in
the number of shares outstanding for the quarter is due
mainly to the issuance of shares upon the exercise of stock
options and the settlement of stock incentive rights.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow from operating activities as reported in the
accompanying Consolidated Statements of Cash Flows, totaled
$313 million for the first quarter, compared with $190 million a
year ago reflecting strong overall operating results.
Principal uses of cash flow in 1997 were capital
expenditures, reduction of debt and dividends.
Capital expenditures for the quarter totaled $40 million,
compared to $53 million in 1996. The Company's long-term
debt (commercial paper obligations) was reduced by $220
million in the quarter. The Company declared a dividend of
$0.36 per share or $51 million, which was paid on April 1,
1997.
At the end of the first quarter, the Company's long term
debt included $274 million of notes payable in March, 1998.
These notes, along with the Company's commercial paper
obligations, are supported by a $3.0 billion revolving
credit agreement with a term extending to November 12,
2000. As a result, these obligations are classified as
long-term debt.
OTHER MATTERS
First quarter expenses included the gift of the Niagara
Gazette newspaper to the Gannett Foundation. Subsequent to
the transfer, the Gannett Foundation sold the Niagara
Gazette so that the proceeds could be used to fund the
Foundation and its community grants. The sale also
resolved the FCC newspaper-television cross-ownership
issues that arose as a result of the company's acquisition
of a television station in Buffalo, New York.
CONSOLIDATED BALANCE SHEETS
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands of dollars
March 30, 1997 Dec. 29, 1996
------------- -------------
ASSETS
Cash $ 37,224 $ 27,179
Marketable securities 7,755 4,023
Trade receivables, less allowance
(1997 - $19,756; 1996 - $18,942) 494,280 569,095
Other receivables 37,878 47,850
Inventories 75,890 73,621
Prepaid expenses 35,776 44,837
------------ ------------
Total current assets 688,803 766,605
------------ ------------
Property, plant and equipment:
Cost 3,452,379 3,423,400
Less accumulated depreciation (1,474,203) (1,429,340)
------------ ------------
Net property, plant and equipment 1,978,176 1,994,060
------------ ------------
Intangible and other assets:
Excess of acquisition cost over
the value of assets acquired, less amortization
(1997 - $594,410; 1996 - $569,527) 3,376,250 3,393,931
Investments and other assets 201,667 195,001
------------ ------------
Total intangible and other assets 3,577,917 3,588,932
------------ ------------
Total assets $ 6,244,896 $ 6,349,597
============ ============
LIABILITIES & SHAREHOLDERS' EQUITY
Current maturities of long-term debt $ 23,126 $ 23,302
Accounts payable and current portion of film
contracts payable 227,775 261,838
Compensation, interest and other accruals 187,454 231,358
Dividend payable 50,802 51,890
Income taxes 120,622 46,098
Deferred income 111,582 104,510
------------ ------------
Total current liabilities 721,361 718,996
------------ ------------
Deferred income taxes 391,670 396,170
Long-term debt, less current portion 1,660,470 1,880,293
Postretirement medical and life insurance liabilities 302,896 301,729
Other long-term liabilities 142,202 121,591
------------ ------------
Total liabilities 3,218,599 3,418,779
------------ ------------
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 162,210,366 shares 162,210 162,210
Additional paid-in capital 87,056 86,126
Retained earnings 3,738,812 3,654,681
------------ ------------
Total 3,988,078 3,903,017
------------ ------------
Less treasury stock - 20,661,922 shares and
20,892,661 shares respectively, at cost (932,589) (942,609)
Deferred compensation related to ESOP (29,192) (29,590)
------------ ------------
Total shareholders' equity 3,026,297 2,930,818
------------ ------------
Total liabilities and shareholders' equity $ 6,244,896 $ 6,349,597
============ ============
CONSOLIDATED STATEMENTS OF INCOME
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands of dollars (except per share amounts)
Thirteen weeks ended % Inc
March 30, 1997 March 31, 1996 (Dec)
Net Operating Revenues:
Newspaper advertising $ 593,552 $ 556,885 6.6
