TEGNA INC
10-Ks and 10-Qs
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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
ANNUAL REPORT
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
| þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 27, 2009
| o | 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
(State or Other Jurisdiction of Incorporation or Organization) |
16-0442930
(I.R.S. Employer Identification No.) |
|
| 7950 Jones Branch Drive, McLean, Virginia | 22107-0910 | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (703) 854-6000
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Name of Each Exchange on Which Registered | |
| Common Stock, par value $1.00 per share | The New York Stock Exchange |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.
Yes
þ
No
o
Indicate by check mark if the registrant is not required to file reports pursuant to Section
13 or Section 15(d) of the Act.
Yes
o
No
þ
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
þ
No
o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or
for such shorter period that the registrant was required to submit and post such files).
Yes
þ
No
o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation
S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K.
o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large
accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act (check one):
| Large accelerated filer þ | Accelerated filer o | Non-accelerated filer o | Smaller reporting company o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Act).
Yes
o
No
þ
The aggregate market value of the voting common equity held by non-affiliates of the
registrant based on the closing sales price of the registrant’s Common Stock as reported on The New
York Stock Exchange on June 26, 2009, was $874,868,691. The registrant has no non-voting common
equity.
As of January 31, 2010, 237,356,592 shares of the registrant’s Common Stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The definitive proxy statement relating to the registrant’s Annual Meeting of Shareholders to
be held on May 4, 2010, is incorporated by reference in Part III to the extent described therein.
INDEX TO GANNETT CO., INC.
2009 FORM 10-K
2009 FORM 10-K
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| Exhibit 32.1 | ||||||||
| Exhibit 32.2 | ||||||||
| EX-101 INSTANCE DOCUMENT | ||||||||
| EX-101 SCHEMA DOCUMENT | ||||||||
| EX-101 CALCULATION LINKBASE DOCUMENT | ||||||||
| EX-101 LABELS LINKBASE DOCUMENT | ||||||||
| EX-101 PRESENTATION LINKBASE DOCUMENT | ||||||||
| EX-101 DEFINITION LINKBASE DOCUMENT | ||||||||
2
Table of Contents
| ITEM 1. | BUSINESS |
Company Profile
Gannett was founded by Frank E. Gannett and associates
in 1906 and incorporated in 1923. The company went
public in 1967. It reincorporated in Delaware in 1972.
Its more than 237 million outstanding shares of common
stock are held by approximately 8,800 shareholders of
record in all 50 states and several foreign countries.
The company has approximately 35,000 employees
including 1,600 employees for CareerBuilder, LLC. Its
headquarters are in McLean, VA, near Washington, DC.
Gannett is an international media and marketing
solutions company. The company provides consumers with
the information they want and connects them to their
communities of interest through multiple platforms
including the Internet, mobile, newspapers, magazines
and TV stations. Gannett helps businesses grow by
providing marketing solutions that reach and engage
their customers across the company’s diverse platforms.
Gannett is an Internet leader with hundreds of
newspaper and TV web sites, reaching 27.3 million
unique users monthly; CareerBuilder.com, the nation’s
top employment site; USA TODAY.com; 80 local
MomsLikeMe.com sites; PointRoll, an industry leader in
rich media advertising solutions; and ShopLocal, a
leader in multichannel shopping and advertising
services. Gannett publishes 83 daily U.S. newspapers,
including USA TODAY, the nation’s largest-selling daily
print newspaper, and more than 650 magazines and other
non-dailies including USA WEEKEND. The company also
operates 23 television stations in 19 U.S. markets and
Captivate, which operates video screens in office
elevators in key urban markets. Gannett subsidiary
Newsquest is the United Kingdom’s second largest
regional newspaper company with 17 daily paid-for
titles, more than 200 weekly newspapers, magazines and
trade publications, and a network of web sites.
In broadcasting, the company’s 23 television
stations in 19 U.S. markets with a total market reach
of more than 20.9 million households cover 18.2% of
the U.S. population. Each of these stations also
operates locally oriented web sites offering news,
entertainment and advertising content, in text and
video format. Through its Captivate subsidiary, the
broadcasting group delivers news, information and
advertising to a highly desirable audience demographic
on video screens located in elevators of office towers
and select hotel lobbies across North America.
Gannett’s total Online U.S. Internet Audience in
January 2010 was 27.3 million unique visitors,
reaching about 13% of the Internet audience, as
measured by comScore Media Metrix.
Beginning in the third quarter of 2008 and
concurrent with the purchase of a controlling interest
in CareerBuilder, LLC, the leading U.S. employment web
site with expanding overseas operations, and
ShopLocal, a provider of online marketing solutions,
the company began reporting a separate Digital
segment.
In addition to CareerBuilder and ShopLocal, the
Digital segment also includes PointRoll, Planet
Discover, Schedule Star and Ripple6. Results from
CareerBuilder and ShopLocal were
initially consolidated in the third quarter of
2008. Results for PointRoll, Planet Discover and
Schedule Star, which had been reflected previously in
the Publishing segment, have been reclassified to the
Digital segment.
PointRoll and ShopLocal, now operating together,
provide online advertisers with rich media marketing
services, and have achieved significant revenue and
earnings gains. Ripple6, acquired in November 2008, is
a provider of technology platforms for social media
services for publishers and other users.
Complementing its core publishing, digital and
broadcasting businesses, the company has made
significant strides in its digital strategy through key
investments and partnerships in the online space. These
include a partnership investment in Classified
Ventures, which owns and operates the Cars.com and
Apartments.com web sites.
In 2008, the company made further strategic
investments in QuadrantONE, a new digital ad sales
network; Fantasy Sports Ventures, which operates a
group of fantasy sports content web sites; COZI Group,
which owns family organization software; and Livestream
(formerly Mogulus), an Internet broadcasting service
provider.
In late 2007, Metromix LLC was created, which is
a digital joint venture focusing on a common model for
local online entertainment sites, and then scaling the
sites into a national platform under the Metromix
brand.
Through its 2007 acquisition of Schedule Star LLC,
the company operates HighSchoolSports.net, a digital
content site serving the high school sports audience,
and the Schedule Star solution for local athletic
directors. National platform opportunities are being
developed from the many local footprints of this
business.
The company continues to evolve to meet the
demands of consumers and advertisers in the digital
environment and to optimize its opportunities at its
core publishing and broadcast operations.
The operating principles in place to achieve
these objectives include:
| • | Drive innovation through the company to create new digital offerings that either complement the company’s news and information businesses, or that take it into new markets with new audiences. |
| • | Improve the company’s core publishing and television operations through transformation of the company’s newsrooms into Information Centers. The Information Center concept has enhanced the company’s appeal to more customers in the markets that are served, with 24/7 updating and through several techniques and products, including video streaming, database information on wide-ranging topics and crowdsourcing to reflect information provided by the company’s audiences. While the company’s focus is on customer centricity, Information Center initiatives also fulfill the company’s responsibilities under the First Amendment. |
| • | Continue the development and enhancement of the ContentOne initiative, through which it expects to fundamentally change the way content is gathered, shared and sold. ContentOne’s focus is to reduce duplication of effort in developing and gathering content and enhancing the sharing of content across the company. A key objective is to view content as a product, with usefulness and value beyond its inclusion in the company’s newspapers, television broadcasts and web sites. ContentOne builds on the Information Center initiative by creating a national focal point that will serve all of the company’s businesses. |
| • | Continued focus on audience aggregation strategies through multiple products to achieve maximum reach and coverage in the company’s communities and better serve advertisers. |
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| • | Maximize the use and deployment of resources throughout the company. In 2009, the company continued its commitment to transforming its business activities, including more consolidation and centralization of functions that do not require a physical presence in the company’s markets. In this regard, the company has consolidated numerous production facilities and established centralized accounting, credit and collection functions which now serve nearly all domestic business operations. These efforts have achieved cost efficiencies and permitted improved local focus on content and revenue-producing activities and these efforts will continue to be aggressively pursued in 2010. |
| • | Employ a customer-centric approach to developing and selling integrated marketing campaigns through a newly created national, cross-divisional sales organization called CustomerOne Solutions. |
| • | Maintain the company’s strong financial discipline and capital structure, preserving its flexibility to make acquisitions, investments and affiliations. The company generated more than $850 million of cash flow from operating activities in 2009, in the face of a very difficult economy. As a result, during 2009 the company’s long-term debt was reduced by $755 million and at the end of the year the company’s senior leverage ratio was 2.63 times, well within the limit of 3.5 times designated by the company’s only financial covenant. The company also successfully refinanced approximately $760 million of its long term debt with new issuances, greatly improving and extending its debt maturity profile. |
| • | Strengthen the foundation of the company by finding, developing and retaining the best and the brightest employees through a robust Leadership and Diversity program. Gannett’s Leadership and Diversity Council has been charged with attracting and retaining superior talent and developing a diverse workforce that reflects the communities Gannett serves. |
Business segments:
The company has three principal
business segments: publishing, digital and
broadcasting. Beginning with the third quarter of 2008,
the company began reporting the new “Digital” business
segment, which includes CareerBuilder and ShopLocal
results from the dates of their full consolidation, on
Sept. 3, 2008 and June 30, 2008, respectively, as well
as PointRoll, Planet Discover, Schedule Star and
Ripple6 (from the date of its acquisition in November
2008). Prior period results for PointRoll, Planet
Discover and Schedule Star have been reclassified from
the publishing segment to the new digital segment.
Operating results from the operation of web sites that
are associated with publishing operations and broadcast
stations are reported in the publishing and broadcast
segments.
Financial information for each of the company’s
reportable segments can be found in the company’s
financial statements, as discussed under Item 7
“Management’s Discussion and Analysis of Financial
Condition and Results of Operations” and as presented
under Item 8 “Financial Statements and Supplementary
Data” of this Form 10-K.
The company’s 83 U.S. daily newspapers have a
combined daily paid circulation of approximately 5.7
million. They include USA TODAY, the nation’s
largest-selling daily print newspaper, with a
circulation of approximately 1.9 million. All U.S.
daily newspapers operate tightly integrated and robust
online sites.
The company operates a diverse business
portfolio, established through acquisitions and
internal development. Some examples of this
diversification are:
| • | CareerBuilder, the No. 1 employment web site in the U.S. |
| • | PointRoll, a leading rich media marketing company that provides Internet user-friendly technology, allowing advertisers to expand their online space and impact. |
| • | ShopLocal, a leader in multichannel shopping and advertising services. |
| • | Planet Discover, a provider of local, integrated online search and advertising technology. |
| • | MomsLikeMe, an internally developed national brand for social networking among moms-site users at the local level, supplemented with helpful information moms can use. |
| • | QuadrantONE, a digital ad sales network formed with three other top media companies. |
| • | Ripple6, a leading provider of technology platforms for social media services for publishers and other users. |
| • | USA WEEKEND, a weekly newspaper magazine carried by more than 650 local newspapers with an aggregate circulation reach of 23 million. |
| • | Clipper Magazine, a direct mail advertising magazine that publishes more than 560 individual market editions under the brands Clipper Magazine, Savvy Shopper and Mint Magazine in 30 states. |
| • | Army Times Publishing, which publishes military and defense newspapers. |
| • | Gannett Healthcare Group, publisher of bi-weekly Nursing Spectrum and NurseWeek periodicals specializing in nursing news and employment advertising, which reaches approximately 728,000 or about 30% of the registered nurses in the U.S. Gannett Healthcare Group also publishes Today in OT and Today in PT periodicals, and operates Pearls Review, a nursing certification and education web site. |
| • | Gannett Offset, a network of six commercial printing operations in the U.S. |
Newspaper partnerships:
The company owns a 19.49%
interest in California Newspapers Partnership, which
includes 19 daily California newspapers; a 40.64%
interest in Texas-New Mexico Newspapers Partnership,
which includes seven daily newspapers in Texas and New
Mexico and four newspapers in Pennsylvania; and a
13.5% interest in Ponderay Newsprint Company in the
state of Washington.
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Table of Contents
Joint operating agencies:
The company’s newspaper
subsidiary in Detroit participates in a joint operating
agency. The joint operating agency performs the
production, sales and distribution functions for the
subsidiary and another newspaper publishing company
under a joint operating agreement. Operating results
for the Detroit joint operating agency are fully
consolidated along with a charge for the minority
partner’s share of profits. Through May 2009, the
company also published the Tucson Citizen through the
Tucson joint operating agency in which the company held
a 50% interest. The company’s share of results for its
share of the Tucson operations were accounted for under
the equity method, and are reported as a net amount in
“Equity income (loss) in unconsolidated investee, net.”
Because of challenges facing the publishing industry,
combined with the difficult economy, particularly in
the Tucson area, the company ceased publication of the
Citizen on May 16, 2009. The company retained its
online site and 50% partnership interest in the joint
operating agency, which provides service to the
remaining non-Gannett newspaper in Tucson.
Prior to 2008, the company participated in a
joint operating agency in Cincinnati. Operating
results for the Cincinnati joint operating agency
were fully consolidated along with a charge for the
minority partner’s share of profits. Beginning in
2008, the company’s newspaper, The Cincinnati
Enquirer, became the sole daily newspaper in that
market.
Strategic investments:
In February 2009, the
company purchased a minority interest in Homefinder.
Homefinder is a leading national online marketplace
connecting homebuyers, sellers and real estate
professionals.
In November 2008, the company acquired Ripple6,
Inc., a leading provider of social media services for
publishers and other users. Ripple6 currently powers
Gannett’s MomsLikeMe.com site, which is in 80 local
markets across the country and has more than one
million moms visiting each month.
In August 2008, the company purchased Pearls
Review, Inc., a nursing certification and education
web site now operated within Gannett Healthcare
Group.
In July 2008, the company purchased a
minority stake in Livestream (formerly Mogulus,
LLC), a company that provides Internet
broadcasting services.
In May 2008, the company purchased a minority
stake in Cozi Group Inc. (COZI). COZI owns and
maintains family organization software aimed at busy
families.
In March 2008, the company purchased a minority
stake in Fantasy Sports Ventures (FSV). FSV owns a set
of fantasy sports content sites and manages advertising
across a group of affiliated sites.
In February 2008, the company formed
QuadrantONE, a new digital ad sales network, with
three other top media companies.
On Dec. 31, 2007, the company acquired X.com, Inc.
(BNQT.com). X.com, Inc. operates a digital media group
of affiliated sites covering eight different action
sports including surfing, snowboarding and
skateboarding. X.com is affiliated with the USA TODAY
Sports brand.
In October 2007, the company, in partnership with
Tribune Company, announced a digital joint venture to
expand a national network of local entertainment web
sites under the Metromix brand. The newly formed
company, Metromix LLC, focuses on a common model for
local online entertainment sites, and then scales the
sites into a national platform under the Metromix
brand.
In October 2007, the company acquired a
controlling interest in Schedule Star LLC, which
operates HighSchoolSports.net, a digital content site
serving the high school sports audience, and the
Schedule Star solution for local athletic directors.
In May 2007, Microsoft purchased a minority stake in
CareerBuilder and in a separate agreement, MSN and
CareerBuilder announced an extension of their
strategic alliance, making CareerBuilder the
exclusive content provider to the MSN Careers channel
in the U.S. through 2013. Additionally, MSN and
CareerBuilder broadened their alliance to include key
MSN international sites, facilitating an accelerated
expansion overseas for CareerBuilder.
The company owns a 23.6% stake in Classified
Ventures, an online business focused on real estate
and automotive advertising categories; and a 19.7%
interest in ShermansTravel, an online travel news,
advertising and booking service.
With these acquisitions and investments, the
company has established important business
relationships to leverage its publishing and online
assets and operations to enhance its online footprint,
revenue base and profits.
Publishing/United States
The company’s U.S. newspapers, including USA TODAY,
reach 13.0 million readers every weekday and 12.8
million readers every Sunday — providing critical news
and information from their customers’ neighborhoods and
around the globe. All of the company’s local domestic
daily newspapers also operate fully
integrated affiliated web sites, and USA TODAY operates
USATODAY.com.
At the end of 2009, the company operated 83 U.S.
daily newspapers, including USA TODAY, and about 650
non-daily local publications in 31 states and Guam.
The U.S. Community Publishing (USCP) division and USA
TODAY are headquartered in McLean, VA. At the end of
2009, U.S. Community Publishing had approximately
24,700 full- and part-time employees.
The company’s local newspapers are managed
through its U.S. Community Publishing division. These
newspapers are positioned in major, mid-size and small
markets; this geographical diversity is a core
strength of the company.
Gannett publishes in major markets such as
Phoenix, AZ; Indianapolis, IN; Cincinnati, OH; Des
Moines, IA; Nashville, TN; Asbury Park, NJ;
Louisville, KY; Westchester, NY; and Rochester, NY.
Mid-sized markets are represented by Poughkeepsie,
NY; Salem, OR; Fort Myers, FL; Appleton, WI; Palm
Springs, CA; Montgomery, AL; and Greenville, SC.
St. George, UT; Fort Collins, CO; Sheboygan, WI;
Iowa City, IA; and Ithaca, NY, are examples of smaller
markets.
USA TODAY was introduced in 1982 as the country’s
first national, general-interest daily newspaper. It
is produced at facilities in McLean, VA, and
transmitted via satellite to offset printing plants
around the country. It is printed at Gannett plants in
14 U.S. markets and commercially at offset plants, not
owned by Gannett, in 18 other U.S. markets.
In 2009, USATODAY.com continued to launch in-depth
communities, adding nine new vertical sites to
community sites that produce over 17 million page-views
per month and focus on users’ conversations and
preferences. USATODAY.com remains one of the most
popular newspaper sites on the web with more than 56
million visits per month at the end of 2009.
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Other businesses that complement, support or are
managed and reported within the publishing segment
include: USA WEEKEND, Clipper Magazine, Army Times
Publishing, Gannett Healthcare Group and Gannett
Offset. In 2009, Gannett News Service became part of
ContentOne; Gannett Retail Advertising Group represents
the company’s local newspapers in the sale of
advertising to national and regional franchise
businesses; Gannett Direct Marketing offers
direct-marketing services; and Gannett Media
Technologies International (GMTI) develops and markets
software and other products for the publishing industry
and provides technology support for the company’s
newspaper and web operations.
News and editorial matters:
Gannett Information
Centers create deep reach into their communities
through newspapers, web sites, mobile content and
niche/custom publications.
At a meeting of top editors in 2009, five key
content priorities were outlined for journalists
across the U.S. Community
Publishing Division to promote growth in audience
aggregation. The five priorities include:
| • | Enhance watchdog journalism, especially daily work. |
| • | Reposition web sites as the primary medium for breaking news and social networking. |
| • | Reposition daily newspapers to focus on depth, analysis and context. |
| • | Create superior Sunday editions of newspapers. |
| • | Enhance local sites’ position as community leaders. |
A cross-discipline task force studied the
changing needs of readers and advertisers to determine
priorities that would preserve the distinct value of
different mediums.
Digital journalism innovation remained a priority
in 2009. The news department created a presentation to
showcase how Gannett journalists use new technologies
and tools to deliver watchdog journalism to digital
readers. It was presented at several industry
conferences throughout 2009. A new digital news
executive position was created and filled to promote
experimentation and innovation in digital journalism.
The company’s domestic daily newspapers received
Gannett’s wire service in 2009 and subscribe to the
Associated Press. Some newspapers use supplemental
news services and syndicated features. The ContentOne
initiative helped to efficiently distribute content
between sites and maximize the use of Gannett content.
The company operates news bureaus in Washington,
DC; Chicago, IL; New York, NY; Los Angeles, CA; San
Francisco, CA; and four state capitals — Albany, NY;
Baton Rouge, LA; Trenton, NJ; and Tallahassee, FL.
In 2009, Gannett newspapers and journalists
received national recognition for excellent work.
The Detroit Free Press won a 2009 Pulitzer Prize
in Local Reporting for lead reporters Jim Schaefer’s
and M.L. Elrick’s investigation into Detroit Mayor
Kwame Kilpatrick’s abuses of office. The Detroit Free
Press also won the George Polk Award for Local
Reporting and the Worth Bingham Prize for Investigative
Journalism for the Kilpatrick story.
Jerry Mitchell, an investigative reporter for The
Clarion-Ledger at Jackson, MS, was awarded a $500,000
John D. and Catherine T. MacArthur Foundation grant
for 2009. These awards, often called “genius grants,”
honor people who have contributed to the betterment of
their communities. Mitchell also was awarded a new
McGill Medal for Journalistic Courage from the
University of Georgia for his longstanding commitment
to investigating unsolved civil rights killings.
Ken Stickney, managing editor of The News-Star in
Monroe, LA, won the 2008 ASNE Distinguished Writing
Award for Editorial Writing.
The News-Press at Fort Myers, FL, won an APME
Online Convergence award for the best use of its
print and online products.
Gannett sites were recognized in the annual
Online News Association awards competition:
| • | The Courier-Journal at Louisville, KY, finalist, multimedia feature presentation. |
| • | The Desert Sun at Palm Springs, CA, finalist, breaking news. |
| • | Military Times, winner, specialty site journalism. |
Among the national honors won by USA TODAY’s Blake
Morrison and Brad Heath for “The Smokestack Effect:
Toxic Air and America’s Schools” were the following:
Casey Media for Meritorious Journalism from Journalism
Center on Children & Families; Grantham Prize for
Excellence in Reporting on the Environment; National
Awards for Education Reporting from the Education
Writers Association; the Kevin Carmody Award for
Outstanding Investigative Reporting from the Society of
Environmental Journalism; the Philip Meyer Journalism
Award from the National Institute for Computer-Assisted
Reporting; American Legion’s Fourth Estate Award; and
John B. Oakes Award from The Journalism School at
Columbia University.
Christopher M. Hawley, Latin American
correspondent for USA TODAY and The Arizona Republic,
received a 2009 Gold Medal Maria Moors Cabot Prize for
Outstanding Reporting on Latin America and the
Caribbean.
The Indianapolis Star captured one of five silver
medals given in the Society for News Design’s Best of
Multimedia Competition.
Karen Magnuson of the Rochester Democrat and
Chronicle won the Robert G. McGruder Award for
Diversity Leadership.
Gannett Information Centers swept the APME
Awards First Amendment category. Winners included:
The Courier-Journal at Louisville, Rochester (NY)
Democrat and Chronicle and the Press-Citizen of Iowa
City.
Audience research:
As Gannett’s publishing
businesses continue their mission to meet consumers’
news and information needs anytime, anywhere and in any
form, the company remains focused on an audience
aggregation strategy. The company considers the reach
and coverage of multiple products in their communities
and measures the frequency with which consumers
interact with each Gannett product.
Results from 2009 studies indicate that many
Gannett publications are reaching more people more
often. For example, in Indianapolis, the combination
of all Gannett products reach 79% of the adult
population, an average of 5.4 times a week for 5.3
million total impressions each week — a 5% increase
since 2007.
The company has gathered audience aggregation
data for 51 Gannett markets and will continue to add
more data in 2010. Aggregated audience data allows
advertising sales staff to provide detailed
information to advertisers about how best to reach
their potential customers and the most effective
product combination and frequency. This approach
enables the company to increase its total advertising
revenue potential while maximizing advertiser
effectiveness. Six key advertiser segments were
identified and performance within each segment is
measured in every study. Through digital
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growth and
the development of ancillary products, Gannett
newspapers have maintained their high reach, reaching
approximately 70% or more of adults in each of the six
segments. The ad sales staff is continually trained on
how to best execute an audience-based selling
strategy.
Scarborough Research measures 81 of the nation’s
top markets. In its report on market penetration, the
number of adults in a community who access a
publication and its related web site, showed that 8 out
of 10 adults in the Rochester, NY, market in a given
week either read the print version of the Rochester
Democrat and Chronicle or visited its web site
(democratandchronicle.com), making it the top-ranked
newspaper in the country for integrated audience
penetration. Gannett had the top three newspapers for
weekly market penetration of the print edition
(Rochester, the Gannett Wisconsin Newspapers and The
Des Moines Register). The same three were top in
combined newspaper and web site penetration. These
markets are industry leaders because they understand
and aggressively pursue different audiences for
different platforms — true audience aggregation.
In addition to the audience-based initiative, the
company continues to measure customer attitudes,
behaviors and opinions to better understand its
customers’ web site use patterns and to use focus
groups with audiences and advertisers to better
determine their needs. In 2009, a research group in
the company launched an ongoing longitudinal study to
measure audience and sentiment of consumers in key
markets.
Circulation:
Detailed information about the
circulation of the company’s newspapers may be found
later in this Form 10-K. Circulation declined in nearly
all of the company’s newspaper markets, a trend
generally consistent with the domestic newspaper
industry.
Home-delivery prices for the company’s newspapers
are established individually for each newspaper and
range from $1.70 to $3.80 a week for daily newspapers
and $0.85 to $3.40 a copy for Sunday newspapers. Price
increases for certain elements of local circulation
volume were initiated at 35 newspapers in 2009.
In 2009, an automatic consumer e-mail response
process was developed, allowing newspapers to provide
confirmation to subscriber inquiries, orders and
concerns. There are three predominant ways for
consumers to communicate with the newspaper: speak with
a customer service representative; enter information
into the IVR (interactive voice response) phone system;
or access ICON (the customer service Internet site).
When customers choose the IVR or ICON, they often
follow up with a live call to a customer service
representative to confirm their transaction. The
automatic confirmation e-mail process eases the
customer’s concerns and reduces the call volume. This
new process also gives customer service representatives
a way to collect more e-mail addresses, as customers
will receive an e-mail confirmation when there is an
e-mail address on their account. As a result, the
percent of subscribers with e-mail addresses on their
accounts grew from 34% in January 2009 to 44% in
December 2009. Confirmation e-mails to subscribers grew by
60%, from an average of nearly 30,000 per week in
January to nearly 48,000 per week in December.
The company is moving aggressively forward with
the development, testing and product launch of
E-editions. E-editions are generally exact replicas of
print editions with the benefit of interactivity and
electronic navigation. During 2009, the company began
successfully offering E-edition subscription service
for USA TODAY and for the Detroit Free Press. In
addition, nearly all U.S. Community Publishing sites
have developed E-editions which are in the final test
stage and are being prepared as a primary product
offering in these markets.
At many of these locations, E-edition prototypes
have already been used during times when print
delivery problems have occurred because of weather
difficulties. Customers who register a “missed
delivery” and have an e-mail address on their account
are automatically sent an e-mail apology along with a
link and temporary access to the E-edition. When sites
know in advance that delivery is going to be
significantly delayed — due to bad weather conditions
— a mass e-mail is sent to all subscribers with an
e-mail address on account that notifies them about the
likely delay and includes a link with a temporary pass
to the E-edition. E-editions have also been used for
Newspapers in Education (NIE) purposes. Community
interest and response to development of E-editions
have been very favorable.
At the end of 2009, 67 of the company’s domestic
daily newspapers, including USA TODAY, were published
in the morning, and 16 were published in the evening.
For local U.S. newspapers, excluding USA TODAY,
morning circulation accounts for 96% of total daily
volume, while evening circulation accounts for 4%.
On Dec. 8, 2008, the single copy price of USA
TODAY at newsstands and vending machines was increased
from 75 cents to $1.00. Mail subscriptions are
available nationwide and abroad, and home, hotel and
office delivery is available in many markets.
Approximately 51% of its net paid circulation results
from single-copy sales at newsstands, vending machines
or to hotel guests, and the remainder is from home and
office delivery, mail, educational and other sales.
Advertising:
The company’s newspapers have
advertising departments that sell retail, classified
and national advertising across multiple platforms
including the print newspaper, online and niche
publications. In 2008, the company added a national ad
sales force to focus efforts on the largest national
advertisers. The company also contracts with outside
representative firms that specialize in the sale of
national ads. Ad revenues from newspaper affiliated
online operations are reported together with revenue
from print publishing.
Retail display advertising is associated with
local merchants or locally owned businesses. In
addition, retail includes regional and national chains
— such as department and grocery stores — that sell in
the local market.
Classified advertising includes the major
categories of automotive, employment, legal, real
estate/rentals and private party consumer-to-consumer
business for merchandise and services.
Advertising for classified segments is published
in the classified sections, in other sections within
the newspaper, on the company’s affiliated web sites
and in niche magazines that specialize in the segment.
National advertising is display advertising
principally from advertisers who are promoting national
products or brands. Examples are pharmaceuticals,
travel, airlines, or packaged goods. Both retail and
national ads also include preprints, typically
stand-alone multiple page fliers that are inserted in
the newspaper.
The company’s audience aggregation strategy gives
Gannett the ability to deliver specific audiences that
advertisers want. Although some advertisers want mass
reach, many want to target niche audiences by
demographics, geography, consumer buying habits or
customer behavior. Whether it is mass reach or a niche
audience, the company’s approach is to identify an
advertiser’s desired customers and develop advertising
schedules that combine products within the company’s
portfolio and best reach the desired audience with the
appropriate frequency. In 2009, the company expanded
the use of online reader panels for measuring
advertising recall and effective-
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ness in large
markets. The reader panels in 13 markets include
nearly 24,000 opt-in respondents who provide valuable
feedback regarding the return on investment (ROI) and
effectiveness of more than 2,100 advertisements and
1,000 news articles. Reader panels are also used to
identify consumer sentiment and trends. This
capability allowed the company to provide deeper
insights for its advertisers and ROI metrics that are
in high-demand from customers.
The company’s audience-based sales efforts have
been directed at all levels of advertisers, from small,
locally owned merchants to large, complex businesses.
Along with this new sales approach, the company has
intensified its sales and management training and
improved the quality of sales calls.
A major company priority is to restructure its sales organizations to match the needs of
customers while creating additional efficiencies to lower the cost of sale. The company’s
newspapers redesigned their sales teams around three general groups of customers: strategic
national, key local and small local controllable accounts. The structure aligns sales and support
resources to customers’ needs and provides efficient service and affordable packages to smaller
accounts and customized, innovative solutions to larger, more market driven clients. The structure
also includes digital specialists who expand the company’s online share in the local market for
retail and classified verticals, Cars.com, Homefinder.com and CareerBuilder.com and product
specialists in the company’s larger markets who focus on growing niche advertisers in non-daily
publications.
To better serve top local customers and win more market share, the company is creating
Regional Client Solutions Groups. Functioning much like local ad agencies, the groups will develop
highly designed creative campaigns to give customers a competitive edge in the marketplace.
The national newspaper ad sales team is
responsible for large national retail accounts. These
resources give national customers one point of contact
for all Gannett markets, enable the company to have
more strategic conversations, allow the company to
respond better to customers’ needs, and permit local
newspaper sales personnel to focus on advertisers in
their markets.
This national team works with the national
sales resources for Digital, Broadcast and USA
TODAY, and together, they become CustomerOne, a team
that can create multi-market, multi-platform
solutions for national advertisers scalable across
the country.
Digital operations:
The company’s local newspaper
web sites achieved significant growth in audience reach
in 2009, as page views were up 4%, and visitors rose 9%
as measured internally. In 2010, in coordination with
the Digital division, the company’s web sites will be
redesigned to create a more relevant and enjoyable
experience for users, drive audience growth, and
establish unique marketing opportunities for
advertisers.
Important executive appointments were made in
January 2008 with Chris D. Saridakis named as senior
vice president and chief digital officer, responsible
for expanding and enriching the company’s global
digital operations. Also, Jack A. Williams was named
president of Gannett Digital Ventures, which oversees
Gannett’s portfolio of online classified companies,
including CareerBuilder, that operate as affiliates of
the company’s local publishing businesses and other
diversified businesses.
Online platform and infrastructure improvements
were made throughout 2008 that now allow Gannett to
sell its advertising inventory as a network. In 2009,
the company initiated sales efforts to more
effectively monetize network inventory; these efforts
will continue in 2010.
The overriding objective of the company’s online
strategy at Gannett newspapers is to provide compelling
content that best serves its customers. A key reason
customers turn to a Gannett newspaper’s online site is
to find local news and information. The credibility of
the local newspaper, a known and trusted information
source, extends to the newspaper’s web site and thus
differentiates the web site from other Internet sites.
This factor allows Gannett newspapers to compete
successfully as Internet information providers.
A second objective in the company’s online
business development is to maximize the natural
synergies between the local newspaper and local web
site. The local content, customer relationships, news
and advertising sales staff, and promotional
capabilities are all competitive advantages for
Gannett. The company’s strategy is to use these
advantages to create strong and timely content, sell
packaged advertising products that meet the needs of
advertisers, operate efficiently and leverage the known
and trusted brand of the newspaper.
Gannett web sites for moms are an example of this
strategy. First launched in November 2006 at The
Indianapolis Star’s Indymoms.com, there now are 80
moms sites in the country, including a web site
serving each of the top 30 largest markets. The
management of 63 of those sites is spread across the
local U.S.
Community Publishing and broadcast markets with 17
centrally managed by Gannett Digital. In 2008, Gannett
created a national platform for its local moms site
under the MomsLikeMe.com brand, leveraging the robust
social networking features of Ripple6. The key to the
success of these sites is the online social networking
among moms-site users at the local level, supplemented
with helpful information moms can use. Many of the
discussions on moms sites are repurposed into pages of
the company’s print publications.
Online business activities also include efforts to
register users of Gannett web sites to obtain ZIP code,
age and gender. This
information allows the company to better
understand the customer needs and provide
better-defined groups for advertisers.
This strategy served Gannett well in the
development of the company’s newspaper Internet
efforts. The aggressive local focus, including
advertising sales efforts, combined with effective use
of national economies of scale and standardized
technology, resulted in significant improvements to
online operations and results in 2009.
GMTI provides technological support and products
for the company’s domestic newspapers and Internet
activities, including ad software and database
management, editorial production and archiving, and web
site hosting. In addition, GMTI provides similar
services to other newspaper companies.
Non-daily operations:
The publication of non-daily
products continued to be an important part of the
company’s market strategy for 2009. The company
publishes non-daily publications in the U.S. including
glossy lifestyle magazines, community newspapers and
publications catering to one topic, such as health or
cars. The company’s strategy for non-daily publications
is to appeal to key advertising segments (e.g. affluent
women, women with children or young readers). Non-daily
products help the company’s newspaper operations
increase overall impressions and frequency for
advertisers looking to reach specific audience segments
or in some cases, like community weeklies, provide a
lower price point alternative for smaller advertisers,
thus helping to increase the newspaper operation’s
local market share.
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In 2009, Gannett began publishing specialty
publications across several markets to take advantage
of market opportunities. The First-Time Homebuyers
Guide, pegged to the federal government’s home-buyer
tax credits, was a glossy booklet with uniform
editorial content and local advertising. It was mailed
to about 250,000 renters across 38 newspaper markets.
The publication was created jointly by U.S. Community
Publishing and ContentOne.
Production:
Product quality and efficiency
improvements continue in several areas as improved
technology has resulted in greater speed and accuracy.
That trend will continue in 2010 and further
consolidation of job functions across multiple
newspaper sites is expected.
In 2007, two Gannett Regional Toning Centers were
established to enhance print quality of the photos for
the majority of its newspapers. This operation was
expanded in 2009 with a commercial contract with
another large publisher to process their images and
the company looks to further expand on this revenue
opportunity in 2010.
Also in 2009, the scope of these two centers was
expanded as the company began the consolidation of
advertising production for the division in two Gannett
Production Centers, which will be completed in early
2011. These centers, in Des Moines and Indianapolis,
will allow Gannett to stay competitive as the objective
is to maintain high quality and service for advertisers
while improving efficiencies.
Eighty-two domestic daily newspapers are printed
by the offset process, and one is printed using the
letterpress process. This single remaining site will be
converted in 2010 to offset in a
Berliner format. At the end of 2009, the majority
of U.S. Community Publishing operations had converted
their presses to a 44-inch web. Additional conversions
to the 44-inch web will continue in 2010. Also in 2009,
88% of the company’s newsprint tonnage ordered was 45
gram newsprint and 6% was 43 gram, with testing planned
of the lighter-weight for additional sites. The
remainder of other newsprint weights used by the
company is principally for commercial printing
operations. Production of 51% of the company’s
newspapers is now out-sourced or insourced and they are
printed by commercial printers or other Gannett and
non-Gannett newspapers.
Competition:
The company’s newspapers and
affiliated web sites compete with other media for
advertising principally on the basis of their
performance in helping to sell the advertisers’
products or services. Newspapers also compete for
circulation and readership against other professional
news and information operations and amateur content
creators. While most of the company’s newspapers do not
have daily newspaper competitors that are published in
the same city, in select larger markets, there are
competitors. Most of the company’s newspapers compete
with other newspapers published in suburban areas,
nearby cities and towns, free-distribution and
paid-advertising publications (such as weeklies), and
other media, including magazines, television, direct
mail, cable television, radio, outdoor advertising,
telephone directories, e-mail marketing, web sites and
mobile-device platforms.
Web sites which compete for the principal
traditional classified advertising revenue streams
such as real estate, employment and automotive, have
had the most significant impact on the company’s
revenue results.
The rate of development of opportunities in, and
competition from, digital communications media,
including Internet and mobile platforms, is increasing.
Through internal development programs, acquisitions and
partnerships, the company’s efforts to explore new
opportunities in news, information and communications
business and audience generation will keep expanding.
The company continues to seek more effective ways to
engage with its local communities using all available
media platforms and tools.
Environmental regulation:
Gannett is committed to
protecting the environment. The company’s goal is to
ensure its facilities comply with federal, state,
local and foreign environmental laws and to
incorporate appropriate environmental practices and
standards in its operations.
The company is one of the industry leaders in the
use of recycled newsprint, increasing its purchases of
newsprint containing recycled content from 42,000
metric tons in 1989 to 324,798 metric tons in 2009.
During 2009, 69% of the company’s domestic newsprint
purchases contained recycled content, with an average
recycled content of 47%.
The company’s newspapers use inks, photographic
chemicals, solvents and fuels. The use, management and
disposal of these substances are sometimes regulated by
environmental agencies. The company retains a corporate
environmental consultant who, along with internal and
outside counsel, oversees regulatory compliance and
preventive measures. Some of the company’s newspaper
subsidiaries have been included among the potentially
responsible parties in connection with the alleged
disposal of ink or other wastes at disposal sites that
have been subsequently identified as requiring
remediation. Additional information about these matters
can be found in Item 3, Legal Proceedings, in this Form
10-K. The company does not believe that these matters
will have a material impact on its financial position
or results of operations.
Raw materials — U.S. & U.K.:
Newsprint, which is
the basic raw material used to publish newspapers, has
been and may continue to be subject to significant
price changes from time to time. During 2009, the
company’s total newsprint consumption was 610,000
metric tons, including the portion of newsprint
consumed at joint operating agencies, consumption by
USA WEEKEND, USA TODAY tonnage consumed at non-Gannett
print sites and consumption by Newsquest. Newsprint
consumption was 31% lower than in 2008. The company
purchases newsprint from 15 domestic and global
suppliers.
In 2009, newsprint supplies were adequate. The
company has and continues to moderate newsprint
consumption and expense through press web-width
reductions and the use of lighter basis weight paper.
The company believes that available sources of
newsprint, together with present inventories, will
continue to be adequate to supply the needs of its
newspapers.
The average cost per ton of newsprint consumed in
2009 declined 4% compared to 2008. Lower domestic
prices in 2009 were driven by a downturn in global
demand for newsprint. In 2010, the company expects
moderate price recovery in the U.S. but price declines
in the UK. Overall, the company expects favorable
newsprint price comparisons to continue at least
through the early part of 2010.
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Publishing/United Kingdom
Newsquest publishes 17 daily paid-for newspapers and
more than 200 weekly newspapers, magazines and trade
publications in the U.K., as well as a wide range of
niche products. Newsquest operates its publishing
activities around regional centers to maximize the use
of management, finance, printing and personnel
resources. This approach enables the group to offer
readers and advertisers a range of attractive products
across the market. The clustering of titles and,
usually, the publication of a free newspaper alongside
a paid-for newspaper, allows cross-selling of
advertising among newspapers serving the same or
contiguous markets, thus satisfying the needs of its
advertisers and audiences. Newsquest’s policy is to
produce free and paid-for newspapers with an
attractive level of quality local editorial content.
Newsquest also distributes a substantial volume of
advertising leaflets in the communities it serves.
Newsquest’s newspapers operate in competitive
markets. Their principal competitors include other
regional and national newspaper and magazine
publishers, other advertising media such as broadcast
and billboard, Internet-based news and other
information and communication businesses.
In 2009, Newsquest exited one of its commercial
printing units, Southernprint. Excluding this unit,
revenues for 2009 were approximately $563 million, down
26% on last year in local currency, reflecting the
recessionary economy. All revenue
categories declined in 2009, with advertising
sales declining 32% in local currency. As with U.S.
newspapers, advertising, including ad revenue from
online web sites affiliated with the publications, is
the largest component of Newsquest’s revenue,
comprising approximately 74%. Circulation represented
20% of revenue. Although experiencing declining
volumes, audited copy sales for Newsquest’s daily paid
for titles outperformed major competitor groups in the
first half of the year (the most recent period for
which audited data was available). Printing for
third-party newspaper publishers accounts for most of
the remainder of revenue.
While the main focus in 2009 has been cost
reduction which included the closure of a number of
titles and editions that were not contributing to
earnings, Newsquest’s specialist magazine unit launched
two new products: Pensions Insight and Fighting Fit,
magazines that complement its existing product
portfolio. In addition, Newsquest is in the second
round of consortia bidding for participation in the
trials of the U.K. government’s independently funded
news consortium (IFNC) plan to replace ITV’s regional
television news operation.
Significant restructuring in response to the
economic downturn saw the number of full-time and
part-time employees at Newsquest reduced to 5,100 at
year end, a decrease of 23% compared to 2008. Cost
reduction initiatives included the consolidation of a
number of back-office functions, particularly in
finance and pre-press and a continuation of outsourcing
non-core activities. Newsquest also implemented a
voluntary furlough program in 2009. Other initiatives
included further outsourcing of printing to third
parties combined with facility consolidation. Newsquest
closed an additional two press sites in Sussex and York
in 2009. These closures resulted in the number of
active press halls reducing to six, down from 11 at the
start of 2008. These press closures resulted in higher
production volume on the remaining more efficient and
modern presses. During 2009, all ongoing press sites
implemented web-width reduction projects, reducing web
widths by 5.3%.
Total costs finished 23% below 2008 in local currency.
Digital operations:
Newsquest actively seeks to
maximize the value of its local media brands through
digital channels. Newsquest’s most recent data
indicated that an average of 5.9 million unique users
accessed the Newsquest site network each month during
the period July — December 2009.
The group’s total online revenue declined by 20%
in local currency, reflecting recessionary conditions.
Online banner revenues from its newspaper web sites
rose 27% from 2008, propelled by improved selling
techniques and pricing. Newsquest’s use of mobile
communications continued to increase significantly
with the introduction of innovative news alert and
location-based services.
Newsquest owns half of the online employment web
site fish4jobs.co.uk. In October 2009, fish4
celebrated its 10th anniversary by being confirmed by
the National Online Recruitment Audience Survey
(“NORAS”) to be the U.K.’s biggest online job board,
with 3.2 million unique users — an audience total that
was 1.2 million users greater than the next largest.
A challenging employment market in Scotland faced
the wholly owned s1 job site business launched in 2001.
However, s1 remains a strong brand and has been voted
the best regional job site for the past six years in
the annual NORAS awards.
Digital operations — Publishing and Broadcasting
Gannett Digital’s mission is to provide its connected
audience with the most interactive, real time news and
information delivered to any digital device. The
company’s goal is to engage its local communities in a
way that creates conversations and empowers its
community members to connect and share common
interests. The company’s advertisers leverage Gannett’s
strong marketing services platform to gain access to
Gannett’s wide, diverse audience in order to
effectively brand and market their products.
The audience Gannett aggregates across the
company’s 100 plus newspaper and broadcast online
properties, combined with the unified ad serving
platform implemented in 2008, enables it to create a
large online ad network. In January 2010, Gannett’s
total online U.S. Internet audience was 27.3 million
unique visitors, reaching about 13% of the Internet
audience, as measured by comScore Media Metrix. In
prior years, the national sales team was primarily
focused on selling Gannett’s premium brands (i.e. USA
TODAY, MomsLikeMe.com, HighSchoolSports.net). Given
the scale across the company’s entire network, its
strategy in 2010 will extend its value proposition
beyond those premium brands to audience segments
through both contextual and behavioral targeting.
In order to drive audience growth, in 2010 the
company will begin a major redesign of the company’s
core newspaper and broadcast web sites that will not
only create a more relevant and enjoyable experience
for users, but also establish an infrastructure that
will allow for constant updates. This will allow the
company to be more nimble in making future changes to
its sites to benefit both users and advertisers. The
redesign project will add appropriate social and
contextual tools to create better experiences for users
and will establish unique advertising opportunities
that will deliver better engagement and enable stronger
connections between advertisers and consumers.
In 2009, the company continued to see benefits
from the rollout of the unified advertising serving
platform, including the establishment of more
comprehensive analytics and reporting. The company was
also able to more effectively monetize unsold
inventory.
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During 2009, the company continued to execute on
the company’s vertical strategy of growing niche
audiences. The MomsLikeMe.com network showed strong
growth in 2009; unique visitors, as measured by
comScore, grew from 592,000 in December 2008 to 736,000
in December 2009. Beyond growing Gannett’s audience,
the company made significant progress attracting
premier national advertisers, such as Proctor and
Gamble, Unilever and Target, to the MomsLikeMe.com
brand. In combination with Ripple6, which powers the
MomsLikeMe.com sites, the company is able to offer
innovative marketing solutions, such as Brand
Communities and Social Insights programs, that allow
for unique opportunities for marketers to interact
directly with moms. This provides a compelling value
proposition beyond
traditional banner advertising as a way to
effectively monetize social media.
Video, both on-demand and live, remained a focus
during 2009. The company successfully transitioned to a
new video platform, Brightcove, which offers increased
monetization capabilities, a better user experience and
a more streamlined process for the company’s
publishers. Gannett’s newspaper and broadcast
properties leveraged Livestream (formerly Mogulus) to
deliver compelling live video for users, including over
2 million minutes of local election night coverage in
Asbury Park, New Jersey and a live birth through the
Twin Cities MomsLikeMe.com site. As video represents a
key growth area in the online marketplace, in 2010 the
company will remain focused on both video content
development and monetization.
As Gannett continues to innovate and build its digital footprint on the web, it continues to
invest in the next digital medium, mobile. Mobile traffic across all of Gannett’s properties, as
measured by advertising impressions through ADTECH, increased over 200% year over year in December
2009 to 78 million impressions. USA TODAY launched an application for Android in March and a new
iPhone travel application, AutoPilot, in October. Combined with the USA TODAY iPhone application
launched in 2008, total application downloads have reached over 2.8 million as of Dec. 31, 2009. At
the company’s local newspaper and broadcast markets, mobile advertising sales (text and display),
were a bright spot in 2009. Gannett’s text messaging program, in collaboration with 4INFO and
TextCaster, is now live in 95 markets and in December 2009 there were approximately 6.2 million
messages sent (up 88.5% year over year) to 224,000 subscribers (up 109.5%).
Going forward, Gannett Digital will continue to invest in operations to remain competitive and
efficient, and, as noted above, will build out and refine the company’s sales efforts to drive
revenue growth. By leveraging impressive content and audience assets and combining them with
technology platforms, Gannett intends to create the next generation of online advertising.
Digital segment
Beginning with 2008, a new digital business segment
was reported, which includes CareerBuilder and
ShopLocal from the dates of their full consolidation,
as well as PointRoll, Planet Discover, Schedule Star
and Ripple6 (from the date of its acquisition in
November 2008). Prior period results for PointRoll,
Planet Discover and Schedule Star have been
reclassified from the publishing segment to the new
digital segment. At the end of 2009, the digital
segment had approximately 2,100 full-time and
part-time employees.
On Sept. 3, 2008, the company increased its
ownership in CareerBuilder to 50.8% from 40.8%,
obtaining a controlling interest, and therefore, the
results of CareerBuilder beginning in September 2008
are now fully consolidated. On June 30, 2008, the
company increased its ownership in ShopLocal to 100%
from 42.5%, and from that date the results of ShopLocal
are now fully consolidated. Prior to these increased
investments, the company’s equity share of
CareerBuilder and ShopLocal results were reported as
equity earnings. Subsequent to the CareerBuilder
acquisition, the company reflects a noncontrolling
interest charge on its Statements of Income (Loss)
related to the other partners’ ownership interest.
CareerBuilder is the No. 1 employment web site in
North America and is rapidly expanding internationally.
Currently CareerBuilder operates web sites in 18
countries outside the U.S., including the U.K., France,
Spain, Germany, India and Greece, and is looking to
expand global operations further in 2010. CareerBuilder
revenue sources primarily include job postings and
related products sold to employers. Most of the
revenues are
generated by its own sales force but substantial
revenues are also earned through sales of employment
advertising placed with CareerBuilder’s owners’
affiliated newspapers.
CareerBuilder’s minority owners include The
McClatchy Company, Tribune Company and Microsoft, with
whom CareerBuilder has a long-term strategic marketing
agreement. CareerBuilder is headquartered in Chicago,
IL, and at the end of 2009, it had approximately 1,600
full-time and part-time employees.
ShopLocal, the retail division of PointRoll and
leader in multi-channel shopping services, connects
retailers with shoppers through innovative, effective
and measurable marketing solutions, enabling over 100
of the nation’s top retailers to deliver highly
interactive, targeted and engaging localized promotions
to shoppers through online circulars, display
advertising, search, social media, digital out of home
and mobile. The result is highly effective
communications that deliver the right message, to the
right person, at the right time. Pioneering the use of
the Internet for driving in-store sales with online
circulars, ShopLocal has spent the past decade
developing digital marketing solutions and building a
powerful publisher network that connects one-to-one
with shoppers. ShopLocal’s leading client base includes
Target, Best Buy, Home Depot, CVS, Albertsons and
Sears. ShopLocal is headquartered in Chicago, IL, and
is now operated together with PointRoll. Its revenues
and operating profit improved significantly in 2009.
11
Table of Contents
PointRoll is the leading provider of digital
marketing services and technology. PointRoll enables
effective digital marketing by delivering the art and
science of consumer engagement, allowing advertisers,
agencies and publishers to create, deliver and measure
interactive and action-inspiring online rich media
display, video, mobile, social, and search campaigns.
PointRoll provides the creative tools, insights and
analytics, distributed content, and expertise marketers
need to effectively engage consumers, make an
impression, and convert them into buyers and brand
supporters. Powering more than 50% of all rich media
campaigns online, PointRoll works with over 1,000
advertisers, thousands of online publishers and serves
over 110 billion ad impressions each year. Founded in
April 2000, PointRoll has been instrumental in the
evolution of digital engagement and has evolved beyond
the expandable banner ad to offer marketers the ability
to find consumers wherever they are across any digital
platform and deliver a relevant brand or direct
response experience, dramatically improving ad
effectiveness while gaining actionable insights. Recent
innovations include dynamic ad creation solution
AdControl, creative tool AdArchitect, HD video ads,
mobile rich media ads and several other best-of-breed
technologies. PointRoll is headquartered in
Conshohocken, PA, and maintains offices across the U.S.
and Canada. PointRoll’s revenue and operating profit
also improved significantly in 2009.
Planet Discover provides hosted search and
advertising services that allow clients to offer
consumers robust local information through search. Its
innovative technology enables clients to provide
specialized, private-label search functionality that
gives users a simple-to-use interface for finding all
the local information they need, and gives advertisers
valuable exposure to local consumers at that critical
time when purchases are considered. Planet Discover is
headquartered in Fort Mitchell, KY.
Schedule Star LLC is the No. 1 scheduling
solution for high school athletic departments and has
expanded HighSchoolSports.net into a top prep sports
media brand. HighSchoolSports.net’s hyper-local focus,
with a home page for over 16,000 U.S. high schools,
has attracted national brand marketers by connecting
them with a highly engaged audience of teens and moms,
and integrating custom solutions with unique features
like mobile game alerts, and content like the
10-episode video reality series called “The Ride,” and
Massey Ratings computer team rankings. Schedule Star
is headquartered in Wheeling, WV.
