20 12 A NN UA L RE P ORT
GANNETT CO., INC. • 7950 JONES BRANCH DR., MCLEAN, VA 22107 • WWW.GANNETT.COM
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B U I L D I N G C O M M U N I T Y T H R O U G H C O N N E C T I O N
GH01AR2013
TABLE OF CONTENTS
2012 Financial Summary ..................... 1
Letter to Shareholders ........................ 2
Board of Directors ............................... 7
Company and Divisional Officers ........ 8
Photo Credits .................................... 90
Form 10-K
C O M PA N Y P R O F I L E
Gannett is a leading international media
and marketing solutions company, deliv-
ering best-in-class content and services
across an integrated, multi-platform
portfolio. It is committed to serving the
greater good of the nation and the com-
munities it serves.
It is Gannett’s vast portfolio of iconic
national brands, such as USA TODAY
and CareerBuilder, as well as its unique
local media organizations in more than
100 communities across the U.S., which
sets the company apart. Gannett provides
consumers with the information they
seek and connects them to their com-
munities of interest through multiple
platforms including web sites, mobile
and tablet products, print publications
and TV stations.
Gannett’s understanding of its
communities and its local market rela-
tionships, many of which have spanned
decades, gives the company a strong
advantage.
As a digital media leader, the com-
pany provides access to content on more
than 400 local mobile and tablet products
and leading applications for iPad, iPhone,
Kindle and Android. Through key acquisi-
tions and partnerships, Gannett continues
to accelerate its digital strategy.
Gannett also helps businesses grow
by providing marketing solutions that
reach and engage their customers across
the company’s diverse platforms. Gannett
Digital Marketing Services serves as a
one-stop shop for digital marketing
services to help tens of thousands of
small and medium-sized businesses use
digital technology to more effectively
reach their customers.
Gannett’s properties cover a wide
range of geographies, demographics and
content areas, which combine to form a
uniquely powerful and comprehensive
portfolio of offerings for consumers and
clients alike.
Gannett reaches 54.6 million unique
visitors monthly or about 24.7% of the
U.S. Internet audience via digital plat-
forms, including CareerBuilder.com, the
nation’s top human capital solutions site,
USATODAY.com, USA TODAY Sports
Digital Properties and more than 100
digital platforms affiliated with its local
media organizations across the country.
Gannett also provides its content through
82 daily U.S. publications, including
USA TODAY, a multi-platform news and
information media company and the
nation’s largest-selling daily print publi-
cation. The company publishes about
480 magazines and other non-dailies
including USA WEEKEND.
Likewise, Gannett subsidiary News-
quest is one of the United Kingdom’s
leading regional community news provid-
ers with 17 daily paid-for titles, more than
200 weekly print products, magazines
and trade publications, and a network of
web sites. More than 9 million unique
users access Newsquest’s network of
news web sites each month.
In addition, the company operates 23
television stations in 19 U.S. markets with
a total market reach of nearly 21 million
households, 18.1% of the U.S. popula-
tion. Each of these stations also operates
locally oriented digital platforms offering
news, entertainment and advertising
content. Through its Captivate subsidiary,
which operates video screens in elevators
of office buildings and select hotel lobbies
across North America, the company’s
broadcasting group delivers news, infor-
mation and advertising to a highly desir-
able demographic in key urban markets.
I
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SHAREHOLDER SERVICES
GANNETT STOCK
Gannett Co., Inc. shares are traded on the New York Stock Exchange with the symbol GCI.
The company’s transfer agent and registrar is Wells Fargo Bank, N.A. General inquiries and
requests for enrollment materials for the programs described below should be directed to
Wells Fargo Shareowner Services, P.O. Box 64854, St. Paul, MN 55164-0854 or by telephone at
1-800-778-3299 or at www.wellsfargo.com/contactshareownerservices.
DIVIDEND REINVESTMENT PLAN
The Dividend Reinvestment Plan (DRP) provides Gannett shareholders the opportunity to
purchase additional shares of the company’s common stock free of brokerage fees or service
charges through automatic reinvestment of dividends and optional cash payments. Cash
payments may range from a minimum of $10 to a maximum of $5,000 per month.
AUTOMATIC CASH INVESTMENT SERVICE FOR THE DRP
This service provides a convenient, no-cost method of having money automatically
withdrawn from your checking or savings account each month and invested in Gannett stock
through your DRP account.
THIS REPORT WAS WRITTEN
AND PRODUCED BY EMPLOYEES
OF GANNETT.
Vice President and Controller
Teresa S. Gendron
Assistant Controller
Cam McClelland
Corporate Consolidations Team
John Dalton
Dimeterice Ferguson
Suzanne Kuo
Lorraine Licayan
Mark Ramsey
Aisha Simpson
Eva Wrublesky
DIRECT DEPOSIT SERVICE
Gannett shareholders may have their quarterly dividends electronically credited to their
checking or savings accounts on the payment date at no additional cost.
Director/Corporate
Communications
Laura Dalton
ANNUAL MEETING
The annual meeting of shareholders will be held at 10 a.m. (E.T.) Tuesday, May 7, 2013, at
Gannett headquarters.
CORPORATE GOVERNANCE
We have posted on our web site (www.gannett.com) our principles of corporate governance,
ethics policy and the charters for the audit, transformation, nominating and public
responsibility and executive compensation committees of our board of directors, and we
intend to post updates to these corporate governance materials promptly if any changes
(including through any amendments or waivers of the ethics policy) are made. This site also
provides access to our annual report on Form 10-K, quarterly reports on Form 10-Q and
current reports on Form 8-K as filed with the SEC. Our chief executive officer and our chief
financial officer have delivered, and we have filed with our 2012 Form 10-K, all certifications
required by the rules of the SEC. Complete copies of our corporate governance materials and
our Form 10-K may be obtained by writing our Secretary at our corporate headquarters.
In accordance with the rules of the New York Stock Exchange, our chief executive officer,
has certified, without qualification, that such officer is not aware of any violation by Gannett
of the NYSE’s corporate governance listing standards.
FOR MORE INFORMATION
News and information about Gannett is available on our web site. Quarterly earnings infor-
mation will be available around the middle of April, July and October 2013. Shareholders
who wish to contact the company directly about their Gannett stock should call Shareholder
Services at Gannett headquarters, 703-854-6960.
Gannett Headquarters
7950 Jones Branch Drive
McLean, VA 22107
703-854-6000
Creative Director/Designer
Michael Abernethy
Printing
Action Printing, Fond du Lac, WI
PHOTO CREDITS:
Page 7: Directors’ photos by
Stacey Wolf, Gannett and
Gretchen Ortega. Martore by
Ralph Alswang.
Photo credits for the Cover and
Pages 2-5 can be found on
Page 90 of the 10-K.
Printed on recycled paper.
This report was printed using
soy-based inks. The entire report
contains 10% total recovered
fiber/all post-consumer waste.
F I N A N C I A L S U M M A R Y
Operating revenues, in millions
In thousands, except per share amounts
10 $5439
11 $5240
12 $5353
Income from continuing operations attributable to Gannett Co.,
Inc. before asset impairment and other special items, in millions
10
11
12
$591 (1)
$518 (1)
$551 (1)
Income per diluted share from continuing operations before
asset impairment and other special items
10
11
12
$2.44 (1)
$2.13 (1)
$2.33 (1)
Operating revenues ..........................
Operating income ...........................
Income from continuing operations
attributable to Gannett Co., Inc. .......
Income per share from continuing
operations – diluted ........................
Income from continuing operations
attributable to Gannett Co., Inc.
before asset impairment and other
special items (1) ...............................
Income per diluted share from
continuing operations before asset
impairment and other charges (1) ....
2012
2011
$ 5,353,197 $ 5,239,989
$ 789,755 $ 830,791
Change
2%
(5%)
$ 424,280 $ 458,748
(8%)
$
1.79 $
1.89
(5%)
$ 551,061 $ 518,193
6%
$
2.33 $
2.13
9%
91,874 $
(10%)
(20%)
(19%)
(4%)
27%
1%
233%
$ 697,994 $ 775,261
$ 138,204 $ 173,608
$ 1,432,100 $ 1,760,363
$ 6,379,886 $ 6,616,450
$
72,451
$ 2,350,614 $ 2,327,891
0.24
$
Free cash flow (2) .............................
Working capital ................................
Long-term debt ...............................
Total assets .......................................
Capital expenditures .......................
Shareholders’ equity.........................
Dividends declared per share ..........
Weighted average common
shares outstanding – diluted .............
(1) Results for 2012 exclude pre-tax asset impairment and other special items
of $178 million ($127 million after tax or $.54 per share). Results for 2011
exclude pre-tax asset impairment and other special items of $146 million
($59 million after tax or $.26 per share). Results for 2010 exclude pre-tax
asset impairment and other special items of $71 million ($23 million after
tax or $.10 per share). These charges are more fully discussed in the Manage-
ment’s Discussion and Analysis of Financial Condition and Results of Opera-
tions and the Consolidated Financial Statement sections of this report.
(2) See page 77 of Gannett’s Form 10-K for a reconciliation of free cash flow,
a non-GAAP financial measure, to net cash flow from operating activities.
0.80 $
236,690
242,768
—
ANNUAL 1 REPORT
L E T T E R T O S H A R E H O L D E R S
Dear Fellow Shareholders:
Gannett had a terrific year in 2012.
With our 100-plus local media organizations, strong na-
tional brands and marketing solutions that scale from local
to national and back again, we are uniquely positioned to do
what no other can.
We have deep local market knowledge, trusted products,
effective services, an expansive reach and a strong financial
profile. For us, 2012 was a year of effectively leveraging all of
our advantages and launching a bold new strategy to redefine
Gannett from the inside out.
With the Board of Directors’ support and our employees’ tena-
cious resolve, we are on the offense at Gannett. We are leaning
into our challenges and transforming them into opportunities.
While we expect 2013 to be a challenging year when com-
pared to 2012, it will be just as important as we continue to suc-
cessfully follow through and execute on what we started. We
are confident that our efforts will continue to strengthen our
market position and lead to a stronger future.
In 2012:
• We achieved our first year-over-year company-wide revenue
growth since 2006;
• We strengthened and differentiated our U.S. Community
Publishing platform through the launch of the all-access
content subscription model, which drove circulation rev-
enue increases for the first time since 2006. We are meeting
or exceeding our revenue and operating profit goals;
• Our Broadcasting segment had its best year in history and
took market share, with most stations gaining position in
their markets;
• Total digital revenue across Gannett increased 19 percent
and represented almost 25 percent of total revenue. We also
funded nearly $75 million in strategic product, platform
and efficiency initiatives.
Our clear sense of purpose is at our core and helps guide
what we do. Each of our media organizations fosters con-
nections among friends and neighbors, schools and students,
voters and politicians, consumers and businesses. The more
trusted connections we build, the stronger our communities
grow. We are a company that is committed to working for the
greater good of the communities we serve – a commitment that
never wavers – as we embrace our new blueprint for growth as
a digital media company.
In February 2012, we laid out our plan to return Gannett to
sustainable revenue growth and increased profitability while
positioning the company for expansion in the digital era.
We are happy to report that our comprehensive strategy to
leverage our powerful local brands, national scale and financial
strength is working and we are once again gaining momentum.
In 2012, through the combination of a 150% increase in our
annual dividend to $.80 per share and the accelerated share
repurchase program that we announced in February, we paid
more than $158 million in dividends to shareholders and
ANNUAL 2 REPORT
MAKE A DIFFERENCE DAY
INSPIRES MILLIONS TO VOLUNTEER
For more than 20 years, USA WEEKEND’s Make A Difference Day
has inspired millions of Americans each year to volunteer in their
communities. Last fall marked the first time all Gannett markets
organized volunteer projects and led employ-
ees in service to their communities. A total
of 136 Gannett-led efforts were organized
nationwide involving nearly 27,000 employees
and community members, helping an esti-
mated 478,000 people. The Gannett Founda-
tion provided grants to each unit to partner
with local nonprofits.
Among the efforts:
• Detroit Free Press employees
were among more than 550
volunteers and 100 skilled
workers who boarded up
185 dangerous vacant homes
on the city’s west side.
• In Annandale, VA, 120
volunteers, including staff
from Gannett corporate, USA
TODAY, WUSA-TV and Gan-
nett Healthcare Group painted
classrooms, constructed play-
grounds and sandboxes and
landscaped the ACCA Child
Development Center, which
serves disadvantaged children.
• In Atlanta, WXIA 11Alive em-
ployees joined 350 HandsOn
Atlanta volunteers who fanned
out to 11 sites across the
city. Among the good deeds:
delivering meals to the sick,
building a community garden
and tutoring disadvantaged
kids.
• In the Cincinnati area, more
than 70 Enquirer Media
employees worked on four
Habitat for Humanity homes
under construction.
• In Palm Springs, The Desert
Sun partnered with Klein
Clark Sports for the 27th
Annual Palm Springs Tram
Road Challenge. Desert Sun
staffers were among the 1,500
volunteers with proceeds
benefiting the 21-member
agencies of the United Way
of the Desert.
purchased approximately 10.3 million shares for $154 million.
This was only the first installment on our plan to return a total
of approximately $1.3 billion in capital to shareholders by
2015. In 2012, we produced a total return to shareholders of
41% compared to 16% for the S&P 500 overall.
Our operating revenues totaled $5.4 billion in 2012, an
increase of over 2 percent from 2011. This represented our
first year-over-year revenue increase since 2006. Revenue
from digital businesses and offerings company-wide reached
$1.3 billion, a record, or nearly 25 percent of total revenue.
Profitability was up as well, with net income attributable to
Gannett excluding special items up 6.3 percent. Non-GAAP
earnings per diluted share for the full year totaled $2.33, an
increase of over 9 percent from 2011.
We continue to make significant progress on a broad range
of initiatives that are bringing our strategy to life – even as we
deliver on our promise to return more value to shareholders.
GROWTH STRATEGY
Our growth strategy is aimed at achieving three main objectives:
• Enhance our local core news and marketing businesses;
• Leverage our hometown and brand advantages and
accelerate growth by entering into or expanding high
growth businesses;
• Continue to optimize our assets and maintain a strong
financial profile to fund our growth while delivering
increased shareholder value.
We are implementing this strategy through an ambitious,
aggressive but attainable plan to achieve long-term revenue and
margin goals while transforming Gannett into a digital power-
house. The plan is built upon unique Gannett advantages, includ-
ing our position as a trusted source of relevant, reliable, valued
news and information in our markets and the close working
relationships we have with more than 150,000 small to medium-
sized businesses. We also are leveraging our strong financial
position, which is the result of many years of prudent financial
stewardship. Maintaining a strong balance sheet and appropri-
ately and carefully allocating our investment dollars are Gannett
hallmarks that remain fundamental to our approach.
KEY INITIATIVES AND BUSINESS HIGHLIGHTS
Since announcing our new strategy and capital allocation plan,
we have moved quickly on many fronts and made excellent
progress across all areas of our business.
We created an integrated national sales organization in
2012 to fully leverage our local-to-national reach. Gannett has
a unique offering when our national brands like USA TODAY
and USA WEEKEND are combined with our 100-plus local
brands. The organization is committed to growing national
advertising revenues across Gannett’s robust publishing and
digital businesses.
One of our major strategic initiatives last year was the
rollout of our new all-access content subscription model in
78 local domestic publishing markets on time, on plan and on
ANNUAL 3 REPORT
L E T T E R T O S H A R E H O L D E R S
budget. This program makes our unique, local, high-quality
content available when and how consumers want it, digitally or
in print. The subscription trends we are seeing are very encour-
aging, including the growth of digital subscriptions. Nearly all
the digital-only subscriptions are new, with about two-thirds
coming from a mostly younger demographic that has never
subscribed; another third are consumers whose subscrip-
tions have lapsed and now are coming back for our content.
As a result of this successful rollout, circulation revenue grew
company-wide for the first time in six years and resulted in
$20 million of additional operating profit in 2012. We expect to
generate an $80 million increase in operating profit in 2013.
Through Gannett Digital Marketing Services (GDMS), we
launched new and expanded offerings aimed at helping tens of
thousands of small and medium-sized businesses in our markets
use digital technology more efficiently and effectively to reach
their customers. By year’s end, we completed the planned GDMS
rollout and were offering a robust suite of digital services in all
of our publishing and broadcast markets. Our offerings range
from our own products such as DealChicken, an online coupon
and special offers site, which tripled revenue in 2012 compared
to 2011, to Internet advertising and social media optimization
services. In the third quarter, we added new social engagement
advertising and consumer loyalty applications through the ac-
quisitions of BLiNQ Media and Mobestream Media, respectively.
Our GDMS offerings open attractive new opportunities in a fast-
growing business segment and enable us to deepen our long-
standing relationships with advertisers, who continue to look to
us as a familiar, knowledgeable and trusted partner. In this first
year of introducing our new GDMS offerings and services, we
are very pleased with our continued progress and the response
we are getting from customers and advertisers. As we enter 2013,
our talented GDMS team is bringing in new business at an accel-
erated rate, customer satisfaction is high and repeat business is
strong. We are very enthusiastic about GDMS’s prospects for the
coming years and see tremendous opportunity. We will continue
to invest prudently in this initiative as well as look at acquisi-
tions to fill in product or capability gaps.
In September, we relaunched our iconic USA TODAY brand
as a multi-platform news and marketing company optimized
for the digital era. We built on the brand’s strong founda-
tion and developed a new brand identity that communicates
a more modern, anywhere, anytime news leader that truly
has its finger on the pulse of the nation. We put content front
and center, invited readers to “Join the Nation’s Conversation”
and reinforced to our audience that USA TODAY is the “go-to”
news source for smart, concise, meaningful reporting with
redesigned print and web products. Results of this “reimagined”
USA TODAY prove that the re-launched products and brand
are making a difference with our audiences across multiple
platforms, and our advertisers have supported us with over
100 digital campaigns since September 2012. In fact, in 2012
USA TODAY’s app made the list of top 10 most downloaded
free news apps on iTunes and received “Best User Experience”
ANNUAL 4 REPORT
GANNETT AND GREAT JOURNALISM
Gannett has a strong commitment to producing great journalism and as a result,
consumers trust our brands. Our industry peers, too, recognize our good work.
This year one of our own, Patti Dennis, vice president and news director at KUSA-TV
in Denver, was named News Director of the Year by Broadcasting & Cable magazine.
Her honor is well deserved, as were our other local, regional and national
awards won by many of our media organizations and journalists. To highlight just
some of our excellent work: Three of our media organizations – The Detroit Free
Press, KARE-TV in Minneapolis-St. Paul and KUSA – won a total of four national
2012 Edward R. Murrow Awards from the Radio Television Digital
News Association (RTNDA). USA TODAY won the prestigious 2013
Alfred I. duPont-Columbia Award, and USA TODAY, along with The
Arizona Republic and the Burlington (VT) Free Press, were among
finalists in the 2012 annual Pulitzer Prize competition.
Other awards are highlighted on www.gannett.com.
from Digital Hollywood. USA TODAY also was named “Mobile
Publisher of the Year” by Mobile Marketer.
In addition to creating those USA TODAY award-winning
tablet and mobile apps, Gannett Digital steamed ahead with its
mobile team rolling out more than 200 other mobile products
in 2012, including new iPad apps for our Gannett broadcast
stations.
During 2012, we also built out and streamlined our
USA TODAY Sports Media Group to fully leverage one of the
country’s strongest local and national sports news and infor-
mation franchises. As a result, Gannett digital sports platforms
now attract on average more than 22 million unique visitors
monthly and consistently rank among the top five digital
sports destinations. Our goal is to have some 35 million unique
visitors per month by 2015, and have one of the industry’s most
recognized and effective sports marketing platforms in place.
In the U.K., Newsquest has done a great job of managing
in a challenging environment and it is looking at its own set
of strategic initiatives that include focusing on growing digital
advertising.
Our Broadcasting division delivered its best year in history,
punctuated by record revenues and profitability along with
significant growth in market share. In total, Broadcasting con-
tributed operating income of approximately $444 million, an
increase of 47 percent compared to 2011.
Its results were driven by a record level of political adver-
tising revenue, which reached $150 million for the year. Our
TV stations earned a significant increase in election-year ad
spending through effective inventory management, strong sta-
tion ratings and a very good footprint in key states like Colo-
rado, Florida, Ohio and Virginia. They also took full advantage
of record viewership of the 2012 Summer Olympics and a new,
locally focused sales strategy to achieve $37 million in bill-
ing, an increase of nearly 60 percent compared with the 2008
Summer Olympic Games in Beijing. Year-over-year retransmis-
sion revenue increased by 21 percent and we expect it to be
a significant contributor to results in 2013. Broadcasting also
benefited from new digital products and capabilities.
CareerBuilder, our industry-leading online recruiting and
employment information company, delivered another solid
year of revenue and market share growth while expanding its
reach in key international markets and adding important new
capabilities. CareerBuilder continues to operate the largest
job board in North America, attracting some 22 million unique
visitors each month. Internationally, CareerBuilder is gaining
momentum to be the leading franchise in key European, Asian
and South American markets. Its sites, combined with partner-
ships and acquisitions, give CareerBuilder a presence in more
than 60 markets worldwide. Its overseas operations grew by
20 percent year-over-year. In September, CareerBuilder made
a bold move in the fast-growing online recruitment field by
acquiring Economic Modeling Specialists Intl. (EMSI), an eco-
nomic software firm specializing in gathering and interpreting
large amounts of employment data and labor market analysis.
ANNUAL 5 REPORT
L E T T E R T O S H A R E H O L D E R S
Combining this unique capability with its global platform
enables the company to deliver deeper, broader employment
data and insight that will change the way companies recruit.
The EMSI acquisition builds on CareerBuilder’s already suc-
cessful Workforce Analytics offering.
Gannett Publishing Services (GPS), initially formed in 2011,
is an integrated nationwide business that now provides custom-
er service, pre-media services (photo toning and ad production
for both digital and print), printing and distribution for all 81
local U.S. Community Publishing newspapers and USA TODAY.
In 2012, its first full year of operation, GPS leveraged economies
of scale and best-in-class processes to deliver significant cost
savings as well as leveraged its assets to grow new revenue by
providing services commercially to other publishers.
2013 AND BEYOND
In 2012, Gannett embarked on a new course and moved
quickly to put plans and investments into action to create
one of the nation’s premier media and marketing solutions
company for the digital era. For the first time in years, Gannett
is playing offense, taking strategic steps to shape our future.
We are convinced that when it comes to our communities, our
investors and our employees, nothing is more important than
our success in building a strong, profitable business driven by
our sense of purpose.
We anticipate that the economy and changing industry con-
ditions will continue to present challenges in 2013. In addition,
our extraordinary achievements in 2012 set a high bar, fueled
by expanding our political and Olympic revenue to historical
company proportions. But, we know that our plan is sound and
we are confident in our ability to execute our strategy. We have
an exceptional leadership team that is determined to move our
transformation forward quickly. Our many advantages include
our employees who are dedicated to ensuring that Gannett
remains a vital resource for the millions of consumers and
tens of thousands of advertisers who rely on us, and that we
continue to be an important and positive presence in the com-
munities we serve.
Based on our successes in 2012, we are exceptionally well
positioned to accomplish all we have set out to do and are fully
committed to delivering increased value to our shareholders.
We are confident we will succeed.
Marjorie Magner,
Chairman of the Board
Gracia Martore,
President and Chief Executive Officer
ANNUAL 6 REPORT
MAGNER
MARTORE
CODY
ELIAS
HARPER
LOUIS
MCCUNE
MCFARLAND
NESS
SHAPIRO
(a) Member of Audit Committee.
(b) Member of Transformation Committee.
(c) Member of Executive Committee.
(d) Member of Executive Compensation Committee.
(e) Member of Nominating and Public Responsibility Committee.
(f) Member of Gannett Leadership Team.
B O A R D O F D I R E C T O R S
MARJORIE MAGNER
Chairman, Gannett Co., Inc. Managing
partner, Brysam Global Partners, a private
equity firm investing in financial services
with a focus on consumer opportunities
in emerging markets. Formerly: Chairman
and CEO, Citigroup’s Global Consumer
Group. Other directorships: Accenture;
Ally Financial Inc. Age 63. (a,c,d)
GRACIA C. MARTORE
President and chief executive officer.
Formerly: President and chief operating
officer, Gannett Co., Inc. (2010-2011);
Executive vice president and chief finan-
cial officer, Gannett Co., Inc. (2006-2010);
Senior vice president and chief financial
officer, Gannett Co., Inc. (2003-2006).
Other directorships: MeadWestvaco
Corporation; FM Global. Age 61. (b,c,f)
JOHN E. CODY
Former executive vice president and chief
operating officer of Broadcast Music, Inc.
Other Directorship: Tennessee Performing
Arts Center. Age 66. (a,c)
DUNCAN M. MCFARLAND
Retired chairman and chief executive
officer, Wellington Management Company,
LLP. Other directorships: NYSE Euronext,
Inc.; and The Asia Pacific Fund, Inc., a
closed-end registered investment company
traded on the New York Stock Exchange.
Age 69. (a,c,d)
SUSAN NESS
Principal, Susan Ness Strategies, a com-
munications policy consulting firm.
Other directorships: J. William Fulbright
Foreign Scholarship Board; Vital Voices
Global Partnership. Age 64. (e)
NEAL SHAPIRO
President and chief executive officer,
WNET.org. Other directorships and
trusteeships: American Public Television;
Investigative Reporters and Editors (IRE);
Investigative News Network (INN); the
Board of Trustees, Tufts University and
the alumni board of Communications and
Media Studies program, Tufts University.
Age 54. (b,e)
HOWARD D. ELIAS
President and chief operating officer,
Global Enterprise Services. Formerly:
President and chief operating officer,
EMC Information Infrastructure and
Cloud Services, Executive Office of the
Chairman; President, EMC Global
Services and Resource Management
Software Group, Executive Vice President,
EMC Corporation. Age 55. (b,d)
ARTHUR H. HARPER
Managing partner, GenNx360 Capital
Partners, a private equity firm focused on
business-to-business companies. Formerly:
President and CEO of General Electric’s
Equipment Services division. Other direc-
torship: Monsanto Company. Age 57. (d,e)
JOHN JEFFRY LOUIS
Co-founder and former chairman, Parson
Capital Corporation (1992-2007). Other
directorships: S. C. Johnson & Son, Inc.;
Johnson Financial Group, Inc.; and a
commissioner of the U.S./ U.K. Fulbright
Commission. Age 50. (a,b)
SCOTT K. MCCUNE
Vice president, Global Partnerships and
Experiential Marketing, The Coca-Cola
Company. Age 56. (b,e)
ANNUAL 7 REPORT
• Member of the Gannett Leadership Team.
n Member of the U. S. Community Publishing Operating Committee.
u Member of the Gannett Broadcasting Operating Committee.
C O M PA N Y & D I V I S I O N A L O F F I C E R S
Gannett’s principal management group is
the Gannett Leadership Team, which coor-
dinates overall management policies for the
company. The U. S. Community Publishing
Operating Committee oversees operations
of the company’s U.S. Community Publish-
ing Division. The Gannett Broadcasting
Operating Committee coordinates manage-
ment policies for the company’s Broadcast
Division. The members of these groups are
identified below.
The managers of the company’s vari-
ous local operating units enjoy substantial
autonomy in local policy, operational details,
news content and political endorsements.
Gannett’s headquarters staff includes
specialists who provide advice and assis-
tance to the company’s operating units in
various phases of the company’s operations.
Below is a listing of the officers of the
company and the heads of its national
and regional divisions. Officers serve for a
term of one year and may be re-elected.
Information about one officer who serves as
a director (Gracia C. Martore) can be found
on page 7.
Maryam Banikarim, Senior Vice
President and Chief Marketing Officer.
Age 44.•
Lynn Beall, Executive Vice President,
Gannett Broadcasting, and President
and General Manager, KSDK-TV,
St. Louis, MO. Age 52.u
William A. Behan, Senior Vice President,
Labor Relations. Age 54.•
Tom R. Cox, Vice President, Corporate
Development. Age 35.
Paul Davidson, Chairman and Chief
Executive Officer, Newsquest. Age 58.•
Robert J. Dickey, President, U.S. Com-
munity Publishing. Age 55.n•
Teresa S. Gendron, Vice President and
Controller. Age 43.
Victoria D. Harker, Chief Financial
Officer. Age 48.•
Michael A. Hart, Vice President and
Treasurer. Age 67.
ANNUAL 8 REPORT
Larry S. Kramer, President and Publish-
er, USA TODAY. Age 62.•
Kevin E. Lord, Senior Vice President
and Chief Human Resources Officer.
Age 50.•
David T. Lougee, President, Gannett
Broadcasting. Age 54.u•
Todd A. Mayman, Senior Vice President,
General Counsel and Secretary. Age 53.•
David A. Payne, Senior Vice President
and Chief Digital Officer. Age 50.•
Barbara W. Wall, Vice President and
Senior Associate General Counsel.
Age 58.
John A. Williams, President, Gannett
Digital Ventures. Age 62.•
Jane Ann Wimbush, Vice President,
Internal Audit. Age 62.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 30, 2012
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-6961
GANNETT CO., INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or Other Jurisdiction of Incorporation or Organization)
7950 Jones Branch Drive, McLean, Virginia
(Address of principal executive offices)
16-0442930
(I.R.S. Employer Identification No.)
22107-0910
(Zip Code)
Registrant’s telephone number, including area code: (703) 854-6000
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Common Stock, par value $1.00 per share
Name of Each Exchange on Which Registered
The New York Stock Exchange
Indicate by check mark if the registrant is well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Securities registered pursuant to Section 12(g) of the Act: None
Yes
No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes
No
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
No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes
No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K (Check box if no delinquent filers).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a
smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company”
in Rule 12b-2 of the Exchange Act:
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
No
The aggregate market value of the voting common equity held by non-affiliates of the registrant based on the closing sales
price of the registrant’s Common Stock as reported on The New York Stock Exchange on June 22, 2012, was $3,123,094,828.
The registrant has no non-voting common equity.
As of February 3, 2013, 229,626,485 shares of the registrant’s Common Stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The definitive proxy statement relating to the registrant’s Annual Meeting of Shareholders to be held on May 7, 2013,
is incorporated by reference in Part III to the extent described therein.
