10-K 1 gci-20131229x10k.htm 10-K GCI-2013.12.29-10K
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(Mark One)
x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 29, 2013
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                     to                     
Commission file number 1-6961
GANNETT CO., INC.
(Exact name of registrant as specified in its charter)
Delaware
 
16-0442930
(State or Other Jurisdiction of Incorporation or Organization)
 
(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 a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.     Yes  x    No  ¨
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  ¨    No  x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    
Yes  x    No   ¨
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  x    No  ¨
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 (Check box if no delinquent filers). x
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:
Large accelerated filer
x
Accelerated filer
¨
Non-accelerated filer
¨
Smaller reporting company
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).     Yes  ¨    No  x
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 30, 2013, was $5,589,908,194. The registrant has no non-voting common equity.
As of February 2, 2014, 227,365,020 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 1, 2014, is incorporated by reference in Part III to the extent described therein.
 



INDEX TO GANNETT CO., INC.
2013 FORM 10-K
 
Item No.
 
Page
 
 
 
 
 
1
 
 
 
1A.
 
 
 
1B.
 
 
 
2
 
 
 
3
 
 
 
4
 
 
 
 
 
 
 
 
5
 
 
 
6
 
 
 
7
 
 
 
7A.
 
 
 
8
 
 
 
9
 
 
 
9A.
 
 
 
 
 
 
 
 
10
 
 
 
11
 
 
 
12
 
 
 
13
 
 
 
14
 
 
 
 
 
 
 
 
15

2


PART I

ITEM 1.BUSINESS
Overview
Gannett is an international media and marketing solutions company and one of the largest, most geographically diverse local content providers in the U.S. Through a vast network of broadcast, digital, mobile and print products, it informs and engages more than 110 million people every month. Gannett’s portfolio of trusted brands offers marketers unmatched local-to-national reach and customizable, innovative marketing solutions. As a digital media leader, the company provides access to content on many different platforms; digital marketing services to businesses to help them more effectively use digital technology to reach their sales goals; and Internet-based human resource solutions.
Gannett’s easily recognizable national brands, such as USA TODAY and CareerBuilder, as well as its rich portfolio of unique local brands serving 112 communities, set the company apart and provide a strong advantage. Gannett’s properties cover a wide range of geographies, demographics and content areas, which combine to form a uniquely powerful and comprehensive portfolio of offerings for consumers and commercial clients alike.
Gannett’s connection to, and understanding of, its communities and its local market relationships – many of which have spanned decades – provide the company with unparalleled advantages.
Gannett provides consumers with the information and entertainment they seek and connects them to their communities of interest through multiple platforms including television stations, web sites, mobile and tablet products and print publications. Gannett helps businesses grow by providing marketing solutions that reach and engage their customers across the company’s diverse platforms.
Gannett is organized along three segments: Broadcasting, Publishing and Digital. Within its Broadcasting Segment, Gannett owns or services (through shared service agreements or other similar agreements) 43 television stations. Excluding owner-operators, following its acquisition of Belo Corp. in December 2013, Gannett is the No. 1 NBC affiliate group, No. 1 CBS affiliate group, and the No. 4 ABC affiliate group. These stations serve 30% of the U.S. population in markets with nearly 35 million households.
Gannett is the largest independent station group of major network affiliates in the top 25 markets, with a uniquely diversified portfolio. Each television station also has a robust digital presence, including mobile, to reach consumers wherever they are.
Within its Publishing Segment, Gannett provides content through 82 local U.S. daily publications, including USA TODAY, a multi-platform news and information media company, as well as more than 400 non-daily local publications in 30 states and Guam. USA TODAY ranks No. 1 in the industry in combined print and digital circulation, according to the Alliance for Audited Media. In addition, Gannett subsidiary Newsquest is one of the United Kingdom’s leading regional community news providers, providing its markets with 17 daily paid-for titles, more than 200 weekly print products, magazines and trade publications. Newsquest is also a digital leader in the U.K. where its network of web sites attracted more than 15 million unique users in December 2013.
 
Gannett also owns and operates a number of stand-alone digital subsidiaries, which are included in the company’s Digital Segment. The largest of these include CareerBuilder, Shoplocal and PointRoll. CareerBuilder is a global leader in human capital solutions, providing everything from labor market intelligence to talent management software and other recruitment solutions, with a presence in more than 60 markets worldwide and a focus on technology solutions and niche sites. CareerBuilder.com is the largest online job site in the U.S., measured both by traffic and revenue. Having served the market for almost twenty years, CareerBuilder is now benefiting from a history of building customer relationships, having gained market share for each of the last nine years.
The company generates revenues within its Broadcasting Segment through advertising, fees paid for retransmission of the company’s television signals on satellite and cable networks, and payments for other services, such as the production of advertising content. Advertising includes local advertising focused on the immediate geographic area of the stations, national advertising, and advertising on the stations’ web, tablet and mobile products. The company generates revenue within its Publishing Segment primarily through advertising and subscriptions to Gannett’s print and digital publications. Its advertising departments sell retail, classified and national advertising across multiple platforms including print, web sites, mobile, tablet and other specialty publications. CareerBuilder, the largest company in the Digital Segment, generates revenues both through its own sales force by providing talent and compensation intelligence, human resource related consulting services and recruitment solutions and through sales of employment advertising placed by affiliated media organizations.
Gannett has made substantial progress in its digital transformation, which has fundamentally changed the way the company interacts with its audiences and advertisers. In step with changes in the media landscape, Gannett has used new technology to meet evolving consumer demands and create valuable new revenue streams. The company generates its digital revenues through online content subscription fees and advertising on its various digital platforms including more than 120 domestic web sites affiliated with its publishing and television markets, USA TODAY, Gannett Government Media and Gannett Healthcare Group. In December 2013, Gannett’s consolidated domestic Internet audience share increased nearly 20% from December of 2012 to over 65 million unique visitors reaching more than 29% of the Internet audience, according to comScore Media Metrix. USATODAY.com is one of the most popular news sites and the USA TODAY app is a top news app with more than 19 million downloads to date across iPad, iPhone, Android, Windows and Kindle Fire. USA TODAY mobile traffic continues to accelerate rapidly with monthly visitors increasing 89% in December from a year ago to approximately 24 million.
Most of the company’s digital offerings are deeply integrated with publishing or broadcasting product offerings, supported by shared infrastructure. As a result, many digital offerings are reported within the operating results of its Publishing and Broadcasting Segments. In addition, as more fully described under “Strategy,” and “Strategic Acquisitions,” Gannett has a number of initiatives underway supporting its digital transformation.



3


Strategy
2013 was a highly transformative year at Gannett as the company made major strides toward the achievement of its transformation goals, while remaining focused on the successful execution of its strategic growth initiatives, ensuring Gannett continues to evolve quickly with the ever-changing media landscape.
The company follows an ambitious business strategy integrated with a comprehensive capital allocation plan designed to leverage its strong brands, deep community ties, and financial strength. The strategy is centered on three themes:
Enhance local core news and marketing operations to make local franchises stronger and ties with the communities even deeper, thereby growing Publishing and higher growth, higher margin Broadcasting and Digital businesses;
Leverage hometown and brand advantages to accelerate growth by entering into or expanding high potential businesses; and
Optimize assets on an ongoing basis to maintain a strong financial profile to improve efficiency and effectiveness, and driving increased shareholder value.
Gannett’s portfolio was permanently changed through its acquisition of Belo Corp. in December 2013. This acquisition positions Gannett as a more diversified, higher-margin, higher growth multimedia business, adding deep connections in new markets while providing the company with strong financial, geographic and network diversification. As a result, Broadcasting now represents about 50% of the company’s overall cash flow and positions Gannett for sustainable growth and success in the digital age.
In connection with implementing its growth strategy in 2012, Gannett continued to pursue, and made significant progress on, a number of specific strategic initiatives which are integrated across all three of its business segments: Broadcasting, Publishing and Digital. Progress on these strategic initiatives, capital allocation plan, and strategic acquisitions and dispositions is highlighted below.
All Access Content Subscription Model: U.S. Community Publishing (USCP) continued to successfully enhance its All Access Content Subscription Model for its local media across the U.S. All subscriptions include full web, mobile, e-Edition and tablet access, with subscription prices that vary according to the frequency of print home delivery. Single-copy print editions continue to be sold at retail outlets. Since the implementation of the model, the company has achieved more than $100 million in operating income benefits. In 2013, USCP reported more than 1.6 million digitally activated subscribers, and USCP is making strides in acquiring digital-only subscribers as well. In some markets, particularly those with younger demographics, digital-only subscribers are approaching 10% of all accounts – and growing. In 2011, prior to the launch of the All Access Model, circulation revenues accounted for 29% of the division’s total revenue. In 2013, after the annual cycling of the launches, circulation revenues accounted for 35% of USCP total revenue.
Learnings from the All Access Content Subscription Model led to the creation of a USCP and USA TODAY pilot project at four local Gannett media organizations. The project provided local consumers with an enhanced news product that leverages Gannett’s unique ability to generate and distribute national content while enhancing its ever-important local hometown coverage. In addition to the local units enhancing their publications with more unique and robust local content, a local edition of USA TODAY is being included inside the
print edition and e-Edition. The added USA TODAY edition
 
includes national News, Money and lifestyle content seven days a week. Also, USA TODAY’s Sports coverage is integrated into local sports sections and a Life edition is included every Sunday. On average, the integration is expected to result in approximately 70 new pages of content per week in print and e-Editions. Following the success of the initiative in the pilot markets, the company will roll out the project to an additional 31 local Gannett daily publications across the country in the first quarter of 2014.
Digital Relaunch & Mobile: The Digital Relaunch initiative focused on the deployment and continued enhancement of the company’s new content management, publishing and integration technology. The launch and roll out of the Gannett Digital platform helped drive editorial and advertising innovation in new smartphone and tablet applications and on desktop sites. Digital teams launched hundreds of enhanced digital products, and migrated toward a unified and streamlined production, programming and distribution system. A new content management system provides the connective tissue for all new products, enabling sharing of digital content company-wide, seamless live video programming, breaking news alerts and high-end creation and presentation of new, front-end storytelling designs. Major core product launches and back-end advertising product solutions allowed the redesigned and higher performing services to deploy across dozens of broadcasting and community publishing properties. The new products led to significantly increased user reach and digital news and information engagement. Unique visitors rose 13% year-over-year across divisions, according to comScore Media Metrix. By the end of 2013, Gannett was ranked in the top five for the News and Information category, up from the company’s No. 6 ranking in 2012.
In addition, as consumer consumption of video rapidly grows, Gannett is well positioned to expand its video-focused approach to delivering news and information. In 2013, the total number of video plays at Gannett increased 95% over the year earlier, to 485 million video plays across the company’s network of media properties. Helping to expand that capability is Gannett’s Video Production Center in Atlanta, which hosts, creates, collects, curates and distributes video from Gannett’s many news organizations and then disseminates that video across the company’s network.
USA TODAY Sports Media Group: USA TODAY Sports Media Group covers sports from the local high school level through college and professional teams and continues to build upon USA TODAY’s 30-year relationship with American sports fans. Its goal is to be the leading sports content provider by leveraging its national and local content, investing in original content, and acquiring additional distribution and content. In 2013, USA TODAY Sports Media Group continued to build new digital products and re-launch existing digital sports products, and maintain its place as one of the nation’s top five digital sports destinations with over 33 million unique visitors each month. The efforts below resulted in a 24% increase in comScore cross platform unique visitor traffic year over year, with significant mobile audience growth of 81% versus 2012. Group highlights included:
Launching “For The Win” (ftw.usatoday.com), the first mainstream sports media property focused exclusively on “social news,” and The Q (q.usatoday.com), a platform that delivers sports news to fans through curated analysis.
Re-launching growth sports sites The Big Lead (www.thebiglead.com), a fast-growing and highly social media property where breaking sports news and commentary combine with pop culture, Hoopshype (www.hoopshype.com), a popular destination for NBA breaking news, and MMA Junkie (www.mmajunkie.com) a popular mixed martial arts site.


4


USA TODAY High School Sports re-launched 39 local high school media sites across Gannett’s local properties, featuring video, text, photo, and social media capabilities.
USA TODAY Sports Images became the official photo partner of Major League Soccer (MLS) and its business and marketing subsidiary, Soccer United Marketing (SUM), as part of a multi-year agreement. 
Expanded its Super Bowl ad-rating platform Ad Meter to The Year in Sports where fans vote in categories like Best Sports Marketing Campaign and Best Athlete Endorsement Ad.

USA TODAY Travel Media Group: The USA TODAY Travel Media Group expanded its focus beyond business travelers to all consumers in 2013. One way it expanded to a broader consumer audience was by launching five “Experience Travel” multiplatform products. The “Experience Travel” products help travelers make the most of their trip by giving them planning tools and information personalized to fit their lifestyle. The Experience Travel sites also offer interactive community-oriented functionality enabling readers to comment and share, and other features. The Travel Media Group also expanded its hotel relationship with The Point, a guest-facing digital news, information, travel utility and entertainment platform. The Point is paired with a hotel’s WiFi network as a means to provide real-time information and services to guests. In addition, the Travel Media Group further leveraged its 10Best travel media brand to more broadly include sports- and entertainment-themed content.
G/O Digital (Digital Marketing Services): Gannett launched a new brand, G/O Digital, for its digital marketing services organization. This new branding signals Gannett’s evolution as a full-service media and marketing company with a suite of best in class digital products. G/O Digital offers a one-stop shop of localized marketing solutions to national and small to medium-sized businesses. G/O Digital comprises Gannett’s full suite of digital marketing services, including marketing leaders Shoplocal, Key Ring, Deal Chicken and BLiNQ - and puts them to work in an integrated, complementary way to transform local marketing and connect advertisers with local consumers.
The market need for these integrated services was validated by the tangible results achieved in 2013. For example, Staples charged Gannett with creating a custom marketing campaign that increased in-store foot traffic and sales in just 12 weeks. G/O Digital provided a cost-efficient, turnkey solution that provided targeted messaging to consumers, helping Staples exceed its ambitious sales goals.
G/O Digital saw strong revenue traction from small to medium-sized business (SMB) customers with over 160% year-over-year growth driven by the strong partnership with U.S. Community Publishing and Broadcasting sales forces. Reflecting the deep commitment and expertise G/O Digital provides to its small and medium-sized clients, G/O Digital was named to Google Adwords™ Premier SMB Partner program, a select program offered to a small number of Google partners worldwide. G/O Digital also integrated BLiNQ and Key Ring offerings with the overall G/O Digital business.
BLiNQ Media won Facebook’s Preferred Marketing Developer Innovation award in 2013 for its LocalLiFT offering – an innovative social local product for retailers and brands that combines BLiNQ’s best-in-class social media advertising capabilities with Shoplocal’s unique content. This reinforces G/O Digital’s strategy to differentiate BLiNQ Media as “leader in local social marketing” with unique local solutions by leveraging Gannett assets.
 
Key Ring launched a new version of its mobile application that expands Key Ring functionality from “Loyalty” to “Shopping Utility” and includes new functionality such as shopping lists, weekly sales listings for all retailers in ZIP code, and expanded coupon offers. This new functionality leverages content from Shoplocal, Deal Chicken and Clipper.
Gannett Publishing Services: In 2013, Gannett Publishing Services (GPS) completed its second year of operations as the centralized circulation, ad production, print and packaging operations, and consumer sales and service functions for all of Gannett’s domestic publishing operations. GPS provides printing services in 39 U.S. locations. In addition to providing an efficient, cost-effective print platform, this allows Gannett publishers to focus on strengthening the core elements of their local business - which are providing valued news and information, building advertising sales and expanding their strong community ties. GPS continues to generate new revenue opportunities by leveraging its existing assets in third-party ad production, printing and packaging services, and distribution services as an integrated nationwide business.
During 2013, GPS reduced annualized distribution costs, production costs and customer call center costs by over $30 million as a result of automation and other efficiency efforts.
Sourcing: The Sourcing initiative focuses on further leveraging company-wide spending in key procurement categories and driving areas of opportunity for savings from contract renegotiations, increased efficiencies of operational shifts, and policy and system enhancements to fully leverage the size and scale of the company for savings across all divisions. The goal of this initiative is to continually review patterns of consumption and find efficient productive ways of doing business through centralized sourcing and procurement from negotiated partner agreements. In 2013, these efforts resulted in 8% cost reduction in specifically targeted spending categories.   
Space Consolidation: In 2013, Gannett’s efforts to optimize its physical footprint continued to progress very successfully. The company sold several facilities and consolidated expiring leases. The real estate team is continually focused on portfolio optimization which includes selling older, underutilized buildings, relocating to more efficient, flexible, digitally oriented office space, reconfiguring spaces to take advantage of leasing and subleasing opportunities, and combining operations where possible. Since the beginning of 2012, the company has sold 25 properties consisting of approximately 1 million square feet of office space and more than 100 acres of excess land. Recent examples include The Des Moines Register moving from a nearly 100-year old building of approximately 225,000 square feet to a state-of-the-art, digital media facility in leased office space of 79,000 square feet, and The Indianapolis Star’s announcement that it will sell its 100-year old building of approximately 325,000 square feet and relocate to smaller, more efficient and digitally-oriented leased space.
Capital Allocation: Gannett’s approach to capital allocation is a key source of financial strength in support of current initiatives as well as providing flexibility for future opportunities. In June 2013, Gannett announced an extension of its share buyback program replacing its existing remaining share repurchase authorization with a new $300 million authorization expected to be completed within two years. During 2013, the company repurchased 4.9 million shares for approximately $117 million at an average price of $23.59 per share. The company also will continue its existing dividend payment program, currently at an annualized rate of $.80 per share.  




