Filed by Bowne Pure Compliance
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 28, 2008
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number 1-6961
GANNETT CO., INC.
(Exact name of registrant as specified in its charter)
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Delaware
(State or Other Jurisdiction of Incorporation or Organization)
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16-0442930
(I.R.S. Employer Identification No.) |
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7950 Jones Branch Drive, McLean, Virginia
(Address of principal executive offices)
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22107-0910
(Zip Code) |
Registrants telephone number, including area code: (703) 854-6000
Securities registered pursuant to Section 12(b) of the Act:
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Title of Each Class
Common Stock, par value $1.00 per share
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Name of Each Exchange on Which Registered
The New York Stock Exchange |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is well-known seasoned issuer, as defined in Rule 405
of the Securities Act.
Yes þ No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section
13 or Section 15(d) of the Act.
Yes o No þ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark 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 registrants knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer or a smaller reporting company. See the definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act (check one):
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Large accelerated filer þ
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Accelerated filer o
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Non-accelerated filer o
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Smaller reporting company o |
Indicate by check mark whether the registrant is a shell company, as defined in Rule 12b-2 of
the Exchange Act. Yes o No þ
The aggregate market value of the voting common equity held by non-affiliates of the
registrant based on the closing sales price of the registrants Common Stock as reported on The New
York Stock Exchange on June 27, 2008, was $5,020,320,713. The registrant has no non-voting common
equity.
As of February 1, 2009, 228,409,277 shares of the registrants Common Stock were
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The definitive proxy statement relating to the registrants Annual Meeting of Shareholders to
be held on April 28, 2009, is incorporated by reference in Part III to the extent described
therein.
INDEX TO GANNETT CO., INC.
2008 FORM 10-K
2
PART I
ITEM 1. BUSINESS
Company Profile
Gannett was founded by Frank E. Gannett and associates in 1906 and incorporated in 1923. The
company went public in 1967. It reincorporated in Delaware in 1972. Its more than 225 million
outstanding shares of common stock are held by approximately 8,500 shareholders of record in all 50
states and several foreign countries. The company has approximately 41,500 employees including
2,000 employees for CareerBuilder, LLC. Its headquarters are in McLean, Va., near Washington, D.C.
The company is a leading international news and information company. In the United States, the
company publishes 85 daily newspapers, including USA TODAY, and nearly 850 non-daily publications.
Along with each of its daily newspapers, the company operates Web sites offering news, information
and advertising that is customized for the market served and integrated with its publishing
operations. USATODAY.com is one of the most popular news sites on the Web. The company is the
largest newspaper publisher in the U.S.
Publishing operations in the United Kingdom, operating as Newsquest, include 17 paid-for daily
newspapers, more than 200 weekly newspapers, magazines and trade publications, locally integrated
Web sites and classified business Web sites with national reach. Newsquest is the second largest
regional newspaper publisher in the U.K.
In broadcasting, the company operates 23 television stations in the U.S. with a market reach
of more than 20.8 million households covering 18% of the U.S. population. Each of these stations
also operates locally oriented Web sites offering news, entertainment and advertising content, in
text and video format. Through its Captivate subsidiary, the broadcasting group delivers news,
information and advertising to a highly desirable audience demographic through its video screens
located in elevators of office towers and select hotel lobbies across North America.
Gannetts total Online U.S. Internet Audience in January 2009 was 27.1 million unique
visitors, reaching about 16.1% of the Internet audience, as measured by Nielsen//NetRatings.
Beginning in the third quarter of 2008 and concurrent with the purchase of a controlling
interest in CareerBuilder, LLC, the leading U.S. employment Web site with expanding overseas
operations, and ShopLocal, a provider of online marketing solutions, the company began reporting a
separate Digital segment.
In addition to CareerBuilder and ShopLocal, the Digital segment also includes PointRoll,
Planet Discover, Schedule Star and Ripple6. Results from CareerBuilder and ShopLocal were initially
consolidated in the third quarter of 2008. Results for PointRoll, Planet Discover and Schedule
Star, which had been reflected previously in the Publishing segment, have been reclassified to the
Digital segment.
PointRoll and ShopLocal, now operating together, provide online advertisers with rich media
marketing services, and have achieved significant revenue and earnings gains. Ripple6, acquired in
November 2008, is a provider of technology platforms for social media services for publishers and
other users.
Complementing its core publishing, digital and broadcasting businesses, the company has made
significant strides in its digital strategy through key investments and partnerships in the online
space. These include a partnership investment in Classified
Ventures, which owns and operates the Cars.com and Apartments.com Web sites.
In 2008, the company made further strategic investments in QuadrantONE, a new digital ad sales
network; Fantasy Sports Ventures, which operates a network of fantasy sports content Web sites;
COZI Group, which owns family organization software; and Mogulus, an Internet broadcasting service
provider.
In late 2007, Metromix LLC was created, a digital joint venture which focuses on a common
model for local online entertainment sites, and then scales the sites into a national platform
under the Metromix brand.
Through its 2007 acquisition of Schedule Star LLC, the company operates HighSchoolSports.net,
a digital content site serving the high school sports audience, and the Schedule Star solution for
local athletic directors. National platform opportunities will be developed from the many local
footprints of this business.
The company continues to evolve to meet the demands of consumers and advertisers in the
digital environment and to optimize its opportunities at its core publishing and broadcast
operations.
The operating principles in place to achieve these objectives include:
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Drive innovation through the company to create new digital offerings that either
complement our news and information businesses, or that take us into new markets with new
audiences. This effort was bolstered by important executive appointments made in January
2008, with Chris D. Saridakis named as Senior Vice President and Chief Digital Officer.
Saridakis is responsible for expanding and enriching the companys global digital
operations. Saridakis was named CEO of PointRoll in 2005 after serving two years as the
companys chief operating officer. Prior to PointRoll, Saridakis was senior vice president
and general manager of the Global TechSolutions division for DoubleClick Inc. |
Also, Jack A. Williams was named president of Gannett Digital Ventures, which oversees
Gannetts portfolio of online classified companies including CareerBuilder and other
diversified businesses.
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Improve our core publishing and television operations through transformation of our
newsrooms into Information Centers. The Information Center concept has enhanced our appeal
to more customers in the markets we serve, with 24/7 updating and through several techniques
and products, including video streaming, database information on wide-ranging topics and
crowdsourcing to reflect information provided by our audiences. While our focus is on
customer centricity, our Information Center initiatives also fulfill our responsibilities
under the First Amendment. |
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In late 2008, the company launched a new initiative called ContentOne through which it
expects to fundamentally change the way content is gathered, shared and sold. ContentOnes
focus will be reducing duplication of effort in developing and gathering content and then
enhancing the sharing of content across the company. A key objective is to view our content
as a product, with usefulness and value beyond its inclusion in our newspapers, our
television broadcasts and our Web sites. ContentOne builds on the Information Center
initiative by creating a national focal point that will serve all of our businesses. |
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Continued focus on audience aggregation strategies through multiple products to achieve
maximum reach and coverage in our communities and better serve our advertisers. |
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Maximize the use and deployment of resources throughout the company. In 2008, the company
continued its commitment to transforming its business activities, including more
consolidation and centralization of functions that do not require a physical presence in our
markets. In this regard, the company has consolidated numerous production facilities and
established centralized accounting, credit and collection functions which will service
nearly all domestic business operations by the end of 2009. These efforts have achieved cost
efficiencies and permitted improved local focus on content and revenue-producing activities. |
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Maintain the companys strong financial discipline and capital structure, preserving its
flexibility to make acquisitions and affiliations. |
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Strengthen the foundation of the company by finding, developing and retaining the best
and the brightest employees through a robust Leadership and Diversity program. Gannetts
Leadership and Diversity Council has been charged with attracting and retaining superior
talent and developing a diverse workforce that reflects the communities Gannett serves. |
Business segments: The company has three principal business segments: publishing, digital and
broadcasting. Beginning with the third quarter, the company reported the new Digital business
segment, which includes CareerBuilder and ShopLocal results from the dates of their full
consolidation, on Sept. 3 and June 30, respectively, as well as PointRoll, Planet Discover,
Schedule Star and Ripple6 (from the date of its acquisition on Nov. 13, 2008). Prior period results
for PointRoll, Planet Discover and Schedule Star have been reclassified from the publishing segment
to the new digital segment.
Operating results from the operation of Web sites that are associated with publishing
operations and broadcast stations continue to be reported in the publishing and broadcast segments.
Financial information for each of the companys reportable segments can be found in our
financial statements, as discussed under Item 7 Managements Discussion and Analysis of Financial
Condition and Results of Operations and as presented under Item 8 Financial Statements and
Supplementary Data of this Form 10-K.
The companys 85 U.S. daily newspapers have a combined daily paid circulation of approximately
6.6 million. They include USA TODAY, the nations largest-selling daily newspaper, with a
circulation of approximately 2.3 million. All U.S. daily newspapers operate tightly integrated and
robust online sites.
The company continues to diversify and expand its portfolio through business acquisitions and
internal development. Some examples of this diversification are:
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PointRoll, a leading rich media marketing company that provides Internet user-friendly
technology that allows advertisers to expand their online space and impact. |
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ShopLocal, a leader in multichannel shopping and advertising services. |
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CareerBuilder, the No. 1 employment Web site in the U.S. |
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Planet Discover, a provider of local, integrated online search and advertising technology. |
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Metromix, a digital joint venture which focuses on a common model for local online
entertainment sites, and then scales the sites into a national platform through the Metromix
brand. |
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MomsLikeMe, an internally developed national brand for social networking among moms-site
users at the local level, supplemented with helpful information moms can use. |
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QuadrantONE, a new digital ad sales network. |
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Ripple6, a leading provider of technology platforms for social media services for
publishers and other users. |
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USA WEEKEND, a weekly newspaper magazine carried by more than 600 local newspapers with
an aggregate circulation reach of 23 million. |
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Clipper Magazine, a direct mail advertising magazine that publishes more than 500
individual market editions under the brands Clipper Magazine, Savvy Shopper and Mint
Magazine in 30 states. |
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Army Times Publishing, which publishes military and defense newspapers. |
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Gannett Healthcare Group, publisher of bi-weekly Nursing Spectrum and NurseWeek
periodicals specializing in nursing news and employment advertising, which reach one million
or nearly half of the registered nurses in the U.S. Gannett Healthcare Group also publishes
Today in OT and Today in PT periodicals, and it was expanded in 2008 with Pearls Review, a
nursing certification and education Web site. |
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Gannett Offset, a network of five commercial printing operations in the U.S. |
Newspaper partnerships: The company owns a 19.49% interest in California Newspapers
Partnership, which includes 21 daily California newspapers; a 40.64% interest in Texas-New Mexico
Newspapers Partnership, which includes seven daily newspapers in Texas and New Mexico and four
newspapers in Pennsylvania; and a 13.5% interest in Ponderay Newsprint Company in the state of
Washington.
Joint operating agencies: The companys newspaper subsidiaries in Detroit and Tucson
participate 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. Operating results for the Detroit joint operating agency are fully
consolidated along with a charge for the minority partners share of profits. The operating results
of the Tucson joint operating agency are accounted for under the equity method, and are reported as
a net amount in Equity income (loss) in unconsolidated investees, net. On Jan. 16, 2009, the
company announced it was offering to sell certain assets of its newspaper in Tucson, the Tucson
Citizen, which participates in the joint operating agency. If a sale is not completed by March 21,
2009, the company will close the newspaper. The company will retain its 50% partnership interest in
the joint operating agency providing services to the remaining non-Gannett newspaper operation in
Tucson.
Prior to 2008, the company participated in a joint operating agency in Cincinnati. Operating
results for the Cincinnati joint operating agency were fully consolidated along with a charge for
the minority partners share of profits. Beginning in 2008, the companys newspaper, The Cincinnati
Enquirer, became the sole daily newspaper in that market.
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Strategic investments: On Dec. 31, 2007, the company acquired X.com, Inc. (BNQT.com). X.com,
Inc. operates an action sports digital network covering eight different action sports including
surfing, snowboarding and skateboarding. X.com is affiliated with the USA TODAY Sports brand.
In February 2008, the company formed QuadrantONE, a new digital ad sales network, with three
other top media companies.
In March 2008, the company purchased a minority stake in Fantasy Sports Ventures (FSV). FSV
owns a set of fantasy sports content sites and manages advertising across a network of affiliated
sites.
In May 2008, the company purchased a minority stake in Cozi Group Inc. (COZI). COZI owns and
maintains family organization software aimed at busy families.
In July 2008, the company purchased a minority stake in Mogulus, LLC, a company that provides
Internet broadcasting services. Also in July 2008, the company increased its investment in 4INFO,
maintaining its approximate ownership interest in this mobile information and advertising company.
In August 2008, the company purchased Pearls Review, Inc., a nursing certification and
education Web site now operated within Gannett Healthcare Group.
In May 2007, Microsoft purchased a minority stake in CareerBuilder and in a separate
agreement, MSN and CareerBuilder announced an extension of their strategic alliance, making
CareerBuilder the exclusive content provider to the MSN Careers channel in the U.S. through 2013.
Additionally, MSN and CareerBuilder broadened their alliance to include key MSN international
sites, facilitating an accelerated expansion overseas for CareerBuilder.
In October 2007, the company acquired a controlling interest in Schedule Star LLC, which
operates HighSchoolSports.net, a digital content site serving the high school sports audience, and
the Schedule Star solution for local athletic directors.
At the end of October 2007, the company, in partnership with Tribune Company, announced a
digital joint venture to expand a national network of local entertainment Web sites under the
Metromix brand. The newly formed company, Metromix LLC, focuses on a common model for local online
entertainment sites, and then scales the sites into a national platform under the Metromix brand.
Metromix is owned equally by the two parent companies.
The company owns a 23.6% stake in Classified Ventures, an online business focused on real
estate and automotive advertising categories; and a 19.7% interest in ShermansTravel, an online
travel news, advertising and booking service.
With all of these acquisitions and investments, the company is establishing important business
relationships to leverage its publishing and online assets and operations to enhance its online
footprint, revenue base and profits.
Publishing/United States
The companys U.S. newspapers, including USA TODAY, reach 14.0 million readers every weekday
and 12.6 million readers every Sunday providing critical news and information from their
customers neighborhoods and from around the globe.
At the end of 2008, the company operated 85 U.S. daily newspapers, including USA TODAY, and
almost 850 non-daily local publications in 31 states and Guam. The U.S. Community
Publishing (USCP) division and USA TODAY are headquartered in McLean, Va. On Dec. 28, 2008,
U.S. publishing had approximately 29,200 full- and part-time employees.
The companys local newspapers are managed through its U.S. Community Publishing division.
These newspapers are in large and small markets, and the geographical diversity is a core strength
of the company.
Gannett publishes in major markets such as Phoenix, Ariz.; Indianapolis, Ind.; Cincinnati,
Ohio; Des Moines, Iowa; Nashville, Tenn.; Asbury Park, N.J.; Louisville, Ky.; and Westchester, N.Y.
Mid-sized markets are represented by Salem, Ore.; Fort Myers, Fla.; Appleton, Wis.; Palm
Springs, Calif.; Montgomery, Ala.; and Greenville, S.C.
St. George, Utah; Fort Collins, Colo.; Sheboygan, Wis.; Iowa City, Iowa; and Ithaca, N.Y., are
examples of our smaller markets.
USA TODAY was introduced in 1982 as the countrys first national, general-interest daily
newspaper. It is produced at facilities in McLean, Va., and is transmitted via satellite to offset
printing plants around the country. It is printed at Gannett plants in 15 U.S. markets and at
offset plants, not owned by Gannett, in 18 other U.S. markets.
In 2008, USATODAY.com launched in-depth social communities and more than 200,000 topics pages
highlighting content around the Web, continuing to develop its focus on users, their conversations
and preferences. USATODAY.com remains one of the most popular newspaper sites on the Web, with more
than 51 million visits per month at the end of 2008.
All of the companys local newspapers and affiliated Web sites are fully integrated
operations.
Other businesses that complement, support or are managed and reported within the publishing
segment include: USA WEEKEND, Clipper Magazine, Army Times Publishing, Gannett Healthcare Group and
Gannett Offset. In addition, during 2008 Gannett News Service provided content for company
newspapers and sold its services to independent newspapers. In 2009, GNS became part of ContentOne;
Gannett Retail Advertising Group represents the companys local newspapers in the sale of
advertising to national and regional franchise businesses; Gannett Direct Marketing offers
direct-marketing services; and Gannett Media Technologies International develops and markets
software and other products for the publishing industry, and provides technology support for the
companys newspaper and Web operations.
News and editorial matters: Gannett Information Centers produce newspapers, Web sites, mobile
content and niche/custom publications that create deep reach into their markets. Market studies
done during 2008 showed that the Information Center concept to produce a range of content in
order to give readers what they want, when and where they want it is working well. The
aggregated reach into each market is growing.
Mid-2008 was the two-year mark of the transformation from traditional print-centric newsrooms
to Information Centers. The next phase of the transformation was rolled out in July. It challenges
journalists to focus on three tasks that are most critical to success:
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Be a communitys watchdog, sustaining high-quality First Amendment journalism. |
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Understand the audiences most important to our success and shape coverage around them. |
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Engage communities, making them full partners in all that we do. |
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Another top priority for Gannett Information Centers in 2008 was digital innovation. Emerging
digital tools were applied to journalism to deliver news to digital-only users. Facebook, YouTube
and Twitter are commonly used now. Gannett is emerging as an industry leader in experimenting with
new techniques and technologies for substantive, issue-based reporting.
The companys domestic daily newspapers received Gannett News Service (GNS) in 2008 and
subscribe to The Associated Press, and some receive various supplemental news services and
syndicated features. The company operates news bureaus in Washington, D.C., and five state
capitals: Albany, N.Y., Baton Rouge, La., Trenton, N.J., Sacramento, Calif., and Tallahassee, Fla.
In 2008, Gannett newspapers and individual staffers received national recognition for
excellent work. Randell Beck, executive editor and director of content and audience development of
the Argus Leader at Sioux Falls, S.D., received the American Society of Newspaper Editors annual
Award for Editorial Leadership, the societys most prestigious honor. Beck was named publisher of
the Argus Leader in August 2008.
Phil Currie, senior vice president/news who retired Dec. 31, 2008, received an APME
Meritorious Award for his longstanding commitment to journalism, his work in championing diversity
and his support of APME.
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Detroit Free Press won Emmys for two video reports Aretha Franklins Respect and Pit
Bulls: Companions or Killers.
The Detroit Free Press and The News Journal at Wilmington, Del., won
APME Public Service Awards Detroit for its investigation of the conduct of the mayor of Detroit;
Wilmington for its examination of patient abuse and other problems at Delawares only mental
hospital.
USA TODAY, The Des Moines Register, and the Army Times won top awards from the Online News
Association. USA TODAY was cited for its Today in the Sky report; Des Moines for its Iowa
caucuses coverage; and the Army Times for general excellence.
The Burlington (Vt.) Free Press won a national Missouri Lifestyle Journalism Award, sponsored
by the University of Missouri, for its local features reporting.
Demonstrating Gannetts
longstanding commitment to diversity, John Bodette, executive editor of the St. Cloud (Minn.)
Times, received a Robert G. McGruder Leadership in Diversity Award.
Five Gannett newspapers were recognized with ASNE Pacesetter Diversity Awards. The newspapers were The News-Press at Fort Myers, Fla., The
Honolulu Advertiser, Visalia (Calif.) Times-Delta and Tulare (Calif.) Advance-Register, The Times
at Shreveport, La., and the Times Herald at Port Huron, Mich.
Audience research: As Gannetts publishing businesses continue their mission to meet
consumers news and information needs anytime, anywhere and in any form, the company has focused on
an audience aggregation strategy. The company considers the reach and coverage of multiple products
in their communities in their totality and measures the frequency with which consumers interact
with each Gannett product.
Results from 2008 studies indicate that many Gannett publications are reaching more people
more often than ever. For example, in Honolulu, the combination of all Gannett products reach 83%
of the adult population an average of 5.1 times a week for a total of 2.99 million impressions each
week a 23% increase since 2006. Overall impressions were up 17% since 2006 in both Louisville,
Ky., and Asbury Park, N.J., and up 8% in Rochester, N.Y.
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company has gathered audience aggregation data for 51 Gannett markets and will
continue to add to that in 2009. Aggregated audience data allows advertising sales staff to provide
detailed information to advertisers about how best to reach their potential customers, which
products to use in which combination, and how often. As a result, this approach enables us to
increase our total advertising revenue potential while maximizing advertiser effectiveness. Six key
advertiser segments have been identified and performance within each segment is measured in every
study. Through digital growth and the development of ancillary products, Gannett newspapers have
maintained their high reach, reaching approximately 70% of adults in each of the six segments. The
training of ad sales staff on how to best execute this audience-based selling strategy is ongoing.
Scarborough Research measures 81 of the nations top markets. In a report on market
penetration or the number of adults in a community who access a publication and its related Web
site it reported that 81 percent of adults in the Rochester, N.Y., market in a given week either
read the print version of the Rochester Democrat and Chronicle or visited its Web site
(democratandchronicle.com), making it the top-ranked newspaper in the country for its integrated
audience penetration. In all, Gannett had the top three newspapers for weekly market penetration of
the print edition (Rochester, the Gannett Wisconsin Newspapers and The Des Moines Register). The same three were
tops in combined newspaper and Web site penetration.
In addition to the audience-based initiative, the company continues to measure customer
attitudes, behaviors and opinions to better understand our customers Web site use patterns, and
use focus groups with audiences and advertisers to more clearly determine their needs. Our focus on
local coverage and reader preferences has reaped benefits. In virtually every study weve done
since the advent of the Information Center, reader satisfaction with our local coverage has
improved, in some cases dramatically. Further, as we have refined our zoned, community weeklies,
readership has increased.
Circulation: Detailed information about the circulation of the companys newspapers may be
found later in this Form 10-K. Circulation declined in nearly all of our newspaper markets, a trend
generally consistent with the domestic newspaper industry.
Home-delivery prices for the companys newspapers are established individually for each
newspaper and range from $1.75 to $3.80 a week for daily newspapers and from $0.85 to $3.40 a copy
for Sunday newspapers. Price increases for certain elements of local circulation volume were
initiated at 83 newspapers in 2008.
The Centers of Excellence (COE) completed their first full year of taking customer calls for
all U.S. Community Publishing and Detroit newspapers. The first center, which opened in Greenville,
completed its second full year in November 2008. Many improvements were realized in 2008, including
an increase from printed bill to EZ-Pay conversions on 5.7% of calls taken, up from 3.9% in 2007.
The number of total payments taken during calls was at 14.2% in 2008 compared to 10% in 2007, and
during a call, customer service representatives were able to obtain new e-mail addresses for 6.4%
of accounts compared to 4.5% in 2007.
During 2008, a great deal of focus was placed on automating processes in order to ensure best
practices were implemented across all USCP sites and in an effort to reduce the number of resources
required to implement repetitive processes. One project focused on sending automatic e-mails to
customers who contacted the COE for
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various purposes through either a phone call or via e-mail to make a payment, to put their
delivery on vacation hold, to request a redelivery, etc. Now, when the customer service
representative enters the pertinent information into the front-end system (Genesys GICS), the
information is translated to code, which triggers a process that sends a confirmation e-mail to the
customer that relates directly to the customers request.
Additionally, the e-mail directs the customer to ICON (the customer service Web site) for
future transactions, and it also provides the customer with various links to sign up for other
Gannett products. As a result of this and other enhancements, ICON
average monthly usage has increased by more than
47,000 hits in 2008 compared to 2007, an increase of 74%.
The company continued its emphasis on its automated payment plan, EZ-Pay. Total EZ-Pay
subscribers grew from 43.8% of all subscribers at the end of 2007 to
49.8% at the end of 2008 a
13.6% increase. EZ-Pay subscribers include those on recurring credit/debit cards as well as 52-week
paid-in-advance customers. Subscriber retention among those who use EZ-Pay is consistently more
than 20% higher than for subscribers who pay by mail. This higher retention improves circulation
volume and provides for a higher return on investment for new subscriber start costs.
At
the end of 2008, 66 of the companys domestic daily newspapers, including USA TODAY, were
published in the morning and 19 were published in the evening. For local U.S. newspapers, excluding
USA TODAY, morning circulation accounts for 93% of total daily volume, while evening circulation
accounts for 7%.
On Dec. 8, 2008, the single copy price of USA TODAY at newsstands and vending machines was
increased from 75 cents to $1.00. Mail subscriptions are available nationwide and abroad, and home,
hotel and office delivery are offered in many markets. Approximately 62% of its net paid
circulation results from single-copy sales at newsstands, vending machines or to hotel guests, and
the remainder is from home and office delivery, mail, educational and other sales.
Advertising: Our newspapers have advertising departments that sell retail, classified and
national advertising across multiple platforms including the print newspaper, online and niche
publications. In 2008, the company added a national ad sales force to focus efforts on the largest
national advertisers. The company also contracts with outside representative firms that specialize
in the sale of national ads. Ad revenues from newspaper affiliated online operations are reported
together with revenue from print publishing.
Retail display advertising is associated with local merchants or locally owned businesses. In
addition, retail includes regional and national chains such as department and grocery stores
that sell in the local market.
Classified advertising includes the major categories of automotive,
employment, legal, and real estate/rentals as well as private party consumer-to-consumer business
for merchandise and services. Advertising for classified segments is published in the classified
sections, in other sections within the newspaper, on our affiliated Web sites and in niche
magazines that specialize in the segment.
National advertising is display advertising principally from advertisers who are promoting
national products or brands. Examples are pharmaceuticals, travel, airlines, or packaged goods.
Both retail and national ads also include preprints, typically stand-alone multiple page fliers
that are inserted in the newspaper.
Our audience aggregation strategy gives us the ability to deliver the specific audiences that
our advertisers want. While there are still many advertisers that want mass reach, many others want
to target niche audiences by demographics, geography, consumer buying habits or customer
behavior. Whether it is mass reach or a niche audience, our approach is to identify an advertisers
best customers and then develop advertising schedules that combine products within our portfolio
that best reach the desired audience with the appropriate frequency. In 2008, we began measuring
advertising recall and effectiveness in our large markets using online reader panels. This
capability has allowed us to better demonstrate our value by connecting our audience reach with our
advertisers store traffic and sales.
The companys audience-based sales efforts have been directed at all levels of advertisers,
from the smallest, locally owned merchants to large, complex businesses. Along with this new sales
approach, the company has intensified its sales and management training and improved the quality of
sales calls.
A major priority over the past two years has been restructuring our sales organizations to
match the needs of our customers while at the same time creating additional efficiencies to lower
the cost of sale. Our newspapers have redesigned their sales teams around three general groups of
customers: strategic national, key local and small local accounts. The structure aligns sales and
support resources to the needs of our customers, providing efficient service and affordable
packages to a greater number of smaller accounts, and customized, innovative solutions for our
larger, more market driven clients. National accounts are managed by the new national sales team.
The structure also includes digital specialists charged with expanding our online share in the local market, as well as
product specialists who focus on growing niche advertisers in our non-daily publications.
A new national newspaper ad sales team was launched in January 2008 that assumed
responsibility for large national retail accounts from local newspaper advertising departments.
These additional resources give our national customers one point of contact for all Gannett
markets, enabling us to have more strategic conversations and better respond to the customers
needs while permitting local newspaper sales personnel to focus on advertisers in their markets.
This national team works in conjunction with other national sales resources for Digital,
Broadcast and USA TODAY, and together, they are part of the SalesOne concept to create
multi-market, multi-platform solutions for national advertisers scalable across the country.
Online operations: The companys local newspaper Web sites achieved significant growth in
audience reach in 2008, as page views were up 6.4% and visitors rose 6.2%.
Important executive appointments were made in January 2008 with Chris D. Saridakis named as
Senior Vice President and Chief Digital Officer, responsible for expanding and enriching the
companys global digital operations.
Also, Jack A. Williams was named president of Gannett Digital Ventures, which oversees
Gannetts portfolio of online classified companies, including CareerBuilder, that operate as
affiliates of our local publishing businesses and other diversified businesses.
Online platform and infrastructure improvements were made throughout 2008 that now allow
Gannett to sell all of its advertising inventory as a network; sales efforts and online technology
improvements will continue in 2009.
The overriding objective of our online strategy at Gannett newspapers is to provide compelling
content to best serve our customers. A key reason customers turn to a Gannett newspapers
7
online site is to find local news and information. The credibility of the local newspaper, the
known and trusted information source, extends to the newspapers Web site and thus differentiates
it from other Internet sites. This is a major factor that allows Gannett newspapers to compete
successfully as Internet information providers.
A second objective in our online business development is to maximize the natural synergies
between the local newspaper and local Web site. The local content, customer relationships, news and
advertising sales staff, and promotional capabilities are all competitive advantages for Gannett.
The companys strategy is to use these advantages to create strong and timely content, sell
packaged advertising products that meet the needs of advertisers, operate efficiently and leverage
the known and trusted brand of the newspaper.
Gannett Web sites for moms are an example of executing this strategy. First launched in
November 2006 at The Indianapolis Stars Indymoms.com, there now are 80 moms sites in the country,
including a Web site serving each of the top 30 largest markets. The
management of 63 of these sites is spread across the local U.S.
Community Publishing and broadcast markets with 17 centrally managed
by Gannett Digital. In 2008, Gannett created a
national platform for its local moms site under the MomsLikeMe.com brand, leveraging the robust
social networking features of Ripple6. The
key to the success of these sites is the online social networking among moms-site users at the
local level, supplemented with helpful information moms can use. Many of the discussions on moms
sites are repurposed into pages of our print publications.
As part of their efforts to expand their
audience reach and generate additional advertising revenue, our U.S. newspapers are testing other
online sites, including Make the Charts, which is a music sharing site for local bands.
Our online business activities also include efforts to register users of Gannett Web sites in
order to obtain ZIP code, age and gender. This information allows us to better understand the needs
of our customers and provide better-defined groups for advertisers.
This strategy has served Gannett well in the development of our newspaper Internet efforts.
The aggressive local focus, including advertising sales efforts, combined with effective use of
national economies of scale and standardized technology, resulted in solid results in 2008.
Gannett Media Technologies International (GMTI) provides technological support and products
for the companys domestic newspapers and Internet activities, including ad software and database
management, editorial production and archiving, and Web site hosting. In addition, GMTI provides
similar services to other newspaper companies.
Non-daily operations: The publication of non-daily products continued to be an important part
of our market strategy for 2008. The company now publishes almost 850 non-daily publications in the
U.S., including glossy lifestyle magazines, community newspapers and publications catering to one
topic, such as health or cars. The companys strategy for non-daily publications is to appeal to
key advertising segments (e.g. affluent women, women with children or young readers). Non-daily
products help our newspaper operations increase overall impressions and frequency for advertisers
looking to reach specific audience segments, or in some cases, like community weeklies, provide a
lower price point alternative for smaller advertisers, thus helping to increase the newspaper
operations local market share. In 2008, Gannett launched its first non-daily titles based on
online content verticals 13 MomsLikeMe monthly publications and one weekly Metromix publication
in Nashville.
In a collaborative effort between Army Times Publishing and WUSA-TV, the company-owned CBS
affiliate in Washington, D.C., This Week in Defense News, has become a very successful half-hour
television program produced and broadcast weekly through the teamwork of Defense News, the leading
news publication in the defense sector, and WUSA-TV. The program includes features and interviews
with government officials and key decision makers in the defense sector.
Production: Eighty-four domestic daily newspapers are printed by the offset process, and one
is printed using the letterpress processes. This single site will be converted in 2010 to offset in
the Berliner format.
In recent years, improved technology has resulted in greater speed and accuracy and in a
reduction in the number of production hours worked at many of the companys newspapers. That trend
will continue in 2009 and further consolidation of job functions across multiple newspaper sites is
expected. In 2008, consolidated printing was accomplished at four sites with an additional seven
sites expected to be consolidated by the end of the first quarter of 2009.
In 2007, two Gannett Regional Toning Centers were established to enhance print quality of the
photos for the majority of our newspapers. This was expanded in 2008 with a commercial offering to
other newspapers. A contract was signed with another large publisher to process their images and we
look to expand on this revenue opportunity in 2009.
At
the end of 2008, the majority of U.S. Community Publishing operations had converted their presses to a
44-inch web. Conversions to the 44-inch web will continue in 2009.
Also in 2008, 86% of our newsprint tonnage ordered by the operations
was 45 gram newsprint and testing of 43 gram newsprint is underway at a few select sites.
Product quality and efficiency improvements continue in other areas. Outsourcing of ad
production was successfully implemented for several newspapers in 2008, with over 76,000 ads
outsourced. Of those, 9,200 were for the Web.
Business processes: In 2008, the company launched two initiatives to centralize and achieve
efficiency in certain accounting operations. A National Shared Service Center was established in
Indianapolis, Ind., to provide centralized accounts payable and general ledger services for U.S.
publishing and broadcast operations. This center currently supports
approximately 60% of our
domestic business units.
In Springfield, Mo., the company established the Centralized Credit & Collection Center, which
provides credit, collection and other accounts receivable support for U.S. publishing and
broadcasting. This center currently supports approximately 50% of our domestic business units.
During 2009, the company expects that nearly all of its U.S. business units will be supported
by these centers.
Competition: The companys newspapers and affiliated Web sites compete with other media for
advertising principally on the basis of their performance in helping to sell the advertisers
products or services. Newspapers also compete for circulation and readership against other
professional news and information operations, and amateur content creators. While most of the
companys newspapers do not have daily newspaper competitors that are published
8
in the same city, in select larger markets, there is such competition. Most of the companys
newspapers compete with other newspapers published in suburban areas and nearby cities and towns
and with free-distribution and paid-advertising publications (often weeklies), as well as other
media, including magazines, television, direct mail, cable television, radio, outdoor advertising
telephone directories, e-mail marketing, Web sites and mobile-device platforms.
Web sites which compete for the principal traditional classified advertising revenue streams
such as real estate, employment and automotive, have had the most significant impact on the
companys revenue results.
The rate of development of opportunities in, and competition from, digital communications
media, including Internet and mobile platforms, continues to increase. Through internal development
programs, acquisitions and partnerships, the companys efforts to explore new opportunities in
news, information and communications business and audience generation have expanded and will
continue to do so. The company continues to seek more effective ways to engage with its local
communities using all available media platforms and tools.
Environmental regulation: Gannett is committed to protecting the environment. The companys
goal is to ensure its facilities comply with federal, state, local and foreign environmental laws
and to incorporate appropriate environmental practices and standards in its operations.
The company is one of the industry leaders in the use of recycled newsprint and increased its
purchases of newsprint containing recycled content from 42,000 metric tons in 1989 to 520,282
metric tons in 2008. During 2008, 74% of the companys domestic newsprint purchases contained
recycled content, with an average recycled content of 49%.
The companys newspapers use inks, photographic chemicals, solvents and fuels. The use,
management and disposal of these substances are sometimes regulated by environmental agencies. The
company retains a corporate environmental consultant who, along with internal and outside counsel,
oversees regulatory compliance and preventive measures. Some of the companys newspaper
subsidiaries have been included among the potentially responsible parties in connection with the
alleged disposal of ink or other wastes at disposal sites that have been subsequently identified as
requiring remediation. Additional information about these matters can be found in Item 3, Legal
Proceedings, in this Form 10-K. The company does not believe that these matters will have a
material impact on its financial position or results of operations.
Raw materials U.S. & U.K.: Newsprint, which is the basic raw material used to publish
newspapers, has been and may continue to be subject to significant price changes from time to time.
During 2008, the companys total newsprint consumption was 885,000 metric tons, including the
portion of newsprint consumed at joint operating agencies, consumption by USA WEEKEND, USA TODAY
tonnage consumed at non-Gannett print sites and consumption by Newsquest. Newsprint consumption was
16% lower than in 2007. The company purchases newsprint from 15 domestic and global suppliers.
In 2008, newsprint supplies were adequate. The company has and continues to moderate newsprint
consumption and expense through press web-width reductions and the use of lighter basis weight
paper. The company believes that available sources of newsprint, together with present inventories,
will continue to be adequate to supply the needs of its newspapers.
The average cost per ton of newsprint consumed in 2008 rose 9% compared to 2007. Newsprint
prices in the U.S. peaked early in the fourth quarter of 2008 and then began to decline. In 2009,
newsprint prices will rise in the U.K. but these increases will be more than offset by declining
prices in the U.S. and further reductions in consumption.
Publishing/United Kingdom
Newsquest publishes 17 daily paid-for newspapers and more than 200 weekly newspapers,
magazines and trade publications in the U.K., as well as a wide range of niche products. Newsquest
operates its publishing activities around regional centers to maximize the use of management,
finance, printing and personnel resources. This approach enables the group to offer readers and
advertisers a range of attractive products across the market. The clustering of titles and,
usually, the publication of a free newspaper alongside a paid-for newspaper, allows cross-selling
of advertising among newspapers serving the same or contiguous markets, thus satisfying the needs
of its advertisers and audiences. Newsquests policy is to produce free and paid-for newspapers
with an attractive level of quality local editorial content. Newsquest also distributes a
substantial volume of advertising leaflets in the communities it serves.
Newsquest newspapers operate in competitive markets. Their principal competitors include other
regional and national newspaper and magazine publishers, other advertising media such as broadcast
and billboard, Internet-based news and other information and communication businesses.
Newsquests revenues for 2008 were approximately $988 million. In local currency, revenues
declined 14%, reflecting the recessionary economy. As with U.S. newspapers, advertising, including
ad revenue from online Web sites affiliated with the publications, is the largest component of
revenue, comprising approximately 74%. Circulation revenue represents 14% of revenues and printing
activities account for much of the remainder. In the markets in which Newsquest operates, its
products maintain strong recognition, and remain vibrant sources of local news.
At the end of 2008, Newsquest had approximately 6,600 full-time and part-time employees. This
represents a reduction of 18% compared to 2007, and resulted from continuous improvements in
efficiency and a vigorous response to the decline in revenues. These efficiency efforts included
the outsourcing of certain production roles, consolidation of back office operations, reductions in
management positions, as well as the closure of loss generating products. With outsourcing to third
parties and facility consolidation efforts, Newsquest was able to close three print centers during
the year and a fourth press early in 2009. These press closures resulted in higher production
volume on the remaining more efficient and modern presses.
Online operations: Newsquest actively seeks to maximize the value of its local media brands
though digital channels. In summer 2008, Newsquest re-launched its main regional and local
newspaper Web site network, adding rich local content and compelling functionality which increased
the attraction and retention of audiences of its local and regional media brands.
Newsquests November ABCe audit reported that an average of 5.12 million unique users accessed
the Newsquest site network each month during the period April June 2008, with May unique users
up 18% from the May 2007 audit.
9
The groups total online revenue rose 17% in local currency. Online banner revenues from its
newspaper Web sites rose 72% from 2007, propelled by improved selling techniques and pricing.
Newsquests use of mobile communications continued to increase significantly with the introduction
of innovative news alert and location-based services. Outbound mobile message volumes rose 95% from
2007 to 1.09 million.
Newsquest owns half of the online employment
Web site fish4jobs.co.uk. In October 2008, fish4
was confirmed by the National Online Recruitment Audience Survey (NORAS) to be the U.K.s biggest
online job board, with 3.3 million unique users an audience total that was 68% greater than the
next largest.
In Scotland, the wholly owned s1 business underwent a major redesign of its
market-leading s1jobs site, which helped it win the annual NORAS award for the U.K.s best regional
recruitment site for the sixth year running. A new developer section on s1homes contributed to 28%
revenue growth over 2007. An s1local platform has also been built to provide news, information and
classified content for small towns throughout Scotland.
Digital operations Publishing and Broadcasting
Gannett Digitals mission is to provide our connected audience with the most interactive, real
time news and information delivered to any digital device. Our goal from the beginning is to engage
our local communities in a way that creates conversations and empowers our community members to
connect and share common interests.
Our advertisers leverage Gannetts strong marketing services platform to gain access to our
wide audience in order to effectively brand and market their products. As part of our strategy to
provide the most efficient and effective marketing services for advertisers and publishers, Gannett
is committed to providing a comprehensive set of Internet marketing solutions. In 2008, we rolled
out one of the most comprehensive ad serving platforms across all Gannett newspaper and broadcast
Web sites. This common platform, in partnership with AdTech, will allow our sales reps the ability
to service the needs of local advertisers while at the same time offer national brands the ability
to target defined audience groups. Furthermore, with the recent upgrade to our ad serving systems,
we have been able to streamline our operational process and leverage a single analytics team that
delivers comprehensive business metrics to all of our Web properties.
Gannett Digital is responsible for leveraging all of the companys diverse assets to build out
the largest local online audience based on geographic, demographic and behavioral interests. In
January 2009, Gannetts total online U.S. Internet audience was 27.1 million unique visitors,
reaching about 16.1% of the Internet audience, as measured by Nielsen//Net Ratings. Segmenting this
audience based on many targeting criteria has attracted a number of national advertisers.
In 2008, we rolled out a consistent user interface for all of our newspaper and broadcast
sites to represent our enormous local content assets. This new, cleaner design has made it easier
for our consumers to find the information they are looking for while offering advertisers a more
consistent and impactful ad placement.
In order to bring sight, sound and motion to our Web sites, we deployed a consistent video
player across our network of sites. This new dimension has offered our local community newspapers
the ability to offer Web-based broadcast programming that engages our communities and builds a more
engaging experience for our audience.
To tap into the growing video on the Web business, in 2008 we invested in Mogulus, the
provider of a live broadcast platform on the Internet. Web users can use the Mogulus browser-based
Studio application to create live, scheduled and on-demand Internet television to broadcast
anywhere on the Web through a single player widget. With Mogulus, Web users can broadcast live from
a mobile phone; use a customizable flash player with integrated chat; and develop a branded channel
page on Mogulus.com that incorporates interactive chat.
We also invested in COZI, a free Web service that helps families manage busy schedules, track
shopping and to-do lists, organize household chores, stay in communication and share memories
all in one place. COZIs family calendar software is made available to users that visit our Web
sites.
Metromix offers a one-stop local entertainment guide on where to go and what to do, from
popular restaurants and bars, to the latest in music, movies, and entertainment. This unique and
innovative platform has been deployed across 28 Gannett newspaper and broadcast sites and is
already attracting over 2.2 million unique visitors each month.
Our originally developed local Moms sites were enhanced in 2008 and were rebranded into
MomsLikeMe. This national brand provides opportunities for larger national advertisers to market to
influential moms in local communities. Through the use of Ripple6s technology platform, we were
able to enhance the local moms experience and grow this community beyond geographic boundaries.
As we continue to innovate and build our digital footprint on the Web, Gannett continues to
invest in the next digital medium, mobile. In 2008, we successfully rolled out mobile Web sites for
USA TODAY, broadcast and local newspaper properties. The recently launched USA TODAY application
for the iPhone is among the most popular free iPhone applications, ranking as high as No. 4 in
downloaded applications recently. USA TODAY is also available on Kindle. The USA TODAY mobile
crossword, Sudoku and full featured iPhone applications offer Gannett a new and growing
distribution and revenue stream. In connection with our 4INFO investment, we also offer national
advertisers the opportunity to market to their consumer through an integrated marketing plan that
combines USA TODAY print, mobile and text messaging.
Going forward, Gannett Digital will continue to invest in operations to remain competitive and
efficient, and build out and refine sales efforts by focusing digital sales plans around solutions
and multi-product and multi-platform offerings. By leveraging content and audience assets and
combining them with technology platforms, Gannett hopes to create the next generation of online
display advertising.
As part of our strategy to socialize our communities and offer advertisers the ability to
connect with our audience, we acquired Ripple6 late in 2008. Ripple6 is a leading provider of
social media technology, analytics and insight services. Its clients include leading national
consumer products companies.
Digital segment
Beginning with 2008, a new digital business segment was reported, which includes CareerBuilder
and ShopLocal from the dates of their full consolidation, as well as PointRoll, Planet Discover,
Schedule Star and Ripple6 (from the date of its acquisition on Nov. 13, 2008). Prior period results
for PointRoll, Planet Discover and Schedule Star have been reclassified from the publishing segment
to the new digi-
10
tal segment. At the end of 2008, the digital segment had approximately 2,500 full-time and
part-time employees.
On Sept. 3, 2008, the company increased its ownership in CareerBuilder to 50.8% from 40.8%,
obtaining a controlling interest, and therefore, the results of CareerBuilder beginning in
September are now fully consolidated. On June 30, 2008, the company increased its ownership in
ShopLocal to 100% from 42.5%, and from that date the results of ShopLocal are now fully
consolidated. Prior to these increased investments, the companys equity share of CareerBuilder and
ShopLocal results were reported as equity earnings. Subsequent to the CareerBuilder acquisition,
the company reflects a minority interest charge on its Statements of Income (Loss) related to the
other partners ownership interest.
CareerBuilder is the No. 1 employment Web site in North America and is rapidly expanding
internationally. Currently CareerBuilder operates in 15 countries outside the U.S., including the
U.K., France, Spain, Germany, India and Greece, and is looking to expand global operations further
in 2009. CareerBuilder revenue sources primarily include job postings and related products sold to
employers. Most of the revenues are generated by its own sales force but substantial revenues are
also earned through up-sell of employment advertising placed with CareerBuilders owners
affiliated newspapers.
CareerBuilders other minority interest owners include The McClatchy Company, Tribune Company
and Microsoft, with whom CareerBuilder has a long-term strategic marketing agreement. CareerBuilder
is headquartered in Chicago, Ill., and at the end of 2008, it had approximately 2,000 full-time and
part-time employees.
ShopLocal is the leader in multi-channel shopping and advertising services, and offers a
complete suite of innovative solutions that connect advertisers and consumers online and
in-store. ShopLocals industry-leading SmartProduct business solutions (SmartCircular, SmartMedia,
SmartDelivery and SmartCatalog) enable more than 100 of the nations top retailers, including
Target, Best Buy, Home Depot, CVS and Sears, to deliver highly interactive, targeted and localized
promotions to shoppers via the Internet, mobile phones and any other digital environment. ShopLocal
is headquartered in Chicago, Ill., and is now operated together with PointRoll.
PointRoll enables advertisers, agencies and publishers to create engaging advertising that
connects with consumers by creating an interactive online environment that generates conversation.
Powering approximately 50% of all rich media campaigns online, PointRoll empowers clients to deliver
and measure interactive advertising while pushing the creative envelope. PointRoll works with more
than 1,000 advertisers and the technology is accepted by thousands of online publishers. PointRoll
is headquartered in Conshohocken, Pa., and maintains offices across the U.S., the U.K. and Canada.
Planet Discover provides hosted search and advertising services that allow clients to offer
consumers robust local information through search. Its innovative technology enables clients to
provide specialized, private-label search functionality that gives users a simple-to-use interface
for finding all the local information they need, and gives advertisers valuable exposure to local
consumers at that critical time when purchases are considered. Planet Discover is headquartered in
Fort Mitchell, Ky.
Schedule Star LLC is the No. 1 scheduling solution for high school athletic directors that
accurately generates and updates schools schedules, scores, stats, and game directions. It can
alert parents and fans to game changes or cancellations, and is the engine that drives the
HighSchoolSports.net network. HighSchoolSports.net, an online network of thousands of high school
sites in communities of all sizes, is a national and hyper-local platform for advertisers. Schedule
Star is headquartered in Wheeling, W.Va.
Ripple6 is a leading provider of social media services. Using the Ripple6 platform, publishers
can offer their users advanced social networking capabilities, while generating incremental revenue
through Ripple6s proprietary social marketing innovations. Ripple Analytics will also help
publishers better understand how their users interact within social networks by offering a true
word of mouth measurement and mapping capability. Ripple6 also offers unique opportunities to
advertisers and marketers. Among the innovations are offerings that make it possible for marketers
to effectively engage in online social networks. Ripple6 is headquartered in New York, N.Y.
Broadcasting
At the end of 2008, the companys broadcasting division, headquartered in McLean, Va.,
included 23 television stations in markets with a total of more than 20.8 million households
covering 18% of the U.S. population. The broadcasting division also includes Captivate Network.
At the end of 2008, the broadcasting division had approximately 2,700 full-time and part-time
employees, approximately 10% fewer than at the end of 2007, reflecting efficiency and consolidation
efforts. Broadcasting revenues accounted for approximately 11% of the companys reported operating
revenues in 2008, 2007 and 2006.
The principal sources of the companys television revenues are: 1) local advertising focusing
on the immediate geographic area of the stations; 2) national advertising; 3) retransmission of our
television signals on satellite and cable networks; 4) advertising on the stations Web sites; and
5) payments by advertisers to television stations for other services, such as the production of
advertising material. The advertising revenues derived from a stations local news programs make up
a significant part of its total revenues. Captivate derives its revenue principally from national
advertising on video screens in elevators of office buildings and select hotel lobbies. As of
year-end, Captivate had over 8,800 video screens located in 25 major cities across North America.