Page
3
24
25
25
26
26
27
28
28
45
46
80
80
82
82
82
82
82
INDEX TO GANNETT CO., INC.
2012 FORM 10-K
Part I
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legal Proceedings.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Part II
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities . . . . . . .
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . .
Item No.
1
1A.
1B.
2
3
4
5
6
7
7A.
Quantitative and Qualitative Disclosures about Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8
9
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . . . . . . . . . . . . . . . . . . . . .
9A.
Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10
11
12
13
14
15
Part III
Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters . . . . . . . . . . . . . . . .
Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Part IV
Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
82
2
PART I
ITEM 1. BUSINESS
Company Profile
Gannett is a leading international media and marketing solutions
company, delivering content and services across an integrated,
multiplatform portfolio.
As a digital media leader, the company provides access to
content on many different platforms, provides digital marketing
services to businesses that help them use digital technology more
effectively, and provides Internet-based human resource solutions.
Gannett’s rich portfolio of iconic national brands, such as
USA TODAY and CareerBuilder, as well as its unique local brands
in more than 100 communities, set the company apart and provide a
strong brand advantage. Gannett’s properties cover a wide range of
geographies, demographics and content areas, which combine to
form a uniquely powerful and comprehensive portfolio of offerings
for consumers and commercial clients alike.
Gannett’s connection to, and understanding of, its communities
and its local market relationships – many of which have spanned
decades – provide the company with strong advantages.
Gannett provides consumers with the information they seek and
connects them to their communities of interest through multiple
platforms including web sites, mobile and tablet products, print
publications and TV stations. Gannett helps businesses grow by
providing marketing solutions that reach and engage their customers
across the company’s diverse platforms.
The company generates digital revenues through online content
subscription fees and advertising in its various digital platforms
including more than 130 publishing web sites, 21 TV web sites, the
management of social engagement advertising campaigns and
customer loyalty programs, a daily coupon and deal business, and
online recruitment services. Gannett reaches 54.6 million unique
visitors monthly or about 24.7% of the U.S. Internet audience, as
measured in December 2012 by comScore Media Metrix, via web
sites supported by industry-leading platforms, including
CareerBuilder.com, the nation’s top human capital solutions site,
USATODAY.com and USA TODAY Sports Digital Properties.
Gannett also provides its content through 82 daily U.S.
publications, including USA TODAY, a multi-platform news and
information media company and the nation’s largest-selling daily
print publication. In September 2012, USA TODAY celebrated its
30th anniversary, re-launching a new print design format and
enhanced digital platforms to provide fresh new ways of interacting
with content. The company also publishes about 480 magazines and
other non-dailies including USA WEEKEND. Likewise, Gannett
subsidiary Newsquest is one of the United Kingdom’s leading
regional community news providers with 17 daily paid-for titles,
more than 200 weekly print products, magazines and trade
publications, and a network of web sites. More than 9 million unique
users access the Newsquest network of news web sites each month.
In addition, the company operates 23 television stations in 19
U.S. markets with a total market reach of nearly 21 million
households, 18.1% of the U.S. population. Each of these stations
also operates locally oriented digital platforms offering news,
entertainment and advertising content. Through its Captivate
subsidiary, which operates video screens in elevators of office
buildings and select hotel lobbies across North America, the
company's broadcasting group delivers news, information and
advertising to a highly desirable demographic in key urban markets.
Many of the company’s digital offerings are tightly integrated
within its existing infrastructure and publishing or broadcasting
product offerings, and reported within the operating results of its
Publishing and Broadcasting Segments. In addition, the company
also separately reports a Digital Segment which includes stand-alone
digital subsidiaries including CareerBuilder, ShopLocal, PointRoll
and Reviewed.com.
During 2012, CareerBuilder, the largest online job site in the
U.S., continued to grow its reach domestically, expand
internationally and enhance its product set. It has a presence in more
than 60 markets worldwide, and a focus on technology solutions and
niche sites. In 2012, CareerBuilder acquired Economic Modeling
Specialists Intl. (EMSI), which specializes in gathering and
interpreting vast amounts of labor market data and employment
information. The company believes that combining EMSI’s “Big
Data” expertise with CareerBuilder’s leading practices and processes
will enable CareerBuilder to deliver deeper and more targeted
employment and labor market information to customers. During
2012, CareerBuilder also continued to grow its global businesses
with the acquisitions of Top Language Jobs in the U.K., the leading
global online job site for multi-language jobs and candidates, and
Ceviu, the leading information technology job board in Brazil.
PointRoll provides online advertisers with rich media marketing
services. In October 2012, Gannett acquired Rovion, a rich-media
advertising company whose primary product, Ad Composer,
includes a self-service technology platform that enables the full
development and deployment of rich media and mobile HTML5 ads
by clients who do not have coding expertise. Rovion is being
integrated into PointRoll’s operations and technology platform,
which will be leveraged across the entire Gannett network to fulfill
the needs of agencies and advertisers. In early 2011, Gannett
acquired Reviewed.com, which operates a group of product-review
web sites that provide comprehensive and comparative reviews for
technology products such as digital cameras, camcorders and high-
definition televisions as well as household products and services.
Complementing its core Digital, Publishing and Broadcasting
segments, the company has made significant strides accelerating its
digital strategy through key investments and partnerships in the
online space. These include a partnership investment in the highly
successful Classified Ventures, which owns and operates the
Cars.com and Apartments.com web sites.
To enhance the company’s delivery of these products and
platforms, Gannett reorganized its local marketing services efforts in
late 2011 and created Gannett Digital Marketing Services (GDMS).
GDMS provides a one-stop shop for digital marketing services to
help tens of thousands of small and medium-sized businesses use
digital technology to more effectively reach their customers. To
further expand the scope of its digital marketing products and
services, and continue to enhance its robust digital solutions product
suite, Gannett acquired BLiNQ Media, which helps companies
advertise and engage with consumers on Facebook and other social
networks, and Mobestream Media, which, through its Key Ring
application, provides a consumer loyalty mobile platform for all
major types of smartphones.
Business Transformation and Initiatives: 2012 was a
watershed year as Gannett launched a new strategic direction for the
company. Gannett laid out a new strategy to return the company to
sustainable revenue growth and increased profitability while
positioning it for expansion in the digital era.
3
The company’s growth strategy is aimed at achieving three main
objectives:
• Enhance its local core news and marketing operations to make its
local franchises stronger and its ties with the communities even
deeper;
• Leverage its hometown and brand advantages to accelerate
growth by entering into or expanding high potential businesses;
• Optimize its assets and maintain a strong financial profile to
improve efficiency and effectiveness, allowing the company to
self-fund growth while delivering increased shareholder value.
The company also announced a new capital allocation plan,
which aims to return over $1.3 billion to shareholders by 2015. As
part of that plan, the company increased the annual dividend by
150% to $0.80 per share; and launched a new $300 million share
repurchase program in February 2012. Against these targets, in 2012
alone, through the combination of the increase in the company’s
annual dividend and the new share repurchase program, Gannett
paid more than $158 million in dividends to shareholders and
repurchased approximately 10.3 million shares for $154 million.
The company is implementing the growth strategy through a plan
built to leverage Gannett advantages. These include the company’s
long history of being a trusted source of relevant, reliable, valued
news and information in its markets and the close working
relationships the company has with more than 150,000 small to
medium-sized businesses.
To implement the strategy, Gannett is committed to revitalizing
local and national news and information capabilities while enabling
subscribers to access Gannett content across a variety of digital
platforms as well as print. The new digital platforms broadened
access to content, and also opened new ways for advertisers and
marketers to engage with consumers.
Gannett created an integrated national sales organization in 2012
to fully leverage its local-to-national reach, growing national
advertising revenues across Gannett’s robust publishing and digital
businesses.
At the same time, Gannett pursued strategic initiatives in seven
primary categories: Digital Relaunch & Mobile; USA TODAY
Sports Media Group; Digital Marketing Services; All-Access
Content Subscription Model; Gannett Publishing Services; Sourcing;
and Space Consolidation.
Gannett made significant progress in implementing its strategy
across each of its business segments – Publishing, Broadcast and
Digital. Progress on these strategic initiatives is highlighted below:
• The Digital Relaunch and Mobile initiative focused on building
out its software and infrastructure for a “One Gannett” platform
and creating new award-winning desktop products and mobile
apps. Digital teams migrated more than 400 mobile and desktop
sites to a single ad server from historically different ad servers.
Gannett also created a new digital content management system;
built and deployed the U.S. Community Publishing (USCP)
online subscription system; and relaunched
USA TODAY.com. In addition, the mobile team built and
launched over 200 mobile products, including new USCP tablet
editions, multiple USA TODAY mobile products for phone and
tablet, and the Broadcasting iPad apps. USA TODAY was named
Mobile Publisher of the Year by Mobile Marketer, and its new
site received the Cutting Edge award from FWA/Adobe.
• USA TODAY Sports Media Group covers sports from the local
high school level through college and professional teams and
continues to leverage USA TODAY’s 30-year relationship with
American sports fans by driving growth in the digital sports
market. In 2012, USA TODAY Sports Media Group streamlined
coverage and became one of the nation’s top five digital sports
destinations with over 20 million unique visitors each month.
Group highlights include:
• Acquisition of Fantasy Sports Ventures/Big Lead Sports, a
leading digital sports site in North America.
• Rolling out USA TODAY’s Sports Pulse digital content
syndication to all local markets, which included content from
USA TODAY Sports, Gannett’s more than 100 local media
brands, Sports On Earth (a joint services agreement between
USA TODAY Sports and Major League Baseball Advanced
Media) and the hundreds of sites within USA TODAY Sports
Digital Properties such as thebiglead.com and mixed martial
arts site MMAjunkie.com, among others.
•
Increased partnership with UFC and continued expansion of
relationships with other league partners such as NASCAR
and the PGA Tour.
• Relaunching USA TODAY’s Sports section in print and
online.
• Re-branding US PRESSWIRE, its dedicated sports image
service providing coverage for nearly 10,000 events each
year, to USA TODAY Sports Images.
• Relaunching and re-branding its high school sports web site,
highschoolsports.net, as USA TODAY High School Sports
(www.usatodayhss.com), which anchors the group’s
comprehensive national coverage of all boys’ and girls’ high
school sports throughout the country, as well as for the more
than 100 local media properties within the company.
• GDMS was created to provide a one-stop shop for digital
marketing services to help tens of thousands of small and
medium-sized businesses in Gannett markets use digital
technology to more effectively reach customers. GDMS enables
Gannett sites to deepen their long-standing relationships with
advertisers, who see Gannett local media as familiar,
knowledgeable and trusted partners.
• By year-end, the planned GDMS roll out was complete and
Gannett’s local publishing and broadcast markets were
offering clients a broad suite of digital services such as daily
deals, coupons, loyalty programs, email marketing, search
engine optimization and online marketing.
• Gannett completed acquisitions of BLiNQ Media, a company
which helps businesses advertise and engage with consumers
on Facebook and other social networks, and Mobestream
Media, which through its Key Ring application, provides a
consumer loyalty mobile platform for all major types of
smartphones.
• GDMS expanded DealChicken, its daily deals offering, to 12
new U.S. Community Publishing markets in 2012.
DealChicken has been rolled out within 72 markets, helping
local area merchants create and expand their brand awareness
as well as deliver a loyal following of repeat customers.
4
• USCP continued to transform itself as it successfully
• Reviewed.com, a group of product review web sites that provide
implemented the roll-out of its all-access content subscription
model for its local media in 78 markets across the U.S. This
program makes USCP’s unique, local, high-quality content
available when and how consumers want it, digitally or in print.
The subscription model built on earlier 2010 tests in three
markets and 2011 research efforts, offers a variety of options to
consumers and advertisers. All subscriptions include full web,
mobile, e-Edition and tablet access, with subscription prices that
vary according to the frequency of print home delivery. Single-
copy print editions continue to be sold at retail outlets.
Circulation revenues increased 8% in 2012 at the company’s
local domestic publishing units driven by the impact of the all-
access roll out. The focus in 2013 will shift to enhancing
operations and growing digital subscribers.
• 2012 was the first full year of operation of Gannett Publishing
Services (GPS), which centralized the circulation, print
production and consumer sales and services functions of USCP,
USA TODAY, and Gannett Offset divisions under one
organizational structure. GPS provides printing services from 43
U.S. locations. This allows Gannett publishers to focus on
strengthening the core elements of their local business – which
are providing valued news and information, building advertising
sales and expanding their strong community ties. GPS also
opened up new revenue generation opportunities in third-party
production, printing and packaging services as an integrated
nationwide business.
• Throughout 2012, Gannett took a number of steps under its
sourcing initiative to create greater efficiencies, including driving
savings through outsourcing, centralization, renegotiations of
vendor contracts and demand management.
• The space consolidation initiative continues to evaluate
opportunities to optimize Gannett’s real estate portfolio, which
include selling older, under utilized buildings and relocating to
more efficient office space; reconfiguring space to take
advantage of leasing and subleasing opportunities, as well as
other options. For example, Gannett’s Los Angeles office moved
to more efficient space and Chicago offices consolidated
locations in 2012. A number of Gannett properties, including
those in Westchester, NY, and Des Moines, IA, were put on the
market and new, more collaborative-designed leased space is
currently under construction. During 2012 alone, Gannett
executed 12 real estate transactions, realizing proceeds of nearly
$40 million.
Business portfolio: The company operates a diverse business
portfolio, established through acquisitions and internal development.
Some examples of this diversification are:
• CareerBuilder is the global leader in human capital solutions,
helping companies target, attract and retain talent. Its online job
site, CareerBuilder.com, is the largest in North America with the
most traffic and revenue.
• PointRoll, a leading multi-screen digital advertising and
technology company that enables advertisers, agencies and
publishers to create, deliver and measure interactive online
video, rich media display, mobile and social campaigns.
• ShopLocal, a leader in multichannel shopping and advertising
services.
comprehensive, comparative reviews of technology and
household products and services. Reviewed.com is a key element
in the company’s consumer media strategy.
• USA WEEKEND, a weekly magazine carried by more than 800
local publishers with an aggregate circulation reach of 22.5
million.
• Clipper Magazine, a direct mail advertising magazine that
publishes more than 450 individual market editions under the
brands Clipper Magazine, Savvy Shopper and Mint Magazine in
29 states.
• Gannett Government Media, which operates military and defense
publications and has expanded into the broadcasting and online
arenas. Gannett Government Media collaborates with Gannett
Washington, D.C., TV station WUSA to produce “This Week in
Defense News” which airs on Sunday mornings.
• Gannett Healthcare Group publishes magazines specializing in
news, continuing education opportunities and employment
opportunities for nurses and allied health professionals with a
combined circulation of 730,000. Its websites, Nurse.com,
TodayinPT.com and TodayinOT.com feature news, continuing
education opportunities and employment opportunities for allied
health professionals. Gannett Healthcare Group also operates
Gannett Education, which delivers continuing education
opportunities to nurses and allied health professionals and
includes ContinuingEducation.com and PearlsReview.com, an
online nursing certification and continuing education web site.
• GDMS was established to aggressively maximize scale and
further enhance Gannett’s product offerings. GDMS, a cross-
divisional organization, includes GannettLocal, DealChicken,
Clipper’s Double-Take Deals, ShopLocal, BLiNQ Media and
Mobestream Media. The new business organization helps the
company better leverage its local sales forces across divisions
and maximize its ability to build, acquire or partner to deliver the
high-quality digital marketing solutions needed to help
customers succeed in Gannett markets and beyond. It is also
responsible for product fulfillment functions such as building
web sites, e-mail marketing, search engine marketing, search
engine optimization, daily deals, mobile loyalty and social media
marketing; expansion of GannettLocal in building a high-quality
telemarketing sales force to work with small customers; and
training and integrating the sales forces at the company’s 100-
plus local media properties.
Strategic Acquisitions: In October 2012, Gannett acquired
Rovion. Rovion’s primary product, Ad Composer, includes a self-
service technology platform that enables the full development and
deployment of rich media and mobile HTML5 ads by clients who do
not have coding expertise.
In September 2012, Gannett acquired Mobestream Media,
developer of the Key Ring consumer rewards mobile platform (“Key
Ring”) available on all major smartphones. Consumers download the
free Key Ring application to scan and store existing loyalty cards,
join new rewards programs, get mobile coupons and other
promotional offers delivered to their smartphones.
Also in September 2012, CareerBuilder acquired a controlling
interest in EMSI. EMSI is an economic software firm that
specializes in employment data and labor market analysis. EMSI
collects and interprets large amounts of labor data, which is used in
work force development and talent strategy.
5
In August 2012, Gannett completed the acquisition of BLiNQ
Media, LLC, a leading global innovator of social engagement
advertising solutions for agencies and brands. BLiNQ helps
companies advertise and engage with consumers on Facebook and
other social networks.
In June 2012, the company acquired Quickish. Quickish is a
sports aggregator that offers a summary and a link for sports stories
throughout the day.
In April 2012, CareerBuilder acquired two new businesses:
Ceviu and Top Language Jobs. Ceviu is the leading information
technology job board in Brazil. Top Language Jobs is Europe’s
number one language specialist recruitment job portal. It operates
the largest global network of job boards dedicated to multilingual
job seekers looking for work internationally.
In February 2012, the company invested in HotelMe LLC, a
company engaged in the business of providing authenticated hotel
and lodging travel reviews.
In January 2012, the company acquired the assets of Fantasy
Sports Ventures/Big Lead Sports, a leading sports digital site. This
business is an important addition to the USA TODAY Sports Media
Group, positioning it as one of the top five sports sites on the web.
In previous years, the company also invested in a full
complement of digital offerings. For example, in November 2011,
the company acquired the mixed martial arts web site,
MMAjunkie.com, one of the leading online news destinations for the
sport and a content provider for several print, online and TV outlets.
Also in November 2011, the company purchased a minority
stake in ShopCo Holdings, LLC (ShopCo). ShopCo provides a
common online shopping platform which allows ShopCo advertisers
to reach consumers in order to assist them in making informed
purchasing decisions.
In September 2011, CareerBuilder acquired JobScout24, which
solidified CareerBuilder’s position as one of the top three online
recruitment sites in Germany.
In August 2011, the company acquired US PRESSWIRE, a
global leader in the creation and distribution of premium digital
sports images to media companies worldwide. US PRESSWIRE
operates within the USA TODAY Sports Media Group and provides
daily sports photo coverage for all of the company’s publishing and
broadcast properties.
In June 2011, the company acquired Nutrition Dimension, which
provides continuing education, certification and review programs
and other educational content for nutrition, fitness and training
professionals.
In May 2011, CareerBuilder acquired JobsCentral, a leading jobs
board in Singapore that also has a fast-growing presence in
Malaysia.
In January 2011, the company acquired Reviewed.com, a group
of product-review web sites that provide comprehensive reviews for
technology products such as digital cameras, camcorders and high
definition televisions. Its operations have been expanded to cover
other household items and consumer services.
In March 2010, CareerBuilder purchased CareerSite.biz, parent
of three successful career-related operations in the U.K., two online
recruitment niche sites targeted to nursing and rail workers as well as
a successful virtual career-fair business.
The company also owns a 23.6% stake in Classified Ventures, a
highly successful online business focused on real estate rental and
automotive advertising. The company’s equity in the earnings of
Classified Ventures grew by 25% and 20% in the years 2011 and
2012, respectively.
With these acquisitions and investments, the company has
established important business relationships to more broadly
leverage its publishing and online assets, as well as products and
operations to enhance its online footprint, revenue base and profits.
6
Digital operations – Publishing and Broadcasting
Gannett Digital’s mission is to be the catalyst for revenue growth
and innovation by developing products that delight and engage
consumers while driving increasing monetization. At its core,
Gannett has numerous original content assets, including its national
brand, USA TODAY, and more than 100 local print and television
brands, as well as a large audience reach. In December 2012,
Gannett’s total online U.S. Internet audience totaled 54.6 million
monthly unique visitors, reaching about 24.7% of the Internet
audience, as measured by comScore Media Metrix.
In 2011, Gannett Digital was reorganized into a product
development and shared services organization that supports, hosts
and manages the key infrastructure for the company’s digital
operations, including databases, applications, templates, architecture,
user experience, project management, digital video production,
mobile and web development, distribution, packaging, ad solutions,
and paid content systems.
Following the reorganization, Gannett Digital developed an
aggressive roadmap aimed at developing next generation mobile,
tablet and browser experiences for Gannett’s properties and
integrating the company’s back-end editorial, publishing and
advertising platforms. In 2012, Gannett Digital made significant
progress on the roadmap through:
• Building and launching an entirely new platform underlying
USATODAY.com, including new publishing tools, content
databases and front-end design. The platform was designed to be
extended with appropriate modifications to the remainder of
Gannett’s properties.
•
Introducing a new advertising strategy for USATODAY.com
focused on higher impact, higher value advertising units in order
to drive better results for marketers.
• Training hundreds of journalists on new publishing tools that
enable device-specific programming (desktop, tablet, mobile
phone).
• Building and launching new or updated mobile and tablet
applications for USA TODAY (iPhone 2.0, iPad 3.0, Kindle Fire
2.0, Windows 8), Broadcast (iPad, Android and Kindle) and U.S.
Community Publishing (iPhone, Android, HTML5 iPad apps).
These product launches, in addition to the robust growth of
consumer adoption of mobile phones and tablets, contributed to
20% and 81% year-over-year growth in Gannett-wide mobile/
tablet visitors and page views, respectively.
• Building and launching the Video Production Center in Atlanta,
housed at WXIA-TV, which enables all Gannett properties to
stream live and on-demand video on desktop, mobile phone and
tablet. In December 2012, on-demand video views and live
video plays across company publishing and broadcast businesses
reached 22.8 million, up 65% year over year. Creating and
licensing more video content and better promoting video via
redesigns drove this growth.
• Converting hundreds of sites to a new ad serving platform across
desktop, mobile phone and tablet that will offer Gannett
increased capabilities, including better forecasting, improved
campaign delivery pacing, and better utilization of inventory.
•
Introducing new technologies to improve diagnostic and
performance testing of software and implementing a private
cloud computing environment to provide greater flexibility for
deployment and reconfiguration of services in production.
Additionally in 2012, Gannett Digital supported the roll out of
USCP’s new all-access content subscription model. Key projects
included the development of hundreds of new mobile and phone
tablet products, as noted above, and deploying the e-commerce
subscription platform associated with USCP’s online and mobile
sites.
Throughout the year, USA TODAY continued its leadership role
in mobile media by developing a broad product portfolio to address
established and emerging platforms and devices. Both
USA TODAY’s iPhone and iPad applications continue to be strong
performers in the news category; the latest iPhone application
reaches 1.8 million monthly visitors and has over 2.7 million
downloads, while the iPad application reaches 1.7 million monthly
visitors and has over 4.1 million downloads. In addition to products
for Apple’s iOS, USA TODAY has also built products for Android
systems and Microsoft systems. Gannett Digital’s mobile product
development successes in 2012 were recognized across the industry:
the USA TODAY iPhone 2.0 was awarded “Best User Experience”
by Digital Hollywood; “Best Mobile Application” by Editor &
Publisher; and USA TODAY was named “Mobile Publisher of the
Year” by Mobile Marketer.
Looking ahead to 2013, Gannett Digital will be focused on
extending the platforms built in 2012, inclusive of the new
publishing tools, content databases, front-end design and ad
management to the Broadcast and USCP divisions. Specifically for
USCP, the relaunch of their digital platforms is aimed at enhancing
the subscriber value and driving digital-only subscriptions. Gannett
Digital will also continue to enhance the platforms, including new
feature enhancements for USA TODAY, and help develop sponsored
content opportunities, Gannett-wide databases and data-driven
interactive features.
Video remains a key growth opportunity for Gannett. The Video
Production Center will continue to enable more content sharing
across the Gannett network (of both internal and external content)
and share best practices across the company about video content
production and programming. Additionally, the VPC will be building
a small studio to enable live webcasting.
Finally, the company's mobile team will be focused on building
uniform code bases for iOS, Android and Windows, which can be
deployed across all Gannett properties, developing ongoing feature
enhancements to existing products and creating new products,
including new tablet applications for the USCP properties.
Business Segments: The company has three principal business
segments: Publishing, Broadcasting and Digital, which includes
CareerBuilder, PointRoll, ShopLocal and Reviewed.com. Operating
revenues and income from web sites, mobile and tablet products
associated with publishing operations and broadcast stations are
reported in the Publishing and Broadcast Segments, respectively.
Financial information for each of the company’s reportable
segments can be found under Item 7 “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” and
Item 8 “Financial Statements and Supplementary Data” of this Form
10-K.
Publishing/United States
Affiliated web sites of the company’s U.S. publications, including
USA TODAY, reach 33.5 million unique visitors monthly. The print
products reach 11.1 million readers every weekday and 12.7 million
readers every Sunday. Together they provide critical news and
information from their customers’ neighborhoods, across the nation
and the globe.
At the end of 2012, the company operated 82 U.S. daily
publications, including USA TODAY, and over 480 non-daily local
publications in 30 states and Guam. The USCP division and
USA TODAY are headquartered in McLean, VA. At the end of 2012,
U.S. Publishing had approximately 18,100 full- and part-time
employees, including 7,200 employees in the newly formed Gannett
Publishing Services.
The company’s local publishing operations are managed through
the USCP division. These publishing operations are positioned in
small and medium sized markets; this geographical diversity is a
core strength of the company. A listing of the markets can be found
on pages 18 to 23 of this report.
USA TODAY was introduced in 1982 as the country’s first
national, general-interest daily publication. It is produced at facilities
in McLean, VA, and transmitted digitally to offset printing plants
around the country. It is printed at Gannett plants in 13 U.S. markets
and commercially at offset plants, not owned by Gannett, in 23 other
U.S. markets. In 2012, the USA TODAY brand was re-launched as a
multi-platform news and marketing company.
During 2012, USATODAY.com hosted on average 19 million
unique visitors, with 75 million visits and 188 million page views
per month. Organic search increased more than 28% from 2011 to
2012. USA TODAY mobile traffic page views increased 137.2%
year over year, to over 5.2 billion page views in 2012.
All of the company’s local publishing operations and affiliated
web sites are fully integrated with shared support, sales and service
platforms.
Other businesses that complement, support or are managed and
reported within the Publishing Segment include: USA WEEKEND,
Clipper Magazine, Gannett Government Media, Gannett Healthcare
Group, Gannett Publishing Services, Big Lead Sports, USA TODAY
Sports Images, USA TODAY High School Sports, and BNQT.
The National Sales Team represents the company’s advertising
operations working with national advertisers in reaching and
engaging local consumers; 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 company’s
publishing and web operations. Gannett Publishing Services
manages the production and other publishing services for all of these
businesses and also oversees third-party commercial printing and
delivery activities for all U.S. publishing locations.
7
News, information and editorial matters: In 2012, USCP
journalists focused on producing high-value, unique content to
support the new all-access content subscription model. Their job was
to provide value to readers of all platforms. Among the initiatives
designed to deliver value:
• The “Content Evolution” program focused on creating platform-
perfect content that serves the needs of key audiences on each
platform by time of day, from social media to mobile web, to
desktop and the daily print edition. In one example, the
Springfield (MO) News-Leader recently began offering the
Evening Edition on its mobile web site, summarizing the top
stories of the day in digestible bites that make for easy browsing
by mobile readers. At The Arizona Republic in Phoenix, a tablet
edition – AZ Today – debuted in December as a weekly news
magazine. It focuses on telling the week’s most compelling
stories in depth, with use of photography, video and interactive
graphics to create a rich reading experience for evening tablet
readers.
Each of these initiatives is designed to promote unique, high-
value local content that will drive dramatic transformation.
The company’s domestic daily publishing operations received
Gannett’s wire service in 2012 and subscribe to The Associated
Press. Some publishing operations use supplemental news services
and syndicated features as well.
The company operates news bureaus in Washington, DC, and
four state capitals – Albany, NY; Baton Rouge, LA; Trenton, NJ; and
Tallahassee, FL.
In 2012, Gannett publishing operations and journalists received
national recognition for their excellent work:
Three newspapers were named finalists in the Pulitzer Prizes in
Journalism:
• The Arizona Republic, Phoenix, AZ, was recognized in the
Breaking News category for comprehensive coverage of the
mass shooting that involved former U.S. Rep. (D-AZ) Gabrielle
Giffords. The Arizona Republic was recognized for its
exemplary use of journalistic tools to tell an unfolding story.
• Strategic investments in news-gathering efforts have enhanced
• The Burlington (VT) Free Press was recognized in the Editorial
local expertise in key coverage areas and raised the overall level
of sophistication on digital platforms, particularly in social
media, driving value by showcasing the expertise and
personalities in its newsrooms.
• Shared Design Studios were created, staffed with top designers
from across the country to provide the sophisticated design that
print readers demand. The studios now handle all aspects of
design for most print publications.
• Nearly all USCP reporters, photographers, videographers and
columnists were equipped with smartphones and other devices in
early 2012, enabling the company’s content-gatherers to write,
photograph, shoot and edit video, while connecting with readers
over social media in real time. This investment has helped
reshape the modern definition of a journalist. It has buttressed
Gannett’s journalists’ competitive edge and allows them to tell
stories with greater color and speed than ever before. The
smartphones are part of a larger investment to equip journalists
with the tools they need to excel at their jobs. They also received
an additional 1,800 tablets and other items to reach audiences
across multiple platforms. In 2013, journalists will be trained to
become advanced video storytellers who deliver compelling
content to viewers.
• Smartphones will continue to be an important tool as the
company continues to make its publishing systems more efficient
and integrated. In 2012, smartphones allowed the company’s
journalists to publish and share video content across all divisions
of the company through the Brightcove app. In 2013, Gannett
will enable more content created on smartphones to move
directly into its publishing systems allowing for selective
syndication for audiences and advertisers around the nation.
• The company's publishing operations organized an aggressive
approach to leveraging the viral aspects of social media in 2012.
Journalists are using social media to share the work they are
doing, source new material and engage with readers in new
ways. Gannett began using a social management platform tool
that allows better tracking and analysis. This tool enables
insights into community conversation trends. By way of
example: In November 2012, journalists set up a national,
coordinated effort to share breaking news through a 24/7 Super
Storm Sandy Social Media Desk. Gannett staff from as many as
18 different markets took shifts to help cover the social media
response and publishing for news organizations affected by the
storm over a span of three weeks.