5


Strategic Acquisitions and Dispositions
Strategic acquisitions are a key component of the company’s strategy to grow its higher-margin businesses, and to accelerate growth by entering into or expanding high potential businesses across all of the company’s segments.
As highlighted earlier, Gannett’s acquisition of Belo Corp. in December 2013 expanded the number of Gannett’s television stations to 43 from 23, including seven stations serviced by Gannett under shared services and similar arrangements.
The company is now the largest independent station group of major network affiliates in the top 25 markets, with 21 stations in those markets. Excluding owner operators, Gannett is now the largest owner of CBS affiliates and expands its NBC affiliate group, which is already No. 1. Gannett also is the No. 4 ABC affiliate group.
Following the Belo acquisition, Gannett’s Broadcasting Segment is projected to contribute more than half of the company’s total operating cash flow in 2014 and beyond, and the Digital and Broadcasting Segments combined are expected to contribute nearly two-thirds.
Subsidiaries of Gannett and Sander Media, a holding company that has a station-operation agreement with Gannett, agreed to sell KMOV-TV in St. Louis, MO, to media company Meredith Corporation (Meredith). Under a separate agreement, subsidiaries of both companies also have agreed to sell Meredith two other stations, KTVK-TV and KASW-TV in Phoenix, AZ. The purchase price for the three stations is $407.5 million.
Also in 2013, Gannett partnered with Generation Partners, a private equity firm with extensive experience in growth-oriented investments, to fund the continued growth and expansion of the Captivate Network. As a result, Captivate Network is now a separate company co-owned by Gannett and Generation. Founded in 1997 and wholly owned by Gannett prior to the new partnership, Captivate operates an IP-enabled digital place-based media network with over 10,000 screens across more than 1,000 commercial office buildings in the U.S. and Canada. This partnership will provide Captivate with the necessary capital and strategic focus to drive growth in the coming years.
In the Digital Segment, CareerBuilder made a number of strategic acquisitions to expand and diversify its business, enabling it to offer the human capital data, software, and advertising solutions in a bundle that no other competitor in the marketplace has. These acquisitions include Oil and Gas Job Search, the oil and gas industry’s leading online job site outside North America, headquartered in Manchester, England, supporting job postings worldwide. CareerBuilder also continued to expand in the Asia market with the acquisition of Vietnam Online Network (KiemViec.com & HR Vietnam). KiemViec.com is Vietnam’s second largest career site by revenue, and first by number of registered users. HR Vietnam specializes in recruitment services and human resource solutions for employers.
These acquisitions built upon investments made in 2012, which included the acquisition of a controlling interest in EMSI, an economic software firm that specializes in employment data and labor market analysis. EMSI collects and interprets large amounts of labor data, which is used in work force development and talent strategy. Also in 2012, CareerBuilder acquired: JobScout24, which solidified CareerBuilder’s position as one of the top three online recruitment sites in Germany; JobsCentral, a leading jobs board in Singapore that also has a fast-growing presence in Malaysia; Ceviu, which is the leading information technology job board in Brazil; and Top Language Jobs, Europe’s number one language specialist recruitment job portal, operating the largest global network of job boards dedicated to multilingual job seekers looking for work internationally.
 
Other recent acquisitions have been targeted at expanding the depth and breadth of the company’s digital offerings through smart investments. They have enabled Gannett to generate valuable new revenue streams by offering a full complement of products to advertisers. These include Gannett’s purchase in 2012 of BLiNQ Media, LLC, a leading global innovator of social engagement advertising solutions for agencies and brands. BLiNQ helps companies advertise and engage with consumers on Facebook and other social networks. In addition, Gannett acquired Mobestream Media, developer of the Key Ring consumer rewards mobile platform (Key Ring), which is available on all major smartphones. Consumers download the free Key Ring application to scan and store existing loyalty cards, join new rewards programs, get mobile coupons and other promotional offers delivered to their smartphones. The 2012 acquisition of Rovion, whose primary product is Ad Composer, provided the company with a self-service technology platform that enables the full development and deployment of rich media and mobile HTML5 ads.
Also in 2012, the company acquired the assets of Fantasy Sports Ventures/Big Lead Sports, a leading sports digital site. This business is an important addition to the USA TODAY Sports Media Group, positioning it as one of the top five sports sites on the web.

General Company Information
Gannett was founded by Frank E. Gannett and associates in 1906 and was incorporated in 1923. The company listed shares publicly for the first time in 1967. It reincorporated in Delaware in 1972. The company’s 228 million outstanding shares of common stock are held by approximately 7,600 shareholders of record in all 50 states and several foreign countries. Gannett’s headquarters is in McLean, VA, near Washington, DC.

Business Segments
The company has three principal business segments: Broadcasting, Publishing and Digital. Operating revenues and income from web sites, mobile and tablet products associated with publishing operations and broadcasting stations are reported in the Publishing and Broadcasting Segments, respectively.
Financial information for each of the company’s reportable segments can be found under Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Item 8 “Financial Statements and Supplementary Data” of this Form 10-K.

Broadcasting Segment
Gannett Broadcasting’s 2013 was a year of strategic changes. On Dec. 23, 2013, Gannett acquired Belo Corp., which, like Gannett, values quality, award-winning journalism, operational excellence and strong brand leadership. At the end of 2013, the company’s broadcasting division, headquartered in McLean, VA, included 43 television stations, either owned or serviced through shared service agreements or other similar agreements. Stations in the company’s broadcasting division cover 30% of the U.S. population in markets with nearly 35 million households.
The primary sources of the company’s broadcasting revenues are: 1) core advertising which includes local and national non-political advertising; 2) political advertising revenues which are particularly seasonal with peaks occurring in even years (e.g. 2012, 2010) and particularly in the fourth quarter of those years; 3) retransmission revenues representing fees paid by satellite and cable networks and telecommunications companies to carry the company’s television signals on their network; 4) digital revenues which encompass advertising on the stations’ web and tablet and mobile products; and 5) payments by advertisers to television stations for other services, such as the production of advertising material.


6


The advertising revenues generated by a station’s local news programs make up a significant part of its total revenues. Advertising rates are influenced by the demand for advertising time. This demand is influenced by a variety of factors, including the size and demographics of the local population, the concentrations of retail stores, local economic conditions in general, and the popularity of the station’s programming. 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 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.
Retransmission consent agreements: Pursuant to Federal Communications Commission (FCC) rules, every three years a local television station must elect to either (1) require cable and/or direct broadcasting satellite operators to carry the station’s signal or (2) enter into retransmission consent negotiations for carriage. At present, the company has retransmission consent agreements with the majority of cable operators and the primary satellite providers for carriage of its television stations. The company has retransmission agreements with several major telecommunications companies.
Revenue from television retransmission fees has increased steadily in the last several years, better reflecting the value of the content that Gannett Broadcasting provides. The year-over-year increases for 2013 and 2012 were 52% and 21%, respectively. While core advertising still represents a majority of broadcasting revenues, the contribution from retransmission revenues continues to grow.
In 2013, the company completed retransmission negotiations with several providers. These are multi-year agreements that provide the company with significant and steady revenue streams. As a result, retransmission revenues are expected to grow significantly in 2014 and beyond.
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.
Gannett television stations led the way in covering major news events during 2013. From the inauguration of the president and the naming of a new Pope, to the wildfires in the west, Gannett Broadcasting provided outstanding news coverage on-air, online, for mobile devices and in social media. The division also focused on working closely with USA TODAY and USCP to develop and enhance content for consumers.
For example, for the inauguration of President Obama, WUSA in Washington, DC, worked with USA TODAY and CBS to bring viewers 15 ½ hours of continuous coverage. WUSA was the only local station to stream the day’s events to mobile devices and coverage was made available to USA TODAY and all other Gannett media properties.
In addition, when a new Pope was elected, WUSA, KSDK in St. Louis, MO, and WGRZ in Buffalo, NY, reported live from Rome and shared their work across the entire company.
Likewise, following the Boston Marathon bombings, Gannett Broadcasting responded quickly both on-air and in social media, dispatching news crews from WUSA, KUSA in Denver, KPNX in Phoenix, and WCHS in Portland, ME, to Boston to cover the
 
unfolding story and provide live-stream breaking news for all Gannett properties, including web and mobile device apps.
Other major stories captured both national and local interest, including extensive wildfires in Colorado and Arizona. Gannett Broadcasting quickly sent additional crews to assist local station coverage and worked closely with USA TODAY and USCP to share content and provide live streaming of coverage.
Advocacy continues to be an important focus for Gannett Broadcasting. For instance, KUSA helped raise more than $1 million for flood victims in Colorado. WTLV and WJXX, First Coast News in Jacksonville, FL, helped provide free dental care for the working poor. WBIR in Knoxville, TN, built a new home for a local charity while WLTX in Columbia, SC, remodeled a home with Habitat for Humanity. Broadcasting collectively made a difference in Gannett’s local communities also by participating in USA WEEKEND’s national Make A Difference Day. These are just a few examples of how the company’s purpose is fulfilled by Gannett’s television stations.
Gannett Broadcasting also finalized the rollout of a new graphics and music package leveraging USA TODAY’s signature color-coding system, which has been well received by viewers. The Broadcasting Segment has also been recognized for its innovative approach to displaying upcoming stories at the bottom of the screen, which is seen as a real differentiator with viewers. Gannett stations started the rollout of a new graphics play-out device with custom-written software that makes workflow faster and more efficient.
Gannett Broadcasting won numerous national and local awards in 2013. Dave Lougee, president of Gannett Broadcasting, was honored by the Radio Television Digital News Association (RTDNA) with a First Amendment Leadership Award. The award is given annually by the Radio Television Digital News Foundation to a leader who has made significant contributions to the protection of the First Amendment and freedom of the press.
KUSA’s Patti Dennis was named News Director of the Year by Broadcasting and Cable Magazine. In addition, Gannett Broadcasting, including the former Belo stations, was honored with six National and 74 Regional Edward R. Murrow Awards. Both represent the largest number of awards for any broadcast group. At the national level, KUSA and KARE received two awards each, and WFAA and WTSP each won one award. Gannett Broadcasting stations also received hundreds of nominations and awards in the Regional Emmy and AP contests conducted throughout the United States. KARE and KUSA were both recognized with Walter Cronkite Awards for outstanding work in Political Reporting and WFAA was recognized with a Gerald Loeb Award for excellence in business journalism.
Competition: In each of its broadcasting markets, the company’s stations and affiliated digital platforms compete for revenues with other network-affiliated and independent television broadcasters and with other advertising media, such as radio broadcasters, cable television, newspapers, magazines, direct mail, out-of-home advertising and Internet media. Other sources of present and potential competition for the company’s broadcasting properties include home video and audio recorders and players, direct broadcasting satellite, low-power television, Internet radio, video offerings (both wire line and wireless) of telephone companies as well as developing video services. 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 tablets, social media platforms, digital spectrum opportunities associated with DTV and the new Internet-enabled television. The company’s broadcasting stations compete principally on the basis of their audience share, advertising rates and audience composition.


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The Broadcasting Segment continues to focus on increasing engagement on all platforms with local customers. As was the case the last several years, Gannett television stations saw growth in digital metrics as the stations’ content remains in high demand and product improvements continue to be favorably received by consumers. Overall in 2013, mobile saw tremendous growth with mobile visitors increasing 65%, mobile page views up 72% and mobile video plays up 190%. Desktop website and mobile app product improvements for Gannett’s local stations are driving higher engagement with consumers on these platforms. Mobile traffic data includes tablets and the company expects greater consumer adoption with increased tablet penetration.
Broadcasting is positioned to maximize engagement through social media. The synergistic relationship between social media and television is strong and research suggests social media engagement can have a positive impact on television viewing consumption. From major sporting events such as the Super Bowl and March Madness, to signature television events like the Grammy or Academy Award shows, to national breaking news events like the Navy Yard shooting or the Boston bombing, to local news events, social media influenced what people watched, what they shared and what they talked about. Gannett Broadcasting Facebook fans increased 54% in 2013 and Twitter followers were up 66% as a result of increased engagement.
Regulation: The company’s television stations are operated under the authority of the 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. The company continues to file license renewal applications for its stations, including for several stations with license renewal applications pending from the last round of license renewals, and it expects these renewals to be granted in the ordinary course.
FCC Regulations also limit concentration 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 market reach of stations that broadcast on UHF channels is discounted by 50% (the “UHF discount”).  The company’s 36 television stations (excluding seven stations currently serviced by Gannett under shared services and similar arrangements) reach approximately 23% of U.S. television households, applying the UHF discount. The FCC has proposed repeal of the UHF discount, and that proceeding remains pending.  Without applying the UHF discount, Gannett’s national reach would be approximately 28%. FCC Regulations permit common ownership of two television stations in the same market in certain defined 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 and at least eight independent media “voices” remain after the acquisition.
 
FCC Regulations prohibit a television station owner from owning a daily newspaper in cases where the station’s contour encompasses the newspaper’s city of publication. In 2007, the FCC granted a permanent waiver authorizing the company’s continued ownership of both KPNX-TV and The Arizona Republic in Phoenix, AZ. The FCC has commenced a new review of its ownership rules in 2010, as it is required to do every four years. In 2011, the FCC had proposed to retain the local television ownership rule, and proposed a modest relaxation of the newspaper/broadcast rule. The current chair of the FCC has stated opposition to any modification of the cross-ownership rule, and is likely to release an order determining that certain joint sales agreements between stations will be treated as attributable ownership interests, and a further notice of proposed rulemaking seeking comment about shared services agreements and local news agreements, including whether such arrangements should be attributable for purposes of the ownership rules. An order in this proceeding is expected in 2014. Gannett is a party to shared services agreements with certain third parties that own stations in markets where Gannett also owns television stations and/or daily newspapers. The company cannot predict whether or how the FCC’s rules in this area may change, or whether it will grandfather existing agreements should it change the rules.
Congress and the FCC are considering possible changes to the Communications Act and to the statutory cable and satellite copyright regime, and to other FCC Regulations, respectively, including the rules concerning good faith negotiation of retransmission consent (which govern cable and satellite operators’ carriage of the signals of the company’s stations); and the rules and policies concerning the specific amount and type of public-interest programming required to be carried by broadcasting stations to satisfy their license obligations and requirements concerning the disclosure of such programming efforts. In addition, as authorized by and pursuant to certain requirements established by Congress, the FCC is seeking comment on rules to govern a “repacking” of the television spectrum. The repacking may entail television stations moving to different channels, having smaller service areas, and/or accepting additional interference. Congress has required that the FCC make “all reasonable efforts” to preserve the coverage area and population served of full-power and Class A television stations. The FCC has an open proceeding seeking comment on the interpretation of this requirement and other issues related to the repacking. The legislation authorizing the repacking establishes a $1.75 billion fund for reimbursement of costs incurred by stations that are required to change channels in the repacking. The rules concerning how the reimbursement process will work have not yet been established.
Services such as Aereo and FilmOn X provide their subscribers with streaming content from television stations, over the Internet. Litigation is ongoing over the claims of certain broadcasters and networks that such services, which are offered without broadcasters’ consent, violate copyright law. The Supreme Court has agreed to hear an appeal of the Second Circuit’s decision affirming a district court decision to deny a preliminary injunction against Aereo.



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Publishing Segment
The company’s publishing business includes 82 U.S. daily publications, including USA TODAY, and more than 400 non-daily local publications in 30 states and Guam. In the U.K, through its Newsquest subsidiary, the company also produces 17 daily paid-for publications and more than 200 weekly publications, magazines and trade publications. All of the company’s local publishing operations and affiliated digital products are fully integrated with shared support, sales and service platforms. Other businesses that are an integral part of the publishing business include:

USA WEEKEND, a weekly magazine carried by more than 760 local publishers with an aggregate circulation reach of more than 22 million.
Clipper Magazine, a direct mail advertising magazine that publishes hundreds of local market editions under the brands Clipper Magazine, Savvy Shopper and Mint Magazine in 29 states to more than 27 million.
Gannett Government Media, a worldwide multimedia business with digital, print and broadcast media properties focused on government, military and defense technology audiences.
Gannett Healthcare Group, which publishes magazines specializing in news, continuing education opportunities and employment opportunities, reaching nurses and allied health professionals nationwide. Its web sites, GannettHG.com, Nurse.com and TodayinPT.com, feature news, continuing education opportunities and information about employment opportunities for allied health professionals. Gannett Healthcare Group also operates Gannett Education, which delivers continuing education opportunities to nurses and allied health professionals and includes GannettEducation.com, ContinuingEducation.com and PearlsReview.com, an online nursing certification and continuing education web site.
The USCP division and USA TODAY are headquartered in McLean, VA, and the company’s U.K. operations are managed from Weybridge, England.
Affiliated digital products of the company’s U.S. publications, including USA TODAY, reach more than 38 million unique visitors monthly.  The print products reach more than 10 million readers every weekday and more than 12 million readers every Sunday. Together they provide critical news and information from neighborhoods, the nation and the globe.
USA TODAY ranks No. 1 in the industry in combined print and digital circulation, according to the Alliance for Audited Media’s September 2013 Publisher’s Statement, with total daily circulation of 2.9 million which includes daily print, digital replica and digital non-replica. USA TODAY was introduced in 1982 as the country’s first national, general-interest daily publication. In 2013, it solidified its position as a leader in digital content. A completely re-imagined set of digital products led to an increase in page views of 66%, a 21% increase in unique visitors and 19% Internet reach. During 2013, USATODAY.com hosted on average more than 24 million unique visitors, with over 67 million visits and 281 million page views per month. USA TODAY mobile page views increased 29% year over year, to more than 6.15 billion page views in 2013.
Newsquest’s digital audience increased substantially during 2013, with audited average daily unique users rising by 35% to 687,000. The heraldscotland.com was named by ABC as the U.K.’s fastest growing news web site, while Newsquest Specialist Media was declared the U.K.’s B2B Digital Publisher of the year by the Periodical Publishers Association.
 