Advertising rates charged by a television station are based on the ability of a station to
deliver a specific audience to an advertiser. The larger a stations ratings in any particular
daypart, the more leverage a station has in asking for a price advantage. As the market fluctuates
with supply and demand, so does the stations pricing. Almost all national advertising is placed
through independent advertising representatives. Local advertising time is sold by each stations
own sales force.
Generally, a network provides programs to its affiliated television stations and sells on its
own behalf commercial advertising announcements for certain of the available ad spots within the
network programs.
The company broadcasts local newscasts in High Definition (HD) in eight cities: Denver,
Washington, D.C., St. Louis, Atlanta, Cleveland, Minneapolis, Phoenix and Tampa. These telecasts
have been well received given the dramatic increase in sales of HD televisions.
11
For all of its stations, the company is party to network affiliation agreements as well as
cable and satellite carriage agreements. The companys three ABC affiliates have agreements which
expire on Feb. 28, 2014. The agreements for the companys six CBS affiliates expire on Dec. 31,
2015. The companys 12 NBC-affiliated stations have agreements that expire on Jan. 1, 2017. The
companys two MyNetworkTV-affiliated stations have agreements that expire in 2011.
During 2008, the
company also entered into retransmission consent agreements with virtually all of the cable
companies in its television markets including four of the largest cable operators in the U.S.,
pursuant to which the companys stations will be carried for period of at least three years, thus
providing the company with significant and steady revenue streams of approximately $50 million of
cash annually. Incremental costs associated with this revenue are minimal and therefore nearly all
of these revenues will contribute directly to operating income.
The company also is a party to agreements with direct broadcast satellite providers under
which the signals of certain of its stations are provided to satellite subscribers in their
markets, one of which expires in May 2009 and the other in 2010.
Federal law requires all full-power television broadcast stations to stop broadcasting in
analog format this year, and convert to an all-digital format. Congress mandated the digital
television (DTV) transition, in part, because all-digital broadcasting will free up frequencies for
public safety communications. The company has been well prepared for the DTV conversion. The
broadcast division activated a comprehensive consumer education plan beginning in the fall of 2007
and has increased those efforts as the transition date has approached. In February 2009, Congress
passed legislation that requires all full-power stations to convert to all-digital operation by
June 12, 2009. This new transition date, which was extended from Feb. 17, 2009, is intended to
permit additional time for consumers to obtain converter boxes and otherwise prepare for the
transition. The legislation also permits stations to convert to all-digital operation as early as
Feb. 17, 2009, in certain circumstances. The company anticipates that it will convert to all
digital operations on June 12, 2009, although it may convert earlier in certain markets.
The transition to DTV also may provide the company with opportunities to program additional
television channels in its markets (so-called multicast channels that are made possible by
increased efficiencies associated with DTV transmissions). The company also is exploring the
potential for Mobile DTV service to viewers, another nascent service that may be made possible by
the DTV transition.
Programming and production: The costs of locally produced and purchased syndicated programming
are a significant portion of television operating expenses. Syndicated programming costs are
determined based upon largely uncontrollable market factors, including demand from the independent
and affiliated stations within the market. In recent years, the companys television stations have
emphasized their locally produced news and entertainment programming in an effort to provide
programs that distinguish the stations from the competition, to increase locally responsible
programming, and to better control costs.
As part of its local news strategy for 2008, the companys television stations implemented the
Information Center concept which was already in place for our local U.S. publishing sites. This
resulted in more focus on 24/7 coverage for dissemination on station-affiliated Web sites as well as in traditional broadcast mode. In addition, the companys
television station Information Centers also produce content for local Metromix entertainment Web
sites and parenting/social networking Web sites under the MomsLikeMe.com national umbrella.
The broadcast division successfully completed our Gannett Graphics Group (G3) project in 2008.
G3s mission is to create high quality work once, and then share that content across the division.
G3 provides daily and long-term graphic support for all of our television stations using high-end
animation and 3-D storytelling graphics. As part of the project, a new server-based graphics system
was licensed to allow all our information center employees to generate graphics from their desktop
computers. The result is more capacity for graphics, at a higher median quality than before, at a
reduced overall cost.
The broadcast division has established hubbing centers for each of its three network
affiliate groups for master control monitoring. The majority of our ABC and CBS stations are live
in the master control hub centers, and the majority of our NBC stations will be complete in first
quarter of 2009. The ABC and NBC hub is located in Jacksonville, and the CBS hub is in Greensboro.
Operational efficiencies and cost reductions will be realized from these centers in 2009.
Competition: In each of its broadcasting markets, the companys stations and affiliated Web
sites compete for revenues with other network-affiliated and independent television and radio
broadcasters and with other advertising media, such as cable television, newspapers, magazines,
direct mail, outdoor advertising and Internet media. The stations also compete in the emerging
local electronic media space, which includes Internet or Internet-enabled devices, handheld
wireless devices such as mobile phones and iPods and digital spectrum opportunities associated
with digital television (DTV). The companys broadcasting stations compete principally on the basis
of their audience share, advertising rates and audience composition.
Local news and information is highly important to a stations 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 companys television
stations, and the companys competitive position is directly affected by viewer acceptance of this
programming. Other sources of present and potential competition for the companys broadcasting
properties include pay cable, home video and audio recorders and players, direct broadcast
satellite, Internet-distributed video offerings, low-power television, video offerings (both
wireline and wireless) of telephone companies as well as developing video services.
Regulation: The companys television stations are operated under the authority of the Federal
Communications Commission (FCC), the Communications Act of 1934, as amended (Communications Act),
and the rules and policies of the FCC (FCC Regulations).
Television broadcast licenses are granted for periods of eight years. They are renewable upon
application to the FCC and usually are renewed except in rare cases in which a petition to deny, a
complaint or an adverse finding as to the licensees qualifications results in loss of the license.
The company believes it is in substantial compliance with all applicable provisions of the
Communications Act and FCC Regulations. All of the companys stations have converted to digital
television operations in accordance with applicable FCC regulations. Nine of the companys stations
filed for FCC license renewals in 2004,
12
eight did so in 2005, another five in 2006 and the remaining station filed on Feb. 1, 2007. As
of February 2009, 18 of the 23 applications were granted and the company expects the remaining five
pending renewals to be granted in the ordinary course.
FCC Regulations also prohibit concentrations of broadcasting control and regulate network and
local programming practices. FCC Regulations governing multiple ownership limit, or in some cases
prohibit, the common ownership or control of most communications media serving common market areas
(for example, television and radio; television and daily newspapers; or radio and daily
newspapers). In addition, the Communications Act includes a national ownership cap under which one
company is permitted to serve no more than 39% of all U.S. television households. (The companys 23
television stations currently reach 18% of U.S. television households.) FCC rules permit common
ownership of two television stations in the same market in certain circumstances provided that at
least one of the commonly owned stations is not among the markets top four rated stations at the
time of acquisition. It is under this standard that the company acquired additional television
stations in Jacksonville, Fla., Denver, Colo., and Atlanta, Ga.
On Dec. 18, 2007, the FCC revised its ownership regulations by adopting a modified
cross-ownership rule. In adopting this new rule, the FCC granted a waiver authorizing the companys
continued ownership of both KPNX-TV and The Arizona Republic in Phoenix, Ariz. The new rule may be
of limited value in permitting expanded ownership opportunities because it contains presumptions
that (i) common ownership of a television station and a daily newspaper may be permitted in the top
20 television markets only if the television station is not one of the top four rated stations, and
(ii) in all other television markets, common ownership of a newspaper and television station in the
same market is not in the public interest. (Most of the companys stations are rated number one or
two in their markets.) Applicants for proposed combinations that are presumed not to be in the
public interest will be required to satisfy specified criteria to rebut the presumption against
common ownership, including demonstrating (i) the level of concentration in the designated market
area, (ii) a significant increase in the amount of local news after the transaction, (iii) the
existence of separate editorial staffs; (iv) the financial condition of either property if a
newspaper is financially troubled; and (v) the new owners commitment to invest in newsroom
operations. The FCC did not revise any other aspect of the FCC ownership rules. The FCC decision is
subject to agency reconsideration as well as review by a federal appeals court. The appellate
process could take up to two years.
Other FCC Regulations also have been proposed to be amended by the agency, including rules and
policies concerning the specific amount and type of public-interest programming required to be
carried by broadcast stations to satisfy their license obligations and requirements concerning the
disclosure of such programming efforts.
Employee Relations
At the end of 2008, the company and its subsidiaries had approximately 41,500 full-time and
part-time employees including 2,000 for CareerBuilder. Headcount reductions were made as part of
multiple efficiency and consolidation efforts taken in response to recessions in the U.S. and U.K.
economies and declining revenues, particularly in the companys publishing businesses.
Approximately 14% of those employed by the company and its subsidiaries in the U.S. are
represented by labor unions. They are represented by 83 local bargaining units, most of which are
affiliated with one of seven international unions under collective bargaining agreements. These
agreements conform generally with the pattern of labor agreements in the publishing and
broadcasting industries. The company does not engage in industrywide or companywide bargaining. The
companys U.K. subsidiaries bargain with two unions over working practices, wages and health and
safety issues only.
The company provides competitive group life and medical insurance programs for full-time
domestic employees at each location. The company pays a substantial portion of these costs and
employees contribute the balance.
The company and its subsidiaries have various retirement plans, including plans established
under some collective bargaining agreements.
The company has a 401(k) Savings Plan, which is available to most domestic non-represented
employees and unionized employees who have bargained participation in the plan in conjunction with
the Gannett Retirement Plan freeze noted below.
In June 2008, the Board of Directors approved amendments to each of (i) the Gannett Retirement
Plan; (ii) the Gannett Supplemental Retirement Plan (SERP); (iii) the Gannett 401(k) Savings Plan
(401(k) Plan); and (iv) the Gannett Deferred Compensation Plan (DCP). The amendments were designed
to improve the 401(k) Plan while reducing the amount and volatility of future pension expense. As a
result of the amendments to the Gannett Retirement Plan and SERP, most participants in these plans
had their benefits frozen as of Aug. 1, 2008. Participants whose Gannett
Retirement Plan and, if applicable, SERP benefits were frozen will have their frozen benefits
periodically increased by a cost of living adjustment until benefits commence. Effective Aug. 1,
2008, most participants whose benefits were frozen under the Gannett Retirement Plan and, if
applicable, the SERP, receive higher matching contributions under the 401(k) Plan. Under the new
formula, the matching contribution rate generally will increase from 50% of the first 6% of
compensation that an employee elects to contribute to the plan to 100% of the first 5% of
compensation. The company will also make additional employer contributions to the 401(k) Plan on
behalf of certain long service employees. The DCP was amended to provide for Gannett contributions
on behalf of certain employees whose benefits under the 401(k) Plan are capped by IRS rules.
Newsquest employees have local staff councils for consultation and communication with local
Newsquest management. Newsquest has provided the majority of its employees with the option to
participate in a retirement plan that incorporates life insurance.
A key initiative for the company is its Leadership and Diversity program that focuses on
finding, developing and retaining the best and the brightest employees and a diverse workforce that
reflects the communities Gannett serves.
Environmental Initiatives
During 2008, the company expanded and enhanced green initiatives at company headquarters in
McLean, Va., and around the company. These included recycling waste paper and plastics, using
recycled materials, reducing energy consumption and using environmentally safe products. Also,
several Gannett Broadcast and Newspaper Web sites maintain green news sites to report
environmental news and provide tips to consumers.
13
MARKETS WE SERVE
DAILY NEWSPAPERS AND AFFILIATED ONLINE SITES
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State |
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Circulation |
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Territory |
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City |
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Newspaper/Online site |
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Morning |
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Afternoon |
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Sunday |
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Founded |
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Alabama |
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Montgomery |
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Montgomery Advertiser |
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41,564 |
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48,892 |
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1829 |
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www.montgomeryadvertiser.com |
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Arizona |
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Phoenix |
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The Arizona Republic |
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384,446 |
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486,686 |
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1890 |
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www.azcentral.com |
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Tucson |
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Tucson Citizen |
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20,485 |
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1870 |
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www.tucsoncitizen.com |
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Arkansas |
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Mountain Home |
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The Baxter Bulletin |
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10,646 |
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1901 |
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www.baxterbulletin.com |
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California |
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Palm Springs |
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The Desert Sun |
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47,090 |
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50,598 |
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1927 |
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www.mydesert.com |
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Salinas |
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The Salinas Californian |
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14,510 |
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1871 |
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www.thecalifornian.com |
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Tulare |
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Tulare Advance-Register |
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5,935 |
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1882 |
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www.tulareadvanceregister.com |
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Visalia |
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Visalia Times-Delta |
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19,073 |
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1859 |
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www.visaliatimesdelta.com |
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Colorado |
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Fort Collins |
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Fort Collins Coloradoan |
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25,289 |
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29,089 |
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1873 |
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www.coloradoan.com |
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Delaware |
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Wilmington |
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The News Journal |
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103,273 |
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120,224 |
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1871 |
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www.delawareonline.com |
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Florida |
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Brevard County |
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FLORIDA TODAY |
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72,161 |
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86,577 |
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1966 |
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www.floridatoday.com |
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Fort Myers |
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The News-Press |
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78,701 |
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96,356 |
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1884 |
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www.news-press.com |
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Pensacola |
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Pensacola News Journal |
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53,332 |
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66,574 |
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1889 |
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www.pnj.com |
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Tallahassee |
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Tallahassee Democrat |
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48,298 |
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59,211 |
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1905 |
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www.tallahassee.com |
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Guam |
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Hagatna |
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Pacific Daily News |
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19,285 |
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18,151 |
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1944 |
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www.guampdn.com |
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Hawaii |
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Honolulu |
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The Honolulu Advertiser |
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134,697 |
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143,036 |
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1856 |
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www.honoluluadvertiser.com |
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Indiana |
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Indianapolis |
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The Indianapolis Star |
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240,823 |
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319,728 |
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1903 |
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www.indystar.com |
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Lafayette |
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Journal and Courier |
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33,338 |
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39,471 |
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1829 |
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www.jconline.com |
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Muncie |
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The Star Press |
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29,444 |
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31,607 |
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1899 |
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www.thestarpress.com |
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Richmond |
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Palladium-Item |
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14,443 |
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18,564 |
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1831 |
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www.pal-item.com |
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Iowa |
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Des Moines |
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The Des Moines Register |
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135,267 |
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218,893 |
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1849 |
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www.desmoinesregister.com |
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Iowa City |
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Iowa City Press-Citizen |
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12,968 |
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1860 |
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www.press-citizen.com |
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Kentucky |
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Louisville |
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The Courier-Journal |
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196,083 |
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253,092 |
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1868 |
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www.courier-journal.com |
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Louisiana |
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Alexandria |
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Alexandria Daily Town Talk |
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29,521 |
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33,141 |
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1883 |
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www.thetowntalk.com |
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Lafayette |
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The Daily Advertiser |
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39,202 |
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48,637 |
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1865 |
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www.theadvertiser.com |
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Monroe |
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The News-Star |
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31,513 |
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35,549 |
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1890 |
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www.thenewsstar.com |
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Opelousas |
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Daily World |
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8,512 |
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9,741 |
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1939 |
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www.dailyworld.com |
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Shreveport |
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The Times |
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49,060 |
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60,752 |
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1871 |
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www.shreveporttimes.com |
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14
DAILY NEWSPAPERS AND AFFILIATED ONLINE SITES
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State |
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Circulation |
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Territory |
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City |
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Newspaper/Online site |
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Morning |
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Afternoon |
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Sunday |
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Founded |
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Maryland |
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Salisbury |
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The Daily Times |
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22,574 |
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26,376 |
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1900 |
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www.delmarvanow.com |
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Michigan |
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Battle Creek |
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Battle Creek Enquirer |
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19,805 |
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26,070 |
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1900 |
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www.battlecreekenquirer.com |
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Detroit |
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Detroit Free Press |
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324,095 |
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599,931 |
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1832 |
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www.freep.com |
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Lansing |
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Lansing State Journal |
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57,426 |
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75,227 |
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1855 |
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www.lansingstatejournal.com |
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Livingston County |
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Daily Press & Argus |
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12,805 |
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15,863 |
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1843 |
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www.livingstondaily.com |
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Port Huron |
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Times Herald |
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24,104 |
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32,628 |
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1900 |
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www.thetimesherald.com |
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Minnesota |
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St. Cloud |
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St. Cloud Times |
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25,376 |
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35,176 |
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1861 |
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www.sctimes.com |
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Mississippi |
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Hattiesburg |
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Hattiesburg American |
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16,526 |
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19,754 |
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1897 |
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www.hattiesburgamerican.com |
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|
|
|
|
|
|
Jackson |
|
The Clarion-Ledger |
|
|
79,470 |
|
|
|
|
|
|
|
91,933 |
|
|
|
1837 |
|
|
|
|
|
www.clarionledger.com |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Missouri |
|
Springfield |
|
Springfield News-Leader |
|
|
52,355 |
|
|
|
|
|
|
|
74,978 |
|
|
|
1893 |
|
|
|
|
|
www.news-leader.com |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Montana |
|
Great Falls |
|
Great Falls Tribune |
|
|
30,067 |
|
|
|
|
|
|
|
32,450 |
|
|
|
1885 |
|
|
|
|
|
www.greatfallstribune.com |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nevada |
|
Reno |
|
Reno Gazette-Journal |
|
|
54,261 |
|
|
|
|
|
|
|
64,197 |
|
|
|
1870 |
|
|
|
|
|
www.rgj.com |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New Jersey |
|
Asbury Park |
|
Asbury Park Press |
|
|
133,263 |
|
|
|
|
|
|
|
178,120 |
|
|
|
1879 |
|
|
|
|
|
www.app.com |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bridgewater |
|
Courier News |
|
|
27,372 |
|
|
|
|
|
|
|
29,737 |
|
|
|
1884 |
|
|
|
|
|
www.mycentraljersey.com |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cherry Hill |
|
Courier-Post |
|
|
62,675 |
|
|
|
|
|
|
|
75,469 |
|
|
|
1875 |
|
|
|
|
|
www.courierpostonline.com |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
East Brunswick |
|
Home News Tribune |
|
|
46,073 |
|
|
|
|
|
|
|
51,865 |
|
|
|
1879 |
|
|
|
|
|
www.mycentraljersey.com |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Morristown |
|
Daily Record |
|
|
32,077 |
|
|
|
|
|
|
|
34,204 |
|
|
|
1900 |
|
|
|
|
|
www.dailyrecord.com |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vineland |
|
The Daily Journal |
|
|
16,570 |
|
|
|
|
|
|
|
|
|
|
|
1864 |
|
|
|
|
|
www.thedailyjournal.com |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New York |
|
Binghamton |
|
Press & Sun-Bulletin |
|
|
46,702 |
|
|
|
|
|
|
|
59,051 |
|
|
|
1904 |
|
|
|
|
|
www.pressconnects.com |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Elmira |
|
Star-Gazette |
|
|
23,113 |
|
|
|
|
|
|
|
31,388 |
|
|
|
1828 |
|
|
|
|
|
www.stargazette.com |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ithaca |
|
The Ithaca Journal |
|
|
14,853 |
|
|
|
|
|
|
|
|
|
|
|
1815 |
|
|
|
|
|
www.theithacajournal.com |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Poughkeepsie |
|
Poughkeepsie Journal |
|
|
34,101 |
|
|
|
|
|
|
|
41,885 |
|
|
|
1785 |
|
|
|
|
|
www.poughkeepsiejournal.com |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rochester |
|
Rochester Democrat and Chronicle |
|
|
144,722 |
|
|
|
|
|
|
|
196,231 |
|
|
|
1833 |
|
|
|
|
|
www.democratandchronicle.com |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Westchester County |
|
The Journal News |
|
|
103,294 |
|
|
|
|
|
|
|
123,243 |
|
|
|
1829 |
|
|
|
|
|
www.lohud.com |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North Carolina |
|
Asheville |
|
Asheville Citizen-Times |
|
|
48,298 |
|
|
|
|
|
|
|
55,851 |
|
|
|
1870 |
|
|
|
|
|
www.citizen-times.com |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15
DAILY NEWSPAPERS AND AFFILIATED ONLINE SITES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State |
|
|
|
|
|
Circulation |
|
|
|
|
Territory |
|
City |
|
Newspaper/Online site |
|
Morning |
|
|
Afternoon |
|
|
Sunday |
|
|
Founded |
|
Ohio |
|
Bucyrus |
|
Telegraph-Forum |
|
|
|
|
|
|
5,492 |
|
|
|
|
|
|
|
1923 |
|
|
|
|
|
www.bucyrustelegraphforum.com |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chillicothe |
|
Chillicothe Gazette |
|
|
|
|
|
|
12,556 |
|
|
|
13,143 |
|
|
|
1800 |
|
|
|
|
|
www.chillicothegazette.com |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cincinnati |
|
The Cincinnati Enquirer |
|
|
199,318 |
|
|
|
|
|
|
|
275,484 |
|
|
|
1841 |
|
|
|
|
|
www.cincinnati.com |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Coshocton |
|
Coshocton Tribune |
|
|
|
|
|
|
5,663 |
|
|
|
6,184 |
|
|
|
1842 |
|
|
|
|
|
www.coshoctontribune.com |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fremont |
|
The News-Messenger |
|
|
|
|
|
|
10,367 |
|
|
|
|
|
|
|
1856 |
|
|
|
|
|
www.thenews-messenger.com |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lancaster |
|
Lancaster Eagle-Gazette |
|
|
|
|
|
|
11,404 |
|
|
|
12,384 |
|
|
|
1807 |
|
|
|
|
|
www.lancastereaglegazette.com |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mansfield |
|
News Journal |
|
|
|
|
|
|
26,572 |
|
|
|
33,376 |
|
|
|
1885 |
|
|
|
|
|
www.mansfieldnewsjournal.com |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marion |
|
The Marion Star |
|
|
|
|
|
|
11,137 |
|
|
|
11,489 |
|
|
|
1880 |
|
|
|
|
|
www.marionstar.com |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Newark |
|
The Advocate |
|
|
|
|
|
|
17,056 |
|
|
|
18,882 |
|
|
|
1820 |
|
|
|
|
|
www.newarkadvocate.com |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Port Clinton |
|
News Herald |
|
|
|
|
|
|
4,437 |
|
|
|
|
|
|
|
1864 |
|
|
|
|
|
www.portclintonnewsherald.com |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Zanesville |
|
Times Recorder |
|
|
16,684 |
|
|
|
|
|
|
|
17,209 |
|
|
|
1852 |
|
|
|
|
|
www.zanesvilletimesrecorder.com |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oregon |
|
Salem |
|
Statesman Journal |
|
|
44,975 |
|
|
|
|
|
|
|
50,958 |
|
|
|
1851 |
|
|
|
|
|
www.statesmanjournal.com |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
South Carolina |
|
Greenville |
|
The Greenville News |
|
|
75,416 |
|
|
|
|
|
|
|
105,412 |
|
|
|
1874 |
|
|
|
|
|
www.greenvilleonline.com |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
South Dakota |
|
Sioux Falls |
|
Argus Leader |
|
|
45,066 |
|
|
|
|
|
|
|
63,413 |
|
|
|
1881 |
|
|
|
|
|
www.argusleader.com |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tennessee |
|
Clarksville |
|
The Leaf-Chronicle |
|
|
19,532 |
|
|
|
|
|
|
|
21,724 |
|
|
|
1808 |
|
|
|
|
|
www.theleafchronicle.com |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jackson |
|
The Jackson Sun |
|
|
29,726 |
|
|
|
|
|
|
|
35,567 |
|
|
|
1848 |
|
|
|
|
|
www.jacksonsun.com |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Murfreesboro |
|
The Daily News Journal |
|
|
13,900 |
|
|
|
|
|
|
|
17,665 |
|
|
|
1848 |
|
|
|
|
|
www.dnj.com |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nashville |
|
The Tennessean |
|
|
154,361 |
|
|
|
|
|
|
|
212,298 |
|
|
|
1812 |
|
|
|
|
|
www.tennessean.com |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Utah |
|
St. George |
|
The Spectrum |
|
|
21,513 |
|
|
|
|
|
|
|
23,042 |
|
|
|
1963 |
|
|
|
|
|
www.thespectrum.com |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vermont |
|
Burlington |
|
The Burlington Free Press |
|
|
38,596 |
|
|
|
|
|
|
|
46,217 |
|
|
|
1827 |
|
|
|
|
|
www.burlingtonfreepress.com |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Virginia |
|
McLean |
|
USA TODAY |
|
|
2,255,295 |
|
|
|
|
|
|
|
|
|
|
|
1982 |
|
|
|
|
|
www.usatoday.com |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Staunton |
|
The Daily News Leader |
|
|
16,855 |
|
|
|
|
|
|
|
18,631 |
|
|
|
1904 |
|
|
|
|
|
www.newsleader.com |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wisconsin |
|
Appleton |
|
The Post-Crescent |
|
|
|
|
|
|
50,320 |
|
|
|
63,086 |
|
|
|
1853 |
|
|
|
|
|
www.postcrescent.com |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fond du Lac |
|
The Reporter |
|
|
|
|
|
|
13,989 |
|
|
|
16,438 |
|
|
|
1870 |
|
|
|
|
|
www.fdlreporter.com |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Green Bay |
|
Green Bay Press-Gazette |
|
|
53,020 |
|
|
|
|
|
|
|
75,068 |
|
|
|
1915 |
|
|
|
|
|
www.greenbaypressgazette.com |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Manitowoc |
|
Herald Times Reporter |
|
|
|
|
|
|
13,314 |
|
|
|
14,280 |
|
|
|
1898 |
|
|
|
|
|
www.htrnews.com |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marshfield |
|
Marshfield News-Herald |
|
|
|
|
|
|
11,004 |
|
|
|
|
|
|
|
1927 |
|
|
|
|
|
www.marshfieldnewsherald.com |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oshkosh |
|
Oshkosh Northwestern |
|
|
19,509 |
|
|
|
|
|
|
|
23,036 |
|
|
|
1868 |
|
|
|
|
|
www.thenorthwestern.com |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sheboygan |
|
The Sheboygan Press |
|
|
19,190 |
|
|
|
|
|
|
|
23,053 |
|
|
|
1907 |
|
|
|
|
|
www.sheboyganpress.com |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stevens Point |
|
Stevens Point Journal |
|
|
|
|
|
|
10,772 |
|
|
|
|
|
|
|
1873 |
|
|
|
|
|
www.stevenspointjournal.com |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Central Wisconsin Sunday |
|
|
|
|
|
|
|
|
|
|
22,699 |
|
|
|
|
|
|
|
Wausau |
|
Wausau Daily Herald |
|
|
|
|
|
|
20,296 |
|
|
|
26,149 |
|
|
|
1903 |
|
|
|
|
|
www.wausaudailyherald.com |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wisconsin Rapids |
|
The Daily Tribune |
|
|
|
|
|
|
10,409 |
|
|
|
|
|
|
|
1914 |
|
|
|
|
|
www.wisconsinrapidstribune.com |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16
DAILY PAID-FOR NEWSPAPERS AND AFFILIATED ONLINE SITES/NEWSQUEST PLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Circulation |
|
|
|
|
City |
|
Newspaper/Online site |
|
Monday-Friday |
|
|
Saturday |
|
|
Founded |
|
Basildon |
|
Echo |
|
|
34,692 |
|
|
|
|
|
|
|
1969 |
|
|
|
www.echo-news.co.uk |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Blackburn |
|
Lancashire Telegraph |
|
|
30,353 |
|
|
|
26,890 |
|
|
|
1886 |
|
|
|
www.lancashiretelegraph.co.uk |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bolton |
|
The Bolton News |
|
|
29,757 |
|
|
|
24,441 |
|
|
|
1867 |
|
|
|
www.theboltonnews.co.uk |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bournemouth |
|
Daily Echo |
|
|
31,538 |
|
|
|
34,670 |
|
|
|
1900 |
|
|
|
www.bournemouthecho.co.uk |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bradford |
|
Telegraph & Argus |
|
|
36,199 |
|
|
|
32,673 |
|
|
|
1868 |
|
|
|
www.thetelegraphandargus.co.uk |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brighton |
|
The Argus |
|
|
31,684 |
|
|
|
31,792 |
|
|
|
1880 |
|
|
|
www.theargus.co.uk |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Colchester |
|
The Gazette |
|
|
21,194 |
|
|
|
|
|
|
|
1970 |
|
|
|
www.gazette-news.co.uk |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Darlington |
|
The Northern Echo |
|
|
50,873 |
|
|
|
48,297 |
|
|
|
1870 |
|
|
|
www.thenorthernecho.co.uk |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Glasgow |
|
Evening Times |
|
|
78,960 |
|
|
|
42,387 |
|
|
|
1876 |
|
|
|
www.eveningtimes.co.uk |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Glasgow |
|
The Herald |
|
|
66,192 |
* |
|
|
|
|
|
|
1783 |
|
|
|
www.theherald.co.uk |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Newport |
|
South Wales Argus |
|
|
28,716 |
|
|
|
25,944 |
|
|
|
1892 |
|
|
|
www.southwalesargus.co.uk |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oxford |
|
Oxford Mail |
|
|
24,892 |
|
|
|
22,663 |
|
|
|
1928 |
|
|
|
www.oxfordmail.co.uk |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Southampton |
|
Southern Daily Echo |
|
|
37,835 |
|
|
|
44,363 |
|
|
|
1888 |
|
|
|
www.dailyecho.co.uk |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Swindon |
|
Swindon Advertiser |
|
|
22,325 |
|
|
|
19,479 |
|
|
|
1854 |
|
|
|
www.swindonadvertiser.co.uk |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weymouth |
|
Dorset Echo |
|
|
18,503 |
|
|
|
19,650 |
|
|
|
1921 |
|
|
|
www.dorsetecho.co.uk |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Worcester |
|
Worcester News |
|
|
17,755 |
|
|
|
16,707 |
|
|
|
1937 |
|
|
|
www.worcesternews.co.uk |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
York |
|
The Press |
|
|
32,991 |
|
|
|
32,204 |
|
|
|
1882 |
|
|
|
www.thepress.co.uk |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Monday-Saturday inclusive |
Circulation figures are according to ABC results from Jan.-June 2008.
Non-daily publications: Essex, London, Midlands, North East, North West, South Coast, South
East, South and East Wales, South West, Yorkshire
GANNETT DIGITAL
CareerBuilder.: www.careerbuilder.com
Headquarters: Chicago, Ill.
Sales offices: Atlanta, Ga., Boston, Mass.; Seattle, Wash., Chicago, Ill.; Cincinnati, Ohio;
Dallas, Texas; Denver, Colo.; Detroit, Mich.; Edison, N.J.; Houston, Texas; Irvine, Calif.; Long
Island, N.Y.; Los Angeles; McLean, Va.; Minneapolis, Minn.; Nashville, Tenn.; New York, N.Y.;
Orlando, Fla.; Overland Park, Kan.; Philadelphia, Pa.; Phoenix, Ariz.; San Mateo, Calif.;
Washington D.C.
International offices: Belgium; Canada; France; Germany; Greece; India; Ireland; Italy;
Netherlands; Norway; Romania; Spain; Sweden; Switzerland; United Kingdom
PointRoll, Inc.: www.pointroll.com
Headquarters: Conshohocken, Pa.
Sales offices: Atlanta, Ga.; Chicago, Ill.; Detroit, Mich.; London, England; Los Angeles,
Calif.; New York, N.Y.; San Francisco, Calif.; Toronto, Canada; Washington, D.C.
Planet Discover: www.planetdiscover.com
Headquarters: Fort Mitchell, Ky.
Sales offices: Fort Mitchell, Ky.; Cedar Rapids, Iowa
Ripple 6: www.ripple6.com
Headquarters: New York, N.Y.
Sales offices: New York, N.Y.; Chicago, Ill.
Schedule Star: www.highschoolsports.net
Headquarters: Wheeling, W.Va.
Sales offices: Seattle, Wash.; Chicago, Ill.; Los Angeles Calif.; New York, N.Y.
ShopLocal: www.shoplocal.com
Headquarters: Chicago, Ill.
Sales offices: Chicago, Ill.; Seattle, Wash.
17
TELEVISION STATIONS AND AFFILIATED ONLINE SITES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weekly |
|
|
|
|
State |
|
City |
|
Station/Online site |
|
Channel/Network |
|
Audience(a) |
|
|
Founded |
|
Arizona |
|
Flagstaff |
|
KNAZ-TV |
|
Channel 2/NBC |
|
|
|
(b) |
|
|
1970 |
|
|
|
Phoenix |
|
KPNX-TV |
|
Channel 12/NBC |
|
|
1,282,000 |
|
|
|
1953 |
|
|
|
|
|
www.azcentral.com/12news |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Arkansas |
|
Little Rock |
|
KTHV-TV |
|
Channel 11/CBS |
|
|
463,000 |
|
|
|
1955 |
|
|
|
|
|
www.todaysthv.com |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
California |
|
Sacramento |
|
KXTV-TV |
|
Channel 10/ABC |
|
|
1,026,000 |
|
|
|
1955 |
|
|
|
|
|
www.news10.net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Colorado |
|
Denver |
|
KTVD-TV |
|
Channel 20/MyNetworkTV |
|
|
668,000 |
|
|
|
1988 |
|
|
|
|
|
www.my20denver.com |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
KUSA-TV |
|
Channel 9/NBC |
|
|
1,215,000 |
|
|
|
1952 |
|
|
|
|
|
www.9news.com |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
District of Columbia |
|
Washington |
|
WUSA-TV |
|
Channel 9/CBS |
|
|
1,799,000 |
|
|
|
1949 |
|
|
|
|
|
www.wusa9.com |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Florida |
|
Jacksonville |
|
WJXX-TV |
|
Channel 25/ABC |
|
|
477,000 |
|
|
|
1989 |
|
|
|
|
|
WTLV-TV |
|
Channel 12/NBC |
|
|
536,000 |
|
|
|
1957 |
|
|
|
|
|
www.firstcoastnews.com |
|
|
|
|
|
|
|
|
|
|
|
|
Tampa-St. Petersburg |
|
WTSP-TV |
|
Channel 10/CBS |
|
|
1,309,000 |
|
|
|
1965 |
|
|
|
|
|
www.tampabays10.com |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Georgia |
|
Atlanta |
|
WATL-TV |
|
Channel 36/MyNetworkTV |
|
|
1,230,000 |
|
|
|
1954 |
|
|
|
|
|
www.myatltv.com |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WXIA-TV |
|
Channel 11/NBC |
|
|
1,719,000 |
|
|
|
1948 |
|
|
|
|
|
www.11alive.com |
|
|
|
|
|
|
|
|
|
|
|
|
Macon |
|
WMAZ-TV |
|
Channel 13/CBS |
|
|
208,000 |
|
|
|
1953 |
|
|
|
|
|
www.13wmaz.com |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maine |
|
Bangor |
|
WLBZ-TV |
|
Channel 2/NBC |
|
|
108,000 |
|
|
|
1954 |
|
|
|
|
|
www.wlbz2.com |
|
|
|
|
|
|
|
|
|
|
|
|
Portland |
|
WCSH-TV |
|
Channel 6/NBC |
|
|
361,000 |
|
|
|
1953 |
|
|
|
|
|
www.wcsh6.com |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michigan |
|
Grand Rapids |
|
WZZM-TV |
|
Channel 13/ABC |
|
|
415,000 |
|
|
|
1962 |
|
|
|
|
|
www.wzzm13.com |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minnesota |
|
Minneapolis-St. Paul |
|
KARE-TV |
|
Channel 11/NBC |
|
|
1,404,000 |
|
|
|
1953 |
|
|
|
|
|
www.kare11.com |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Missouri |
|
St. Louis |
|
KSDK-TV |
|
Channel 5/NBC |
|
|
1,138,000 |
|
|
|
1947 |
|
|
|
|
|
www.ksdk.com |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New York |
|
Buffalo |
|
WGRZ-TV |
|
Channel 2/NBC |
|
|
546,000 |
|
|
|
1954 |
|
|
|
|
|
www.wgrz.com |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North Carolina |
|
Greensboro |
|
WFMY-TV |
|
Channel 2/CBS |
|
|
600,000 |
|
|
|
1949 |
|
|
|
|
|
www.digtriad.com |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ohio |
|
Cleveland |
|
WKYC-TV |
|
Channel 3/NBC |
|
|
1,247,000 |
|
|
|
1948 |
|
|
|
|
|
www.wkyc.com |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
South Carolina |
|
Columbia |
|
WLTX-TV |
|
Channel 19/CBS |
|
|
296,000 |
|
|
|
1953 |
|
|
|
|
|
www.wltx.com |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tennessee |
|
Knoxville |
|
WBIR-TV |
|
Channel 10/NBC |
|
|
497,000 |
|
|
|
1956 |
|
|
|
|
|
www.wbir.com |
|
|
|
|
|
|
|
|
|
|
Captivate Network: www.captivatenetwork.com
Headquarters: Chelmsford, Mass.
Advertising offices: Chicago, Ill.; Los Angeles, Calif.; New York, N.Y.; San Francisco, Calif.; Toronto, Canada.
(a) |
|
Weekly audience is number of TV households reached, according to the November 2008 Nielsen book. |
|
(b) |
|
Audience numbers fall below minimum reporting standards. |
18
USA TODAY: www.usatoday.com
Headquarters and editorial offices: McLean, Va.
Print sites: Arlington, Texas; Atlanta, Ga.; Batavia, N.Y.; Brevard County, Fla.; Chandler,
Ariz.; Columbia, S.C.; Fort Collins, Colo.; Fort Lauderdale, Fla.; Hattiesburg, Miss.; Houston,
Texas; Kankakee, Ill.; Las Vegas, Nev.; Lawrence, Kan.; Marin County, Calif.; Milwaukee, Wis.;
Minneapolis, Minn.; Nashville, Tenn.; Newark, Ohio; Norwood, Mass.; Olympia, Wash.; Raleigh, N.C.;
Rockaway, N.J.; St. Louis, Mo.; Salisbury, N.C.; Salt Lake City, Utah; San Bernardino, Calif.;
Springfield, Va.; Sterling Heights, Mich.; Tampa, Fla.; Warrendale, Pa.; White Plains, N.Y.;
Wilmington, Del.
International print sites: Frankfurt, Germany; Gosselies, Belgium; Hong Kong; London, England
Advertising offices: Atlanta, Ga.; Chicago, Ill.; Dallas, Texas; Detroit, Mich.; London,
England; Los Angeles, Calif.; McLean, Va.; New York, N.Y.; San Francisco, Calif.
USA TODAY SPORTS WEEKLY
Editorial offices: McLean, Va.
Advertising offices: McLean, Va.; New York, N.Y.
USATODAY.com
Headquarters and editorial offices: McLean, Va.
Advertising offices: Atlanta, Ga.; Chicago, Ill.; Dallas, Texas; Detroit, Mich.; Los Angeles,
Calif.; McLean, Va.; New York, N.Y.; San Francisco, Calif.
USA WEEKEND: www.usaweekend.com
Headquarters and editorial offices: McLean, Va.
Advertising offices: Chicago, Ill.; Detroit, Mich.; Los Angeles, Calif.; New York, N.Y.; San
Francisco, Calif.
Clipper Magazine: www.clippermagazine.com; www.couponclipper.com
Headquarters: Mountville, Pa.
Gannett Healthcare Group: www.gannetthg.com; www.Nurse.com; www.TodayInPT.com;
www.TodayInOt.com; www.PearlsReview.com
Headquarters: Falls Church, Va.
Regional offices: San Jose, Calif.; Hoffman Estates, Ill.; Westbury, N.Y.; Dallas, Texas
Publications: Nursing Spectrum, NurseWeek, Today in PT, Today in OT
Times News Group, Inc. (Army Times Publishing Co.)
Headquarters: Springfield, Va.
Publications: 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, Armed Forces Journal:
www.armedforcesjournal.com, C4ISR Journal: www.c4isrjournal.com, Training and Simulation Journal:
www.tsjonline.com
Gannett Media Technologies International: www.gmti.com: Cincinnati, Ohio; Norfolk, Va.; Tempe,
Ariz.
ContentOne/Gannett News Service
Headquarters: McLean, Va.
Bureaus: Washington, D.C.: Albany, N.Y.; Baton Rouge, La.; Trenton, N.J.; Sacramento, Calif.;
Tallahassee, Fla.
Non-daily publications
Weekly, semi-weekly, monthly or bimonthly publications in Alabama, Arizona, Arkansas,
California, Colorado, Delaware, Florida, Guam, Hawaii, Indiana, Iowa, Kentucky, Louisiana,
Maryland, Michigan, Minnesota, Mississippi,
Missouri, Montana, Nevada, New Jersey, New York, North Carolina, Ohio, Oregon, South Carolina,
South Dakota, Tennessee, Utah, Vermont, Virginia, Wisconsin
Gannett Media Sales Group: McLean, Va.
Gannett Offset: www.gannettoffset.com
Headquarters: Springfield, Va.
Offset sites: Atlanta, Ga.; Minneapolis, Minn.; Norwood, Mass.; St. Louis, Mo.; Springfield, Va.
Gannett Direct Marketing Services, Inc.: www.gdms.com:
Headquarters: Louisville, Ky.
Gannett Satellite Information Network: McLean, Va.
|
|
|
National Web Sites:
www.MomsLikeMe.com;
www.HighSchoolSports.net
|
|
GANNETT ON THE NET:
News and information about
Gannett is available on our Web site,
www.gannett.com. In addition to news and other
information about our company, we provide access
through this site to our annual report on Form
10-K, our quarterly reports on Form 10-Q, our
current reports on Form 8-K and all amendments to
those reports as soon as reasonably practicable
after we file or furnish them electronically to
the Securities and Exchange Commission (SEC). Certifications by
Gannetts Chief Executive Officer and Chief Financial Officer are included as exhibits to the companys SEC reports (including the companys Form 10-K filed in 2008).
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We also provide access on this Web site to our
Principles of Corporate Governance, the charters
of our Audit, Digital Technology, Executive
Compensation and Nominating and Public
Responsibility Committees and other important
governance documents and policies, including our
Ethics and Inside Trading Policies. Copies of all
of these corporate governance documents are
available to any shareholder upon written request
made to our Secretary at our headquarters
address. In addition, we will disclose on this
Web site changes to, or waivers of, our corporate
Ethics Policy. |
19
ITEM 1A. RISK FACTORS
In addition to the other information contained or incorporated by reference into this Form
10-K, prospective investors should consider carefully the following risk factors before investing
in our securities. The risks described below may not be the only risks we face. Additional risks
that we do not yet perceive or that we currently believe are immaterial may also adversely affect
our business and the trading price of our securities.
Deterioration in economic conditions in the markets we serve in the U.S. and the U.K. may
further depress demand for our products and services
Our operating results depend on the relative strength of the economy in our principal
newspaper, digital and television markets as well as the strength or weakness of national and regional
economic factors. Recessionary conditions in the U.S. and U.K. have had a significant adverse
impact on the companys businesses. Continuing or a deepening recession in the U.S. or U.K. economy
could significantly affect all key advertising revenue categories.
Competition from alternative forms of media may impair our ability to grow or maintain revenue
levels in core and new businesses
Advertising produces the predominant share of our publishing, broadcasting and affiliated Web
site revenues as well as Digital segment revenues. With the continued development of alternative
forms of media, particularly those based on the Internet, our businesses face increased
competition. Alternative media sources also affect our ability to generate circulation revenues and
television audience. This competition could make it difficult for us to grow or maintain our
broadcasting, print advertising and circulation revenues, which we believe will challenge us to
expand the contributions of our online and other digital businesses.
Further declines in the companys credit ratings and continued volatility in the U.S. credit
markets could significantly impact the companys ability to obtain new financing to fund its
operations and strategic initiatives or to refinance its existing debt at reasonable rates as it
matures
At the end of 2008, the company had approximately $3.8 billion in long-term debt, of which
approximately $2.2 billion was in the form of borrowings under bank credit facilities and the
balance was in the form of unsecured public notes. This debt matures in part in 2009, 2011 and
2012. While the companys cash flow permits us to lower the amount of this debt before it matures,
a significant portion of it may need to be refinanced. Access to the capital markets for
longer-term financing is currently restricted due to the unprecedented and ongoing turmoil in the
capital markets. At the end of 2008, the company had approximately $1.2 billion of additional
borrowing capacity under its revolving credit facilities, providing near-term liquidity to fund its
needs and to repay debt maturing in 2009 and beyond.
Volatility in U.S. and U.K. financial markets directly affects the value of our pension plan
assets
Because of volatility and sharp declines in global financial markets, the companys pension
plan asset values declined significantly in 2008 and the companys principal U.S. retirement plan,
the Gannett Retirement Plan, is underfunded. These 2008 investment losses will result in higher
pension costs in 2009. Depending on various factors, including future investment returns, discount
rates and potential pension legislative changes, the company may be required to make up this
underfunding with contributions in future years although no contributions are required in 2009.
Foreign exchange variability could adversely affect our consolidated operating results
Weakening of the British pound-to-U.S. dollar exchange rate could diminish Newsquests
earnings contribution to consolidated results. Newsquest results for 2008 were translated to U.S.
dollars at the average rate of 1.86. For the first 45 days of 2009, the average exchange rate was
approximately 1.45, or 26% lower than the comparable period in 2008. CareerBuilder, with expanding
oversees operations, also has foreign exchange risk but to a significantly lesser degree.
Changes in regulatory environment could encumber or impede our efforts to improve operating
results
Our publishing and broadcasting operations are subject to government regulation. Changing
regulations, particularly FCC regulations which affect our television stations, may result in
increased costs and adversely impact our future profitability. FCC regulations required us to
construct digital television stations in all of our television markets, despite the fact that the
new digital stations are unlikely to produce significant additional revenue. Congress established
June 12, 2009, as the date by which each television station will be required to return one of the
two channels currently assigned to it and operate as a digital facility exclusively. All of the
companys stations have converted to digital television; however, we cannot predict how the
transition will affect our broadcast results. In addition, our television stations are required to
possess television broadcast licenses from the FCC; when granted, these licenses are generally
granted for a period of eight years. Under certain circumstances the FCC is not required to
renew any license and could decline to renew our license applications that are currently pending in
2009.
The degree of success of our investment and acquisition strategy may significantly impact our
ability to expand overall profitability
We intend to continue efforts to identify and complete strategic investments, partnerships and
business acquisitions. These efforts may not prove successful. Strategic investments and
partnerships with other companies expose us to the risk that we may not be able to control the
operations of our investee or partnership, which could decrease the amount of benefits we reap from
a particular relationship. The company is also exposed to the risk that its partners in strategic
investments and infrastructure may encounter financial difficulties which could lead to disruption
of investee or partnership activities.
Acquisitions of other businesses may be difficult to integrate with our existing operations,
could require an inefficiently high amount of attention from our senior management, might require
us to incur additional debt or divert our capital from more profitable expenditures, and might
result in other unanticipated problems and liabilities.
20
The value of our intangible assets may become further impaired, depending upon future
operating results
Goodwill and other intangible assets were approximately $3.5 billion as of Dec. 28, 2008,
representing approximately 44% of our total assets. We periodically evaluate our goodwill and other
intangible assets to determine whether all or a portion of their carrying values may no longer be
recoverable, in which case a charge to earnings may be necessary, as occurred in both 2007 and 2008
(see Notes 3 and 4 to the Consolidated Financial Statements). Any future evaluations requiring an
asset impairment charge for goodwill or other intangible assets would adversely affect future
reported results of operations and shareholders equity, although such charges would not affect our
operations or cash flow.
The collectability of accounts receivable under current adverse economic conditions could
deteriorate to a greater extent than provided for in the companys financial statements and in its
projections of future results
Recessionary conditions in the U.S. and U.K. have increased the companys exposure to losses
resulting from the potential bankruptcy of its advertising customers. The companys accounts
receivable are stated at net estimated realizable value and its allowance for doubtful accounts has
been determined based on several factors, including receivable agings, significant individual
credit risk accounts and historical experience. If such collectability estimates prove inaccurate,
adjustments to future operating results could occur.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
Publishing/United States
Generally, the company owns the plants that house all aspects of the publication process. In
the case of USA TODAY, at Dec. 28, 2008, 18 non-Gannett printers were used to print the newspaper
in U.S. markets where there are no company publishing sites with appropriate facilities. Four
non-Gannett printers in foreign countries are used to print USA TODAY International. USA WEEKEND,
Clipper Magazine and Gannett Healthcare Group are also printed under contracts with commercial
printing companies. Many of the companys newspapers have outside news bureaus and sales offices,
which generally are leased. In several markets, two or more of the companys newspapers share
combined facilities; and in certain locations, facilities are shared with other newspaper
properties. The companys publishing properties have rail siding facilities or access to main roads
for newsprint delivery purposes and are conveniently located for distribution purposes.