Ripple6 is a provider of social media technology
and services, providing both highly customized and
out-of-the-box solutions. The company delivers these as
software-as-a-service (SaaS) and generates revenue via
fees for the creation, customization, hosting and
management of its platform solution. Unique to Ripple6
is its patent-pending community syndication technology
that provides brands with a social marketing hub to
listen and engage with consumers and can connect all of
their social marketing efforts across multiple web
sites and social networks. In 2009, Ripple6 bolstered
its Social Analytics technology in order to provide
deeper community insights, and added a new turnkey
community product, Ripple6 On-Demand. These new
products provide clients with streamlined deployment of
Ripple6 solutions while reducing implementation costs.
In 2010, the company will be scaling the offering of
these solutions to major national brands and
advertisers. Ripple6 is headquartered in New York, NY.
Competition:
For CareerBuilder, the market for
online recruitment solutions is highly competitive with
a multitude of online and offline competitors.
Competitors include other employment related websites,
general classified advertising websites, professional
networking and social networking websites, traditional
media companies, Internet portals, search engines and
blogs. The barriers for entry into the online
recruitment market are relatively low and new
competitors continue to emerge. Recent trends include
the rising popularity of professional and social media
networking websites which have gained traction with
employer advertisers. The number of niche job boards
targeting specific industry verticals has also
continued to increase. CareerBuilder’s ability to
maintain its existing customer base and generate new
customers depends to a significant degree on the
quality of its services, pricing and reputation among
customers and potential customers.
For PointRoll, the market for rich media
advertising technology solutions is highly competitive
with a dozen or so main competitors. Competitors
include divisions of larger public media and technology
companies, and several earlier-stage independent rich
media, dynamic ad and video advertising technology
specialists. In addition, significant venture capital
investment dollars are currently being invested in the
broader advertising technology market. The barriers to
entry in the rich media market are moderate. Recent
trends include the entry of dynamic ad generation
specialists, the move towards automated creative design
tools, and the shift of video content online with
associated in-stream advertising opportunities.
Increasingly, marketers and their agencies are looking
for advertising technology providers that can scale
across media platforms, including rich media, video and
mobile. PointRoll’s ability to maintain and grow its
customer base
and revenue depends largely on its continued
product innovation, level of service quality, depth of
marketing analytics and ultimately the effectiveness of
its rich media advertising and resulting customer
satisfaction.
For ShopLocal, the market for digital store
promotions is highly competitive and evolving as
digital media transforms marketing programs. ShopLocal
competitors in the online circular space are also
numerous. Recent trends include the increasingly rapid
consumer media shift to digital formats and the growth
in research-online-buy-offline shopping behavior. These
are driving an evolution and eventual transformation of
marketing for the store which creates potential
challenges from traditional as well as new competitors.
The barriers to entry in the space are moderate.
ShopLocal’s ability to retain and grow its client base
and revenue depends largely on expansion of the types
of promotions managed, innovation in distribution
methods and continued high-quality service.
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Table of Contents
Regulation and Legislation
(for digital segment
businesses and digital operations associated with
publishing and broadcasting businesses)
:
The U.S.
Congress has passed legislation that regulates certain
aspects of the Internet, including content, copyright
infringement, user privacy, advertising and promotional
activities, taxation, access charges, liability for
third-party activities and jurisdiction. In addition,
federal, state, local and foreign governmental
organizations have enacted and also are considering
other legislative and regulatory proposals that would
regulate the Internet. Areas of potential regulation
include, but are not limited to, libel, electronic
contracting, pricing, quality of products and services
and intellectual property ownership. With regard to
PointRoll and ShopLocal, there also are legislative and
regulatory proposals that would regulate the Internet
related to behavioral advertising, which specifically
refers to the use of user behavioral data for the
creation and delivery of more relevant, targeted
Internet advertisements. While PointRoll and ShopLocal
leverage certain aspects of user behavioral data in
their solutions, the companies abide by all privacy
laws and regulations applicable to their businesses.
Broadcasting
At the end of 2009, the company’s broadcasting
division, headquartered in McLean, VA, included 23
television stations in markets with a total of more
than 20.9 million households covering 18.2% of the
U.S. population. The broadcasting division also
includes Captivate Network.
At the end of 2009, the broadcasting division had
approximately 2,500 full-time and part-time employees,
approximately 8% fewer than at the end of 2008,
reflecting efficiency and consolidation efforts.
Broadcasting revenues accounted for approximately 11%
of the company’s reported operating revenues in 2009,
2008 and 2007.
The principal sources of the company’s television
revenues are: 1) local advertising focusing on the
immediate geographic area of the stations; 2) national
advertising; 3) retransmission of the company’s
television signals on satellite and cable networks; 4)
advertising on the stations’ web sites; and 5) payments
by advertisers to television stations for other
services, such as the production of advertising
material. The advertising revenues
derived from a station’s local news programs make
up a significant part of its total revenues. Captivate
derives its revenue principally from national
advertising on video screens in elevators of office
buildings and select hotel lobbies. As of year-end,
Captivate had over 9,100 video screens located in 25
major cities across North America.
Advertising rates charged by a television station
are based on the ability of a station to deliver a
specific audience to an advertiser. The larger a
station’s ratings in any particular day part, the more
leverage a station has in asking for a price advantage.
As the market fluctuates with supply and demand, so
does the station’s pricing. Almost all national
advertising is placed through independent advertising
representatives. Local advertising time is sold by each
station’s own sales force.
Generally, a network provides programs to its
affiliated television stations and sells on its own
behalf commercial advertising announcements for certain
of the available ad spots within the network programs.
The company’s television stations produce local
programming such as news, sports, and entertainment
programming.
The company broadcasts local newscasts in High
Definition (HD) in 10 cities: Denver, CO; Washington,
DC; St. Louis, MO; Atlanta, GA; Cleveland, OH;
Minneapolis, MN; Phoenix, AZ; Tampa, FL; Sacramento,
CA; and Jacksonville, FL. These telecasts have been
well received given the dramatic increase in sales of
HD televisions.
For all of its stations, the company is party to
network affiliation agreements as well as cable and
satellite carriage agreements. The company’s three ABC
affiliates have agreements which expire on Feb. 28,
2014. The agreements for the company’s six CBS
affiliates expire on Dec. 31, 2015. The company’s 12
NBC-affiliated stations have agreements that expire on
Jan. 1, 2017. The company’s two MyNetworkTV-affiliated
stations have agreements that expire in October 2011.
In 2009, the company finalized a retransmission
agreement with one direct broadcast satellite
provider. Virtually all cable company, telephone
company and satellite company retransmission deals
were completed in 2008 and 2009. All are multi-year
agreements that provide the company with significant
and steady revenue streams in excess of $60 million of
cash annually. There are no incremental costs
associated with this revenue and therefore all of
these revenues contribute directly to operating
income. In 2010 the company has one retransmission
agreement with a direct broadcast satellite provider
that will expire, and it has finalized renewals of
agreements with two major telecommunication providers.
Federal law required all full-power television
broadcast stations to stop broadcasting in analog
format and convert to an all-digital format on June 12,
2009. Congress mandated the digital television (DTV)
transition, in part, because all-digital broadcasting
will free up frequencies for public safety
communications. The company was well prepared for the
DTV conversion. The broadcast division activated a
comprehensive consumer education plan beginning in the
fall of 2007. The educational campaign worked well and
the transition was a success. The company converted all
its full-power
television stations to all-digital operation in
compliance with the federal deadline.
The transition to DTV has provided the company
with opportunities to program additional television
channels in its markets (so-called “multicast” channels
that are made possible by increased efficiencies
associated with DTV transmissions). The company also is
very active in exploring ways to provide a Mobile DTV
service to viewers, including a commercial trial,
another service that is made possible due to the DTV
transition. There continue to be great advances in the
Mobile DTV area. For example, already 30 local
broadcast stations are on the air including WUSA,
Gannett’s station in Washington DC. A recent consumer
interest survey demonstrates strong consumer demand for
Mobile DTV with 90% of respondents expressing a strong
interest in this new service. Gannett continues to be
committed to bringing this important service to its
local communities.
Programming and production:
The costs of locally
produced and purchased syndicated programming are a
significant portion of television operating expenses.
Syndicated programming costs are determined based upon
largely uncontrollable market factors, including demand
from the independent and affiliated stations within the
market. In recent years, the company’s television
stations have emphasized their locally produced news
and entertainment programming in an effort to provide
programs that distinguish the stations from the
competition, to increase locally responsible
programming, and to better control costs.
13
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The company’s television stations continue to
refine their Information Centers with an emphasis on
using new technologies that allow more journalists to
be actively involved in the news gathering and
disseminating processes. The stations have aggressively
trained the rapidly growing number of Multi-Media
Journalists (MMJs), which has led to more enterprise
content and a more streamlined workflow. The unique,
local entertainment content for the company’s local
Metromix web sites has led to some special television
programming associated with that content and helps the
company reach a more diverse demographic. The
properties have also expanded the parenting information
and social networking capabilities of MomsLikeMe.com
and streamed the live birth of a baby on the site.
The broadcast division achieved quality
improvements and efficiencies by centralizing the
graphics production through the Gannett Graphics Group
(G3). Broadcasting is now developing information
technology tools to enable the sharing of weather
information and music across the group. The stations
are also moving toward an updated newsroom workflow
solution that allows them to share content seamlessly
throughout the entire company.
ContentOne has become an integral part of the day
to day operations of the stations. The Broadcast
Division is working closely with USA TODAY and U.S.
Community Publishing to share content on all platforms
and reduce the amount of repetition in the
news-gathering processes. The divisions have worked
together on breaking news, investigative reporting,
severe weather situations, political conventions and
elections, sports and many other day to day stories in
order to enhance and differentiate coverage that affect
Gannett’s customers locally, nationally and
internationally.
The Broadcast Division has established “hubbing
centers” for each of its three network affiliate groups
for master control monitoring. The majority of its ABC,
CBS and NBC stations are live in the master control hub
centers. The ABC and NBC hub is located in
Jacksonville, FL, and the CBS hub is in Greensboro, NC.
Operational efficiencies and cost reductions were
realized from these centers in 2009.
Broadcasting stations, too, were recognized with
several national awards, including KARE-TV at
Minneapolis-St. Paul, WGRZ-TV at Buffalo, NY, and
KSDK-TV in St. Louis, MO. They were presented with
National Edward R. Murrow Awards honoring outstanding
achievements in electronic journalism from the Radio
Television Digital News Association for a variety of
locally produced work.
Competition:
In each of its broadcasting markets,
the company’s stations and affiliated web sites
compete for revenues with other network-affiliated and
independent television and radio broadcasters and with
other advertising media, such as cable television,
newspapers, magazines, direct mail, outdoor
advertising and Internet media. The stations also
compete in the emerging local electronic media space,
which includes Internet or Internet-enabled devices,
handheld wireless devices such as mobile phones and
iPods and digital spectrum opportunities associated
with digital television (DTV). The company’s
broadcasting stations compete principally on the basis
of their audience share, advertising rates and
audience composition.
Local news and information is highly important to
a station’s success, and there is a growing emphasis on
other forms of programming that relate to the local
community. Network and syndicated programming
constitute the majority of all other programming
broadcast on the company’s television stations, and the
company’s competitive position is directly affected by
viewer acceptance of this programming. Other sources of
present and potential competition for the company’s
broadcasting properties include pay cable, home video
and audio recorders and players, direct broadcast
satellite, Internet-distributed video offerings,
low-power television, video offerings (both wire line
and wireless) of telephone companies as well as
developing video services.
Regulation:
The company’s television stations are
operated under the authority of the Federal
Communications Commission (FCC), the Communications Act
of 1934, as amended (Communications Act), and the rules
and policies of the FCC (FCC Regulations).
Television broadcast licenses are granted for
periods of eight years. They are renewable upon
application to the FCC and usually are renewed except
in rare cases in which a petition to deny, a complaint
or an adverse finding as to the licensee’s
qualifications results in loss of the license. The
company believes it is in substantial compliance with
all applicable provisions of the Communications Act and
FCC Regulations. All of the company’s stations have
converted to digital television operations in
accordance with applicable FCC regulations. Nine of the
company’s stations filed for FCC license renewals in
2004, eight did so in 2005, another five in 2006 and
the remaining station filed on Feb. 1, 2007. As of
February 2010, 18 of the 23 applications
were granted and the company expects the remaining
five pending renewals to be granted in the ordinary
course.
FCC Regulations also prohibit concentrations of
broadcasting control and regulate network and local
programming practices. FCC Regulations governing
multiple ownership limit, or in some cases prohibit,
the common ownership or control of most communications
media serving common market areas (for example,
television and radio; television and daily newspapers;
or radio and daily newspapers). In addition, the
Communications Act includes a national ownership cap
under which one company is permitted to serve no more
than 39% of all U.S. television households. (The
company’s 23 television stations currently reach 18.2%
of U.S. television households.) FCC rules permit
common ownership of two television stations in the
same market in certain circumstances provided that at
least one of the commonly owned stations is not among
the market’s top four rated stations at the time of
acquisition. It is under this standard that the
company acquired additional television stations in
Jacksonville, FL, Denver, CO, and Atlanta, GA.
On Dec. 18, 2007, the FCC revised its ownership
regulations by adopting a modified cross-ownership
rule. In adopting this new rule, the FCC granted a
waiver authorizing the company’s continued ownership of
both KPNX-TV and The Arizona Republic in Phoenix, AZ.
The new rule may be of limited value in permitting
expanded ownership opportunities because it contains
presumptions that (i) common ownership of a television
station and a daily newspaper may be permitted in the
top 20 television markets only if the television
station is not one of the top four rated stations, and
(ii) in all other television markets, common ownership
of a newspaper and television station in the same
market is not in the public interest. (Most of the
company’s stations are rated number one or two in their
markets.) Applicants for proposed combinations that are
presumed not to be in the public interest will be
required to satisfy specified criteria to rebut the
presumption against common ownership, including
demonstrating (i) the level of concentration in the
designated market area, (ii) a significant increase in
the amount of local news after the transaction, (iii)
the existence of separate editorial staffs; (iv) the
financial condition of either property if a newspaper
is financially troubled; and (v) the new owner’s
commitment to invest in newsroom operations. The
14
Table of Contents
FCC
did not revise any other aspect of the FCC ownership
rules. The FCC decision is subject to agency
reconsideration as well as review by a federal appeals
court. The appellate process could take up to two
years. In addition, the FCC has commenced a new review
of its ownership rules, and this review may result in
additional rule modifications. This review process is
expected to continue throughout 2010 and is likely to
be followed by court appeals.
Other FCC Regulations also have been proposed to
be amended by the agency, including rules and policies
concerning the specific amount and type of
public-interest programming required to be carried by
broadcast stations to satisfy their license obligations
and requirements concerning the disclosure of such
programming efforts.
Employees
At the end of 2009, the company and its subsidiaries
had approximately 35,000 full-time and part-time
employees including
1,600 for CareerBuilder. Headcount reductions were
made in 2009 as part of multiple efficiency and
consolidation efforts taken in response to recessions
in the U.S. and U.K. economies and declining revenues,
particularly in the company’s publishing businesses.
Approximately 13% of those employed by the company
and its subsidiaries in the U.S. are represented by
labor unions. They are represented by 78 local
bargaining units, most of which are affiliated with one
of seven international unions under collective
bargaining agreements. These agreements conform
generally with the pattern of labor agreements in the
publishing and broadcasting industries. The company
does not engage in industrywide or companywide
bargaining. The company’s U.K. subsidiaries bargain
with two unions over working practices, wages and
health and safety issues only.
The company provides competitive group life and
medical insurance programs for full-time domestic
employees at each location. The company pays a
substantial portion of these costs and employees
contribute the balance.
The company and its subsidiaries have various
retirement plans, including plans established under
some collective bargaining agreements.
The company has a 401(k) Savings Plan, which is
available to most domestic non-represented employees
and unionized employees who have bargained
participation in the plan in conjunction with the
Gannett Retirement Plan freeze noted below.
In June 2008, the Board of Directors approved
amendments to each of (i) the Gannett Retirement Plan;
(ii) the Gannett Supplemental Retirement Plan (SERP);
(iii) the Gannett 401(k) Savings Plan (401(k) Plan);
and (iv) the Gannett Deferred Compensation Plan (DCP).
The amendments were designed to improve the 401(k) Plan
while reducing the amount and volatility of future
pension expense. As a result of the amendments to the
Gannett Retirement Plan and SERP, most participants in
these plans had their benefits frozen as of Aug. 1,
2008. Participants whose Gannett Retirement Plan and,
if applicable, SERP benefits were frozen will have
their frozen benefits periodically increased by a cost
of living adjustment until benefits commence. Effective
Aug. 1, 2008, most participants whose benefits were
frozen under the Gannett Retirement Plan and, if
applicable, the SERP, receive higher matching
contributions under the 401(k) Plan. Under the new
formula, the matching contribution rate generally
increased from 50% of the first 6% of compensation that
an employee elects to contribute to the plan to 100% of
the first 5% of compensation. The company also makes
additional employer contributions to the 401(k) Plan on
behalf of certain long service employees. The DCP was
amended to provide for Gannett contributions on behalf
of certain employees whose benefits under the 401(k)
Plan are capped by IRS rules.
Newsquest employees have local staff councils for
consultation and communication with local Newsquest
management. Newsquest has provided the majority of its
employees with the option to participate in a
retirement plan that incorporates life insurance.
A key initiative for the company is its
Leadership and Diversity program that focuses on
finding, developing and retaining the best and the
brightest employees and a diverse workforce that
reflects the communities Gannett serves.
Environmental Initiatives
During 2009 the company continued to expand and
enhance “green” initiatives. In addition to continuing
the 2008 efforts of recycling, waste paper and
plastics, using recycled materials, reducing energy
consumption, using environmentally safe products and
maintaining “green” news sites to report environmental
news and provide tips to consumers, there was a
companywide effort to save energy. The “Ener-G-Smart”
campaign focused on encouraging employees to save
energy in the workplace in the following ways:
| • | Turn off unneeded lights. Use outside window light and desk lamps where possible. Replace incandescent bulbs with fluorescent bulbs where possible. |
| • | Remove personal portable heaters and refrigerators. |
| • | Use shared network printers instead of personal printers, and reduce paper printing when possible. |
| • | Adjust power settings on computers to put monitor on sleep mode after five minutes of inactivity and set the computer on standby after thirty minutes of inactivity. |
| • | Shut doors to the outside to keep in heat/air conditioning. |
These efforts have been successful and to date the
company has achieved significant reductions in energy
savings. The Gannett/USA TODAY Corporate headquarters
alone saved 20% in electricity usage in 2009 versus
2007.
15
Table of Contents
MARKETS WE SERVE
DAILY NEWSPAPERS AND AFFILIATED ONLINE SITES
| State | Circulation | |||||||||||||||||||
| Territory | City | Newspaper/Online site | Morning | Afternoon | Sunday | Founded | ||||||||||||||
| Alabama | Montgomery |
Montgomery Advertiser
|
36,009 | 44,354 | 1829 | |||||||||||||||
|
www.montgomeryadvertiser.com
|
||||||||||||||||||||
| Arizona | Phoenix |
The Arizona Republic
|
347,060 | 487,311 | 1890 | |||||||||||||||
|
www.azcentral.com
|
||||||||||||||||||||
| Arkansas | Mountain Home |
The Baxter Bulletin
|
9,961 | 1901 | ||||||||||||||||
|
www.baxterbulletin.com
|
||||||||||||||||||||
| California | Palm Springs |
The Desert Sun
|
42,128 | 46,835 | 1927 | |||||||||||||||
|
www.mydesert.com
|
||||||||||||||||||||
| Salinas |
The Salinas Californian
|
11,906 | 1871 | |||||||||||||||||
|
www.thecalifornian.com
|
||||||||||||||||||||
| Visalia |
Visalia Times-Delta/Tulare Advance-Register
|
21,597 | 1859 | |||||||||||||||||
|
www.visaliatimesdelta.com
www.tulareadvanceregister.com
|
||||||||||||||||||||
| Colorado | Fort Collins |
Fort Collins Coloradoan
|
23,098 | 27,062 | 1873 | |||||||||||||||
|
www.coloradoan.com
|
||||||||||||||||||||
| Delaware | Wilmington |
The News Journal
|
93,121 | 113,368 | 1871 | |||||||||||||||
|
www.delawareonline.com
|
||||||||||||||||||||
| Florida | Brevard County |
FLORIDA TODAY
|
66,217 | 84,972 | 1966 | |||||||||||||||
|
www.floridatoday.com
|
||||||||||||||||||||
| Fort Myers |
The News-Press
|
70,887 | 90,417 | 1884 | ||||||||||||||||
|
www.news-press.com
|
||||||||||||||||||||
| Pensacola |
Pensacola News Journal
|
45,261 | 59,961 | 1889 | ||||||||||||||||
|
www.pnj.com
|
||||||||||||||||||||
| Tallahassee |
Tallahassee Democrat
|
41,420 | 51,148 | 1905 | ||||||||||||||||
|
www.tallahassee.com
|
||||||||||||||||||||
| Guam | Hagatna |
Pacific Daily News
|
18,809 | 17,337 | 1944 | |||||||||||||||
|
www.guampdn.com
|
||||||||||||||||||||
| Hawaii | Honolulu |
The Honolulu Advertiser
|
117,122 | 127,731 | 1856 | |||||||||||||||
|
www.honoluluadvertiser.com
|
||||||||||||||||||||
| Indiana | Indianapolis |
The Indianapolis Star
|
201,914 | 296,942 | 1903 | |||||||||||||||
|
www.indystar.com
|
||||||||||||||||||||
| Lafayette |
Journal and Courier
|
29,527 | 37,002 | 1829 | ||||||||||||||||
|
www.jconline.com
|
||||||||||||||||||||
| Muncie |
The Star Press
|
25,181 | 29,485 | 1899 | ||||||||||||||||
|
www.thestarpress.com
|
||||||||||||||||||||
| Richmond |
Palladium-Item
|
11,974 | 16,678 | 1831 | ||||||||||||||||
|
www.pal-item.com
|
||||||||||||||||||||
| Iowa | Des Moines |
The Des Moines Register
|
119,355 | 206,205 | 1849 | |||||||||||||||
|
www.desmoinesregister.com
|
||||||||||||||||||||
| Iowa City |
Iowa City Press-Citizen
|
11,357 | 1860 | |||||||||||||||||
|
www.press-citizen.com
|
||||||||||||||||||||
| Kentucky | Louisville |
The Courier-Journal
|
182,326 | 241,756 | 1868 | |||||||||||||||
|
www.courier-journal.com
|
||||||||||||||||||||
| Louisiana | Alexandria |
Alexandria Daily Town Talk
|
24,531 | 29,241 | 1883 | |||||||||||||||
|
www.thetowntalk.com
|
||||||||||||||||||||
| Lafayette |
The Daily Advertiser
|
33,313 | 43,392 | 1865 | ||||||||||||||||
|
www.theadvertiser.com
|
||||||||||||||||||||
| Monroe |
The News-Star
|
29,195 | 31,343 | 1890 | ||||||||||||||||
|
www.thenewsstar.com
|
||||||||||||||||||||
| Opelousas |
Daily World
|
6,678 | 8,004 | 1939 | ||||||||||||||||
|
www.dailyworld.com
|
||||||||||||||||||||
| Shreveport |
The Times
|
44,576 | 56,531 | 1871 | ||||||||||||||||
|
www.shreveporttimes.com
|
||||||||||||||||||||
16
Table of Contents
DAILY NEWSPAPERS AND AFFILIATED ONLINE SITES
| State | Circulation | |||||||||||||||||||
| Territory | City | Newspaper/Online site | Morning | Afternoon | Sunday | Founded | ||||||||||||||
| Maryland | Salisbury |
The Daily Times
|
19,107 | 23,790 | 1900 | |||||||||||||||
|
www.delmarvanow.com
|
||||||||||||||||||||
| Michigan | Battle Creek |
Battle Creek Enquirer
|
17,112 | 24,040 | 1900 | |||||||||||||||
|
www.battlecreekenquirer.com
|
||||||||||||||||||||
| Detroit |
Detroit Free Press
|
288,957 | 552,736 | 1832 | ||||||||||||||||
|
www.freep.com
|
||||||||||||||||||||
| Lansing |
Lansing State Journal
|
47,966 | 68,448 | 1855 | ||||||||||||||||
|
www.lansingstatejournal.com
|
||||||||||||||||||||
| Livingston County |
Daily Press & Argus
|
12,452 | 16,062 | 1843 | ||||||||||||||||
|
www.livingstondaily.com
|
||||||||||||||||||||
| Port Huron |
Times Herald
|
19,284 | 29,700 | 1900 | ||||||||||||||||
|
www.thetimesherald.com
|
||||||||||||||||||||
| Minnesota | St. Cloud |
St. Cloud Times
|
23,129 | 32,683 | 1861 | |||||||||||||||
|
www.sctimes.com
|
||||||||||||||||||||
| Mississippi | Hattiesburg |
Hattiesburg American
|
14,241 | 17,368 | 1897 | |||||||||||||||
|
www.hattiesburgamerican.com
|
||||||||||||||||||||
| Jackson |
The Clarion-Ledger
|
68,208 | 81,356 | 1837 | ||||||||||||||||
|
www.clarionledger.com
|
||||||||||||||||||||
| Missouri | Springfield |
Springfield News-Leader
|
44,801 | 70,015 | 1893 | |||||||||||||||
|
www.news-leader.com
|
||||||||||||||||||||
| Montana | Great Falls |
Great Falls Tribune
|
28,436 | 30,946 | 1885 | |||||||||||||||
|
www.greatfallstribune.com
|
||||||||||||||||||||
| Nevada | Reno |
Reno Gazette-Journal
|
46,607 | 55,385 | 1870 | |||||||||||||||
|
www.rgj.com
|
||||||||||||||||||||
| New Jersey | Asbury Park |
Asbury Park Press
|
119,701 | 166,289 | 1879 | |||||||||||||||
|
www.app.com
|
||||||||||||||||||||
| Bridgewater |
Courier News
|
20,493 | 24,318 | 1884 | ||||||||||||||||
|
www.mycentraljersey.com
|
||||||||||||||||||||
| Cherry Hill |
Courier-Post
|
54,160 | 67,889 | 1875 | ||||||||||||||||
|
www.courierpostonline.com
|
||||||||||||||||||||
| East Brunswick |
Home News Tribune
|
38,519 | 45,365 | 1879 | ||||||||||||||||
|
www.mycentraljersey.com
|
||||||||||||||||||||
| Morristown |
Daily Record
|
25,765 | 28,649 | 1900 | ||||||||||||||||
|
www.dailyrecord.com
|
||||||||||||||||||||
| Vineland |
The Daily Journal
|
14,848 | 1864 | |||||||||||||||||
|
www.thedailyjournal.com
|
||||||||||||||||||||
| New York | Binghamton |
Press & Sun-Bulletin
|
40,626 | 55,341 | 1904 | |||||||||||||||
|
www.pressconnects.com
|
||||||||||||||||||||
| Elmira |
Star-Gazette
|
18,939 | 27,911 | 1828 | ||||||||||||||||
|
www.stargazette.com
|
||||||||||||||||||||
| Ithaca |
The Ithaca Journal
|
12,955 | 1815 | |||||||||||||||||
|
www.theithacajournal.com
|
||||||||||||||||||||
| Poughkeepsie |
Poughkeepsie Journal
|
29,928 | 38,908 | 1785 | ||||||||||||||||
|
www.poughkeepsiejournal.com
|
||||||||||||||||||||
| Rochester |
Rochester Democrat and Chronicle
|
129,621 | 184,379 | 1833 | ||||||||||||||||
|
www.democratandchronicle.com
|
||||||||||||||||||||
| Westchester County |
The Journal News
|
88,907 | 109,958 | 1829 | ||||||||||||||||
|
www.lohud.com
|
||||||||||||||||||||
| North Carolina | Asheville |
Asheville Citizen-Times
|
38,144 | 52,449 | 1870 | |||||||||||||||
|
www.citizen-times.com
|
||||||||||||||||||||
17
Table of Contents
DAILY NEWSPAPERS AND AFFILIATED ONLINE SITES
| State | Circulation | |||||||||||||||||||
| Territory | City | Newspaper/Online site | Morning | Afternoon | Sunday | Founded | ||||||||||||||
| Ohio | Bucyrus |
Telegraph-Forum
|
4,658 | 1923 | ||||||||||||||||
|
www.bucyrustelegraphforum.com
|
||||||||||||||||||||
| Chillicothe |
Chillicothe Gazette
|
10,531 | 11,916 | 1800 | ||||||||||||||||
|
www.chillicothegazette.com
|
||||||||||||||||||||
| Cincinnati |
The Cincinnati Enquirer
|
173,798 | 262,225 | 1841 | ||||||||||||||||
|
www.cincinnati.com
|
||||||||||||||||||||
| Coshocton |
Coshocton Tribune
|
4,918 | 5,676 | 1842 | ||||||||||||||||
|
www.coshoctontribune.com
|
||||||||||||||||||||
| Fremont |
The News-Messenger
|
8,336 | 1856 | |||||||||||||||||
|
www.thenews-messenger.com
|
||||||||||||||||||||
| Lancaster |
Lancaster Eagle-Gazette
|
9,640 | 10,893 | 1807 | ||||||||||||||||
|
www.lancastereaglegazette.com
|
||||||||||||||||||||
| Mansfield |
News Journal
|
21,980 | 29,760 | 1885 | ||||||||||||||||
|
www.mansfieldnewsjournal.com
|
||||||||||||||||||||
| Marion |
The Marion Star
|
9,132 | 10,315 | 1880 | ||||||||||||||||
|
www.marionstar.com
|
||||||||||||||||||||
| Newark |
The Advocate
|
14,282 | 16,737 | 1820 | ||||||||||||||||
|
www.newarkadvocate.com
|
||||||||||||||||||||
| Port Clinton |
News Herald
|
3,716 | 1864 | |||||||||||||||||
|
www.portclintonnewsherald.com
|
||||||||||||||||||||
| Zanesville |
Times Recorder
|
14,716 | 15,952 | 1852 | ||||||||||||||||
|
www.zanesvilletimesrecorder.com
|
||||||||||||||||||||
| Oregon | Salem |
Statesman Journal
|
40,023 | 47,374 | 1851 | |||||||||||||||
|
www.statesmanjournal.com
|
||||||||||||||||||||
| South Carolina | Greenville |
The Greenville News
|
64,543 | 101,252 | 1874 | |||||||||||||||
|
www.greenvilleonline.com
|
||||||||||||||||||||
| South Dakota | Sioux Falls |
Argus Leader
|
38,341 | 57,357 | 1881 | |||||||||||||||
|
www.argusleader.com
|
||||||||||||||||||||
| Tennessee | Clarksville |
The Leaf-Chronicle
|
17,158 | 20,157 | 1808 | |||||||||||||||
|
www.theleafchronicle.com
|
||||||||||||||||||||
| Jackson |
The Jackson Sun
|
25,261 | 32,835 | 1848 | ||||||||||||||||
|
www.jacksonsun.com
|
||||||||||||||||||||
| Murfreesboro |
The Daily News Journal
|
12,925 | 16,806 | 1848 | ||||||||||||||||
|
www.dnj.com
|
||||||||||||||||||||
| Nashville |
The Tennessean
|
137,323 | 201,166 | 1812 | ||||||||||||||||
|
www.tennessean.com
|
||||||||||||||||||||
| Utah | St. George |
The Spectrum
|
19,878 | 23,589 | 1963 | |||||||||||||||
|
www.thespectrum.com
|
||||||||||||||||||||
| Vermont | Burlington |
The Burlington Free Press
|
33,734 | 42,226 | 1827 | |||||||||||||||
|
www.burlingtonfreepress.com
|
||||||||||||||||||||
| Virginia | McLean |
USA TODAY
|
1,904,362 | 1982 | ||||||||||||||||
|
www.usatoday.com
|
||||||||||||||||||||
| Staunton |
The Daily News Leader
|
15,547 | 17,674 | 1904 | ||||||||||||||||
|
www.newsleader.com
|
||||||||||||||||||||
| Wisconsin | Appleton |
The Post-Crescent
|
43,808 | 58,339 | 1853 | |||||||||||||||
|
www.postcrescent.com
|
||||||||||||||||||||
| Fond du Lac |
The Reporter
|
12,002 | 14,818 | 1870 | ||||||||||||||||
|
www.fdlreporter.com
|
||||||||||||||||||||
| Green Bay |
Green Bay Press-Gazette
|
47,070 | 69,718 | 1915 | ||||||||||||||||
|
www.greenbaypressgazette.com
|
||||||||||||||||||||
| Manitowoc |
Herald Times Reporter
|
11,790 | 13,322 | 1898 | ||||||||||||||||
|
www.htrnews.com
|
||||||||||||||||||||
| Marshfield |
Marshfield News-Herald
|
9,532 | 1927 | |||||||||||||||||
|
www.marshfieldnewsherald.com
|
||||||||||||||||||||
| Oshkosh |
Oshkosh Northwestern
|
16,628 | 21,310 | 1868 | ||||||||||||||||
|
www.thenorthwestern.com
|
||||||||||||||||||||
| Sheboygan |
The Sheboygan Press
|
16,285 | 20,251 | 1907 | ||||||||||||||||
|
www.sheboyganpress.com
|
||||||||||||||||||||
| Stevens Point |
Stevens Point Journal
|
9,235 | 1873 | |||||||||||||||||
|
www.stevenspointjournal.com
Central Wisconsin Sunday |
19,229 | |||||||||||||||||||
| Wausau |
Wausau Daily Herald
|
17,914 | 24,382 | 1903 | ||||||||||||||||
|
www.wausaudailyherald.com
|
||||||||||||||||||||
| Wisconsin Rapids |
The Daily Tribune
|
9,140 | 1914 | |||||||||||||||||
|
www.wisconsinrapidstribune.com
|
||||||||||||||||||||
18
Table of Contents
DAILY PAID-FOR NEWSPAPERS AND AFFILIATED ONLINE SITES/NEWSQUEST PLC
| Circulation | ||||||||||||||
| City | Newspaper/Online site | Monday-Friday | Saturday | Founded | ||||||||||
| Basildon |
Echo
|
33,854 | 1969 | |||||||||||
|
www.echo-news.co.uk
|
||||||||||||||
| Blackburn |
Lancashire Telegraph
|
27,932 | 25,300 | 1886 | ||||||||||
|
www.lancashiretelegraph.co.uk
|
||||||||||||||
| Bolton |
The Bolton News
|
26,800 | 22,497 | 1867 | ||||||||||
|
www.theboltonnews.co.uk
|
||||||||||||||
| Bournemouth |
Daily Echo
|
29,116 | 32,325 | 1900 | ||||||||||
|
www.bournemouthecho.co.uk
|
||||||||||||||
| Bradford |
Telegraph & Argus
|
32,386 | 29,917 | 1868 | ||||||||||
|
www.thetelegraphandargus.co.uk
|
||||||||||||||
| Brighton |
The Argus
|
29,299 | 27,579 | 1880 | ||||||||||
|
www.theargus.co.uk
|
||||||||||||||
| Colchester |
The Gazette
|
19,656 | 1970 | |||||||||||
|
www.gazette-news.co.uk
|
||||||||||||||
| Darlington |
The Northern Echo
|
47,074 | 45,113 | 1870 | ||||||||||
|
www.thenorthernecho.co.uk
|
||||||||||||||
| Glasgow |
Evening Times
|
69,293 | 37,007 | 1876 | ||||||||||
|
www.eveningtimes.co.uk
|
||||||||||||||
| Glasgow |
The Herald
|
58,359 | 63,223 | 1783 | ||||||||||
|
www.theherald.co.uk
|
||||||||||||||
| Newport |
South Wales Argus
|
27,182 | 24,156 | 1892 | ||||||||||
|
www.southwalesargus.co.uk
|
||||||||||||||
| Oxford |
Oxford Mail
|
23,064 | 21,717 | 1928 | ||||||||||
|
www.oxfordmail.co.uk
|
||||||||||||||
| Southampton |
Southern Daily Echo
|
35,088 | 40,725 | 1888 | ||||||||||
|
www.dailyecho.co.uk
|
||||||||||||||
| Swindon |
Swindon Advertiser
|
21,037 | 18,810 | 1854 | ||||||||||
|
www.swindonadvertiser.co.uk
|
||||||||||||||
| Weymouth |
Dorset Echo
|
18,230 | 19,763 | 1921 | ||||||||||
|
www.dorsetecho.co.uk
|
||||||||||||||
| Worcester |
Worcester News
|
16,138 | 15,213 | 1937 | ||||||||||
|
www.worcesternews.co.uk
|
||||||||||||||
| York |
The Press
|
30,772 | 30,479 | 1882 | ||||||||||
|
www.thepress.co.uk
|
||||||||||||||
Circulation figures are according to ABC results from Jan.-June 2009.
Non-daily publications:
Essex, London, Midlands, North East, North West, South Coast, South East,
South and East Wales, South West, Yorkshire
GANNETT DIGITAL
CareerBuilder:
www.careerbuilder.com
Headquarters:
Chicago, IL
Sales offices:
Atlanta, GA; Boston, MA; Seattle, WA; Chicago, IL; Cincinnati, OH; Dallas, TX;
Denver, CO; Detroit, MI; Edison, NJ; Houston, TX; Irvine, CA; Long Island, NY; Los Angeles; McLean,
VA; Minneapolis, MN; Nashville, TN; New York, NY; Orlando, FL; Overland Park, KS; Philadelphia, PA;
Phoenix, AZ; San Mateo, CA; Washington, DC
International offices:
Belgium; Canada; China; France; Germany; Greece; India; Italy; Netherlands;
Spain; Sweden; United Kingdom
PointRoll, Inc.:
www.pointroll.com
Headquarters:
Conshohocken, PA
Sales offices:
Atlanta, GA; Chicago, IL; Detroit, MI; Los Angeles, CA; New York, NY; San Francisco,
CA
Planet Discover:
www.planetdiscover.com
Headquarters and sales office:
Fort
Mitchell, KY
Technology office:
Cedar Rapids, IA
Ripple 6:
www.ripple6.com
Headquarters:
New York,
NY
Sales office:
New York,
NY
Schedule Star:
www.highschoolsports.net
Headquarters:
Wheeling, WV
ShopLocal:
www.shoplocal.com
Headquarters:
Chicago,
IL
Sales office:
Chicago,
IL
19
Table of Contents
TELEVISION STATIONS AND AFFILIATED ONLINE SITES
| Weekly | ||||||||||||||
| State | City | Station/Online site | Channel/Network | Audience(a) | Founded | |||||||||
| Arizona | Flagstaff |
KNAZ-TV
|
Channel 2/NBC | (b) | 1970 | |||||||||
| Phoenix |
KPNX-TV
|
Channel 12/NBC | 1,258,000 | 1953 | ||||||||||
|
www.azcentral.com/12news
|
||||||||||||||
| Arkansas | Little Rock |
KTHV-TV
|
Channel 11/CBS | 420,000 | 1955 | |||||||||
|
www.todaysthv.com
|
||||||||||||||
| California | Sacramento |
KXTV-TV
|
Channel 10/ABC | 875,000 | 1955 | |||||||||
|
www.news10.net
|
||||||||||||||
| Colorado | Denver |
KTVD-TV
|
Channel 20/MyNetworkTV | 792,000 | 1988 | |||||||||
|
www.my20denver.com
KUSA-TV |
Channel 9/NBC | 1,212,000 | 1952 | |||||||||||
|
www.9news.com
|
||||||||||||||
|
District of Columbia
|
Washington |
WUSA-TV
www.wusa9.com |
Channel 9/CBS | 1,766,000 | 1949 | |||||||||
| Florida | Jacksonville |
WJXX-TV
|
Channel 25/ABC | 472,000 | 1989 | |||||||||
|
WTLV-TV
|
Channel 12/NBC | 529,000 | 1957 | |||||||||||
|
www.firstcoastnews.com
|
||||||||||||||
| Tampa-St. Petersburg |
WTSP-TV
|
Channel 10/CBS | 1,283,000 | 1965 | ||||||||||
|
www.tampabays10.com
|
||||||||||||||
| Georgia | Atlanta |
WATL-TV
www.myatltv.com |
Channel 36/MyNetworkTV | 1,108,000 | 1954 | |||||||||
|
WXIA-TV
|
Channel 11/NBC | 1,613,000 | 1948 | |||||||||||
|
www.11alive.com
|
||||||||||||||
| Macon |
WMAZ-TV
|
Channel 13/CBS | 197,000 | 1953 | ||||||||||
|
www.13wmaz.com
|
||||||||||||||
| Maine | Bangor |
WLBZ-TV
|
Channel 2/NBC | 100,000 | 1954 | |||||||||
|
www.wlbz2.com
|
||||||||||||||
| Portland |
WCSH-TV
|
Channel 6/NBC | 341,000 | 1953 | ||||||||||
|
www.wcsh6.com
|
||||||||||||||
| Michigan | Grand Rapids |
WZZM-TV
|
Channel 13/ABC | 396,000 | 1962 | |||||||||
|
www.wzzm13.com
|
||||||||||||||
| Minnesota | Minneapolis-St. Paul |
KARE-TV
|
Channel 11/NBC | 1,375,000 | 1953 | |||||||||
|
www.kare11.com
|
||||||||||||||
| Missouri | St. Louis |
KSDK-TV
|
Channel 5/NBC | 1,035,000 | 1947 | |||||||||
|
www.ksdk.com
|
||||||||||||||
| New York | Buffalo |
WGRZ-TV
|
Channel 2/NBC | 519,000 | 1954 | |||||||||
|
www.wgrz.com
|
||||||||||||||
| North Carolina | Greensboro |
WFMY-TV
|
Channel 2/CBS | 595,000 | 1949 | |||||||||
|
www.digtriad.com
|
||||||||||||||
| Ohio | Cleveland |
WKYC-TV
|
Channel 3/NBC | 1,171,000 | 1948 | |||||||||
|
www.wkyc.com
|
||||||||||||||
| South Carolina | Columbia |
WLTX-TV
|
Channel 19/CBS | 287,000 | 1953 | |||||||||
|
www.wltx.com
|
||||||||||||||
| Tennessee | Knoxville |
WBIR-TV
|
Channel 10/NBC | 478,000 | 1956 | |||||||||
|
www.wbir.com
|
||||||||||||||
Captivate Network:
www.captivatenetwork.com
Headquarters:
Chelmsford, MA
Advertising offices:
Chicago, IL; Los Angeles, CA; New York, NY; San Francisco, CA; Toronto,
Canada.
| (a) | Weekly audience is number of TV households reached, according to the November 2009 Nielsen book. | |
| (b) | Audience numbers fall below minimum reporting standards. |
20
Table of Contents
USA TODAY:
www.usatoday.com
Headquarters and editorial offices:
McLean, VA
Print sites:
Atlanta, GA; Batavia, NY; Brevard County, FL; Chandler, AZ; Columbia, SC; Denver, CO;
Fort Lauderdale, FL; Hattiesburg, MS; Houston, TX; Indianapolis, Ind; Kankakee, IL; Las Vegas, NV;
Lawrence, KS; Marin County, CA; Milwaukee, WI; Minneapolis, MN; Nashville, TN; Newark, OH; Norwood,
MA; Olympia, WA; Plano, TX; Raleigh, NC; Rockaway, NJ; St. Louis, MO; Salisbury, NC; Salt Lake
City, UT; San Bernardino, CA; Springfield, VA; Sterling Heights, MI; Tampa, FL; Warrendale, PA;
Wilmington, DE
Advertising offices:
Atlanta, GA; Chicago, IL; Dallas, TX; Detroit, MI; Los Angeles,
CA; McLean, VA; New York, NY; San Francisco, CA
USATODAY.com
Headquarters and editorial offices:
McLean, VA
Advertising offices:
Atlanta, GA; Chicago, IL; Dallas, TX; Detroit, MI; Los Angeles, CA; McLean,
VA; New York, NY; San Francisco, CA
USA WEEKEND:
www.usaweekend.com
Headquarters and editorial offices:
McLean, VA
Advertising offices:
Chicago, IL; Detroit, MI; Los Angeles, CA; New York, NY; San Francisco, CA
Clipper Magazine:
www.clippermagazine.com; www.couponclipper.com
Headquarters:
Mountville, PA
Gannett Healthcare Group:
www.gannetthg.com; www.getcedirect.com;www.Nurse.com; www.TodayinPT.com;
www.TodayinOt.com; www.PearlsReview.com
Headquarters:
Falls Church, VA
Regional offices:
Dallas, TX; Hoffman Estates, IL;
San Jose, CA
Publications:
Nursing Spectrum, NurseWeek, Today in PT,
Today in OT
Times News Group, Inc. (Army Times Publishing
Co.)
Headquarters:
Springfield, VA
Regional office:
Los Angeles, CA
Publications:
Army Times:
www.armytimes.com
, Navy Times:
www.navytimes.com
, Marine Corps Times:
www.marinecorpstimes.com
, Air Force Times:
www.airforcetimes.com
, Federal Times:
www.federaltimes.com
, Defense News:
www.defensenews.com
, Armed Forces Journal:
www.armedforcesjournal.com
, C4ISR Journal:
www.c4isrjournal.com
, Training and Simulation Journal:
www.tsjonline.com
, Military Times EDGE:
www.militarytimesedge.com
Gannett Media Technologies International:
www.gmti.com
: Cincinnati, OH; Norfolk, VA;
Tempe, AZ
ContentOne
Headquarters:
McLean, VA
Bureau:
Washington, DC
Non-daily publications
Weekly, semi-weekly, monthly or bimonthly publications in Alabama, Arizona, Arkansas, California,
Colorado, Delaware, Florida, Guam, Hawaii, Indiana, Iowa, Kentucky, Louisiana, Maryland, Michigan,
Minnesota, Mississippi, Missouri, Montana, Nevada, New Jersey, New York, North Carolina, Ohio,
Oregon, South Carolina, South Dakota, Tennessee, Utah, Vermont, Virginia, Wisconsin
Gannett Media Sales Group:
McLean, VA
Gannett Offset:
www.gannettoffset.com
Headquarters:
Springfield, VA
Offset sites:
Atlanta, GA; Hattiesburg, MS; Minneapolis, MN; Norwood, MA; St. Louis, MO;
Springfield, VA
Gannett Direct Marketing Services, Inc.:
www.gdms.com
:
Headquarters:
Louisville, KY
Gannett Satellite Information Network:
McLean, VA
National Web Sites:
www.MomsLikeMe.com;
www.HighSchoolSports.net
GANNETT ON THE NET:
News and information about Gannett is available on its web
site, www.gannett.com. In addition to news and other information about Gannett, the
company provides access through this site to its annual report on
Form 10-K
, its
quarterly reports on
Form 10-Q
, its current reports on
Form 8-K
and all amendments
to those reports as soon as reasonably practicable after the company files or
furnish them electronically to the Securities and Exchange Commission (SEC).
Certification by Gannett’s Chief Executive Officer and Chief Financial Officer are
included as exhibits to the company’s SEC reports (including the company’s Form 10-K
filed in 2009).
Gannett also provides access on this web site to its Principles of Corporate
Governance, the charters of its Audit, Digital Technology, Executive Compensation
and Nominating and Public Responsibility Committees and other important governance
documents and policies, including its Ethics and Inside Trading Policies. Copies of
all of these corporate governance documents are available to any shareholder upon
written request made to the company’s Secretary at our headquarters address. In
addition, the company will disclose on this web site changes to, or waivers of, its
corporate Ethics Policy.
21
Table of Contents
| ITEM 1A. | RISK FACTORS |
In addition to the other information contained or
incorporated by reference into this Form 10-K,
prospective investors should consider carefully the
following risk factors before investing in our
securities. The risks described below may not be the
only risks we face. Additional risks that we do not
yet perceive or that we currently believe are
immaterial may also adversely affect our business and
the trading price of our securities.
Deterioration in economic conditions in the markets
we serve in the U.S. and the UK may further depress
demand for our products and services
Our operating results depend on the relative strength
of the economy in our principal newspaper, digital and
television markets as well as the strength or weakness
of national and regional economic factors. Recessionary
conditions in the U.S. and U.K. have had a significant
adverse impact on the company’s businesses. Continuing
or a deepening recession in the U.S. or U.K. economy
could significantly affect all key advertising revenue
categories.
Competition from alternative forms of media may
impair our ability to grow or maintain revenue
levels in core and new businesses
Advertising produces the predominant share of our
publishing, broadcasting and affiliated web site
revenues as well as digital segment revenues. With the
continued development of alternative forms of media,
particularly those based on the Internet, our
businesses may face increased competition. Alternative
media sources may also affect our ability to generate
circulation revenues and television audience. This
competition may make it difficult for us to grow or
maintain our broadcasting, print advertising and
circulation revenues, which we believe will challenge
us to expand the contributions of our online and other
digital businesses.
Further declines in the company’s credit ratings and
continued volatility in the U.S. credit markets could
significantly impact the company’s ability to obtain
new financing to fund its operations and strategic
initiatives or to refinance its existing debt at
reasonable rates as it matures
At the end of 2009, the company had approximately $3.1
billion in long-term debt, of which approximately $1.6
billion was in the form of borrowings under bank credit
facilities and the balance was in the form of unsecured
notes. This debt matures in part beginning in 2011 with
remaining maturities in 2012-2017. While the company’s
cash flow is expected to be sufficient to pay amounts
when due, if operating results deteriorate
significantly, a significant portion of its maturities
may need to be refinanced. Access to the capital
markets may at times be affected by conditions in the
economy. However, the company did access the capital
markets in October 2009 with $500 million of unsecured
borrowings. At the end of 2009, the company had
approximately $1.35 billion of additional borrowing
capacity under its revolving credit facilities,
providing near-term liquidity to fund its needs and to
repay debt maturing through March 2012.
Volatility in U.S. and UK financial markets
directly affects the value of our pension plan
assets
Because of volatility in the global financial markets,
the company’s pension plan asset values declined
significantly in 2008. While asset returns were
strongly positive in 2009, the company’s principal U.S.
retirement plan, the Gannett Retirement Plan, is
underfunded by $437 million. Depending on various
factors, including future investment returns, discount
rates and potential pension legislative changes, the
company may be required to make up this underfunding
with contributions in future years although no
contributions are required until 2011.
Foreign exchange variability could adversely
affect our consolidated operating results
Weakening of the British pound-to-U.S. dollar exchange
rate could diminish Newsquest’s earnings contribution
to consolidated results. Newsquest results for 2009
were translated to U.S. dollars at the average rate of
1.56. For the first 45 days of 2010, the average
exchange rate was approximately 1.60, or 10% higher
than the comparable period in 2009. CareerBuilder, with
expanding overseas operations, also has foreign
exchange risk but to a significantly lesser degree.
Changes in regulatory environment could encumber or
impede our efforts to improve operating results
Our publishing and broadcasting operations are subject
to government regulation. Changing regulations,
particularly FCC regulations which affect our
television stations, may result in increased costs and
adversely impact our future profitability. For example,
FCC regulations required us to construct digital
television stations in all of our television markets,
despite the fact that the new digital stations are
unlikely to produce significant additional revenue. In
addition, our television stations are required to
possess television broadcast licenses from the FCC;
when granted, these licenses are generally granted for
a period of eight years. Under certain circumstances
the FCC is not required to renew any license and could
decline to renew our license applications that are
currently pending in 2010.
The degree of success of our investment and
acquisition strategy may significantly impact our
ability to expand overall profitability
We will continue efforts to identify and complete
strategic investments, partnerships and business
acquisitions. These efforts may not prove successful.
Strategic investments and partnerships with other
companies expose us to the risk that we may not be
able to control the operations of our investee or
partnership, which could decrease the amount of
benefits we reap from a particular relationship. The
company is also exposed to the risk that its partners
in strategic investments and infrastructure may
encounter financial difficulties which could lead to
disruption of investee or partnership activities.
Acquisitions of other businesses may be difficult
to integrate with our existing operations, could
require an inefficiently high amount of attention from
our senior management, might require us to incur
additional debt or divert our capital from more
profitable expenditures, and might result in other
unanticipated problems and liabilities.
22
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The value of our intangible assets may become further
impaired, depending upon future operating results
Goodwill and other intangible assets were
approximately $3.4 billion as of Dec. 27, 2009,
representing approximately 48% of our total assets. We
periodically evaluate our goodwill and other
intangible assets to determine whether all or a
portion of their carrying values may no longer be
recoverable, in which case a charge to earnings may be
necessary, as occurred in 2007, 2008 and 2009 (see
Notes 3 and 4 to the Consolidated Financial
Statements). Any future evaluations requiring an asset
impairment charge for goodwill or other intangible
assets would adversely affect future reported results
of operations and shareholders’ equity, although such
charges would not affect our operations or cash flow.