Newspaper circulation 233,370 229,417 1.7
Broadcasting 150,606 141,688 6.3
Cable & Security 61,546 56,612 8.7
Other 37,683 39,281 (4.1)
------------- ------------- -----
Total 1,076,757 1,023,883 5.2
------------- ------------- -----
Operating Expenses:
Cost of sales and operating expenses,
exclusive of depreciation 566,522 590,515 (4.1)
Selling, general and administrative
expenses, exclusive of depreciation 174,791 168,707 3.6
Depreciation 49,782 48,837 1.9
Amortization of intangible assets 24,842 23,515 5.6
------------- ------------- -----
Total 815,937 831,574 (1.9)
------------- ------------- -----
Operating income 260,820 192,309 35.6
------------- ------------- -----
Non-operating income (expense):
Interest expense (25,618) (39,528) 35.2
Other (5,088) (1,583) (221.4)
------------- ------------- -----
Total (30,706) (41,111) 25.3
------------- ------------- -----
Income before income taxes 230,114 151,198 52.2
Provision for income taxes 95,050 64,750 46.8
------------- ------------- -----
Income from continuing operations 135,064 86,448 56.2
Discontinued operations:
Income from discontinued operations,
net of income taxes 2,902 (100.0)
------------- ------------- -----
Net income $ 135,064 $ 89,350 51.2
============= ============= =====
Earnings per share:
Earnings from continuing operations $0.96 $0.62 54.8
Earnings from discontinued
operations, net of tax 0.02 (100.0)
----- ----- -----
Net income per share $0.96 $0.64 50.0
===== ===== =====
Dividends per share $0.36 $0.35 2.9
===== ===== =====
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands of dollars
Thirteen weeks ended
March 30, 1997 March 31, 1996
Cash flows from operating activities
Net income $ 135,064 $ 86,448
Adjustments to reconcile net income to
operating cash flows:
Discontinued operations 0 2,902
Depreciation 49,782 48,837
Amortization of intangibles 24,842 23,515
Deferred income taxes (4,500) (5,672)
Other, net 107,535 34,057
--------- ---------
Net cash flow from operating activities 312,723 190,087
--------- ---------
Cash flows from investing activities
Purchase of property, plant & equipment (40,263) (53,180)
Change in other investments (2,025) (8,500)
Proceeds from sale of certain assets 864 3,907
Collection of long-term receivables 2,407 425
--------- ---------
Net cash used for investing activities (39,017) (57,348)
--------- ---------
Cash flow from financing activities
Payments of long-term debt (219,999) (89,033)
Dividends paid (50,731) (49,246)
Proceeds from issuance of common stock 10,801 9,431
--------- ---------
Net cash used for financing activities (259,929) (128,848)
--------- ---------
Net increase in cash and cash equivalents 13,777 3,891
Balance of cash & cash equivalents at
beginning of year 31,202 46,985
--------- ---------
Balance of cash and cash equivalents at
end of first quarter $ 44,979 $ 50,876
========= =========
BUSINESS SEGMENT INFORMATION
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands of dollars
Thirteen weeks ended % Inc
March 30, 1997 March 31, 1996 (Dec)
Operating Revenues:
Newspaper publishing $ 864,605 $ 825,583 4.7
Broadcasting 150,606 141,688 6.3
Cable and Security 61,546 56,612 8.7
-------------- -------------- -----
Total $ 1,076,757 $ 1,023,883 5.2
============== ============== =====
Operating Income:
(net of depreciation and amortization)
Newspaper publishing $ 207,194 $ 146,971 41.0
Broadcasting 57,400 50,039 14.7
Cable and Security 13,365 11,717 14.1
Corporate (17,139) (16,418) (4.4)
-------------- -------------- -----
Total $ 260,820 $ 192,309 35.6
============== ============== =====
Depreciation and Amortization:
Newspaper publishing $ 41,149 $ 40,716 1.1
Broadcasting 14,812 13,119 12.9
Cable and Security 16,493 15,961 3.3
Corporate 2,170 2,556 (15.1)
-------------- -------------- -----
Total $ 74,624 $ 72,352 3.1
============== ============== =====
Operating Cash Flow:
Newspaper publishing $ 248,343 $ 187,687 32.3
Broadcasting 72,212 63,158 14.3
Cable and Security 29,858 27,678 7.9
Corporate (14,969) (13,862) (8.0)
-------------- -------------- -----
Total $ 335,444 $ 264,661 26.7
============== ============== =====
NOTE:
Operating Cash Flow represents operating income for each of the Company's
business segments plus related depreciation and amortization expense.