During the past five years, new or substantial additions or remodeling of existing facilities
have been completed or are at some stage of construction at 15 of the companys publishing
operations. Gannett continues to make investments in renovations where necessary for operating
efficiency.
During 2008, the company consolidated certain of its U.S. publishing facilities to achieve
savings and efficiencies. The companys facilities are adequate for present operations. A listing
of publishing centers and key properties may be found on pages 14-16.
Publishing/United Kingdom
Newsquest owns certain of the plants where its newspapers are produced and leases other
facilities. Newsquest headquarters is in Weybridge, Surrey. Additions to Newsquests printing
capacity and color capabilities have been made since Gannett acquired Newsquest in 1999. During
2008, Newsquest also consolidated certain of its facilities to achieve savings and efficiencies.
All of Newsquests properties are adequate for present purposes. A listing of Newsquest publishing
centers and key properties may be found on page 17.
Digital
Generally, the companys digital businesses lease their facilities. This includes facilities
for executive offices, sales offices and data centers. The companys facilities are adequate for
present operations. The company also believes that suitable additional or alternative space,
including those under lease options, will be available at commercially reasonable terms for future
expansion. A listing of key digital facilities can be found on page 17.
Broadcasting
The companys broadcasting facilities are adequately equipped with the necessary television
broadcasting equipment. The company owns or leases transmitter facilities in 29 locations. A
listing of television stations can be found on page 18.
As a result of our duopoly acquisition in Atlanta, the acquired facility was enlarged to
accommodate the staff and technical facilities for both stations. This project was completed in
2008. The companys former television station facility was sold. All of the companys stations have
converted to digital television operations in accordance with applicable FCC regulations. The
companys broadcasting facilities are adequate for present purposes.
Corporate facilities
The companys headquarters and USA TODAY are located in McLean, Va. The company also owns data
and network operations centers in nearby Maryland and in Phoenix, Ariz. Headquarters facilities are
adequate for present operations.
21
ITEM 3. LEGAL PROCEEDINGS
Information regarding legal proceedings may be found in Note 12 of the Notes to Consolidated
Financial Statements.
Environmental
Some of the companys newspaper subsidiaries have been identified as potentially responsible
parties for cleanup of contaminated sites as a result of their alleged disposal of ink or other
wastes at disposal sites that have been subsequently identified as requiring remediation. In five
such matters, the companys liability could exceed $100,000.
Poughkeepsie Newspapers is required by a consent order with the United States Environmental
Protection Agency (U.S. EPA) to fund a portion of the remediation costs at the Hertel Landfill site
in Plattekill, N.Y. Poughkeepsie Newspapers has paid and expensed its share of the initial clean up
but remains liable for a share of follow-up testing and potential further remediation at the site.
Such remaining liability is not expected to be material.
In September 2003, the U.S. EPA notified Multimedia, Inc., a wholly owned Gannett subsidiary,
that the company is considered a de minimis potentially responsible party for costs associated with
the Operating Industries, Inc. Superfund Site in Monterey, Calif. Based on the most recent
information from the U.S. EPA, Multimedia, Inc. expects to settle this matter for a minor amount.
In conjunction with the sale of property in Norwich, Conn., in May 2006, Gannett Satellite
Information Network, Inc. (GANSAT) submitted a Transfer of Establishment form to the Connecticut
Department of Environmental Protection. Because there is evidence of soil and groundwater
contamination at the property, GANSAT will conduct a site investigation, and, if necessary,
remediation, in accordance with the requirements of the Connecticut Transfer Act. The site
investigation cost is not expected to be material. The cost of remediation, if any, will not be
known until the conclusion of the site investigation.
In December 2004, the U.S. Forest Service advised by letter that it considers Shiny Rock
Mining Corporation to be legally responsible for a release of hazardous substances at a closed
mine site in Oregon. Shiny Rock Mining Corporation is a former Gannett subsidiary that donated the
property at issue to Friends of Opal Creek (Friends) in 1992. Gannett tendered this matter to
Friends pursuant to an indemnification agreement, and Friends and the Forest Service entered into a
Consent Agreement to conduct the site investigation. Friends has been funding the investigation by
using proceeds from an insurance policy, now expired. In December 2008, Friends notified Gannett
that it may not have sufficient resources to fund its indemnification responsibilities if site
costs exceed the proceeds available under the insurance policy. Whether Gannett will be required to
fund further site work and how much that might cost depends on whether the additional site
investigation and/or remediation will be required, both unknown at this time.
In July 2007, suit was filed in the Superior Court of New Jersey by third-party plaintiffs
against the company as successor to a former subsidiary seeking to recover cleanup costs associated
with the former Burlington Environmental Management Services, Inc. landfill. The suit, NJDEP, et
al. v Almo Anti-Pollution Services, demands cleanup costs from the company on the theory that
wastewater legally discharged by two print sites to a municipally owned wastewater treatment plant
contained pollutants that allegedly ended up in sewage sludge deposited by the treatment plant at
the landfill. The company believes the complaint does not state a valid claim against it and is
currently engaging in mediation regarding this dispute.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
22
PART II
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ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES |
Gannett Co., Inc. shares are traded on the New York Stock Exchange with the symbol GCI.
Information regarding outstanding shares, shareholders and dividends may be found on pages
1, 3 and 38 of this Form 10-K.
Gannett Common stock prices
High-low range by fiscal quarters based on NYSE-composite closing prices.
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Year |
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Quarter |
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Low |
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High |
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1998 |
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First |
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$ |
57.25 |
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$ |
69.94 |
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Second |
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$ |
65.13 |
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$ |
74.69 |
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Third |
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$ |
55.81 |
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$ |
73.56 |
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Fourth |
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$ |
48.94 |
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$ |
68.06 |
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1999 |
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First |
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$ |
61.81 |
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$ |
70.25 |
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Second |
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$ |
61.81 |
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$ |
75.44 |
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Third |
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$ |
66.81 |
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$ |
76.94 |
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Fourth |
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$ |
68.81 |
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$ |
79.31 |
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2000 |
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First |
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$ |
61.75 |
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$ |
83.25 |
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Second |
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$ |
59.25 |
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$ |
72.13 |
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Third |
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$ |
49.25 |
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$ |
60.06 |
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Fourth |
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$ |
48.69 |
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$ |
63.06 |
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2001 |
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First |
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$ |
56.50 |
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$ |
67.74 |
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Second |
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$ |
59.58 |
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$ |
69.38 |
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Third |
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$ |
55.55 |
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$ |
69.11 |
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Fourth |
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$ |
58.55 |
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$ |
71.10 |
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2002 |
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First |
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$ |
65.03 |
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$ |
77.85 |
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Second |
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$ |
71.50 |
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$ |
79.87 |
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Third |
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$ |
63.39 |
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$ |
77.70 |
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Fourth |
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$ |
66.62 |
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$ |
79.20 |
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2003 |
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First |
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$ |
67.68 |
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$ |
75.10 |
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Second |
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$ |
70.43 |
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$ |
79.70 |
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Third |
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$ |
75.86 |
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$ |
79.18 |
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Fourth |
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$ |
77.56 |
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$ |
88.93 |
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2004 |
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First |
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$ |
84.50 |
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$ |
90.01 |
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Second |
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$ |
84.95 |
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$ |
91.00 |
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Third |
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$ |
79.56 |
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$ |
86.78 |
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Fourth |
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$ |
78.99 |
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$ |
85.62 |
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2005 |
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First |
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$ |
78.43 |
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$ |
82.41 |
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Second |
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$ |
71.13 |
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$ |
80.00 |
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Third |
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$ |
66.25 |
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$ |
74.80 |
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Fourth |
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$ |
59.19 |
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$ |
68.62 |
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2006 |
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First |
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$ |
58.81 |
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$ |
64.80 |
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Second |
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$ |
53.22 |
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$ |
60.92 |
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Third |
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$ |
51.67 |
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$ |
57.15 |
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Fourth |
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$ |
55.92 |
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$ |
61.25 |
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2007 |
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First |
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$ |
55.76 |
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$ |
63.11 |
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Second |
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$ |
54.12 |
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$ |
59.79 |
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Third |
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$ |
43.70 |
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$ |
55.40 |
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Fourth |
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$ |
35.30 |
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$ |
45.85 |
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2008 |
|
First |
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$ |
28.43 |
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$ |
39.00 |
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|
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Second |
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$ |
21.79 |
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|
$ |
30.75 |
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Third |
|
$ |
15.96 |
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$ |
21.67 |
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Fourth |
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$ |
6.09 |
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$ |
17.05 |
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2009 |
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First |
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$ |
3.70 |
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$ |
9.30 |
* |
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* |
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Through February 20, 2009 |
Purchases of Equity Securities
There were no repurchases of common stock in the last half of 2008. The approximate dollar
value of shares that may yet be purchased under the program is $808,936,610. While there is no
expiration date for the repurchase program, the Board of Directors reviews the authorization of the
program annually and did so in October 2008.
23
Comparison of shareholder return
The following graph compares the performance of the companys common stock during the period
Dec. 28, 2003, to Dec. 28, 2008, with the S&P 500 Index, and a Peer Group Index selected by the
company.
The company has established an index of peer group companies because of changes in 2007 to the
S&P 500 Publishing Index. At the end of 2006, the S&P 500 Publishing Index included Gannett Co.,
Inc., Dow Jones & Co., Inc., The McGraw-Hill Companies, Meredith Corporation, The New York Times
Company and Tribune Company. During 2007, Dow Jones was purchased by News Corp. and Tribune Company
was taken private, and both companies therefore were removed from the S&P 500 Publishing Index. The
Washington Post Company, which holds substantial non-publishing/broadcast interests, was added to
the S&P 500 Publishing Index.
Because of these changes, the company believes the S&P 500 Publishing Index no longer
comprises a representative group of peer companies. The company therefore selected a Peer Group
which it believes to be more representative based upon the strong publishing/broadcasting
orientation of the companies selected. This Peer Group is comprised of Gannett Co., Inc., A.H. Belo
Corp., The E.W. Scripps Company, Gatehouse Media, Inc., Journal Communications, Inc., Journal
Register Company, Lee Enterprises, Inc., The McClatchy Company, Media General, Inc. and The New
York Times Company.
The S&P 500 Index includes 500 U.S. companies in the industrial, utilities and financial
sectors and is weighted by market capitalization.
The graph depicts the results of investing $100 in the companys common stock, the S&P 500
Index and the Peer Group Index at closing on Dec. 28, 2003. It assumes that dividends were
reinvested quarterly with respect to the companys common stock, daily with respect to the S&P 500
Index and monthly with respect to the Peer Group.
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|
|
|
|
|
2003 |
|
|
2004 |
|
|
2005 |
|
|
2006 |
|
|
2007 |
|
|
2008 |
|
Gannett Co., Inc. |
|
|
100 |
|
|
|
92.77 |
|
|
|
69.90 |
|
|
|
71.22 |
|
|
|
47.36 |
|
|
|
10.78 |
|
S&P 500 Index |
|
|
100 |
|
|
|
110.88 |
|
|
|
116.33 |
|
|
|
134.70 |
|
|
|
142.10 |
|
|
|
89.53 |
|
Peer Group |
|
|
100 |
|
|
|
94.54 |
|
|
|
74.68 |
|
|
|
72.14 |
|
|
|
50.34 |
|
|
|
12.22 |
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ITEM 6. SELECTED FINANCIAL DATA
Selected financial data for the years 2004 through 2008 is contained under the heading
Selected Financial Data on page 67 and is derived from the companys audited financial statements
for those years. Certain reclassifications have been made to previously reported financial data to
reflect the creation of a new digital segment, as more fully discussed in Note 1 to the
Consolidated Financial Statements.
The information contained in the Selected Financial Data is not necessarily indicative of
the results of operations to be expected for future years, and should be read in conjunction with
Managements Discussion and Analysis of Financial Condition and Results of Operations included in
Item 7 and the consolidated financial statements and related notes thereto included in Item 8 of
this Form 10-K.
ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Executive Summary
Gannett Co., Inc. is a leading international news and information company operating primarily
in the United States and the United Kingdom (U.K.). Approximately 85% of 2008 consolidated revenues
are from domestic operations including Guam, and approximately 15% are from foreign operations
primarily in the U.K.
The companys goal is to be the leading source of news and information in the markets we
serve, and be customer centric by delivering quality products and results for our readers, viewers,
advertisers and other customers. We believe that well-managed newspapers, television stations,
Internet products, magazine/ specialty publications and programming efforts will maximize profits
for our shareholders. To that end, our strategy has the following elements:
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Become the digital destination for local news and information in all our markets. |
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Create new business opportunities in the digital space through internal innovation,
acquisitions or affiliations. The company established a new Digital segment in 2008. |
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Maintain strong financial discipline throughout our operations. |
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Maximize existing resources through efforts to enhance revenues and control or reduce
costs. For businesses that do not fit with our long-term strategic goals, a reallocation of
resources will be undertaken. |
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Strengthen the foundation of the company by finding, developing and retaining the best
and brightest employees through a robust Leadership and Diversity program. |
We implement our strategy and manage our operations through three business segments:
publishing, digital and broadcasting (television). The publishing segment includes the operations
of 102 daily newspapers in the U.S. and U.K., nearly 850 non-daily local publications in the United
States and Guam and more than 200 such titles in the U.K. Our 85 U.S. daily newspapers, including
USA TODAY, the nations largest-selling daily newspaper, with an average circulation of
approximately 2.3 million, have a combined
24
daily average paid circulation of 6.6 million, which is the nations largest newspaper group
in terms of circulation. Together with the 17 daily paid-for newspapers our Newsquest division
publishes in the U.K., the total average daily circulation of our 102 domestic and U.K. daily
newspapers was approximately 7.2 million for 2008. All of our daily newspapers also operate Web
sites which are tightly integrated with publishing operations. Our newspapers also have strategic
business relationships with online affiliates including CareerBuilder, Classified Ventures,
ShopLocal.com, Topix and Metromix LLC.
The publishing segment also includes commercial printing; newswire; marketing and data
services operations.
Beginning with the third quarter of 2008, the company reported a new Digital business
segment, which includes CareerBuilder and ShopLocal results from the dates of their full
consolidation (Sept. 3 and June 30, respectively), as well as PointRoll, Planet Discover, Schedule
Star and Ripple6 (from the date of its acquisition on Nov. 13, 2008). Prior period results for
PointRoll, Planet Discover and Schedule Star have been reclassified from the publishing segment to
the new Digital segment.
Operating results from Web sites that are associated with publishing operations and broadcast
stations continue to be reported in the publishing and broadcast segments.
Through our broadcasting segment, we own and operate 23 television stations with affiliated
Web sites covering 18% of the U.S. population in markets with a total of more than 20.8 million
households. We also include in this segment the results of Captivate Network, a national news and
entertainment network that delivers programming and full-motion video advertising through video
screens located in elevators of office towers and select hotel lobbies across North America.
Fiscal year: The companys fiscal year ends on the last Sunday of the calendar year. The companys 2008
fiscal year ended on Dec. 28, 2008, and encompassed a 52-week period. The companys 2007 and 2006
fiscal years encompassed 52-week and 53-week periods, respectively.
Discontinued operations: Unless stated otherwise, as in the section titled Discontinued
Operations, all of the information contained in Managements Discussion and Analysis of Financial
Condition and Results of Operations relates to continuing operations. Therefore, the results of the
Norwich (Conn.) Bulletin, the Rockford (Ill.) Register Star, the Observer-Dispatch in Utica, N.Y.,
and The Herald-Dispatch in Huntington, W.Va., which were sold to Gatehouse Media, Inc. in May 2007,
and the Chronicle-Tribune in Marion, Ind., which was contributed to the Gannett Foundation in May
2007, are excluded for all periods covered by this report. These transactions are discussed in more
detail on page 27 in the business acquisitions, investments, exchanges, dispositions and
discontinued operations section of this report.
Presentation of certain pro forma information: The discussion below is focused mainly on
changes in historical financial results, however certain operating information for the newly formed
Digital Segment is also presented on a pro forma basis, which assumes that all properties owned at
the end of 2008 were owned throughout the periods covered by the discussion. The company
consistently uses, for individual businesses and for aggregated business data, pro forma reporting
of operating results in its internal financial reports because it enhances measurement of performance by permitting
comparisons with prior period historical data. Likewise, the company uses this same pro forma data
in its external reporting of key financial results and benchmarks.
Operating results and non-cash impairment charges: The company reported a net loss from
continuing operations for 2008 of $6.65 billion or $29.11 per share. The net loss included second-
and fourth-quarter non-cash impairment charges for intangible assets, property, plant and
equipment, investments and certain other assets, totaling $8.35 billion on a pre-tax basis ($7.39
billion after-tax, or $32.38 per share). These charges are discussed in detail on page 28 and in
the financial statements in Note 3.
The impairment charges were driven by soft business trends in the early part of the year,
which worsened rapidly toward the end of the year as recessions in the U.S. and U.K. economies
deepened. Concurrent with the decline in business conditions, there was broad-based downward
pressure on equity share values and the companys stock price declined significantly. These factors
led to the reassessment of asset carrying values and the determination that non-cash impairment
write downs to underlying estimated fair value were required. The impairment charges principally
involved the companys U.S. Community Publishing Division, its U.K. publishing business, Newsquest,
certain other U.S. publishing businesses and minority investments in U.S. newspaper publishing
partnerships.
Absent these non-cash impairment charges in 2008 and 2007
($72.0 million pre-tax or $50.8 million after-tax and $.22 per share), net income from
continuing operations would have declined 27%.
Operating
revenues declined 9% to $6.8 billion for 2008.
Publishing revenues were $5.7 billion
or 13% below 2007 levels. Reflecting recessions in the U.S. and U.K. and the real estate crisis
through the first nine months of the year, publishing revenue declined 11%. Fourth quarter
publishing revenue declined by 19% as the economic crisis deepened and the British pound weakened
against the U.S. dollar.
Digital segment revenues totaled $281 million for 2008, compared to $70 million in 2007,
reflecting the initial consolidation of CareerBuilder and ShopLocal. On a pro forma basis,
operating revenues for the Digital segment rose 13% reflecting solid gains by CareerBuilder and
PointRoll.
Broadcast revenues for 2008 were $773 million or 2% below year ago levels. The companys
television stations reported increased political and Olympic related revenue of $94 million and $24
million, respectively. However, these gains were mostly offset by losses in certain core revenue
categories, primarily automotive and retail reflecting the recession in the U.S.
Operating costs excluding the non-cash impairment charges discussed above declined 3%.
Newsprint expenses for publishing declined 9% as a 16% reduction in consumption was partially
offset by a 9% increase in average usage prices. Newsprint prices rose throughout most of 2008,
peaked early in the fourth quarter and then started to decline. The company expects further price
declines in 2009, but expense comparisons with 2008 will be unfavorable for at least the early part
of the year.
For the full year, the company recorded severance and related benefits costs totaling $119
million, thereby reducing headcount across the company by 7,200 positions.
25
During the second quarter of 2008, the company made changes to its domestic benefit plans by
improving its 401(k) plan while freezing benefits under certain company sponsored defined benefit
pension plans. As a result, the company recognized a pre-tax curtailment gain from its domestic
pension plans of approximately $46.5 million ($28.9 million after-tax or $.13 per share).
Costs under the companys 401(k) match increased from the date of the change, Aug. 1, 2008,
reflecting an increase in the company match from 50% of the first 6% of qualified payroll to 100%
of the first 5%. The company also provided further 401(k) plan enhancements to certain long-service
employees.
While total operating costs increased substantially in 2008 due to the non-cash impairment
charges, and to the incremental costs from the consolidation of CareerBuilder and ShopLocal
beginning in the third quarter, pro forma operating expenses, excluding severance and impairment
charges, declined 6%, reflecting aggressive, companywide cost control efforts.
The company reported an operating loss for 2008 of $6.76 billion, reflecting the non-cash
impairment charges of $7.98 billion. Absent the impairment charges from 2008 and 2007 results, the
company would have reported a 29% decline in operating income from 2007.
The company reported a loss of $374.9 million from its equity share of results from
unconsolidated investees for 2008, primarily because of the impairment of the carrying values of
its interest in newspaper publishing partnerships and certain other investees. The publishing
businesses in these partnerships have also been adversely affected by the U.S. economic crisis and
other challenging market factors, and their earnings declined significantly in 2008.
Interest expense was lower for the year down $69 million or 27%, reflecting lower average
debt levels and lower borrowing rates.
Other non operating items reflect higher asset sale and other gains for 2008, up slightly from
last year. For 2008, these gains were partially offset by the CareerBuilder minority interest
charge recorded since its consolidation in the third quarter.
The company reported a net loss of $6.65 billion or $29.11 per share for 2008 compared with
net income of $1.06 billion for 2007, or $4.52 per diluted share. Absent the non-cash impairment
charges in both years, the company would have reported a decline in net income of 32% and net
income per share of 31%.
Challenges for 2009: Looking forward to 2009, the company faces several important challenges,
including:
|
|
Effectively manage in a global economic recession which will continue to adversely
affect all revenue streams for our publishing, digital and broadcasting businesses; |
|
|
Continue transforming our cost structure to align expenses with revenue levels; |
|
|
Respond to the changing media landscape and consumers increasing desire to access
content across multiple platforms; and |
|
|
Drive innovation throughout the company with important efforts such as our ContentOne
initiative and the product distribution and online changes we are making at the Detroit
Free Press. |
Basis of reporting
Following is a discussion of the key factors that have affected the companys business over
the last three fiscal years. This commentary should be read in conjunction with the companys
financial statements, Selected Financial Data and the remainder of this Form 10-K.
Critical accounting policies and the use of estimates: The company prepares its financial
statements in accordance with generally accepted accounting principles (GAAP) which require the use
of estimates and assumptions that affect the reported amount of assets, liabilities, revenues and
expenses and related disclosure of contingent matters. The company bases its estimates on
historical experience, actuarial studies and other assumptions, as appropriate, concerning the
carrying values of its assets and liabilities and disclosure of contingent matters. The company
re-evaluates its estimates on an ongoing basis. Actual results could differ from these estimates.
Critical accounting policies for the company involve its assessment of the recoverability of
its long-lived assets, including goodwill and other intangible assets, which are based on such
factors as estimated future cash flows and
current fair value estimates of businesses. Similarly the company evaluated the recoverability
of the carrying value of its property, plant and equipment and its investments in minority-owned
unconsolidated investees, including its newspaper publishing partnerships and certain online/new
technology business investments. The company employed consulting valuation specialists to assist in
these important accounting determinations.
The companys accounting for pension and retiree medical benefits requires the use of various
estimates concerning the work force, interest rates, plan investment return, and involves the use
of advice from consulting actuaries. The companys accounting for income taxes in the U.S. and
foreign jurisdictions is sensitive to interpretation of various laws and regulations therein, and
to accounting rules regarding the repatriation of earnings from foreign sources. The company must
also exercise significant judgment in assessing the recoverability of its deferred tax assets.
Refer to Note 1 to the Consolidated Financial Statements for a more complete discussion of all
of the companys significant accounting policies.
Reclassifications of certain items within the Consolidated Statements of Income: In the third
quarter of 2008, the company began reporting a new digital segment and a separate digital revenues
line in its Statements of Income (Loss). This revenue line includes only revenue from the
businesses that comprise the new digital segment. It therefore includes all revenues from
CareerBuilder and ShopLocal beginning with the full consolidation of these businesses in the third
quarter of 2008, and revenues from PointRoll, Schedule Star, Planet Discover and Ripple6 (from the
date of its acquisition on Nov. 13, 2008). Revenues from PointRoll, Schedule Star and Planet
Discover had previously been reported within the publishing segment and were included in the All
other revenue line in the Statement of Income. All other revenue is now comprised principally of
commercial printing revenues. All periods presented reflect these reclassifications.
Neither the Digital revenue line nor the Digital Segment include online revenue from the Web
sites operated together with our publishing or broadcasting businesses.
26
Business acquisitions, investments, exchanges, dispositions and discontinued operations
2008: On Dec. 31 2007, the first day of the companys 2008 fiscal year, the company purchased
X.com, Inc. (BNQT.com), which operates an action sports digital network covering eight different
action sports including surfing, snowboarding and skateboarding. X.com is affiliated with the USA
TODAY Sports brand.
In February 2008, the company formed QuadrantONE, a new digital ad sales network, with three
other large media companies.
In March 2008, the company purchased a minority stake in Fantasy Sports Ventures (FSV). FSV
owns a set of fantasy sports content sites and manages advertising across a network of affiliated
sites.
In May 2008, the company purchased a minority stake in Cozi Group Inc. (COZI). COZI is a free
Web service that helps families manage busy schedules, track shopping and to-do lists, organize
household chores, stay in communication and share memories all in one place.
In July 2008, the company purchased a minority stake in Mogulus, LLC, a company that provides
Internet broadcasting services. Also in July 2008, the company increased its investment in 4INFO
maintaining its approximate ownership interest.
In August 2008, the company purchased 100% of the outstanding shares of Pearls Review, Inc.,
an online nursing certification and continuing education review site.
On June 30, 2008, the company acquired from Tribune Company and The McClatchy Company their
minority ownership interests in ShopLocal LLC, a leading marketing and database services company
for major retailers in the U.S. The company now owns 100% of ShopLocal and began consolidating its
results in the digital segment at the beginning of the third quarter of 2008. ShopLocal
collaborates with PointRoll to create ads that dynamically connect retail advertisers and
consumers, online and in the store. ShopLocals operations turned profitable in the third quarter.
On Sept. 3, 2008, the company acquired an additional 10% stake in CareerBuilder from Tribune
Company increasing its investment to 50.8% so that it became the majority and controlling owner.
Beginning in September 2008, the operations of CareerBuilder have been fully consolidated and are
reported in the digital segment. The related minority interest charge for CareerBuilder is
reflected in Other non-operating items in the Statements of Income (Loss).
On Nov. 13, 2008, the company acquired Ripple6, Inc., a leading provider of social media
services for publishers and other users. Ripple6 currently powers Gannetts MomsLikeMe.com site,
which recently rolled out in 80 local markets across the country and has more than one million moms
visiting each month.
The total cash paid in 2008 for business acquisitions was $168.6 million and for investments
was $46.8 million. The financial statements reflect an allocation of purchase price that is
preliminary for the acquisitions.
2007: In May 2007, the company completed the sale of the Norwich (Conn.) Bulletin, the
Rockford (Ill.) Register Star, the Observer-Dispatch in Utica, N.Y., and The Herald-Dispatch in
Huntington, W.Va., to GateHouse Media, Inc. and contributed the Chronicle-Tribune in Marion, Ind.,
to the Gannett Foundation. In connection with these transactions, the company recorded a net
after-tax gain of $73.8 million in discontinued operations. For all periods presented, results from
these businesses have been reported as discontinued operations.
In January 2007, the company acquired Central Florida Future, the independent student
newspaper of the University of Central Florida.
In June 2007, the company acquired the Central Ohio Advertiser Network, a network of eight
weekly shoppers with the Advertiser brand and a commercial print operation in Ohio.
In October 2007, the company acquired a controlling interest in Schedule Star LLC, which
operates HighSchoolSports.net, a digital content site serving the high school sports audience, and
the Schedule Star solution for local athletic directors.
At the end of October 2007, the company, in partnership with Tribune Company, announced a
digital joint venture to expand a national network of local entertainment Web sites under the
Metromix brand. The newly formed company, Metromix LLC, focuses on a common model for local online
entertainment sites, and then scales the sites into a national platform under the Metromix brand.
Metromix is owned equally by the two parent companies.
The total cash paid in 2007 for business acquisitions was $30.6 million and for investments
was $40.0 million.
2006: In January 2006, the company acquired a minority equity interest in 4INFO, a leading
mobile and media advertising company with the largest ad-supported text messaging content network
in the U.S.
In April 2006, the company contributed the Muskogee (Okla.) Phoenix to the Gannett Foundation.
In connection with the acquisition of Clipper Magazine, Inc. in 2003 and PointRoll, Inc. in
2005, the company paid additional cash consideration totaling $41.2 million in 2006 as a result of
certain performance metrics being achieved by these businesses.
In June 2006, the company completed the acquisition of KTVD-TV in Denver and in August the
acquisition of WATL-TV in Atlanta, which created the companys second and third broadcast station
duopolies.
In August 2006, the company made additional investments in CareerBuilder, ShopLocal.com and
Topix totaling $155 million, which increased the ownership stake in each of those businesses.
In August 2006, the company invested an additional $145 million in the California Newspapers
Partnership (CNP) in conjunction with the CNPs acquisition of the Contra Costa Times and the San
Jose Mercury News and related publications and Web sites. The companys additional investment
enabled it to maintain its 19.49% ownership in the CNP.
The company also purchased several small non-daily products in the U.S. as well as Planet
Discover, a provider of local, integrated online search and advertising technology.
The total cash paid in 2006 for business acquisitions was $402.7 million and for investments
was $338.3 million.
27
RESULTS OF OPERATIONS
Consolidated summary continuing operations
In its press release of Jan. 30, 2009, and Form 8-K filed on the same day, the company
reported that preliminary 2008 fourth quarter earnings per diluted share were $.69 compared with
$1.06 per diluted share in the fourth quarter of 2007. Preliminary full year results reported were
a net loss of $1.8 billion or $7.81 per share. These preliminary results, however, did not include
fourth quarter non-cash charges, which had not been finalized at that time, for the impairment of
goodwill, other intangible assets, property, plant and equipment and certain other assets. In its
Jan. 30, 2009, press release, the company indicated that such charges were expected to total in the
range of $5.1 billion to $5.9 billion on a pre-tax basis and $4.5 billion to $5.2 billion on an
after-tax basis.
The financial statements included in this Form 10-K reflect final fourth quarter adjustments
for these matters, which totaled $5.59 billion on a pre-tax basis and $4.86 billion after-tax, or
$21.34 per share.
Final reported results from continuing operations
The company reported a loss from continuing operations for 2008 of $6.65 billion or $29.11 per
share. For 2007, income from continuing operations was $975.6 million or $4.17 per diluted share.
During the second and fourth quarters of 2008, the company recorded certain non-cash
impairment charges totaling approximately $8.35 billion on a pre-tax basis and $7.39 billion on an
after-tax basis or $32.38 per share. These second and fourth quarter charges are more fully
described in the following section of this report.
Non-cash charges recorded in 2008
Very difficult business conditions, the ensuing economic crisis, recessionary conditions in
the U.S. and U.K. and a decline in the companys stock price required the company to perform
impairment tests on goodwill, intangible assets, and other long-lived assets as of March 31, 2008,
the first day of its fiscal second quarter, as well as on Dec. 28, 2008, in connection with the
required annual impairment test of goodwill and indefinite-lived intangibles. As a result, the
company has recorded non-cash impairment charges to reduce the book value of goodwill, other
intangible assets including mastheads, and certain property, plant and equipment assets. The
carrying value of certain of the companys investments in newspaper publishing partnerships and
other businesses, which are accounted for under the equity method, were also written down due to
other than temporary impairments. The company also recorded accelerated depreciation expense
associated with certain facility consolidation and cost reduction initiatives.
A summary of these charges is presented below:
In millions except per share amounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-Tax |
|
|
After-Tax |
|
|
Per Share |
|
|
|
Amount(a) |
|
|
Amount(a) |
|
|
Amount(a) |
|
Asset impairment and other charges |
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill: |
|
|
|
|
|
|
|
|
|
|
|
|
Publishing |
|
$ |
7,448 |
|
|
$ |
6,812 |
|
|
$ |
29.83 |
|
Digital |
|
|
10 |
|
|
|
6 |
|
|
|
0.03 |
|
|
|
|
|
|
|
|
|
|
|
Total goodwill |
|
|
7,458 |
|
|
|
6,818 |
|
|
|
29.86 |
|
|
|
|
|
|
|
|
|
|
|
Other intangible assets -
principally mastheads: |
|
|
|
|
|
|
|
|
|
|
|
|
Publishing |
|
|
232 |
|
|
|
150 |
|
|
|
0.66 |
|
Digital |
|
|
2 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other intangible assets |
|
|
233 |
|
|
|
151 |
|
|
|
0.66 |
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment: |
|
|
|
|
|
|
|
|
|
|
|
|
Publishing |
|
|
255 |
|
|
|
159 |
|
|
|
0.70 |
|
Broadcasting |
|
|
2 |
|
|
|
1 |
|
|
|
|
|
Corporate |
|
|
1 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total property, plant and equipment |
|
|
258 |
|
|
|
161 |
|
|
|
0.70 |
|
|
|
|
|
|
|
|
|
|
|
Other: |
|
|
|
|
|
|
|
|
|
|
|
|
Publishing |
|
|
17 |
|
|
|
11 |
|
|
|
0.05 |
|
Digital |
|
|
3 |
|
|
|
2 |
|
|
|
0.01 |
|
Broadcasting |
|
|
7 |
|
|
|
4 |
|
|
|
0.02 |
|
|
|
|
|
|
|
|
|
|
|
Total other |
|
|
27 |
|
|
|
17 |
|
|
|
0.08 |
|
|
|
|
|
|
|
|
|
|
|
Total asset impairment and
other charges |
|
$ |
7,976 |
|
|
$ |
7,147 |
|
|
$ |
31.30 |
|
|
|
|
|
|
|
|
|
|
|
Newspaper publishing partnerships
and other equity method
investments: |
|
|
|
|
|
|
|
|
|
|
|
|
Publishing |
|
|
377 |
|
|
|
248 |
|
|
|
1.09 |
|
|
|
|
|
|
|
|
|
|
|
Total charges |
|
$ |
8,354 |
|
|
$ |
7,395 |
|
|
$ |
32.38 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Total amounts may not sum due to rounding. |
The goodwill impairment charges result from the application of the impairment testing
provisions of Statement of Financial Accounting Standards No. 142 Goodwill and Other Intangible
Assets (SFAS No. 142). Impairment testing is customarily performed annually, and had been
performed at the end of 2007, at which time no goodwill impairment charge was indicated. Because of
softening business conditions within the companys publishing segment and the decline in the
companys stock price and market capitalization, this testing was updated as of the beginning of
the second quarter of 2008 and as required the annual testing was performed again as of Dec. 28,
2008. For certain publishing and digital reporting units, an impairment was indicated. The fair
values of the reporting units were determined using discounted cash flow and multiple of earnings
techniques. The company then undertook the next step in the impairment testing process by
determining the fair value of assets and liabilities for these reporting units.
The implied value of goodwill determined by the valuation for these reporting units was less
than the carrying amount by $7.46 billion, and therefore an impairment charge in this amount was
taken. There was minimal tax benefit recognized related to the impairment charges since much of the
recorded goodwill was non-deductible as it arose from stock purchase transactions. Therefore the
after-tax effect of the goodwill impairment was $6.82 billion or $29.86 per share.
28
The goodwill impairment charge recorded in the second quarter, in the amount of $2.14 billion,
was related to Newsquest, the companys U.K. publishing operations that had been acquired
relatively recently in several transactions from 1999-2005. Following the second quarter impairment
testing, Newsquests fourth quarter operating results and projections indicated a significant
decline from the amounts estimated in the second quarter and as a result a further goodwill
impairment charge of approximately $507 million was recorded.
In the fourth quarter, the company also recognized an impairment charge for its U.S. Community
Publishing reporting unit of approximately $4.4 billion. This reporting unit is comprised of 82
individual publishing operations which have been acquired at various times over the past several
decades. Consequently, many of the properties were acquired at a relatively low cost compared to
prices paid in the market for newspapers in the last decade. Since these publishing operations are
aggregated into a single reporting unit, the overall carrying value is lower than it would
otherwise have been had the portfolio of businesses been acquired in recent years.
Additionally, when the majority of the operations within U.S. Community Publishing were
acquired, the accounting policies for purchase price allocation were different than they are
currently. Until 2002, as permitted under then generally accepted accounting principles, a portion
of the companys purchase price allocation was assigned to property, plant and equipment with all
of the residual going to goodwill. Beginning in 2002, purchase price allocation was required to
also cover other intangible assets, such as mastheads and customer relationships. One result of the
existence of the two accounting policies for purchase price allocation is that in the second step
of the impairment process, when the new rules are applied, it often results in a low level of
implied goodwill, thus leading to a larger goodwill impairment charge.
The goodwill impairment charges for other stand alone reporting units totaled $408 million in
the fourth quarter.
The impairment charge of $233 million for other intangible assets was required because revenue
results from the underlying businesses have softened from what was expected at the time they were
purchased and the assets were initially valued. In accordance with SFAS No. 142, the carrying
values of impaired indefinite lived intangible assets, principally mastheads, were reduced to fair
value. Fair value was determined using a relief-from-royalty method. The carrying values of certain
definite lived intangible assets, principally customer relationships, were reduced to fair value in
accordance with Statement of Financial Accounting Standard No. 144 Accounting for the Impairment
or Disposal of Long-Lived Assets (SFAS No. 144). Deferred tax benefits have been recognized for
these intangible asset impairment charges and therefore the after-tax impact was $151 million or
$.66 per share.
The carrying value of property, plant and equipment at certain publishing businesses was also
evaluated due to softening business conditions and, in some cases, changes in expected useful
lives. The recoverability of these assets was measured in accordance with SFAS No. 144. This
process indicated that the carrying values of certain assets were not recoverable, as the expected
undiscounted future cash flows to be generated by them would be less than
their carrying values. The related impairment loss was measured based on the amount by which
the assets carrying value exceeded their fair value. Asset group fair values were determined using
discounted cash flow or multiple of earnings techniques. Certain asset fair values were based on
estimates of prices for similar assets. In addition, as required by SFAS No. 144, the company
revised the useful lives of certain assets, which were abandoned
during the year or for which
management has committed to a plan to abandon in the near future, in order to reflect the use of
those assets over their shortened useful life. As a result of the application of the requirements
of SFAS No. 144, the company recorded charges of $258 million. Deferred tax benefits were
recognized for these charges and therefore the after-tax impact was $161 million or $.70 per
diluted share.
The charges of $27 million pre-tax included in the Other category include a charge to
increase the level of the companys allowance for doubtful accounts reflecting higher collection
risk from the recession-driven increase in the delinquency of receivable agings and bankruptcy
filings toward the end of 2008. Charges also include amounts for future lease payments for
facilities abandoned in connection with consolidation efforts and amounts for the impairment of
certain broadcast programming assets.
For certain of the companys newspaper publishing partnership investments, and for certain
other investments in which the company owns a minority equity interest, carrying values were
written down to fair value because the businesses underlying the investments had experienced
significant and sustained declines in operating performance, leading the company to conclude that
they were other than temporarily impaired. The adjustment of newspaper publishing partnership
carrying values comprise the majority of these investment charges, and these were driven by many of
the same factors affecting the companys wholly owned publishing businesses. Fair values were
determined using a multiple of earnings or a multiple of revenues technique. These investment
carrying value adjustments were $377 million pre-tax and $248 million on an after-tax basis, or
$1.09 per diluted share. The pre-tax impairment charges for
these investments are reflected as Equity income (loss) in unconsolidated investees, net in
the Statement of Income (Loss).
A consolidated summary of the companys results is presented below, which reflect the
aforementioned non-cash charges.
In millions of dollars, except per share amounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
Change |
|
|
2007 |
|
|
Change |
|
|
2006 |
|
Operating revenues |
|
$ |
6,768 |
|
|
|
(9 |
%) |
|
$ |
7,439 |
|
|
|
(5 |
%) |
|
$ |
7,848 |
|
Operating expenses (1) |
|
$ |
13,529 |
|
|
|
*** |
|
|
$ |
5,789 |
|
|
|
(3 |
%) |
|
$ |
5,943 |
|
Operating income (loss) (1) |
|
$ |
(6,762 |
) |
|
|
*** |
|
|
$ |
1,651 |
|
|
|
(13 |
%) |
|
$ |
1,905 |
|
Income (loss) from
continuing operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per share basic (1) |
|
$ |
(29.11 |
) |
|
|
*** |
|
|
$ |
4.18 |
|
|
|
(13 |
%) |
|
$ |
4.81 |
|
Per share diluted (1) |
|
$ |
(29.11 |
) |
|
|
*** |
|
|
$ |
4.17 |
|
|
|
(13 |
%) |
|
$ |
4.81 |
|
|
|
|
(1) |
|
Results for 2008 include pre-tax non-cash asset impairment charges of $8.35 billion ($7.39
billion after-tax or $32.38 per share). Results for 2007 include pre-tax non-cash intangible asset
impairment charges of $72.0 million ($50.8 million after-tax or $.22 per share). The asset
impairment charges did not affect the companys operations or cash flow. Refer to Notes 3 and 4 of
the Consolidated Financial Statements for more information. |
29
Publishing segment
In addition to its domestic local newspapers and affiliated Web sites, the companys publishing
operations include USA TODAY, USA WEEKEND, Newsquest, which publishes daily and non-daily
newspapers in the U.K., Clipper Magazine, Gannett Healthcare Group, Army Times Publishing, Gannett
Offset commercial printing and other advertising and marketing services businesses. The publishing
segment in 2008 contributed 84% of the companys revenues.
Publishing operating results were as follows:
In millions of dollars
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
Change |
|
|
2007 |
|
|
Change |
|
|
2006 |
|
Revenues |
|
$ |
5,714 |
|
|
|
(13 |
%) |
|
$ |
6,580 |
|
|
|
(5 |
%) |
|
$ |
6,940 |
|
Expenses (1) |
|
$ |
12,739 |
|
|
|
*** |
|
|
$ |
5,190 |
|
|
|
(3 |
%) |
|
$ |
5,351 |
|
Operating income (loss) (1) |
|
$ |
(7,026 |
) |
|
|
*** |
|
|
$ |
1,390 |
|
|
|
(13 |
%) |
|
$ |
1,589 |
|
|
|
|
(1) |
|
Results for 2008 include pre-tax non-cash asset impairment charges of $7.95 billion. Results
for 2007 include pre-tax non-cash intangible asset impairment charges of $72.0 million. These
charges, which did not affect the companys operations or cash flow, and are more fully discussed
on page 28 of this report and in Notes 3 and 4 of the Consolidated Financial Statements. |
Foreign currency translation: The average exchange rate used to translate U.K. publishing
results was 1.86 for 2008, 2.00 for 2007 and 1.84 for 2006. Therefore, publishing segment revenue
and expense when comparing 2008 with 2007 are lower as a result.
Publishing operating revenues: Publishing operating revenues are derived principally from
advertising and circulation sales, which accounted for 73% and 21%, respectively, of total
publishing revenues in 2008. Ad revenues include those derived from advertising placed with
affiliated Internet sites which include revenue from the classified, retail and national ad
categories. Other publishing revenues are mainly from commercial printing.
The table below presents the principal components of publishing revenues for the last three
years.
Publishing operating revenues, in millions of dollars
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
Change |
|
|
2007 |
|
|
Change |
|
|
2006 |
|
Advertising |
|
$ |
4,146 |
|
|
|
(16 |
%) |
|
$ |
4,937 |
|
|
|
(6 |
%) |
|
$ |
5,276 |
|
Circulation |
|
$ |
1,217 |
|
|
|
(3 |
%) |
|
$ |
1,252 |
|
|
|
(2 |
%) |
|
$ |
1,280 |
|
Commercial
printing and other |
|
$ |
352 |
|
|
|
(10 |
%) |
|
$ |
390 |
|
|
|
1 |
% |
|
$ |
385 |
|
Total |
|
$ |
5,714 |
|
|
|
(13 |
%) |
|
$ |
6,580 |
|
|
|
(5 |
%) |
|
$ |
6,940 |
|
The table below presents the principal components of publishing advertising revenues for the
last three years. These amounts include ad revenue from printed publications as well as online ad
revenue from Web sites affiliated with the publications.
Advertising revenues, in millions of dollars
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
Change |
|
|
2007 |
|
|
Change |
|
|
2006 |
|
Retail |
|
$ |
1,964 |
|
|
|
(10 |
%) |
|
$ |
2,184 |
|
|
|
(4 |
%) |
|
$ |
2,279 |
|
National |
|
$ |
672 |
|
|
|
(10 |
%) |
|
$ |
751 |
|
|
|
(8 |
%) |
|
$ |
820 |
|
Classified |
|
$ |
1,509 |
|
|
|
(25 |
%) |
|
$ |
2,003 |
|
|
|
(8 |
%) |
|
$ |
2,177 |
|
Total ad revenue |
|
$ |
4,146 |
|
|
|
(16 |
%) |
|
$ |
4,937 |
|
|
|
(6 |
%) |
|
$ |
5,276 |
|
Publishing revenue comparisons 2008-2007: Advertising revenues for 2008 decreased $792 million
or 16%. The rate of decline accelerated over the course of the year as economic conditions
worsened. Early in the year revenue declines were due in large measure to recessionary conditions
in the U.S., including the real estate and subprime lending crisis. In the second part of the year
as the economic crisis deepened and financial market functions deteriorated, the U.S. recession
worsened and the U.K. economy went into recession. Therefore all markets and revenue categories
were adversely affected. Increased competition for advertising spending from other media outlets
also affected trends and results for 2008.
Advertising revenues in Arizona, California, Florida and Nevada continued to be the most
severely affected by the slowing U.S. economy. Approximately 37% of the U.S. Community Publishing
ad revenue decline can be attributed to these four states. Most other U.S. publishing businesses
reported lower revenues as well, but at a lower rate of decline. In the U.K., in local currency, ad
revenues were lower as well, and were down more than in the U.S. U.K. ad revenue declines were
exacerbated by a lower average exchange rate for 2008. In U.S. dollars, Newsquest ad revenues were
down 23% compared with a 14% decline for U.S. publishing.
Retail ad revenues were down $219 million or 10% in 2008. In the U.S., revenues were lower in
most principal categories, with the more significant declines occurring in the department store,
furniture, entertainment, home improvement and telecommunications categories. Retail ad revenues
declined at a faster rate in the U.K. due in part to the currency impact.
National ad revenues were down $79 million or 10% in 2008, primarily due to lower ad sales for
USA TODAY branded publications, although national ad revenues for U.S. Community Publishing were
lower as well.
Classified ad revenues decreased $494 million or 25%. Classified revenue declined 24% in the
U.S. and 25% in the U.K. Declines in the U.K. were affected by the currency impact. In the U.S.,
classified was significantly affected by the real estate crisis and its contribution to an overall
softening in the advertising environment. Classified revenue declines occurred in all three
principal categories of employment (down 30%), real estate (down 34%), and automotive (down 19%).
Publishing advertising revenues in millions, as reported.
Looking to 2009, the global recession will continue to put pressure on all publishing revenue
streams both in the U.S. and U.K. Ad revenues are expected to be lower in most core categories and
in most markets. U.K. revenues will also be affected by fluctuations in the exchange rate. For the
first 45 days of 2009, the average exchange rate was approximately 1.45, or 26% lower than the
comparable period in 2008.
30
Newspaper circulation revenues declined $36 million or 3% over 2007. Circulation revenues for
local U.S. and U.K. newspapers were lower for the year. Daily net paid circulation for publishing
operations, excluding USA TODAY, declined 6%, generally consistent with industry trends. However,
volume declines were also affected by price increases for certain elements of local circulation
volume initiated at most U.S. newspapers in 2008, and by selective culling of distribution in
certain areas.
Circulation revenues were higher at USA TODAY, reflecting in part a December 2008 increase in
the single copy price of the newspaper at newsstands and vending machines from $.75 to $1.00. USA
TODAYs average daily circulation for 2008 decreased 2% to 2,255,295. USA TODAY reported an average
daily paid circulation of 2,293,310 in the Audit Bureau of Circulations (ABC) Publishers Statement
for the 26 weeks ended Sept. 30, 2008, a slight increase over the comparable period in 2007.
For local newspapers, morning circulation accounts for approximately 92% of total daily
volume, while evening circulation accounts for 8%.
Publishing circulation revenues in millions, as reported.
Circulation volume for the companys local newspapers is summarized in the table below and
includes data for the companys newspapers participating in joint operating agencies. In 2008, the
company reclassified some net paid circulation volume from evening to morning distribution due to
changes in delivery times. All prior periods have been restated to conform to the new
classifications.
Average net paid circulation volume, in thousands
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
Change |
|
|
2007 |
|
|
Change |
|
|
2006 |
|
Local Newspapers |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Morning |
|
|
4,521 |
|
|
|
(6 |
%) |
|
|
4,809 |
|
|
|
(3 |
%) |
|
|
4,980 |
|
Evening |
|
|
412 |
|
|
|
(7 |
%) |
|
|
442 |
|
|
|
(4 |
%) |
|
|
461 |
|
Total daily |
|
|
4,933 |
|
|
|
(6 |
%) |
|
|
5,251 |
|
|
|
(3 |
%) |
|
|
5,441 |
|
Sunday |
|
|
5,539 |
|
|
|
(5 |
%) |
|
|
5,828 |
|
|
|
(4 |
%) |
|
|
6,068 |
|
Publishing revenue comparisons 2007-2006: Reported advertising revenues for 2007 decreased
$338 million or 6%, reflecting the impact of the real estate and subprime mortgage crisis, the
softening U.S. economy, competitive forces, as well as the absence of the additional week in 2006.