The collectability of accounts receivable under
current difficult economic conditions could
deteriorate to a greater extent than provided for in
the company’s financial statements and in its
projections of future results
Recessionary conditions in the U.S. and U.K. have
increased the company’s exposure to losses resulting
from the potential bankruptcy of its advertising
customers. The company’s accounts receivable are stated
at net estimated realizable value and its allowance for
doubtful accounts has been determined based on several
factors, including receivable agings, significant
individual credit risk accounts and historical
experience. If such collectability estimates prove
inaccurate, adjustments to future operating results
could occur.
| ITEM 1B. | UNRESOLVED STAFF COMMENTS |
None.
| ITEM 2. | PROPERTIES |
Publishing/United States
Generally, the company owns many of the plants that
house all aspects of the publication process. Certain
U.S. Community Publishing operations have outsourced
printing to non-Gannett newspapers or commercial
printers. In the case of USA TODAY, at Dec. 27, 2009,
19 non-Gannett printers were used to print the
newspaper in U.S. markets where there are no company
publishing sites with appropriate facilities.
Non-Gannett printers in six foreign countries publish
and distribute an international edition of USA TODAY
under a royalty agreement. USA WEEKEND, Clipper
Magazine and Gannett Healthcare Group are also printed
under contracts with commercial printing companies.
Many of the company’s newspapers have outside news
bureaus and sales offices, which generally are leased.
In several markets, two or more of the company’s
newspapers share combined facilities; and in certain
locations, facilities are shared with other newspaper
properties. The company’s publishing properties have
rail siding facilities or access to main roads for
newsprint delivery purposes and are conveniently
located for distribution purposes.
During the past five years, new or substantial
additions or remodeling of existing facilities have
been completed or are at some stage of construction at
12 of the company’s publishing operations. Gannett
continues to make investments in renovations where
necessary for operational efficiency.
During 2009, the company continued its efforts to
consolidate certain of its U.S. publishing facilities
to achieve savings and efficiencies. The company’s
facilities are adequate for present operations. A
listing of publishing centers and key properties may
be found on pages 16-18.
Publishing/United Kingdom
Newsquest owns certain of the plants where its
newspapers are produced and leases other facilities.
Newsquest headquarters is in Weybridge, Surrey.
Additions to Newsquest’s printing capacity and color
capabilities have been made since Gannett acquired
Newsquest in 1999. During 2009, Newsquest consolidated
certain of its facilities to achieve savings and
efficiencies. Certain Newsquest operations have
outsourced printing to non-Newsquest newspaper
companies. All of Newsquest’s properties are adequate
for present purposes. A listing of Newsquest publishing
centers and key properties may be found on page 19.
Digital
Generally, the company’s digital businesses lease their
facilities. This includes facilities for executive
offices, sales offices and data centers. The company’s
facilities are adequate for present operations. The
company also believes that suitable additional or
alternative space, including those under lease options,
will be available at commercially reasonable terms for
future expansion. A listing of key digital facilities
can be found on page 19.
Broadcasting
The company’s broadcasting facilities are adequately
equipped with the necessary television broadcasting
equipment. The company owns or leases transmitter
facilities in 23 locations. All of the company’s
stations have converted to digital television
operations in accordance with applicable FCC regulations.
The company’s broadcasting facilities are
adequate for present purposes. A listing of television
stations can be found on page 20.
Corporate facilities
The company’s headquarters and USA TODAY are located
in McLean, VA. The company also owns data and network
operations centers in nearby Maryland and in Phoenix,
AZ. Headquarters facilities are adequate for present
operations.
23
Table of Contents
| ITEM 3. | LEGAL PROCEEDINGS |
Information regarding legal proceedings may be found
in Note 12 of the Notes to Consolidated Financial
Statements.
Environmental
Some of the company’s newspaper subsidiaries have been
identified as potentially responsible parties for
cleanup of contaminated sites as a result of their
alleged disposal of ink or other wastes at disposal
sites that have been subsequently identified as
requiring remediation. In five such matters that
involve a governmental authority as a party, the
company’s liability could exceed $100,000.
Poughkeepsie Newspapers is required by a consent
order with the US EPA to fund a portion of the
remediation costs at the Hertel Landfill site in
Plattekill, NY. Poughkeepsie Newspapers has paid and
expensed its share of the initial clean up but remains
liable for a share of follow-up testing and potential
further remediation at the site. Such remaining
liability is not expected to be material.
In September 2003, the US EPA notified
Multimedia, Inc., a wholly owned Gannett subsidiary,
that the company is considered a de minimis
potentially responsible party for costs associated
with the Operating Industries, Inc. Superfund Site in
Monterey, CA. Based on the most recent information from
the US EPA, Multimedia, Inc. expects to settle this
matter for a minor amount.
In conjunction with the sale of property in
Norwich, CT, in May 2007, Gannett Satellite Information
Network, Inc. (GANSAT) submitted a Transfer of
Establishment form to the Connecticut Department of
Environmental Protection (CDEP). Because there is
evidence of soil and groundwater contamination at the
property, GANSAT will conduct a site investigation,
and, if necessary, remediation, in accordance with the
requirements of the Connecticut Transfer Act. The site
investigation cost is not expected to be material. The
cost of remediation, if any, will not be known until
the conclusion of the site investigation.
In December 2004, the US Forest Service advised by
letter that it considers “Shiny Rock Mining
Corporation” to be legally responsible for a release of
hazardous substances at a closed mine site in Oregon.
Shiny Rock Mining Corporation is a former Gannett
subsidiary that donated the property at issue to
Friends of Opal Creek (“Friends”) in 1992. Gannett
tendered this matter to Friends pursuant to an
indemnification agreement, and Friends and the Forest
Service entered into a Consent Agreement to conduct a
site investigation. Friends has been funding the
investigation by using proceeds from an insurance
policy, now expired. In December 2008, Friends
notified Gannett that it may not have sufficient
resources to fund its indemnification responsibilities
if site costs exceed the proceeds available under the
insurance policy. Whether Gannett will be required to
fund further site work, and how much that might cost,
depends on whether additional site investigation
and/or remediation will be required, both unknown at
this time.
Gannett Suburban Newspapers has been identified as
a PRP — along with approximately 200 other governmental
and private entities — at the Ellis Road Superfund site
in Jacksonville, FL.
Pursuant to an Administrative Order on Consent
entered into in 1989, Gannett and other PRPs paid for
certain cleanup actions at the site. Gannett was
allocated approximately 0.06% of the cost of that
cleanup, resulting in a payment of $3,250. In 2009, EPA
determined that additional investigation and cleanup of
the Ellis Road Site is required. Because EPA has not
yet disclosed the scope and cost of any additional
cleanup, Gannett is unable to reasonably estimate its
potential liability with respect to this matter;
however, Gannett expects such liability will be
nominal.
| ITEM 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS |
None.
24
Table of Contents
| ITEM 5. | MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
Gannett Co., Inc. shares are traded on the New York Stock Exchange with the symbol GCI.
Information regarding outstanding shares, shareholders and dividends may be found on pages 1,
3 and 44 of this Form 10-K. Information about debt securities sold in private transactions may be
found on page 41 of this Form 10-K.
Gannett Common stock prices
High-low range by fiscal quarters based on NYSE-composite closing prices.
| Year | Quarter | Low | High | |||||||
|
1999
|
First | $ | 61.81 | $ | 70.25 | |||||
|
|
Second | $ | 61.81 | $ | 75.44 | |||||
|
|
Third | $ | 66.81 | $ | 76.94 | |||||
|
|
Fourth | $ | 68.81 | $ | 79.31 | |||||
|
2000
|
First | $ | 61.75 | $ | 83.25 | |||||
|
|
Second | $ | 59.25 | $ | 72.13 | |||||
|
|
Third | $ | 49.25 | $ | 60.06 | |||||
|
|
Fourth | $ | 48.69 | $ | 63.06 | |||||
|
2001
|
First | $ | 56.50 | $ | 67.74 | |||||
|
|
Second | $ | 59.58 | $ | 69.38 | |||||
|
|
Third | $ | 55.55 | $ | 69.11 | |||||
|
|
Fourth | $ | 58.55 | $ | 71.10 | |||||
|
2002
|
First | $ | 65.03 | $ | 77.85 | |||||
|
|
Second | $ | 71.50 | $ | 79.87 | |||||
|
|
Third | $ | 63.39 | $ | 77.70 | |||||
|
|
Fourth | $ | 66.62 | $ | 79.20 | |||||
|
2003
|
First | $ | 67.68 | $ | 75.10 | |||||
|
|
Second | $ | 70.43 | $ | 79.70 | |||||
|
|
Third | $ | 75.86 | $ | 79.18 | |||||
|
|
Fourth | $ | 77.56 | $ | 88.93 | |||||
|
2004
|
First | $ | 84.50 | $ | 90.01 | |||||
|
|
Second | $ | 84.95 | $ | 91.00 | |||||
|
|
Third | $ | 79.56 | $ | 86.78 | |||||
|
|
Fourth | $ | 78.99 | $ | 85.62 | |||||
|
2005
|
First | $ | 78.43 | $ | 82.41 | |||||
|
|
Second | $ | 71.13 | $ | 80.00 | |||||
|
|
Third | $ | 66.25 | $ | 74.80 | |||||
|
|
Fourth | $ | 59.19 | $ | 68.62 | |||||
|
2006
|
First | $ | 58.81 | $ | 64.80 | |||||
|
|
Second | $ | 53.22 | $ | 60.92 | |||||
|
|
Third | $ | 51.67 | $ | 57.15 | |||||
|
|
Fourth | $ | 55.92 | $ | 61.25 | |||||
|
2007
|
First | $ | 55.76 | $ | 63.11 | |||||
|
|
Second | $ | 54.12 | $ | 59.79 | |||||
|
|
Third | $ | 43.70 | $ | 55.40 | |||||
|
|
Fourth | $ | 35.30 | $ | 45.85 | |||||
|
2008
|
First | $ | 28.43 | $ | 39.00 | |||||
|
|
Second | $ | 21.79 | $ | 30.75 | |||||
|
|
Third | $ | 15.96 | $ | 21.67 | |||||
|
|
Fourth | $ | 6.09 | $ | 17.05 | |||||
|
2009
|
First | $ | 1.95 | $ | 9.30 | |||||
|
|
Second | $ | 2.20 | $ | 5.48 | |||||
|
|
Third | $ | 3.18 | $ | 10.14 | |||||
|
|
Fourth | $ | 9.76 | $ | 15.63 | |||||
|
2010
|
First | $ | 13.53 | $ | 17.25 | * | ||||
| * | Through February 12, 2010 |
Purchases of Equity Securities
There were no repurchases of common stock in 2009. The approximate dollar value of shares that may
yet be purchased under the company’s share repurchase program described on page 44 is $808,936,610.
While there is no expiration date for the repurchase program, the Board of Directors reviews the
authorization of the program annually and did so in October 2009.
25
Table of Contents
Comparison of shareholder return
The following graph compares the performance of the
company’s common stock during the period Dec. 26,
2004, to Dec. 27, 2009, with the S&P 500 Index, and a
Peer Group Index selected by the company.
The company has established an index of peer group
companies because of changes in 2007 to the S&P 500
Publishing Index. At the end of 2006, the S&P 500
Publishing Index included Gannett Co., Inc., Dow Jones
& Co., Inc., The McGraw-Hill Companies, Meredith
Corporation, The New York Times Company and Tribune
Company. During 2007, Dow Jones was purchased by News
Corp. and Tribune Company was taken private, and both
companies therefore were removed from the S&P 500
Publishing Index. The Washington Post Company, which
holds substantial non-publishing/broadcast interests,
was added to the S&P 500 Publishing Index.
Because of these changes, the company believes
the S&P 500 Publishing Index no longer comprises a
representative group of peer companies. The company
therefore selected a Peer Group which it believes to
be more representative based upon the strong
publishing/broadcasting orientation of the companies
selected. This Peer Group is comprised of Gannett Co.,
Inc., A.H. Belo Corp., The E.W. Scripps Company,
Journal Communications, Inc., Lee Enterprises, Inc.,
The McClatchy Company, Media General, Inc. and The New
York Times Company.
The S&P 500 Index includes 500 U.S. companies in
the industrial, utilities and financial sectors and is
weighted by market capitalization.
The graph depicts the results of investing $100
in the company’s common stock, the S&P 500 Index and
the Peer Group Index at closing on Dec. 26, 2004. It
assumes that dividends were reinvested quarterly with
respect to the company’s common stock, daily with
respect to the S&P 500 Index and monthly with respect
to the Peer Group.
| 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | |||||||||||||||||||
|
Gannett Co., Inc.
|
100 | 75.35 | 76.77 | 51.05 | 11.62 | 22.34 | ||||||||||||||||||
|
S&P 500 Index
|
100 | 104.91 | 121.48 | 128.16 | 80.74 | 102.11 | ||||||||||||||||||
|
Peer Group
|
100 | 78.73 | 77.37 | 53.30 | 13.82 | 29.88 | ||||||||||||||||||
| ITEM 6. | SELECTED FINANCIAL DATA |
Selected financial data for the years 2005 through 2009
is contained under the heading “Selected Financial
Data” on page 75 and is derived from the company’s
audited financial statements for those years. Certain
reclassifications have been made to previously reported
financial data to reflect the creation of a new digital
segment, as more fully discussed in Note 1 to the
Consolidated Financial Statements.
The information contained in the “Selected
Financial Data” is not necessarily indicative of the
results of operations to be expected for future years,
and should be read in conjunction with “Management’s
Discussion and Analysis of Financial Condition and
Results of Operations” included in Item 7 and the
consolidated financial statements and related notes
thereto included in Item 8 of this Form 10-K.
| ITEM 7. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Certain factors affecting forward-looking statements
Certain statements in this Annual Report on Form 10-K
contain forward-looking information. The words
“expect,” “intend,” “believe,” “anticipate,” “likely,”
“will” and similar expressions generally identify
forward-looking statements. These forward-looking
statements are subject to certain risks and
uncertainties that could cause actual results and
events to differ materially from those anticipated in
the forward-looking statements. The company is not
responsible for updating or revising any
forward-looking statements, whether the result of new
information, future events or otherwise, except as
required by law.
Potential risks and uncertainties which could
adversely affect the company’s 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 continuance of the economic
recessionary conditions in the U.S. and the U.K. or a
further economic downturn leading to a continuing or
accelerated decrease in circulation or local, national
or classified advertising; (c) a further decline in
general newspaper readership and/or advertiser patterns
as a result of competitive alternative media or other
factors; (d) an increase in newsprint or syndication
programming costs over the levels anticipated; (e)
labor disputes which may cause revenue declines or
increased labor costs; (f) acquisitions of new
businesses or dispositions of existing businesses; (g)
a decline in viewership of major networks and local
news programming; (h) rapid technological changes and
frequent new product introductions prevalent in
electronic publishing; (i) an increase in interest
rates; (j) a weakening in the British pound to U.S.
dollar exchange rate; (k) volatility in financial and
credit markets which could affect the value of
retirement plan assets and the company’s ability to
raise funds through debt or equity issuances; (l)
changes in the regulatory environment; (m) an other
than temporary decline in operating results and
enterprise value that could lead to further non-cash
goodwill, other intangible asset, investment or
property, plant and equipment impairment charges; (n)
credit rating downgrades, which could affect the
availability and cost of future financing; and (o)
general economic, political and business conditions.
26
Table of Contents
Executive Summary
Gannett Co., Inc. is a leading international media and
marketing solutions company operating primarily in the
United States and the United Kingdom (U.K.).
Approximately 89% of 2009 consolidated revenues are
from domestic operations including Guam, and
approximately 11% are from foreign operations,
primarily in the U.K.
The company’s goal is to be the leading source of
news and information in the markets it serves, and be
customer centric by delivering quality products and
results for readers, viewers, advertisers and other
customers. Gannett believes that well-managed
newspapers, television stations, Internet products and
services, magazine/specialty publications and
programming efforts will maximize profits for the
company’s shareholders as will a
customer-centric solutions approach to
advertising. To that end, the company’s strategy has
the following elements:
| • | Become the digital destination for consumers and advertisers. |
| • | Create new business opportunities in the digital space through internal innovation, acquisitions or affiliations. The company established a new Digital segment in 2008. |
| • | Transform its sales organization from transactional advertising to a culture of customer-focused marketing solutions and ideas. |
| • | Create highly relevant content that delivers what consumers want and advertisers need to engage with their audiences on multiple platforms. |
| • | Maintain strong financial discipline throughout its operations. |
| • | Maximize existing resources through efforts to enhance revenues and control or reduce costs. For businesses that do not fit with the company’s long-term strategic goals, a reallocation of resources will be undertaken. |
| • | Strengthen the foundation of the company by finding, developing and retaining the best and brightest employees through a robust Leadership and Diversity program. |
Gannett implements its strategy and manages its operations through three business segments:
publishing, digital and broadcasting (television). The publishing segment includes the operations
of 100 daily newspapers in the U.S. and U.K., more than 650 non-daily local publications in the
United States and Guam and more than 200 such titles in the U.K. Its 83 U.S. daily newspapers,
including USA TODAY, the nation’s largest-selling daily print newspaper, with an average
circulation of approximately 1.9 million, have a combined daily average paid circulation of 5.7
million, which is the nation’s largest newspaper group in terms of circulation. Together with the
17 daily paid-for newspapers its Newsquest division publishes in the U.K., the total average daily
circulation of its 100 domestic and U.K. daily newspapers was approximately 6.2 million for 2009.
All daily newspapers also operate web sites which are tightly integrated with publishing
operations. The company’s newspapers also have strategic business relationships with online
affiliates including CareerBuilder, Classified Ventures, ShopLocal.com, Topix and Metromix LLC.
The publishing segment also includes commercial printing; newswire; marketing and data
services operations.
Beginning with the third quarter of 2008, the
company reported a new “Digital” business segment,
which includes CareerBuilder and ShopLocal results
from the dates of their full consolidation (Sept. 3
and June 30, respectively), as well as PointRoll,
Planet Discover, Schedule Star and Ripple6 (from the
date of its acquisition on Nov. 13, 2008). Prior
period results for PointRoll, Planet Discover and
Schedule Star have been reclassified from the
publishing segment to the new Digital segment.
Operating results from web sites that are
associated with publishing operations and broadcast
stations continue to be reported in the publishing and
broadcast segments.
Through its broadcasting segment, the company owns
and operates 23 television stations with affiliated web
sites covering 18.2% of the U.S. population in markets
with a total of more than 20.9 million households. This
segment also includes the results of Captivate Network,
a national news and entertainment network that delivers
programming and full-motion video advertising on video
screens located in elevators of office towers and
select hotel lobbies across North America.
Fiscal year:
The company’s fiscal year ends on
the last Sunday of the calendar year. The company’s
2009 fiscal year ended on Dec. 27, 2009, and
encompassed a 52-week period. The company’s 2008 and
2007 fiscal years also encompassed 52-week periods.
Discontinued operations:
Unless stated otherwise,
as in the section titled “Discontinued operations,” all
of the information contained in Management’s Discussion
and Analysis of Financial Condition and Results of
Operations relates to continuing operations. Therefore,
the results of the Norwich (CT) Bulletin, the Rockford
(IL) Register Star, the Observer-Dispatch in Utica, NY,
and The Herald-Dispatch in Huntington, WV, which were
sold to Gatehouse Media, Inc. in May 2007, and the
Chronicle-Tribune in Marion, IN, which was contributed
to the Gannett Foundation in May 2007, are excluded for
all periods covered by this report. These transactions
are discussed in more detail on page 31 in the business
acquisitions, investments, dispositions and
discontinued operations section of this report.
Presentation of certain pro forma and non-GAAP
information:
The discussion below is focused mainly on
changes in historical financial results, however
certain operating information for the newly formed
Digital Segment is also presented on a pro forma basis,
which assumes that all properties owned at the end of
2009 were owned throughout the periods covered by the
discussion. The company consistently uses, for
individual businesses and for aggregated business data,
pro forma reporting of operating results in its
internal financial reports because it enhances
measurement of performance by permitting comparisons
with prior period historical data. Likewise, the
company uses this same pro forma data in its external
reporting of key financial results and benchmarks.
In addition to the results reported in accordance
with accounting principles generally accepted in the
United States (“GAAP”), the company has provided in
this report amounts for operating expenses, operating
income, non-operating expenses and earnings per share
excluding certain special items (non GAAP basis).
Management believes results excluding these items
better reflect the ongoing performance of the company
and enables management and investors to meaningfully
trend, analyze and benchmark the performance of the
company’s operations. These measures are also more
comparable to financial measures reported by the
company’s competitors. These results should not be
considered a substitute for amounts calculated and
reported in accordance with GAAP.
27
Table of Contents
Operating results and non-cash impairment charges:
The company reported net income attributable to Gannett
Co., Inc. for 2009 of $355 million or $1.51 per share.
This net income amount includes special items which
have a net unfavorable impact totaling $116 million on
a pre-tax basis ($86 million after-tax, or $.36 per
share).
The table below reconciles diluted earnings per
share reported in accordance with GAAP to adjusted
earnings per share excluding special items:
| Fifty-two | Fifty-two | Fifty-two | ||||||||||
| weeks ended | weeks ended | weeks ended | ||||||||||
| Diluted Earnings Per Share | Dec. 27, 2009 | Dec. 28, 2008 | Dec. 30, 2007 | |||||||||
|
Earnings (loss) per share
(GAAP basis)
|
$ | 1.51 | $ | (29.11 | ) | $ | 4.17 | |||||
|
Operating items:
|
||||||||||||
|
Facility consolidation and asset
impairment charges
|
0.37 | 31.30 | 0.22 | |||||||||
|
Workforce restructuring and
related expenses
|
0.08 | 0.34 | 0.18 | |||||||||
|
Pension gain
|
(0.10 | ) | (0.13 | ) | — | |||||||
|
Non-operating items:
|
||||||||||||
|
Impairment of newspaper
publishing partnerships and other
equity method investments
|
0.03 | 1.09 | — | |||||||||
|
Debt exchange gain
|
(0.11 | ) | — | — | ||||||||
|
Impairment of publishing assets sold
|
0.10 | — | — | |||||||||
|
Tysons land sale gain
|
— | (0.07 | ) | — | ||||||||
|
|
||||||||||||
|
Adjusted earnings per share
(Non-GAAP basis)
|
$ | 1.87 | (a) | $ | 3.41 | (a) | $ | 4.57 | ||||
|
|
||||||||||||
| (a) | Total per diluted share amount does not sum due to rounding. |
Discussion of special charges and credits
affecting reported results:
Very difficult business
conditions required the company to perform impairment
tests on certain assets including goodwill, other
intangible assets, other long lived assets and
investments accounted for under the equity method
during 2009, 2008 and 2007. As a result, the company
has recorded non-cash impairment charges to reduce the
book value of certain of those assets of $142 million
($95 million after-tax or $.40 per share), $8.4 billion
($7.39 billion after-tax or $32.38 per share) and $72
million ($51 million after-tax or $.22 per share) in
2009, 2008 and 2007, respectively. In addition, an
impairment charge of $28 million ($24 million after-tax
or $.10 per share) was taken in 2009 to reduce the
value of certain commercial printing assets which were
then sold. The impairment charges were driven by
deteriorating business trends as recessions in the U.S.
and U.K. economies deepened. Concurrent with the
decline in business conditions, there was broad-based
downward pressure on equity share values in 2008 and
early 2009 and the company’s stock price declined
significantly. These factors led to the reassessment of
asset carrying values and the determination that
non-cash impairment write downs to underlying estimated
fair value were required. These non-cash impairment
charges are detailed on page 31 and in Note 3 to the Consolidated Financial Statements.
For the years 2009, 2008 and 2007 the company
recorded work-force restructuring related costs
totaling $29 million ($18 million after-tax or $.08
per share), $119 million ($77 million after-tax or
$.34 per share), and $65 million ($42 million
after-tax or $.18 per share), respectively. These
charges were taken in connection with workforce
reductions related to facility consolidation and
outsourcing efforts and as part of a general program
to fundamentally change the company’s cost structure.
During the first quarter of 2009, the company
reached an agreement with one of its unions for a
complete withdrawal from the union’s underfunded
pension plan and release from any future obligations
with respect thereto. As a result of this agreement,
the company recognized a pension settlement gain of
$40 million ($25 million after-tax or $.10 per share).
During the second quarter of 2008, the company
made changes to its domestic benefit plans by improving
its 401(k) plan while freezing benefits under certain
company sponsored defined benefit pension plans. As a
result, the company recognized a curtailment gain from
its domestic pension plans of $47 million ($29 million
after-tax or $.13 per share).
In connection with the private exchange offer
completed in May 2009, the company recorded a gain of
approximately $43 million
($26 million after-tax or $.11 per share) which is
classified in “Other non-operating items” in the
Statement of Income. This gain resulted from recording
its new 2015 and 2016 notes at fair value as of the
time of the exchange and extinguishing the old notes
at their historical book values.
In 2008, the company realized a $26 million ($16
million after-tax or $.07 per share) gain on the sale
of a parcel of land adjacent to its headquarters
building in McLean, VA.
Operating results summary:
Operating revenues declined 17% to $5.61 billion for 2009.
Publishing revenues were $4.40 billion for 2009 or 23% below 2008 levels, reflecting severe
recessionary conditions in the U.S. and U.K.
Digital segment revenues totaled $586 million for
2009, compared to $281 million for 2008, reflecting a
full year consolidation of CareerBuilder and ShopLocal.
On a pro forma basis, operating revenues for the
Digital segment fell 15%, reflecting softer employment
advertising demand that impacted CareerBuilder’s
results offset partially by revenue increases at
PointRoll and ShopLocal.
Broadcast revenues for 2009 were $631 million or
18% below 2008 levels, reflecting substantially lower
political spending and the absence of summer Olympic
revenue achieved in 2008. Overall, Olympic and
political revenues were down approximately $100 million
in 2009 from 2008 levels.
While all of 2009 was very challenging from a
revenue perspective, revenue declines compared to 2008
generally narrowed for each successive quarter. The
table below presents the percentage of revenue decline
for each quarter and for the full year, for the company
as a whole and for its three business segments. Note
that these revenue amounts are pro forma for the
Digital segment (due to acquisitions in the second half
of 2008) and for Publishing (to reflect exiting a
commercial printing business in the U.K. in mid 2009).
28
Table of Contents
| Revenue Decline 2009 vs. 2008 | Q1 | Q2 | Q3 | Q4 | Full Year | |||||||||||||||
|
Publishing
|
(26 | %) | (25 | %) | (22 | %) | (14 | %) | (22 | %) | ||||||||||
|
Digital
|
(13 | %) | (18 | %) | (20 | %) | (7 | %) | (15 | %) | ||||||||||
|
Broadcast
|
(16 | %) | (21 | %) | (23 | %) | (14 | %) | (18 | %) | ||||||||||
|
|
||||||||||||||||||||
|
Total
|
(24 | %) | (24 | %) | (22 | %) | (14 | %) | (21 | %) | ||||||||||
|
|
||||||||||||||||||||
Operating costs declined 64% to $4.89 billion
for 2009, due mainly to substantially smaller
impairment and restructuring charges in 2009 compared
with 2008. Operating costs excluding these and other
special items discussed above declined 13%, and on a
pro forma basis (regarding Digital business
acquisitions in 2008 as discussed on page 27 and the
sale of a U.K. commercial printing business in 2009),
operating costs declined 18%. Lower costs reflect the
savings from the many consolidation and restructuring
efforts undertaken over the last two years.
Newsprint expense for publishing was also
significantly less than in 2008, declining 34% as a
31% reduction in consumption was combined with a 4%
decrease in average usage prices.
The company reported operating income for 2009 of
$725 million, including the special items charges of
$122 million. Absent the special items from 2009 and
2008 results, as shown on page 32, the company’s
operating income would have been $847 million, a 34%
decline from 2008.
The company reported income of $4 million from its
equity share of results from unconsolidated investees
for 2009, an increase over 2008, primarily because of
the impairment of the carrying value of its interest in
newspaper publishing partnerships and certain other
investees in 2008. The publishing businesses in these
partnerships had also been adversely affected by the
recessionary conditions in the U.S. Absent the special
items in 2009 ($9 million) and 2008 ($382 million),
equity income in unconsolidated investees would have
improved by $8 million which reflects improved results
from the company’s digital investments.
Interest expense was lower for the year — down $15 million or 8%, reflecting lower average
debt levels and lower borrowing rates. From its strong operating cash flow and its tightly
disciplined liquidity management, the company reduced its long-term debt by $755 million or 20% in
2009.
The company reported net income attributable to Gannett Co., Inc. of $355 million or $1.51 per
share for 2009 compared with a loss of $6.65 billion or $29.11 per share for 2008. Absent the
special items in both years, the company would have reported a decline in net income attributable
to Gannett of 43% and diluted earnings per share of 45%.
The company recorded net income attributable to
noncontrolling interests of $27 million for 2009, an
increase of $20 million over 2008, reflecting an
increase in income at CareerBuilder and the
consolidation of CareerBuilder for the full year
2009.
Challenges for 2010:
Looking forward to 2010,
the company faces several important challenges,
including:
| • | Effectively manage in a global economic recession with the likelihood of a slow and uneven recovery period, which will continue to affect all revenue streams for the company’s publishing, digital and broadcasting businesses; |
| • | Continue transforming its cost structure to align expenses with revenue levels; |
| • | Respond to the changing media landscape and consumers’ increasing desire to access content across multiple platforms; | |
| • | Drive innovation throughout the company with important efforts such as the ContentOne, E-edition and CustomerOne initiatives; and |
| • | Possible rise in newsprint prices in the U.S. |
Basis of reporting
Following is a discussion of the key factors that have
affected the company’s business over the last three
fiscal years. This commentary should be read in
conjunction with the company’s financial statements,
Selected Financial Data and the remainder of this Form
10-K.
Critical accounting policies and the use of
estimates:
The company prepares its financial
statements in accordance with generally accepted
accounting principles (GAAP) which require the use of
estimates and assumptions that affect the reported
amount of assets, liabilities, revenues and expenses
and related disclosure of contingent matters. The
company bases its estimates on historical experience,
actuarial studies and other assumptions, as
appropriate, concerning the carrying values of its
assets and liabilities and disclosure of contingent
matters. The company re-evaluates its estimates on an
ongoing basis. Actual results could differ from these
estimates.
Critical accounting policies for the company
involve its assessment of the recoverability of its
long-lived assets, including goodwill and other
intangible assets, which are based on such factors as
estimated future cash flows and current fair value
estimates of businesses. Similarly the company
evaluates the recoverability of the carrying value of
its property, plant and equipment and its investments
in minority-owned unconsolidated investees, including
its newspaper publishing partnerships and certain
online/new technology business investments.
The company’s accounting for pension and retiree
medical benefits requires the use of various estimates
concerning the work force, interest rates, plan
investment return, and involves the use of advice from
consulting actuaries. The company’s accounting for
income taxes in the U.S. and foreign jurisdictions is
sensitive to interpretation of various laws and
regulations therein, and to accounting rules regarding
the repatriation of earnings from foreign sources. The
company must also exercise significant judgment in
assessing the recoverability of its deferred tax
assets.
Refer to Note 1 to the Consolidated Financial
Statements for a more complete discussion of all of
the company’s significant accounting policies.
29
Table of Contents
Reclassifications of certain items within the
Consolidated Financial Statements:
The company adopted
Financial Accounting Standards Board (FASB) Statement
of Financial Accounting Standards No. 160,
“Noncontrolling Interests in Consolidated Financial
Statements, an amendment of ARB No. 51” (SFAS No. 160),
as subsequently codified in Accounting Standards
Codification (ASC) Topic 810, “Consolidation,” at the
beginning of its 2009 fiscal year. SFAS No. 160 changed
the accounting and reporting for minority interest,
which was renamed noncontrolling interests and
generally classified as a component of equity on the
Consolidated Balance Sheet. Gannett’s SFAS No. 160
adoption resulted in the presentation of a new line
“Redeemable noncontrolling interest” in the mezzanine
section of the balance sheet. The balance in this line
represents redeemable stock held by a noncontrolling
owner in CareerBuilder. The redeemable stock is
generally exercisable within 30 days after Jan. 1,
2014. On the Consolidated Statements of Income, SFAS
No. 160 affected primarily the company’s reporting of
the 49.2 percent noncontrolling interest in
CareerBuilder. Previously, the company presented this
minority interest in “Other non-operating items” in the
Consolidated Statements of Income. Under SFAS No. 160,
“Net income” in the Consolidated Statements of Income
reflects 100 percent of CareerBuilder results as the
company holds the controlling interest. “Net income
(loss)” is subsequently adjusted to remove the
noncontrolling (minority) interest to arrive at “Net
income (loss) attributable to Gannett Co., Inc.” While
this presentation is different than previously required
by GAAP, the final net income results attributable to
the company are the same under SFAS No. 160 and the
previous reporting method.
Reclassifications were made to prior periods to
conform to the new SFAS No. 160 presentation
requirements.
In the third quarter of 2008, the company began
reporting a new digital segment and a separate digital
revenues line in its Statements of Income (Loss). This
revenue line includes only revenue from the businesses
that comprise the new digital segment. It therefore
includes all revenues from CareerBuilder and ShopLocal
beginning with the full consolidation of these
businesses in the third quarter of 2008, and revenues
from PointRoll, Schedule Star, Planet Discover and
Ripple6 (from the date of its acquisition in November
2008). Revenues from PointRoll, Schedule Star and
Planet Discover had previously been reported within the
publishing segment and were included in the “All other”
revenue line in the Statement of Income. “All other”
revenue is now comprised principally of commercial
printing revenues. All periods presented reflect these
reclassifications.
Neither the Digital revenue line nor the Digital
Segment include online revenue from the web sites
operated together with publishing or broadcasting
businesses.
Business acquisitions, investments, dispositions and discontinued operations
2009
:
In February 2009, the company purchased a
minority interest in Homefinder, a leading national
online marketplace connecting homebuyers, sellers and
real estate professionals.
In July 2009, Newsquest sold one of its
commercial printing businesses, Southernprint
Limited.
Total cash paid in 2009 for business acquisitions
(principally post-acquisition consideration) and
investments was $9.6 million and $9.7 million,
respectively.
2008
:
On Dec. 31, 2007, the first day of the
company’s 2008 fiscal year, the company purchased
X.com, Inc. (BNQT.com), which operates a digital
media group of affiliated sites covering eight
different action sports including surfing,
snowboarding and skateboarding. X.com is affiliated
with the USA TODAY Sports brand.
In February 2008, the company formed
QuadrantONE, a new digital ad sales network, with
three other large media companies.
In March 2008, the company purchased a minority
stake in Fantasy Sports Ventures (FSV). FSV owns a
set of fantasy sports content sites and manages
advertising across a group of affiliated sites.
In May 2008, the company purchased a minority
stake in Cozi Group Inc. (COZI). COZI is a free web
service that helps families manage busy schedules,
track shopping and to-do lists, organize household
chores, stay in communication and share memories — all
in one place.
In July 2008, the company purchased a minority
stake in Livestream (formerly Mogulus), a company that
provides Internet broadcasting services. Also in July
2008, the company increased its investment in 4INFO,
maintaining its approximate ownership interest.
In August 2008, the company purchased 100% of the
outstanding shares of Pearls Review, Inc., an online
nursing certification and continuing education review
site.
In June 2008, the company acquired from Tribune
Company and The McClatchy Company their minority
ownership interests in ShopLocal LLC, a leading
marketing and database services company for major
retailers in the U.S. The company now owns 100% of
ShopLocal and began consolidating its results in the
digital segment at the beginning of the third quarter
of 2008. ShopLocal collaborates with PointRoll to
create ads that dynamically connect retail advertisers
and consumers, online and in the store.
ShopLocal’s operations turned profitable in the
third quarter of 2008.
In September 2008, the company acquired an
additional 10% stake in CareerBuilder from Tribune
Company increasing its investment to 50.8% so that it
became the majority and controlling owner. Beginning in
September 2008, the operations of CareerBuilder have
been fully consolidated and are reported in the digital
segment. The related noncontrolling interest charge for
CareerBuilder is reflected in “Net income attributable
to noncontrolling interests” in the Statements of
Income (Loss).
30
Table of Contents
In November 2008, the company acquired Ripple6,
Inc., a leading provider of social media services for
publishers and other users. Ripple6 currently powers
Gannett’s MomsLikeMe.com site, which recently rolled
out in 80 local markets across the country and has
more than one million moms visiting each month.
The total cash paid in 2008 for business acquisitions was $168.6 million and for investments
was $46.8 million.
2007
:
In May 2007, the company completed the sale of the Norwich (CT) Bulletin, the Rockford
(IL) Register Star, the Observer-Dispatch in Utica, NY, and The Herald-Dispatch in Huntington, WV,
to GateHouse Media, Inc. and contributed the Chronicle-Tribune in Marion, IN, to the Gannett
Foundation. In connection with these transactions, the company recorded a net after-tax gain of
$73.8 million in discontinued operations. For all periods presented, results from these businesses
have been reported as discontinued operations.
In January 2007, the company acquired Central
Florida Future, the independent student newspaper of
the University of Central Florida.
In June 2007, the company acquired the Central
Ohio Advertiser Network, a network of eight weekly
shoppers with the Advertiser brand and a commercial
print operation in Ohio.
In October 2007, the company acquired a
controlling interest in Schedule Star LLC, which
operates HighSchoolSports.net, a digital content site
serving the high school sports audience, and the
Schedule Star solution for local athletic directors.
At the end of October 2007, the company, in
partnership with Tribune Company, announced a digital
joint venture to expand a national network of local
entertainment web sites under the Metromix brand.
Metromix LLC focuses on a common model for local
online entertainment sites, and then scales the sites
into a national platform under the Metromix brand.
The total cash paid in 2007 for business
acquisitions was $30.6 million and for investments was
$40.0 million.
RESULTS OF OPERATIONS
Consolidated summary — continuing operations
A consolidated summary of the company’s results is
presented below.
| In millions of dollars, except per share amounts | 2009 | Change | 2008 (a) | Change | 2007 (a) | |||||||||||||||
|
Operating revenues
|
$ | 5,613 | (17 | %) | $ | 6,768 | (9 | %) | $ | 7,439 | ||||||||||
|
Operating expenses
|
$ | 4,888 | (64 | %) | $ | 13,529 | *** | $ | 5,789 | |||||||||||
|
Operating income (loss)
|
$ | 725 | *** | $ | (6,762 | ) | *** | $ | 1,651 | |||||||||||
|
Non-operating expense
|
$ | 149 | (72 | %) | $ | 537 | *** | $ | 200 | |||||||||||
|
Income (loss) from
continuing operations
|
||||||||||||||||||||
|
Per share — basic
|
$ | 1.52 | *** | $ | (29.11 | ) | *** | $ | 4.18 | |||||||||||
|
Per share — diluted
|
$ | 1.51 | *** | $ | (29.11 | ) | *** | $ | 4.17 | |||||||||||
| (a) | Numbers do not sum due to rounding |
Results for all periods reflect certain
special items that are included in either operating
expenses or non-operating expense which are further
discussed on page 28 and in Notes 3 and 4 to the
Consolidated Financial Statements.
In the next table and certain other tables and
discussions that follow, the effect of these items has
been removed from key financial measures to better
reflect the ongoing performance of the company.
Operating expenses and non-operating expenses
adjusted to remove the effect of certain special
items are as follows:
| 2009 (a) | 2008 (a) | 2007 (a) | ||||||||||||||||||
| operating | non-operating | operating | non-operating | operating | ||||||||||||||||
| In millions of dollars | expense | expense | expense | expense | expense | |||||||||||||||
|
As reported (GAAP)
|
$ | 4,888 | $ | 149 | $ | 13,529 | $ | 537 | $ | 5,789 | ||||||||||
|
Remove favorable (unfavorable) special items:
|
||||||||||||||||||||
|
Facility consolidation and
asset impairment charges
|
$ | (133 | ) | $ | — | $ | (7,976 | ) | $ | — | $ | (72 | ) | |||||||
|
Workplace restructuring
and related expenses
|
$ | (29 | ) | $ | — | $ | (119 | ) | $ | — | $ | (65 | ) | |||||||
|
Pension gains
|
$ | 40 | $ | — | $ | 47 | $ | — | $ | — | ||||||||||
|
Impairment of newspaper
publishing partnerships
and other equity method
investments
|
$ | — | $ | (9 | ) | $ | — | $ | (382 | ) | $ | — | ||||||||
|
Debt exchange gain
|
$ | — | $ | 43 | $ | — | $ | — | $ | — | ||||||||||
|
Impairment of publishing
assets sold
|
$ | — | $ | (28 | ) | $ | — | $ | — | $ | — | |||||||||
|
Tysons land sale gain
|
$ | — | $ | — | $ | — | $ | 26 | $ | — | ||||||||||
|
|
||||||||||||||||||||
|
As adjusted (non-GAAP)
|
$ | 4,766 | $ | 154 | $ | 5,480 | $ | 181 | $ | 5,651 | ||||||||||
|
|
||||||||||||||||||||
| (a) | Numbers do not sum due to rounding. |
31
Table of Contents
Operating income adjusted to remove the effect of
certain special items is as follows:
| In millions of dollars | 2009 | 2008 (a) | 2007 | |||||||||
|
Operating income (GAAP basis)
|
$ | 725 | $ | (6,762 | ) | $ | 1,651 | |||||
|
Remove (favorable) unfavorable special items:
|
||||||||||||
|
Facility consolidation and asset
impairment charges
|
$ | 133 | $ | 7,976 | $ | 72 | ||||||
|
Workforce restructuring and
related expenses
|
$ | 29 | $ | 119 | $ | 65 | ||||||
|
Pension gains
|
$ | (40 | ) | $ | (47 | ) | $ | — | ||||
|
|
||||||||||||
|
Adjusted operating income (non-GAAP basis)
|
$ | 847 | $ | 1,288 | $ | 1,788 | ||||||
|
|
||||||||||||
| (a) | Numbers do not sum due to rounding. |
On an as adjusted basis using non GAAP
amounts for expenses, operating results were as
follows:
| Consolidated Summary-Non GAAP Basis | ||||||||||||||||||||
| In millions of dollars | 2009 | Change | 2008 | Change | 2007 | |||||||||||||||
|
Operating revenues
|
$ | 5,613 | (17 | %) | $ | 6,768 | (9 | %) | $ | 7,439 | ||||||||||
|
Operating expenses
|
$ | 4,766 | (13 | %) | $ | 5,480 | (3 | %) | $ | 5,651 | ||||||||||
|
Operating income
|
$ | 847 | (34 | %) | $ | 1,288 | (28 | %) | $ | 1,788 | ||||||||||
|
Non-operating expense
|
$ | 154 | (15 | %) | $ | 181 | (10 | %) | $ | 200 | ||||||||||
A discussion of operating results of the
company’s publishing, digital and broadcasting
segments, along with other factors affecting net income
attributable to Gannett, is as follows.
Publishing segment
In addition to its domestic local newspapers and
affiliated web sites, the company’s publishing
operations include USA TODAY, USA WEEKEND, Newsquest,
which publishes daily and non-daily newspapers in the
U.K., Clipper Magazine, Gannett Healthcare Group, Army
Times Publishing, Gannett Offset commercial printing
and other advertising and marketing services
businesses. The publishing segment in 2009 contributed
78% of the company’s revenues.
Publishing operating results were as follows:
| In millions of dollars | 2009 | Change | 2008 | Change | 2007 | |||||||||||||||
|
Revenues
|
$ | 4,396 | (23 | %) | $ | 5,714 | (13 | %) | $ | 6,580 | ||||||||||
|
Expenses
|
$ | 3,873 | (70 | %) | $ | 12,740 | *** | $ | 5,190 | |||||||||||
|
Operating income (loss)
|
$ | 523 | *** | $ | (7,026 | ) | *** | $ | 1,390 | |||||||||||
Operating expenses for publishing include the
effects of certain special items which are more fully
discussed on page 28 and in Notes 3 and 4 to the
Consolidated Financial Statements. Operating expenses
adjusted for the effect of special items are as
follows:
| In millions of dollars | 2009 | 2008 | 2007 | |||||||||
|
Operating expenses (GAAP basis)
|
$ | 3,873 | $ | 12,740 | $ | 5,190 | ||||||
|
Remove favorable (unfavorable) special items:
|
||||||||||||
|
Facility consolidation and asset
impairment charges
|
$ | (99 | ) | $ | (7,951 | ) | $ | (72 | ) | |||
|
Workforce restructuring and
related expenses
|
$ | (28 | ) | $ | (103 | ) | $ | (64 | ) | |||
|
Pension gains
|
$ | 40 | $ | 37 | $ | — | ||||||
|
|
||||||||||||
|
Adjusted operating expenses
(non-GAAP basis)
|
$ | 3,786 | $ | 4,723 | $ | 5,054 | ||||||
|
|
||||||||||||
Publishing operating results excluding the
effects of the above special items were as follows:
| In millions of dollars | 2009 | Change | 2008 | Change | 2007 | |||||||||||||||
|
Operating revenues
|
$ | 4,396 | (23 | %) | $ | 5,714 | (13 | %) | $ | 6,580 | ||||||||||
|
Operating expenses
|
$ | 3,786 | (20 | %) | $ | 4,723 | (7 | %) | $ | 5,054 | ||||||||||
|
Operating income
|
$ | 610 | (38 | %) | $ | 991 | (35 | %) | $ | 1,526 | ||||||||||
Foreign currency translation:
The average
exchange rate used to translate U.K. publishing
results was 1.56 for 2009, 1.86 for 2008 and 2.00 for
2007. Therefore, publishing segment revenue and
expense when comparing 2009 with 2008 are lower as a
result.
Publishing operating revenues:
Publishing
operating revenues are derived principally from
advertising and circulation sales, which accounted for
67% and 27%, respectively, of total publishing
revenues in 2009. Ad revenues include those derived
from advertising placed with affiliated Internet sites
which include revenue in the classified, retail and
national ad categories. Other publishing revenues are
mainly from commercial printing.
The table below presents the principal components
of publishing revenues for the last three years.
| Publishing operating revenues, in millions of dollars | 2009 (a) | Change | 2008 (a) | Change | 2007 (a) | |||||||||||||||
|
Advertising
|
$ | 2,966 | (28 | %) | $ | 4,146 | (16 | %) | $ | 4,937 | ||||||||||
|
Circulation
|
$ | 1,167 | (4 | %) | $ | 1,217 | (3 | %) | $ | 1,252 | ||||||||||
|
Commercial
printing and other
|
$ | 262 | (25 | %) | $ | 352 | (10 | %) | $ | 390 | ||||||||||
|
Total
|
$ | 4,396 | (23 | %) | $ | 5,714 | (13 | %) | $ | 6,580 | ||||||||||
| (a) | Numbers do not sum due to rounding. |
32
Table of Contents
The table below presents the principal
components of publishing advertising revenues for the
last three years. These amounts include ad revenue
from printed publications as well as online ad revenue
from web sites affiliated with the publications.
| Advertising revenues, in millions of dollars | 2009 | Change | 2008 | Change | 2007 | |||||||||||||||
|
Retail
|
$ | 1,533 | (22 | %) | $ | 1,964 | (10 | %) | $ | 2,184 | ||||||||||
|
National
|
$ | 524 | (22 | %) | $ | 672 | (10 | %) | $ | 751 | ||||||||||
|
Classified
|
$ | 909 | (40 | %) | $ | 1,510 | (25 | %) | $ | 2,002 | ||||||||||
|
Total ad revenue
|
$ | 2,966 | (28 | %) | $ | 4,146 | (16 | %) | $ | 4,937 | ||||||||||
Publishing revenue comparisons 2009-2008:
Advertising revenues for 2009 decreased $1.18 billion
or 28%. The rate of decline narrowed over the course of
the year as economic conditions slowly improved. Early
in the year, revenue declines were the most pronounced
due in large measure to the severe global economic
recession. Real estate and employment advertising were
especially hampered by the recession. As the year
progressed, ad revenue declines narrowed in each
successive quarter and December was the company’s best
year-over-year comparison month of the year.
Ad revenues were lower in both the U.S. and the U.K.
In the U.K., in local currency, ad revenues were down more than in the U.S. U.K. ad revenue
declines were exacerbated by a lower average exchange rate for 2009. In U.S. dollars, Newsquest ad
revenues were down 44% compared with a 25% decline for U.S. publishing.
The table below presents the percentage decline
in 2009 for each of the major ad revenue categories,
by quarter. As indicated for nearly all categories,
the percentage decline narrowed in each successive
quarter.
| Advertising Revenue Decline by Quarter | Q1 | Q2 | Q3 | Q4 | ||||||||||||
|
Retail
|
(23 | %) | (24 | %) | (22 | %) | (18 | %) | ||||||||
|
National
|
(31 | %) | (22 | %) | (25 | %) | (10 | %) | ||||||||
|
Classified
|
(47 | %) | (46 | %) | (37 | %) | (22 | %) | ||||||||
|
Total advertising
|
(34 | %) | (32 | %) | (28 | %) | (18 | %) | ||||||||
Retail ad revenues were down $430 million or
22% in 2009. In the U.S., revenues were lower in most
principal categories, with the more significant
declines occurring in the department store, furniture,
entertainment, financial and telecommunications
categories. Retail ad revenues declined at a greater
rate in the U.K. due to the currency impact. On a
constant currency basis, retail ad
revenues in the U.K. were down 19%. Retail revenue
declines narrowed in the third and again in the fourth
quarter, and December was the best comparison month of
the year.
National ad revenues were down $147 million or
22% in 2009, primarily due to lower ad sales for USA
TODAY branded publications and national ad revenues
for U.S. Community Publishing. In the fourth quarter,
the decline in national ad revenues moderated
significantly and in the month of December national ad
revenues were higher than 2008 levels. At USA TODAY,
ad revenues were down 29% for the year, reflecting the
continued slowdown in the travel and lodging
industries. Paid ad pages were down 26% for the year
and totaled 2,326 in 2009 compared to 3,158 in 2008.
Fourth quarter comparisons were the best of the year
and in December USA Today ad revenues were nearly even with
2008.
Classified ad revenues decreased $602 million or
40% in 2009 with a decline of 35% in the U.S. and 50%
in the U.K. The currency impact contributed to the U.K.
decline. On a constant currency basis, classified ad
revenues in the U.K. were down 39%.
Classified revenue in both countries was affected by
the global recession and particularly the weakness in
employment and housing. Classified revenue declines
occurred in all three principal categories of
employment (down 58%), real estate (down 42%), and
automotive (down 34%). Declines in all categories
narrowed over the course of the year and classified
comparisons were the best in December.
Looking to 2010, the company expects the economic
environment to continue to put pressure on publishing
ad revenue streams in the U.S. and the U.K. While
comparisons should be better than they were in 2009,
ad revenues presently are expected to be lower in most
core categories and in most markets. U.K. revenues
will also be affected by fluctuations in the exchange
rate. For the first 45 days of 2010, the average
exchange rate was 1.60, or 10% higher than the
comparable period in 2009.
Newspaper circulation revenues declined $50
million or 4% over 2008 as circulation revenues for
U.S. and U.K. newspapers were lower. Revenue
comparisons reflect lower circulation volumes
partially offset by price increases. Daily net paid
circulation, excluding USA TODAY, declined 12%, while
Sunday net paid circulation declined 7%. Volumes were
affected, in part, by single copy and home delivery
price increases at most U.S. newspapers and by
selective culling of distribution in certain areas.
Circulation revenues were lower at USA TODAY,
reflecting lower average daily circulation, partially
offset by a December 2008 increase in the single copy
price of the newspaper at newsstands and vending
machines from $.75 to $1.00. USA TODAY’s average daily
circulation for 2009 decreased 16% to 1,904,362. USA
TODAY reported an average daily paid circulation of
1,900,116 in the Audit Bureau of Circulations (ABC)
Publisher’s Statement for the 26 weeks ended Sept. 27,
2009, a 17% decrease over the comparable period in
2008. The circulation volume decline at USA TODAY
reflects the general recessionary
economic conditions particularly as they
contributed to lower business and leisure travel.