USA TODAY is produced at facilities in McLean, VA, and transmitted digitally to offset printing plants around the country. It is printed at Gannett plants in 13 U.S. markets and commercially at offset plants owned by other print providers in 23 other U.S. markets.
The publication of non-daily products continued to be an important part of Gannett’s market strategy for 2013. The company produces non-daily publications in the U.S. including glossy lifestyle magazines, community publications and publications focused on 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 print 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 with specific geographic targets, thus helping to increase the local media organization’s local market share.
Audience research: As Gannett’s publishing businesses relentlessly pursue 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 its communities and measures the frequency with which consumers interact with each Gannett product.
Results from 2013 studies in 10 of the company’s local domestic publishing markets conducted by Thoroughbred Research Group indicate that Gannett local media organizations reach more than two in three adults each week - and nearly eight in 10 each month. Under the All Access Content Subscription Model rolled out to 78 sites during 2012, more than half of readers access Gannett content on two or more platforms.
The company has gathered audience aggregation data for 53 Gannett markets and will continue to add more data in 2014. 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.
In addition to the audience-based initiative, the company continues to measure customer attitudes, behaviors and opinions to better understand customers’ digital use patterns and use qualitative research with audiences and advertisers to better determine their needs. In 2009, the USCP research group launched an ongoing longitudinal study to measure audience and consumer satisfaction in key markets. To date, the group has conducted nearly 33,000 interviews for the study.
Advertising: The company has advertising departments that sell retail, classified and national advertising across multiple platforms including print, online, mobile, tablet and niche publications. The company has a national ad sales force focused on the largest national advertisers and a separate sales organization to support classified employment sales - the Digital Employment Sales Center. Additionally, G/O Digital provides marketing specialists to small and medium-sized businesses, and Gannett Client Solutions groups provide customized marketing solutions. The company also has relationships with outside representative firms that specialize in the sale of national ads.
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.


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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 daily print product.
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 publication, on affiliated digital platforms and in niche magazines that specialize in the segment.
Proprietary research indicates that local and national advertisers find it challenging to manage the complexity of their marketing investments. They are seeking to reach an increasingly elusive audience and are struggling to influence attitudes and behavior at each stage of the purchase path. To help advertisers solve that, a refined approach to media planning was created to present advertisers with targeted, integrated solutions. The planning process leverages the company’s considerable advantage in data analysis and secondary research. The result is a tailored media/marketing plan where the individual elements work in concert to amplify and reinforce the advertiser’s message.
In addition, USCP continues to use online reader panels in 18 markets to measure advertising recall and effectiveness, article response, and identify consumer sentiment and trends. The reader panels include more than 30,000 opt-in respondents who have provided valuable feedback on more than 8,100 advertisements and 5,800 news articles. This capability allows sales staff in markets to provide deeper insights and return-on-investment metrics to advertisers.
The company’s consultative multi-media sales approach has been tailored to all levels of advertisers, from small, locally owned merchants to large, complex businesses. Along with this sales approach, the company has intensified its sales and management training and improved the quality of sales calls. Digital product integration, sales pipeline management and a Gannett five-step consultative sales process were focus areas in 2013, with formal training delivered in all Gannett markets. Front-line sales managers in all USCP markets participated in intensive training to help them coach their sales executives for top performance.
Online operations: In support of the All Access Content Subscription Model, the company invested in a significant expansion of mobile offerings across local markets, including native applications for iPhone and Android smartphones and iPads and tablet-optimized web sites. The mobile audience at the company’s local domestic publishing markets continued to grow in 2013, ultimately making up 13% of total page views, with mobile web sites and the native iPhone applications leading the way.
Through the All Access Content Subscription Model, the company made a clear commitment to provide consumers with the content they most want on the devices they use to access news and information about their local communities. Mobile page views increased 4% and mobile visitors increased 11% in 2013 on a year-over-year basis.
In 2013, the company implemented a social media content management software tool to ensure the division’s journalists and marketing and customer service teams could more effectively manage multiple social media profiles and significantly increase their responsiveness and engagement with consumers.
 
Gannett continues to enjoy a long-standing relationship of trust in local business communities. Its advertising sales staff delivers solutions for its customers and helps small and medium-size businesses navigate the increasingly complex and diverse world of digital marketing. In 2013, the company further expanded its G/O Digital suite of products and continued its partnership with Yahoo! to offer more digital solutions to advertisers. Through this, Gannett is able to offer its customers expanded digital reach.
The overriding objective of the company’s online strategy is to provide compelling content that best serves its customers. A key reason customers turn to a Gannett digital platform is to find local news and information. The credibility of the local media organization, a known and trusted information source, includes its digital platforms (tablet, mobile applications and its web site) and differentiates these online sources from competing online products. This allows Gannett’s local media organizations to compete successfully as information providers.
A second objective in the company’s online business development is to leverage the natural synergies between the local media organizations and local digital platforms. 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 local media organization.
GMTI builds, manages and maintains the cloud infrastructure that supports the desktop, mobile and native app digital presence associated with Gannett’s U.S. newspaper and television businesses. GMTI partners with Gannett development teams to design applications and deliver platform enhancements in accelerated, iterative cycles with stringent quality standards.  GMTI also provides application support and training for Gannett staff across the country.
Circulation: USCP delivers content in print and online, via mobile devices and tablets. In a trend generally consistent with the domestic publishing industry, circulation volume declined in 2013. However, year over year USCP circulation revenues increased 3% and digital access increased across all publications, driven by the All Access Content Subscription Model. USCP’s All Access Content Subscription Model has more than 1.6 million digitally activated subscribers, enabling them easy access to content-rich products.
EZ Pay, which enhances subscriber retention rates, grew from approximately 59% at the end of 2012 to 64% in 2013 across all USCP sites.
For USCP, single copy represents approximately 15% of daily and 24% of Sunday net paid circulation volume.
The single copy price of USA TODAY at newsstands and vending machines was $2.00 in 2013 (price increased September 2013). Mail subscriptions are available nationwide and abroad, and home, hotel and office delivery is available in many markets. Approximately 83% of its net paid circulation results are from single-copy sales at newsstands, vending machines or provided to hotel guests. The remainder is from home and office delivery, mail, educational and other sales.
At the end of 2013, 71 of the company’s domestic daily publications, including USA TODAY, were published in the morning, and 11 were published in the evening.


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Production and distribution: In 2011, Gannett Publishing Services, or GPS, was formed to improve the efficiency and reduce the cost associated with the production and distribution of the company’s printed products across all divisions in the U.S. GPS directly manages all of the production and circulation operations for all of Gannett’s domestic publishing operations including all community newspapers and USA TODAY.
GPS leverages Gannett’s existing assets, including employee talent and experience, physical plants and equipment, and its vast national and local distribution networks. GPS is responsible for imaging, ad production, internal and external printing and packaging, internal and external distribution, consumer sales, customer service and direct marketing services.
The Gannett Imaging and Ad Design Centers (GIADC) serve 79 publishing properties, including all USCP dailies with the exception of Guam and Detroit. In addition to the USCP sites, the GIADC also provides services to USA TODAY and Gannett Broadcasting properties and completes special projects for other internal businesses. GIADC is utilized for commercial imaging and/or ad production by 34 external customers.
By the end of 2013, almost all USCP and USA TODAY employees were utilizing a common content management system. The common content management system enables communication and collaboration needed to build strong design remotely. The studios are operationally efficient while enhancing design in publications across the company.
Newsquest operates its publishing activities around regional centers to maximize the use of management, finance, printing and personnel resources. This 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 print product alongside a paid-for print product, allows cross-selling of advertising serving the same or contiguous markets, satisfying the needs of its advertisers and audiences.
Newsquest produces free and paid-for print products with quality local editorial content. Newsquest also distributes a substantial volume of advertising leaflets in the communities it serves. Most of Newsquest’s paid-for distribution is outsourced to wholesalers, although direct delivery is employed as well to maximize circulation sales opportunities.
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 six daily newspapers in Texas and New Mexico and four newspapers in Pennsylvania; and a 13.50% interest in Ponderay Newsprint Company in the state of Washington.
Competition: The company’s publishing operations and affiliated digital platforms compete with other media and digital ventures for advertising. Publishing operations also compete for circulation and readership against other professional news and information operations and amateur content creators. Very few of the company’s publishing operations have daily competitors that are published in the same city. Most of the company’s print products compete with other print products 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. Newsquest’s publishing operations are 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.
 
The rate of development of opportunities in, and competition from, digital media, including web site, tablet and mobile products, is increasing. Through internal development, content distribution programs, acquisitions and partnerships, the company’s efforts to explore new opportunities in the news, information and communications business and in 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 purchase of newsprint containing recycled content from 42,000 metric tons in 1989 to 152,023 metric tons in 2013. During 2013, 38% of the company’s domestic newsprint purchases contained recycled content, with an average recycled content of 32%. Additional information about the company’s environmental and sustainability initiatives can be found on page 13.
The company’s operations use inks, 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, oversee regulatory compliance and preventive measures. Some of the company’s subsidiaries have been included among the potentially responsible parties in connection with sites that have been identified as possibly requiring environmental remediation. Additional information about these matters can be found in Part I, Item 3, Legal Proceedings, in this Form 10-K.
Raw materials: Newsprint, which is the basic raw material used in print publication, has been and may continue to be subject to significant price changes from time to time. During 2013, the company’s total newsprint consumption was 404,173 metric tons, including consumption by USA WEEKEND, USA TODAY, tonnage at non-Gannett print sites and Newsquest. Newsprint consumption was 11% less than in 2012. The company purchases newsprint from 20 domestic and global suppliers.
In 2013, global newsprint supplies were adequate. The company 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 publishing operations.
Joint operating agencies: The company’s publishing subsidiary in Detroit participates in a joint operating agency (JOA). The JOA performs the production, sales and distribution functions for the subsidiary and another publishing company under a joint operating agreement. Operating results for the Detroit JOA are fully consolidated along with a charge for the minority partner’s share of profits. The company has a 50% partnership interest in a JOA in Tucson, AZ, which provides service to a non-Gannett publication in the city. The company’s share of results for the Tucson operations are accounted for under the equity method, and are reported as a net amount in “Equity income in unconsolidated investees, net.”





11


Digital Segment
The largest businesses within the company’s Digital Segment are CareerBuilder, PointRoll and Shoplocal.
CareerBuilder is the global leader in human capital solutions, helping companies target, attract and retain talent. Its online job site, CareerBuilder.com, is the largest in North America with the most revenue.
Headquartered in Chicago, IL, CareerBuilder and its subsidiaries operate in the U.S., Europe, Canada, Asia and South America. Its sites, combined with its partnerships, give CareerBuilder a presence in more than 60 markets worldwide.
CareerBuilder offers a wide array of services from labor market intelligence to talent management software and other recruitment solutions. 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 media organizations.
In 2013, CareerBuilder acquired KiemViec.com & HR Vietnam (collectively Vietnam Online Network or VON), headquartered in Ho Chi Minh City, Vietnam. KiemViec.com is one of Vietnam’s largest career sites. HR Vietnam specializes in recruitment services and human resource solutions for employers. Together, CareerBuilder and VON will bring Vietnam’s employers and workers a broader range of recruitment and job search resources. During 2013, CareerBuilder also acquired Oil and Gas Job Search (OilandGasJobSearch.com), continuing its expansion of niche online job search platforms. Oil and Gas Job Search, headquartered in Manchester, England, is the oil and gas industry’s leading online job site outside North America with job postings worldwide.
CareerBuilder is changing the way companies source, engage and re-engage talent. The company’s Talent Network solution is an “always-on” recruiting engine that leverages SEO and popular destinations like recruitment sites to match the right candidates with open positions and help businesses build a pipeline of active and passive candidates for current and future openings.
In 2012, CareerBuilder acquired EMSI, which collects and interprets large amounts of employment data which is used in workforce development and talent strategy. CareerBuilder is leveraging the EMSI acquisition to enhance their workforce analytics platform, creating an unmatched repository of historical and real-time labor information.
CareerBuilder also continued to grow its global businesses with the acquisitions of Top Language Jobs in the U.K., the leading global online jobsite for multi-language jobs and candidates, and Ceviu, the leading information technology job board in Brazil.
PointRoll is a multi-screen digital advertising technology and services company. PointRoll enables advertisers, agencies, and publishers to create, target, deploy, and optimize digital campaigns in real time across any digital channel including display, rich media, in-stream video, mobile, tablet and more. PointRoll provides the creative tools, analytics and expertise marketers need to effectively engage consumers and convert them into buyers and brand supporters. Founded in May 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. PointRoll is headquartered in King of Prussia, PA, and maintains offices across the U.S.
 
In October 2012, Gannett acquired Rovion. Rovion’s primary product, Ad Composer, includes a self-service technology platform that enables the full development and deployment of rich media and mobile HTML5 ads by clients who do not have coding expertise. Rovion is being integrated into PointRoll’s operations and technology platform and will be leveraged across the entire Gannett network to fulfill the needs of agencies and advertisers.
Shoplocal is the leader in turnkey local, at scale interactive marketing that turns content into commerce for national retailers, brands and agencies. Shoplocal offers a complete suite of innovative digital advertising solutions to connect with shoppers along the path to purchase, driving measurable in-store sales and ROI. Shoplocal partners with more than 100 of the nation’s top retailers, including CVS, Kohl’s, Lowe’s, Macy’s, Publix, Staples, Target, Walmart and Walgreens, to deliver localized promotions to shoppers at national scale through online circulars, display advertising, search, social media, digital out of home and mobile. Shoplocal is headquartered in Chicago, IL.
Competition: For CareerBuilder, the largest online employment site in North America, the market for online recruitment solutions is highly competitive with a multitude of online and offline competitors. Competitors include other employment related web sites, general classified advertising web sites, professional networking and social networking web sites, 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 web sites 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, product innovation and reputation among customers and potential customers.
For PointRoll, the market for rich media advertising technology solutions is highly competitive. Competitors include divisions of larger public media and technology companies, and several earlier-stage independent rich media, dynamic ad, video, mobile, and social advertising technology specialists. The barriers to entry in the rich media market are moderate. Recent trends include the shift towards audience-centric, exchange-based media buying, entry of dynamic ad generation specialists, the move towards automated creative design tools, and the shift toward 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 few. Media fragmentation continues to challenge retailers and Shoplocal is well positioned to deliver solutions to meet this challenge. Shoplocal anticipates continued benefit from growth in online-influenced offline retail sales (which Forrester Research projects to exceed $1.42 billion in 2014). The scale of Shoplocal’s proprietary retail database and its established distribution partnerships is a source of advantage in this space. Shoplocal enables delivery of all types of promotional content to any digitally connected device across all platforms, a key factor with the continued surge in mobile and social usage among consumers.


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Regulation and legislation (impacting Digital Segment businesses and digital operations associated with Publishing and Broadcasting businesses): The U.S. Congress has passed legislation which regulates certain aspects of the Internet, including content, copyright infringement, 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, user privacy and intellectual property ownership. With respect to user privacy, the legislative and regulatory proposals could regulate behavioral advertising, which specifically refers to the use of user behavioral data for the creation and delivery of more relevant, targeted Internet advertisements. Some Gannett properties leverage certain aspects of user behavioral data in their solutions.

Employees
At the end of 2013, the company and its subsidiaries had approximately 31,600 full-time and part-time employees including 2,600 for CareerBuilder and 2,250 employees from the Belo acquisition.
 
2013
 
2012
Broadcast
4,800

 
2,600

Publishing
23,000

 
24,800

Digital
3,000

 
2,500

Corporate
800

 
800

Total company
31,600

 
30,700


Approximately 10% 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 eight 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 industry-wide or company-wide bargaining. The company’s U.K. subsidiaries bargain with two unions over working practices, wages and health and safety issues only.