Advertising revenues in Arizona, California, Florida and Nevada were the most severely affected by
the slowing U.S. economy. Approximately 40% of the U.S. Community Publishing ad revenue decline was
attributed to these four states. However, most U.S. publishing businesses reported lower revenues.
In the U.K., in local currency, ad revenues were lower as well, but less so than in the U.S. U.K.
ad revenue declines in local currency were more than offset by a higher average exchange rate for
2007.
Retail ad revenues were down $95 million or 4% in 2007. In the U.S., revenues were lower in
most principal categories, with the more significant declines occurring in the department store,
furniture, entertainment and financial categories. Comparisons were also adversely impacted by the
additional week in 2006. Retail ad revenues declined in the U.S. but rose in the U.K. due to the
currency impact.
National ad revenues were down $69 million or 8% in 2007, primarily due to lower ad sales for
USA TODAY branded publications although national ad revenues for U.S. Community Publishing were
lower as well.
Classified ad revenues decreased $174 million or 8%.Classified revenue declined in the U.S.
but rose in the U.K. due to the currency impact. In the U.S., classified was significantly affected
by the real estate crisis and its contribution to an overall softening in the advertising
environment. Classified revenue declines occurred in all three principal categories of employment
(down 9%), real estate (down 11%), and automotive (down 14%). Classified revenue softness was
greater in the U.S. than in the U.K.
Circulation revenues in 2007 declined $27 million or 2% over 2006. Circulation revenues for
local U.S. newspapers were down slightly, while revenues rose slightly at USA TODAY and in the U.K.
due to the currency impact.
USA TODAYs average daily circulation for 2007 increased 1% to 2,289,872. USA TODAY reported
an average daily paid circulation of 2,293,137 in the Audit Bureau of Circulations (ABC)
Publishers Statement for the 26 weeks ended Sept. 30, 2007, an increase of 1% over the comparable
period in 2006.
Publishing expense comparisons 2008-2007: Publishing operating costs increased $7.55 billion
in 2008, primarily due to $7.95 billion of pre-tax non-cash impairment charges for goodwill, other
intangible assets and certain property, plant and equipment. These charges are more fully discussed
on page 28 of this report and in Note 3 of the Consolidated Financial Statements. Absent these
charges in 2008 and the $72.0 million pre-tax non-cash impairment charges in 2007, publishing
segment expense would have been down 6%.
During 2008, in efforts to align costs with revenue levels, the company undertook
reductions-in-force programs at most of its publishing properties. In total, the company recorded
severance and related benefit costs of approximately $103 million in 2008. Severance and related
benefit costs recorded in 2007 totaled approximately $64 million. Absent the impairment charges,
severance and facility consolidation costs, publishing segment expenses in 2008 declined 7% from
2007 levels.
These savings were achieved through strict cost control measures in the U.S. and the U.K.
Newsprint expense was down 9%, reflecting sharply lower consumption, down 16%, including savings
from web width reductions and greater use of light weight newsprint. Newsprint usage prices in the
U.S. rose throughout most of the year and finished up 13% for the full year. Near the end of the
fourth quarter, however, U.S. newsprint prices declined and the company expects further declines in
2009. Publishing segment expenses were favorably affected by a portion of the curtailment gain
recognized in the second quarter upon the freeze of benefits under its principal qualified domestic
defined benefit pension plan.
Publishing payroll costs were down approximately 6%, reflecting significant headcount
reductions partially offset by modest wage/salary increases.
31
Publishing expense comparisons 2007-2006: Publishing operating costs declined $161 million or
3% in 2007, primarily due to lower newsprint consumption, strong cost controls and the absence of
the additional week in 2006. These factors were partially offset by the impact of the U.K. exchange
rate on expenses, and staff consolidation costs. Publishing segment costs for 2007 also included a
$72.0 million non-cash impairment charge related to several publication mastheads, or titles, from
businesses acquired in recent years in the U.S. and the U.K. The charge results from lower revenue
expectations from these properties than were anticipated at the date they were acquired.
Absent this charge, which had no effect on operations or operating cash flow, publishing
segment expense would have been down 4%. If the non-cash impairment charge is excluded from 2007
costs and adjustments are made to reflect a constant currency rate for 2007 and 2006, publishing
segment expense would have declined 6%.
During 2007, the company undertook reductions-in-force programs at many of its publishing
properties. These programs involved a reduction of nearly 1,700 positions. Efficiency programs also
involved the consolidation of production and business facilities. In total, severance and facility
consolidation costs of approximately $64 million in 2007 were recorded for the publishing segment.
Reported newsprint expense declined 12% for 2007, reflecting a 1% decrease in average prices
and an 11% decrease in consumption. The company has systematically reduced web widths throughout
the U.S. publishing group over the last few years and it has plans to make further reductions in
2008. Expanded use of light weight basis newsprint also occurred in 2007, and substantially more of
the companys newsprint consumption will be shifted to light weight in 2008.
Publishing payroll costs were down approximately 2% reflecting headcount reductions partially
offset by modest wage/salary increases.
Outlook for 2009: The company expects operating expenses to decline in 2009, reflecting
payroll savings from headcount reductions already achieved across nearly all businesses. Newsprint
expense is also expected to be lower as consumption is further reduced and more light-weight paper
is used. Newsprint prices will be higher in the U.K. but these effects will be more than offset by
lower usage in the U.K. and declining prices in the U.S. Pricing comparisons will continue to be
unfavorable in the early part of the year.
Publishing operating results 2008-2007: Publishing operating results in 2008 reflect a loss of
$7.03 billion, compared with operating income of $1.39 billion in 2007. The principal factors
affecting operating results comparisons were the following:
|
|
non-cash asset impairment charges of $7.95 billion; |
|
|
|
generally lower operating results at most U.S. and U.K. properties as all ad revenue
categories were adversely affected by the economic conditions, which worsened as the year
progressed; |
|
|
|
ad revenue losses attributed to increased level of competition from other media,
particularly the Internet; |
|
|
|
lower newsprint usage and expense, which more than offset higher average prices for
the year; |
|
|
|
higher severance and facility consolidation costs, although these will result in labor
and benefit savings going forward; |
|
|
|
pension curtailment credit for certain U.S. plans; |
|
|
|
currency translation at a lower rate in 2008; and |
|
|
|
aggressive and broad based cost control efforts throughout U.S. and U.K. operations
contributed to significant year over year savings. |
Publishing operating results 2007-2006: Publishing operating income decreased in 2007, to
$1.39 billion from $1.59 billion in 2006. The principal factors affecting operating results were
the following:
Favorable
|
|
generally lower newsprint usage and prices; and |
|
|
|
currency translation at a higher rate
in 2007. |
Unfavorable
|
|
generally lower operating results in the U.S. amid a softening overall revenue
environment and competitive forces; |
|
|
|
lower employment, automotive and real estate ad
revenues in the U.S. and U.K.; |
|
|
|
negative impact of 2006s extra week on 2007; |
|
|
|
non-cash intangible asset impairment charge of $72.0 million; and |
|
|
|
severance and facility consolidation costs, although these result in labor and benefit costs going forward. |
|
Digital
Beginning with 2008, a new digital business segment was reported, which includes CareerBuilder and
ShopLocal from the dates of their full consolidation, as well as PointRoll, Planet Discover,
Schedule Star and Ripple6 (from the date of acquisition in period 11, 2008). Prior period results
for PointRoll, Planet Discover and Schedule Star have been reclassified from the publishing segment
to the new digital segment.
On Sept. 3, 2008, the company increased its ownership in CareerBuilder to 50.8% from 40.8%,
obtaining a controlling interest, and therefore, the results of CareerBuilder beginning in
September are now fully consolidated. On June 30, 2008, the company increased its ownership in
ShopLocal to 100% from 42.5%, and from that date the results of ShopLocal are now fully
consolidated. Prior to these increased investments, the companys equity share of CareerBuilder and
ShopLocal results were reported as equity earnings. Subsequent to the CareerBuilder consolidation,
the company reflects a minority interest charge in its Statements of Income (Loss) related to the
other partners ownership interest. This charge is reflected with Other non-operating items.
Over the last three years, reported digital revenues, expenses and operating income were as follows:
In millions of dollars
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
Change |
|
|
2007 |
|
|
Change |
|
|
2006 |
|
Revenues |
|
$ |
281 |
|
|
|
*** |
|
|
$ |
70 |
|
|
|
33 |
% |
|
$ |
53 |
|
Expenses |
|
$ |
262 |
|
|
|
*** |
|
|
$ |
47 |
|
|
|
34 |
% |
|
$ |
35 |
|
Operating income |
|
$ |
19 |
|
|
|
(18 |
%) |
|
$ |
23 |
|
|
|
32 |
% |
|
$ |
18 |
|
Reported digital revenues increased $211 million and reported digital costs increased $215
million from the prior year. The year-over-year increase is primarily due to the full consolidation
of CareerBuilder and ShopLocal in 2008. Digital costs in 2008 also include approximately $17
million in severance and non-cash impairment charges. Operating income for the digital segment
reflects solid results in 2008 for CareerBuilder, PointRoll and ShopLocal. Earnings from these
businesses were partially offset by investments in other digital businesses.
32
Revenues in millions of dollars (pro forma)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
Change |
|
|
2007 |
|
|
Change |
|
|
2006 |
|
Digital |
|
$ |
689 |
|
|
|
13 |
% |
|
$ |
607 |
|
|
|
38 |
% |
|
$ |
440 |
|
On a pro forma basis, digital revenues increased 13% in 2008 due primarily to increased
revenues at CareerBuilder and PointRoll. Digital segment costs on a pro forma basis rose 15%
reflecting severance and impairment charges, general expansion of the CareerBuilder business and
higher intangible asset amortization.
CareerBuilder operations are predominately based in North America, however expansion efforts
are underway in parts of Europe and Asia. CareerBuilder is the nations largest online recruitment
and career advancement source for employees, recruiters and job seekers. Its North American Network
revenue is driven mainly from its own sales force but it also derives revenues from its owner
affiliated newspapers, including the companys newspapers, which represent upsells from print
publication employment ads. For the companys financial reporting purposes, CareerBuilder revenues
exclude amounts recorded at Gannett-owned newspapers. The pro forma gains in CareerBuilder revenues
in 2008 were primarily from its own sales efforts. Upsell revenue softened from non-Gannett
affiliated newspapers as U.S. print employment advertising continued to decline in 2008.
PointRoll revenue improved in 2008 although earnings were down slightly, reflecting new
product development and marketing costs.
Outlook for 2009: The company expects its digital revenue and profit to continue to grow in
2009 principally through full year consolidations of CareerBuilder and ShopLocal.
Broadcasting
The companys broadcasting operations at the end of 2008 included 23 television stations and
affiliated Web sites in markets with a total of more than 20.8 million households reaching 18% of
the U.S. population. The Broadcasting Division also includes Captivate Network.
Broadcasting revenues accounted for approximately 11% of the companys reported operating
revenues in 2008, 2007 and 2006.
Over the last three years, broadcasting revenues, expenses and operating income were as
follows:
In millions of dollars
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
Change |
|
|
2007 |
|
|
Change |
|
|
2006 |
|
Revenues |
|
$ |
773 |
|
|
|
(2 |
%) |
|
$ |
789 |
|
|
|
(8 |
%) |
|
$ |
855 |
|
Expenses |
|
$ |
466 |
|
|
|
(2 |
%) |
|
$ |
474 |
|
|
|
|
|
|
$ |
475 |
|
Operating income |
|
$ |
306 |
|
|
|
(3 |
%) |
|
$ |
315 |
|
|
|
(17 |
%) |
|
$ |
380 |
|
Broadcast revenues decreased $17 million or 2% for 2008. Year-over-year revenue comparisons
are favorably impacted by $24 million in ad revenues associated with the 2008 Summer Olympics and
$94 million in political/election-related advertising. These incremental revenues, however, were
more than offset by revenue losses in several core categories, including automotive and retail.
Excluding Captivate, broadcast revenues declined 2%; local revenue was 8% lower while national was
7% higher. Television online revenue increased by 13% in 2008.
Broadcasting costs declined 2% from the prior year, reflecting cost containment efforts
partially offset by severance costs and non-cash impairment charges. Operating expenses excluding
severance and non-cash impairment charges declined 5% from the prior year.
Broadcast results 2007-2006: Broadcast revenues decreased $66 million or 8% for 2007. The
year-over-year comparison is unfavorably impacted by the near absence of $112 million in ad
revenues associated with the 2006 Winter Olympics, political/election related advertising and the
extra week in 2006. Revenues in 2007 also benefited from the 2006 station acquisitions. Excluding
Captivate, broadcast revenues decreased 8%; local television station revenue was 3% lower and
national was 19% lower. Television online revenue increased by 30% in 2007.
Broadcasting costs were even with the prior year, reflecting generally lower television
station costs because of lower ad sales, offset by incremental costs associated with the 2006
station acquisitions.
Broadcasting revenues in millions, as reported.
Outlook for 2009: The company expects revenues to be lower due to the economy and to the
absence of the Summer Olympics and substantially reduced political and election related advertising
partially offset by significant increases in retransmission fees. During 2008, the
company entered into retransmission consent agreements with virtually all of the cable
companies in its television markets including four of the largest cable operators in the U.S.,
pursuant to which the companys stations will be carried for period of at least three years, thus
providing the company with significant and steady revenue streams of approximately $50 million of
cash annually. Incremental costs associated with this revenue are minimal and therefore nearly all
of these revenues will contribute directly to operating income. Costs are expected to decline
significantly due to lower revenue levels and savings from consolidations and other cost control
measures.
Consolidated operating expenses
Over the last three years, the companys consolidated operating expenses were as follows:
Consolidated operating expenses, in millions of dollars
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
Change |
|
|
2007 |
|
|
Change |
|
|
2006 |
|
Cost of sales |
|
$ |
4,013 |
|
|
|
(4 |
%) |
|
$ |
4,164 |
|
|
|
(5 |
%) |
|
$ |
4,371 |
|
Selling, general and
admin. expenses |
|
$ |
1,278 |
|
|
|
1 |
% |
|
$ |
1,270 |
|
|
|
(2 |
%) |
|
$ |
1,301 |
|
Depreciation |
|
$ |
231 |
|
|
|
(6 |
%) |
|
$ |
246 |
|
|
|
4 |
% |
|
$ |
237 |
|
Amortization of
intangible assets |
|
$ |
31 |
|
|
|
(14 |
%) |
|
$ |
36 |
|
|
|
6 |
% |
|
$ |
34 |
|
Asset impairment and
other charges |
|
$ |
7,976 |
|
|
|
*** |
|
|
$ |
72 |
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
13,529 |
|
|
|
*** |
|
|
$ |
5,789 |
|
|
|
(3 |
%) |
|
$ |
5,943 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales for 2008 declined $151 million or 4%. Newsprint costs were 9% lower because of
sharply reduced consumption partially offset by higher average prices, which were up 9%. Severance
and related benefit costs of $97 million were partially offset by a portion of the curtailment gain
for the benefit freeze under U.S.
33
pension plans. Incremental costs from the initial consolidation
in the third quarter of 2008 of CareerBuilder and ShopLocal also contributed to higher cost of
goods sold. Cost of sales excluding severance from 2008 and 2007 and the incremental costs from the
2008 acquisitions of CareerBuilder and ShopLocal, would have declined 7%, reflecting very strong
cost controls at virtually all locations.
Selling, general and administrative expenses rose $8 million or 1% primarily due to the
incremental costs from the initial consolidation of CareerBuilder and ShopLocal and from severance.
Excluding severance from 2008 and 2007 and the incremental costs from the 2008 acquisitions of
CareerBuilder and ShopLocal, SG&A costs would have declined 9% for the year. This again reflects
strong cost controls including lower stock-based compensation and lower corporate costs.
Depreciation expense was 6% lower in 2008, reflecting reduced capital spending, reduced
depreciation from impaired assets and certain assets reaching the end of their depreciable life.
The non-cash asset impairment charges for 2008 and 2007 are more fully discussed on page 28 of this
report and in Notes 3 and 4 to the Consolidated Financial Statements.
Total operating expense increased $7.74 billion principally due to the non-cash impairment charges, severance cost and the
initial consolidations of CareerBuilder and ShopLocal.
Payroll, benefits and newsprint costs (along with certain other production material costs),
the largest elements of the companys normal operating expenses, are presented below, expressed as
a percentage of total pre-tax operating expenses (excluding non-cash impairment charges, severance
and related expenses):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
Payroll and employee benefits |
|
|
47.9 |
% |
|
|
48.0 |
% |
|
|
46.9 |
% |
Newsprint and other
production material |
|
|
16.9 |
% |
|
|
17.5 |
% |
|
|
18.3 |
% |
Operating expense comparisons 2007-2006: Cost of sales for 2007 declined $207 million or 5%.
Newsprint costs were substantially lower because of reduced consumption and lower prices. Generally
strong cost controls were in place at all operations and comparisons were favorably affected by the
extra week in 2006. These favorable factors were partially offset by severance and facility
consolidation costs and by the higher foreign currency translation rate for U.K. operations.
Selling, general and administrative expenses declined $31 million or 2% primarily due to
strong cost controls, lower stock compensation expense and the absence of the impact of the
additional week in 2006.
Depreciation expense was 4% higher in 2007, reflecting accelerated depreciation related to
facility consolidations.
The non-cash intangible asset impairment charges of $72 million were recognized in 2007, which
are more fully discussed on page 28 of this report and in Note 4 to the Consolidated Financial
Statements.
Total operating expenses declined 3% or $154 million in 2007. If the non-cash impairment
charges are excluded from 2007 costs and adjustments are made to reflect a constant currency rate
for 2007 and 2006, operating costs would have declined 5%. This includes the negative impact of $65
million in severance and facility consolidation costs.
Outlook for 2009: The company anticipates that operating expenses, exclusive of non-cash
impairment charges, will decline further in 2009, reflecting payroll savings from completed
restructuring activities across nearly all businesses. In January 2009, the company announced an
employee furlough program for the first quarter of 2009. Most domestic employees will be furloughed
the equivalent of one weeks work during which the employees will not be paid or permitted to work.
Newsprint expense is also expected to be lower as consumption is further reduced and more
light-weight paper is used. Newsprint prices are expected to decline from end of 2008 levels,
although pricing comparisons in the early months of 2009 will continue to be unfavorable.
In the benefits area, pension costs are expected to be higher, reflecting the lower 2008
impact of significant negative investment returns for qualified plan assets in 2008, due to the
disruption of financial markets and equity share values.
Incremental expenses from the consolidation of CareerBuilder, ShopLocal and Ripple6 for the
full year of 2009 will result in increases to all operating cost categories.
The company will continue its efforts to reduce operating costs wherever possible and
practical.
Non-operating income and expense
Equity earnings: This income statement category reflects results from unconsolidated minority
interest investments, including the companys equity share of operating results from its newspaper
partnerships, including Tucson, which participates in a joint operating agency, the California
Newspapers Partnership and the Texas-New Mexico Newspapers Partnership and investments in certain
other online/new technology businesses. The companys net equity loss in unconsolidated investees
for 2008 includes $380 million of impairment charges related to equity investments in newspaper
partnerships and certain other businesses (discussed more fully on page 28 of this report and in
Note 3 to the Consolidated Financial Statements). Absent these non cash impairment charges, the companys net equity income in
unconsolidated investees declined $35 million for the year, reflecting primarily lower operating
results from all three newspaper partnership investments, but also continuing investment in digital
assets including Metromix, Mogulus, 4INFO and Fantasy Sports Ventures.
Interest expense: Interest expense in 2008 declined $69 million or 27%, reflecting lower
average outstanding debt and lower rates.
Interest expense in 2007 fell $28 million or 10%, reflecting lower average outstanding debt
and lower rates.
A further discussion of the companys borrowing and related interest costs is presented in the
Liquidity and capital resources section of this report on page 35, and in Note 7 to the
Consolidated Financial Statement.
Other non-operating items: In 2008, the company realized a gain on the sale of a parcel of
land adjacent to its headquarters building in McLean, Va., several gains on the sale of certain
investments and other assets and a gain on the redemption of a portion of the companys notes due
in May 2009. These gains were partially offset by foreign currency translation losses and the
minority interest charge for CareerBuilder, which has been recorded in this category since the
company acquired a controlling interest on Sept. 3, 2008. The level of asset sale gains was lower
in 2007.
34
Outlook for 2009: The company expects its net interest expense to be flat for the year due to
lower debt outstanding in part offset by higher interest expense on a projected term financing. The
company expects equity income, absent impairment charges, to decline due to investments in new
businesses including Metromix, Mogulus and COZI.
Provision (benefit) for income taxes on earnings from continuing operations
The company reported a pre-tax loss of $7.31 billion for 2008. This pre-tax loss includes
impairment charges for intangible and other assets taken in the second and fourth quarters, the
majority of which are not deductible for income tax purposes. Therefore, the effective tax benefit
rate on these pre-tax losses, including the impairment charges, is 9% for the year. Excluding the
pre-tax and tax effects of all impairment charges, the companys effective tax rate on such
earnings would have been 28.7% for the year.
This
2008 rate of 28.7% benefitted from several factors, including favorable U.S. state and U.K. tax
settlements, the release of certain state tax reserves upon the expiration of statutes of
limitation, a lower U.K. statutory rate and the provisions of the American Jobs Creation Act, which
permit a U.S. federal deduction for certain domestic production activities.
The 2007 and 2006 effective tax rates of 32.7% and 32.4%, respectively, reflect the favorable
settlement of tax audits during those years and the provisions of the American Jobs Creation Act.
Higher state income taxes contributed to the increase in the effective rate for 2007.
Further information concerning income tax matters is contained in Note 10 of the Consolidated
Financial Statements.
Income (loss) from continuing operations
For 2008, the companys loss from continuing operations was $6.65 billion. The loss reflects the
non-cash after-tax impairment charges of $7.39 billion or $32.28 per diluted share.
Absent the impairment charges from 2008 and 2007, income from continuing operations declined 27% .
In thousands, except per share amounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
Change |
|
|
2007 |
|
|
Change |
|
|
2006 |
|
Income (loss) from continuing operations (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per basic share (1) |
|
$ |
(29.11 |
) |
|
|
*** |
|
|
$ |
4.18 |
|
|
|
(13 |
%) |
|
$ |
4.81 |
|
Per diluted share (1) |
|
$ |
(29.11 |
) |
|
|
*** |
|
|
$ |
4.17 |
|
|
|
(13 |
%) |
|
$ |
4.81 |
|
Average basic shares outstanding |
|
|
228,345 |
|
|
|
(2 |
%) |
|
|
233,148 |
|
|
|
(1 |
%) |
|
|
236,337 |
|
Average diluted shares outstanding |
|
|
228,345 |
|
|
|
(2 |
%) |
|
|
233,740 |
|
|
|
(1 |
%) |
|
|
236,756 |
|
|
|
|
(1) |
|
Results for 2008 include pre-tax non-cash asset impairment charges of $8.35 billion ($7.39
billion after-tax or $32.28 per share). Results for 2007 include pre-tax non-cash intangible asset
impairment charges of $72.0 million ($50.8 million after-tax or $.22 per share). The asset
impairment charges did not affect the companys operations or cash flow. Refer to page 28 of this
report for further discussion and to Notes 3 and 4 of the Consolidated Financial Statements. |
In 2007, the company reported income from continuing operations of $975.6 million or $4.17 per
diluted share. Income from continuing operations was down 14% while income per share, basic and
diluted, declined 13%, reflecting share repurchase activity.
Discontinued operations
Earnings from discontinued operations represent the combined operating results (net of income
taxes) of the Norwich (Conn.) Bulletin, the Rockford (Ill.) Register Star, the Observer-Dispatch in
Utica, N.Y., and The Herald-Dispatch in Huntington, W.Va., sold in May 2007. The Chronicle-Tribune
in Marion, Ind., was contributed to the Gannett Foundation in May 2007 and is also included in
discontinued operations. The revenues and expenses from each of these properties have, along with
associated income taxes, been removed from continuing operations and reclassified into a single
line item amount on the Statements of Income (Loss) titled Income from the operation of
discontinued operations, net of tax for each period presented.
Earnings from discontinued operations, excluding the gain, per diluted share were $.03 in 2007
and $.10 in 2006. In 2007 the company also reported earnings per diluted share of $.32 for the gain
on the disposition of these properties.
Discontinued Operations
In thousands, except per share amounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007 |
|
|
Change |
|
|
2006 |
|
Income (loss) from operation of discontinued
operations, net of tax |
|
$ |
6,221 |
|
|
|
(73 |
%) |
|
$ |
22,896 |
|
Per share diluted |
|
$ |
.03 |
|
|
|
(70 |
%) |
|
$ |
.10 |
|
Gain on disposal of newspaper businesses,
net of tax |
|
$ |
73,814 |
|
|
|
|
|
|
|
|
|
Per share diluted |
|
$ |
.32 |
|
|
|
|
|
|
|
|
|
Net income (loss) and related per share amounts are presented in the table below, and include
income from continuing and discontinued operations.
In millions of dollars, except per share amounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
Change |
|
|
2007 |
|
|
Change |
|
|
2006 |
|
Net income (loss) |
|
$ |
(6,648 |
) |
|
|
*** |
|
|
$ |
1,056 |
|
|
|
(9 |
%) |
|
$ |
1,161 |
|
Per basic share |
|
$ |
(29.11 |
) |
|
|
*** |
|
|
$ |
4.53 |
|
|
|
(8 |
%) |
|
$ |
4.91 |
|
Per diluted share |
|
$ |
(29.11 |
) |
|
|
*** |
|
|
$ |
4.52 |
|
|
|
(8 |
%) |
|
$ |
4.90 |
|
FINANCIAL POSITION
Liquidity and capital resources
The companys cash flow from operating activities was $1.02 billion in 2008, down from $1.35
billion in 2007, primarily reflecting lower operating earnings for the publishing segment. Cash
flow for 2007 was favorably affected by refunds of tax and interest received of $178 million (see
Note 10 of the Consolidated Financial Statements for more detail).
Cash used for investing activities totaled $272.8 million. This reflects capital spending of
$165 million, $168.6 million for acquisitions, and $46.8 million for equity investments, including
Metromix. Proceeds from the sale of certain assets totaled $78.5 million.
Cash used by the company for financing activities totaled $716.9 million in 2008. This
reflects repurchase of approximately 2.3 million shares of the companys stock for $72.8 million,
the payment of dividends totaling $366.7 million and payments of unsecured promissory notes and
other indebtedness totaling $2.46 billion. These financing cash flows were partially offset by
proceeds of $280 million under a term loan agreement with certain lenders and $1.9 billion under
revolving credit agreements.
35
Certain key measurements of the elements of working capital for the last three years are
presented in the following chart:
Working capital measurements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
Current ratio |
|
1.1-to-1 |
|
1.4-to-1 |
|
1.4-to-1 |
Accounts receivable turnover |
|
|
7.5 |
|
|
|
7.5 |
|
|
|
7.8 |
|
Newsprint inventory turnover |
|
|
5.8 |
|
|
|
6.8 |
|
|
|
6.4 |
|
The companys operations have historically generated strong positive cash flow which, along
with the companys program of issuing commercial paper and maintaining bank revolving credit
agreements, has provided adequate liquidity to meet the companys requirements, including those for
acquisitions. During September 2008, liquidity in the commercial paper market was highly
constrained and the company elected to borrow under its revolving credit agreements to repay
commercial paper outstanding as it matured. As of Dec. 28, 2008, the company had $1.9 billion of
borrowings under its revolving credit facilities which had been used to repay all outstanding
commercial paper. The companys current credit rating effectively precludes it from issuing
commercial paper. The company anticipates reducing the level of borrowings under its revolving
credit facilities over time with cash flow from operations and will look to strategically refinance
amounts borrowed with the issuance of longer-term debt.
Long-term debt
The long-term debt of the company is summarized below.
In thousands of dollars
|
|
|
|
|
|
|
|
|
|
|
Dec. 28, 2008 |
|
|
Dec. 30, 2007 |
|
Unsecured floating notes due May 2009 |
|
$ |
632,205 |
|
|
$ |
750,000 |
|
Unsecured notes bearing fixed rate
interest at 5.75% due June 2011 |
|
|
498,464 |
|
|
|
497,832 |
|
Unsecured floating rate term loan due
July 2011 |
|
|
280,000 |
|
|
|
|
|
Borrowings under revolving credit
agreements expiring March 2012 |
|
|
1,907,000 |
|
|
|
|
|
Unsecured notes bearing fixed rate
interest at 6.375% due April 2012 |
|
|
499,269 |
|
|
|
499,046 |
|
Unsecured promissory notes |
|
|
|
|
|
|
835,010 |
|
Unsecured notes bearing fixed rate
interest at 4.125% repaid June 2008 |
|
|
|
|
|
|
499,721 |
|
Unsecured senior convertible notes
repaid July 2008 |
|
|
|
|
|
|
1,000,000 |
|
Industrial revenue bonds and other
indebtedness |
|
|
4 |
|
|
|
16,729 |
|
|
|
|
|
|
|
|
Total long-term debt |
|
$ |
3,816,942 |
|
|
$ |
4,098,338 |
|
|
|
|
|
|
|
|
As of Dec. 28, 2008, there were no unsecured promissary notes outstanding. The unsecured
promissory notes at Dec. 30, 2007, were due from Jan. 2, 2008, to Feb. 8, 2008, with rates varying
from 5.28% to 5.60%.
The maximum amount of such promissory notes outstanding at the end of any period during 2008
and 2007 was $2.0 billion and $2.7 billion, respectively. The daily average outstanding balance of
promissory notes was $883 million during 2008 and $1.7 billion during 2007. The weighted average
interest rate on such notes was 3.5% for 2008 and 5.4% for 2007.
As of Dec. 28, 2008, the company had approximately $1.9 billion of borrowings under its
revolving credit facilities, which were used to repay all outstanding commercial paper. The maximum
amount outstanding at the end of any period during 2008 was $1.9 billion. The daily average
outstanding balance of the revolving credit facilities was $486 million during 2008. The weighted
average interest rate was 4.4% for 2008.
Total average debt outstanding in 2008 and 2007 was $4.0 billion and $4.6 billion,
respectively. The weighted average interest rate on all debt was 4.6% for 2008 and 5.4% for 2007.
The unsecured fixed rate notes bearing interest at 6.375% were issued in March 2002 and mature
in 2012.
On June 16, 2008, the company repaid $500 million in unsecured notes bearing interest at
4.125% that were due using borrowings in the commercial paper market. These notes were issued in
June 2005 in an underwritten public offering.
In May 2006, the company issued $500 million aggregate principal amount of 5.75% notes due
2011 and $750 million aggregate principal amount of floating rate notes due 2009 in an underwritten
public offering. The net proceeds of the offering were used to pay down commercial paper
borrowings.
On April 2, 2007, the company redeemed the $700 million aggregate principal amount of 5.50%
notes. This payment was funded by borrowings in the commercial paper market and from investment
proceeds of $525 million in marketable securities.
In June 2007, the company issued $1.0 billion aggregate principal amount of unsecured senior
convertible notes in an underwritten public offering. Proceeds from the notes were used to repay
commercial paper obligations. The convertible notes bore interest at a floating rate equal to one
month LIBOR, reset monthly, minus twenty-three basis points. As anticipated, on July 15, 2008, the
holders of the convertible notes required the company to repurchase the convertible notes for cash
at a price equal to 100% of the principal amount of the notes submitted for repurchase, plus
accrued and unpaid interest.
The industrial revenue bonds were repaid in full in 2008. Prior to repayment, the bonds bore
interest at a floating rate based on a municipal bond index.
In December 2008, the company launched a tender offer to purchase any and all of its
outstanding floating rate notes due in May 2009 at a purchase price of $950 per $1,000 in principal
amount plus accrued and unpaid interest. In the response to the offer, $98.4 million in aggregate
principal amount of notes, representing approximately 13.5 percent of the then outstanding notes,
were purchased at this price in December 2008. Prior to the tender offer, the company had
repurchased $19.4 million in principal amount of the floating rate notes in a privately negotiated
transaction. In connection with these transactions, the company recorded a gain of $4 million which
is classified in Other non-operating items in the Statement of Income (Loss). This gain is net of
$1.7 million in projected losses reclassified from accumulated other comprehensive income (loss)
related to the interest swap agreements.
36
In August 2007, the company entered into three interest rate swap agreements totaling a
notional amount of $750 million in order to mitigate the volatility of interest rates. These
agreements effectively fixed the interest rate on the $750 million in floating rate notes due May
2009 at 5.0125%. These instruments were designated as cash flow hedges in accordance with SFAS No.
133, Accounting for Derivative Instruments and Hedging Activities, and changes in fair value are
recorded through accumulated other comprehensive income with a corresponding adjustment to other
long-term liabilities. As a result of the transactions discussed above, the cash flow hedging
treatment was discontinued for interest rate swaps associated with approximately $118 million of
notional value on the retired floating rate notes. Amounts recorded in accumulated other
comprehensive income (loss) related to the discontinued cash flow hedges were reclassified into
earnings and subsequent changes are being recorded through earnings.
In July 2008, the company received proceeds of $280 million from borrowings under a new term
loan agreement with certain bank lenders. The term loan is payable in full on July 14, 2011. The
loan carries interest at a floating rate and may be prepaid at any time without penalty.
On Oct. 31, 2008, the company amended each of its three revolving credit agreements and its
term loan agreement. Under each of the amendments, the existing financial covenant requiring that
the company maintain shareholders equity in excess of $3.5 billion was replaced with a new
covenant that requires that the company maintain a senior leverage ratio of less than 3.5x. The new
covenant also requires the company to maintain a total leverage ratio of less than 4.0x. The total
leverage ratio would also include any subordinated debt the company may issue in the future.
Currently, all of the companys debt is senior and unsecured. At Dec. 28, 2008, the senior leverage
ratio was 2.56x. The company believes its senior leverage ratio will remain below 3.5 during 2009.
In addition, the aggregate size of the revolving credit facilities was reduced to $3.1 billion
from $3.9 billion. There is a further provision that the aggregate size of the three revolving
credit agreements will be reduced on a dollar-for-dollar basis for the first $397 million that the
company raises in the capital markets prior to Dec. 31, 2009. Irrespective of any such interim
reductions, the aggregate size of the three revolving credit agreements will be reduced to $2.75
billion on Dec. 31, 2009. The amendments also provide for certain changes to the pricing of the
facilities. For the revolving credit facilities, the commitment fees may range from 0.125% to 0.25%
depending on credit ratings for the companys senior unsecured debt from Moodys Investor Services
(Moodys) and Standard & Poors (S&P). The rate currently in effect is 0.20%.
Under each of the agreements, the company may borrow at an applicable margin above the
Eurodollar base rate or the higher of the Prime Rate or the Federal Funds Effective Rate plus
0.50%. Under the amended revolving credit agreements, the applicable margin for such borrowings
ranges from 1.00% to 2.25% depending on credit ratings. Under the term loan agreement, the
applicable margin varies from 1.25% to 2.25%. At its current ratings the company will pay an
applicable margin of 1.75% under the revolving credit agreements and 1.75% under the term loan
agreement.
Also, in connection with the amendments, the company agreed to provide future guarantees from
its domestic wholly-owned subsidiaries in the event that the companys credit ratings from either
Moodys or S&P fall below investment grade. If the guarantees are triggered, the existing notes and
other unsecured debt of the company will become structurally subordinated to the revolving credit
agreements and the term loan. The company believes the amended facilities provide it with ample
liquidity to operate its business and pursue its strategic objectives.
The companys short-term and long-term debt is rated by S&P and Moodys. On Nov. 11, 2008,
S&P, reduced the companys long-term rating to BBB- and on Jan. 30, 2009, placed the companys
long-term and short-term ratings on credit watch with negative implications. On Feb. 2, 2009,
Moodys reduced the companys long term and short-term ratings to Baa3 and P-3, respectively and
placed the ratings under review for further downgrades. If S&P or Moodys further downgrades the
companys credit ratings, then the revolving credit agreement guarantees discussed above will be
triggered.
The company has an effective universal shelf registration statement filed with the Securities
and Exchange Commission in July 2006 under which an unspecified amount of securities may be issued,
subject to a $7 billion limit established by the Board of Directors. Proceeds from the sale of such
securities may be used for general corporate purposes, including capital expenditures, working
capital, securities repurchase programs, repayment of debt and financing of acquisitions. The
company may also invest borrowed funds that are not required for other purposes in short-term
marketable securities.
The following schedule of annual maturities of long-term debt assumes the company uses
available capacity under its revolving credit agreements to refinance the unsecured floating rate
notes due in 2009. Based on this refinancing assumption, all of the obligations are reflected as
maturities for 2011 and 2012.
|
|
|
|
|
In thousands of dollars |
|
|
|
|
2009 |
|
$ |
|
|
2010 |
|
|
|
|
2011 |
|
|
778,464 |
|
2012 |
|
|
3,038,478 |
|
2013 |
|
|
|
|
Later years |
|
|
|
|
|
|
|
|
Total |
|
$ |
3,816,942 |
|
|
|
|
|
The fair value of the companys total long-term debt, determined based on estimated market
prices for similar issues of debt with the same remaining maturities and similar terms, totaled
$3.0 billion at Dec. 28, 2008.
The company has a capital expenditure program (not including business acquisitions) of
approximately $148 million planned for 2009, including approximately $4 million for land and
buildings or renovation of existing facilities, $128 million for machinery and equipment, and $16
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 2009 capital program will be funded from cash flow
from operations.
37
Contractual obligations and commitments
The following table summarizes the expected cash outflows resulting from financial contracts and
commitments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contractual obligations |
|
Payments due by period |
|
In millions of dollars |
|
Total |
|
|
2009 |
|
|
2010-11 |
|
|
2012-13 |
|
|
Thereafter |
|
Long-term debt (1) |
|
$ |
4,368 |
|
|
$ |
179 |
|
|
$ |
1,118 |
|
|
$ |
3,071 |
|
|
$ |
|
|
Operating leases (2) |
|
|
340 |
|
|
|
60 |
|
|
|
96 |
|
|
|
64 |
|
|
|
120 |
|
Purchase obligations (3) |
|
|
605 |
|
|
|
320 |
|
|
|
179 |
|
|
|
96 |
|
|
|
10 |
|
Programming contracts (4) |
|
|
107 |
|
|
|
14 |
|
|
|
77 |
|
|
|
15 |
|
|
|
1 |
|
Other long-term liabilities (5) |
|
|
423 |
|
|
|
41 |
|
|
|
83 |
|
|
|
85 |
|
|
|
214 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
5,843 |
|
|
$ |
614 |
|
|
$ |
1,553 |
|
|
$ |
3,331 |
|
|
$ |
345 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
See Note 7 to the Consolidated Financial Statements. The amounts included above include
periodic interest payments. Interest payments are based on interest rates in effect at year-end and
assume term debt is outstanding for the life of the back-up revolving credit agreements.
|
|
(2) |
|
See Note 12 to the Consolidated Financial Statements. |
|
(3) |
|
Includes purchase obligations related to printing contracts, newsprint contracts, capital
projects, interactive marketing agreements, wire services and other legally binding commitments.
Amounts which the company is liable for under purchase orders outstanding at Dec. 28, 2008, are
reflected in the consolidated balance sheets as accounts payable and accrued liabilities and are
excluded from the table above. |
|
(4) |
|
Programming contracts include television station commitments reflected in the consolidated
balance sheet and commitments to purchase programming to be produced in future years. |
|
(5) |
|
Other long-term liabilities primarily consist of amounts expected to be paid under
postretirement benefit plans. |
Due to uncertainty with respect to the timing of future cash flows associated with
unrecognized tax benefits at Dec. 28, 2008, the company is unable to make reasonably reliable
estimates of the period of cash settlement. Therefore, $182 million of unrecognized tax benefits
have been excluded from the contractual obligations table above. See Note 10 to the Consolidated
Financial Statements for further discussion of income taxes.
The companys principal defined benefit plan, the Gannett Retirement Plan, was underfunded by
$587 million at Dec. 28, 2008. Under current U.S. pension laws and regulations, the company is not
required to make contributions to the Gannett Retirement Plan in 2009, however it may elect to do
so. Due to uncertainties regarding significant assumptions involved in estimating future
contributions, such as interest rate levels and the amount and timing of asset returns, the company
is unable to reasonably estimate its future contributions beyond 2009.
In December 1990, the company adopted a Transitional Compensation Plan (the Plan). The Plan
provides termination benefits to key executives whose employment is terminated under certain
circumstances within two years following a change in control of the company. Benefits under the
Plan include a severance payment of up to three years compensation and continued life and medical
insurance coverage.
Capital stock
In February 2004, the company announced the reactivation of its share repurchase program that had
last been utilized in February 2000. On July 25, 2006, the authorization to repurchase shares was
increased by $1 billion, and as of Dec. 28, 2008, approximately $808.9 million may yet be expended
under the program. Under the program, the company purchased $72.8 million (2.3 million shares),
$215.2 million (4.6 million shares) and $215.4 million (3.9 million shares) in 2008, 2007 and 2006,
respectively. Shares may be repurchased at managements discretion, either in the open market or in
privately negotiated block transactions. Managements decision to repurchase shares will depend on
price, availability and other corporate circumstances. Purchases may occur from time to time and no
maximum purchase price has been set. The companys Board of Directors reviews the share repurchase
authorization annually, the last such review having occurred in October 2008. Certain of the shares
previously acquired by the company have been reissued in settlement of employee stock awards. For
more information on the share repurchase program, refer to Item 5 of Part II of this Form 10-K.
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 companys matching contribution, an Employee
Stock Ownership Plan (ESOP) was formed which acquired 2,500,000 shares of Gannett stock from the
company for $50 million. The stock purchase was financed with a loan from the company. In June
2003, the debt was fully repaid and all of the shares had been fully allocated to participants. The
company elected not to add additional shares to the ESOP and began funding contributions in cash.
Through 2008, the ESOP used the cash match to purchase on the open market an equivalent number of
shares of company
stock on behalf of participants. Beginning in 2009, the company intends to fund the 401(k)
Savings Plan match through the issuance of treasury shares.
The companys common stock outstanding at Dec. 28, 2008, totaled 228,123,393 shares, compared
with 230,202,557 shares at Dec. 30, 2007.
Dividends
Dividends declared on common stock amounted to $365 million in 2008, compared with $331 million in
2007.
Dividends declared per share.
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends |
|
|
Payment date |
|
|
Per share |
|
2008 |
|
4th Quarter |
|
Jan. 2, 2009 |
|
$ |
.40 |
|
|
|
3rd Quarter |
|
Oct. 1, 2008 |
|
$ |
.40 |
|
|
|
2nd Quarter |
|
July 1, 2008 |
|
$ |
.40 |
|
|
|
1st Quarter |
|
April 1, 2008 |
|
$ |
.40 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007 |
|
4th Quarter |
|
Jan. 2, 2008 |
|
$ |
.40 |
|
|
|
3rd Quarter |
|
Oct. 1, 2007 |
|
$ |
.40 |
|
|
|
2nd Quarter |
|
July 2, 2007 |
|
$ |
.31 |
|
|
|
1st Quarter |
|
April 2, 2007 |
|
$ |
.31 |
|
On Feb.
25, 2009, the Board of Directors declared a dividend of four cents
per share, payable on April 1, 2009, to shareholders of record as of the close of business March 6, 2009. This is a reduction from the first quarter dividend rate of 40 cents per share,
38
which
further strengthens the companys balance sheet and allows the company greater financial flexibility through the reallocation of more than $325 million of free cash flow annually toward debt repayment.
The Boards action is in response to the full-fledged recessions in the U.S. and U.K. and the continuing difficulties in the credit markets.
Accumulated other comprehensive income (loss)
The companys foreign currency translation adjustment, included in accumulated other comprehensive
income (loss) and reported as part of shareholders equity, totaled $355 million at the end of 2008
and $777 million at the end of 2007. The decrease reflects a weakening of Sterling against the U.S.
dollar. Newsquests assets and liabilities at Dec. 28, 2008, were translated from Sterling to U.S.
dollars at an exchange rate of 1.46 versus 2.00 at the end of 2007. Newsquests financial results
were translated at an average rate of 1.86 for 2008, 2.00 for 2007 and 1.84 for 2006.
The company adopted SFAS No. 158 at Dec. 31, 2006, which changed the accounting for pension
and other postretirement benefits as discussed in Note 1 to the financial statements. Under this
standard the company has recognized the funded status of its pension and retiree medical benefit
plans in the statement of financial position. At Dec. 28, 2008, accumulated other comprehensive
income includes an $819 million pre-tax charge for the aggregate excess of retirement plan
liabilities over plan assets.
In August 2007, the company entered into three interest rate swap agreements totaling a
notional amount of $750 million in order to mitigate the volatility of interest rates. This
arrangement effectively fixed the interest rate on the $750 million in floating rate notes due May
2009 at 5.0125%. These instruments were designated as cash flow hedges in accordance with SFAS No.
133, Accounting for Derivative Instruments and Hedging Activities and changes in fair value were
recorded through accumulated other comprehensive income (loss) with a corresponding adjustment to
other long-term liabilities. As a result of partially redeeming the floating rate notes, the cash
flow hedging treatment was discontinued for interest rate swaps associated with approximately $118
million of notional value on the retired floating rate notes.
Amounts recorded in accumulated other comprehensive income (loss) related to the discontinued cash
flow hedges were reclassified into earnings and subsequent changes are being recorded through
earnings.
Effects of inflation and changing prices and other matters
The companys results of operations and financial condition have not been significantly affected by
inflation. The companys principal operating costs have not generally been subject to significant
inflationary pressures. Further, the effects of inflation and changing prices on the companys
property, plant and equipment and related depreciation expense have been reduced as a result of an
ongoing capital expenditure program and the availability of replacement assets with improved
technology and efficiency.
The company is exposed to foreign exchange rate risk primarily due to its ownership of
Newsquest, which uses the British pound as its functional currency, which is then translated into
U.S. dollars. The companys foreign currency translation adjustment, related principally to
Newsquest and reported as part of shareholders equity, totaled $355 million at Dec. 28 2008.
Newsquests assets and liabilities were translated from British pounds to U.S. dollars at the Dec.
28, 2008, exchange rate of 1.46. Refer to Item 7A below for additional detail.
Certain factors affecting forward-looking statements
Certain statements in this Annual Report on Form 10-K contain forward-looking information. The
words expect, intend, believe, anticipate, likely, will and similar expressions
generally identify forward-looking statements. These forward-looking statements are subject to
certain risks and uncertainties that could cause actual results and events to differ materially
from those anticipated in the forward-looking statements. The company is not responsible for
updating or revising any forward-looking statements, whether the result of new information, future
events or otherwise, except as required by law.
Potential risks and uncertainties which could adversely affect the companys results include,
without limitation, the following factors: (a) increased consolidation among major retailers or
other events which may adversely affect business operations of major customers and depress the
level of local and national advertising; (b) a continuance of the economic recessionary conditions
in the U.S. and the U.K. or a further economic downturn leading to a continuing or accelerated
decrease in circulation or local, national or classified advertising; (c) a decline in general
newspaper readership and/or advertiser patterns as a result of competitive alternative media or
other factors; (d) an increase in newsprint or syndication programming costs over the levels
anticipated; (e) labor disputes which may cause revenue declines or increased labor costs; (f)
acquisitions of new businesses or dispositions of existing businesses; (g) a decline in viewership
of major networks and local news programming; (h) rapid technological changes and frequent new
product introductions prevalent in electronic publishing; (i) an increase in interest rates; (j) a
weakening in the British pound to U.S. dollar exchange rate; (k) volatility in financial and credit
markets which could affect the value of retirement plan assets and the companys ability to raise
funds through debt or equity issuances; (l) changes in the regulatory environment; (m) an other
than temporary decline in operating results and enterprise value that could lead to further
non-cash goodwill, or other intangible asset or property, plant and equipment impairment charges;
(n) credit rating downgrades, which could affect the availability and cost of future financing; and
(o) general economic, political and business conditions.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The company believes that its market risk from financial instruments, such as accounts receivable,
accounts payable and debt, is not material. The company is exposed to foreign exchange rate risk
primarily due to its operations in the United Kingdom, for which the British pound is the
functional currency. Translation gains or losses affecting the Consolidated Statements of Income have not been
significant in the past. If the price of the British pound against the U.S. dollar had been 10%
more or less than the actual price, operating income, excluding the non-cash impairment charges,
for 2008 would have increased or decreased less than 1%.
