-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DniBb5pcZNwD76Jnjfm9NL+RrONXGwLcMdIOJcPxzQLcJOSZgobYj9CpkaKr6bsj zSrXbQqbv6mAqOgyoVh+/g== 0000039899-00-000006.txt : 20000320 0000039899-00-000006.hdr.sgml : 20000320 ACCESSION NUMBER: 0000039899-00-000006 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 19991226 FILED AS OF DATE: 20000317 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GANNETT CO INC /DE/ CENTRAL INDEX KEY: 0000039899 STANDARD INDUSTRIAL CLASSIFICATION: NEWSPAPERS: PUBLISHING OR PUBLISHING & PRINTING [2711] IRS NUMBER: 160442930 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-06961 FILM NUMBER: 572089 BUSINESS ADDRESS: STREET 1: 1100 WILSON BLVD CITY: ARLINGTON STATE: VA ZIP: 22234 BUSINESS PHONE: 7032846000 MAIL ADDRESS: STREET 1: 1100 WILSON BLVD 28TH FLOOR CITY: ARLINGTON STATE: VA ZIP: 22234 10-K 1 GANNETT FORM 10-K Exhibit Index begins on page 11 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) X Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 [No Fee Required] for the fiscal year ended December 26, 1999 or ___ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 [No Fee Required] for the transition period from ______________ to _____________. Commission file number 1-6961 GANNETT CO., INC. (Exact name of registrant as specified in its charter) Delaware 16-0442930 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 1100 Wilson Boulevard, Arlington, Virginia 22234 (Address of principal executive offices) (Zip Code) (Registrant's telephone number, including area code) (703) 284-6000 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered Common Stock, Par Value $1.00 New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None (Title of Class) 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 __ -1- 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. [ X ] The aggregate market value of the voting stock held by non-affiliates of the registrant as of March 3, 2000 was $17,467,183,778. The number of shares outstanding (basic) of the registrant's Common Stock, Par Value $1.00, as of March 3, 2000 was 270,000,105. Documents incorporated by reference. (1) Portions of the registrant's Annual Report to Shareholders for the fiscal year ended December 26, 1999 in Parts I, II and III. (2) Portions of the registrant's Proxy Statement issued in connection with its Annual Meeting of Shareholders to be held on May 2, 2000. -2- CROSS REFERENCE SHEET The information required in Parts I, II and III of the Form 10-K is incorporated by reference to sections of the company's 1999 Annual Report to Shareholders ("Annual Report") and its definitive Proxy Statement for the Annual Meeting of Shareholders to be held May 2, 2000 ("Proxy Statement") as described below: Part I Item 1. Business. Form 10-K Information (Annual Report pp. 55-69); Note 10 - Business Segment Information (Annual Report p. 50). Item 2. Properties. Properties (Annual Report pp. 58 and 61); Corporate Facilities (Annual Report p. 63); Markets We Serve (Annual Report pp. 70-74). Item 3. Legal Proceedings. Note 9 - Commitments, Contingent Liabilities and Other Matters (Annual Report p. 49); Regulation (Annual Report pp. 59 and 61). Item 4. Submission of Matters Not applicable. to a Vote of Security Holders. Part II Item 5. Market for Registrant's Gannett Shareholder Services (Annual Common Equity and Report, p. 77); Company Related Stockholder Profile (Annual Report, p. 1); Matters Gannett Common Stock Prices (Annual Report p. 22); Dividends (Annual Report p. 33). Item 6. Selected Financial Eleven-Year Summary and Notes to Data. Eleven-Year Summary (Annual Report pp. 52-54). Item 7. Management's Discussion Management's Discussion and Analysis and Analysis of of Results of Operations and Financial Financial Condition and Position (Annual Report pp. 23-33). Results of Operations. Item 7A. Quantitative and The company is not subject to market risk Qualitative Disclosures associated with derivative financial about Market Risk instruments or derivative commodity instruments, as the company is not a party to any such instruments. The company believes that its market risk from other financial instruments, such as accounts receivable, accounts payable and debt, is not material. The company is exposed to foreign exchange rate risk primarily due to its acquisition of Newsquest, which uses British pounds as its functional currency which is then translated into U.S. dollars. Item 8. Financial Statements Consolidated Financial Statements and and Supplementary Data. Notes to Consolidated Financial State- ments (Annual Report pp. 34-50). Effects of inflation and changing prices (Annual Report p. 33); Quarterly Statements of Income (Annual Report pp. 66-67). Item 9. Changes in and None. Disagreements with Accountants on Account- ing and Financial Disclosure. -3- Part III Item 10. Directors and Executive Executive Officers of the Officers of the Registrant. company are listed below: Sara M. Bentley - President, Gannett Northwest Newspaper Group, and President and Publisher, Statesman Journal Thomas L. Chapple - Senior Vice President, General Counsel, and Secretary Richard L. Clapp - Senior Vice President, Human Resources Susan Clark-Johnson - Senior Group President, Gannett Pacific Newspaper Group, and President and Publisher, Reno (Nev.) Gazette-Journal Michael J. Coleman - Senior Group President, Gannett South Newspaper Group, and President and Publisher, FLORIDA TODAY at Brevard County Robert T. Collins - President, New Jersey Newspaper Group, and President and Publisher, Asbury Park Press and Home News Tribune, East Brunswick, NJ John J. Curley - Chairman and Chief Executive Officer Thomas Curley - Senior Vice President, Administration, and President and Publisher, USA TODAY Philip R. Currie - Senior Vice President, News, Gannett Newspaper Division Ardyth R. Diercks - Senior Vice President, Gannett Television Craig A. Dubow - Executive Vice President, Gannett Television Daniel S. Ehrman, Jr. - Vice President, Planning & Development Millicent A. Feller - Senior Vice President, Public Affairs and Government Relations Lawrence P. Gasho - Vice President, Financial Analysis George R. Gavagan - Vice President and Controller Denise H. Ivey - President, Gannett Gulf Coast Newspaper Group, and President and Publisher, Pensacola News Journal John B. Jaske - Senior Vice President, Labor Relations and Assistant General Counsel Richard A. Mallary - Senior Vice President, Gannett Broadcasting Gracia C. Martore - Treasurer and Vice President, Investor Relations Douglas H. McCorkindale - Vice Chairman and President Larry F. Miller - Executive Vice President and Chief Financial Officer Craig A. Moon - President, Piedmont Newspaper Group, and President and Publisher, The Tennessean Roger Ogden - Vice President, Gannett Television, and President and General Manager, KUSA-TV, Denver W. Curtis Riddle - Senior Group President, Gannett East Newspaper Group, and President and Publisher, The News Journal (Wilmington, DE) Carleton F. Rosenburgh - Senior Vice President, Gannett Newspaper Division Gary F. Sherlock - President, Gannett Atlantic Newspaper Group, and President and Publisher, The Journal News Mary P. Stier - President, Gannett Midwest Newspaper Group, and President and Publisher, Rockford Register Star Frank J. Vega - President and CEO, Detroit Newspapers Cecil L. Walker - President, Gannett Broadcasting Division Gary L. Watson - President, Gannett Newspaper Division -4- Information concerning the Executive Officers of the company is included in the Annual Report on pages 18-20. Information concerning the Board of Directors of the company is incorporated by reference to the company's Proxy Statement pursuant to General Instruction G(3) to Form 10-K. Item 11. Executive Compensation. Incorporated by reference to the company's Proxy Statement pursuant to General Instruction G(3) to Form 10-K. Item 12. Security Ownership of Certain Incorporated by reference to the Beneficial Owners and company's Proxy Statement pursuant to Management. General Instruction G(3) to Form 10-K. Item 13. Certain Relationships and Incorporated by reference to the Related Transactions. company's Proxy Statement pursuant to General Instruction G(3) to Form 10-K. -5- Part IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. (a) Financial Statements, Financial Statement Schedules and Exhibits. (1) Financial Statements. The following financial statements of the company and the accountants' report thereon are included on pages 34 through 51 of the company's 1999 Annual Report to Shareholders and are incorporated herein by reference: Consolidated Balance Sheets as of December 26, 1999 and December 27, 1998. Consolidated Statements of Income - Fiscal Years Ended December 26, 1999, December 27, 1998, and December 28, 1997. Consolidated Statements of Cash Flows - Fiscal Years Ended December 26, 1999, December 27, 1998, and December 28, 1997. Consolidated Statements of Changes in Shareholders' Equity - December 26, 1999, December 27, 1998, and December 28, 1997. Notes to Consolidated Financial Statements. Report of Independent Accountants. -6- (2) Financial Statement Schedules. The following financial statement schedules are incorporated by reference to "Schedules to Form 10-K Information" appearing on pages 68 and 69 of the company's 1999 Annual Report to Shareholders: Schedule V - Property, Plant and Equipment. Schedule VI - Accumulated Depreciation and Amortization of Property, Plant and Equipment. Schedule VIII - Valuation and Qualifying Accounts. Schedule X - Supplementary Income Statement Information. The Report of Independent Accountants on Financial Statement Schedules appears on page 8 of this Form 10-K. Note: All other schedules are omitted as the required information is not applicable or the information is presented in the consolidated financial statements or related notes. (3) Pro Forma Financial Information. Not Applicable. (4) Exhibits. See Exhibit Index for list of exhibits filed with this Annual Report on Form 10-K. Management contracts and compensatory plans or arrangements are identified with asterisks on the Exhibit Index. (b) Reports on Form 8-K. (1) Current Report on Form 8-K/A dated October 5, 1999, in connection with the company's acquisition of Newsquest plc. (2) Current Report on Form 8-K dated December 7, 1999 in connection with the sale of the company's cable business. -7- REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULES To the Board of Directors and Shareholders of Gannett Co., Inc. Our audits of the consolidated financial statements referred to in our report dated January 31, 2000 appearing on page 51 of the 1999 Annual Report to Shareholders of Gannett Co., Inc. (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the Financial Statement Schedules listed in Item 14(a) of this Form 10-K. In our opinion, these Financial Statement Schedules present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. /s/PRICEWATERHOUSECOOPERS, LLP - -------------------------------- PRICEWATERHOUSECOOPERS, LLP Washington, D.C. January 31, 2000 -8- SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Dated: February 23, 2000 GANNETT CO., INC. (Registrant) By /s/Douglas H. McCorkindale ------------------------------ Douglas H. McCorkindale, Vice Chairman and President Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated. Dated: February 23, 2000 /s/John J. Curley ------------------------------ John J. Curley, Director, Chairman and Chief Executive Officer Dated: February 23, 2000 /s/Douglas H. McCorkindale ------------------------------ Douglas H. McCorkindale, Director, Vice Chairman and President Dated: February 23, 2000 /s/Larry F. Miller ------------------------------ Larry F. Miller, Executive Vice President and Chief Financial Officer Dated: February 23, 2000 /s/H. Jesse Arnelle ------------------------------ H. Jesse Arnelle, Director Dated: February 23, 2000 /s/Meredith A. Brokaw ------------------------------ Meredith A. Brokaw, Director Dated: February 23, 2000 /s/Stuart T.K. Ho ------------------------------ Stuart T.K. Ho, Director -9- Dated: February 23, 2000 /s/Drew Lewis ------------------------------ Drew Lewis, Director Dated: February 23, 2000 /s/Josephine P. Louis ------------------------------ Josephine P. Louis, Director Dated: February 23, 2000 /s/Samuel J. Palmisano ------------------------------ Samuel J. Palmisano, Director Dated: February 23, 2000 /s/Karen Hastie Williams ------------------------------ Karen Hastie Williams, Director -10- EXHIBIT INDEX Exhibit Number Exhibit Location 3-1 Second Restated Certificate Incorporated by reference to Exhibit of Incorporation of Gannett Co., 3-1 to Gannett Co., Inc's Form 10-K Inc. for the fiscal year ended December 26, 1993 ("1993 Form 10-K"). Amendment incorporated by reference to Exhibit 3-1 to the 1993 Form 10-K. 3-2 By-laws of Gannett Co., Inc. Incorporated by reference to Exhibit (reflects all amendments 3-1 to Gannett Co., Inc.'s Form 10-Q through September 24, 1997) for the fiscal quarter ended September 28, 1997. 4-1 $1,000,000,000 Revolving Incorporated by reference to Exhibit Credit Agreement among 4-1 to the 1993 Form 10-K. Gannett Co., Inc. and the Banks named therein. 4-2 Amendment Number One Incorporated by reference to Exhibit to $1,000,000,000 Revolving 4-2 to Gannett Co., Inc.'s Form 10-Q Credit Agreement among for the fiscal quarter ended June 26, Gannett Co., Inc. and the 1994. Banks named therein. 4-3 Amendment Number Two to Incorporated by reference to Exhibit $1,500,000,000 Revolving 4-3 to Gannett Co., Inc.'s Form 10-K Credit Agreement among for the fiscal year ended Gannett Co., Inc. and the December 31, 1995. Banks named therein. 4-4 Amendment Number Three to Incorporated by reference to Exhibit $3,000,000,000 Revolving 4-4 to Gannett Co., Inc.'s Form 10-Q Credit Agreement among for the fiscal quarter ended Gannett Co., Inc. and the Banks September 29, 1996. named therein. 4-5 Indenture dated as of March 1, Incorporated by reference to Exhibit 1983 between Gannett Co., Inc. 4-2 to Gannett Co., Inc.'s Form 10-K and Citibank, N.A., as Trustee. for the fiscal year ended December 29, 1985. 4-6 First Supplemental Indenture Incorporated by reference to Exhibit dated as of November 5, 1986 4 to Gannett Co., Inc.'s Form 8-K among Gannett Co., Inc., filed on November 9, 1986. Citibank, N.A., as Trustee, and Sovran Bank, N.A., as Successor Trustee. 4-7 Second Supplemental Indenture Incorporated by reference to dated as of June 1, 1995, Exhibit 4 to Gannett Co., Inc.'s among Gannett Co., Inc., Form 8-K filed on June 15, 1995. NationsBank, N.A., as Trustee, and Crestar Bank, as Trustee. 4-8 Rights Plan. Incorporated by reference to Exhibit 1 to Gannett Co., Inc.'s Form 8-K filed on May 23, 1990. 4-9 Amendment Number Four to Incorporated by reference to $3,000,000,000 Revolving Exhibit 4-9 to Gannett Co. Inc's Credit Agreement among Form 10-Q filed on August 12, 1998. Gannett Co., Inc. and the Banks named therein. -11- 10-1 Employment Agreement dated Incorporated by reference to Gannett December 7, 1992 between Co., Inc.'s Form 10-K for the fiscal Gannett Co., Inc. and John J. year ended December 27, 1992 ("1992 Curley.* Form 10-K"). 10-2 Employment Agreement dated Incorporated by reference to the 1992 December 7, 1992 between Form 10-K. Gannett Co., Inc. and Douglas H. McCorkindale.* 10-3 Gannett Co., Inc. 1978 Incorporated by reference to Exhibit Executive Long-Term Incentive 10-3 to Gannett Co., Inc.'s Form 10-K Plan* for the fiscal year ended December 28, 1980. Amendment No. 1 incorporated by reference to Exhibit 20-1 to Gannett Co., Inc.'s Form 10-K for the fiscal year ended December 27, 1981. Amendment No. 2 incorporated by reference to Exhibit 10-2 to Gannett Co., Inc.'s Form 10-K for the fiscal year ended December 25, 1983. Amendments Nos. 3 and 4 incorporated by reference to Exhibit 4-6 to Gannett Co., Inc.'s Form S-8 Registration Statement No. 33-28413 filed on May 1, 1989. Amendments Nos. 5 and 6 incorporated by reference to Exhibit 10-8 to Gannett Co., Inc.'s Form 10-K for the fiscal year ended December 31, 1989. Amendment No. 7 incorporated by reference to Gannett Co., Inc.'s Form S-8 Registration Statement No. 333-04459 filed on May 24, 1996. Amendment No. 8 incorporated by reference to Exhibit 10-3 to Gannett Co., Inc.'s Form 10-Q for the quarter ended September 28, 1997. Amendment dated December 9, 1997, incorporated by reference to Gannett Co., Inc.'s 1997 Form 10-K. Amendment No. 9 incorporated by reference to Exhibit 10-3 to Gannett Co., Inc.'s Form 10-Q for the quarter ended June 27, 1999. 10-4 Description of supplemental Incorporated by reference to Exhibit insurance benefits.* 10-4 to the 1993 Form 10-K. 10-5 Gannett Co., Inc. Supplemental Attached. Retirement Plan, as amended.* 10-6 Gannett Co., Inc. Retirement Incorporated by reference to Exhibit Plan for Directors.* 10-10 to the 1986 Form 10-K. 1991 Amendment incorporated by reference to Exhibit 10-2 to Gannett Co., Inc.'s Form 10-Q for the quarter ended September 29, 1991. Amendment to Gannett Co., Inc. Retirement Plan for Directors dated October 31, 1996, incorporated by reference to Exhibit 10-6 to the 1996 Form 10K. -12- 10-7 Amended and Restated Incorporated by reference to Exhibit Gannett Co., Inc. 1987 10-1 to Gannett Co., Inc.'s Form 10-Q Deferred Compensation Plan.* for the fiscal quarter ended September 29, 1996. Amendment No. 5 incorporated by reference to Exhibit 10-2 to Gannett Co., Inc.'s Form 10-Q for the quarter ended September 28, 1997. Amendment No. 2 to January 1, 1997 Restatement incorporated by reference to Exhibit 10-7 to Gannett Co., Inc.'s Form 10-Q for the quarter ended June 27, 1999. 10-8 Gannett Co., Inc. Transitional Incorporated by reference to Exhibit Compensation Plan.* 10-13 to Gannett Co., Inc.'s Form 10-K for the fiscal year ended December 30, 1990. 13 Portions of 1999 Annual Report Attached. to Shareholders incorporated by reference. 21 Subsidiaries of Gannett Co., Attached. Inc. 23 Consent of Independent Attached. Accountants. 27 Financial Data Schedules. Attached. The company agrees to furnish to the Commission, upon request, a copy of each agreement with respect to long-term debt not filed herewith in reliance upon the exemption from filing applicable to any series of debt which does not exceed 10% of the total consolidated assets of the company. * Asterisks identify management contracts and compensatory plans or arrangements. -13- EX-10 2 EXH. 10.5 - GANNETT CO., INC. SUPPLEMENTAL RETIREMENT PLAN GANNETT SUPPLEMENTAL RETIREMENT PLAN (Restated as of January 1, 1998) ARTICLE ONE Definitions 1.1 "Plan" means this Gannett Supplemental Retirement Plan. 1.2 "Funded Plan" means the Gannett Retirement Plan as it may pertain to a particular Employee. 1.3 "Company" means Gannett Co., Inc. 1.4 "Board" means the Board of Directors of Gannett Co., Inc. 1.5 "Committee" means the Gannett Benefit Plans Committee. 1.6 "Effective Date" means January 1, 1978. The effective date of this restatement is January 1, 1998. 1.7 "Employee" means any employee of the Company who (1) is paid through the Company's headquarters payroll system, operating as of the date of this restatement in Arlington, Virginia ("Corporate Payroll"), (2) is within "a select group of management or highly compensated employees" as this term is used in Title I of ERISA and (3) is designated by the Company's Benefit Plans Committee as being an eligible participant in the Plan and listed on Appendix A or B. 1.8 "Monthly Benefit" means: - for an Employee who began participating in the Plan on or before January 1, 1998 and who is listed in Appendix A, the Employee's monthly benefit, expressed as a single life annuity payable for the Employee's life, calculated using the formula set forth in Article VI of the Funded Plan but ignoring the benefit limitations in the Funded Plan required by Code Section 415 or the limitations on an Employee's compensation under Code Section 401(a)(17) and taking into account all amounts deferred under the Gannett Co., Inc. Deferred Compensation Plan. - for an Employee who began participating in the Plan after January 1, 1998 and who is listed in Appendix A, the Employee's monthly benefit, expressed as a single life annuity payable for the Employee's life, calculated using the formula under Article VI or Article VIA, whichever is used to calculate the Employee's benefit under the Funded Plan, but ignoring the benefit limitations in the Funded Plan required by Code Section 415 or the limitations on an Employee's compensation under Code Section 401(a)(17) and taking into account all amounts deferred under the Gannett Co., Inc. Deferred Compensation Plan. - for an Employee who began participating in the Plan after January 1, 1998 and who is listed in Appendix B, the Employee's monthly benefit, expressed as a single life annuity payable for the Employee's life, calculated using the formula set forth in Article VI of the Funded Plan but ignoring the benefit limitations in the Funded Plan required by Code Section 415 or the limitations on an Employee's compensation under Code Section 401(a)(17) and taking into account all amounts deferred under the Gannett Co., Inc. Deferred Compensation Plan. 1.9 "Normal Retirement Date" and "Early Retirement Date" mean the relevant dates in the Funded Plan as they apply to a particular Employee. 1.10 "Code" means the Internal Revenue Code of 1986 as amended, and regulations thereunder. ARTICLE TWO Purpose of Plan 2.1 The purpose of this Plan is to provide supplemental retirement benefits on an unfunded basis to certain highly compensated employees. ARTICLE THREE Eligibility and Vesting 3.1 All Employees shall be eligible to participate in this Plan. The Benefit Plans Committee has full discretionary authority to add or delete individuals from participation in this Plan by amending Appendix A or B. If an individual's name is removed from Appendix A or B, such individual shall have no rights to benefits under this Plan except for those benefits that have vested as of the date of removal or that will vest in the future pursuant to the last paragraph of Section 4.2. Benefits determined under Article Four shall vest pursuant to the same vesting schedule and vesting terms and conditions as are in effect from time to time under the Funded Plan. ARTICLE FOUR Benefits 4.1 The Company shall pay the benefits due under this Plan commencing within 30 days of retirement, disability, death or any other event that entitles an Employee or the Employee's beneficiary to receive benefits under the Funded Plan. Notwithstanding the foregoing, no benefits shall commence prior to the date an Employee attains or would have attained Early Retirement Age under the Funded Plan. 4.2 The benefit payable under this Plan is determined by (i) calculating the Employee's Monthly Benefit and (ii) subtracting from such monthly amount the actual benefit to which the Employee is entitled under the Funded Plan. For purposes of calculating the offset under subsection (ii), if the Employee's benefit is determined under Article VIA of the Funded Plan, it shall be converted to an actuarially equivalent single life annuity, determined as follows: - For those Employees who retire directly from active employment on or after their earliest Early Retirement Date, the Employee's benefit under the Funded Plan shall be converted to a single life annuity payable immediately at the Employee's retirement date. - For deferred vested Employees, the Employee's benefit under the Funded Plan shall be converted to a single life annuity payable at age 65. To the extent that the amount of an Employee's monthly benefit under the Funded Plan is increased or decreased (due, e.g., to a change in the 401(a)(17) or 415 limits or otherwise), the amount payable from this Plan shall increase or decrease accordingly. Notwithstanding the foregoing, an Employee's monthly benefit calculations under subsections (i) and (ii) above shall not take into account any of his or her service with Army Times, Asbury Park, Multimedia or their related businesses prior to the date that the Employee transfers to the Company's Corporate Payroll. If an Employee leaves the Company's Corporate Payroll, no further benefits shall accrue under this Plan, provided that service within the Company's controlled group will count for purposes of determining the vested portion of the benefit accrued to the date an Employee leaves the Company's Corporate Payroll. 4.3 The benefit payable under this Plan shall be payable in the same form as the form in which benefits are payable to the Employee under the Funded Plan, except that benefits under this Plan shall not be payable in the form of a "lump sum" distribution. If no timely election is made, or a timely election is not possible at the time benefits become payable (e.g., due to the death of a contingent annuitant or a change in marital status), the benefit payable to a single Employee will be paid in the form of a single life annuity and the benefit payable to a married Employee will be paid in the form of a joint and 100 percent spousal survivor annuity. In the case of a contingent annuitant annuity or any option other than a life-only annuity, the amount of the benefit shall be actuarially reduced to reflect that form of payment. If an Employee's benefit commences prior to his or her Normal Retirement Date, the benefit from this Plan shall be reduced in the same manner as provided for in the Funded Plan. If an Employee dies after becoming vested but before the Employee's benefit commences, a spouse, if surviving, shall be entitled to receive a monthly lifetime benefit equal to the benefit that would have been received had the Employee terminated employment on his or her date of death and retired on the first day of the month on or following the later of the Employee's date of death or the date that would have been the Employee's earliest Early Retirement Date, and elected a 100 percent spousal survivor annuity, and then died. Any actuarial adjustments required with respect to benefits payable under this Plan shall be accomplished by reference to the actuarial assumptions used in the Funded Plan. 4.4 The benefits payable under this Plan shall be paid by the Company each year out of assets which at all times shall be subject to the claims of the Company's creditors. The Company may in its discretion establish a trust in which to place assets from which such benefits are to be paid on behalf of all or some Employees, as determined by the Committee in its sole discretion, but neither the creation of such trust nor the transfer of funds to such trust shall render such assets unavailable to settle the claims of the Company's creditors. Notwithstanding the establishment of a trust, the Company intends this Plan to be unfunded for tax purposes and for purposes of Title I of ERISA. In addition, despite the existence of this Plan or an associated trust to pay promised benefits, Employees have the status of general unsecured creditors of the Company and the Plan constitutes a mere promise to make benefit payments in the future. ARTICLE FIVE Administration 5.1 This Plan shall be administered by the Committee which shall possess all powers necessary to administer the Plan, including but not limited to the sole discretion to interpret the Plan and to determine eligibility for benefits. 5.2 The Committee shall cause the benefits due each Employee from this Plan to be paid by the Company and/or trustee accordingly. 5.3 The Committee shall inform each Employee of any elections which the Employee may possess and shall record such choices along with such other information as may be necessary to administer the Plan. 5.4 The decisions made by, and the actions taken by, the Committee in the administration of this Plan shall be final and conclusive on all persons, and the members of the Committee shall not be subject to individual liability with respect to this Plan. ARTICLE SIX Amendment and Termination 6.1 While the Company intends to maintain this Plan for as long as necessary, the Board, or a committee of the Board acting on its behalf, reserves the right to amend and/or terminate it at any time for whatever reasons it may deem appropriate. 6.2 Notwithstanding the preceding Section, however, the Company hereby makes a contractual commitment to pay the benefits accrued under this Plan to the extent it is financially capable of meeting such obligation. ARTICLE SEVEN Miscellaneous 7.1 Nothing contained in this Plan shall be construed as a contract of employment between the Company and an Employee, or as a right of any Employee to be continued in the employment of the Company, or as a limitation of the right of the Company to discharge any of its Employees, with or without cause. 7.2 An Employee's rights to benefit payments under the Plan are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors of the Employee or the Employee's beneficiary or contingent annuitant. IN WITNESS WHEREOF, the Company has caused this restated Plan document to be executed by its duly authorized officer this 16th day of December 1999. GANNETT CO., INC. By: /s/ Richard L. Clapp --------------------- Richard L. Clapp Senior Vice President/ Human Resources EX-13 3 EXH. 13 - PORTIONS OF THE 1999 ANNUAL REPORT Company Profile: Gannett Co., Inc. is a diversified news and information company that publishes newspapers, operates broadcasting stations and is engaged in marketing, commercial printing, a newswire service, data services and news programming. Gannett is an international company with headquarters in Arlington, Va., and operations in 45 states, the District of Columbia, Guam, England, Germany and Hong Kong. Gannett is the USA's largest newspaper group in terms of circulation. The company's 74 U.S. daily newspapers have a combined daily paid circulation of 6.6 million. They include USA TODAY, the nation's largest-selling daily newspaper, with a circulation of approximately 2.3 million. In addition, Gannett owns a variety of non- daily publications, and USA WEEKEND, a weekly newspaper magazine. Newsquest plc, a wholly owned Gannett subsidiary acquired in mid- 1999, is one of the largest regional newspaper publishers in England with a portfolio of 180 titles. Its publications include 11 daily newspapers with a combined circulation of approximately 450,000. Newsquest also publishes a variety of non-daily publications, including Berrow's Worcester Journal, the oldest continuously published newspaper in the world. The company owns and operates 21 television stations covering 17.4 percent of the USA. Gannett was founded by Frank E. Gannett and associates in 1906 and incorporated in 1923. The company went public in 1967. Its 278 million shares of common stock as of December 26, 1999 are held by approximately 14,000 shareholders of record in all 50 states and several foreign countries. The company has approximately 45,800 employees. Board of Directors John J. Curley Chairman and chief executive officer, Gannett Co., Inc. Formerly: Chairman, president and chief executive officer, Gannett Co., Inc. (1989-1997). Age 61. (b,d,f,g) H. Jesse Arnelle Of counsel to Winston-Salem, N.C., law firm of Womble, Carlyle, Sandridge & Rice. Other directorships: FPL Group, Inc.; Textron Corporation; Eastman Chemical Co.; Armstrong World Industries; Waste Management, Inc.; Union Pacific Resources Group, Inc. Age 66. (d,e) Meredith A. Brokaw Founder, Penny Whistle Toys, Inc., New York City, and author of children's books. Other directorships: Conservation International, Washington, D.C.; Women's First Health Care. Age 59. (b,d,e) Stuart T.K. Ho Chairman of the board and president, Capital Investment of Hawaii, Inc. Other directorships: Aloha Airgroup, Inc.; College Retirement Equities Fund; Pacific Century Financial Corporation; and funds which are a part of the TIAA-CREF Institutional Mutual Funds. Age 64. (a,b,c) Drew Lewis Former chairman and chief executive officer, Union Pacific Corporation. Other directorships: American Express Co.; FPL Group, Inc.; Millennium Bank; Union Pacific Resources Group Inc. Age 68. (a,d) Josephine P. Louis Chairman and chief executive officer, Eximious Inc., and Eximious Ltd. Other directorships: HDO Productions, Inc.; trustee, Chicago Horticultural Society; trustee, Chicago Historical Society. Age 70. (a,b,e) Douglas H. McCorkindale Vice chairman and president, Gannett Co., Inc. Formerly: Vice chairman and chief financial and administrative officer, Gannett Co., Inc. (1985-1997). Other directorships: Continental Airlines, Inc.; Global Crossing Ltd.; and funds which are part of the Prudential group of mutual funds. Age 60. (b,f,g) Samuel J. Palmisano Senior vice president and group executive, IBM Enterprise Systems Group. Age 48. (a,c) Karen Hastie Williams Partner of Washington, D.C., law firm of Crowell & Moring. Other directorships: Crestar Financial Services Corporation; Continental Airlines, Inc.; Fannie Mae; Washington Gas Light Company. Age 55. (a,c) (a) Member of Audit Committee. (b) Member of Executive Committee. (c) Member of Executive Compensation Committee. (d) Member of Management Continuity Committee. (e) Member of Public Responsibility and Personnel Practices Committee. (f) Member of Gannett Management Committee. (g) Member of Contributions Committee. A Special Thanks Peter B. Clark, former chairman, president and CEO of The Evening News Association, and Thomas A. Reynolds, chairman emeritus of Chicago law firm Winston & Strawn, retired from the Gannett Board of Directors on May 4, 1999. Clark had served on the board since March 25, 1986; Reynolds, since June 26, 1979. Company and divisional officers Gannett's principal management group is the Gannett Management Committee, which coordinates overall management policies for the company. The Gannett Newspaper Operating Committee oversees operations of the company's newspaper division. The Gannett Broadcasting Operating Committee coordinates management policies for the company's television stations. The members of these three groups are identified below and on the previous pages. The managers of the company's various local operating units enjoy substantial autonomy in local policy, operational details, news content and political endorsements. Gannett's headquarters staff includes specialists who provide advice and assistance to the company's operating units in various phases of the company's