 
Environmental and Sustainability Initiatives
Gannett is committed to making smart decisions to protect the environment and manage its environmental impact responsibly. The company has taken a number of steps to reduce its environmental impact and underscore its commitment to sustainability.
The company has been an industry pioneer in switching to environmentally-friendly press products, such as low-VOC (Volatile Organic Compound) washes and fountain solutions and citrus-based press cleaners. All colored inks and many black inks the company uses are soy-based rather than petroleum-based, and delivered in reusable containers. Gannett’s waste ink is recycled, either on-site or at the manufacturer’s facility. The company continues to minimize landfill usage by collecting used paper, plastics and other materials for recycling and has substantially reduced water usage by switching to dry methods of photo processing and plate processing.
Gannett has reduced green house emissions by using newsprint vendors who practice sustainability, switching to light-weight newsprint, and reducing the size of the newspapers printed.
The company also is focused on being energy efficient. Its headquarters building received the Leadership in Energy and Environmental Design (LEEDS) EB certification, and the company has relocated many employees in other facilities to newer, more energy efficient offices.
Gannett has installed more energy efficient systems and appliances in many of its buildings. In 2013 alone, Gannett’s energy efficiency program resulted in a reduction of more than five million kilowatt hours of annual electricity use. For 2014, Gannett has identified new projects estimated to reduce power consumption by another 10 million kilowatt hours annually.
The Gannett Green Operating Employee Group serves as a forum to review and recommend “green” ideas and practices. The group maintains an intranet site that provides an accessible, informative and interactive resource highlighting new and innovative green best practices which help Gannett businesses and properties develop more sustainable operating practices.
Many of Gannett’s media organizations cover environmental and sustainability issues. A good example is USA TODAY, which in 2013 did a recurring series on climate change. Many stories from this series were also shared across Gannett through the USA TODAY Network National News Desk.
Make A Difference Day, created by USA WEEKEND, is the nation’s largest day of volunteering. For more than 20 years, the group has mobilized millions of people across the U.S. for this national day of service. Together with its hundreds of carrier newspapers and longstanding partners, USA WEEKEND rallies millions of people to help improve their communities. Volunteer efforts often include environmentally beneficial projects such as planting trees or gardens, cleaning up trash and planting sod.
The Gannett Foundation supports non-profit activities in communities where the company does business and contributes to a variety of charitable causes through its Community Grant Program. One of Gannett Foundation’s community action grant priorities is environmental conservation.



13


MARKETS WE SERVE
TELEVISION STATIONS AND AFFILIATED DIGITAL PLATFORMS
State/District of Columbia
City
Station/web site
Channel/Network
Affiliation Agreement Expires in
Weekly Audience (6)
Founded
Arizona
Flagstaff
KNAZ-TV: azcentral.com/12news
Ch. 2/NBC
2017
(7 
) 
1970
 
Phoenix
KASW-TV(1)(2): azfamily.com
Ch. 6/CW
2016
562,000

1995
 
 
KPNX-TV: azcentral.com/12news
Ch. 12/NBC
2017
1,240,000

1953
 
 
KTVK-TV(1)(2): azfamily.com
Ch. 3/IND
 
750,000

1955
 
Tucson
KMSB-TV(1): tucsonnewsnow.com
Ch. 11/FOX
2016
190,000

1967
 


KTTU-TV(1): tucsonnewsnow.com
Ch. 12/MNTV
2014
81,000

1984
Arkansas
Little Rock
KTHV-TV: todaysthv.com
Ch. 11/CBS
2015
421,000

1955
California
Sacramento
KXTV-TV: news10.net
Ch. 10/ABC
2014
85,300

1955
Colorado
Denver
KTVD-TV: ktvd.com
Ch. 20/MNTV
2014
536,000

1988
 
 
KUSA-TV: 9news.com
Ch. 9/NBC
2017
1,171,000

1952
District of Columbia
Washington
WUSA-TV: wusa9.com

Ch. 9/CBS
2015
1,803,000

1949
Florida
Jacksonville
WJXX-TV: firstcoastnews.com
Ch. 25/ABC
2014
404,000

1989
 
 
WTLV-TV: firstcoastnews.com
Ch. 12/NBC
2017
501,000

1957
 
Tampa-St. Petersburg
WTSP-TV: wtsp.com
Ch. 10/CBS
2015
1,262,000

1965
Georgia
Atlanta
WATL-TV: myatltv.com
Ch. 36/MNTV
2016
793,000

1954
 
 
WXIA-TV: 11alive.com
Ch. 11/NBC
2017
1,556,000

1948
 
Macon
WMAZ-TV: 13wmaz.com
Ch. 13/CBS
2015
206,000

1953
Idaho
Boise
KTVB-TV(5): ktvb.com
Ch. 7/NBC
2015
198,000

1953
Kentucky
Louisville
WHAS-TV(1): whas11.com
Ch. 11/ABC
2014
514,000

1950
Louisiana
New Orleans
WWL-TV: wwltv.com
Ch. 4/CBS
2017
543,000

1957
 
 
WUPL-TV(4): wupltv.com
Ch. 54/MNTV
2014
169,000

1955
Maine
Bangor
WLBZ-TV: wlbz2.com
Ch. 2/NBC
2017
107,000

1954
 
Portland
WCSH-TV: wcsh6.com
Ch. 6/NBC
2017
310,000

1953
Michigan
Grand Rapids
WZZM-TV: wzzm13.com
Ch. 13/ABC
2014
394,000

1962
Minnesota
Minneapolis-St. Paul
KARE-TV: kare11.com
Ch. 11/NBC
2017
1,300,000

1953
Missouri
St. Louis
KMOV-TV(1)(2): kmov.com
Ch. 4/CBS
2016
997,000

1954
 
 
KSDK-TV: ksdk.com
Ch. 5/NBC
2017
984,000

1947
New York
Buffalo
WGRZ-TV: wgrz.com
Ch. 2/NBC
2017
513,000

1954
North Carolina
Charlotte
WCNC-TV: wcnc.com
Ch. 36/NBC
2015
769,000

1967
 
Greensboro
WFMY-TV: digtriad.com
Ch. 2/CBS
2015
582,000

1949
Ohio
Cleveland
WKYC-TV: wkyc.com
Ch. 3/NBC
2017
1,114,000

1948
Oregon
Portland
KGW-TV(1)(3): kgw.com
Ch. 8/NBC
2015
809,000

1956
South Carolina
Columbia
WLTX-TV: wltx.com
Ch. 19/CBS
2015
291,000

1953
Tennessee
Knoxville
WBIR-TV: wbir.com
Ch. 10/NBC
2017
460,000

1956
Texas
Austin
KVUE-TV: kvue.com
Ch. 24/ABC
2014
488,000

1971
 
Dallas/Ft. Worth
WFAA-TV: wfaa.com
Ch. 8/ABC
2014
1,694,000

1949
 
Houston
KHOU-TV: khou.com
Ch. 11/CBS
2017
1,595,000

1953
 
San Antonio
KENS-TV: kens5.com
Ch. 5/CBS
2017
629,000

1950
Virginia
Hampton/Norfolk
WVEC-TV: wvec.com
Ch. 13/ABC
2014
539,000

1953
Washington
Seattle/Tacoma
KING-TV: king5.com
Ch. 5/NBC
2015
1,370,000

1948
 
 
KONG-TV: king5.com
Ch. 16/IND
 
618,000

1997
 
Spokane
KREM-TV: krem.com
Ch. 2/CBS
2016
282,000

1954
 
 
KSKN-TV: spokanescw22.com
Ch. 22/CW
2016
95,000

1983
(1)
Stations serviced by Gannett under shared services and similar arrangements.
(2)
Meredith Corporation has agreed to purchase KMOV-TV, KTVK-TV and KASW-TV.
(3)
The company also owns KGWZ-LD, a low power television station in Portland, OR.
(4)
The company also owns WBXN-CA, a Class A television station in New Orleans, LA.
(5)
The company also owns KTFT-LD (NBC), a low power television station in Twin Falls, ID.
(6)
Weekly audience is number of television households reached, according to the November 2013 Nielsen book.
(7)
Audience numbers fall below minimum reporting standards.
The company also has two regional news channels, Texas Cable News (TXCN) in Dallas/Fort Worth, TX, and Northwest Cable News (NWCN) in Seattle/Tacoma, WA, and two local news channels, 24/7 NewsChannel in Boise, ID and NewsWatch on Channel 15 in New Orleans, LA. These operations provide news coverage and certain other programming in a comprehensive 24-hour a day format using the resources of the company’s television stations in Texas, Washington, Oregon, Idaho, Louisiana and Arizona.

14



DAILY LOCAL MEDIA ORGANIZATIONS AND AFFILIATED DIGITAL PLATFORMS
State
Territory
 
 
 
 
Average 2013 Circulation - Print and Digital Replica and Non-Replica
 
 
City
 
Local media organization/web site
 
Morning
 
Afternoon
 
Sunday
 
Founded
Alabama
Montgomery
 
Montgomery Advertiser
www.montgomeryadvertiser.com
 
26,952

 
 
 
33,035

 
1829
Arizona
Phoenix
 
The Arizona Republic
www.azcentral.com
 
263,348

 
 
 
509,197

 
1890
Arkansas
Mountain Home
 
The Baxter Bulletin
www.baxterbulletin.com
 
8,753

 
 
 
 
 
1901
California
Palm Springs
 
The Desert Sun
www.mydesert.com
 
35,369

 
 
 
40,024

 
1927
 
Salinas
 
The Salinas Californian
www.thecalifornian.com
 
8,059

 
 
 
 
 
1871
 
Visalia
 
Visalia Times-Delta/Tulare
Advance-Register
www.visaliatimesdelta.com
www.tulareadvanceregister.com
 
16,428

 
 
 
 
 
1859
Colorado
Fort Collins
 
Fort Collins Coloradoan
www.coloradoan.com
 
19,669

 
 
 
24,835

 
1873
Delaware
Wilmington
 
The News Journal
www.delawareonline.com
 
76,945

 
 
 
107,209

 
1871
Florida
Brevard County
 
FLORIDA TODAY
www.floridatoday.com
 
53,099

 
 
 
86,394

 
1966
 
Fort Myers
 
The News-Press
www.news-press.com
 
56,787

 
 
 
76,461

 
1884
 
Pensacola
 
Pensacola News Journal
www.pnj.com
 
33,862

 
 
 
48,495

 
1889
 
Tallahassee
 
Tallahassee Democrat
www.tallahassee.com
 
30,303

 
 
 
40,933

 
1905
Guam
Hagatna
 
Pacific Daily News
www.guampdn.com
 
15,042

 
 
 
12,746

 
1944
Indiana
Indianapolis
 
The Indianapolis Star
www.indystar.com
 
145,930

 
 
 
280,428

 
1903
 
Lafayette
 
Journal and Courier
www.jconline.com
 
24,775

 
 
 
33,240

 
1829
 
Muncie
 
The Star Press
www.thestarpress.com
 
21,849

 
 
 
28,282

 
1899
 
Richmond
 
Palladium-Item
www.pal-item.com
 
10,088

 
 
 
15,097

 
1831
Iowa
Des Moines
 
The Des Moines Register
www.desmoinesregister.com
 
90,982

 
 
 
186,383

 
1849
 
Iowa City
 
Iowa City Press-Citizen
www.press-citizen.com
 
10,359

 
 
 
 
 
1860
Kentucky
Louisville
 
The Courier-Journal
www.courier-journal.com
 
125,887

 
 
 
222,229

 
1868
Louisiana
Alexandria
 
Alexandria Daily Town Talk
www.thetowntalk.com
 
16,605

 
 
 
22,242

 
1883
 
Lafayette
 
The Daily Advertiser
www.theadvertiser.com
 
24,430

 
 
 
32,653

 
1865
 
Monroe
 
The News-Star
www.thenewsstar.com
 
23,696

 
 
 
26,561

 
1890
 
Opelousas
 
Daily World
www.dailyworld.com
 
4,867

 
 
 
6,041

 
1939
 
Shreveport
 
The Times
www.shreveporttimes.com
 
34,946

 
 
 
51,955

 
1871
Maryland
Salisbury
 
The Daily Times
www.delmarvanow.com
 
15,447

 
 
 
20,463

 
1900

15


DAILY LOCAL MEDIA ORGANIZATIONS AND AFFILIATED DIGITAL PLATFORMS
State
Territory
 
 
 
 
Average 2013 Circulation - Print and Digital Replica and Non-Replica
 
 
City
 
Local media organization/web site
 
Morning
 
Afternoon
 
Sunday
 
Founded
Michigan
Battle Creek
 
Battle Creek Enquirer
www.battlecreekenquirer.com
 
13,019

 
 
 
18,446

 
1900
 
Detroit
 
Detroit Free Press
www.freep.com
 
193,420

 
 
 
784,243

 
1832
 
Lansing
 
Lansing State Journal
www.lansingstatejournal.com
 
38,770

 
 
 
53,244

 
1855
 
Livingston County
 
Daily Press & Argus
www.livingstondaily.com
 
9,913

 
 
 
14,452

 
1843
 
Port Huron
 
Times Herald
www.thetimesherald.com
 
16,482

 
 
 
24,894

 
1900
Minnesota
St. Cloud
 
St. Cloud Times
www.sctimes.com
 
20,925

 
 
 
27,210

 
1861
Mississippi
Hattiesburg
 
Hattiesburg American
www.hattiesburgamerican.com
 
 
 
8,872

 
12,154

 
1897
 
Jackson
 
The Clarion-Ledger
www.clarionledger.com
 
50,950

 
 
 
60,307

 
1837
Missouri
Springfield
 
Springfield News-Leader
www.news-leader.com
 
32,039

 
 
 
51,010

 
1893
Montana
Great Falls
 
Great Falls Tribune
www.greatfallstribune.com
 
23,479

 
 
 
26,669

 
1885
Nevada
Reno
 
Reno Gazette-Journal
www.rgj.com
 
38,046

 
 
 
60,869

 
1870
New Jersey
Asbury Park
 
Asbury Park Press
www.app.com
 
90,859

 
 
 
133,276

 
1879
 
Bridgewater
 
Courier News
www.mycentraljersey.com
 
12,082

 
 
 
15,610

 
1884
 
Cherry Hill
 
Courier-Post
www.courierpostonline.com
 
41,217

 
 
 
53,575

 
1875
 
East Brunswick
 
Home News Tribune
www.mycentraljersey.com
 
23,720

 
 
 
28,633

 
1879
 
Morristown
 
Daily Record
www.dailyrecord.com
 
16,152

 
 
 
19,720

 
1900
 
Vineland
 
The Daily Journal
www.thedailyjournal.com
 
11,700

 
 
 
 
 
1864
New York
Binghamton
 
Press & Sun-Bulletin
www.pressconnects.com
 
31,425

 
 
 
41,697

 
1904
 
Elmira
 
Star-Gazette
www.stargazette.com
 
14,102

 
 
 
21,727

 
1828
 
Ithaca
 
The Ithaca Journal
www.theithacajournal.com
 
10,113

 
 
 
 
 
1815
 
Poughkeepsie
 
Poughkeepsie Journal
www.poughkeepsiejournal.com
 
22,756

 
 
 
30,892

 
1785
 
Rochester
 
Rochester Democrat and Chronicle
www.democratandchronicle.com
 
101,113

 
 
 
140,239

 
1833
 
Westchester County
 
The Journal News
www.lohud.com
 
64,022

 
 
 
81,896

 
1829
North Carolina
Asheville
 
Asheville Citizen-Times
www.citizen-times.com
 
29,820

 
 
 
43,845

 
1870

16


DAILY LOCAL MEDIA ORGANIZATIONS AND AFFILIATED DIGITAL PLATFORMS
State
Territory
 
 
 
 
Average 2013 Circulation - Print and Digital Replica and Non-Replica
 
 
City
 
Local media organization/web site
 
Morning
 
Afternoon
 
Sunday
 
Founded
Ohio
Bucyrus
 
Telegraph-Forum
www.bucyrustelegraphforum.com
 
3,818

 
 
 
 
 
1923
 
Chillicothe
 
Chillicothe Gazette
www.chillicothegazette.com
 
 
 
8,076

 
9,895

 
1800
 
Cincinnati
 
The Cincinnati Enquirer
www.cincinnati.com
 
122,900

 
 
 
236,689

 
1841
 
Coshocton
 
Coshocton Tribune
www.coshoctontribune.com
 
 
 
3,800

 
4,748

 
1842
 
Fremont
 
The News-Messenger
www.thenews-messenger.com
 
 
 
5,629

 
 
 
1856
 
Lancaster
 
Lancaster Eagle-Gazette
www.lancastereaglegazette.com
 
 
 
8,022

 
9,865

 
1807
 
Mansfield
 
News Journal
www.mansfieldnewsjournal.com
 
17,572

 
 
 
25,187

 
1885
 
Marion
 
The Marion Star
www.marionstar.com
 
6,174

 
 
 
7,883

 
1880
 
Newark
 
The Advocate
www.newarkadvocate.com
 
 
 
11,821

 
14,437

 
1820
 
Port Clinton
 
News Herald
www.portclintonnewsherald.com
 
 
 
2,437

 
 
 
1864
 
Zanesville
 
Times Recorder
www.zanesvilletimesrecorder.com
 
11,314

 
 
 
13,325

 
1852
Oregon
Salem
 
Statesman Journal
www.statesmanjournal.com
 
31,894

 
 
 
38,501

 
1851
South Carolina
Greenville
 
The Greenville News
www.greenvilleonline.com
 
46,957

 
 
 
92,288

 
1874
South Dakota
Sioux Falls
 
Argus Leader
www.argusleader.com
 
30,295

 
 
 
55,182

 
1881
Tennessee
Clarksville
 
The Leaf-Chronicle
www.theleafchronicle.com
 
12,187

 
 
 
16,785

 
1808
 
Jackson
 
The Jackson Sun
www.jacksonsun.com
 
15,763

 
 
 
24,287

 
1848
 
Murfreesboro
 
The Daily News Journal
www.dnj.com
 
10,665

 
 
 
14,784

 
1848
 
Nashville
 
The Tennessean
www.tennessean.com
 
96,542

 
 
 
219,188

 
1812
Utah
St. George
 
The Spectrum
www.thespectrum.com
 
14,665

 
 
 
17,029

 
1963
Vermont
Burlington
 
The Burlington Free Press
www.burlingtonfreepress.com
 
25,255

 
 
 
30,602

 
1827
Virginia
McLean
 
USA TODAY*
www.usatoday.com
 
2,862,229

 
 
 
 
 
1982
 
Staunton
 
The Daily News Leader
www.newsleader.com
 
12,916

 
 
 
16,093

 
1904
Wisconsin
Appleton
 
The Post-Crescent
www.postcrescent.com
 
38,509

 
 
 
50,722

 
1853
 
Fond du Lac
 
The Reporter
www.fdlreporter.com
 
9,911

 
 
 
13,076

 
1870
 
Green Bay
 
Green Bay Press-Gazette
www.greenbaypressgazette.com
 
41,542

 
 
 
61,666

 
1915
 
Manitowoc
 
Herald Times Reporter
www.htrnews.com
 
9,603

 
 
 
11,394

 
1898
 
Marshfield
 
Marshfield News-Herald
www.marshfieldnewsherald.com
 
 
 
7,608

 
 
 
1927
 
Oshkosh
 
Oshkosh Northwestern
www.thenorthwestern.com
 
12,712

 
 
 
17,805

 
1868
 
Sheboygan
 
The Sheboygan Press
www.sheboyganpress.com
 
14,054

 
 
 
17,639

 
1907
 
Stevens Point
 
Stevens Point Journal
www.stevenspointjournal.com
 
 
 
7,500

 
 
 
1873
 
 
 
Central Wisconsin Sunday
 
 
 
 
 
15,880

 
 
 
Wausau
 
Wausau Daily Herald
www.wausaudailyherald.com
 
 
 
14,855

 
20,029

 
1903
 
Wisconsin Rapids
 
The Daily Tribune
www.wisconsinrapidstribune.com
 
 
 
7,657

 
 
 
1914
*
USA TODAY morning figure is the average Print and Digital Replica and Non-Replica circulation according to the Alliance for Audited Media’s September 2013 Publisher’s Statement.