33
Table of Contents
For local newspapers, morning circulation
accounted for approximately 93% of total daily
volume, while evening circulation accounted for 7%.
Circulation volume for the company’s local
newspapers is summarized in the table below. In 2009,
the company reclassified certain net paid circulation
volume from evening to morning distribution due to
changes in delivery times. All prior periods have been
restated to conform to the new classifications.
| Average net paid circulation volume, in thousands | 2009 | Change | 2008 | Change | 2007 | |||||||||||||||
|
Local Newspapers
|
||||||||||||||||||||
|
Morning
|
4,048 | (12 | %) | 4,587 | (6 | %) | 4,877 | |||||||||||||
|
Evening
|
285 | (13 | %) | 326 | (7 | %) | 350 | |||||||||||||
|
Total daily
|
4,333 | (12 | %) | 4,913 | (6 | %) | 5,227 | |||||||||||||
|
Sunday
|
5,158 | (7 | %) | 5,539 | (5 | %) | 5,828 | |||||||||||||
Commercial printing and other publishing
revenues declined 25% to $262 million in 2009 due
primarily to generally lower commercial printing
revenue in the U.S. and U.K. and from the sale of a
U.K. commercial printing business early in the third
quarter of 2009.
Publishing revenue comparisons 2008-2007:
Advertising
revenues for 2008 decreased $792 million or 16% from 2007. The rate of decline
accelerated over the course of the year as economic
conditions worsened. Early in the year revenue
declines were due in large measure to recessionary
conditions in the U.S., including the real estate and
subprime lending crisis. In the second part of the
year as the economic crisis deepened and financial
market functions deteriorated, the U.S. recession
worsened and the U.K. economy went into recession.
Therefore all markets and revenue categories were
adversely affected. Increased competition for
advertising spending from other media outlets also
affected trends and results for 2008.
Retail ad revenues were down $219 million or 10%
in 2008. In the U.S., revenues were lower in most
principal categories, with the more significant
declines occurring in the department store, furniture,
entertainment, home improvement and telecommunications
categories. Retail ad revenues declined at a faster
rate in the U.K. due in part to the currency impact.
National ad revenues were down $79 million or 10%
in 2008, primarily due to lower ad sales for USA TODAY
branded publications, although national ad revenues
for U.S. Community Publishing were lower as well.
Classified ad revenues decreased $494 million or
25%. Classified revenue declined 24% in the U.S. and
25% in the U.K. Declines in the U.K. were adversely
affected by the currency impact. In the U.S.,
classified was significantly affected by the real
estate crisis and its contribution to an overall
softening in the
advertising environment. Classified revenue
declines occurred in all three principal categories of
employment (down 30%), real estate (down 34%), and
automotive (down 19%).
Newspaper circulation revenues declined $36
million or 3% from 2007. Circulation revenues for local
U.S. and U.K. newspapers were lower for the year. Daily
net paid circulation for publishing operations,
excluding USA TODAY, declined 6%, generally consistent
with industry trends. However, volume declines were
also affected by price increases for certain elements
of local circulation volume initiated at most U.S.
newspapers in 2008, and by selective culling of
distribution in certain areas.
Circulation revenues were higher at USA TODAY,
reflecting in part a December 2008 increase in the
single copy price of the newspaper at newsstands and
vending machines from $.75 to $1.00. USA TODAY’s
average daily circulation for 2008 decreased 2% to
2,255,295. USA TODAY reported an average daily paid
circulation of 2,293,310 in the Audit Bureau of
Circulations (ABC) Publisher’s Statement for the 26
weeks ended Sept. 30, 2008, a slight increase over the
comparable period in 2007.
For local newspapers, morning circulation
accounted for approximately 92% of total daily
volume, while evening circulation accounted for 8%.
Publishing expense comparisons 2009-2008:
Publishing operating costs declined 70% to $3.87
billion in 2009, primarily due to non cash impairment
charges incurred in 2008. Absent the special items in
both years, as reflected in the table on page 32,
publishing segment expense was down 20%.
Significant cost savings were achieved through
strict cost control measures in the U.S. and the U.K.
as well as by means of permanently restructuring the
company’s cost base and creating efficiencies wherever
possible. Efforts included numerous facility
consolidations, centralization, furloughs and
outsourcing. Savings reflect the impact of substantial
headcount reductions in 2009 and 2008. Lower newsprint
expense was also a significant contributor to the
savings.
Publishing payroll costs were down 23%,
reflecting the impact of headcount reductions in both
years as well as the furloughs the majority of company
employees were required to take in the first and
second quarters of 2009.
Newsprint expense was down 34%, reflecting
sharply lower consumption, down 31%, including savings
from web width reductions and greater use of light
weight newsprint. Newsprint usage prices declined
sharply throughout the second half of the year and
finished down 4% for the full year. Usage prices,
however, were higher in the first half of the year
compared to the first half of 2008.
Other factors contributing to the decline in
costs include the impact of a lower U.K. exchange
rate, and the sale mid year of a commercial printing
business in the U.K. partially offset by higher
pension cost.
34
Table of Contents
Publishing expense comparisons 2008-2007:
Publishing operating costs increased $7.55 billion in
2008 from the prior year,
primarily due to $7.95 billion of pre-tax non-cash
impairment charges. These charges are more fully
detailed and discussed on page 32 of this report and in
Notes 3 and 4 of the Consolidated Financial Statements.
Absent special items, publishing segment
expenses in 2008 declined 7% from 2007 levels.
These savings were achieved through strict cost
control measures in the U.S. and the U.K. Newsprint
expense was down 9%, reflecting sharply lower
consumption, down 16%, including savings from web width
reductions and greater use of light weight newsprint.
Newsprint usage prices in the U.S. rose throughout most
of the year and finished up 13% for the year. Near the
end of the fourth quarter, however, U.S. newsprint
prices declined.
Publishing payroll costs were down approximately
6%, reflecting significant headcount reductions
partially offset by modest wage/salary increases.
Outlook for 2010:
The company expects operating
expenses to decline further in 2010, reflecting
continued savings from previously and newly planned
restructuring and consolidation efforts. The company
will continue to see savings from headcount reductions
in 2009, and a one-week furlough program has been
announced for most U.S. employees during 2010.
Newsprint expense is also expected to be lower as
consumption is further reduced and favorable price
comparisons will continue through at least the early
part of the year. Pension and other benefit costs will
also be lower in 2010.
Publishing operating results 2009-2008:
Publishing operating income increased to $523 million
in 2009 from a loss of $7.03 billion in 2008. Excluding special items described in more detail on
page 32 and Notes 3 and 4 of the Consolidated Financial Statements, publishing operating income
declined 38%. However, operating income comparisons excluding special items improved each quarter of 2009
and adjusted operating income was up 5% in the fourth quarter. The principal factors affecting
operating results comparisons for the full year were the following:
| • | lower operating results at most U.S. and U.K. properties as all ad revenue categories were affected by difficult economic conditions. Operating results improved throughout the year and many properties had increased operating income against last year in the fourth quarter; |
| • | ad revenue losses attributed to increased competition from other media, particularly the Internet; |
| • | sharply lower newsprint usage and a slight decline in usage price led to significant savings; |
| • | favorable impact in 2009 of workforce restructuring actions; |
| • | furloughs in the first and second quarter for the majority of employees; |
| • | negative impact of currency translation at a lower rate in 2009; and |
| • | cost control efforts throughout the U.S. and U.K. operations contributed to significant year-over-year savings. |
Publishing operating results 2008-2007:
Publishing operating results in 2008 reflect a loss of
$7.03 billion, compared with operating income of $1.39 billion in 2007. Excluding special items described in more detail on page 32 and Notes 3 and 4 of the Consolidated Financial Statements, publishing operating income declined 35%.. The principal factors
affecting operating results comparisons were the following:
| • | generally lower operating results at most U.S. and U.K. properties as all ad revenue categories were adversely affected by economic conditions, which worsened as the year progressed; | |
| • | ad revenue losses attributed to increased competition from other media, particularly the Internet; |
| • | lower newsprint usage, which more than offset higher average prices for the year, leading to lower expense; |
| • | negative impact of currency translation at a lower rate in 2008; and |
| • | aggressive and broad based cost control efforts throughout U.S. and U.K. operations contributed to significant year over year savings. |
35
Table of Contents
Digital
Beginning with 2008, a new digital business segment was
reported, which includes CareerBuilder and ShopLocal
from the dates of their full consolidation, as well as
PointRoll, Planet Discover, Schedule Star and Ripple6
(from the date of acquisition in November 2008). Prior
period results for PointRoll, Planet Discover and
Schedule Star have been reclassified from the
publishing segment to the new digital segment.
On Sept. 3, 2008, the company increased its ownership in CareerBuilder to 50.8% from 40.8%,
obtaining a controlling interest, and therefore, the results of CareerBuilder beginning in
September 2008 have been fully consolidated. On June 30, 2008, the company increased its ownership
in ShopLocal to 100% from 42.5%, and from that date the results of ShopLocal are now fully
consolidated. Prior to these increased investments, the company’s equity share of CareerBuilder and
ShopLocal results were reported as equity earnings. Subsequent to the CareerBuilder consolidation,
the company reflects a noncontrolling interest charge in its Statements of Income (Loss) related to
the other partners’ ownership interest. This charge is reflected with “Net income attributable to
noncontrolling interests.”
Over the last two years since the digital segment was formed, reported digital revenues,
expenses and operating income were as follows:
| In millions of dollars | 2009 | 2008 | ||||||
|
Revenues
|
$ | 586 | $ | 281 | ||||
|
Expenses
|
$ | 543 | $ | 262 | ||||
|
Operating income
|
$ | 43 | $ | 19 | ||||
Reported digital revenues increased $305
million and reported digital costs increased $280
million from the prior year. The year-over-year
increase is primarily due to the full consolidation of
CareerBuilder and ShopLocal beginning in the third
quarter of 2008.
Digital costs in 2009 also include $25 million in
asset impairment charges, while digital costs in 2008
include $17 million in workforce restructuring and
impairment charges.
| Revenues in millions of dollars (pro forma) | 2009 | Change | 2008 | Change | 2007 | |||||||||||||||
|
Digital
|
$ | 586 | (15 | %) | $ | 689 | 13 | % | $ | 607 | ||||||||||
On a pro forma basis, as if CareerBuilder and
ShopLocal had been owned for all of 2008, digital
revenues would have decreased 15% in 2009. This
reflects softer employment advertising demand that
impacted CareerBuilder’s results, offset partially by
strong revenue growth at PointRoll and ShopLocal.
Excluding the special items and on a pro forma
basis, operating costs for digital would have been 21%
lower, reflecting significant savings at CareerBuilder
and ShopLocal. Operating income excluding special items
rose $32 million or 89%. Operating income reflects
solid results in 2009 for CareerBuilder, and strong
gains from PointRoll and ShopLocal.
CareerBuilder operations are predominately based
in North America, however expansion efforts are
underway in parts of Europe and Asia. CareerBuilder is
the nation’s largest online recruitment and career
advancement source for employers, employees, recruiters
and job seekers. Its North American network revenue is
driven mainly from its own sales force but it also
derives revenues from its owner affiliated newspapers,
including the company’s newspapers, which sell various
CareerBuilder employment products including upsells of
print employment ads from newspapers. For the company’s
financial reporting purposes, CareerBuilder revenues
exclude amounts recorded at Gannett-owned newspapers.
North American network revenue declined 27%, compared
to last year, with more than 45% of the decline
attributable to revenues CareerBuilder derived from its
owner-affiliated newspapers. From CareerBuilder’s own
sales efforts there was a 19% decline in revenue for
the year, however these revenues were down only 2% in
the fourth quarter. Upsell revenue softened from
non-Gannett affiliated newspapers as U.S. print
employment advertising declined significantly in 2009.
Digital results 2008-2007:
Reported digital
revenues increased $211 million and reported digital
costs increased $215 million from 2007. The
year-over-year increase is primarily due to the full
consolidation of CareerBuilder and ShopLocal in 2008.
Digital costs in 2008 also include $17 million in
special item charges. Operating income for the digital
segment reflects solid results in 2008 for
CareerBuilder, PointRoll and ShopLocal. Earnings from
these businesses were partially offset by investments
in other digital businesses.
On a pro forma basis, digital revenues increased
13% in 2008 due primarily to increased revenues at
CareerBuilder and PointRoll. Digital segment costs on a
pro forma basis rose 15% reflecting workforce
restructuring costs and impairment charges, general
expansion of the CareerBuilder business and higher
intangible asset amortization. The pro forma gains in
CareerBuilder revenues in 2008 were primarily from its
own sales efforts. Upsell revenue softened from
non-Gannett affiliated newspapers as U.S. print
employment advertising continued to decline.
PointRoll revenue improved in 2008 although
earnings were down slightly, reflecting new product
development and marketing costs.
Outlook for 2010:
The company expects digital
segment revenue and profit to grow in 2010 with
improved results at most of its digital businesses.
36
Table of Contents
Broadcasting
The company’s broadcasting operations at the end of
2009 included 23 television stations and affiliated
web sites in markets with a total of more than 20.9
million households reaching 18.2% of the U.S.
population. The Broadcasting Division also includes
Captivate Network.
Broadcasting revenues accounted for approximately
11% of the company’s reported operating revenues in
2009, 2008 and 2007.
Over the last three years, broadcasting revenues,
expenses and operating income were as follows:
| In millions of dollars | 2009 | Change | 2008 | Change | 2007 | |||||||||||||||
|
Revenues
|
$ | 631 | (18 | %) | $ | 773 | (2 | %) | $ | 789 | ||||||||||
|
Expenses
|
$ | 415 | (11 | %) | $ | 467 | (2 | %) | $ | 474 | ||||||||||
|
Operating income
|
$ | 216 | (29 | %) | $ | 306 | (3 | %) | $ | 315 | ||||||||||
Broadcast revenues decreased $141 million or
18% for 2009. Year-over-year revenue comparisons are
unfavorably impacted by $118 million in ad revenues
associated with the 2008 Summer Olympics and
political/election-related advertising in 2008.
Excluding the impact of Olympic- and political-related
advertising in both years, broadcast revenues were
down 6% in 2009. This decline reflects substantial
losses in several core categories, especially
automotive, partially offset by an almost three-fold
increase in retransmission revenues.
Excluding Captivate, broadcast revenues declined
19%. Local television revenues declined 21% while
national revenues declined 31%. Excluding the impact
of political in both years, local revenues declined
18% and national revenues 15%. Late in 2009, broadcast
revenue comparisons began trending more favorably and
excluding the impact of political in both years,
broadcast revenues were up 11% in the fourth quarter.
Broadcast costs declined 11% to $415 million in
2009. Excluding special item charges in both years,
broadcast expenses declined 11%. The decline reflects
ongoing efforts to control costs and create
efficiencies, the impact of workforce restructuring in
2008 as well as payroll savings from furloughs and
salary reductions in the first and second quarters of
2009.
Reported operating income declined 29% to $216
million in 2009 reflecting the impact of lower core
revenues and incremental Olympic and political revenue
achieved in 2008. These factors were partially offset
by increased retransmission revenue in 2009 and
continued savings from strong efforts to control
costs.
Broadcast results 2008-2007:
Broadcast revenues
decreased $17 million or 2% for 2008. Year-over-year
revenue comparisons were favorably impacted by $118
million in ad revenues associated with the 2008 Summer
Olympics and political/election-related advertising.
These incremental revenues, however, were more than
offset by revenue losses in several core categories,
including automotive and retail. Excluding Captivate,
broadcast revenues declined 2%; local revenue was 8%
lower while national was 7% higher. Television online
revenue increased by 13% in 2008.
Broadcasting costs declined 2% from the prior
year, reflecting cost containment efforts partially
offset by workforce restructuring costs and non-cash
impairment charges. Operating expenses excluding
severance and non-cash impairment charges declined 5%
from the prior year.
Outlook for 2010:
The company expects revenues to
increase primarily due to increased ad demand from
2010 political election campaigns and from Winter
Olympics coverage on its NBC stations. The company
expects operating profit from broadcast to show a
substantial gain in 2010.
Consolidated operating expenses
Over the last three years, the company’s
consolidated operating expenses were as follows:
| Consolidated operating expenses, in millions of dollars | 2009 | Change | 2008 | Change | 2007 (a) | |||||||||||||||
|
Cost of sales
|
$ | 3,305 | (18 | %) | $ | 4,013 | (4 | %) | $ | 4,164 | ||||||||||
|
Selling,
general and admin. expenses
|
$ | 1,207 | (6 | %) | $ | 1,278 | 1 | % | $ | 1,270 | ||||||||||
|
Depreciation
|
$ | 210 | (9 | %) | $ | 231 | (6 | %) | $ | 246 | ||||||||||
|
Amortization
of intangible assets
|
$ | 33 | 6 | % | $ | 31 | (14 | %) | $ | 36 | ||||||||||
|
Facility
consolidations and asset impairment charges
|
$ | 133 | (98 | %) | $ | 7,976 | *** | $ | 72 | |||||||||||
|
|
||||||||||||||||||||
|
Total
|
$ | 4,888 | (64 | %) | $ | 13,529 | *** | $ | 5,789 | |||||||||||
|
|
||||||||||||||||||||
| (a) | Numbers do not sum due to rounding. |
Total operating expenses adjusted to remove
the effect of certain special items are as follows:
| In millions of dollars | 2009 (a) | Change | 2008 (a) | Change | 2007 (a) | |||||||||||||||
|
Operating
expenses (GAAP basis)
|
$ | 4,888 | (64 | %) | $ | 13,529 | *** | $ | 5,789 | |||||||||||
|
Remove special items:
|
||||||||||||||||||||
|
Facility
consolidation and asset impairment charges
|
$ | (133 | ) | (98 | %) | $ | (7,976 | ) | *** | $ | (72 | ) | ||||||||
|
Workforce
restructuring and related expenses
|
$ | (29 | ) | (76 | %) | $ | (119 | ) | 83 | % | $ | (65 | ) | |||||||
|
Pension gains
|
$ | 40 | (14 | %) | $ | 47 | *** | $ | — | |||||||||||
|
|
||||||||||||||||||||
|
Adjusted
operating expenses (non-GAAP basis)
|
$ | 4,766 | (13 | %) | $ | 5,480 | (3 | %) | $ | 5,651 | ||||||||||
|
|
||||||||||||||||||||
| (a) | Numbers do not sum due to rounding. |
37
Table of Contents
The 13% decline in 2009 in consolidated
operating costs excluding special items is attributable
in part to sharply lower newsprint expense (down 34%)
reflecting lower consumption and lower prices. Payroll
savings were also significant, from reduced headcount
resulting from consolidations and other
restructuring/downsizing efforts as well as from
furloughs. Other savings were achieved from generally
strong overall cost controls and cost comparisons were
also favorably affected by a lower foreign exchange
rate for U.K. expenses. The effect of these cost
reduction areas was partially offset by the
consolidation of CareerBuilder and ShopLocal for only
part of 2008 but for all of 2009.
Total reported operating expense decreased 64% to $4.89
billion primarily due to the special items in 2008. On
a pro forma basis and excluding special items, total
operating expense declined 18%.
Selling, general and administrative expenses
declined $71 million or 6% reflecting strong cost
controls, furloughs in the first and second quarters of
2009, the positive impact of workforce restructuring in
prior periods, partially offset by the full
consolidation of CareerBuilder and ShopLocal for all of
2009.
Depreciation expense was 9% lower in 2009,
reflecting reduced capital spending, reduced
depreciation resulting from impairment charges and
certain assets reaching the end of their depreciable
life.
The non-cash facility consolidation and asset
impairment charges for all years are more fully
discussed on page 28 and in Notes 3 and 4 to the
Consolidated Financial Statements.
Payroll, benefits and newsprint costs (along with
certain other production material costs), the largest
elements of the company’s normal operating expenses,
are presented below, expressed as a percentage of
total pre-tax operating expenses (excluding the
special items discussed on page 28):
| 2009 | 2008 | 2007 | ||||||||||
|
Payroll and employee benefits
|
47.4 | % | 47.9 | % | 47.6 | % | ||||||
|
Newsprint and other
production material
|
13.5 | % | 16.8 | % | 17.5 | % | ||||||
Operating expense comparisons 2008-2007:
Cost of sales for 2008 declined $151 million or 4%.
Newsprint costs were 9% lower because of sharply
reduced consumption partially offset by higher
average usage prices, which were up 9%. Workforce
restructuring and related costs of $97 million were
partially offset by the curtailment gain for the
benefit freeze under U.S. pension plans.
Incremental costs from the initial consolidation in the
third quarter of 2008 of CareerBuilder and ShopLocal
also contributed to higher cost of goods sold. Cost of
sales excluding workforce restructuring from 2008 and
2007, the pension gain in 2008 and the incremental
costs from the 2008 acquisitions of CareerBuilder and
ShopLocal, declined 6%, reflecting very strong cost
controls at virtually all locations.
Selling, general and administrative expenses rose
$8 million or 1% primarily due to the incremental
costs from the initial consolidation of CareerBuilder
and ShopLocal and from
workforce restructuring. Excluding workforce
restructuring from 2008 and 2007, the pension gain in
2008 and the incremental costs from the 2008
acquisitions of CareerBuilder and ShopLocal, SG&A
costs declined 8% for the year. This again reflects
strong cost controls including lower stock-based
compensation and lower corporate costs.
Depreciation expense was 6% lower in 2008,
reflecting reduced capital spending, reduced
depreciation resulting from impairment charges and
certain assets reaching the end of their
depreciable life.
The non-cash facility consolidation and asset
impairment charges for 2008 and 2007 are more fully
discussed on page 28 of this report and in Notes 3 and
4 to the Consolidated Financial Statements.
Total operating expense increased $7.74 billion
principally due to the non-cash impairment charges,
workforce restructuring cost and the initial
consolidations of CareerBuilder and ShopLocal.
Outlook for 2010:
The company anticipates that
operating expenses will decline further in 2010,
reflecting further cost control and consolidation
where possible and continued payroll savings from
completed workforce restructurings, and furloughs. The
company announced a furlough for the first quarter of
2010 that will impact some of its domestic operations,
but furlough savings in 2010 will be less than in
2009 because the program will be less
extensive.
Newsprint expense is also expected to be lower as
consumption is further reduced and favorable usage
prices will continue in the early part of 2010.
In the benefits area, pension costs are expected
to be lower, reflecting the impact of significant
positive investment returns for qualified plan assets
in 2009.
The company does not believe that any of its
major reporting units including the U.K. and U.S.
community newspaper publishing and broadcast groups and
CareerBuilder, are at risk of failing the first step
of the goodwill impairment test for the foreseeable
future. Certain of the company’s smaller reporting
units, which are stand-alone businesses, and which in
the aggregate have recorded goodwill of $44 million,
may be at risk of failing the first step in the
future. Refer to Note 1 to the Consolidated Financial
Statements for a discussion of the goodwill impairment
test.
38
Table of Contents
Non-operating income and expense
Equity earnings:
This income statement category
reflects results from unconsolidated minority interest
investments, including the company’s equity share of
operating results from its newspaper partnerships,
including the Tucson joint operating agency, the
California Newspapers Partnership and the Texas-New
Mexico Newspapers Partnership, as well as from
investments in certain other digital/new technology
businesses.
The company’s net equity income in
unconsolidated investees for 2009 includes $9 million
of impairment charges related to certain digital
business investments.
The company’s net equity loss in unconsolidated
investees for 2008 includes $382 million of impairment
charges related to equity investments in newspaper
partnerships and certain other businesses (discussed
more fully on page 28 of this report and in Note 3 to
the Consolidated Financial Statements). Absent these
non-cash impairment charges from both years, the
company’s net equity income in unconsolidated investees
increased $8 million for 2009, reflecting significantly
improved performance at certain of the company’s
digital investments, particularly Classified Ventures.
Interest expense:
Interest expense decreased $15
million or 8% in 2009 as compared to 2008 and decreased
$69 million or 27% in 2008 as compared to 2007. For
both years the decline reflects lower average
outstanding debt and lower rates. The company reduced
its long-term debt by $755 million, or 20%, in 2009. At
the end of 2009, the company’s senior leverage ratio
was 2.63, well under the ceiling designated by its only
financial covenant.
A further discussion of the company’s borrowing
and related interest cost is presented in the
“Liquidity and capital resources” section of this
report beginning on page 40, and in Note 7 to the
Consolidated Financial Statements.
Other non-operating items:
In 2009, the company realized a $43 million non-cash debt exchange
gain offset partially by a $28 million non-cash charge for the write-down of certain publishing
business assets held for sale. In 2008, the company realized a gain on the sale of a parcel of land
adjacent to its headquarters building in McLean, VA, and several gains on the sale of certain
investments and other assets. These gains were partially offset by currency and investment losses.
The level of net asset sale gains was lower in both 2009 and 2007 than in 2008.
Outlook for 2010:
The company expects its net interest expense to be slightly higher for the
year due to the issuance of higher fixed rate debt in 2009, partially offset by lower average debt
balances.
Provision (benefit) for income taxes on
earnings from continuing operations
The company reported pre-tax income attributable to
Gannett of $549 million for 2009. This pre-tax income
includes facility consolidation and asset impairment
charges, workforce restructuring costs and certain
gains, as described on page 28. The effective tax rate
on this pre-tax income is 35.3%. Excluding the pre-tax
and tax effects of all special items, the company’s
effective tax rate is 33.6%.
The company reported a pre-tax loss attributable to Gannett of $7.31 billion for 2008. This
pre-tax loss includes impairment charges for intangible and other assets, the majority of which are not deductible for income tax purposes. Therefore the
effective tax benefit rate on these pre-tax losses, including the impairment charges, was 9%.
Excluding the pre-tax and tax effects of all special items, the company’s effective tax rate was
28.7%. The company’s effective tax rate for 2007 was 32.7%
Excluding the effect of special items, the increase in the company’s effective tax rate in
2009 compared with 2008 is due principally to the benefits in 2008 of favorable U.S. state and U.K.
tax settlements and the release of certain state tax reserves upon the expiration of statutes of
limitation. These factors, along with a lower U.K. statutory rate, were also the principal reasons
for the decline in the effective rate from 2007 to 2008.
Further information concerning income tax
matters is contained in Note 10 of the Consolidated
Financial Statements.
Income (loss) from continuing operations and net income
(loss) attributable to Gannett Co., Inc
For 2009, the company’s income from continuing
operations was $382 million. This amount reflects
unfavorable operating and non-operating after-tax
special items of $86 million or $.36 per diluted
share. Absent these special items, income from
continuing operations would have been $469 million,
representing a decline of 41% from a similarly
adjusted amount for 2008.
In 2008, the company’s loss from continuing
operations was $6.64 billion. This loss reflects
unfavorable operating and non-operating after-tax
special items of $7.43 billion or $32.54 per diluted
share. Absent these special items, income from
continuing operations would have been $790 million,
representing a decline of 26% from a similarly
adjusted amount for 2007.
For 2007, the company’s income from continuing
operations was $977 million. This income amount
reflects unfavorable operating after-tax special items
of $93 million or $0.40 per diluted share.
Net income (loss) attributable to Gannett Co.,
Inc. consists of income from continuing operations
reduced by net income attributable to noncontrolling
interests, primarily from CareerBuilder. Net income
attributable to noncontrolling interests was $27
million, $7 million and $2 million in 2009, 2008 and
2007, respectively. The increase in 2008 and again in
2009 is attributable to the full consolidation of
CareerBuilder beginning in September of 2008.
39
Table of Contents
Discontinued operations
Earnings from discontinued operations represent the
combined operating results (net of income taxes) of the
Norwich (CT) Bulletin, the Rockford (IL) Register Star,
the Observer-Dispatch in Utica, NY, and The
Herald-Dispatch in Huntington, WV, sold in May 2007.
The Chronicle-Tribune in Marion, IN, was contributed to
the Gannett Foundation in May 2007 and is also included
in discontinued operations. The revenues and expenses
from each of these properties have, along with
associated income taxes, been removed from continuing
operations and reclassified into a single line item
amount on the Statements of Income (Loss) titled
“Income from the operation of discontinued operations,
net of tax” for each period presented.
Earnings from discontinued operations, excluding
the gain, per diluted share were $.03 in 2007. In 2007
the company also reported earnings per diluted share of
$.32 for the gain on the disposition of these
properties.
| Discontinued Operations | ||||
| In thousands, except per share amounts | 2007 | |||
|
Income (loss) from operation of discontinued operations, net of tax
|
$ | 6,221 | ||
|
Per share — diluted
|
$ | .03 | ||
|
Gain on disposal of newspaper businesses, net of tax
|
$ | 73,814 | ||
|
Per share — diluted
|
$ | .32 | ||
Net income (loss) attributable to Gannett
Co., Inc., and related per share amounts are presented
in the table below, and include income from continuing
and discontinued operations.
| In millions of dollars, except per share amounts | 2009 | Change | 2008 | Change | 2007 | |||||||||||||||
|
Net income (loss)
|
$ | 355 | *** | $ | (6,648 | ) | *** | $ | 1,056 | |||||||||||
|
Per basic share
|
$ | 1.52 | *** | $ | (29.11 | ) | *** | $ | 4.53 | |||||||||||
|
Per diluted share
|
$ | 1.51 | *** | $ | (29.11 | ) | *** | $ | 4.52 | |||||||||||
FINANCIAL POSITION
Liquidity and capital resources
The company’s cash flow from operating activities was $867 million in 2009, down from $1.02 billion
in 2008, primarily reflecting lower operating earnings for publishing and broadcasting.
Cash used
for investing activities totaled $35 million. This reflects capital spending of $68 million, $10
million for acquisitions, and $10 million for equity investments. These investing cash flows were
partially offset by proceeds from the sale of certain assets of $32 million and proceeds from
investments of $20 million.
Cash used for financing activities totaled $833
million in 2009. This reflects the payment of dividends
of $119 million, the payment of borrowings under
revolving credit facilities of $526 million and
payments of unsecured promissory notes and other
indebtedness totaling $681 million. These financing
cash flows were partially offset by proceeds of $493
million from a private debt offer completed in October
2009.
Certain key measurements of the elements of
working capital for the last three years are
presented in the following chart:
| Working capital measurements | 2009 | 2008 | 2007 | |||||||||
|
Current ratio
|
1.2-to-1 | 1.1-to-1 | 1.4-to-1 | |||||||||
|
Accounts receivable turnover
|
7.0 | 7.5 | 7.5 | |||||||||
|
Newsprint inventory turnover
|
4.6 | 5.8 | 6.8 | |||||||||
The company’s operations have historically
generated strong positive cash flow which, along with
the company’s program of issuing commercial paper and
maintaining bank revolving credit agreements, has
provided adequate liquidity to meet the company’s
requirements, including those for acquisitions. During
September 2008, liquidity in the commercial paper
market was highly constrained and the company elected
to borrow under its revolving credit agreements to
repay commercial paper outstanding as it matured. As of
Dec. 28, 2008, the company had $1.9 billion of
borrowings under its revolving credit facilities which
had been used to repay all outstanding commercial
paper. As of Dec. 27, 2009, the company had $1.4
billion of borrowings under its revolving credit
facilities. The company anticipates reducing the level
of borrowings under its revolving credit facilities
over time with cash flow from operations and will look
to strategically refinance amounts borrowed with the
issuance of longer-term debt.
40
Table of Contents
The long-term debt of the company is summarized below:
| In thousands of dollars | Dec. 27, 2009 | Dec. 28, 2008 | ||||||
|
Unsecured floating rate notes paid
May 2009
|
$ | — | $ | 632,205 | ||||
|
Unsecured notes bearing fixed rate
interest at 5.75% due June 2011
|
432,648 | 498,464 | ||||||
|
Unsecured floating rate term loan due
July 2011
|
230,000 | 280,000 | ||||||
|
Borrowings under revolving credit
agreements expiring March 2012
|
1,381,000 | 1,907,000 | ||||||
|
Unsecured notes bearing fixed rate
interest at 6.375% due April 2012
|
306,260 | 499,269 | ||||||
|
Unsecured notes bearing fixed rate
interest at 8.75% due November 2014
|
246,304 | — | ||||||
|
Unsecured notes bearing fixed rate
interest at 10% due June 2015
|
56,684 | — | ||||||
|
Unsecured notes bearing fixed rate
interest at 10% due April 2016
|
162,531 | — | ||||||
|
Unsecured notes bearing fixed rate
interest at 9.375% due November 2017
|
246,524 | — | ||||||
|
Other indebtedness
|
— | 4 | ||||||
|
|
||||||||
|
Total long-term debt
|
$ | 3,061,951 | $ | 3,816,942 | ||||
|
|
||||||||
Total average debt outstanding in 2009 and 2008 was $3.6 billion and $4.0 billion,
respectively. The weighted average interest rate on all debt was 4.5% for 2009 and 4.6% for 2008.
During 2009, the company completed transactions in May and October to improve its debt
maturity profile.
In May 2009, the company completed a private exchange offer related to its 5.75% fixed rate
notes due June 2011 and its 6.375% fixed rate notes due April 2012. The company exchanged
approximately $67 million in principal amount of new 10% senior notes due 2015 for approximately
$67 million principal amount of the 2011 notes, and approximately $193 million in principal amount
of new 10% senior notes due 2016 for approximately $193 million principal amount of the 2012 notes.
The new 2015 notes and the new 2016 notes (together, the Notes) are senior unsecured
obligations and are guaranteed by the company subsidiaries providing guarantees under the revolving
credit agreements and the term loan agreement as described below. The Notes and the subsidiary
guarantees have not been and will not be registered under the Securities Act of 1933, as amended
(the Securities Act), or any state securities laws and may not be offered or sold in the United
States absent registration or an applicable exemption from registration requirements.
In connection with the exchange transactions and in accordance with the modifications and
extinguishments requirements of ASC Topic 470, “Debt,” the company recorded a gain of approximately
$42.7 million which was classified in “Other non-operating items” in the Statement of Income for
the second quarter of 2009. This gain resulted from recording the Notes at fair value as of the
time of the exchange and extinguishing the old notes at their historical book values. Fair value of
the Notes was based on their trading prices on and shortly after the exchange date. The discount
created by recording the Notes at fair value instead of face value is being amortized over the term
of the loans to interest expense.
In October 2009, the company completed a private placement offering of $250 million in
aggregate principal amount of 8.750% senior notes due 2014 and $250 million in aggregate principal
amount of 9.375% senior notes due 2017. The 2014 notes were priced at 98.465% of face value,
resulting in a yield to maturity of 9.l25%. The 2017 notes were priced at 98.582% of face value,
resulting in a yield to maturity of 9.625%. The 2014 notes and the 2017 notes (together, the New
Notes) were made available in a private offering that is exempt from the registration requirements
of the Securities Act. The New Notes are guaranteed on a senior basis by the subsidiaries of the
company that guarantee its revolving credit facilities and term loan. The company used the net
proceeds from the offering to partially repay borrowings outstanding under its revolving credit
facilities and term loan. The New Notes and the subsidiary guarantees have not been and will not be
registered under the Securities Act, or any state securities laws and may not be offered or sold in
the United States absent registration or an applicable exemption from registration requirements.
On Oct. 31, 2008, the company amended each of its three revolving credit agreements and its
term loan agreement. Under each of the amendments, it is required that the company maintain a
senior leverage ratio of less than 3.5x. The agreements also require the company to maintain a
total leverage ratio of less than 4.0x. The total leverage ratio would also include any
subordinated debt the company may issue in the future. Currently, all of the company’s debt is
senior and unsecured. At Dec. 27, 2009, the senior leverage ratio was 2.63x.
The amendments also changed the pricing of the facilities. For the revolving credit
facilities, the commitment fees may range from 0.125% to 0.25% depending on credit ratings for the
company’s senior unsecured debt from Moody’s Investor Services (Moody’s) and Standard & Poor’s
(S&P). The rate currently in effect is 0.25%. In addition, at the time of the amendments the
aggregate size of the revolving credit facilities was reduced to $3.1 billion from $3.9 billion.
There was a further provision that the aggregate size of the three revolving credit agreements
would be reduced on a dollar-for-dollar basis for the first $397 million that the company raised in
the capital markets prior to Dec. 31, 2009 and in any event reduced to $2.75 billion at Dec. 31,
2009. As a result, the aggregate size of the facilities was reduced to $2.75 billion in October
2009 with the issuance of New Notes.
Under each of the agreements, the company may borrow at an applicable margin above the
Eurodollar base rate or the higher of the Prime Rate or the Federal Funds Effective Rate plus
0.50%. Under the amended revolving credit agreements, the applicable margin for such borrowings
ranges from 1.00% to 2.25% depending on credit ratings. Under the term loan agreement, the
applicable margin varies from 1.25% to 2.25%. At its current ratings the company will pay an
applicable margin of 2.25% under each of the revolving credit agreements and the term loan
agreement.
41
Table of Contents
In connection with each of its three revolving credit agreements and its term loan agreement,
the company agreed to provide guarantees from a majority of its domestic wholly-owned subsidiaries
in the event that the company’s credit ratings from either Moody’s or S&P fell below investment
grade. In the first quarter of 2009, the company’s credit rating was downgraded below investment
grade by both S&P and Moody’s. Accordingly, the guarantees were triggered and the existing notes
due 2011 and 2012 and other unsecured debt of the company became structurally subordinated to the
revolving credit agreements and the term loan.
On Sept. 25, 2009, the company further amended the terms of its three revolving credit
agreements and its term loan agreement to provide for the issuance of up to $500 million of
additional long-term debt carrying the same guarantees put in place for the revolving credit
agreements and term loan. In addition, the company also amended one of the credit agreements to
permit it to obtain up to $100 million of letters of credit from the lenders, which would count
toward their commitments.
On Aug. 21, 2009, Moody’s confirmed the company’s Ba1 corporate family rating and its Ba2
senior unsecured note rating which had been placed under review for a possible downgrade in April.
In addition, Moody’s rated the company’s bank debt, which includes its revolving credit agreements
and term loan, Baa3. The Baa3 rating also applies to any long-term debt which has the same
subsidiary guarantees as the bank debt. The company’s debt is rated BB by Standard and Poor’s.
As of Dec. 27, 2009, the company had approximately $1.4 billion of borrowings under its
revolving credit facilities. The maximum amount outstanding at the end of any period during 2009
and 2008 was $2.5 billion and $1.9 billion, respectively. The daily average outstanding balance of
the revolving credit facilities during 2009 and 2008 was $2.0 million and $486 million,
respectively. The weighted average interest rate for 2009 and 2008 was 3.1% and 4.4%, respectively.
During the first quarter of 2009, the company repurchased $68.8 million in principal amount of
its floating rate notes in privately negotiated transactions at a discount. In connection with
these transactions, the company recorded a gain of approximately $1.1 million which is classified
in “Other non-operating items” in the Statement of Income. This gain is net of $0.6 million
reclassified from accumulated other comprehensive loss for related interest rate swap agreements.
In December 2008, the company launched a tender offer to purchase any and all of its
outstanding floating rate notes due in May 2009 at a purchase price of $950 per $1,000 in principal
amount plus accrued and unpaid interest. In response to the offer, $98.4 million in aggregate
principal amount of notes, representing approximately 13.5 percent of the then outstanding notes,
were purchased at this price in December 2008. Prior to the tender offer, the company had
repurchased $19.4 million in principal amount of the floating rate notes in a privately negotiated
transaction. In connection with these transactions, the company recorded a gain of approximately $4
million which is classified in “Other non-operating items” in the Statement of Income (Loss). This
gain was net of $1.7 million in losses reclassified from accumulated other comprehensive income
(loss) related to the interest rate swap agreements.
In July 2008, the company received proceeds of $280 million from borrowings under a new term
loan agreement with certain bank lenders. The term loan is payable in full on July 14, 2011. The
loan carries interest at a floating rate and may be prepaid at any time without penalty. The
company prepaid $50 million of this loan in October 2009 reducing the balance to $230 million.
During 2007 and 2008, the company utilized commercial paper as a source of financing. The
maximum amount of such commercial paper outstanding at the end of any period during 2008 and 2007
was $2.0 billion and $2.7 billion, respectively. The daily average outstanding balance of
promissory notes was $883 million during 2008 and $1.7 billion during 2007. The weighted average
interest rate on such notes was 3.5% for 2008 and 5.4% for 2007.
In June 2008, the company repaid $500 million in unsecured notes bearing interest at 4.125%
with proceeds from borrowings in the commercial paper market. These notes had been issued in June
2005 in an underwritten public offering.
In August 2007, the company entered into three interest rate swap agreements totaling a
notional amount of $750 million in order to mitigate the volatility of interest rates. These
agreements, which expired in May 2009, effectively fixed the interest rate on the $750 million in
floating rate notes due May 2009 at 5.0125%. These instruments were designated as cash flow hedges
in accordance with ASC Topic 815, “Derivatives and Hedging,” and changes in fair value were
recorded through accumulated other comprehensive income with a corresponding adjustment to other
long-term liabilities. As a result of the tender offer and other repurchases discussed above, the
cash flow hedging treatment was discontinued for interest rate swaps associated with approximately
$118 million of notional value on the retired floating rate notes. Amounts recorded in accumulated
other comprehensive income (loss) related to the discontinued cash flow hedges were reclassified
into earnings and subsequent changes to the fair value of these interest rate swaps were being
recorded through earnings.
In June 2007, the company issued $1.0 billion aggregate principal amount of unsecured senior
convertible notes in an underwritten public offering. Proceeds from the notes were used to repay
commercial paper obligations. The convertible notes bore interest at a floating rate equal to one
month LIBOR, reset monthly, minus twenty-three basis points. As anticipated, on July 15, 2008, the
holders of the convertible notes required the company to repurchase the convertible notes for cash
at a price equal to 100% of the principal amount of the notes submitted for repurchase, plus
accrued and unpaid interest.
Industrial revenue bonds with a principal amount of approximately $17 million were repaid in
full in 2008. Prior to repayment, the bonds bore interest at variable interest rates based on a
municipal bond index.
In April 2007, the company redeemed the $700 million aggregate principal amount of 5.50%
notes. This payment was funded by borrowings in the commercial paper market and from investment
proceeds of $525 million in marketable securities.
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Table of Contents
In May 2006, the company issued $500 million aggregate principal amount of 5.75% notes due
2011 and $750 million aggregate principal amount of floating rate notes due 2009 in an underwritten
public offering. The net proceeds of the offering were used to pay down commercial paper
borrowings.
The unsecured fixed rate notes bearing interest at 6.375% were issued in March 2002 and mature
in 2012.
The company has an effective universal shelf registration statement under which an unspecified
amount of securities may be issued, subject to a $7 billion limit established by the Board of
Directors. Proceeds from the sale of such securities may be used for general corporate purposes,
including capital expenditures, working capital, securities repurchase programs, repayment of debt
and financing of acquisitions. The company may also invest borrowed funds that are not required for
other purposes in short-term marketable securities.
The following schedule of annual maturities of long-term debt assumes the company uses
available capacity under its revolving credit agreements to refinance the unsecured floating rate
notes and term loan due in 2011. Based on this refinancing assumption, all of the obligations are
reflected as maturities for 2012 and beyond.
| In thousands of dollars | ||||
|
2010
|
$ | — | ||
|
2011
|
— | |||
|
2012
|
2,349,908 | |||
|
2013
|
— | |||
|
2014
|
246,304 | |||
|
Later years
|
465,739 | |||
|
|
||||
|
Total
|
$ | 3,061,951 | ||
|
|
||||
The fair value of the company’s total long-term debt, determined based on the bid and ask
quotes for the related debt, totaled $2.9 billion at Dec. 27, 2009.
The company has a capital expenditure program (not including business acquisitions) of
approximately $85 million planned for 2010, including approximately $6 million for renovation of
existing facilities, $66 million for machinery and equipment, and $13 million for vehicles and
other assets. Management reviews the capital expenditure program periodically and modifies it as
required to meet current business needs. It is expected that the 2010 capital program will be
funded from cash flow from operations.
Contractual obligations and commitments
The following table summarizes the expected cash outflows resulting from financial contracts and
commitments as of the end of 2009.
| Contractual obligations | Payments due by period | |||||||||||||||||||
| In millions of dollars | Total | 2010 | 2011-12 | 2013-14 | Thereafter | |||||||||||||||
|
Long-term debt (1)
|
$ | 3,736 | $ | 156 | $ | 2,586 | $ | 291 | $ | 703 | ||||||||||
|
Operating leases (2)
|
326 | 59 | 96 | 64 | 107 | |||||||||||||||
|
Purchase obligations (3)
|
364 | 169 | 136 | 56 | 3 | |||||||||||||||
|
Programming contracts (4)
|
62 | 12 | 47 | 3 | — | |||||||||||||||
|
Other long-term liabilities (5)
|
342 | 35 | 69 | 69 | 169 | |||||||||||||||
|
|
||||||||||||||||||||
|
Total
|
$ | 4,830 | $ | 431 | $ | 2,934 | $ | 483 | $ | 982 | ||||||||||
|
|
||||||||||||||||||||
| (1) | See Note 7 to the Consolidated Financial Statements. The amounts included above include periodic interest payments. Interest payments are based on interest rates in effect at year-end and assume term debt is outstanding for the life of the revolving credit agreements. | |
| (2) | See Note 12 to the Consolidated Financial Statements. | |
| (3) | Includes purchase obligations related to printing contracts, capital projects, interactive marketing agreements, wire services and other legally binding commitments. Amounts which the company is liable for under purchase orders outstanding at Dec. 27, 2009, are reflected in the consolidated balance sheets as accounts payable and accrued liabilities and are excluded from the table above. | |
| (4) | Programming contracts include television station commitments to purchase programming to be produced in future years. | |
| (5) | Other long-term liabilities primarily consist of amounts expected to be paid under unfunded postretirement benefit plans. |
Due to uncertainty with respect to the timing of future cash flows associated with
unrecognized tax benefits at Dec. 27, 2009, the company is unable to make reasonably reliable
estimates of the period of cash settlement, if necessary. Therefore, $192 million of unrecognized
tax benefits have been excluded from the contractual obligations table above. See Note 10 to the
Consolidated Financial Statements for further discussion of income taxes.
The company’s principal retirement plan, the Gannett Retirement Plan, had assets of $1.75 billion and liabilities of $2.19 billion at Dec. 27, 2009.
Under current U.S. pension laws and regulations, the company is not required to make contributions
to the Gannett Retirement Plan in 2010, however it elected to make a $10 million contribution in
early fiscal 2010 and may make further voluntary contributions in the future. Due to uncertainties
regarding significant assumptions involved in estimating future contributions, such as interest
rate levels and the amount and timing of asset returns, the company is unable to reasonably
estimate its future contributions beyond 2010.
In December 1990, the company adopted a Transitional Compensation Plan (the Plan). The Plan
provides termination benefits to key executives whose employment is terminated under certain
circumstances within two years following a change in control of the company. Benefits under the
Plan include a severance payment of up to three years’ compensation and continued life and medical
insurance coverage.
43
Table of Contents
Capital stock
In February 2004, the company announced the reactivation of its share repurchase program that had
last been utilized in February 2000. On July 25, 2006, the authorization to repurchase shares was
increased by $1 billion, and as of Dec. 27, 2009, approximately $808.9 million may yet be expended
under the program. Under the program, the company purchased $72.8 million (2.3 million shares) and
$215.2 million (4.6 million shares) in 2008 and 2007, respectively. No shares were purchased in
2009. Shares may be repurchased at management’s discretion, either in the open market or in
privately negotiated block transactions. Management’s decision to repurchase shares will depend on
price, availability and other corporate developments. Purchases may occur from time to time and no
maximum purchase price has been set. While there is no expiration date for the repurchase program,
the company’s Board of Directors reviews the share repurchase authorization annually, the last such
review having occurred in October 2009. Certain of the shares previously acquired by the company
have been reissued in settlement of employee stock awards. At this time, the company does not
anticipate repurchasing its shares for the near term.
An employee 401(k) Savings Plan was established in 1990, which includes a company matching
contribution in the form of Gannett stock. To fund the company’s matching contribution, an Employee
Stock Ownership Plan (ESOP) was formed which acquired 2,500,000 shares of Gannett stock from the
company for $50 million. The stock purchase was financed with a loan from the company. In June
2003, the debt was fully repaid and all of the shares had been fully allocated to participants. The
company elected not to add additional shares to the ESOP and began funding contributions in cash.
Through 2008, the ESOP used the cash match to purchase on the open market an equivalent number of
shares of company stock on behalf of participants. In early 2009, the company began funding the
401(k) Savings Plan match through the issuance of treasury shares. Beginning in 2010, the company
intends to fund the 401(k) Savings Plan match through the issuance of a combination of treasury
shares and shares purchased on the open market with cash.
The company’s common stock outstanding at Dec. 27, 2009, totaled 237,156,663 shares, compared
with 228,123,393 shares at Dec. 28, 2008.
Dividends
Dividends declared on common stock amounted to $37 million in 2009, compared with $365 million in
2008. On Feb. 25, 2009, the Board of Directors declared a dividend of $.04 per share, payable on
April 1, 2009, to shareholders of record as of the close of business March 6, 2009. This
represented a 90% reduction from the prior quarter’s dividend rate of $0.40 cents per share. The
Board’s action in setting the new quarterly dividend rate, a response to the full-fledged
recessions in the U.S. and U.K. and the continuing difficulties in the credit markets, strengthened
the company’s balance sheet and allowed it greater financial flexibility to reallocate more than
$325 million of free cash flow annually toward debt repayment.
| Cash dividends | Payment date | Per share | ||||||
|
2009
|
4th Quarter | Jan. 4, 2010 | $ | .04 | ||||
|
|
3rd Quarter | Oct. 1, 2009 | $ | .04 | ||||
|
|
2nd Quarter | July 1, 2009 | $ | .04 | ||||
|
|
1st Quarter | April 1, 2009 | $ | .04 | ||||
|
2008
|
4th Quarter | Jan. 2, 2009 | $ | .40 | ||||
|
|
3rd Quarter | Oct. 1, 2008 | $ | .40 | ||||
|
|
2nd Quarter | July 1, 2008 | $ | .40 | ||||
|
|
1st Quarter | April 1, 2008 | $ | .40 | ||||
On Feb. 24, 2010, the Board of Directors declared a dividend of $.04 cents per share, payable
on April 1, 2010, to shareholders of record as of the close of business March 5, 2010. On Oct. 28,
2009, the Board of Directors declared a dividend of $0.04 per share, payable on Jan. 4, 2010, to
shareholders of record as of the close of business on Dec. 11, 2009.
Accumulated other comprehensive income (loss)
The company’s foreign currency translation adjustment, included in accumulated other comprehensive
income (loss) and reported as part of shareholders’ equity, totaled $416 million at the end of 2009
and $355 million at the end of 2008. The increase reflected a strengthening of Sterling against the
U.S. dollar. Newsquest’s assets and liabilities at Dec. 27, 2009 were translated from Sterling to
U.S. dollars at an exchange rate of 1.60 versus 1.46 at the end of 2008. Newsquest’s financial
results were translated at an average rate of 1.56 for 2009, 1.86 for 2008 and 2.00 for 2007.
The company has recognized the funded status of its pension and retiree medical benefit plans
in the statement of financial position. At Dec. 27, 2009 and Dec. 28, 2008, accumulated other
comprehensive loss includes a reduction of equity of $735 million and $819 million, respectively,
for the aggregate excess of retirement plan liabilities over plan assets.
44
Table of Contents
In August 2007, the company entered into three interest rate swap agreements totaling a
notional amount of $750 million in order to mitigate the volatility of interest rates. These
agreements effectively fixed the interest rate on the $750 million in floating rate notes due May
2009 at 5.0125%. These instruments were designated as cash flow hedges in accordance with ASC Topic
815, “Derivatives and Hedging” and changes in fair value are recorded through accumulated other
comprehensive loss with a corresponding adjustment to liabilities. As a result of the strategic
redemptions of part of the floating rate notes during the fourth quarter of 2008 and first quarter
of 2009, the cash flow hedging treatment was discontinued for interest rate swaps associated with
approximately $186.6 million of notional value on the retired floating rate notes. Amounts recorded
in accumulated other comprehensive loss related to the discontinued cash flow hedges were
reclassified into earnings and subsequent changes were recorded through earnings. The interest rate
swap agreements expired concurrent with the maturity of the floating rate notes in May 2009.
Expense in 2009 associated with the derivatives designated as hedges under ASC Topic 815, which is
classified as “Interest expense” on the company’s Consolidated Income Statement, was $7.7 million.