operations. Below are brief descriptions of the business experience during the last five years of the officers of the company and the heads of its national and regional divisions. Officers serve for a term of one year and may be re-elected. Information about the two officers who serve as directors (John J. Curley and Douglas H. McCorkindale) can be found on pages 16-17. Christopher W. Baldwin, Vice president, taxes. Age 56. Sara M. Bentley, President, Gannett Northwest Newspaper Group, and president and publisher, Statesman Journal, Salem, Ore. Age 48. (2) James T. Brown, Executive chairman, Newsquest. Age 64. Thomas L. Chapple, Senior vice president, general counsel and secretary. Formerly: Vice president, general counsel and secretary (1991-1995). Age 52. (1) Richard L. Clapp, Senior vice president/human resources. Formerly: Vice president, compensation and benefits (1983-1995). Age 59. (1) Susan Clark-Johnson, Senior group president, Gannett Pacific Newspaper Group, and president and publisher, Reno (Nev.) Gazette-Journal. Age 53. (2) Michael J. Coleman, Senior group president, Gannett South Newspaper Group, and president and publisher, FLORIDA TODAY at Brevard County. Age 56. (2) Robert T. Collins, President, New Jersey Newspaper Group, and president and publisher, Asbury Park Press, Home News Tribune, East Brunswick, N.J., and Ocean County Newspapers. Formerly: President and publisher, Asbury Park Press and Home News Tribune (1997-1998); president and publisher, Courier- Post, Cherry Hill, N.J. (1993-1997). Age 56. (2) Thomas Curley, Senior vice president, administration, and president and publisher, USA TODAY. Formerly: President and publisher, USA TODAY (1991-1998). Thomas Curley is the brother of John J. Curley. Age 51. (1) Philip R. Currie, Senior vice president, news, Newspaper Division. Formerly: Vice president, news, Newspaper Division (1982-1995). Age 58. (2) Ardyth R. Diercks, Senior vice president, Gannett Television. Formerly: President and general manager, KSDK-TV, St. Louis (1996-1998); president and general manager, KVUE-TV, Austin, Texas (1994-1996). Age 45. (3) Craig A. Dubow, Executive vice president, Gannett Television. Formerly: President and general manager, WXIA-TV, Atlanta (1992-1996). Age 45. (3) Daniel S. Ehrman Jr., Vice president, planning and development. Formerly: Senior vice president, Gannett Broadcasting (1995-1997); vice president, finance and business affairs, Gannett Broadcasting (1984-1995). Age 53. Millicent A. Feller, Senior vice president, public affairs and government relations. Age 52. (1) Lawrence P. Gasho, Vice president, financial analysis. Age 57. George R. Gavagan, Vice president and controller. Formerly: Vice president, corporate accounting services (1993-1997). Age 53. Denise H. Ivey, President, Gannett Gulf Coast Newspaper Group, and president and publisher, Pensacola (Fla.) News Journal. Age 49. (2) John B. Jaske, Senior vice president, labor relations and assistant general counsel. Age 55. (1) Richard A. Mallary, Senior vice president, Gannett Broadcasting. Formerly: Vice president, news, Gannett Broadcasting (1989-1995). Age 57. (3) Gracia C. Martore, Treasurer and vice president, investor relations. Formerly: Vice president, treasury services and investor relations (1996-1998); vice president, treasury services (1993-1996). Age 47. Myron Maslowsky, Vice president, internal audit. Formerly: Director, internal audit (1989-1995). Age 45. Larry F. Miller, Executive vice president and chief financial officer. Formerly: Senior vice president, financial planning and controller (1991-1997). Age 61. (1) Craig A. Moon, President, Piedmont Newspaper Group, and president and publisher, The Tennessean, Nashville. Formerly: Vice president, Gannett South Newspaper Group, and president and publisher, The Tennessean (1991- 1999). Age 50. (2) Roger Ogden, Vice president, Gannett Television, and president and general manager, KUSA-TV, Denver, Colo. Age 54. (3) W. Curtis Riddle, Senior group president, Gannett East Newspaper Group, and president and publisher, The News Journal, Wilmington, Del. Age 48. (2) Carleton F. Rosenburgh, Senior vice president, Gannett Newspaper Division. Age 60. (2) Gary F. Sherlock, President, Gannett Atlantic Newspaper Group, and president and publisher, The Journal News, Westchester County, N.Y. Age 54. (2) Mary P. Stier, President, Gannett Midwest Newspaper Group, and president and publisher, Rockford (Ill.) Register Star. Age 42. (2) Wendell J. Van Lare, Vice president, senior labor counsel. Age 54. Frank J. Vega, President and CEO, Detroit Newspapers. Age 51. (2) Cecil L. Walker President, Gannett Broadcasting Division. Age 63. (1)(3) Barbara W. Wall, Vice president, senior legal counsel. Age 45. Gary L. Watson, President, Gannett Newspaper Division. Age 54. (1)(2) (1) Member of the Gannett Management Committee. (2) Member of the Gannett Newspaper Operating Committee. (3) Member of the Gannett Broadcasting Operating Committee. GANNETT COMMON STOCK PRICES High-low range by quarters based on NYSE-composite closing prices. Year Quarter Low High - ---- ------- ----- ------ 1989 first $17.32 $19.13 second $18.32 $24.25 third $21.82 $24.94 fourth $19.75 $22.63 1990 first $19.75 $22.19 second $17.75 $21.13 third $14.94 $18.75 fourth $15.32 $18.88 1991 first $17.88 $21.32 second $19.88 $22.19 third $19.69 $23.32 fourth $17.94 $21.13 1992 first $21.13 $23.94 second $20.75 $24.57 third $21.94 $24.13 fourth $23.00 $26.82 1993 first $25.32 $27.69 second $23.75 $27.38 third $23.88 $25.69 fourth $23.75 $29.07 1994 first $26.69 $29.19 second $25.32 $27.44 third $24.19 $25.82 fourth $23.38 $26.69 1995 first $25.07 $27.50 second $26.00 $27.88 third $26.50 $27.75 fourth $26.44 $32.19 1996 first $29.63 $35.38 second $32.25 $35.82 third $32.00 $35.07 fourth $34.75 $39.25 1997 first $35.81 $44.75 second $40.50 $50.66 third $48.00 $53.00 fourth $51.13 $61.81 1998 first $57.25 $69.94 second $65.13 $74.69 third $55.81 $73.56 fourth $48.94 $68.06 1999 first $61.81 $70.25 second $61.81 $75.44 third $66.81 $76.94 fourth $68.81 $79.31 2000 first $61.75 $83.25* * Through Feb. 25, 2000 -22- Management's responsibility for financial statements The management of the company has prepared and is responsible for the consolidated financial statements and related financial information included in this report. These financial statements were prepared in accordance with generally accepted accounting principles in the United States. These financial statements necessarily include amounts determined using management's best judgments and estimates. The company's accounting and other control systems provide reasonable assurance that assets are safeguarded and that the books and records reflect the authorized transactions of the company. Underlying the concept of reasonable assurance is the premise that the cost of control not exceed the benefit derived. Management believes that the company's accounting and other control systems appropriately recognize this cost/benefit relationship. The company's independent accountants, PricewaterhouseCoopers LLP, provide an independent assessment of the degree to which management meets its responsibility for fairness in financial reporting. They regularly evaluate the company's system of internal accounting controls and perform such tests and other procedures as they deem necessary to reach and express an opinion on the financial statements. The PricewaterhouseCoopers LLP report appears on page 51. The Audit Committee of the Board of Directors is responsible for reviewing and monitoring the company's financial reports and accounting practices to ascertain that they are appropriate in the circumstances. The Audit Committee consists of five non-management directors, and meets to discuss audit and financial reporting matters with representatives of financial management, the internal auditors and the independent accountants. The internal auditors and the independent accountants have direct access to the Audit Committee to review the results of their examinations, the adequacy of internal accounting controls and the quality of financial reporting. Douglas H. McCorkindale Vice Chairman and President Larry F. Miller Executive Vice President and Chief Financial Officer Management's discussion and analysis of results of operations and financial position Basis of reporting Following is a discussion of the key factors that have affected the company's business over the last three fiscal years. This commentary should be read in conjunction with the company's financial statements, the 11-year summary of operations and the Form 10-K information that appear in the following sections of this report. The company's fiscal year ends on the last Sunday of the calendar year. The company's 1999 fiscal year ended on Dec. 26, 1999, and encompassed a 52-week period. The company's 1998 and 1997 fiscal years also encompassed 52-week periods. Business acquisitions, exchanges and dispositions 1999 On June 24, 1999, Gannett made a cash offer to acquire the stock of Newsquest plc ("Newsquest"). Newsquest's principal activities are publishing and printing regional and local newspapers in England with a portfolio of 180 titles that include paid-for daily and weekly newspapers, and free weekly newspapers. The offer was for 460 pence (U.S. $7.26) in cash or loan notes for each of 200.4 million fully diluted shares, for a total price of approximately 922 million pounds sterling (U.S. $1.5 billion). Gannett also financed the repayment of Newsquest's existing debt. Share purchases commenced in the third quarter of 1999 and were financed principally by commercial paper borrowings and operating cash flow. On July 26, 1999, Gannett declared the offer unconditional in all respects and shortly thereafter, Gannett effectively owned 100% of Newsquest shares. The acquisition was recorded under the purchase method of accounting and Newsquest's results of operations are included in the company's financial statements from July 26, 1999 forward. On June 1, 1999, the company completed a broadcast station transaction under which it exchanged its ABC affiliate KVUE-TV in Austin, Texas, and received KXTV-TV, the ABC affiliate in Sacramento, Calif., plus cash consideration. For financial reporting purposes, the company recorded the exchange as two simultaneous but separate events; that is, a sale of its Austin TV station for which a non-operating gain was recognized and the acquisition of the Sacramento station accounted for under the purchase method. In its second quarter, the company reported a net non-operating gain of $55 million ($33 million after tax) principally as a result of this transaction. In March 1999, the company contributed The San Bernardino County Sun to a partnership that includes 21 daily California newspapers in exchange for a partnership interest. The aggregate purchase price, including liabilities assumed, for businesses and assets acquired in 1999 including Newsquest, the Sacramento television station and certain smaller non-daily newspaper publishing operations, totaled approximately $1.8 billion. -23- Subsequent event - January 31, 2000 On January 31, 2000, the previously announced sale of the assets of the company's subsidiary, Multimedia Cablevision, Inc., to Cox Communications, Inc. of Atlanta, Ga., was completed. The sale price for the cable business was approximately $2.7 billion in cash, which resulted in an after-tax gain of approximately $740 million or $2.64 per diluted share. The gain will be reported in Gannett's first quarter of 2000. The proceeds from the sale were used to pay down commercial paper obligations. Although the cable sale was finalized in the year 2000, for financial reporting purposes, the cable operating results for 1999 and all prior years for which it was owned by the company have been reclassified in the statements of income and related discussions as discontinued operations. Likewise for the year 2000, cable operating results for the period up to the sale date, along with the gain on the sale, will be reported as discontinued operations. The cable business (along with the alarm security business sold in 1998) was previously reported as a separate segment by the company. 1998 In the first quarter of 1998, the company sold its five remaining radio stations, its alarm security business and its newspaper in St. Thomas, Virgin Islands. The company also contributed its newspaper in Saratoga Springs, N.Y., to the Gannett Foundation. The company recorded a net non-operating gain of $307 million ($184 million after tax), principally as a result of these transactions. The company purchased television stations WCSH-TV (NBC) in Portland, Maine, and WLBZ-TV (NBC) in Bangor, Maine, early in the first quarter and WLTX- TV (CBS) in Columbia, S.C., in April 1998. In the third quarter of 1998, the company sold five small- market daily newspapers in Ohio, Illinois and West Virginia and completed the acquisition of several newspapers in New Jersey, including The Daily Record in Morristown and the Ocean County Observer in Toms River. Also in the third quarter of 1998, the company completed a transaction with TCI Communications, Inc., under which it exchanged its subscribers and certain cable system assets in the suburban Chicago area (93,000 subscribers) for subscribers and certain cable system assets of TCI in Kansas (128,000 subscribers). The aggregate purchase price for businesses and assets acquired in 1998 was approximately $370 million in cash. These acquisitions were accounted for under the purchase method of accounting. 1997 In January 1997, the company exchanged WLWT-TV (NBC) in Cincinnati and KOCO-TV (ABC) in Oklahoma City for WZZM-TV (ABC) in Grand Rapids and WGRZ-TV (NBC) in Buffalo. This exchange was necessary to comply with Federal Communications Commission (FCC) cross-ownership rules. In May 1997, the company acquired KNAZ-TV (NBC) in Flagstaff, Ariz., KMOH- TV (WB, now NBC) in Kingman, Ariz., and Printed Media Companies in Minneapolis, Minn. In July 1997, Mary Morgan, Inc., a printing business in Green Bay, Wis., was purchased, and in August 1997, the company acquired Army Times Publishing Company in Springfield, Va., which produces military newspapers and a monthly defense publication. In October 1997, the company acquired New Jersey Press, Inc., which publishes two dailies, the Asbury Park Press and the Home News Tribune of East Brunswick. The aggregate purchase price for businesses acquired in 1997 was approximately $445 million in cash and liabilities assumed. These acquisitions were accounted for under the purchase method of accounting. In January 1997, the company contributed the Niagara Gazette newspaper to the Gannett Foundation. In April 1997, the company sold its newspaper in Moultrie, Ga., and in November 1997, the company sold its newspapers in Tarentum and North Hills, Pa. -24- Results of continuing operations Note that the company's results of continuing operations discussed below do not include results from the cable business which was sold in January 2000. All cable operating results have been reclassified in the statements of income and related discussions as discontinued operations. Consolidated summary Operating earnings reached another record level in 1999. A consolidated summary of the company's results is presented below. Note that this summary separates from ongoing results the second quarter 1999 net non-operating gain of $55 million ($33 million after tax) principally from the exchange of the Austin television station for the Sacramento television station, and the first quarter 1998 net non-operating gain of $307 million ($184 million after tax) principally from the sale of radio and alarm security businesses. In millions of dollars, except per share amounts 1999 Change 1998 Change 1997 Change ------ ------ ------ ------ ------ ------ Operating revenues $5,260 8% $4,881 9% $4,474 7% Operating expenses $3,697 6% $3,495 9% $3,212 1% Operating income $1,563 13% $1,386 10% $1,262 24% Income from continuing operations, excluding gains on sale/exchange of properties $ 886 13% $ 782 15% $ 681 35% After-tax gains on sale/exchange of properties $ 33 $ 184 Income from continuing operations, as reported $ 919 (5%) $ 966 42% $ 681 14% Earnings per share from continuing operations, excluding gains on sale/exchange of properties Basic $ 3.18 15% $ 2.76 15% $ 2.41 35% Diluted $ 3.15 15% $ 2.74 15% $ 2.39 34% Earnings per share from gains on sale/exchange of properties Basic $ .11 $ .65 Diluted $ .11 $ .64 Earnings per share from continuing operations, as reported Basic $ 3.29 (4%) $ 3.41 42% $ 2.41 14% Diluted $ 3.26 (4%) $ 3.38 42% $ 2.39 13% A discussion of operating results of the company's newspaper and broadcasting segments along with other factors affecting net income follows. Operating cash flow amounts presented with business segment information represent operating income plus depreciation and amortization of intangible assets. Such cash flow amounts vary from net cash flow from operating activities presented in the Consolidated Statements of Cash Flows because cash payments for interest and taxes are not reflected therein, nor are the cash flow effects of non-operating items, discontinued operations or changes in certain operations-related balance sheet accounts. Newspapers In addition to its domestic local newspapers, the company's newspaper publishing operations include USA TODAY, USA WEEKEND, Newsquest, purchased in 1999, which publishes daily and non-daily newspapers in England, and Gannett Offset commercial printing. The newspaper segment in 1999 contributed 86% of the company's revenues and 83% of its operating income. Record earnings were achieved by the newspaper segment in 1999, reflecting the results from newly acquired Newsquest operations but also gains at most U.S. local newspapers, and significant revenue and earnings growth at USA TODAY and USA WEEKEND. Ad revenues at USA TODAY rose 17%, and earnings were up dramatically. Newspaper earnings also were aided by lower newsprint prices which, on average, were 12% lower than in 1998. Newspaper operating results were as follows: In millions of dollars 1999 Change 1998 Change 1997 Change ------ ------ ------ ------ ------ ------ Revenues $4,532 9% $4,159 10% $3,771 8% Expenses $3,240 6% $3,050 10% $2,769 2% ------ ------ ------ ------ ------ ------ Operating income $1,292 16% $1,109 11% $1,002 27% ====== ====== ====== ====== ====== ====== Operating cash flow $1,499 16% $1,294 11% $1,170 23% Newspaper operating revenues: Newspaper operating revenues are derived principally from advertising and circulation sales, which accounted for 73% and 23%, respectively, of total newspaper revenues in 1999. Ad revenues include those derived from advertising placed with newspaper Internet products. Other newspaper publishing revenues are mainly from commercial printing businesses. The table below presents these components of reported revenues for the last three years. Newspaper publishing revenues, in millions of dollars 1999 Change 1998 Change 1997 Change ------ ------ ------ ------ ------ ------ Advertising $3,293 12% $2,943 12% $2,634 9% Circulation $1,023 1% $1,010 7% $ 948 3% Commercial printing and other $ 216 5% $ 206 9% $ 189 13% ------ ------ ------ ------ ------ ------ Total $4,532 9% $4,159 10% $3,771 8% ====== ====== ====== ====== ====== ====== -25- In the tables that follow, newspaper advertising linage, circulation volume statistics and related revenue results are presented on a pro forma basis for newspapers owned at the end of 1999. For Newsquest, advertising and circulation revenues are fully reflected in the amounts below, as are daily paid circulation volumes. Advertising linage for Newsquest is not reflected, however. Advertising revenues, in millions of dollars (pro forma) 1999 Change 1998 Change 1997 Change ------ ------ ------ ------ ------ ------ Local $1,007 (1%) $1,012 4% $ 975 5% National $ 647 15% $ 565 9% $ 516 10% Classified $1,397 6% $1,314 9% $1,203 11% ------ ------ ------ ------ ------ ------ Total Run-of-Press $3,051 6% $2,891 7% $2,694 8% Preprint and other advertising $ 483 6% $ 456 2% $ 446 6% ------ ------ ------ ------ ------ ------ Total ad revenue $3,534 6% $3,347 7% $3,140 8% ====== ====== ====== ====== ====== ====== Advertising linage, in millions of inches, and preprint distribution (pro forma) 1999 Change 1998 Change 1997 Change ------ ------ ------ ------ ------ ------ Local 34.8 0% 34.9 3% 33.8 5% National 3.5 15% 3.0 7% 2.8 13% Classified 45.0 9% 41.5 9% 38.0 8% ------ ------ ------ ------ ------ ------ Total Run-of-Press 83.3 5% 79.4 6% 74.6 7% ====== ====== ====== ====== ====== ====== Preprint distribution (millions) 7,515 3% 7,287 7% 6,812 3% Reported newspaper advertising revenues for 1999 were $350 million greater than in 1998, a 12% increase, while pro forma revenues presented above reflect a 6% increase. The variance in these two comparisons relates principally to the Newsquest properties acquired in July 1999. Pro forma local ad revenues and linage were down slightly (less than 1%) for the full year. Ad spending by the larger retailers in our markets declined for the year, reflecting closings and consolidations, but this was mostly offset by greater revenue from expanded sales and marketing efforts directed toward small and medium sized advertisers. Pro forma national ad revenues and linage rose 15%, driven principally by USA TODAY, which reported a 19% gain in revenues on a 14% linage gain. National ad revenue growth also was strong at USA WEEKEND and at several large daily newspaper properties. Pro forma classified revenue in 1999 rose 6% on a 9% linage gain. Employment ad revenue gains were the strongest, followed by automotive and then real estate. The continued strong economy and the tight labor market were key factors in these revenue gains, along with added marketing and sales resources. In millions, as reported Newspaper advertising Year revenues - ---- --------------------- 1990 $1,917 1991 $1,853 1992 $1,882 1993 $2,005 1994 $2,153 1995 $2,219 1996 $2,418 1997 $2,634 1998 $2,943 1999 $3,293 Looking to the year 2000, further ad revenue and volume growth is anticipated in all categories. Generally modest price increases are planned at most properties, and the company will continue to expand and refine sales and marketing efforts. Changes in national economic factors such as interest rates, employment levels and the rate of general economic growth will impact revenues at all of the company's newspapers. Newspaper circulation revenues rose $12 million or slightly more than 1% in 1999. Incremental circulation revenues from Newsquest offset declines in domestic circulation revenue. On a pro forma basis, circulation revenues declined slightly less than 1%. For local newspapers, morning circulation accounts for approximately 80% of total daily volume, while evening circulation accounts for 20%. On a pro forma basis, local morning circulation declined 1%, evening circulation declined 2% and Sunday circulation declined 2%. Selected circulation price increases were implemented in 1999 at certain newspapers. During 1999, the St. Cloud (Minn.) Times and the Vineland (N.J.) Daily Journal were converted from evening to morning publications. USA TODAY's average daily circulation for 1999 rose .1% to 2,274,621. USA TODAY reported an average daily paid circulation of 2,235,808 in the ABC Publishers' Statement for the six months ended Sept. 26, 1999, a 1% increase over the comparable period a year ago. Newspaper circulation revenues In millions, as reported Newspaper circulation Year revenues - ---- --------------------- 1990 $730 1991 $777 1992 $807 1993 $839 1994 $849 1995 $869 1996 $918 1997 $948 1998 $1,010 1999 $1,023 -26- The company expects modest circulation revenue growth at most of its newspaper properties in 2000. Circulation price increases are planned at certain newspapers, along with overall slightly higher volume. Pro forma circulation volume for the company's local newspapers is summarized in the table below: Average net paid circulation volume, in thousands (pro forma) 1999 Change 1998 Change 1997 Change ------ ------ ------ ------ ------ ------ Local Newspapers Morning 3,828 (1%) 3,875 1% 3,823 1% Evening 960 (2%) 979 - 983 (2%) ------ ------ ------ ------ ------ ------ Total daily 4,788 (1%) 4,854 1% 4,806 1% Sunday 5,813 (2%) 5,942 (1%) 6,022 (1%) Reported newspaper advertising revenues for 1998 were $309 million greater than in 1997, a 12% increase, while pro forma revenues presented above reflect a 7% increase. This reported/pro forma variance relates principally to newspaper acquisitions in 1998 and 1997. Pro forma local ad revenues and linage in 1998 rose 4% and 3%, respectively. Most local newspapers achieved gains in this category, particularly from medium and smaller accounts. Ad spending by major retailers was slightly lower in 1998. The overall gains in local revenues were spurred by enhanced sales and marketing efforts and by the strong economy. Pro forma national ad revenues and linage rose 9% and 7%, respectively, in 1998 fueled principally by USA TODAY, which reported a 12% gain in total ad revenues and a 9% linage gain. Ad revenue growth at USA TODAY in 1998 followed a 12% gain in 1997 and a 30% gain in 1996. Pro forma classified revenues in 1998 rose 9% on a 9% linage gain. Employment advertising revenue gains were the strongest, followed by real estate and automotive. Newspaper circulation revenues rose $62 million or 7% in 1998. Incremental revenue from the newspaper businesses acquired in 1997 and 1998 contributed significantly to the gains, although most of the company's local newspapers, along with USA TODAY and USA WEEKEND, reported higher circulation revenue as well. On a pro forma basis, local morning circulation rose 1%. Average evening circulation was less than 1% lower, continuing the national trend. Average Sunday circulation was 1% lower in 1998. During 1998, the Battle Creek (Mich.) Enquirer was converted from an evening to a morning publication, and the 10 daily Gannett Suburban Newspapers were consolidated into one morning and Sunday publication, The Journal News, based in Westchester County, N.Y. Selected circulation price increases were implemented in 1998 at certain newspapers. USA TODAY's average daily paid circulation for 1998 rose 2% to 2,271,767. USA TODAY reported an average daily paid circulation of 2,213,255 in the ABC Publisher's Statement for the six months ended Sept. 27, 1998, a 2% increase over the comparable period a year ago. Reported newspaper ad revenues for 1997 were $216 million greater than in 1996, a 9% increase, while pro forma revenues reflect an 8% increase. This reported/pro forma variance relates to the 1997 acquisitions of Army Times Publishing Company and New Jersey Press, Inc. Pro forma local ad revenues and linage rose 5%. Most of the company's local newspapers achieved gains in this category. Pro forma national ad revenues and linage rose 10% and 13% in 1997, respectively. USA TODAY reported a 12% gain in total ad revenues and a 7% linage gain. USA WEEKEND's national revenues rose 16%, and local newspaper national revenues were up 13%. Pro forma classified revenues rose 11% in 1997 on an 8% linage gain. Employment advertising revenue gains were strongest, followed by real estate and automotive. Ad rates were higher at most newspapers for most key classified categories. Newspaper circulation revenues rose $30 million or 3% in 1997. Most local newspapers, along with USA TODAY and USA WEEKEND, contributed to the gain. On a pro forma basis, local morning circulation rose 1% in 1997 while average evening circulation was 2% lower. Average Sunday circulation was 1% lower. At The Detroit News, daily and Sunday circulation rose for the year, reversing the effects of the strike initiated in 1995. During 1997, The Bellingham (Wash.) Herald and the Iowa City Press-Citizen converted from evening to morning publication and the evening Rochester (N.Y.) Times-Union was consolidated with the morning publication, Democrat and Chronicle. Selected price increases were implemented in 1997 at certain newspapers. USA TODAY's average daily paid circulation in 1997 rose 3% to 2,234,474. USA TODAY reported an average daily paid circulation of 2,169,860 in the ABC Publisher's Statement for the six months ended Sept. 28, 1997, a 2% increase over the comparable period in 1996. Newspaper operating expense: Newspaper operating expenses rose $190 million, or 6%, in 1999. The increase was caused principally by incremental costs from Newsquest properties acquired in July 1999. Newsprint expense for the year, including the effect of acquisitions, was 6% lower than in 1998. While consumption rose nearly 7% (due principally to Newsquest), average newsprint prices declined 12%. For 2000, newsprint consumption and prices are expected to be slightly higher than in 1999. The increase in consumption in 2000 will be tempered by web width reductions to 50 inches at most of the company's U.S. newspapers, including USA TODAY. -27- Payroll costs for newspaper operations rose 10% in 1999, in part because of the Newsquest acquisition but also because of staffing increases in marketing and ad sales and modest pay increases. For 2000, moderate pay increases are planned and staffing levels are expected to be up slightly. Newspaper operating expenses rose $281 million or 10% in 1998. The increase was caused principally by incremental costs from newspaper properties acquired in 1997 and 1998. Newsprint expense for the year, including the effect of acquisitions, was 18% higher than in 1997. Both consumption and average prices were higher by approximately 9%. Payroll costs for newspaper operations rose 9% in 1998, in part because of acquired properties but also because of increases in headcount, particularly in marketing and ad sales, and pay increases. Newspaper operating expenses rose $53 million or 2% in 1997. The company benefited from lower average newsprint costs for the year. Newsprint expense for the year, including the effect of acquisitions, was 15% lower than in 1996. Consumption was higher by 8%, but average prices were down 21%. Payroll costs for newspaper operations rose 7% in 1997, in part because of the acquired properties but also because of slight increases in headcount, particularly in ad sales, and modest pay increases. Newspaper operating income: The company's newspapers produced record earnings in 1999. Operating profit rose $182 million or 16%. The Newsquest properties acquired in July 1999 contributed to the profit gain. Earnings were strong at Detroit, the company's New Jersey Group and at USA WEEKEND. Most of the company's local U.S. newspapers reported earnings gains. For USA TODAY, 1999 was another record year as operating profit rose dramatically. Newsquest financial results were translated from British pounds to U.S. dollars using a weighted average rate of $1.62 for the period it was owned in 1999. For 2000, newspaper operating profits are expected to show continued growth, reflecting full-year results at Newsquest, generally higher profits at most local domestic newspapers and further earnings gains at USA TODAY. Newspapers operating profit rose $107 million or 11% in 1998. While newspaper properties acquired in 1997 and 1998 contributed significant earnings, most of the company's local newspapers also reported higher profits. Earnings gains at Detroit and at USA TODAY were among the strongest. Newspapers earnings were sharply higher in 1997; operating profit rose $216 million or 27%. Nearly all local newspapers reported higher profits and significant gains were achieved in Detroit and other large-city markets, as well as at USA WEEKEND. At USA TODAY, operating results were sharply higher. Broadcasting The company's broadcasting operations at the end of 1999 included 21 television stations in markets reaching 17.4 percent of U.S. television homes. Over the last three years, reported broadcasting revenues, expenses, operating income and operating cash flows were as follows: In millions of dollars 1999 Change 1998 Change 1997 Change ------ ------ ------ ------ ------ ------ Revenues $ 729 1% $ 721 3% $ 704 2% Expenses $ 391 4% $ 377 1% $ 376 (4%) ------ ------ ------ ------ ------ ------ Operating income $ 338 (2%) $ 344 5% $ 328 10% ====== ====== ====== ====== ====== ====== Operating cash flow $ 400 (1%) $ 404 5% $ 385 10% ====== ====== ====== ====== ====== ====== Reported broadcast results are affected by the station exchange on June 1, 1999 of KVUE-TV in Austin for KXTV-TV in Sacramento. (Refer to page 23 for details of the transaction.) Total broadcast reported revenues rose $7 million or 1% for 1999. However, on a pro forma basis, giving effect to the Austin/Sacramento station exchange, total station revenues were slightly less than 1% lower for the full year. Pro forma local revenues rose 5% for the year, while national revenues were down 7%. The decline in national ad revenue in comparison with 1998 reflects in part revenue spikes in 1998 on CBS stations for the Winter Olympics and on NBC affiliates for the Super Bowl and the Seinfeld program, and from generally strong political/issue advertising. Reported operating expenses for broadcast were up 4%, reflecting the impact of the Austin/Sacramento station exchange. On a pro forma basis, operating costs were down slightly. Pro forma payroll was up 1%. For 2000, television revenues and earnings are expected to improve considerably, buoyed by incremental ad revenues from the Olympics and political campaigns. In November 1999, the company announced an agreement to acquire WJXX-TV, the ABC affiliate in Jacksonville, Fla. Closing is expected to occur as soon as regulatory approvals are obtained. The company also will continue to own WTLV- TV, the NBC affiliate in Jacksonville. A summary of pro forma revenues for television stations owned at the end of 1999 follows: Pro forma broadcast revenues, in millions of dollars 1999 Change 1998 Change 1997 Change ------ ------ ------ ------ ------ ------ Revenues $ 732 (1%) $ 736 6% $ 692 2% -28- Total reported broadcasting revenues rose $18 million or 3% in 1998. On a pro forma basis, broadcasting revenues rose 6% for the year. Pro forma local and national advertising revenues increased 6% and 9%, respectively, over 1997, reflecting strong advertising demand for NBC programming (12 company stations were NBC affiliates) and overall growth in the economy. Advertising revenues benefited from the Super Bowl broadcast on the company's NBC stations and the Winter Olympics airing on its CBS stations. Strong political advertising contributed to the overall revenue growth as well. Reported operating expenses for broadcast were up 1% for 1998. On a pro forma basis, operating expenses increased 2%, with payroll costs up 4% and program costs up 1% over 1997. Operating income in 1998 from broadcasting reached a record high, climbing $15 million to $344 million. The 5% increase was the result of continued strong demand for television advertising in most markets throughout the year and cost controls. Reported broadcasting revenues rose $17 million or 2% in 1997. On a pro forma basis, broadcasting revenues rose 2% with local advertising revenues up 5% and national advertising revenues even with 1996. Reported operating expenses for broadcast in 1997 declined $14 million or 4%, mainly because of Olympics-related costs in 1996. On a pro forma basis, operating expenses declined 2%. Pro forma payroll increased 4%, while program expenses decreased 9%. Broadcasting revenues In millions, as reported Year Broadcast revenues - ---- ------------------ 1990 $397 1991 $357 1992 $371 1993 $397 1994 $407 1995 $466 1996 $687 1997 $704 1998 $721 1999 $729 Consolidated operating expenses Over the last three years, the company's consolidated operating expenses were as follows: Consolidated operating expenses, in millions of dollars 1999 Change 1998 Change 1997 Change ------ ------ ------ ------ ------ ------ Cost of sales $2,608 4% $2,499 10% $2,272 -- Selling, general and admin. expenses $ 809 9% $ 743 5% $ 706 6% Depreciation $ 169 3% $ 164 7% $ 153 3% Amortization of intangible assets $ 111 23% $ 90 11% $ 81 8% Cost of sales for 1999 were up $110 million or 4%, reflecting increased costs from businesses acquired in 1998 and 1999, particularly Newsquest. Newsprint expense decreased 6% despite a 7% increase in consumption (including acquisitions). Average newsprint prices dropped 12% as compared to 1998. Selling, general and administrative costs (SG&A) were up 9% for the year due primarily to the Newsquest acquisition and generally higher newspaper advertising expenses. Depreciation expense increased 3% during the year as a result of the Newsquest acquisition. Amortization of intangibles rose $21 million or 23% due to 1998 and 1999 acquisitions, principally Newsquest. Cost of sales for 1998 increased $227 million or 10%. Newsprint expense rose 18% for the year because of a 9% increase in consumption (including acquisitions) and 9% higher average newsprint prices. Other costs from businesses acquired in 1997 and 1998 also contributed to this increase. SG&A rose 5% for 1998, mainly because of incremental newspaper advertising expenses from properties acquired in 1997 and 1998. Depreciation expense in 1998 was up 7% from the prior year due to increased depreciation expense from capital additions and newly acquired properties. Amortization of intangibles rose $9 million or 11% because of costs associated with 1997 and 1998 acquisitions. Cost of sales for 1997 was unchanged from 1996. Although newsprint consumption for 1997 increased 8% (including consumption by businesses acquired in 1997), newsprint expense declined 15% for the year because of lower newsprint prices. Newsprint savings were offset principally by the incremental costs of properties acquired in 1997. SG&A rose $42 million or 6% for 1997, primarily because of the effect of properties acquired in that year. Depreciation expense rose $5 million or 3% in 1997, while amortization of intangibles increased $6 million or 8%. Both increases were attributable to newly acquired properties. -29- Payroll and newsprint costs (along with certain other production material costs), the largest elements of the company's operating expenses, are presented below, expressed as a percentage of total pre-tax operating expenses. 