17


DAILY PAID-FOR LOCAL MEDIA ORGANIZATIONS AND AFFILIATED DIGITAL PLATFORMS/NEWSQUEST PLC
 
 
 
Circulation*
 
 
City
Local media organization/web site
 
Monday-Saturday
 
Founded
Basildon
Echo**
www.echo-news.co.uk
 
26,705

 
1969
Blackburn
Lancashire Telegraph
www.lancashiretelegraph.co.uk
 
18,293

 
1886
Bolton
The Bolton News
www.theboltonnews.co.uk
 
17,199

 
1867
Bournemouth
Daily Echo
www.bournemouthecho.co.uk
 
22,007

 
1900
Bradford
Telegraph & Argus
www.thetelegraphandargus.co.uk
 
21,641

 
1868
Brighton
The Argus
www.theargus.co.uk
 
16,622

 
1880
Colchester
The Gazette**
www.gazette-news.co.uk
 
12,889

 
1970
Darlington
The Northern Echo
www.thenorthernecho.co.uk
 
35,196

 
1870
Glasgow
Evening Times
www.eveningtimes.co.uk
 
39,234

 
1876
Glasgow
The Herald
www.heraldscotland.com
 
41,030

 
1783
Newport
South Wales Argus
www.southwalesargus.co.uk
 
19,748

 
1892
Oxford
Oxford Mail
www.oxfordmail.co.uk
 
16,569

 
1928
Southampton
Southern Daily Echo
www.dailyecho.co.uk
 
26,846

 
1888
Swindon
Swindon Advertiser
www.swindonadvertiser.co.uk
 
15,506

 
1854
Weymouth
Dorset Echo
www.dorsetecho.co.uk
 
15,195

 
1921
Worcester
Worcester News
www.worcesternews.co.uk
 
11,922

 
1937
York
The Press
www.yorkpress.co.uk
 
22,057

 
1882
* Circulation figures are according to ABC results for the period January - June 2013
** Publishes Monday-Friday
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; Charlotte, NC; Chicago, IL; Cincinnati, OH; Dallas, TX; Denver, CO; Detroit, MI; Edison, NJ; Los Angeles; Minneapolis, MN; Moscow, ID; Nashville, TN; New York, NY; Orlando, FL; Overland Park, KS; Philadelphia, PA; San Bruno, CA; Scottsdale, AZ; Seattle, WA; Washington, DC
International offices:  Brazil, Canada, China, France, Germany, Greece, India, Indonesia, Italy, Malaysia, Netherlands, Belgium, Norway, Singapore, Spain, Sweden, United Kingdom, Vietnam
PointRoll, Inc.: www.pointroll.com
Headquarters: King of Prussia, PA
Sales offices: Atlanta, GA; Boston, MA; Chicago, IL; Detroit, MI; Los Angeles, CA; New York, NY; San Francisco, CA;
Shoplocal: www.shoplocal.com
Headquarters: Chicago, IL
Sales office: Chicago, IL
 

 
 
 
 
Mobile and Tablet: Gannett powers more than 500 local mobile and tablet products and also partners with mobile service providers to power news alerts and mobile marketing campaigns. Gannett has also developed and deployed leading applications for iPad, iPhone, Kindle, Android and Windows.
 
 
 
 



18


USA TODAY/USATODAY.com
Headquarters and editorial offices: McLean, VA
Print sites: Albuquerque, NM; Atlanta, GA; Columbia, SC; Denver, CO; Des Moines, IA; Eugene, OR; Fort Lauderdale, FL; Houston, TX; Indianapolis, IN; Las Vegas, NV; Lawrence, KS; Los Angeles, CA; Louisville, KY; Milwaukee, WI; Minneapolis, MN; Mobile, AL; Nashville, TN; Newark, OH; Norwood, MA; Oklahoma City, OK; Orlando, FL; Phoenix, AZ; Plano, TX; Rochester, NY; Rockaway, NJ; St. Louis, MO; Salt Lake City, UT; San Jose, CA; Seattle, WA; Springfield, VA; Sterling Heights, MI; Tampa, FL; Warrendale, PA; Wilmington, DE; Winston-Salem, NC
Advertising offices: Atlanta, GA; Chicago, IL; Dallas, TX; Detroit, MI; Los Angeles, CA; McLean, VA; New York, NY; San Francisco, CA
USA TODAY Sports Media Group: www.bigleadsports.com; www.kffl.com; www.thehuddle.com (subscription); www.hoopsworld.com; hoopshype.com; mmajunkie.com; bnqt.com; www.baseballhq.com (subscription); www.quickish.com; www.venturethere.com; www.schedulestar.com; www.usatodayhss.com; ftw.usatoday.com; q.usatoday.com
Headquarters: Los Angeles
Advertising offices: Los Angeles, CA; McLean, VA; New York, NY
USA TODAY Travel Media Group
Headquarters: McLean, VA
Advertising offices: McLean, VA
USA WEEKEND: www.usaweekend.com
Headquarters and editorial offices: McLean, VA
Advertising offices: Chicago, IL; Los Angeles, CA; New York, NY; San Francisco, CA
Reviewed.com: www.reviewed.com
Headquarters: Cambridge, MA
G/O Digital: BLiNQ Media: www.blinqmedia.com; Deal Chicken: www.dealchicken.com; Clipper Digital: www.clippermagazine.com; www.DoubleTakeOffers.com; G/O Digital: www.godigitalmarketing.com; Mobestream Media (Key Ring): www.keyringapp.com
Headquarters: Chicago, IL
Sales offices: Atlanta, GA; Chicago, IL; Dallas, TX; McLean, VA; New York, NY; Phoenix, AZ
BLiNQ Media: www.blinqmedia.com; bam.blinqmedia.com
Headquarters: New York, NY
Advertising offices:  Atlanta, GA; Chicago, IL; New York, NY
Mobestream Media: www.keyringapp.com
Headquarters: Dallas, TX
Clipper Magazine: www.clippermagazine.com; DoubleTakeOffers.com
Headquarters: Mountville, PA
Gannett Healthcare Group: www.GannettHG.com; www.GannettEducation.com; www.ContinuingEducation.com; www.Nurse.com; www.TodayinPT.com; www.PearlsReview.com
Headquarters: Hoffman Estates, IL
Regional offices: Dallas, TX; San Jose, CA
Publications: Nurse.com, Today in PT, Today in OT
Gannett Government Media Corp.
Headquarters:
 Springfield, VA
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, C4ISR & Networks: www.c4isrnet.com, Military Times EDGE: www.militarytimesedge.com
Gannett Media Technologies International: www.gmti.com 
Headquarters: Norfolk, VA
Regional offices: Cincinnati, OH; Phoenix, AZ
Non-daily publications: Weekly, semi-weekly, monthly or bimonthly publications in Alabama, Arizona, Arkansas, California, Colorado, Delaware, Florida, Guam, 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 Publishing Services: www.gannettpublishingservices.com
Headquarters: McLean, VA
Sales office: Atlanta, GA
Gannett Satellite Information Network: McLean, VA
 
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 furnishes them electronically to the Securities and Exchange Commission (SEC). Certifications by Gannett’s Chief Executive Officer and Chief Financial Officer are included as exhibits to the company’s SEC reports (including to this Form 10-K).
Gannett also provides access on this web site to its Principles of Corporate Governance, the charters of its Audit, Transformation, 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 the headquarters address. In addition, the company will disclose on this web site changes to, or waivers of, its corporate Ethics Policy.
 
 



19


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 did 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., U.K. and other international markets we serve may depress demand for our products and services
Our operating results depend on the relative strength of the economy in our principal television, publishing and digital markets as well as the strength or weakness of national and regional economic factors. Generally soft economic conditions and uneven recoveries in the U.S. and U.K. have had a significant adverse impact on the company’s businesses, particularly publishing. If conditions remain challenging or worsen in the U.S. or U.K. economy, all key advertising revenue categories could be significantly impacted.

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 broadcasting, publishing and digital revenues, with affiliated web site, mobile and tablet revenues being an important component. With the continued development of alternative forms of media, particularly electronic media including those based on the Internet, our businesses may face increased competition. Alternative media sources may also affect our ability to generate circulation revenues and our television audience. In addition, new and emerging technologies such as subscription streaming media services and mobile video are increasing competition for household audiences and advertisers. Services such as Aereo and FilmOn X provide their subscribers with streaming content from television stations, over the Internet. Litigation is ongoing over the claims of certain broadcasters and networks that such services, which are offered without broadcasters’ consent, violate copyright law. The Supreme Court has agreed to hear an appeal of the Second Circuit’s decision affirming a district court decision to deny a preliminary injunction against Aereo.
This competition may make it difficult for us to grow or maintain our print advertising, circulation and broadcasting revenues, which we believe will challenge us to expand the contributions of our online and other digital businesses.

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 2013, the company had approximately $3.7 billion in long-term debt and approximately $1.2 billion of additional borrowing capacity under its revolving credit facilities. This debt matures at various times during the years 2014-2027. While the company’s cash flow is expected to be sufficient to pay amounts when due, if operating results deteriorate significantly, a portion of these maturities may need to be refinanced. Access to the capital markets for longer term financing is unpredictable, and volatile credit markets could make it harder for us to obtain debt financings generally.

 
Volatility in global financial markets directly affects the value of our pension plan assets and liabilities
The company’s three largest retirement plans, which account for more than 95% of total pension plan assets, were underfunded as of Dec. 29, 2013 by $456 million on a U.S. GAAP basis. Various factors, including future investment returns, discount rates and potential pension legislative changes, impact the timing and amount of pension contributions the company may be required to make in the future.

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 2013 were translated to U.S. dollars at the average rate of 1.56. CareerBuilder, with expanding overseas operations, also has foreign exchange risk but to a significantly lesser degree.

Changes in the regulatory environment could encumber or impede our efforts to improve operating results or the value of assets
Our broadcasting, publishing and digital operations are subject to government regulation. Changing regulations, particularly FCC Regulations which affect our television stations (including changes to our shared services and similar agreements), may result in increased costs, reduced valuations for certain broadcasting properties or other impacts, all of which may adversely impact our future profitability. For example, the FCC is expected to release an order determining that certain joint sales agreements between stations will be treated as attributable interests and seek comment about shared services agreements and local news agreements, including whether such arrangements should be attributable for purposes of the FCC’s ownership rules. In addition, the FCC is seeking comment on rules governing a “repacking of the broadcast spectrum which may require certain stations to move to different channels. All of our television stations are required to possess television broadcasting 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 either our current license applications that are pending or those submitted in the future.



20


Our strategic acquisitions, investments and partnerships could pose various risks, increase our leverage and may significantly impact our ability to expand our overall profitability
Acquisitions involve inherent risks, such as increasing leverage and debt service requirements and combining company cultures and facilities, which could have a material adverse effect on our results of operations or cash flow and could strain our human resources. We may not be able to successfully implement effective cost controls, achieve expected synergies or increase revenues as a result of any acquisition. Acquisitions may result in our assumption of unexpected liabilities and may result in the diversion of management’s attention from the operation of our legacy business. In addition, disclosures we make regarding past operating results of acquired entities and our pro forma results are based on financial information provided to us by acquired entities, which has not been reviewed by our auditors or subject to our internal controls. Acquisitions may also result in us having greater exposure to the industry risks of the businesses underlying the acquisition. For example, our recent acquisition of Belo escalated our dependency on network affiliation agreements and beneficial retransmission agreements. 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 realize 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, or impairment of assets acquired, which would adversely affect future reported results of operations and shareholders’ equity.

The value of our existing intangible assets may become impaired, depending upon future operating results
Goodwill and other intangible assets were approximately $5.27 billion as of Dec. 29, 2013, representing approximately 57% 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 2013 and 2012 (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 cash flow.


 
Adverse results from litigation or governmental investigations can impact our business practices and operating results
From time to time, we are parties to litigation and regulatory, environmental and other proceedings with governmental authorities and administrative agencies. Adverse outcomes in lawsuits or investigations could result in significant monetary damages or injunctive relief that could adversely affect our operating results or financial condition as well as our ability to conduct our businesses as they are presently being conducted. See Note 12 of the Notes to Consolidated Financial Statements and Part I, Item 3. “Legal Proceedings” contained elsewhere in this report for a description of certain of our pending litigation and regulatory matters and other proceedings with governmental authorities.

The value of our assets or operations may be diminished if our information technology systems fail to perform adequately or if we are the subject of a data breach or cyber attack
Our information technology systems are critically important to operating our business efficiently and effectively.  We rely on our information technology systems to manage our business data, communications, news and advertising content, digital products, order entry, fulfillment and other business processes. The failure of our information technology systems to perform as we anticipate could disrupt our business and could result in transaction errors, processing inefficiencies, late or missed publications, and loss of sales and customers, causing our business and results of operations to suffer.
Furthermore, attempts to compromise information technology systems occur regularly across many industries and sectors, and we may be vulnerable to security breaches beyond our control.  We invest in security resources and technology to protect our data and business processes against risk of data security breaches and cyber attack, but the techniques used to attempt attacks are constantly changing.  A breach or successful attack could have a negative impact on our operations or business reputation. We maintain cyber risk insurance, but this insurance may not be sufficient to cover all of our losses from any future breaches of our systems.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.


21


ITEM 2. PROPERTIES

Broadcasting
The company’s broadcasting facilities are adequately equipped with the necessary television broadcasting equipment. The company owns or leases transmitter facilities in 40 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 14.

Publishing
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 publishers or commercial printers. In the case of USA TODAY, at Dec. 29, 2013, 22 non-Gannett printers were used to print it in U.S. markets where there were no company publishing sites with appropriate facilities. Non-Gannett printers in 9 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 local media organizations have outside news bureaus and sales offices, which generally are leased. In several markets, two or more of the company’s local media organizations share combined facilities; and in certain locations, facilities are shared with other non-Gannett publishing properties. At the end of 2013, 78% of the company’s U.S. daily publications were either printed by non-Gannett printers or printed in combination with other Gannett publications. 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 2013, the company continued its efforts to consolidate certain of its U.S. publishing facilities to achieve ongoing savings and greater efficiencies. The company’s facilities are adequate for present operations. A listing of publishing centers and key properties may be found on pages 15-17.
Newsquest owns certain of the plants where its publications 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. Newsquest has consolidated certain of its facilities to achieve savings and efficiencies. Certain Newsquest operations have out-sourced printing to non-Newsquest publishers. All of Newsquest’s properties are adequate for present purposes. A listing of Newsquest publishing centers and key properties may be found on page 18.

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 pages 18-19.

 
Corporate facilities
The company owns the buildings in which its 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. The company also leases space in its headquarters facilities to third-party tenants.

ITEM 3. LEGAL PROCEEDINGS

Information regarding legal proceedings may be found in Note 12 of the Notes to Consolidated Financial Statements.

Environmental
From time to time, some of the company’s current and former subsidiaries have been included among potentially responsible parties in connection with sites that have been identified as possibly requiring environmental remediation. These environmental proceedings are highly complex, and require a variety of issues to be resolved, including the extent of contamination, the nature and extent of investigation and remedial action that may ultimately be required, and the number of parties that will be required to contribute to such investigation and remediation costs, before the company’s liability for them, if any, will be known.
In March 2011, the Advertiser Company, a Gannett subsidiary which publishes The Montgomery Advertiser, was notified by the U.S. EPA that it has been identified as a potentially responsible party for the investigation and remediation of groundwater contamination in downtown Montgomery, AL. At this point in the investigation, incomplete information is available about the site, other potentially responsible parties and what further investigation and remediation may be required. Accordingly, future costs at the site, and The Advertiser Company’s share of such costs, if any, cannot yet be determined. Some of The Advertiser Company’s fees and costs in connection with this matter may be reimbursed under its liability insurance policies.
Management does not expect that these pending proceedings will have a material adverse effect upon the company’s consolidated results of operations or financial condition.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.