Writing category. Aki Soga and Michael Townsend were
recognized for a campaign that resulted in the state’s first reform
of open government laws in 35 years.
• USA TODAY was named in the Explanatory Reporting category.
Tom Frank’s series explained how state lawmakers pump up
their pensions. Frank examined thousands of pages of pension
laws from all 50 states to untangle the obscure language behind
pension perks.
USA TODAY won the Alfred I. duPont-Columbia Award for
investigative multimedia reporting for a report that uncovered
hundreds of forgotten lead factories and their health hazards. The
award is presented by the Columbia Journalism School.
The Detroit Free Press, MI, won a 2012 National Edward R.
Murrow Award for “Living with Murder,” a video documentary that
explored the toll of homicide in Detroit neighborhoods.
Videographer Romain Blanquart, Reporter Suzette Hackney and
Deputy Director Photo/Video Kathy Kieliszewski produced the
documentary. The awards are presented by the Radio Television
Digital News Association and honor excellence in electronic
journalism.
Five newspapers were among winners in their circulation
categories in the 2012 Associated Press Media Editors (APME)
Journalism Excellence Awards competition:
• USA TODAY received a Digital Storytelling and Reporting
award for its 14-month investigation, “Ghost Factories: Poison in
the Ground,” which revealed the locations of long-forgotten
factories and the amount of toxic lead left behind.
• The Burlington (VT) Free Press won a First Amendment award,
for its investigation of the handling of warrants by the Vermont
judiciary, which revealed negligence at every level of the legal
system; and a Digital Storytelling and Reporting award, for
breaking news coverage during the Occupy Burlington
encampment.
• Asbury Park (NJ) Press won a Public Service award for its report
on a cluster of suicides by teens and young adults in the
Manasquan, NJ area.
• Argus Leader in Sioux Falls, SD, won a Public Service award for
“Fighting DUI” about the cost of cracking down on DUIs.
• The News-Press in Fort Myers, FL, won a digital storytelling and
reporting award for its package, “Loving Ingrid,” about a woman
who suffered a traumatic brain injury.
8
•
In addition, The Arizona Republic, AZ, was one of three finalists
selected for APME’s Innovator of the Year Award. It was cited
for the convergence of print, broadcast and online in its web site,
AZCentral.
Journalists at five Gannett newspapers were cited in the Society
of Professional Journalists Sigma Delta Chi Awards for excellence in
journalism.
• Keith Runyon, The Courier-Journal at Louisville, KY, won for
“Hospital Merger: A Series of Editorials” in Editorial Writing.
• Candace Page, Burlington (VT) Free Press, won for “Hard
lessons of the tweed” in Feature Reporting.
• Douglas Walker and Keith Roysdon, The Star Press at Muncie,
IN, won for “For a Child’s Sake: The epidemic of child abuse” in
Public Service journalism.
• Andrew West, The News-Press Media Group at Fort Myers, FL,
won for “Hope for Haiti” in Feature Photography.
• The Burlington (VT) Free Press won for “Occupy Burlington”
shooting in Online, Deadline Reporting.
Three Detroit Free Press business reporters, Greg Gardner, Brent
Snavely and Chrissie Thompson, won a Gerald Loeb Award for
business journalism in the breaking news category for their stories
about contract negotiations last year between GM and the UAW.
The Army Times’ Sean Naylor won top honors for his
investigative series, “The Secret War in Africa,” from the Military
Reporters and Editors Association.
Writers at four Gannett newspapers won awards in the Society of
American Business Editors and Writers (SABEW) 17th Best in
Business competition. The awards honor excellence in business and
financial journalism across all news platforms:
• Ronald J. Hansen, The Arizona Republic, Phoenix, AZ, won for
“Business Taxes” in the Explanatory category.
• Patrick Peterson, FLORIDA TODAY, Brevard, FL, won for
“Bright Idea Man” and “Scrap Daddy” in the Feature category.
Results from 2012 studies conducted by Scarborough Research
indicate that Gannett local media organizations reach more than
seven in 10 adults each week – more than eight in 10 each month.
Under the all-access content subscription model rolled out to 78 sites
during 2012, more than half of readers access Gannett content on
two or more platforms.
The company has gathered audience aggregation data for 52
Gannett markets and will continue to add more data in 2013.
Aggregated audience data allows advertising sales staff to provide
detailed information to advertisers about how best to reach their
potential customers and the most effective product combination and
frequency. This approach enables the company to increase its total
advertising revenue potential while maximizing advertiser
effectiveness.
Scarborough Research measures 77 of the nation’s top markets.
In a report on market penetration, the number of adults in a
community who access a publication and its related web site, it
noted that more than 3 out of 4 adults in the Rochester, NY, market
in a given week either read the print version of the Rochester
Democrat and Chronicle or visited its web site
(democratandchronicle.com), making it the top-ranked publishing/
web operations in the country for integrated audience penetration.
Gannett publications also hold the second (Gannett East Wisconsin)
and third (The Des Moines Register) positions in the Scarborough
Research rankings. These markets are industry leaders because they
understand and aggressively pursue different audiences for different
platforms - true audience aggregation.
In addition to the audience-based initiative, the company
continues to measure customer attitudes, behaviors and opinions to
better understand customers’ digital use patterns and use focus
groups with audiences and advertisers to better determine their
needs. In 2009, the USCP research group launched an ongoing
longitudinal study to measure audience and sentiment of consumers
in key markets. To date, the group has conducted more than 31,000
interviews for the study.
The group also supported the content evolution initiative in 2012
by conducting consumer research in 74 markets to determine the
topics readers are most interested in seeing covered in their Gannett
local daily newspaper.
• Dick Hogan, The News-Press in Fort Myers, FL, won for
Advertising: USCP has advertising departments that sell retail,
“Flopping: Fraud Runs Rampant” in the Investigative category.
• Thomas Frank, USA TODAY, won for “Public-Sector Pensions”
in the Investigative category.
FLORIDA TODAY in Brevard, FL, won first place for a features
web site in The Society for Features Journalism competition for
reader engagement.
The Arizona Republic, Phoenix, AZ, was honored by the
National Press Club for its breaking news coverage of the Tucson
shooting that involved former U.S. Rep. (D-AZ) Gabrielle Giffords.
The Tennessean at Nashville was a finalist in the 2012 Online
Journalism awards from the Online News Association for
outstanding breaking news coverage of Occupy Nashville.
In Lafayette, IN, Journal and Courier sportswriter Mike Carmin
was named recipient of the 2012 Mel Greenberg Media Award from
the Women’s Basketball Coaches Association.
Audience research: As Gannett’s publishing businesses continue
their mission to meet consumers’ news and information needs
anytime, anywhere and in any form, the company remains focused
on an audience aggregation strategy. The company considers the
reach and coverage of multiple products in its communities and
measures the frequency with which consumers interact with each
Gannett product.
classified and national advertising across multiple platforms
including print, online, mobile, tablet and niche publications. The
company has a national ad sales force focused on the largest national
advertisers and a separate sales organization to support classified
employment sales – the Digital Employment Sales Center.
Additionally, GannettLocal provides marketing specialists to small
and medium sized businesses, and Gannett Client Solutions groups
provide customized marketing solutions. The company also has
relationships with outside representative firms that specialize in the
sale of national ads.
Retail display advertising is associated with local merchants or
locally owned businesses. In addition, retail includes regional and
national chains – such as department and grocery stores – that sell in
the local market.
Classified advertising includes the major categories of
automotive, employment, legal, real estate/rentals and private party
consumer-to-consumer business for merchandise and services.
Advertising for classified segments is published in the classified
sections, in other sections within the publication, on affiliated digital
platforms and in niche magazines that specialize in the segment.
National advertising is display advertising principally from
advertisers who are promoting national products or brands.
Examples are pharmaceuticals, travel, airlines, or packaged goods.
Both retail and national ads also include preprints, typically stand-
alone multiple page fliers that are inserted in the daily print product.
9
The division’s audience aggregation strategy gives it the ability
to deliver specific audiences that advertisers want. Although some
advertisers require mass reach, many want to target niche audiences
by demographics, geography, consumer buying habits or customer
behavior. With Gannett’s continued partnership with Yahoo! and
enhancement of its digital portfolio with in-house digital marketing
services, the company’s local media organizations are able to
enhance audience delivery for customers by offering behavioral
targeting. Whether it is mass reach or a target audience, the
company’s publishing sites identify an advertiser’s key customers
and develop advertising schedules that combine products within a
site’s portfolio to best reach the desired audience with the
appropriate frequency.
USCP continues to use online reader panels in 19 markets to
measure advertising recall and effectiveness, article response, and
identify consumer sentiment and trends. The reader panels include
nearly 30,000 opt-in respondents who provide valuable feedback on
over 7,800 advertisements and 4,800 news articles. This capability
allows markets to provide deeper insights for advertisers and return-
on-investment metrics that are in high-demand from customers.
The company’s consultative multi-media sales approach has been
tailored to all levels of advertisers, from small, locally owned
merchants to large, complex businesses. Along with this sales
approach, the company has intensified its sales and management
training and improved the quality of sales calls. Digital product
integration, sales skills and a Gannett five-step consultative sales
process were focus areas in 2012 with formal training delivered in
all Gannett markets. Front line sales managers in the company’s
largest 20 markets participated in intensive training to help them
coach their sales executives for top performance.
A major company priority is to realign the USCP sales
organizations to match customers’ needs while creating additional
efficiencies to lower the cost of sale. USCP local media
organizations designed their sales teams around three general groups
of customers: strategic regional, key local and small local
controllable accounts. The structure aligns sales and support
resources to customers’ needs and provides efficient service and
affordable packages to smaller accounts and customized, innovative
solutions to larger, market-driven clients. The structure includes
digital specialists who expand online share in the local market for
retail and classified verticals, including Cars.com, Homefinder.com,
Apartments.com and CareerBuilder.com. There are also product
specialists in larger markets who focus on growing niche advertisers
in non-daily publications.
To better serve local customers and win market share, the
company created five Gannett Client Solutions Groups. Functioning
much like local ad agencies, the groups develop highly designed
creative campaigns to give customers a competitive edge in the
marketplace. The campaigns are comprehensive and often extend
beyond the local media organization’s product portfolio, providing a
high level of service.
The national ad sales team is responsible for large national retail
accounts. These resources give national customers a single point of
contact for all Gannett markets, enable Gannett to have more
strategic conversations, allow teams to respond better to customers’
needs, and focus local sales personnel on advertisers in their local
markets they know best.
This national team works with the national sales resources of
Digital, Broadcast and USA TODAY to create multi-market, multi-
platform solutions for national advertisers scalable across the
country.
Ad revenues from affiliated online operations are reported
together with revenue from print publishing.
Online operations: The company’s local publishing digital
platforms showed continued strength in growing audience in 2012,
with visitors increasing by 6% year over year as measured internally.
More users accessing the full web site on mobile devices and
improved search engine optimization for article searches drove the
increase.
USCP completed the development and deployment of access
management software across 78 local market web sites, allowing
subscribers access to all content, while limiting the access of non-
subscribers to a small number of articles per month, designed to help
them try the services.
In support of the all-access content subscription model, the
company invested in a significant expansion of mobile offerings
across local markets, including native applications for iPhone and
Android smartphones and iPads and tablet-optimized web sites. The
mobile audience continued to grow in 2012, ultimately making up
11% of total page views, with mobile web sites and the native
iPhone applications leading the way. Through the all-access content
subscription model, the company made a clear commitment to
provide consumers with the content they most want on the devices
they use to access news and information about their local
communities. Mobile page views nearly doubled, and mobile visitors
increased 45% in 2012 on a year over year basis.
Another key initiative in 2012 was the implementation of a
social media content management software tool to ensure the
division’s journalists and marketing and customer service teams
could more effectively manage multiple social media profiles and
significantly increase their responsiveness and engagement with
consumers.
Gannett continues to enjoy a long standing relationship of trust
in the local business community. Its advertising sales staff delivers
solutions for its customers and helps small and medium size
businesses navigate the increasingly complex and diverse world of
digital marketing. In 2012, the company further expanded its GDMS
suite of products and continued its partnership with Yahoo! to offer
more digital solutions to advertisers. Through this, Gannett is able
to offer its customers expanded digital reach.
The overriding objective of USCP’s online strategy is to provide
compelling content that best serves its customers. A key reason
customers turn to a Gannett digital platform is to find local news and
information. The credibility of the local media organization, a
known and trusted information source, includes its digital platforms
(tablet and mobile applications and its web site) and differentiates
these online sources from competing online products. This allows
Gannett’s local media organizations to compete successfully as
information providers.
A second objective in the company’s online business
development is to maximize the natural synergies between the local
media organizations and local digital platforms. The local content,
customer relationships, news and advertising sales staff, and
promotional capabilities are all competitive advantages for Gannett.
The company’s strategy is to use these advantages to create strong
and timely content, sell packaged advertising products that meet the
needs of advertisers, operate efficiently and leverage the known and
trusted brand of the local media organization.
Gannett Media Technologies International (GMTI) provides
technological support and products for the company’s domestic local
media organizations 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 media companies.
10
Non-daily operations: The publication of non-daily products
continued to be an important part of Gannett’s market strategy for
2012. The company produces non-daily publications in the U.S.
including glossy lifestyle magazines, community publications and
publications focused on one topic, such as health or cars. The
company’s strategy for non-daily publications is to appeal to key
advertising segments (e.g. affluent women, women with children or
young readers). Non-daily products help print operations increase
overall impressions and frequency for advertisers looking to reach
specific audience segments or in some cases, like community
weeklies, provide a lower price point alternative for smaller
advertisers with specific geographic targets, thus helping to increase
the local media organization’s local market share.
Circulation: Detailed information about the circulation of the
company’s newspapers may be found later in this Form 10-K. In a
trend generally consistent with the domestic publishing industry,
circulation volume declined. However, year over year circulation
revenues increased 5.0% and digital access increased across all
publications. USCP has approximately 46,000 digital-only
subscribers.
The company's all-access subscription prices are market specific.
For example, all-access pricing that includes Monday through
Sunday print home delivery ranges from $28 per month per printed
bill ($25 EZ Pay) to $14.35 per printed bill ($13 EZ Pay). All-access
that includes home delivery of only the Sunday print edition ranges
from a high of $17 per printed bill ($15 EZ Pay) to a low of $6 per
printed bill ($5 EZ Pay). For USCP publications, all-access
subscriptions make up 78% daily (home delivery) and 73% Sunday
of total net paid circulation. EZ Pay grew from approximately 50%
at the end of 2011 to approximately 60% one year later across
Gannett sites, excluding USA TODAY.
More than 70% of the 82 Gannett publications (or 60
publications) had a single copy price increase in 2012. For USCP,
single copy represents 13% of daily and 25% of Sunday net paid
circulation volume.
The single copy price of USA TODAY at newsstands and
vending machines was $1.00 in 2012. Mail subscriptions are
available nationwide and abroad, and home, hotel and office delivery
is available in many markets. Approximately 76% of its net paid
circulation results are from single-copy sales at newsstands, vending
machines or provided to hotel guests. The remainder is from home
and office delivery, mail, educational and other sales.
At the end of 2012, 71 of the company’s domestic daily
publications, including USA TODAY, were published in the
morning, and 11 were published in the evening.
Production: Product quality and efficiency improvements
continue in several areas, as continually improving technology
allows for greater speed and accuracy and led to continued
consolidation of job functions for all divisions of Gannett now
managed by Gannett Publishing Services. That efficiency trend is
expected to continue through 2013.
The three Gannett Imaging and Ad Design Centers (GIADC)
serve 79 publishing properties, including all USCP dailies except
Detroit and Guam. In addition to the USCP sites, USA TODAY and
Gannett Broadcast properties are now included. The GIADC also
supports projects for Deal Chicken, Gannett Digital and the Client
Solutions Group. Fourteen external customers also utilize the
GIADC for imaging and/or ad production.
In 2012, the GIADC built 1.2 million ads. Additionally, the
GIADC processed over 3.7 million images in 2012 and also created
170 Creative Campaigns as part of a program which allows sales
representatives to work directly with a team of highly creative artists
to target particular customers and develop a comprehensive
multimedia program.
Digital needs continue to evolve rapidly for the company’s
customers. The GIADC is training in custom rich media utilizing
technology offered by two other Gannett companies, PointRoll and
Rovion. The GIADC began assuming commercial work in 2012 for
external customers and plans to continue this work in 2013.
At the end of 2012, all 82 domestic daily newspapers (including
USA TODAY) were printed by the offset process and the majority at
44-inch web and on 45 gram paper. Also at year end, more than 73
percent of its domestic community daily publications were either
printed in Gannett-owned facilities that print multiple daily
publications or by non-Gannett printers.
Design Studios now handle the layout, design and selection of
nation/world content of Gannett’s daily newspapers, and the design
of Gannett’s non-daily print publications. The Design Studios are
located in Asbury Park, NJ; Nashville, TN; Louisville, KY; Des
Moines, IA; and Phoenix, AZ.
By the end of 2012, almost all USCP and USA TODAY
employees were utilizing a common content management system.
The common content management system enables communication
and collaboration needed to build strong design remotely. The
studios are operationally efficient while enhancing design in
publications across the company.
Gannett Publishing Services: Improving the efficiency and
reducing the cost associated with the production and distribution of
the company’s printed products across all divisions remains an
important strategic initiative for Gannett. In 2011, GPS was formed
to directly manage all of the production and circulation operations of
Gannett’s 81 domestic community newspapers, USA TODAY and
Gannett Offset.
GPS leverages Gannett’s existing assets, including employee
talent and experience, physical plants and equipment, and its vast
national and local distribution networks. The objectives of the new
unit are to optimize commercial services, leverage expertise,
standardize best practices to optimize efficiency and eliminate
duplication. This in turn allows local unit management to focus on
growing audience, content and revenue development working with
GPS management to focus on consumer sales and the transition of
the company’s print subscribers to multi-media subscribers on the
all-access content subscription model.
GPS is responsible for imaging, ad production, internal and
external printing and packaging, internal and external distribution,
consumer sales, customer service and direct marketing services.
GPS is generating revenue gains from the sale of pre-media services,
commercial printing, and third party product delivery. It also is
generating cost savings from outsourcing selected production and
distribution activities, through standardizing best practices across
Gannett’s printing and distribution networks and through the
elimination of operational redundancies.
Competition: The company’s publishing operations and affiliated
digital platforms compete with other media for advertising.
Publishing operations also compete for circulation and readership
against other professional news and information operations and
amateur content creators. Very few of the company’s publishing
operations have daily competitors that are published in the same city.
Most of the company’s print products compete with other print
products published in suburban areas, nearby cities and towns, free-
distribution and paid-advertising publications (such as weeklies),
and other media, including magazines, television, direct mail, cable
television, radio, outdoor advertising, telephone directories, e-mail
marketing, web sites and mobile-device platforms.
Digital platforms, which compete for the principal traditional
classified advertising revenue streams such as real estate,
employment and automotive, have had the most significant impact
on the company’s revenue results.
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The rate of development of opportunities in, and competition
from, digital media, including web site, tablet and mobile products,
is increasing. Through internal development, content distribution
programs, acquisitions and partnerships, the company’s efforts to
explore new opportunities in the news, information and
communications business and in audience generation will keep
expanding. The company continues to seek more effective ways to
engage with its local communities using all available media
platforms and tools.
Environmental regulation: Gannett is committed to protecting
the environment. The company’s goal is to ensure its facilities
comply with federal, state, local and foreign environmental laws and
to incorporate appropriate environmental practices and standards in
its operations. The company is one of the industry leaders in the use
of recycled newsprint, increasing its purchases of newsprint
containing recycled content from 42,000 metric tons in 1989 to
198,000 metric tons in 2012. During 2012, 43% of the company’s
domestic newsprint purchases contained recycled content, with an
average recycled content of 42%.
The company’s publishing operations use inks, photographic
chemicals, solvents and fuels. The use, management and disposal of
these substances are sometimes regulated by environmental
agencies. The company retains a corporate environmental consultant
who, along with internal and outside counsel, oversees regulatory
compliance and preventive measures. Some of the company’s
subsidiaries have been included among the potentially responsible
parties in connection with sites that have been identified as possibly
requiring environmental remediation. Additional information about
these matters can be found in Part I, Item 3, Legal Proceedings, in
this Form 10-K.
Raw materials - U.S. & U.K.: Newsprint, which is the basic raw
material used in print publication, has been and may continue to be
subject to significant price changes from time to time. During 2012,
the company’s total newsprint consumption was 452,745 metric
tons, including consumption by USA WEEKEND, USA TODAY,
tonnage at non-Gannett print sites and Newsquest. Newsprint
consumption was 7% less than in 2011. The company purchases
newsprint from 22 domestic and global suppliers.
In 2012, global 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 publishing operations.
Newspaper partnerships: The company owns a 19.49% interest
in California Newspapers Partnership, which includes 19 daily
California newspapers; a 40.64% interest in Texas-New Mexico
Newspapers Partnership, which includes six daily newspapers in
Texas and New Mexico and four newspapers in Pennsylvania; and a
13.50% interest in Ponderay Newsprint Company in the state of
Washington.
Joint operating agencies: The company’s publishing subsidiary
in Detroit participates in a joint operating agency (JOA). The JOA
performs the production, sales and distribution functions for the
subsidiary and another publishing company under a joint operating
agreement. Operating results for the Detroit JOA are fully
consolidated along with a charge for the minority partner’s share of
profits. Through May 2009, the company also published the Tucson
Citizen through the Tucson JOA in which the company held a 50%
interest. Because of challenges facing the publishing industry,
combined with the difficult economy, particularly in the Tucson area,
the company ceased publication of the Tucson Citizen on May 16,
2009. The company retained its online site and 50% partnership
interest in the JOA, which provides service to the remaining non-
Gannett publication in Tucson. The company’s share of results for
the Tucson operations are accounted for under the equity method,
and are reported as a net amount in "Equity income in
unconsolidated investees, net.”
Publishing/United Kingdom
Newsquest produces 17 daily paid-for publications and more than
200 weekly publications, magazines and trade publications in the
U.K., as well as associated web sites and 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 enables the group to offer
readers and advertisers a range of attractive products across the
market. The clustering of titles and, usually, the publication of a free
print product alongside a paid-for print product, allows cross-selling
of advertising serving the same or contiguous markets, satisfying the
needs of its advertisers and audiences. Newsquest produces free and
paid-for print products with quality local editorial content.
Newsquest also distributes a substantial volume of advertising
leaflets in the communities it serves. Most of Newsquest’s paid-for
distribution is outsourced to wholesalers, although direct delivery is
employed as well to maximize circulation sales opportunities.
Newsquest’s publishing operations are in competitive markets.
Their principal competitors include other regional and national
newspaper and magazine publishers, other advertising media such as
broadcast and billboard, Internet-based news and other information
and communication businesses.
Newsquest revenues for 2012 were approximately $484 million,
down 5% in local currency reflecting the continuing difficult
economy. While print advertising revenue categories declined,
digital ad revenues grew by 10% in local currency. As in the U.S.,
advertising, including ad revenue from online web sites affiliated
with the publications, is the largest component of Newsquest’s
revenue, comprising approximately 69%. Circulation represented
23% of revenue. Printing for third-party newspaper publishers
accounts for most of the remainder of revenue.
Recognition for Newsquest’s editorial achievements included a
variety of Scottish Press Awards won by The Herald, Sunday Herald
and Evening Times, which included awards in the following
categories: front page, campaign, scoop, reporter, financial
journalist, journalist, cartoonist, columnist and young journalist of
the year prizes; as well as seven European Newspaper of the Year
awards for excellence. In addition, a campaign which seeks to
encourage correct grammar and concise writing named the
Worcester News as England’s top regional daily.
In 2012, the “Queen’s Diamond Jubilee” was celebrated across
the U.K. A message of thanks on behalf of Queen Elizabeth II was
sent to the Telegraph & Argus after copies of six “Diamond Decades
Jubilee” commemorative supplements and the shortlist supplement
for the publication’s “Queen’s Jubilee Portrait Competition” were
forwarded to her with a letter from the editor. More than 3,500
children from 107 schools entered the “Queen’s Jubilee Portrait
Competition” competition.
Newsquest newspapers continued to campaign on local issues.
For example, The Westmorland Gazette’s “Shorter Journeys Longer
Lives” campaign culminated in a 2,000-plus people march through
the streets of Kendal, U.K. It prompted Britain’s Prime Minister to
set up a summit meeting to promote “swift and positive” action to
bring a radiotherapy unit to Kendal’s Westmorland General Hospital.
The proposed unit would dramatically trim a 140-mile round trip to
the Royal Preston Hospital for 400 local South Cumbrian cancer
patients.
In Winchester, the Hampshire Chronicle celebrated 240 years of
continuous publishing with a special supplement focusing not only
on the history of the paper, but how it is moving forward into the
digital age.
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Following the successful launch of regional farming products in
2010 and 2011, Three Counties Farmer was launched in 2012. The
Newsquest Specialist Media unit successfully launched Reward in
June. Reward is a new information product for the workplace
benefits sector.
Trials have taken place in three markets for significant changes
in cover prices and editorial content, involving two daily products
and one weekly product. Initial results are in line with expectations,
and Newsquest intends to roll out further changes in selected
markets following market research on how to develop its products in
those markets.
There were 4,300 Newsquest employees at year end, a decrease
of 3% compared to 2011. Efficiency initiatives included the
consolidation of a number of back-office functions. Total costs in
local currency were 5% lower year-over-year as a result of the range
of efficiency measures taken.
Digital operations: Newsquest continues to actively seek to
maximize the value of its local media brands through digital
channels. Newsquest’s most recent data indicated that an average of
9.1 million unique users accessed the Newsquest site network each
month during the period July-December 2012.
Newsquest’s total digital ad revenue increased by 10% in local
currency. Online banner revenues grew by 26%, propelled by
improved audiences, increased local resourcing and sales activity. In
Scotland, the group’s wholly owned market leading recruitment web
site, s1, increased revenues by 9% from 2011.
Digital Segment
The Digital business segment includes CareerBuilder, as well as
PointRoll, ShopLocal and Reviewed.com. At the end of 2012, the
Digital Segment had approximately 2,600 full-time and part-time
employees.
CareerBuilder is the global leader in human capital solutions,
helping companies target, attract and retain talent. Its online job site,
CareerBuilder.com, is the largest in North America with the most
traffic and revenue.
Headquartered in Chicago, IL, CareerBuilder at the end of 2012
had approximately 2,200 full-time and part-time employees.
Currently, CareerBuilder operates in the U.S., Europe, Canada,
Asia and South America. Its sites, combined with partnerships and
acquisitions, give CareerBuilder a presence in more than 60 markets
worldwide. CareerBuilder offers everything from employment
branding, and talent and compensation intelligence to recruitment
solutions. Most of the revenues are generated by its own sales force
but substantial revenues are also earned through sales of
employment advertising placed with CareerBuilder’s owners’
affiliated media organizations. It also has a long-term strategic
marketing agreement with Microsoft.
In 2012, CareerBuilder acquired EMSI, which collects and
interprets large amounts of employment data which is used in
workforce development and talent strategy. CareerBuilder plans to
leverage the EMSI acquisition to enhance their workforce analytics
platform creating an unmatched repository of historical and real-time
labor information. CareerBuilder also continued to grow its global
businesses with the acquisitions of Top Language Jobs in the U.K.,
the leading global online jobsite for multi-language jobs and
candidates, and Ceviu, the leading information technology job board
in Brazil.
PointRoll is a multi-screen digital advertising technology and
services company. PointRoll enables advertisers, agencies, and
publishers to create, target, deploy, and optimize digital campaigns
in real time across any digital channel including display, rich media,
in-stream video, mobile, tablet and more. PointRoll provides the
creative tools, analytics and expertise marketers need to effectively
13
engage consumers and convert them into buyers and brand
supporters. Founded in May 2000, PointRoll has been instrumental
in the evolution of digital engagement and has evolved beyond the
expandable banner ad to offer marketers the ability to find
consumers wherever they are across any digital platform and deliver
a relevant brand or direct response experience, dramatically
improving ad effectiveness while gaining actionable insights.
PointRoll is headquartered in King of Prussia, PA, and maintains
offices across the U.S. In October 2012, Gannett acquired Rovion.
Rovion’s primary product, Ad Composer, includes a self-service
technology platform that enables the full development and
deployment of rich media and mobile HTML5 ads by clients who do
not have coding expertise. Rovion is being integrated into
PointRoll’s operations and technology platform and will be
leveraged across the entire Gannett network to fulfill the needs of
agencies and advertisers.
ShopLocal, the leader in multi-channel marketing services, offers
a complete suite of innovative digital solutions which connect
advertisers and consumers, both online and in-store. ShopLocal’s
industry-leading SmartProduct business solutions (SmartCircular,
SmartCatalog and SmartDelivery) enable more than 100 of the
nation’s top retailers, including Target, Macy’s, Home Depot, CVS,
Staples, Toys“R”Us, Walgreens, Kohl’s and Sears, to deliver highly
interactive, targeted and localized promotions to shoppers through
use of online circulars, display advertising, search, social media,
digital out of home and mobile. ShopLocal is headquartered in
Chicago, IL.
Competition: For CareerBuilder, the largest online employment
site in North America, the market for online recruitment solutions is
highly competitive with a multitude of online and offline
competitors. Competitors include other employment related web
sites, general classified advertising web sites, professional
networking and social networking web sites, traditional media
companies, Internet portals, search engines and blogs. The barriers
for entry into the online recruitment market are relatively low and
new competitors continue to emerge. Recent trends include the
rising popularity of professional and social media networking web
sites which have gained traction with employer advertisers. The
number of niche job boards targeting specific industry verticals has
also continued to increase. CareerBuilder’s ability to maintain its
existing customer base and generate new customers depends to a
significant degree on the quality of its services, pricing, product
innovation and reputation among customers and potential customers.
For PointRoll, the market for rich media advertising technology
solutions is highly competitive with a number of competitors.