1999 1998 1997 ------ ------ ------ Payroll and employee benefits 45.7% 44.7% 44.1% Newsprint and other production material 19.5% 21.4% 20.1% Non-operating income and expense Interest expense for 1999 increased $15 million or 19%, reflecting significantly increased commercial paper borrowings in the second half of 1999 as a result of the Newsquest acquisition. Interest expense in 2000 is expected to decline significantly due to repayment of commercial paper borrowings from proceeds from the sale of the company's cable division on Jan. 31, 2000. The company's financing activities are discussed further in the financial position section of this report. Other non-operating income for 1999 includes the second quarter net non- operating gain of $55 million principally from the exchange of the television stations discussed above. Interest expense for 1998 decreased $19 million or 19%, reflecting the paydown of fixed-rate debt and commercial paper borrowings from operating cash flow and the proceeds from the sale of certain businesses. Other non-operating income for 1998 includes the first quarter net non- operating gain of $307 million principally from the sale of radio and alarm security businesses. Interest expense for 1997 decreased $37 million or 28%, reflecting the paydown of commercial paper borrowings from operating cash flow and the proceeds from the sale of the outdoor and entertainment businesses in 1996. Provision for income taxes The company's effective income tax rate for continuing operations was 39.8% in 1999, 40.0% in 1998 and 41.0% in 1997. The decrease in the effective tax rate in 1999 and 1998 reflects lower state taxes and the diminished impact of the amortization of non-deductible intangible assets. Income from continuing operations In 1999, the company reported income from continuing operations of $919 million or $3.26 per diluted share. However, this reflects the net non-operating gain principally from the television station exchange transaction discussed on page 23. This net gain totaled $55 million pre-tax ($33 million after tax or $.11 per diluted share). For 1998, the company reported income from continuing operations of $966 million or $3.38 per diluted share. This amount reflects the net non-operating gain principally from the sale of radio and alarm security businesses in the first quarter of the year. This net gain totaled $307 million pre-tax ($184 million after tax or $.64 per diluted share). For purposes of evaluating the company's earnings progress from ongoing operations, the earnings summary below excludes the effect of these non- operating gains in 1999 and 1998. In millions of dollars, except per share amounts Earnings summary excluding 1999 and 1998 net non-operating gains 1999 Change 1998 Change 1997 Change ------ ------ ------ ------ ------ ------ Operating income $1,563 13% $1,386 10% $1,262 24% Non-operating expense Interest expense (95) 19% (80) (19%) (98) (28%) Other 4 -- (1) (87%) (9) 241% ------ ------ ------ ------ ------ ------ Total (91) 12% (81) (25%) (107) (22%) ------ ------ ------ ------ ------ ------ Income before income taxes 1,472 13% 1,305 13% 1,155 31% Provision for income taxes 586 12% 523 10% 474 25% ------ ------ ------ ------ ------ ------ Income from continuing operations $ 886 13% $ 782 15% $ 681 35% ====== ====== ====== ====== ====== ====== Earnings per share from continuing operations - diluted $ 3.15 15% $ 2.74 15% $ 2.39 34% ------ ------ ------ ------ ------ ------ Excluding non-recurring items, the company's reported earnings from continuing operations in 1999 were $886 million, a 13% increase with diluted earnings per share at $3.15, up 15%; operating income reached $1.563 billion, an increase of $177 million or 13%. The strong, record showing in operating income and after-tax results for 1999 came from newspapers. Broadcast earnings were down 2%. Interest expense was 19% higher. -30- Excluding non-recurring items, 1998 income from continuing operations was $782 million or $2.74 per diluted share, both up 15%. Operating income reached $1.386 billion, an increase of $124 million or 10%. Both the newspaper and broadcasting segments reported higher earnings for the year, with record results at USA TODAY and strong improvement at The Detroit News. Lower interest costs and a lower effective tax rate also contributed. For 1997, the company reported earnings from continuing operations of $681 million or $2.39 per diluted share, both record highs, up 35% and 34%, respectively, from record results in 1996. The company's operating income reached $1.262 billion in 1997, an increase of $243 million or 24%. Both of the company's business segments reported higher earnings for the year, with record operating results at USA TODAY, a favorable year-to-year comparison at The Detroit News, lower interest costs and a lower effective tax rate. Income from continuing operations in millions Income from Year Continuing Operations - ---- --------------------- 1990 $355 1991 $292 1992 $341* 1993 $389 1994 $455 1995 $459 1996 $503** 1997 $681 1998 $782** 1999 $886** * Before effect of accounting principle changes ** Before net non-recurring gains from sale/exchange of businesses Discontinued operations As part of the Multimedia purchase in 1995, the company acquired cable television and alarm security operations. In 1998, the company sold its alarm security business, which had been reported within the cable segment. In July 1999, the company announced it had agreed to sell its cable business to Cox Communications, Inc., and on Jan. 31, 2000, the sale of cable was completed. Sale proceeds were approximately $2.7 billion and the company will recognize an after-tax gain in its 2000 financial statements of approximately $740 million or $2.64 per diluted share. In connection with the cable sale, the company has reclassified cable segment operating results for 1999 and for all prior periods owned as discontinued operations in its statements of income and related discussions. The gain upon sale in 2000 will likewise be reported as an element of discontinued operations. At the end of 1999, the cable television business served 523,000 subscribers in three states. Reported operating results for the cable and security segment over the last three years were as follows: In millions of dollars 1999 Change 1998 Change 1997 ------ ------ ------ ------ ------ Revenues $ 258 7% $ 241 (6%) $ 255 Expenses $ 192 4% $ 183 (9%) $ 201 ------ ------ ------ ------ ------ Operating income $ 66 14% $ 58 7% $ 54 ====== ====== ====== ====== ====== Operating cash flow $ 118 4% $ 114 (6%) $ 121 After tax earnings $ 39 18% $ 33 6% $ 31 Net Income The company reported net income of $958 million or $3.40 per diluted share in 1999 which includes after-tax earnings from discontinued operations of $39 million or $0.14 per share, and a net non-operating after-tax gain of $33 million or $0.11 per share from the company's exchange of television stations previously discussed. Average diluted shares outstanding for 1999 totaled 281,608,000, compared to 285,711,000 in 1998. Basic shares totaled 279,048,000 for 1999 and 283,097,000 for 1998. The company's return on shareholders' equity, based on earnings from continuing operations, is presented in the table below. Return on shareholders' equity (before non-recurring gains and accounting principle changes) in percentages Return on shareholders' Year equity - ---- ----------------------- 1990 17.5 1991 16.2 1992 21.9 1993 22.3 1994 24.4 1995 23.0 1996 19.8 1997 21.3 1998 21.0 1999 20.6 The percentage return on equity for 1999 and 1998 declined from the prior years because non-recurring gains from the sale/ exchange of businesses are included in shareholders' equity, but are excluded from the amount of earnings from continuing operations used in the calculation. -31- Financial Position Liquidity and capital resources The principal changes in the company's financial position for 1999 relate to the Newsquest acquisition, with an aggregate cost of approximately $1.5 billion which was funded principally by commercial paper borrowings. Changes in property, plant and equipment in 1999 reflect capital spending of $258 million plus amounts recorded in connection with newly acquired properties, principally Newsquest. The increase in intangible assets is primarily due to amounts recorded in connection with the Newsquest acquisition, and the increases in working capital balances are likewise due to Newsquest. The increase in investments and other assets in 1999 is primarily the result of the company's contribution of The San Bernardino County Sun to a partnership that includes a number of daily California newspapers in exchange for a partnership interest. The company purchased $163 million in treasury shares in the second half of 1999. The company's foreign currency translation adjustment, related to Newsquest and reported as part of shareholders' equity, totaled $14.3 million, net of tax, at Dec. 26, 1999. This reflects the strengthening of the pound against the U.S. dollar since the Newsquest acquisition date. Newsquest's assets and liabilities were translated from British pounds to U.S. dollars at the Dec. 26, 1999 exchange rate of $1.62. The company's consolidated operating cash flow (defined as operating income plus depreciation and amortization of intangible assets) totaled $1.843 billion in 1999 compared to $1.639 billion in 1998 and $1.496 billion in 1997. The cash flow increase of $204 million or 12% in 1999 reflects significant operating income growth for the company's newspaper segment. The table below presents operating cash flow as a percent of revenue over the last 10 years. Operating cash flow, Year as a percent of revenue - ---- --------------------- 1990 25.8 1991 23.1 1992 24.4 1993 26.1 1994 27.5 1995 27.0 1996 29.7 1997 33.4 1998 33.6 1999 35.0 Working capital, or the excess of current assets over current liabilities, totaled $191 million at the end of 1999 and $178 million at the end of 1998. Certain key measurements of the elements of working capital for the last three years are presented in the following chart: Working capital measurements 1999 1998 1997 -------- -------- -------- Current ratio 1.2-to-1 1.2-to-1 1.2-to-1 Accounts receivable turnover 7.4 7.9 7.8 Newsprint inventory turnover 7.3 7.5 7.3 The company's operations have historically generated strong positive cash flow, which, along with the company's program of issuing commercial paper and maintaining bank revolving credit agreements, has provided adequate liquidity to meet the company's requirements, including those for acquisitions. The company regularly issues commercial paper for cash requirements and maintains a revolving credit agreement equal to or in excess of any commercial paper outstanding. The company's commercial paper has been rated A-1+ and P-1 by Standard & Poor's and Moody's Investors Service, respectively. The company's senior unsecured long-term debt is rated AA- by Standard & Poor's and A1 by Moody's Investors Service. The company has a shelf registration statement with the Securities and Exchange Commission under which up to $1.5 billion of additional debt securities may be issued. The company's Board of Directors has established a maximum aggregate level of $3.5 billion for amounts which may be raised through borrowings or the issuance of equity securities. The company repaid its commercial paper obligations from the pre-tax proceeds from the sale of the company's cable division on Jan. 31, 2000. Commercial paper borrowings are expected to be made later in 2000 for income tax requirements on the cable sale and also may be necessary for acquisitions or additional share repurchases. Note 4 to the company's financial statements on page 42 of this report provides further information concerning commercial paper transactions and the company's $3.0 billion revolving credit agreement. The company has a capital expenditure program (not including business acquisitions) of approximately $325 million planned for 2000, including approximately $144 million for land and buildings or renovation of existing facilities, including costs associated with the new USA TODAY and corporate headquarters facility, $162 million for machinery and equipment, and $19 million for vehicles and other assets. Management reviews the capital expenditure program periodically and modifies it as required to meet current business needs. It is expected that the 2000 capital program will be funded from operating cash flow. -32- Capital stock In 1998, the company announced authorizations to repurchase up to $750 million of its company stock. During 1998, the company repurchased a total of approximately 6 million shares of common stock at a cost of $329 million and in 1999, the company purchased approximately 2.4 million shares of its common stock at a cost of $163 million. In early 2000, the Board authorized the repurchase of an additional $500 million of company stock. Certain of the shares previously acquired by the company have been reissued in settlement of employee stock awards. In 1997, the company's Board of Directors approved a two-for-one stock split effective on Oct. 6, 1997. In this report, all share and per-common-share amounts have been adjusted to reflect this stock split. In connection with the split, $162.2 million was transferred from retained earnings to common stock to reflect the par value of additional shares issued. An employee 401(k) Savings Plan was established in 1990 which includes a company matching contribution in the form of Gannett stock. To fund the company's matching contribution, an Employee Stock Ownership Plan (ESOP) was formed which acquired 2,500,000 shares of Gannett stock from the company for $50 million. The stock purchase was financed with a loan from the company. The company's common stock outstanding at Dec. 26, 1999, totaled 277,926,431 shares, compared with 279,001,295 shares at Dec. 27, 1998. Dividends Dividends declared on common stock amounted to $229 million in 1999, compared with $221 million in 1998, reflecting an increase in the dividend rate. Dividends declared Year per share - ---- ------------------ 1990 $.61 1991 $.62 1992 $.63 1993 $.65 1994 $.67 1995 $.69 1996 $.71 1997 $.74 1998 $.78 1999 $.82 In October 1999, the quarterly dividend was increased from $.20 to $.21 per share. Cash dividends Payment date Per share ------------ --------- 1999 4th Quarter Jan. 3, 2000 $.21 3rd Quarter Oct. 1, 1999 $.21 2nd Quarter July 1, 1999 $.20 1st Quarter April 1, 1999 $.20 1998 4th Quarter Jan. 2, 1999 $.20 3rd Quarter Oct. 1, 1998 $.20 2nd Quarter July 1, 1998 $.19 1st Quarter April 1, 1998 $.19 Effects of inflation and changing prices and other matters The company's results of operations and financial condition have not been significantly affected by inflation and changing prices. In all of its principal businesses, subject to normal competitive conditions, the company generally has been able to pass along rising costs through increased selling prices. Further, the effects of inflation and changing prices on the company's property, plant and equipment and related depreciation expense have been reduced as a result of an ongoing capital expenditure program and the availability of replacement assets with improved technology and efficiency. The company is exposed to foreign exchange rate risk primarily due to its acquisition of Newsquest, which uses the British pound as its functional currency which is then translated into U.S. dollars. In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" was issued. This standard is effective for fiscal periods beginning after June 15, 2000. The adoption of this standard is not expected to have a material effect on the company's results of operations or financial position. Year 2000 The company's efforts to address potential Year 2000 problems began in 1995 and resulted in the development of a plan to ensure all of the company's key computer and telecommunications systems were Year 2000 compliant. The company's plan was successful; no significant Year 2000 problems were encountered. Costs associated with efforts to achieve Year 2000 compliance were not material to the company's financial position or to operating results for any of the years involved. Certain factors affecting forward-looking statements Certain statements in the company's 1999 Annual Report to Shareholders and its 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 which could cause actual results and events to differ materially from those anticipated in the forward-looking statements. Potential risks and uncertainties which could adversely affect the company's ability to obtain these 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) an economic downturn in some or all of the company's principal newspaper or television markets leading to decreased circulation or local, national or classified advertising; (c) a decline in general newspaper readership patterns as a result of competitive alternative media or other factors; (d) an increase in newsprint or syndication programming costs over the levels anticipated; (e) labor disputes which may cause revenue declines or increased labor costs; (f) acquisitions of new businesses or dispositions of existing businesses; (g) a decline in viewership of major networks and local news programming; (h) rapid technological changes and frequent new product introductions prevalent in electronic publishing; and (i) a weakening in the British pound to U.S. dollar exchange rate. -33- CONSOLIDATED BALANCE SHEETS In thousands of dollars
Dec. 26, 1999 Dec. 27, 1998 ------------- ------------- ASSETS Current assets Cash $ 46,148 $ 60,103 Marketable securities, at cost, which approximates market 12 6,084 Trade receivables (less allowance for doubtful receivables of $30,694 and $19,143, respectively) 800,682 664,540 Other receivables 80,753 52,619 Inventories 95,014 87,176 Prepaid expenses 52,613 35,863 ------------- ------------- Total current assets 1,075,222 906,385 ------------- ------------- Property, plant and equipment Land 182,138 180,786 Buildings and improvements 886,655 839,210 Cable systems (Note 2) 424,907 413,059 Machinery, equipment and fixtures 2,259,362 2,123,468 Construction in progress 130,850 110,220 ------------- ------------- Total 3,883,912 3,666,743 Less accumulated depreciation (1,660,060) (1,602,960) ------------- ------------- Net property, plant and equipment 2,223,852 2,063,783 ------------- ------------- Intangible and other assets Excess of acquisition cost over the value of assets acquired (less accumulated amortization of $867,606 and $749,680, respectively) 5,398,227 3,794,601 Investments and other assets (Note 5) 309,145 214,711 ------------- ------------- Total intangible and other assets 5,707,372 4,009,312 ------------- ------------- Total assets $ 9,006,446 $ 6,979,480 ============= =============
-34- CONSOLIDATED BALANCE SHEETS In thousands of dollars
Dec. 26, 1999 Dec. 27, 1998 ------------- ------------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Current maturities of long-term debt (Note 4) $ 7,812 Accounts Payable Trade $ 312,277 282,798 Other 36,312 29,485 Accrued liabilities Compensation 120,581 108,301 Interest 5,230 5,213 Other 145,684 114,708 Dividend payable 58,297 55,790 Income taxes (Note 7) 77,553 6,395 Deferred income 127,844 117,465 ------------- ------------- Total current liabilities 883,778 727,967 ------------- ------------- Deferred income taxes (Note 7) 479,547 442,359 Long-term debt (Note 4) 2,463,250 1,306,859 Postretirement medical and life insurance liabilities (Note 6) 304,400 308,145 Other long-term liabilities 245,825 214,326 ------------- ------------- Total liabilities 4,376,800 2,999,656 ------------- ------------- Shareholders' equity (Notes 4 and 8) Preferred stock, par value $1: Authorized, 2,000,000 shares: Issued, none Common stock, par value $1: Authorized, 400,000,000 shares: Issued, 324,420,732 shares, as to both years 324,421 324,421 Additional paid-in capital 153,267 126,045 Retained earnings 5,504,810 4,775,313 Accumulated other comprehensive income 25,377 ------------- ------------- 6,007,875 5,225,779 Less Treasury stock, 46,494,301 shares and 45,419,437 shares, respectively, at cost (1,359,263) (1,223,077) Deferred compensation related to ESOP (Note 8) (18,966) (22,878) ------------- ------------- Total shareholders' equity 4,629,646 3,979,824 ------------- ------------- Commitments and contingent liabilities (Note 9) ------------- ------------- Total liabilities and shareholders' equity $ 9,006,446 $ 6,979,480 ============= =============
-35- CONSOLIDATED STATEMENTS OF INCOME In thousands of dollars
Fiscal year ended Dec. 26, 1999 Dec. 27, 1998 Dec. 28, 1997 ------------- ------------- ------------- Net operating revenues Newspaper advertising $ 3,292,894 $ 2,942,995 $ 2,634,334 Newspaper circulation 1,022,520 1,010,238 948,141 Broadcasting 728,642 721,298 703,558 All other 216,134 206,160 188,195 ------------- ------------- ------------- Total 5,260,190 4,880,691 4,474,228 ------------- ------------- ------------- Operating expenses Cost of sales and operating expenses, exclusive of depreciation 2,608,469 2,498,876 2,272,080 Selling, general and administrative expenses, exclusive of depreciation 808,529 742,538 706,201 Depreciation 169,460 163,776 152,964 Amortization of intangible assets 110,631 89,687 80,741 ------------- ------------- ------------- Total 3,697,089 3,494,877 3,211,986 ------------- ------------- ------------- Operating income 1,563,101 1,385,814 1,262,242 ------------- ------------- ------------- Non-operating income (expense) Interest expense (94,619) (79,412) (98,242) Interest income 5,739 19,318 6,517 Other (Note 2) 52,966 286,005 (15,564) ------------- ------------- ------------- Total (35,914) 225,911 (107,289) ------------- ------------- ------------- Income before income taxes 1,527,187 1,611,725 1,154,953 Provision for income taxes 607,800 645,300 473,600 ------------- ------------- ------------- Income from continuing operations 919,387 966,425 681,353 Income from the operation of discontinued operations, net of income taxes of $27,700, $24,200 and $22,700 respectively 38,541 33,488 31,326 ------------- ------------- ------------- Net income $ 957,928 $ 999,913 $ 712,679 ============= ============= ============= Earnings per share - basic Earnings from continuing operations $3.29 $3.41 $2.41 Earnings from discontinued operations, net of tax .14 .12 .11 ------------- ------------- ------------- Net income per share - basic $3.43 $3.53 $2.52 ============= ============= ============= Earnings per share - diluted Earnings from continuing operations $3.26 $3.38 $2.39 Earnings from discontinued operations, net of tax .14 .12 .11 ------------- ------------- ------------- Net income per share - diluted $3.40 $3.50 $2.50 ============= ============= =============
-36- CONSOLIDATED STATEMENTS OF CASH FLOWS In thousands of dollars
Fiscal year ended Dec. 26, 1999 Dec. 27, 1998 Dec. 28, 1997 -------------- -------------- -------------- Cash flows from operating activities Net income $ 957,928 $ 999,913 $ 712,679 Adjustments to reconcile net income to operating cash flows Discontinued operations, net of tax (38,541) (33,488) (31,326) Depreciation 169,460 163,776 152,964 Amortization of intangibles 110,631 89,687 80,741 Deferred income taxes 21,983 40,105 (14,244) Other, net, including gains on sales (49,269) (360,944) (20,166) Increase in receivables (70,014) (29,732) (41,684) (Increase) decrease in inventories (7,624) 11,054 (6,336) Decrease (increase) in film broadcast rights 3,359 62 (644) Decrease in accounts payable (34,805) (14,777) (40,487) Increase (decrease) in interest and taxes payable 11,555 7,951 (26,336) Change in other assets and liabilities, net 72,223 96,928 115,896 -------------- -------------- -------------- Net cash flow from operating activities 1,146,886 970,535 881,057 -------------- -------------- -------------- Cash flows from investing activities Purchase of property, plant and equipment (258,443) (244,425) (221,251) Payments for acquisitions, net of cash acquired (1,496,649) (369,804) (355,343) Change in other investments (18,561) (16,244) (8,099) Proceeds from sale of certain assets 38,450 665,001 40,859 Collection of long-term receivables 8,178 2,409 5,388 -------------- -------------- -------------- Net cash (used for) provided by investing activities (1,727,025) 36,937 (538,446) -------------- -------------- -------------- Cash flows from financing activities Proceeds from (payments of) long-term debt 915,865 (470,207) (144,903) Dividends paid (226,274) (218,853) (206,557) Cost of common shares repurchased (163,228) (328,956) Proceeds from issuance of common stock 33,681 23,953 30,425 -------------- -------------- -------------- Net cash provided by (used for) financing activities 560,044 (994,063) (321,035) -------------- -------------- -------------- Effect of currency exchange rate change 68 (Decrease) increase in cash and cash equivalents (20,027) 13,409 21,576 Balance of cash and cash equivalents at beginning of year 66,187 52,778 31,202 -------------- -------------- -------------- Balance of cash and cash equivalents at end of year $ 46,160 $ 66,187 $ 52,778 ============== ============== ==============
-37- CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY In thousands of dollars Fiscal years ended December 28, 1997 December 27, 1998 and December 26, 1999
Accumulated Deferred Common stock Additional other compensation $1 par paid-in Retained comprehensive Treasury related value capital earnings income stock to ESOP Total ------------ ------------ ------------- ----------- ------------ ------------ ------------ Balance: Dec. 29, 1996 $ 162,210 $ 86,126 $ 3,654,681 $ (942,609) $ (29,590) $ 2,930,818 ------------ ------------ ------------- ----------- ------------ ------------ ------------ Net income, 1997 712,679 712,679 Dividends declared, 1997: $0.74 per share (209,867) (209,867) Stock options exercised 4,152 25,781 29,933 Stock issued under incentive plan 114 120 234 Tax benefit derived from stock incentive plans 13,974 13,974 Compensation expense related to ESOP 1,535 1,535 Tax benefit from ESOP 430 430 Par value of shares issued in 2-for-1 stock split effective Oct. 6, 1997 162,211 (162,211) ------------ ------------ ------------- ----------- ------------ ------------ ------------ Balance: Dec. 28, 1997 $ 324,421 $ 104,366 $ 3,995,712 $ (916,708) $ (28,055) $ 3,479,736 ------------ ------------ ------------- ----------- ------------ ------------ ------------ Net income, 1998 999,913 999,913 Dividends declared, 1998: $.78 per share (220,718) (220,718) Treasury stock acquired (328,956) (328,956) Stock options exercised 4,870 19,285 24,155 Stock issued under incentive plan (1,255) 3,302 2,047 Tax benefit derived from stock incentive plans 18,064 18,064 Compensation expense related to ESOP 5,177 5,177 Tax benefit from ESOP 406 406 ------------ ------------ ------------- ----------- ------------ ------------ ------------ Balance: Dec. 27, 1998 $ 324,421 $ 126,045 $ 4,775,313 $(1,223,077) $ (22,878) $ 3,979,824 ------------ ------------ ------------- ----------- ------------ ------------ ------------ Net Income, 1999 957,928 957,928 Foreign currency translation adjustment, net of taxes $ 14,280 14,280 of $9,130 Unrealized gain on securities, net of taxes of $7,095 11,097 11,097 Total comprehensive income 983,305 Dividends declared, 1999: $.82 per share (228,781) (228,781) Treasury stock acquired (163,228) (163,228) Stock options exercised 7,916 23,490 31,406 Stock issued under incentive plan (2,154) 3,552 1,398 Tax benefit derived from stock incentive plans 21,460 21,460 Compensation expense related to ESOP 3,912 3,912 Tax benefit from ESOP 350 350 ------------ ------------ ------------- ----------- ------------ ------------ ------------ Balance: Dec. 26, 1999 $ 324,421 $ 153,267 $ 5,504,810 $ 25,377 $(1,359,263) $ (18,966) $ 4,629,646 ============ ============ ============= =========== ============ ============ ============