Because the company has $2.8 billion in floating interest rate obligations outstanding at Dec.
28, 2008, the company is subject to significant changes in the amount of interest expense it might
incur. A 1/2% increase or decrease in the average interest rate for these obligations would result
in an increase or decrease in annual interest expense of $14.1 million.
Refer to Note 7 to the Consolidated Financial Statements for information regarding the fair value of the companys
long-term debt.
39
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|
|
|
|
|
|
|
Page |
|
|
FINANCIAL STATEMENTS |
|
|
|
|
|
|
|
|
|
|
|
|
41 |
|
|
|
|
|
|
|
|
|
42 |
|
|
|
|
|
|
|
|
|
44 |
|
|
|
|
|
|
|
|
|
45 |
|
|
|
|
|
|
|
|
|
46 |
|
|
|
|
|
|
|
|
|
47 |
|
|
|
|
|
|
SUPPLEMENTARY DATA |
|
|
|
|
|
|
|
|
|
|
|
|
70 |
|
|
|
|
|
|
FINANCIAL STATEMENT SCHEDULE |
|
|
|
|
|
|
|
|
|
|
|
|
72 |
|
|
|
|
|
|
OTHER INFORMATION |
|
|
|
|
|
|
|
|
|
|
|
|
68 |
|
|
|
|
|
|
|
|
|
* |
|
All other schedules prescribed under Regulation S-X are omitted because they are not applicable or not required. |
40
REPORT OF ERNST & YOUNG LLP, INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders of Gannett Co., Inc.:
We have audited the accompanying consolidated balance sheets of Gannett Co., Inc. as of
December 28, 2008 and December 30, 2007, and the related consolidated statements of income (loss),
cash flows, and shareholders equity for each of the three fiscal years in the period ended
December 28, 2008. Our audits also included the financial statement schedule listed in the
accompanying index in Item 8. These financial statements and schedule are the responsibility of the
Companys management. Our responsibility is to express an opinion on these financial statements and
schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material
respects, the consolidated financial position of Gannett Co., Inc. at December 28, 2008 and
December 30, 2007, and the consolidated results of its operations and its cash flows for each of
the three fiscal years in the period ended December 28, 2008, in conformity with U.S. generally
accepted accounting principles. Also, in our opinion, the related financial statement schedule,
when considered in relation to the basic financial statements taken as a whole, presents fairly in
all material respects the information set forth therein.
We also have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), Gannett Co., Inc.s internal control over financial reporting as
of December 28, 2008, based on criteria established in Internal Control Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated
February 24, 2009, included in Item 9A, expressed an unqualified opinion thereon.
McLean, Virginia
February 24, 2009
41
GANNETT CO., INC.
CONSOLIDATED BALANCE SHEETS
In thousands of dollars
|
|
|
|
|
|
|
|
|
Assets |
|
Dec. 28, 2008 |
|
|
Dec. 30, 2007 |
|
Current assets |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
98,949 |
|
|
$ |
77,249 |
|
Trade receivables, less allowance for doubtful receivables of $59,008 and $36,772, respectively |
|
|
846,590 |
|
|
|
956,523 |
|
Other receivables |
|
|
58,399 |
|
|
|
92,660 |
|
Inventories |
|
|
121,484 |
|
|
|
97,086 |
|
Deferred income taxes |
|
|
29,386 |
|
|
|
28,470 |
|
Prepaid expenses and other current assets |
|
|
91,136 |
|
|
|
91,267 |
|
|
|
|
|
|
|
|
Total current assets |
|
|
1,245,944 |
|
|
|
1,343,255 |
|
|
|
|
|
|
|
|
Property, plant and equipment |
|
|
|
|
|
|
|
|
Land |
|
|
218,260 |
|
|
|
224,609 |
|
Buildings and improvements |
|
|
1,454,303 |
|
|
|
1,545,781 |
|
Machinery, equipment and fixtures |
|
|
2,891,966 |
|
|
|
3,087,618 |
|
Construction in progress |
|
|
42,834 |
|
|
|
63,869 |
|
|
|
|
|
|
|
|
Total |
|
|
4,607,363 |
|
|
|
4,921,877 |
|
Less accumulated depreciation |
|
|
(2,385,869 |
) |
|
|
(2,306,207 |
) |
|
|
|
|
|
|
|
Net property, plant and equipment |
|
|
2,221,494 |
|
|
|
2,615,670 |
|
|
|
|
|
|
|
|
Intangible and other assets |
|
|
|
|
|
|
|
|
Goodwill |
|
|
2,872,888 |
|
|
|
10,034,943 |
|
Indefinite-lived and amortizable intangible assets, less accumulated amortization
of $135,468 and $123,680, respectively |
|
|
582,691 |
|
|
|
735,461 |
|
Deferred income taxes |
|
|
460,567 |
|
|
|
|
|
Investments and other assets |
|
|
413,230 |
|
|
|
1,158,398 |
|
|
|
|
|
|
|
|
Total intangible and other assets |
|
|
4,329,376 |
|
|
|
11,928,802 |
|
|
|
|
|
|
|
|
Total assets |
|
$ |
7,796,814 |
|
|
$ |
15,887,727 |
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
42
GANNETT CO., INC.
CONSOLIDATED BALANCE SHEETS
In thousands of dollars
|
|
|
|
|
|
|
|
|
Liabilities and shareholders equity |
|
Dec. 28, 2008 |
|
|
Dec. 30, 2007 |
|
Current liabilities |
|
|
|
|
|
|
|
|
Accounts payable |
|
|
|
|
|
|
|
|
Trade |
|
$ |
287,690 |
|
|
$ |
219,450 |
|
Other |
|
|
36,883 |
|
|
|
37,943 |
|
Accrued liabilities |
|
|
|
|
|
|
|
|
Compensation |
|
|
191,019 |
|
|
|
144,318 |
|
Interest |
|
|
27,432 |
|
|
|
24,972 |
|
Other |
|
|
246,271 |
|
|
|
237,955 |
|
Dividend payable |
|
|
91,465 |
|
|
|
93,050 |
|
Income taxes |
|
|
|
|
|
|
24,301 |
|
Deferred income |
|
|
272,381 |
|
|
|
180,174 |
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
1,153,141 |
|
|
|
962,163 |
|
|
|
|
|
|
|
|
Deferred income taxes |
|
|
|
|
|
|
696,112 |
|
Income taxes |
|
|
227,067 |
|
|
|
319,778 |
|
Long-term debt |
|
|
3,816,942 |
|
|
|
4,098,338 |
|
Postretirement medical and life insurance liabilities |
|
|
217,143 |
|
|
|
216,988 |
|
Pension liability |
|
|
882,511 |
|
|
|
244,780 |
|
Other long-term liabilities |
|
|
234,384 |
|
|
|
312,130 |
|
|
|
|
|
|
|
|
Total liabilities |
|
|
6,531,188 |
|
|
|
6,850,289 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority interests in consolidated subsidiaries |
|
|
209,744 |
|
|
|
20,279 |
|
|
|
|
|
|
|
|
|
|
Commitments and contingent liabilities (see Note 12) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders equity |
|
|
|
|
|
|
|
|
Preferred stock, par value $1: Authorized, 2,000,000 shares: Issued, none |
|
|
|
|
|
|
|
|
Common stock, par value $1: Authorized, 800,000,000 shares: Issued, 324,418,632 shares |
|
|
324,419 |
|
|
|
324,419 |
|
Additional paid-in capital |
|
|
743,199 |
|
|
|
721,205 |
|
Retained earnings |
|
|
6,006,753 |
|
|
|
13,019,143 |
|
Accumulated other comprehensive income (loss) |
|
|
(469,252 |
) |
|
|
430,891 |
|
|
|
|
|
|
|
|
|
|
|
6,605,119 |
|
|
|
14,495,658 |
|
|
|
|
|
|
|
|
Less Treasury stock, 96,295,239 shares and 94,216,075 shares, respectively, at cost |
|
|
(5,549,237 |
) |
|
|
(5,478,499 |
) |
|
|
|
|
|
|
|
Total shareholders equity |
|
|
1,055,882 |
|
|
|
9,017,159 |
|
|
|
|
|
|
|
|
Total liabilities, minority interests and shareholders equity |
|
$ |
7,796,814 |
|
|
$ |
15,887,727 |
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
43
GANNETT CO., INC.
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
In thousands of dollars, except per share amounts
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal year ended |
|
Dec. 28, 2008 |
|
|
Dec. 30, 2007 |
|
|
Dec. 31, 2006 |
|
Net operating revenues |
|
|
|
|
|
|
|
|
|
|
|
|
Publishing advertising |
|
$ |
4,145,592 |
|
|
$ |
4,937,159 |
|
|
$ |
5,275,650 |
|
Publishing circulation |
|
|
1,216,637 |
|
|
|
1,252,356 |
|
|
|
1,279,530 |
|
Digital |
|
|
281,378 |
|
|
|
70,347 |
|
|
|
52,773 |
|
Broadcasting |
|
|
772,533 |
|
|
|
789,297 |
|
|
|
854,821 |
|
All other |
|
|
351,510 |
|
|
|
390,301 |
|
|
|
384,839 |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
6,767,650 |
|
|
|
7,439,460 |
|
|
|
7,847,613 |
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales and operating expenses, exclusive of depreciation |
|
|
4,012,727 |
|
|
|
4,164,083 |
|
|
|
4,370,550 |
|
Selling, general and administrative expenses, exclusive of depreciation |
|
|
1,277,962 |
|
|
|
1,270,090 |
|
|
|
1,301,170 |
|
Depreciation |
|
|
230,987 |
|
|
|
246,275 |
|
|
|
237,309 |
|
Amortization of intangible assets |
|
|
31,211 |
|
|
|
36,086 |
|
|
|
33,989 |
|
Asset impairment and other charges (see Notes 3 and 4) |
|
|
7,976,418 |
|
|
|
72,030 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
13,529,305 |
|
|
|
5,788,564 |
|
|
|
5,943,018 |
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
|
(6,761,655 |
) |
|
|
1,650,896 |
|
|
|
1,904,595 |
|
|
|
|
|
|
|
|
|
|
|
Non-operating (expense) income |
|
|
|
|
|
|
|
|
|
|
|
|
Equity income (loss) in unconsolidated investees, net (see Note 3) |
|
|
(374,925 |
) |
|
|
40,693 |
|
|
|
38,044 |
|
Interest expense |
|
|
(190,845 |
) |
|
|
(259,825 |
) |
|
|
(288,040 |
) |
Other non-operating items |
|
|
21,460 |
|
|
|
17,113 |
|
|
|
27,487 |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
(544,310 |
) |
|
|
(202,019 |
) |
|
|
(222,509 |
) |
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes |
|
|
(7,305,965 |
) |
|
|
1,448,877 |
|
|
|
1,682,086 |
|
Provision (benefit) for income taxes |
|
|
(658,400 |
) |
|
|
473,300 |
|
|
|
544,200 |
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations |
|
|
(6,647,565 |
) |
|
|
975,577 |
|
|
|
1,137,886 |
|
|
|
|
|
|
|
|
|
|
|
Income from the operation of discontinued operations, net of tax |
|
|
|
|
|
|
6,221 |
|
|
|
22,896 |
|
Gain on disposal of newspaper businesses, net of tax |
|
|
|
|
|
|
73,814 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(6,647,565 |
) |
|
$ |
1,055,612 |
|
|
$ |
1,160,782 |
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) from continuing operations per share basic |
|
$ |
(29.11 |
) |
|
$ |
4.18 |
|
|
$ |
4.81 |
|
|
|
|
|
|
|
|
|
|
|
Earnings from discontinued operations |
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations per share basic |
|
|
|
|
|
|
.03 |
|
|
|
.10 |
|
Gain on disposal of newspaper businesses per share basic |
|
|
|
|
|
|
.32 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share basic |
|
$ |
(29.11 |
) |
|
$ |
4.53 |
|
|
$ |
4.91 |
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) from continuing operations per share diluted |
|
$ |
(29.11 |
) |
|
$ |
4.17 |
|
|
$ |
4.81 |
|
|
|
|
|
|
|
|
|
|
|
Earnings from discontinued operations |
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations per share diluted |
|
|
|
|
|
|
.03 |
|
|
|
.10 |
|
Gain on disposal of newspaper businesses per share diluted |
|
|
|
|
|
|
.32 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share diluted |
|
$ |
(29.11 |
) |
|
$ |
4.52 |
|
|
$ |
4.90 |
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
44
GANNETT CO., INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
In thousands of dollars
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal year ended |
|
Dec. 28, 2008 |
|
|
Dec. 30, 2007 |
|
|
Dec. 31, 2006 |
|
Cash flows from operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss) |
|
$ |
(6,647,565 |
) |
|
$ |
1,055,612 |
|
|
$ |
1,160,782 |
|
Adjustments to reconcile net income (loss) to operating cash flows: |
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sale of discontinued operations, net of tax |
|
|
|
|
|
|
(73,814 |
) |
|
|
|
|
Taxes paid on gain on sale of discontinued operations |
|
|
|
|
|
|
(134,932 |
) |
|
|
|
|
Depreciation |
|
|
230,987 |
|
|
|
249,039 |
|
|
|
242,781 |
|
Amortization of intangibles |
|
|
31,211 |
|
|
|
36,086 |
|
|
|
33,989 |
|
Asset impairment and other charges (see Notes 3 and 4) |
|
|
7,976,418 |
|
|
|
72,030 |
|
|
|
|
|
Minority interest |
|
|
6,885 |
|
|
|
1,535 |
|
|
|
2,148 |
|
Stock-based compensation |
|
|
22,646 |
|
|
|
29,082 |
|
|
|
47,040 |
|
(Benefit) provision for deferred income taxes |
|
|
(816,219 |
) |
|
|
15,488 |
|
|
|
32,010 |
|
Pension (benefit) expense, net of pension contributions |
|
|
(61,258 |
) |
|
|
20,064 |
|
|
|
92,016 |
|
Equity (income) loss in unconsolidated investees, net (see Note 3) |
|
|
374,925 |
|
|
|
(40,693 |
) |
|
|
(38,044 |
) |
Other, net, including gains on asset sales |
|
|
(54,996 |
) |
|
|
(37,760 |
) |
|
|
(42,689 |
) |
Decrease (increase) in trade receivables |
|
|
132,143 |
|
|
|
56,237 |
|
|
|
(1,341 |
) |
Decrease in other receivables |
|
|
16,285 |
|
|
|
200,780 |
|
|
|
19,613 |
|
Decrease (increase) in inventories |
|
|
(26,856 |
) |
|
|
21,943 |
|
|
|
(2,145 |
) |
(Decrease) increase in accounts payable |
|
|
50,256 |
|
|
|
(35,970 |
) |
|
|
(34,165 |
) |
Decrease in interest and taxes payable |
|
|
(151,469 |
) |
|
|
(46,070 |
) |
|
|
(17,759 |
) |
Change in other assets and liabilities, net |
|
|
(66,207 |
) |
|
|
(43,548 |
) |
|
|
(14,371 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash flow from operating activities |
|
|
1,017,186 |
|
|
|
1,345,109 |
|
|
|
1,479,865 |
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property, plant and equipment |
|
|
(165,000 |
) |
|
|
(171,405 |
) |
|
|
(200,780 |
) |
Payments for acquisitions, net of cash acquired |
|
|
(168,570 |
) |
|
|
(30,581 |
) |
|
|
(402,684 |
) |
Payments for investments |
|
|
(46,779 |
) |
|
|
(39,963 |
) |
|
|
(338,341 |
) |
Proceeds from investments |
|
|
29,049 |
|
|
|
43,381 |
|
|
|
53,751 |
|
Proceeds from sale of certain assets, including discontinued operations |
|
|
78,541 |
|
|
|
464,157 |
|
|
|
42,927 |
|
Proceeds from investments in marketable securities |
|
|
|
|
|
|
|
|
|
|
93,822 |
|
|
|
|
|
|
|
|
|
|
|
Net cash (used for) provided by investing activities |
|
|
(272,759 |
) |
|
|
265,589 |
|
|
|
(751,305 |
) |
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from borrowings under revolving credit facilities |
|
|
1,907,000 |
|
|
|
|
|
|
|
|
|
Proceeds from issuance of long-term debt, net of debt issuance fees |
|
|
280,000 |
|
|
|
1,000,000 |
|
|
|
1,246,820 |
|
Payments of unsecured promissory notes |
|
|
(833,876 |
) |
|
|
(1,364,523 |
) |
|
|
(1,481,828 |
) |
Payments of unsecured fixed rate notes and other indebtedness |
|
|
(1,628,458 |
) |
|
|
(748,099 |
) |
|
|
|
|
Dividends paid |
|
|
(366,748 |
) |
|
|
(311,237 |
) |
|
|
(280,008 |
) |
Cost of common shares repurchased |
|
|
(72,764 |
) |
|
|
(215,210 |
) |
|
|
(215,426 |
) |
Proceeds from issuance of common stock upon exercise of stock options |
|
|
|
|
|
|
12,472 |
|
|
|
27,353 |
|
Distributions to minority interest in consolidated partnerships |
|
|
(2,041 |
) |
|
|
(3,014 |
) |
|
|
(3,013 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash used for financing activities |
|
|
(716,887 |
) |
|
|
(1,629,611 |
) |
|
|
(706,102 |
) |
|
|
|
|
|
|
|
|
|
|
Effect of currency exchange rate change |
|
|
(5,840 |
) |
|
|
1,906 |
|
|
|
2,995 |
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents |
|
|
21,700 |
|
|
|
(17,007 |
) |
|
|
25,453 |
|
Balance of cash and cash equivalents at beginning of year |
|
|
77,249 |
|
|
|
94,256 |
|
|
|
68,803 |
|
|
|
|
|
|
|
|
|
|
|
Balance of cash and cash equivalents at end of year |
|
$ |
98,949 |
|
|
$ |
77,249 |
|
|
$ |
94,256 |
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
45
GANNETT CO., INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
In thousands of dollars
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal years ended |
|
Common |
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
December 31, 2006, |
|
stock |
|
|
Additional |
|
|
|
|
|
|
other |
|
|
|
|
|
|
|
December 30, 2007, |
|
$1 par |
|
|
paid-in |
|
|
Retained |
|
|
comprehensive |
|
|
Treasury |
|
|
|
|
and December 28, 2008 |
|
value |
|
|
capital |
|
|
earnings |
|
|
income (loss) |
|
|
stock |
|
|
Total |
|
Balance: Dec. 25, 2005 |
|
$ |
324,419 |
|
|
$ |
619,569 |
|
|
$ |
11,459,496 |
|
|
$ |
249,150 |
|
|
$ |
(5,082,072 |
) |
|
$ |
7,570,562 |
|
Net income, 2006 |
|
|
|
|
|
|
|
|
|
|
1,160,782 |
|
|
|
|
|
|
|
|
|
|
|
1,160,782 |
|
Foreign currency translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
413,878 |
|
|
|
|
|
|
|
413,878 |
|
Minimum pension liability adjustment, net of tax provision of $12,036 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,638 |
|
|
|
|
|
|
|
19,638 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,594,298 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adoption of SFAS No. 158 for pension and
postretirement benefits, net of tax benefit
of $220,108 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(376,368 |
) |
|
|
|
|
|
|
(376,368 |
) |
Dividends declared, 2006: $1.20 per share |
|
|
|
|
|
|
|
|
|
|
(283,237 |
) |
|
|
|
|
|
|
|
|
|
|
(283,237 |
) |
Treasury stock acquired |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(215,426 |
) |
|
|
(215,426 |
) |
Stock options exercised |
|
|
|
|
|
|
14,303 |
|
|
|
|
|
|
|
|
|
|
|
13,050 |
|
|
|
27,353 |
|
Stock option compensation |
|
|
|
|
|
|
39,230 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39,230 |
|
Restricted stock compensation |
|
|
|
|
|
|
7,810 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,810 |
|
Tax benefit derived from stock
awards settled |
|
|
|
|
|
|
3,325 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,325 |
|
Other treasury stock activity |
|
|
|
|
|
|
1,663 |
|
|
|
|
|
|
|
|
|
|
|
13,053 |
|
|
|
14,716 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance: Dec. 31, 2006 |
|
$ |
324,419 |
|
|
$ |
685,900 |
|
|
$ |
12,337,041 |
|
|
$ |
306,298 |
|
|
$ |
(5,271,395 |
) |
|
$ |
8,382,263 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income, 2007 |
|
|
|
|
|
|
|
|
|
|
1,055,612 |
|
|
|
|
|
|
|
|
|
|
|
1,055,612 |
|
Foreign currency translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
78,230 |
|
|
|
|
|
|
|
78,230 |
|
Interest rate swap |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,523 |
) |
|
|
|
|
|
|
(8,523 |
) |
Pension and other postretirement benefit
liability adjustment, net of tax provision
of $39,094 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
54,886 |
|
|
|
|
|
|
|
54,886 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,180,205 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared, 2007: $1.42 per share |
|
|
|
|
|
|
|
|
|
|
(331,010 |
) |
|
|
|
|
|
|
|
|
|
|
(331,010 |
) |
Adjustment to initially apply FIN No. 48. |
|
|
|
|
|
|
|
|
|
|
(42,500 |
) |
|
|
|
|
|
|
|
|
|
|
(42,500 |
) |
Treasury stock acquired |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(215,210 |
) |
|
|
(215,210 |
) |
Stock options exercised |
|
|
|
|
|
|
7,493 |
|
|
|
|
|
|
|
|
|
|
|
4,557 |
|
|
|
12,050 |
|
Stock option compensation |
|
|
|
|
|
|
21,178 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,178 |
|
Restricted stock compensation |
|
|
|
|
|
|
7,904 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,904 |
|
Tax benefit derived from stock
awards settled |
|
|
|
|
|
|
422 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
422 |
|
Other treasury stock activity |
|
|
|
|
|
|
(1,692 |
) |
|
|
|
|
|
|
|
|
|
|
3,549 |
|
|
|
1,857 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance: Dec. 30, 2007 |
|
$ |
324,419 |
|
|
$ |
721,205 |
|
|
$ |
13,019,143 |
|
|
$ |
430,891 |
|
|
$ |
(5,478,499 |
) |
|
$ |
9,017,159 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss, 2008 |
|
|
|
|
|
|
|
|
|
|
(6,647,565 |
) |
|
|
|
|
|
|
|
|
|
|
(6,647,565 |
) |
Foreign currency translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(421,845 |
) |
|
|
|
|
|
|
(421,845 |
) |
Interest rate swap |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,445 |
|
|
|
|
|
|
|
3,445 |
|
Pension and other postretirement benefit
liability adjustment, net of tax benefit
of $315,832 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(481,743 |
) |
|
|
|
|
|
|
(481,743 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,547,708 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared, 2008: $1.60 per share |
|
|
|
|
|
|
|
|
|
|
(364,825 |
) |
|
|
|
|
|
|
|
|
|
|
(364,825 |
) |
Treasury stock acquired |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(72,764 |
) |
|
|
(72,764 |
) |
Stock option compensation |
|
|
|
|
|
|
13,097 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,097 |
|
Restricted stock compensation |
|
|
|
|
|
|
9,549 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,549 |
|
Other treasury stock activity |
|
|
|
|
|
|
(652 |
) |
|
|
|
|
|
|
|
|
|
|
2,026 |
|
|
|
1,374 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance: Dec. 28, 2008 |
|
$ |
324,419 |
|
|
$ |
743,199 |
|
|
$ |
6,006,753 |
|
|
$ |
(469,252 |
) |
|
$ |
(5,549,237 |
) |
|
$ |
1,055,882 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
46
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1
Summary of significant accounting policies
Fiscal year: The companys fiscal year ends on the last Sunday of the calendar year. The companys
2008 fiscal year ended on Dec. 28, 2008, and encompassed a 52-week period. The companys 2007 and
2006 fiscal years encompassed 52-week and 53-week periods, respectively.
Consolidation: The consolidated financial statements include the accounts of the company and
its wholly and majority-owned subsidiaries after elimination of all significant intercompany
transactions and profits. Investments in entities for which the company does not have control, but
has the ability to exercise significant influence over operating and financial policies, are
accounted for under the equity method. Accordingly, the companys share of net earnings and losses
from these ventures is included in Equity income (loss) in unconsolidated investees, net in the
Consolidated Statements of Income (Loss).
Segment presentation: In the third quarter of 2008, the company began reporting a new digital
segment and a separate digital revenues line in its Statements of Income (Loss). This revenue line
includes only revenue from the businesses that comprise the new digital segment. It therefore
includes all revenues from CareerBuilder and ShopLocal beginning with the full consolidation of
these businesses in the third quarter of 2008, and revenues from PointRoll, Schedule Star, Planet
Discover and Ripple6. Revenues from PointRoll, Schedule Star and Planet Discover had previously
been reported within the publishing segment and were included in the All other revenue line in
the Statement of Income. All other revenue is now comprised principally of commercial printing
revenues. All periods presented reflect these reclassifications.
The digital segment and the digital revenues line do not include online/digital revenues
generated by Web sites that are associated with the companys publishing and broadcasting operating
properties. Such amounts are reflected within those segments and are included as part of publishing
advertising revenues and broadcasting revenues in the Statements of Income.
Operating agencies: Two of the companys newspaper subsidiaries are 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 companys operating results from the Tucson joint operating agency are accounted for
under the equity method and reported as Equity income (loss) in unconsolidated investees, net. On
Jan. 16, 2009, the company announced it was offering to sell certain assets of its newspaper in
Tucson, the Tucson Citizen, which participates in the joint operating agency. If a sale is not
completed by March 21, 2009, the company will close the newspaper. The company will retain its 50%
partnership interest in the joint operating agency providing services to the remaining non-Gannett
newspaper operation in Tucson.
The companys operating results from the Detroit joint operating agency are fully consolidated
in its financial statements along with a minority interest charge for its minority partners
interest. This minority interest charge and the minority interest charge related to CareerBuilder
are reflected in Other non-operating items in the Consolidated Statements of Income (Loss).
Prior to 2008, the company participated in a joint operating agency in Cincinnati. Operating
results for the Cincinnati joint operating agency were fully consolidated along with a charge for
the minority partners share of profits. Beginning in 2008, the companys newspaper, The Cincinnati
Enquirer, became the sole daily newspaper in the market, and the joint operating agency was
terminated.
Critical accounting policies and the use of estimates: The company prepares its financial
statements in accordance with generally accepted accounting principles which require the use of
estimates and assumptions that affect the reported amount of assets, liabilities, revenues and
expenses and related disclosure of contingent matters. The company bases its estimates on
historical experience, actuarial studies and other assumptions, as appropriate. The company
re-evaluates its estimates on an ongoing basis. Actual results could differ from these estimates.
Critical accounting policies for the company involve its assessment of the recoverability of
its long-lived assets, including goodwill and other intangible assets and property, plant and
equipment. These assessments are based on factors such as estimated future cash flows and current
fair value estimates of businesses. The company utilized the services of an outside valuation
appraisal firm to assist in the 2008 assessment of recoverability.
The companys accounting for pension and retiree medical benefits requires the use of various
estimates concerning the work force, interest rates, plan investment return, and involves the use
of advice from consulting actuaries.
The company periodically evaluates its investments in unconsolidated entities for impairment.
When the company determines that an impairment is other-than-temporary, an impairment is recognized
equal to the excess of the investments carrying amount over its estimated fair value. In making
such a determination, the company considers recent financial results and forward looking
projections. The company also considers various qualitative factors. These factors include the
intent and ability of the company to retain its investment in the entity and the financial
condition and long-term prospects of the entity. If the company believes that the decline in the
fair value of the investment is temporary, then no impairment is recorded.
The companys accounting for income taxes in the U.S. and foreign jurisdictions is sensitive
to interpretation of various laws and regulations therein, and to company policy and expectations
as to the repatriation of earnings from foreign sources. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. If current available information
raises doubt as to the realization of the deferred tax assets, a valuation allowance is
established. The company must exercise significant judgment in evaluating the amount and timing of
recognition of deferred tax liabilities and assets, including projections of future taxable income.
These judgments and estimates are reviewed on a continual basis as regulatory and business factors
change. A valuation allowance for deferred tax assets may be required if the amount of taxes
recoverable through loss carryback declines, if tax planning strategies are not available, or if
the company projects lower levels of future taxable income.
47
A more complete discussion of all of the companys significant accounting policies follows.
Cash and cash equivalents: Cash and cash equivalents consist of cash and investments with
maturities of three months or less.
Trade receivables and allowances for doubtful accounts:Trade receivables are recorded at invoiced
amounts and generally do not bear interest. The allowance for doubtful accounts reflects the
companys estimate of credit exposure, determined principally on the basis of its collection
experience, aging of its receivables and significant individual account credit risks.
Inventories: Inventories, consisting principally of newsprint, printing ink, plate material
and production film for the companys publishing operations, are valued primarily at the lower of
cost (first-in, first-out) or market. At certain U.S. publishing operations however, newsprint
inventory is carried on a last-in, first-out basis.
Valuation of long-lived assets: In accordance with Statement of Financial Accounting Standards
No. 144 (SFAS No. 144), Accounting for the Impairment or Disposal of Long-lived Assets, the
company evaluates the carrying value of long-lived assets (mostly property, plant and equipment and
definite-lived intangible assets) to be held and used whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable. The carrying value of a long-lived asset
group is considered impaired when the projected undiscounted future cash flows are less than its
carrying value. The company measures impairment based on the amount by which the carrying value
exceeds the fair value. Fair value is determined primarily using the projected future cash flows
discounted at a rate commensurate with the risk involved. Losses on long-lived assets to be
disposed of are determined in a similar manner, except that fair values are reduced for the cost to
dispose.
Property and depreciation: Property, plant and equipment is recorded at cost, and depreciation
is provided generally on a straight-line basis over the estimated useful lives of the assets. The
principal estimated useful lives are: buildings and improvements, 10 to 40 years; and machinery,
equipment and fixtures, 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.
As discussed in Note 3, the company performed impairment tests on certain of its property,
plant and equipment during the second and fourth quarters of 2008.
Goodwill and other intangible assets: Goodwill represents the excess of acquisition cost over
the fair value of assets acquired, including identifiable intangible assets, net of liabilities
assumed. The company follows the provisions of Statement of Financial Accounting Standards No. 142
(SFAS No. 142) Goodwill and Other Intangible Assets. In accordance with SFAS No. 142, goodwill is
tested for impairment on an annual basis or between annual tests if events occur or circumstances
change that would more likely than not reduce the fair value of a reporting unit below its carrying
amount. The companys annual measurement date is the end of its fiscal year. The company is
required to determine the fair value of each reporting unit and compare it to the carrying amount
of the reporting unit. Fair value of the reporting unit is determined using various techniques,
including multiple of earnings and discounted cash flow valuation techniques. If the carrying
amount of the reporting unit exceeds the fair value of the reporting unit, the company performs the
second step of the impairment test, as this is an indication that the reporting unit goodwill may
be impaired. In the second step of the impairment test, the company determines the implied fair
value of the reporting units goodwill. If the carrying value of a reporting units goodwill
exceeds its implied fair value, then an impairment of goodwill has occurred and the company
recognizes an impairment loss for the difference between the carrying amount and the implied fair
value of goodwill. In determining the reporting units, the company considers the way it manages its
businesses and the nature of those businesses. The company has established its reporting units for
newspapers at or one level below the segment level. These reporting units therefore consist
principally of U.S. Community Publishing businesses, the USA TODAY group, individual standalone
publishing businesses and the U.K. newspaper group. For Digital, the reporting units are the
stand-alone digital businesses. For Broadcasting, goodwill is accounted for at the segment level.
The company performs an impairment test annually, or more often if circumstances dictate, of
its indefinite-lived intangible assets. Intangible assets that have finite useful lives are
amortized over those useful lives and are evaluated for impairment in accordance with SFAS No. 144
as described above.
As described more fully in Note 3, the company recognized pre-tax intangible asset impairment
charges of $7.69 billion.
Investments and other assets: Investments in non-public businesses in which the company does
not have control or does not exert significant influence are carried at cost and losses resulting
from periodic evaluations of the carrying value of these investments are included as a
non-operating expense. At Dec. 28, 2008, and Dec. 30, 2007, such investments aggregated
approximately $16 million and $17 million, respectively.
Investments where the company does have significant influence are recorded under the equity method of accounting. See Note 6 for further
discussion of these investments.
The companys 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.
Revenue recognition: The companys revenues include amounts charged to customers for space
purchased in the companys newspapers, ads placed on its Web sites, amounts charged to customers
for commercial printing jobs, and advertising broadcast on the companys television stations.
Newspaper revenues also include circulation revenues for newspapers purchased by readers or
distributors, reduced by the amount of discounts taken. Advertising revenues are recognized, net of
agency commissions, in the period when advertising is printed or placed on Web sites or broadcast.
Commercial printing revenues are recognized when the job is delivered to the customer. Circulation
revenues are recognized when purchased newspapers are distributed. Amounts received from customers
in advance of revenue recognition are deferred as liabilities. Broadcasting retransmission fees are
recognized over the contract period based on a negotiated fee per subscriber.
48
Retirement plans: Pension and other postretirement benefits costs under the companys
retirement plans are actuarially determined. The company recognizes the cost of postretirement
benefits including pension, medical and life insurance benefits on an accrual basis over the
working lives of employees expected to receive such benefits.
Stock-based employee compensation: Effective Dec. 26, 2005, the first day of its 2006 fiscal
year, the company adopted the fair value recognition provisions of SFAS No. 123(R), Share-Based
Payments, using the modified prospective transition method. Under this transition method,
stock-based compensation costs recognized in the income statement beginning in 2006 include (a)
compensation expense for all unvested stock-based awards that were granted through Dec. 25, 2005,
based on the grant date fair value estimated in accordance with the original provisions of SFAS No.
123 and (b) compensation expense for all share-based payments granted after Dec. 25, 2005, based on
grant date fair value estimated in accordance with the provisions of SFAS No. 123(R). The companys
stock option awards generally have graded vesting terms and the company recognizes compensation
expense for these options on a straight-line basis over the requisite service period for the entire
award (generally four years). See Note 11 for further discussion.
The company also grants restricted stock or restricted stock units to employees and members of
its Board of Directors as a form of compensation. The expense for such awards is based on the grant
date fair value of the award and is recognized on a straight-line basis over the requisite service
period, which is generally the four-year incentive period.
Income taxes: The company accounts for certain income and expense items differently for
financial reporting purposes than for income tax reporting purposes. Deferred income taxes are
provided in recognition of these temporary differences. The company adopted the provisions of FASB
Interpretation No. 48 Accounting for Uncertainty in Income Taxes (FIN No. 48) on Jan. 1, 2007.
See Note 10 for further discussion.
Per share amounts: The company reports earnings per share on two bases, basic and diluted. All
basic income per share amounts are based on the weighted average number of common shares
outstanding during the year. The calculation of diluted earnings per share also considers the
assumed dilution from the exercise of stock options and from restricted stock units. Loss amounts
per share consider only basic shares outstanding due to the antidilutive effect of adding shares
for stock option exercises and restricted stock units.
Foreign currency translation: The income statements of foreign operations have been translated
to U.S. dollars using the average currency exchange rates in effect during the relevant period. The
balance sheets have been translated using the currency exchange rate as of the end of the
accounting period. The impact of currency exchange rate changes on the translation of the balance
sheets are included in comprehensive income (loss) and are classified as accumulated other
comprehensive income (loss) in shareholders equity.
New accounting pronouncements: In November 2008, the Financial Accounting Standards Board
(FASB) ratified Emerging Issues Task Force 08-6, Equity Method Investment Accounting
Considerations, (EITF 08-6). EITF 08-6 clarifies that the initial carrying value of an equity
method investment should be recognized using a cost accumulation model consistent with SFAS No.
141(R). EITF 08-6 also clarifies that the equity method investment as a whole should be assessed for
other-than-temporary impairment in accordance with APB Opinion 18. In addition, EITF 08-6 concludes
that an equity method investor shall recognize gains and losses in earnings for the issuance of
shares by the equity method investee, provided that the issuance of shares qualifies as a sale of
shares, and not a financing. EITF 08-6 is effective on a prospective basis in fiscal years
beginning on or after Dec. 15, 2008, and interim periods within those fiscal years. The company is
currently assessing the potential impact, if any, of the adoption of EITF 08-6 on its consolidated
results of operations and financial condition.
In October 2008, the FASB issued FASB Staff Position FAS 157-3 (FSP FAS 157-3), Determining
the Fair Value of a Financial Asset When the Market for That Asset Is Not Active. FSP FAS 157-3
clarifies the application of Statement of Financial Accounting Standards No. 157 in a market that
is not active and provides an example to illustrate key considerations in determining the fair
value of a financial asset when the market for that financial asset is not active. FSP FAS 157-3 is
effective upon issuance, including prior periods for which financial statement have not been
issued. The company adopted FSP FAS 157-3 for the period ended Sept. 28, 2008. The adoption did not
have a significant impact on the companys Consolidated Financial Statements.
In June 2008, the FASB issued FSP EITF No. 03-6-1, Determining Whether Instruments Granted in
Share-Based Payment Transactions Are Participating Securities. This FSP provides that unvested
share-based payment awards that contain nonfor-feitable rights to dividends or dividend equivalents
(whether paid or unpaid) are participating securities and shall be included in the computation of
earnings per share pursuant to the two-class method. The FSP is effective for financial statements
issued for fiscal years beginning after Dec. 15, 2008, and interim periods within those years. The
adoption of FSP No. EITF 03-6-1 will not have a material effect on the companys Consolidated
Financial Statements.
In May 2008, the FASB issued FSP No. APB 14-1, Accounting for Convertible Debt Instruments
That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement). This FSP
clarifies that convertible debt instruments that may be settled in cash upon conversion (including
partial cash settlement) are not addressed by paragraph 12 of APB Opinion No. 14, Accounting for
Convertible Debt and Debt Issued with Stock Purchase Warrants. Additionally, this FSP specifies
that issuers of such instruments should separately account for the liability and equity components
in a manner that will reflect the entitys nonconvertible debt borrowing rate when interest cost is
recognized in subsequent periods. This
FSP is effective for financial statements issued for fiscal years beginning after Dec. 15,
2008, and interim periods within those fiscal years. The adoption of FSP No. APB 14-1 will not have
an effect on the companys Consolidated Financial Statements.
In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161,
Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement
No. 133 (SFAS No. 161). SFAS No. 161 amends and expands the disclosure requirements of SFAS No.
133 with the intent to provide users of financial statements with an enhanced understanding of: (i)
How and why an entity uses derivative instruments; (ii) How derivative instruments and related
hedged items are accounted for under SFAS No. 133 and its related interpretations and (iii) How
derivative instruments and related hedged items affect
49
an entitys financial position, financial performance and cash flows. This statement is effective
for financial statements issued for fiscal years and interim periods beginning after Nov. 15, 2008,
with early application encouraged. The company is in the process of evaluating the impact of SFAS
No. 161 on its Consolidated Financial Statements.
In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141 (revised
2007), Business Combinations (SFAS No. 141(R)) and No. 160, Noncontrolling Interests in
Consolidated Financial Statements, an amendment of ARB No. 51 (SFAS No. 160). SFAS No. 141(R) and
SFAS No. 160 are effective for the beginning of fiscal year 2009. SFAS No. 141(R) will
significantly change how business acquisitions are accounted for and will impact financial
statements both on the acquisition date and in subsequent periods. SFAS No. 160 will change the
accounting and reporting for minority interest, which will be recharacterized as noncontrolling
interests and classified as a component of equity. At Dec. 28, 2008, the minority interest balance
is $210 million, principally related to the portion of CareerBuilder owned by other companies.
In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, Fair
Value Measurements (SFAS No. 157) which is effective for fiscal years beginning after Nov. 15,
2007. The company adopted SFAS No. 157 at the beginning of 2008. SFAS No. 157 defines fair value,
establishes a framework for measuring fair value in GAAP, and expands disclosures about fair value
measurements. Refer to Note 13 for information regarding the companys fair value measurements. In
November 2007, the FASB agreed to a one-year deferral of the effective date for nonfinancial assets
and liabilities that are recognized or disclosed at fair value on a nonrecurring basis. The company
is currently assessing the impact of adopting the deferred portion of the pronouncement.
NOTE 2
Acquisitions, investments, dispositions and exchanges
2008: On Dec. 31 2007, the first day of the companys 2008 fiscal year, the company purchased
X.com, Inc. (BNQT.com), which operates an action sports digital network covering eight different
action sports including surfing, snowboarding and skateboarding. X.com is affiliated with the USA
TODAY Sports brand.
In February 2008, the company formed QuadrantONE, a new digital ad sales network, with three
other large media companies.
In March 2008, the company purchased a minority stake in Fantasy Sports Ventures (FSV). FSV
owns a set of fantasy sports content sites and manages advertising across a network of affiliated
sites.
In May 2008, the company purchased a minority stake in Cozi Group Inc. (COZI). COZI is a free
Web service that helps families manage busy schedules, track shopping and to-do lists, organize
household chores, stay in communication and share memories all in one place.
In July 2008, the company purchased a minority stake in Mogulus, LLC, a company that provides
Internet broadcasting services. Also in July 2008, the company increased its investment in 4INFO
maintaining its approximate ownership interest.
In August 2008, the company purchased 100% of the outstanding shares of Pearls Review, Inc.,
an online nursing certification and continuing education review site.
The above business acquisitions and investments did not materially affect the companys
financial position or results of operations.
On June 30, 2008, the company acquired from Tribune Company and The McClatchy Company their
minority ownership interests in ShopLocal LLC, a leading marketing and database services company
for major retailers in the U.S. The company now owns 100% of ShopLocal and began consolidating its
results in the digital segment at the beginning of the third quarter of 2008. ShopLocal
collaborates with PointRoll to create ads that dynamically connect retail advertisers and
consumers, online and in the store.
On Sept. 3, 2008, the company acquired an additional 10% stake in CareerBuilder from Tribune
Company increasing its investment to 50.8% so that it became the majority and controlling owner.
Beginning in September 2008, the operations of CareerBuilder have been fully consolidated and are
reported in the digital segment. The related minority interest charge for CareerBuilder is
reflected in Other non-operating items in the Statements of Income (Loss).
On Nov. 13, 2008, the company acquired Ripple6, Inc., a leading provider of social media
services for publishers and other users. Ripple6 currently powers Gannetts MomsLikeMe.com site,
which recently rolled out in 80 local markets across the country and has more than one million moms
visiting each month.
The total cash paid in 2008 for business acquisitions and investments was $168.6 million and
$46.8 million, respectively.
2007: In May 2007, the company completed the sale of the Norwich (Conn.) Bulletin, the
Rockford (Ill.) Register Star, the Observer-Dispatch in Utica, N.Y., and The Herald-Dispatch in
Huntington, W.Va., to GateHouse Media, Inc. and contributed the Chronicle-Tribune in Marion, Ind.,
to the Gannett Foundation. In connection with these transactions, the company recorded a net
after-tax gain of $73.8 million (reflecting a charge for goodwill associated with these businesses
of $138 million) in discontinued operations. For all periods presented, results from these
businesses have been reported as discontinued operations.
Amounts applicable to these discontinued operations are as follows:
In millions of dollars
|
|
|
|
|
|
|
|
|
|
|
2007 |
|
|
2006 |
|
Revenues |
|
$ |
41 |
|
|
$ |
128 |
|
Pre-tax income |
|
$ |
10 |
|
|
$ |
37 |
|
Net income |
|
$ |
6 |
|
|
$ |
23 |
|
In January 2007, the company acquired Central Florida Future, the independent student
newspaper of the University of Central Florida.
In June 2007, the company acquired the Central Ohio Advertiser Network, a network of eight
weekly shoppers with the Advertiser brand and a commercial print operation in Ohio.
In October 2007, the company acquired a controlling interest in Schedule Star LLC, which
operates HighSchoolSports.net, a digital content site serving the high school sports audience and
the Schedule Star solution for local athletic directors.
50
At the end of October 2007, the company, in partnership with Tribune Company, announced a
digital joint venture to expand a national network of local entertainment Web sites under the
Metromix brand. The newly formed company, Metromix LLC, focuses on a common model for local online
entertainment sites, and then scales the sites into a national platform under the Metromix brand.
Metromix is owned equally by the two parent companies.
The total cash paid in 2007 for business acquisitions and investments was $30.6 million and
$40.0 million, respectively.
2006: In January 2006, the company acquired a minority equity interest in 4INFO, a leading
mobile and media advertising company with the largest ad-supported text messaging content network
in the U.S.
In April 2006, the company contributed the Muskogee (Okla.) Phoenix to the Gannett Foundation.
In connection with the acquisition of Clipper Magazine in 2003 and PointRoll, Inc. in 2005,
the company paid additional cash consideration totaling $41.2 million in 2006 as a result of
certain performance metrics being achieved by these businesses.
In June 2006, the company completed the acquisition of KTVD-TV in Denver and in August the
acquisition of WATL-TV in Atlanta, which created the companys second and third broadcast station
duopolies.
In August 2006, the company made additional investments in CareerBuilder, ShopLocal.com and
Topix totaling $155 million, which increased the ownership stake in each of those businesses.
In August 2006, the company invested an additional $145 million in the California Newspapers
Partnership (CNP) in conjunction with the CNPs acquisition of the Contra Costa Times and the San
Jose Mercury News and related publications and Web sites. The companys additional investment
enabled it to maintain its 19.49% ownership in the CNP.
The company also purchased several small non-daily products in the U.S. as well as Planet
Discover, a provider of local, integrated online search and advertising technology.
The total cash paid in 2006 for business acquisitions and investments was $402.7 million and
$338.3 million, respectively.
NOTE 3
Asset impairment and other charges
Very difficult business conditions, the ensuing economic crisis, recessionary conditions in the
U.S. and U.K. and a decline in the companys stock price required the company to perform impairment
tests on goodwill, intangible assets, and other long-lived assets as of March 31, 2008, the first
day of its fiscal second quarter, as well as on Dec. 28, 2008, in connection with the required
annual impairment test of goodwill and indefinite-lived intangibles. As a result, the company has
recorded non-cash impairment charges to reduce the book value of goodwill, other intangible assets
including mastheads, and certain property, plant and equipment assets. The carrying value of
certain of the companys investments in newspaper publishing partnerships and other businesses,
which are accounted for under the equity method, were also written down due to other than temporary
impairments. The company also recorded accelerated depreciation expense associated with certain
facility consolidation and cost reduction initiatives.
A summary of these charges is presented below:
In millions except per share amounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-Tax |
|
|
After-Tax |
|
|
Per Share |
|
|
|
Amount(a) |
|
|
Amount(a) |
|
|
Amount(a) |
|
Asset impairment and other charges |
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill: |
|
|
|
|
|
|
|
|
|
|
|
|
Publishing |
|
$ |
7,448 |
|
|
$ |
6,812 |
|
|
$ |
29.83 |
|
Digital |
|
|
10 |
|
|
|
6 |
|
|
|
0.03 |
|
|
|
|
|
|
|
|
|
|
|
Total goodwill |
|
|
7,458 |
|
|
|
6,818 |
|
|
|
29.86 |
|
|
|
|
|
|
|
|
|
|
|
Other intangible assets- principally mastheads: |
|
|
|
|
|
|
|
|
|
|
|
|
Publishing |
|
|
232 |
|
|
|
150 |
|
|
|
0.66 |
|
Digital |
|
|
2 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other intangible assets |
|
|
233 |
|
|
|
151 |
|
|
|
0.66 |
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment: |
|
|
|
|
|
|
|
|
|
|
|
|
Publishing |
|
|
255 |
|
|
|
159 |
|
|
|
0.70 |
|
Broadcasting |
|
|
2 |
|
|
|
1 |
|
|
|
|
|
Corporate |
|
|
1 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total property, plant and equipment |
|
|
258 |
|
|
|
161 |
|
|
|
0.70 |
|
|
|
|
|
|
|
|
|
|
|
Other: |
|
|
|
|
|
|
|
|
|
|
|
|
Publishing |
|
|
17 |
|
|
|
11 |
|
|
|
0.05 |
|
Digital |
|
|
3 |
|
|
|
2 |
|
|
|
0.01 |
|
Broadcasting |
|
|
7 |
|
|
|
4 |
|
|
|
0.02 |
|
|
|
|
|
|
|
|
|
|
|
Total other |
|
|
27 |
|
|
|
17 |
|
|
|
0.08 |
|
|
|
|
|
|
|
|
|
|
|
Total asset impairment and other charges |
|
$ |
7,976 |
|
|
$ |
7,147 |
|
|
$ |
31.30 |
|
|
|
|
|
|
|
|
|
|
|
Newspaper publishing partnerships and other
equity method investments: |
|
|
|
|
|
|
|
|
|
|
|
|
Publishing |
|
|
377 |
|
|
|
248 |
|
|
|
1.09 |
|
|
|
|
|
|
|
|
|
|
|
Total charges |
|
$ |
8,354 |
|
|
$ |
7,395 |
|
|
$ |
32.38 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Total amounts may not sum due to rounding. |
The goodwill impairment charges result from the application of the impairment testing
provisions of Statement of Financial Accounting Standards No. 142 Goodwill and Other Intangible
Assets (SFAS No. 142). Impairment testing is customarily performed annually, and had been
performed at the end of 2007, at which time no goodwill impairment charge was indicated. Because of
softening business conditions within the companys publishing segment and the decline in the
companys stock price and market capitalization, this testing was updated as of the beginning of
the second quarter of 2008 and as required the testing was performed again as of Dec. 28, 2008. For
certain publishing and digital reporting units, an impairment was indicated. The fair values of the
reporting units were determined using discounted cash flow and multiple of earnings techniques. The
company then undertook the next step in the impairment testing process by determining the fair
value of assets and liabilities for these reporting units.