Expense in 2009 associated with the derivatives not designated as hedges under ASC Topic 815, which
is classified as “Other non-operating items” on the company’s Consolidated Income Statement, was
$0.6 million.
Effects of inflation and changing prices and other matters
The company’s results of operations and financial condition have not been significantly affected by
inflation. The company’s principal operating costs have not generally been subject to significant
inflationary pressures. Further, the effects of inflation and changing prices on the company’s
property, plant and equipment and related depreciation expense have been reduced as a result of an
ongoing capital expenditure program and the availability of replacement assets with improved
technology and efficiency.
The company is exposed to foreign exchange rate risk primarily due to its ownership of
Newsquest, which uses the British pound as its functional currency, which is then translated into
U.S. dollars. The company’s foreign currency translation adjustment, related principally to
Newsquest and reported as part of shareholders’ equity, totaled $416 million at Dec. 27 2009.
Newsquest’s assets and liabilities were translated from British pounds to U.S. dollars at the Dec.
27, 2009, exchange rate of 1.60. Refer to Item 7A for additional detail.
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, for which the British pound is the
functional currency. Translation gains or losses affecting the Consolidated Statements of Income
have not been significant in the past. If the price of the British pound against the U.S. dollar
had been 10% more or less than the actual price, operating income, excluding the special items, for
2009 would have increased or decreased approximately 1%.
Because the company has $1.6 billion in floating interest rate obligations outstanding at Dec.
27, 2009, the company is subject to significant changes in the amount of interest expense it might
incur. A 1/2% increase or decrease in the average interest rate for these obligations would result
in an increase or decrease in annual interest expense of $8.1 million.
Refer to Note 7 to the Consolidated Financial Statements for information regarding the fair
value of the company’s long-term debt.
45
Table of Contents
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
| Page | ||||
|
|
||||
|
FINANCIAL STATEMENTS
|
||||
|
|
||||
| 47 | ||||
|
|
||||
| 48 | ||||
|
|
||||
| 50 | ||||
|
|
||||
| 51 | ||||
|
|
||||
| 52 | ||||
|
|
||||
| 53 | ||||
|
|
||||
|
SUPPLEMENTARY DATA
|
||||
|
|
||||
| 78 | ||||
|
|
||||
|
FINANCIAL STATEMENT SCHEDULE
|
||||
|
|
||||
| 80 | ||||
|
|
||||
|
OTHER INFORMATION
|
||||
|
|
||||
| 75 | ||||
| * | All other schedules prescribed under Regulation S-X are omitted because they are not applicable or not required. |
46
Table of Contents
REPORT OF ERNST & YOUNG LLP, INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders of Gannett Co., Inc.:
We have audited the accompanying consolidated balance sheets of Gannett Co., Inc. as of
December 27, 2009 and December 28, 2008, and the related consolidated statements of income (loss),
cash flows, and equity for each of the three fiscal years in the period ended
December 27, 2009. Our audits also included the financial statement schedule listed in the
accompanying index in Item 8. These financial statements and schedule are the responsibility of the
Company’s management. Our responsibility is to express an opinion on these financial statements and
schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material
respects, the consolidated financial position of Gannett Co., Inc. at December 27, 2009 and
December 28, 2008, and the consolidated results of its operations and its cash flows for each of
the three fiscal years in the period ended December 27, 2009, in conformity with U.S. generally
accepted accounting principles. Also, in our opinion, the related financial statement schedule,
when considered in relation to the basic financial statements taken as a whole, presents fairly in
all material respects the information set forth therein.
As disclosed in Note 1 to the consolidated financial statements, the company adopted Statement
of Financial Accounting Standards No. 160, as subsequently codified in Accounting Standards
Codification Topic 810, during fiscal year 2009.
We also have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), Gannett Co., Inc.’s internal control over financial reporting as
of December 27, 2009, based on criteria established in Internal Control — Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated
February 24, 2010, included in Item 9A, expressed an unqualified opinion thereon.
McLean, Virginia
February 24, 2010
February 24, 2010
47
Table of Contents
GANNETT CO., INC.
| In thousands of dollars | ||||||||
| Assets | Dec. 27, 2009 | Dec. 28, 2008 | ||||||
|
Current assets
|
||||||||
|
Cash and cash equivalents
|
$ | 98,795 | $ | 98,949 | ||||
|
Trade receivables, less allowance for doubtful receivables of $46,255 and $59,008, respectively
|
759,934 | 846,590 | ||||||
|
Other receivables
|
20,557 | 58,399 | ||||||
|
Inventories
|
63,752 | 121,484 | ||||||
|
Deferred income taxes
|
19,577 | 29,386 | ||||||
|
Prepaid expenses and other current assets
|
86,427 | 91,136 | ||||||
|
|
||||||||
|
Total current assets
|
1,049,042 | 1,245,944 | ||||||
|
|
||||||||
|
Property, plant and equipment
|
||||||||
|
Land
|
203,937 | 218,260 | ||||||
|
Buildings and improvements
|
1,426,150 | 1,454,303 | ||||||
|
Machinery, equipment and fixtures
|
2,782,595 | 2,891,966 | ||||||
|
Construction in progress
|
16,177 | 42,834 | ||||||
|
|
||||||||
|
Total
|
4,428,859 | 4,607,363 | ||||||
|
Less accumulated depreciation
|
(2,457,041 | ) | (2,385,869 | ) | ||||
|
|
||||||||
|
Net property, plant and equipment
|
1,971,818 | 2,221,494 | ||||||
|
|
||||||||
|
Intangible and other assets
|
||||||||
|
Goodwill
|
2,854,247 | 2,872,888 | ||||||
|
Indefinite-lived and amortizable intangible assets, less accumulated amortization
of $170,182 and $135,468, respectively
|
565,610 | 582,691 | ||||||
|
Deferred income taxes
|
302,360 | 460,567 | ||||||
|
Investments and other assets
|
405,355 | 413,230 | ||||||
|
|
||||||||
|
Total intangible and other assets
|
4,127,572 | 4,329,376 | ||||||
|
|
||||||||
|
Total assets
|
$ | 7,148,432 | $ | 7,796,814 | ||||
|
|
||||||||
The accompanying notes are an integral part of these consolidated financial statements.
48
Table of Contents
GANNETT
CO., INC.
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS
| In thousands of dollars | ||||||||
| Liabilities and equity | Dec. 27, 2009 | Dec. 28, 2008 | ||||||
|
Current liabilities
|
||||||||
|
Accounts payable
|
||||||||
|
Trade
|
$ | 216,721 | $ | 287,690 | ||||
|
Other
|
35,864 | 36,883 | ||||||
|
Accrued liabilities
|
||||||||
|
Compensation
|
143,182 | 191,019 | ||||||
|
Interest
|
25,281 | 27,432 | ||||||
|
Other
|
201,711 | 250,271 | ||||||
|
Dividend payable
|
9,703 | 91,465 | ||||||
|
Income taxes
|
45,085 | — | ||||||
|
Deferred income
|
222,556 | 272,381 | ||||||
|
|
||||||||
|
Total current liabilities
|
900,103 | 1,157,141 | ||||||
|
|
||||||||
|
Income taxes
|
206,115 | 227,067 | ||||||
|
Long-term debt
|
3,061,951 | 3,816,942 | ||||||
|
Postretirement medical and life insurance liabilities
|
185,433 | 217,143 | ||||||
|
Pension liability
|
708,133 | 882,511 | ||||||
|
Other long-term liabilities
|
260,918 | 248,482 | ||||||
|
|
||||||||
|
Total liabilities
|
5,322,653 | 6,549,286 | ||||||
|
|
||||||||
|
|
||||||||
|
Redeemable noncontrolling interest
|
78,304 | 72,840 | ||||||
|
|
||||||||
|
|
||||||||
|
Commitments and contingent liabilities (see Note 12)
|
||||||||
|
|
||||||||
|
Equity
|
||||||||
|
Gannett Co., Inc. shareholders’ equity
|
||||||||
|
Preferred stock, par value $1: Authorized, 2,000,000 shares: Issued, none
|
— | — | ||||||
|
Common stock, par value $1: Authorized, 800,000,000 shares: Issued, 324,418,632 shares
|
324,419 | 324,419 | ||||||
|
Additional paid-in capital
|
629,714 | 743,199 | ||||||
|
Retained earnings
|
6,324,586 | 6,006,753 | ||||||
|
Accumulated other comprehensive loss
|
(316,832 | ) | (469,252 | ) | ||||
|
|
||||||||
|
|
6,961,887 | 6,605,119 | ||||||
|
|
||||||||
|
Less Treasury stock, 87,261,969 shares and 96,295,239 shares, respectively, at cost
|
(5,357,962 | ) | (5,549,237 | ) | ||||
|
|
||||||||
|
Total Gannett Co., Inc. shareholders’ equity
|
1,603,925 | 1,055,882 | ||||||
|
|
||||||||
|
Noncontrolling interests
|
143,550 | 118,806 | ||||||
|
|
||||||||
|
Total equity
|
1,747,475 | 1,174,688 | ||||||
|
|
||||||||
|
Total liabilities, redeemable noncontrolling interest and equity
|
$ | 7,148,432 | $ | 7,796,814 | ||||
|
|
||||||||
The accompanying notes are an integral part of these consolidated financial statements.
49
Table of Contents
GANNETT CO., INC.
| In thousands of dollars, except per share amounts | ||||||||||||
| Fiscal year ended | Dec. 27, 2009 | Dec. 28, 2008 | Dec. 30, 2007 | |||||||||
|
Net operating revenues
|
||||||||||||
|
Publishing advertising
|
$ | 2,966,301 | $ | 4,145,592 | $ | 4,937,159 | ||||||
|
Publishing circulation
|
1,166,984 | 1,216,637 | 1,252,356 | |||||||||
|
Digital
|
586,174 | 281,378 | 70,347 | |||||||||
|
Broadcasting
|
631,085 | 772,533 | 789,297 | |||||||||
|
All other
|
262,449 | 351,510 | 390,301 | |||||||||
|
|
||||||||||||
|
Total
|
5,612,993 | 6,767,650 | 7,439,460 | |||||||||
|
|
||||||||||||
|
Operating expenses
|
||||||||||||
|
Cost of sales and operating expenses, exclusive of depreciation
|
3,304,784 | 4,012,727 | 4,164,083 | |||||||||
|
Selling, general and administrative expenses, exclusive of depreciation
|
1,207,313 | 1,277,962 | 1,270,090 | |||||||||
|
Depreciation
|
209,826 | 230,987 | 246,275 | |||||||||
|
Amortization of intangible assets
|
32,983 | 31,211 | 36,086 | |||||||||
|
Facility consolidation and asset impairment charges (see Notes 3 and 4)
|
132,904 | 7,976,418 | 72,030 | |||||||||
|
|
||||||||||||
|
Total
|
4,887,810 | 13,529,305 | 5,788,564 | |||||||||
|
|
||||||||||||
|
Operating income (loss)
|
725,183 | (6,761,655 | ) | 1,650,896 | ||||||||
|
|
||||||||||||
|
Non-operating (expense) income
|
||||||||||||
|
Equity income (loss) in unconsolidated investees, net (see Notes 3 and 6)
|
3,927 | (374,925 | ) | 40,693 | ||||||||
|
Interest expense
|
(175,748 | ) | (190,845 | ) | (259,825 | ) | ||||||
|
Other non-operating items
|
22,799 | 28,430 | 18,648 | |||||||||
|
|
||||||||||||
|
Total
|
(149,022 | ) | (537,340 | ) | (200,484 | ) | ||||||
|
|
||||||||||||
|
Income (loss) before income taxes
|
576,161 | (7,298,995 | ) | 1,450,412 | ||||||||
|
Provision (benefit) for income taxes
|
193,800 | (658,400 | ) | 473,300 | ||||||||
|
|
||||||||||||
|
Income (loss) from continuing operations
|
382,361 | (6,640,595 | ) | 977,112 | ||||||||
|
|
||||||||||||
|
Income from the operation of discontinued operations, net of tax
|
— | — | 6,221 | |||||||||
|
Gain on disposal of newspaper businesses, net of tax
|
— | — | 73,814 | |||||||||
|
|
||||||||||||
|
Net income (loss)
|
382,361 | (6,640,595 | ) | 1,057,147 | ||||||||
|
|
||||||||||||
|
Net income attributable to noncontrolling interests
|
(27,091 | ) | (6,970 | ) | (1,535 | ) | ||||||
|
|
||||||||||||
|
Net income (loss) attributable to Gannett Co., Inc
|
$ | 355,270 | $ | ( 6,647,565 | ) | $ | 1,055,612 | |||||
|
|
||||||||||||
|
|
||||||||||||
|
Earnings (loss) from continuing operations per share — basic
|
$ | 1.52 | $ | (29.11 | ) | $ | 4.18 | |||||
|
|
||||||||||||
|
Earnings from discontinued operations
|
||||||||||||
|
Discontinued operations per share — basic
|
— | — | .03 | |||||||||
|
Gain on disposal of newspaper businesses per share — basic
|
— | — | .32 | |||||||||
|
|
||||||||||||
|
Net income (loss) per share — basic
|
$ | 1.52 | $ | (29.11 | ) | $ | 4.53 | |||||
|
|
||||||||||||
|
Earnings (loss) from continuing operations per share — diluted
|
$ | 1.51 | $ | (29.11 | ) | $ | 4.17 | |||||
|
|
||||||||||||
|
Earnings from discontinued operations
|
||||||||||||
|
Discontinued operations per share — diluted
|
— | — | .03 | |||||||||
|
Gain on disposal of newspaper businesses per share — diluted
|
— | — | .32 | |||||||||
|
|
||||||||||||
|
Net income (loss) per share — diluted
|
$ | 1.51 | $ | (29.11 | ) | $ | 4.52 | |||||
|
|
||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
50
Table of Contents
GANNETT CO., INC.
| In thousands of dollars | ||||||||||||
| Fiscal year ended | Dec. 27, 2009 | Dec. 28, 2008 | Dec. 30, 2007 | |||||||||
|
Cash flows from operating activities
|
||||||||||||
|
Net income (loss)
|
$ | 382,361 | $ | (6,640,595 | ) | $ | 1,057,147 | |||||
|
Adjustments to reconcile net income (loss) to operating cash flows:
|
||||||||||||
|
Debt exchange gain
|
(42,746 | ) | — | — | ||||||||
|
Gain on sale of discontinued operations, net of tax
|
— | — | (73,814 | ) | ||||||||
|
Taxes paid on gain on sale of discontinued operations
|
— | — | (134,932 | ) | ||||||||
|
Depreciation
|
209,826 | 230,987 | 249,039 | |||||||||
|
Amortization of intangible assets
|
32,983 | 31,211 | 36,086 | |||||||||
|
Facility consolidation and asset impairment charges (see Notes 3 and 4)
|
160,939 | 7,976,418 | 72,030 | |||||||||
|
Stock-based compensation — equity awards
|
25,373 | 22,646 | 29,082 | |||||||||
|
Provision (benefit) for deferred income taxes
|
54,660 | (816,219 | ) | 15,488 | ||||||||
|
Pension (benefit) expense, net of pension contributions
|
(7,417 | ) | (61,258 | ) | 20,064 | |||||||
|
Equity (income) loss in unconsolidated investees, net (see Notes 3 and 6)
|
(3,927 | ) | 374,925 | (40,693 | ) | |||||||
|
Other, net, including gains on asset sales
|
14,668 | (54,996 | ) | (37,760 | ) | |||||||
|
Decrease in trade receivables
|
105,184 | 132,143 | 56,237 | |||||||||
|
Decrease in other receivables
|
26,951 | 16,285 | 200,780 | |||||||||
|
Decrease (increase) in inventories
|
56,768 | (26,856 | ) | 21,943 | ||||||||
|
Increase (decrease) in accounts payable
|
(66,765 | ) | 50,256 | (35,970 | ) | |||||||
|
Increase (decrease) in interest and taxes payable
|
64,079 | (151,469 | ) | (46,070 | ) | |||||||
|
Decrease in deferred income
|
(50,300 | ) | (24,375 | ) | (11,311 | ) | ||||||
|
Change in other assets and liabilities, net
|
(96,057 | ) | (43,758 | ) | (34,883 | ) | ||||||
|
|
||||||||||||
|
Net cash flow from operating activities
|
866,580 | 1,015,345 | 1,342,463 | |||||||||
|
|
||||||||||||
|
Cash flows from investing activities
|
||||||||||||
|
Purchase of property, plant and equipment
|
(67,737 | ) | (165,000 | ) | (171,405 | ) | ||||||
|
Payments for acquisitions, net of cash acquired
|
(9,581 | ) | (168,570 | ) | (30,581 | ) | ||||||
|
Payments for investments
|
(9,674 | ) | (46,779 | ) | (39,963 | ) | ||||||
|
Proceeds from investments
|
20,461 | 29,049 | 43,381 | |||||||||
|
Proceeds from sale of certain assets, including discontinued operations
|
31,908 | 78,541 | 464,157 | |||||||||
|
|
||||||||||||
|
Net cash (used for) provided by investing activities
|
(34,623 | ) | (272,759 | ) | 265,589 | |||||||
|
|
||||||||||||
|
Cash flows from financing activities
|
||||||||||||
|
(Payments of) proceeds from borrowings under revolving credit facilities
|
(526,000 | ) | 1,907,000 | — | ||||||||
|
Proceeds from issuance of long-term debt
|
492,618 | 280,000 | 1,000,000 | |||||||||
|
Payments of unsecured promissory notes
|
— | (833,876 | ) | (1,364,523 | ) | |||||||
|
Payments of unsecured fixed rate notes and other indebtedness
|
(680,505 | ) | (1,628,458 | ) | (748,099 | ) | ||||||
|
Dividends paid
|
(119,328 | ) | (366,748 | ) | (311,237 | ) | ||||||
|
Cost of common shares repurchased
|
— | (72,764 | ) | (215,210 | ) | |||||||
|
Proceeds from issuance of common stock upon exercise of stock options
|
402 | — | 12,472 | |||||||||
|
Distributions to noncontrolling interest shareholders
|
— | (200 | ) | (368 | ) | |||||||
|
|
||||||||||||
|
Net cash used for financing activities
|
(832,813 | ) | (715,046 | ) | (1,626,965 | ) | ||||||
|
|
||||||||||||
|
Effect of currency exchange rate change
|
702 | (5,840 | ) | 1,906 | ||||||||
|
|
||||||||||||
|
Increase (decrease) in cash and cash equivalents
|
(154 | ) | 21,700 | (17,007 | ) | |||||||
|
Balance of cash and cash equivalents at beginning of year
|
98,949 | 77,249 | 94,256 | |||||||||
|
|
||||||||||||
|
Balance of cash and cash equivalents at end of year
|
$ | 98,795 | $ | 98,949 | $ | 77,249 | ||||||
|
|
||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
51
Table of Contents
GANNETT CO., INC.
CONSOLIDATED STATEMENTS OF EQUITY
| In thousands of dollars | Gannett Co., Inc. Shareholders’ Equity | |||||||||||||||||||||||||||
| Fiscal years ended | Common | Accumulated | ||||||||||||||||||||||||||
| December 30, 2007, | stock | Additional | other | |||||||||||||||||||||||||
| December 28, 2008, | $1 par | paid-in | Retained | comprehensive | Treasury | Noncontrolling | ||||||||||||||||||||||
| and December 27, 2009 | value | capital | earnings | income (loss) | stock | Interests | Total | |||||||||||||||||||||
|
Balance: Dec. 31, 2006
|
$ | 324,419 | $ | 685,900 | $ | 12,337,041 | $ | 306,298 | $ | (5,271,395 | ) | $ | 1,725 | $ | 8,383,988 | |||||||||||||
|
|
||||||||||||||||||||||||||||
|
Net income, 2007
|
1,055,612 | 1,535 | 1,057,147 | |||||||||||||||||||||||||
|
Foreign currency translation
adjustment
|
78,230 | 78,230 | ||||||||||||||||||||||||||
|
Interest rate swap
|
(8,523 | ) | (8,523 | ) | ||||||||||||||||||||||||
|
Pension and other postretirement
benefit liability adjustment,
net of tax provision of $39,094
|
54,886 | 54,886 | ||||||||||||||||||||||||||
|
Other
|
(2,920 | ) | (2,920 | ) | ||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Total comprehensive income
|
1,178,820 | |||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Dividends declared, 2007:
|
||||||||||||||||||||||||||||
|
$1.42 per share
|
(331,010 | ) | (331,010 | ) | ||||||||||||||||||||||||
|
Adjustment to initially
apply FIN No. 48
|
(42,500 | ) | (42,500 | ) | ||||||||||||||||||||||||
|
Treasury stock acquired
|
(215,210 | ) | (215,210 | ) | ||||||||||||||||||||||||
|
Stock options exercised
|
7,493 | 4,557 | 12,050 | |||||||||||||||||||||||||
|
Stock option and restricted
stock compensation
|
29,082 | 29,082 | ||||||||||||||||||||||||||
|
Tax benefit derived from stock
awards settled
|
422 | 422 | ||||||||||||||||||||||||||
|
Other treasury stock activity
|
(1,692 | ) | 3,549 | 1,857 | ||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Balance: Dec. 30, 2007
|
$ | 324,419 | $ | 721,205 | $ | 13,019,143 | $ | 430,891 | $ | (5,478,499 | ) | $ | 340 | $ | 9,017,499 | |||||||||||||
|
|
||||||||||||||||||||||||||||
|
Net income (loss), 2008
|
(6,647,565 | ) | 6,970 | (6,640,595 | ) | |||||||||||||||||||||||
|
Redeemable noncontrolling
interest accretion
|
(1,736 | ) | (1,736 | ) | ||||||||||||||||||||||||
|
Foreign currency translation
adjustment
|
(421,845 | ) | (421,845 | ) | ||||||||||||||||||||||||
|
Interest rate swap
|
3,445 | 3,445 | ||||||||||||||||||||||||||
|
Pension and other postretirement
benefit liability adjustment,
net of tax benefit of $315,832
|
(481,743 | ) | (481,743 | ) | ||||||||||||||||||||||||
|
Other
|
1,330 | 1,330 | ||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Total comprehensive loss
|
(7,541,144 | ) | ||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Dividends declared, 2008:
|
||||||||||||||||||||||||||||
|
$1.60 per share
|
(364,825 | ) | (364,825 | ) | ||||||||||||||||||||||||
|
Acquisitions
|
111,902 | 111,902 | ||||||||||||||||||||||||||
|
Treasury stock acquired
|
(72,764 | ) | (72,764 | ) | ||||||||||||||||||||||||
|
Stock option and restricted
stock compensation
|
22,646 | 22,646 | ||||||||||||||||||||||||||
|
Other treasury stock activity
|
(652 | ) | 2,026 | 1,374 | ||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Balance: Dec. 28, 2008
|
$ | 324,419 | $ | 743,199 | $ | 6,006,753 | $ | (469,252 | ) | $ | (5,549,237 | ) | $ | 118,806 | $ | 1,174,688 | ||||||||||||
|
|
||||||||||||||||||||||||||||
|
Net income, 2009
|
355,270 | 27,091 | 382,361 | |||||||||||||||||||||||||
|
Redeemable noncontrolling
interest accretion
|
(5,463 | ) | (5,463 | ) | ||||||||||||||||||||||||
|
Foreign currency translation
adjustment
|
60,934 | 60,934 | ||||||||||||||||||||||||||
|
Interest rate swap
|
5,075 | 5,075 | ||||||||||||||||||||||||||
|
Pension and other postretirement
benefit liability adjustment,
net of tax benefit of $74,051
|
84,355 | 84,355 | ||||||||||||||||||||||||||
|
Other
|
2,056 | 3,116 | 5,172 | |||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Total comprehensive income
|
532,434 | |||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Dividends declared, 2009:
|
||||||||||||||||||||||||||||
|
$0.16 per share
|
(37,437 | ) | (37,437 | ) | ||||||||||||||||||||||||
|
Stock options exercised
|
(678 | ) | 986 | 308 | ||||||||||||||||||||||||
|
Stock option and restricted
stock compensation
|
25,373 | 25,373 | ||||||||||||||||||||||||||
|
401(k) match
|
(139,919 | ) | 185,444 | 45,525 | ||||||||||||||||||||||||
|
Tax benefit derived from stock
awards settled
|
94 | 94 | ||||||||||||||||||||||||||
|
Other treasury stock activity
|
1,645 | 4,845 | 6,490 | |||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Balance: Dec. 27, 2009
|
$ | 324,419 | $ | 629,714 | $ | 6,324,586 | $ | (316,832 | ) | $ | (5,357,962 | ) | $ | 143,550 | $ | 1,747,475 | ||||||||||||
|
|
||||||||||||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
52
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1
Summary of significant accounting policies
Fiscal year:
The company’s fiscal year ends on the last Sunday of the calendar year. The
company’s 2009 fiscal year ended on Dec. 27, 2009, and encompassed a 52-week period. The company’s
2008 and 2007 fiscal years also encompassed 52-week periods.
Subsequent events:
The company has evaluated subsequent events through Feb. 24, 2010, which is
the date that these financial statements have been filed with the Securities and Exchange
Commission (SEC). No material subsequent events have occurred since
Dec. 27, 2009, that required
recognition or disclosure in these financial statements.
Consolidation:
The consolidated financial statements include the accounts of the company and
its wholly and majority-owned subsidiaries after elimination of all significant intercompany
transactions and profits. Investments in entities for which the company does not have control, but
has the ability to exercise significant influence over operating and financial policies, are
accounted for under the equity method. Accordingly, the company’s share of net earnings and losses
from these ventures is included in “Equity income (loss) in unconsolidated investees, net” in the
Consolidated Statements of Income (Loss).
Segment presentation:
In the third quarter of 2008, the company began reporting a new digital
segment and a separate digital revenues line in its Statements of Income (Loss). This revenue line
includes only revenue from the businesses that comprise the new digital segment. It therefore
includes all revenues from CareerBuilder and ShopLocal beginning with the full consolidation of
these businesses in the third quarter of 2008, and revenues from PointRoll, Schedule Star, Planet
Discover and Ripple6. Revenues from PointRoll, Schedule Star and Planet Discover had previously
been reported within the publishing segment and were included in the “All other” revenue line in
the Statement of Income. “All other” revenue is now comprised principally of commercial printing
revenues. All periods presented reflect these reclassifications.
The digital segment and the digital revenues line do not include online/digital revenues
generated by web sites that are associated with the company’s publishing and broadcasting operating
properties. Such amounts are reflected within those segments and are included as part of publishing
advertising revenues and broadcasting revenues in the Statements of Income.
Accounting standards codification:
In June 2009, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting Standards (SFAS) No. 168, The “FASB Accounting
Standards Codification and the Hierarchy of Generally Accepted Accounting Principles — a replacement
of FASB Statement No. 162.” This standard establishes only two levels of U.S. generally accepted
accounting principles (GAAP), authoritative and nonauthoritative. The FASB Accounting Standards
Codification (the Codification) became the source of authoritative, nongovernmental GAAP, except
for rules and interpretive releases of the SEC, which are sources of authoritative GAAP for SEC
registrants. All other nongrandfathered, non-SEC accounting literature not included in the
Codification became nonauthoritative. This standard is effective for financial statements for
interim or annual reporting periods ending after Sept. 15, 2009. The company began using the new
guidelines and numbering system prescribed by the Codification when referring to GAAP in the third
quarter of 2009. As the Codification was not intended to change or alter existing GAAP, it did not
have any impact on the company’s consolidated financial statements.
Reclassifications of certain items within the Consolidated Statements of Income:
The company
adopted SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an amendment
of ARB No. 51” (SFAS No. 160), as subsequently codified in Accounting Standards Codification (ASC)
Topic 810, “Consolidation,” at the beginning of its 2009 fiscal year. SFAS No. 160 changed the
accounting and reporting for minority interest, which was renamed noncontrolling interests and
generally classified as a component of equity on the Consolidated Balance Sheet. Gannett’s SFAS No.
160 adoption resulted in the presentation of a new line “Redeemable noncontrolling interest” in the
mezzanine section of the balance sheet. The balance in this line represents redeemable stock held
by a noncontrolling owner in CareerBuilder, LLC (CareerBuilder). The redeemable stock is generally
exercisable within 30 days after Jan. 1, 2014. On the Consolidated Statements of Income, SFAS No.
160 affected primarily the company’s reporting of the 49.2 percent noncontrolling interest in
CareerBuilder. Previously, the company presented this minority interest in “Other non-operating
items” in the Consolidated Statements of Income. Under SFAS No. 160, “Net income (loss)” in the
Consolidated Statements of Income reflects 100 percent of CareerBuilder results as the company
holds the controlling interest. “Net income (loss)” is subsequently adjusted to remove the
noncontrolling (minority) interest to arrive at “Net income (loss) attributable to Gannett Co.,
Inc.” While this presentation is different than previously required by GAAP, the final net income
results attributable to the company are the same under SFAS No. 160 and the previous reporting
method. Reclassifications were made to prior periods to conform to the new SFAS No. 160
presentation requirements.
Operating agencies:
The company’s newspaper subsidiary in Detroit participates in a joint
operating agency. The joint operating agency performs the production, sales and distribution
functions for the subsidiary and another newspaper publishing company under a joint operating
agreement. Operating results for the Detroit joint operating agency are fully consolidated along
with a charge for the noncontrolling partner’s share of profits.
Through May 2009, the company also published the Tucson Citizen through the Tucson joint
operating agency in which the company held a 50% interest. The company’s share of results for its
share of Tucson operations are accounted for under the equity method, and are reported as a net
amount in “Equity income (loss) in unconsolidated investees, net.” Because of challenges facing
the publishing industry and the difficult economy, particularly in the Tucson area, the company
ceased publishing the Citizen on May 16, 2009. The company retained its online site and 50%
partnership interest in the joint operating agency which provides services to the remaining
non-Gannett newspaper in Tucson.
Prior to 2008, the company participated in a joint operating agency in Cincinnati. Operating
results for the Cincinnati joint operating agency were fully consolidated along with a charge for
the noncontrolling partner’s share of profits. Beginning in 2008, the company’s newspaper, The
Cincinnati Enquirer, became the sole daily newspaper in the market, and the joint operating agency
was terminated.
53
Table of Contents
Critical accounting policies and the use of estimates:
The company prepares its financial
statements in accordance with generally accepted accounting principles which require the use of
estimates and assumptions that affect the reported amount of assets, liabilities, revenues and
expenses and related disclosure of contingent matters. The company bases its estimates on
historical experience, actuarial studies and other assumptions, as appropriate. The company
re-evaluates its estimates on an ongoing basis. Actual results could differ from these estimates.
Critical accounting policies for the company involve its assessment of the recoverability of
its long-lived assets, including goodwill and other intangible assets and property, plant and
equipment. These assessments are based on factors such as estimated future cash flows and current
fair value estimates of businesses.
The company’s accounting for pension and retiree medical benefits requires the use of various
estimates concerning the work force, interest rates, plan investment return, and involves the use
of advice from consulting actuaries.
The company periodically evaluates its investments in unconsolidated entities for impairment.
When the company determines that an impairment is other-than-temporary, an impairment is recognized
equal to the excess of the investment’s carrying amount over its estimated fair value. In making
such a determination, the company considers recent financial results and forward looking
projections. The company also considers various qualitative factors. These factors include the
intent and ability of the company to retain its investment in the entity and the financial
condition and long-term prospects of the entity. If the company believes that the decline in the
fair value of the investment is temporary, then no impairment is recorded.
The company’s accounting for income taxes in the U.S. and foreign jurisdictions is sensitive
to interpretation of various laws and regulations therein, and to company policy and expectations
as to the repatriation of earnings from foreign sources. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. If currently available information
raises doubt as to the realization of the deferred tax assets, a valuation allowance is
established. The company must exercise significant judgment in evaluating the amount and timing of
recognition of deferred tax liabilities and assets, including projections of future taxable income.
These judgments and estimates are reviewed on a continual basis as regulatory and business factors
change. A valuation allowance for deferred tax assets may be required if the amount of taxes
recoverable through loss carryback declines, if tax planning strategies are not available, or if
the company projects lower levels of future taxable income.
A more complete discussion of all of the company’s significant accounting policies follows.
Cash and cash equivalents:
Cash and cash equivalents consist of cash and investments with
maturities of three months or less.
Trade receivables and allowances for doubtful accounts:
Trade receivables are recorded at
invoiced amounts and generally do not bear interest. The allowance for doubtful accounts reflects
the company’s estimate of credit exposure, determined principally on the basis of its collection
experience, aging of its receivables and significant individual account credit risk.
Inventories:
Inventories, consisting principally of newsprint, printing ink and plate material
for the company’s publishing operations, are valued primarily at the lower of cost (first-in,
first-out) or market. At certain U.S. publishing operations however, newsprint inventory is carried
on a last-in, first-out basis.
Valuation of long-lived assets:
In accordance with the requirements included within ASC Topic
350, “Intangibles — Goodwill and Other” (ASC Topic 350) and Topic 360, “Property, Plant, and
Equipment” (ASC Topic 360), the company evaluates the carrying value of long-lived assets (mostly
property, plant and equipment and definite-lived intangible assets) to be held and used whenever
events or changes in circumstances indicate that the carrying amount may not be recoverable. The
carrying value of a long-lived asset group is considered impaired when the projected undiscounted
future cash flows are less than its carrying value. The company measures impairment based on the
amount by which the carrying value exceeds the fair value. Fair value is determined primarily using
the projected future cash flows, discounted at a rate commensurate with the risk involved. Losses
on long-lived assets to be disposed of are determined in a similar manner, except that fair values
are reduced for the cost to dispose.
Property and depreciation:
Property, plant and equipment is recorded at cost, and depreciation
is provided generally on a straight-line basis over the estimated useful lives of the assets. The
principal estimated useful lives are: buildings and improvements, 10 to 40 years; and machinery,
equipment and fixtures, three to 30 years. Major renewals and improvements and interest incurred
during the construction period of major additions are capitalized. Expenditures for maintenance,
repairs and minor renewals are charged to expense as incurred.
Goodwill and other intangible assets:
Goodwill represents the excess of acquisition cost over
the fair value of assets acquired, including identifiable intangible assets, net of liabilities
assumed. In accordance with the impairment testing provisions included in ASC Topic 350, goodwill
is tested for impairment on an annual basis or between annual tests if events occur or
circumstances change that would more likely than not reduce the fair value of a reporting unit
below its carrying amount. The company’s annual measurement date is the end of its fiscal year. The
company is required to determine the fair value of each reporting unit and compare it to the
carrying amount of the reporting unit. Fair value of the reporting unit is determined using various
techniques, including multiple of earnings and discounted cash flow valuation techniques. If the
carrying amount of the reporting unit exceeds the fair value of the reporting unit, the company
performs the second step of the impairment test, as this is an indication that the reporting unit
goodwill may be impaired. In the second step of the impairment test, the company determines the
implied fair value of the reporting unit’s goodwill. If the carrying value of a reporting unit’s
goodwill exceeds its implied fair value, then an impairment of goodwill has occurred and the
company must recognize an impairment loss for the difference between the carrying amount and the
implied fair value of goodwill. In determining the reporting units, the company considers the way
it manages its businesses and the nature of those businesses. The company has established its
reporting units for newspapers at or one level below the segment level. These reporting units
therefore consist principally of U.S. Community Publishing, the USA TODAY group, the U.K. newspaper
group, and certain individual stand-alone publishing businesses. For Digital, the reporting units
are the stand-alone digital businesses. For Broadcasting, goodwill is accounted for at the segment
level.
The company performs an impairment test annually, or more often if circumstances dictate, of
its indefinite-lived intangible assets. Intangible assets that have finite useful lives are
amortized over those useful lives and are evaluated for impairment in accordance with ASC Topic 350
as described above.
54
Table of Contents
Investments and other assets:
Investments in non-public businesses in which the company does
not have control or does not exert significant influence are carried at cost and losses resulting
from periodic evaluations of the carrying value of these investments are included as a
non-operating expense. At Dec. 27, 2009, and Dec. 28, 2008, such investments aggregated
approximately $16 million.
Investments where the company does have significant influence are recorded under the equity
method of accounting. See Note 6 for further discussion of these investments.
The company’s television stations are parties to program broadcast contracts. These contracts
are recorded at the gross amount of the related liability when the programs are available for
telecasting. The related assets are recorded at the lower of cost or estimated net realizable
value. Program assets are classified as current (as a prepaid expense) or noncurrent (as an other
asset) in the Consolidated Balance Sheets, based upon the expected use of the programs in
succeeding years. The amount charged to expense appropriately matches the cost of the programs with
the revenues associated with them. The liability for these contracts is classified as current or
noncurrent in accordance with the payment terms of the contracts. The payment period generally
coincides with the period of telecast for the programs, but may be shorter.
Revenue recognition:
The company’s revenues include amounts charged to customers for: space
purchased in the company’s newspapers, digital ads placed on its web sites, digital marketing
service agreement fees, commercial printing jobs, and advertising broadcast on the company’s
television stations. Newspaper revenues also include circulation revenues for newspapers purchased
by readers or distributors, reduced by the amount of discounts taken. Advertising revenues are
recognized, net of agency commissions, in the period when advertising is printed or placed on web
sites or broadcast. Revenues for digital marketing services are generally recognized
as web site ad impressions are delivered. Commercial printing revenues are recognized when the job
is delivered to the customer. Circulation revenues are recognized when purchased newspapers are
distributed. Amounts received from customers in advance of revenue recognition are deferred as
liabilities. Broadcasting retransmission fees are recognized over the contract period based on a
negotiated fee per subscriber.
Retirement plans:
Pension and other postretirement benefit costs under the company’s
retirement plans are actuarially determined. The company recognizes the cost of postretirement
benefits including pension, medical and life insurance benefits on an accrual basis over the
working lives of employees expected to receive such benefits.
Stock-based employee compensation:
Effective Dec. 26, 2005, the first day of its 2006 fiscal
year, the company adopted the fair value recognition provisions of SFAS No. 123(R), “Share-Based
Payments,” as subsequently codified in ASC Topic 718, “Compensation-Stock Compensation,” using the
modified prospective transition method. Under this transition method, stock-based compensation
costs recognized in the income statement beginning in 2006 include (a) compensation expense for all
unvested stock-based awards that were granted through Dec. 25, 2005, based on the grant date fair
value estimated in accordance with the original provisions of SFAS No. 123 and (b) compensation
expense for all share-based payments granted after Dec. 25, 2005, based on grant date fair value
estimated in accordance with the provisions of SFAS No. 123(R). The company’s stock option awards
generally have graded vesting terms and the company recognizes compensation expense for these
options on a straight-line basis over the requisite service period for the entire award (generally
four years). See Note 11 for further discussion.
The company also grants restricted stock or restricted stock units to employees and members of
its Board of Directors as a form of compensation. The expense for such awards is based on the grant
date fair value of the award and is recognized on a straight-line basis over the requisite service
period, which is generally the four-year incentive period.
Income taxes:
The company accounts for certain income and expense items differently for
financial reporting purposes than for income tax reporting purposes. Deferred income taxes are
provided in recognition of these temporary differences. The company adopted the provisions of FASB
Interpretation No. 48 “Accounting for Uncertainty in Income Taxes” (FIN No. 48), as subsequently
codified in ASC Topic 740, “Income Taxes,” on Jan. 1, 2007. See Note 10 for further discussion.
Per share amounts:
The company reports earnings per share on two bases, basic and diluted. All
basic income per share amounts are based on the weighted average number of common shares
outstanding during the year. The calculation of diluted earnings per share also considers the
assumed dilution from the exercise of stock options and from restricted stock units. Loss amounts
per share consider only basic shares outstanding due to the antidilutive effect of adding shares
for stock option exercises and restricted stock units.
Foreign currency translation:
The income statements of foreign operations have been translated
to U.S. dollars using the average currency exchange rates in effect during the relevant period. The
balance sheets have been translated using the currency exchange rate as of the end of the
accounting period. The impact of currency exchange rate changes on the translation of the balance
sheets are included in comprehensive income (loss) and are classified as accumulated other
comprehensive income (loss) in shareholders’ equity.
New accounting pronouncements:
In January 2010, the FASB issued Accounting Standards Update
(ASU) 2010-02, “Consolidation (Topic 810), Accounting and Reporting for Decreases in Ownership of a
Subsidiary — a Scope Clarification.” ASU 2010-02 addresses implementation issues associated with
the provisions of ASC 810-10, “Consolidation-Overall” relating to the accounting for decreases in
the ownership of a subsidiary.
Additionally, ASU 2010-02 expands the disclosures required for a business combination achieved
in stages and deconsolidation of a business or nonprofit activity within the scope of ASC 810-10.
The amendments in ASU 2010-02 are effective beginning in the first interim or annual reporting
period beginning on or after Dec. 15, 2009. Absent future occurrence of transactions contemplated
by this standard, ASU 2010-02 will have no impact on the company’s consolidated results of
operations and financial condition.
In August 2009, the FASB issued ASU 2009-05, “Fair Value Measurements and Disclosures (Topic
820) — Measuring Liabilities at Fair Value.” ASU 2009-05 amends ASC Topic 820 by providing
additional guidance clarifying the measurement of liabilities at fair value. ASU 2009-5 is
effective for the first reporting period beginning after its issuance. The company’s disclosures on
measurement of liabilities can be found in Note 13.
55
Table of Contents
NOTE 2
Acquisitions, investments and dispositions
2009
:
In February 2009, the company purchased a minority interest in Homefinder, a leading
national online marketplace connecting homebuyers, sellers and real estate professionals.
In July 2009, Newsquest sold one of its commercial printing businesses, Southernprint Limited.
Total cash paid in 2009 for business acquisitions (principally post-acquisition consideration)
and investments was $9.6 million and $9.7 million, respectively.
2008
:
On Dec. 31 2007, the first day of the company’s 2008 fiscal year, the company purchased
X.com, Inc. (BNQT.com), which operates a digital media group of affiliated sites covering eight
different action sports including surfing, snowboarding and skateboarding. X.com is affiliated
with the USA TODAY Sports brand.
In February 2008, the company formed QuadrantONE, a digital ad sales network, with three other
large media companies.
In March 2008, the company purchased a minority stake in Fantasy Sports Ventures (FSV). FSV
owns a set of fantasy sports content sites and manages advertising across a group of affiliated
sites.
In May 2008, the company purchased a minority stake in Cozi Group Inc. (COZI). COZI is a free
web service that helps families manage busy schedules, track shopping and to-do lists, organize
household chores and stay in communication.
In July 2008, the company purchased a minority stake in Livestream (formerly Mogulus), a
company that provides Internet broadcasting services. Also in July 2008, the company increased its
investment in 4INFO maintaining its approximate ownership interest.
In August 2008, the company purchased 100% of the outstanding shares of Pearls Review, Inc.,
an online nursing certification and continuing education review site.
The above business acquisitions and investments did not materially affect the company’s
financial position or results of operations.
In June 2008, the company acquired from Tribune Company and The McClatchy Company their
minority ownership interests in ShopLocal LLC, a leading marketing and database services company
for major retailers in the U.S. The company then owned 100% of ShopLocal and began consolidating
its results in the digital segment at the beginning of the third quarter of 2008. ShopLocal
collaborates with PointRoll to create ads that dynamically connect retail advertisers and
consumers, online and in the store.
In September 2008, the company acquired an additional 10% stake in CareerBuilder from Tribune
Company increasing its investment to 50.8% so that it became the majority and controlling owner.
Beginning in September 2008, the operations of CareerBuilder have been fully consolidated and are
reported in the digital segment. The related minority interest charge for CareerBuilder is
reflected in “Net income attributable to noncontrolling interests” in the Statements of Income
(Loss).
In November 2008, the company acquired Ripple6, Inc., a leading provider of social media
services for publishers and other users. Ripple6 currently powers Gannett’s MomsLikeMe.com site,
which recently rolled out in 80 local markets across the country and has more than one million moms
visiting each month.
The total cash paid in 2008 for business acquisitions and investments was $168.6 million and
$46.8 million, respectively.
2007
:
In May 2007, the company completed the sale of the Norwich (CT) Bulletin, the Rockford
(IL) Register Star, the Observer-Dispatch in Utica, NY, and The Herald-Dispatch in Huntington, WV,
to GateHouse Media, Inc. and contributed the Chronicle-Tribune in Marion, IN, to the Gannett
Foundation. In connection with these transactions, the company recorded a net after-tax gain of
$73.8 million (reflecting a charge for goodwill associated with these businesses of $138 million)
in discontinued operations. Results from these businesses have been reported as discontinued
operations in 2007.
Amounts applicable to these discontinued operations are as follows:
| In millions of dollars | 2007 | |||
|
Revenues
|
$ | 41 | ||
|
Pre-tax income
|
$ | 10 | ||
|
Net income
|
$ | 6 | ||
In January 2007, the company acquired Central Florida Future, the independent student
newspaper of the University of Central Florida.
In June 2007, the company acquired the Central Ohio Advertiser Network, a network of eight
weekly shoppers with the Advertiser brand and a commercial print operation in Ohio.
In October 2007, the company acquired a controlling interest in Schedule Star LLC, which
operates HighSchoolSports.net, a digital content site serving the high school sports audience and
the Schedule Star solution for local athletic directors.
In late 2007, Metromix LLC was created, which is a digital joint venture focusing on a common
model for local online entertainment sites, and then scaling the sites into a national platform
under the Metromix brand.
The total cash paid in 2007 for business acquisitions and investments was $30.6 million and
$40.0 million, respectively.
NOTE 3
Facility consolidation and asset impairment charges
Very difficult business conditions required the company to perform impairment tests on certain
assets including goodwill, other intangible assets, other long-lived assets and investments
accounted for under the equity method during 2009 and 2008. As a result, the company recorded
non-cash impairment charges to reduce the book value of certain of those assets. In addition, an
impairment charge was taken to reduce the value of certain publishing assets sold in 2009 to fair
value less costs to sell.
56
Table of Contents
A summary of these charges by year is presented below:
| 2009 | ||||||||||||
| Pre-Tax | After-Tax | Per Share | ||||||||||
| In millions except per share amounts | Amount | Amount(a) | Amount | |||||||||
|
Asset impairment and other charges
|
||||||||||||
|
Goodwill:
|
||||||||||||
|
Publishing
|
$ | 17 | $ | 10 | $ | 0.04 | ||||||
|
Digital
|
16 | 16 | 0.07 | |||||||||
|
|
||||||||||||
|
Total goodwill
|
33 | 26 | 0.11 | |||||||||
|
|
||||||||||||
|
Other intangible assets:
|
||||||||||||
|
Digital
|
9 | 5 | 0.02 | |||||||||
|
|
||||||||||||
|
Total other intangible assets
|
9 | 5 | 0.02 | |||||||||
|
|
||||||||||||
|
Property, plant and equipment:
|
||||||||||||
|
Publishing
|
76 | 47 | 0.20 | |||||||||
|
Broadcasting
|
3 | 2 | 0.01 | |||||||||
|
|
||||||||||||
|
Total property, plant and equipment
|
79 | 50 | 0.21 | |||||||||
|
|
||||||||||||
|
Other:
|
||||||||||||
|
Publishing
|
7 | 4 | 0.02 | |||||||||
|
Broadcasting
|
5 | 3 | 0.01 | |||||||||
|
|
||||||||||||
|
Total other
|
12 | 7 | 0.03 | |||||||||
|
|
||||||||||||
|
Total asset impairment and other
charges-operations
|
$ | 133 | $ | 88 | $ | 0.37 | ||||||
|
|
||||||||||||
|
Non-operating charges:
|
||||||||||||
|
Publishing assets sold
|
28 | 24 | 0.10 | |||||||||
|
Equity method investments
|
9 | 7 | 0.03 | |||||||||
|
|
||||||||||||
|
Total charges
|
$ | 170 | $ | 119 | $ | 0.50 | ||||||
|
|
||||||||||||
| (a) | Total amounts may not sum due to rounding. |
| 2008 | ||||||||||||
| Pre-Tax | After-Tax | Per Share | ||||||||||
| In millions except per share amounts | Amount(a) | Amount(a) | Amount(a) | |||||||||
|
Asset impairment and other charges
|
||||||||||||
|
Goodwill:
|
||||||||||||
|
Publishing
|
$ | 7,448 | $ | 6,812 | $ | 29.83 | ||||||
|
Digital
|
10 | 6 | 0.03 | |||||||||
|
|
||||||||||||
|
Total goodwill
|
7,458 | 6,818 | 29.86 | |||||||||
|
|
||||||||||||
|
Other intangible assets — principally mastheads:
|
||||||||||||
|
Publishing
|
232 | 150 | 0.66 | |||||||||
|
Digital
|
2 | 1 | — | |||||||||
|
|
||||||||||||
|
Total other intangible assets
|
233 | 151 | 0.66 | |||||||||
|
|
||||||||||||
|
Property, plant and equipment:
|
||||||||||||
|
Publishing
|
255 | 159 | 0.70 | |||||||||
|
Broadcasting
|
2 | 1 | — | |||||||||
|
Corporate
|
1 | 1 | — | |||||||||
|
|
||||||||||||
|
Total property, plant and equipment
|
258 | 161 | 0.70 | |||||||||
|
|
||||||||||||
|
Other:
|
||||||||||||
|
Publishing
|
17 | 11 | 0.05 | |||||||||
|
Digital
|
3 | 2 | 0.01 | |||||||||
|
Broadcasting
|
7 | 4 | 0.02 | |||||||||
|
|
||||||||||||
|
Total other
|
27 | 17 | 0.08 | |||||||||
|
|
||||||||||||
|
Total asset impairment and other
charges-operations
|
$ | 7,976 | $ | 7,147 | $ | 31.30 | ||||||
|
|
||||||||||||
|
Non-operating charges:
|
||||||||||||
|
Newspaper publishing partnerships
and other equity method investments
|
382 | 251 | 1.10 | |||||||||
|
Noncontrolling interests reduction
|
(4 | ) | (3 | ) | (0.01 | ) | ||||||
|
|
||||||||||||
|
Total charges
|
$ | 8,354 | $ | 7,395 | $ | 32.38 | ||||||
|
|
||||||||||||
| (a) | Total amounts may not sum due to rounding. |
2009:
The goodwill impairment charges result from the application of the impairment testing
provisions included within the goodwill subtopic of ASC Topic 350. Because of difficult business
conditions due to the economy, testing for certain reporting units was updated during the second
quarter of 2009 and for all reporting units on Dec. 27, 2009, in connection with the required
annual impairment test of goodwill and indefinite-lived intangibles. For one of the stand-alone
business reporting units in the publishing segment and one in the digital segment, a potential
impairment was indicated. The fair value of the reporting units was determined based on a multiple
of earnings technique and/or a discounted cash flow technique. The company then undertook the next
step in the impairment testing process by determining the fair value of assets and liabilities
within these reporting units. The implied value of goodwill for these reporting units was less than
the carrying amount by $33 million and therefore impairment charges in this total amount were
taken. Deferred tax benefits were recognized for the publishing charge only and therefore the after-tax
effect of the total goodwill impairment charge was $26 million or $.11 per share.
The impairment charge of $9 million for other intangible assets, principally customer
relationships and a trade name, was required because revenue results from the underlying business
have softened from what was expected at the time these assets were initially valued. Carrying values were
reduced to fair value for an indefinite lived asset and for certain definite-lived assets in
accordance with ASC Topic 350. Deferred tax benefits have been recognized for these intangible
asset impairment charges and therefore the total after-tax impact was $5 million or $.02 per share.
The carrying values of property, plant and equipment at certain publishing businesses were
evaluated in 2009 due to facility consolidation efforts, changes in expected useful lives and
softening business conditions. The recoverability of these assets was measured in accordance with
the requirements included within ASC Topic 360. This process indicated that the carrying values of
certain assets were not recoverable, as the expected undiscounted future cash flows to be generated
by them were less than their carrying values. The related impairment loss was measured based on the
amount by which the asset carrying value exceeded fair value. Asset group fair values were
determined using the discounted cash flow technique. Certain asset fair values were based on
estimates of prices for similar assets. In addition, as required by ASC Topic 360, the company
revised the useful lives of certain assets, which were taken out of service during the year or for
which management has committed to a plan to discontinue use in the near future, in order to reflect
the use of those assets over their shortened useful life. As a result of the application of the
requirements of ASC Topic 360, the company recorded charges of $79 million in 2009. Deferred tax
benefits were recognized for these charges and the 2009 after-tax impact was $50 million or $.21
per share.