-38- Notes to Consolidated Financial Statements Note 1 Summary of significant accounting policies Fiscal year: The company's fiscal year ends on the last Sunday of the calendar year. The company's 1999 fiscal year ended on Dec. 26, 1999, and encompassed a 52-week period. The company's 1998 and 1997 fiscal years also encompassed 52- week periods. Consolidation: The consolidated financial statements include the accounts of the company and its subsidiaries after elimination of all significant intercompany transactions and profits. Certain prior-year information has been reclassified to conform with the current year presentation. Operating agencies: Four of the company's newspaper subsidiaries were participants in joint operating agencies. Each joint operating agency performs the production, sales and distribution functions for the subsidiary and another newspaper publishing company under a joint operating agreement. The company includes its appropriate portion of the revenues and expenses generated by the operation of the agencies on a line-by-line basis in its statement of income. Inventories: Inventories, consisting principally of newsprint, printing ink, plate material and production film for the company's newspaper publishing operations, are valued at the lower of cost (first-in, first-out) or market. Property and depreciation: Property, plant and equipment is recorded at cost, and depreciation is provided generally on a straight-line basis over the estimated useful lives of the assets. The principal estimated useful lives are: buildings and improvements, 10 to 40 years; machinery, equipment and fixtures and cable systems, four to 30 years. Major renewals and improvements and interest incurred during the construction period of major additions are capitalized. Expenditures for maintenance, repairs and minor renewals are charged to expense as incurred. Excess of acquisition cost over fair value of assets acquired: The excess of acquisition cost over the fair value of assets acquired represents the cost of intangible assets at the time the subsidiaries were purchased. In accordance with Opinion 17 of the Accounting Principles Board of the American Institute of Certified Public Accountants, the excess acquisition cost of subsidiaries arising from acquisitions accounted for as purchases since Oct. 31, 1970, ($6.14 billion at Dec. 26, 1999) is being amortized generally over 40 years on a straight-line basis. Valuation of Long-Lived Assets: The company evaluates the carrying value of long-lived assets to be held and used, including the excess of acquisition cost over fair value of assets acquired, whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The carrying value of a long-lived asset, including the excess of acquisition cost over fair value of assets acquired, is considered impaired when the projected undiscounted future cash flows from the related business unit are less than its carrying value. The company measures impairment based on the amount by which the carrying value exceeds the fair market value. Fair market value is determined primarily using the projected future cash flows discounted at a rate commensurate with the risk involved. Losses on long-lived assets to be disposed of are determined in a similar manner, except that fair market values are reduced for the cost to dispose. Other assets: The company's television stations are parties to program broadcast contracts. These contracts are recorded at the gross amount of the related liability when the programs are available for telecasting. Program assets are classified as current (as a prepaid expense) or noncurrent (as an other asset) in the Consolidated Balance Sheets, based upon the expected use of the programs in succeeding years. The amount charged to expense appropriately matches the cost of the programs with the revenues associated with them. The liability for these contracts is classified as current or noncurrent in accordance with the payment terms of the contracts. The payment period generally coincides with the period of telecast for the programs, but may be shorter. Retirement plans: Pension costs under the company's retirement plans are actuarially computed. The company's policy is to fund costs accrued under its qualified pension plans. Postretirement benefits other than pensions: The company recognizes the cost of postretirement medical and life insurance benefits on an accrual basis over the working lives of employees expected to receive such benefits. Income taxes: The company accounts for certain income and expense items differently for financial reporting purposes than for income tax reporting purposes. Deferred income taxes are provided in recognition of these temporary differences. Per share amounts: The company reports earnings per share on two bases, basic and diluted. All basic income per share amounts are based on the weighted average number of common shares outstanding during the year. The calculation of diluted earnings per share also considers the assumed dilution from the exercise of stock options and from stock incentive rights. Foreign currency translation: The income statement of Newsquest has been translated to U.S. dollars using the average currency exchange rates in effect during the relevant period. Newsquest's balance sheet has been translated using the currency exchange rate as of the end of the accounting period. The impact of currency exchange rate changes on the translation of Newsquest's balance sheet is included in comprehensive income, net of tax, and is classified as accumulated other comprehensive income in shareholders' equity. Use of estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions that affect the reported amount of assets, liabilities, revenues and expenses. Actual results could differ from these estimates. Discontinued operations: In connection with the sale of the cable business, the cable operating results have been reclassified in the statements of income and related discussions as discontinued operations. The cable business (along with the alarm security business sold in 1998) was previously reported as a separate segment by the company. Assets and liabilities from the cable business have not been separately presented in the balance sheet. New accounting pronouncements: In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" was issued. This standard is effective for fiscal periods beginning after June 15, 2000. The adoption of this standard is not expected to have a material effect on the company's results of operations or financial position. -39- Note 2 Acquisitions, exchanges and dispositions 1999: On June 24, 1999, Gannett made a cash offer to acquire the stock of Newsquest plc ("Newsquest"). Newsquest's principal activities are publishing and printing regional and local newspapers in England with a portfolio of 180 titles that include paid-for daily and weekly newspapers, and free weekly newspapers. The offer was for 460 pence (U.S. $7.26) in cash or loan notes for each of 200.4 million fully diluted shares, for a total price of approximately 922 million pounds sterling (U.S. $1.5 billion). Gannett also financed the repayment of Newsquest's existing debt. Share purchases commenced in the third quarter of 1999 and were financed principally by commercial paper borrowings and operating cash flow. On July 26, 1999, Gannett declared the offer unconditional in all respects and shortly thereafter, Gannett effectively owned 100% of Newsquest shares. The acquisition was recorded under the purchase method of accounting and Newsquest's results of operations are included in the company's financial statements from July 26, 1999 forward. On June 1, 1999, the company completed a broadcast station transaction under which it exchanged its ABC affiliate KVUE-TV in Austin, Texas, and received KXTV-TV, the ABC affiliate in Sacramento, Calif., plus cash consideration. For financial reporting purposes, the company recorded the exchange as two simultaneous but separate events; that is, a sale of its Austin TV station for which a non-operating gain was recognized, and the acquisition of the Sacramento station accounted for under the purchase method. In its second quarter, the company reported a net non-operating gain of $55 million ($33 million after tax) principally as a result of this transaction. In March 1999, the company contributed The San Bernardino County Sun to a partnership that includes 21 daily California newspapers in exchange for a partnership interest. The aggregate purchase price, including liabilities assumed, for businesses and assets acquired in 1999 including Newsquest, the Sacramento television station and certain smaller non-daily newspaper publishing operations, totaled approximately $1.8 billion. Subsequent event - January 31, 2000: On Jan. 31, 2000, the previously announced sale of the assets of the company's subsidiary, Multimedia Cablevision, Inc., to Cox Communications, Inc. of Atlanta, Ga., was completed. The sale price for the cable business was approximately $2.7 billion in cash, which resulted in an after-tax gain of approximately $740 million or $2.64 per diluted share. The gain will be reported in Gannett's first quarter of 2000. The proceeds from the sale were used to pay down commercial paper obligations. Although the cable sale was finalized in the year 2000, for financial reporting purposes, the cable operating results for 1999 and all prior years for which it was owned by the company have been reclassified in the statements of income and related discussions as discontinued operations. Likewise for the year 2000, cable operating results for the period up to the sale date, along with the gain on the sale, will be reported as discontinued operations. The cable business (along with the alarm security business sold in 1998) was previously reported as a separate segment by the company (refer to page 31 for additional information). 1998: In the first quarter of 1998, the company sold its five remaining radio stations, its alarm security business and its newspaper in St. Thomas, Virgin Islands. It also contributed its newspaper in Saratoga Springs, N.Y., to the Gannett Foundation. The company recorded a net non-operating gain of $307 million ($184 million after tax), principally as a result of these transactions. The company purchased television stations WCSH-TV (NBC) in Portland, Maine, and WLBZ-TV (NBC) in Bangor, Maine, early in the first quarter and WLTX-TV (CBS) in Columbia, S.C., in April 1998. In the third quarter of 1998, the company sold five small-market daily newspapers in Ohio, Illinois and West Virginia and completed the acquisition of several newspapers in New Jersey, including The Daily Record in Morristown and the Ocean County Observer in Toms River. Also in the third quarter of 1998, the company completed a transaction with TCI Communications, Inc., under which it exchanged its subscribers and certain cable system assets in the suburban Chicago area (93,000 subscribers) for subscribers and certain cable system assets of TCI in Kansas (128,000 subscribers). The aggregate purchase price for businesses and assets acquired in 1998 was approximately $370 million in cash. The acquisitions, which were accounted for under the purchase method of accounting, did not materially affect reported results of operations for the year. 1997: In January 1997, the company exchanged WLWT-TV (NBC) in Cincinnati and KOCO-TV (ABC) in Oklahoma City for WZZM-TV (ABC) in Grand Rapids and WGRZ-TV (NBC) in Buffalo. This exchange was necessary to comply with FCC cross-ownership rules and did not materially affect broadcast operating results. In May 1997, the company acquired KNAZ-TV (NBC) in Flagstaff, Ariz., and KMOH-TV (WB, now NBC) in Kingman, Ariz. Also in May 1997, the company acquired Printed Media Companies. In July 1997, Mary Morgan, Inc., was purchased, and in August 1997, the company acquired Army Times Publishing Company. In October 1997, the company acquired New Jersey Press, Inc., which publishes two dailies, the Asbury Park Press and the Home News Tribune of East Brunswick. -40- The aggregate purchase price for businesses acquired in 1997 was approximately $445 million in cash and liabilities assumed. The acquisitions were accounted for under the purchase method of accounting, and they did not materially affect reported results of operations for the year. In January 1997, the company contributed the Niagara Gazette newspaper to the Gannett Foundation. In April 1997, the company sold its newspaper in Moultrie, Ga., and in November 1997, the company sold its newspapers in Tarentum and North Hills, Pa. These dispositions did not materially affect results of operations. An unaudited earnings summary of the company's income from continuing operations, excluding the net non-operating gains in 1999 and 1998 discussed above, is as follows: In millions of dollars, except per share amounts (unaudited) 1999 Change 1998 Change 1997 Change ------ -------- ----- ------- ----- ------- Income from continuing operations $ 886 13% $ 782 15% $ 681 35% Earnings per share from continuing operations -Basic $ 3.18 15% $ 2.76 15% $ 2.41 35% -Diluted $ 3.15 15% $ 2.74 15% $ 2.39 34% The following table summarizes, on an unaudited, pro forma basis, the estimated combined results of operations of the company and its subsidiaries as though the acquisitions, exchanges and dispositions noted above (including the pro forma effects of the cable division sale completed January 2000) were made at the beginning of 1998. On this basis, these transactions would have resulted in a pro forma increase in income per share (diluted) from continuing operations (excluding the 1999 and the 1998 net non-operating gains previously discussed) of $.21. However, this pro forma combined statement does not necessarily reflect the results of operations as they would have been if the combined companies had constituted a single entity during those years. In millions, except per share amounts (pro forma and unaudited) Fiscal Year 1999 1998 ------ ------ Operating Revenues* $5,544 $5,358 Income before taxes* $1,571 $1,393 Income* $ 946 $ 836 Income per share* - Basic $ 3.39 $ 2.95 Income per share* - Diluted $ 3.36 $ 2.93 * from continuing operations Note 3 Statement of cash flows For purposes of this statement, the company considers its marketable securities, which are readily convertible into cash (with original maturity dates of less than 90 days) and consist of short-term investments in government securities, commercial paper and money market funds, as cash equivalents. Cash paid in 1999, 1998 and 1997 for income taxes and for interest (net of amounts capitalized) was as follows: In thousands of dollars 1999 1998 1997 -------- -------- -------- Income taxes $596,873 $626,409 $506,209 Interest $100,547 $ 84,808 $102,228 Liabilities assumed in connection with 1999 acquisitions totaled approximately $365 million, with $181 million related to Newsquest's outstanding debt obligations. Liabilities assumed in connection with 1998 and 1997 acquisitions totaled approximately $17 million and $56 million, respectively. In each January following the years ended 1999, 1998 and 1997, the company issued 137,168, 161,646 and 149,148 shares of common stock, respectively, in settlement of stock incentive rights whose four-year grant periods ended in December of those years. As a result of issuing those shares, the compensation liabilities for those rights, which equaled $6.3 million, $5.5 million and $6.0 million, respectively, were transferred to shareholders' equity. -41- Note 4 Long-term debt The long-term debt of the company is summarized below. In thousands of dollars Dec. 26, 1999 Dec. 27, 1998 ------------- ------------- Unsecured promissory notes $ 2,113,763 $ 1,003,328 Notes due 5/1/00, interest at 5.85% 249,982 249,884 Other indebtedness 99,505 61,459 ------------- ------------- 2,463,250 1,314,671 Less amount included in current liabilities 0 (7,812) ------------- ------------- Total long-term debt $ 2,463,250 $ 1,306,859 ============= ============= The unsecured promissory notes at Dec. 26, 1999 were due from Dec. 27, 1999 to Jan. 31, 2000 with rates varying from 5.50% to 6.03%. The unsecured promissory notes at Dec. 27, 1998, were due from Dec. 28, 1998, to Jan. 19, 1999, with rates varying from 4.82% to 5.21%. The maximum amount of such promissory notes outstanding at the end of any period during 1999 and 1998 was $2.2 billion and $1.2 billion, respectively. The daily average outstanding balance was $1.3 billion during 1999 and $1 billion during 1998. The weighted average interest rate was 5.2% for 1999 and 5.5% for 1998. Other indebtedness includes the loan notes issued by the company to the former shareholders of Newsquest plc in connection with its acquisition as more fully discussed in Note 2. The notes bear interest at .5% below the London Interbank Offered Rate subject to a cap of 6.5%. Interest is payable semiannually. The notes are due on Dec. 31, 2006, but may be redeemed by the company on June 30, 2000, and on each interest payment date thereafter. The remaining other indebtedness at Dec. 26, 1999, has maturities ranging from 2000 to 2013 at interest rates ranging from 3.7% to 10%. At Dec. 26, 1999, the company had $3.0 billion of credit available under a revolving credit agreement. The agreement provides for a revolving credit period which permits borrowing from time to time up to the maximum commitment. The revolving credit period extends to July 1, 2003. The commitment fee rate may range from .07% to .175%, depending on Standard & Poor's or Moody's credit rating of the company's senior unsecured long-term debt. The rate in effect at Dec. 26, 1999, was .07%. At the option of the company, the interest rate on borrowings under the agreement may be at the prime rate, at rates ranging from .13% to .35% above the London Interbank Offered Rate or at rates ranging from .255% to .50% above a certificate of deposit-based rate. The prime rate was 8.5% at the end of 1999 and 7.75% at the end of 1998. The percentages that will apply will be dependent on Standard & Poor's or Moody's credit rating of the company's senior unsecured long-term debt. The revolving credit agreement contains restrictive provisions that require the maintenance of net worth of $2.0 billion. At Dec. 26, 1999, and Dec. 27, 1998, net worth was $4.6 billion and $4.0 billion, respectively. At Dec. 26, 1999, the unsecured promissory notes and the notes due May 1, 2000, were supported by the $3.0 billion revolving credit agreement and, therefore, are classified as long-term debt. As discussed in Note 2, the company sold its cable business on Jan. 31, 2000. The proceeds from the sale were used to pay down commercial paper obligations. Approximate annual maturities of long-term debt, assuming that the company had used the $3.0 billion revolving credit agreement as of the balance sheet date to refinance existing unsecured promissory notes and the notes due May 1, 2000, on a long-term basis, are as follows: In thousands of dollars 2000 0 2001 0 2002 0 2003 $2,379,495 2004 0 Later years 83,755 ----------- Total $ 2,463,250 =========== At Dec. 26, 1999, and Dec. 27, 1998, the company estimates that the amount reported on the balance sheet for financial instruments, including long-term debt, cash and cash equivalents, trade and other receivables, current maturities of long-term debt and other long-term liabilities, approximate fair value. -42- Note 5 Retirement plans The company and its subsidiaries have various retirement plans, including plans established under collective bargaining agreements and separate plans for joint operating agencies, under which substantially all full-time employees are covered. The Gannett Retirement Plan is the company's principal retirement plan and covers most of the U.S. employees of the company and its subsidiaries. Benefits under the Gannett Retirement Plan are based on years of service and final average pay. The company's pension plan assets include marketable securities such as common stocks, bonds and U.S. government obligations and interest-bearing deposits. The company's pension costs for 1999, 1998 and 1997 are presented in the following table: In thousands of dollars 1999 1998 1997 -------- --------- --------- Service cost - benefits earned during the period $ 60,834 $ 51,249 $ 47,105 Interest cost on benefit obligation 103,412 94,171 85,033 Expected return on plan assets (146,168) (135,484) (112,040) Amortization of transition asset (984) (4,226) (11,008) Amortization of prior service (credit) cost (3,754) (3,773) 1,790 Amortization of actuarial loss 1,407 443 --------- --------- --------- Pension expense for company- sponsored retirement plans 14,747 2,380 10,880 Union and other pension cost 5,071 5,357 4,135 --------- --------- --------- Pension cost $ 19,818 $ 7,737 $ 15,015 ========= ========= ========= The following table provides a reconciliation of benefit obligations, plan assets and funded status of the company's pension plans. The related amounts that are recognized in the Consolidated Balance Sheets for the company's retirement plans also are provided. In thousands of dollars Dec. 26, 1999 Dec. 27, 1998 -------------- -------------- Change in benefit obligation Net benefit obligation at beginning of year $ 1,474,411 $ 1,243,188 Service cost 60,834 51,249 Interest cost 103,412 94,171 Plan participants' contributions 1,947 0 Plan amendments 253 (3,791) Actuarial (gain) loss (185,452) 57,550 Acquisitions/plan mergers 106,090 102,927 Gross benefits paid (91,092) (70,883) -------------- -------------- Net benefit obligation at end of year $ 1,470,403 $ 1,474,411 -------------- -------------- Change in plan assets Fair value of plan assets at beginning of year $ 1,470,826 $ 1,269,090 Actual return on plan assets 264,905 151,892 Plan participants' contributions 1,947 0 Employer contributions 5,354 3,813 Acquisitions/plan mergers 111,201 116,914 Gross benefits paid (91,092) (70,883) -------------- -------------- Fair value of plan assets at end of year $ 1,763,141 $ 1,470,826 -------------- -------------- Funded status at end of year $ 292,738 $ (3,585) Unrecognized net actuarial (gain) loss (218,942) 92,081 Unrecognized prior service credit (35,783) (39,790) Unrecognized net transition asset (232) (1,214) -------------- -------------- Net amount recognized at end of year $ 37,781 $ 47,492 -------------- -------------- Amounts recognized in Consolidated Balance Sheet Prepaid benefit cost $ 111,232 $ 110,531 Accrued benefit cost $ 73,451 $ 63,039 ============== ============== The net benefit obligation was determined using an assumed discount rate of 8.0% and 6.75% at the end of 1999 and 1998, respectively. The assumed rate of compensation increase was 5% at the end of each of 1999 and 1998. The assumed long-term rate of return on plan assets used in determining pension cost was 10%. Pension plan assets include 1,242,300 shares of the company's common stock valued at $101 million at the end of 1999 and 1,239,800 shares valued at $80 million at the end of 1998. -43- Note 6 Postretirement benefits other than pensions The company provides health care and life insurance benefits to certain retired employees who meet certain age and service requirements. The cost of providing retiree health care and life insurance benefits is actuarially determined and accrued over the service period of the active employee group. Postretirement benefit cost for health care and life insurance for 1999, 1998 and 1997 included the following components: In thousands of dollars 1999 1998 1997 -------- -------- -------- Service cost - benefits earned during the period $ 3,796 $ 3,118 $ 3,416 Interest cost on net benefit obligation 14,901 14,378 15,342 Amortization of prior service credit (8,478) (5,578) (5,303) Amortization of actuarial loss (gain) 20 235 (171) -------- -------- -------- Net periodic postretirement benefit cost $10,239 $12,153 $13,284 ======== ======== ======== The table below provides a reconciliation of benefit obligations and funded status of the company's postretirement benefit plans: In thousands of dollars Dec. 26, 1999 Dec. 27, 1998 ------------- ------------- Change in benefit obligation Net benefit obligation at beginning of year $ 238,346 $ 231,565 Service cost 3,796 3,118 Interest cost 14,901 14,378 Plan participants' contributions 4,656 4,402 Plan amendments (8,341) Actuarial (gain) loss (28,142) 13,798 Acquisitions/plan mergers 3,392 Gross benefits paid (21,356) (20,574) ------------- ------------- Net benefit obligation at end of year $ 215,593 $ 238,346 ------------- ------------- Change in plan assets Fair value of plan assets at beginning of year 0 0 Employer contributions 16,700 16,172 Plan participants' contributions 4,656 4,402 Gross benefits paid (21,356) (20,574) ------------- ------------- Fair value of plan assets at end of year 0 0 ------------- ------------- Funded status at end of year $ 215,593 $ 238,346 Unrecognized net actuarial gain (loss) 21,519 (6,154) Unrecognized prior service credit 67,288 75,953 ------------- ------------- Accrued postretirement benefit cost $ 304,400 $ 308,145 ============= ============= At Dec. 26, 1999, the accumulated postretirement benefit obligation was determined using a discount rate of 8.0% and a health care cost trend rate of 7.5% for pre-age 65 benefits, decreasing to 5% in the year 2005 and thereafter. For post-age 65 benefits, the health care cost trend rate used was 5.5%, declining to 5% in the year 2001 and thereafter. At Dec. 27, 1998, the accumulated postretirement benefit obligation was determined using a discount rate of 6.75% and a health care cost trend rate of 8% for pre-age 65 benefits, decreasing to 5% in the year 2005 and thereafter. For post-age 65 benefits, the health care cost trend rate used was 6%, declining to 5% in the year 2001 and thereafter. The company's policy is to fund the above-mentioned benefits as claims and premiums are paid. The effect of a 1% increase in the health care cost trend rate used would result in increases of approximately $13 million in the 1999 postretirement benefit obligation and $1 million in the aggregate service and interest components of the 1999 expense. The effect of a 1% decrease in the health care cost trend rate used would result in decreases of approximately $11 million in the 1999 postretirement benefit obligation and $1 million in the aggregate service and interest components of the 1999 expense. The company's U.S. retiree medical insurance plan limits the company's share of the cost of such benefits it will pay to future retirees. The company's share of these benefit costs also depends on employee retirement age and length of service. -44- Note 7 Income taxes The provision for income taxes on income from continuing operations consists of the following: In thousands of dollars 1999 Current Deferred Total -------- -------- -------- Federal $505,902 $ 14,791 $520,693 State and other 72,927 2,132 75,059 Foreign 10,863 1,185 12,048 -------- -------- -------- Total $589,692 $ 18,108 $607,800 ======== ======== ======== In thousands of dollars 1998 Current Deferred Total -------- -------- -------- Federal $528,800 $ 31,144 $559,944 State and other 80,609 4,747 85,356 -------- -------- -------- Total $609,409 $ 35,891 $645,300 ======== ======== ======== In thousands of dollars 1997 Current Deferred Total -------- -------- -------- Federal $428,928 $(17,490) $411,438 State and other 64,805 (2,643) 62,162 -------- -------- -------- Total $493,733 $(20,133) $473,600 ======== ======== ======== In addition to the income tax provision presented above for continuing operations, the company also recorded federal and state income taxes payable on discontinued operations of $28 million in 1999, $24 million in 1998 and $23 million in 1997. The provision for income taxes on continuing operations exceeds the U.S. federal statutory tax rate as a result of the following differences: Fiscal year 1999 1998 1997 ------ ------ ------ U.S. statutory tax rate 35.0% 35.0% 35.0% Increase in taxes resulting from: State/other income taxes net of federal income tax benefit 3.2 3.5 3.5 Goodwill amortization not deductible for tax purposes 1.7 1.9 2.1 Other, net (0.1) (0.4) 0.4 ------ ------ ------ Effective tax rate 39.8% 40.0% 41.0% ====== ====== ====== Deferred income taxes reflect temporary differences in the recognition of revenue and expense for tax reporting and financial statement purposes. Deferred tax liabilities and assets were composed of the following at the end of 1999 and 1998: In thousands of dollars Dec. 26, 1999 Dec. 27, 1998 ------------- ------------- Liabilities Accelerated depreciation $ 403,846 $ 392,374 Accelerated amortization of deductible intangibles 114,547 109,807 Pension 15,085 16,211 Other 148,258 120,475 ------------- ------------- Total deferred tax liabilities 681,736 638,867 ------------- ------------- Assets Accrued compensation costs (63,095) (55,718) Postretirement medical and life (118,310) (120,177) Other (20,784) (20,613) ------------- ------------- Total deferred tax assets (202,189) (196,508) ------------- ------------- Net deferred tax liabilities $ 479,547 $ 442,359 ============= ============= -45- Note 8 Capital stock, stock options, incentive plans On Aug. 19, 1997, the company's Board of Directors approved a two-for-one stock split effective on Oct. 6, 1997, for shareholders of record on Sept. 12, 1997. In this report, all share and per-common-share amounts have been adjusted to reflect the stock split. The company's earnings per share from continuing operations (basic and diluted) for 1999, 1998 and 1997 are presented below: In thousands, except per share amounts 1999 1998 1997 ---- ---- ---- Income from continuing operations $919,387 $966,425 $681,353 Weighted average number of common shares outstanding (basic) 279,048 283,097 283,360 Effect of dilutive securities Stock options 2,217 2,197 1,768 Stock incentive rights 343 417 482 Weighted average number of common shares outstanding (diluted) 281,608 285,711 285,610 Earnings per share from continuing operations (basic) $3.29 $3.41 $2.41 Earnings per share from continuing operations (diluted) $3.26 $3.38 $2.39 The 1999, 1998 and 1997 diluted earnings per share amounts exclude the effects of 3,150,090, 2,500,210 and 1,750,100 stock options outstanding, respectively, as their inclusion would be antidilutive. In the third quarter of 1998, the company announced an authorization to repurchase up to $250 million of company stock. That authorization was substantially used by the end of the third quarter, and the Board approved an additional $500 million authorization on Sept. 30. Under these authorizations, the company purchased approximately 6 million shares of common stock in 1998 for $329 million and approximately 2.4 million shares in 1999 for $163 million. In early 2000, the Board approved an authorization for the company to repurchase up to $500 million in additional common stock. The company's 1978 Executive Long-term Incentive Plan (the Plan) provides for the granting of stock options, stock incentive rights and option surrender rights to executive officers and other key employees. The Plan may issue up to 24,000,000 shares of Gannett common stock through the end of 1997. The Plan restricts the granting of options to any participant in any fiscal year to no more than 350,000 shares of common stock and the exercise period for any stock options issued under the Plan is 10 years after the date of the grant thereof. The Plan provides that shares of common stock subject to a stock option or other award that is canceled or forfeited again be available for issuance under the Plan. Stock options are granted to purchase common stock of the company at not less than 100% of the fair market value on the day the option is granted. The exercise period is eight years for options granted prior to Dec. 10, 1996, and 10 years for options granted on that date and subsequent. The options become exercisable at 25% per year after a one-year waiting period. Stock incentive rights entitle the employee to receive one share of common stock at the end of an incentive period, conditioned upon the employee's continued employment throughout the incentive period. The incentive period is normally four years. During the incentive period, the employee receives cash payments equal to the cash dividend the company would have paid had the employee owned the shares of common stock issuable under the incentive rights. Under the Plan, all outstanding awards will be vested if there is a change in control of the company. Stock options become 100% exercisable immediately upon a change in control. Option surrender rights have been awarded, which relate one-for-one to all outstanding stock options. These rights are effective only upon a change in control and entitle the employee to receive cash for option surrender rights equal to 100% of the difference between the exercise price of the related stock option and the change-in-control price (which is the highest price paid for a share of stock as part of the change in control). The Plan also provides for the payment in cash of the value of stock incentive rights based on the change-in-control price. -46- A summary of the status of the company's stock option and stock incentive rights plans as of Dec. 26, 1999, Dec. 27, 1998, and Dec. 28, 1997, and changes during the years then ended is presented below: Weighted average 1999 Stock Option Activity Shares exercise price ---------- ---------------- Outstanding at beginning of year 10,572,736 $43.59 Granted 3,180,365 74.21 Exercised (1,158,304) 30.04 Canceled (187,956) 52.47 Outstanding at end of year 12,406,841 52.57 Options exercisable at year end 6,236,725 38.43 Weighted average fair value of options granted during the year $25.04 Weighted average 1998 Stock Option Activity Shares exercise price ---------- ---------------- Outstanding at beginning of year 9,234,421 $36.00 Granted 2,514,210 65.00 Exercised (931,604) 26.91 Canceled (244,291) 40.49 Outstanding at end of year 10,572,736 43.59 Options exercisable at year end 5,365,913 31.93 Weighted average fair value of options granted during the year $17.32 Weighted average 1997 Stock Option Activity Shares exercise price ---------- ---------------- Outstanding at beginning of year 8,866,658 $29.64 Granted 1,789,460 59.20 Exercised (1,237,089) 24.68 Canceled (184,608) 31.28 Outstanding at end of year 9,234,421 36.00 Options exercisable at year end 4,557,488 27.90 Weighted average fair value of options granted during the year $14.71 Further information about stock options outstanding at Dec. 26, 1999, follows: Weighted average Weighted Weighted Range of Number remaining average Number average exercise outstanding contractual exercise exercisable exercise prices at 12/26/99 life (yrs) price at 12/26/99 price - -------- ----------- ----------- -------- ----------- -------- $23-28 2,004,883 2.2 $25.61 2,004,883 $25.61 32-38 3,188,248 5.7 $35.14 2,725,441 $34.76 41-49 33,060 7.0 $45.98 24,795 $45.98 50-60 1,565,950 8.0 $59.50 782,975 $59.50 61-68 2,464,185 9.0 $65.02 628,296 $65.02 70-75 3,150,515 9.9 $74.26 70,335 $71.82 ----------- ----------- -------- ----------- -------- 12,406,841 7.2 $52.57 6,236,725 $38.43 =========== =========== ======== =========== ======== Stock Incentive Rights Awards made under the Plan for stock incentive rights were as follows: 1999 1998 1997 -------- -------- -------- Awards granted 169,290 168,785 173,325 Awards for 1997 are for the four-year period 1998-2001. Awards for 1998 are for the four-year period 1999-2002. Awards for 1999 are for the four-year period 2000-2003. In January 2000, 137,168 shares of common stock were issued in settlement of previously granted stock incentive rights for the incentive period ended December 1999. Shares available: Shares available for future grants under the 1978 Plan totaled 16,872,659 at Dec. 26, 1999. Pro forma results: SFAS No. 123, "Accounting for Stock-Based Compensation," establishes a fair value-based method of accounting for employee stock-based compensation plans and encourages companies to adopt that method. However, it also allows companies to continue to apply the intrinsic value- based method currently prescribed under Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25). The company has chosen to continue to report stock-based compensation in accordance with APB 25, and provides the following pro forma disclosure of the effects of applying the fair value method to all applicable awards granted. Under APB Opinion 25 and related Interpretations, no compensation cost has been recognized for its stock options. The compensation cost that has been charged against income for its stock incentive rights was $8 million for 1999, $7 million for 1998 and $8 million for 1997. Those charges were based on the grant price of the stock incentive rights recognized over the four-year -47- earnout periods. Had compensation cost for the company's stock options been determined based on the fair value at the grant date for those awards as permitted (but not required) under the alternative method of SFAS No. 123, the company's results of operations and related per share amounts would have been reduced to the pro forma amounts indicated below: In thousands, except per share amounts 1999 1998 1997 ---------- ----------- ---------- Net income As reported $957,928 $999,913 $712,679 Pro forma $942,733 $991,385 $707,717 Income from continuing operations As reported $919,387 $966,425 $681,353 Pro forma $904,192 $957,897 $676,391 Net Income per share - basic As reported $3.43 $3.53 $2.52 Pro forma $3.38 $3.50 $2.50 Net income per share - diluted As reported $3.40 $3.50 $2.50 Pro forma $3.35 $3.47 $2.48 Income from continuing operations per share - basic As reported $3.29 $3.41 $2.41 Pro forma $3.24 $3.38 $2.39 Income from continuing operations per share - diluted As reported $3.26 $3.38 $2.39 Pro forma $3.21 $3.35 $2.37 The fair value of each option is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions used for grants in 1999, 1998 and 1997, respectively: dividend yield of 1.38%, 1.69% and 2.15%; expected volatility of 22.31%, 20.62% and 16.28%; risk-free interest rates of 6.34%, 4.66% and 5.87%; and expected lives of seven years each. SFAS No. 123 applies to stock compensation awards granted in fiscal years that began after Dec. 15, 1994. Options are granted by the company primarily in December and begin vesting over a four-year period. Options granted in December 1995 and thereafter are subject to the pronouncement. To calculate the pro forma amounts shown above, compensation cost was recognized over the four-year period of service during which the options will be earned. As a result, options granted in December of each year (beginning with December 1995) impact pro forma amounts for following years but not the year in which they were granted. 