The implied value of goodwill determined by the valuation for these reporting units was less
than the carrying amount by $7.46 billion, and therefore an impairment charge in this amount was
taken. There was minimal tax benefit recognized related to the impairment charges since much of the
recorded goodwill was non-deductible as it arose from stock purchase transactions. Therefore the
after-tax effect of the goodwill impairment was $6.82 billion or $29.86 per share.
51
The goodwill impairment charge recorded in the second quarter, in the amount of $2.14 billion,
was related to Newsquest, the companys U.K. publishing operations that had been acquired
relatively recently in several transactions from 1999-2005. Following the second quarter impairment
testing, Newsquests fourth quarter operating results and projections indicated a significant
decline from the amounts estimated in the second quarter and as a result a further goodwill
impairment charge of approximately $507 million was recorded.
In the fourth quarter, the company also recognized an impairment charge for its U.S. Community
Publishing reporting unit of approximately $4.4 billion. This reporting unit is comprised of 82
individual publishing operations which have been acquired at various times over the past several
decades. Consequently, many of the properties were acquired at a relatively low cost compared to
prices paid in the market for newspapers in the last decade. Since these publishing operations are
aggregated into a single reporting unit, the overall carrying value is lower than it would
otherwise have been had the portfolio of businesses been acquired in recent years.
Additionally, when the majority of the operations within U.S. Community Publishing were
acquired, the accounting policies for purchase price allocation were different than they are
currently. Until 2002, as permitted under then generally accepted accounting principles, a portion
of the companys purchase price allocation was assigned to property, plant and equipment with all
of the residual going to goodwill. Beginning in 2002, purchase price allocation was required to
also cover other intangible assets, such as mastheads and customer relationships. One result of the
existence of the two accounting policies for purchase price allocation is that in the second step
of the impairment process, when the new rules are applied, it often results in a low level of
implied goodwill, thus leading to a larger goodwill impairment charge.
The goodwill impairment charges for other stand-alone reporting units totaled $408 million in
the fourth quarter.
The impairment charge of $233 million for other intangible assets was required because revenue
results from the underlying businesses have softened from what was expected at the time they were
purchased and the assets were initially valued. In accordance with SFAS No. 142, the carrying
values of impaired indefinite-lived intangible assets, principally mastheads, were reduced to fair
value. Fair value was determined using a relief-from-royalty method. The carrying values of certain
definite-lived intangible assets, principally customer relationships, were reduced to fair value in
accordance with SFAS No. 144. Deferred tax benefits have been recognized for these intangible asset
impairment charges and therefore the after-tax impact was $151 million or $.66 per share.
The carrying value of property, plant and equipment at certain publishing businesses was also
evaluated due to softening business conditions and, in some cases, changes in expected useful
lives. The recoverability of these assets was measured in accordance with SFAS No. 144. This
process indicated that the carrying values of certain assets were not recoverable, as the expected
undiscounted future cash flows to be generated by them would be less than their carrying values.
The related impairment loss was measured based on the amount by which the assets carrying value
exceeded their fair value. Asset group fair values were determined using discounted cash flow or
multiple of earnings techniques. Certain asset fair values were based on estimates of prices for
similar assets. In addition, as required by SFAS No. 144, the company revised the useful lives of
certain assets, which were abandoned during the year or for which management has committed to a plan to
abandon in the near future, in order to reflect the use of those assets over their shortened useful
life. As a result of the application of the requirements of SFAS No. 144, the company recorded
charges of $258 million. Deferred tax benefits were recognized for these charges and therefore the
after-tax impact was $161 million or $.70 per diluted share.
The charges of $27 million pre-tax included in the Other category include a charge to
increase the level of the companys allowance for doubtful accounts reflecting higher collection
risk from the recession-driven increase in delinquency of receivable agings and bankruptcy filings
toward the end of 2008. Charges also include amounts for future lease payments for facilities
abandoned in connection with consolidation efforts and amounts for the impairment of certain
broadcast programming assets.
For certain of the companys newspaper publishing partnership investments, and for certain
other investments in which the company owns a minority equity interest, carrying values were
written down to fair value because the businesses underlying the investments had experienced
significant and sustained declines in operating performance, leading the company to conclude that
they were other than temporarily impaired. The adjustment of newspaper publishing partnership
carrying values comprise the majority of these investment charges, and these were driven by
many of the same factors affecting the companys wholly owned publishing businesses. Fair
values were determined using a multiple of earnings or a multiple of revenues technique. These
investment carrying value adjustments were $377 million pre-tax and $248 million on an after-tax
basis, or $1.09 per diluted share. The pre-tax impairment charges for these investments are
reflected as Equity income (loss) in unconsolidated investees, net in the Statement of Income
(Loss).
NOTE 4
Goodwill and other intangible assets
SFAS No. 142 requires that goodwill and indefinite-lived intangible assets be tested for impairment
at least annually. Recognized intangible assets that have finite useful lives are amortized over
their useful lives and are subject to tests for impairment in accordance with the provisions of
SFAS No. 144.
The company performed an impairment test of its goodwill at Dec. 30, 2007, and determined that
no impairment existed. As noted in Note 3, the company performed interim and year end impairment
tests on its goodwill and other intangible assets during 2008, and, as a result, recorded non-cash
impairment charges totaling $7.69 billion.
For Publishing, goodwill impairment charges for U.K. operations were recorded in the second
and fourth quarters of 2008 and totaled $2.65 billion. Remaining goodwill for U.K. publishing at
Dec. 28, 2008, totals $173 million.
52
For the companys U.S. Community Publishing division, which carried a relatively lower book
goodwill basis, goodwill impairment was not indicated until the required annual testing at the end
of 2008. The impairment charge determined at that time totaled $4.41 billion. Remaining goodwill
for this reporting unit totals $281 million.
For several other publishing businesses which are each considered separate reporting units for
SFAS No. 142 purposes, goodwill impairments were also identified at the end of 2008. These goodwill
impairment charges totaled $398 million, leaving remaining aggregate goodwill for these reporting
units of $74 million.
During 2008 and 2007, the company determined that the carrying values of mastheads at certain
properties in the U.K. and U.S., which are classified as indefinite-lived intangible assets, were
not recoverable based on interim and annual impairment tests. Accordingly, the company recognized
non-cash impairment charges of $176 million in 2008 and $72 million in 2007 to reduce the carrying
value of these mastheads to fair value.
The company calculated the fair value of mastheads using a relief-from-royalty method. The
impairment charge relates to several publication mastheads, in the U.S. and the U.K., and results
from lower revenue expectations from these properties than were anticipated at the date they were
acquired.
The following table displays goodwill, indefinite-lived intangible assets, and amortizable
intangible assets at Dec. 28, 2008, and Dec. 30, 2007.
In thousands of dollars
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
Gross |
|
|
Amortization |
|
|
Net |
|
Dec. 28, 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill |
|
$ |
2,872,888 |
|
|
$ |
|
|
|
$ |
2,872,888 |
|
Indefinite-lived intangibles: |
|
|
|
|
|
|
|
|
|
|
|
|
Mastheads and trade names |
|
|
104,512 |
|
|
|
|
|
|
|
104,512 |
|
Television station FCC licenses |
|
|
255,304 |
|
|
|
|
|
|
|
255,304 |
|
Amortizable intangible assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Customer relationships |
|
|
298,566 |
|
|
|
116,803 |
|
|
|
181,763 |
|
Other |
|
|
59,777 |
|
|
|
18,665 |
|
|
|
41,112 |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
3,591,047 |
|
|
$ |
135,468 |
|
|
$ |
3,455,579 |
|
|
|
|
|
|
|
|
|
|
|
Dec. 30, 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill |
|
$ |
10,034,943 |
|
|
$ |
|
|
|
$ |
10,034,943 |
|
Indefinite-lived intangibles: |
|
|
|
|
|
|
|
|
|
|
|
|
Mastheads and trade names |
|
|
248,501 |
|
|
|
|
|
|
|
248,501 |
|
Television station FCC licenses |
|
|
255,304 |
|
|
|
|
|
|
|
255,304 |
|
Amortizable intangible assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Customer relationships |
|
|
307,114 |
|
|
|
110,491 |
|
|
|
196,623 |
|
Other |
|
|
48,222 |
|
|
|
13,189 |
|
|
|
35,033 |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
10,894,084 |
|
|
$ |
123,680 |
|
|
$ |
10,770,404 |
|
|
|
|
|
|
|
|
|
|
|
Amortization expense was approximately $31.2 million in 2008 and $36.1 million in 2007.
Customer relationships, which include subscriber lists and advertiser relationships, are amortized
on a straight-line basis over four to 25 years. Other intangibles primarily include internally
developed technology, partner relationships, patents and amortizable trade names and were assigned
lives of between one and 21 years and are amortized on a straight-line basis.
Amortization expense relating to the amortizable intangibles is expected to be approximately
$32 million in 2009 and decline to $25 million in 2013 assuming no acquisitions or dispositions.
The following table shows the changes in the carrying amount of goodwill during 2008 and 2007.
In thousands of dollars
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Publishing |
|
|
Digital |
|
|
Broadcasting |
|
|
Total |
|
Goodwill |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at Dec. 31, 2006 |
|
$ |
8,358,346 |
|
|
$ |
78,705 |
|
|
$ |
1,623,389 |
|
|
$ |
10,060,440 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions &
adjustments |
|
|
32,452 |
|
|
|
27,375 |
|
|
|
(4,891 |
) |
|
|
54,936 |
|
Dispositions |
|
|
(138,345 |
) |
|
|
|
|
|
|
|
|
|
|
(138,345 |
) |
Foreign currency
exchange rate changes |
|
|
57,358 |
|
|
|
|
|
|
|
554 |
|
|
|
57,912 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at Dec. 30, 2007 |
|
$ |
8,309,811 |
|
|
$ |
106,080 |
|
|
$ |
1,619,052 |
|
|
$ |
10,034,943 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions &
adjustments |
|
|
(985 |
) |
|
|
568,208 |
|
|
|
(397 |
) |
|
|
566,826 |
|
Impairment |
|
|
(7,448,048 |
) |
|
|
(10,000 |
) |
|
|
|
|
|
|
(7,458,048 |
) |
Dispositions |
|
|
(137 |
) |
|
|
|
|
|
|
|
|
|
|
(137 |
) |
Foreign currency
exchange rate changes |
|
|
(266,313 |
) |
|
|
(3,695 |
) |
|
|
(688 |
) |
|
|
(270,696 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at Dec. 28, 2008 |
|
$ |
594,328 |
|
|
$ |
660,593 |
|
|
$ |
1,617,967 |
|
|
$ |
2,872,888 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE 5
Consolidated statements of cash flows
Cash paid in 2008, 2007 and 2006 for income taxes and for interest (net of amounts capitalized) was
as follows:
In thousands of dollars
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
Income taxes |
|
$ |
306,074 |
|
|
$ |
653,368 |
|
|
$ |
549,763 |
|
Interest |
|
$ |
188,385 |
|
|
$ |
260,247 |
|
|
$ |
281,275 |
|
Interest in the amount of $458,000, $43,000 and $2.0 million was capitalized in 2008, 2007 and
2006, respectively.
In connection with the 2006 broadcasting acquisitions, the company assumed approximately $29.9
million of film contract liabilities.
In connection with the acquisition of Schedule Star LLC in October 2007 and Ripple6 in
November 2008, the company recorded liabilities of $7.2 million and $1.8 million, respectively,
related to payments due to the sellers in future years.
53
NOTE 6
Investments
The companys investments include several that are accounted for under the equity method. Principal
among these are the following:
|
|
|
|
|
|
|
% Owned |
|
Ponderay Newsprint Company |
|
|
13.50 |
% |
California Newspapers Partnership |
|
|
19.49 |
% |
Shermans Travel |
|
|
19.67 |
% |
Classified Ventures |
|
|
23.60 |
% |
Cozi |
|
|
23.30 |
% |
4INFO |
|
|
24.71 |
% |
Quadrant ONE |
|
|
25.00 |
% |
Fantasy Sports Venture |
|
|
28.52 |
% |
Mogulus |
|
|
31.10 |
% |
Topix |
|
|
33.71 |
% |
Texas-New Mexico Newspapers Partnership |
|
|
40.64 |
% |
Detroit Weekend Direct |
|
|
50.00 |
% |
Metromix |
|
|
50.00 |
% |
Tucson Newspapers Partnership |
|
|
50.00 |
% |
The aggregate carrying value of the equity investments at Dec. 28, 2008, was $201 million.
Certain differences exist between the companys investment carrying value and the underlying equity
of the investee companies principally due to fair value measurement at the date of investment
acquisition and due to impairment charges recorded by the company for certain of the investments.
The aggregate amount of pretax earnings (losses) recorded by the company for its investments
accounted for under the equity method was $(374.9) million, $40.7 million, and $38.0 million for
2008, 2007, and 2006, respectively.
The
2008 amount is inclusive of non-cash impairment charges of
$337 million related to the
carrying value of California Newspapers Partnership and Texas-New Mexico Newspapers Partnership.
On Sept. 3, 2008, the company acquired an additional 10% stake in CareerBuilder from Tribune
Company increasing its investment to 50.8% so that it became the majority and controlling owner.
Beginning in September 2008, the operations of CareerBuilder have been fully consolidated and are
reported in the digital segment. The related minority interest charge for CareerBuilder is
reflected in Other non-operating items in the Statements of Income (Loss).
The company also recorded revenue related to CareerBuilder and Classified Ventures products
for online advertisements placed on its newspaper publishing affiliated Web sites. Such amounts
totaled approximately $186 million for 2008, $209 million for 2007 and $215 million for 2006. These
revenues are recorded within Publishing segment advertising revenue.
NOTE 7
Long-term debt
The long-term debt of the company is summarized below:
In thousands of dollars
|
|
|
|
|
|
|
|
|
|
|
Dec. 28, 2008 |
|
|
Dec. 30, 2007 |
|
Unsecured floating notes due May 2009 |
|
$ |
632,205 |
|
|
$ |
750,000 |
|
Unsecured notes bearing fixed rate
interest at 5.75% due June 2011 |
|
|
498,464 |
|
|
|
497,832 |
|
Unsecured floating rate term loan due
July 2011 |
|
|
280,000 |
|
|
|
|
|
Borrowings under revolving credit
agreements expiring March 2012 |
|
|
1,907,000 |
|
|
|
|
|
Unsecured notes bearing fixed rate
interest at 6.375% due April 2012 |
|
|
499,269 |
|
|
|
499,046 |
|
Unsecured promissory notes |
|
|
|
|
|
|
835,010 |
|
Unsecured notes bearing fixed rate
interest at 4.125% repaid June 2008 |
|
|
|
|
|
|
499,721 |
|
Unsecured senior convertible notes
repaid July 2008 |
|
|
|
|
|
|
1,000,000 |
|
Industrial revenue bonds and other
indebtedness |
|
|
4 |
|
|
|
16,729 |
|
|
|
|
|
|
|
|
Total long-term debt |
|
$ |
3,816,942 |
|
|
$ |
4,098,338 |
|
|
|
|
|
|
|
|
As of Dec. 28, 2008, there were no unsecured promissory notes outstanding. The unsecured
promissory notes at Dec. 30, 2007, were due from Jan. 2, 2008, to Feb. 8, 2008, with rates varying
from 5.28% to 5.60%.
The maximum amount of such promissory notes outstanding at the end of any period during 2008
and 2007 was $2.0 billion and $2.7 billion, respectively. The daily average outstanding balance of
promissory notes was $883 million during 2008 and $1.7 billion during 2007. The weighted average
interest rate on such notes was 3.5% for 2008 and 5.4% for 2007.
As of Dec. 28, 2008, the company had approximately $1.9 billion of borrowings under its
revolving credit facilities, which were used to repay all outstanding commercial paper. The maximum
amount outstanding at the end of any period during 2008 was $1.9 billion. The daily average
outstanding balance of the revolving credit facilities was $486 million during 2008. The weighted
average interest rate was 4.4% for 2008.
Total average debt outstanding in 2008 and 2007 was $4.0 billion and $4.6 billion,
respectively. The weighted average interest rate on all debt was 4.6% for 2008 and 5.4% for 2007.
The unsecured fixed rate notes bearing interest at 6.375% were issued in March 2002 and mature
in 2012.
On June 16, 2008, the company repaid $500 million in unsecured notes bearing interest at
4.125% that were due using borrowings in the commercial paper market. These notes had been issued
in June 2005 in an underwritten public offering.
In May 2006, the company issued $500 million aggregate principal amount of 5.75% notes due
2011 and $750 million aggregate principal amount of floating rate notes due 2009 in an underwritten
public offering. The net proceeds of the offering were used to pay down commercial paper
borrowings.
On April 2, 2007, the company redeemed the $700 million aggregate principal amount of 5.50%
notes. This payment was funded by borrowings in the commercial paper market and from investment
proceeds of $525 million in marketable securities.
54
In June 2007, the company issued $1.0 billion aggregate principal amount of unsecured senior
convertible notes in an underwritten public offering. Proceeds from the notes were used to repay
commercial paper obligations. The convertible notes bore interest at a floating rate equal to one
month LIBOR, reset monthly, minus twenty-three basis points. As anticipated, on July 15, 2008, the
holders of the convertible notes required the company to repurchase the convertible notes for cash
at a price equal to 100% of the principal amount of the notes submitted for repurchase, plus
accrued and unpaid interest.
The industrial revenue bonds were repaid in full in 2008. Prior to repayment, the bonds bore
interest at variable interest rates based on a municipal bond index.
In December 2008, the company launched a tender offer to purchase any and all of its
outstanding floating rate notes due in May 2009 at a purchase price of $950 per $1,000 in principal
amount plus accrued and unpaid interest. In response to the offer, $98.4 million in aggregate
principal amount of notes, representing approximately 13.5 percent of the then outstanding notes,
were purchased at this price in December 2008. Prior to the tender offer, the company had
repurchased $19.4 million in principal amount of the floating rate notes in a privately negotiated
transaction. In connection with these transactions, the company recorded a gain of approximately $4
million which is classified in Other non-operating items in the Statement of Income (Loss). This
gain is net of $1.7 million in losses reclassified from accumulated other comprehensive income
(loss) related to the interest swap agreements.
In August 2007, the company entered into three interest rate swap agreements totaling a
notional amount of $750 million in order to mitigate the volatility of interest rates. These
agreements effectively fixed the interest rate on the $750 million in floating rate notes due May
2009 at 5.0125%. These instruments were designated as cash flow hedges in accordance with SFAS No.
133, Accounting for Derivative Instruments and Hedging Activities, and changes in fair value are
recorded through accumulated other comprehensive income with a corresponding adjustment to other
long-term liabilities. As a result of the tender offer discussed above, the cash flow hedging
treatment was discontinued for interest rate swaps associated with approximately $118 million of
notional value on the retired floating rate notes. Amounts recorded in accumulated other
comprehensive income (loss) related to the discontinued cash flow hedges were reclassified into
earnings and subsequent changes to the fair value of these interest rate swaps are being recorded
through earnings.
In July 2008, the company received proceeds of $280 million from borrowings under a new term
loan agreement with certain bank lenders. The term loan is payable in full on July 14, 2011. The
loan carries interest at a floating rate and may be prepaid at any time without penalty.
On Oct. 31, 2008, the company amended each of its three revolving credit agreements and its
term loan agreement. Under each of the amendments, the existing financial covenant requiring that
the company maintain shareholders equity in excess of $3.5 billion was replaced with a new
covenant that requires that the company maintain a senior leverage ratio of less than 3.5x. The
senior leverage ratio is the ratio of the companys senior unsecured debt outstanding to its EBITDA
measured on a trailing four quarters basis. The new covenant also requires the company to maintain
a total leverage ratio of less than 4.0x. The total leverage ratio would
also include any subordinated debt the company may issue in the future. Currently, all of the
companys debt is senior and unsecured. At Dec. 28, 2008, its senior leverage ratio was 2.56x.
In addition, the aggregate size of the revolving credit facilities was reduced to $3.1 billion
from $3.9 billion. There is a further provision that the aggregate size of the three revolving
credit agreements will be reduced on a dollar-for-dollar basis for the first $397 million that the
company raises in the capital markets prior to Dec. 31, 2009. Irrespective of any such interim
reductions, the aggregate size of the three revolving credit agreements will be reduced to $2.75
billion on Dec. 31, 2009. The amendments also provide for certain changes to the pricing of the
facilities. For the revolving credit facilities, the commitment fees may range from 0.125% to 0.25%
depending on credit ratings for the companys senior unsecured debt from Moodys Investor Services
(Moodys) and Standard & Poors (S&P). The rate currently in effect is 0.20%.
Under each of the agreements, the company may borrow at an applicable margin above the
Eurodollar base rate or the higher of the Prime Rate or the Federal Funds Effective Rate plus
0.50%. Under the amended revolving credit agreements, the applicable margin for such borrowings
ranges from 1.00% to 2.25% depending on credit ratings. Under the term loan agreement, the
applicable margin varies from 1.25% to 2.25%. At its current ratings the company will pay an
applicable margin of 1.75% under the revolving credit agreements and 1.75% under the term loan
agreement.
Also, in connection with the amendments, the company agreed to provide future guarantees from
its domestic wholly-owned subsidiaries in the event that the companys credit ratings from either
Moodys or S&P fall below investment grade. If the guarantees are triggered, the existing notes and
other unsecured debt of the company will
become structurally subordinated to the revolving credit agreements and the term loan. The
company believes the amended facilities provide it with ample liquidity to operate its business and
pursue its strategic objectives.
The companys short-term and long-term debt is rated by S&P and Moodys. On Nov. 11, 2008,
S&P, reduced the companys long-term rating to BBB- and on Jan. 30, 2009, placed the companys
long-term and short-term ratings on credit watch with negative implications. On Feb. 2, 2009,
Moodys reduced the companys long term and short-term ratings to Baa3 and P-3, respectively and
placed the ratings under review for further downgrades. If S&P or Moodys further downgrades the
companys credit ratings, the guarantees discussed above will be triggered.
The company has an effective universal shelf registration statement filed with the Securities
and Exchange Commission in July 2006 under which an unspecified amount of securities may be issued,
subject to a $7 billion limit established by the Board of Directors. Proceeds from the sale of such
securities may be used for general corporate purposes, including capital expenditures, working
capital, securities repurchase programs, repayment of debt and financing of acquisitions. The
company may also invest borrowed funds that are not required for other purposes in short-term
marketable securities.
55
The following schedule of annual maturities of long-term debt assumes the company uses
available capacity under its revolving credit agreements to refinance the unsecured floating rate
notes due in 2009. Based on this refinancing assumption, all of the obligations are reflected as
maturities for 2011 and 2012.
|
|
|
|
|
In thousands of dollars |
|
|
|
|
2009 |
|
$ |
|
|
2010 |
|
|
|
|
2011 |
|
|
778,464 |
|
2012 |
|
|
3,038,478 |
|
2013 |
|
|
|
|
Later years |
|
|
|
|
|
|
|
|
Total |
|
$ |
3,816,942 |
|
|
|
|
|
The fair value of the companys total long-term debt, determined based on estimated market
prices for similar issues of debt with the same remaining maturities and similar terms, totaled
$3.0 billion at Dec. 28, 2008.
NOTE 8
Retirement plans
The company and its subsidiaries have various retirement plans, including plans established under
collective bargaining agreements. The companys principal retirement plan is the Gannett Retirement
Plan (GRP). As described more fully below, substantially all participants had their benefits under
this plan frozen effective Aug. 1, 2008. Prior to this, benefits under the GRP were based on years
of service and final average pay.
The disclosure tables below also include the assets and obligations of the Newsquest Pension
Plan in the U.K., certain collectively bargained plans, the Gannett Supplemental Retirement Plan
and a frozen plan for the companys Board of Directors. The company uses a Dec. 31 measurement date
for its retirement plans.
In June 2008, the Board of Directors approved amendments to each of (i) the GRP; (ii) the
Gannett Supplemental Retirement Plan (SERP); (iii) the Gannett 401(k) Savings Plan (401(k) Plan);
and (iv) the Gannett Deferred Compensation Plan (DCP). The amendments were designed to improve the
401(k) Plan while reducing the amount and volatility of future pension expense. As a result of the
amendments to the GRP and SERP, most participants in these plans had their benefits frozen as of
Aug. 1, 2008. Participants whose GRP and, if applicable, SERP benefits were frozen will have their
frozen benefits periodically increased by a cost of living adjustment until benefits commence.
Effective Aug. 1, 2008, most participants whose benefits were frozen under the GRP and, if
applicable, the SERP receive higher matching contributions under the 401(k) Plan. Under the new
formula, the matching contribution rate generally increased from 50% of the first 6% of
compensation that an employee elects to contribute to the plan to 100% of the first 5% of
contributed compensation. The company will also make additional employer contributions to the
401(k) Plan on behalf of certain long-service employees. The DCP was amended to provide for
Gannett contributions on behalf of certain employees whose benefits under the 401(k) Plan are
capped by IRS rules.
As a result of the amendments to freeze most benefit accruals in the GRP and the SERP, the
company recognized a net pre-tax pension curtailment gain of $46.5 million in the second quarter of
2008 in accordance with Statement of Financial Accounting Standards No. 88, Employers Accounting
for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits.
The companys pension costs, which include costs for its qualified, non-qualified and union
plans, for 2008, 2007 and 2006 are presented in the following table:
In thousands of dollars
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
Service cost
benefits earned during the period |
|
$ |
64,563 |
|
|
$ |
100,213 |
|
|
$ |
107,644 |
|
Interest cost on benefit obligation |
|
|
207,758 |
|
|
|
199,714 |
|
|
|
183,637 |
|
Expected return on plan assets |
|
|
(266,079 |
) |
|
|
(276,437 |
) |
|
|
(247,434 |
) |
Amortization of prior service
credit |
|
|
(9,682 |
) |
|
|
(21,025 |
) |
|
|
(21,097 |
) |
Amortization of actuarial loss |
|
|
23,465 |
|
|
|
43,051 |
|
|
|
68,824 |
|
Curtailment gain |
|
|
(46,463 |
) |
|
|
|
|
|
|
|
|
Special termination benefit charge |
|
|
4,168 |
|
|
|
1,527 |
|
|
|
2,703 |
|
|
|
|
|
|
|
|
|
|
|
Pension
expense (benefit) for company-sponsored retirement plans |
|
|
(22,270 |
) |
|
|
47,043 |
|
|
|
94,277 |
|
Union and other pension cost |
|
|
5,002 |
|
|
|
7,246 |
|
|
|
8,398 |
|
|
|
|
|
|
|
|
|
|
|
Total
pension cost (benefit) |
|
$ |
(17,268 |
) |
|
$ |
54,289 |
|
|
$ |
102,675 |
|
|
|
|
|
|
|
|
|
|
|
56
The following table provides a reconciliation of pension benefit obligations (on a projected
benefit obligation measurement basis), plan assets and funded status of company-sponsored
retirement plans, along with the related amounts that are recognized in the Consolidated Balance
Sheets.
In thousands of dollars
|
|
|
|
|
|
|
|
|
|
|
Dec. 28, 2008 |
|
|
Dec. 30, 2007 |
|
Change in benefit obligations |
|
|
|
|
|
|
|
|
Benefit obligations at beginning
of year |
|
$ |
3,519,996 |
|
|
$ |
3,527,523 |
|
Service cost |
|
|
64,563 |
|
|
|
100,213 |
|
Interest cost |
|
|
207,758 |
|
|
|
199,714 |
|
Plan participants contributions |
|
|
12,130 |
|
|
|
13,212 |
|
Plan amendments |
|
|
92,284 |
|
|
|
(7,077 |
) |
Actuarial gains |
|
|
(175,842 |
) |
|
|
(100,291 |
) |
Foreign currency translation |
|
|
(192,550 |
) |
|
|
14,551 |
|
Gross benefits paid |
|
|
(258,620 |
) |
|
|
(229,376 |
) |
Curtailments |
|
|
(213,600 |
) |
|
|
|
|
Special termination benefits |
|
|
4,168 |
|
|
|
1,527 |
|
|
|
|
|
|
|
|
Benefit obligations at end of year |
|
$ |
3,060,287 |
|
|
$ |
3,519,996 |
|
|
|
|
|
|
|
|
Change in plan assets |
|
|
|
|
|
|
|
|
Fair value of plan assets at
beginning of year |
|
$ |
3,376,268 |
|
|
$ |
3,291,675 |
|
Actual return on plan assets |
|
|
(826,125 |
) |
|
|
251,731 |
|
Plan participants contributions |
|
|
12,130 |
|
|
|
13,212 |
|
Employer contributions |
|
|
43,990 |
|
|
|
34,225 |
|
Gross benefits paid |
|
|
(258,620 |
) |
|
|
(229,376 |
) |
Foreign currency translation |
|
|
(179,084 |
) |
|
|
14,801 |
|
Fair value of plan assets at
end of year |
|
$ |
2,168,559 |
|
|
$ |
3,376,268 |
|
|
|
|
|
|
|
|
Funded status at end of year |
|
$ |
(891,728 |
) |
|
$ |
(143,728 |
) |
|
|
|
|
|
|
|
Amounts recognized in Consolidated Balance Sheets |
|
|
|
|
|
|
|
|
Long-term other assets |
|
$ |
4,988 |
|
|
$ |
116,150 |
|
Accrued benefit cost current |
|
$ |
(14,205 |
) |
|
$ |
(15,098 |
) |
Accrued
benefit cost long-term |
|
$ |
(882,511 |
) |
|
$ |
(244,780 |
) |
The funded status (on a projected benefit obligation basis) of the companys principal
retirement plans at Dec. 28, 2008, is as follows:
In thousands of dollars
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value of |
|
Benefit |
|
Funded |
|
|
Plan Assets |
|
|
Obligation |
|
|
Status |
|
GRP |
|
$ |
1,621,971 |
|
|
$ |
2,209,188 |
|
|
$ |
(587,217 |
) |
SERP |
|
|
|
|
|
|
187,909 |
|
|
|
(187,909 |
) |
Newsquest |
|
|
447,138 |
|
|
|
493,009 |
|
|
|
(45,871 |
) |
All other |
|
|
99,450 |
|
|
|
170,181 |
|
|
|
(70,731 |
) |
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
2,168,559 |
|
|
$ |
3,060,287 |
|
|
$ |
(891,728 |
) |
|
|
|
|
|
|
|
|
|
|
The accumulated benefit obligation for all defined benefit pension plans was $3.01 billion and
$2.98 billion at Dec. 28, 2008 and Dec. 30, 2007, respectively.
Net actuarial losses recognized in accumulated other comprehensive income (loss) were $1,267.4
million in 2008 and $643.7 million in 2007. Prior service cost (credits) recognized in accumulated
other comprehensive income (loss) were $80.4 million in 2008 and $(72.3) million in 2007.
The actuarial loss and prior service cost expected to be amortized from accumulated other
comprehensive income (loss) into net periodic benefit cost in 2009 are $50.8 million and $2.0
million, respectively.
Other changes in plan assets and benefit obligations recognized in other comprehensive income
(loss) for 2008 consist of the following:
|
|
|
|
|
In thousands of dollars |
|
|
|
|
Current year actuarial loss |
|
$ |
(916,361 |
) |
Current year actuarial gain due to curtailment |
|
|
213,600 |
|
Prior service credit recognized in curtailment |
|
|
(46,463 |
) |
Amortization of actuarial loss |
|
|
23,465 |
|
Prior service cost change |
|
|
(92,284 |
) |
Amortization of prior service credit |
|
|
(9,682 |
) |
Currency loss/(gain) |
|
|
51,223 |
|
|
|
|
|
Total |
|
$ |
(776,502 |
) |
|
|
|
|
Pension costs: The following assumptions were used to determine net pension costs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
Discount rate |
|
|
6.23 |
% |
|
|
5.85 |
% |
|
|
5.61 |
% |
Expected return on plan assets |
|
|
8.75 |
% |
|
|
8.75 |
% |
|
|
8.75 |
% |
Rate of compensation increase |
|
|
4.00 |
% |
|
|
4.00 |
% |
|
|
4.00 |
% |
The expected return on asset assumption was determined based on plan asset allocations, a
review of historic capital market performance, historical plan asset performance and a forecast of
expected future asset returns.
Benefit obligations and funded status: The following assumptions were used to determine the
year-end benefit obligations:
|
|
|
|
|
|
|
|
|
|
|
Dec. 28, 2008 |
|
|
Dec. 30, 2007 |
|
Discount rate |
|
|
6.26 |
% |
|
|
6.08 |
% |
Rate of compensation increase |
|
|
3.00 |
% |
|
|
4.00 |
% |
The following table presents information for those company retirement plans for which
accumulated benefits exceed assets:
In thousands of dollars
|
|
|
|
|
|
|
|
|
|
|
Dec. 28, 2008 |
|
|
Dec. 30, 2007 |
|
Accumulated benefit obligation |
|
$ |
2,954,780 |
|
|
$ |
280,667 |
|
Fair value of plan assets |
|
$ |
2,107,175 |
|
|
$ |
64,900 |
|
The following table presents information for those company retirement plans for which the
projected benefit obligation exceeds assets:
In thousands of dollars
|
|
|
|
|
|
|
|
|
|
|
Dec. 28, 2008 |
|
|
Dec. 30, 2007 |
|
Projected benefit obligation |
|
$ |
3,003,891 |
|
|
$ |
1,134,243 |
|
Fair value of plan assets |
|
$ |
2,107,175 |
|
|
$ |
874,365 |
|
The company made de minimus contributions to the GRP in 2008 and 2007. The company contributed
$18.1 million to the U.K. retirement plan in 2008 and $22.2 million in 2007. At this time, the
company expects to contribute $14.1 million to the U.K. retire-
57
ment plan in 2009. Under current U.S. pension laws and regulations, the company is not required to
make contributions to the GRP in 2009, however it may elect to do so.
Plan assets: The fair value of plan assets was approximately $2.2 billion and $3.4 billion at
the end of 2008 and 2007, respectively. The expected long-term rate of return on these assets was
8.75% for 2008, 2007 and 2006. The asset allocation for company-sponsored pension plans at the end
of 2008 and 2007, and target allocations for 2009, by asset category, are presented in the table
below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Target Allocation |
|
|
Allocation of Plan Assets |
|
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
Equity securities |
|
|
59 |
% |
|
|
40 |
% |
|
|
59 |
% |
Debt securities |
|
|
30 |
|
|
|
52 |
|
|
|
34 |
|
Other |
|
|
11 |
|
|
|
8 |
|
|
|
7 |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
100 |
% |
|
|
100 |
% |
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
The primary objective of company-sponsored retirement plans is to provide eligible employees
with scheduled pension benefits: the prudent man guideline is followed with regard to the
investment management of retirement plan assets. Consistent with prudent standards for preservation
of capital and maintenance of liquidity, the goal is to earn the highest possible total rate of
return while minimizing risk. The principal means of reducing volatility and exercising prudent
investment judgment is diversification by asset class and by investment manager; consequently,
portfolios are constructed to attain prudent diversification in the total portfolio, each asset
class, and within each individual investment managers portfolio.
Investment diversification is consistent with the intent to minimize the risk of large losses. All
objectives are based upon an investment horizon spanning five years so that interim market
fluctuations can be viewed with the appropriate perspective. The target asset allocation represents
the long-term perspective. Retirement plan assets will be rebalanced at least annually to align
them with the target asset allocations. Risk characteristics are measured and compared with an
appropriate benchmark quarterly; periodic reviews are made of the investment objectives and the
investment managers. The companys actual investment return (loss) on its Gannett Retirement Plan
assets was (25.6)% for 2008, 9.3% for 2007 and 13.2% for 2006. The negative return for 2008
reflects the global economic crisis and near collapse of financial markets and equity share values.
Retirement plan assets include approximately 1.2 million shares of the companys common stock
valued at approximately $10 million and $48 million at the end of 2008 and 2007, respectively. The
plan received dividends of approximately $2 million on these shares in 2008.
Cash flows: The company estimates it will make the following benefit payments (from either
retirement plan assets or directly from company funds), which reflect expected future service, as
appropriate:
|
|
|
|
|
In thousands of dollars |
|
|
|
|
2009 |
|
$ |
210,003 |
|
2010 |
|
$ |
209,905 |
|
2011 |
|
$ |
211,967 |
|
2012 |
|
$ |
216,916 |
|
2013 |
|
$ |
219,873 |
|
20142018 |
|
$ |
1,146,612 |
|
NOTE 9
Postretirement benefits other than pensions
The company provides health care and life insurance benefits to certain retired employees who meet
age and service requirements. Most of the companys retirees contribute to the cost of these
benefits and retiree contributions are
increased as actual benefit costs increase. The cost of providing retiree health care and life
insurance benefits is actuarially determined and accrued over the service period of the active
employee group. The companys policy is to fund benefits as claims and premiums are paid. The
company uses a Dec. 31 measurement date for these plans.
Postretirement benefit cost for health care and life insurance for 2008, 2007 and 2006
included the following components:
In thousands of dollars
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
Service cost benefits earned during the period |
|
$ |
1,634 |
|
|
$ |
1,906 |
|
|
$ |
2,101 |
|
Interest cost on net benefit obligation |
|
|
14,013 |
|
|
|
13,817 |
|
|
|
13,604 |
|
Amortization of prior service credit |
|
|
(15,560 |
) |
|
|
(15,560 |
) |
|
|
(15,560 |
) |
Amortization of actuarial loss |
|
|
4,752 |
|
|
|
5,180 |
|
|
|
5,068 |
|
|
|
|
|
|
|
|
|
|
|
Net periodic postretirement
benefit cost |
|
$ |
4,839 |
|
|
$ |
5,343 |
|
|
$ |
5,213 |
|
|
|
|
|
|
|
|
|
|
|
Special termination benefit charge |
|
$ |
1,307 |
|
|
$ |
356 |
|
|
$ |
231 |
|
|
|
|
|
|
|
|
|
|
|
The table below provides a reconciliation of benefit obligations and funded status of the
companys postretirement benefit plans:
In thousands of dollars
|
|
|
|
|
|
|
|
|
|
|
Dec. 28, 2008 |
|
|
Dec. 30, 2007 |
|
Change in benefit obligations |
|
|
|
|
|
|
|
|
Net benefit obligations at
beginning of year |
|
$ |
242,610 |
|
|
$ |
251,402 |
|
Service cost |
|
|
1,634 |
|
|
|
1,906 |
|
Interest cost |
|
|
14,013 |
|
|
|
13,817 |
|
Plan participants contributions |
|
|
13,621 |
|
|
|
11,937 |
|
Plan amendments |
|
|
(957 |
) |
|
|
|
|
Actuarial (gain) loss |
|
|
9,029 |
|
|
|
(2,173 |
) |
Special termination benefits |
|
|
1,307 |
|
|
|
356 |
|
Gross benefits paid |
|
|
(40,100 |
) |
|
|
(37,466 |
) |
Federal subsidy on benefits paid |
|
|
3,033 |
|
|
|
2,831 |
|
|
|
|
|
|
|
|
Net benefit obligations at
end of year |
|
$ |
244,190 |
|
|
$ |
242,610 |
|
|
|
|
|
|
|
|
Change in plan assets |
|
|
|
|
|
|
|
|
Fair value of plan assets at
beginning of year |
|
$ |
|
|
|
$ |
|
|
Employer contributions |
|
|
26,479 |
|
|
|
25,529 |
|
Plan participants contributions |
|
|
13,621 |
|
|
|
11,937 |
|
Gross benefits paid |
|
|
(40,100 |
) |
|
|
(37,466 |
) |
Fair value of plan assets at
end of year |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
Benefit obligation at end of year |
|
$ |
244,190 |
|
|
$ |
242,610 |
|
|
|
|
|
|
|
|
Accrued postretirement benefit cost: |
|
|
|
|
|
|
|
|
Current |
|
$ |
27,047 |
|
|
$ |
25,622 |
|
Noncurrent |
|
$ |
217,143 |
|
|
$ |
216,988 |
|
58
Net actuarial losses recognized in accumulated other comprehensive income (loss) were $57.1
million in 2008 and $50.7 million in 2007. Prior service credits recognized in accumulated other
comprehensive income (loss) were $78.1 million in 2008 and $92.7 million in 2007.
The actuarial loss and prior service credit estimated to be amortized from accumulated other
comprehensive income (loss) into net periodic benefit cost in 2009 are $5.7 million and $15.7
million, respectively.
Other changes in plan assets and benefit obligations recognized in other comprehensive income
(loss) for 2008 consist of the following:
|
|
|
|
|
In thousands of dollars |
|
|
|
|
Current year actuarial loss |
|
$ |
(11,222 |
) |
Prior service credit change |
|
|
957 |
|
Amortization of actuarial loss |
|
|
4,752 |
|
Amortization of prior service credit |
|
|
(15,560 |
) |
|
|
|
|
Total |
|
$ |
(21,073 |
) |
|
|
|
|
Postretirement benefit costs: The following assumptions were used to determine postretirement
benefit cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
Discount rate |
|
|
6.13 |
% |
|
|
5.81 |
% |
|
|
5.57 |
% |
Health care cost trend on coverage pre 65 |
|
|
8.00 |
% |
|
|
9.00 |
% |
|
|
10.00 |
% |
Health care cost trend on coverage post 65 |
|
|
8.00 |
% |
|
|
9.00 |
% |
|
|
10.00 |
% |
Ultimate trend rate |
|
|
5.00 |
% |
|
|
5.00 |
% |
|
|
5.00 |
% |
Year that ultimate trend rate is reached |
|
|
2014 |
|
|
|
2011 |
|
|
|
2011 |
|
|
|
|
|
|
|
|
|
|
|
Benefit obligations and funded status: The following assumptions were used to determine the
year-end benefit obligation:
|
|
|
|
|
|
|
|
|
|
|
Dec. 28, 2008 |
|
|
Dec. 30, 2007 |
|
Discount rate |
|
|
6.15 |
% |
|
|
6.13 |
% |
Health care cost trend rate assumed for
next year |
|
|
7.50 |
% |
|
|
8.00 |
% |
Ultimate trend rate |
|
|
5.00 |
% |
|
|
5.00 |
% |
Year that ultimate trend rate is reached |
|
|
2014 |
|
|
|
2014 |
|
|
|
|
|
|
|
|
A 7.5% annual rate of increase in the per capita cost of covered health care benefits was
assumed for 2009. Assumed health care cost trend rates have a significant effect on the amounts
reported for the health care plans. The effect of a 1% change in the health care cost trend rate
would result in a change of approximately $12 million in the 2008 postretirement benefit obligation
and a $1 million change in the aggregate service and interest components of the 2008 expense.
Cash flows: The company expects to make the following benefit payments, which reflect expected
future service, and to receive the following federal subsidy benefits as appropriate:
|
|
|
|
|
|
|
|
|
In thousands of dollars |
|
Benefit Payments |
|
|
Subsidy Benefits |
|
2009 |
|
$ |
27,047 |
|
|
$ |
3,141 |
|
2010 |
|
$ |
26,798 |
|
|
$ |
3,246 |
|
2011 |
|
$ |
26,303 |
|
|
$ |
3,327 |
|
2012 |
|
$ |
25,280 |
|
|
$ |
3,386 |
|
2013 |
|
$ |
24,624 |
|
|
$ |
3,394 |
|
20142018 |
|
$ |
110,847 |
|
|
$ |
13,577 |
|
|
|
|
|
|
|
|
The amounts above exclude the participants share of the benefit cost. The companys policy is
to fund benefits as claims and premiums are paid.
NOTE 10
Income taxes
The provision (benefit) for income taxes on income from continuing operations consists of the
following:
In thousands of dollars
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
Current |
|
|
Deferred |
|
|
Total |
|
Federal |
|
$ |
196,648 |
|
|
$ |
(636,841 |
) |
|
$ |
(440,193 |
) |
State and other |
|
|
(25,236 |
) |
|
|
(152,567 |
) |
|
|
(177,803 |
) |
Foreign |
|
|
(13,593 |
) |
|
|
(26,811 |
) |
|
|
(40,404 |
) |
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
157,819 |
|
|
$ |
(816,219 |
) |
|
$ |
(658,400 |
) |
|
|
|
|
|
|
|
|
|
|
In thousands of dollars
|
|
|
|
|
|
|
|
|
|
|
|
|
2007 |
|
Current |
|
|
Deferred |
|
|
Total |
|
Federal |
|
$ |
358,018 |
|
|
$ |
9,434 |
|
|
$ |
367,452 |
|
State and other |
|
|
42,240 |
|
|
|
12,529 |
|
|
|
54,769 |
|
Foreign |
|
|
57,554 |
|
|
|
(6,475 |
) |
|
|
51,079 |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
457,812 |
|
|
$ |
15,488 |
|
|
$ |
473,300 |
|
|
|
|
|
|
|
|
|
|
|
In thousands of dollars
|
|
|
|
|
|
|
|
|
|
|
|
|
2006 |
|
Current |
|
|
Deferred |
|
|
Total |
|
Federal |
|
$ |
407,774 |
|
|
$ |
19,082 |
|
|
$ |
426,856 |
|
State and other |
|
|
60,222 |
|
|
|
7,496 |
|
|
|
67,718 |
|
Foreign |
|
|
43,808 |
|
|
|
5,818 |
|
|
|
49,626 |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
511,804 |
|
|
$ |
32,396 |
|
|
$ |
544,200 |
|
|
|
|
|
|
|
|
|
|
|
The components of income (loss) from continuing operations before income taxes consist of the
following:
In thousands of dollars
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
Domestic |
|
$ |
(4,752,181 |
) |
|
$ |
1,091,725 |
|
|
$ |
1,378,411 |
|
Foreign |
|
|
(2,553,784 |
) |
|
|
357,152 |
|
|
|
303,675 |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
(7,305,965 |
) |
|
$ |
1,448,877 |
|
|
$ |
1,682,086 |
|
|
|
|
|
|
|
|
|
|
|
The provision for income taxes on continuing operations varies from the U.S. federal statutory
tax rate as a result of the following differences:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal year |
|
2008 |
|
|
2007 |
|
|
2006 |
|
U.S. statutory tax rate |
|
|
35.0 |
% |
|
|
35.0 |
% |
|
|
35.0 |
% |
Increase (decrease) in taxes resulting from: |
|
|
|
|
|
|
|
|
|
|
|
|
Asset impairments |
|
|
(27.8 |
) |
|
|
|
|
|
|
|
|
State/other income taxes net of
federal income tax benefit |
|
|
3.0 |
|
|
|
2.5 |
|
|
|
2.1 |
|
Earnings in jurisdictions taxed at
rates different from the statutory
U.S. federal rate |
|
|
(2.0 |
) |
|
|
(2.8 |
) |
|
|
(2.7 |
) |
Other, net |
|
|
0.8 |
|
|
|
(2.0 |
) |
|
|
(2.0 |
) |
|
|
|
|
|
|
|
|
|
|
Effective tax rate |
|
|
9.0 |
% |
|
|
32.7 |
% |
|
|
32.4 |
% |
|
|
|
|
|
|
|
|
|
|
Absent the pre-tax and tax effect of impairment charges in 2008 and 2007, as more fully
discussed in Notes 3 and 4, the companys effective tax rate would have been 28.7% for 2008 and
32.5% for 2007.
59
In addition to the income tax provision presented above for continuing operations, the company
also recorded federal and state income taxes payable on discontinued operations in 2006 and 2007.