Competitors include divisions of larger public media and technology
companies, and several earlier-stage independent rich media,
dynamic ad, video, mobile, and social advertising technology
specialists. The barriers to entry in the rich media market are
moderate. Recent trends include the shift towards audience-centric,
exchange-based media buying, entry of dynamic ad generation
specialists, the move towards automated creative design tools, and
the shift toward video content online with associated in-stream
advertising opportunities. Increasingly, marketers and their agencies
are looking for advertising technology providers that can scale
across media platforms, including rich media, video and mobile.
PointRoll’s ability to maintain and grow its customer base and
revenue depends largely on its continued product innovation, level
of service quality, depth of marketing analytics and ultimately the
effectiveness of its rich media advertising and resulting customer
satisfaction.
For ShopLocal, the market for digital store promotions is
highly competitive and evolving as digital media transforms
marketing programs. ShopLocal competitors in the online circular
space are few, but very active. Recent trends include a surge in
mobile usage driven by smartphone adoption (53% of cell phone
users according to comScore) as well as “showrooming” in which
the consumer researches prices at other competitive stores while
shopping via mobile phone. Media fragmentation continues to
challenge retailers and ShopLocal is well positioned to deliver
solutions to meet this challenge. ShopLocal’s distribution
capabilities allows retailers and brands to distribute any type of deal
content to social, advertisements, third-party web sites and any other
digitally connected devices.
Regulation and legislation (for digital segment businesses and
digital operations associated with publishing and broadcasting
businesses): The U.S. Congress has passed legislation which
regulates certain aspects of the Internet, including content, copyright
infringement, taxation, access charges, liability for third-party
activities and jurisdiction. In addition, federal, state, local and
foreign governmental organizations have enacted and also are
considering other legislative and regulatory proposals that would
regulate the Internet. Areas of potential regulation include, but are
not limited to, user privacy and intellectual property ownership. With
respect to user privacy, the legislative and regulatory proposals
would regulate behavioral advertising, which specifically refers to
the use of user behavioral data for the creation and delivery of more
relevant, targeted Internet advertisements. Some Gannett properties
leverage certain aspects of user behavioral data in their solutions.
Broadcasting Segment
Gannett Broadcasting had its best year in history in 2012 with record
revenues and record operating income along with significant share
growth. Operating revenues finished 25% above last year for the full
year. The company benefited from both record Olympic and political
revenues this year.
The 2012 Summer Olympic Games were the most viewed
television event in U.S. history. More than 219 million Americans
tuned into the games, and Gannett local stations helped drive those
numbers. KUSA in Denver was the top rated NBC affiliate in adults
ages 25 to 54. Gannett stations in Atlanta and Minneapolis were
second and third respectively. With Gannett TV stations in St. Louis,
Cleveland and Phoenix, six out of the top ten NBC affiliates were
Gannett stations. Gannett brought a lot of new major local
advertisers into the 2012 Olympics and is already working with them
on renewals for the 2014 Sochi Winter Games. Gannett Broadcasting
finished the Olympics with $37 million in billing, up 58% from the
Beijing Olympics in 2008.
Gannett TV stations have a solid footprint for strong political
activity and ended the year with $150 million of political revenue, a
company record by a significant margin, leveraged through strong
stations and strong local news positions (approximately $4 million of
political advertising aired during the Olympics and is included in
both the political and Olympic categories).
Digital revenues in the Broadcasting Segment finished up 11%,
and retransmission revenues for the year finished 21% above last
year.
At the end of 2012, the company’s broadcasting division,
headquartered in McLean, VA, included 23 television stations in
markets with nearly 21 million households covering 18.1% of the
U.S. population. The broadcasting division also includes the
Captivate Network.
At the end of 2012, the broadcasting division had approximately
2,600 full-time and part-time employees, approximately 1.1% more
than at the end of 2011.
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The principal sources of the company’s television revenues are:
1) local advertising focusing on the immediate geographic area of
the stations; 2) national advertising; 3) retransmission of the
company’s television signals on satellite and cable networks; 4)
advertising on the station’s web and tablet and mobile products; and
5) payments by advertisers to television stations for other services,
such as the production of advertising material. The advertising
revenues derived from a station’s local news programs make up a
significant part of its total revenues. Captivate derives its revenue
principally from national advertising on video screens in elevators of
office buildings and select hotel lobbies. As of year-end, Captivate
had over 10,000 video screens located in 25 major cities across
North America.
Advertising rates charged by a television station are based on the
ability of a station to deliver a specific audience to an advertiser. The
larger a station’s ratings in any particular day part, the more leverage
a station has in asking for a price advantage. As the market fluctuates
with supply and demand, so does the station’s pricing. Almost all
national advertising is placed through independent advertising
representatives. Local advertising time is sold by each station’s own
sales force.
Generally, a network provides programs to its affiliated
television stations and sells on its own behalf commercial
advertising for certain of the available ad spots within the network
programs. The company’s television stations produce local
programming such as news, sports, and entertainment.
For all of its stations, the company is party to network affiliation
agreements as well as cable and satellite carriage agreements. The
company’s 12 NBC-affiliated stations have agreements that expire
on Jan. 1, 2017. The agreements for the company’s six CBS affiliates
expire on Dec. 31, 2015. The company’s three ABC affiliates have
agreements which expire on Feb. 28, 2014. The company’s two
MyNetworkTV-affiliated stations have agreements that expire in
October 2014.
In 2012, the company completed retransmission negotiations
with several providers including cable and satellite operators. All are
multi-year agreements that provide the company with significant and
steady revenue streams. There are no incremental costs associated
with this revenue and therefore all of these revenues contribute
directly to operating income. Retransmission revenues are expected
to grow significantly in 2013.
As part of the company’s growing engagement and innovation
with social media, Gannett joined 9 leading television broadcast
groups and invested in a long-term commercial partnership with a
Silicon Valley-based start-up called ConnecTV. ConnecTV,
launched in 2012, is a social television network for TV fans. On Feb.
5, 2012, Gannett entered into a public “Beta” testing period with
ConnecTV for the kickoff of Super bowl XLVI. Consumers used the
ConnecTV service on their iPads and computers to experience
“synced” companion news, polls, player bios and to participate in
online chats with other social TV users.
In June 2012, with a significantly improved technology platform
and user interface as well as the addition of a core content-
development team, ConnecTV “soft launched” its new product with
digital promotions and TV spots across the Garnet Media Co., LLC
stations, including Belo Corp., Cox Media Group, E.W. Scripps Co.,
Gannett Broadcasting, Hearst Television Inc., Media General Inc.,
Meredith Corp., Post-Newsweek Stations Inc., Raycom Media and
Schurz. In August 2012, the social TV service was used by 100,000
consumers as its Olympics coverage for the “second” screen rolled
out with special companion Games content.
The ConnectTV engineering team also developed a first-ever Ad
Sync Network that synchronizes the television advertising
experience with companion marketing on the second screen –
enabling users to take action on a TV ad that includes the ability to
Buy Now, Find the Closest Store, Play Product Videos, Enter a
Contest and other “activations” that extend the TV branding
experience.
In the fourth quarter of 2012, ConnecTV signed a Charter
Programming revenue deal with CBS Television Distribution
focused on “Entertainment Tonight” tuned-alerts and co-marketing.
This effort also features Entertainment Tonight-ConnecTV co-
branded television spots and digital promotion, as well as
“Entertainment Tonight” talent appearing in ConnecTV’s
WATERCOOLER chat venue.
ConnecTV was honored this past year as “The Best Ubiquitous
Social TV Network” by the Social TV Summit as its numbers and
industry awareness continued to grow.
Programming and production: The costs of locally produced
and purchased syndicated programming are a significant portion of
television operating expenses. Syndicated programming costs are
determined based upon largely uncontrollable market factors,
including demand from the independent and affiliated stations within
the market. In recent years, the company’s television stations have
emphasized their locally produced news and entertainment
programming in an effort to provide programs that distinguish the
stations from the competition, to increase locally responsible
programming, and to better control costs.
Gannett TV stations led the way in covering major news events
during 2012. Gannett’s 12 NBC stations were front and center for
the 2012 London Olympics and were home to Super Bowl XLVI.
While the company’s broadcast markets had no local team in the
Super Bowl game, Gannett stations took advantage of the enormous
audience and four stations were among the top 10 rated stations
(adults ages 25 to 54) for the 2012 Super Bowl: KARE in
Minneapolis-St. Paul, MN (No. 3), KUSA in Denver, CO (No. 6),
WXIA in Atlanta, GA (No. 8) and WKYC in Cleveland, OH (No. 9).
Maximizing its use of cross-divisional content and resource
sharing for the 2012 London Olympics, Gannett Broadcasting sent
teams from eight stations to London where they combined forces
with USA TODAY to provide the most comprehensive coverage of
any local media group. Hundreds of stories produced stateside,
combined with hundreds of live shots outside Olympic Stadium,
helped Gannett TV stations dominate coverage. Highlights included
KUSA in Denver’s coverage of hometown four-time gold medalist
Missy Franklin and WXIA in Atlanta co-anchoring its morning show
from London during the Games. Gannett Broadcasting also teamed
with USA TODAY and USCP to provide extensive coverage of
Hurricanes Isaac and Sandy. Locally, KUSA led coverage of a tragic
movie theater shooting in Aurora, CO, and followed with
informative coverage of the worst wild fire season in a decade.
KPNX and Republic Media were honored for their coverage of a
massive dust storm that blanketed Phoenix, and First Coast News in
Jacksonville, FL, produced in-depth coverage of a local high school
student who was killed during a confrontation over loud music.
Tampa was the host city of the 2012 Republican Convention and
WTSP in Tampa-St. Petersburg, FL, anchored live from the
convention for five straight days. WTSP provided hours of extended
coverage that included nightly 7 p.m. specials, expanded 11p.m.
newscasts, fact-checking political spots and working with
USA TODAY to provide a live webcast each day.
Gannett Broadcasting also continued its pursuit of providing
innovative, relevant local newscasts to consumers using its “9 Areas
of Focus” as a guide. Two areas of particular attention for stations in
2012 were the “Watchdog” and “Advocacy” categories. WUSA in
Washington, DC, took on the issue of teenage drinking; WXIA in
Atlanta investigated wrongful parking fines; KUSA in Denver
showed how dozens of children have been “Failed to Death”; KPNX
in Phoenix produced a series called “30 Ways in 30 Days,” which
highlighted how consumers could help Arizona’s children in need;
WLTX in Columbia, SC, broke news of the cyber intrusion of the
South Carolina Department of Revenue’s web site by data thieves
and, working with The Greenville (SC) News and USA TODAY,
reported the stories of hundreds of thousands of residents who had
personal information compromised; WFMY in Greensboro, NC,
worked with Guilford County schools to encourage students to read
three million books in three months, and, for the first time, the
school district reached its goal; and, as a result of reporting by
WMAZ in Macon, GA, a railroad crossing gate was installed where
a woman had been killed by a train.
Gannett Broadcasting began rolling out a new graphics and
music package at year end, with full implementation expected to be
completed in April 2013. Based on feedback from viewers, the new
look is clean, sharp and easy to read and uses USA TODAY’s
signature section color-coding system; news is blue, money is green,
sports is red, life is purple.
Gannett Broadcasting stations continue to be recognized by their
peers for outstanding work. KARE in Minneapolis-St. Paul and
KUSA in Denver won three national Edward R. Murrow awards for
locally produced work. In addition, thirty-one regional Edward R.
Murrow Awards were presented to Gannett television stations,
including three Overall Excellence Awards received by KARE,
WGRZ in Buffalo, NY, and KTHV in Little Rock, AR. WXIA in
Atlanta was recognized with three National Association of Black
Journalists Awards of Excellence in three different categories. Along
with the Gannett Graphics Group, six Gannett broadcasting stations,
WXIA, WCSH in Portland, ME, KPNX in Phoenix, AZ, WZZM in
Grand Rapids, MI, WKYC in Cleveland, OH, and WGRZ won
Promax Awards in promotion and marketing and Gannett TV
stations across the country combined to win more than 100 AP and
Regional Emmy Awards for outstanding journalism. KUSA won its
13th straight Colorado Broadcasters Station of the Year Award, and
WUSA was recognized by Mothers Against Drunk Driving (MADD)
for its series on teenage drinking.
Competition: In each of its broadcasting markets, the company’s
stations and affiliated digital platforms compete for revenues with
other network-affiliated and independent television and radio
broadcasters and with other advertising media, such as cable
television, newspapers, magazines, direct mail, out-of-home
advertising and Internet media. Other sources of present and
potential competition for the company’s broadcasting properties
include home video and audio recorders and players, direct
broadcast satellite, low-power television, radio, video offerings (both
wire line and wireless) of telephone companies as well as developing
video services. The stations also compete in the emerging local
electronic media space, which includes Internet or Internet-enabled
devices, handheld wireless devices such as mobile phones and
tablets, social media platforms, and digital spectrum opportunities
associated with DTV. The company’s broadcasting stations compete
principally on the basis of their audience share, advertising rates and
audience composition.
With the Democratic Convention in Charlotte, NC, WFMY in
The Broadcast Segment continues to focus on increasing
Greensboro, NC, anchored its newscasts from the convention as
well. Both WTSP’s and WFMY’s efforts reflect a division-wide
commitment to providing informative political coverage to
consumers.
engagement on all platforms with local customers. As was the case
the last several years, Gannett television stations saw very strong
growth in digital metrics as the stations’ content remains in high
demand and product improvements continue to be favorably
15
received by consumers. Overall in 2012, online visitors increased
20%. Mobile page views are up 195% in 2012, and customers are
consuming more content when they visit. Mobile page views per
visitor are up 65%, primarily because of the iPhone, Android and
Weather apps. Preliminary numbers are positive for the recently
launched iPad apps, and the company expects greater consumer
adoption with increased tablet penetration.
Video remains the most valuable content from an advertising
perspective. On demand video plays increased 33% in 2012 while
live video plays increased 500%. This is a result of continued
technology improvements, workflow enhancements and viewer
demand. Often breaking news happens when people are at work and
unable to view a traditional TV. Desktop and mobile video are
allowing company broadcast stations to reach consumers no matter
where they are, or which device they have available.
Broadcast focused on building engagement in social media in
2012. The synergistic relationship between social media and
television is strong. From major sporting events such as the Super
Bowl, March Madness and the Olympics to major news events like
the shootings in Newtown, CT, and Aurora, CO, to national and local
election coverage to entertainment programming such as “The
Voice,” social media influenced what people watched, what they
shared and what they talked about. Gannett Broadcast Facebook fans
increased over 33% in the last half of 2012 and Twitter followers
were up over 21%.
Regulation: The company’s television stations are operated
under the authority of the Federal Communications Commission
(FCC), the Communications Act of 1934, as amended
(Communications Act), and the rules and policies of the FCC (FCC
Regulations).
Television broadcast licenses are granted for periods of eight
years. They are renewable upon application to the FCC and usually
are renewed except in rare cases in which a petition to deny, a
complaint or an adverse finding as to the licensee’s qualifications
results in loss of the license. The company believes it is in
substantial compliance with all applicable provisions of the
Communications Act and FCC Regulations. Nine of the company’s
stations, including two stations with pending renewal applications
from 2004, filed for FCC license renewals in 2012. As of Feb. 15,
2013, the renewals remain pending and the company expects the
renewals filed in 2012 to be granted in the ordinary course. The
company will be filing additional license renewal applications in
2013, including three for stations with pending renewal applications
filed in 2005, and anticipate that these applications also will be
granted in the ordinary course.
FCC regulation also limits concentration of broadcasting control
and regulate network and local programming practices. FCC
Regulations governing multiple ownership limit, or in some cases
prohibit, the common ownership or control of most communications
media serving common market areas (for example, television and
radio; television and daily newspapers; or radio and daily
newspapers). In addition, the Communications Act includes a
national ownership cap under which one company is permitted to
serve no more than 39% of all U.S. television households (the
company’s 23 television stations currently reach approximately
18.1% of U.S. television households). FCC rules permit common
ownership of two television stations in the same market in certain
defined circumstances, provided that at least one of the commonly
owned stations is not among the market’s top four rated stations at
the time of acquisition and at least eight independent media “voices”
remain after the acquisition.
FCC regulation prohibits a television station owner from owning
a daily newspaper in cases where the station’s contour encompasses
the newspaper’s city of publication. In 2007, the FCC granted a
permanent waiver authorizing the company’s continued ownership
of both KPNX-TV and The Arizona Republic in Phoenix, AZ. The
FCC also adopted a waiver standard for the newspaper/broadcast
cross-ownership rule, but the pertinent part of the order was vacated
on appeal, and thus the waiver standard never went into effect. The
appeals court rejected a challenge to the FCC’s retention of the local
television ownership rule. In addition, the FCC has commenced a
new review of its ownership rules, as it is required to do every four
years, and this review may result in additional rule modifications.
The FCC has proposed to retain the local television ownership rule
(but is seeking comment on a possible waiver standard for smaller
markets), and has proposed a modest relaxation of the newspaper/
broadcast rule (similar to the waiver standard that the FCC had
adopted during the last ownership review that was rejected in court).
However, the waiver standard may be of limited value for the
company in permitting expanded ownership opportunities, because it
contains presumptions that, in the top 20 television markets,
common ownership of a television station and a daily newspaper
may be permitted only if the station is not one of the top four rated
stations; most of the company’s stations are rated number one or two
in their markets. The FCC’s notice of proposed rulemaking also
seeks comment about shared services agreements and local news
agreements, including whether such arrangements should be
attributable for purposes of the ownership rules. An order in this
proceeding is expected in 2013.
Congress and the FCC are considering possible changes to the
Communications Act and to other FCC regulations, respectively,
including the rules concerning retransmission consent (which govern
cable and satellite operators’ carriage of the signals of the company’s
stations); the statutory cable and satellite copyright regime; and the
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. The current retransmission
consent rules are working overall. There continues to be few
retransmission disputes with virtually all negotiations completed
successfully. In addition, as authorized by and pursuant to certain
requirements established by Congress in 2012, the FCC is seeking
comment on rules to govern a “repacking” of the television
spectrum, which may entail the company’s stations moving to
different channels, having smaller service areas, and /or accepting
additional interference.
Employees
At the end of 2012, the company and its subsidiaries had
approximately 30,700 full-time and part-time employees including
2,200 for CareerBuilder. At certain operations, headcount reductions
were made in 2012 as part of efficiency and consolidation efforts.
Approximately 10% of those employed by the company and its
subsidiaries in the U.S. are represented by labor unions. They are
represented by 60 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 industry-wide or company-wide
bargaining. The company’s U.K. subsidiaries bargain with two
unions over working practices, wages and health and safety issues
only.
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.
16
During 2008, substantially all of the participants in the Gannett
The company also is focused on being energy efficient. Its
headquarters building received the Leadership in Energy and
Environmental Design (LEEDS) EB certification, and the company
has relocated many employees in other facilities to newer, more
energy efficient offices.
Gannett has installed more energy efficient HVAC systems and
appliances in many of its buildings. In 2011-2012 alone, Gannett’s
HVAC upgrade program resulted in a reduction of 10.7 million
kilowatt hours of annual electricity use. In 2012, Gannett also
invested in energy efficient lighting upgrades at two locations. For
2013, Gannett has identified new projects estimated to reduce power
consumption further by approximately 2.8 million kilowatt hours
annually.
The Gannett Green Operating Employee Group serves as a
forum to review and recommend “green” ideas and practices. The
group maintains an intranet site that provides an accessible,
informative and interactive resource highlighting new and innovative
green best practices which help Gannett businesses and properties
develop more sustainable operating practices.
Many of Gannett's media organizations cover environmental and
sustainability issues and inspire action. One good example is
USA TODAY, which was recognized for “Ghost Factories: Poison in
the Ground.” The series won four national awards, including the
Alfred I. duPont-Columbia Award from the Columbia Journalism
School. The investigative report uncovered hundreds of forgotten
lead factories and the toxic lead left behind. The series drew calls for
action from seven U.S. senators and led the EPA to re-examine
health risks at 464 sites nationwide.
Make A Difference Day, created by USA WEEKEND, is the
nation’s largest day of volunteering. For more than 20 years,
USA WEEKEND has mobilized millions of people across the U.S.
for this National Day of Doing Good. Together with its hundreds of
carrier newspapers and longstanding partners Points of Light and
Newman’s Own, it rallies millions of people in a single day to help
the change communities they live in. Volunteer efforts often include
projects such as planting trees or gardens, cleaning up trash, planting
sod and other environmentally beneficial tasks.
The Gannett Foundation is a corporate foundation sponsored by
the company. Through its Community Grant Program, Gannett
Foundation supports non-profit activities in the communities in
which Gannett does business and contributes to a variety of
charitable causes. One of Gannett Foundation’s community action
grant priorities includes environmental conservation.
General Company Information
Gannett was founded by Frank E. Gannett and associates in 1906
and was incorporated in 1923. The company listed shares publicly
for the first time in 1967. It reincorporated in Delaware in 1972. Its
more than 230 million outstanding shares of common stock are held
by approximately 7,960 shareholders of record in all 50 states and
several foreign countries. Gannett’s headquarters is in McLean, VA,
near Washington, DC.
Retirement Plan (GRP) and the Gannett Supplemental Retirement
Plan (SERP) had their benefits under these plans frozen.
Amendments were made to the existing Gannett 401(k) Savings Plan
(401(k) Plan) and the Gannett Deferred Compensation Plan (DCP).
Most participants whose benefits were frozen under the GRP and, if
applicable, the SERP received higher matching contributions under
the 401(k) Plan. The matching contribution rate generally increased
from 50% of the first 6% of compensation that an employee elects to
contribute to the plan to 100% of the first 5% of contributed
compensation. The company also makes additional employer
contributions to the 401(k) Plan on behalf of certain long-service
employees. The DCP was amended to provide for Gannett
contributions on behalf of certain employees whose benefits under
the 401(k) Plan are capped by IRS rules. Participants whose benefits
were frozen will have their benefits periodically increased by a cost
of living adjustment until benefits commence.
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.
As is the practice in the U.K., Newsquest employees have local
staff councils for consultation and communication with local
Newsquest management. Newsquest provides its employees with the
option to participate in a retirement plan. In October 2010, after
discussion with its pension plan trustees and employees, the decision
was made to close the Newsquest defined benefit plan to future
accrual, effective March 31, 2011. The plan closure was made to
reduce pension expenses and funding volatility and was part of a
package of measures to address the plan’s deficit. Some of the
savings from closing the defined benefit plan were offset by
increased membership in Newsquest’s defined contribution plan.
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, as well as a diverse workforce that
reflects the fabric of the communities Gannett serves.
Environmental and Sustainability Initiatives
Gannett is committed to making smart decisions to protect the
environment and manage its environmental impact responsibly.
Being a good corporate citizen is a core value and the company has
taken a number of steps to reduce its environmental impact and
underscore its commitment to sustainability.
The company has been an industry pioneer in switching to
environmentally-friendly press products, such as low-VOC (Volatile
Organic Compound) washes and fountain solutions and citrus-based
press cleaners. All colored inks and many black inks the company
uses are soy-based rather than petroleum-based, and delivered in
reusable containers. Gannett’s waste ink is recycled, either on-site or
at the manufacturer’s facility. The company continues to minimize
landfill usage by collecting used paper, plastics and other materials
for recycling and has substantially reduced water usage by switching
to dry methods of photo processing and plate processing.
Gannett has reduced green house emissions by using newsprint
vendors who practice sustainability, switching to light-weight
newsprint, reducing the size of the newspapers printed, and using
recycled and Forest Stewardship Council (FSC)-certified newsprint
where available.
17
Mobile and Tablet: Gannett powers more than 400 local mobile and tablet products and also partners with mobile service providers to
power news alerts and mobile marketing campaigns. Gannett has also developed and deployed leading applications for iPad, iPhone,
Kindle, Android and Windows.