NOTE TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
March 30, 1997
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 30, 1997, and the comparative periods of 1996
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.
(i) Current Report on Form 8-K dated January 14, 1997
in connection with the exchange of radio stations
for a television station, the sale of Multimedia
Entertainment, and restatement of financial
statements.
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 8, 1997 /s/
----------------------------------------
Larry F. Miller
Senior Vice President/Financial
Planning and Controller
Dated: May 8, 1997 /s/
----------------------------------------
Thomas L. Chapple
Senior Vice President, General
Counsel and Secretary
EXHIBIT INDEX
Exhibit
Number Title or Description Location
3-1 By-laws of Gannett Co., Attached.
Inc. [reflects all
amendments through
May 6, 1997]
4-1 $1,000,000,000 Revolving Incorporated by reference
Credit Agreement among to Exhibit 4-1 to Gannett
Gannett Co., Inc. and Co., Inc.'s Form 10-K for
the Banks named therein. the fiscal year ended
December 26, 1993.
4-2 Amendment Number One to Incorporated by reference
$1,000,000,000 Revolving to Exhibit 4-2 to Gannett
Credit Agreement among Co., Inc.'s Form 10-Q for
Gannett Co., Inc. and the fiscal quarter ended
the Banks named therein. June 26, 1994.
4-3 Amendment Number Two to Incorporated by reference
$1,500,000,000 Revolving to Gannett Co., Inc.'s
Credit Agreement among Form 10-K for the fiscal
Gannett Co., Inc. and year ended December 31,
the Banks named therein. 1995.
4-4 Amendment Number Three Incorporated by reference
to $3,000,000,000 to Exhibit 4-4 to Gannett
Revolving Credit Co., Inc.'s Form 10-Q for
Agreement among Gannett the fiscal quarter ended
Co., Inc. and the Banks September 29, 1996.
named therein, dated as
of August 20, 1996.
4-5 Indenture dated as of Incorporated by reference
March 1, 1983 between to Exhibit 4-2 to Gannett
Gannett Co., Inc. and Co., Inc's Form 10-K for the
Citibank, N.A., as fiscal year ended
Trustee. December 29, 1985.
4-6 First Supplemental Incorporated by reference
Indenture dated as of to Exhibit 4 to Gannett
November 5, 1986 among Co., Inc.'s Form 8-K filed
Gannett Co., Inc., on November 9, 1986.
Citibank, N.A., as
Trustee, and Sovran
Bank, N.A., as
Successor Trustee.
4-7 Second Supplemental Incorporated by reference
Indenture dated as of to Exhibit 4 to Gannett Co.,
June 1, 1995 among Inc.'s Form 8-K filed
Gannett Co., Inc., June 15, 1995
NationsBank, N.A., as
Trustee, and Crestar
Bank, as Trustee.
4-8 Rights Plan. Incorporated by reference
to Exhibit 1 to Gannett Co.,
Inc.'s Form 8-K filed on
May 23, 1990.
10-1 Amended and Restated Incorporated by reference to
Gannett Co., Inc. Exhibit 10-1 to Gannett Co.,
Deferred Compensation Inc.'s Form 10-Q for the
Plan. fiscal quarter ended
September 29, 1996.
11 Statement re computation Attached.
of 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.