Taxes provided on the earnings from discontinued operations include amounts reclassified from
previously reported income tax provisions and totaled $4 million for 2007 and $15 million for 2006,
covering U.S. federal and state income taxes and representing an effective rate of 39%. Also
included in discontinued operations for 2007 is a recognized gain of $73.8 million, which is net of
tax. Taxes provided on the gains from the disposals totaled approximately $139.8 million for 2007,
covering U.S. federal and state income taxes and represent an effective rate of 65.4%. The excess
of the effective rate over the U.S. statutory tax of 35% is due principally to the
non-deductibility of goodwill associated with the properties disposed.
Deferred income taxes reflect temporary differences in the recognition of revenue and expense
for tax reporting and financial statement purposes. Amortization of intangibles represents the
largest component of the deferred provision, including a deferred benefit related to impairments.
Deferred tax liabilities and assets are adjusted for enacted changes in tax laws or tax rates of
the various tax jurisdictions. The amounts of such adjustments for 2006, 2007 and 2008 are not
significant.
Deferred tax liabilities and assets were composed of the following at the end of 2008 and
2007:
In thousands of dollars
|
|
|
|
|
|
|
|
|
|
|
Dec. 28, 2008 |
|
|
Dec. 30, 2007 |
|
Liabilities |
|
|
|
|
|
|
|
|
Accelerated depreciation |
|
$ |
340,632 |
|
|
$ |
398,552 |
|
Accelerated
amortization of
deductible intangibles |
|
|
|
|
|
|
593,866 |
|
Other |
|
|
|
|
|
|
101,390 |
|
|
|
|
|
|
|
|
Total deferred tax liabilities |
|
|
340,632 |
|
|
|
1,093,808 |
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
Accelerated amortization net of impairment of
deductible intangibles |
|
|
(52,984 |
) |
|
|
|
|
Accrued compensation costs |
|
|
(114,153 |
) |
|
|
(114,428 |
) |
Pension |
|
|
(348,608 |
) |
|
|
(59,569 |
) |
Postretirement medical and life |
|
|
(97,550 |
) |
|
|
(95,413 |
) |
Federal tax benefits of uncertain state
tax positions |
|
|
(70,761 |
) |
|
|
(93,509 |
) |
Partnership
investments including impairments |
|
|
(92,953 |
) |
|
|
|
|
Other |
|
|
(53,576 |
) |
|
|
(63,247 |
) |
|
|
|
|
|
|
|
Total deferred tax assets |
|
|
(830,585 |
) |
|
|
(426,166 |
) |
|
|
|
|
|
|
|
Total net deferred tax (assets) liabilities |
|
|
(489,953 |
) |
|
|
667,642 |
|
|
|
|
|
|
|
|
Net current deferred tax assets |
|
|
(29,386 |
) |
|
|
(28,470 |
) |
|
|
|
|
|
|
|
Net long-term deferred tax (assets)
liabilities |
|
$ |
(460,567 |
) |
|
$ |
696,112 |
|
|
|
|
|
|
|
|
Net deferred tax assets increased in 2008 by approximately $1.2 billion, primarily due to the
deferred tax effect of the impairments of goodwill and other assets, and the deferred tax effect of
the increase in the minimum pension liability recorded in Other Comprehensive Income (Loss).
Included in total deferred tax assets are foreign tax credits available for carryforward to
future years of approximately $10 million and $8 million in 2008 and 2007, respectively, upon which
the company has recorded full valuation allowances.
The company has not otherwise increased the valuation allowance for its deferred tax assets
for 2008. Realization of the deferred tax assets is dependent upon generating sufficient future
taxable income. The company expects to realize the benefit of its deferred tax assets through
future reversals of its deferred tax liabilities, through the recognition of taxable income in the
allowable carryback and carryforward periods, and through implementation of future tax planning
strategies. Although realization is not assured, the company believes it is more likely than not
that all of the deferred tax assets will be realized.
The companys legal and tax structure reflects acquisitions that have occurred over the years
as well as the multi-jurisdictional nature of the companys businesses.
The
company adopted FASB Interpretation No. 48 Accounting for Uncertainty in Income Taxes (FIN No. 48) on Jan. 1, 2007. As a result of the
implementation of FIN No. 48, the company recognized a $43 million increase in liabilities for
unrecognized tax benefits with a corresponding reduction in the Jan. 1, 2007, balance of retained
earnings.
The following table summarizes the activity related to unrecognized tax benefits:
In thousands of dollars
|
|
|
|
|
|
|
|
|
Change in unrecognized tax benefits |
|
Dec. 28, 2008 |
|
Dec. 30, 2007 |
Balance at beginning of year |
|
$ |
264,245 |
|
|
$ |
239,406 |
|
Additions based on tax positions related
to the current year |
|
|
13,645 |
|
|
|
44,846 |
|
Reductions based on tax positions
related to the current year |
|
|
|
|
|
|
|
|
Additions for tax positions of prior years |
|
|
12,396 |
|
|
|
32,624 |
|
Reductions for tax positions of prior years |
|
|
(45,397 |
) |
|
|
(26,856 |
) |
Settlements |
|
|
(33,403 |
) |
|
|
(16,209 |
) |
Lapse of statute of limitations |
|
|
(29,461 |
) |
|
|
(9,566 |
) |
|
|
|
|
|
|
|
Balance at end of year |
|
$ |
182,025 |
|
|
$ |
264,245 |
|
|
|
|
|
|
|
|
The total amount of unrecognized tax benefits that, if recognized, would impact the effective
tax rate was $182 million as of Dec. 30, 2007, and $116 million as of Dec. 28, 2008. This amount
includes the federal tax benefit of state tax deductions. Excluding the federal tax benefit of
state tax deductions, the total amount of unrecognized tax benefits at Dec. 30, 2007, was $264
million and at Dec. 28, 2008, was $182 million.
Included in the $182 million unrecognized tax benefit balance at Dec. 28, 2008, are $19
million of tax positions for which the ultimate deductibility is highly certain but for which there
is uncertainty about the timing of such deductibility.
The company recognizes interest and penalties related to unrecognized tax benefits as a
component of income tax expense. The company also recognizes interest income attributable to
overpayment of income taxes as a component of income tax expense. During 2008, 2007 and 2006, the
company recognized interest and penalty income of $13 million, $5 million and $6 million,
respectively. The amount of accrued interest and penalties payable related to uncertain tax
benefits was $73 million and $83 million as of Dec. 28, 2008, and Dec. 30, 2007, respectively.
60
In the third quarter of 2007, the Internal Revenue Service (IRS) completed its examinations of
the U.S. income tax returns for 1995 through 2004, and as a result the company received refunds of
tax and interest of approximately $178 million.
The 2005 through 2008 tax years remain subject to examination by the IRS. The IRS has
commenced examination of the 2005 and 2006 U.S. income tax returns, and this examination is
expected to be completed in 2009. The 2005 through 2008 tax years generally remain subject to
examination by state authorities, and the years 2003 through 2008 are subject to examination in the
U.K. In addition, tax years prior to 2005 remain subject to examination by certain states primarily
due to the filing of amended tax returns as a result of the settlement of the IRS examination for
these years and due to ongoing audits.
It is reasonably possible that the amount of unrecognized benefit with respect to certain of
the companys unrecognized tax positions will significantly increase or decrease within the next 12
months. These changes may be the result of settlement of ongoing audits, lapses of statutes of
limitation or other regulatory developments. At this time, the company estimates that the amount of
its gross unrecognized tax positions may decrease by up to approximately $25 million within the
next 12 months primarily due to lapses of statutes of limitations in various jurisdictions.
NOTE 11 SHAREHOLDERS EQUITY
Capital stock and earnings per share
The companys earnings (loss) per share (basic and diluted) for 2008, 2007 and 2006 are presented
below:
In thousands, except per share amounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
Net income (loss) |
|
$ |
(6,647,565 |
) |
|
$ |
1,055,612 |
|
|
$ |
1,160,782 |
|
|
|
|
|
|
|
|
|
|
|
Weighted average number
of common shares outstanding
(basic) |
|
|
228,345 |
|
|
|
233,148 |
|
|
|
236,337 |
|
Effect of dilutive securities |
|
|
|
|
|
|
|
|
|
|
|
|
Stock options |
|
|
|
|
|
|
300 |
|
|
|
382 |
|
Restricted stock |
|
|
|
|
|
|
292 |
|
|
|
37 |
|
|
|
|
|
|
|
|
|
|
|
Weighted average number
of common shares outstanding
(diluted) |
|
|
228,345 |
|
|
|
233,740 |
|
|
|
236,756 |
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share (basic) |
|
$ |
(29.11 |
) |
|
$ |
4.53 |
|
|
$ |
4.91 |
|
Earnings (loss) per share (diluted) |
|
$ |
(29.11 |
) |
|
$ |
4.52 |
|
|
$ |
4.90 |
|
|
|
|
|
|
|
|
|
|
|
The diluted earnings per share amounts exclude the effects of approximately 27.1 million stock
options outstanding for 2008, 27.3 million for 2007 and 26.6 million for 2006, as their inclusion
would be antidilutive. The diluted earnings per share amount for 2008
also excludes 2.2 million restricted stock units.
Share repurchase program
In February 2004, the company announced the reactivation of its existing share repurchase program
that was last utilized in February 2000. On July 25, 2006, the authorization to repurchase shares
was increased by $1 billion. During 2006, 3.9 million shares were purchased under the program for
$215.4 million. During 2007, 4.6 million shares were purchased under the program for $215.2
million. During 2008, 2.3 million shares were purchased under the program for $72.8 million. As of
Dec. 28, 2008, approximately $808.9 million may yet be expended under the program.
The shares may be repurchased at managements discretion, either in the open market or in
privately negotiated block transactions. Managements decision to repurchase shares will depend on
price, availability and other corporate circumstances. Purchases may occur from time to time and no
maximum purchase price has been set. The companys Board of Directors reviews the share repurchase
authorization annually, the last such review having occurred in October 2008. Certain of the shares
previously acquired by the company have been reissued in settlement of employee stock awards.
Equity-based awards
In May 2001, the companys shareholders approved the adoption of the Omnibus Incentive Compensation
Plan (the Plan), which replaced the 1978 Long-Term Executive Incentive Plan (1978 Plan). The Plan,
as amended, is administered by the Executive Compensation Committee of the Board of Directors and
provides for the issuance of up to 32.5 million shares of company common stock for awards granted
on or after May 7, 2001. No more than 5,000,000 of the authorized shares may be granted in the
aggregate in the form of Restricted Stock, Performance Shares and/or Performance Units. The Plan
provides for the granting of stock options, stock appreciation rights, restricted stock and other
equity-based and cash-based awards. Awards may be granted to employees of the company and members
of the Board of Directors. The Plan provides that shares of common stock subject to awards granted
become available again for issuance if such awards are canceled or forfeited.
Stock options may be granted as either non-qualified stock options or incentive stock options.
Options are granted to purchase common stock of the company at not less than 100% of the fair
market value on the day of grant. Options are exercisable at such times and subject to such terms
and conditions as the Executive Compensation Committee determines. The Plan restricts the granting
of options to any participant in any fiscal year to no more than 1,000,000 shares. Options issued
from 1996 through November 2004 have a 10-year exercise period, and options issued in December 2004
and thereafter have an eight-year exercise period. Options generally become exercisable at 25% per
year after a one-year waiting period.
Restricted Stock is an award of common stock that is subject to restrictions and such other
terms and conditions as the Executive Compensation Committee determines. These rights entitle an
employee to receive one share of common stock at the end of a four-year incentive period
conditioned on continued employment. Under the Plan, no more than 500,000 restricted shares may be
granted to any participant in any fiscal year.
61
The Executive Compensation Committee may grant other types of awards that are valued in whole
or in part by reference to or that are otherwise based on fair market value of the companys common
stock or other criteria established by the Executive Compensation Committee and the achievement of
performance goals. The maximum aggregate grant of performance shares that may be awarded to any
participant in any fiscal year shall not exceed 500,000 shares of common stock. The maximum
aggregate amount of performance units or cash-based awards that may be awarded to any participant
in any fiscal year shall not exceed $10,000,000.
In the event of a change in control as defined in the Plan, (1) all outstanding options will
become immediately exercisable in full; (2) all restricted periods and restrictions imposed on
non-performance based restricted stock awards will lapse; and (3) target payment opportunities
attainable under all outstanding awards of performance-based restricted stock, performance units
and performance shares will be paid on a prorated basis as specified in the Plan.
Effective the first day of its 2006 fiscal year, the company adopted the fair value
recognition provisions of SFAS No. 123(R), Share-Based Payments, using the modified prospective
transition method. Under this transition method, stock-based compensation cost recognized in the
income statement for 2006, 2007 and 2008, includes (a) expense for all unvested stock-based awards
that were granted prior to Dec. 25, 2005, based on the grant date fair value estimated in
accordance with the original provisions of SFAS No. 123 and (b) expense for all share-based
payments granted on or after Dec. 25, 2005, based on grant date fair value estimated in accordance
with the provisions of SFAS No. 123(R).
Determining fair value
Valuation and amortization method The company determines the fair value of stock options using
the Black-Scholes option-pricing formula. Key inputs into this formula include expected term,
expected volatility, expected dividend yield and the risk-free rate. Each assumption is discussed
below. This fair value is amortized on a straight-line basis over the requisite service periods of
the awards, which is generally the four-year vesting period.
Expected term The expected term represents the period that the companys stock-based awards
are expected to be outstanding, and is determined based on historical experience of similar awards,
giving consideration to contractual terms of the awards, vesting schedules and expectations of
future employee behavior.
Expected volatility The fair value of stock-based awards reflects a volatility factor
calculated using historical market data for the companys common stock. The time frame used is
equal to the expected term.
Expected dividend The dividend assumption is based on the companys expectations about its
dividend policy on the date of grant.
Risk-free interest rate The company bases the risk-free interest rate on the yield to
maturity at the time of the stock option grant on zero-coupon U.S. government bonds having a
remaining life equal to the options expected life.
Estimated forfeitures When estimating forfeitures, the company considers voluntary
termination behavior as well as analysis of actual option forfeitures.
The following assumptions were used to estimate the fair value of option awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
Average expected term |
|
4.5 yrs. |
|
4.5 yrs. |
|
4.5 yrs. |
Expected volatility |
|
17.51 34.63% |
|
16.77 17.80% |
|
11.46 22.0% |
Weighted average volatility |
|
28.60% |
|
17.35% |
|
19.32% |
Risk-free interest rates |
|
1.55 3.25% |
|
3.51 4.52% |
|
4.32 4.84% |
Expected dividend yield |
|
4.20 13.30% |
|
2.07 4.20% |
|
1.30 2.07% |
Weighted average expected
dividend |
|
9.91% |
|
2.97% |
|
2.01% |
|
|
|
|
|
|
|
|
|
|
The following table shows the stock-based compensation related amounts recognized in the
Consolidated Statements of Income (Loss):
In thousands, except per share amounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
Stock options |
|
$ |
13,097 |
|
|
$ |
21,178 |
|
|
$ |
39,230 |
|
Restricted stock |
|
|
9,549 |
|
|
|
7,904 |
|
|
|
7,810 |
|
|
|
|
|
|
|
|
|
|
|
Total stock-based compensation |
|
|
22,646 |
|
|
|
29,082 |
|
|
|
47,040 |
|
Income tax benefit |
|
|
8,605 |
|
|
|
11,040 |
|
|
|
17,856 |
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation,
net of tax |
|
$ |
14,041 |
|
|
$ |
18,042 |
|
|
$ |
29,184 |
|
|
|
|
|
|
|
|
|
|
|
Per share impact |
|
$ |
.06 |
|
|
$ |
.08 |
|
|
$ |
.12 |
|
|
|
|
|
|
|
|
|
|
|
As of Dec. 28, 2008, there was $12.2 million of unrecognized compensation cost related to
non-vested share-based compensation for options. Such amount will be adjusted for future changes in
estimated forfeitures. Unrecognized compensation cost for options will be recognized on a
straight-line basis over a weighted average period of 1.6 years.
During 2008, no options were exercised.
During 2007, options for 216,864 shares of common stock were exercised from which the company
received $12.0 million of cash. The intrinsic value of the options exercised was approximately $1.1
million. The actual tax benefit realized from the option exercises was $0.4 million.
During 2006, options for 620,091 shares of common stock were exercised from which the company
received $27.3 million of cash. The intrinsic value of the options exercised was approximately $8.8
million. The actual tax benefit realized from the option exercises was $3.3 million.
Option exercises are satisfied through the issuance of shares from treasury stock.
62
A summary of the companys stock-option awards is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
average |
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
remaining |
|
|
|
|
|
|
|
|
|
|
average |
|
|
contractual |
|
|
Aggregate |
|
|
|
|
|
|
|
exercise |
|
|
term |
|
|
intrinsic |
|
2008 Stock Option Activity |
|
Shares |
|
|
price |
|
|
(in years) |
|
|
value |
|
Outstanding at
beginning of year |
|
|
27,933,353 |
|
|
$ |
70.88 |
|
|
|
|
|
|
|
|
|
Granted |
|
|
2,181,083 |
|
|
|
16.62 |
|
|
|
|
|
|
|
|
|
Exercised |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canceled/Expired |
|
|
(3,007,741 |
) |
|
|
70.31 |
|
|
|
|
|
|
|
|
|
Outstanding at
end of year |
|
|
27,106,695 |
|
|
$ |
66.58 |
|
|
|
4.3 |
|
|
$ |
68,360 |
|
Options exercisable
at year end |
|
|
23,201,201 |
|
|
$ |
71.74 |
|
|
|
3.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
grant date fair value
of options granted
during the year |
|
$ |
1.33 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
average |
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
remaining |
|
|
|
|
|
|
|
|
|
|
average |
|
|
contractual |
|
|
Aggregate |
|
|
|
|
|
|
|
exercise |
|
|
term |
|
|
intrinsic |
|
2007 Stock Option Activity |
|
Shares |
|
|
price |
|
|
(in years) |
|
|
value |
|
Outstanding at
beginning of year |
|
|
28,920,680 |
|
|
$ |
71.68 |
|
|
|
|
|
|
|
|
|
Granted |
|
|
1,413,526 |
|
|
|
50.43 |
|
|
|
|
|
|
|
|
|
Exercised |
|
|
(216,864 |
) |
|
|
55.58 |
|
|
|
|
|
|
|
|
|
Canceled/Expired |
|
|
(2,183,989 |
) |
|
|
69.73 |
|
|
|
|
|
|
|
|
|
Outstanding at
end of year |
|
|
27,933,353 |
|
|
$ |
70.88 |
|
|
|
4.8 |
|
|
$ |
1,406,344 |
|
Options exercisable
at year end |
|
|
23,867,697 |
|
|
$ |
73.24 |
|
|
|
4.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
grant date fair value
of options granted
during the year |
|
$ |
8.59 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
average |
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
remaining |
|
|
|
|
|
|
|
|
|
|
average |
|
|
contractual |
|
|
Aggregate |
|
|
|
|
|
|
|
exercise |
|
|
term |
|
|
intrinsic |
|
2006 Stock Option Activity |
|
Shares |
|
|
price |
|
|
(in years) |
|
|
value |
|
Outstanding at
beginning of year |
|
|
28,913,513 |
|
|
$ |
71.91 |
|
|
|
|
|
|
|
|
|
Granted |
|
|
1,770,722 |
|
|
|
59.56 |
|
|
|
|
|
|
|
|
|
Exercised |
|
|
(620,091 |
) |
|
|
44.08 |
|
|
|
|
|
|
|
|
|
Canceled/Expired |
|
|
(1,143,464 |
) |
|
|
74.02 |
|
|
|
|
|
|
|
|
|
Outstanding at
end of year |
|
|
28,920,680 |
|
|
$ |
71.68 |
|
|
|
5.6 |
|
|
$ |
14,387,000 |
|
Options exercisable
at year end |
|
|
24,651,725 |
|
|
$ |
73.48 |
|
|
|
5.3 |
|
|
|
12,523,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
grant date fair value
of options granted
during the year |
|
$ |
11.82 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In addition to stock options, the company issues stock-based compensation to employees in the
form of restricted stock units (RSUs), which is an award of common stock subject to certain
restrictions. These awards generally entitle employees to receive at the end of a four-year
incentive period one share of common stock for each RSU granted, conditioned on continued
employment for the full incentive period. Compensation expense for RSUs is recognized for the
awards that are expected to vest. The expense is based on the fair value of the awards on the date
of grant recognized on a straight-line basis over the requisite service period, which is generally
the four-year incentive period.
The company has also issued restricted stock to its Board of Directors. These restricted stock
awards generally vest over three years and expense is recognized on a straight-line basis over the
three-year vesting period based on the grant date fair value. During 2008, 2007 and 2006, members
of the Board of Directors were awarded 15,872 shares, 10,565 shares and 8,954 shares, respectively,
of restricted stock as part of their compensation plan. All vested shares will be issued to
directors when leaving the Board.
For 2008, the company recorded compensation expense for restricted stock of $9.5 million and a
related tax benefit of $3.6 million. For 2007, the company recorded compensation expense for
restricted stock of $7.9 million and a related tax benefit of $3.0 million. For 2006, the company
recorded compensation expense for restricted stock of $7.8 million and a related tax benefit of
$3.0 million.
As of Dec. 28, 2008, there was $21 million of unrecognized compensation cost related to
non-vested restricted stock. This amount will be adjusted for future changes in estimated
forfeitures and recognized on a straight-line basis over a weighted average period of 3.3 years.
A summary of restricted stock awards is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
average |
|
2008 Restricted Stock Activity |
|
Shares |
|
|
fair value |
|
Outstanding and unvested at beginning
of year |
|
|
1,041,222 |
|
|
$ |
47.89 |
|
Granted |
|
|
1,479,277 |
|
|
|
2.26 |
|
Settled |
|
|
(194,048 |
) |
|
|
11.36 |
|
Canceled |
|
|
(85,261 |
) |
|
|
44.33 |
|
|
|
|
|
|
|
|
Outstanding and unvested at end of year |
|
|
2,241,190 |
|
|
$ |
19.47 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
average |
|
2007 Restricted Stock Activity |
|
Shares |
|
|
fair value |
|
Outstanding and unvested at beginning
of year |
|
|
586,900 |
|
|
$ |
60.49 |
|
Granted |
|
|
613,520 |
|
|
|
37.15 |
|
Settled |
|
|
(101,558 |
) |
|
|
48.95 |
|
Canceled |
|
|
(57,640 |
) |
|
|
60.01 |
|
|
|
|
|
|
|
|
Outstanding and unvested at end of year |
|
|
1,041,222 |
|
|
$ |
47.89 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
average |
|
2006 Restricted Stock Activity |
|
Shares |
|
|
fair value |
|
Outstanding and unvested at beginning
of year |
|
|
275,409 |
|
|
$ |
62.37 |
|
Granted |
|
|
340,874 |
|
|
|
59.20 |
|
Settled |
|
|
(2,826 |
) |
|
|
73.81 |
|
Canceled |
|
|
(26,557 |
) |
|
|
60.83 |
|
|
|
|
|
|
|
|
Outstanding and unvested at end of year |
|
|
586,900 |
|
|
$ |
60.49 |
|
|
|
|
|
|
|
|
63
Long-term incentive program
In February 2006, the company adopted a three-year strategic long-term incentive program, or LTIP.
Through the use of the LTIP, the company desired to motivate key executives to drive success in new
businesses while continuing to achieve success in core businesses. Twenty-three senior executives
were designated to participate in the LTIP.
The company established various targets to measure performance during the three-year period
ending with its 2008 fiscal year (Performance Period), including (i) a proprietary target range
of net income before tax, or NIBT, for fiscal year 2008, (ii) a proprietary target range of
digital, Internet and other non-core business revenues for fiscal year 2008, and (iii) a
proprietary range of excess total shareholder return, or TSR, measured over the period from Jan. 1,
2006, through Dec. 31, 2008, over the average TSR of those companies (other than the company) that
comprised the S&P 500 Publishing Index as of Jan. 1, 2006. Actual payouts under the LTIP, if any,
were to be determined by a formula, which measures performance against the targets during the
Performance Period. For 2007, the company did not achieve an interim goal under the LTIP. Also, at
the end of 2007 the company determined it was no longer probable it would achieve one of the
strategic goals of the LTIP but believed it was probable that another of the strategic goals would
be achieved. Under these circumstances, performance units but not performance shares would be
issued. Based on those expectations of program target achievement, the company recorded total
expense for the LTIP of $6.6 million from inception through Dec. 30, 2007. Because of softening
business conditions in 2008, the company determined that none of the LTIP program targets would be
achieved, and previously accrued cost was reversed.
401(k) savings plan
In 1990, the company established a 401(k) Savings Plan (the Plan). Substantially all employees of
the company (other than those covered by a collective bargaining agreement) who are scheduled to
work at least 1,000 hours during each year of employment are eligible to participate in the Plan.
Employees can elect to save up to 20% of compensation on a pre-tax basis subject to certain limits.
Initially the company matched 50% of the first 6% of employee contributions. From inception through
June 2003, the match was funded with company common stock issued through an Employee Stock
Ownership Plan (ESOP). In June 2003, all of the ESOP shares had been fully allocated to
participants. The company elected not to add additional shares to the ESOP and through 2008 funded
contributions in cash. The ESOP used the cash match to purchase on the open market an equivalent
number of shares of company stock on behalf of the participants. Beginning in 2002, Plan
participants were able to fully diversify their Plan investments.
On Aug. 1, 2008, the company approved amendments to its principal domestic retirement plans
and to its 401(k) plan. The 401(k) plan matching formula was changed to 100% of the first 5% of
employee contributions. The company also now makes additional 401(k) employer contributions on
behalf of certain long-term employees.
Beginning in 2009, the companys 401(k) match will be settled with treasury shares.
Compensation expense for the 401(k) match was $46.6 million in 2008, $32.0 million in 2007 and
$32.1 million in 2006.
In 2002, the Board authorized 3,000,000 shares of common stock to be
registered in connection with savings-related share option plans available to eligible employees of
Newsquest. In July 2004, options covering 143,000 shares were subscribed to by Newsquest employees.
None of the options, which became exercisable in July 2007, were exercised during 2007 or 2008.
Preferred share purchase rights
In May 1990, the Board of Directors declared a dividend distribution of one Preferred Share
Purchase Right (Right) for each common share held, payable to shareholders of record on June 8,
1990. The Rights become exercisable when a person or group of persons acquires or announces an
intention to acquire ownership of 15% or more of the companys 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 companys common shares at 50% of the market value of the
shares at the time the Rights are exercised. The Rights are redeemable by the company at any time
prior to the time they become exercisable, at a price of $.01 per Right.
In May 2000, the company announced that its Board of Directors approved an amendment to its
Shareholder Rights Plan to extend the expiration date of the Rights to May 31, 2010, and increase
the initial exercise price of each preferred stock purchase right to $280.
Accumulated other comprehensive income (loss)
The elements of the companys Accumulated Other Comprehensive Income (Loss) consisted of the
following items (net of tax): Pension, retiree medical and life insurance liabilities a reduction
of equity of $819 million at Dec. 28, 2008, and $338 million at Dec. 30, 2007; foreign currency
translation gains an increase of equity of $355 million at Dec. 28, 2008, and $777 million at
Dec. 30, 2007; and interest rate swaps a reduction of equity of $5 million at Dec. 28, 2008, and
$9 million at Dec. 30, 2007.
64
NOTE 12
Commitments, contingent liabilities and other matters
Litigation: The company and a number of its subsidiaries are defendants in judicial and
administrative proceedings involving matters incidental to their business. The companys 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, primarily real-estate related, are as follows:
|
|
|
|
|
In thousands
of dollars |
|
|
|
|
2009 |
|
$ |
60,371 |
|
2010 |
|
|
52,175 |
|
2011 |
|
|
44,300 |
|
2012 |
|
|
35,760 |
|
2013 |
|
|
27,983 |
|
Later years |
|
|
119,549 |
|
|
|
|
|
Total |
|
$ |
340,138 |
|
|
|
|
|
Total minimum annual rentals have not been reduced for future minimum sublease rentals
aggregating $2.4 million. Total rental costs reflected in continuing operations were $74 million in
2008, $67 million in 2007 and $67 million in 2006.
Program broadcast contracts: The company has commitments under program broadcast contracts
totaling $107 million for programs to be available for telecasting in the future.
Purchase obligations: The company has commitments under purchasing obligations totaling $605
million related to printing contracts, newsprint contracts, capital projects, interactive marketing
agreements, wire services and other legally binding commitments. Amounts which the company is
liable for under purchase orders outstanding at Dec. 28, 2008, are reflected in the Consolidated
Balance Sheets as accounts payable and accrued liabilities and are excluded from the $605 million.
Self insurance: The company is self-insured for most of its employee medical coverage and for
its casualty, general liability and libel coverage (subject to a cap above which third party
insurance is in place). The liabilities are established on an actuarial basis, with the advice of
consulting actuaries, and totaled $163 million at the end of 2008 and $183 million at the end of
2007.
Other matters: In December 1990, the company adopted a Transitional Compensation Plan (the
Plan). The Plan provides termination benefits to key executives whose employment is terminated
under certain circumstances within two years following a change in control of the company. Benefits
under the Plan include a severance payment of up to three years compensation and continued life
and medical insurance coverage.
In connection with the purchase of Schedule Star in 2007, the company is contingently liable
for earnout payments to some previous owners, depending upon certain performance metrics achieved
by Schedule Star through 2010. The minimum payment will be $7.2 million.
In connection with CareerBuilders acquisition of certain international companies in 2007, it
is contingently liable for earnout payments to previous owners, depending upon achievement of
certain performance metrics with measurement periods ending in 2009 ($8.1 million or SEK 64,350 and
$4.1 million or EUR 2,926) and 2010 ($8.4 million or EUR 6,000).
In connection with the purchase of Ripple6 in 2008, the company is contingently liable for
earnout payments to some previous owners, depending upon certain performance metrics achieved by
Ripple6 through 2013. The minimum payment will be $1.8 million,
which has been accrued in the 2008 financial statements.
NOTE 13
Fair value measurement
The company measures and records in the accompanying consolidated financial statements certain assets and liabilities at fair value. SFAS No. 157 establishes a fair value hierarchy for those instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the companys own assumptions (unobservable inputs). The hierarchy consists of three levels:
Level 1 Quoted market prices in active markets for identical assets or liabilities;
Level 2 Inputs other than Level 1 inputs that are either directly or indirectly observable; and
Level 3 Unobservable inputs developed using estimates and assumptions developed by the company, which reflect those that a market participant would use.
The following table summarizes the financial instruments measured at fair value in the accompanying consolidated balance sheet as of Dec. 28, 2008:
In thousands of dollars
Fair value measurement as of Dec. 28, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee compensation
related investments |
|
$ |
40,101 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
40,101 |
|
Sundry investments |
|
|
19,724 |
|
|
|
|
|
|
|
27,500 |
|
|
|
47,224 |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap |
|
|
|
|
|
|
9,722 |
|
|
|
|
|
|
|
9,722 |
|
The level 3 sundry investments are financial instruments held by CareerBuilder. As discussed
in Note 1 above, the company began consolidating the financial statements of CareerBuilder in
September 2008. No gain or loss was recognized in the companys Consolidated Statement of Income
with respect to these investments since the date of consolidation. The company utilized a
probability-weighted discounted cash flow technique to determine the fair value of its level 3
financial instruments. The main assumptions used in the fair value calculation were the estimated
coupon rate associated with the securities and the discount rate (determined based on market yields
of similar taxable obligations).
65
NOTE 14
Business operations and segment information
The company has determined that its reportable segments based on its management and internal
reporting structure are newspaper publishing, which is the largest segment of its operations,
broadcasting and digital.
The publishing segment at the end of 2008 consisted of 85 U.S. daily newspapers with
affiliated online sites in 31 states and one U.S. territory, including USA TODAY, a national,
general-interest daily newspaper; USATODAY.com; USA WEEKEND, a magazine supplement for newspapers;
Clipper; Gannett Healthcare Group; and Army Times. The publishing segment also includes Newsquest,
which is a regional newspaper publisher in the United Kingdom that includes 17 paid-for daily
newspapers and more than 200 weekly newspapers, magazines and trade publications. The publishing
segment in the U.S. also includes nearly 850 non-daily publications, a network of offset presses
for commercial printing and several smaller businesses.
In the third quarter of 2008, the company began reporting a new digital segment and a
separate digital revenues line in its Statements of Income (Loss). This revenue line includes only
revenue from the businesses that comprise the new digital segment. It therefore includes all
revenues from CareerBuilder and ShopLocal beginning with the full consolidation of these
businesses in the third quarter of 2008, and revenues from PointRoll, Schedule Star, Planet
Discover and Ripple6 (from the date of its acquisition on Nov. 13, 2008). Revenues from PointRoll,
Schedule Star and Planet Discover had previously been reported within the publishing segment and
were included in the All Other revenue line in the Statement of Income. All other revenue is
now comprised principally of commercial printing revenues. All periods presented reflect these
reclassifications.
At the end of 2008, the companys broadcasting division included 23 television stations and
affiliated online sites in markets with more than 20.8 million households covering 18% of the U.S.
Captivate Network is also part of the broadcasting division.
The companys foreign revenues, principally from newspaper publishing and related businesses
in the United Kingdom, totaled approximately $1.0 billion in 2008 and $1.2 billion in 2007 and
2006. The companys long-lived assets in foreign countries, principally in the United Kingdom,
totaled approximately $628 million at Dec. 28, 2008, and $3.7 billion at Dec. 30, 2007, and Dec.
31, 2006.
Separate financial data for each of the companys business segments is presented in the table
that follows. The accounting policies of the segments are those described in Note 1. The company
evaluates the performance of its segments based on operating income. Operating income represents
total revenue less operating expenses, including depreciation, amortization of intangibles and
asset impairment charges. In determining operating income by industry segment, general corporate
expenses, interest expense, interest income, and other income and expense items of a non-operating
nature are not considered, as such items are not allocated to the companys segments.
Corporate assets include cash and cash equivalents, property, plant and equipment used for
corporate purposes and certain other financial investments.
In thousands of dollars
Business segment financial information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
Operating revenues |
|
|
|
|
|
|
|
|
|
|
|
|
Publishing |
|
$ |
5,713,739 |
|
|
$ |
6,579,816 |
|
|
$ |
6,940,019 |
|
Digital |
|
|
281,378 |
|
|
|
70,347 |
|
|
|
52,773 |
|
Broadcasting |
|
|
772,533 |
|
|
|
789,297 |
|
|
|
854,821 |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
6,767,650 |
|
|
$ |
7,439,460 |
|
|
$ |
7,847,613 |
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
Publishing (2) |
|
$ |
(7,025,681 |
) |
|
$ |
1,390,170 |
|
|
$ |
1,588,972 |
|
Digital (2) |
|
|
18,934 |
|
|
|
23,201 |
|
|
|
17,540 |
|
Broadcasting (2) |
|
|
306,354 |
|
|
|
314,900 |
|
|
|
379,989 |
|
Corporate (1) (2) |
|
|
(61,262 |
) |
|
|
(77,375 |
) |
|
|
(81,906 |
) |
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
(6,761,655 |
) |
|
$ |
1,650,896 |
|
|
$ |
1,904,595 |
|
|
|
|
|
|
|
|
|
|
|
Depreciation, amortization and asset impairment charges |
|
|
|
|
|
|
|
|
|
|
|
|
Publishing (2) |
|
$ |
8,147,018 |
|
|
$ |
299,921 |
|
|
$ |
212,712 |
|
Digital (2) |
|
|
31,950 |
|
|
|
5,260 |
|
|
|
5,360 |
|
Broadcasting (2) |
|
|
42,520 |
|
|
|
33,553 |
|
|
|
36,675 |
|
Corporate (1) (2) |
|
|
17,128 |
|
|
|
15,657 |
|
|
|
16,551 |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
8,238,616 |
|
|
$ |
354,391 |
|
|
$ |
271,298 |
|
|
|
|
|
|
|
|
|
|
|
Equity income (loss) in unconsolidated investees, net |
|
|
|
|
|
|
|
|
|
|
|
|
Publishing |
|
$ |
(365,371 |
) |
|
$ |
45,054 |
|
|
$ |
53,680 |
|
Digital |
|
|
(9,554 |
) |
|
|
(4,361 |
) |
|
|
(15,636 |
) |
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
(374,925 |
) |
|
$ |
40,693 |
|
|
$ |
38,044 |
|
|
|
|
|
|
|
|
|
|
|
Identifiable assets |
|
|
|
|
|
|
|
|
|
|
|
|
Publishing |
|
$ |
4,038,015 |
|
|
$ |
12,565,723 |
|
|
$ |
12,844,757 |
|
Digital |
|
|
1,096,026 |
|
|
|
409,577 |
|
|
|
390,146 |
|
Broadcasting |
|
|
2,153,257 |
|
|
|
2,366,793 |
|
|
|
2,377,971 |
|
Corporate (1) |
|
|
509,516 |
|
|
|
545,634 |
|
|
|
610,930 |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
7,796,814 |
|
|
$ |
15,887,727 |
|
|
$ |
16,223,804 |
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures |
|
|
|
|
|
|
|
|
|
|
|
|
Publishing |
|
$ |
104,804 |
|
|
$ |
136,472 |
|
|
$ |
159,202 |
|
Digital |
|
|
5,445 |
|
|
|
1,011 |
|
|
|
1,372 |
|
Broadcasting |
|
|
52,706 |
|
|
|
29,096 |
|
|
|
33,426 |
|
Corporate (1) |
|
|
2,045 |
|
|
|
4,826 |
|
|
|
6,780 |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
165,000 |
|
|
$ |
171,405 |
|
|
$ |
200,780 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Corporate amounts represent those not directly related to the companys three business
segments. |
|
(2) |
|
Results for 2008 include pre-tax non-cash asset impairment and other charges of $7.95 billion
for publishing, $15 million for digital, $8 million for broadcasting, and $1 million for
corporate. Results for 2007 include pre-tax non-cash intangible asset impairment charges of $72.0
million for publishing. The asset impairment charges did not affect the companys operations or
cash flow. Refer to Notes 3 and 4 of the Consolidated Financial Statements for more information. |
66
SELECTED FINANCIAL DATA (Unaudited)
(See notes a and b on page 68)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In thousands of dollars, except per share amounts |
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
|
2004 |
|
Net operating revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Publishing advertising |
|
$ |
4,145,592 |
|
|
$ |
4,937,159 |
|
|
$ |
5,275,650 |
|
|
$ |
5,065,380 |
|
|
$ |
4,742,641 |
|
Publishing circulation |
|
|
1,216,637 |
|
|
|
1,252,356 |
|
|
|
1,279,530 |
|
|
|
1,236,406 |
|
|
|
1,189,553 |
|
Digital |
|
|
281,378 |
|
|
|
70,347 |
|
|
|
52,773 |
|
|
|
25,383 |
|
|
|
|
|
Broadcasting |
|
|
772,533 |
|
|
|
789,297 |
|
|
|
854,821 |
|
|
|
736,452 |
|
|
|
821,543 |
|
All other |
|
|
351,510 |
|
|
|
390,301 |
|
|
|
384,839 |
|
|
|
371,015 |
|
|
|
350,836 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
6,767,650 |
|
|
|
7,439,460 |
|
|
|
7,847,613 |
|
|
|
7,434,636 |
|
|
|
7,104,573 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses |
|
|
5,290,689 |
|
|
|
5,434,173 |
|
|
|
5,671,720 |
|
|
|
5,191,477 |
|
|
|
4,850,408 |
|
Depreciation |
|
|
230,987 |
|
|
|
246,275 |
|
|
|
237,309 |
|
|
|
242,577 |
|
|
|
219,109 |
|
Amortization of intangible assets |
|
|
31,211 |
|
|
|
36,086 |
|
|
|
33,989 |
|
|
|
23,236 |
|
|
|
11,634 |
|
Asset impairment and other charges |
|
|
7,976,418 |
|
|
|
72,030 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
13,529,305 |
|
|
|
5,788,564 |
|
|
|
5,943,018 |
|
|
|
5,457,290 |
|
|
|
5,081,151 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
|
(6,761,655 |
) |
|
|
1,650,896 |
|
|
|
1,904,595 |
|
|
|
1,977,346 |
|
|
|
2,023,422 |
|
Non-operating (expense) income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity (loss) income in unconsolidated investees, net |
|
|
(374,925 |
) |
|
|
40,693 |
|
|
|
38,044 |
|
|
|
6,638 |
|
|
|
21,571 |
|
Interest expense |
|
|
(190,845 |
) |
|
|
(259,825 |
) |
|
|
(288,040 |
) |
|
|
(210,625 |
) |
|
|
(140,647 |
) |
Other non-operating items |
|
|
21,460 |
|
|
|
17,113 |
|
|
|
27,487 |
|
|
|
2,931 |
|
|
|
11,065 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
(544,310 |
) |
|
|
(202,019 |
) |
|
|
(222,509 |
) |
|
|
(201,056 |
) |
|
|
(108,011 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes |
|
|
(7,305,965 |
) |
|
|
1,448,877 |
|
|
|
1,682,086 |
|
|
|
1,776,290 |
|
|
|
1,915,411 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision (benefit) for income taxes |
|
|
(658,400 |
) |
|
|
473,300 |
|
|
|
544,200 |
|
|
|
590,390 |
|
|
|
647,339 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations |
|
$ |
(6,647,565 |
) |
|
$ |
975,577 |
|
|
$ |
1,137,886 |
|
|
$ |
1,185,900 |
|
|
$ |
1,268,072 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
per basic/diluted share |
|
$ |
(29.11)/$(29.11 |
) |
|
$ |
4.18/$4.17 |
|
|
$ |
4.81/$4.81 |
|
|
$ |
4.84/$4.82 |
|
|
$ |
4.79/$4.74 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other selected financial data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared per share |
|
$ |
1.60 |
|
|
$ |
1.42 |
|
|
$ |
1.20 |
|
|
$ |
1.12 |
|
|
$ |
1.04 |
|
Weighted average number of common
shares outstanding in thousands: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
basic |
|
|
228,345 |
|
|
|
233,148 |
|
|
|
236,337 |
|
|
|
244,958 |
|
|
|
264,714 |
|
diluted |
|
|
228,345 |
|
|
|
233,740 |
|
|
|
236,756 |
|
|
|
246,256 |
|
|
|
267,590 |
|
Financial position |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt, excluding current maturities |
|
$ |
3,816,942 |
|
|
$ |
4,098,338 |
|
|
$ |
5,210,021 |
|
|
$ |
5,438,273 |
|
|
$ |
4,607,743 |
|
Shareholders equity |
|
$ |
1,055,882 |
|
|
$ |
9,017,159 |
|
|
$ |
8,382,263 |
|
|
$ |
7,570,562 |
|
|
$ |
8,164,002 |
|
Total assets |
|
$ |
7,796,814 |
|
|
$ |
15,887,727 |
|
|
$ |
16,223,804 |
|
|
$ |
15,743,396 |
|
|
$ |
15,420,740 |
|
Return on equity (1) |
|
|
8.5 |
% |
|
|
11.8 |
% |
|
|
14.6 |
% |
|
|
15.6 |
% |
|
|
15.9 |
% |
Percentage increase (decrease) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As reported, earnings from continuing
operations, after-tax, per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
basic |
|
|
(796.4 |
%) |
|
|
(13.1 |
%) |
|
|
(0.6 |
%) |
|
|
1.0 |
% |
|
|
11.1 |
% |
diluted |
|
|
(798.1 |
%) |
|
|
(13.3 |
%) |
|
|
(0.2 |
%) |
|
|
1.7 |
% |
|
|
11.0 |
% |
Dividends declared per share |
|
|
12.7 |
% |
|
|
18.3 |
% |
|
|
7.1 |
% |
|
|
7.7 |
% |
|
|
6.1 |
% |
Credit ratios |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt to EBITDA ratio (2) |
|
|
2.54 |
|
|
|
1.99 |
|
|
|
2.32 |
|
|
|
2.41 |
|
|
|
2.01 |
|
Times interest expense earned |
|
|
(35.4 |
)x |
|
|
6.4 |
x |
|
|
6.6 |
x |
|
|
9.4 |
x |
|
|
14.4 |
x |
|
|
|
(1) |
|
Calculated using income from continuing operations plus earnings from discontinued operations
(but excluding the gain in 2007 and 2005 on the disposal of discontinued operations). In addition,
net income and shareholders equity were adjusted to remove the effect of the $8.4 billion ($7.4
billion after-tax) and $72.0 million ($50.8 million after-tax) of asset impairment and other
charges recognized in 2008 and 2007, respectively. |
|
(2) |
|
EBITDA is calculated by adding income taxes, interest expense, depreciation, amortization of
intangible assets and asset impairment and other charges recorded in operating income (loss) and
non-operating expense (see Notes 3 and 4 to the Consolidated Financial Statements) to income (loss)
from continuing operations. |
67
NOTES TO SELECTED FINANCIAL DATA (Unaudited)
(a) The company and its subsidiaries made the significant acquisitions listed below during the
period. The results of operations of these acquired businesses are included in the accompanying
financial information from the date of acquisition.
(b) During the period, the company sold or otherwise disposed of substantially all of the
assets or capital stock of certain other significant subsidiaries and divisions of other
subsidiaries, which are listed on page 69.
Note 2 of the consolidated financial statements contains further information concerning certain
of these acquisitions and dispositions.
Acquisitions and dispositions 2004-2008
Significant acquisitions since the beginning of 2004 are shown below. The company has disposed of
several significant businesses during this period, which are presented on the following page.
Acquisitions 2004-2008
|
|
|
|
|
|
|
Year acquired |
|
Name |
|
Location |
|
Publication times or business |
2004 |
|
NurseWeek
|
|
Sunnyvale, Calif.
|
|
Magazines focused on nursing
industry, Web site and other
related businesses |
|
|
The Daily News Journal
|
|
Murfreesboro, Tenn.
|
|
Daily newspaper |
|
|
The Williamson County Review Appeal
|
|
Franklin, Tenn.
|
|
Daily newspaper converted to a weekly newspaper |
|
|
Captivate Network
|
|
Westford, Mass.
|
|
News and entertainment network |
|
|
Green Bay News Chronicle
|
|
Green Bay, Wis.
|
|
Daily newspaper and several weekly newspapers |
2005 |
|
Hometown Communications, Inc.
|
|
Livingston County, Mich.
Lansing, Mich.