401(k) Savings Plan On July 1, 1990, the company established a 401(k) Savings Plan. Most domestic employees of the company (other than those covered by a collective bargaining agreement) who are scheduled to work at least 1,000 hours during each year of employment are eligible to participate in the Plan. Employees may elect to save up to 15% of compensation on a pre-tax basis subject to certain limits. Through 1997, the company matched, with company common stock, 25% of the first 4% of employee contributions. Beginning Jan. 1, 1998, the company match increased to 50% of the first 6% of employee contributions. To fund the company's matching contribution, an Employee Stock Ownership Plan (ESOP) was formed in 1990 which acquired 2,500,000 shares of Gannett stock from the company for $50 million. The stock purchase was financed with a loan from the company, and the shares are pledged as collateral for the loan. The company makes monthly contributions to the ESOP equal to the ESOP's debt service requirements less dividends. All dividends received by the ESOP are used to pay debt service. As the debt is paid, shares are released as collateral and are available for allocation to participants. The company follows the shares allocated method in accounting for its ESOP. The cost of shares allocated to match employee contributions or to replace dividends that are used for debt service are accounted for as compensation expense. The cost of unallocated shares is reported as deferred compensation in the financial statements. The company, at its option, may repurchase shares from employees who leave the Plan. The shares are purchased at fair market value, and the difference between the original cost of the shares and fair market value is expensed at the time of purchase. All of the shares initially purchased by the ESOP are considered outstanding for earnings per share calculations. Dividends on allocated and unallocated shares are recorded as reductions of retained earnings. Compensation expense for the 401(k) match and repurchased shares was $8.9 million in 1999, $7.3 million in 1998 and $2.4 million in 1997. The ESOP shares as of the end of 1999 and 1998 were as follows: 1999 1998 --------- --------- Allocated shares 1,559,218 1,335,933 Shares released for allocation 44,812 40,950 Unreleased shares 895,970 1,103,117 Shares distributed to terminated participants (53,563) (40,454) --------- --------- ESOP shares 2,446,437 2,439,546 ========= ========= -48- In May 1990, the Board of Directors declared a dividend distribution of one Preferred Share Purchase Right ("Right") for each common share held, payable to shareholders of record on June 8, 1990. The Rights become exercisable when a person or group of persons acquires or announces an intention to acquire ownership of 15% or more of the company's common shares. Holders of the Rights may acquire an interest in a new series of junior participating preferred stock, or they may acquire an additional interest in the company's common shares at 50% of the market value of the shares at the time the Rights are exercised. The Rights are redeemable by the company at any time prior to the time they become exercisable, at a price of $.01 per Right. In November 1999, the Board authorized 2,000,000 shares of common stock to be registered in connection with a savings related share option plan, available to eligible employees of Newsquest. Note 9 Commitments and contingent liabilities Litigation: The company and a number of its subsidiaries are defendants in judicial and administrative proceedings involving matters incidental to their business. The company's management does not believe that any material liability will be imposed as a result of these matters. Leases: Approximate future minimum annual rentals payable under non- cancelable operating leases are as follows: In thousands of dollars 2000 $44,154 2001 40,780 2002 26,079 2003 22,187 2004 19,136 Later years 86,935 -------- Total $239,271 ======== Total minimum annual rentals have not been reduced for future minimum sublease rentals aggregating approximately $9 million. Total rental costs reflected in continuing operations were $50 million for 1999, $44 million for 1998 and $42 million for 1997. Program broadcast contracts: The company has commitments under program broadcast contracts totaling $109.5 million for programs to be available for telecasting in the future. The company presently owns a 58% interest in WKYC-TV and National Broadcasting Company (NBC) owns a 42% interest. In December 1998, the company entered into a Put-Call agreement with NBC. Terms of the agreement permit (but don't require) either party to initiate a purchase/sale of some or all of NBC's shares in WKYC-TV over a four-year period. A put was made by NBC in April 1999 whereby Gannett acquired an additional 7% of WKYC shares. The company's maximum aggregate remaining potential commitment under the agreement is approximately $174 million. In December 1990, the company adopted a Transitional Compensation Plan ("Plan") which provides termination benefits to key executives whose employment is terminated under certain circumstances within two years following a change in control of the company. Benefits under the Plan include a severance payment of up to three years' compensation and continued life and medical insurance coverage. -49- Note 10 Business operations and segment information The company has determined that its reportable segments based on its management and internal reporting structure are newspaper publishing, which is the largest segment of its operations; and secondly, broadcasting (television). As discussed in Note 2, the cable division's operating results, identifiable assets and capital expenditures have been retroactively excluded from the segment data presented herein as the division has been reclassified in the statements of income and related discussions as discontinued operations. The newspaper segment at the end of 1999 consisted of 74 U.S. daily newspapers in 38 states and one U.S. territory, including USA TODAY, a national, general-interest daily newspaper; and USA WEEKEND, a magazine supplement for newspapers. The newspaper segment also includes Newsquest (acquired in 1999) which is a regional newspaper publisher in England with a portfolio of 180 titles that include paid-for daily and weekly newspapers, and free weekly newspapers. The newspaper segment in the U.S. also includes non-daily publications, a nationwide network of offset presses for commercial printing and several smaller businesses. Newsprint, which is the principal product used in newspaper publishing, has been and may continue to be subject to significant price changes from time to time. The broadcasting segment's activities for 1999 include the operation of 21 U.S. television stations. The company's foreign revenues in 1999 totaled approximately $239 million, principally from publications distributed in England. The company's long-lived assets in foreign countries totaled approximately $1.8 billion at Dec. 26, 1999, principally in England. Separate financial data for each of the company's business segments is presented in the table which follows. The accounting policies of the segments are those described in Note 1. The company evaluates the performance of its segments based on operating income and operating cash flow. Operating income represents total revenue less operating expenses, depreciation and amortization of intangibles. In determining operating income by industry segment, general corporate expenses, interest expense, interest income, and other income and expense items of a non-operating nature are not considered, as such items are not allocated to the company's segments. Operating cash flow represents operating income plus depreciation and amortization of intangible assets. Corporate assets include cash and marketable securities, certain investments, long-term receivables and plant and equipment primarily used for corporate purposes. Interest capitalized has been included as a corporate capital expenditure for purposes of segment reporting. In thousands of dollars Business segment financial information 1999 1998 1997 ---------- ---------- ---------- Operating revenues Newspaper publishing $4,531,548 $4,159,393 $3,770,670 Broadcasting 728,642 721,298 703,558 ---------- ---------- ---------- $5,260,190 $4,880,691 $4,474,228 ---------- ---------- ---------- Operating income Newspaper publishing $1,291,665 $1,109,221 $1,001,965 Broadcasting 337,537 343,512 328,311 Corporate (3) (66,101) (66,919) (68,034) ---------- ---------- ---------- $1,563,101 $1,385,814 $1,262,242 ---------- ---------- ---------- Depreciation and amortization Newspaper publishing $ 207,720 $ 184,718 $ 168,526 Broadcasting 62,861 60,023 56,459 Corporate (3) 9,510 8,722 8,720 ---------- ---------- ---------- $ 280,091 $ 253,463 $ 233,705 ---------- ---------- ---------- Operating cash flow (4) Newspaper publishing $1,499,385 $1,293,939 $1,170,491 Broadcasting 400,398 403,535 384,770 Corporate (3) (56,591) (58,197) (59,314) ---------- ---------- ---------- $1,843,192 $1,639,277 $1,495,947 ---------- ---------- ---------- Identifiable assets (1) Newspaper publishing $5,548,738 $3,682,839 $3,593,932 Broadcasting 1,931,034 1,872,351 1,725,019 Corporate (3) 427,429 355,236 348,343 ---------- ---------- ---------- $7,907,201 $5,910,426 $5,667,294 ---------- ---------- ---------- Capital expenditures (2) Newspaper publishing $ 169,259 $ 164,479 $ 123,343 Broadcasting 24,831 25,548 13,157 Corporate (3) 51,055 32,032 3,495 ---------- ---------- ---------- $ 245,145 $ 222,059 $ 139,995 ---------- ---------- ---------- (1) Excludes assets related to discontinued operations totaling $1,112,527 in 1999, $1,069,054 in 1998, and $1,223,057 in 1997. (2) Excludes capital expenditures made for discontinued operations totaling $13,298 for 1999, $22,366 for 1998, and $81,256 for 1997. (3) Corporate amounts represent those not directly related to the company's two business segments. (4) Operating cash flow amounts represent operating income plus depreciation and amortization of intangible assets. Such cash flow amounts in total vary from net cash flow from operating activities presented in the Consolidated Statements of Cash Flows. -50- Report of independent accountants To the Board of Directors and Shareholders of Gannett Co., Inc. In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, of cash flows and of changes in shareholders' equity present fairly, in all material respects, the financial position of Gannett Co., Inc. and its subsidiaries at Dec. 26, 1999 and Dec. 27, 1998, and the results of their operations and their cash flows for each of the three years in the period ended Dec. 26, 1999 in conformity with accounting principles generally accepted in the United States. These financial statements are the responsibility of the company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. /s/PricewaterhouseCoopers LLP - ----------------------------- PricewaterhouseCoopers LLP Washington, D.C. January 31, 2000 -51- 11-Year Summary In thousands of dollars, except per share amounts
1999 1998 1997 1996 1995 1994 ---------- ---------- ---------- ---------- ---------- ---------- Net operating revenues Newspaper advertising $3,292,894 $2,942,995 $2,634,334 $2,417,550 $2,219,250 $2,152,671 Newspaper circulation 1,022,520 1,010,238 948,141 917,677 869,173 849,461 Broadcasting 728,642 721,298 703,558 686,936 466,187 406,608 All other 216,134 206,160 188,195 166,444 171,426 174,655 ---------- ---------- ---------- ---------- ---------- ---------- Total (Notes a and b, see page 54) 5,260,190 4,880,691 4,474,228 4,188,607 3,726,036 3,583,395 ---------- ---------- ---------- ---------- ---------- ---------- Operating expenses Costs and expenses 3,416,998 3,241,414 2,978,281 2,946,565 2,720,245 2,597,556 Depreciation 169,460 163,776 152,964 147,721 141,151 146,054 Amortization of intangible assets 110,631 89,687 80,741 75,043 47,509 44,110 ---------- ---------- ---------- ---------- ---------- ---------- Total 3,697,089 3,494,877 3,211,986 3,169,329 2,908,905 2,787,720 ---------- ---------- ---------- ---------- ---------- ---------- Operating income 1,563,101 1,385,814 1,262,242 1,019,278 817,131 795,675 Non-operating income (expense) Interest expense (94,619) (79,412) (98,242) (135,563) (52,175) (45,624) Other 58,705 (11) 305,323 (9) (9,047) 155,825 (7) 3,754 14,945 ---------- ---------- ---------- ---------- ---------- ---------- Income before income taxes 1,527,187 1,611,725 1,154,953 1,039,540 768,710 764,996 Provision for income taxes 607,800 645,300 473,600 442,900 312,084 309,600 ---------- ---------- ---------- ---------- ---------- ---------- Income from continuing operations 919,387 (11) 966,425 (9) 681,353 596,640 (7) 456,626 455,396 ---------- ---------- ---------- ---------- ---------- ---------- Discontinued operations: Income from the operation of discontinued businesses (net of income taxes)(12) 38,541 33,488 31,326 51,867 20,636 10,003 Gain on disposal of Outdoor business (net of income taxes) 0 0 0 294,580 0 0 ---------- ---------- ---------- ---------- ---------- ---------- Total 38,541 33,488 31,326 346,447 20,636 10,003 ---------- ---------- ---------- ---------- ---------- ---------- Income before cumulative effect of accounting principle changes 957,928 999,913 712,679 943,087 477,262 465,399 Cumulative effect on prior years of accounting principle changes for: Income taxes 0 0 0 0 0 0 Retiree health and life insurance benefits 0 0 0 0 0 0 ---------- ---------- ---------- ---------- ---------- ---------- Net income $ 957,928 $ 999,913 $712,679 $943,087 $477,262 $465,399 ========== ========== ========== ========== ========== ========== Operating cash flow (5) $1,843,192 $1,639,277 $1,495,947 $1,242,042 $1,005,791 $985,839 ---------- ---------- ---------- ---------- ---------- ---------- Per share amounts (1) Income from continuing operations before cumulative effect of accounting principle changes: basic/diluted $3.29/3.26(11) $3.41/3.38(9) $2.41/2.39 $2.12/2.11(7) $1.63/1.62 $1.58/1.57 Net income: basic/diluted $3.43/3.40 $3.53/3.50 $2.52/2.50 $3.35/3.33 $1.70/1.69 $1.61/1.60 Dividends declared (2) .82 .78 .74 .71 .69 .67 Weighted average number of common shares outstanding in thousands (2): Basic 279,048 283,097 283,360 281,782 280,312 288,552 Diluted 281,608 285,711 285,610 283,426 282,323 290,148 Financial position Working capital $ 191,444 $ 178,418 $ 146,057 $ 47,609 $ 41,312 $ 123,783 Long-term debt excluding current maturities 2,463,250 1,306,859 1,740,534 1,880,293 2,767,880 767,270 Shareholders' equity 4,629,646 3,979,824 3,479,736 2,930,818 2,145,648 1,822,238 Total assets 9,006,446 6,979,480 6,890,351 6,349,597 6,503,800 3,707,052 Selected financial percentages and ratios Percentage increase (decrease) Earnings from continuing operations, after tax (4) 13.3%(10) 14.9%(8) 35.4% 10.2%(6) 0.3% 17.0% Earnings from continuing operations, after tax, per share (4): Basic 14.9%(10) 14.5%(8) 36.9% 8.0%(6) 3.2% 18.8% Diluted 14.9%(10) 14.6%(8) 34.3% 9.9%(6) 3.2% 18.9% Dividends declared per share 5.1% 5.4% 4.2% 2.9% 3.0% 3.1% Return on equity (3) 20.6% 21.0% 21.3% 19.8% 23.0% 24.4% Credit ratios Long-term debt to shareholders' equity 53.2% 32.8% 50.0% 64.2% 129.0% 42.1% Times interest expense earned 17.1x 21.3x 12.8x 8.7x 15.7x 17.8x 1993 1992 1991 1990 1989 ---------- ---------- ---------- ---------- ---------- Net operating revenues Newspaper advertising $2,005,037 $1,882,114 $1,852,591 $1,917,477 $2,018,076 Newspaper circulation 838,706 807,093 777,221 730,426 718,087 Broadcasting 397,204 370,613 357,383 396,693 408,363 All other 169,903 167,824 134,720 125,659 115,773 ---------- ---------- ---------- ---------- ---------- Total (Notes a and b, see page 54) 3,410,850 3,227,644 3,121,915 3,170,255 3,260,299 ---------- ---------- ---------- ---------- ---------- Operating expenses Costs and expenses 2,520,278 2,440,275 2,399,930 2,353,281 2,368,160 Depreciation 147,248 139,080 139,268 135,294 134,119 Amortization of intangible assets 43,771 39,197 39,621 39,649 39,100 ---------- ---------- ---------- ---------- ---------- Total 2,711,297 2,618,552 2,578,819 2,528,224 2,541,379 ---------- ---------- ---------- ---------- ---------- Operating income 699,553 609,092 543,096 642,031 718,920 Non-operating income (expense) Interest expense (51,250) (50,817) (71,057) (71,567) (90,638) Other 5,350 7,814 14,859 10,689 (18,364) ---------- ---------- ---------- ---------- ---------- Income before income taxes 653,653 566,089 486,898 581,153 609,918 Provision for income taxes 264,400 224,900 194,400 226,600 235,500 ---------- ---------- ---------- ---------- ---------- Income from continuing operations 389,253 341,189 292,498 354,553 374,418 ---------- ---------- ---------- ---------- ---------- Discontinued operations: Income from the operation of discontinued businesses (net of income taxes) (12) 8,499 4,491 9,151 22,410 23,091 Gain on disposal of Outdoor business (net of income taxes) 0 0 0 0 0 ---------- ---------- ---------- ---------- ---------- Total 8,499 4,491 9,151 22,410 23,091 ---------- ---------- ---------- ---------- ---------- Income before cumulative effect of accounting principle changes 397,752 345,680 301,649 376,963 397,509 Cumulative effect on prior years of accounting principle changes for: Income taxes 0 34,000 0 0 0 Retiree health and life insurance benefits 0 (180,000) 0 0 0 ---------- ---------- ---------- ---------- ---------- Net income $397,752 $199,680 $301,649 $376,963 $397,509 ========== ========== ========== ========== ========== Operating cash flow (5) $890,572 $787,369 $721,985 $816,974 $892,139 ---------- ---------- ---------- ---------- ---------- Per share amounts (1) Income from continuing operations before cumulative effect of accounting principle changes: basic/diluted $1.33/1.32 $1.18/1.18 $.97/.96 $1.11/1.10 $1.16/1.16 Net income: basic/diluted $1.36/1.35 $.69/.69 $1.00/.99 $1.18/1.17 $1.23/1.23 Dividends declared (2) .65 .63 .62 .61 .56 Weighted average number of common shares outstanding in thousands (2): Basic 292,948 288,296 301,566 320,094 322,506 Diluted 294,659 290,174 303,267 322,830 323,932 Financial position Working capital $ 302,818 $ 199,896 $ 192,266 $ 168,487 $ 193,208 Long-term debt excluding current maturities 850,686 1,080,756 1,335,394 848,633 922,470 Shareholders' equity 1,907,920 1,580,101 1,539,487 2,063,077 1,995,791 Total assets 3,823,798 3,609,009 3,684,080 3,826,145 3,782,848 Selected financial percentages and ratios Percentage increase (decrease) Earnings from continuing operations, after tax (4) 14.1% 16.6% (17.5%) (5.3%) 9.9% Earnings from continuing operations, after tax, per share (4): Basic 12.3% 22.0% (12.4%) (4.6%) 10.2% Diluted 11.9% 22.9% (12.7%) (5.2%) 10.5% Dividends declared per share 3.2% 1.6% 2.5% 9.0% 8.8% Return on equity (3) 22.3% 21.9% 16.2% 17.5% 19.8% Credit ratios Long-term debt to shareholders' equity 44.6% 68.4% 86.7% 41.1% 46.2% Times interest expense earned 13.8x 12.1x 7.9x 9.1x 7.7x (1) Per share amounts have been based upon average number of shares outstanding during each year, giving retroactive effect to adjustment in (2). (2) Shares outstanding and dividends declared have been converted to a comparable basis by reflecting retroactively the 2-for-1 stock split effective Oct. 6, 1997. (3) Based upon average shareholders' equity (continuing operations before non-recurring gains and accounting principle changes). (4) Before cumulative effect of accounting principle changes. (5) Operating cash flow represents operating income plus depreciation and amortization of intangible assets. (6) Before 1996 after-tax gain on exchange of broadcast stations of $93 million or $.33 per share. (7) Includes pre-tax gain on exchange of broadcast stations of $158 million (after-tax gain of $93 million or $.33 per share). (8) Before 1998 $184 million after-tax net non-operating gain principally from the disposition of the radio and alarm security businesses ($.65 per share-basic and $.64 per share-diluted). (9) Includes pre-tax net non-operating gain principally from the disposition of the radio and alarm security businesses of $307 million (after-tax gain of $184 million or $.65 per share-basic and $.64 per share-diluted). (10) Before 1999 $33 million after-tax net non-operating gain principally from the exchange of KVUE-TV for KXTV-TV ($.11 per share) (11) Includes pre-tax net non-operating gain principally from the exchange of KVUE-TV for KXTV-TV of $55 million (after-tax gain of $33 million or $.11 per share). (12) Includes results from businesses sold and accounted for as discontinued operations (cable - 1995 to 1999; security - 1995 to 1998; entertainment - 1995 to 1996; outdoor - 1989 to 1996). -52/53-
Notes to 11-year Summary (a) The company and its subsidiaries made the acquisitions listed below during the period. The results of operations of these acquired businesses are included in the accompanying financial information from the date of acquisition. Note 2 of the consolidated financial statements on page 40 contains further information concerning certain of these acquisitions. (b) During the period, the company sold or otherwise disposed of substantially all of the assets or capital stock of certain other subsidiaries and divisions of other subsidiaries. Note 2 of the consolidated financial statements on page 40 contains further information concerning certain of these dispositions. Acquisitions 1989-1999 1989 Oct. 31 Rockford Magazine Nov. 6 Outdoor advertising displays merged into New Jersey Outdoor 1990 March 28 Great Falls (Mont.) Tribune May 17 Ye Olde Fishwrapper June 18 The Shopper Advertising, Inc. Sept. 7 Desert Community Newspapers Dec. 27 North Santiam Newspapers Dec. 28 Pensacola Engraving Co. 1991 Feb. 11 The Add Sheet April 3 New Jersey Publishing Co. Aug. 30 The Times Journal Co., including The Journal Newspapers, The Journal Printing Co. (now Springfield Offset) and Telematch Oct. 3 Gulf Breeze Publishing Co. 1992 April 24 Graphic Publications, Inc. 1993 Jan. 30 The Honolulu Advertiser April 24 Tulare Advance-Register 1994 May 2 Nursing Spectrum June 9 Altoona Herald-Mitchellville Index and the Eastern ADvantage Dec. 1 KTHV-TV, Little Rock 1995 Dec. 4 Multimedia, Inc. 1996 Dec. 9 WTSP-TV, Tampa-St. Petersburg, Fla. 1997 Jan. 31 WZZM-TV, Grand Rapids, Mich. Jan. 31 WGRZ-TV, Buffalo, N.Y. May 5 Printed Media Companies May 27 KNAZ-TV, Flagstaff, Ariz. May 27 KMOH-TV, Kingman, Ariz. July 18 Mary Morgan, Inc. Aug. 1 Army Times Publishing Co., Inc. Oct. 24 New Jersey Press, Inc. 1998 Jan. 5 WCSH-TV, Portland, Maine Jan. 5 WLBZ-TV, Bangor, Maine April 30 WLTX-TV, Columbia, S.C. May 31 Classified Gazette, San Rafael, Calif. July 7 Ocean County Observer, Toms River, N.J. July 7 Daily Record, Morristown, N.J. July 7 Manahawkin Newspapers, Manahawkin, N.J. Aug. 31 TCI Cable Kansas Aug. 31 New Castle County Shopper's Guide, Brandywine Valley Weekly and Autos plus, Wilmington, Del. 1999 March 17 The Reporter, Melbourne, Fla. March 29 Lehigh Acres News-Star, Lehigh Acres, Fla. June 1 Dealer Magazine, Reno, Nev. June 1 KXTV-TV, Sacramento, Calif. July 26 Newsquest plc, United Kingdom Sept. 28 Tucker Communications, Inc., Westchester Co., N.Y. Sept. 29 Pennypower Shopping News, Branson & Springfield, Mo. -54- Form 10-K information Business of the company Gannett Co., Inc. is a diversified information company that operates primarily in the U.S. and England. Approximately 95% of its revenues are from domestic operations. In addition to operations in England, it has limited foreign operations in certain European and Asian markets. Its corporate headquarters is in Arlington, Va., near Washington, D.C. It was incorporated in New York in 1923 and was reincorporated in Delaware in 1972. The company presently reports two principal business segments: newspaper publishing and television broadcasting. The company's newspapers make up the largest newspaper group in the U.S. in circulation, and in 1999 the company acquired Newsquest plc, one of the largest regional newspaper publishers in England. At the end of 1999, the company operated 85 daily newspapers, with a total average daily circulation of approximately 7.1 million for 1999, including USA TODAY. The company also publishes USA WEEKEND, a weekend newspaper magazine, and a number of non-daily publications. The newspaper segment includes the following: Gannett News Service, which provides news services for its newspaper operations; Gannett Retail Advertising Group, which represents the company's newspapers, other than USA TODAY, in the sale of advertising to national and regional retailers and service providers; and Gannett Offset, which is composed of the Gannett Offset print group and Gannett Marketing Services Group. The Gannett Offset print group includes seven non-heatset printing plants and two heatset printing facilities. Gannett Offset's dedicated commercial printing plants are located in Atlanta, Ga.; Chandler, Ariz.; Minneapolis, Minn.; Miramar, Fla.; Nashville, Tenn.; Norwood, Mass.; Pensacola, Fla.; St. Louis, Mo.; and Springfield, Va. Gannett Marketing Services Group coordinates the sale of direct-marketing services through: Telematch, a database management and data enhancement company; Gannett Direct Marketing Services, a direct-marketing company with operations in Louisville, Ky.; and Gannett TeleMarketing, a telephone sales and marketing company. The company also owns USATODAY.com and other Internet services at many of its local newspapers and television stations; Gannett Media Technologies International, which develops and markets software and other products for the publishing industry; Nursing Spectrum, publisher of biweekly periodicals specializing in advertising for nursing employment; and Army Times Publishing Company, which publishes military and defense newspapers. On Dec. 26, 1999, the broadcasting division included 21 television stations in markets with more than 17.5 million households. The company's cable business was sold on Jan. 31, 2000, and its results for 1999 and prior years are treated as discontinued operations in the company's statements of income and related discussions elsewhere in this report. Newspaper publishing/United States On Dec. 26, 1999, the company operated 74 daily newspapers, including USA TODAY, and a number of non-daily local publications, in 38 states and Guam. The Newspaper Division is headquartered in Arlington, Va., and on Dec. 26, 1999, it had approximately 35,200 full-time and part-time employees. USA TODAY was introduced in 1982 as the country's first national, general- interest daily newspaper. It is available in all 50 states and is available to readers on the day of publication in the top 100 metropolitan markets in the U.S. USA TODAY is produced at facilities in Arlington, Va., and is transmitted via satellite to offset printing plants around the country. It is printed at Gannett plants in 19 U.S. markets and under contract at offset plants in 14 other U.S. markets. It is sold at newsstands and vending machines generally at 50 cents a copy. Mail subscriptions are available nationwide and abroad, and home and office delivery is offered in many markets. Approximately 67% of its net paid circulation results from single-copy sales at newsstands or vending machines and the remainder is from home and office delivery, mail and other sales. For 1999, USA TODAY's advertising revenues and volume rose 17% and 13%, respectively. USA TODAY's operating income rose sharply in 1999. USA TODAY International is printed from satellite transmission under contract in London, Frankfurt and Hong Kong, and is distributed in Europe, the Middle East, Africa and Asia. It is available in more than 60 foreign countries. USATODAY.com reached nearly 15 million different people per month by the end of 1999 and its revenue increased 89%. This operation turned profitable in the latter part of 1999. Gannett News Service (GNS) is headquartered in Arlington, Va., and has bureaus in nine other states (see page 72 for more information). GNS provides national and regional news coverage and sports, features, photo and graphic services to Gannett newspapers. GNS also is distributed by syndication to several non-Gannett newspapers, including ones in Chicago, Salt Lake City, Boston and Seattle. The newspaper publishing segment also includes USA WEEKEND, which is distributed as a weekend newspaper magazine in 563 newspapers throughout the country, with a total circulation of 21.8 million at the end of 1999. At the end of 1999, 59 of the company's daily newspapers, including USA TODAY, were published in the morning and 15 were published in the evening. Individually, Gannett newspapers are the leading news and information source with strong brand recognition in their markets. Their durability lies in the quality of their management, their flexibility, their focus on such customer-directed programs as NEWS 2000, ADvance and ADQ, and their capacity to invest in new technology. Collectively, they form a powerful network to distribute news and advertising information across the nation. -55- News departments across Gannett continued to emphasize coverage of the key franchise subject - local news. Many newspapers expanded efforts to reach more local readers by increasing or enhancing coverage of additional local communities around the core cities. In June 1999 at a meeting of Gannett publishers and editors, the Newspaper Division introduced the Principles of Ethical Conduct for Newsrooms, guidelines to better address issues of information gathering and presentation. The program's aim is to set out the high standards expected and practiced at the newspapers. The five key principles state that our newsrooms are committed to: seeking and reporting the truth in a truthful way; serving the public interest; exercising fair play; maintaining independence; and acting with integrity. Training in the program took place in the fall and extended to all newsrooms. By year-end, nearly 5,000 journalists had participated in training programs. The principles also were spelled out in the newspapers for readers in each community, and editors make sure that newsrooms remain focused on these principles. Another major effort in newsrooms was special coverage of Y2K issues and the coming of the new millennium. Newspapers presented some year-long features, special historic sections and sections looking ahead to the next century. Gannett News Service moved substantial material for use by newspapers throughout the year. Each newspaper presented extensive local - as well as national and world - coverage of events Dec. 31, 1999, and into Jan. 1, 2000. All of the company's daily newspapers receive Gannett News Service. In addition, all subscribe to The Associated Press, and some receive various supplemental news and syndicated features services. In 1999, the company continued to implement strategies to increase its revenues from medium and smaller advertisers in each market it serves. Revenues from these types of advertisers increased again in 1999. Initiatives focused on sales and rate management, among other areas. Sales management initiatives included allocating proper resources to increase the number and quality of sales calls, improving sales compensation and providing consistent sales training. Rate management programs focused on selling multiple advertising insertions and reviewing rates and rate structures to assure they match the opportunities in the market. The company regularly calculates market potential and develops strategic plans to capitalize on that potential. Significant efforts will continue to be taken in 2000 to make the company's personnel increasingly competitive in their leadership, strategic thinking and marketing skills. The newspapers' quality initiative, known as ADQ, produced for the fifth consecutive year improved ad quality and reduced credit cost. With ROP ad count up and total ad revenues up in 1999 over 1998, Gannett newspapers produced higher volume with higher quality. The online strategy at Gannett local newspapers is consistent with the overall Gannett philosophy in serving our newspapers' communities. The role of the local newspaper is to serve the local reader and advertiser; local newspaper products