MARKETS WE SERVE
DAILY LOCAL MEDIA ORGANIZATIONS AND AFFILIATED DIGITAL PLATFORMS
Average 2012 Circulation - Print and
Digital Replica and Non-Replica
Afternoon
Morning
Sunday
39,851
Founded
1829
State
Territory
Alabama
City
Montgomery
Arizona
Phoenix
Arkansas
Mountain Home
California
Palm Springs
Salinas
Visalia
Colorado
Fort Collins
Delaware
Wilmington
Florida
Brevard County
Guam
Indiana
Fort Myers
Pensacola
Tallahassee
Hagatna
Indianapolis
Lafayette
Muncie
Richmond
Iowa
Des Moines
Iowa City
Kentucky
Louisville
Louisiana
Alexandria
Lafayette
Monroe
Opelousas
Shreveport
Maryland
Salisbury
Local media organization/web site
Montgomery Advertiser
www.montgomeryadvertiser.com
The Arizona Republic
www.azcentral.com
The Baxter Bulletin
www.baxterbulletin.com
The Desert Sun
www.mydesert.com
The Salinas Californian
www.thecalifornian.com
Visalia Times-Delta/Tulare
Advance-Register
www.visaliatimesdelta.com
www.tulareadvanceregister.com
Fort Collins Coloradoan
www.coloradoan.com
The News Journal
www.delawareonline.com
FLORIDA TODAY
www.floridatoday.com
The News-Press
www.news-press.com
Pensacola News Journal
www.pnj.com
Tallahassee Democrat
www.Tallahassee.com
Pacific Daily News
www.guampdn.com
The Indianapolis Star
www.indystar.com
Journal and Courier
www.jconline.com
The Star Press
www.thestarpress.com
Palladium-Item
www.pal-item.com
The Des Moines Register
www.desmoinesregister.com
Iowa City Press-Citizen
www.press-citizen.com
The Courier-Journal
www.courier-journal.com
Alexandria Daily Town Talk
www.thetowntalk.com
The Daily Advertiser
www.theadvertiser.com
The News-Star
www.thenewsstar.com
Daily World
www.dailyworld.com
The Times
www.shreveporttimes.com
The Daily Times
www.delmarvanow.com
18
30,654
296,934
8,960
37,077
8,441
17,774
19,736
78,961
55,633
61,183
36,824
33,830
16,484
516,753
1890
1901
43,719
1927
1871
1859
24,679
1873
108,750
1871
76,469
1966
84,388
1884
54,315
1889
39,685
1905
14,276
1944
157,749
291,842
1903
25,225
20,586
9,602
99,328
10,297
33,769
1829
26,762
1899
14,856
1831
199,125
1849
1860
138,224
234,561
1868
18,337
27,561
23,344
5,303
36,018
16,374
24,486
1883
37,725
1865
26,191
1890
6,533
1939
47,310
1871
22,729
1900
DAILY LOCAL MEDIA ORGANIZATIONS AND AFFILIATED DIGITAL PLATFORMS
Average 2012 Circulation - Print and
Digital Replica and Non-Replica
Afternoon
Morning
Sunday
20,345
Founded
1900
14,175
212,235
41,283
10,832
16,909
21,303
55,843
33,586
25,376
41,201
97,375
14,219
45,131
27,442
18,440
12,394
33,617
15,175
10,451
23,963
110,088
71,642
30,353
851,546
1832
58,625
1855
15,815
1843
25,897
1900
27,157
1861
10,577
14,067
1897
67,595
1837
52,958
1893
27,730
1885
66,055
1870
144,562
1879
18,139
1884
59,414
1875
34,034
1879
22,335
1900
1864
45,379
1904
23,183
1828
1815
32,615
1785
154,557
1833
90,758
1829
46,234
1870
State
Territory
Michigan
City
Battle Creek
Detroit
Lansing
Livingston County
Port Huron
Minnesota
St. Cloud
Mississippi
Hattiesburg
Jackson
Missouri
Springfield
Montana
Great Falls
Nevada
Reno
New Jersey
Asbury Park
Bridgewater
Cherry Hill
East Brunswick
Morristown
Vineland
New York
Binghamton
Elmira
Ithaca
Poughkeepsie
Rochester
Westchester County
North Carolina
Asheville
Local media organization/web site
Battle Creek Enquirer
www.battlecreekenquirer.com
Detroit Free Press
www.freep.com
Lansing State Journal
www.lansingstatejournal.com
Daily Press & Argus
www.livingstondaily.com
Times Herald
www.thetimesherald.com
St. Cloud Times
www.sctimes.com
Hattiesburg American
www.hattiesburgamerican.com
The Clarion-Ledger
www.clarionledger.com
Springfield News-Leader
www.news-leader.com
Great Falls Tribune
www.greatfallstribune.com
Reno Gazette-Journal
www.rgj.com
Asbury Park Press
www.app.com
Courier News
www.mycentraljersey.com
Courier-Post
www.courierpostonline.com
Home News Tribune
www.mycentraljersey.com
Daily Record
www.dailyrecord.com
The Daily Journal
www.thedailyjournal.com
Press & Sun-Bulletin
www.pressconnects.com
Star-Gazette
www.stargazette.com
The Ithaca Journal
www.theithacajournal.com
Poughkeepsie Journal
www.poughkeepsiejournal.com
Rochester Democrat and Chronicle
www.democratandchronicle.com
The Journal News
www.lohud.com
Asheville Citizen-Times
www.citizen-times.com
19
DAILY LOCAL MEDIA ORGANIZATIONS AND AFFILIATED DIGITAL PLATFORMS
State
Territory
Ohio
City
Bucyrus
Chillicothe
Cincinnati
Coshocton
Fremont
Lancaster
Mansfield
Marion
Newark
Port Clinton
Zanesville
Oregon
Salem
South Carolina
Greenville
South Dakota
Sioux Falls
Tennessee
Clarksville
Jackson
Murfreesboro
Nashville
St. George
Utah
Vermont
Burlington
Virginia
McLean
Staunton
Wisconsin
Appleton
Fond du Lac
Green Bay
Manitowoc
Marshfield
Oshkosh
Sheboygan
Stevens Point
Wausau
Wisconsin Rapids
Local media organization/web site
Telegraph-Forum
www.bucyrustelegraphforum.com
Chillicothe Gazette
www.chillicothegazette.com
The Cincinnati Enquirer
www.cincinnati.com
Coshocton Tribune
www.coshoctontribune.com
The News-Messenger
www.thenews-messenger.com
Lancaster Eagle-Gazette
www.lancastereaglegazette.com
News Journal
www.mansfieldnewsjournal.com
The Marion Star
www.marionstar.com
The Advocate
www.newarkadvocate.com
News Herald
www.portclintonnewsherald.com
Times Recorder
www.zanesvilletimesrecorder.com
Statesman Journal
www.statesmanjournal.com
The Greenville News
www.greenvilleonline.com
Argus Leader
www.argusleader.com
The Leaf-Chronicle
www.theleafchronicle.com
The Jackson Sun
www.jacksonsun.com
The Daily News Journal
www.dnj.com
The Tennessean
www.tennessean.com
The Spectrum
www.thespectrum.com
The Burlington Free Press
www.burlingtonfreepress.com
USA TODAY
www.usatoday.com
The Daily News Leader
www.newsleader.com
The Post-Crescent
www.postcrescent.com
The Reporter
www.fdlreporter.com
Green Bay Press-Gazette
www.greenbaypressgazette.com
Herald Times Reporter
www.htrnews.com
Marshfield News-Herald
www.marshfieldnewsherald.com
Oshkosh Northwestern
www.thenorthwestern.com
The Sheboygan Press
www.sheboyganpress.com
Stevens Point Journal
www.stevenspointjournal.com
Central Wisconsin Sunday
Wausau Daily Herald
www.wausaudailyherald.com
The Daily Tribune
www.wisconsinrapidstribune.com
20
Average 2012 Circulation - Print and
Digital Replica and Non-Replica
Afternoon
Morning
Sunday
3,883
Founded
1923
8,135
10,027
1800
136,280
263,630
1841
17,887
6,416
11,624
35,478
51,217
31,842
13,817
18,199
10,723
108,397
15,520
28,532
1,732,918
13,073
40,482
10,198
43,824
10,204
14,238
14,441
3,688
5,846
8,007
4,590
1842
1856
9,641
1807
25,895
1885
8,073
1880
11,218
13,985
1820
2,629
1864
13,763
1852
42,581
1851
96,767
1874
48,030
1881
18,100
1808
28,302
1848
15,152
1848
218,728
1812
18,591
1963
34,723
1827
1982
16,271
1904
53,777
1853
13,440
1870
64,878
1915
12,001
1898
8,072
1927
19,568
1868
18,013
1907
17,589
21,292
1873
1903
1914
7,965
15,456
7,998
DAILY PAID-FOR LOCAL MEDIA ORGANIZATIONS AND AFFILIATED DIGITAL PLATFORMS/NEWSQUEST PLC
City
Basildon
Blackburn
Bolton
Bournemouth
Bradford
Brighton
Colchester
Darlington
Glasgow
Glasgow
Newport
Oxford
Southampton
Swindon
Weymouth
Worcester
York
Local media organization/web site
Echo**
www.echo-news.co.uk
Lancashire Telegraph
www.lancashiretelegraph.co.uk
The Bolton News
www.theboltonnews.co.uk
Daily Echo
www.bournemouthecho.co.uk
Telegraph & Argus
www.thetelegraphandargus.co.uk
The Argus
www.theargus.co.uk
The Gazette**
www.gazette-news.co.uk
The Northern Echo
www.thenorthernecho.co.uk
Evening Times
www.eveningtimes.co.uk
The Herald
www.heraldscotland.com
South Wales Argus
www.southwalesargus.co.uk
Oxford Mail
www.oxfordmail.co.uk
Southern Daily Echo
www.dailyecho.co.uk
Swindon Advertiser
www.swindonadvertiser.co.uk
Dorset Echo
www.dorsetecho.co.uk
Worcester News
www.worcesternews.co.uk
The Press
www.thepress.co.uk
Circulation*
Monday-Saturday
29,125
Founded
1969
20,870
19,740
24,825
24,163
22,399
15,259
38,479
45,942
45,493
21,437
17,556
29,973
16,837
16,313
13,305
24,312
1886
1867
1900
1868
1880
1970
1870
1876
1783
1892
1928
1888
1854
1921
1937
1882
* Circulation figures are according to ABC results for the period January - June 2012
** Publishes Monday-Friday
Non-daily publications: Essex, London, Midlands, North East, North West, South Coast, South East, South and East Wales, South West,
Yorkshire
GANNETT DIGITAL
CareerBuilder: www.careerbuilder.com
Headquarters: Chicago, IL
Sales offices: Atlanta, GA; Boston, MA; Charlotte, NC; Chicago, IL; Cincinnati, OH; Dallas, TX; Denver, CO; Detroit, MI; Edison, NJ;
Houston, TX; Los Angeles; Minneapolis, MN; Moscow, ID; Nashville, TN; New York, NY; Orlando, FL; Overland Park, KS; Philadelphia,
PA; San Bruno, CA; Scottsdale, AZ; Seattle, WA; Washington, DC
International offices: Canada, China, France, Germany, Greece, India, Italy, Malaysia, Netherlands, Belgium, Norway, Singapore, Spain,
Sweden, United Kingdom, Brazil, Indonesia
PointRoll, Inc.: www.pointroll.com
Headquarters: King of Prussia, PA
Sales offices: Atlanta, GA; Chicago, IL; Detroit, MI; Los Angeles, CA; New York, NY; San Francisco, CA; Toronto, Canada
ShopLocal: www.shoplocal.com
Headquarters: Chicago, IL
Sales office: Chicago, IL
Reviewed.com: www.reviewed.com
Headquarters: Boston, MA
21
TELEVISION STATIONS AND AFFILIATED DIGITAL PLATFORMS
State/District
of Columbia
Arizona
City
Flagstaff
Phoenix
Arkansas
Little Rock
California
Sacramento
Colorado
Denver
District of
Columbia
Florida
Washington
Jacksonville
Tampa-St. Petersburg
Georgia
Atlanta
Maine
Macon
Bangor
Portland
Michigan
Grand Rapids
Minnesota
Minneapolis-St. Paul
Missouri
St. Louis
New York
Buffalo
North Carolina Greensboro
Ohio
Cleveland
South Carolina Columbia
Tennessee
Knoxville
Station/web site
KNAZ-TV
KPNX-TV
www.azcentral.com/12news
KTHV-TV
www.todaysthv.com
KXTV-TV
www.news10.net
KTVD-TV
www.ktvd.com
KUSA-TV
www.9news.com
WUSA-TV
www.wusa9.com
WJXX-TV
WTLV-TV
www.firstcoastnews.com
WTSP-TV
www.wtsp.com
WATL-TV
www.myatltv.com
WXIA-TV
www.11alive.com
WMAZ-TV
www.13wmaz.com
WLBZ-TV
www.wlbz2.com
WCSH-TV
www.wcsh6.com
WZZM-TV
www.wzzm13.com
KARE-TV
www.kare11.com
KSDK-TV
www.ksdk.com
WGRZ-TV
www.wgrz.com
WFMY-TV
www.digtriad.com
WKYC-TV
www.wkyc.com
WLTX-TV
www.wltx.com
WBIR-TV
www.wbir.com
Weekly
Audience (a)
(b)
1,155,000
Founded
1970
1953
Channel/Network
Channel 2/NBC
Channel 12/NBC
Channel 11/CBS
Channel 10/ABC
Channel 20/MyNetworkTV
Channel 9/NBC
Channel 9/CBS
Channel 25/ABC
Channel 12/NBC
Channel 10/CBS
417,000
866,000
590,000
1,201,000
1,763,000
366,000
461,000
1,243,000
Channel 36/MyNetworkTV
883,000
Channel 11/NBC
1,642,000
Channel 13/CBS
Channel 2/NBC
Channel 6/NBC
Channel 13/ABC
Channel 11/NBC
Channel 5/NBC
Channel 2/NBC
Channel 2/CBS
Channel 3/NBC
Channel 19/CBS
Channel 10/NBC
199,000
106,000
306,000
374,000
1,345,000
1,028,000
520,000
562,000
1,122,000
292,000
443,000
1955
1955
1988
1952
1949
1989
1957
1965
1954
1948
1953
1954
1953
1962
1953
1947
1954
1949
1948
1953
1956
Captivate Network: www.captivatenetwork.com
Headquarters: Chelmsford, MA
Advertising offices: Chicago, IL; Los Angeles, CA; New York, NY; San Francisco, CA; Toronto, Canada.
(a) Weekly audience is number of TV households reached, according to the November 2012 Nielsen book.
(b) Audience numbers fall below minimum reporting standards.
22
USA TODAY/USATODAY.com
Headquarters and editorial offices: McLean, VA
Print sites: Albuquerque, NM; Atlanta, GA; Columbia, SC; Denver, CO; Des Moines, IA; Eugene, OR; Everett, WA; Fort Lauderdale, FL;
Houston, TX; Indianapolis, IN; Kankakee, IL; Las Vegas, NV; Lawrence, KS; Los Angeles, CA; Louisville, KY; Milwaukee, WI;
Minneapolis, MN; Mobile, AL; Nashville, TN; Newark, OH; Norwood, MA; Oklahoma City, OK; Orlando, FL; Phoenix, AZ; Plano, TX;
Rochester, NY; Rockaway, NJ; St. Louis, MO; Salt Lake City, UT; San Jose, CA; Springfield, VA; Sterling Heights, MI; Tampa, FL;
Warrendale, PA; Wilmington, DE; Winston-Salem, NC
Advertising offices: Atlanta, GA; Chicago, IL; Dallas, TX; Detroit, MI; Los Angeles, CA; McLean, VA; New York, NY; San Francisco, CA
USA TODAY Sports Media Group: www.bigleadsports.com; www.kffl.com; www.thehuddle.com (subscription); www.hoopsworld.com;
hoopshype.com; mmajunkie.com; bnqt.com; www.baseballhq.com (subscription); www.quickish.com; www.venturethere.com;
www.schedulestar.com; www.usatodayhss.com
Headquarters: New York, NY
Advertising offices: Los Angeles, CA; McLean, VA; New York, NY
USA TODAY Travel Media Group
Headquarters: McLean, VA
Advertising offices: McLean, VA
USA WEEKEND: www.usaweekend.com
Headquarters and editorial offices: McLean, VA
Advertising offices: Chicago, IL; Los Angeles, CA; New York, NY; San Francisco, CA
Gannett Digital Marketing Services: BLiNQ Media: www.blinqmedia.com; DealChicken: www.dealchicken.com; Clipper Digital:
www.clippermagazine.com; www.couponclipper.com; www.DoubleTakeDeals.com; GannettLocal: www.gannettlocal.com; Mobestream
Media (Key Ring): www.keyringapp.com
Headquarters: Chicago, IL
Sales offices: Atlanta, GA; Chicago, IL; Dallas, TX; McLean, VA: New York, NY
BLiNQ Media: www.blinqmedia.com; bam.blinqmedia.com
Headquarters: New York, NY
Advertising offices: Atlanta, GA; Cambridge, MA; Chicago, IL; New York, NY
Mobestream Media: www.keyringapp.com
Headquarters: Dallas, TX
Clipper Magazine: www.clippermagazine.com; www.couponclipper.com; DoubleTakeDeals.com
Headquarters: Mountville, PA
Gannett Healthcare Group: www.GannettHG.com; www.GannettEducation.com; www.ContinuingEducation.com; www.Nurse.com;
www.TodayinPT.com; www.TodayinOt.com; www.PearlsReview.com
Headquarters: Falls Church, VA
Regional offices: Dallas, TX; Hoffman Estates, IL; San Jose, CA
Publications: Nurse.com, Today in PT, Today in OT
Gannett Government Media Corp.
Headquarters: Springfield, VA
Regional office: Los Angeles, CA
Publications: Army Times: www.armytimes.com, Navy Times: www.navytimes.com, Marine Corps Times: www.marinecorpstimes.com, Air
Force Times: www.airforcetimes.com, Federal Times: www.federaltimes.com, Defense News: www.defensenews.com, Armed Forces Journal:
www.armedforcesjournal.com, C4ISR Journal: www.c4isrjournal.com, Training and Simulation Journal: www.tsjonline.com, Military Times
EDGE: www.militarytimesedge.com
Gannett Media Technologies International: www.gmti.com
Headquarters: Norfolk, VA
Regional offices: Cincinnati, OH; Phoenix, AZ
Non-daily publications: Weekly, semi-weekly, monthly or bimonthly publications in Alabama, Arizona, Arkansas, California, Colorado,
Delaware, Florida, Guam, Indiana, Iowa, Kentucky, Louisiana, Maryland, Michigan, Minnesota, Mississippi, Missouri, Montana, Nevada,
New Jersey, New York, North Carolina, Ohio, Oregon, South Carolina, South Dakota, Tennessee, Utah, Vermont, Virginia, Wisconsin
Gannett Publishing Services
Headquarters: McLean, VA
Sales office: Atlanta, GA
Gannett Direct Marketing Services, Inc.: www.gdms.com
Headquarters: Louisville, KY
Gannett Satellite Information Network: McLean, VA
GANNETT ON THE NET: News and information about Gannett is available on its web site, www.gannett.com. In addition to news and other information
about Gannett, the company provides access through this site to its annual report on Form 10-K, its quarterly reports on Form 10-Q, its current reports on
Form 8-K and all amendments to those reports as soon as reasonably practicable after the company files or furnishes them electronically to the Securities
and Exchange Commission (SEC). Certifications by Gannett’s Chief Executive Officer and Chief Financial Officer are included as exhibits to the company’s
SEC reports (including the company’s Form 10-K filed in 2012).
Gannett also provides access on this web site to its Principles of Corporate Governance, the charters of its Audit, Transformation, Executive
Compensation and Nominating and Public Responsibility Committees and other important governance documents and policies, including its Ethics and
Inside Trading Policies. Copies of all of these corporate governance documents are available to any shareholder upon written request made to the company’s
Secretary at our headquarters address. In addition, the company will disclose on this web site changes to, or waivers of, its corporate Ethics Policy.
23
ITEM 1A. RISK FACTORS
In addition to the other information contained or incorporated by
reference into this Form 10-K, prospective investors should consider
carefully the following risk factors before investing in our securities.
The risks described below may not be the only risks we face.
Additional risks that we did not yet perceive or that we currently
believe are immaterial may also adversely affect our business and
the trading price of our securities.
Deterioration in economic conditions in the markets we serve in
the U.S. and the U.K. may depress demand for our products and
services
Our operating results depend on the relative strength of the economy
in our principal publishing, digital and television markets as well as
the strength or weakness of national and regional economic factors.
Generally soft economic conditions and uneven recoveries in the
U.S. and U.K. have had a significant adverse impact on the
company’s businesses, particularly publishing. If conditions remain
challenging or worsen in the U.S. or U.K. economy, all key
advertising revenue categories could be significantly impacted.
Competition from alternative forms of media may impair our
ability to grow or maintain revenue levels in core and new
businesses
Advertising produces the predominant share of our publishing,
digital, and broadcast revenues, with affiliated web site, mobile and
tablet revenues being an important component. With the continued
development of alternative forms of media, particularly electronic
media including those based on the Internet, our businesses may face
increased competition. Alternative media sources may also affect our
ability to generate circulation revenues and our television audience.
This competition may make it difficult for us to grow or maintain
our print advertising, circulation and broadcasting revenues, which
we believe will challenge us to expand the contributions of our
online and other digital businesses.
A decline in the company’s credit ratings and continued
volatility in the U.S. credit markets could significantly impact
the company’s ability to obtain new financing to fund its
operations and strategic initiatives or to refinance its existing
debt at reasonable rates as it matures
At the end of 2012, the company had approximately $1.43 billion in
long-term debt, of which $205 million was in the form of
borrowings under bank credit agreements, and the balance was in the
form of unsecured notes. This debt matures at various times during
the years 2014-2018. While the company’s cash flow is expected to
be sufficient to pay amounts when due, if operating results
deteriorate significantly, a portion of these maturities may need to be
refinanced. Access to the capital markets may at times be affected by
our credit ratings and conditions in the economy. A decline in our
corporate credit rating could make future borrowings more
expensive, and volatile credit markets could make it harder for us to
obtain debt financings generally. At the end of 2012, the company
had approximately $922 million of additional borrowing capacity
under its revolving credit facilities.
Volatility in global financial markets directly affects the value of
our pension plan assets and liabilities
The company’s principal U.S. retirement plan, the Gannett
Retirement Plan, was underfunded as of Dec. 30, 2012 by $594
million on a U.S. GAAP basis. Various factors, including future
investment returns, discount rates and potential pension legislative
changes, impact the timing and amount of pension contributions the
company may be required to make in the future. The company's
funding target attainment percentage, as defined by the IRS and
based on the 2012 annual update, is 95%.
Foreign exchange variability could adversely affect our
consolidated operating results
Weakening of the British pound-to-U.S. dollar exchange rate could
diminish Newsquest’s earnings contribution to consolidated results.
Newsquest results for 2012 were translated to U.S. dollars at the
average rate of 1.58. CareerBuilder, with expanding overseas
operations, also has foreign exchange risk but to a significantly
lesser degree.
Changes in the regulatory environment could encumber or
impede our efforts to improve operating results or value of assets
Our publishing, digital and broadcasting operations are subject to
government regulation. Changing regulations, particularly FCC
regulations which affect our television stations, may result in
increased costs and adversely impact our future profitability. For
example, FCC regulations required us to construct digital television
stations in all of our television markets, despite the fact that the new
digital stations did not produce significant additional revenue. In
addition, our television stations are required to possess television
broadcast licenses from the FCC; when granted, these licenses are
generally granted for a period of eight years. Under certain
circumstances the FCC is not required to renew any license and
could decline to renew either our current license applications that are
pending or those submitted in the future.
The degree of success of our investment and acquisition strategy
may significantly impact our ability to expand overall
profitability
We will continue efforts to identify and complete strategic
investments, partnerships and business acquisitions. These efforts
may not prove successful. Strategic investments and partnerships
with other companies expose us to the risk that we may not be able
to control the operations of our investee or partnership, which could
decrease the amount of benefits we reap from a particular
relationship. The company is also exposed to the risk that its partners
in strategic investments and infrastructure may encounter financial
difficulties which could lead to disruption of investee or partnership
activities, or impairment of assets acquired, which would adversely
affect future reported results of operations and shareholders' equity.
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.
24
The value of our existing intangible assets may become impaired,
depending upon future operating results
Goodwill and other intangible assets were approximately $3.3 billion
as of Dec. 30, 2012, representing approximately 52% 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 2010 and 2012 (see Notes 3 and 4
to the Consolidated Financial Statements). Any future evaluations
requiring an asset impairment charge for goodwill or other intangible
assets would adversely affect future reported results of operations
and shareholders’ equity, although such charges would not affect our
cash flow.
Adverse results from litigation or governmental investigations
can impact our business practices and operating results
From time to time, we are parties to litigation and regulatory,
environmental and other proceedings with governmental authorities
and administrative agencies. Adverse outcomes in lawsuits or
investigations could result in significant monetary damages or
injunctive relief that could adversely affect our operating results or
financial condition as well as our ability to conduct our businesses as
they are presently being conducted. See Note 12 of the Notes to
Consolidated Financial Statements and Part I, Item 3. “Legal
Proceedings” contained elsewhere in this report for a description of
certain of our pending litigation and regulatory matters and other
proceedings with governmental authorities.
The value of our assets or operations may be diminished if our
information technology systems fail to perform adequately or if
we are the subject of a data breach or cyber attack
Our information technology systems are critically important to
operating our business efficiently and effectively. We rely on our
information technology systems to manage our business data,
communications, news and advertising content, digital products,
order entry, fulfillment and other business processes. The failure of
our information technology systems to perform as we anticipate
could disrupt our business and could result in transaction errors,
processing inefficiencies, late or missed publications, and loss of
sales and customers, causing our business and results of operations
to suffer.
Furthermore, attempts to compromise information technology
systems occur regularly, and we may be vulnerable to security
breaches beyond our control. We invest in security resources and
technology to protect our data and business processes against risk of
data security breaches and cyber attack, but the techniques used to
attempt attacks are constantly changing. A breach or successful
attack could have a negative impact on our operations or business
reputation.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
Publishing/United States
Generally, the company owns many of the plants that house all
aspects of the publication process. Certain U.S. Community
Publishing operations have outsourced printing to non-Gannett
publishers or commercial printers. In the case of USA TODAY, at
Dec. 30, 2012, 23 non-Gannett printers were used to print it in U.S.
markets where there were no company publishing sites with
appropriate facilities. Non-Gannett printers in 10 foreign countries
publish and distribute an international edition of USA TODAY under
a royalty agreement. USA WEEKEND, Clipper Magazine and
Gannett Healthcare Group are also printed under contracts with
commercial printing companies. Many of the company’s local media
organizations have outside news bureaus and sales offices, which
generally are leased. In several markets, two or more of the
company’s local media organizations share combined facilities; and
in certain locations, facilities are shared with other non-Gannett
publishing properties. At the end of 2012, 72% of the company’s
U.S. daily publications were either printed by non-Gannett printers
or printed in combination with other Gannett publications. The
company’s publishing properties have rail siding facilities or access
to main roads for newsprint delivery purposes and are conveniently
located for distribution purposes.
During 2012, the company continued its efforts to consolidate
certain of its U.S. publishing facilities to achieve savings and
efficiencies. The company’s facilities are adequate for present
operations. A listing of publishing centers and key properties may be
found on pages 18 - 20.
Publishing/United Kingdom
Newsquest owns certain of the plants where its publications are
produced and leases other facilities. Newsquest headquarters is in
Weybridge, Surrey. Additions to Newsquest’s printing capacity and
color capabilities have been made since Gannett acquired Newsquest
in 1999. Newsquest has consolidated certain of its facilities to
achieve savings and efficiencies. Certain Newsquest operations have
out-sourced printing to non-Newsquest publishers. All of
Newsquest’s properties are adequate for present purposes. A listing
of Newsquest publishing centers and key properties may be found on
page 21.
Digital
Generally, the company’s digital businesses lease their facilities.
This includes facilities for executive offices, sales offices and data
centers. The company’s facilities are adequate for present operations.
The company also believes that suitable additional or alternative
space, including those under lease options, will be available at
commercially reasonable terms for future expansion. A listing of key
digital facilities can be found on page 21.
Broadcasting
The company’s broadcasting facilities are adequately equipped with
the necessary television broadcasting equipment. The company owns
or leases transmitter facilities in 22 locations. All of the company’s
stations have converted to digital television operations in accordance
with applicable FCC regulations. The company’s broadcasting
facilities are adequate for present purposes. A listing of television
stations can be found on page 22.
25
Corporate facilities
The company owns the buildings in which its headquarters and
USA TODAY are located in McLean, VA. The company also owns
data and network operations centers in nearby Maryland and in
Phoenix, AZ. Headquarters facilities are adequate for present
operations. The company leases space in its headquarters facilities to
third-party tenants.
ITEM 3. LEGAL PROCEEDINGS
Information regarding legal proceedings may be found in Note 12 of
the Notes to Consolidated Financial Statements.
Environmental
From time to time, some of the company’s current and former
subsidiaries have been included among potentially responsible
parties in connection with sites that have been identified as possibly
requiring environmental remediation. These environmental
proceedings are highly complex, and require a variety of issues to be
resolved, including the extent of contamination, the nature and
extent of investigation and remedial action that may ultimately be
required, and the number of parties that will be required to
contribute to such investigation and remediation costs, before the
company’s liability for them, if any, will be known.
In March 2011, the Advertiser Company, a Gannett subsidiary
which publishes The Montgomery Advertiser, was notified by the
U.S. EPA that it has been identified as a potentially responsible party
for the investigation and remediation of groundwater contamination
in downtown Montgomery, AL. At this point in the investigation,
incomplete information is available about the site, other potentially
responsible parties and what further investigation and remediation
may be required. Accordingly, future costs at the site, and The
Advertiser Company’s share of such costs, if any, cannot yet be
determined. Some of The Advertiser Company's fees and costs in
connection with this matter may be reimbursed under its liability
insurance policies.
Management does not expect that these pending proceedings will
have a material adverse effect upon the company’s consolidated
results of operations or financial condition.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
26
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
Gannett Co., Inc. shares are traded on the New York Stock Exchange with the symbol GCI.
Information regarding outstanding shares, shareholders and dividends may be found on pages 1, 17, 44 and 45 of this Form 10-K.
Information about debt securities sold in private transactions may be found on page 43 of this Form 10-K.
Gannett Common stock prices
High-low range by fiscal quarters based on NYSE-composite closing prices.
Year
2002
2003
2004
2005
2006
2007
Low
Quarter
First. . . . . . . . . . . . . . . . . . . . . . $ 65.03
Second . . . . . . . . . . . . . . . . . . . $ 71.50
Third . . . . . . . . . . . . . . . . . . . . . $ 63.39
Fourth . . . . . . . . . . . . . . . . . . . . $ 66.62
First. . . . . . . . . . . . . . . . . . . . . . $ 67.68
Second . . . . . . . . . . . . . . . . . . . $ 70.43
Third . . . . . . . . . . . . . . . . . . . . . $ 75.86
Fourth . . . . . . . . . . . . . . . . . . . . $ 77.56
First. . . . . . . . . . . . . . . . . . . . . . $ 84.50
Second . . . . . . . . . . . . . . . . . . . $ 84.95
Third . . . . . . . . . . . . . . . . . . . . . $ 79.56
Fourth . . . . . . . . . . . . . . . . . . . . $ 78.99
First. . . . . . . . . . . . . . . . . . . . . . $ 78.43
Second . . . . . . . . . . . . . . . . . . . $ 71.13
Third . . . . . . . . . . . . . . . . . . . . . $ 66.25
Fourth . . . . . . . . . . . . . . . . . . . . $ 59.19
First. . . . . . . . . . . . . . . . . . . . . . $ 58.81
Second . . . . . . . . . . . . . . . . . . . $ 53.22
Third . . . . . . . . . . . . . . . . . . . . . $ 51.67
Fourth . . . . . . . . . . . . . . . . . . . . $ 55.92
First. . . . . . . . . . . . . . . . . . . . . . $ 55.76
Second . . . . . . . . . . . . . . . . . . . $ 54.12
Third . . . . . . . . . . . . . . . . . . . . . $ 43.70
Fourth . . . . . . . . . . . . . . . . . . . . $ 35.30
High
$ 77.85
$ 79.87
$ 77.70
$ 79.20
$ 75.10
$ 79.70
$ 79.18
$ 88.93
$ 90.01
$ 91.00
$ 86.78
$ 85.62
$ 82.41
$ 80.00
$ 74.80
$ 68.62
$ 64.80
$ 60.92
$ 57.15
$ 61.25
$ 63.11
$ 59.79
$ 55.40
$ 45.85
Year
2008
2009
2010
2011
2012
2013
Low
Quarter
First. . . . . . . . . . . . . . . . . . . . . . $ 28.43
Second . . . . . . . . . . . . . . . . . . . $ 21.79
Third . . . . . . . . . . . . . . . . . . . . . $ 15.96
6.09
Fourth . . . . . . . . . . . . . . . . . . . . $
1.95
First. . . . . . . . . . . . . . . . . . . . . . $
2.20
Second . . . . . . . . . . . . . . . . . . . $
Third . . . . . . . . . . . . . . . . . . . . . $
3.18
9.76
Fourth . . . . . . . . . . . . . . . . . . . . $
First. . . . . . . . . . . . . . . . . . . . . . $ 13.53
Second . . . . . . . . . . . . . . . . . . . $ 13.73
Third . . . . . . . . . . . . . . . . . . . . . $ 11.98
Fourth . . . . . . . . . . . . . . . . . . . . $ 11.76
First. . . . . . . . . . . . . . . . . . . . . . $ 14.49
Second . . . . . . . . . . . . . . . . . . . $ 13.30
8.55
Third . . . . . . . . . . . . . . . . . . . . . $
Fourth . . . . . . . . . . . . . . . . . . . . $
9.16
First. . . . . . . . . . . . . . . . . . . . . . $ 13.36
Second . . . . . . . . . . . . . . . . . . . $ 12.33
Third . . . . . . . . . . . . . . . . . . . . . $ 13.20
Fourth . . . . . . . . . . . . . . . . . . . . $ 16.63
First*. . . . . . . . . . . . . . . . . . . . . $ 18.01
High
$ 39.00
$ 30.75
$ 21.67
$ 17.05
9.30
$
$
5.48
$ 10.14
$ 15.63
$ 17.25
$ 18.67
$ 15.11
$ 15.78
$ 17.19
$ 15.64
$ 14.60
$ 13.57
$ 15.61
$ 15.74
$ 18.75
$ 18.97
$ 20.55
*Feb. 19, 2013
Purchases of Equity Securities
Period
9/24/12 – 10/28/12. . . . . . . . . . . . . .
10/29/12 – 11/25/12 . . . . . . . . . . . . .
11/26/12 – 12/30/12 . . . . . . . . . . . . .
(a) Total Number of
Shares Purchased
(b) Average Price
Paid per Share
(c) Total Number of
Shares Purchased as Part
of Publicly Announced
Program
(d) Approximate Dollar
Value of Shares that May
Yet Be Repurchased
Under the Program
558,101
664,700
884,701
$
$
$
$
18.26
17.06
17.99
17.77
558,101
664,700
884,701
2,107,502
$
$
$
$
177,370,440
166,031,082
150,116,389
150,116,389
Total 4th Quarter 2012 . . . . . . . . .
2,107,502
On Feb. 21, 2012, the company’s Board of Directors approved a new program to repurchase up to $300 million in Gannett common stock (replacing the $1
billion program). There is no expiration date for the new $300 million stock repurchase program. However, it is targeted to be completed over the two years
following the announcement. All shares repurchased as shown above were part of this publicly announced repurchase program.
In addition to the above, as of Dec. 30, 2012, 36,000 shares were repurchased as part of the publicly announced repurchase program, but were settled
subsequent to the end of the quarter. The effect of those repurchases decreased the maximum dollar value available under the program to $149,479,382.
27
Comparison of shareholder return – 2008 to 2012
The following graph compares the performance of the company’s
common stock during the period Dec. 31, 2007, to Dec. 31, 2012,
with the S&P 500 Index, and a peer group index selected by the
company.