The $12 million of charges in the “Other” category include shut down costs as well as the
impairment of certain broadcast programming assets. Deferred tax benefits were recognized for these
charges and therefore the after-tax impact was $7 million or $.03 per share.
57
Table of Contents
In the second quarter of 2009, in accordance with ASC Topic 360, the company recorded an
impairment charge to reduce the value of certain publishing assets to be sold to fair value less costs to
sell. Fair value was determined using a discounted cash flow technique that included the cash flows
associated with the disposition. This impairment charge was $28 million pre-tax and $24 million
after-tax, or $.10 per share. The charge is reflected in “Other non-operating items” in the
Consolidated Statements of Income.
In 2009, for certain investments in which the company owns noncontrolling interests, carrying
values were written down to fair value because the businesses underlying the investments had
experienced significant and sustained operating losses, leading the company to conclude that they
were other than temporarily impaired. These investment carrying value adjustments totaled $9
million pre-tax and $7 million on an after-tax basis, or $.03 per share.
2008:
Very difficult business conditions, the economic crisis, recessionary conditions
in the U.S. and U.K. and a decline in the company’s stock price required the company to perform
impairment tests on goodwill, intangible assets, and other long-lived assets as of March 31, 2008,
the first day of its fiscal second quarter, as well as on Dec. 28, 2008, in connection with the
required annual impairment test of goodwill and indefinite-lived intangibles. As a result, the
company recorded non-cash impairment charges to reduce the book value of goodwill, other intangible
assets including mast-heads, and certain property, plant and equipment assets. The carrying value
of certain of the company’s investments in newspaper publishing partnerships and other businesses,
which are accounted for under the equity method, were also written down due to other than temporary
impairments. The company also recorded accelerated depreciation expense associated with certain
facility consolidation and cost reduction initiatives.
The goodwill impairment charges resulted from the application of the impairment testing
provisions included within the goodwill subtopic ASC Topic 350. Impairment testing is customarily
performed annually. Because of softening business conditions within the company’s publishing
segment and the decline in the company’s stock price and market capitalization, this testing was
updated as of the beginning of the second quarter of 2008 and as required the testing was performed
again as of Dec. 28, 2008. For certain publishing and digital reporting units, an impairment was
indicated. The fair values of the reporting units were determined using discounted cash flow and
multiple of earnings techniques. The company then undertook the next step in the impairment testing
process by determining the fair value of assets and liabilities for these reporting units.
The implied value of goodwill determined by the valuation for these reporting units was less
than the carrying amount by $7.46 billion, and therefore an impairment charge in this amount was
taken. There was minimal tax benefit recognized related to the impairment charges since much of the
recorded goodwill was non-deductible as it arose from stock purchase transactions. Therefore the
after-tax effect of the goodwill impairment was $6.82 billion or $29.86 per share.
The goodwill impairment charge recorded in the second quarter, in the amount of $2.14 billion,
was related to Newsquest, the company’s U.K. publishing operations that had been acquired relatively recently in several transactions from 1999-2005. Following the second quarter impairment
testing, Newsquest’s fourth quarter operating results and projections indicated a significant
decline from the amounts estimated in the second quarter and as a result a further goodwill
impairment charge of approximately $507 million was recorded.
In the fourth quarter, the company also recognized an impairment charge for its U.S. Community
Publishing reporting unit of approximately $4.4 billion. This reporting unit was comprised of 82
individual publishing operations which had been acquired at various times over the past several
decades.
The goodwill impairment charges for other stand-alone business reporting units totaled $408
million in the fourth quarter.
The impairment charge of $233 million for other intangible assets was required because revenue
results from the underlying businesses had softened from what was expected at the time they were
purchased and the assets initially valued. In accordance with the requirements included within ASC
Topic 350, the carrying values of impaired indefinite-lived intangible assets, principally
mast-heads, were reduced to fair value. Fair value was determined using a relief-from-royalty
method. The carrying values of certain definite-lived intangible assets, principally customer
relationships, were reduced to fair value in accordance with the requirements included within ASC
Topic 350. Deferred tax benefits have been recognized for these intangible asset impairment charges
and therefore the after-tax impact was $151 million or $.66 per share.
The carrying value of property, plant and equipment at certain publishing businesses was also
evaluated due to softening business conditions and, in some cases, changes in expected useful
lives. The recoverability of these assets was measured in accordance with the requirements included
within ASC Topic 360. This process indicated that the carrying values of certain assets were not
recoverable, as the expected undiscounted future cash flows to be generated by them would be less
than their carrying values.
The related impairment loss was measured based on the amount by which asset carrying value
exceeded fair value. Asset fair values were determined using discounted cash flow or multiple of
earnings techniques. Certain asset fair values were based on estimates of prices for similar
assets. In addition, as required by ASC Topic 360, the company revised the useful lives of certain
assets, which were taken out of service during the year or for which management has committed to a
plan to discontinue use in the near future, in order to reflect the use of those assets over their
shortened useful life. As a result of the application of the requirements within ASC Topic 360, the
company recorded charges of $258 million. Deferred tax benefits were recognized for these charges
and therefore the after-tax impact was $161 million or $.70 per diluted share.
The charges of $27 million included in the “Other” category include an amount to increase the
level of the company’s allowance for doubtful accounts reflecting higher collection risk from the
recession-driven increase in delinquency of receivable agings and bankruptcy filings toward the end
of 2008. Charges also include amounts for future lease payments for facilities abandoned in
connection with consolidation efforts and amounts for the impairment of certain broadcast
programming assets. Deferred tax benefits were recognized for these charges and therefore the
after-tax impact was $17 million or $.08 per share.
58
Table of Contents
For certain of the company’s newspaper publishing partnership investments, and for certain
other investments in which the company owns a minority equity interest, carrying values were
written down to fair value because the businesses underlying the investments had experienced
significant and sustained declines in operating performance, leading the company to conclude that
they were other than temporarily impaired. The adjustment of newspaper publishing partnership
carrying values comprise the majority of these investment charges, and these were driven by many of
the same factors affecting the company’s wholly owned publishing businesses. Fair values were
determined using a multiple of earnings or a multiple of revenues technique. These investment
carrying value adjustments were $382 million pre-tax and $251 million on an after-tax basis, or
$1.10 per diluted share. The pre-tax impairment charges for these investments are reflected as
“Equity income (loss) in unconsolidated investees, net” in the Statement of Income (Loss).
2007:
During 2007, the company determined that the carrying values of mastheads at certain
properties in the U.K. and U.S., which are classified as indefinite-lived intangible assets, were
not recoverable based on its annual impairment tests. Accordingly, the company recognized
non-cash impairment charges of $72 million to reduce the carrying value of these mastheads to fair
value. Deferred tax benefits were recognized for these charges and therefore the after-tax effect
was $51 million or $0.22 per share.
The company calculated the fair value of mastheads using a relief-from-royalty method. The
impairment charge relates to several publication mastheads in the U.S. and the U.K., and results
from lower revenue expectations from these properties than were anticipated at the date they were
acquired.
NOTE 4
Goodwill and other intangible assets
ASC Topic 350 requires that goodwill and indefinite-lived intangible assets be tested for
impairment at least annually. Recognized intangible assets that have finite useful lives are
amortized over their useful lives and are subject to tests for impairment in accordance with the
requirements included within ASC Topic 350.
As discussed in Note 3, the company performed interim and year-end impairment tests on its
goodwill and other intangible assets during 2009, and, as a result, recorded non-cash impairment
charges totaling $42 million. During 2008, the company recorded non-cash impairment charges
totaling $7.69 billion.
For Publishing, goodwill impairment charges for U.K. operations were recorded in the second
and fourth quarters of 2008 and totaled $2.65 billion.
For the company’s U.S. Community Publishing division, which carried a relatively lower book
goodwill basis, goodwill impairment was not indicated until the required annual testing at the end
of 2008. The impairment charge at that time totaled $4.41 billion.
For several other stand-alone publishing businesses which are considered separate reporting
units in accordance with the requirements included within ASC Topic 350, goodwill impairments were
also identified at the end of 2008. These goodwill impairment charges totaled $398 million.
During 2008, the company determined that the carrying values of mastheads at certain
properties in the U.K. and U.S., which are classified as indefinite-lived intangible assets, were
not recoverable based on interim and annual impairment tests. Accordingly, the company recognized
non-cash impairment charges of $176 million to reduce the carrying value of these mastheads
to fair value.
The company calculated the fair value of mastheads using a relief-from-royalty method. The
impairment charge relates to several publication mastheads in the U.S. and the U.K., and results
from lower revenue expectations from these properties than were anticipated at the date they were
acquired.
The following table displays goodwill, indefinite-lived intangible assets, and amortizable
intangible assets at Dec. 27, 2009, and Dec. 28, 2008.
| Accumulated | ||||||||||||
| In thousands of dollars | Gross | Amortization | Net | |||||||||
|
Dec. 27, 2009
|
||||||||||||
|
Goodwill
|
$ | 2,854,247 | $ | — | $ | 2,854,247 | ||||||
|
Indefinite-lived intangibles:
|
||||||||||||
|
Mastheads and trade names
|
110,319 | — | 110,319 | |||||||||
|
Television station FCC licenses
|
255,304 | — | 255,304 | |||||||||
|
Amortizable intangible assets:
|
||||||||||||
|
Customer relationships
|
311,840 | 141,902 | 169,938 | |||||||||
|
Other
|
58,329 | 28,280 | 30,049 | |||||||||
|
|
||||||||||||
|
Total
|
$ | 3,590,039 | $ | 170,182 | $ | 3,419,857 | ||||||
|
|
||||||||||||
|
Dec. 28, 2008
|
||||||||||||
|
Goodwill
|
$ | 2,872,888 | $ | — | $ | 2,872,888 | ||||||
|
Indefinite-lived intangibles:
|
||||||||||||
|
Mastheads and trade names
|
104,512 | — | 104,512 | |||||||||
|
Television station FCC licenses
|
255,304 | — | 255,304 | |||||||||
|
Amortizable intangible assets:
|
||||||||||||
|
Customer relationships
|
298,566 | 116,803 | 181,763 | |||||||||
|
Other
|
59,777 | 18,665 | 41,112 | |||||||||
|
|
||||||||||||
|
Total
|
$ | 3,591,047 | $ | 135,468 | $ | 3,455,579 | ||||||
|
|
||||||||||||
Amortization expense was approximately $33.0 million in 2009 and $31.2 million in 2008.
Customer relationships, which include subscriber lists and advertiser relationships, are amortized
on a straight-line basis over three to 25 years. Other intangibles primarily include internally
developed technology, partner relationships, patents and amortizable trade names and were assigned
lives of between three and 21 years and are amortized on a straight-line basis.
Annual amortization expense relating to the amortizable intangibles is expected to be
approximately $31 million in 2010 and gradually decline to $21 million in 2014 assuming no
acquisitions or dispositions.
59
Table of Contents
The following table shows the changes in the carrying amount of goodwill during 2009 and 2008.
| In thousands of dollars | Publishing | Digital | Broadcasting | Total | ||||||||||||
|
Goodwill
|
||||||||||||||||
|
Balance at Dec. 30, 2007
|
$ | 8,309,811 | $ | 106,080 | $ | 1,619,052 | $ | 10,034,943 | ||||||||
|
|
||||||||||||||||
|
Acquisitions &
adjustments
|
(985 | ) | 568,208 | (397 | ) | 566,826 | ||||||||||
|
Impairment
|
(7,448,048 | ) | (10,000 | ) | — | (7,458,048 | ) | |||||||||
|
Dispositions
|
(137 | ) | — | — | (137 | ) | ||||||||||
|
Foreign currency
exchange rate changes
|
(266,313 | ) | (3,695 | ) | (688 | ) | (270,696 | ) | ||||||||
|
|
||||||||||||||||
|
Balance at Dec. 28, 2008
|
$ | 594,328 | $ | 660,593 | $ | 1,617,967 | $ | 2,872,888 | ||||||||
|
|
||||||||||||||||
|
Gross balance at
Dec. 28, 2008
|
8,042,376 | 670,593 | 1,617,967 | 10,330,936 | ||||||||||||
|
Accumulated
impairment losses
|
(7,448,048 | ) | (10,000 | ) | — | (7,458,048 | ) | |||||||||
|
|
||||||||||||||||
|
Net balance at
Dec. 28, 2008
|
$ | 594,328 | $ | 660,593 | $ | 1,617,967 | $ | 2,872,888 | ||||||||
|
|
||||||||||||||||
|
Acquisitions &
adjustments
|
1,534 | (1,735 | ) | — | (201 | ) | ||||||||||
|
Impairment
|
(17,000 | ) | (16,000 | ) | — | (33,000 | ) | |||||||||
|
Dispositions
|
(6,039 | ) | — | — | (6,039 | ) | ||||||||||
|
Foreign currency
exchange rate changes
|
18,019 | 2,118 | 462 | 20,599 | ||||||||||||
|
|
||||||||||||||||
|
Balance at Dec. 27, 2009
|
$ | 590,842 | $ | 644,976 | $ | 1,618,429 | $ | 2,854,247 | ||||||||
|
|
||||||||||||||||
|
Gross balance at
Dec. 27, 2009
|
8,055,890 | 670,976 | 1,618,429 | 10,345,295 | ||||||||||||
|
Accumulated
impairment losses
|
(7,465,048 | ) | (26,000 | ) | — | (7,491,048 | ) | |||||||||
|
|
||||||||||||||||
|
Net balance at
Dec. 27, 2009
|
$ | 590,842 | $ | 644,976 | $ | 1,618,429 | $ | 2,854,247 | ||||||||
|
|
||||||||||||||||
NOTE 5
Consolidated statements of cash flows
Cash paid in 2009, 2008 and 2007 for income taxes and for interest (net of amounts capitalized) was
as follows:
| In thousands of dollars | 2009 | 2008 | 2007 | |||||||||
|
Income taxes
|
$ | 78,856 | $ | 306,074 | $ | 653,368 | ||||||
|
Interest
|
$ | 177,899 | $ | 188,385 | $ | 260,247 | ||||||
Interest in the amount of $216,000, $458,000 and $43,000 was capitalized in 2009, 2008 and
2007, respectively.
In connection with the acquisition of Schedule Star LLC in October 2007 and Ripple6 in
November 2008, the company recorded liabilities of $7.2 million and $1.8 million, respectively,
related to payments due to the sellers in future years.
NOTE 6
Investments
The company’s investments include several that are accounted for under the equity method.
Principal among these are the following:
| % Owned | ||||
|
Ponderay Newsprint Company
|
13.50 | % | ||
|
California Newspapers Partnership
|
19.49 | % | ||
|
ShermansTravel
|
19.67 | % | ||
|
Classified Ventures
|
23.60 | % | ||
|
Cozi
|
23.30 | % | ||
|
QuadrantONE
|
25.00 | % | ||
|
4INFO
|
27.51 | % | ||
|
Fantasy Sports Venture
|
30.33 | % | ||
|
Livestream (formerly Mogulus)
|
31.10 | % | ||
|
Homefinder.com
|
33.33 | % | ||
|
Topix
|
33.71 | % | ||
|
Texas-New Mexico Newspapers Partnership
|
40.64 | % | ||
|
Detroit Weekend Direct
|
50.00 | % | ||
|
Tucson Newspaper Partnership
|
50.00 | % | ||
|
Metromix
|
51.06 | % | ||
The aggregate carrying value of equity investments at Dec. 27, 2009, was $189 million. Certain
differences exist between the company’s investment carrying value and the underlying equity of the
investee companies principally due to fair value measurement at the date of investment acquisition
and due to impairment charges recorded by the company for certain of the investments. The aggregate
amount of pretax earnings (losses) recorded by the company for its investments accounted for under
the equity method was $3.9 million, $(374.9) million, and $40.7 million for 2009, 2008, and 2007,
respectively.
The company’s net equity income in unconsolidated
investees for 2009 includes $9 million of impairment charges related
to certain digital business investments. The 2008 amount is inclusive
of non-cash impairment charges of $382 million primarily related to the
carrying value of California Newspapers Partnership and Texas-New Mexico Newspapers Partnership.
The company also recorded revenue related to CareerBuilder (fully consolidated since Sept. 1,
2008) and Classified Ventures products for online advertisements placed on its newspaper publishing
affiliated web sites. Such amounts totaled approximately $135 million for 2009, $186 million for
2008 and $209 million for 2007. These revenues are recorded within Publishing segment advertising
revenue.
60
Table of Contents
NOTE 7
Long-term debt
The long-term debt of the company is summarized below:
| In thousands of dollars | Dec. 27, 2009 | Dec. 28, 2008 | ||||||
|
Unsecured floating rate notes paid
May 2009
|
$ | — | $ | 632,205 | ||||
|
Unsecured notes bearing fixed rate
interest at 5.75% due June 2011
|
432,648 | 498,464 | ||||||
|
Unsecured floating rate term loan due
July 2011
|
230,000 | 280,000 | ||||||
|
Borrowings under revolving credit
agreements expiring March 2012
|
1,381,000 | 1,907,000 | ||||||
|
Unsecured notes bearing fixed rate
interest at 6.375% due April 2012
|
306,260 | 499,269 | ||||||
|
Unsecured notes bearing fixed rate
interest at 8.75% due November 2014
|
246,304 | — | ||||||
|
Unsecured notes bearing fixed rate
interest at 10% due June 2015
|
56,684 | — | ||||||
|
Unsecured notes bearing fixed rate
interest at 10% due April 2016
|
162,531 | — | ||||||
|
Unsecured notes bearing fixed rate
interest at 9.375% due November 2017
|
246,524 | — | ||||||
|
Other indebtedness
|
— | 4 | ||||||
|
|
||||||||
|
Total long-term debt
|
$ | 3,061,951 | $ | 3,816,942 | ||||
|
|
||||||||
Total average debt outstanding in 2009 and 2008 was $3.6 billion and $4.0 billion,
respectively. The weighted average interest rate on all debt was 4.5% for 2009 and 4.6% for 2008.
During 2009, the company completed transactions in May and October to improve its debt
maturity profile.
In May 2009, the company completed a private exchange offer related to its 5.75% fixed rate
notes due June 2011 and its 6.375% fixed rate notes due April 2012. The company exchanged
approximately $67 million in principal amount of new 10% senior notes due 2015 for approximately
$67 million principal amount of the 2011 notes, and approximately $193 million in principal amount
of new 10% senior notes due 2016 for approximately $193 million principal amount of the 2012 notes.
The new 2015 notes and the new 2016 notes (together, the Notes) are senior unsecured
obligations and are guaranteed by the company subsidiaries providing guarantees under the revolving
credit agreements and the term loan agreement as described below. The Notes and the subsidiary
guarantees have not been and will not be registered under the Securities Act of 1933, as amended
(the Securities Act), or any state securities laws and may not be offered or sold in the United
States absent registration or an applicable exemption from registration requirements.
In connection with the exchange transactions and in accordance with the modifications and
extinguishments requirements of ASC Topic 470, “Debt,” the company recorded a gain of approximately
$42.7 million which was classified in “Other non-operating items” in the Statement of Income for
the second quarter of 2009. This gain resulted from recording the Notes at fair value as of the
time of the exchange and extinguishing the old notes at their historical book values. Fair value of
the Notes was based on their trading prices on and shortly after the exchange date. The discount
created by recording the Notes at fair value instead of face value is being amortized over the term
of the loans to interest expense.
In October 2009, the company completed a private placement offering of $250 million in
aggregate principal amount of 8.750% senior notes due 2014 and $250 million in aggregate principal
amount of 9.375% senior notes due 2017. The 2014 notes were priced at 98.465% of face value,
resulting in a yield to maturity of 9.l25%. The 2017 notes were priced at 98.582% of face value,
resulting in a yield to maturity of 9.625%. The 2014 notes and the 2017 notes (together, the New
Notes) were made available in a private offering that is exempt from the registration requirements
of the Securities Act. The New Notes are guaranteed on a senior basis by the subsidiaries of the
company that guarantee its revolving credit facilities and term loan. The company used the net
proceeds from the offering to partially repay borrowings outstanding under its revolving credit
facilities and term loan. The New Notes and the subsidiary guarantees have not been and will not be
registered under the Securities Act, or any state securities laws and may not be offered or sold in
the United States absent registration or an applicable exemption from registration requirements.
On Oct. 31, 2008, the company amended each of its three revolving credit agreements and its
term loan agreement. Under each of the amendments, it is required that the company maintain a
senior leverage ratio of less than 3.5x. The agreements also require the company to maintain a
total leverage ratio of less than 4.0x. The total leverage ratio would also include any
subordinated debt the company may issue in the future. Currently, all of the company’s debt is
senior and unsecured. At December 27, 2009, the senior leverage ratio was 2.63x.
The amendments also provide for certain changes to the pricing of the facilities. For the
revolving credit facilities, the commitment fees may range from 0.125% to 0.25% depending on credit
ratings for the company’s senior unsecured debt from Moody’s Investor Services (Moody’s) and
Standard & Poor’s (S&P). The rate currently in effect is 0.25%. In addition, at the time of the
amendments the aggregate size of the revolving credit facilities was reduced to $3.1 billion from
$3.9 billion. There was a further provision that the aggregate size of the three revolving credit
agreements would be reduced on a dollar-for-dollar basis for the first $397 million that the
company raised in the capital markets prior to Dec. 31, 2009 and in any event reduced to $2.75
billion at Dec. 31, 2009. As a result, the aggregate size of the facilities was reduced to $2.75
billion in October 2009 with the issuance of the New Notes.
Under each of the agreements, the company may borrow at an applicable margin above the
Eurodollar base rate or the higher of the Prime Rate or the Federal Funds Effective Rate plus
0.50%. Under the amended revolving credit agreements, the applicable margin for such borrowings
ranges from 1.00% to 2.25% depending on credit ratings. Under the term loan agreement, the
applicable margin varies from 1.25% to 2.25%. At its current ratings the company will pay an
applicable margin of 2.25% under each of the revolving credit agreements and the term loan
agreement.
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Table of Contents
In connection with each of its three revolving credit agreements and its term loan agreement,
the company agreed to provide guarantees from a majority of its domestic wholly-owned subsidiaries
in the event that the company’s credit ratings from either Moody’s or S&P fell below investment
grade. In the first quarter of 2009, the company’s credit rating was downgraded below investment
grade by both S&P and Moody’s. Accordingly, the guarantees were triggered and the existing notes
due 2011 and 2012 and other unsecured debt of the company became structurally subordinated to the
revolving credit agreements and the term loan.
On Sept. 25, 2009, the company further amended the terms of its three revolving credit
agreements and its term loan agreement to provide for the issuance of up to $500 million of
additional long-term debt carrying the same guarantees put in place for the revolving credit
agreements and term loan. In addition, the company also amended one of the credit agreements to
permit it to obtain up to $100 million of letters of credit from the lenders, which would count
toward their commitments.
On August 21, 2009, Moody’s confirmed the company’s Ba1 corporate family rating and its Ba2
senior unsecured note rating which had been placed under review for a possible downgrade in April.
In addition, Moody’s rated the company’s bank debt, which includes its revolving credit agreements
and term loan, Baa3. The Baa3 rating also applies to any long-term debt which has the same
subsidiary guarantees as the bank debt. The company’s debt is rated BB by Standard and Poor’s.
As of Dec. 27, 2009, the company had approximately $1.4 billion of borrowings under its
revolving credit facilities. The maximum amount outstanding at the end of any period during 2009
and 2008 was $2.5 billion and $1.9 billion, respectively. The daily average outstanding balance of
the revolving credit facilities during 2009 and 2008 was $2.0 billion and $486 million,
respectively. The weighted average interest rate for 2009 and 2008 was 3.1% and 4.4%, respectively.
During the first quarter of 2009, the company repurchased $68.8 million in principal amount of
its floating rate notes in privately negotiated transactions at a discount. In connection with
these transactions, the company recorded a gain of approximately $1.1 million which is classified
in “Other non-operating items” in the Statement of Income. This gain is net of $0.6 million
reclassified from accumulated other comprehensive loss for related interest rate swap agreements.
In December 2008, the company launched a tender offer to purchase any and all of its
outstanding floating rate notes due in May 2009 at a purchase price of $950 per $1,000 in principal
amount plus accrued and unpaid interest. In response to the offer, $98.4 million in aggregate
principal amount of notes, representing approximately 13.5 percent of the then outstanding notes,
were purchased at this price in December 2008. Prior to the tender offer, the company had
repurchased $19.4 million in principal amount of the floating rate notes in a privately negotiated
transaction. In connection with these transactions, the company recorded a gain of approximately $4
million which is classified in “Other non-operating items” in the Statement of Income (Loss). This
gain was net of $1.7 million in losses reclassified from accumulated other comprehensive income
(loss) related to the interest rate swap agreements.
In July 2008, the company received proceeds of $280 million from borrowings under a new term
loan agreement with certain bank lenders. The term loan is payable in full on July 14, 2011. The
loan carries interest at a floating rate and may be prepaid at any time without penalty. The
company prepaid $50 million of this loan in October 2009, reducing the balance to $230 million.
During 2007 and 2008, the company utilized commercial paper as a source of financing. The
maximum amount of such commercial paper outstanding at the end of any period during 2008 and 2007
was $2.0 billion and $2.7 billion, respectively. The daily average outstanding balance of
promissory notes was $883 million during 2008 and $1.7 billion during 2007. The weighted average
interest rate on such notes was 3.5% for 2008 and 5.4% for 2007.
In June 2008, the company repaid $500 million in unsecured notes bearing interest at 4.125%
with proceeds from borrowings in the commercial paper market. These notes had been issued in June
2005 in an underwritten public offering.
In August 2007, the company entered into three interest rate swap agreements totaling a
notional amount of $750 million in order to mitigate the volatility of interest rates. These
agreements, which expired in May 2009, effectively fixed the interest rate on the $750 million in
floating rate notes due May 2009 at 5.0125%. These instruments were designated as cash flow hedges
in accordance with ASC Topic 815, “Derivatives and Hedging,” and changes in fair value were
recorded through accumulated other comprehensive income with a corresponding adjustment to other
long-term liabilities. As a result of the tender offer and other repurchases discussed above, the
cash flow hedging treatment was discontinued for interest rate swaps associated with approximately
$118 million of notional value on the retired floating rate notes. Amounts recorded in accumulated
other comprehensive income (loss) related to the discontinued cash flow hedges were reclassified
into earnings and subsequent changes to the fair value of these interest rate swaps were recorded
through earnings.
In June 2007, the company issued $1.0 billion aggregate principal amount of unsecured senior
convertible notes in an underwritten public offering. Proceeds from the notes were used to repay
commercial paper obligations. The convertible notes bore interest at a floating rate equal to one
month LIBOR, reset monthly, minus twenty-three basis points. As anticipated, on July 15, 2008, the
holders of the convertible notes required the company to repurchase the convertible notes for cash
at a price equal to 100% of the principal amount of the notes submitted for repurchase, plus
accrued and unpaid interest.
Industrial revenue bonds with a principal amount of approximately $17 million were repaid in
full in 2008. Prior to repayment, the bonds bore interest at variable interest rates based on a
municipal bond index.
In April 2007, the company redeemed the $700 million aggregate principal amount of 5.50%
notes. This payment was funded by borrowings in the commercial paper market and from investment
proceeds of $525 million in marketable securities.
In May 2006, the company issued $500 million aggregate principal amount of 5.75% notes due
2011 and $750 million aggregate principal amount of floating rate notes due 2009 in an underwritten
public offering. The net proceeds of the offering were used to pay down commercial paper
borrowings.
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Table of Contents
The unsecured fixed rate notes bearing interest at 6.375% were issued in March 2002 and mature
in 2012.
The company has an effective universal shelf registration statement under which an unspecified
amount of securities may be issued, subject to a $7 billion limit established by the Board of
Directors. Proceeds from the sale of such securities may be used for general corporate purposes,
including capital expenditures, working capital, securities repurchase programs, repayment of debt
and financing of acquisitions. The company may also invest borrowed funds that are not required for
other purposes in short-term marketable securities.
The following schedule of annual maturities of long-term debt assumes the company uses
available capacity under its revolving credit agreements to refinance the unsecured floating rate
notes and term loan due in 2011. Based on this refinancing assumption, all of the obligations are
reflected as maturities for 2012 and beyond.
| In thousands of dollars | ||||
|
2010
|
$ | — | ||
|
2011
|
— | |||
|
2012
|
2,349,908 | |||
|
2013
|
— | |||
|
2014
|
246,304 | |||
|
Later years
|
465,739 | |||
|
|
||||
|
Total
|
$ | 3,061,951 | ||
|
|
||||
The fair value of the company’s total long-term debt, determined based on the bid and ask
quotes for the related debt, totaled $2.9 billion at Dec. 27, 2009.
NOTE 8
Retirement plans
The company and its subsidiaries have various retirement plans, including plans established under
collective bargaining agreements. The company’s principal retirement plan is the Gannett Retirement
Plan (GRP). As described more fully below, substantially all participants had their benefits under
this plan frozen effective Aug. 1, 2008. Prior to this, benefits under the GRP were based on years
of service and final average pay.
The disclosure tables below also include the assets and obligations of the Newsquest Pension
Plan in the U.K., certain collectively bargained plans, the Gannett Supplemental Retirement Plan
(SERP) and a frozen plan for the company’s Board of Directors. The company uses a Dec. 31
measurement date for its retirement plans.
In June 2008, the Board of Directors approved amendments to each of (i) the GRP; (ii) the
SERP; (iii) the Gannett 401(k) Savings Plan (401(k) Plan); and (iv) the Gannett Deferred
Compensation Plan (DCP). The amendments were designed to improve the 401(k) Plan while reducing the
amount and volatility of future pension expense. As a result of the amendments to the GRP and SERP,
most participants in these plans had their benefits frozen as of Aug. 1, 2008. Participants whose
GRP and, if applicable, SERP benefits were frozen will have their frozen benefits periodically
increased by a cost of living adjustment until benefits commence.
Effective Aug. 1, 2008, most participants whose benefits were frozen under the GRP and, if
applicable, the SERP receive higher matching contributions under the 401(k) Plan. Under the new
formula, the matching contribution rate generally increased from 50% of the first 6% of
compensation that an employee elects to contribute to the plan to 100% of the first 5% of
contributed compensation. The company also makes additional employer contributions to the 401(k)
Plan on behalf of certain long-service employees. The DCP was amended to provide for Gannett
contributions on behalf of certain employees whose benefits under the 401(k) Plan are capped by IRS
rules.
As a result of the amendments to freeze most benefit accruals in the GRP and the SERP, the
company recognized a net pre-tax pension curtailment gain of $46.5 million in the second quarter of
2008 in accordance with the Defined Benefit Plans-Pension subtopic of ASC Topic 715,
“Compensation-Retirement Benefits.”
During the first quarter of 2009, the company reached an
agreement with one of its unions for a complete withdrawal from the union’s underfunded pension
plan and release from any future obligations with respect thereto. Under the agreement, the company
made a settlement payment of $7.3 million in May 2009 and will make a payment of $7.7 million in
2010. As a result of this agreement, the company recognized a pretax settlement gain of $39.8
million in the first quarter of 2009.
The company’s pension costs, which include costs for its qualified, non-qualified and union
plans, are presented in the following table:
| In thousands of dollars | 2009 | 2008 | 2007 | |||||||||
|
Service cost — benefits
earned during the period
|
$ | 14,439 | $ | 64,563 | $ | 100,213 | ||||||
|
Interest cost on benefit obligation
|
178,646 | 207,758 | 199,714 | |||||||||
|
Expected return on plan assets
|
(171,472 | ) | (266,079 | ) | (276,437 | ) | ||||||
|
Amortization of prior service
costs/(credit)
|
1,641 | (9,682 | ) | (21,025 | ) | |||||||
|
Amortization of actuarial loss
|
48,541 | 23,465 | 43,051 | |||||||||
|
Curtailment gain
|
— | (46,463 | ) | — | ||||||||
|
Settlement
and special termination benefit
charge/(credit)
|
(39,159 | ) | 4,168 | 1,527 | ||||||||
|
|
||||||||||||
|
Pension expense (benefit) for
company-sponsored retirement plans
|
32,636 | (22,270 | ) | 47,043 | ||||||||
|
Union and other pension cost
|
5,146 | 5,002 | 7,246 | |||||||||
|
|
||||||||||||
|
Total pension cost (benefit)
|
$ | 37,782 | $ | (17,268 | ) | $ | 54,289 | |||||
|
|
||||||||||||
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Table of Contents
The following table provides a reconciliation of pension benefit obligations (on a projected
benefit obligation measurement basis), plan assets and funded status of company-sponsored
retirement plans, along with the related amounts that are recognized in the Consolidated Balance
Sheets.
| In thousands of dollars | Dec. 27, 2009 | Dec. 28, 2008 | ||||||
|
Change in benefit obligations
|
||||||||
|
Benefit obligations at beginning
of year
|
$ | 3,060,287 | $ | 3,519,996 | ||||
|
Service cost
|
14,439 | 64,563 | ||||||
|
Interest cost
|
178,646 | 207,758 | ||||||
|
Plan participants’ contributions
|
11,497 | 12,130 | ||||||
|
Plan amendments
|
— | 92,284 | ||||||
|
Actuarial
(gain) loss
|
172,717 | (175,842 | ) | |||||
|
Foreign currency translation
|
51,823 | (192,550 | ) | |||||
|
Gross benefits paid
|
(275,575 | ) | (258,620 | ) | ||||
|
Curtailments
|
— | (213,600 | ) | |||||
|
Settlement
|
(125,470 | ) | — | |||||
|
Special termination benefits
|
— | 4,168 | ||||||
|
Benefit obligations at end of year
|
$ | 3,088,364 | $ | 3,060,287 | ||||
|
|
||||||||
|
Change in plan assets
|
||||||||
|
Fair value of plan assets at
beginning of year
|
$ | 2,168,559 | $ | 3,376,268 | ||||
|
Actual return on plan assets
|
427,299 | (826,125 | ) | |||||
|
Plan participants’ contributions
|
11,497 | 12,130 | ||||||
|
Employer contributions
|
45,199 | 43,990 | ||||||
|
Gross benefits paid
|
(275,575 | ) | (258,620 | ) | ||||
|
Settlements
|
(46,968 | ) | — | |||||
|
Foreign currency translation
|
45,756 | (179,084 | ) | |||||
|
Fair value of plan assets at
end of year
|
$ | 2,375,767 | $ | 2,168,559 | ||||
|
|
||||||||
|
Funded status at end of year
|
$ | (712,597 | ) | $ | (891,728 | ) | ||
|
|
||||||||
|
Amounts recognized in
Consolidated Balance Sheets
|
||||||||
|
Long-term other assets
|
$ | 7,682 | $ | 4,988 | ||||
|
Accrued benefit cost — current
|
$ | (12,145 | ) | $ | (14,205 | ) | ||
|
Accrued benefit cost — long-term
|
$ | (708,134 | ) | $ | (882,511 | ) | ||
The funded status (on a projected benefit obligation basis) of the company’s principal
retirement plans at Dec. 27, 2009, is as follows:
| Fair Value of | Benefit | Funded | ||||||||||
| In thousands of dollars | Plan Assets | Obligation | Status | |||||||||
|
GRP
|
$ | 1,750,310 | $ | 2,187,023 | $ | (436,713 | ) | |||||
|
SERP
|
— | 165,841 | (165,841 | ) | ||||||||
|
Newsquest
|
557,017 | 673,258 | (116,241 | ) | ||||||||
|
All other
|
68,440 | 62,242 | 6,198 | |||||||||
|
|
||||||||||||
|
Total
|
$ | 2,375,767 | $ | 3,088,364 | $ | (712,597 | ) | |||||
|
|
||||||||||||
The accumulated benefit obligation for all defined benefit pension plans was $3.07 billion and
$3.01 billion at Dec. 27, 2009 and Dec. 28, 2008, respectively.
Net
actuarial losses recognized in accumulated other comprehensive loss were $1,128.4
million in 2009 and $1,267.4 million in 2008. Prior service cost recognized in accumulated other
comprehensive loss was $78.1 million in 2009 and $80.4 million in 2008.
The actuarial loss and prior service cost amounts expected to be amortized from accumulated
other comprehensive loss into net periodic benefit cost in 2010 are $46.3 million and $6.4
million, respectively.
Other changes in plan assets and benefit obligations recognized in other comprehensive income for 2009 consist of the following:
| In thousands of dollars | ||||
|
Current year actuarial gain
|
$ | 83,110 | ||
|
Current year actuarial gain due to settlement
|
24,936 | |||
|
Amortization of actuarial loss
|
48,541 | |||
|
Amortization
of prior service costs
|
1,641 | |||
|
Currency loss
|
(16,823 | ) | ||
|
|
||||
|
Total
|
$ | 141,405 | ||
|
|
||||
Pension costs:
The following assumptions were used to determine net pension costs:
| 2009 | 2008 | 2007 | ||||||||||
|
Discount rate
|
6.26 | % | 6.23 | % | 5.85 | % | ||||||
|
Expected return on plan assets
|
8.75 | % | 8.75 | % | 8.75 | % | ||||||
|
Rate of compensation increase
|
2.54 | % | 4.00 | % | 4.00 | % | ||||||
The expected return on asset assumption was determined based on plan asset allocations, a
review of historic capital market performance, historical plan asset performance and a forecast of
expected future asset returns.
Benefit obligations and funded status:
The following assumptions were used to determine the
year-end benefit obligations:
| Dec. 27, 2009 | Dec. 28, 2008 | |||||||
|
Discount rate
|
5.90 | % | 6.26 | % | ||||
|
Rate of compensation increase
|
2.69 | % | 3.00 | % | ||||
The following table presents information for those company retirement plans for which
accumulated benefits exceed assets:
| In thousands of dollars | Dec. 27, 2009 | Dec. 28, 2008 | ||||||
|
Accumulated benefit obligation
|
$ | 3,017,124 | $ | 2,954,780 | ||||
|
Fair value of plan assets
|
$ | 2,307,328 | $ | 2,107,175 | ||||
The following table presents information for those company retirement plans for which the
projected benefit obligation exceeds assets:
| In thousands of dollars | Dec. 27, 2009 | Dec. 28, 2008 | ||||||
|
Projected benefit obligation
|
$ | 3,027,606 | $ | 3,003,891 | ||||
|
Fair value of plan assets
|
$ | 2,307,328 | $ | 2,107,175 | ||||
The company made de minimis contributions to the GRP in 2009 and 2008. The company contributed
$21.2 million to the U.K. retirement plan in 2009 and $18.1 million in 2008. At this time, the
company expects to contribute $13.4 million to the U.K. retirement plan in 2010. Under current U.S.
pension laws and regulations, the company is not required to make contributions to the GRP in 2010.
However, it elected to make a $10 million contribution in early fiscal 2010 and may make further
voluntary contributions in the future.
64
Table of Contents
Plan assets:
The fair value of plan assets was approximately $2.4 billion and $2.2 billion at
the end of 2009 and 2008, respectively. The expected long-term rate of return on these assets was
8.75% for 2009, 2008 and 2007. The asset allocation for company-sponsored pension plans at the end
of 2009 and 2008, and target allocations for 2010, by asset category, are presented in the table
below:
| Target Allocation | Allocation of Plan Assets | |||||||||||
| 2010 | 2009 | 2008 | ||||||||||
|
Equity securities
|
59 | % | 43 | % | 40 | % | ||||||
|
Debt securities
|
30 | 50 | 52 | |||||||||
|
Other
|
11 | 7 | 8 | |||||||||
|
|
||||||||||||
|
Total
|
100 | % | 100 | % | 100 | % | ||||||
|
|
||||||||||||
The primary objective of company-sponsored retirement plans is to provide eligible employees
with scheduled pension benefits: the “prudent man” guideline is followed with regard to the
investment management of retirement plan assets. Consistent with prudent standards for preservation
of capital and maintenance of liquidity, the goal is to earn the highest possible total rate of
return while minimizing risk. The principal means of reducing volatility and exercising prudent
investment judgment is diversification by asset class and by investment manager; consequently,
portfolios are constructed to attain prudent diversification in the total portfolio, each asset
class, and within each individual investment manager’s portfolio.
Investment diversification is consistent with the intent to minimize the risk of large losses. All
objectives are based upon an investment horizon spanning five years so that interim market
fluctuations can be viewed with the appropriate perspective. The target asset allocation represents
the long-term perspective. Retirement plan assets will be rebalanced at least annually to align
them with the target asset allocations. Risk characteristics are measured and compared with an
appropriate benchmark quarterly; periodic reviews are made of the investment objectives and the
investment managers. The company’s actual investment return (loss) on its Gannett Retirement Plan
assets was 25.6% for 2009, (25.6)% for 2008 and 9.3% for 2007. The negative return for 2008
reflects the global economic crisis and sharp decline in equity share values.
Retirement plan assets include approximately 1.2 million shares of the company’s common stock
valued at approximately $18 million and $10 million at the end of 2009 and 2008, respectively. The
plan received dividends of approximately $199,000 on these shares in 2009.
Cash flows:
The company estimates it will make the following benefit payments (from either
retirement plan assets or directly from company funds), which reflect expected future service, as
appropriate:
| In thousands of dollars | ||||
|
2010
|
$ | 205,245 | ||
|
2011
|
$ | 207,129 | ||
|
2012
|
$ | 209,663 | ||
|
2013
|
$ | 212,982 | ||
|
2014
|
$ | 216,423 | ||
|
2015-2019
|
$ | 1,104,300 |
NOTE 9
Postretirement benefits other than pensions
The company provides health care and life insurance benefits to certain retired employees who meet
age and service requirements. Most of the company’s retirees contribute to the cost of these
benefits and retiree contributions are increased as actual benefit costs increase. The cost of
providing retiree health care and life insurance benefits is actuarially determined and accrued
over the service period of the active employee group. The company’s policy is to fund benefits as
claims and premiums are paid. The company uses a Dec. 31 measurement date for these plans.
Postretirement benefit cost for health care and life insurance included the following
components:
| In thousands of dollars | 2009 | 2008 | 2007 | |||||||||
|
Service cost — benefits earned
during the period
|
$ | 1,405 | $ | 1,634 | $ | 1,906 | ||||||
|
Interest cost on net benefit obligation
|
13,339 | 14,013 | 13,817 | |||||||||
|
Amortization of prior service credit
|
(15,689 | ) | (15,560 | ) | (15,560 | ) | ||||||
|
Amortization of actuarial loss
|
4,695 | 4,752 | 5,180 | |||||||||
|
|
||||||||||||
|
Net periodic postretirement
benefit cost
|
$ | 3,750 | $ | 4,839 | $ | 5,343 | ||||||
|
|
||||||||||||
|
Special termination benefit charge
|
$ | — | $ | 1,307 | $ | 356 | ||||||
|
|
||||||||||||
The table below provides a reconciliation of benefit obligations and funded status of the
company’s postretirement benefit plans:
| In thousands of dollars | Dec. 27, 2009 | Dec. 28, 2008 | ||||||
|
Change in benefit obligations
|
||||||||
|
Net benefit obligations at
beginning of year
|
$ | 244,190 | $ | 242,610 | ||||
|
Service cost
|
1,405 | 1,634 | ||||||
|
Interest cost
|
13,339 | 14,013 | ||||||
|
Plan participants’ contributions
|
10,429 | 13,621 | ||||||
|
Plan amendments
|
(19,853 | ) | (957 | ) | ||||
|
Actuarial (gain) loss
|
(7,799 | ) | 9,029 | |||||
|
Special termination benefits
|
— | 1,307 | ||||||
|
Gross benefits paid
|
(35,856 | ) | (40,100 | ) | ||||
|
Federal subsidy on benefits paid
|
2,358 | 3,033 | ||||||
|
Net benefit obligations at
end of year
|
$ | 208,213 | $ | 244,190 | ||||
|
|
||||||||
|
Change in plan assets
|
||||||||
|
Fair value of plan assets at
beginning of year
|
$ | — | $ | — | ||||
|
Employer contributions
|
25,427 | 26,479 | ||||||
|
Plan participants’ contributions
|
10,429 | 13,621 | ||||||
|
Gross benefits paid
|
(35,856 | ) | (40,100 | ) | ||||
|
Fair value of plan assets at
end of year
|
$ | — | $ | — | ||||
|
|
||||||||
|
Benefit obligation at end of year
|
$ | 208,213 | $ | 244,190 | ||||
|
|
||||||||
|
Accrued postretirement benefit cost:
|
||||||||
|
Current
|
$ | 22,780 | $ | 27,047 | ||||
|
Noncurrent
|
$ | 185,433 | $ | 217,143 | ||||
65
Table of Contents
Net
actuarial losses recognized in accumulated other comprehensive loss were $44.3
million in 2009 and $57.1 million in 2008. Prior service credits recognized in accumulated other
comprehensive loss were $82.3 million in 2009 and $78.1 million in 2008.
The actuarial loss and prior service
credit estimated to be amortized from accumulated other
comprehensive loss into net periodic benefit cost in 2010 are
$4.9 million and $(19.4) million, respectively.
Other changes in plan assets and
benefit obligations recognized in other comprehensive income for 2009 consist of the following:
| In thousands of dollars | ||||
|
Current year
actuarial gain
|
$ | 8,143 | ||
|
Prior service credit change
|
19,853 | |||
|
Amortization of actuarial loss
|
4,695 | |||
|
Amortization of prior service credit
|
(15,689 | ) | ||
|
Total
|
$ | 17,002 |
Postretirement benefit costs:
The following assumptions were used to determine postretirement
benefit cost:
| 2009 | 2008 | 2007 | ||||||||||
|
Discount rate
|
6.15 | % | 6.13 | % | 5.81 | % | ||||||
|
Health care cost trend on coverage
|
7.00 | % | 8.00 | % | 9.00 | % | ||||||
|
Ultimate trend rate
|
5.00 | % | 5.00 | % | 5.00 | % | ||||||
|
Year that ultimate trend rate is reached
|
2014 | 2014 | 2011 | |||||||||
Benefit obligations and funded status:
The following assumptions were used to determine the
year-end benefit obligation:
| Dec. 27, 2009 | Dec. 28, 2008 | |||||||
|
Discount rate
|
5.80 | % | 6.15 | % | ||||
|
Health care cost trend rate assumed for
next year
|
7.00 | % | 7.50 | % | ||||
|
Ultimate trend rate
|
5.00 | % | 5.00 | % | ||||
|
Year that ultimate trend rate is reached
|
2014 | 2014 | ||||||
A 7.0% annual rate of increase in the per capita cost of covered health care benefits was
assumed for 2010. Assumed health care cost trend rates have a significant effect on the amounts
reported for the health care plans. The effect of a 1% change in the health care cost trend rate
would result in a change of approximately $10 million in the 2009 postretirement benefit obligation
and a $1 million change in the aggregate service and interest components of the 2009 expense.
Cash flows:
The company expects to make the following benefit payments, which reflect expected
future service, and to receive the following federal subsidy benefits as appropriate:
| In thousands of dollars | Benefit Payments | Subsidy Benefits | ||||||
|
2010
|
$ | 22,780 | $ | 2,362 | ||||
|
2011
|
$ | 22,036 | $ | 2,353 | ||||
|
2012
|
$ | 21,159 | $ | 2,349 | ||||
|
2013
|
$ | 20,438 | $ | 2,312 | ||||
|
2014
|
$ | 20,438 | $ | 2,253 | ||||
|
2015-2019
|
$ | 89,472 | $ | 9,961 | ||||
The amounts above exclude the participants’ share of the benefit cost. The company’s policy is
to fund benefits as claims and premiums are paid.
NOTE 10
Income taxes
The provision (benefit) for income taxes on income from continuing operations consists of the
following:
| In thousands of dollars | ||||||||||||
| 2009 | Current | Deferred | Total | |||||||||
|
Federal
|
$ | 92,043 | $ | 53,566 | $ | 145,609 | ||||||
|
State and other
|
24,202 | 9,954 | 34,156 | |||||||||
|
Foreign
|
22,895 | (8,860 | ) | 14,035 | ||||||||
|
|
||||||||||||
|
Total
|
$ | 139,140 | $ | 54,660 | $ | 193,800 | ||||||
|
|
||||||||||||
| In thousands of dollars | ||||||||||||
| 2008 | Current | Deferred | Total | |||||||||
|
Federal
|
$ | 196,648 | $ | (636,841 | ) | $ | (440,193 | ) | ||||
|
State and other
|
(25,236 | ) | (152,567 | ) | (177,803 | ) | ||||||
|
Foreign
|
(13,593 | ) | (26,811 | ) | (40,404 | ) | ||||||
|
|
||||||||||||
|
Total
|
$ | 157,819 | $ | (816,219 | ) | $ | (658,400 | ) | ||||
|
|
||||||||||||
| In thousands of dollars | ||||||||||||
| 2007 | Current | Deferred | Total | |||||||||
|
Federal
|
$ | 358,018 | $ | 9,434 | $ | 367,452 | ||||||
|
State and other
|
42,240 | 12,529 | 54,769 | |||||||||
|
Foreign
|
57,554 | (6,475 | ) | 51,079 | ||||||||
|
|
||||||||||||
|
Total
|
$ | 457,812 | $ | 15,488 | $ | 473,300 | ||||||
|
|
||||||||||||
The components of income (loss) from continuing operations attributable to Gannett Co., Inc.
before income taxes consist of the following:
| In thousands of dollars | 2009 | 2008 | 2007 | |||||||||
|
Domestic
|
$ | 490,578 | $ | (4,752,181 | ) | $ | 1,091,725 | |||||
|
Foreign
|
58,492 | (2,553,784 | ) | 357,152 | ||||||||
|
|
||||||||||||
|
Total
|
$ | 549,070 | $ | (7,305,965 | ) | $ | 1,448,877 | |||||
|
|
||||||||||||
The provision for income taxes on continuing operations varies from the U.S. federal statutory
tax rate as a result of the following differences:
| Fiscal year | 2009 | 2008 | 2007 | |||||||||
|
U.S. statutory tax rate
|
35.0 | % | 35.0 | % | 35.0 | % | ||||||
|
Increase (decrease) in taxes resulting from:
|
||||||||||||
|
Asset impairments
|
1.4 | (27.8 | ) | — | ||||||||
|
State/other income taxes net of
federal income tax benefit
|
3.5 | 3.0 | 2.5 | |||||||||
|
Statutory rate differential and
permanent differences in earnings
in foreign jurisdictions
|
(3.2 | ) | (2.0 | ) | (2.8 | ) | ||||||
|
Other, net
|
(1.4 | ) | 0.8 | (2.0 | ) | |||||||
|
|
||||||||||||
|
Effective tax rate
|
35.3 | % | 9.0 | % | 32.7 | % | ||||||
|
|
||||||||||||
Absent the pre-tax and tax effect of facility consolidation and asset impairment charges,
workforce restructuring, and certain gains in 2009 and 2008, the company’s effective tax rate would
have been 33.6% for 2009 and 28.7% for 2008.
66
Table of Contents
In addition to the income tax provision presented above for continuing operations, the company
also recorded federal and state income taxes payable on discontinued operations in 2007.
Taxes provided on the earnings from discontinued operations include amounts reclassified from
previously reported income tax provisions and totaled $4 million for 2007, covering U.S. federal
and state income taxes and representing an effective rate of 39%. Also included in discontinued
operations for 2007 is a recognized gain of $73.8 million, which is net of tax. Taxes provided on
the gains from the disposals totaled approximately $139.8 million for 2007, covering U.S. federal
and state income taxes and represent an effective rate of 65.4%. The excess of the effective rate
over the U.S. statutory tax of 35% is due principally to the non-deductibility of goodwill
associated with the properties disposed.
Deferred income taxes reflect temporary differences in the recognition of revenue and expense
for tax reporting and financial statement purposes. Amortization of intangibles represents the
largest component of the deferred provision. Deferred tax liabilities and assets are adjusted for
enacted changes in tax laws or tax rates of the various tax jurisdictions. The amounts of such
adjustments for 2007, 2008 and 2009 are not significant.