22


PART II

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, 6, 40 and 41 of this Form 10-K. Information about debt securities sold in private transactions may be found on pages 38-40 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
 
Year
Quarter
Low
 
High
2009
First
$
1.95

 
$
9.30

 
2012
First
$
13.36

 
$
15.61

 
Second
$
2.20

 
$
5.48

 
 
Second
$
12.33

 
$
15.74

 
Third
$
3.18

 
$
10.14

 
 
Third
$
13.20

 
$
18.75

 
Fourth
$
9.76

 
$
15.63

 
 
Fourth
$
16.63

 
$
18.97

2010
First
$
13.53

 
$
17.25

 
2013
First
$
18.01

 
$
22.07

 
Second
$
13.73

 
$
18.67

 
 
Second
$
19.85

 
$
26.60

 
Third
$
11.98

 
$
15.11

 
 
Third
$
24.06

 
$
26.67

 
Fourth
$
11.76

 
$
15.78

 
 
Fourth
$
24.39

 
$
29.31

2011
First
$
14.49

 
$
17.19

 
2014
First*
$
26.36

 
$
30.04

 
Second
$
13.30

 
$
15.64

 
* Through Feb. 18, 2014
 
 
 
 
Third
$
8.55

 
$
14.60

 
 
 
 
 
 
 
Fourth
$
9.16

 
$
13.57

 
 
 
 
 
 

Purchases of Equity Securities
Period
(a) Total Number of Shares Purchased
 
(b) Average Price Paid per Share
 
(c) Total Number of Shares Purchased as Part of Publicly Announced Program
 
(d) Approximate Dollar Value of Shares that May Yet Be Repurchased Under the Program
9/30/13 – 11/3/13
398,000

 
$
26.42

 
398,000

 
$
252,084,536

11/4/13 – 12/1/13
945,000

 
$
26.81

 
945,000

 
$
226,751,369

12/2/13 – 12/29/13
75,000

 
$
26.73

 
75,000

 
$
224,746,379

Total 4th Quarter 2013
1,418,000

 
$
26.69

 
1,418,000

 
$
224,746,379

On June 11, 2013, the company’s Board of Directors approved a new $300 million share repurchase program (replacing the 2012 $300 million program). While the Board of Directors reviews the program at least annually, there is no current expiration date for the new $300 million authorization. However, it is targeted to be completed over the two years following the announcement.




23


Comparison of shareholder return – 2009 to 2013
The following graph compares the performance of the company’s common stock during the period Dec. 31, 2008, to Dec. 31, 2013, with the S&P 500 Index, and a peer group index selected by the company.
The company’s peer group includes A.H. Belo Corp., Discovery Communications Inc., The E.W. Scripps Company, Graham Holdings Company, Journal Communications, Inc., The McClatchy Company, Media General, Inc., Meredith Corp., Monster Worldwide Inc., The New York Times Company, News Corp., and Yahoo Inc. (collectively, the “Peer Group”). Many of the Peer Group companies have a strong publishing/broadcasting orientation, but the Peer Group also includes companies in the digital media industry.
The S&P 500 Index includes 500 U.S. companies in the industrial, utilities and financial sectors and is weighted by market capitalization. The total returns of the Peer Group also are weighted by market capitalization.
The graph depicts representative results of investing $100 in the company’s common stock, the S&P 500 Index and Peer Group index at closing on Dec. 31, 2008. It assumes that dividends were reinvested monthly with respect to the company’s common stock, daily with respect to the S&P 500 Index and monthly with respect to each Peer Group company.

 
2008
2009
2010
2011
2012
2013
Gannett Co., Inc.
$
100

$
192.25

$
197.57

$
178.54

$
252.50

$
427.96

S&P 500 Index
$
100

$
126.46

$
145.51

$
148.59

$
172.37

$
228.19

Peer Group
$
100

$
151.79

$
164.25

$
175.07

$
239.98

$
347.83

 
ITEM 6. SELECTED FINANCIAL DATA

Selected financial data for the years 2009 through 2013 is contained under the heading “Selected Financial Data” on page 74 and is derived from the company’s audited financial statements for those years.
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 potential increase in competition for the company’s Digital Segment businesses; (c) a decline in viewership of major networks and local news programming resulting from increased competition or other factors; (d) a continuance of the generally soft economic 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; (e) a further decline in general print readership and/or advertiser patterns as a result of competitive alternative media or other factors; (f) an increase in newsprint or syndication programming costs over the levels anticipated; (g) labor disputes which may cause revenue declines or increased labor costs; (h) acquisitions of new businesses or dispositions of existing businesses; (i) rapid technological changes and frequent new product introductions prevalent in electronic publishing; (j) an increase in interest rates; (k) a weakening in the British pound to U.S. dollar exchange rate; (l) 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; (m) changes in the regulatory environment; (n) credit rating downgrades, which could affect the availability and cost of future financing; (o) adverse outcomes in proceedings with governmental authorities or administrative agencies; (p) cyber security breaches (q) general economic, political and business conditions; and (r) 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. The company continues to monitor the uneven economic recovery in the U.S., as well as new and developing competition and technological change, to evaluate whether any indicators of impairment exist, particularly for those reporting units where fair value is closer to carrying value.



24


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 90% of 2013 consolidated revenues are generated by its domestic operations and approximately 10% by its foreign operations, primarily in the U.K.
Gannett implements its strategy and manages its operations through three business segments: Broadcasting (television), Publishing, and Digital. Through its Broadcasting Segment, the company owns or services (through shared service agreements or similar arrangements) 43 television stations with affiliated digital platforms sites. These stations serve 30% of the U.S. population in markets with a total of nearly 35 million households.
The Publishing Segment includes the operations of 99 daily publications in the U.S., U.K. and Guam, more than 400 non-daily local publications in the United States and Guam and more than 200 such titles in the U.K. Its 82 U.S. daily publications, including USA TODAY, the nation’s number one newspaper in combined print and digital circulation, with an average circulation of approximately 2.9 million, have a combined daily average circulation of 5.6 million, which is the nation’s largest publishing group in terms of circulation. Together with the 17 daily paid-for publications its Newsquest division operates in the U.K., the total average daily print and digital circulation of its 99 domestic and U.K. daily publications was approximately 6.0 million for 2013. Daily newspapers also operate web sites, mobile and tablet products which are tightly integrated with publishing operations. The company’s broadcasting and publishing operations also have strategic business relationships with online affiliates including CareerBuilder, Classified Ventures, Shoplocal.com and Topix.
The Publishing Segment also includes commercial printing, newswire, marketing and data services operations.
The largest businesses within the company’s Digital Segment are CareerBuilder, PointRoll and Shoplocal. CareerBuilder is the global leader in human capital solutions, helping companies to target, attract and retain talent. Its online job site, CareerBuilder.com, is the largest in North America with the highest revenue. CareerBuilder is also rapidly expanding its international operations.
Fiscal year: The company’s fiscal year ends on the last Sunday of the calendar year. The company’s 2013 fiscal year ended on Dec. 29, 2013, and encompassed a 52-week period. The company’s 2012 fiscal year encompassed a 53-week period and the 2011 fiscal year encompassed a 52-week period.
Operating results summary: Company-wide operating revenues were $5.16 billion in 2013, a decrease of 4% from $5.35 billion in 2012. This decline was primarily due to the relative absence of a record $150 million in political advertising and $37 million of advertising associated with the Summer Olympic Games generated during 2012. On a comparable 52 week basis, total company revenues excluding the incremental impact of political and Olympic advertising revenues, were up slightly.
Broadcasting revenues for 2013 were $835 million or 8% lower than 2012 levels, as a significant increase in retransmission revenues was offset by the absence of significant political spending which reached record levels in 2012. The comparison to 2012 was also impacted by the Olympic spending in 2012. On a comparable 52 week basis, broadcasting revenues, excluding the incremental impact of political and Olympic advertising, were 13% higher.
Publishing revenues were $3.58 billion for 2013 or 4% below 2012 levels, reflecting a 7% decline in advertising revenues, partially offset by a 1% increase in circulation revenues. The increase in circulation revenues represents the second consecutive year of higher circulation revenues and reflects the impact of the All Access Content Subscription Model as well as cover price increases at Newsquest and USA TODAY.
 
Digital Segment revenues totaled $748 million for 2013, an increase of 4%, reflecting stronger results at CareerBuilder driven by additional partner programs, the strength of human capital software solutions, the recent vertical acquisition of Oil & Gas Job Search and geographical expansion into Vietnam.
Digital revenues company-wide, including the Digital Segment and all digital revenues generated by other business segments, were approximately $1.47 billion in 2013, nearly 30% of total operating revenues and an increase of 16% compared to 2012. The increase was driven primarily by the impact of the All Access Content Subscription Model as well as higher revenue associated with digital advertising and marketing solutions across all segments, and CareerBuilder.
Total operating expenses decreased by 3% to $4.42 billion for 2013, due to lower circulation print volumes in Publishing and continued cost efficiency efforts company-wide.
Newsprint expense for publishing was 14% lower than in 2012 due to a decline in consumption and prices.
The company reported operating income for 2013 of $739 million compared to $790 million in 2012, a 6% decrease.
The company’s net equity income in unconsolidated investees for 2013 was $44 million, an increase of $21 million over 2012. This increase reflects better results at Classified Ventures as well as reduced impairment charges in 2013.
Interest expense was $176 million in 2013, an increase of $26 million compared to 2012, largely due to new debt associated with the Belo transaction.
The company reported net income attributable to Gannett Co., Inc. of $389 million or $1.66 per diluted share for 2013 compared to $424 million or $1.79 per diluted share for 2012.
Net income attributable to noncontrolling interests was $57 million in 2013, an increase of 13% or $7 million over 2012, reflecting significantly improved operating results at CareerBuilder.
During 2013, the company paid out $183 million in dividends and repurchased 4.9 million shares at a cost of $117 million for an average price of $23.59 per share.
Outlook for 2014: For 2014, the company expects significant revenue growth in its Broadcasting Segment, Publishing Segment revenues to be flat to down in the low single-digit percentages, and growth in the Digital Segment consistent with 2013. The projected increase in Broadcasting Segment revenues is due primarily to the impact of the Belo acquisition, political and Olympic even year peaks, higher retransmission revenues and television digital revenue growth. Broadcasting Segment revenues are expected to increase in the range of 95% to 100%, reflecting 125% to 130% growth in retransmission revenues combined with incremental revenues from political, the Winter Olympics, and continued growth in digital advertising.
Publishing revenues will be positively impacted by the continued growth of digital marketing services, which may be diminished by secular declines in print advertising. Digital Segment revenues are expected to increase primarily due to continued growth at CareerBuilder consistent with past trends.
Total operating expenses are also expected to increase in comparison to 2013. Broadcasting Segment expenses are anticipated to nearly double, commensurate with growth in revenue, reflecting a full year of Belo operating expenses and increased reverse retransmission costs as a part of programming expenses. Publishing expenses will reflect increased spending on initiatives such as the integration of USA TODAY content into local publications and digital marketing services as well as increased costs for Broadcasting and Digital Segments associated with strong revenue growth. Newsprint expense is also expected to be lower as consumption continues to decrease.


25


Amortization expense is expected to be in the range of $50 million to $60 million in 2014, an increase over 2013 primarily due to the Belo acquisition.
The company expects its interest expense to be up in 2014, reflecting the full year impact of debt issued in the second half of 2013 primarily in connection with the Belo acquisition.

Basis of reporting
Following is a discussion of the key factors that have affected the company’s accounting for or reporting on the 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 preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and accompanying notes. Actual results could significantly differ from those estimates. The company believes that the following discussion addresses the company’s most critical accounting policies, which are those that are important to the presentation of the company’s financial condition and results of operations and require management’s most difficult, subjective and complex judgments.
Business Combinations: The company allocates the fair value of purchase consideration to the tangible assets acquired, liabilities assumed and intangible assets acquired, based on their estimated fair values. The excess of the fair value of purchase consideration over the values of these identifiable assets and liabilities is recorded as goodwill. When determining the fair value of assets acquired and liabilities assumed, management makes significant estimates and assumptions, especially with respect to intangible assets.
Critical estimates in valuing certain identifiable assets include but are not limited to expected long-term market growth; station revenue shares within a market; future expected operating expenses; costs of capital; and appropriate discount rates. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates.
Goodwill: As of Dec. 29, 2013, goodwill represented approximately 41% of the company’s total assets. Goodwill represents the excess of acquisition cost over the fair value of assets acquired, including identifiable intangible assets, net of liabilities assumed. Goodwill is tested for impairment on an annual basis (first day of fourth quarter) 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.
Under recent guidance, prior to performing the annual two-step goodwill impairment test, the company is first permitted to perform a qualitative assessment to determine if the two-step quantitative test must be completed. The qualitative assessment considers events and circumstances such as macroeconomic conditions, industry and market conditions, cost factors and overall financial performance, as well as company and specific reporting unit specifications. If after performing this assessment, the company concludes it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then it is required to perform a two-step quantitative test. Otherwise, the two-step test is not required. In the first step of the quantitative test, 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. Determining the fair value of the reporting units is judgmental in nature and involves the use of significant estimates and assumptions. These estimates and assumptions include changes
 
in revenue and operating margins used to project future cash flows, discount rates, valuation multiples of entities engaged in the same or similar lines of business and future economic and market conditions. 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.
The company used both the qualitative and quantitative assessments for its goodwill impairment testing during 2013.
In 2013, the company recognized impairment charges in its Publishing Segment of $8 million and its Digital Segment of $12 million. Both charges were to bring the recorded goodwill equal to implied fair value based on future projections for each reporting unit. The impairment charges coincide with updated financial projections for each of these reporting units.
The company has 5 major reporting units (defined as reporting units with goodwill in excess of $50 million) which accounted for 97% of its goodwill balance at Dec. 29, 2013. The following table shows the aggregate goodwill for these units summarized at the segment level:
In millions of dollars
 
Segment
Goodwill Balance
Broadcasting
$
2,544

Publishing
$
553

Digital
$
576


For the Broadcasting Segment, which is considered a single reporting unit, estimated fair value exceeded carrying value on the date of the impairment test by over 100%. Subsequent to the impairment testing date, the company completed its acquisition of Belo which is part of the Broadcasting Segment. The carrying value of Belo on the day of acquisition was equal to its fair value. At the end of 2013, in order for the Broadcasting reporting unit to fail step one of the goodwill impairment test, its estimated fair value would have to decline by over 40%.
In the case of the Publishing Segment there are three major reporting units that comprise the goodwill balance shown above. These consist of U.S. Community Publishing (including Gannett Publishing Services), Newsquest and USA TODAY group (which includes USA TODAY brand properties and USA WEEKEND). The company performed a qualitative assessment for the USA TODAY group and concluded that it was more likely than not that the fair value was greater than the carrying value. For U.S. Community Publishing and Newsquest, the aggregate estimated fair value of these reporting units exceeded the carrying value at the most recent test. In order for these reporting units to fail step one of the goodwill impairment test, the estimated value of the reporting units would have to decline by over 40%.
The Digital Segment balance represents CareerBuilder, where the company performed a qualitative assessment and concluded that it was more likely than not that the fair value was greater than the carrying value.


26


Fair value of the reporting units depends on several factors, including the future strength of the economy in the company’s principal broadcast, publishing and digital markets. Generally soft and uneven recoveries in the U.S. and U.K. markets have had an adverse effect on most of the company’s reporting units in recent years. As a result, the differences between fair value and carrying value have narrowed particularly for certain less significant reporting units in the Publishing Segment. New and developing competition as well as technological change could also adversely affect future fair value estimates. Any one or a combination of these factors could lead to declines in reporting unit fair values and result in goodwill impairment charges.
Indefinite Lived Intangibles: This asset grouping consists of FCC licenses for television stations and mastheads and trade names for publishing and digital businesses.
Indefinite lived assets are not subject to amortization and as a result they are tested for impairment annually (first day of the fourth quarter), or more frequently if events or changes in circumstances suggest that the asset might be impaired. The company is permitted to perform a qualitative assessment to determine if it is more likely than not that the fair value of the indefinite lived asset is less than its carrying amount. If that is the case, then the company would not have to perform the quantitative analysis. The qualitative assessment considers events and circumstances such as macroeconomic conditions, industry and market conditions, cost factors and overall financial performance of the indefinite lived asset.
Television FCC licenses are not subject to amortization and are tested for impairment annually (first day of fourth quarter), or more frequently if events or changes in circumstances indicate that the asset might be impaired. If the licenses are not tested qualitatively, then the quantitative impairment test consists of a comparison of the fair value of the license with its carrying amount. Fair value is estimated using an income approach referred to as the “Greenfield Approach.” This method requires multiple assumptions relating to the future prospects of each individual television station including, but not limited to: (i) expected long-term market growth characteristics, (ii) station revenue shares within a market, (iii) future expected operating expenses, (iv) costs of capital and (v) appropriate discount rates. The company performed a qualitative analysis on both of its FCC licenses on the impairment testing date and concluded that it was more likely than not that the fair value was more than the carrying value for each license. In addition, the company does not believe that either of these FCC licenses is at risk of requiring an impairment charge for the foreseeable future.
Subsequent to the impairment testing date, the company completed its acquisition of Belo and as a result recorded FCC licenses for all stations acquired. As these FCC licenses were recorded at fair value on the date of acquisition, any future declines in the fair value of the FCC license would result in an impairment charge. Factors that could cause the fair value to decline would be a decrease in any of the assumptions described in the above Greenfield Approach.
 