The company’s peer group includes A.H. Belo Corp., Belo Corp.,
Discovery Communications Inc., The E.W. Scripps Company,
Journal Communications, Inc., The McClatchy Company, Media
General, Inc., Meredith Corp., Monster Worldwide Inc., News Corp.,
The New York Times Company, The Washington Post Company, and
Yahoo Inc. (collectively, the “Peer Group”). Many of the Peer Group
companies have a strong publishing/broadcasting orientation, but the
Peer Group also includes companies in the digital media industry.
The S&P 500 Index includes 500 U.S. companies in the
ITEM 6. SELECTED FINANCIAL DATA
Selected financial data for the years 2008 through 2012 is contained
under the heading “Selected Financial Data” on page 76 and is
derived from the company’s audited financial statements for those
years.
The information contained in the “Selected Financial Data” is
not necessarily indicative of the results of operations to be expected
for future years, and should be read in conjunction with
“Management’s Discussion and Analysis of Financial Condition and
Results of Operations” included in Item 7 and the consolidated
financial statements and related notes thereto included in Item 8 of
this Form 10-K.
industrial, utilities and financial sectors and is weighted by market
capitalization. The total returns of the Peer Group also are weighted
by market capitalization.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The graph depicts representative results of investing $100 in the
company’s common stock, the S&P 500 Index and Peer Group index
at closing on Dec. 31, 2007. It assumes that dividends were
reinvested monthly with respect to the company’s common stock,
daily with respect to the S&P 500 Index and monthly with respect to
each Peer Group company.
Recent Gannett stock returns have improved from the five-year
comparison below. For example, Gannett's one-year cumulative total
return for 2012 was 41%. This compares to returns for the S&P 500
Index and Peer Group index of 16% and 37%, respectively.
2007
2008
2009
2010
2011
2012
Gannett Co., Inc. $ 100
$22.76
$43.76
$44.98
$40.64
$ 57.48
S&P 500 Index . $ 100
$63.00
$79.67
$91.68
$93.61
$108.59
Peer Group. . . . . $ 100
$45.72
$70.02
$75.90
$80.79
$110.71
Certain factors affecting forward-looking statements
Certain statements in this Annual Report on Form 10-K contain
forward-looking information. The words “expect,” “intend,”
“believe,” “anticipate,” “likely,” “will” and similar expressions
generally identify forward-looking statements. These forward-
looking statements are subject to certain risks and uncertainties that
could cause actual results and events to differ materially from those
anticipated in the forward-looking statements. The company is not
responsible for updating or revising any forward-looking statements,
whether the result of new information, future events or otherwise,
except as required by law.
Potential risks and uncertainties which could adversely affect the
company’s results include, without limitation, the following factors:
(a) increased consolidation among major retailers or other events
which may adversely affect business operations of major customers
and depress the level of local and national advertising; (b) a potential
increase in competition for the company’s Digital Segment
businesses; (c) a decline in viewership of major networks and local
news programming resulting from increased competition or other
factors; (d) a continuance of the generally soft economic conditions
in the U.S. and the U.K. or a further economic downturn leading to a
continuing or accelerated decrease in circulation or local, national or
classified advertising; (e) a further decline in general print readership
and/or advertiser patterns as a result of competitive alternative media
or other factors; (f) an increase in newsprint or syndication
programming costs over the levels anticipated; (g) labor disputes
which may cause revenue declines or increased labor costs;
(h) acquisitions of new businesses or dispositions of existing
businesses; (i) rapid technological changes and frequent new product
introductions prevalent in electronic publishing; (j) an increase in
interest rates; (k) a weakening in the British pound to U.S. dollar
exchange rate; (l) volatility in financial and credit markets which
could affect the value of retirement plan assets and the company’s
ability to raise funds through debt or equity issuances; (m) changes
in the regulatory environment; (n) credit rating downgrades, which
could affect the availability and cost of future financing; (o) adverse
outcomes in proceedings with governmental authorities or
administrative agencies; (p) cyber security breaches and (q) general
economic, political and business conditions; (r) an other than
temporary decline in operating results and enterprise value that could
lead to further non-cash goodwill, other intangible asset, investment
or property, plant and equipment impairment charges. The company
continues to monitor the uneven economic recovery in the U.S., as
well as new and developing competition and technological change,
to evaluate whether any indicators of impairment exist, particularly
for those reporting units where fair value is closer to carrying value.
28
Executive Summary
Gannett Co., Inc. is a leading international media and marketing
solutions company operating primarily in the United States and the
United Kingdom (U.K.). Approximately 90% of 2012 consolidated
revenues are from domestic operations and approximately 10% are
from foreign operations, primarily in the U.K.
Gannett implements its strategy and manages its operations
through three business segments: Publishing, Digital and
Broadcasting (television). The Publishing Segment includes the
operations of 99 daily publications in the U.S., U.K. and Guam,
about 500 non-daily local publications in the United States and
Guam and more than 200 such titles in the U.K. Its 82 U.S. daily
publications, including USA TODAY, the nation’s number one
newspaper in print circulation, with an average circulation of
approximately 1.7 million, have a combined daily average paid
circulation of 4.7 million, which is the nation’s largest publishing
group in terms of circulation. Together with the 17 daily paid-for
publications its Newsquest division operates in the U.K., the total
average daily circulation of its 99 domestic and U.K. daily
publications was approximately 5.2 million for 2012. Daily
newspapers also operate web sites, mobile and tablet products which
are tightly integrated with publishing operations. The company’s
publishing operations also have strategic business relationships with
online affiliates including CareerBuilder, Classified Ventures,
ShopLocal.com and Topix.
The Publishing Segment also includes commercial printing;
newswire; marketing and data services operations.
The company’s Digital Segment includes CareerBuilder,
PointRoll, ShopLocal and Reviewed.com. CareerBuilder is the
global leader in human capital solutions, helping companies to
target, attract and retain talent. Its online job site, CareerBuilder.com,
is the largest in North America with the highest traffic and revenue.
CareerBuilder is also rapidly expanding its international operations.
Through its Broadcasting Segment, the company owns and
operates 23 television stations with affiliated digital platforms sites
covering 18.1% of the U.S. population in markets with a total of
nearly 21 million households. This segment also includes Captivate
Network, a national news and entertainment network that delivers
programming and full-motion video advertising on video screens
located in elevators of office towers and select hotel lobbies across
North America.
Operating results summary: Operating revenues were $5.4
billion in 2012, an increase of 2% from $5.2 billion in 2011. This
represents the first year-over-year increase in company-wide revenue
since 2006.
Publishing revenues were $3.7 billion for 2012 or 3% below
2011 levels, reflecting lower advertising demand partially offset by a
5% increase in circulation revenue due to the roll out of the all-
access content subscription model throughout 2012. Circulation
revenue grew significantly during the year as the content
subscription model was rolled out in waves to 78 domestic markets
throughout the year.
Digital Segment revenues totaled $719 million for 2012, an
increase of 5%, reflecting solid revenue growth at CareerBuilder as
it gained strength and market share domestically and as it expanded
its reach domestically and internationally through key acquisitions.
Broadcast revenues and operating results for 2012 were the best
results ever for the Broadcast Segment. Revenues for 2012 were
$906 million or 25% higher than 2011 levels, reflecting record
political and Summer Olympic revenue achieved in 2012. Political
revenues totaled $150 million in 2012 while the Summer Olympics
generated $37 million in revenue, of which $4 million was political
that aired during the Olympics and is included in both the political
and Olympic categories. Significantly higher retransmission and
digital television revenues also contributed to the increase. Just as
importantly, the Broadcasting Segment increased its market share in
2012, reflecting the value of its content and format, while retaining
its loyal base.
Digital revenues company-wide, including the Digital Segment
and all digital revenues generated by other business segments, were
approximately $1.3 billion in 2012, over 24% of total operating
revenues and an increase of 19% compared to 2011. The increase
was driven primarily by the impact of the all-access content
subscription model as well as higher revenue associated with digital
advertising and marketing solutions across all segments.
Total operating costs increased by 3% to $4.6 billion for 2012,
due to an increase in Broadcasting and Digital Segment expenses
related to higher revenues, increased facility consolidation and asset
impairment charges, the extra week in 2012 and strategic initiative
investments made throughout the year. These increases were
partially offset by continued cost reduction and cost efficiency
efforts company-wide.
Fiscal year: The company’s fiscal year ends on the last Sunday
Newsprint expense for publishing was 6% lower than in 2011
of the calendar year. The company’s 2012 fiscal year ended on
Dec. 30, 2012, and encompassed a 53-week period. The company’s
2011 and 2010 fiscal years encompassed 52-week periods.
Discontinued operations: Unless stated otherwise, as discussed
in the section titled “Discontinued operations,” all of the information
contained in Management’s Discussion and Analysis of Financial
Condition and Results of Operations relates to continuing operations.
Therefore, the results of The Honolulu Advertiser and its related
assets, which were sold in May 2010, and a small directory
publishing operations sold in June 2010, are excluded for all periods
covered by this report. These transactions are discussed in more
detail on page 38 in the discontinued operations section of this
report.
due to a decline in consumption.
The company reported operating income for 2012 of $790
million compared to $831 million in 2011, a 5% decrease.
The company’s net equity income in unconsolidated investees
for 2012 was $22 million, an increase of $14 million over 2011. This
increase reflects better results at Classified Ventures as well as
reduced impairment charges in 2012.
Interest expense was $150 million in 2012, a decrease of $23
million compared to 2011, reflecting significantly lower average
debt balances partially offset by higher average interest rates. From
its strong operating cash flow and its disciplined liquidity
management, the company reduced its long-term debt by $328
million or 19% in 2012, by $920 million or 39% over the last two
years and by $2.7 billion or 65% over the last five years.
The company reported income from continuing operations
attributable to Gannett Co., Inc. of $424 million or $1.79 per diluted
share for 2012 compared to $459 million or $1.89 per diluted share
for 2011.
29
Net income attributable to noncontrolling interests was $51
During the quarter ended Dec. 30, 2012, the company voluntarily
million in 2012, an increase of 23% or $9 million over 2011,
reflecting significantly improved operating results at CareerBuilder.
In early 2012, the company increased its annual dividend by 150
percent to $0.80 per share and announced plans to accelerate its
stock buyback program. During 2012, the company paid out $159
million in dividends and repurchased over 10 million shares at a cost
of $154 million.
Outlook for 2013: For 2013, the company expects digital
revenue growth will be partially offset by a decline in broadcasting
revenue. Publishing revenue is expected to stabilize in 2013, driven
primarily by the staggered roll out in 2012 of the all-access content
subscription model and revenue growth from digital marketing
services. Digital Segment revenue is expected to continue growing
primarily due to an increase at CareerBuilder. Broadcasting revenue
comparisons for 2013 will be challenging against the strong 2012
Summer Olympics and politically related advertising totaling $183
million, as well as the move of the Super Bowl from the company’s
12 NBC affiliates in 2012 to its six CBS affiliates in 2013. Partially
offsetting the absence of these revenues, the company expects
growth in core advertising revenue, retransmission revenue and
digital revenue from the company's television stations.
Total operating expenses are expected to decrease slightly as
asset impairment charges incurred in 2012 are not expected to
repeat. Newsprint expense is also expected to be lower as
consumption will continue to decrease. Newsprint prices are also
expected to be lower in the U.K. These decreases will be partially
offset by increased spending on initiatives such as mobile and tablet
relaunches, digital marketing services and travel partner programs.
Basis of reporting
Following is a discussion of the key factors that have affected the
company’s accounting for or reporting on the business over the last
three fiscal years. This commentary should be read in conjunction
with the company’s financial statements, selected financial data and
the remainder of this Form 10-K.
Critical accounting policies and the use of estimates: The
preparation of financial statements in conformity with generally
accepted accounting principles requires management to make
estimates and assumptions about future events that affect the
amounts reported in the financial statements and accompanying
notes. Actual results could significantly differ from those estimates.
The company believes that the following discussion addresses the
company’s most critical accounting policies, which are those that are
important to the presentation of the company’s financial condition
and results of operations and require management’s most difficult,
subjective and complex judgments.
Goodwill: As of Dec. 30, 2012, goodwill represented
approximately 45% of the company’s total assets. Goodwill
represents the excess of acquisition cost over the fair value of assets
acquired, including identifiable intangible assets, net of liabilities
assumed. Goodwill is tested for impairment on an annual basis 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.
changed the date of its annual goodwill and indefinite-lived
intangible assets impairment testing from the last day of the fourth
quarter to the first day of the fourth quarter. This change is
preferable as it provides the company with additional time to
complete its annual goodwill and indefinite-lived intangible asset
impairment testing in advance of its year-end reporting and results in
better alignment with the company’s strategic planning and
forecasting process. In accordance with U.S. generally accepted
accounting principles, the company will continue to perform interim
impairment testing should circumstances requiring it arise. The
company believes that this accounting change is appropriate and
does not result in the delay, acceleration or avoidance of an
impairment charge. This change is not applied retrospectively as it is
impracticable to do so because retrospective application would
require application of significant estimates and assumptions with the
use of hindsight. Accordingly, the change will be applied
prospectively.
Under recent guidance, prior to performing the annual two-step
goodwill impairment test, the company is first permitted to perform
a qualitative assessment to determine if the two-step quantitative test
must be completed. The qualitative assessment considers events and
circumstances such as macroeconomic conditions, industry and
market conditions, cost factors and overall financial performance, as
well as company and specific reporting unit specifications. If after
performing this assessment, the company concludes it is more likely
than not that the fair value of a reporting unit is less than its carrying
amount, then it is required to perform a two-step quantitative test.
Otherwise, the two-step test is not required. In the first step of the
quantitative test, the company is required to determine the fair value
of each reporting unit and compare it to the carrying amount of the
reporting unit. Fair value of the reporting unit is determined using
various techniques, including multiple of earnings and discounted
cash flow valuation. Determining the fair value of the reporting units
is judgmental in nature and involves the use of significant estimates
and assumptions. These estimates and assumptions include changes
in revenue and operating margins used to project future cash flows,
discount rates, valuation multiples of entities engaged in the same or
similar lines of business and future economic and market conditions.
The fair value of the company’s reporting units is also impacted by
the company’s overall market capitalization. If the carrying amount
of the reporting unit exceeds the fair value of the reporting unit, the
company performs the second step of the impairment test, as this is
an indication that the reporting unit goodwill may be impaired. In
the second step of the impairment test, the company determines the
implied fair value of the reporting unit’s goodwill. If the carrying
value of a reporting unit’s goodwill exceeds its implied fair value,
then an impairment of goodwill has occurred and the company must
recognize an impairment loss for the difference between the carrying
amount and the implied fair value of goodwill.
The company used both the qualitative and quantitative
assessments for its goodwill impairment testing during 2012.
In 2012, the company recognized impairment charges in its
Digital Segment totaling $90 million to bring recorded goodwill
equal to implied fair value based on future projections for each
reporting unit. The impairment charges coincide with the reduction
in advertising from a large customer during the fourth quarter of
2012 as well as a change in strategy and updated financial
projections reflective of these events.
30
Television FCC licenses for the Atlanta and Denver markets are
not subject to amortization and are tested for impairment annually
(first day of fourth quarter), or more frequently if events or changes
in circumstances indicate that the asset might be impaired. The
impairment test consists of a comparison of the fair value of the
license with its carrying amount. Fair value is estimated using an
income approach referred to as the “Greenfield Approach.” This
method requires multiple assumptions relating to the future
prospects of each individual television station including, but not
limited to: (i) expected long-term market growth characteristics,
(ii) station revenue shares within a market, (iii) future expected
operating expenses, (iv) costs of capital and (v) appropriate discount
rates. This analysis confirmed the carrying value exceeded the fair
value and as such, no impairment of these licenses was required. In
addition, the company does not believe that either of these FCC
licenses is at risk of requiring an impairment charge for the
foreseeable future.
Other Long-Lived Assets (Property, Plant and Equipment and
Amortizable Intangible Assets): Property, plant and equipment are
recorded at cost and are depreciated on a straight-line method over
the estimated useful lives of such assets. Changes in circumstances,
such as technological advances or changes to the company’s
business model or capital strategy, could result in actual useful lives
differing from company estimates. In cases where the company
determines that the useful life of buildings and equipment should be
shortened, the company would depreciate the asset over its revised
remaining useful life thereby increasing depreciation expense.
Accelerated depreciation was recorded in the years 2010-2012
for certain property, plant and equipment, reflecting specific
decisions to consolidate production and other business services,
primarily affecting the Publishing Segment.
The company reviews its property, plant and equipment assets
for potential impairment at the asset group level (generally at the
local business level) by comparing the carrying value of such assets
with the expected undiscounted cash flows to be generated by those
asset groups/local business units. Due to expected continued cash
flow in excess of carrying value from its businesses, no property,
plant or equipment assets were considered impaired.
The company’s amortizable intangible assets consist mainly of
customer relationships. These asset values are amortized
systematically over their estimated useful lives. An impairment test
of these assets would be triggered if the undiscounted cash flows
from the related asset group (business unit) were to be less than the
asset carrying value. No such triggering events relative to those
assets have occurred.
For certain of these amortizable intangible assets, a significant
deterioration in operating results at the underlying business unit
could lead to future impairment charges.
The company has 5 major reporting units (defined as reporting
units with goodwill in excess of $50 million) which accounted for
95% of its goodwill balance at Dec. 30, 2012. The following table
shows the aggregate goodwill for these units summarized at the
segment level:
In millions of dollars
Segment
Publishing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Broadcast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Digital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Goodwill Balance
543
1,619
543
In the case of the Publishing Segment there are three major
reporting units that comprise the goodwill balance shown above. The
aggregate estimated fair value of these reporting units exceeded the
carrying value at the most recent test. In order for these reporting
units to fail step one of the goodwill impairment test, the estimated
value of the reporting units would have to decline by over 35% for
U.S. Community Publishing (including Gannett Publishing
Services), Newsquest and the USA TODAY group (which includes
USA TODAY brand properties and USA WEEKEND).
For the Broadcast Segment, which is considered a single
reporting unit, estimated fair value exceeded carrying value. In order
for the Broadcast reporting unit to fail step one of the goodwill
impairment test, its estimated fair value would have to decline by
over 40%.
The Digital Segment balance represents CareerBuilder, where
the company performed a qualitative assessment and concluded that
it was more likely than not that the fair value was greater than the
carrying value.
Fair value of the reporting units depends on several factors,
including the future strength of the economy in the company’s
principal publishing, digital and broadcast markets. Generally soft
and uneven recoveries in the U.S. and U.K. markets have had an
adverse effect on most of the company’s reporting units in recent
years. New and developing competition as well as technological
change could also adversely affect fair value estimates in the near
term for certain of the company’s reporting units, particularly those
in the Digital Segment (exclusive of CareerBuilder). Any one or a
combination of these factors could lead to declines in reporting unit
fair values and result in goodwill impairment charges.
Indefinite Lived Intangibles: This asset grouping consists of
mastheads and trade names for publishing and digital businesses and
FCC licenses for television stations.
Local mastheads (publishing periodical titles and web site
domain names) and other trade names are not subject to amortization
and as a result they are tested for impairment annually (first day of
the fourth quarter), or more frequently if events or changes in
circumstances suggest that the asset might be impaired. The
impairment test consists of a comparison of the fair value of each
masthead/domain name or trade name with its carrying amount. The
company uses a “relief from royalty” approach which utilizes a
discounted cash flow model to determine the fair value of each
masthead/domain name or trade name. Management’s judgments
and estimates of future operating results in determining the reporting
unit fair values are consistently applied to each underlying business
in determining the fair value of each intangible asset. No
impairments in this asset category are indicated at this time. For
certain mastheads and other trade names, a deterioration in operating
results at the underlying business units could lead to future
impairment charges.
31
Pension and Other Postretirement Benefits: The determination
of pension plan obligations and expense is based on a number of
actuarial assumptions. Two critical assumptions are the expected
long-term rate of return on plan assets and the discount rate applied
to pension plan obligations. For other postretirement benefit (OPEB)
plans, which provide for certain health care and life insurance
benefits for qualifying retired employees and which are not funded,
critical assumptions in determining OPEB obligations and expense
are the discount rate and the assumed health care cost-trend rates.
The company and its subsidiaries have various retirement plans,
including plans established under collective bargaining agreements.
The company’s principal retirement plan is the Gannett Retirement
Plan (GRP). The GRP accounted for 73% of company pension plan
assets and 69% of company pension obligations at Dec. 30, 2012.
Substantially all GRP participants’ benefits were frozen effective
Aug. 1, 2008. At the end of 2012, the plan’s projected benefit
obligation was $2.46 billion and its plan assets were valued at $1.87
billion. The company's funding target attainment percentage, as
defined by the IRS and based on the 2012 annual update, is 95%.
The projected benefit obligation was negatively impacted by
generally lower discount rates. This impact was offset by better than
expected investment returns on plan assets.
To estimate the long-term rate of return on pension assets, the
company uses a process that incorporates actual historical asset-class
returns and an assessment of expected future performance. The
company used an assumption of 8.25% for its expected return on
GRP assets for 2012. Changes in the expected long-term return on
plan assets would increase or decrease pension plan expense. As an
indication of the sensitivity of pension expense to the long-term rate
of return assumption, a 50 basis point decrease in the expected rate
of return on GRP assets would have increased estimated pension
plan expense for 2012 by approximately $8.8 million. Actual rates of
return on plan assets may vary significantly from estimates due to
changes in financial markets.
U.S. accounting rules specify that discount rates reflect rates at
which pension benefits could be effectively settled using high
quality fixed income investments with maturities similar to the
benefit payments. The company developed the discount rate for the
GRP by matching the projected payments underlying the pension
benefit obligation to a modeled yield curve consisting of high-
quality Aa-graded non-callable bonds. A decrease in the discount
rate for the GRP would increase the pension obligations, thus
changing the funded status recorded on the company’s Consolidated
Balance Sheet. As an indication of the sensitivity of pension
liabilities to the discount rate assumption, a 50 basis point reduction
in the discount rate applied to the GRP at the end of 2012 would
have increased plan obligations by approximately $115 million. A 50
basis point change in the discount rate used to calculate 2012
expense for the plan would have changed total pension plan expense
for 2012 by approximately $0.8 million.
The company’s principal pension plan in the U.K., the
Newsquest Pension Scheme, has also been frozen to future accruals.
At Dec. 30, 2012, this plan had a projected benefit obligation of
$798 million, assets of $606 million and was therefore 76% funded.
This plan would be subject to the same accounting impacts as the
GRP, although by lesser amounts, based upon changes in discount
rate and investment return assumptions.
The company developed its discount rate for its OPEB plans
using the same methodology as that described for the GRP. As an
indication of discount rate sensitivity to the determination of
estimated OPEB expense in 2012, a 50 basis point change in the
discount rate for the company’s OPEB plans would change estimated
OPEB expense by approximately $0.6 million and would have
changed OPEB liabilities at the end of 2012 by approximately $7.7
million. The assumed health care cost-trend rate also affects OPEB
32
liabilities and expense. A 100 basis point increase in the health care
cost trend rate would result in an increase of approximately $7.0
million in the Dec. 30, 2012 postretirement benefit obligation and a
$0.3 million increase in the aggregate service and interest cost
components of 2012 expense.
Income Taxes: The company’s annual tax rate is based on its
income, statutory tax regulations and rates, and tax planning
opportunities available to it in the various jurisdictions in which it
operates. Significant judgment is required in determining the
company’s annual tax expense and in evaluating its tax positions.
Tax law requires items to be included in the company’s tax
returns at different times than when the items are reflected in the
financial statements. As a result, the annual tax expense reflected in
the consolidated statements of income is different than that reported
in the tax returns. Some of these differences are permanent, such as
expenses recorded for accounting purposes that are not deductible in
the returns, and some differences are temporary and reverse over
time, such as depreciation expense. Temporary differences create
deferred tax assets and liabilities. Deferred tax liabilities generally
represent tax expense recognized in the financial statements for
which payment has been deferred, or expense for which a deduction
has been taken already in the tax return but the expense has not yet
been recognized in the financial statements. Deferred tax assets
generally represent items that can be used as a tax deduction or
credit in tax returns in future years for which a benefit has already
been recorded in the financial statements. Valuation allowances are
established when necessary to reduce deferred income tax assets to
the amounts the company believes are more likely than not to be
recovered. In evaluating the amount of any such valuation
allowance, the company considers the reversal of existing temporary
differences, the existence of taxable income in prior carry back
years, available tax planning strategies and estimates of future
taxable income for each of its taxable jurisdictions. The latter two
factors involve the exercise of significant judgment. As of Dec. 30,
2012, deferred tax asset valuation allowances totaled $76 million,
primarily related to foreign tax credits, foreign losses and state net
operating losses available for carry forward to future years. Although
realization is not assured, the company believes it is more likely than
not that all other deferred tax assets for which no valuation
allowances have been established will be realized. Projected future
taxable income is the principal basis upon which this assumption is
made.
The company determines whether it is more likely than not that a
tax position will be sustained upon examination by the appropriate
taxing authorities before any part of the benefit is recorded in the
financial statements. A tax position is measured as the portion of the
tax benefit that is greater than 50% likely to be realized upon
settlement with a taxing authority (that has full knowledge of all
relevant information). The company may be required to change its
provision for income taxes when the ultimate deductibility of certain
items is challenged or agreed to by taxing authorities, when
estimates used in determining valuation allowances on deferred tax
assets significantly change, or when receipt of new information
indicates the need for adjustment in valuation allowances.
Additionally, future events, such as changes in tax laws, tax
regulations, or interpretations of such laws or regulations, could have
an impact on the provision for income tax and the effective tax rate.
Any such changes could significantly affect the amounts reported in
the consolidated financial statements in the year these changes occur.
The effect of a one percentage point change in the effective tax
rate for 2012 would have resulted in a change of $6 million in the
provision for income taxes and net income attributable to
Gannett Co., Inc.
RESULTS OF OPERATIONS
The table below presents the principal components of publishing
Consolidated summary – continuing operations
A consolidated summary of the company’s results is presented
below.
In millions of dollars, except per share amounts
2012 Change
2011 Change
2010
Operating revenues . . . . . . . $ 5,353
Operating expenses . . . . . . . $ 4,563
Operating income . . . . . . . . $ 790
Non-operating expense, net . $ 119
Income from continuing
operations
2%
3%
$ 5,240
$ 4,409
(4%)
(1%)
$ 5,439
$ 4,439
(5%)
$ 831
(17%)
$ 1,000
(33%)
$ 178
16% $ 154
Per share – basic . . . . . . . . $ 1.83
Per share – diluted . . . . . . $ 1.79
(5%)
(5%)
$ 1.92
(19%)
$ 2.38
$ 1.89
(20%)
$ 2.35
revenues for the last three years.
Publishing operating revenues, in millions of dollars
Advertising . . . . . . . . . . . . $ 2,356
(6%)
2012 Change
2011 Change 2010(a)
$ 2,711
(7%)
$ 2,511
Circulation . . . . . . . . . . . . .
1,117
5%
1,064
(2%)
1,087
Commercial printing and
other. . . . . . . . . . . . . . . . . .
255 —%
256
1%
254
Total. . . . . . . . . . . . . . . . . . $ 3,728
(a) Numbers do not sum due to rounding
(3%)
$ 3,831
(5%)
$ 4,051
The table below presents the principal components of publishing
advertising revenues for the last three years. These amounts include
ad revenue from printed publications as well as online ad revenue
from web sites, mobile and tablets affiliated with the publications.
A discussion of operating results of the company’s Publishing,
Advertising revenues, in millions of dollars
Digital and Broadcasting Segments, along with other factors
affecting net income attributable to Gannett, is as follows:
Publishing Segment
In addition to its domestic local publications and affiliated digital
platforms, the company’s publishing operations include Gannett
Publishing Services, USA TODAY group (which includes
USA TODAY brand properties and USA WEEKEND), Newsquest,
which produces daily and non-daily publications in the U.K., Clipper
Magazine, Gannett Healthcare Group, Gannett Government Media
and other advertising and marketing services businesses. The
Publishing Segment in 2012 contributed 70% of the company’s
revenues.
Publishing operating results were as follows:
Publishing operating results, in millions of dollars
2012(a) Change 2011(a) Change
2010
Revenues . . . . . . . . . . . . . . $ 3,728
(3%)
$ 3,831
Expenses . . . . . . . . . . . . . .
3,360 —%
3,354
(5%)
(1%)
$ 4,051
3,403
Operating income . . . . . . . $
369
(23%)
$
478
(26%)
$
648
(a) Numbers do not sum due to rounding
Foreign currency translation impacts: The average exchange
rate used to translate U.K. publishing results was 1.58 for 2012, 1.60
for 2011 and 1.55 for 2010. Translation fluctuations impact U.K.
publishing revenue, expense and operating income results.
Publishing operating revenues: Publishing operating revenues
are derived principally from advertising and circulation sales, which
accounted for 63% and 30%, respectively, of total publishing
revenues in 2012. Ad revenues include those derived from
advertising placed with print products as well as publishing related
Internet web sites, mobile and tablet applications. These include
revenue in the classified, retail and national ad categories. Other
publishing revenues are mainly from commercial printing.
2012 Change
2011 Change
2010
Retail . . . . . . . . . . . . . . . . . $ 1,230
(6%)
$ 1,303
(6%)
$ 1,384
National . . . . . . . . . . . . . . .
Classified . . . . . . . . . . . . . .
396
730
Total ad revenue . . . . . . . . $ 2,356
(11%)
(4%)
(6%)
446
762
$ 2,511
(11%)
(8%)
(7%)
501
826
$ 2,711
Publishing revenue comparisons 2012-2011:
Advertising Revenue: Advertising revenues for 2012 declined
$155 million or 6%, reflecting the impact of the soft economy on
advertising demand. Quarterly advertising comparisons improved
sequentially throughout 2012, with the fourth quarter being the best
comparison quarter of the year (even after removing the extra week
impact), reflecting strengthening sectors such as automotive.
The table below presents the percentage change in 2012
compared to 2011 for each of the major ad revenue categories, by
quarter.
Advertising Revenue Comparisons by Quarter
Q1
Retail . . . . . . . . . . . . . . . . . . . .
(8%)
National . . . . . . . . . . . . . . . . . .
(14%)
Classified . . . . . . . . . . . . . . . . .
Total advertising . . . . . . . . . . .