Deferred tax liabilities and assets were composed of the following at the end of 2009 and
2008:
| In thousands of dollars | Dec. 27, 2009 | Dec. 28, 2008 | ||||||
|
Liabilities
|
||||||||
|
Accelerated depreciation
|
$ | 317,547 | $ | 340,632 | ||||
|
Accelerated amortization of
deductible intangibles
|
6,547 | — | ||||||
|
Other
|
36,143 | — | ||||||
|
|
||||||||
|
Total deferred tax liabilities
|
360,237 | 340,632 | ||||||
|
|
||||||||
|
Assets
|
||||||||
|
Accelerated amortization net of
impairment of deductible intangibles
|
— | (52,984 | ) | |||||
|
Accrued compensation costs
|
(112,339 | ) | (114,153 | ) | ||||
|
Pension
|
(270,403 | ) | (348,608 | ) | ||||
|
Postretirement medical and life
|
(83,859 | ) | (97,550 | ) | ||||
|
Federal tax benefits of uncertain state
tax positions
|
(73,736 | ) | (70,761 | ) | ||||
|
Partnership investments including
impairments
|
(79,471 | ) | (92,953 | ) | ||||
|
Other
|
(62,366 | ) | (53,576 | ) | ||||
|
|
||||||||
|
Total deferred tax assets
|
(682,174 | ) | (830,585 | ) | ||||
|
|
||||||||
|
Total net deferred tax assets
|
(321,937 | ) | (489,953 | ) | ||||
|
|
||||||||
|
Net current deferred tax assets
|
(19,577 | ) | (29,386 | ) | ||||
|
|
||||||||
|
Net long-term deferred tax assets
|
$ | (302,360 | ) | $ | (460,567 | ) | ||
|
|
||||||||
Included in total deferred tax assets are valuation allowances of approximately $38 million
and $29 million in 2009 and 2008, respectively, primarily related to foreign tax credits available
for carry forward to future years and to certain foreign losses.
Realization of deferred tax assets for which valuation allowances have not been established is
dependent upon generating sufficient future taxable income. The company expects to realize the
benefit of these deferred tax assets through future reversals of its deferred tax liabilities,
through the recognition of taxable income in the allowable carryback and carryforward periods, and
through implementation of future tax planning strategies. Although realization is not assured, the
company believes it is more likely than not that all deferred tax assets for which valuation
allowances have not been established will be realized.
The company’s legal and tax structure reflects acquisitions that have occurred over the years
as well as the multi-jurisdictional nature of the company’s businesses.
The company adopted FASB Interpretation No. 48 “Accounting for Uncertainty in Income Taxes” (FIN
No. 48) as subsequently codified in ASC Topic 740, “Income Taxes,” on Jan. 1, 2007. As a result
of the implementation of FIN No. 48, the company recognized a $43 million increase in liabilities
for unrecognized tax benefits with a corresponding reduction in the Jan. 1, 2007, balance of
retained earnings.
The following table summarizes the activity related to unrecognized tax benefits, excluding
the federal tax benefit of state tax deductions:
| In thousands of dollars | ||||||||
| Change in unrecognized tax benefits | Dec. 27, 2009 | Dec. 28, 2008 | ||||||
|
Balance at beginning of year
|
$ | 182,025 | $ | 264,245 | ||||
|
Additions based on tax positions related
to the current year
|
19,455 | 13,645 | ||||||
|
Additions for tax positions of prior years
|
14,462 | 12,396 | ||||||
|
Reductions for tax positions of prior years
|
(16,959 | ) | (45,397 | ) | ||||
|
Settlements
|
(3,140 | ) | (33,403 | ) | ||||
|
Lapse of statutes of limitations
|
(4,128 | ) | (29,461 | ) | ||||
|
|
||||||||
|
Balance at end of year
|
$ | 191,715 | $ | 182,025 | ||||
|
|
||||||||
The total amount of unrecognized tax benefits that, if recognized, would impact the effective
tax rate was $126 million as of Dec. 27, 2009, and $116 million as of Dec. 28, 2008. This amount
includes the federal tax benefit of state tax deductions.
Included in the $192 million unrecognized tax benefit balance at Dec. 27, 2009, are $19
million of tax positions for which the ultimate deductibility is highly certain but for which there
is uncertainty about the timing of such deductibility.
The company recognizes interest and penalties related to unrecognized tax benefits as a
component of income tax expense. The company also recognizes interest income attributable to
overpayment of income taxes as a component of income tax expense. During 2009, the company
recognized interest expense of $3 million. During 2008, the company recognized income from interest
and the release of penalty reserves of $13 million. During 2007, the company recognized income from
interest, partially offset by penalty expense, of $5 million. The amount of accrued interest and
penalties payable related to unrecognized tax benefits was $74 million and $73 million as of Dec.
27, 2009, and Dec. 28, 2008, respectively.
67
Table of Contents
In the third quarter of 2007, the Internal Revenue Service (IRS) completed its examinations of
the U.S. income tax returns for 1995 through 2004, and as a result the company received refunds of
tax and interest of approximately $178 million.
The 2005 through 2009 tax years remain subject to examination by the IRS. The IRS is examining
the 2005 through 2008 U.S. income tax returns. The company believes it is likely that the 2005-2006
examination will be completed in 2010. The 2007-2008 examination is expected to be completed in
2011. The 2005 through 2009 tax years generally remain subject to examination by state authorities,
and the years 2003 through 2009 are subject to examination in the U.K. In addition, tax years prior
to 2005 remain subject to examination by certain states primarily due to the filing of amended tax
returns as a result of the settlement of the IRS examination for these years and due to ongoing
audits.
It is reasonably possible that the amount of unrecognized benefit with respect to certain of
the company’s unrecognized tax positions will significantly increase or decrease within the next 12
months. These changes may be the result of settlement of ongoing audits, lapses of statutes of
limitations or other regulatory developments. At this time, the company estimates that the amount
of its gross unrecognized tax positions may decrease by up to approximately $49 million within the
next 12 months primarily due to lapses of statutes of limitations in various jurisdictions.
Capital stock and earnings per share
The company’s earnings (loss) per share (basic and diluted) for 2009, 2008 and 2007 are presented
below:
| In thousands, except per share amounts | 2009 | 2008 | 2007 | |||||||||
|
Net income (loss) attributable
to Gannett Co., Inc
|
$ | 355,270 | $ | (6,647,565 | ) | $ | 1,055,612 | |||||
|
|
||||||||||||
|
Weighted average number
of common shares outstanding
(basic)
|
233,683 | 228,345 | 233,148 | |||||||||
|
Effect of
dilutive securities
|
||||||||||||
|
Stock options
|
723 | — | 300 | |||||||||
|
Restricted stock
|
1,117 | — | 292 | |||||||||
|
401(k) employer match
|
504 | — | — | |||||||||
|
|
||||||||||||
|
Weighted average number
of common shares outstanding
(diluted)
|
236,027 | 228,345 | 233,740 | |||||||||
|
|
||||||||||||
|
Earnings (loss) per share (basic)
|
$ | 1.52 | $ | (29.11 | ) | $ | 4.53 | |||||
|
Earnings (loss) per share (diluted)
|
$ | 1.51 | $ | (29.11 | ) | $ | 4.52 | |||||
The diluted earnings per share amounts exclude the effects of approximately 22.3 million stock
options outstanding for 2009, 27.1 million for 2008 and 27.3 million for 2007, as their inclusion
would be antidilutive. The diluted earnings per share amount for 2008 also excludes 2.2 million
restricted stock units.
Share repurchase program
In February 2004, the company announced the reactivation of its existing share repurchase program
that was last utilized in February 2000. On July 25, 2006, the authorization to repurchase shares
was increased by $1 billion. During 2007, 4.6 million shares were purchased under the program for
$215.2 million. During 2008, 2.3 million shares were purchased under the program for $72.8 million.
There were no shares purchased under the program during 2009.
The shares may be repurchased at management’s discretion, either in the open market or in
privately negotiated block transactions. Management’s decision to repurchase shares will depend on
price, availability and other corporate developments. Purchases may occur from time to time and no
maximum purchase price has been set. While there is no expiration date for the repurchase program,
the company’s Board of Directors reviews the share repurchase authorization annually, the last such
review having occurred in October 2009. Certain of the shares previously acquired by the company
have been reissued in settlement of employee stock awards. At this time, the company does not
anticipate repurchasing its shares for the near term.
Equity-based awards
In May 2001, the company’s shareholders approved the adoption of the Omnibus Incentive Compensation
Plan (the Plan). The Plan, as amended, is administered by the Executive Compensation Committee of
the Board of Directors and provides for the issuance of up to 32.5 million shares of company common
stock for awards granted on or after May 7, 2001. No more than 5,000,000 of the authorized shares
may be granted in the aggregate in the form of Restricted Stock, Performance Shares and/or
Performance Units. The Plan provides for the granting of stock options, stock appreciation rights,
restricted stock and other equity-based and cash-based awards. Awards may be granted to employees
of the company and members of the Board of Directors. The Plan provides that shares of common stock
subject to awards granted become available again for issuance if such awards are canceled or
forfeited.
Stock options may be granted as either non-qualified stock options or incentive stock options.
Options are granted to purchase common stock of the company at not less than 100% of the fair
market value on the day of grant. Options are exercisable at such times and subject to such terms
and conditions as the Executive Compensation Committee determines. The Plan restricts the granting
of options to any participant in any fiscal year to no more than 1,000,000 shares. Options issued
from 1996 through November 2004 have a 10-year exercise period, and options issued in December 2004
and thereafter have an eight-year exercise period. Options generally become exercisable at 25% per
year after a one-year waiting period.
The company issued
stock options to certain members of its Board of Directors as compensation for
meeting fees and retainer fees, as well as long-term awards. Meeting fees paid
as stock options fully vest upon grant. Retainers paid in the form of stock
options vest quarterly over one year. Long-term awards vest over four years.
Expense is recognized on a straight-line basis over the vesting period based on
the grant date fair value. During 2009, 2008 and 2007, members of the Board of
Directors were awarded 144,667 shares, 28,683 shares and 24,450 shares,
respectively, of stock options as part of their compensation plan. All vested
shares will be issued to directors when retiring from the Board.
68
Table of Contents
Restricted Stock is an award of common stock that is subject to restrictions and such other
terms and conditions as the Executive Compensation Committee determines. These rights entitle an
employee to receive one share of common stock at the end of a four-year incentive period
conditioned on continued employment. Under the Plan, no more than 500,000 restricted shares may be
granted to any participant in any fiscal year.
The Executive Compensation Committee may grant other types of awards that are valued in whole
or in part by reference to or that are otherwise based on fair market value of the company’s common
stock or other criteria established by the Executive Compensation Committee including the
achievement of performance goals. The maximum aggregate grant of performance shares that may be
awarded to any participant in any fiscal year shall not exceed 500,000 shares of common stock. The
maximum aggregate amount of performance units or cash-based awards that may be awarded to any
participant in any fiscal year shall not exceed $10,000,000.
In the event of a change in control as defined in the Plan, (1) all outstanding options will
become immediately exercisable in full; (2) all restricted periods and restrictions imposed on
non-performance based restricted stock awards will lapse; and (3) target payment opportunities
attainable under all outstanding awards of performance-based restricted stock, performance units
and performance shares will be paid on a prorated basis as specified in the Plan.
Determining fair value
Valuation and amortization method —
The company determines the fair value of stock options using
the Black-Scholes option-pricing formula. Key inputs into this formula include expected term,
expected volatility, expected dividend yield and the risk-free rate. Each assumption is discussed
below. This fair value is amortized on a straight-line basis over the requisite service periods of
the awards, which is generally the four-year vesting period.
Expected term —
The expected term represents the period that the company’s stock-based awards
are expected to be outstanding, and is determined based on historical experience of similar awards,
giving consideration to contractual terms of the awards, vesting schedules and expectations of
future employee behavior.
Expected volatility —
The fair value of stock-based awards reflects a volatility factor
calculated using historical market data for the company’s common stock. The time frame used is
equal to the expected term.
Expected dividend —
The dividend assumption is based on the company’s expectations about its
dividend policy on the date of grant.
Risk-free interest rate —
The company bases the risk-free interest rate on the yield to
maturity at the time of the stock option grant on zero-coupon U.S. government bonds having a
remaining life equal to the option’s expected life.
Estimated forfeitures —
When estimating forfeitures, the company considers voluntary
termination behavior as well as analysis of actual option forfeitures.
The following assumptions were used to estimate the fair value of option awards:
| 2009 | 2008 | 2007 | ||||
|
Average expected term
|
4.5 yrs. | 4.5 yrs. | 4.5 yrs. | |||
|
Expected volatility
|
38.67 - 59.18% | 17.51 - 34.63% | 16.77 - 17.80% | |||
|
Weighted average volatility
|
48.73% | 28.60% | 17.35% | |||
|
Risk-free interest rates
|
1.97 - 2.63% | 1.55 - 3.25% | 3.51 - 4.52% | |||
|
Expected dividend yield
|
1.00 - 2.20% | 4.20 - 13.30% | 2.07 - 4.20% | |||
|
Weighted average expected
dividend
|
1.20% | 9.91% | 2.97% |
The following table shows the stock-based compensation related amounts recognized in the
Consolidated Statements of Income (Loss) for equity awards:
| In thousands, except per share amounts | 2009 | 2008 | 2007 | |||||||||
|
Stock options
|
$ | 12,578 | $ | 13,097 | $ | 21,178 | ||||||
|
Restricted stock
|
12,795 | 9,549 | 7,904 | |||||||||
|
|
||||||||||||
|
Total stock-based compensation
|
25,373 | 22,646 | 29,082 | |||||||||
|
Income tax benefit
|
9,641 | 8,605 | 11,040 | |||||||||
|
|
||||||||||||
|
Stock-based compensation,
net of tax
|
$ | 15,732 | $ | 14,041 | $ | 18,042 | ||||||
|
|
||||||||||||
|
Per share impact
|
$ | .07 | $ | .06 | $ | .08 | ||||||
|
|
||||||||||||
As of Dec. 27, 2009, there was $9.1 million of unrecognized compensation cost related to
non-vested share-based compensation for options. Such amount will be adjusted for future changes in
estimated forfeitures. Unrecognized compensation cost for options will be recognized on a
straight-line basis over a weighted average period of 3.0 years.
During 2009, options for 44,250 shares of common stock were exercised from which the company
received $0.3 million of cash. The intrinsic value of the options exercised was approximately $0.4
million. The actual tax benefit realized from the option exercises was $0.1 million.
During 2008, no options were exercised.
During 2007, options for 216,864 shares of common stock were exercised from which the company
received $12.0 million of cash. The intrinsic value of the options exercised was approximately $1.1
million. The actual tax benefit realized from the option exercises was $0.4 million.
Option exercises are satisfied through the issuance of shares from treasury stock.
69
Table of Contents
A summary of the company’s stock-option awards is presented below:
| Weighted | ||||||||||||||||
| average | ||||||||||||||||
| Weighted | remaining | |||||||||||||||
| average | contractual | Aggregate | ||||||||||||||
| exercise | term | intrinsic | ||||||||||||||
| 2009 Stock Option Activity | Shares | price | (in years) | value | ||||||||||||
|
Outstanding at
beginning of year
|
27,106,695 | $ | 66.58 | 4.3 | $ | 68,360 | ||||||||||
|
Granted
|
3,171,867 | $ | 8.00 | |||||||||||||
|
Exercised
|
(44,250 | ) | $ | 7.53 | ||||||||||||
|
Canceled/Expired
|
(4,991,061 | ) | $ | 69.83 | ||||||||||||
|
Outstanding at
end of year
|
25,243,251 | $ | 58.68 | 4.1 | $ | 33,560,103 | ||||||||||
|
Options exercisable
at year end
|
19,788,317 | $ | 69.76 | 3.3 | $ | 3,662,795 | ||||||||||
|
|
||||||||||||||||
|
Weighted average
grant date fair value
of options granted
during the year
|
$ | 3.41 | ||||||||||||||
|
|
||||||||||||||||
| Weighted | ||||||||||||||||
| average | ||||||||||||||||
| Weighted | remaining | |||||||||||||||
| average | contractual | Aggregate | ||||||||||||||
| exercise | term | intrinsic | ||||||||||||||
| 2008 Stock Option Activity | Shares | price | (in years) | value | ||||||||||||
|
Outstanding at
beginning of year
|
27,933,353 | $ | 70.88 | 4.8 | $ | 1,406,344 | ||||||||||
|
Granted
|
2,181,083 | $ | 16.62 | |||||||||||||
|
Exercised
|
— | $ | — | |||||||||||||
|
Canceled/Expired
|
(3,007,741 | ) | $ | 70.31 | ||||||||||||
|
Outstanding at
end of year
|
27,106,695 | $ | 66.58 | 4.3 | $ | 68,360 | ||||||||||
|
Options exercisable
at year end
|
23,201,201 | $ | 71.74 | 3.9 | — | |||||||||||
|
|
||||||||||||||||
|
Weighted average
grant date fair value
of options granted
during the year
|
$ | 1.33 | ||||||||||||||
|
|
||||||||||||||||
| Weighted | ||||||||||||||||
| average | ||||||||||||||||
| Weighted | remaining | |||||||||||||||
| average | contractual | Aggregate | ||||||||||||||
| exercise | term | intrinsic | ||||||||||||||
| 2007 Stock Option Activity | Shares | price | (in years) | value | ||||||||||||
|
Outstanding at
beginning of year
|
28,920,680 | $ | 71.68 | 5.6 | $ | 14,387,000 | ||||||||||
|
Granted
|
1,413,526 | $ | 50.43 | |||||||||||||
|
Exercised
|
(216,864 | ) | $ | 55.58 | ||||||||||||
|
Canceled/Expired
|
(2,183,989 | ) | $ | 69.73 | ||||||||||||
|
Outstanding at
end of year
|
27,933,353 | $ | 70.88 | 4.8 | $ | 1,406,344 | ||||||||||
|
Options exercisable
at year end
|
23,867,697 | $ | 73.24 | 4.5 | — | |||||||||||
|
|
||||||||||||||||
|
Weighted average
grant date fair value
of options granted
during the year
|
$ | 8.59 | ||||||||||||||
|
|
||||||||||||||||
In addition to stock options, the company issues stock-based compensation to employees in the
form of restricted stock units (RSUs), which is an award of common stock subject to certain
restrictions. These awards generally entitle employees to receive at the end of a four-year
incentive period one share of common stock for each RSU granted, conditioned on continued
employment for the full incentive period. Compensation expense for RSUs is recognized for the
awards that are expected to vest. The expense is based on the fair value of the awards on the date
of grant recognized on a straight-line basis over the requisite service period, which is generally
the four-year incentive period.
The company also issued restricted stock to certain members of its Board of Directors as
compensation for meeting fees and retainer fees, as well as annual long-term awards. Meeting fees
paid as restricted stock fully vest upon grant. Retainers paid in the form of restricted shares
vest quarterly over one year. Long-term awards vest over three years. Expense is recognized on a
straight-line basis over the vesting period based on the grant date fair value. During 2009, 2008
and 2007, members of the Board of Directors were awarded 95,543 shares, 15,872 shares and 10,565
shares, respectively, of restricted stock as part of their compensation plan. All vested shares
will be issued to directors when retiring from the Board.
As
of Dec. 27, 2009, there was $24.3 million of unrecognized compensation cost related to
non-vested restricted stock. This amount will be adjusted for future changes in estimated
forfeitures and recognized on a straight-line basis over a weighted average period of 2.9 years.
A summary of restricted stock awards is presented below:
| Weighted | ||||||||
| average | ||||||||
| 2009 Restricted Stock Activity | Shares | fair value | ||||||
|
Outstanding and unvested at beginning
of year
|
2,241,190 | $ | 19.47 | |||||
|
Granted
|
1,714,633 | $ | 11.63 | |||||
|
Settled
|
(445,084 | ) | $ | 30.67 | ||||
|
Canceled
|
(217,446 | ) | $ | 23.35 | ||||
|
|
||||||||
|
Outstanding and unvested at end of year
|
3,293,293 | $ | 13.62 | |||||
|
|
||||||||
| Weighted | ||||||||
| average | ||||||||
| 2008 Restricted Stock Activity | Shares | fair value | ||||||
|
Outstanding and unvested at beginning
of year
|
1,041,222 | $ | 47.89 | |||||
|
Granted
|
1,479,277 | $ | 2.26 | |||||
|
Settled
|
(194,048 | ) | $ | 11.36 | ||||
|
Canceled
|
(85,261 | ) | $ | 44.33 | ||||
|
|
||||||||
|
Outstanding and unvested at end of year
|
2,241,190 | $ | 19.47 | |||||
|
|
||||||||
| Weighted | ||||||||
| average | ||||||||
| 2007 Restricted Stock Activity | Shares | fair value | ||||||
|
Outstanding and unvested at beginning
of year
|
586,900 | $ | 60.49 | |||||
|
Granted
|
613,520 | $ | 37.15 | |||||
|
Settled
|
(101,558 | ) | $ | 48.95 | ||||
|
Canceled
|
(57,640 | ) | $ | 60.01 | ||||
|
|
||||||||
|
Outstanding and unvested at end of year
|
1,041,222 | $ | 47.89 | |||||
|
|
||||||||
70
Table of Contents
401(k) savings plan
In 1990, the company established a 401(k) Savings Plan (the Plan). Substantially all employees of
the company (other than those covered by a collective bargaining agreement) who are scheduled to
work at least 1,000 hours during each year of employment are eligible to participate in the Plan.
Employees can elect to save up to 50% of compensation on a pre-tax basis subject to certain limits.
Initially the company matched 50% of the first 6% of employee contributions. From inception through
June 2003, the match was funded with company common stock issued through an Employee Stock
Ownership Plan (ESOP). In June 2003, all of the ESOP shares had been fully allocated to
participants. The company elected not to add additional shares to the ESOP and through the early
part of 2009 funded contributions in cash. The ESOP used the cash match to purchase on the open
market an equivalent number of shares of company stock on behalf of the participants. In 2009, the
majority of the company’s 401(k) match was settled with treasury shares. Beginning in 2002, Plan
participants were able to fully diversify their Plan investments.
On Aug. 1, 2008, the company approved amendments to its principal domestic retirement plans and to
its 401(k) plan. The 401(k) plan matching formula was changed to 100% of the first 5% of employee
contributions. The company also now makes additional 401(k) employer contributions on behalf of
certain long-term employees.
Compensation expense for the 401(k) match was $59.8 million in 2009, $46.6 million in 2008 and
$32.0 million in 2007. In 2009, $14.3 million of the 401(k) match was funded with cash, and $45.5
million was funded with treasury stock.
In 2002, the Board authorized 3,000,000 shares of common stock to be registered in connection with
savings-related share option plans available to eligible employees of Newsquest. In July 2004,
options covering 143,000 shares were subscribed to by Newsquest employees. None of the options,
which became exercisable in July 2007, were exercised during 2007, 2008 or 2009.
Preferred share purchase rights
In May 1990, the Board of Directors declared a dividend distribution of one Preferred Share
Purchase Right (Right) for each common share held, payable to shareholders of record on June 8,
1990. The Rights become exercisable when a person or group of persons acquires or announces an
intention to acquire ownership of 15% or more of the company’s common shares. Holders of the Rights
may acquire an interest in a new series of junior participating preferred stock, or they may
acquire an additional interest in the company’s common shares at 50% of the market value of the
shares at the time the Rights are exercised. The Rights are redeemable by the company at any time
prior to the time they become exercisable, at a price of $.01 per Right.
In May 2000, the company announced that its Board of Directors approved an amendment to its
Shareholder Rights Plan to extend the expiration date of the Rights to May 31, 2010, and increase
the initial exercise price of each preferred stock purchase right to $280.
Accumulated other comprehensive income (loss)
The elements of the company’s Accumulated Other Comprehensive Loss consisted of the following items
(net of tax): Pension, retiree medical and life insurance liabilities – a reduction of equity of
$735 million at Dec. 27, 2009, and $819 million at Dec. 28, 2008; foreign currency translation
gains – an increase of equity of $416 million at Dec. 27, 2009, and $355 million at Dec. 28, 2008;
interest rate swaps – no impact to equity at Dec. 27, 2009, and $5 million reduction to equity at
Dec. 28, 2008 and all other – an increase of $2 million at Dec. 27, 2009.
NOTE 12
Commitments, contingent liabilities and other matters
Litigation:
The company and a number of its subsidiaries are defendants in judicial and
administrative proceedings involving matters incidental to their business. The company does not
believe that any material liability will be imposed as a result of these matters.
Leases:
Approximate future minimum annual rentals payable under non-cancelable operating leases,
primarily real-estate related, are as follows:
| In thousands of dollars | ||||
|
2010
|
$ | 59,311 | ||
|
2011
|
52,235 | |||
|
2012
|
43,406 | |||
|
2013
|
34,687 | |||
|
2014
|
29,480 | |||
|
Later years
|
107,007 | |||
|
|
||||
|
Total
|
$ | 326,126 | ||
|
|
||||
Total minimum annual rentals have not been reduced for future minimum sublease rentals
aggregating $2.5 million. Total rental costs reflected in continuing operations were $69 million in
2009, $74 million in 2008 and $67 million in 2007.
Program broadcast contracts:
The company has $62 million of commitments under programming contracts
that include television station commitments to purchase programming to be produced in future years.
Purchase obligations:
The company has commitments under purchasing obligations totaling $364
million related to printing contracts, capital projects, interactive marketing agreements, wire
services and other legally binding commitments. Amounts which the company is liable for under
purchase orders outstanding at Dec. 27, 2009, are reflected in the Consolidated Balance Sheets as
accounts payable and accrued liabilities and are excluded from the $364 million.
Self insurance:
The company is self-insured for most of its employee medical coverage and for its casualty, general
liability and libel coverage (subject to a cap above which third party insurance is in place). The
liabilities are established on an actuarial basis, with the advice of consulting actuaries, and
totaled $151 million at the end of 2009 and $163 million at the end of 2008.
Other matters:
In December 1990, the company adopted a Transitional Compensation Plan (the Plan).
The Plan provides termination benefits to key executives whose employment is terminated under
certain circumstances within two years following a change in control of the company. Benefits under
the Plan include a severance payment of up to three years’ compensation and continued life and
medical insurance coverage.
71
Table of Contents
In connection with the purchase of Schedule Star in 2007, the company is contingently liable for
earnout payments to some previous owners, depending upon certain performance metrics which may be
achieved by Schedule Star through 2010. The minimum payment of $7.2 million was reduced by payments
in 2009 of approximately $4.7 million. The remaining minimum payment of $2.5 million has been
accrued in the 2009 financial statements.
In connection with CareerBuilder’s acquisition of certain international companies in 2007, it is
contingently liable for earnout payments to previous owners, depending upon the achievement of
certain performance metrics. The maximum potential payment in future years related to these
acquisitions is $5.2 million including $1.9 million, which has been accrued in the 2009 financial
statements.
In connection with the purchase of Ripple6 in 2008, the company is contingently liable for earnout
payments to some previous owners, depending upon the achievement of certain performance metrics by
Ripple6 through 2013. The minimum payment will be $1.8 million, which has been accrued in the 2009
financial statements.
NOTE 13
Fair value measurement
The company measures and records in the accompanying consolidated financial statements certain
assets and liabilities at fair value. ASC Topic 820, “Fair Value Measurements and Disclosures,”
establishes a fair value hierarchy for those instruments measured at fair value that distinguishes
between assumptions based on market data (observable inputs) and the company’s own assumptions
(unobservable inputs). The hierarchy consists of three levels:
Level 1
- Quoted market prices in active markets for identical assets or liabilities;
Level 2
- Inputs other than Level 1 inputs that are either directly or indirectly observable; and
Level 3
- Unobservable inputs developed using estimates and assumptions developed by the company,
which reflect those that a market participant would use.
The following table summarizes the financial instruments measured at fair value in the accompanying
consolidated balance sheet as of Dec. 27, 2009:
| In thousands of dollars | ||||||||||||||||
| Fair value measurement as of Dec. 27, 2009 | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
|
Assets:
|
||||||||||||||||
|
Employee compensation
related investments
|
$ | 21,757 | $ | — | $ | — | $ | 21,757 | ||||||||
|
Sundry investments
|
24,800 | — | 27,202 | 52,002 | ||||||||||||
The
level 3 sundry investments are financial instruments held by
CareerBuilder. During 2009, the company sold some of these instruments receiving
proceeds of $1.7 million and recording a gain of $0.2 million. In addition, an unrealized gain of
$1.2 million related to these securities was recorded in the company’s Consolidated Balance Sheet.
The company utilized a probability-weighted discounted cash flow technique to determine the fair
value of these financial instruments.
The main assumptions used in the fair value calculation were the estimated coupon rate associated
with the securities and the discount rate (determined based on market yields of similar taxable
obligations).
In
December 2008, the FASB issued FASB Staff Position FAS 132(R)-1, “Employers’ Disclosures about
Pensions and Other Postretirement Benefits” (FSP FAS 132(R)-1), as subsequently codified in ASC
Topic 715, “Compensation-Retirement Benefits”. The FSP amends FASB Statement No. 132(R),
“Employer’s Disclosures about Pensions and Other Postretirement Benefits” (FAS 132(R)) to require
additional disclosures about assets held in an employer’s defined benefit pension or other
postretirement plan. The FSP also amends Statement 132(R) to require disclosure of the level within
the fair value hierarchy in which each major category of plan assets falls, using the guidance in
ASC Topic 820.
Additionally, employers are required to reconcile the beginning and ending balances of plan assets
with fair values measured using significant unobservable inputs (Level 3). The FSP is effective for
fiscal years ending after Dec. 15, 2009.
The following table sets forth by level within the fair value hierarchy the fair values of the
company’s pension plan assets by asset category:
| In thousands of dollars | ||||||||||||||||
| Fair value measurement as of Dec. 27, 2009 (a) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
|
Assets:
|
||||||||||||||||
|
U.S.
government-related securities
|
$ | — | $ | 235,863 | $ | 3,437 | $ | 239,300 | ||||||||
|
Other government bonds
|
— | 31,314 | — | 31,314 | ||||||||||||
|
Corporate bonds
|
— | 178,475 | 15,191 | 193,666 | ||||||||||||
|
Corporate stock
|
559,886 | — | — | 559,886 | ||||||||||||
|
Real estate
|
— | — | 91,765 | 91,765 | ||||||||||||
|
Interest in common/collective trusts
|
10,916 | 447,227 | — | 458,143 | ||||||||||||
|
Interest in reg. invest.
companies
|
328,404 | 2,083 | — | 330,487 | ||||||||||||
|
Interest in 103-12
investments
|
— | 111,575 | — | 111,575 | ||||||||||||
|
Partnership/joint venture
interests
|
— | — | 95,965 | 95,965 | ||||||||||||
|
Hedge funds
|
— | 73,573 | 173,559 | 247,132 | ||||||||||||
|
Derivative contracts
|
500 | 1,574 | 1,865 | 3,939 | ||||||||||||
|
|
||||||||||||||||
|
Total
|
$ | 899,706 | $ | 1,081,684 | $ | 381,782 | $ | 2,363,172 | ||||||||
|
|
||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
|
Liabilities:
|
||||||||||||||||
|
Derivative liabilities
|
$ | (2,615 | ) | $ | (6,100 | ) | $ | (3 | ) | $ | (8,718 | ) | ||||
|
Liability to purchase U.S.
government and other
securities
|
— | (120,747 | ) | — | (120,747 | ) | ||||||||||
|
|
||||||||||||||||
|
Total
|
$ | (2,615 | ) | $ | (126,847 | ) | $ | (3 | ) | $ | (129,465 | ) | ||||
|
|
||||||||||||||||
|
Cash and other
|
14,730 | 127,330 | — | $ | 142,060 | |||||||||||
|
|
||||||||||||||||
|
Total net fair value of
plan assets
|
$ | 911,821 | $ | 1,082,167 | $ | 381,779 | $ | 2,375,767 | ||||||||
|
|
||||||||||||||||
(a) The
company uses a Dec. 31 measurement date for its retirement plans.
Items included in “Cash and other” in the table above primarily consist of amounts categorized as cash
and cash equivalents and pending purchases and sales of securities.
72
Table of Contents
Valuation methodologies used for assets and liabilities measured at fair value are as follows:
U.S. government-related securities are primarily mortgage-backed securities that are typically not
actively quoted. Values are obtained from industry vendors who use various pricing models or use
quotes for identical or similar securities. Investments categorized in Level 3 are thinly traded
with values derived using unobservable inputs.
Other government and corporate bonds are mainly valued based on institutional bid evaluations using
proprietary models, using discounted cash flow models or models that derive prices based on similar
securities. Corporate bonds categorized in Level 3 are primarily from distressed issuers for whom
the values represent an estimate of recovery in a potential or actual bankruptcy situation.
Corporate stock is valued at the closing price reported on the active market on which the
individual securities are traded.
Investments in direct real estate have been valued by an independent qualified valuer in the UK
using a valuation approach that capitalizes any current or future income streams at an appropriate
multiplier. Investments in real estate funds are mainly valued utilizing the net asset valuations
provided by the underlying private investment companies.
Interest in common/collective trusts and interest in 103-12 investments are valued using the net
asset value as provided monthly by the fund family or fund company. The investment classified in
Level 1 is a money market fund with a constant net asset value.
Interest in registered investment companies is valued using the published net asset values as
quoted through publicly available pricing sources. The investments in Level 2 are proprietary
funds of the individual fund managers and are not publicly quoted.
Investments in partnerships and joint venture interests are valued based on an assessment of each
underlying investment, considering items such as expected cash flows, changes in market outlook and
subsequent rounds of financing. Exit prices tend to be unobservable.
Investments in hedge funds are valued at the net asset value as reported by the fund managers.
Derivatives are mainly swaps valued at the mid-evaluation price using discounted cash flow models.
Items in Level 3 are valued based on the market values of other securities for which they represent
a synthetic combination.
Liability to purchase U.S. government and other securities relates to buying and selling contracts
in federal agency securities that have not yet been opened up for public trading. In these
instances the investment manager has sold the securities prior to owning them, resulting in a
negative asset position. These securities are valued in the same manner as those noted above in
U.S. government-related securities.
The table below sets forth a summary of changes in the fair value of the company’s pension plan
assets and liabilities, categorized as Level 3, for the fiscal year ended
Dec. 27, 2009:
| Actual Return on Plan Assets | ||||||||||||||||||||||||
| Balance at | Relating to | Relating to | Purchases, | Transfers in | ||||||||||||||||||||
| beginning | assets still held | assets sold during | sales, and | and/or out | Balance at | |||||||||||||||||||
| In thousands of dollars | of year | at report date | the period | settlements | of Level 3 | end of year | ||||||||||||||||||
|
Assets:
|
||||||||||||||||||||||||
|
U.S.
government-related securities
|
$ | 2,974 | $ | 486 | $ | — | $ | (23 | ) | $ | — | $ | 3,437 | |||||||||||
|
Corporate bonds
|
15,715 | 5,469 | 2,023 | (1,513 | ) | (6,503 | ) | 15,191 | ||||||||||||||||
|
Corporate stock
|
283 | — | — | (283 | ) | — | — | |||||||||||||||||
|
Real estate
|
94,723 | (9,073 | ) | — | 6,115 | — | 91,765 | |||||||||||||||||
|
Partnership/joint venture interests
|
134,222 | 369 | 10,173 | (48,799 | ) | — | 95,965 | |||||||||||||||||
|
Hedge funds
|
141,801 | 11,533 | 15,583 | 4,642 | — | 173,559 | ||||||||||||||||||
|
Derivative contracts
|
17,529 | 82 | (2,008 | ) | (11,763 | ) | (1,975 | ) | 1,865 | |||||||||||||||
|
|
||||||||||||||||||||||||
|
Total
|
$ | 407,247 | $ | 8,866 | $ | 25,771 | $ | (51,624 | ) | $ | (8,478 | ) | $ | 381,782 | ||||||||||
|
|
||||||||||||||||||||||||
|
Liabilities:
|
||||||||||||||||||||||||
|
Derivative liabilities
|
$ | (34,332 | ) | $ | 170 | $ | 8,954 | $ | 21,708 | $ | 3,497 | $ | (3 | ) | ||||||||||
|
|
||||||||||||||||||||||||
The fair value of the company’s total long-term debt, determined based on the bid and ask quotes
for the related debt, totaled $2.9 billion at Dec. 27, 2009. As described in Note 7, the company
recognized the new debt resulting from the May 2009 private exchange offer at fair value in
accordance with the modifications and extinguishments requirements of ASC Topic 470, “Debt.”
Certain assets are measured at fair value on a nonrecurring basis; that is, the instruments are not
measured at fair value on an ongoing basis but are subject to fair value adjustments only in
certain circumstances (for example, when there is evidence of impairment). During the second and
fourth quarters of 2009, certain goodwill was written down to fair value. In the fourth quarter of
2009, certain intangibles assets were written down to fair value. Long-lived assets held and used
were written down to fair value in the last three quarters of 2009.
The following table summarizes the nonfinancial assets measured at fair value on a nonrecurring
basis in the accompanying consolidated balance sheet as of Dec. 27, 2009:
| In thousands of dollars | ||||||||||||||||
| Fair value measurement as of Dec. 27, 2009 | Level 1 | Level 2 | Level 3 | Total: | ||||||||||||
|
Goodwill – Quarter 2
|
$ | — | $ | — | $ | 5,719 | $ | 5,719 | ||||||||
|
Goodwill and other
intangibles – Quarter 4
|
— | — | 12,495 | 12,495 | ||||||||||||
|
Long-lived assets held and
used – Quarter 2
|
— | — | 36,929 | 36,929 | ||||||||||||
|
Long-lived assets held and
used – Quarter 3
|
— | — | 8,481 | 8,481 | ||||||||||||
|
Long-lived assets held and
used – Quarter 4
|
— | — | 29,974 | 29,974 | ||||||||||||
In addition, the company holds investments in non-public businesses in which the company does
not have control and does not exert significant influence. Such investments are carried at cost and
reduced for any impairment losses resulting from periodic evaluations of the carrying value of the
investment. At Dec. 27, 2009, and Dec. 28, 2008, the aggregate carrying amount of such investments
was $16 million. No events or changes in circumstances have occured since Dec. 28, 2008, that
suggests a significant and adverse effect on the fair value of such investments. Accordingly, the
company did not evaluate such investments for impairment in 2009.
73
Table of Contents
NOTE 14
Business operations and segment information
The company has determined that its reportable segments based on its management and internal
reporting structure are newspaper publishing, which is the largest segment of its operations,
digital and broadcasting.
The publishing segment at the end of 2009 consisted of 83 U.S. daily
newspapers with affiliated online sites in 30 states and one U.S. territory, including USA TODAY, a
national, general-interest daily newspaper; USATODAY.com; USA WEEKEND, a magazine supplement for
newspapers; Clipper; Gannett Healthcare Group; and Army Times. The publishing segment also includes
Newsquest, which is a regional newspaper publisher in the United Kingdom that includes 17 paid-for
daily newspapers and more than 200 weekly newspapers, magazines and trade publications. The
publishing segment in the U.S. also includes nearly 650 non-daily publications, a network of offset
presses for commercial printing and several smaller businesses.
In the third quarter of 2008, the company began reporting a new digital segment and a separate
digital revenues line in its Statements of Income (Loss). This revenue line includes only revenue
from the businesses that comprise the new digital segment. It therefore includes all revenues from
CareerBuilder and ShopLocal beginning with the full consolidation of these businesses in the third
quarter of 2008, and revenues from PointRoll, Schedule Star, Planet Discover and Ripple6 (from the
date of its acquisition in November 2008). Revenues from PointRoll, Schedule Star and Planet
Discover had previously been reported within the publishing segment and were included in the “All
other” revenue line in the Statement of Income. “All other” revenue is now comprised principally of
commercial printing revenues. All periods presented reflect these reclassifications.
At the end of 2009, the company’s broadcasting division included 23 television stations and
affiliated online sites in markets with more than 20.9 million households covering 18.2% of the
U.S. Captivate Network is also part of the broadcasting division.
The company’s foreign revenues, principally from newspaper publishing businesses in the United
Kingdom and CareerBuilder subsidiaries in Europe, totaled approximately $621 million in 2009, $1.0
billion in 2008 and $1.2 billion in 2007. The company’s long-lived assets in foreign countries,
principally in the United Kingdom, totaled approximately $535 million at Dec. 27, 2009, $628
million at Dec. 28, 2008, and $3.7 billion at Dec. 30, 2007.
Separate financial data for each of the company’s business segments is presented in the table that
follows. The accounting policies of the segments are those described in Note 1. The company
evaluates the performance of its segments based on operating income. Operating income represents
total revenue less operating expenses, including depreciation, amortization of intangibles and
asset impairment charges. In determining operating income by industry segment, general corporate
expenses, interest expense, interest income, and other income and expense items of a non-operating
nature are not considered, as such items are not allocated to the company’s segments.
Corporate assets include cash and cash equivalents, property, plant and equipment used for
corporate purposes and certain other financial investments.
| In thousands of dollars | ||||||||||||
| Business segment financial information | 2009 | 2008 | 2007 | |||||||||
|
Operating revenues
|
||||||||||||
|
Publishing
|
$ | 4,395,734 | $ | 5,713,739 | $ | 6,579,816 | ||||||
|
Digital
|
586,174 | 281,378 | 70,347 | |||||||||
|
Broadcasting
|
631,085 | 772,533 | 789,297 | |||||||||
|
|
||||||||||||
|
Total
|
$ | 5,612,993 | $ | 6,767,650 | $ | 7,439,460 | ||||||
|
|
||||||||||||
|
Operating income (loss)
|
||||||||||||
|
Publishing (2)
|
$ | 522,593 | $ | (7,025,681 | ) | $ | 1,390,170 | |||||
|
Digital (2)
|
43,295 | 18,934 | 23,201 | |||||||||
|
Broadcasting (2)
|
216,101 | 306,354 | 314,900 | |||||||||
|
Corporate (1) (2)
|
(56,806 | ) | (61,262 | ) | (77,375 | ) | ||||||
|
|
||||||||||||
|
Total
|
$ | 725,183 | $ | (6,761,655 | ) | $ | 1,650,896 | |||||
|
|
||||||||||||
|
Depreciation, amortization and
facility consolidation and asset
impairment charges |
||||||||||||
|
Publishing (2)
|
$ | 257,907 | $ | 8,147,018 | $ | 299,921 | ||||||
|
Digital (2)
|
59,489 | 31,950 | 5,260 | |||||||||
|
Broadcasting (2)
|
42,640 | 42,520 | 33,553 | |||||||||
|
Corporate (1) (2)
|
15,677 | 17,128 | 15,657 | |||||||||
|
|
||||||||||||
|
Total
|
$ | 375,713 | $ | 8,238,616 | $ | 354,391 | ||||||
|
|
||||||||||||
| Equity income (loss) in unconsolidated investees, net | ||||||||||||
|
Publishing
|
$ | 4,010 | $ | (365,371 | ) | $ | 45,054 | |||||
|
Digital
|
(83 | ) | (9,554 | ) | (4,361 | ) | ||||||
|
|
||||||||||||
|
Total
|
$ | 3,927 | $ | (374,925 | ) | $ | 40,693 | |||||
|
|
||||||||||||
|
Identifiable assets
|
||||||||||||
|
Publishing
|
$ | 3,417,026 | $ | 4,038,015 | $ | 12,565,723 | ||||||
|
Digital
|
1,139,266 | 1,096,026 | 409,577 | |||||||||
|
Broadcasting
|
2,058,415 | 2,153,257 | 2,366,793 | |||||||||
|
Corporate (1)
|
533,725 | 509,516 | 545,634 | |||||||||
|
|
||||||||||||
|
Total
|
$ | 7,148,432 | $ | 7,796,814 | $ | 15,887,727 | ||||||
|
|
||||||||||||
|
Capital expenditures
|
||||||||||||
|
Publishing
|
$ | 44,935 | $ | 104,804 | $ | 136,472 | ||||||
|
Digital
|
8,232 | 5,445 | 1,011 | |||||||||
|
Broadcasting
|
13,656 | 52,706 | 29,096 | |||||||||
|
Corporate (1)
|
914 | 2,045 | 4,826 | |||||||||
|
|
||||||||||||
|
Total
|
$ | 67,737 | $ | 165,000 | $ | 171,405 | ||||||
|
|
||||||||||||
| (1) | Corporate amounts represent those not directly related to the company’s three business segments. | |
| (2) | Results for 2009 include pre-tax facility consolidation and asset impairment charges of $99 million for publishing, $25 million for digital and $9 million for broadcasting. Results for 2008 include pre-tax facility consolidation and asset impairment charges of $7.95 billion for publishing, $15 million for digital, $8 million for broadcasting, and $1 million for corporate. Results for 2007 include pre-tax facility consolidation and asset impairment charges of $72 million for publishing. The asset impairment charges did not affect the company’s operations or cash flow. Refer to Notes 3 and 4 of the Consolidated Financial Statements for more information. |
74
Table of Contents
SELECTED FINANCIAL DATA (Unaudited)
(See notes a and b on page 76)
| In thousands of dollars, except per share amounts | 2009 | 2008 | 2007 | 2006 | 2005 | |||||||||||||||
|
Net operating revenues
|
||||||||||||||||||||
|
Publishing advertising
|
$ | 2,966,301 | $ | 4,145,592 | $ | 4,937,159 | $ | 5,275,650 | $ | 5,065,380 | ||||||||||
|
Publishing circulation
|
1,166,984 | 1,216,637 | 1,252,356 | 1,279,530 | 1,236,406 | |||||||||||||||
|
Digital
|
586,174 | 281,378 | 70,347 | 52,773 | 25,383 | |||||||||||||||
|
Broadcasting
|
631,085 | 772,533 | 789,297 | 854,821 | 736,452 | |||||||||||||||
|
All other
|
262,449 | 351,510 | 390,301 | 384,839 | 371,015 | |||||||||||||||
|
|
||||||||||||||||||||
|
Total
|
5,612,993 | 6,767,650 | 7,439,460 | 7,847,613 | 7,434,636 | |||||||||||||||
|
|
||||||||||||||||||||
|
Operating expenses
|
||||||||||||||||||||
|
Costs and expenses
|
4,512,097 | 5,290,689 | 5,434,173 | 5,671,720 | 5,191,477 | |||||||||||||||
|
Depreciation
|
209,826 | 230,987 | 246,275 | 237,309 | 242,577 | |||||||||||||||
|
Amortization of intangible assets
|
32,983 | 31,211 | 36,086 | 33,989 | 23,236 | |||||||||||||||
|
Facility consolidation and asset impairment charges
|
132,904 | 7,976,418 | 72,030 | — | — | |||||||||||||||
|
|
||||||||||||||||||||
|
Total
|
4,887,810 | 13,529,305 | 5,788,564 | 5,943,018 | 5,457,290 | |||||||||||||||
|
|
||||||||||||||||||||
|
Operating income (loss)
|
725,183 | (6,761,655 | ) | 1,650,896 | 1,904,595 | 1,977,346 | ||||||||||||||
|
Non-operating (expense) income
|
||||||||||||||||||||
|
Equity
income (loss) in unconsolidated investees, net
|
3,927 | (374,925 | ) | 40,693 | 38,044 | 6,638 | ||||||||||||||
|
Interest expense
|
(175,748 | ) | (190,845 | ) | (259,825 | ) | (288,040 | ) | (210,625 | ) | ||||||||||
|
Other non-operating items
|
22,799 | 28,430 | 18,648 | 29,636 | 11,264 | |||||||||||||||
|
|
||||||||||||||||||||
|
Total
|
(149,022 | ) | (537,340 | ) | (200,484 | ) | (220,360 | ) | (192,723 | ) | ||||||||||
|
|
||||||||||||||||||||
|
Income (loss) before income taxes
|
576,161 | (7,298,995 | ) | 1,450,412 | 1,684,235 | 1,784,623 | ||||||||||||||
|
|
||||||||||||||||||||
|
Provision (benefit) for income taxes
|
193,800 | (658,400 | ) | 473,300 | 544,200 | 590,390 | ||||||||||||||
|
|
||||||||||||||||||||
|
Income (loss) from continuing operations
|
382,361 | (6,640,595 | ) | 977,112 | 1,140,035 | 1,194,233 | ||||||||||||||
|
|
||||||||||||||||||||
|
Income from
continuing operations attributable to
noncontrolling interests
|
(27,091 | ) | (6,970 | ) | (1,535 | ) | (2,149 | ) | (8,333 | ) | ||||||||||
|
|
||||||||||||||||||||
|
Income (loss) from continuing operations
attributable to Gannett Co., Inc.
|
$ | 355,270 | $ | (6,647,565 | ) | $ | 975,577 | $ | 1,137,886 | $ | 1,185,900 | |||||||||
|
|
||||||||||||||||||||
|
Income (loss) from continuing operations per share:
|
||||||||||||||||||||
|
basic
|
$ | 1.52 | $ | (29.11 | ) | $ | 4.18 | $ | 4.81 | $ | 4.84 | |||||||||
|
diluted
|
$ | 1.51 | $ | (29.11 | ) | $ | 4.17 | $ | 4.81 | $ | 4.82 | |||||||||
|
|
||||||||||||||||||||
|
Other selected financial data
|
||||||||||||||||||||
|
Dividends declared per share
|
$ | 0.16 | $ | 1.60 | $ | 1.42 | $ | 1.20 | $ | 1.12 | ||||||||||
|
Weighted average number of common
shares outstanding in thousands:
|
||||||||||||||||||||
|
basic
|
233,683 | 228,345 | 233,148 | 236,337 | 244,958 | |||||||||||||||
|
diluted
|
236,027 | 228,345 | 233,740 | 236,756 | 246,256 | |||||||||||||||
|
Financial position
|
||||||||||||||||||||
|
Long-term debt, excluding current maturities
|
$ | 3,061,951 | $ | 3,816,942 | $ | 4,098,338 | $ | 5,210,021 | $ | 5,438,273 | ||||||||||
|
Redeemable noncontrolling interest
|
$ | 78,304 | $ | 72,840 | $ | — | $ | — | $ | — | ||||||||||
|
Shareholders’ equity
|
$ | 1,603,925 | $ | 1,055,882 | $ | 9,017,159 | $ | 8,382,263 | $ | 7,570,562 | ||||||||||
|
Total assets
|
$ | 7,148,432 | $ | 7,796,814 | $ | 15,887,727 | $ | 16,223,804 | $ | 15,743,396 | ||||||||||
|
Return on equity (1)
|
26.7 | % | (132.0 | %) | 11.3 | % | 14.6 | % | 15.6 | % | ||||||||||
|
Percentage increase (decrease)
|
||||||||||||||||||||
|
As reported, earnings from continuing
operations, after-tax, per share:
|
||||||||||||||||||||
|
basic
|
(105.2 | %) | (796.4 | %) | (13.1 | %) | (0.6 | %) | 1.0 | % | ||||||||||
|
diluted
|
(105.2 | %) | (798.1 | %) | (13.3 | %) | (0.2 | %) | 1.7 | % | ||||||||||
|
Dividends declared per share
|
(90.0 | %) | 12.7 | % | 18.3 | % | 7.1 | % | 7.7 | % | ||||||||||
|
Credit ratios
|
||||||||||||||||||||
|
Senior leverage ratio (2)
|
2.63 | X | 2.56 | X | ||||||||||||||||
|
Times
interest expense earned (3)
|
4.8 | X | 6.7 | X | 6.9 | X | 6.6 | X | 9.4 | X | ||||||||||
| (1) | Calculated using income from continuing operations attributable to Gannett Co., Inc. plus earnings from discontinued operations (but excluding the gain in 2007 and 2005 on the disposal of discontinued operations). | |
| (2) | The senior leverage ratio is calculated in accordance with the company’s revolving credit agreements and term loan agreement. Currently, the company is required to maintain a senior leverage ratio of less than 3.5X. Due to the absence of this financial covenant in 2005-2007, data for those years in not presented. These agreements are described more fully on pages 41-42 in Management’s Discussion and Analysis of Financial Condition and Results of Operations. More information regarding the computation can be found in Exhibits 10.3, 10.4 and 10.5 to the Form 10-Q for the quarterly period ended Sept. 28, 2008, filed on Nov. 6, 2008. | |
| (3) | Calculated using operating income adjusted to remove the effect of certain special items. These special items are described more fully on pages 28 and 32 in Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
75
Table of Contents
NOTES TO SELECTED FINANCIAL DATA (Unaudited)
(a) The company and its subsidiaries made the significant acquisitions listed below during the
period. The results of operations of these acquired businesses are included in the accompanying
financial information from the date of acquisition.