Cincinnati, Ohio
Suburban Detroit
|
|
Daily and weekly newspapers,
telephone directories and niche
publications |
|
|
PointRoll, Inc.
|
|
Conshohocken, Pa.
|
|
Rich media marketing services
for online businesses/advertisers |
|
|
Mint Magazine, Inc.
|
|
Jacksonville, Fla.
|
|
Direct-mail advertising magazine company |
|
|
The Tallahassee Democrat (3)
|
|
Tallahassee, Fla.
|
|
Daily newspaper |
|
|
Exchange & Mart and Auto Exchange
|
|
U.K.
|
|
Weekly classified advertising
magazine and motoring classified
Web site; free pick-up publication |
2006 |
|
KTVD-TV
|
|
Denver, Colo.
|
|
TV station |
|
|
WATL-TV
|
|
Atlanta, Ga.
|
|
TV station |
|
|
Planet Discover
|
|
Cedar Rapids, Iowa
Fort Mitchell, Ky.
|
|
Local, integrated online search and
advertising technology |
|
|
Marco Island Sun Times
|
|
Marco Island, Fla.
|
|
Weekly newspaper |
|
|
FS View & Florida Flambeau
|
|
Tallahassee, Fla.
|
|
Independent student newspaper of
Florida State University |
2007 |
|
Central Florida Future
|
|
Orlando, Fla.
|
|
Independent student newspaper of
the University of Central Florida |
|
|
Central Ohio Advertiser Network
|
|
Chillicothe, Ohio
|
|
A network of eight weekly shoppers
with the Advertiser brand |
|
|
Schedule Star LLC
|
|
Wheeling, W.Va.
|
|
Online high school sports network |
2008 |
|
X.com, Inc. (BNQT.com)
|
|
Pasadena, Calif.
|
|
Action sports Web site |
|
|
ShopLocal
|
|
Chicago, Ill.
|
|
Marketing and database services
company |
|
|
CareerBuilder
|
|
Chicago, Ill., Atlanta, Ga.
|
|
Job search, employment and careers
Web site |
|
|
Pearls Review
|
|
St. Petersburg, Fla.
|
|
A nursing certification and
education Web site |
|
|
Ripple6
|
|
New York, N.Y.
|
|
Provider of social media services |
68
Dispositions 2004-2008
|
|
|
|
|
|
|
Year disposed |
|
Name |
|
Location |
|
Publication times or business |
2004 |
|
The Times (4)
|
|
Gainesville, Ga.
|
|
Daily newspaper |
2005 |
|
The Bellingham Herald (3)
|
|
Bellingham, Wash.
|
|
Daily newspaper |
|
|
The Idaho Statesman (3)
|
|
Boise, Idaho
|
|
Daily newspaper |
|
|
The Olympian (3)
|
|
Olympia, Wash.
|
|
Daily newspaper |
|
|
Public Opinion (2)
|
|
Chambersburg, Pa.
|
|
Daily newspaper |
|
|
Texas-New Mexico
|
|
|
|
|
|
|
Newspapers Partnership (2)
|
|
Texas, New Mexico
|
|
Daily newspapers |
2006 |
|
Muskogee Phoenix (1)
|
|
Muskogee, Okla.
|
|
Daily newspaper |
2007 |
|
Chronicle Tribune (1)
|
|
Marion, Ind.
|
|
Daily newspaper |
|
|
Norwich Bulletin
|
|
Norwich, Conn.
|
|
Daily newspaper |
|
|
Rockford Register Star
|
|
Rockford, Ill.
|
|
Daily newspaper |
|
|
The Herald-Dispatch
|
|
Huntington, W. Va.
|
|
Daily newspaper |
|
|
Observer-Dispatch
|
|
Utica, N.Y.
|
|
Daily newspaper |
2008 |
|
Telematch
|
|
Springfield, Va.
|
|
Database marketing services company |
|
|
|
(1) |
|
These properties were contributed to the Gannett Foundation, a not-for-profit, private
foundation. |
|
(2) |
|
On Dec. 25, 2005, the company contributed the Public Opinion to the Texas-New Mexico Newspapers
Partnership at which time the partnership was expanded. At the time of the expansion, the companys
interest in the partnership was reduced from 66.6% to 40.6%. |
|
(3) |
|
Exchanged for The Tallahassee Democrat in Tallahassee, Fla., plus cash consideration. |
|
(4) |
|
Exchanged for The Daily News Journal in Murfreesboro, Tenn., and several other nondaily
publications (including The Williamson County Review Appeal in Franklin, Tenn.) |
69
QUARTERLY STATEMENTS OF INCOME (Unaudited)
In thousands of dollars, except per share amounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal year ended December 28, 2008 |
|
1st Quarter(2) |
|
|
2nd Quarter(2)(3) |
|
|
3rd Quarter |
|
|
4th Quarter(4) |
|
|
Total |
|
Net operating revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Publishing advertising |
|
$ |
1,096,894 |
|
|
$ |
1,108,189 |
|
|
$ |
977,111 |
|
|
$ |
963,398 |
|
|
$ |
4,145,592 |
|
Publishing circulation |
|
|
309,178 |
|
|
|
305,994 |
|
|
|
298,978 |
|
|
|
302,487 |
|
|
|
1,216,637 |
|
Digital |
|
|
13,893 |
|
|
|
20,008 |
|
|
|
77,594 |
|
|
|
169,883 |
|
|
|
281,378 |
|
Broadcasting |
|
|
170,180 |
|
|
|
192,568 |
|
|
|
197,000 |
|
|
|
212,785 |
|
|
|
772,533 |
|
All other |
|
|
86,724 |
|
|
|
91,230 |
|
|
|
86,627 |
|
|
|
86,929 |
|
|
|
351,510 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
1,676,869 |
|
|
|
1,717,989 |
|
|
|
1,637,310 |
|
|
|
1,735,482 |
|
|
|
6,767,650 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales and operating expenses, exclusive
of depreciation |
|
|
986,500 |
|
|
|
988,538 |
|
|
|
985,004 |
|
|
|
1,052,685 |
|
|
|
4,012,727 |
|
Selling, general and administrative expenses,
exclusive of depreciation |
|
|
294,896 |
|
|
|
299,539 |
|
|
|
328,320 |
|
|
|
355,207 |
|
|
|
1,277,962 |
|
Depreciation |
|
|
59,602 |
|
|
|
55,109 |
|
|
|
57,682 |
|
|
|
58,594 |
|
|
|
230,987 |
|
Amortization of intangible assets |
|
|
8,240 |
|
|
|
6,475 |
|
|
|
7,123 |
|
|
|
9,373 |
|
|
|
31,211 |
|
Asset impairment and other charges |
|
|
|
|
|
|
2,501,874 |
|
|
|
|
|
|
|
5,474,544 |
|
|
|
7,976,418 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
1,349,238 |
|
|
|
3,851,535 |
|
|
|
1,378,129 |
|
|
|
6,950,403 |
|
|
|
13,529,305 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
|
327,631 |
|
|
|
(2,133,546 |
) |
|
|
259,181 |
|
|
|
(5,214,921 |
) |
|
|
(6,761,655 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-operating (expense) income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity income (loss) in unconsolidated investees, net |
|
|
(11,755 |
) |
|
|
(252,793 |
) |
|
|
5,711 |
|
|
|
(116,088 |
) |
|
|
(374,925 |
) |
Interest expense |
|
|
(48,549 |
) |
|
|
(43,957 |
) |
|
|
(46,802 |
) |
|
|
(51,537 |
) |
|
|
(190,845 |
) |
Other non-operating items |
|
|
24,151 |
|
|
|
5,340 |
|
|
|
(3,333 |
) |
|
|
(4,698 |
) |
|
|
21,460 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
(36,153 |
) |
|
|
(291,410 |
) |
|
|
(44,424 |
) |
|
|
(172,323 |
) |
|
|
(544,310 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes |
|
|
291,478 |
|
|
|
(2,424,956 |
) |
|
|
214,757 |
|
|
|
(5,387,244 |
) |
|
|
(7,305,965 |
) |
Provision (benefit) for income taxes |
|
|
99,700 |
|
|
|
(134,200 |
) |
|
|
56,700 |
|
|
|
(680,600 |
) |
|
|
(658,400 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
191,778 |
|
|
$ |
(2,290,756 |
) |
|
$ |
158,057 |
|
|
$ |
(4,706,644 |
) |
|
$ |
(6,647,565 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per share computations(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share basic |
|
$ |
0.84 |
|
|
$ |
(10.03 |
) |
|
$ |
0.69 |
|
|
$ |
(20.65 |
) |
|
$ |
(29.11 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share diluted |
|
$ |
0.84 |
|
|
$ |
(10.03 |
) |
|
$ |
0.69 |
|
|
$ |
(20.65 |
) |
|
$ |
(29.11 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends per share |
|
$ |
0.40 |
|
|
$ |
0.40 |
|
|
$ |
0.40 |
|
|
$ |
0.40 |
|
|
$ |
1.60 |
|
|
|
|
(1) |
|
As a result of rounding and the required method of computing shares in interim periods, the
total of the quarterly earnings per share amounts may not equal the earnings per share amount for
the year. |
|
(2) |
|
Certain amounts differ from amounts previously reported on Form 10-Q due to revenue
reclassifications made in connection with the companys new Digital segment described in Note 1
to the Consolidated Financial Statements and the reclassification of accelerated depreciation
recognized in the second quarter of 2008 to asset impairment and other charges from depreciation. |
|
(3) |
|
Results for the second quarter of 2008 include pre-tax non-cash impairment charges of $2.8
billion ($2.5 billion after-tax or $11.08 per share). The asset impairment charges did not affect
the companys operations or cash flow. Refer to Note 3 of the Consolidated Financial Statements for
more information. |
|
(4) |
|
Results for the fourth quarter of 2008 include pre-tax non-cash asset impairment and other
charges of $5.6 billion ($4.9 billion after-tax or $21.34 per share). These charges did not affect
the companys operations or cash flow. Refer to Note 3 of the Consolidated Financial Statements for
more information. |
70
QUARTERLY STATEMENTS OF INCOME (Unaudited)
In thousands of dollars, except per share amounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal year ended December 30, 2007 |
|
1st Quarter(3) |
|
|
2nd Quarter(3) |
|
|
3rd Quarter |
|
|
4th Quarter(2) |
|
|
Total |
|
Net operating revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Publishing advertising |
|
$ |
1,221,627 |
|
|
$ |
1,281,555 |
|
|
$ |
1,187,744 |
|
|
$ |
1,246,233 |
|
|
$ |
4,937,159 |
|
Publishing circulation |
|
|
317,535 |
|
|
|
312,506 |
|
|
|
309,143 |
|
|
|
313,172 |
|
|
|
1,252,356 |
|
Digital |
|
|
13,087 |
|
|
|
16,346 |
|
|
|
17,181 |
|
|
|
23,733 |
|
|
|
70,347 |
|
Broadcasting |
|
|
183,059 |
|
|
|
204,666 |
|
|
|
189,540 |
|
|
|
212,032 |
|
|
|
789,297 |
|
All other |
|
|
95,906 |
|
|
|
97,562 |
|
|
|
95,085 |
|
|
|
101,748 |
|
|
|
390,301 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
1,831,214 |
|
|
|
1,912,635 |
|
|
|
1,798,693 |
|
|
|
1,896,918 |
|
|
|
7,439,460 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales and operating expenses, exclusive
of depreciation |
|
|
1,057,936 |
|
|
|
1,052,476 |
|
|
|
1,026,041 |
|
|
|
1,027,630 |
|
|
|
4,164,083 |
|
Selling, general and administrative expenses,
exclusive of depreciation |
|
|
320,521 |
|
|
|
320,636 |
|
|
|
313,654 |
|
|
|
315,279 |
|
|
|
1,270,090 |
|
Depreciation |
|
|
62,185 |
|
|
|
62,677 |
|
|
|
61,017 |
|
|
|
60,396 |
|
|
|
246,275 |
|
Amortization of intangible assets |
|
|
8,855 |
|
|
|
8,855 |
|
|
|
8,852 |
|
|
|
9,524 |
|
|
|
36,086 |
|
Intangible asset impairment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
72,030 |
|
|
|
72,030 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
1,449,497 |
|
|
|
1,444,644 |
|
|
|
1,409,564 |
|
|
|
1,484,859 |
|
|
|
5,788,564 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
381,717 |
|
|
|
467,991 |
|
|
|
389,129 |
|
|
|
412,059 |
|
|
|
1,650,896 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-operating (expense) income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity income (loss) in unconsolidated investees, net |
|
|
(1,480 |
) |
|
|
17,470 |
|
|
|
15,332 |
|
|
|
9,371 |
|
|
|
40,693 |
|
Interest expense |
|
|
(72,945 |
) |
|
|
(66,400 |
) |
|
|
(63,010 |
) |
|
|
(57,470 |
) |
|
|
(259,825 |
) |
Other non-operating items |
|
|
(38 |
) |
|
|
10,324 |
|
|
|
4,173 |
|
|
|
2,654 |
|
|
|
17,113 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
(74,463 |
) |
|
|
(38,606 |
) |
|
|
(43,505 |
) |
|
|
(45,445 |
) |
|
|
(202,019 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
307,254 |
|
|
|
429,385 |
|
|
|
345,624 |
|
|
|
366,614 |
|
|
|
1,448,877 |
|
Provision for income taxes |
|
|
100,900 |
|
|
|
139,500 |
|
|
|
111,600 |
|
|
|
121,300 |
|
|
|
473,300 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
|
206,354 |
|
|
|
289,885 |
|
|
|
234,024 |
|
|
|
245,314 |
|
|
|
975,577 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from the operation of discontinued operations, net of tax |
|
|
4,258 |
|
|
|
1,963 |
|
|
|
|
|
|
|
|
|
|
|
6,221 |
|
Gain on disposal of newspaper businesses, net of tax |
|
|
|
|
|
|
73,814 |
|
|
|
|
|
|
|
|
|
|
|
73,814 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
210,612 |
|
|
$ |
365,662 |
|
|
$ |
234,024 |
|
|
$ |
245,314 |
|
|
$ |
1,055,612 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per share computations(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing operations per share basic |
|
$ |
0.88 |
|
|
$ |
1.24 |
|
|
$ |
1.01 |
|
|
$ |
1.06 |
|
|
$ |
4.18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from discontinued operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations per share basic |
|
|
.02 |
|
|
|
.01 |
|
|
|
|
|
|
|
|
|
|
|
.03 |
|
Gain on disposal of newspaper businesses per share basic |
|
|
|
|
|
|
.32 |
|
|
|
|
|
|
|
|
|
|
|
.32 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share basic |
|
$ |
0.90 |
|
|
$ |
1.56 |
|
|
$ |
1.01 |
|
|
$ |
1.06 |
|
|
$ |
4.53 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing operations per share diluted |
|
$ |
0.88 |
|
|
$ |
1.24 |
|
|
$ |
1.01 |
|
|
$ |
1.06 |
|
|
$ |
4.17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from discontinued operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations per share diluted |
|
|
.02 |
|
|
|
.01 |
|
|
|
|
|
|
|
|
|
|
|
.03 |
|
Gain on disposal of newspaper businesses per share diluted |
|
|
|
|
|
|
.31 |
|
|
|
|
|
|
|
|
|
|
|
.32 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share diluted |
|
$ |
0.90 |
|
|
$ |
1.56 |
|
|
$ |
1.01 |
|
|
$ |
1.06 |
|
|
$ |
4.52 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends per share |
|
$ |
0.31 |
|
|
$ |
0.31 |
|
|
$ |
0.40 |
|
|
$ |
0.40 |
|
|
$ |
1.42 |
|
|
|
|
(1) |
|
As a result of rounding and the required method of computing shares in interim periods, the
total of the quarterly earnings per share amounts may not equal the earnings per share amount for
the year. In addition, the sum of the individual per share amounts in each period may not equal the
total per share amounts due to rounding. |
|
(2) |
|
Results for the fourth quarter of 2007 include pre-tax non-cash intangible asset impairment
charges of $72.0 million ($50.8 million after-tax or $.22 per share). The asset impairment charges
did not affect the companys operations or cash flow. Refer to Note 4 of the Consolidated Financial
Statements for more information. |
|
(3) |
|
Certain amounts differ from amounts previously reported on Form 10-Q due to revenue
reclassifications made in connection with the companys new Digital segment described in Note 1
to the Consolidated Financial Statements. |
71
SCHEDULE II Valuation and qualifying accounts and reserves
In thousands of dollars
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at |
|
|
|
|
|
|
Additions/(reductions) |
|
|
|
|
|
|
|
|
|
beginning |
|
|
Additions charged |
|
|
for acquisitions/ |
|
|
Deductions |
|
|
Balance at |
|
Allowance for doubtful receivables |
|
of period |
|
|
to cost and expenses |
|
|
dispositions (2) |
|
|
from reserves (1) |
|
|
end of period |
|
Fiscal year ended Dec. 28, 2008 |
|
$ |
36,772 |
|
|
$ |
57,671 |
|
|
$ |
4,080 |
|
|
$ |
(39,515 |
) |
|
$ |
59,008 |
|
Fiscal year ended Dec. 30, 2007 |
|
$ |
38,123 |
|
|
$ |
27,786 |
|
|
$ |
174 |
|
|
$ |
(29,311 |
) |
|
$ |
36,772 |
|
Fiscal year ended Dec. 31, 2006 |
|
$ |
40,037 |
|
|
$ |
24,188 |
|
|
$ |
864 |
|
|
$ |
(26,966 |
) |
|
$ |
38,123 |
|
|
|
|
(1) |
|
Consists of write-offs, net of recoveries in each year. |
|
(2) |
|
Also includes foreign currency translation adjustments in each year. |
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our principal
executive officer and principal financial officer, we conducted an evaluation of our disclosure
controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the
Securities Exchange Act of 1934, as amended (the Exchange Act). Based on this evaluation, our
principal executive officer and our principal financial officer concluded that our disclosure
controls and procedures were effective as of the end of the period covered by this annual report.
Managements Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over
financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision
and with the participation of our management, including our principal executive officer and
principal financial officer, we conducted an evaluation of the effectiveness of our internal
control over financial reporting based on the framework in Internal Control Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on
our evaluation under the framework in Internal Control Integrated Framework, our management
concluded that our internal control over financial reporting was effective as of Dec. 28, 2008.
Managements assessment of and conclusion on the effectiveness of internal control over
financial reporting did not include the internal controls of CareerBuilder LLC, which is included
in the 2008 consolidated financial statements of Gannett Co., Inc. On Sept. 3, 2008, the company
acquired an additional 10% stake in CareerBuilder LLC, increasing its ownership to 50.8% thereby
becoming majority and controlling owner. In connection with this, the company began consolidating
results of CareerBuilder and it represented approximately 7% of the companys total assets at Dec.
28, 2008. Due to the timing of this acquisition and as permitted by SEC guidance, management
excluded CareerBuilder from its Dec. 28, 2008, assessment of internal control over financial
reporting.
The effectiveness of our internal control over financial reporting as of Dec. 28, 2008, has
been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in
its report which is included herein.
Changes in Internal Control Over Financial Reporting
There has been no change in the companys internal control over financial reporting that occurred
during the companys fiscal quarter ended Dec. 28, 2008, that has materially affected, or is
reasonably likely to materially affect, the companys internal control over financial reporting.
72
Report of Ernst & Young LLP,
Independent Registered Public Accounting Firm, on Internal Control Over Financial Reporting
Board of Directors and Shareholders of Gannett Co., Inc.:
We have audited Gannett Co., Inc.s internal control over financial reporting as of December 28,
2008, based on criteria established in Internal ControlIntegrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Gannetts
management is responsible for maintaining effective internal control over financial reporting, and
for its assessment of the effectiveness of internal control over financial reporting included in
the accompanying Managements Report on Internal Control Over Financial Reporting. Our
responsibility is to express an opinion on the companys internal control over financial reporting
based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness exists, testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk,
and performing such other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.
A companys internal control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting
principles. A companys internal control over financial reporting includes those policies and
procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately
and fairly reflect the transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and
directors of the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the companys assets that could have
a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent
or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
As
indicated in the accompanying Managements Report on Internal Control Over Financial
Reporting, managements assessment of and conclusion on the effectiveness of internal control over
financial reporting did not include internal controls of CareerBuilder LLC, which is included in
the 2008 consolidated financial statements of Gannett Co., Inc. and constituted $557 million and
$130 million of total and net assets, respectively, as of December 28, 2008 and $195 million and
$14 million of revenues and net income, respectively, for the year then ended. Our audit of
internal control over financial reporting of Gannett Co., Inc. also did not include an evaluation
of the internal control over financial reporting of CareerBuilder LLC.
In our opinion, Gannett Co., Inc. maintained, in all material respects, effective internal
control over financial reporting as of December 28, 2008, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the 2008 consolidated financial statements of Gannett Co., Inc.
and our report dated February 24, 2009 expressed an unqualified opinion thereon.
McLean, Virginia
February 24, 2009
ITEM 9B. OTHER EVENTS
On Feb. 25, 2009, the Gannett Board of Directors appointed Howard Elias to serve on the Boards
Digital Technology Committee and Scott McCune to serve on the Boards Nominating and Public
Responsibility Committee, effectively immediately.
On February 24, 2009, the companys Executive Compensation Committee approved amendments to the Digital Long-Term Incentive Plan dated as of December 4, 2007, to modify the definition of digital revenue and the formula used to determine qualifying performance-based compensation under Section 162(m) of the Internal
Revenue Code. The amended Plan is attached as Exhibit 10-16-1 to this Form 10-K.
73
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Below is a listing of the executive officers of the company. Executive officers serve for a term of
one year and may be re-elected. A list of directors is incorporated by reference to the companys
Proxy Statement pursuant to general instruction G(3) to Form 10-K.
Paul Davidson
Chairman and Chief Executive Officer, Newsquest (2003-present). Formerly: Chief Executive,
Newsquest (2001-2003). Age 54. U.K. citizen.
Robert J. Dickey
President, U.S. Community Publishing, formerly Newspaper Division (February 2008-present). Formerly
Senior Group President, Gannetts Pacific Group and Chairman of Phoenix Newspapers Inc.
(2005-2008); President and Publisher of The Desert Sun, Palm Springs, Calif., (1993-2005) and Group
Vice President of the Pacific Group (1997-2005). Age 51.
Craig A. Dubow
Chairman, President and Chief Executive Officer (July 2006-present). Formerly: President and CEO
(2005-2006); and President and CEO, Gannett Broadcasting (2001-2005). Age 54.
Daniel S. Ehrman, Jr.
Vice President, Planning & Development (1997-present). Age 62.
George R. Gavagan
Vice President and Controller (1997-present). Age 62.
Roxanne V. Horning
Senior Vice President, Human Resources (July 2006-present). Formerly: Vice President, Human
Resources (2005-2006); and Vice President, Compensation and Benefits (2003-2005). Age 59.
Dave Lougee
President, Gannett Broadcasting (July 2007-present). Formerly: Executive Vice President, Media
Relations, Belo (2006-2007); Senior Vice President, Belo (2005-2006); General Manager, Belo TV and
Cable Operations, Seattle/Tacoma (2000-2005). Age 50.
Gracia C. Martore
Executive Vice President and Chief Financial Officer (April 2006-present). Formerly: Senior Vice
President and CFO (2003-2006). Age 57.
Craig A. Moon
President and Publisher, USA TODAY (2003-present). Formerly: Executive Vice President, Gannett
Newspaper Division (2002-2003). Age 59.
Chris D. Saridakis
Senior Vice President and Chief Digital Officer (2008-present). Formerly: CEO, PointRoll, Inc.
(2005-2007); Chief Operating Officer and Head of Strategy, PointRoll (2003-2005). Age 40.
Wendell J. Van Lare
Senior Vice President, Gannett Labor Relations (June 2006-present). Formerly: Vice President and
Senior Labor Counsel (1994-2006). Age 64.
John A. Williams
President, Gannett Digital Ventures (January 2008-present). Formerly: President, Gannett Digital
(January 2006-December 2007); Senior Vice President, Diversified Business and Development,
Newspaper Division (2003-2005); Vice President, Business Development, Newspaper Division
(1995-2003). Age 58.
Kurt Wimmer
Senior Vice President and General Counsel (August 2006-present). Formerly: Partner, Covington &
Burling, LLP (1995-2006). Age 49.
ITEM 11. EXECUTIVE COMPENSATION
Incorporated by reference to the companys Proxy Statement pursuant to General Instruction G(3) to
Form 10-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
Incorporated by reference to the companys Proxy Statement pursuant to General Instruction G(3) to
Form 10-K.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Incorporated by reference to the companys Proxy Statement pursuant to General Instruction G(3) to
Form 10-K.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Incorporated by reference to the companys Proxy Statement pursuant to General Instruction G(3) to
Form 10-K.
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Financial Statements, Financial Statement Schedules and Exhibits.
(1) Financial Statements.
As listed in the Index to Financial Statements and Supplementary Data on page 40.
(2) Financial Statement Schedules.
As listed in the Index to Financial Statements and Supplementary Data on page 40.
Note: All other schedules are omitted as the required information is not applicable or the
information is presented in the consolidated financial statements or related notes.
(3) Exhibits.
See Exhibit Index on pages 76-79 for list of exhibits filed with this Form 10-K. Management
contracts and compensatory plans or arrangements are identified with asterisks on the Exhibit
Index.
74
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 25, 2009 |
GANNETT CO., INC. (Registrant)
|
|
|
By: |
/s/ Gracia C. Martore
|
|
|
|
Gracia C. Martore, |
|
|
|
Executive Vice President and
Chief Financial Officer |
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has
been signed below by the following persons on behalf of the registrant in the capacities and on the
dates indicated.
|
|
|
|
|
|
|
|
Dated: February 25, 2009 |
/s/ Craig A. Dubow
|
|
|
Craig A. Dubow, |
|
|
Chairman, President and
Chief Executive Officer |
|
|
|
|
Dated: February 25, 2009 |
/s/ Gracia C. Martore
|
|
|
Gracia C. Martore, |
|
|
Executive Vice President and
Chief Financial Officer |
|
|
|
|
Dated: February 25, 2009 |
/s/ George R. Gavagan
|
|
|
George R. Gavagan, |
|
|
Vice President and Controller |
|
|
|
|
Dated: February 25, 2009 |
/s/ Craig A. Dubow
|
|
|
Craig A. Dubow, |
|
|
Director, Chairman |
|
|
|
|
Dated: February 25, 2009 |
/s/ Howard D. Elias
|
|
|
Howard D. Elias, Director |
|
|
|
|
Dated: February 25, 2009 |
/s/ Arthur H. Harper
|
|
|
Arthur H. Harper, Director |
|
|
|
|
Dated: February 25, 2009 |
/s/ John Jeffry Louis
|
|
|
John Jeffry Louis, Director |
|
|
|
|
Dated: February 25, 2009 |
/s/ Marjorie Magner
|
|
|
Marjorie Magner, Director |
|
|
|
|
Dated: February 25, 2009 |
/s/ Scott K. McCune
|
|
|
Scott K. McCune, Director |
|
|
|
|
Dated: February 25, 2009 |
/s/ Duncan M. McFarland
|
|
|
Duncan M. McFarland, Director |
|
|
|
|
Dated: February 25, 2009 |
/s/ Donna E. Shalala
|
|
|
Donna E. Shalala, Director |
|
|
|
|
Dated: February 25, 2009 |
/s/ Neal Shapiro
|
|
|
Neal Shapiro, Director |
|
|
|
|
Dated: February 25, 2009 |
/s/ Karen Hastie Williams
|
|
|
Karen Hastie Williams, Director |
|
75
EXHIBIT INDEX
|
|
|
|
|
Exhibit |
|
|
|
|
Number |
|
Exhibit |
|
Location |
|
|
|
|
|
2-1
|
|
Equity Purchase Agreement, dated as of August 28,
2008, among Cape Publications, Inc., Gannett
Satellite
Information Network, Inc., Tribune Media Net, Inc.
and Tribune National Marketing Company.
|
|
Incorporated by reference to Exhibit 2-1 to Gannett Co., Inc.s
Form 8-K dated August 28, 2008 and filed September 3, 2008. |
|
|
|
|
|
3-1
|
|
Third Restated Certificate of Incorporation of
Gannett Co., Inc.
|
|
Incorporated by reference to Exhibit 3-1 to Gannett Co., Inc.s
Form 10-Q for the fiscal quarter ended April 1, 2007. |
|
|
|
|
|
3-2
|
|
Amended by-laws of Gannett Co., Inc.
|
|
Incorporated by reference to Exhibit 3-2 to Gannett Co., Inc.s
Form 8-K filed on December 19, 2008. |
|
|
|
|
|
3-3
|
|
Form of Certificate of Designation, Preferences and
Rights setting forth the terms of the Series A Junior
Participating Preferred Stock, par value $1.00 per
share, of Gannett Co., Inc.
|
|
Incorporated by reference to Exhibit 1 to Gannett Co., Inc.s
Form 8-A filed on May 23, 1990. |
|
|
|
|
|
4-1
|
|
Indenture dated as of March 1, 1983, between
Gannett Co., Inc. and Citibank, N.A., as Trustee.
|
|
Incorporated by reference to Exhibit 4-2 to Gannett Co., Inc.s
Form 10-K for the fiscal year ended December 29, 1985. |
|
|
|
|
|
4-2
|
|
First Supplemental Indenture dated as of November 5,
1986, among Gannett Co., Inc., Citibank, N.A., as
Trustee, and Sovran Bank, N.A., as Successor Trustee.
|
|
Incorporated by reference to Exhibit 4 to Gannett Co., Inc.s
Form 8-K filed on November 9, 1986. |
|
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|
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|
4-3
|
|
Second Supplemental Indenture dated as of June 1,
1995, among Gannett Co., Inc., NationsBank, N.A.,
as Trustee, and Crestar Bank, as Trustee.
|
|
Incorporated by reference to Exhibit 4 to Gannett Co., Inc.s
Form 8-K filed on June 15, 1995. |
|
|
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4-4
|
|
Third Supplemental Indenture, dated as of March 14,
2002, between Gannett Co., Inc. and Wells Fargo
Bank Minnesota, N.A., as Trustee.
|
|
Incorporated by reference to Exhibit 4.16 to Gannett Co., Inc.s
Form 8-K filed on March 14, 2002. |
|
|
|
|
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4-5
|
|
Fourth Supplemental Indenture, dated as of June 16,
2005, between Gannett Co., Inc. and Wells Fargo
Bank Minnesota, N.A., as Trustee.
|
|
Incorporated by reference to same numbered exhibit to Gannett
Co., Inc.s Form 10-Q for the fiscal quarter ended June 26, 2005. |
|
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4-6
|
|
Fifth Supplemental Indenture, dated as of May 26,
2006,
between Gannett Co., Inc. and Wells Fargo Bank, N.A.,
as Trustee.
|
|
Incorporated by reference to Exhibit 4-5 to Gannett Co. Inc.s
Form 10-Q for the fiscal quarter ended June 25, 2006. |
|
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|
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4-7
|
|
Sixth Supplemental Indenture, dated as of June 29,
2007,
between Gannett Co., Inc. and Wells Fargo Bank, N.A.,
as Successor Trustee.
|
|
Incorporated by reference to Exhibit 4.5 to Gannett Co., Inc.s
Form 10-Q for the fiscal quarter ended July 1, 2007. |
|
|
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|
4-8
|
|
Rights Agreement, dated as of May 21, 1990, between
Gannett Co., Inc. and First Chicago Trust Company of
New York, as Rights Agent.
|
|
Incorporated by reference to Exhibit 1 to Gannett Co., Inc.s
Form 8-A filed on May 23, 1990. |
|
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|
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4-8-1
|
|
Amendment No. 1 to Rights Agreement, dated as of
May 2, 2000, between Gannett Co., Inc. and Norwest
Bank Minnesota, N.A., as successor rights agent to
First Chicago Trust Company of New York.
|
|
Incorporated by reference to Exhibit 2 to Gannett Co., Inc.s
Form 8-A/A filed on May 2, 2000. |
|
|
|
|
|
4-9
|
|
Form of Rights Certificate.
|
|
Incorporated by reference to Exhibit 1 to Gannett Co., Inc.s
Form 8-A/A filed on May 23, 1990. |
|
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|
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4-10
|
|
Specimen Certificate for Gannett Co., Inc.s common
stock, par value $1.00 per share.
|
|
Incorporated by reference to Exhibit 2 to Gannett Co., Inc.s
Form 8-B filed on June 14, 1972. |
76
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Exhibit |
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Number |
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Exhibit |
|
Location |
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10-1
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Gannett Co., Inc. 1978 Executive Long-Term
Incentive Plan.*
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|
Incorporated by reference to Exhibit 10-3 to Gannett Co., Inc.s
Form 10-K for the fiscal year ended December 28, 1980.
Amendment No. 1 incorporated by reference to Exhibit 20-1 to
Gannett Co., Inc.s Form 10-K for the fiscal year ended December
27, 1981. Amendment No. 2 incorporated by reference to Exhibit
10-2 to Gannett Co., Inc.s Form 10-K for the fiscal year ended
December 25, 1983. Amendments Nos. 3 and 4 incorporated by
reference to Exhibit 4-6 to Gannett Co., Inc.s Form S-8
Registration Statement No. 33-28413 filed on May 1, 1989.
Amendments Nos. 5 and 6 incorporated by reference to Exhibit
10-8 to Gannett Co., Inc.s Form 10-K for the fiscal year ended
December 31, 1989. Amendment No. 7 incorporated by reference
to Gannett Co., Inc.s Form S-8 Registration Statement No. 333-
04459 filed on May 24, 1996. Amendment No. 8 incorporated by
reference to Exhibit 10-3 to Gannett Co., Inc.s Form 10-Q for the
fiscal quarter ended September 28, 1997. Amendment dated
December 9, 1997, incorporated by reference to Gannett Co., Inc.s
1997 Form 10-K. Amendment No. 9 incorporated by reference
to Exhibit 10-3 to Gannett Co., Inc.s Form 10-Q for the fiscal
quarter ended June 27, 1999. Amendment No. 10 incorporated by
reference to Exhibit 10-3 to Gannett Co., Inc.s Form 10-Q for
the fiscal quarter ended June 25, 2000. Amendment No. 11
incorporated by reference to Exhibit 10-3 to Gannett Co., Inc.s
Form 10-K for the fiscal year ended December 31, 2000. |
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10-2
|
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Description of supplemental insurance benefits.*
|
|
Incorporated by reference to Exhibit 10-4 to Gannett Co., Inc.s
Form 10-K for the fiscal year ended December 29, 2002. |
|
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10-3
|
|
Gannett Supplemental Retirement Plan Restatement.*
|
|
Incorporated by reference to Exhibit 10-2 to Gannett Co., Inc.s
Form 10-Q for the fiscal quarter ended September 30, 2007. |
|
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10-3-1
|
|
Amendment No. 1 to the Gannett Co., Inc. Supplemental
Retirement Plan dated July 31, 2008 and effective
August 1, 2008.*
|
|
Incorporated by reference to Exhibit 10-1 to Gannett Co., Inc.s
Form 10-Q for the fiscal quarter ended September 28, 2008. |
|
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10-4
|
|
Gannett Co., Inc. Deferred Compensation Plan
Restatement dated February 1, 2003 (reflects all
amendments through July 25, 2006).*
|
|
Incorporated by reference to the same-numbered Exhibit
to Gannett Co., Inc.s Form 10-K for the fiscal year ended
December 31, 2006. |
|
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10-4-1
|
|
Gannett Co., Inc. Deferred Compensation Plan Rules
for Post-2004 Deferrals.*
|
|
Incorporated by reference to Exhibit 10-3 to Gannett Co., Inc.s
Form 10-Q for the fiscal quarter ended July 1, 2007. |
|
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10-4-2
|
|
Amendment No. 1 to the Gannett Co., Inc. Deferred
Compensation Plan Rules for Post-2004 Deferrals
dated July 31, 2008 and effective August 1, 2008.*
|
|
Incorporated by reference to Exhibit 10-2 to Gannett Co., Inc.s
Form 10-Q for the fiscal quarter ended September 28, 2008. |
|
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10-4-3
|
|
Amendment No. 2 to the Gannett Co., Inc. Deferred
Compensation Plan Rules for Post-2004 Deferrals
dated December 9, 2008.*
|
|
Attached. |
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10-5
|
|
Gannett Co., Inc. Transitional Compensation Plan
Restatement.*
|
|
Incorporated by reference to Exhibit 10-1 to Gannett Co., Inc.s
Form 10-Q for the fiscal quarter ended September 30, 2007. |
|
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10-6
|
|
Omnibus Incentive Compensation Plan, as amended.*
|
|
Incorporated by reference to Exhibit 10-8 to Gannett Co., Inc.s
Form 10-K for the fiscal year ended December 25, 2005. |
|
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10-6-1
|
|
Amendment to Omnibus Incentive Compensation Plan
dated August 7, 2007.*
|
|
Incorporated by reference to Exhibit 10-6 to Gannett Co., Inc.s
Form 10-Q for the fiscal quarter ended July 1, 2007. |
|
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10-6-2
|
|
Gannett Co., Inc. 2001 Inland Revenue Approved
Sub-Plan for the United Kingdom.*
|
|
Incorporated by reference to Exhibit 10-1 to Gannett Co., Inc.s
Form 10-Q for the fiscal quarter ended September 26, 2004. |
|
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10-6-3
|
|
Form of Director Stock Option Award Agreement.*
|
|
Incorporated by reference to Exhibit 10-7-3 to Gannett Co., Inc.s
Form 10-K for the fiscal year ended December 30, 2007. |
77
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Exhibit |
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|
Number |
|
Exhibit |
|
Location |
|
|
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10-6-4
|
|
Form of Director Restricted Stock Award Agreement.*
|
|
Attached. |
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|
|
10-6-5
|
|
Form of Executive Officer Stock Option Award Agreement.*
|
|
Attached. |
|
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|
10-6-6
|
|
Form of Executive Officer Restricted Stock Unit Award
Agreement.*
|
|
Attached. |
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10-7
|
|
Gannett U.K. Limited Share Incentive Plan,
as amended effective June 25, 2004.*
|
|
Incorporated by reference to Exhibit 10-2 to Gannett Co., Inc.s
Form 10-Q for the fiscal quarter ended June 27, 2004. |
|
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10-8
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Competitive Advance and Revolving Credit Agreement
among Gannett Co., Inc., the Several Lenders from Time
to Time Parties Thereto, Bank of America, N.A., as
Administrative Agent and JPMorgan Chase Bank, as
Syndication Agent, dated as of February 27, 2004, and
Effective as of March 15, 2004.
|
|
Incorporated by reference to Exhibit 10-2 to Gannett Co., Inc.s
Form 10-Q for the fiscal quarter ended March 28, 2004. |
|
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10-8-1
|
|
First Amendment, dated as of February 28, 2007, and
Effective as of March 15, 2007, to Competitive
Advance and Revolving Credit Agreement.
|
|
Incorporated by reference to Exhibit 10-5 to Gannett Co., Inc.s
Form 10-Q for the fiscal quarter ended April 1, 2007. |
|
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10-8-2
|
|
Second Amendment, dated as of October 23, 2008, and
Effective as of October 31, 2008, to Competitive
Advance and Revolving Credit Agreement.
|
|
Incorporated by reference to Exhibit 10-3 to Gannett Co., Inc.s
Form 10-Q for the fiscal quarter ended September 28, 2008. |
|
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10-9
|
|
Competitive Advance and Revolving Credit Agreement
among Gannett Co., Inc., the Several Lenders from Time
to Time Parties Thereto, Bank of America, N.A., as
Administrative Agent, JPMorgan Chase Bank, N.A.,
as Syndication Agent, and Barclays Bank PLC, as
Documentation Agent, dated as of December 13, 2004,
and Effective as of January 5, 2005.
|
|
Incorporated by reference to Exhibit 10-16 to Gannett Co., Inc.s
Form 10-K for the fiscal year ended December 26, 2004. |
|
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10-9-1
|
|
First Amendment, dated as of February 28, 2007, and
Effective as of March 15, 2007, to Competitive
Advance and Revolving Credit Agreement.
|
|
Incorporated by reference to Exhibit 10-3 to Gannett Co., Inc.s
Form 10-Q for the fiscal quarter ended April 1, 2007. |
|
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10-9-2
|
|
Second Amendment, dated as of October 23, 2008, and
Effective as of October 31, 2008, to Competitive
Advance and Revolving Credit Agreement.
|
|
Incorporated by reference to Exhibit 10-4 to Gannett Co., Inc.s
Form 10-Q for the fiscal quarter ended September 28, 2008. |
|
|
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10-10
|
|
Amended and Restated Competitive Advance and
Revolving Credit Agreement among Gannett Co., Inc., the
Several Lenders from Time to Time Parties Thereto, Bank of
America, N.A., as Administrative Agent, JPMorgan Chase
Bank, N.A., as Syndication Agent, and Barclays Bank PLC,
as Documentation Agent, dated as of March 11, 2002, and
Effective as of March 18, 2002, as Amended and Restated as
of December 13, 2004, and Effective as of January 5, 2005.
|
|
Incorporated by reference to Exhibit 10-17 to Gannett Co., Inc.s
Form 10-K for the fiscal year ended December 26, 2004. |
|
|
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|
|
10-10-1
|
|
First Amendment, dated as of February 28, 2007, and
Effective as of March 15, 2007, to Amended and
Restated Competitive Advance and Revolving
Credit Agreement.
|
|
Incorporated by reference to Exhibit 10-4 to Gannett Co., Inc.s
Form 10-Q for the fiscal quarter ended April 1, 2007. |
|
|
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|
|
10-10-2
|
|
Second Amendment, dated as of October 23, 2008, and
Effective as of October 31, 2008, to Amended and Restated
Competitive Advance and Revolving Credit Agreement.
|
|
Incorporated by reference to Exhibit 10-5 to Gannett Co., Inc.s
Form 10-Q for the fiscal quarter ended September 28, 2008. |
|
|
|
|
|
10-11
|
|
Summary of Non-Employee Director Compensation.*
|
|
Incorporated by reference to Exhibit 10-7 to Gannett Co., Inc.s
Form 10-Q for the fiscal quarter ended July 1, 2007. |
|
|
|
|
|
10-12
|
|
Employment Agreement dated February 27, 2007,
between Gannett Co., Inc. and Craig A. Dubow.*
|
|
Incorporated by reference to
Exhibit 10-14 to
Gannett Co., Inc.s Form 10-K for the fiscal year ended
December 31, 2006. |
78
|
|
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|
|
Exhibit |
|
|
|
|
Number |
|
Exhibit |
|
Location |
|
|
|
|
|
10-12-1
|
|
Amendment, dated as of August 7, 2007, to
Employment Agreement dated February 27, 2007.*
|
|
Incorporated by reference to Exhibit 10-4 to Gannett Co., Inc.s
Form 10-Q for the fiscal quarter ended July 1, 2007. |
|
|
|
|
|
10-13
|
|
Employment Agreement dated February 27, 2007,
between Gannett Co., Inc. and Gracia C. Martore.*
|
|
Incorporated by reference to
Exhibit 10-15 to
Gannett Co., Inc.s Form 10-K for the fiscal year ended
December 31, 2006. |
|
|
|
|
|
10-13-1
|
|
Amendment, dated as of August 7, 2007, to
Employment Agreement dated February 27, 2007.*
|
|
Incorporated by reference to Exhibit 10-5 to Gannett Co., Inc.s
Form 10-Q for the fiscal quarter ended July 1, 2007. |
|
10-14
|
|
Amendment for section 409A Plans dated
December 31, 2008.*
|
|
Attached. |
|
|
|
|
|
10-15
|
|
Executive Life Insurance Plan document dated
December 31, 2008.*
|
|
Attached. |
|
|
|
|
|
10-16
|
|
Termination Benefits Agreement dated as of December 5,
2007 between Gannett Co., Inc. and Christopher Saridakis.*
|
|
Attached. |
|
|
|
|
|
10-16-1
|
|
Digital Long-Term Incentive Plan dated as of
December 4, 2007, as amended on February 24, 2009.*
|
|
Attached. |
|
|
|
|
|
10-17
|
|
Omnibus Amendment to Terms and Conditions of
Restricted Stock Awards dated as of December 31, 2008.*
|
|
Attached. |
|
|
|
|
|
10-18
|
|
Omnibus Amendment to Terms and Conditions of
Stock Unit Awards dated as of December 31, 2008.*
|
|
Attached. |
|
|
|
|
|
10-19
|
|
Omnibus Amendment to Terms and Conditions of
Stock Option Awards dated as of December 31, 2008.*
|
|
Attached. |
|
|
|
|
|
21
|
|
Subsidiaries of Gannett Co., Inc.
|
|
Attached. |
|
|
|
|
|
23
|
|
Consent of Ernst & Young LLP, Independent Registered
Public Accounting Firm.
|
|
Attached. |
|
|
|
|
|
31-1
|
|
Certification Pursuant to Rule 13a-14(a) under the
Securities Exchange Act of 1934.
|
|
Attached. |
|
|
|
|
|
31-2
|
|
Certification Pursuant to Rule 13a-14(a) under the
Securities Exchange Act of 1934.
|
|
Attached. |
|
|
|
|
|
32-1
|
|
Section 1350 Certification.
|
|
Attached. |
|
|
|
|
|
32-2
|
|
Section 1350 Certification.
|
|
Attached. |
For purposes of the incorporation by reference of documents as Exhibits, all references to Form
10-K, 10-Q and 8-K of Gannett Co., Inc. refer to Forms 10-K, 10-Q and 8-K filed with the Commission
under Commission file number 1-6961.
The company agrees to furnish to the Commission, upon request, a copy of each agreement with
respect to long-term debt not filed herewith in reliance upon the exemption from filing applicable
to any series of debt which does not exceed 10% of the total consolidated assets of the company.
|
|
|
* |
|
Asterisks identify management contracts and compensatory plans or arrangements. |
|
|
|
Portions of this exhibit were redacted pursuant to a confidential treatment request filed with
the Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of
1934, as amended. |
79
GLOSSARY OF FINANCIAL TERMS
Presented below are definitions of certain key financial and operational terms that we hope will
enhance your reading and understanding of Gannetts 2008 Form 10-K.
AMORTIZATION - A charge against the companys earnings that represents the write off of intangible
assets over the projected life of the assets.
BALANCE SHEET - A summary statement that reflects the companys assets, liabilities and
shareholders equity at a particular point in time.
BROADCASTING REVENUES - Primarily amounts charged to customers for commercial advertising aired on
the companys television stations.
CIRCULATION - The number of newspapers sold to customers each day (paid circulation). The company
keeps separate records of morning, evening and Sunday circulation.
CIRCULATION REVENUES - Amounts charged to newspaper readers or distributors reduced by the amount
of discounts. Charges vary from city to city and depend on the type of sale (i.e., subscription or
single copy) and distributor arrangements.
COMPREHENSIVE INCOME - The change in equity (net assets) of the company from transactions and other
events from non-owner sources. Comprehensive income comprises net income and other items reported
directly in shareholders equity, principally the foreign currency translation adjustment and
funded status of postretirement plans.
CURRENT ASSETS - Cash and other assets that are expected to be converted to cash within one year.
CURRENT LIABILITIES - Amounts owed that will be paid within one year.
DEFERRED INCOME - Revenue derived principally from advance subscription payments for newspapers.
Revenue is recognized in the period in which it is earned (as newspapers are delivered).
DEPRECIATION - A charge against the companys earnings that allocates the cost of property, plant
and equipment over the estimated useful lives of the assets.
DIGITAL/ONLINE REVENUES - These include revenue from advertising placed on Web sites that are
associated with the company publishing and broadcasting operations which are reflected as revenues
of those business segments, and revenues from the businesses that comprise the Digital segment,
principal of which are CareerBuilder (employment Web site) and PointRoll (technology/marketing
services revenue).
DIGITAL SEGMENT - Beginning with 2008, a new digital business segment was reported, which includes
CareerBuilder and ShopLocal from the dates of their full consolidation, as well as PointRoll,
Planet Discover, Schedule Star and Ripple6 (from the date of acquisition Nov. 13, 2008).
DISCONTINUED OPERATIONS - A term which refers to businesses which have been sold or disposed of by
the company. To achieve comparability in financial reporting for all remaining operations, the
results from discontinued operations are reclassified from the normal operating section of the
Statements of Income and presented in a separate section entitled Discontinued Operations.
DIVIDEND - Payment by the company to its shareholders of a portion of its earnings.
EARNINGS PER SHARE (basic) - The companys earnings divided by the average number of shares
outstanding for the period.
EARNINGS PER SHARE (diluted) - The companys earnings divided by the average number of shares
outstanding for the period, giving effect to assumed dilution from outstanding stock options and
restricted stock units.
EQUITY EARNINGS FROM INVESTMENTS - For those investments which are 50% or less owned by the
company, an income or loss entry is recorded in the Statements of Income representing the companys
ownership share of the operating results of the investee company.
GAAP - Generally accepted accounting principles.
FOREIGN CURRENCY TRANSLATION - The process of reflecting foreign currency accounts of subsidiaries
in the reporting currency of the parent company.
GOODWILL - In a business purchase, this represents the excess of amounts paid over the fair value
of tangible and other identified intangible assets acquired net of liabilities assumed.
INVENTORIES - Raw materials, principally newsprint, used in the business.
MINORITY INTEREST - The portion of equity and net earnings in consolidated subsidiaries that is
owned by others.
NEWSPAPER ADVERTISING REVENUES - Amounts charged to customers for space (advertising linage)
purchased in the companys newspapers and/or the associated Web site. There are three major types
of advertising revenue: retail ads from local merchants, such as department stores; classified ads,
which include automotive, real estate and help wanted; and national ads, which promote products
or brand names on a nationwide basis.
PRO FORMA - A non-GAAP manner of presentation intended to provide improved comparability of
financial results; it assumes business purchases/dispositions were completed at the beginning of
the earliest period discussed (i.e., results are compared for all periods but only for businesses
presently owned).
PURCHASE - A business acquisition. The acquiring company records at its cost the acquired assets
less liabilities assumed. The reported income of an acquiring company includes the operations of
the acquired company from the date of acquisition.
RESTRICTED STOCK - An award that gives key employees the right to shares of the companys stock,
pursuant to a vesting schedule.
RESULTS OF CONTINUING OPERATIONS - A key section of the statement of income which presents
operating results for the companys principal ongoing businesses (newspaper and broadcasting).
RETAINED EARNINGS - The earnings of the company not paid out as dividends to shareholders.
STATEMENT OF CASH FLOWS - A financial statement that reflects cash flows from operating, investing
and financing activities, providing a comprehensive view of changes in the companys cash and cash
equivalents.
STATEMENT OF SHAREHOLDERS EQUITY - A statement that reflects changes in the companys common
stock, retained earnings and other equity accounts.
STATEMENT OF INCOME - A financial statement that reflects the companys profit by measuring
revenues and expenses.
STOCK-BASED COMPENSATION - The payment to employees for services received with equity instruments
such as stock options and restricted stock.
STOCK OPTION - An award that gives key employees the right to buy shares of the companys stock,
pursuant to a vesting schedule, at the market price of the stock on the date of the award.
80