(6%)
(8%)
Q2
(7%)
(17%)
(5%)
(8%)
Q3
(7%)
(8%)
(5%)
(7%)
Q4
(1%)
(7%)
1%
(2%)
Ad revenues were lower in both the U.S. and the U.K during
2012. In the U.K., in local currency, ad revenues comparisons were
comparable to that of the U.S. Due to a slightly lower average
exchange rate for 2012, in U.S. dollars, Newsquest ad revenues were
down 7% compared with a 6% decline for U.S. publishing.
33
The table below presents the percentage change for the retail,
Circulation Revenue: Publishing circulation revenues increased
national, and classified categories for 2012 compared to 2011.
Advertising Revenue Year Over Year Comparisons
U.S. Publishing
Newsquest
(in pounds)
Total Publishing
(constant currency)
Retail . . . . . . . . . .
National . . . . . . . .
Classified . . . . . . .
Total . . . . . . . . . . .
(6%)
(12%)
(3%)
(6%)
(4%)
(5%)
(7%)
(6%)
(5%)
(11%)
(4%)
(6%)
Retail ad revenues were down $73 million or 6% in 2012. In the
U.S., revenues were down in most principal categories, with the
more significant declines occurring in the financial and
telecommunication categories, partially offset by an increase in retail
online advertising. Retail ad revenues were down 4% in the U.K. on
a constant currency basis.
National ad revenues were down $51 million or 11% in 2012,
primarily due to lower ad sales for USA TODAY and its associated
businesses, as well as for U.S. Community Publishing.
The table below presents the percentage change in classified
categories for 2012 compared to 2011.
Classified Revenue Year Over Year Comparisons
U.S. Publishing
Newsquest
(in pounds)
Total Publishing
(constant currency)
Automotive . . . . .
Employment. . . . .
Real Estate . . . . . .
Legal . . . . . . . . . .
Other . . . . . . . . . .
Total . . . . . . . . . . .
2%
(3%)
(11%)
(1%)
(6%)
(3%)
(13%)
(4%)
(9%)
—%
(5%)
(7%)
—%
(3%)
(10%)
(1%)
(6%)
(4%)
Classified ad revenues declined $32 million or 4% in 2012 with a
decline of 3% in the U.S. and 8% in the U.K. Domestically,
automotive advertising was up 2% for the year while employment
declined 3%. Real estate continued to reflect the housing issues
nationwide and was down 11% for the year. Classified advertising
results in the U.K. lagged results in the U.S. as automotive,
employment and real estate declined in local currency 13%, 4% and
9%, respectively.
Digital advertising revenues in the Publishing Segment were up
for the year in the U.S. as well as at Newsquest in the U.K.
Revenues benefited from the company’s continued focus on digital
marketing services. U.S. Community Publishing digital advertising
revenues were up 6%, reflecting increases in the automotive and
retail categories. Digital ad revenues at USA TODAY and its
associated brands were up by 38%, while digital ad revenues at
Newsquest increased 10% in local currency.
by $53 million or 5% over 2011, reflecting the first company-wide
circulation revenue increase since 2006. Circulation revenues were
up as a result of the implementation of the all-access content
subscription model throughout 2012 and the favorable impact of the
extra week in 2012. Late in the fourth quarter of 2012, the company
completed the final phase of the all-access roll out across 78 U.S.
community publishing markets. Company-wide circulation revenue
ramped up throughout the year and was up 17% in the fourth quarter
(up almost 10% excluding the extra week in the fourth quarter of
2012). Circulation revenues increased 8% in 2012 at the company’s
local domestic publishing units. Circulation revenue in the U.K. was
flat compared to last year in local currency.
Revenue comparisons reflect generally lower circulation
volumes more than offset by price increases. Daily average print and
digital, replica and non-replica circulation, excluding USA TODAY,
declined 8%, while Sunday net paid circulation declined 3%.
Circulation revenues were lower at USA TODAY, reflecting
lower average daily circulation volume. USA TODAY’s average
daily circulation for 2012 declined 2% to 1.7 million copies.
For local publishing operations in the U.S. and U.K., morning
circulation accounted for approximately 95% of total daily volume,
while evening circulation accounted for 5%.
Local publishing circulation volume is summarized in the table
below. In 2012, the company reclassified certain circulation volume
from evening to morning distribution due a change in delivery time.
All prior period amounts have been reclassified to conform to the
new classifications. In addition, verified circulation copies have
been added for all periods.
Total average circulation volume, print and digital, replica and non-replica
in thousands
2012 Change
2011 Change
2010
Local Publications
Morning. . . . . . . . . . . . .
3,240
Evening . . . . . . . . . . . . .
Total daily . . . . . . . . . . .
Sunday. . . . . . . . . . . . . .
177
3,417
5,003
(8%)
(8%)
(8%)
(3%)
3,512
193
3,705
(6%)
(7%)
(6%)
5,150 —%
3,722
207
3,929
5,171
Other Revenue: Commercial printing and other publishing
revenues were flat in 2012 and totaled $255 million. A decrease in
commercial print revenues was mostly offset by the impact of the
extra week in 2012. Commercial printing revenues in the U.S. and
U.K. combined, accounted for approximately 58% of total other
revenues.
Outlook for 2013: The company expects publishing revenue to
stabilize in 2013 driven primarily by the staggered roll out in 2012
of the all-access content subscription model and revenue growth
from digital marketing services.
34
Publishing revenue comparisons 2011-2010:
Advertising Revenue: Advertising revenues for 2011 declined
$199 million or 7% reflecting the impact of the soft economy on
advertising demand.
Ad revenues were lower in both the U.S. and the U.K. In the
U.K., in local currency, ad revenues were down more than in the
U.S. Because U.K. ad revenue benefited from a higher average
exchange rate for 2011, in U.S. dollars, Newsquest ad revenues were
down 6% compared with an 8% decline for U.S. publishing.
Publishing expense comparisons 2011-2010: Publishing
operating costs decreased 1% to $3.4 billion in 2011, primarily due
to the impact of continued cost control and efficiency efforts,
partially offset by an increase in workforce restructuring charges of
$64 million. These charges include costs of $35 million associated
with the transition of printing and publishing services from the
company’s Cincinnati production facility to a non-Gannett
publishing facility in Columbus, OH.
Publishing payroll costs were down 6%, reflecting the impact of
Retail ad revenues were down $82 million or 6% in 2011. In the
headcount reductions across the segment.
U.S., revenues were down in most principal categories, with the
more significant declines occurring in the department store,
telecommunications and home improvement categories, partially
offset by an increase in retail online advertising. Retail ad revenues
were down 6% in the U.K. on a constant currency basis.
National ad revenues were down $54 million or 11% in 2011,
primarily due to lower ad sales for USA TODAY and its associated
businesses, as well as for U.S. Community Publishing.
Classified ad revenues decreased $64 million or 8% in 2011 with
a decline of 7% in the U.S. and 9% in the U.K. Domestically,
employment advertising was up 2% for the year while automotive
declined 2%. Real estate reflected the housing issues across the
country and was down 18% for the year. Classified advertising in the
U.K. was worse than in the U.S. as automotive, employment and real
estate declined in local currency 13%, 20% and 9%, respectively.
Digital revenues in the Publishing Segment were up for 2011 in
the U.S. as well as at Newsquest in the U.K. U.S. Community
Publishing digital revenues were up 9%, reflecting strong increases
in the automotive, employment and retail categories. Digital
revenues at USA TODAY and its associated brands were up by a low
double digit percentage for the year, while digital revenues at
Newsquest increased 5% in local currency.
Circulation Revenue: Publishing circulation revenues declined
$23 million in 2011 or 2% over 2010. Circulation revenues were
lower in the U.S., and in the U.K., in local currency. Revenue
comparisons reflect generally lower circulation volumes partially
offset by price increases. Daily average paid and verified circulation,
excluding USA TODAY, declined 6%, while Sunday average paid
and verified circulation declined slightly.
Circulation revenues were lower at USA TODAY, reflecting
lower average daily circulation volume. USA TODAY’s average
daily circulation for 2011 declined 2%.
For local publishing operations in the U.S. and U.K., morning
circulation accounted for approximately 95% of total daily volume,
while evening circulation accounted for 5%.
Other Revenue: Commercial printing and other publishing
revenues increased 1% to $256 million in 2011 due primarily to an
increase in commercial printing revenues in the U.K. Commercial
printing revenues in the U.S. and U.K. accounted for approximately
58% of total other revenues.
Publishing expense comparisons 2012-2011: Publishing
operating costs increased slightly to $3.4 billion in 2012 as
continued cost control and efficiency efforts were offset by strategic
initiative spending of $68 million, higher pension expense and the
impact of the extra week in 2012. A majority of the strategic
spending in 2012 was in conjunction with the roll out of the all-
access content subscription model, digital relaunches and the
investments made in the company’s digital marketing services
business.
Publishing payroll costs were relatively unchanged compared to
2011 reflecting the impact of headcount reductions across certain
divisions offset by the additional week in 2012.
Newsprint expense was down 6% in 2012 due to a decline in
consumption.
35
Newsprint expense was up 3%, reflecting lower consumption,
down 9%, offset by a 13% increase in usage prices.
Outlook for 2013: The company expects 2013 expenses to be
impacted by continued cost control and efficiency efforts across the
segment, offset by increased strategic initiative investment in mobile
and tablet relaunches, digital marketing services and travel partner
programs as well as ongoing sales support, service and training
associated with previously launched initiatives. Newsprint expense
will be lower due primarily to a decrease in consumption.
Publishing operating results 2012-2011: Publishing operating
income decreased to $369 million in 2012 from $478 million in
2011. The principal factors affecting reported operating results
comparisons for the full year were the following:
• Lower operating results in the U.S. and U.K. as ad revenue
categories were affected by the impact of the soft economy on
advertising demand, partially offset by an increase in circulation
revenue at the company’s U.S. Community Publishing
operations;
• Strategic initiative spending in 2012 of $68 million primarily
related to the roll out of the all-access content subscription
model, digital relaunches and investments made to the
company’s digital marketing service business;
• Special charges for facility consolidation and asset impairment
as well as workforce restructuring totaled $74 million in 2012
and $100 million in 2011;
• Positive impact of a significant increase in digital revenue;
• Positive impact of the extra week in 2012;
• Higher pension expenses in 2012; and
• A decrease in newsprint expense, primarily due to a decline in
usage.
Publishing operating results 2011-2010: Publishing operating
income decreased to $478 million in 2011 from $648 million in
2010. The principal factors affecting reported operating results
comparisons for the full year were the following:
• Lower operating results at most U.S. and U.K. properties as ad
revenue categories were affected by the impact of the soft
economy on advertising demand;
• An increase in newsprint expense as a significant decline in
usage was not sufficient to offset an increase in usage prices;
• Higher charges in 2011 from workforce restructuring efforts and
consolidations;
• Positive impact of a significant increase in digital revenue; and
• Positive impact of currency translation at a higher rate in 2011.
Digital Segment
The Digital business segment includes CareerBuilder, PointRoll,
ShopLocal and Reviewed.com.
Digital revenues, expenses and operating income were as
follows:
In millions of dollars
2012 Change
2011 Change
2010
Revenues . . . . . . . . . . . . . . $
Expenses . . . . . . . . . . . . . .
719
677
5%
21%
Operating income . . . . . . . $
42
(67%)
$
$
686
561
125
11% $
5%
50% $
618
535
83
Digital revenues increased $32 million or 5% over 2011,
primarily reflecting a strong increase in revenues at CareerBuilder.
Digital expenses in 2012 increased 21% to $677 million,
primarily due to $90 million of impairment charges recognized in
2012 as well as an increase in expenses at CareerBuilder associated
with its revenue growth.
As a result of these factors, Digital Segment operating income
decreased 67% to $42 million in 2012.
CareerBuilder operations are predominately based in North
America, although expansion efforts continue in parts of Europe,
Asia and South America. CareerBuilder is the nation’s largest online
recruitment and career advancement source for employers,
employees, recruiters and job seekers. Its North American network
revenue is driven mainly from its own sales force but it also derives
revenues from its owner affiliated businesses, including the
company’s local media organizations, which sell various
CareerBuilder employment products including upsells of print
employment ads. North American network revenue increased 5%,
compared to last year, with substantially all the increase attributable
to revenues CareerBuilder derived from its own sales efforts.
Revenues derived from its owner-affiliated newspapers were down
1% in 2012, while revenues from its own sales efforts were up 6% in
2012. Since CareerBuilder is consolidated, for Gannett’s financial
reporting purposes, CareerBuilder revenues exclude amounts
recorded at Gannett-owned local media organizations.
Digital results 2011-2010: Digital revenues increased $68
million or 11% over 2010, reflecting primarily a significant increase
in revenues at CareerBuilder.
Digital expenses in 2011 increased 5% to $561 million, primarily
due to an increase in expenses at CareerBuilder associated with its
revenue growth. Expenses were also higher at PointRoll as
investments in new products and services are being made there. As
an offset to these factors, an intangible impairment charge of $13
million was reflected in digital results for 2010 which did not recur
in 2011.
As a result of all these factors, Digital Segment operating income
increased 50% to $125 million in 2011.
Outlook for 2013: The company expects Digital Segment
revenues and profits to grow in 2013, led by continued gains at
CareerBuilder.
Broadcasting Segment
The company’s broadcasting operations at the end of 2012 included
23 television stations and affiliated digital platforms in markets with
nearly 21 million households reaching 18.1% of the U.S. population.
The Broadcasting Division also includes Captivate Network.
Broadcasting revenues accounted for approximately 17% of the
company’s reported operating revenues in 2012. Broadcasting
revenues accounted for approximately 14% of the company’s
reported operating revenues in both 2011 and 2010.
Over the last three years, broadcasting revenues, expenses and
operating income were as follows:
In millions of dollars
2012 Change
Revenues . . . . . . . . . . . . . . $
Expenses . . . . . . . . . . . . . .
906
462
25% $
10%
Operating income . . . . . . . $
(a) Numbers do not sum due to rounding
444
47% $
2011 Change 2010(a)
770
(6%)
722
$
420
302
(5%)
(8%)
440
329
$
Broadcasting revenues and operating results for 2012 were the
best results ever for the Broadcast Segment. Revenues for 2012
were $906 million or 25% higher than 2011 levels, reflecting record
political and Summer Olympic revenue achieved in 2012. Political
revenues totaled $150 million in 2012 while the Summer Olympics
generated $37 million in revenue, of which $4 million was also
political. Core ad revenues, while impacted by the displacement
effect of record political revenues, were up 5% in 2012, reflecting
strong growth in the automotive, banking and medical categories.
Retransmission revenues increased 21% in 2012 and digital
television revenues increased 11% compared to 2011. Just as
importantly, the Broadcasting Segment increased its market share in
2012 reflecting the value of its content and format, while retaining
its loyal base.
Broadcast costs increased 10% to $462 million in 2012. The
increase reflects higher sales and marketing costs in 2012 associated
with the higher revenues.
As a result of all of these factors, Broadcasting Segment
operating income increased 47% to a record high of $444 million in
2012.
Broadcast results 2011-2010: Broadcast revenues decreased $47
million or 6% for 2011. Year-over-year revenue comparisons were
unfavorably impacted by $107 million in ad revenues associated
with the Winter Olympics and political/election-related advertising
in 2010. Partially offsetting the decline was a significant
improvement in core advertising, led by the automotive, banking and
medical categories. Retransmission and digital television revenue
were also significantly higher in 2011 from 2010, up 27% and 26%,
respectively.
Broadcast costs decreased 5% to $420 million in 2011. The
decrease reflects continuing cost control and efficiency efforts, lower
sales and programming costs in 2011 and certain facility
consolidation and asset impairment charges recognized in 2010 that
did not recur in 2011.
Operating income decreased 8% to $302 million in 2011,
reflecting significantly lower net political and Olympic advertising
revenues, partially offset by higher core revenues, retransmission
revenues, and digital television revenues and lower expenses.
36
Outlook for 2013: Revenue comparisons for 2013 will be
Depreciation expense was 9% lower in 2011, reflecting reduced
challenging against the record 2012 Summer Olympics and
politically related advertising totaling $183 million, as well as the
shift of the Super Bowl from the company’s twelve NBC stations to
its six CBS stations. Partially offsetting the absence of these
revenues, the company expects core advertising and retransmission
revenue increases.
Consolidated operating expenses
Over the last three years, the company’s consolidated operating
expenses were as follows:
Consolidated operating expenses, in millions of dollars
2012 Change
2011 Change
2010
Cost of sales. . . . . . . . . . $ 2,944
Selling, general and
admin. expenses. . . . . . .
1,303
(1%)
$ 2,961
(1%)
$ 2,980
7%
1,223
3%
Depreciation . . . . . . . . .
161
(3%)
166
(9%)
Amortization of
intangible assets. . . . . . .
33
5%
32
1%
Facility consolidation
and asset impairment
122
charges. . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . $ 4,563
***
3%
27
(52%)
$ 4,409
(1%)
$ 4,439
1,188
183
31
57
Total reported operating expense increased 3% to $4.56 billion in
2012, due to an increase in Broadcasting and Digital Segment
expenses related to higher revenues, increased facility consolidation
and asset impairment charges, higher pension expense, the extra
week in 2012 and $74 million of strategic initiative investments
made throughout the year. These increases were partially offset by
continued cost reduction and cost efficiency efforts company-wide
and lower newsprint expense. Payroll increased by 2% in 2012 as a
result of recent acquisitions and the impact of the extra week in
2012, partially offset by reduced headcount in certain divisions.
Depreciation expense was 3% lower in 2012, reflecting certain
assets reaching the end of their depreciable life.
The non-cash facility consolidation and asset impairment charges
for all years are more fully discussed beginning on page 38 and in
Notes 3 and 4 to the Consolidated Financial Statements.
Payroll, benefits and newsprint costs (along with certain other
production material costs), the largest elements of the company’s
normal operating expenses, are presented below, expressed as a
percentage of total pre-tax operating expenses.
Payroll and employee benefits . . . . . . . . . . . .
2012
2011
2010
45.9% 46.8% 47.4%
Newsprint and other production material . . . .
11.2% 12.1% 12.0%
Operating expense comparisons 2011-2010: Total reported
operating expense decreased 1% to $4.41 billion in 2011. Payroll
savings were significant from reduced headcount from
consolidations and restructuring efforts. Strong cost controls were in
place throughout the company, however expenses increased 5% in
the Digital Segment associated with the significant increase in its
revenue. Cost savings were also partially offset by an increase in
workforce restructuring charges of $62 million as well as a charge of
$15 million incurred for the disability-related retirement of the
company’s former chairman and chief executive officer in 2011.
37
depreciation resulting from accelerated depreciation charges
recognized in 2010 and early 2011 and certain assets reaching the
end of their depreciable life.
The non-cash facility consolidation and asset impairment charges
for all years are more fully discussed beginning on page 38 and in
Notes 3 and 4 to the Consolidated Financial Statements.
Outlook for 2013: Total operating expenses are expected to
decrease slightly as asset impairment charges incurred in 2012 are
not expected to repeat. Newsprint expense is also expected to be
lower as consumption will continue to decrease. These decreases
will be partially offset by increased spending on initiatives such as
mobile and tablet relaunches, digital marketing services and travel
partner programs.
Non-operating income and expense
Equity earnings: This income statement category reflects results
from unconsolidated minority interest investments, including the
company’s equity share of operating results from its publishing
partnerships, including the Tucson joint operating agency, the
California Newspapers Partnership and the Texas-New Mexico
Newspapers Partnership, as well as from investments in certain other
digital/new technology businesses.
The company’s net equity income in unconsolidated investees
for 2012 was $22 million, an increase of $14 million over 2011. This
increase reflects better results at Classified Ventures as well as
reduced impairment charges recognized in 2012.
The company’s net equity income in unconsolidated investees
for 2011 was $8 million, a decrease of $11 million over 2010. The
decline reflects $16 million in impairment charges recognized in
2011, partially offset by better results at certain digital investments,
particularly Classified Ventures.
Interest expense: 2012 interest expense decreased by 13%
compared to 2011 due to a significantly lower average debt level of
$1.7 billion in 2012, partially offset by higher average interest rates
and the extra week in 2012.
Interest expense in 2011 was flat compared to 2010, as lower
average debt levels were offset by higher average rates.
The company reduced its long-term debt by $328 million or 19%
in 2012. At the end of 2012, the company’s senior leverage ratio was
1.41x, well within the financial covenants under its revolving credit
agreements.
A further discussion of the company’s borrowing and related
interest cost is presented in the “Liquidity and capital resources”
section of this report beginning on page 42, and in Note 7 to the
Consolidated Financial Statements.
Other non-operating items: The company reported a net gain of
$9 million for other non-operating items in 2012. The majority
relates to a gain on a distribution from a cost method investment and
interest income earned during 2012.
Other non-operating items totaled a net loss of $13 million in
2011 as the company recorded $15 million of non-cash charges for
the write-down of certain minority investments. These charges were
partially offset by a gain recognized as a result of the prepayment of
a secured promissory note. The company had received the
promissory note in connection with the disposition of certain
publishing operations in 2010.
The company reported a net gain of $100,000 in 2010 as gains
on its investments were offset by currency related losses.
Outlook for 2013: The company expects its net interest expense
to be down for the year, reflecting lower average debt balances.
Provision for income taxes on income from continuing
operations
The company reported pre-tax income attributable to Gannett of
$620 million for 2012. The provision for income taxes reflects an
impairment of non-deductible goodwill, certain state audit
settlements and a special net tax benefit from the release of certain
tax reserves due to a federal audit settlement in 2012. The effective
tax rate on pre-tax income is 31.5%.
The company reported pre-tax income attributable to Gannett of
$612 million for 2011. The provision for income taxes reflects a
special net tax benefit from the release of certain tax reserves due to
audit settlements and a permanent stock basis deduction associated
with the disposal of certain business assets in 2011. An impairment
charge for these assets had been recorded in previous years, however
no related tax benefit had been recognized as the formal disposal of
the assets did not occur until 2011. The effective tax rate on pre-tax
income was 25.0%.
The lower effective tax rate for 2011 compared to 2012 is due to
the stock basis deduction associated with previous impairment
charges and the release of foreign tax reserves upon audit settlements
recognized in 2011 as well as a non-deductible goodwill impairment
charge incurred in 2012.
The company reported pre-tax income attributable to Gannett of
$811 million for 2010. The provision for income taxes reflects a
special net tax benefit primarily from the release of certain state tax
reserves due to the lapse of statutes of limitations. The effective tax
rate on pre-tax income was 30.1%.
The lower effective tax rate for 2011 compared to 2010 is due to
the stock basis deduction associated with previous impairment
charges and the release of foreign tax reserves upon audit settlements
recognized in 2011.
Further information concerning income tax matters is contained
in Note 10 of the Consolidated Financial Statements.
Income from continuing operations attributable to
Gannett Co., Inc.
Income from continuing operations attributable to Gannett Co., Inc.
and related per share amounts are presented in the table below.
In millions of dollars, except per share amounts
2012
Change
2011
Change
2010
Income . . . . . . . . . . . $
Per diluted share. . . . $
424
(8%)
1.79
(5%)
$
$
459
(19%)
1.89
(20%)
$
$
567
2.35
Discontinued operations
Earnings from discontinued operations represent the combined
operating results (net of income taxes) of The Honolulu Advertiser
and its related assets as well as a small directory publishing
operation in Michigan each of which were sold during the second
quarter of 2010. 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 titled “Loss from the operation
of discontinued operations, net of tax.”
In 2010 the company reported earnings per diluted share of $0.08
for the gain on the disposition of these properties.
Discontinued Operations
In thousands, except per share amounts
Loss from operation of discontinued operations, net of tax. . . . . . $
(322)
Per share – diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
—
Gain on disposal of publishing businesses, net of tax . . . . . . . . . . $ 21,195
Per share – diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
0.08
2010
Net income attributable to Gannett Co., Inc., and related per
share amounts are presented in the table below, and include income
from continuing and discontinued operations.
In millions of dollars, except per share amounts
2012
Change
2011
Change
2010
Net income . . . . . . . . . $
Per basic share . . . . . . $
Per diluted share . . . . . $
424
(8%)
1.83
(5%)
1.79
(5%)
$
$
$
459
(22%)
1.92
(22%)
1.89
(22%)
$
$
$
588
2.47
2.43
Operating results non-GAAP information
Presentation of non-GAAP information: The company uses
non-GAAP financial performance and liquidity measures to
supplement the financial information presented on a GAAP basis.
These non-GAAP financial measures are not to be considered in
isolation from or as a substitute for the related GAAP measures, and
should be read only in conjunction with financial information
presented on a GAAP basis.
The company discusses in this report non-GAAP financial
performance measures that exclude from its reported GAAP results
the impact of special items consisting of:
Income attributable to Gannett Co., Inc. consists of income from
• Workforce restructuring charges;
continuing operations reduced by net income attributable to
noncontrolling interests, primarily from CareerBuilder. Net income
attributable to noncontrolling interests was $51 million, $41 million
and $35 million in 2012, 2011 and 2010, respectively.
• Non-cash facility consolidation expenses;
• Non-cash asset impairment charges;
•
Incremental charges associated with the company’s former
chairman and chief executive officer’s disability related
retirement;
• Pension settlement charges; and
• Certain credits and charges to its income tax provision.
The company believes that such expenses and tax items are not
indicative of normal, ongoing operations and their inclusion in
results makes for more distorted comparisons between periods and
with peer group companies. Workforce restructuring and facility
consolidation expenses primarily relate to incremental expenses the
company has incurred to consolidate or outsource production
processes and centralize other functions. These expenses include
payroll and related benefit costs (including certain union pension
costs), accelerated depreciation and charges to reduce the carrying
38
value of assets held for sale to fair value less costs to sell. Non-cash
asset impairment charges were recorded to reduce the book value of
certain intangible assets and investments accounted for under the
equity and cost methods to fair value, as the businesses underlying
these assets had experienced significant and sustained unfavorable
operating results. The pension settlement charges result from the
acceleration of expense related to the timing of certain pension
payments.
Management uses non-GAAP financial performance measures
for purposes of evaluating business unit and consolidated company
performance. The company therefore believes that each of the non-
GAAP measures presented provides useful information to investors
by allowing them to view the company’s businesses through the eyes
of management and the Board of Directors, facilitating comparison
of results across historical periods, and providing a focus on the
underlying ongoing operating performance of its businesses. In
addition, many of the company’s peer group companies present
similar non-GAAP measures so the presentation of such measures
facilitates industry comparisons.
Discussion of special charges and credits affecting reported
results: Facility consolidation plans led the company to recognize
charges in 2010-2012 associated with revising the useful lives of
certain assets over a shortened period, as well as shutdown costs and
charges to reduce the carrying value of assets held for sale to fair
value less costs to sell. Additionally, results from performing
impairment tests on certain assets including goodwill, other
intangible assets, other long-lived assets and investments accounted
for under the equity and cost methods, required the recognition of
impairment charges in 2010-2012. Total charges for these matters
were $129 million ($110 million after-tax or $.47 per share), $58
million ($36 million after-tax or $.15 per share) and $60 million
($43 million after-tax or $.18 per share) in 2012, 2011 and 2010,
respectively. These non-cash impairment charges are detailed in
Notes 3 and 4 to the Consolidated Financial Statements.
For the years 2012, 2011 and 2010 the company recorded
workforce restructuring related costs totaling $41 million ($25
million after-tax or $.10 per share), $74 million ($46 million after-
tax or $.19 per share) and $12 million ($7 million after-tax or $.03
per share), respectively. These charges were taken in connection with
workforce reductions related to facility consolidation and
outsourcing efforts and as part of a general program to
fundamentally change the company’s cost structure.
During 2012, the company recorded $8 million ($5 million after-
tax or $.02 per share) in pension settlement charges and special
benefits of $13 million ($.06 per share) related primarily to tax
settlements covering multiple years.
During 2011, the company recorded a $15 million ($9 million
after-tax or $.04 per share) incremental charge for the disability-
related retirement of the company’s former chairman and chief
executive officer.
In addition, the company recorded net special benefits of $31
million ($.13 per share) during 2011 related to tax audit settlements
covering multiple years and a permanent stock basis deduction
related to the disposal of certain business assets.
During 2010, the company booked a net tax benefit of $29
million ($.12 per share) primarily attributable to the release of
reserves due to the expiration of the statutes of limitations, including
the release of certain reserves related to the sale of a business in a
prior year. The benefit was partially offset by a $2 million ($.01 per
share) tax charge related to health care reform legislation.
Consolidated results
The following is a discussion of the company's as adjusted non-
GAAP financial results. All as adjusted (non-GAAP basis) measures
are labeled as such or “adjusted”.
Adjustments to remove special items from GAAP operating
expense follow:
In millions of dollars
2012(a) Change
2011 Change
2010
Operating expense
(GAAP basis) . . . . . . . . . . . $ 4,563
Remove special items:
3%
$ 4,409
(1%)
$ 4,439
Workforce restructuring. .
(41)
(45%)
(74)
***
(12)
Facility consolidation
and asset impairment
charges . . . . . . . . . . . . . .
Pension settlement
charges . . . . . . . . . . . . . .
Former Chairman and
CEO incremental
retirement charges . . . . .
(122)
***
(27)
(52%)
(57)
(8)
***
— —
— ***
(15)
***
—
—
As adjusted
(non-GAAP basis). . . . . . . . $ 4,393
(a) Numbers do not sum due to rounding
2%
$ 4,293
(2%)
$ 4,370
Adjusted operating expenses increased 2% in 2012 to $4.4
billion, due to an increase in Broadcasting and Digital Segment
expenses related to higher revenues, the extra week in 2012 and
strategic initiative investments made throughout the year. These
increases were partially offset by continued cost reduction and cost
efficiency efforts company-wide.
Adjusted operating expenses declined 2% in 2011 to $4.3 billion,
reflecting strong cost controls throughout the company, partially
offset by an increase in Digital Segment expenses as a result of
increased revenue. Payroll savings were significant from reduced
headcount from consolidations and restructuring efforts.
Adjustments to remove special items from GAAP operating
income follow:
In millions of dollars
2012(a) Change
2011 Change 2010(a)
Operating income
(GAAP basis) . . . . . . . . . . . $ 790
Remove special items:
(5%)
$ 831
(17%)
$ 1,000
Workforce restructuring. .