and services, including online products, must be designed to serve community needs. The company is taking an aggressive approach to providing online information products that position its local newspapers to grow and enhance their franchises as the leading information providers in their communities. Internet publishing, by its nature, paired with good business approaches, demands more national economies of scale, and standardization of products and technology than traditional newspaper publishing. The company takes advantage of national economies, national partnerships and national-level technology by adapting them to its local markets. Various approaches and different levels of activity are employed based on the specific needs and opportunities in each market. A principal achievement in 1998 was growth of newspapers online. By Dec. 31, 1998, 54 newspapers had online projects. This was up from 30 at the end of 1997. In 1999, growth of Internet products at newspapers already launched was emphasized. As a result, the number of newspapers online rose to 60 at the end of 1999, but the number of products these papers offered rose from 238 to over 480. These products are each designed to offer penetrating specific information on important subjects and include not only local news, but also guides for home buying, employment and job information, automotive, entertainment, and tourism, as well as other specialty products such as Space Online in Brevard County, Fla., or the Kentucky Derby in Louisville, Ky. Revenue for newspaper Internet activities has more than tripled from the first quarter, 1998 through the fourth quarter of 1999. The company expects sharp revenue growth again in 2000. The company is also pursuing opportunities to develop national Internet businesses. By partnering with other companies, using the strength of local newspaper franchises and adding to the efficiencies of the Internet to deliver both nationally and locally, unique opportunities to develop new national businesses are being created. In addition, these partnerships enhance local efforts by providing additional content, advertising opportunities and technical resources that help Gannett's local newspapers improve their products and services. -56- Some examples are: Career Path, which offers the opportunity to build a strong national employment service and, at the same time, makes the company's local employment sites richer for local users and expands the products and services the local paper can offer to local employment advertisers. Classified Ventures, which creates similar benefits in Real Estate and Automotive categories. InfiNet, which provides Internet site hosting expertise, enables the company's papers to have better, more cost-efficient, more reliable, basic hosting technology than could be provided on a site-by-site basis. The senior executive of each newspaper is the publisher, and the newspapers have advertising, business, information systems, circulation, news, market development, human resources, online and production departments. Technological advances in recent years have had an impact on the way newspapers are produced. Computer-based text editing systems capture drafts of reporters' stories and then are used to edit and produce type for transfer by a photographic process to printing plates. All of the company's daily newspapers are produced by this method. "Pagination" enables editors to create a newspaper page by computer, avoiding all or part of the manual "paste-up" of the page before it can be converted into a printing plate. The company uses pagination systems at 67 newspaper plants. Twenty-five editorial systems and 26 classified advertising systems were replaced from late 1998 through the end of 1999 ensuring Y2K compliance along with providing major upgrades. Gannett newsrooms are making the transition from film to digital cameras, which provide greater flexibility and speed in getting late-breaking photographs into the newspaper. One example was during the spring 1999 snowstorm in Rochester, N.Y. Roads were impassable, but photographers were able to work from home where they transmitted photos from laptop computers to the newspaper plant, thus providing readers with dramatic photos of a major storm. In addition to Rochester, 10 other newspapers have converted to virtually all digital photo departments. Louisville, Nashville, Fort Myers, El Paso, Cherry Hill and Huntington are among the 10. Some newspapers keep one or two film cameras for extremely low-light situations or, in the case of FLORIDA TODAY, for shooting remote shots of space shuttle launches. The Mobile Advertising Sales System, or MASS, is Gannett's sales force automation software. This laptop technology provides sales executives with up- to-date customer, contract and sales revenue information; an electronic Rate Calculator for pricing ads; productivity tools for managing their schedules; and software for sales presentations. MASS is currently installed at 54 newspapers, with more than 1,200 laptops deployed. Eight newspapers are electronically uploading insertion orders directly into the business billing system, rather than entering this information manually. Four more newspapers are scheduled to implement this process in the first quarter of 2000. In 1999, a version of MASS that runs on palmtop technology was successfully tested at four newspapers. More newspapers will deploy palmtops in 2000. Celebro Advertising Solutions, originally developed by the company in 1994 as AdLink, is a suite of software applications that enables major real estate agents to control the design, scheduling and content of their advertising in the newspaper and market their properties on the Internet, and with audio text/fax back. The Celebro Real Estate System has been installed at 28 Gannett newspapers and at an additional 24 non-Gannett newspapers by Gannett Media Technologies International (GMTI). Celebro auto advertising systems are installed at six Gannett and two non-Gannett newspapers. Celebro's newest product, CityServer, provides newspapers with database and publishing tools to build directories and guides on newspaper Web sites. Hosted by InfiNet, CityServer was field tested in Palm Springs and Brevard and will be rolled out to all newspaper division Web sites in 2000. The Digital Collections integrated text/photo archive system has been installed at 46 Gannett newspapers, including Rochester, Des Moines, Louisville, Honolulu, Wilmington, Detroit and Tucson. The system stores, retrieves and distributes text, photos and full-page images of the newspaper in a digital form that can be searched using an easy-to-use interface. GMTI, licensed by DiGiCol, the U.S. subsidiary of Gannett and Digital Collections Verlagsges.mbH, sells and installs Digital Collections systems in North and South America. In addition to the Gannett installations, there are 5 installations in South America and 12 non-Gannett installations in the United States. Non-Gannett customers include The Milwaukee Journal, America Online, O'Globo (Rio De Janiero, Brazil), Copesa (Santiago, Chile), the Princeton (N.J.) Packet, The Indianapolis (Ind.) Star, The University of Missouri, Journal Newspapers (Virginia), Lance Newspapers (Rio De Janiero and Sao Paulo), Prensa Libre (Guatemala) and Kohla de Sao Paulo (Brazil). Installation of a "light" version employing a central server based at Gannett's Maryland Operations Center was completed in 1999. All Gannett newsrooms now have digital archives. -57- With respect to newspaper production, 56 daily newspaper plants print by the offset process, and 15 plants print using various letterpress processes. In recent years, improved technology for all of the newspapers has resulted in greater speed and accuracy and in a reduction in the number of production hours worked. The company expects this trend to continue in 2000. The principal sources of newspaper revenues are circulation and advertising. Circulation: Sixteen of the company's local newspapers reported gains in daily circulation in 1999, and seven increased Sunday circulation. Home- delivery prices for the company's newspapers are established individually for each newspaper and range from $1.50 to $2.86 per week in the case of daily newspapers and from $.71 to $2.35 per copy for Sunday newspapers. The company implemented circulation price increases at 20 newspapers in 1999 and plans increases at 30 newspapers in 2000. Additional information about the circulation of the company's newspapers may be found on pages 26-27, 60 and 70-72 of this annual report. Advertising: The newspapers have advertising departments that sell retail, classified and national advertising. The Gannett Retail Advertising Group also sells advertising on behalf of the company's newspapers, other than USA TODAY, to national and regional retailers and service providers. The company also contracts with outside representative firms that specialize in the sale of national advertising. A further analysis of newspaper advertising revenues is presented on pages 26 and 60 of this report. Retail advertising is display advertising associated with local merchants, such as department and grocery stores. Classified advertising includes ads listed together in sequence by the nature of the ads, such as automobile sales, real estate sales and "help wanted." National advertising is display advertising principally from advertisers who are promoting products or brand names nationally. Retail and national advertising may appear in the newspaper itself or in preprinted sections. Generally there are different rates for each category of advertising, and the rates for each newspaper are set independently, varying from city to city. The newspapers have made continuing efforts to serve their readers and advertisers by introducing complete market coverage programs and by targeting specific market segments desired by many advertisers through the use of specially zoned editions and other special publications. Competition: The company's newspapers compete with other media for advertising principally on the basis of their advertising rates and their performance in helping sell the advertisers' products or services. They compete for circulation principally on the basis of their content and price. While most of the company's newspapers do not have daily newspaper competitors that are published in the same city, in certain of the company's larger markets, there is such direct competition. Most of the company's newspapers compete with other newspapers published in nearby cities and towns and with free distribution and paid advertising weeklies, as well as other print and non-print media. The rate of development of opportunities in, and competition from, emerging electronic communications services, including those related to the Internet and the Web, is increasing. Through internal development programs, acquisitions and partnerships, the company's efforts to explore new opportunities in news, information and communications businesses have expanded. At the end of 1999, The Cincinnati Enquirer, The Detroit News, The Honolulu Advertiser and the Tucson (Ariz.) Citizen were published under joint operating agreements with non-Gannett newspapers located in the same cities. All of these agreements provide for joint business, advertising, production and circulation operations and a contractual division of profits. The editorial and reporting staffs of the company's newspapers, however, are separate and autonomous from those of the non-Gannett newspapers. Properties: Generally, the company owns the plants that house all aspects of the newspaper publication process. In the case of USA TODAY, at Dec. 26, 1999, 14 non-Gannett printers were used to print the newspaper in U.S. markets where there are no company newspapers with appropriate facilities. Three non- Gannett printers in foreign countries are used to print USA TODAY International. USA WEEKEND and Nursing Spectrum also are printed under contracts with commercial printing companies. Many of the company's newspapers also have outside news bureaus and sales offices, which generally are leased. In a few cities, two or more of the company's newspapers share combined facilities; and in certain locations, facilities are shared with other newspaper properties. The company's newspaper properties have rail siding facilities or access to main roads for newsprint delivery purposes and are conveniently located for distribution purposes. -58- During the past five years, new or substantial additions or remodeling of existing newspaper facilities have been completed or are at some stage of construction at 23 of the company's newspaper operations. Gannett continues to make significant investments in the renovation of existing or new facilities where the investment will help to improve the products for its readers and advertisers as well as improve productivity and operating efficiencies. The company's facilities are adequate for present operations. 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 our operations. The company employs a corporate environmental manager responsible for overseeing not only regulatory compliance but also preventive measures. The company is one of the industry leaders in the use of recycled newsprint. The company increased its purchase of newsprint containing some recycled content from 42,000 metric tons in 1989 to 825,000 metric tons in 1999. The company's newspapers use inks, photographic chemicals, solvents and fuels. The use and disposal of these substances may be regulated by federal, state and local agencies. Through its environmental compliance plan, the company is taking effective measures to comply with environmental laws. Any release into the environment may create obligations to private and governmental entities under a variety of statutes and rules regulating the environment. Several of the company's newspaper subsidiaries have been included among the potentially responsible parties in connection with the alleged disposal of ink or other chemical wastes at disposal sites which have been subsequently identified as inactive hazardous waste sites by the U.S. Environmental Protection Agency ("EPA") or comparable state agencies. Generally, the company's subsidiaries are de minimus parties. At one such site, the amount in controversy may exceed $300,000. The company believes its liability is substantially less and is defending the case. The company provides for costs associated with these matters in accordance with generally accepted accounting principles. The company does not believe that these matters will have any significant impact on its financial position or results of operations. Additional information about the company's newspapers may be found on pages 70-73 of this report. Newspapers/England In the third quarter of 1999, the company purchased all of the stock of Newsquest plc, one of the largest regional newspaper publishers in England, with 180 publications in total, including 11 dailies (10 evening titles and one morning title). The acquisition was accounted for under the purchase method. For the period it was owned in 1999, Newsquest contributed slightly to the company's consolidated earnings. Newsquest manages its publishing activities around geographic clusters to maximize the use of management, finance, printing and personnel resources. This also enables the group to offer readers and advertisers a range of attractive products covering the market. The clustering of titles and, usually, the publication of a free newspaper alongside a paid-for newspaper allows cross- selling of advertising among newspapers serving the same or contiguous markets, thus satisfying the needs of its advertisers and audiences. At the end of 1999, Newsquest had 13 such clusters in England. Newsquest's policy is to produce free and paid-for newspapers with an attractive level of quality local editorial content. Newsquest also distributes a substantial volume of advertising leaflets in the communities it serves and it offers a travel/ vacation booking service. Newsquest's full year revenues for 1999 were in excess of $500 million. As with U.S. newspapers, advertising is the largest component of Newsquest's revenue, comprising approximately 85%. Circulation revenues represent 12% and printing activities account for much of the remainder. Compared to U.S. newspaper operations, ad revenue at Newsquest is a greater percent of total revenue and circulation revenue is a lesser percent reflecting the greater volume and importance of free non-daily publications among Newsquest's titles. Newsquest is actively seeking to maximize the value of its local information franchises through development of opportunities offered by the Internet. Through internal growth and in partnership with other businesses, Newsquest has established a number of local and national Web sites which offer news and other information of special interest to its communities, as well as classified and retail advertising and shopping services. Newsquest owns certain of the plants where its newspapers are produced and leases other facilities. Its headquarters is in Morden, Surrey. All of its properties are adequate for present purposes. A listing of Newsquest publishing centers and key properties may be found on page 74. At the end of 1999, Newsquest had approximately 5,900 full-time and part- time employees. Newsquest employees have local staff councils for consultation and communication with Newsquest subsidiary management. Newsquest provides its employees with a retirement plan that incorporates life insurance and a stock option linked savings plan. Newsquest newspapers operate in competitive markets. Their principal competitors include other regional and national newspaper and magazine publishers, other advertising media such as radio and billboard, and Internet- based news, information and communication businesses. -59- Key revenue and expense data - for all newspapers combined The table that follows summarizes the circulation volume and revenues of U.S. newspapers owned by the company at the end of 1999, including USA TODAY. The table also includes circulation revenue for all Newsquest publications and circulation volume for Newsquest's eleven paid daily newspapers. This table assumes that all newspapers owned by the company at the end of 1999 were owned during all years shown: Circulation: newspapers owned on Dec. 26, 1999 Circulation Daily Sunday revenues net paid net paid in thousands circulation circulation ------------ ------------ ------------ 1999 $1,054,077 7,063,000 5,813,000 1998 $1,062,223 7,126,000 5,942,000 1997 $1,043,486 7,041,000 6,022,000 1996 $1,021,982 6,939,000 6,076,000 1995 $ 993,282 6,970,000 6,342,000 The following chart summarizes the advertising linage (in six- column inches) and advertising revenues of the newspapers owned by the company at the end of 1999. For Newsquest, advertising revenues are reflected but linage is not. The chart assumes that all of the newspapers owned at the end of 1999 were owned throughout the years shown: Advertising: newspapers owned on Dec. 26, 1999 Advertising Inches of revenues (ROP) advertising, in thousands excluding preprints ------------ ------------------- 1999 $3,050,697 83,322,000 1998 $2,890,559 79,406,000 1997 $2,694,339 74,570,000 1996 $2,486,942 69,684,000 1995 $2,338,712 70,383,000 Total newspaper ad revenues on a pro forma basis rose 6% in 1999. Most major advertising classifications showed substantial year-over-year growth during 1999. However, local ad revenues and linage were down slightly (less then 1%) for the full year. Ad spending by larger retailers declined for the year, reflecting closings and consolidations, but this was mostly offset by greater revenue from expanded sales and marketing efforts directed toward small and medium sized advertisers. Classified advertising revenues grew 6% on the strength of the employment, automotive, and real estate categories. National advertising revenues increased 15%. Preprint revenues grew 6%. The company's ad revenues include revenues from Internet activities. At this time, the company's Internet activities are not material to results of operations or financial condition taken as a whole. For 2000, further ad revenue and volume growth is anticipated in all categories. Generally modest price increases are planned at most properties, and the company will continue to expand and refine sales and marketing efforts. Changes in economic factors such as interest rates, employment levels and the rate of general economic growth will have an impact on revenue at all of the company's newspapers. Raw materials: Newsprint is the basic raw material used to publish newspapers. During 1999, the company's total newsprint consumption was 1,033,000 metric tons, including the company's portion of newsprint consumed at joint operating agencies, consumption by USA WEEKEND, USA TODAY tonnage consumed at non-Gannett print sites and consumption by Newsquest. Newsprint consumption was up 7% in 1999. The company purchases newsprint from 23 North American, European and other offshore suppliers under contracts, which expire at various times through 2010. During 1999, all of the company's newspapers consumed some recycled newsprint. For the year, more than 80% of the company's newsprint purchases contained recycled content. In 1999, newsprint supplies were adequate. The company believes that the available sources of newsprint, together with present inventories, will continue to be adequate to supply the needs of its newspapers. The average cost per ton of newsprint consumed in 1999 declined 12% compared to the 1998 average cost. -60- Broadcasting On Dec. 26, 1999, the company's television division, headquartered in Arlington, Va., included 21 television stations in markets with a total of more than 17.5 million households. On June 1, 1999, the company completed a broadcast station transaction under which it exchanged its ABC affiliate KVUE-TV in Austin, Texas, and received KXTV-TV, the ABC affiliate in Sacramento, Calif., plus cash consideration. In November 1999, the company announced an agreement to acquire WJXX-TV, the ABC affiliate in Jacksonville, Fla. Closing is expected to occur as soon as regulatory approvals are obtained. The company also will continue to own WTLV-TV, the NBC affiliate in Jacksonville. At the end of 1999, the broadcasting division had approximately 3,000 full-time and part-time employees. Broadcasting revenues accounted for approximately 14% of the company's reported operating revenues from continuing operations in 1999, 15% in 1998 and 16% in 1997. The principal sources of the company's broadcasting revenues are: 1) local advertising focusing on the immediate geographic area of the stations; 2) national advertising; 3) compensation paid by the networks for carrying commercial network programs; and 4) payments by advertisers to television stations for other services, such as the production of advertising material. The advertising revenues derived from a station's local news programs make up a significant part of its total revenues. Advertising rates charged by a television station are based primarily upon the station's ability to attract viewers, demographics and the number of television households in the area served by the station. Practically 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, sells commercial advertising announcements within the network programs and compensates the local stations by paying an amount based on the television station's network affiliation agreement. For all of its stations, the company is party to network affiliation agreements. The company's two ABC affiliates have agreements which expire in 2005. The agreements for all but one (Macon) of its six CBS affiliates run through 2004-2005, with several having been renewed in 1999. The company has completed negotiations to renew the agreements for its 13 NBC affiliates and they will expire in December 2005. The company will continue to receive compensation under these new agreements, at a reduced level. The amount of the reduction is not material. Programming: 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 and in some cases from cable operations. 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 and to better control costs. Properties: The company's broadcasting facilities are adequately equipped with the necessary television broadcasting equipment. The company owns transmitter sites in 22 locations and leases sites in 8 others. During the past five years, new broadcasting facilities or substantial improvements to existing facilities were completed in Greensboro, N.C., Little Rock, Phoenix, Jacksonville, Knoxville, Columbia and Atlanta. A new facility will be completed in 2000 in Cleveland. Facility expansion to accommodate Digital Television (DTV) was completed at five sites in 1998 and 1999. Four additional station facilities will be converted to DTV during 2000. The company's broadcast facilities are adequate for present purposes. Competition: In each of its broadcasting markets, the company's stations compete for revenues with other network-affiliated and independent television and radio broadcasters and with other advertising media, such as cable television, newspapers, magazines and outdoor advertising. The stations also compete in the emerging local electronic media space, which includes Internet or Internet enabled devices and any digital spectrum opportunities associated with Digital Television. The company's broadcasting stations compete principally on the basis of their market share, advertising rates and audience composition. Local news is most important to a station's success, and there is a growing emphasis on other forms of programming that relate to the local community. Network and syndicated programming constitute the majority of all other programming broadcast on the company's television stations, and the company's competitive position is directly affected by viewer acceptance of this programming. Other sources of present and potential competition for the company's broadcasting properties include pay cable, home video and audio recorders and video disc players, direct broadcast satellite and low power television. Some of these competing services have the potential of providing improved signal reception or increased home entertainment selection, and they are continuing development and expansion. In November 1999, the Satellite Home Viewer Improvement Act of 1999 was enacted, which for the first time permits satellite carriers to retransmit local television stations to subscribers within the stations' market. Several of the company's television stations are currently being delivered by satellite carriers pursuant to this new law. In order to continue delivery of any local signal beyond May 29, 2000, satellite carriers will be required to obtain the consent of each television station. The new law also permits satellite carriers to retransmit distant network television stations into areas served by local television stations if it is determined, using FCC-approval signal strength measurement standards, that local stations do not deliver an acceptable viewing signal. Regulation: The company's television stations are operated under the authority of the Federal Communications Commission (FCC) under the Communications Act of 1934, as amended (Communications Act), and the rules and policies of the FCC (FCC Regulations). -61- Television broadcast licenses are granted for periods of eight years. They are renewable by broadcasters upon application to the FCC and usually are renewed except in rare cases in which a conflicting application, 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. FCC Regulations also prohibit concentrations of broadcasting control and regulate network programming. 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; radio and daily newspapers; or television and cable television). In August 1999, the FCC substantially rewrote a number of its broadcast ownership rules, including restrictions on local television ownership, radio-television cross-ownership, and attribution of broadcast ownership interests. One significant rule change permits common ownership of two television stations in the same market, provided eight independently owned television stations remain in the market following the combination and provided that at least one of the commonly owned stations is not among the market's top four rated stations. It is under this standard that the company has agreed to acquire a second television station in the Jacksonville, Fla. market. The FCC's action removed the interim waivers previously granted to allow the company to own television stations with overlapping signals in the Atlanta and Macon, Ga., markets and in the Portland and Bangor, Maine markets, since such waivers are no longer necessary. The FCC also adopted rules to permit common ownership of a number (depending on market size) of radio stations and a television station serving the same community. The FCC retained its rule prohibiting a party from having attributable interests in television stations which collectively reach more than 35 percent of all U.S. television households. The FCC will continue to review this limitation as required by Congress. Presently, the company's 21 television stations reach an aggregate of 17.4% of U.S. TV households. Additional information about the company's television stations may be found on page 73 of this annual report. Cable On Jan. 31, 2000, the previously announced sale of the assets of the company's subsidiary, Multimedia Cablevision, Inc., to Cox Communications, Inc. of Atlanta, Ga., was completed. At the end of fiscal 1999, the company's cable division operated cable television systems serving 523,000 subscribers in Kansas, Oklahoma and North Carolina, and had approximately 1,100 full-time and part-time employees. The principal sources of the company's cable division revenues were: 1) monthly fees paid by subscribers for primary services generally consisting mainly of local and distant broadcast stations and public, educational and governmental channels; 2) monthly and per-event fees; and 3) local advertising revenues. The sale price for the cable business was approximately $2.7 billion in cash, which resulted in an after-tax gain of approximately $740 million or $2.64 per diluted share. The gain will be reported in Gannett's first quarter, 2000. Although the cable sale was finalized in the year 2000, for financial reporting purposes, the cable operating results for 1999 and all prior years for which it was owned by the company have been reclassified in the statements of income as discontinued operations. Likewise for the year 2000, cable operating results for the period up to the sale date, along with the gain on the sale, will be reported as discontinued operations. -62- Corporate facilities The company leases office space for its headquarters in Arlington, Va., and also owns data processing facilities in nearby Maryland. The capital expenditure program for 1997, 1998 and 1999 included amounts for leasehold improvements, land, building, furniture, equipment and fixtures for headquarters operations. Headquarters facilities are adequate for present operations. In September 1996, the company purchased 30 acres of land in Fairfax County, Va., for use as a future site for USA TODAY and corporate headquarters. Building construction began in 1999 and is scheduled to be completed in 2001. Employee relations At the end of 1999, the company and its subsidiaries had approximately 45,800 full-time and part-time employees. Four of the company's newspapers were published in 1999 together with non-company newspapers pursuant to joint operating agreements, and the employment numbers above include the company's pro-rata share of employees at those joint production and business operations. Approximately 12% of those employed by the company and its subsidiaries are represented by labor unions. They are represented by 86 local bargaining units affiliated with nine international unions under collective bargaining agreements. These agreements conform generally with the pattern of labor agreements in the newspaper and broadcasting industries. The company does not engage in industrywide or companywide bargaining. The company strives to maintain good relationships with its employees. On July 13, 1995, approximately 2,500 workers from six unions began a strike against the company's largest local newspaper, The Detroit News, the Detroit Newspaper Agency and the Detroit Free Press, its agency partner. The strike was precipitated by unrealistic and excessive demands by the unions for wage increases and position levels. The strike ended in mid-February 1997 when the six striking unions made an unconditional offer to return to work. They continue to attempt a subscriber and advertiser boycott. Throughout the strike and despite union efforts at stopping delivery of the newspapers through intimidation and frequent violence, the newspapers published every day. More than 1,000 of the original strikers have now returned to work and approximately 700 replacement workers have been employed to fill other necessary positions. Litigation before the National Labor Relations Board and in the federal courts concerning the strike and its aftermath continues. In February 1999, a 10-year agreement was reached with the Detroit Typographical Union, one of the unions previously on strike, under which its members will work at the Detroit Newspapers. Negotiations with the other formerly striking unions are ongoing. The company provides competitive group life and medical insurance programs for full-time domestic employees at each location. The company pays a substantial portion of these costs and employees contribute the balance. Virtually all of the company's units provide retirement or profit-sharing plans which cover eligible full-time employees In 1990, the company established a 401(k) Savings Plan, which is available to most of its domestic non-union employees. -63- Acquisitions 1995-1999 The growth of the company has resulted from acquisitions of businesses, as well as from internal expansion. Its significant acquisitions since the beginning of 1995 are shown below. The company has disposed of several businesses during this period, which are presented on the following page.