Local mastheads (publishing periodical titles and web site domain names) and other trade names are not subject to amortization and as a result they are tested for impairment annually (first day of the fourth quarter), or more frequently if events or changes in circumstances suggest that the asset might be impaired. The quantitative impairment test consists of a comparison of the fair value of each masthead/domain name or trade name with its carrying amount. The company uses a “relief from royalty” approach which utilizes a discounted cash flow model to determine the fair value of each masthead/domain name or trade name. Management’s judgments and estimates of future operating results in determining the reporting unit fair values are consistently applied to each underlying business in determining the fair value of each intangible asset. For two trade names and one masthead the fair value of each was less than the carrying value and impairment charges totaling $12 million were incurred during 2013. The majority of the impairment charge related to a trade name in the company’s Publishing Segment that will not be a meaningful part of the business going forward. For certain mastheads and other trade names, a deterioration in operating results at the underlying business units could lead to future impairment charges.
Other Long-Lived Assets (Property, Plant and Equipment and Amortizable Intangible Assets): Property, plant and equipment are recorded at cost and are depreciated on a straight-line method over the estimated useful lives of such assets. Changes in circumstances, such as technological advances or changes to the company’s business model or capital strategy, could result in actual useful lives differing from company estimates. In cases where the company determines that the useful life of buildings and equipment should be shortened, the company would depreciate the asset over its revised remaining useful life thereby increasing depreciation expense.
Accelerated depreciation was recorded in the years 2011-2013 for certain property, plant and equipment, reflecting specific decisions to consolidate production and other business services, primarily affecting the Publishing Segment.
The company reviews its property, plant and equipment assets for potential impairment at the asset group level (generally at the local business level) by comparing the carrying value of such assets with the expected undiscounted cash flows to be generated by those asset groups/local business units. Due to expected continued cash flow in excess of carrying value from its businesses, no property, plant or equipment assets were considered impaired.
The company’s amortizable intangible assets consist mainly of customer relationships and retransmission agreements. These asset values are amortized systematically over their estimated useful lives. An impairment test of these assets would be triggered if the undiscounted cash flows from the related asset group (business unit) were to be less than the asset carrying value. Impairment charges totaled less than $1 million in 2013 for amortizable intangible assets.
For certain of these amortizable intangible assets, a significant deterioration in operating results at the underlying business unit could lead to future impairment charges.


27


Pension Accounting: The company and its subsidiaries have various retirement plans, under which substantially all of the benefits have been frozen in previous years. The company accounts for its pension plans in accordance with the applicable accounting guidance, which requires it to include the funded status of its pension plans in the balance sheets, and to recognize, as a component of other comprehensive income (loss), the gains or losses that arise during the period, but are not recognized in pension expense. Pension expense is reported on the consolidated statement of income as “Cost of sales and operating expenses,” or “Selling, general and administrative expenses”.
The determination of pension plan obligations and expense is dependent upon a number of assumptions regarding future events, the most important of which are the discount rate applied to pension plan obligations and the expected long-term rate of return on plan assets. The discount rate assumption is based on investment yields available at year-end on corporate bonds rated AA and above with a maturity to match the expected benefit payment stream. A decrease in discount rates would increase pension obligations, thus changing the funded status recorded on the company’s consolidated balance sheet.
The company establishes the expected long-term rate of return by developing a forward-looking, long-term return assumption for each pension fund asset class, taking into account factors such as the expected real return for the specific asset class and inflation. A single, long-term rate of return is then calculated as the weighted average of the target asset allocation percentages and the long-term return assumption for each asset class. The company applies its expected long-term rate of return to the fair value of its pension assets in determining the dollar amount of its expected return. Changes in the expected long-term return on plan assets would increase or decrease pension plan expense. The effects of actual results differing from these assumptions are accumulated as unamortized gains and losses. A corridor approach is used in the amortization of these gains and losses, by amortizing the balance exceeding the greater of 10% of the beginning balances of the projected benefit obligation or the fair value of the plan assets. The amortization period is based on the average life expectancy of plan participants, which is currently estimated to be approximately 22 years for the company’s principal retirement plan.
For 2013, the assumption used for the discount rate was 4.85% for obligations of the company’s principal retirement plan. As an indication of the sensitivity of pension liabilities to the discount rate assumption, a 50 basis point reduction in the discount rate at the end of 2013 would have increased plan obligations by approximately $118 million. A 50 basis point change in the discount rate used to calculate 2013 expense would have changed total pension plan expense for 2013 by approximately $1.8 million. The company’s long-term expected return on pension assets used was an assumption of 8.25%. As an indication of the sensitivity of pension expense to the long-term rate of return assumption, a 50 basis point decrease in the expected rate of return on pension assets would have increased estimated pension plan expense for 2013 by approximately $9.1 million.
 
Income Taxes: The company’s annual tax rate is based on its income, statutory tax regulations and rates, and tax planning opportunities available to it in the various jurisdictions in which it operates. Significant judgment is required in determining the company’s annual tax expense and in evaluating its tax positions.
Tax law requires items to be included in the company’s tax returns at different times than when the items are reflected in the financial statements. As a result, the annual tax expense reflected in the consolidated statements of income is different than that reported in the tax returns. Some of these differences are permanent, such as expenses recorded for accounting purposes that are not deductible in the returns, and some differences are temporary and reverse over time, such as depreciation expense. Temporary differences create deferred tax assets and liabilities. Deferred tax liabilities generally represent tax expense recognized in the financial statements for which payment has been deferred, or expense for which a deduction has been taken already in the tax return but the expense has not yet been recognized in the financial statements. Deferred tax assets generally represent items that can be used as a tax deduction or credit in tax returns in future years for which a benefit has already been recorded in the financial statements. Valuation allowances are established when necessary to reduce deferred income tax assets to the amounts the company believes are more likely than not to be recovered. In evaluating the amount of any such valuation allowance, the company considers the reversal of existing temporary differences, the existence of taxable income in prior carry back years, available tax planning strategies and estimates of future taxable income for each of its taxable jurisdictions. The latter two factors involve the exercise of significant judgment. As of Dec. 29, 2013, deferred tax asset valuation allowances totaled $84 million, primarily related to foreign tax credits, foreign losses and state net operating losses available for carry forward to future years. Although realization is not assured, the company believes it is more likely than not that all other deferred tax assets for which no valuation allowances have been established will be realized. Review of historical and projected future taxable income is the principal basis upon which this assumption is made.
The company determines whether it is more likely than not that a tax position will be sustained upon examination by the appropriate taxing authorities before any part of the benefit is recorded in the financial statements. A tax position is measured as the portion of the tax benefit that is greater than 50% likely to be realized upon settlement with a taxing authority (that has full knowledge of all relevant information). The company may be required to change its provision for income taxes when the ultimate deductibility of certain items is challenged or agreed to by taxing authorities, when estimates used in determining valuation allowances on deferred tax assets significantly change, or when receipt of new information indicates the need for adjustment in valuation allowances. Additionally, future events, such as changes in tax laws, tax regulations, or interpretations of such laws or regulations, could have an impact on the provision for income tax and the effective tax rate. Any such changes could significantly affect the amounts reported in the consolidated financial statements in the year these changes occur.
The effect of a one percentage point change in the effective tax rate for 2013 would have resulted in a change of $5 million in the provision for income taxes and net income attributable to Gannett Co., Inc.



28


RESULTS OF OPERATIONS

Consolidated summary
A consolidated summary of the company’s results is presented below.
In millions of dollars, except per share amounts
 
2013
Change
2012
Change
2011
Operating revenues
$
5,161

(4%)
$
5,353

2%
$
5,240

Operating expenses
$
4,422

(3%)
$
4,563

3%
$
4,409

Operating income
$
739

(6%)
$
790

(5%)
$
831

Non-operating expense, net
$
180

51%
$
119

(33%)
$
178

Net income








Per share – basic
$
1.70

(7%)
$
1.83

(5%)
$
1.92

Per share – diluted
$
1.66

(7%)
$
1.79

(5%)
$
1.89


A discussion of operating results of the company’s Broadcasting, Publishing, and Digital Segments, along with other factors affecting net income attributable to Gannett, is as follows:

Broadcasting Segment
Gannett Broadcasting’s 2013 was a year of strategic changes. On Dec. 23, 2013, Gannett acquired Belo Corp., which, like Gannett, values quality, award-winning journalism, operational excellence and strong brand leadership. At the end of 2013, the company’s broadcasting operations included 43 television stations either owned or serviced through shared service agreements or other similar agreements. Stations in the company’s broadcasting division cover 30% of the U.S. population in markets with nearly 35 million households.
On Sept. 25, 2013 the company contributed the assets of Captivate to a new company that is jointly owned by Gannett and Generation Partners. As a result, the company ceased consolidating the results of Captivate as of that date.
Broadcasting revenues accounted for approximately 16% of the company’s reported operating revenues in 2013. Broadcasting revenues accounted for approximately 17% of the company’s reported operating revenues in 2012 and 14% in 2011.
 
Over the last three years, broadcasting revenues, expenses and operating income were as follows:
In millions of dollars
 
2013
Change
2012
Change
2011
Revenues
$
835

(8%)
$
906

25%
$
722

Expenses
473

2%
462

10%
420

Operating income
$
362

(18%)
$
444

47%
$
302

 
Reported broadcasting revenues decreased $71 million to $835 million or 8% for 2013. The 2013 year-over-year comparison is impacted by the absence of a record level of political spending and ad revenues associated with the 2012 Summer Olympics as well as an extra week in 2012’s results. On a comparable 52 week basis, broadcasting revenues, excluding the incremental impact of political and Summer Olympics revenue, were up 13%.
Core ad revenues, while impacted by the displacement of record political revenues, were up 3% in 2013, reflecting strong growth in the media, medical, and services categories. Retransmission revenues increased 52% in 2013 and digital television revenues increased 21% compared to 2012.
Broadcasting costs increased 2% to $473 million in 2013. The increase reflects higher digital sales and marketing costs in 2013 associated with online revenue growth and workforce restructuring costs associated with the Belo transaction.
As a result of all of these factors, Broadcasting Segment operating income decreased 18% to $362 million in 2013.
Broadcasting results 2012-2011: Broadcasting revenues increased $184 million or 25% for 2012. Year-over-year revenue comparisons were favorably impacted by a record level $183 million in ad revenues associated with the summer Olympics and political/election-related advertising in 2012. Political revenues totaled $150 million in 2012 while summer Olympics generated $37 million in revenue, of which $4 million was also political. Core ad revenues while impacted by the displacement effect of record political revenues, were up 5% in 2012, reflecting strong growth in automotive, banking and medical categories. Retransmission and digital television revenue were also significantly higher in 2012 from 2011, up 21% and 11%, respectively.
Broadcasting costs increased 10% to $462 million in 2012. The increase reflects higher sales and marketing costs in 2012 associated with higher revenues.
Operating income increased 47% to $444 million in 2012, benefiting from the impact of the Summer Olympics and a record level of political revenues.





29


Publishing Segment
In addition to its domestic local publications and affiliated digital platforms, the company’s publishing operations include Gannett Publishing Services, USA TODAY group (which includes USA TODAY brand properties and USA WEEKEND), Newsquest, which produces daily and non-daily publications in the U.K., Clipper Magazine, Gannett Healthcare Group, Gannett Government Media and other advertising and marketing services businesses. The Publishing Segment in 2013 contributed 69% of the company’s revenues.
Publishing operating results were as follows:
Publishing operating results, in millions of dollars
 
2013
Change
2012(a)
Change
2011(a)
Revenues
$
3,578

(4%)
$
3,728

(3%)
$
3,831

Expenses
3,264

(3%)
3,360

—%
3,354

Operating income
$
314

(15%)
$
369

(23%)
$
478

(a) Numbers do not sum due to rounding.
 
Foreign currency translation impacts: The average exchange rate used to translate U.K. publishing results was 1.56 for 2013, 1.58 for 2012 and 1.60 for 2011. Translation fluctuations impact U.K. publishing revenue, expense and operating income results.
Publishing operating revenues: Publishing operating revenues are derived principally from advertising and circulation sales, which accounted for 61% and 32%, respectively, of total publishing revenues in 2013. Ad revenues include those derived from advertising placed with print products as well as publishing related Internet web sites, mobile and tablet applications. These 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
 
2013
Change
2012
Change
2011
Advertising
$
2,199

(7%)
$
2,356

(6%)
$
2,511

Circulation
1,129

1%
1,117

5%
1,064

Commercial printing and other
250

(2%)
255

—%
256

Total
$
3,578

(4%)
$
3,728

(3%)
$
3,831

 
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, mobile and tablets affiliated with the publications.
Advertising revenues, in millions of dollars
 
2013
Change
2012
Change
2011
Retail
$
1,157

(6%)
$
1,230

(6%)
$
1,303

National
365

(8%)
396

(11%)
446

Classified
677

(7%)
730

(4%)
762

Total ad revenue
$
2,199

(7%)
$
2,356

(6%)
$
2,511


 
Publishing revenue comparisons 2013-2012:
Advertising Revenue: Advertising revenues for 2013 decreased $157 million or 7%. The decrease reflects lower advertising demand due to secular pressures, a slow pace of the economic recovery, and the extra week in 2012.
The table below presents the percentage change in 2013 compared to 2012 for each of the major ad revenue categories, by quarter.
Advertising Revenue Comparisons by Quarter
 
Q1
Q2
Q3
Q4 (a)
Retail
(3%)
(6%)
(4%)
(5%)
National
(5%)
(1%)
(10%)
(10%)
Classified
(6%)
(7%)
(6%)
(6%)
Total advertising
(5%)
(5%)
(6%)
(6%)
(a) The extra week in the fourth quarter of 2012 is excluded for comparability.

Ad revenues were lower in both the U.S. and the U.K during 2013. In the U.K., in local currency, ad revenues comparisons lagged comparisons in the U.S.. Newsquest ad revenues were down 8% compared with a 6% decline for U.S. publishing.
The table below presents the percentage change for the retail, national, and classified categories for 2013 compared to 2012. 
Advertising Revenue Year Over Year Comparisons
 
U.S. Publishing
Newsquest (in pounds)
Total Publishing (constant currency)
Retail
(6%)
(4%)
(6%)
National
(7%)
(16%)
(8%)
Classified
(7%)
(8%)
(7%)
Total
(6%)
(8%)
(7%)

Retail ad revenues were down $73 million or 6% in 2013. In the U.S. revenues were down in all major categories. Retail ad revenues were down 4% in the U.K. on a constant currency basis.
National ad revenues were down $31 million or 8% in 2013, primarily due to lower ad sales for U.S. Community Publishing, Newsquest, and as well as for USA TODAY and its associated businesses.
The table below presents the percentage change in classified categories for 2013 compared to 2012. 
Classified Revenue Year Over Year Comparisons
 
U.S. Publishing
Newsquest (in pounds)
Total Publishing (constant currency)
Automotive
(2%)
(10%)
(3%)
Employment
(10%)
(4%)
(8%)
Real Estate
(5%)
(9%)
(6%)
Legal
(12%)
—%
(12%)
Other
(8%)
(10%)
(8%)
Total
(7%)
(8%)
(7%)



30


Classified ad revenues declined $53 million or 7% in 2013 with a decline of 7% in the U.S. and 8% in the U.K. Domestically, automotive advertising was down 2% for the year while employment declined 10%. Real estate continued to reflect the housing issues nationwide and was down 5% for the year. Most classified advertising results in the U.K. lagged results in the U.S. as automotive, employment and real estate declined in local currency 10%, 4% and 9%, respectively.


Circulation Revenue: Publishing circulation revenues increased by $12 million or 1% over 2012, reflecting the second consecutive company-wide circulation annual revenue increase. Circulation revenues were up as a result of the implementation of the All Access Content Subscription Model in 2012. Circulation revenues increased 3% in 2013 at the company’s local domestic publishing units. Circulation revenue in the U.K. was up 3% compared to last year in local currency reflecting increases in cover prices.
Revenue comparisons reflect generally lower circulation volumes more than offset by price increases. Daily average print and digital, replica and non-replica circulation, excluding USA TODAY, declined 8%, while Sunday net paid circulation declined 5%.
Circulation revenues were lower at USA TODAY, reflecting lower average print daily circulation volume, partially offset by price increases.
For local publishing operations in the U.S. and U.K., morning circulation accounted for approximately 95% of total daily volume, while evening circulation accounted for 5%.


Local publishing circulation volume is summarized in the table below.
Total average circulation volume, print and digital, replica and non-replica in thousands
 
2013
Change
2012
Change
2011
Local Publications
 
 
 
 
 
Morning
2,967

(8%)
3,240

(8%)
3,512

Evening
161

(9%)
177

(8%)
193

Total daily
3,128

(8%)
3,417

(8%)
3,705

Sunday
4,729

(5%)
5,003

(3%)
5,150


Other Revenue: Commercial printing and other publishing revenues were down 2% in 2013 and totaled $250 million. Declines in other publishing revenues were partially offset by an increase in commercial print revenues. Commercial printing revenues in the U.S. and U.K. combined, accounted for approximately 60% of total other revenues.
 