(b) During the period, the company sold or otherwise disposed of substantially all of the assets or
capital stock of certain other significant subsidiaries and divisions of other subsidiaries, which
are listed on page 77.
Note 2 of the consolidated financial statements contains further information concerning certain of
these acquisitions and dispositions.
Acquisitions and dispositions 2005-2009
Significant acquisitions since the beginning of 2005 are shown below. The company has disposed of
several significant businesses during this period, which are presented on the following page.
Acquisitions 2005-2009
| Year acquired | Name | Location | Publication times or business | |||
|
2005
|
Hometown Communications, Inc. |
Livingston County, MI
Lansing, MI Cincinnati, OH Suburban Detroit |
Daily and weekly newspapers, telephone directories and niche publications | |||
|
|
PointRoll, Inc. | Conshohocken, PA |
Rich media marketing services
for online businesses/advertisers |
|||
|
|
Mint Magazine, Inc. | Jacksonville, FL |
Direct-mail advertising magazine
company |
|||
|
|
The Tallahassee Democrat (3) | Tallahassee, FL | Daily newspaper | |||
|
|
Exchange & Mart and Auto Exchange | U.K. | Weekly classified advertising magazine and motoring classified web site; free pick-up publication | |||
|
2006
|
KTVD-TV | Denver, CO | TV station | |||
|
|
WATL-TV | Atlanta, GA | TV station | |||
|
|
Planet Discover |
Cedar Rapids, IA
Fort Mitchell, KY |
Local, integrated online search and advertising technology | |||
|
|
Marco Island Sun Times | Marco Island, FL | Weekly newspaper | |||
|
|
FS View & Florida Flambeau | Tallahassee, FL | Independent student newspaper of Florida State University | |||
|
2007
|
Central Florida Future | Orlando, FL | Independent student newspaper of the University of Central Florida | |||
|
|
Central Ohio Advertiser Network | Chillicothe, OH | A network of eight weekly shoppers with the Advertiser brand | |||
|
|
Schedule Star LLC | Wheeling, WV | Online high school sports network | |||
|
2008
|
X.com, Inc. (BNQT.com) | Pasadena, CA | Action sports web site | |||
|
|
ShopLocal | Chicago, IL | Marketing and database services company | |||
|
|
CareerBuilder | Chicago, IL, Atlanta, GA | Job search, employment and careers web site | |||
|
|
Pearls Review | St. Petersburg, FL | A nursing certification and education web site | |||
|
|
Ripple6 | New York, NY | Provider of social media services |
76
Table of Contents
Dispositions 2005-2009
| Year disposed | Name | Location | Publication times or business | |||
|
2005
|
The Bellingham Herald (3) | Bellingham, WA | Daily newspaper | |||
|
|
The Idaho Statesman (3) | Boise, ID | Daily newspaper | |||
|
|
The Olympian (3) | Olympia, WA | Daily newspaper | |||
|
|
Public Opinion (2) | Chambersburg, PA | Daily newspaper | |||
|
|
Texas-New Mexico
Newspapers Partnership (2) |
Texas, New Mexico | Daily newspapers | |||
|
2006
|
Muskogee Phoenix (1) | Muskogee, OK | Daily newspaper | |||
|
2007
|
Chronicle Tribune (1) | Marion, IN | Daily newspaper | |||
|
|
Norwich Bulletin | Norwich, CT | Daily newspaper | |||
|
|
Rockford Register Star | Rockford, IL | Daily newspaper | |||
|
|
The Herald-Dispatch | Huntington, WV | Daily newspaper | |||
|
|
Observer-Dispatch | Utica, NY | Daily newspaper | |||
|
2008
|
Telematch | Springfield, VA | Database marketing services company | |||
|
2009
|
Southernprint Limited | U.K. | Commercial printing |
| (1) | These properties were contributed to the Gannett Foundation, a not-for-profit, private foundation. | |
| (2) | On Dec. 25, 2005, the company contributed the Public Opinion to the Texas-New Mexico Newspapers Partnership at which time the partnership was expanded. At the time of the expansion, the company’s interest in the partnership was reduced from 66.6% to 40.6%. | |
| (3) | Exchanged for The Tallahassee Democrat in Tallahassee, FL, plus cash consideration. |
77
Table of Contents
QUARTERLY STATEMENTS OF INCOME (Unaudited)
| In thousands of dollars, except per share amounts | ||||||||||||||||||||
| Fiscal year ended December 27, 2009 | 1st Quarter (1) | 2nd Quarter (2) | 3rd Quarter (3) | 4th Quarter (4) | Total | |||||||||||||||
|
Net operating revenues
|
||||||||||||||||||||
|
Publishing advertising
|
$ | 722,755 | $ | 753,079 | $ | 699,644 | $ | 790,823 | $ | 2,966,301 | ||||||||||
|
Publishing circulation
|
299,683 | 292,757 | 284,259 | 290,285 | 1,166,984 | |||||||||||||||
|
Digital
|
143,160 | 142,354 | 142,955 | 157,705 | 586,174 | |||||||||||||||
|
Broadcasting
|
143,490 | 152,966 | 151,458 | 183,171 | 631,085 | |||||||||||||||
|
All other
|
69,390 | 71,437 | 58,267 | 63,355 | 262,449 | |||||||||||||||
|
|
||||||||||||||||||||
|
Total
|
1,378,478 | 1,412,593 | 1,336,583 | 1,485,339 | 5,612,993 | |||||||||||||||
|
|
||||||||||||||||||||
|
Operating expenses
|
||||||||||||||||||||
|
Cost of sales and operating expenses, exclusive
of depreciation
|
839,004 | 867,312 | 796,984 | 801,484 | 3,304,784 | |||||||||||||||
|
Selling, general and administrative expenses,
exclusive of depreciation
|
309,380 | 293,102 | 284,111 | 320,720 | 1,207,313 | |||||||||||||||
|
Depreciation
|
55,736 | 53,798 | 50,901 | 49,391 | 209,826 | |||||||||||||||
|
Amortization of intangible assets
|
8,165 | 8,232 | 8,378 | 8,208 | 32,983 | |||||||||||||||
|
Facility consolidation and asset impairment charges
|
— | 47,391 | 39,248 | 46,265 | 132,904 | |||||||||||||||
|
|
||||||||||||||||||||
|
Total
|
1,212,285 | 1,269,835 | 1,179,622 | 1,226,068 | 4,887,810 | |||||||||||||||
|
|
||||||||||||||||||||
|
Operating income (loss)
|
166,193 | 142,758 | 156,961 | 259,271 | 725,183 | |||||||||||||||
|
|
||||||||||||||||||||
|
Non-operating (expense) income
|
||||||||||||||||||||
|
Equity income (loss) in unconsolidated investees, net
|
(2,689 | ) | 2,839 | (373 | ) | 4,150 | 3,927 | |||||||||||||
|
Interest expense
|
(48,912 | ) | (43,972 | ) | (38,065 | ) | (44,799 | ) | (175,748 | ) | ||||||||||
|
Other non-operating items
|
2,457 | 16,582 | 3,570 | 190 | 22,799 | |||||||||||||||
|
|
||||||||||||||||||||
|
Total
|
(49,144 | ) | (24,551 | ) | (34,868 | ) | (40,459 | ) | (149,022 | ) | ||||||||||
|
|
||||||||||||||||||||
|
Income (loss) before income taxes
|
117,049 | 118,207 | 122,093 | 218,812 | 576,161 | |||||||||||||||
|
Provision (benefit) for income taxes
|
39,300 | 39,900 | 36,900 | 77,700 | 193,800 | |||||||||||||||
|
|
||||||||||||||||||||
|
Net income (loss)
|
$ | 77,749 | $ | 78,307 | $ | 85,193 | $ | 141,112 | $ | 382,361 | ||||||||||
|
|
||||||||||||||||||||
|
Net income attributable to noncontrolling interests
|
(314 | ) | (7,826 | ) | (11,441 | ) | (7,510 | ) | (27,091 | ) | ||||||||||
|
|
||||||||||||||||||||
|
Net income (loss) attributable to Gannett Co., Inc.
|
$ | 77,435 | $ | 70,481 | $ | 73,752 | $ | 133,602 | $ | 355,270 | ||||||||||
|
|
||||||||||||||||||||
|
|
||||||||||||||||||||
|
Per share computations
|
||||||||||||||||||||
|
Net income (loss) per share — basic
|
$ | 0.34 | $ | 0.30 | $ | 0.31 | $ | 0.57 | $ | 1.52 | ||||||||||
|
|
||||||||||||||||||||
|
Net income (loss) per share — diluted
|
$ | 0.34 | $ | 0.30 | $ | 0.31 | $ | 0.56 | $ | 1.51 | ||||||||||
|
|
||||||||||||||||||||
|
Dividends per share
|
$ | 0.04 | $ | 0.04 | $ | 0.04 | $ | 0.04 | $ | 0.16 | ||||||||||
|
|
||||||||||||||||||||
| (1) | Results for the first quarter of 2009 include the following special items: workforce restructuring and related expenses of $7 million pre-tax ($4 million after-tax or $0.02 per share) and a pension gain of $40 million pre-tax ($25 million after-tax or $0.11 per share). Refer to page 28 and Note 8 to the Consolidated Financial Statements for more information on special items. | |
| (2) | Results for the second quarter of 2009 include the following special items: facility consolidation and asset impairment charges of $47 million pre-tax ($30 million after-tax or $0.13 per share), workforce restructuring and related expenses of $17 million pre-tax ($10 million after-tax or $0.04 per share), debt exchange gain of $43 million pre-tax ($26 million after-tax or $0.11 per share) and an impairment of publishing assets sold charge of $28 million pre-tax ($24 million after-tax or $0.10 per share). Refer to page 28 and Notes 3 and 4 to the Consolidated Financial Statements for more information on special items. | |
| (3) | Results for the third quarter of 2009 include the following special items: facility consolidation and asset impairment charges of $39 million pre-tax ($24 million after-tax or $0.10 per share), workforce restructuring and related expenses of $2 million pre-tax ($1 million after-tax or $0.01 per share) and an impairment of equity method investment charge of $5 million pre-tax ($4 million after-tax or $0.02 per share). Refer to page 28 and Notes 3 and 4 to the Consolidated Financial Statements for more information on special items. | |
| (4) | Results for the fourth quarter of 2009 include the following special items: facility consolidation and asset impairment charges of $46 million pre-tax ($34 million after-tax or $0.14 per share), workforce restructuring and related expenses of $3 million pre-tax ($2 million after-tax or $0.01 per share), and impairment of equity method investments charge of $4 million pre-tax ($2 million after-tax or $0.01 per share). Refer to page 28 and Notes 3 and 4 to the Consolidated Financial Statements for more information on special items. |
78
Table of Contents
QUARTERLY STATEMENTS OF INCOME (Unaudited)
| In thousands of dollars, except per share amounts | ||||||||||||||||||||
| Fiscal year ended December 28, 2008 | 1st Quarter (2) | 2nd Quarter (3) | 3rd Quarter (4) | 4th Quarter (5) | Total | |||||||||||||||
|
Net operating revenues
|
||||||||||||||||||||
|
Publishing advertising
|
$ | 1,096,894 | $ | 1,108,189 | $ | 977,111 | $ | 963,398 | $ | 4,145,592 | ||||||||||
|
Publishing circulation
|
309,178 | 305,994 | 298,978 | 302,487 | 1,216,637 | |||||||||||||||
|
Digital
|
13,893 | 20,008 | 77,594 | 169,883 | 281,378 | |||||||||||||||
|
Broadcasting
|
170,180 | 192,568 | 197,000 | 212,785 | 772,533 | |||||||||||||||
|
All other
|
86,724 | 91,230 | 86,627 | 86,929 | 351,510 | |||||||||||||||
|
|
||||||||||||||||||||
|
Total
|
1,676,869 | 1,717,989 | 1,637,310 | 1,735,482 | 6,767,650 | |||||||||||||||
|
|
||||||||||||||||||||
|
Operating expenses
|
||||||||||||||||||||
|
Cost of sales and operating expenses, exclusive
of depreciation
|
986,500 | 988,538 | 985,004 | 1,052,685 | 4,012,727 | |||||||||||||||
|
Selling, general and administrative expenses,
exclusive of depreciation
|
294,896 | 299,539 | 328,320 | 355,207 | 1,277,962 | |||||||||||||||
|
Depreciation
|
59,602 | 55,109 | 57,682 | 58,594 | 230,987 | |||||||||||||||
|
Amortization of intangible assets
|
8,240 | 6,475 | 7,123 | 9,373 | 31,211 | |||||||||||||||
|
Facility consolidation and asset impairment charges
|
— | 2,501,874 | — | 5,474,544 | 7,976,418 | |||||||||||||||
|
|
||||||||||||||||||||
|
Total
|
1,349,238 | 3,851,535 | 1,378,129 | 6,950,403 | 13,529,305 | |||||||||||||||
|
|
||||||||||||||||||||
|
Operating income (loss)
|
327,631 | (2,133,546 | ) | 259,181 | (5,214,921 | ) | (6,761,655 | ) | ||||||||||||
|
|
||||||||||||||||||||
|
Non-operating (expense) income
|
||||||||||||||||||||
|
Equity income (loss) in unconsolidated investees, net
|
(11,755 | ) | (252,793 | ) | 5,711 | (116,088 | ) | (374,925 | ) | |||||||||||
|
Interest expense
|
(48,549 | ) | (43,957 | ) | (46,802 | ) | (51,537 | ) | (190,845 | ) | ||||||||||
|
Other non-operating items
|
24,172 | 5,362 | (2,192 | ) | 1,088 | 28,430 | ||||||||||||||
|
|
||||||||||||||||||||
|
Total
|
(36,132 | ) | (291,388 | ) | (43,283 | ) | (166,537 | ) | (537,340 | ) | ||||||||||
|
|
||||||||||||||||||||
|
Income (loss) before income taxes
|
291,499 | (2,424,934 | ) | 215,898 | (5,381,458 | ) | (7,298,995 | ) | ||||||||||||
|
Provision (benefit) for income taxes
|
99,700 | (134,200 | ) | 56,700 | (680,600 | ) | (658,400 | ) | ||||||||||||
|
|
||||||||||||||||||||
|
Net income (loss)
|
$ | 191,799 | $ | (2,290,734 | ) | $ | 159,198 | $ | (4,700,858 | ) | $ | (6,640,595 | ) | |||||||
|
|
||||||||||||||||||||
|
Net income attributable to noncontrolling interests
|
(21 | ) | (22 | ) | (1,141 | ) | (5,786 | ) | (6,970 | ) | ||||||||||
|
|
||||||||||||||||||||
|
Net income (loss) attributable to Gannett Co., Inc.
|
$ | 191,778 | $ | (2,290,756 | ) | $ | 158,057 | $ | (4,706,644 | ) | $ | (6,647,565 | ) | |||||||
|
|
||||||||||||||||||||
|
|
||||||||||||||||||||
|
Per share computations
(1)
|
||||||||||||||||||||
|
Net income (loss) per share — basic
|
$ | 0.84 | $ | (10.03 | ) | $ | 0.69 | $ | (20.65 | ) | $ | (29.11 | ) | |||||||
|
|
||||||||||||||||||||
|
Net income (loss) per share — diluted
|
$ | 0.84 | $ | (10.03 | ) | $ | 0.69 | $ | (20.65 | ) | $ | (29.11 | ) | |||||||
|
|
||||||||||||||||||||
|
Dividends per share
|
$ | 0.40 | $ | 0.40 | $ | 0.40 | $ | 0.40 | $ | 1.60 | ||||||||||
|
|
||||||||||||||||||||
| (1) | As a result of rounding and the required method of computing shares in interim periods, the total of the quarterly earnings per share amounts may not equal the earnings per share amount for the year. | |
| (2) | Results for the first quarter of 2008 include a special item land sale gain of $26 million pre-tax ($16 million after-tax or $0.07 per share). Refer to page 28 for more information. | |
| (3) | Results for the second quarter of 2008 include the following special items: facility consolidation and asset impairment charges of $2.50 billion pre-tax ($2.37 billion after-tax or $10.37 per share), workforce restructuring and related expenses of $40 million pre-tax ($26 million after-tax or $0.12 per share), a pension gain of $47 million pre-tax ($29 million after-tax or $0.13 per share) and impairment of newspaper publishing partnerships and other equity method investments charges of $261 million pre-tax ($162 million after-tax or $0.71 per share). Refer to page 28 and Notes 3, 4 and 8 to the Consolidated Financial Statements for more information on special items. | |
| (4) | Results for the third quarter of 2008 include a special item workforce restructuring and related expenses charge of $23 million pre-tax ($14 million after-tax or $0.07 per share). Refer to page 28 for more information. | |
| (5) | Results for the fourth quarter of 2008 include the following special items: facility consolidation and asset impairment charges of $5.47 billion pre-tax ($4.78 billion after-tax or $20.97 per share), workforce restructuring and related expenses of $56 million pre-tax ($36 million after-tax or $0.16 per share) and impairment of newspaper publishing partnerships and other equity method investments charge of $121 million pre-tax ($86 million after-tax or $0.38 per share). Refer to page 28 and Notes 3 and 4 to the Consolidated Financial Statements for more information on special items. |
79
Table of Contents
SCHEDULE II – Valuation and qualifying accounts and reserves
| Balance at | Additions/(reductions) | |||||||||||||||||||
| In thousands of dollars | beginning | Additions charged | for acquisitions/ | Deductions | Balance at | |||||||||||||||
| Allowance for doubtful receivables | of period | to cost and expenses | dispositions (2) | from reserves (1) | end of period | |||||||||||||||
|
Fiscal year ended Dec. 27, 2009
|
$ | 59,008 | $ | 34,492 | $ | 213 | $ | (47,458 | ) | $ | 46,255 | |||||||||
|
Fiscal year ended Dec. 28, 2008
|
$ | 36,772 | $ | 57,671 | $ | 4,080 | $ | (39,515 | ) | $ | 59,008 | |||||||||
|
Fiscal year ended Dec. 30, 2007
|
$ | 38,123 | $ | 27,786 | $ | 174 | $ | (29,311 | ) | $ | 36,772 | |||||||||
| (1) | Consists of write-offs, net of recoveries in each year. | |
| (2) | Also includes foreign currency translation adjustments in each year. |
| ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
None.
| ITEM 9A. | CONTROLS AND PROCEDURES |
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our principal
executive officer and principal financial officer, we conducted an evaluation of our disclosure
controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the
Securities Exchange Act of 1934, as amended (the Exchange Act). Based on this evaluation, our
principal executive officer and our principal financial officer concluded that our disclosure
controls and procedures were effective as of the end of the period covered by this annual report.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over
financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision
and with the participation of our management, including our principal executive officer and
principal financial officer, we conducted an evaluation of the effectiveness of our internal
control over financial reporting based on the framework in “Internal Control – Integrated
Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on
our evaluation under the framework in “Internal Control – Integrated Framework,” our management
concluded that our internal control over financial reporting was effective as of Dec. 27, 2009.
The effectiveness of our internal control over financial reporting as of Dec. 27, 2009, has been
audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in its
report which is included elsewhere in this item.
Changes in Internal Control Over Financial Reporting
There has been no change in the company’s internal control over financial reporting that occurred
during the company’s fiscal quarter ended Dec. 27, 2009, that has materially affected, or is
reasonably likely to materially affect, the company’s internal control over financial reporting.
80
Table of Contents
Report of Ernst & Young LLP,
Independent Registered Public Accounting Firm,
on Internal Control Over Financial Reporting
Board of Directors and Shareholders of Gannett Co., Inc.:
We have audited Gannett Co., Inc.’s internal control over financial reporting as of December 27,
2009, based on criteria established in Internal Control—Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Gannett’s
management is responsible for maintaining effective internal control over financial reporting, and
for its assessment of the effectiveness of internal control over financial reporting included in
the accompanying Management’s Report on Internal Control Over Financial Reporting. Our
responsibility is to express an opinion on the company’s internal control over financial reporting
based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness exists, testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk,
and performing such other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles. A
company’s internal control over financial reporting includes those policies and procedures that (1)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of management and directors of the company;
and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
In our opinion, Gannett Co., Inc. maintained, in all material respects, effective internal control
over financial reporting as of December 27, 2009, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the 2009 consolidated financial statements of Gannett Co., Inc. and our
report dated February 24, 2010 expressed an unqualified opinion thereon.
McLean, Virginia
February 24, 2010
February 24, 2010
81
Table of Contents
| ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE |
Below is a listing of the executive officers of the company. Executive officers serve for a term of
one year and may be re-elected. A list of directors is incorporated by reference to the company’s
Proxy Statement pursuant to general instruction G(3) to Form 10-K.
Paul Davidson
Chairman and Chief Executive Officer, Newsquest (2003-present). Age 55. U.K. citizen.
Robert J. Dickey
President, U.S. Community Publishing, formerly Newspaper Division (February 2008-present). Formerly
Senior Group President, Gannett’s Pacific Group and Chairman of Phoenix Newspapers Inc.
(2005-2008); President and Publisher of The Desert Sun, Palm Springs, CA, (1993-2005) and Group
Vice President of the Pacific Group (1997-2005). Age 52.
Craig A. Dubow
Chairman and Chief Executive Officer (February 2010-present) Formerly: Chairman, President and CEO
(2006-2010); President and CEO (2005-2006); and President and CEO, Gannett Broadcasting
(2001-2005). Age 55.
Daniel S. Ehrman, Jr.
Vice President, Planning & Development (1997-present). Age 63.
George R. Gavagan
Vice President and Controller (1997-present). Age 63.
Roxanne V. Horning
Senior Vice President, Human Resources (July 2006-present). Formerly: Vice President, Human
Resources (2005-2006); and Vice President, Compensation and Benefits (2003-2005). Age 60.
David L. Hunke
President and Publisher, USA TODAY (April 2009-present). Formerly: CEO, Detroit Media Partnership
and Publisher of Detroit Free Press (2005-2009); and President and Publisher of Rochester Democrat
and Chronicle (1999-2005). Age 57.
Dave Lougee
President, Gannett Broadcasting (July 2007-present). Formerly: Executive Vice President, Media
Relations, Belo (2006-2007); Senior Vice President, Belo (2005-2006); General Manager, Belo TV and
Cable Operations, Seattle/Tacoma (2000-2005). Age 51.
Gracia C. Martore
President, Chief Operating Officer and Chief Financial Officer (February 2010-present). Formerly:
Executive Vice President and CFO (2006-2010); Senior Vice President and CFO (2003-2006). Age 58.
Todd A. Mayman
Senior Vice President, General Counsel and Secretary (April 2009-present). Formerly: Vice
President, Associate General Counsel, Secretary and Chief Governance Officer (2007-2009); and Vice
President, Associate General Counsel and Secretary (2003-2007). Age 50.
Christopher D. Saridakis
Senior Vice President and Chief Digital Officer (2008-present). Formerly: CEO, PointRoll, Inc.
(2005-2007). Age 41.
Wendell J. Van Lare
Senior Vice President, Gannett Labor Relations (June 2006-present). Formerly: Vice President and
Senior Labor Counsel (1994-2006). Age 64.
John A. Williams
President, Gannett Digital Ventures (January 2008-present). Formerly: President, Gannett Digital
(January 2006-December 2007); Senior Vice President, Diversified Business and Development,
Newspaper Division (2003-2005). Age 59.
| ITEM 11. | EXECUTIVE COMPENSATION |
Incorporated by reference to the company’s Proxy Statement pursuant to General Instruction G(3) to
Form 10-K.
| ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
Incorporated by reference to the company’s Proxy Statement pursuant to General Instruction G(3) to
Form 10-K.
| ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE |
Incorporated by reference to the company’s Proxy Statement pursuant to General Instruction G(3) to
Form 10-K.
| ITEM 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES |
Incorporated by reference to the company’s Proxy Statement pursuant to General Instruction G(3) to
Form 10-K.
| ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES |
(a) Financial Statements, Financial Statement Schedules and Exhibits.
(1) Financial Statements.
As listed in the Index to Financial Statements and Supplementary Data on page 46.
(2) Financial Statement Schedules.
As listed in the Index to Financial Statements and Supplementary Data on page 46.
Note: All other schedules are omitted as the required information is not applicable or the
information is presented in the consolidated financial statements or related notes.
(3) Exhibits.
See Exhibit Index on pages 84-87 for list of exhibits filed with this Form 10-K. Management
contracts and compensatory plans or arrangements are identified with asterisks on the Exhibit
Index.
82
Table of Contents
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
| Dated: February 24, 2010 |
GANNETT CO., INC. (Registrant)
|
|||
| By: | /s/ Gracia C. Martore | |||
| Gracia C. Martore, | ||||
|
President, Chief Operating Officer
and
Chief Financial Officer |
||||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed
below by the following persons on behalf of the registrant in the capacities and on the dates
indicated.
| Dated: February 24, 2010 | /s/ Craig A. Dubow | |||
| Craig A. Dubow, | ||||
| Chairman and Chief Executive Officer (principal executive officer) | ||||
| Dated: February 24, 2010 | /s/ Gracia C. Martore | |||
| Gracia C. Martore, | ||||
|
President, Chief Operating Officer and
Chief Financial Officer (principal financial officer) |
||||
| Dated: February 24, 2010 | /s/ George R. Gavagan | |||
| George R. Gavagan, | ||||
|
Vice President and Controller
(principal accounting officer) |
||||
| Dated: February 24, 2010 | /s/ Craig A. Dubow | |||
| Craig A. Dubow, | ||||
| Director, Chairman | ||||
| Dated: February 24, 2010 | /s/ Howard D. Elias | |||
| Howard D. Elias, Director | ||||
| Dated: February 24, 2010 | /s/ Arthur H. Harper | |||
| Arthur H. Harper, Director | ||||
| Dated: February 24, 2010 | /s/ John Jeffry Louis | |||
| John Jeffry Louis, Director | ||||
| Dated: February 24, 2010 | /s/ Marjorie Magner | |||
| Marjorie Magner, Director | ||||
| Dated: February 24, 2010 | /s/ Scott K. McCune | |||
| Scott K. McCune, Director | ||||
| Dated: February 24, 2010 | /s/ Duncan M. McFarland | |||
| Duncan M. McFarland, Director | ||||
| Dated: February 24, 2010 | /s/ Donna E. Shalala | |||
| Donna E. Shalala, Director | ||||
| Dated: February 24, 2010 | /s/ Neal Shapiro | |||
| Neal Shapiro, Director | ||||
| Dated: February 24, 2010 | /s/ Karen Hastie Williams | |||
| Karen Hastie Williams, Director | ||||
83
Table of Contents
EXHIBIT INDEX
| Exhibit | ||||||
| Number | Exhibit | Location | ||||
|
|
||||||
| 2-1 | Equity Purchase Agreement, dated as of August 28, 2008, among Cape Publications, Inc., Gannett Satellite Information Network, Inc., Tribune Media Net, Inc. and Tribune National Marketing Company. |
Incorporated by reference to Exhibit 2-1 to Gannett Co., Inc.’s
Form 8-K dated August 28, 2008 and filed September 3, 2008.
|
||||
|
|
||||||
| 3-1 | Third Restated Certificate of Incorporation of Gannett Co., Inc. |
Incorporated by reference to Exhibit 3-1 to Gannett Co., Inc.’s
Form 10-Q for the fiscal quarter ended April 1, 2007.
|
||||
|
|
||||||
| 3-2 | Amended by-laws of Gannett Co., Inc. |
Incorporated by reference to Exhibit 3-2 to Gannett Co., Inc.’s
Form 8-K filed on December 19, 2008.
|
||||
|
|
||||||
| 3-3 | Form of Certificate of Designation, Preferences and Rights setting forth the terms of the Series A Junior Participating Preferred Stock, par value $1.00 per share, of Gannett Co., Inc. |
Incorporated by reference to Exhibit 1 to Gannett Co., Inc.’s
Form 8-A filed on May 23, 1990.
|
||||
|
|
||||||
| 4-1 | Indenture dated as of March 1, 1983, between Gannett Co., Inc. and Citibank, N.A., as Trustee. |
Incorporated by reference to Exhibit 4-2 to Gannett Co., Inc.’s
Form 10-K for the fiscal year ended December 29, 1985.
|
||||
|
|
||||||
| 4-2 | First Supplemental Indenture dated as of November 5, 1986, among Gannett Co., Inc., Citibank, N.A., as Trustee, and Sovran Bank, N.A., as Successor Trustee. |
Incorporated by reference to Exhibit 4 to Gannett Co., Inc.’s
Form 8-K filed on November 9, 1986.
|
||||
|
|
||||||
| 4-3 | Second Supplemental Indenture dated as of June 1, 1995, among Gannett Co., Inc., NationsBank, N.A., as Trustee, and Crestar Bank, as Trustee. |
Incorporated by reference to Exhibit 4 to Gannett Co., Inc.’s
Form 8-K filed on June 15, 1995.
|
||||
|
|
||||||
| 4-4 | Third Supplemental Indenture, dated as of March 14, 2002, between Gannett Co., Inc. and Wells Fargo Bank Minnesota, N.A., as Trustee. |
Incorporated by reference to Exhibit 4.16 to Gannett Co., Inc.’s
Form 8-K filed on March 14, 2002.
|
||||
|
|
||||||
| 4-5 | Fourth Supplemental Indenture, dated as of June 16, 2005, between Gannett Co., Inc. and Wells Fargo Bank Minnesota, N.A., as Trustee. |
Incorporated by reference to same numbered exhibit to Gannett
Co., Inc.’s Form 10-Q for the fiscal quarter ended June 26, 2005.
|
||||
|
|
||||||
| 4-6 | Fifth Supplemental Indenture, dated as of May 26, 2006, between Gannett Co., Inc. and Wells Fargo Bank, N.A., as Trustee. |
Incorporated by reference to Exhibit 4-5 to Gannett Co. Inc.’s
Form 10-Q for the fiscal quarter ended June 25, 2006.
|
||||
|
|
||||||
| 4-7 | Sixth Supplemental Indenture, dated as of June 29, 2007, between Gannett Co., Inc. and Wells Fargo Bank, N.A., as Successor Trustee. |
Incorporated by reference to Exhibit 4.5 to Gannett Co., Inc.’s
Form 10-Q for the fiscal quarter ended July 1, 2007.
|
||||
|
|
||||||
| 4-8 | Rights Agreement, dated as of May 21, 1990, between Gannett Co., Inc. and First Chicago Trust Company of New York, as Rights Agent. |
Incorporated by reference to Exhibit 1 to Gannett Co., Inc.’s
Form 8-A filed on May 23, 1990.
|
||||
|
|
||||||
| 4-8-1 | Amendment No. 1 to Rights Agreement, dated as of May 2, 2000, between Gannett Co., Inc. and Norwest Bank Minnesota, N.A., as successor rights agent to First Chicago Trust Company of New York. |
Incorporated by reference to Exhibit 2 to Gannett Co., Inc.’s
Form 8-A/A filed on May 2, 2000.
|
||||
|
|
||||||
| 4-9 | Form of Rights Certificate. |
Incorporated by reference to Exhibit 1 to Gannett Co., Inc.’s
Form 8-A/A filed on May 23, 1990.
|
||||
|
|
||||||
| 4-10 | Specimen Certificate for Gannett Co., Inc.’s common stock, par value $1.00 per share. |
Incorporated by reference to Exhibit 2 to Gannett Co., Inc.’s
Form 8-B filed on June 14, 1972.
|
||||
84
Table of Contents
| Exhibit | ||||||
| Number | Exhibit | Location | ||||
| 10-1 | Gannett Co., Inc. 1978 Executive Long-Term Incentive Plan.* |
Incorporated by reference to Exhibit 10-3 to Gannett Co., Inc.’s
Form 10-K 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
fiscal 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 fiscal
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 fiscal 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.
|
||||
|
|
||||||
| 10-2 | Description of supplemental insurance benefits.* |
Incorporated by reference to Exhibit 10-4 to Gannett Co., Inc.’s
Form 10-K for the fiscal year ended December 29, 2002.
|
||||
|
|
||||||
| 10-3 | Gannett Supplemental Retirement Plan Restatement.* |
Incorporated by reference to Exhibit 10-2 to Gannett Co., Inc.’s
Form 10-Q for the fiscal quarter ended September 30, 2007.
|
||||
|
|
||||||
| 10-3-1 | Amendment No. 1 to the Gannett Co., Inc. Supplemental Retirement Plan dated July 31, 2008 and effective August 1, 2008.* |
Incorporated by reference to Exhibit 10-1 to Gannett Co., Inc.’s
Form 10-Q for the fiscal quarter ended September 28, 2008.
|
||||
|
|
||||||
| 10-4 | Gannett Co., Inc. Deferred Compensation Plan Restatement dated February 1, 2003 (reflects all amendments through July 25, 2006).* |
Incorporated by reference to the same-numbered Exhibit
to Gannett Co., Inc.’s Form 10-K for the fiscal year ended
December 31, 2006.
|
||||
|
|
||||||
| 10-4-1 | Gannett Co., Inc. Deferred Compensation Plan Rules for Post-2004 Deferrals.* |
Incorporated by reference to Exhibit 10-3 to Gannett Co., Inc.’s
Form 10-Q for the fiscal quarter ended July 1, 2007.
|
||||
|
|
||||||
| 10-4-2 | Amendment No. 1 to the Gannett Co., Inc. Deferred Compensation Plan Rules for Post-2004 Deferrals dated July 31, 2008 and effective August 1, 2008.* |
Incorporated by reference to Exhibit 10-2 to Gannett Co., Inc.’s
Form 10-Q for the fiscal quarter ended September 28, 2008.
|
||||
|
|
||||||
| 10-4-3 | Amendment No. 2 to the Gannett Co., Inc. Deferred Compensation Plan Rules for Post-2004 Deferrals dated December 9, 2008.* |
Incorporated by reference to Exhibit 10-4-3 to Gannett Co., Inc.’s
Form 10-K for the fiscal year ended December 28, 2008.
|
||||
|
|
||||||
| 10-4-4 | Amendment No. 3 to the Gannett Co., Inc. Deferred Compensation Plan Rules for Post-2004 Deferrals dated October 27, 2009.* |
Attached.
|
||||
|
|
||||||
| 10-5 | Gannett Co., Inc. Transitional Compensation Plan Restatement.* |
Incorporated by reference to Exhibit 10-1 to Gannett Co., Inc.’s
Form 10-Q for the fiscal quarter ended September 30, 2007.
|
||||
|
|
||||||
| 10-6 | Omnibus Incentive Compensation Plan, as amended.* |
Incorporated by reference to Exhibit 10-8 to Gannett Co., Inc.’s
Form 10-K for the fiscal year ended December 25, 2005.
|
||||
|
|
||||||
| 10-6-1 | Amendment to Omnibus Incentive Compensation Plan dated August 7, 2007.* |
Incorporated by reference to Exhibit 10-6 to Gannett Co., Inc.’s
Form 10-Q for the fiscal quarter ended July 1, 2007.
|
||||
|
|
||||||
| 10-6-2 | Gannett Co., Inc. 2001 Inland Revenue Approved Sub-Plan for the United Kingdom.* |
Incorporated by reference to Exhibit 10-1 to Gannett Co., Inc.’s
Form 10-Q for the fiscal quarter ended September 26, 2004.
|
||||
|
|
||||||
| 10-6-3 | Form of Director Stock Option Award Agreement.* |
Incorporated by reference to Exhibit 10-7-3 to Gannett Co.,
Inc.’s
Form 10-K for the fiscal year ended December 30, 2007.
|
||||
|
|
||||||
| 10-6-4 | Form of Director Restricted Stock Award Agreement.* |
Incorporated by reference to Exhibit 10-6-4 to Gannett Co.,
Inc.’s
Form 10-K for the fiscal year ended December 28, 2008.
|
||||
|
|
||||||
| 10-6-5 | Form of Executive Officer Stock Option Award Agreement.* |
Incorporated by reference to Exhibit 10-6-5 to Gannett Co.,
Inc.’s
Form 10-K for the fiscal year ended December 28, 2008.
|
||||
85
Table of Contents
| Exhibit | ||||||
| Number | Exhibit | Location | ||||
| 10-6-6 | Form of Executive Officer Restricted Stock Unit Award Agreement.* |
Incorporated by reference to Exhibit 10-6-6 to Gannett Co., Inc.’s
Form 10-K for the fiscal year ended December 28, 2008.
|
||||
|
|
||||||
| 10-7 | Gannett U.K. Limited Share Incentive Plan, as amended effective June 25, 2004.* |
Incorporated by reference to Exhibit 10-2 to Gannett Co., Inc.’s
Form 10-Q for the fiscal quarter ended June 27, 2004.
|
||||
|
|
||||||
| 10-8 | Competitive Advance and Revolving Credit Agreement among Gannett Co., Inc., the Several Lenders from Time to Time Parties Thereto, Bank of America, N.A., as Administrative Agent and JPMorgan Chase Bank, as Syndication Agent, dated as of February 27, 2004, and Effective as of March 15, 2004. |
Incorporated by reference to Exhibit 10-2 to Gannett Co., Inc.’s
Form 10-Q for the fiscal quarter ended March 28, 2004.
|
||||
|
|
||||||
| 10-8-1 | First Amendment, dated as of February 28, 2007, and Effective as of March 15, 2007, to Competitive Advance and Revolving Credit Agreement. |
Incorporated by reference to Exhibit 10-5 to Gannett Co., Inc.’s
Form 10-Q for the fiscal quarter ended April 1, 2007.
|
||||
|
|
||||||
| 10-8-2 | Second Amendment, dated as of October 23, 2008, and Effective as of October 31, 2008, to Competitive Advance and Revolving Credit Agreement. |
Incorporated by reference to Exhibit 10-3 to Gannett Co., Inc.’s
Form 10-Q for the fiscal quarter ended September 28, 2008.
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|
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| 10-8-3 | Third Amendment, dated as of September 28, 2009, to Competitive Advance and Revolving Credit Agreement, dated as of February 27, 2004 and effective as of March 15, 2004. |
Incorporated by reference to Exhibit 10-2 to Gannett Co., Inc.’s
Form 10-Q for the fiscal quarter ended September 27, 2009.
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|
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| 10-9 | Competitive Advance and Revolving Credit Agreement among Gannett Co., Inc., the Several Lenders from Time to Time Parties Thereto, Bank of America, N.A., as Administrative Agent, JPMorgan Chase Bank, N.A., as Syndication Agent, and Barclays Bank PLC, as Documentation Agent, dated as of December 13, 2004, and Effective as of January 5, 2005. |
Incorporated by reference to Exhibit 10-16 to Gannett Co., Inc.’s
Form 10-K for the fiscal year ended December 26, 2004.
|
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|
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| 10-9-1 | First Amendment, dated as of February 28, 2007, and Effective as of March 15, 2007, to Competitive Advance and Revolving Credit Agreement. |
Incorporated by reference to Exhibit 10-3 to Gannett Co., Inc.’s
Form 10-Q for the fiscal quarter ended April 1, 2007.
|
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|
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| 10-9-2 | Second Amendment, dated as of October 23, 2008, and Effective as of October 31, 2008, to Competitive Advance and Revolving Credit Agreement. |
Incorporated by reference to Exhibit 10-4 to Gannett Co., Inc.’s
Form 10-Q for the fiscal quarter ended September 28, 2008.
|
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|
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| 10-9-3 | Third Amendment, dated as of September 28, 2009, to Competitive Advance and Revolving Credit Agreement, dated as of December 13, 2004 and effective as of January 5, 2005. |
Incorporated by reference to Exhibit 10-1 to Gannett Co., Inc.’s
Form 10-Q for the fiscal quarter ended September 27, 2009.
|
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|
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| 10-10 | Amended and Restated Competitive Advance and Revolving Credit Agreement among Gannett Co., Inc., the Several Lenders from Time to Time Parties Thereto, Bank of America, N.A., as Administrative Agent, JPMorgan Chase Bank, N.A., as Syndication Agent, and Barclays Bank PLC, as Documentation Agent, dated as of March 11, 2002, and Effective as of March 18, 2002, as Amended and Restated as of December 13, 2004, and Effective as of January 5, 2005. |
Incorporated by reference to Exhibit 10-17 to Gannett Co., Inc.’s
Form 10-K for the fiscal year ended December 26, 2004.
|
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|
|
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| 10-10-1 | First Amendment, dated as of February 28, 2007, and Effective as of March 15, 2007, to Amended and Restated Competitive Advance and Revolving Credit Agreement. |
Incorporated by reference to Exhibit 10-4 to Gannett Co., Inc.’s
Form 10-Q for the fiscal quarter ended April 1, 2007.
|
||||
|
|
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| 10-10-2 | Second Amendment, dated as of October 23, 2008, and Effective as of October 31, 2008, to Amended and Restated Competitive Advance and Revolving Credit Agreement. |
Incorporated by reference to Exhibit 10-5 to Gannett Co., Inc.’s
Form 10-Q for the fiscal quarter ended September 28, 2008.
|
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|
|
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| 10-10-3 | Third Amendment, dated as of September 28, 2009, to Amended and Restated Competitive Advance and Revolving Credit Agreement, dated as of March 11, 2002 and effective as of March 18, 2002, as amended and restated as of December 13, 2004 and effective as of January 5, 2005. |
Incorporated by reference to Exhibit 10-3 to Gannett Co., Inc.’s
Form 10-Q for the fiscal quarter ended September 27, 2009.
|
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86
Table of Contents
| Exhibit | ||||||
| Number | Exhibit | Location | ||||
| 10-11 | Summary of Non-Employee Director Compensation.* |
Incorporated by reference to Exhibit 10-7 to Gannett Co., Inc.’s
Form 10-Q for the fiscal quarter ended July 1, 2007.
|
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|
|
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| 10-12 | Employment Agreement dated February 27, 2007, between Gannett Co., Inc. and Craig A. Dubow.* |
Incorporated by reference to Exhibit 10-14 to Gannett Co., Inc.’s
Form 10-K for the fiscal year ended December 31, 2006.
|
||||
|
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| 10-12-1 | Amendment, dated as of August 7, 2007, to Employment Agreement dated February 27, 2007.* |
Incorporated by reference to Exhibit 10-4 to Gannett Co., Inc.’s
Form 10-Q for the fiscal quarter ended July 1, 2007.
|
||||
|
|
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| 10-13 | Employment Agreement dated February 27, 2007, between Gannett Co., Inc. and Gracia C. Martore.* |
Incorporated by reference to Exhibit 10-15 to Gannett Co., Inc.’s
Form 10-K for the fiscal year ended December 31, 2006.
|
||||
|
|
||||||
| 10-13-1 | Amendment, dated as of August 7, 2007, to Employment Agreement dated February 27, 2007.* |
Incorporated by reference to Exhibit 10-5 to Gannett Co., Inc.’s
Form 10-Q for the fiscal quarter ended July 1, 2007.
|
||||
|
|
||||||
| 10-14 | Amendment for section 409A Plans dated December 31, 2008.* |
Incorporated by reference to Exhibit 10-14 to Gannett Co., Inc.’s
Form 10-K for the fiscal year ended December 28, 2008.
|
||||
|
|
||||||
| 10-15 | Executive Life Insurance Plan document dated December 31, 2008.* |
Incorporated by reference to Exhibit 10-15 to Gannett Co., Inc.’s
Form 10-K for the fiscal year ended December 28, 2008.
|
||||
|
|
||||||
| 10-16 | Termination Benefits Agreement dated as of December 5, 2007 between Gannett Co., Inc. and Christopher Saridakis.* |
Incorporated by reference to Exhibit 10-16 to Gannett Co., Inc.’s
Form 10-K for the fiscal year ended December 28, 2008.
|
||||
|
|
||||||
| 10-16-1 | Digital Long-Term Incentive Plan dated as of December 4, 2007, as amended February 24, 2009.*† |
Incorporated by reference to Exhibit 10-16-1 to Gannett Co., Inc.’s
Form 10-K for the fiscal year ended December 28, 2008.
|
||||
|
|
||||||
| 10-17 | Omnibus Amendment to Terms and Conditions of Restricted Stock Awards dated as of December 31, 2008.* |
Incorporated by reference to Exhibit 10-17 to Gannett Co., Inc.’s
Form 10-K for the fiscal year ended December 28, 2008.
|
||||
|
|
||||||
| 10-18 | Omnibus Amendment to Terms and Conditions of Stock Unit Awards dated as of December 31, 2008.* |
Incorporated by reference to Exhibit 10-18 to Gannett Co., Inc.’s
Form 10-K for the fiscal year ended December 28, 2008.
|
||||
|
|
||||||
| 10-19 | Omnibus Amendment to Terms and Conditions of Stock Option Awards dated as of December 31, 2008.* |
Incorporated by reference to Exhibit 10-19 to Gannett Co., Inc.’s
Form 10-K for the fiscal year ended December 28, 2008.
|
||||
|
|
||||||
| 21 | Subsidiaries of Gannett Co., Inc. |
Attached.
|
||||
|
|
||||||
| 23 | Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm. |
Attached.
|
||||
|
|
||||||
| 31-1 | Certification Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934. |
Attached.
|
||||
|
|
||||||
| 31-2 | Certification Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934. |
Attached.
|
||||
|
|
||||||
| 32-1 | Section 1350 Certification. |
Attached.
|
||||
|
|
||||||
| 32-2 | Section 1350 Certification. |
Attached.
|
||||
|
|
||||||
| 101 | The following financial information from Gannett Co., Inc. Annual Report on Form 10-K for the year ended December 27, 2009, formatted in XBRL includes: |
Attached.
|
||||
| (1) Consolidated Statements of Income (Loss) for the 2009, 2008 and 2007 fiscal years, (ii) Consolidated Balance Sheets at December 27, 2009 and December 28, 2008, (iii) Consolidated Cash Flow Statements for the 2009, 2008 and 2007 fiscal years; (iv) Consolidated Statements of Equity for the 2009, 2008 and 2007 fiscal years; and (v) the Notes to Consolidated Financial Statements, tagged as blocks of text. |
|
|||||
For purposes of the incorporation by reference of documents as Exhibits, all references to Form
10-K, 10-Q and 8-K of Gannett Co., Inc. refer to Forms 10-K, 10-Q and 8-K filed with the Commission
under Commission file number 1-6961.
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. | |
| † | Portions of this exhibit were redacted pursuant to a confidential treatment request filed with and approved by the Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended. |
87
Table of Contents
GLOSSARY OF FINANCIAL TERMS
Presented below are definitions of certain key financial and operational terms that Gannett
hopes will enhance the reading and understanding of Gannett’s 2009 Form 10-K.
AMORTIZATION
- A charge against the company’s earnings that represents the write off of intangible
assets over the projected life of the assets.
BALANCE SHEET
- A summary statement that reflects the company’s assets, liabilities and
equity at a particular point in time.
BROADCASTING REVENUES
- Primarily amounts charged to customers for commercial advertising aired on
the company’s television stations.
CIRCULATION
- The number of newspapers sold to customers each day (“paid circulation”). The company
keeps separate records of morning, evening and Sunday circulation.
CIRCULATION REVENUES
- Amounts charged to newspaper readers or distributors reduced by the amount
of discounts. Charges vary from city to city and depend on the type of sale (i.e., subscription or
single copy) and distributor arrangements.
COMPREHENSIVE INCOME
- The change in equity (net assets) of the company from transactions and other
events from non-owner sources. Comprehensive income comprises net income and other items reported
directly in shareholders’ equity, principally the foreign currency translation adjustment and
funded status of postretirement plans.
CURRENT ASSETS
- Cash and other assets that are expected to be converted to cash within one year.
CURRENT LIABILITIES
- Amounts owed that will be paid within one year.
DEFERRED INCOME
- Revenue derived principally from advance subscription payments for newspapers.
Revenue is recognized in the period in which it is earned (as newspapers are delivered).
DEPRECIATION
- A charge against the company’s earnings that allocates the cost of property, plant
and equipment over the estimated useful lives of the assets.
DIGITAL/ONLINE
REVENUES
- These include revenue from advertising placed on web sites that are
associated with the company publishing and broadcasting operations which are reflected as revenues
of those business segments, and revenues from the businesses that comprise the Digital segment,
principal of which are CareerBuilder (employment web site) and PointRoll (technology/marketing
services revenue).
DIGITAL SEGMENT
- Beginning with 2008, a new digital business segment was reported, which includes
CareerBuilder and ShopLocal from the dates of their full consolidation, as well as PointRoll,
Planet Discover, Schedule Star and Ripple6.
DISCONTINUED OPERATIONS
- A term which refers to businesses which have been sold or disposed of by
the company. To achieve comparability in financial reporting for all remaining operations, the
results from discontinued operations are reclassified from the normal operating section of the
Statements of Income and presented in a separate section entitled “Discontinued Operations.”
DIVIDEND
- Payment by the company to its shareholders of a portion of its earnings.
EARNINGS PER SHARE (basic)
- The company’s earnings divided by the average number of shares
outstanding for the period.
EARNINGS PER SHARE (diluted)
- The company’s earnings divided by the average number of shares
outstanding for the period, giving effect to assumed dilution from outstanding stock options and
restricted stock units.
EQUITY EARNINGS FROM INVESTMENTS
- For those investments which are 50% or less owned by the
company, an income or loss entry is recorded in the Statements of Income representing the company’s
ownership share of the operating results of the investee company.
GAAP
- Generally accepted accounting principles.
FOREIGN CURRENCY TRANSLATION
- The process of reflecting foreign currency accounts of subsidiaries
in the reporting currency of the parent company.
GOODWILL
- In a business purchase, this represents the excess of amounts paid over the fair value
of tangible and other identified intangible assets acquired net of liabilities assumed.
INVENTORIES
- Raw materials, principally newsprint, used in the business.
NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS
- The portion of equity and net earnings in
consolidated subsidiaries that is owned by others.
ADVERTISING REVENUES
- Amounts charged to customers for space purchased in
the company’s newspapers and/or the associated web site. There are three major types of advertising
revenue: retail ads from local merchants, such as department stores; classified ads, which include
automotive, real estate and “help wanted”; and national ads, which promote products or brand names
on a nationwide basis.
PRO FORMA
- A non-GAAP manner of presentation intended to provide improved comparability of
financial results; it assumes business purchases/dispositions were completed at the beginning of
the earliest period discussed (i.e., results are compared for all periods but only for businesses
presently owned).
PURCHASE
- A business acquisition. The acquiring company records at its cost the acquired assets
less liabilities assumed. The reported income of an acquiring company includes the operations of
the acquired company from the date of acquisition.
RESTRICTED STOCK
- An award that gives key employees the right to shares of the company’s stock,
pursuant to a vesting schedule.
RETAINED EARNINGS
- The earnings of the company not paid out as dividends to shareholders.
STATEMENT OF CASH FLOWS
- A financial statement that reflects cash flows from operating, investing
and financing activities, providing a comprehensive view of changes in the company’s cash and cash
equivalents.
STATEMENT OF EQUITY
- A statement that reflects changes in the company’s common
stock, retained earnings and other equity accounts.
STATEMENT OF INCOME
- A financial statement that reflects the company’s profit by measuring
revenues and expenses.
STOCK-BASED COMPENSATION
- The payment to employees for services received with equity instruments
such as stock options and restricted stock.
STOCK OPTION
- An award that gives key employees the right to buy shares of the company’s stock,
pursuant to a vesting schedule, at the market price of the stock on the date of the award.
88
TABLE OF CONTENTS
Part IItem 1. BusinessItem 1A. Risk FactorsItem 1B. Unresolved Staff CommentsItem 2. PropertiesItem 3. Legal ProceedingsItem 4. Submission Of Matters To A Vote Of Security HoldersPart IIItem 5. Market For Registrant S Common Equity, Related Stockholder Matters and Issuer Purchases Of Equity SecuritiesItem 6. Selected Financial DataItem 7. Management S Discussion and Analysis Of Financial Condition and Results Of OperationsItem 7A. Quantitative and Qualitative Disclosures About Market RiskItem 8. Financial Statements and Supplementary DataNote 11 Shareholders EquityItem 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureItem 9A. Controls and ProceduresPart IIIItem 10. Directors, Executive Officers and Corporate GovernanceItem 11. Executive CompensationItem 12. Security Ownership Of Certain Beneficial Owners and Management and Related Stockholder MattersItem 13. Certain Relationships and Related Transactions, and Director IndependenceItem 14. Principal Accountant Fees and ServicesPart IVItem 15. Exhibits and Financial Statement Schedules