Year Publication times acquired Name Location or business - -------- ------------------------ -------------- ----------------- 1995 Multimedia, Inc. Greenville, S.C. Ten daily newspapers, various non-dailies, five television stations, two radio stations, cable television franchises in five states, alarm security business, television entertainment programming 1996 WTSP-TV Tampa-St. Television station Petersburg, Fla. 1997 WZZM-TV Grand Rapids, Mich. Television station WGRZ-TV Buffalo, N.Y. Television station Printed Media Companies Minneapolis, Minn. Commercial printing KNAZ-TV Flagstaff, Ariz. Television station KMOH-TV Kingman, Ariz. Television station Mary Morgan, Inc. Green Bay, Wis. Commercial printing Army Times Publishing Co., Inc. Springfield, Va. Weekly and Monthly periodicals New Jersey Press, Inc. Asbury Park and East Brunswick, N.J. Two daily newspapers 1998 WCSH-TV Portland, Maine Television station WLBZ-TV Bangor, Maine Television station WLTX-TV Columbia, S.C. Television station Ocean County Observer Toms River, N.J. Daily newspaper Daily Record Morristown, N.J. Daily newspaper Manahawkin Newspapers Manahawkin, N.J. Weekly newspapers Classified Gazette San Rafael, Calif. Semi-weekly newspaper New Castle County Shopper's Guide Wilmington, Del. Weekly advertising shopper Brandywine Valley Weekly Wilmington, Del. Weekly advertising shopper Autos plus Wilmington, Del. Weekly advertising shopper TCI Cable Kansas Kansas Cable television systems 1999 The Reporter Melbourne, Fla. Weekly newspaper Lehigh Acres News-Star Lehigh Acres, Fla. Weekly newspaper Dealer Magazine Reno, Nev. Weekly magazine KXTV-TV Sacramento, Calif. Television station Newsquest plc United Kingdom Daily and weekly newspapers Tucker Communications, Inc. Westchester Co., N.Y. Weekly newspaper Pennypower Shopping News Branson & Springfield, Mo. Weekly newspaper
-64- Dispositions 1995-1999
Year Publication times disposed Name Location or business - -------- ------------------------ -------------- ----------------- 1995 The Add Sheet Columbia, Mo. Weekly advertising shopper 1996 WMAZ/WAYS-FM Macon, Ga. Radio stations Gannett Outdoor Group Various major Outdoor advertising markets, U.S. and Canada Multimedia Entertainment New York, N.Y. Television enter- tainment programming Louis Harris and Associates, Inc. New York, N.Y. Polling and research Gannett Community Directories Paramus, N.J. Community directories KIIS/KIIS-FM Los Angeles, Calif. Radio stations KSDO/KKBH-FM San Diego, Calif. Radio stations WDAE/WUSA-FM Tampa, Fla. Radio stations 1997 WLWT-TV Cincinnati, Ohio Television station KOCO-TV Oklahoma City, Okla. Television station Niagara Gazette Niagara Falls, N.Y. Daily newspaper The Observer Moultrie, Ga. Daily newspaper North Hills News Record North Hills, Pa. Daily newspaper Valley News Dispatch Tarentum, Pa. Daily newspaper 1998 The Virgin Islands Daily News St. Thomas, V.I. Daily newspaper WGCI/WGCI-FM Chicago, Ill. Radio stations KKBQ/KKBQ-FM Houston, Texas Radio stations KHKS-FM Dallas, Texas Radio station The Saratogian Saratoga Springs, N.Y. Daily newspaper Multimedia Security Service Wichita, Kan. Alarm security business Commercial-News Danville, Ill. Daily newspaper Chillicothe Gazette Chillicothe, Ohio Daily newspaper Gallipolis Daily Tribune Gallipolis, Ohio Daily newspaper The Daily Sentinel Pomeroy, Ohio Daily newspaper Point Pleasant Register Point Pleasant, W.Va. Daily newspaper Multimedia Cable Illinois Suburban Chicago, Ill. Cable television systems 1999 The San Bernardino County Sun San Bernardino, Calif. Daily newspaper KVUE-TV Austin, Texas Television station
-65- QUARTERLY STATEMENTS OF INCOME In thousands of dollars
Fiscal year ended December 26, 1999 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total ----------- ----------- ----------- ----------- ----------- Net operating revenues Newspaper advertising $ 720,551 $ 788,274 $ 817,844 $ 966,225 $3,292,894 Newspaper circulation 253,357 248,812 255,754 264,597 1,022,520 Broadcasting 161,194 194,480 166,770 206,198 728,642 All other 50,837 48,052 53,193 64,052 216,134 ----------- ----------- ----------- ----------- ----------- Total 1,185,939 1,279,618 1,293,561 1,501,072 5,260,190 ----------- ----------- ----------- ----------- ----------- Operating expenses Cost of sales and operating expenses, exclusive of depreciation 635,732 620,682 659,654 692,401 2,608,469 Selling, general and administrative expenses, exclusive of depreciation 187,986 190,525 205,716 224,302 808,529 Depreciation 42,715 42,130 44,325 40,290 169,460 Amortization of intangible assets 22,914 23,170 30,500 34,047 110,631 ----------- ----------- ----------- ----------- ----------- Total 889,347 876,507 940,195 991,040 3,697,089 ----------- ----------- ----------- ----------- ----------- Operating income 296,592 403,111 353,366 510,032 1,563,101 Non-operating (expense) income Interest expense (16,592) (13,852) (26,474) (37,701) (94,619) Other 2,368 55,305 (2) 1,588 (556) 58,705 (2) ----------- ----------- ----------- ----------- ----------- Total (14,224) 41,453 (24,886) (38,257) (35,914) ----------- ----------- ----------- ----------- ----------- Income before income taxes 282,368 444,564 328,480 471,775 1,527,187 Provision for income taxes 112,400 176,950 130,700 187,750 607,800 ----------- ----------- ----------- ----------- ----------- Income from continuing operations 169,968 267,614 (2) 197,780 284,025 919,387 (2) Income from discontinued operations, net 8,925 9,356 9,699 10,561 38,541 ----------- ----------- ----------- ----------- ----------- Net income $ 178,893 $ 276,970 (2) $ 207,479 $ 294,586 $ 957,928 (2) =========== =========== =========== =========== =========== Basic earnings per share Basic earnings from continuing operations $0.61 $0.96 (2) $0.70 $1.02 $3.29 (2) Basic earnings from discontinued operations, net .03 .03 .04 .04 .14 ----------- ----------- ----------- ----------- ----------- Net income per share - basic $0.64 $0.99 (2) $0.74 $1.06 $3.43 (2) =========== =========== =========== =========== =========== Diluted earnings per share Diluted earnings from continuing operations (1) $0.61 $0.95 (2) $0.70 $1.01 $3.26 (2) Diluted earnings from discontinued operations, net .03 .03 .04 .04 .14 ----------- ----------- ----------- ----------- ----------- Net income per share - diluted (1) $0.64 $0.98 (2) $0.74 $1.05 $3.40 (2) =========== =========== =========== =========== ===========
EARNINGS SUMMARY, EXCLUDING NON-RECURRING NET NON-OPERATING GAINS In thousands of dollars
Fiscal year ended December 26, 1999 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total ----------- ----------- ----------- ----------- ----------- Income from continuing operations, as reported $ 169,968 $ 267,614 $ 197,780 $ 284,025 $ 919,387 Less: after-tax gains on sale/exchange of businesses 0 32,780 0 0 32,780 ----------- ----------- ----------- ----------- ----------- Income from continuing operations, as adjusted $ 169,968 $ 234,834 $ 197,780 $ 284,025 $ 886,607 =========== =========== =========== =========== =========== Diluted earnings per share from continuing operations, as adjusted (1) $0.61 $0.84 $0.70 $1.01 $3.15 =========== =========== =========== =========== =========== (1) As a result of rounding, the total of the four quarters' earnings per share does not equal the earnings per share for the year. (2) Includes second quarter net gain principally from the exchange of KVUE-TV in Austin, Texas for KXTV-TV in Sacramento, Calif., ($55 million pre-tax, $33 million after tax, $.11 per share-basic and diluted).
-66- QUARTERLY STATEMENTS OF INCOME In thousands of dollars
Fiscal year ended December 27, 1998 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total ----------- ----------- ----------- ----------- ----------- Net operating revenues Newspaper advertising $ 669,994 $ 746,675 $ 707,347 $ 818,979 $2,942,995 Newspaper circulation 254,079 252,762 251,534 251,863 1,010,238 Broadcasting 160,692 198,799 159,125 202,682 721,298 All other 51,083 48,673 49,825 56,579 206,160 ----------- ----------- ----------- ----------- ----------- Total 1,135,848 1,246,909 1,167,831 1,330,103 4,880,691 ----------- ----------- ----------- ----------- ----------- Operating expenses Cost of sales and operating expenses, exclusive of depreciation 617,556 624,414 625,258 631,648 2,498,876 Selling, general and administrative expenses, exclusive of depreciation 180,638 183,826 180,548 197,526 742,538 Depreciation 41,596 41,640 40,760 39,780 163,776 Amortization of intangible assets 21,731 21,733 22,482 23,741 89,687 ----------- ----------- ----------- ----------- ----------- Total 861,521 871,613 869,048 892,695 3,494,877 ----------- ----------- ----------- ----------- ----------- Operating income 274,327 375,296 298,783 437,408 1,385,814 Non-operating (expense) income Interest expense (23,229) (20,348) (17,190) (18,645) (79,412) Other 307,356 (2) 2,498 (877) (3,654) 305,323 (2) ----------- ----------- ----------- ----------- ----------- Total 284,127 (17,850) (18,067) (22,299) 225,911 ----------- ----------- ----------- ----------- ----------- Income before income taxes 558,454 357,446 280,716 415,109 1,611,725 Provision for income taxes 223,720 143,100 112,250 166,230 645,300 ----------- ----------- ----------- ----------- ----------- Income from continuing operations 334,734 (2) 214,346 168,466 248,879 966,425 (2) Income from discontinued operations, net 8,116 8,463 8,053 8,856 33,488 ----------- ----------- ----------- ----------- ----------- Net income $ 342,850 (2) $ 222,809 $ 176,519 $ 257,735 $ 999,913 (2) =========== =========== =========== =========== =========== Basic earnings per share Basic earnings from continuing operations $1.18 (2) $0.75 $0.59 $0.89 $3.41 (2) Basic earnings from discontinued operations, net .03 .03 .03 .03 .12 ----------- ----------- ----------- ----------- ----------- Net income per share - basic $1.21 (2) $0.78 $0.62 $0.92 $3.53 (2) =========== =========== =========== =========== =========== Diluted earnings per share Diluted earnings from continuing operations (1) $1.17 (2) $0.75 $0.59 $0.89 $3.38 (2) Diluted earnings from discontinued operations, net .03 .03 .03 .03 .12 ----------- ----------- ----------- ----------- ----------- Net income per share - diluted (1) $1.20 (2) $0.78 $0.62 $0.92 $3.50 (2) =========== =========== =========== =========== ===========
EARNINGS SUMMARY, EXCLUDING NON-RECURRING NET NON-OPERATING GAINS In thousands of dollars
Fiscal year ended December 27, 1998 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total ----------- ----------- ----------- ----------- ----------- Income from continuing operations, as reported $ 334,734 $ 214,346 $ 168,466 $ 248,879 $ 966,425 Less: after-tax gains on sale/exchange of businesses 183,607 0 0 0 183,607 ----------- ----------- ----------- ----------- ----------- Income from continuing operations, as adjusted $ 151,127 $ 214,346 $ 168,466 $ 248,879 $ 782,818 =========== =========== =========== =========== =========== Diluted earnings per share from continuing operations, as adjusted (1) $0.53 $0.75 $0.59 $0.89 $2.74 =========== =========== =========== =========== =========== (1) As a result of rounding, the total of the four quarters' earnings per share does not equal the earnings per share for the year. (2) Includes first quarter net gain on sale of certain businesses, including radio and alarm security ($307 million pre-tax, $184 million after tax, $.65 per share-basic and $.64 per share-diluted).
-67- SCHEDULES TO FORM 10-K INFORMATION In thousands of dollars Property, plant & equipment
Balance at beginning Additions Retirements Other Balance at end Classification of period at cost or sales changes of period - -------------------------------- -------------- --------------------- -------------- ---------------- -------------- Dec. 28, 1997 Land $ 174,838 $ 2,544 $ 1,435 $ (63) $ 175,884 Buildings & improvements 770,456 73,581 7,265 3,385 840,157 Cable and security systems 481,053 76,574 13,383 3,975 548,219 Machinery, equipment & fixtures 1,926,058 260,814 46,508 (216) 2,140,148 Construction in progress and deposits on contracts 70,995 3,637 17,122 (7,081) 50,429 -------------- --------------------- -------------- ---------------- -------------- $3,423,400 $417,150 (A)(E) $ 85,713 $ 0 $3,754,837 ============== ===================== ============== ================ ============== Dec. 27, 1998 Land $ 175,884 $ 7,769 $ 987 $(1,880) $ 180,786 Buildings & improvements 840,157 10,022 13,790 2,821 839,210 Cable and security systems 548,219 24,218 159,634 256 413,059 Machinery, equipment & fixtures 2,140,148 126,006 140,424 (2,262) 2,123,468 Construction in progress and deposits on contracts 50,429 58,859 133 1,065 110,220 -------------- --------------------- -------------- ---------------- -------------- $3,754,837 $226,874 (B)(E) $ 314,968 $ 0 $3,666,743 ============== ===================== ============== ================ ============== Dec. 26, 1999 Land $ 180,786 $ 5,901 $ 4,853 $ 304 $ 182,138 Buildings & improvements 839,210 83,975 37,189 659 886,655 Cable 413,059 13,680 1,821 (11) 424,907 Machinery, equipment & fixtures 2,123,468 308,547 171,525 (1,128) 2,259,362 Construction in progress and deposits on contracts 110,220 21,810 1,318 138 130,850 -------------- --------------------- -------------- ---------------- -------------- $3,666,743 $433,913 (C)(E) $ 216,706 $ (38) (D) $3,883,912 ============== ===================== ============== ================ ============== Notes (A) Includes assets at acquisition net of adjustments for prior years' acquisitions. $ 195,899 (B) Includes assets at acquisition net of adjustments for prior years' acquisitions. $ (17,551) (C) Includes assets at acquisition net of adjustments for prior years' acquisitions. $ 175,470 (D) Principally the effect of current foreign currency translation adjustment. (E) Includes capitalized interest of $1,624 in 1997, $1,610 in 1998 and $5,707 in 1999. (F) Generally the rates of depreciation range from 2.5% to 10% for buildings and improvements, 3.3% to 20% for cable and 4% to 30% for machinery, equipment and fixtures. (G) Includes depreciation expense from cable and security reflected in earnings from discontinued operations of $31,806 in 1999, $37,907 in 1998 and $48,136 in 1997.
-68- SCHEDULES TO FORM 10-K INFORMATION In thousands of dollars Accumulated depreciation and amortization of property, plant and equipment
Balance at Additions charged beginning to costs Retirements Other Balance at end of period and expenses or sales changes of period - -------------------------------- -------------- ------------------------- -------------- ---------------- -------------- Dec. 28, 1997 Buildings and improvements $ 300,775 $ 24,396 $ 5,148 $ 4,057 $ 324,080 Cable and security systems 32,597 60,377 5,976 (3,892) 83,106 Machinery, equipment and fixtures 1,095,968 116,327 56,521 (165) 1,155,609 -------------- ------------------------- -------------- ---------------- -------------- $1,429,340 $201,100 (F)(G) $ 67,645 $ 0 $1,562,795 ============== ========================= ============== ================ ============== Dec. 27, 1998 Buildings and improvements $ 324,080 $ 25,434 $ 12,941 $ 9,318 $ 345,891 Cable 83,106 31,134 36,369 (196) 77,675 Machinery, equipment and fixtures 1,155,609 145,115 112,208 (9,122) 1,179,394 -------------- ------------------------- -------------- ---------------- -------------- $1,562,795 $201,683 (F)(G) $161,518 $ 0 $1,602,960 ============== ========================= ============== ================ ============== Dec. 26, 1999 Buildings and improvements $ 345,891 $ 22,056 $ 16,511 $(5,003) $ 346,433 Cable 77,675 24,862 1,243 0 101,294 Machinery, equipment and fixtures 1,179,394 154,348 126,421 5,012 1,212,333 -------------- ------------------------- -------------- ---------------- -------------- $1,602,960 $201,266 (F)(G) $144,175 $ 9 (D) $1,660,060 ============== ========================= ============== ================ ============== (D)(F) and (G) See page 68
Valuation and qualifying accounts
Balance at Additions charged Additions/(reductions) Allowance for doubtful beginning to costs for acquisitions/ Deductions Balance at end receivables of period and expenses dispositions from reserves of period -------------- ------------------ ---------------------- ---------------- -------------- Year ended Dec. 28, 1997 $18,942 $22,333 $ 618 $23,873 $18,020 Year ended Dec. 27, 1998 $18,020 $22,077 $(1,240) $19,714 $19,143 Year ended Dec. 26, 1999 $19,143 $26,213 $ 9,419 $24,081 $30,694
Supplementary income statement information (from continuing operations)
Fiscal year ended Dec. 26, 1999 Dec. 27, 1998 Dec. 28, 1997 ------------------ --------------- ---------------- Maintenance and repairs $45,862 $45,792 $47,159 Taxes other than payroll and income tax Property $24,898 $22,725 $18,072 Other $ 9,034 $ 9,118 $10,601 ------------------ --------------- ---------------- Total $33,932 $31,843 $28,673 ------------------ --------------- ----------------
-69- MARKETS WE SERVE NEWSPAPERS AND NEWSPAPER DIVISION
Daily newspapers State Circulation Circulation Circulation Joined Territory City Newspaper Morning Afternoon Sunday Founded Gannett * - -------------- --------------------- ------------------------------- ----------- ------------ ----------- ------- ------------- Alabama Montgomery Montgomery Advertiser 54,659 70,104 1829 1995 (65) Arizona Tucson Tucson Citizen 40,601 1870 1976 (31) Arkansas Mountain Home The Baxter Bulletin 11,224 1901 1995 (66) California Marin County Marin Independent Journal 39,606 40,494 1861 1980 (49) Palm Springs The Desert Sun 51,117 53,422 1927 1986 (59) Salinas The Californian 19,421 1871 1977 (37) Tulare Tulare Advance-Register 8,257 1882 1993 (64) Visalia Visalia Times-Delta 21,906 1859 1977 (38) Colorado Fort Collins Fort Collins Coloradoan 28,584 35,339 1873 1977 (39) Connecticut Norwich Norwich Bulletin 30,086 36,367 1791 1981 (52) Delaware Wilmington The News Journal 124,509 146,125 1871 1978 (44) Florida Brevard County FLORIDA TODAY 88,342 112,396 1966 1966 ( 9) Fort Myers News-Press 88,998 106,752 1884 1971 (24) Pensacola Pensacola News Journal 62,717 82,385 1889 1969 (11) Georgia Gainesville The Times 22,549 26,659 1947 1981 (51) Guam Hagatna Pacific Daily News 22,422 21,609 1944 1971 (23) Hawaii Honolulu The Honolulu Advertiser 108,543 188,416 1856 1993 (63) Idaho Boise The Idaho Statesman 64,545 86,584 1864 1971 (16) Illinois Rockford Rockford Register Star 72,105 83,846 1855 1967 (10) Indiana Lafayette Journal and Courier 37,141 43,839 1829 1971 (17) Marion Chronicle-Tribune 20,206 22,469 1867 1971 (20) Richmond Palladium-Item 19,454 23,217 1831 1976 (30) Iowa Des Moines The Des Moines Register 158,194 254,679 1849 1985 (56) Iowa City Iowa City Press-Citizen 15,116 1860 1977 (41) Kentucky Louisville The Courier-Journal 228,132 299,539 1868 1986 (61) Louisiana Monroe The News-Star 37,049 41,909 1890 1977 (43) Shreveport The Times 73,328 89,952 1871 1977 (42) Michigan Battle Creek Battle Creek Enquirer 25,781 34,407 1900 1971 (18) Detroit The Detroit News 238,445 1873 1986 (58) The Detroit News and Free Press 771,632 Lansing Lansing State Journal 70,147 91,872 1855 1971 (15) Port Huron Times Herald 31,030 43,294 1900 1970 (12) Minnesota St. Cloud St. Cloud Times 28,441 38,585 1861 1977 (36) Mississippi Hattiesburg Hattiesburg American 22,414 26,983 1897 1982 (54) Jackson The Clarion-Ledger 104,055 121,335 1837 1982 (53) Missouri Springfield Springfield News-Leader 64,867 95,823 1893 1977 (35) Montana Great Falls Great Falls Tribune 33,722 39,297 1885 1990 (62) Nevada Reno Reno Gazette-Journal 67,247 84,517 1870 1977 (32) New Jersey Asbury Park Asbury Park Press 158,397 222,215 1879 1997 (71) Bridgewater The Courier-News 42,359 42,477 1884 1927 (5) Cherry Hill Courier-Post 84,538 98,035 1875 1959 (7) East Brunswick Home News Tribune 72,763 79,260 1879 1997 (72) Morristown Daily Record 47,221 51,341 1900 1998 (73) Toms River Ocean County Observer 10,538 10,000 1850 1998 (74) Vineland The Daily Journal 17,463 1864 1986 (60) New York Binghamton Press & Sun-Bulletin 62,453 79,392 1904 1943 (6) Elmira Star-Gazette 30,175 42,303 1828 1906 (1) Ithaca The Ithaca Journal 18,983 1815 1912 (2) Poughkeepsie Poughkeepsie Journal 41,640 55,073 1785 1977 (34) Rochester Rochester Democrat and Chronicle 175,134 242,218 1833 1918 (3) Utica Observer-Dispatch 48,157 58,799 1817 1922 (4) Westchester County The Journal News 146,141 175,262 1829 1964 (8) North Carolina Asheville Asheville Citizen-Times 57,930 71,030 1870 1995 (67) Ohio Cincinnati The Cincinnati Enquirer 205,112 321,314 1841 1979 (45) Fremont The News-Messenger 14,059 1856 1975 (28) Marietta The Marietta Times 12,205 1864 1974 (27) Port Clinton News Herald 6,031 1864 1975 (29) Oklahoma Muskogee Muskogee Daily Phoenix and Times-Democrat 19,541 20,411 1888 1977 (40) Oregon Salem Statesman Journal 58,821 66,784 1851 1974 (26) Pennsylvania Chambersburg Public Opinion 21,323 1869 1971 (14) Lansdale The Reporter 19,177 1870 1980 (50) South Carolina Greenville The Greenville News 98,953 133,874 1874 1995 (68) South Dakota Sioux Falls Argus Leader 52,599 74,475 1881 1977 (33) Tennessee Clarksville The Leaf-Chronicle 20,839 25,318 1808 1995 (69) Jackson The Jackson Sun 39,654 44,276 1848 1985 (57) Nashville The Tennessean 189,756 269,220 1812 1979 (46) Texas El Paso El Paso Times 76,289 95,876 1879 1972 (25) Vermont Burlington The Burlington Free Press 51,528 62,195 1827 1971 (13) Virginia Arlington USA TODAY 2,274,621 1982 1982 (55) Staunton The Daily News Leader 18,243 21,838 1904 1995 (70) Washington Bellingham The Bellingham Herald 26,251 33,287 1890 1971 (21) Olympia The Olympian 39,735 45,928 1889 1971 (19) West Virginia Huntington The Herald-Dispatch 36,822 42,869 1909 1971 (22) Wisconsin Green Bay Green Bay Press-Gazette 59,099 84,866 1915 1980 (47) Wausau Wausau Daily Herald 23,513 30,843 1903 1980 (48) * Number in parentheses notes chronological order in which existing newspapers joined Gannett.