Publishing Segment digital revenues were up for the year in the U.S. as well as at Newsquest in the U.K. Revenues benefited from the company’s continued focus on digital marketing services and the All Access Content Subscription Model. Domestic U.S. digital revenues were up 34%, while digital revenues at Newsquest increased 13% in local currency.
Publishing revenue comparisons 2012-2011:
Advertising Revenue: Advertising revenues for 2012 declined $155 million or 6% reflecting the impact of the soft economy on advertising demand.
Ad revenues were lower in both the U.S. and the U.K. In the U.K., in local currency, ad revenues were comparable to that of the U.S. Due to a slightly lower average exchange rate for 2012, in U.S. dollars, Newsquest ad revenues were down 7% compared with 6% decline for U.S. publishing.
Retail ad revenues were down $73 million or 6% in 2012. In the U.S., revenues were down in most principal categories, with the more significant declines occurring in the financial and telecommunications categories, partially offset by an increase in retail online advertising. Retail ad revenues were down 4% in the U.K. on a constant currency basis.
National ad revenues were down $51 million or 11% in 2012, primarily due to lower ad sales for USA TODAY and its associated businesses, as well as for U.S. Community Publishing.
Classified ad revenues decreased $32 million or 4% in 2012 with a decline of 3% in the U.S. and 8% in the U.K. Domestically, automotive advertising was up 2% for the year while employment declined 3%. Real estate reflected the housing issues across the country and was down 11% for the year. Classified advertising in the U.K. was worse than in the U.S. as automotive, employment and real estate declined in local currency 13%, 4% and 9%, respectively.
Digital revenues in the Publishing Segment were up for 2012 in the U.S. as well as at Newsquest in the U.K. U.S. Community Publishing digital revenues were up 6%, reflecting increases in the automotive and retail categories. Digital ad revenues at USA TODAY and its associated brands were up by 38% for the year, while digital revenues at Newsquest increased 10% in local currency.
Circulation Revenue: Publishing circulation revenues increased $53 million in 2012 or 5% over 2011, reflecting the first company-wide circulation revenue increase since 2006. Circulation revenues were up as a result of the implementation of the All Access Content Subscription Model throughout 2012 and the favorable impact of the extra week in 2012. Late in the fourth quarter of 2012, the company completed the final phase of the All Access roll out across 78 U.S. community publishing markets. Circulation revenues increased 8% in 2012 at the company’s local domestic publishing units. Circulation revenue in the U.K. was flat compared to 2011 in local currency.
Revenue comparisons reflect generally lower circulation volumes more than offset by price increases. Daily average paid and verified circulation, excluding USA TODAY, declined 8%, while Sunday average paid and verified circulation declined 3%.
Circulation revenues were lower at USA TODAY, reflecting lower average daily circulation volume. USA TODAY’s average daily circulation for 2012 declined 2%.
For local publishing operations in the U.S. and U.K., morning circulation accounted for approximately 95% of total daily volume, while evening circulation accounted for 5%.
Other Revenue: Commercial printing and other publishing revenues totaled $255 million in 2012 and were flat compared to 2011 due primarily to a decrease in commercial printing revenues that were more than offset by the impact of the extra week in 2012. Commercial printing revenues in the U.S. and U.K. accounted for approximately 58% of total other revenues.


31


Publishing expense comparisons 2013-2012: Publishing operating expense decreased to $3.26 billion in 2013 as continued cost efficiency efforts were partially offset by strategic initiative spending of $36 million. A majority of the strategic spending in 2013 was in conjunction with digital relaunches and the investments made in the company’s digital marketing services business.
Publishing payroll costs were down 3% compared to 2012 reflecting the impact of workforce restructuring across certain divisions.
Newsprint expense was down 14% in 2013 due to a decline in consumption and prices.
Publishing expense comparisons 2012-2011: Publishing operating expense increased slightly to $3.36 billion in 2012, primarily due to the impact of continued cost control and efficiency efforts, offset by strategic initiative spending of $68 million, higher pension expense and the impact of the extra week in 2012. A majority of the strategic spending in 2012 was in conjunction with the roll out of the All Access Content Subscription Model, digital relaunches and the investments made in the company’s digital marketing services business.
Publishing payroll costs were relatively unchanged, reflecting the impact of headcount reductions across certain divisions offset by the additional week in 2012.
Newsprint expense was down 6%, reflecting lower consumption, down 7%, offset by a 1% increase in usage prices.
Publishing operating results 2013-2012: Publishing operating income decreased to $314 million in 2013 from $369 million in 2012. The principal factors affecting reported operating results comparisons for the full year were the following:
Lower operating results in the U.S. and U.K. as ad revenue categories were affected by the impact of the soft economy on advertising demand, partially offset by an increase in circulation revenue at the company’s U.S. Community Publishing and U.K. operations;
Strategic initiative spending in 2013 of $36 million;
Special charges for facility consolidation and asset impairments as well as workforce restructuring totaled $89 million in 2013 and $74 million in 2012;
Significant increase in digital revenue;
Negative impact of the extra week in 2012; and
A decrease in newsprint expense.
Publishing operating results 2012-2011: Publishing operating income decreased to $369 million in 2012 from $478 million in 2011. The principal factors affecting reported operating results comparisons for the full year were the following:
Lower operating results at most U.S. and U.K. properties as ad revenue categories were affected by the impact of the soft economy on advertising demand;
A decrease in newsprint expense due to a decline in usage;
Higher charges in 2012 from workforce restructuring efforts and consolidations;
Positive impact of a significant increase in digital revenue; and
Positive impact of the extra week in 2012.

 
Digital Segment
The largest businesses within the company’s Digital Segment are CareerBuilder, PointRoll and Shoplocal.
Digital revenues, expenses and operating income were as follows: 
In millions of dollars

2013
Change
2012
Change
2011
Revenues
$
748

4%
$
719

5%
$
686

Expenses
620

(8%)
677

21%
561

Operating income
$
128

***
$
42

(67%)
$
125


Digital revenues increased $29 million or 4% over 2012, primarily reflecting a strong increase in revenues at CareerBuilder.
Digital expenses in 2013 decreased 8% to $620 million, primarily due to a $78 million decrease in impairment charges in 2013 partly offset by an increase in expenses at CareerBuilder associated with its revenue growth.
As a result of these factors, Digital Segment operating income increased to $128 million in 2013.
CareerBuilder operations are predominately based in North America, although expansion efforts continue in parts of Europe, Asia and South America. 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 businesses, including the company’s local media organizations, which sell various CareerBuilder employment products including upsells of print employment ads. North American network revenue increased 3%, compared to last year, with substantially all the increase attributable to revenues CareerBuilder derived from its own sales efforts. Revenues derived from its owner-affiliated newspapers were down 10% in 2013, while revenues from its own sales efforts were up 5% in 2013. Since CareerBuilder is consolidated, for Gannett’s financial reporting purposes, CareerBuilder revenues exclude amounts recorded at Gannett-owned local media organizations.
Digital results 2012-2011: Digital revenues increased $32 million or 5% over 2011, reflecting primarily a significant increase in revenues at CareerBuilder.
Digital expenses in 2012 increased 21% to $677 million, primarily due to an increase in expenses at CareerBuilder associated with its revenue growth. Expenses were also higher due to $90 million impairment charges recognized in 2012. As a result of all these factors, Digital Segment operating income decreased 67% to $42 million in 2012.




32


Consolidated operating expenses
Over the last three years, the company’s consolidated operating expenses were as follows:
Consolidated operating expenses, in millions of dollars
 
2013(a)

Change
2012

Change
2011

Cost of sales
$
2,882

(2%)
$
2,944

(1%)
$
2,961

Selling, general and admin. expenses
1,292

(1%)
1,303

7%
1,223

Depreciation
153

(5%)
161

(3%)
166

Amortization of intangible assets
36

9%
33

5%
32

Facility consolidation and asset impairment charges
58

(52)%
122

***
27

Total
$
4,422

(3%)
$
4,563

3%
$
4,409

(a) Numbers do not sum due to rounding.

Total reported operating expense decreased 3% to $4.42 billion in 2013, due to continued cost efficiency efforts company-wide, lower facility consolidation and asset impairment charges as well as lower newsprint expense. These were partially offset by $58 million in workforce restructuring charges and $41 million of strategic initiative investments made throughout the year.
Depreciation expense was 5% lower in 2013, reflecting 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 beginning on page 34 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.
 
2013
2012
2011
Payroll and employee benefits
47.6%
45.9%
46.8%
Newsprint and other production material
10.1%
11.2%
12.1%

Operating expense comparisons 2012-2011: Total reported operating expense increased 3% to $4.56 billion in 2012. Payroll increased by 2% in 2012 as a result of recent acquisitions and the impact of the extra week in 2012, partially offset by reduced headcount in certain divisions. Strong cost controls were in place throughout the company, however expenses increased 10% in the Broadcasting Segment and 20% in the Digital Segment associated with significant increases in their revenue. Cost savings were also offset by an increase in facility consolidation and asset impairment charges, higher pension expense, the extra week in 2012 and $74 million of strategic initiative investments made throughout the year.
Depreciation expense was 3% lower in 2012, reflecting reduced depreciation of certain assets reaching the end of their depreciable life.

 
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 publishing 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 2013 was $44 million, an increase of $21 million over 2012. This increase reflects better results at Classified Ventures, the California Newspapers Partnership, as well as reduced impairment charges recognized in 2013.
The company’s net equity income in unconsolidated investees for 2012 was $22 million, an increase of $14 million over 2011. This increase reflects better results at Classified Ventures as well as reduced impairment charges recognized in 2012.
Interest expense: 2013 interest expense increased by 17% to $176 million compared to 2012 due to a higher average debt level of $2.01 billion. The higher average debt level is related to the issuance of $1.85 billion in senior notes during the second half of 2013 primarily related to the Belo acquisition which closed on Dec. 23, 2013.
Interest expense in 2012 was lower compared to 2011, as lower average debt levels were offset by higher average rates and the extra week in 2012.
The company increased its long-term debt by $2.27 billion or 159% in 2013. At the end of 2013, the company’s leverage ratio was 3.24x, within the financial covenants under its revolving credit agreements.
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 38 and in Note 7 to the Consolidated Financial Statements.
Other non-operating items: The company reported a net loss of $48 million for other non-operating items in 2013. The majority relates to costs associated with the Belo transaction and a non-cash charge associated with the change in control and sale of interests related to Captivate. These costs were partly offset by interest income earned in 2013.
Other non-operating items totaled a net gain of $9 million in 2012 with the majority related to a gain on distribution from a cost method investment and interest income earned during 2012.
The company reported a net loss of $13 million in 2011 as the company recorded $15 million of non-cash charges for the write-down of certain minority investments.

Provision for income taxes
The company reported pre-tax income attributable to Gannett of $502 million for 2013. The provision for income taxes reflects certain state audit settlements and a special net tax benefit from the release of certain tax reserves due to a multi-year federal audit settlement in 2013. The effective tax rate on pre-tax income is 22.6%.
The company reported pre-tax income attributable to Gannett of $620 million for 2012. The provision for income taxes reflects an impairment of non-deductible goodwill, certain state audit settlements and a special net tax benefit from the release of certain tax reserves due to a federal audit settlement in 2012. The effective tax rate on pre-tax income is 31.5%.


33


The lower effective tax rate for 2013 compared to 2012 is due to special items contributing a net tax benefit that related primarily to a multi-year federal audit settlement recognized in 2013 as well as a non-deductible goodwill impairment charge incurred in 2012.
The company reported pre-tax income attributable to Gannett of $612 million for 2011. The provision for income taxes reflects a special net tax benefit from the release of certain tax reserves due to audit settlements and a permanent stock basis deduction associated with the disposal of certain business assets in 2011. An impairment charge for these assets had been recorded in previous years, however no related tax benefit had been recognized as the formal disposal of the assets did not occur until 2011. The effective tax rate on pre-tax income was 25.0%.
The lower effective tax rate for 2011 compared to 2012 is due to the stock basis deduction associated with previous impairment charges and the release of foreign tax reserves upon audit settlements recognized in 2011 as well as a non-deductible goodwill impairment charge incurred in 2012.
Further information concerning income tax matters is contained in Note 10 of the Consolidated Financial Statements.

Net income attributable to Gannett Co., Inc.
Net income attributable to Gannett Co., Inc. and related per share amounts are presented in the table below.
In millions of dollars, except per share amounts
 
2013
Change
2012
Change
2011
Net income
$
389

(8%)
$
424

(8%)
$
459

Per basic share
$
1.70

(7%)
$
1.83

(5%)
$
1.92

Per diluted share
$
1.66

(7%)
$
1.79

(5%)
$
1.89


Net income attributable to Gannett Co., Inc. consists of net income reduced by net income attributable to noncontrolling interests, primarily from CareerBuilder. Net income attributable to noncontrolling interests was $57 million, $51 million and $41 million in 2013, 2012 and 2011, respectively.

Operating results non-GAAP information
Presentation of non-GAAP information: The company uses non-GAAP financial performance and liquidity measures to supplement the financial information presented on a GAAP basis. These non-GAAP financial measures should not be considered in isolation from or as a substitute for the related GAAP measures, and should be read in conjunction with financial information presented on a GAAP basis.
The company discusses in this report non-GAAP financial performance measures that exclude from its reported GAAP results the impact of special items consisting of:
Workforce restructuring charges;
Transformation costs;
Non-cash asset impairment charges;
A non-cash charge related to a change in control and sale of interests in a business;
Non-cash charges related to certain investments accounted for under the equity method;
A currency-related loss recognized in other non-operating items; and
Certain credits to its income tax provision.
 
The company believes that such expenses, charges and credits are not indicative of normal, ongoing operations and their inclusion in results makes for more difficult comparisons between years and with peer group companies. Workforce restructuring and facility consolidation expenses primarily relate to incremental expenses the company has incurred to consolidate or outsource production processes and centralize other functions. These expenses include payroll and related benefit costs. Transformation costs include incremental expenses incurred by the company to execute on its transformation and growth plan, including those related to the company’s recently completed Belo acquisition and incremental expenses associated with optimizing the company’s real estate portfolio. Non-cash asset impairment charges were recorded to reduce the book value of certain intangible assets and investments accounted for under the equity and cost methods to fair value, as the businesses underlying these assets had experienced significant and sustained unfavorable operating results. Other non-operating charges include a non-cash charge related to the change in control and sale of interests in the company’s Captivate business and a currency loss in the first quarter of 2013 related to the weakening of the British pound associated with the downgrade of the U.K. sovereign credit rating. Results for 2013 also include credits to the income tax provision related to reserve releases as a result of federal exam resolution and lapse of a statute of limitation. Results for 2012 included a credit related primarily to tax settlements covering multiple years.
Management uses non-GAAP financial performance measures for purposes of evaluating business unit and consolidated company performance. The company therefore believes that each of the non-GAAP measures presented provides useful information to investors by allowing them to view the company’s businesses through the eyes of management and the Board of Directors, facilitating comparison of results across historical periods, and providing a focus on the underlying ongoing operating performance of its businesses. In addition, many of the company’s peer group companies present similar non-GAAP measures to better facilitate industry comparisons.
Discussion of special charges and credits affecting reported results: For the years 2013, 2012, and 2011 the company recorded workforce restructuring related costs totaling $58 million ($37 million after-tax or $.16 per share), $49 million ($29 million after-tax or $.12 per share), and $74 million ($46 million after-tax or $.19 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.
Company-wide transformation plans led the company to recognize charges in 2011-2013 associated with revising the useful lives of certain assets over a shortened period, as well as shutdown costs and charges to reduce the carrying value of assets held for sale to fair value less costs to sell. Additionally, costs from the company’s recent acquisition of Belo are included as part of transformation costs. Total charges for these matters were $61 million ($45 million after-tax or $.19 per share), $32 million ($20 million after-tax or $.08 per share), and $27 million ($18 million after-tax or $.07 per share) in 2013, 2012, and 2011, respectively.


34


The company performed impairment tests on certain assets including goodwill, other intangible assets, other long-lived assets and investments accounted for under the equity and cost methods, that resulted in the recognition of impairment charges in 2011-2013. During 2013, the company recorded operating and non-operating non-cash asset impairment charges of $34 million ($20 million after-tax or $.09 per share). In 2012, non-cash asset impairment charges to operating and non-operating expense totaled $97 million ($91 million after-tax or $.38 per share). In 2011, non-cash asset impairment and investment charges to non-operating expense totaled $30 million ($18 million after-tax or $.08 per share). These non-cash impairment charges are detailed in Notes 3 and 4 to the Consolidated Financial Statements.
During 2011, the company recorded a $15 million ($9 million after-tax or $.04 per share) incremental charge for the disability-related retirement of the company’s former chairman and chief executive officer.
Other non-operating item charges in 2013 totaled $19 million ($10 million after-tax or $.04 per share) and are primarily related to a loss recognized on the Captivate transaction and a currency related loss related to the weakening of the British pound.
The company recorded a tax benefit of $28 million or $.12 per share related to resolution of several federal tax claims in the first quarter of 2013. In 2012, the company recorded $13 million or $.06 per share related primarily to tax settlements covering multiple years. In addition, the company recorded net special benefits of $31 million ($.13 per share) during 2011 related to tax audit settlements covering multiple years and a permanent stock basis deduction related to the disposal of certain business assets.

Consolidated results
The following is a discussion of the company’s as adjusted non-GAAP financial results. All as adjusted (non-GAAP basis) measures are labeled as such or “adjusted”.
Adjustments to remove special items from GAAP operating expense follow:
In millions of dollars
 
2013

Change
2012(a)

Change
2011

Operating expense
(GAAP basis)
$
4,422

(3%)
$
4,563

3%
$
4,409

Remove special items:
 
 
 
 
 
Workforce restructuring
(58
)
19%
(49
)
(34)%
(74
)
Transformation costs
(25
)
(21)%
(32
)
18%
(27
)
Asset impairment charges
(33
)
(63)%
(90
)
***

Former Chairman and CEO incremental retirement charges