Army Times Publishing Co. Headquarters: Springfield, Va. Publications: Army Times, Navy Times, Marine Corps Times, Air Force Times, Federal Times, Defense News, Space News, Military Market Nursing Spectrum Offices: Falls Church, Va. (serving Washington, D.C./Baltimore); Hoffman Estates, Ill. (serving Illinois and Indiana); Ft. Lauderdale, Fla. (serving Ft. Lauderdale and Tampa); King of Prussia, Pa. (serving Philadelphia and the Delaware Valley); Westbury, N.Y. (serving New York and New Jersey); Lexington, Mass. (serving New England states) Non-daily publications Weekly, semi-weekly or monthly publications in Alabama, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Guam, Hawaii, Idaho, Illinois, Indiana, Iowa, Kentucky, Louisiana, Michigan, Minnesota, Mississippi, Missouri, Montana, Nevada, New Jersey, New York, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Vermont, Virginia, Washington, West Virginia, Wisconsin and Juarez, Mexico. USA WEEKEND Circulation 21.8 million in 563 newspapers Headquarters: Arlington, Va. Advertising offices: Chicago; Detroit; Los Angeles; New York Gannett Media Technologies International Cincinnati, Ohio Gannett Offset Headquarters: Springfield, Va. Offset sites: Atlanta, Ga.; Chandler, Ariz.; Minneapolis, Minn.; Miramar, Fla.; Nashville, Tenn.; Norwood, Mass.; Olivette, Mo.; Pensacola, Fla.; Springfield, Va. Gannett Offset Marketing Services Group Gannett Direct Marketing Services, Inc. Louisville, Ky. Gannett TeleMarketing, Inc. Headquarters: Springfield, Va. Operations: Cambridge, Mass.; Cincinnati, Ohio; Columbia, Mo.; Louisville, Ky.; Nashville, Tenn.; Silver Spring, Md.; Towson, Md. Telematch Springfield, Va. Gannett Retail Advertising Group Chicago Gannett Satellite Information Network Arlington, Va. Gannett News Service Headquarters: Arlington, Va. Bureaus: Albany, N.Y.; Baton Rouge, La.; Columbus, Ohio; Harrisburg, Pa.; Indianapolis, Ind.; Olympia, Wash.; Sacramento, Calif.; Springfield, Ill.; Tallahassee, Fla. - 70, 71, 72 - USA TODAY Headquarters: Arlington, Va. Print sites: Arlington, Texas; Atlanta; Batavia, N.Y.; Brevard County, Fla.; Chandler, Ariz.; Chicago; Columbia, S.C.; Fort Collins, Colo.; Fort Myers, Fla.; Gainesville, Ga.; Hattiesburg, Miss.; Kankakee, Ill.; Lawrence, Kan.; Mansfield, Ohio; Marin County, Calif.; Miramar, Fla.; Nashville, Tenn.; Newark, Ohio; Norwood, Mass.; Olympia, Wash.; Pasadena, Texas; Port Huron, Mich.; Richmond, Ind.; Rockaway, N.J.; St. Cloud, Minn.; St. Louis; Salisbury, N.C.; Salt Lake City; San Bernardino, Calif.; Springfield, Va.; Tarentum, Pa.; White Plains, N.Y.; Wilmington, Del. International print sites: Frankfurt, Germany; Hong Kong; London, England Regional offices: Atlanta; Boston; Buffalo, N.Y.; Charlotte, N.C.; Chicago; Cincinnati; Cleveland; Columbus, Ohio; Dallas; Denver; Detroit; Houston; Indianapolis; Kansas City, Mo.; Las Vegas; Los Angeles; Milwaukee; Minneapolis-St. Paul; Miramar, Fla.; Mountainside, N.J.; Nashville, Tenn.; New Orleans; Orlando, Fla.; Philadelphia; Phoenix, Ariz.; Pittsburgh; Port Washington, N.Y.; St. Louis; San Francisco; Seattle; Springfield, Va. International offices: Hong Kong; London, England; Paris, France; Singapore Advertising offices: Arlington, Va.; Atlanta; Chicago; Dallas; Detroit; London, England; Los Angeles; New York; San Francisco USA TODAY Baseball Weekly Circulation 280,000 Editorial and advertising offices: Arlington, Va. USATODAY.com Arlington, Va. BROADCASTING Television stations
** Weekly Joined State City Station Channel/Network Audience Founded Gannett - ---------------- --------------------- ------------ ----------------- ----------- -------- ------- Arizona Flagstaff KNAZ-TV Channel 2/NBC * 1970 1997 Kingman KMOH-TV Channel 6/NBC * 1988 1997 Phoenix KPNX-TV Channel 12/NBC 1,128,000 1953 1979 Arkansas Little Rock KTHV-TV Channel 11/CBS 373,000 1955 1994 California Sacramento KXTV-TV Channel 10/ABC 1,012,000 1955 1999 Colorado Denver KUSA-TV Channel 9/NBC 1,258,000 1952 1979 District of Columbia Washington WUSA-TV Channel 9/CBS 1,983,000 1949 1986 Florida Jacksonville*** WTLV-TV Channel 12/NBC 471,000 1957 1988 Tampa-St. Petersburg WTSP-TV Channel 10/CBS 1,168,000 1965 1996 Georgia Atlanta WXIA-TV Channel 11/NBC 1,564,000 1948 1979 Macon WMAZ-TV Channel 13/CBS 228,000 1953 1995 Maine Bangor WLBZ-TV Channel 2/NBC 131,000 1954 1998 Portland WCSH-TV Channel 6/NBC 333,000 1953 1998 Michigan Grand Rapids WZZM-TV Channel 13/ABC 396,000 1962 1997 Minnesota Minneapolis-St. Paul KARE-TV Channel 11/NBC 1,311,000 1953 1983 Missouri St. Louis KSDK-TV Channel 5/NBC 1,065,000 1947 1995 New York Buffalo WGRZ-TV Channel 2/NBC 461,000 1954 1997 North Carolina Greensboro WFMY-TV Channel 2/CBS 579,000 1949 1988 Ohio Cleveland WKYC-TV Channel 3/NBC 1,305,000 1948 1995 South Carolina Columbia WLTX-TV Channel 19/CBS 240,000 1953 1998 Tennessee Knoxville WBIR-TV Channel 10/NBC 416,000 1956 1995 * Audience numbers fall below minimum reporting standards. ** Weekly audience is number of TV households reached, according to the November 1999 Nielsen book. *** On Nov. 16, 1999, Gannett entered into an agreement with Allbritton Jacksonville Inc. to acquire and operate WJXX-TV, the ABC affiliate in Jacksonville, Fla. Gannett will also continue to own and operate WTLV-TV, the NBC affiliate in Jacksonville. The transaction is subject to FCC and other approvals.
-73- NEWSQUEST plc
Daily Newspapers Circulation Circulation Circulation Joined City Newspaper Morning Afternoon Saturday Founded Gannett - --------------------- ------------------------------- ----------- ------------ ----------- ------- --------- Basildon Evening Echo 44,342 1969 1999 Blackburn Lancashire Evening Telegraph 43,181 37,207 1886 1999 Bolton Bolton Evening News 41,636 32,927 1867 1999 Bradford Telegraph & Argus 52,766 50,200 1868 1999 Brighton Evening Argus 49,122 46,716 1880 1999 Colchester Evening Gazette 28,551 1970 1999 Darlington The Northern Echo 67,822* 67,822* 1870 1999 Oxford Oxford Mail 32,159 29,403 1928 1999 Swindon Evening Advertiser 26,584 22,899 1854 1999 Worcester Worcester Evening News 23,141 19,134 1837 1999 York Evening Press 41,945* 41,945* 1882 1999 * Monday-Saturday inclusive Non-daily publications: North West, Yorkshire, North East, Midlands, South East, South West, Essex, London, South Coast.
-74- Gannett on the Net News and information about Gannett is available on our Web site, www.gannett.com. The following Gannett properties also offer online services or informational sites on the Internet: Newspapers and Newspaper Division USA TODAY www.usatoday.com USA WEEKEND www.usaweekend.com Asbury Park (N.J.) Press www.injersey.com/app Asheville (N.C.) Citizen-Times www.citizen-times.com The Bellingham (Wash.) Herald www.bellinghamherald.com Press & Sun-Bulletin, Binghamton, N.Y. www.binghamtonpress.com FLORIDA TODAY, Brevard County www.flatoday.com Courier News, Bridgewater, N.J. www.c-n.com The Idaho Statesman, Boise www.idahostatesman.com The Burlington (Vt.) Free Press www.burlingtonfreepress.com Courier-Post, Cherry Hill, N.J. www.courierpostonline.com The Cincinnati Enquirer enquirer.com The Des Moines Register DesMoinesRegister.com The Detroit News detnews.com Home News Tribune, East Brunswick, N.J. www.injersey.com/hnt Star-Gazette, Elmira, N.Y. www.star-gazette.com El Paso (Texas) Times www.elpasotimes.com Fort Collins Coloradoan www.coloradoan.com The News-Press, Fort Myers, Fla. www.news-press.com Green Bay (Wis.) Press-Gazette www.greenbaypressgazette.com The Greenville (S.C.) News greenvilleonline.com The Honolulu Advertiser www.honoluluadvertiser.com The Herald-Dispatch, Huntington, W.Va. www.hdonline.com Iowa City (Iowa) Press-Citizen www.press-citizen.com The Clarion-Ledger, Jackson, Miss. www.clarionledger.com The Jackson (Tenn.) Sun www.jacksonsun.com Journal and Courier, Lafayette, Ind. www.jconline.com Lansing (Mich.) State Journal www.lansingstatejournal.com The Courier-Journal, Louisville, Ky. www.courier-journal.com Marin (County, Calif.) Independent Journal www.marinij.com The Montgomery (Ala.) Advertiser www.montgomeryadvertiser.com Daily Record, Morristown, N.J. www.dailyrecord.com The Tennessean, Nashville www.tennessean.com The Olympian, Olympia, Wash. www.theolympian.com The Desert Sun, Palm Springs, Calif. www.desertsunonline.com Pensacola (Fla.) News Journal www.PensacolaNewsJournal.com Poughkeepsie (N.Y.) Journal www.pojonews.com Reno (Nev.) Gazette-Journal www.rgj.com Rochester (N.Y.) Democrat and Chronicle www.democratandchronicle.com Rockford (Ill.) Register Star www.rrstar.com Argus Leader, Sioux Falls, S.D. www.argusleader.com St. Cloud (Minn.) Times www.sctimes.com Statesman Journal, Salem, Ore. www.statemansjournal.com The Times, Shreveport, La. www.nwlouisiana.com Springfield (Mo.) News-Leader www.ozarksgateway.com Ocean County Observer, Toms River, N.J. www.injersey.com/observer Tucscon (Ariz.) Citizen www.tucsoncitizen.com Observer-Dispatch, Utica, N.Y. www.uticaod.com Wausau (Wis.) Daily Herald www.wausaudailyherald.com The Journal News, Westchester County, N.Y. www.nyjournalnews.com The News Journal, Wilmington, Del. www.delawareonline.com Army Times www.armytimes.com Navy Times www.navytimes.com Marine Corps Times www.marinetimes.com Air Force Times www.airforcetimes.com Federal Times www.federaltimes.com Defense News www.defensenews.com Space News www.spacenews.com Military City www.militarycity.com Nursing Spectrum www.nursingspectrum.com Gannett Direct Marketing Services www.gdms.com Gannett Media Technologies International www.gmti.com Newsquest plc Newsquest Media Group www.newsquest.co.uk Broadcasting WXIA-TV, Atlanta www.11alive.com WLBZ-TV, Bangor, Maine www.wlbz.com WKYC-TV, Cleveland, Ohio www.wkyc.com WLTX-TV, Columbia, S.C. www.wltx.com KUSA-TV, Denver www.9news.com WFMY-TV, Greensboro, N.C. www.wfmy.com WTLV-TV, Jacksonville, Fla. www.wtlv.com WMAZ-TV, Macon, Ga. www.13wmaz.com KARE-TV, Minneapolis-St. Paul www.kare11.com KPNX-TV, Phoenix, Ariz. www.12news.com WCSH-TV, Portland, Maine www.wcsh6.com KXTV-TV, Sacramento, Calif. www.kxtv.com KSDK-TV, St. Louis, Mo. www.ksdk.com WTSP-TV, Tampa-St. Petersburg, Fla. www.wtsp.com WUSA-TV, Washington, D.C. www.wusatv9.com -75- Shareholder Services Gannett stock Gannett Co., Inc. shares are traded on the New York Stock Exchange with the symbol GCI. The company's transfer agent and registrar is Norwest Bank Minnesota, N.A. General inquiries and requests for enrollment materials for the programs described below should be directed to Norwest's Shareowner Services,P.O. Box 64854, St. Paul, MN 55164-0854 or by telephone at 1-800-778-3299. Gannett is pleased to offer the following shareholder services: Dividend reinvestment plan The Dividend Reinvestment Plan (DRP) provides Gannett shareholders the opportunity to purchase additional shares of the company's common stock free of brokerage fees or service charges through automatic reinvestment of dividends and optional cash payments. Cash payments may range from a minimum of $10 to a maximum of $5,000 per month. Automatic cash investment service for the DRP This service provides a convenient, no-cost method of having money automatically withdrawn from your checking or savings account each month and invested in Gannett stock through your DRP account. Direct deposit service Gannett shareholders may have their quarterly dividends electronically credited to their checking or savings accounts on the payment date at no additional cost. Form 10-K Information provided by Gannett in its Form 10-K annual report to the Securities and Exchange Commission has been incorporated in this report. Copies of the complete Form 10-K annual report may be obtained by writing the Secretary, Gannett Co., Inc., 1100 Wilson Blvd., Arlington, VA 22234. Annual meeting The annual meeting of shareholders will be held at 10 a.m. Tuesday, May 2, 2000 at Gannett headquarters. For more information News and information about Gannett is available on our Web site (www.gannett.com). Quarterly earnings information will be available around the middle of April, July and October 2000. Shareholders who wish to contact the company directly about their Gannett stock should call Shareholder Services at Gannett headquarters, 703-284-6960. Gannett Headquarters 1100 Wilson Boulevard Arlington, VA 22234 703-284-6000 -77- EX-21 4 EXH. 21 SUBSIDIARY LIST SUBSIDIARY LIST State of Subsidiary Incorporation THE ADVERTISER COMPANY ALABAMA APP NEW JERSEY PUBLISHING CO., INC. DELAWARE ARKANSAS TELEVISION COMPANY ARKANSAS ARMY TIMES PUBLISHING COMPANY DELAWARE ASBURY PARK PRESS INC. NEW JERSEY BAXTER COUNTY NEWSPAPERS, INC. ARKANSAS CALIFORNIA NEWSPAPERS, INC. CALIFORNIA CAPE PUBLICATIONS, INC. KENTUCKY CITIZEN PUBLISHING COMPANY ARIZONA COMBINED COMMUNICATIONS CORPORATION OF OKLAHOMA, INC. OKLAHOMA DES MOINES REGISTER AND TRIBUNE COMPANY IOWA THE DESERT SUN PUBLISHING COMPANY CALIFORNIA THE DETROIT NEWS, INC. MICHIGAN DETROIT NEWSPAPER AGENCY MICHIGAN DIGIFARM, LLC MINNESOTA EL PASO TIMES, INC. DELAWARE FEDERATED PUBLICATIONS, INC. DELAWARE GANNETT DIRECT MARKETING SERVICES, INC. KENTUCKY GANNETT GEORGIA L.P. GEORGIA GANNETT GEORGIA PUBLISHING, INC. DELAWARE GANNETT HAWAII, INC. HAWAII GANNETT KENTUCKY LIMITED PARTNERSHIP KENTUCKY GANNETT MISSOURI PUBLISHING, INC. KANSAS GANNETT NEW JERSEY PARTNERS L.P. DELAWARE GANNETT NEW JERSEY RESOURCES CO., INC. DELAWARE GANNETT PACIFIC CORPORATION HAWAII GANNETT RETAIL ADVERTISING GROUP, INC. DELAWARE GANNETT RIVER STATES PUBLISHING CORPORATION ARKANSAS GANNETT SATELLITE INFORMATION NETWORK, INC. DELAWARE GANNETT SUPPLY CORPORATION DELAWARE GANNETT TELEMARKETING, INC. DELAWARE GANNETT TENNESSEE L.P. TENNESSEE GANNETT U.K. LIMITED UNITED KINGDOM GANNETT VERMONT PUBLISHING, INC. DELAWARE GANSAT NEW JERSEY PUBLISHING CO., INC. DELAWARE GUAM PUBLICATIONS, INCORPORATED HAWAII HAWAII NEWSPAPER AGENCY LIMITED PARTNERSHIP DELAWARE KINSMAN REEDS LIMITED UNITED KINGDOM KXTV, INC. MICHIGAN MARY MORGAN, INC. WISCONSIN MCCLURE NEWSPAPERS, INC. DELAWARE MULTIMEDIA, INC. SOUTH CAROLINA MULTIMEDIA OF CINCINNATI, INC. OHIO MULTIMEDIA GEORGIA BROADCASTING, INC. SOUTH CAROLINA MULTIMEDIA HOLDINGS CORPORATION SOUTH CAROLINA MULTIMEDIA KSDK, INC. SOUTH CAROLINA MULTIMEDIA PUBLISHING OF NORTH CAROLINA, INC. SOUTH CAROLINA MULTIMEDIA PUBLISHING OF SOUTH CAROLINA, INC. SOUTH CAROLINA MULTIMEDIA TENNESSEE BROADCASTING, INC. SOUTH CAROLINA MULTIMEDIA TENNESSEE PUBLISHING, INC. DELAWARE NEW JERSEY PRESS, INC. NEW JERSEY NEWSQUEST PLC UNITED KINGDOM NEWSQUEST CAPITAL PLC UNITED KINGDOM NEWSQUEST (BRADFORD) LIMITED UNITED KINGDOM NEWSQUEST (CHESHIRE/MERSEYSIDE) LIMITED UNITED KINGDOM NEWSQUEST (ESSEX) LIMITED UNITED KINGDOM NEWSQUEST (KENDAL) UNITED KINGDOM NEWSQUEST (LANCASHIRE) LIMITED UNITED KINGDOM NEWSQUEST (LONDON) LIMITED UNITED KINGDOM NEWSQUEST (MIDLANDS SOUTH) LIMITED UNITED KINGDOM NEWSQUEST (NORTHEAST) LIMITED UNITED KINGDOM NEWSQUEST (OXFORDSHIRE) LIMITED UNITED KINGDOM NEWSQUEST (SUSSEX) LIMITED UNITED KINGDOM NEWSQUEST (WILTSHIRE) LIMITED UNITED KINGDOM NEWSQUEST (YORK) LIMITED UNITED KINGDOM OKLAHOMA PRESS PUBLISHING COMPANY OKLAHOMA P&S GEORGIA BROADCASTING, INC. DELAWARE PACIFIC MEDIA, INC. DELAWARE PACIFIC AND SOUTHERN COMPANY, INC. DELAWARE PRESS-CITIZEN COMPANY INC. IOWA RENO NEWSPAPERS, INC. NEVADA SALINAS NEWSPAPERS INC. CALIFORNIA STI TENNESSEE PUBLISHING, INC. DELAWARE THE SUN COMPANY OF SAN BERNARDINO, CALIFORNIA CALIFORNIA THE TIMES HERALD COMPANY MICHIGAN THE TIMES JOURNAL CO. FSC, INC. VIRGIN ISLANDS TNI PARTNERS ARIZONA TUCKER COMMUNICATIONS, INC. DELAWARE TUCKER COMMUNICATIONS, INC. NEW YORK TUCKER COMMUNICATIONS CONNECTICUT, INC. NEW YORK TUCKER COMMUNICATIONS GREENWICH, INC. NEW YORK USA TODAY INTERNATIONAL CORPORATION DELAWARE USA WEEKEND, INC. DELAWARE VISALIA NEWSPAPERS INC. CALIFORNIA WFMY TELEVISION CORP. NORTH CAROLINA WKYC HOLDINGS, INC. DELAWARE WKYC-TV, INC. DELAWARE The company has omitted the names of 178 wholly-owned subsidiaries, which in the aggregate would not constitute a significant subsidiary of the company. EX-23 5 EXH. 23 - CONSENT OF INDEPENDENT ACCOUNTANTS Exhibit 23 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (Nos. 33-63673, 33-58686 and 33-53159) and on Form S-8 (Nos. 2-63038, 2-84088, 33-15319, 33-16790, 33-28413, 33-35305, 33-50813, 33-64959, 333-04459, 333-03941, 333-61859, and 333-66051) of Gannett Co., Inc. of our report dated January 31, 2000 relating to the financial statements which appears on page 51 of the Annual Report to Shareholders which is incorporated in this Annual Report on Form 10-K. We also consent to the incorporation by reference of our report on the Financial Statement Schedules, which appears on page 8 of this Form 10-K. /s/PRICEWATERHOUSECOOPERS LLP - ----------------------------- PRICEWATERHOUSECOOPERS LLP Washington, D.C. March 17, 2000 EX-27 6 EXH. 27 - FINANCIAL DATA SCHEDULES - 1999
5 This schedule contains summary financial information extracted from the consolidated balance sheets and statements of income for Gannett Co., Inc. and is qualified in its entirety by reference to such financial statements. YEAR DEC-26-1999 DEC-28-1998 DEC-26-1999 46,148,000 12,000 831,376,000 30,694,000 95,014,000 1,075,222,000 3,883,912,000 1,660,060,000 9,006,446,000 883,778,000 0 324,421,000 0 0 4,305,225,000 9,006,446,000 5,260,190,000 5,260,190,000 2,608,469,000 3,697,089,000 0 0 94,619,000 1,527,187,000 607,800,000 919,387,000 38,541,000 0 0 957,928,000 3.43 3.40
EX-27 7 EXH. 27 - FINANCIAL DATA SCHEDULES - 1998
5 This schedule contains summary financial information extracted from the consolidated balance sheets and statements of income for Gannett Co., Inc. and is qualified in its entirety by reference to such financial statements. YEAR DEC-27-1998 DEC-29-1997 DEC-27-1998 60,103,000 6,084,000 683,683,000 19,143,000 87,176,000 906,385,000 3,666,743,000 1,602,960,000 6,979,480,000 727,967,000 0 324,421,000 0 0 3,655,403,000 6,979,480,000 4,880,691,000 4,880,691,000 2,498,876,000 3,494,877,000 0 0 79,412,000 1,611,725,000 645,300,000 966,425,000 33,488,000 0 0 999,913,000 3.53 3.50
EX-27 8 EXH. 27 - FINANCIAL DATA SCHEDULES - 1997
5 This schedule contains summary financial information extracted from the consolidated balance sheets and statements of income for Gannett Co., Inc. and is qualified in its entirety by reference to such financial statements. YEAR DEC-28-1997 DEC-30-1996 DEC-28-1997 45,059,000 7,719,000 656,331,000 18,020,000 101,080,000 884,634,000 3,754,837,000 1,562,795,000 6,890,351,000 767,501,000 0 324,421,000 0 0 3,155,315,000 6,890,351,000 4,474,228,000 4,474,228,000 2,272,080,000 3,211,986,000 15,564,000 0 98,242,000 1,154,953,000 473,600,000 681,353,000 31,326,000 0 0 712,679,000 2.52 2.50
EX-27 9 EXH. 27 - FINANCIAL DATA SCHEDULES - 1996
5 This schedule contains summary financial information extracted from the consolidated balance sheets and statements of income for Gannett Co., Inc. and is qualified in its entirety by reference to such financial statements. YEAR DEC-29-1996 JAN-01-1996 DEC-29-1996 27,179,000 4,023,000 588,037,000 18,942,000 73,621,000 766,605,000 3,423,400,000 1,429,340,000 6,349,597,000 718,996,000 0 162,210,000 0 0 2,768,608,000 6,349,597,000 4,188,607,000 4,188,607,000 2,282,103,000 3,169,329,000 0 0 135,563,000 1,039,540,000 442,900,000 596,640,000 346,447,000 0 0 943,087,000 3.35 3.33
EX-27 10 EXH. 27 - FINANCIAL DATA SCHEDULES - 1995 WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
5 This schedule contains summary financial information extracted from the consolidated balance sheets and statements of income for Gannett Co., Inc. and is qualified in its entirety by reference to such financial statements. YEAR DEC-31-1995 DEC-26-1994 DEC-31-1995 46,962,000 23,000 610,078,000 22,182,000 111,653,000 854,084,000 3,559,666,000 1,488,979,000 6,503,800,000 812,772,000 0 162,210,000 0 0 1,983,438,000 6,503,800,000 3,726,036,000 3,726,036,000 2,076,935,000 2,908,905,000 3,760,000 0 52,175,000 768,710,000 312,084,000 456,626,000 20,636,000 0 0 477,262,000 1.70 1.69
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