41
(45%)
74
***
Facility consolidation
and asset impairment
charges . . . . . . . . . . . . . .
Pension settlement
charges . . . . . . . . . . . . . .
Former Chairman and
CEO incremental
retirement charges . . . . .
122
***
27
(52%)
8
***
— —
— ***
15
***
12
57
—
—
As adjusted
(non-GAAP basis). . . . . . . . $ 960
(a) Numbers do not sum due to rounding
1%
$ 947
(11%)
$ 1,068
Adjusted operating income increased 1% in 2012 to $960
million reflecting the first year-over-year increase in company-wide
revenue since 2006. Publishing revenues reflected lower advertising
demand partially offset by a 5% increase in circulation revenue due
to the roll out of the all-access content subscription model
throughout 2012. Circulation revenue grew significantly during the
year as the content subscription model was rolled out in waves to 78
domestic markets throughout the year. Digital revenues increased,
reflecting solid revenue growth at CareerBuilder. Broadcast revenues
and operating results were the best results ever for the Broadcast
39
Segment. Revenues for 2012 were significantly higher than 2011
levels, reflecting record political and Summer Olympic revenue
achieved in 2012. Digital revenues company-wide including the
Digital Segment and all digital revenues generated by other business
segments were approximately $1.3 billion in 2012, over 24% of
operating revenues and an increase of 19% compared to 2011.
Adjusted operating income declined 11% in 2011 to $947
million reflecting the impact the soft economy had on publishing
advertising revenues. Broadcast revenues were lower as a result of
substantially lower political spending and the absence of Winter
Olympic revenue achieved in 2010. Digital revenues increased
significantly, reflecting stronger revenue growth at CareerBuilder. As
adjusted (non-GAAP basis) operating income comparisons were
favorably impacted by reduced expenses in the Publishing and
Broadcast Segments.
Adjustments to remove special items from GAAP non-
operating expense which consist of equity income or loss, interest
expense and other non-operating items follow:
In millions of dollars
2012 Change
2011 Change
2010
Total non-operating
(expense) income
(GAAP basis) . . . . . . . . . . . $ (119)
Remove special items:
(33%)
$ (178)
16% $ (154)
Investment charges. . . . . .
7
(77%)
30
***
3
As adjusted
(non-GAAP basis). . . . . . . . $ (112)
(24%)
$ (148)
(2%)
$ (151)
Adjusted non-operating expense declined 24% in 2012 to $112
million reflecting lower interest expense due to significantly lower
average debt levels, partially offset by higher average interest rates
and the extra week in 2012.
Adjusted non-operating expense declined 2% in 2011 to $148
million reflecting better results at certain digital unconsolidated
investees, particularly Classified Ventures. This was partially offset
by reduced equity income in the company’s publishing partnerships.
A summary of the impact of special items on the company’s
effective tax rate follows:
In millions of dollars
Provision for income taxes as reported
(GAAP basis) . . . . . . . . . . . . . . . . . . . . . . . . . $ 195
Remove special items:
$ 153
$ 244
2012
2011
2010(a)
Workforce restructuring . . . . . . . . . . . . . . .
Facility consolidation and asset
impairment charges. . . . . . . . . . . . . . . . . .
Former Chairman and CEO incremental
retirement charges. . . . . . . . . . . . . . . . . . .
Pension settlement charges . . . . . . . . . . . . .
Non-operating investment charges . . . . . . .
Prior year tax reserve adjustments, net . . . .
Tax benefit of stock basis deduction . . . . . .
Tax charge for health care legislation . . . . .
16
16
—
3
3
13
—
—
28
10
6
—
12
20
11
—
5
16
—
—
1
29
—
(2)
As adjusted (non-GAAP basis). . . . . . . . . . . . $ 246
$ 240
$ 292
As adjusted effective tax rate
(non-GAAP basis). . . . . . . . . . . . . . . . . . . . . .
(a) Numbers do not sum due to rounding
30.9% 31.6% 33.1%
The adjusted effective tax rate in 2012 was 30.9% compared to
31.6% in 2011. The lower rate for 2012 reflects higher reserve
releases due to audit settlements and the lapse of certain statutes of
limitations. The 2012 rate also reflects a lower statutory tax rate for
U.K. operations.
40
Adjustments to remove special items from GAAP income from
continuing operations attributable to Gannett Co., Inc. and diluted
earnings per share from continuing operations follow:
In millions of dollars, except per share amounts
2012(a) Change 2011(a) Change 2010(a)
Income from continuing
operations attributable to
Gannett Co., Inc.
(GAAP basis) . . . . . . . . . . . $ 424
Remove special items (net
of tax):
(8%)
$ 459
(19%)
$ 567
Workforce restructuring. .
25
(46%)
46
***
7
41
—
—
2
—
—
Facility consolidation
and asset impairment
charges . . . . . . . . . . . . . .
Former Chairman and
CEO incremental
retirement charges . . . . .
Pension settlement
charges . . . . . . . . . . . . . .
Investment charges. . . . . .
Prior year tax reserve
adjustments, net . . . . . . .
Tax benefit of stock
basis deduction . . . . . . .
Tax charge for health
care legislation . . . . . . . .
106
***
18
(56%)
— ***
9
***
5
4
***
(76%)
— —
18
***
(13)
(35%)
(20)
(30%)
(29)
— ***
(11)
***
— ***
— ***
—
2
As adjusted
(non-GAAP basis). . . . . . . . $ 551
Diluted earnings per share
from continuing operations
(GAAP basis) . . . . . . . . . . . $ 1.79
Remove special items (net
of tax):
6%
$ 518
(12%)
$ 591
(5%)
$ 1.89
(20%)
$ 2.35
Workforce restructuring. .
0.10
(47%)
0.19
***
0.03
Facility consolidation
and asset impairment
charges . . . . . . . . . . . . . .
Former Chairman and
CEO incremental
retirement charges . . . . .
Pension settlement
charges . . . . . . . . . . . . . .
Investment charges. . . . . .
Prior year tax reserve
adjustments, net . . . . . . .
Tax benefit of stock
basis deduction . . . . . . .
Tax charge for health
care legislation . . . . . . . .
0.45
***
0.07
(59%)
0.17
— ***
0.04
***
0.02
0.02
***
(75%)
— —
0.08
***
0.01
(0.06)
(25%)
(0.08)
(33%)
(0.12)
— ***
(0.04)
***
—
— —
— ***
0.01
As adjusted
(non-GAAP basis). . . . . . . . $ 2.33
(a) Numbers do not sum due to rounding
9%
$ 2.13
(13%)
$ 2.44
Adjusted income from continuing operations attributable to
Gannett Co., Inc. increased 6% in 2012 (9% on a diluted per share
basis) as a result of higher as adjusted (non-GAAP basis) operating
income in the Digital and Broadcast Segments partially offset by
lower operating income in the Publishing Segment.
Adjusted income from continuing operations attributable to
Gannett Co., Inc. declined 12% in 2011 (13% on a diluted per share
basis) as a result of reduced revenue in the Publishing and Broadcast
Segments partially offset by a reduction in their expenses.
Segment results
The following is a discussion of the company's as adjusted non-
GAAP financial results. All as adjusted (non-GAAP basis) measures
are labeled as such or “adjusted”.
A summary of the impact of asset impairment and workforce
restructuring charges on the company’s Publishing Segment is
presented below:
In millions of dollars
A summary of the impact of asset impairment and workforce
restructuring charges on the company’s Digital Segment is presented
below:
In millions of dollars
2012 Change
2011 Change
2010
Digital Segment operating
expenses (GAAP basis) . . . . . $ 677
Remove special items:
21% $ 561
5%
$ 535
2012(a) Change 2011(a) Change 2010(a)
Workforce restructuring . . .
— —
— ***
Publishing Segment
operating expenses
(GAAP basis) . . . . . . . . . . . $ 3,360 — $ 3,354
Remove special items:
(1%)
$ 3,403
Workforce restructuring. .
(42)
(42%)
(73)
***
(10)
Facility consolidation and
asset impairment
charges . . . . . . . . . . . . . .
(32)
18%
(27)
(24%)
(36)
As adjusted (non-GAAP
basis) . . . . . . . . . . . . . . . . . . $ 3,285
Publishing Segment
operating income
(GAAP basis) . . . . . . . . . . . $ 369
Remove special items:
1%
$ 3,253
(3%)
$ 3,358
(23%)
$ 478
(26%)
$ 648
Workforce restructuring. .
42
(42%)
73
***
Facility consolidation and
asset impairment
charges . . . . . . . . . . . . . .
32
18%
27
(24%)
10
36
As adjusted
(non-GAAP basis). . . . . . . . $ 443
(a) Numbers do not sum due to rounding
(23%)
$ 578
(17%)
$ 693
Adjusted Publishing Segment operating expenses increased 1%
in 2012 compared to 2011 as continued cost control and efficiency
efforts were offset by strategic initiative spending, higher pension
expense and the impact of the extra week in 2012.
Adjusted Publishing Segment operating income declined 23% in
2012 compared to 2011 due to lower ad revenue in the U.S. and
U.K., $68 million of strategic initiative spending and higher pension
expense, partially offset by a 5% increase in circulation revenue, a
decrease in newsprint expense and the positive impact of the extra
week in 2012.
Adjusted Publishing Segment operating expenses declined 3% in
2011 as a result of continued cost control and efficiency efforts as
well as lower payroll expense.
Adjusted Publishing Segment operating income declined 17% in
2011 to $578 million, reflecting the impact of the soft economy on
advertising demand, partially offset by a decrease in expenses.
(1)
(13)
Asset impairment
charges . . . . . . . . . . . . . . .
(90)
***
— ***
As adjusted (non-GAAP
basis) . . . . . . . . . . . . . . . . . . . $ 587
Digital Segment operating
income (GAAP basis) . . . . . . $
Remove special items:
42
5%
$ 561
8%
$ 521
(67%)
$ 125
50% $
83
Workforce restructuring . . .
— —
— ***
Asset impairment
charges . . . . . . . . . . . . . . .
90
***
— ***
1
13
As adjusted
(non-GAAP basis) . . . . . . . . . $ 132
5%
$ 125
29% $
97
Adjusted Digital Segment operating expenses increased 5% in
2012 compared to 2011 due to an increase in expenses at
CareerBuilder associated with its revenue growth. Adjusted Digital
Segment operating income also increased 5% reflecting strong gains
for CareerBuilder.
Adjusted Digital Segment operating expenses increased 8% in
2011 to $561 million, due primarily to an increase in expenses at
CareerBuilder associated with revenue growth. Adjusted Digital
Segment operating income increased 29% to $125 million in 2011,
reflecting a significant increase in revenues at CareerBuilder,
partially offset by an increase in expenses.
A summary of the impact of asset impairment and workforce
restructuring charges on the company’s Broadcasting Segment is
presented below:
In millions of dollars
2012 Change 2011(a) Change 2010(a)
Broadcasting Segment
operating expenses
(GAAP basis). . . . . . . . . . . . $ 462
Remove special items:
10% $ 420
(5%)
$ 440
Workforce restructuring . .
— ***
(1) —
Facility consolidation
charges . . . . . . . . . . . . . .
— ***
— ***
(1)
(9)
As adjusted
(non-GAAP basis) . . . . . . . . $ 462
Broadcasting Segment
operating income
(GAAP basis). . . . . . . . . . . . $ 444
Remove special items:
10% $ 420
(3%)
$ 431
47% $ 302
(8%)
$ 329
Workforce restructuring . .
— ***
1 —
Facility consolidation
charges . . . . . . . . . . . . . .
— —
— ***
1
9
As adjusted
(non-GAAP basis) . . . . . . . . $ 444
(a) Numbers do not sum due to rounding
47% $ 303
(11%)
$ 339
41
Adjusted Broadcast Segment operating expenses increased 10%
in 2012 compared to 2011 due to higher sales and marketing costs in
2011 associated with higher revenues and the extra week in 2012.
Adjusted Broadcast Segment operating income increased 47% to
$444 million in 2012, reflecting record political and Summer
Olympic revenue achieved in 2012, as well as, higher core ad,
retransmission and digital television revenues.
Adjusted Broadcast Segment operating expenses decreased 3%
in 2011, reflecting continued cost control and efficiency efforts and
lower sales and programming costs. Adjusted Broadcast Segment
operating income decreased 11% in 2011 to $303 million, as a result
of significantly lower political and Olympic advertising revenues,
partially offset by higher core, retransmission and digital television
revenues, and lower expenses.
A summary of the impact of special charges on the company’s
Corporate Segment is presented below:
In millions of dollars
Corporate Segment
operating expenses
(GAAP basis) . . . . . . . . . . . . $
Remove special items:
2012 Change 2011(a) Change
2010
64
(13%)
$
74
22% $
61
Workforce restructuring . .
2
***
— —
Former Chairman and
CEO incremental
retirement charges . . . . . .
Pension settlement
charges . . . . . . . . . . . . . .
— ***
(15)
***
(8)
***
— —
—
—
—
As adjusted
(non-GAAP basis) . . . . . . . . $
(a) Numbers do not sum due to rounding
58
(2%)
$
60
(2%)
$
61
FINANCIAL POSITION
Liquidity and capital resources
The company’s cash flow from operating activities was $757 million
in 2012, versus $814 million in 2011, primarily reflecting the impact
of higher pension contributions to the company’s sponsored plans.
Contributions increased $81 million to $137 million in 2012.
Net cash used for investing activities totaled $87 million. This
reflects capital spending of $92 million, $67 million for acquisitions,
and $3 million for equity investments, which were partially offset by
proceeds from the sale of certain assets of $39 million and proceeds
from investments of $36 million.
Cash used for financing activities totaled $664 million in 2012.
This included the scheduled repayment of fixed rate long term notes
of $307 million. The company also repurchased approximately
10.3 million shares of the company’s stock for $154 million, paid
dividends totaling $159 million and made distributions to
noncontrolling membership shareholders of $47 million. These
financing cash flows were partially offset by proceeds from
borrowings under its revolving credit agreements of $30 million as
well as stock option exercise proceeds of $34 million.
Certain key measurements of the elements of working capital for
the last three years are presented in the following chart:
Working capital measurements
2012
2011
2010
Current ratio . . . . . . . . . . . . . . . . . . . . . .
1.1-to-1
1.2-to-1
1.3-to-1
Accounts receivable turnover . . . . . . . . .
Newsprint inventory turnover . . . . . . . .
7.8
6.1
7.4
5.7
7.4
5.1
The company’s operations have historically generated strong
positive cash flow which, along with the company’s program of
maintaining bank revolving credit availability, has provided
adequate liquidity to meet the company’s requirements, including
those for acquisitions.
42
Long-term debt
The long-term debt of the company is summarized below:
In thousands of dollars
Unsecured notes bearing fixed rate
interest at 6.375% repaid April 2012 . . $
— $
306,534
Dec. 30, 2012 Dec. 25, 2011
Borrowings under revolving credit
agreements expiring September 2014. .
Unsecured notes bearing fixed rate
interest at 8.75% due November 2014 .
Unsecured notes bearing fixed rate
interest at 10% due June 2015 . . . . . . .
Unsecured notes bearing fixed rate
205,000
235,000
248,376
247,609
61,286
59,522
interest at 6.375% due September 2015
248,497
247,995
Unsecured notes bearing fixed rate
interest at 10% due April 2016 . . . . . . .
Unsecured notes bearing fixed rate
174,241
169,775
interest at 9.375% due November 2017
247,547
247,168
Unsecured notes bearing fixed rate
interest at 7.125% due September 2018
247,153
246,760
Total long-term debt . . . . . . . . . . . . . . . . . $
1,432,100 $
1,760,363
Total average debt outstanding in 2012 and 2011 was $1.7 billion
and $2.1 billion, respectively. The weighted average interest rate on
all debt was 7.7% for 2012 and 7.4% for 2011.
On Dec. 30, 2012, the company had unused borrowing capacity
of $922 million under its revolving credit agreements. In addition, its
revolving credit agreements allow the company to borrow at least
$1.25 billion of additional unsecured debt (unrestricted as to
purpose) guaranteed by the guarantor subsidiaries under these credit
agreements. This borrowing limit is subject to increases depending
upon the company’s total leverage ratio.
During 2010 and 2009, the company completed a series of
financing transactions which improved its debt maturity profile.
In September 2010, the company completed a private placement
offering of unsecured senior notes totaling $500 million in two
tranches: $250 million with a coupon of 6.375% due 2015 and $250
million with a coupon of 7.125% due 2018. The 2015 notes were
priced at 98.970% of face value, resulting in a yield to maturity of
6.625%. The 2018 notes were priced at 98.527% of face value,
resulting in a yield to maturity of 7.375%. On or after Sept. 1, 2014,
the 2018 notes may be redeemed or purchased by the company at the
applicable redemption price (expressed as a percentage of the
principal amount of the 2018 notes) plus accrued but unpaid interest
thereon to the redemption date, if redeemed during the 12-month
period commencing on Sept. 1 of the following years: 2014 –
103.563%, 2015 – 101.781% and 2016 and thereafter 100.000%.
The company used the net proceeds of the offering to partially repay
borrowings outstanding under its revolving credit agreements and its
then outstanding term loan.
In September 2010, the company amended its revolving credit
agreements and extended the maturity date with the majority of its
lenders from March 15, 2012 to Sept. 30, 2014. Total commitments
under the amended revolving credit agreements are $1.14 billion
through September 30, 2014.
In October 2009, the company completed a private placement
offering of $250 million in aggregate principal amount of 8.750%
senior notes due 2014 and $250 million in aggregate principal
amount of 9.375% senior notes due 2017. The 2014 notes were
priced at 98.465% of face value, resulting in a yield to maturity of
9.125%. The 2017 notes were priced at 98.582% of face value,
resulting in a yield to maturity of 9.625%. On or after November 15,
2013, the 2017 notes may be redeemed or purchased by the company
at the applicable redemption price (expressed as a percentage of the
principal amount of the 2017 notes) plus accrued but unpaid interest
thereon to the redemption date, if redeemed during the 12-month
period commencing on November 15 of the following years: 2013 –
104.688%, 2014 – 102.344% and 2015 and thereafter 100.000%.
In May 2009, the company completed a private exchange offer
related to its 5.75% fixed rate notes due June 2011 and its 6.375%
fixed rate notes due April 2012. The company exchanged
approximately $67 million in principal amount of its 2011 notes for
approximately $67 million principal amount of new 10% senior
notes due 2015, and approximately $193 million in principal amount
of its 2012 notes for approximately $193 million principal amount of
new 10% senior notes due 2016.
The notes issued during 2010 and 2009 with maturity dates in
2014 and thereafter were made available in private offerings that
were exempt from the registration requirements of the Securities Act
of 1933. These notes are guaranteed on a senior basis by the
subsidiaries of the company that guarantee its revolving credit and
term loan agreements discussed more fully below.
The company’s three revolving credit agreements require the
company to maintain a senior leverage ratio of less than 3.5x. The
agreements also require the company to maintain a total leverage
ratio of less than 4.0x. The total leverage ratio would also include
any subordinated debt the company may issue in the future.
Currently, all of the company’s debt is senior and unsecured. At Dec.
30, 2012, the senior leverage ratio was 1.41x.
Commitment fees since March 15, 2012 on the revolving credit
agreements are equal to 0.50% of the undrawn commitments. Prior
to this, the company paid a fee to the lenders that agreed in
September 2010 to extend their commitments from 2012 to 2014
based on the leverage ratio that ranged from 0 to 75 basis points for
drawn amounts and 25 basis points for undrawn amounts.
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%. The
applicable margin is determined based on the company’s leverage
ratio but will differ between Eurodollar base rate loans and loans
based on the higher of the Prime Rate or the Federal Funds Effective
Rate plus 0.50%. For borrowings at a margin above the Eurodollar
base rate, the margin varies from 2.00% to 3.25%. For borrowings at
a margin above the higher of the Prime Rate or the Federal Funds
Effective Rate plus 0.50%, the margin will vary from 1.00% to
2.25%. At its current leverage ratios, the company’s applicable
margins will be 2.25% and 1.25%, respectively.
In connection with each of its three revolving credit agreements
and its then outstanding loan agreement, the company agreed to
provide guarantees from a majority of its domestic wholly-owned
subsidiaries in the event that the company’s credit ratings from either
Moody’s or S&P fell below investment grade. In the first quarter of
2009, the company’s credit rating was downgraded below
investment grade by both S&P and Moody’s. Accordingly, the
guarantees were triggered and the existing notes then due in 2011
and 2012 and other unsecured debt of the company became
structurally subordinated to the revolving credit agreements and its
then outstanding term loan.
43
On Aug. 21, 2009, Moody’s confirmed the company’s Ba1
corporate family rating and its Ba2 senior unsecured debt rating. In
addition, Moody’s rated the company’s bank debt, which included its
revolving credit facilities, Baa3. The Baa3 rating was also applicable
to most of the company’s long-term debt which has the same
subsidiary guarantees as the bank debt, while the Ba2 rating applied
to certain non-guaranteed senior long-term debt. On April 2, 2012,
following the redemption of the last tranche of the company’s non-
guaranteed long-term debt, Moody’s changed the company’s senior
unsecured debt rating to Ba1 and lowered the rating applicable to the
company’s revolving credit facilities and remaining guaranteed long-
term debt to Ba1 for consistency with the new senior unsecured debt
rating.
As of Dec. 30, 2012, the company had $205 million of
borrowings under its revolving credit agreements. The maximum
amount outstanding at any time during 2012 and 2011 was $521
million and $470 million, respectively. The daily average
outstanding balance of the revolving credit agreements during 2012
and 2011 was $353 million and $257 million, respectively. The
weighted average interest rate for 2012 was 2.8% and 2.6% for 2011.
The company has an effective universal shelf registration
statement under which an unspecified amount of securities may be
issued, subject to a $7 billion limit established by the Board of
Directors. Proceeds from the sale of such securities may be used for
general corporate purposes, including capital expenditures, working
capital, securities repurchase programs, repayment of debt and
financing of acquisitions. The company may also invest borrowed
funds that are not required for other purposes in short-term
marketable securities.
The following schedule shows the annual maturities of long term
debt:
In thousands of dollars
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
247,153
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,432,100
309,783
174,241
453,376
247,547
—
The company’s debt maturities may be repaid with cash flow
from operating activities or by accessing capital markets or a
combination of both.
Contractual obligations and commitments
The following table summarizes the expected cash outflows
resulting from financial contracts and commitments as of the end of
2012.
Contractual obligations
Payments due by period
In millions of dollars
Total 2013 2014-15 2016-17 Thereafter
Long-term debt (1). . . . . . $1,847 $105 $
952 $
528 $
262
Operating leases (2) . . . . .
Purchase obligations (3). .
Programming
contracts (4) . . . . . . . . . . .
Other long-term
liabilities (5) . . . . . . . . . . .
278
186
52
54
79
10
448
141
89
66
41
74
61
25
1
71
Total . . . . . . . . . . . . . . . . . $2,811 $389 $ 1,222 $
686 $
74
16
—
162
514
(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.
(2) See Note 12 to the Consolidated Financial Statements.
(3) Includes purchase obligations related to printing contracts, capital projects,
interactive marketing agreements, wire services and other legally binding
commitments. Amounts which the company is liable for under purchase orders
outstanding at Dec. 30, 2012, are reflected in the consolidated balance sheets as
accounts payable and accrued liabilities and are excluded from the table above.
(4) Programming contracts include television station commitments to purchase
programming to be produced in future years.
(5) Other long-term liabilities primarily consist of amounts expected to be paid related
to under-funded postretirement benefit plans.
Due to uncertainty with respect to the timing of future cash flows
associated with unrecognized tax benefits at Dec. 30, 2012, the
company is unable to make reasonably reliable estimates of the
period of cash settlement. Therefore, $86 million of unrecognized
tax benefits have been excluded from the contractual obligations
table above. See Note 10 to the Consolidated Financial Statements
for a further discussion of income taxes.
The company’s principal retirement plan, the GRP, had assets of
$1.87 billion and liabilities of $2.46 billion at Dec. 30, 2012. Early
in fiscal 2013, the company contributed $50 million to the GRP. For
2013, the company expects to contribute $35 million to the U.K.
retirement plan. 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 2013, and therefore no plan contributions thereafter are
reflected in the above table.
In December 1990, the company adopted a Transitional
Compensation Plan (the TCP). The TCP 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 TCP include a severance
payment of up to three years’ compensation and continued life and
medical insurance coverage. The company amended the TCP in
April 2010 to provide that new participants will not be entitled to the
benefit of the TCP's excise tax gross-up or modified single trigger
provisions.
Capital stock
In February 2012, the company announced that its Board of
Directors approved a new program to repurchase up to $300 million
in Gannett common stock (replacing a former repurchase program of
$1 billion). During 2012, 10.3 million shares were purchased under
the programs for $154 million. During 2011, 4.9 million shares were
purchased under the former program for $53 million; no shares were
purchased in 2010. As of Dec. 30, 2012, the value of shares that may
be repurchased under the existing program is $150 million.
44
The shares may be repurchased at management’s discretion,
either in the open market or in privately negotiated block
transactions. Management’s decision to repurchase shares will
depend on price and other corporate developments. Purchases may
occur from time to time and no maximum purchase price has been
set. There is no expiration date for the $300 million stock repurchase
program. However, it is targeted to be completed over the two years
following the announcement. Certain of the shares previously
acquired by the company have been reissued in settlement of
employee stock awards.
An employee 401(k) Savings Plan was established in 1990,
which includes a company matching contribution in the form of
Gannett stock. To fund the company’s matching contribution, an
Employee Stock Ownership Plan (ESOP) was formed which
acquired 2,500,000 shares of Gannett stock from the company for
$50 million. The stock purchase was financed with a loan from the
company. In June 2003, the debt was fully repaid and all of the
shares had been fully allocated to participants. The company elected
not to add additional shares to the ESOP and began funding
contributions in cash. Through 2008, the ESOP used the cash match
to purchase on the open market an equivalent number of shares of
company stock on behalf of participants. In early 2009, the company
began funding the 401(k) Savings Plan company matching
contributions through the issuance of treasury shares. Beginning in
2010, the company funded the 401(k) Savings Plan match through
the issuance of a 50/50 combination of treasury shares and shares
purchased on the open market with cash. In late 2011, the company
began funding the 401(k) Saving Plan match by purchasing all
shares on the open market with cash.
The company’s common stock outstanding at Dec. 30, 2012,
totaled 230,042,098 shares, compared with 237,036,994 shares at
Dec. 25, 2011.
Dividends
Dividends declared on common stock amounted to $186 million in
2012, compared with $57 million in 2011.
Cash dividends
Payment date
Per share
2012
4th Quarter . . . . . . . . . . . . . . . . . .
3rd Quarter . . . . . . . . . . . . . . . . . .
Jan. 2, 2013
Oct. 1, 2012
2nd Quarter . . . . . . . . . . . . . . . . .
July 2, 2012
1st Quarter . . . . . . . . . . . . . . . . . . April 2, 2012
2011
4th Quarter . . . . . . . . . . . . . . . . . .
Jan. 3, 2012
3rd Quarter . . . . . . . . . . . . . . . . . .
Oct. 3, 2011
2nd Quarter . . . . . . . . . . . . . . . . .
July 1, 2011
1st Quarter . . . . . . . . . . . . . . . . . .
April 1, 2011
$
$
$
$
$
$
$
$
0.20
0.20
0.20
0.20
0.08
0.08
0.04
0.04
On Feb. 26, 2013, the Board of Directors declared a dividend of
$0.20 per share, payable on April 1, 2013, to shareholders of record
as of the close of business March 8, 2013.
Accumulated other comprehensive income (loss)
The company’s foreign currency translation adjustment, included in
accumulated other comprehensive income (loss) and reported as part
of shareholders’ equity, totaled $418 million at the end of 2012 and
$400 million at the end of 2011. The increase reflected a
strengthening of the British pound against the U.S. dollar.
Newsquest’s assets and liabilities at Dec. 30, 2012 were translated
from British pounds to U.S. dollars at an exchange rate of 1.62
versus 1.56 at the end of 2011. Newsquest’s financial results were
translated at an average rate of 1.58 for 2012, 1.60 for 2011 and 1.55
for 2010.
The company has recognized the funded status of its pension and
retiree medical benefit plans in the statement of financial position. At
Dec. 30, 2012 and Dec. 25, 2011, accumulated other comprehensive
loss includes a reduction of equity of $1.12 billion and $996 million,
respectively, for losses that will be amortized to pension and other
postretirement costs in future years.
Effects of inflation and changing prices and other matters
The company’s results of operations and financial condition have not
been significantly affected by inflation. Further, the effects of
inflation and changing prices on the company’s property, plant and
equipment and related depreciation expense have been reduced as a
result of an ongoing capital expenditure program and the availability
of replacement assets with improved technology and efficiency.
The company is exposed to foreign exchange rate risk primarily
due to its ownership of Newsquest, which uses the British pound as
its functional currency, which is then translated into U.S. dollars.
The company’s foreign currency translation adjustment, related
principally to Newsquest and reported as part of shareholders’
equity, totaled $418 million at Dec. 30, 2012. Newsquest’s assets
and liabilities were translated from British pounds to U.S. dollars at
the Dec. 30, 2012, exchange rate of 1.62. Refer to Item 7A for
additional detail.
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 on a limited basis 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 would have increased or
decreased approximately 1% in 2012.
Because the company has $205 million in floating interest rate
obligations outstanding at Dec. 30, 2012, the company is subject to
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
$1.0 million.
Refer to Note 7 to the Consolidated Financial Statements for
information regarding the fair value of the company’s long-term
debt.
45
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
FINANCIAL STATEMENTS
Report of Ernst & Young LLP, Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheets at Dec. 30, 2012 and Dec. 25, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Income for each of the three fiscal years in the period ended Dec. 30, 2012. . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Comprehensive Income for each of the three fiscal years in the period ended Dec. 30, 2012 . . . . . . . . . .
Consolidated Statements of Cash Flows for each of the three fiscal years in the period ended Dec. 30, 2012 . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Equity for each of the three fiscal years in the period ended Dec. 30, 2012 . . . . . . . . . . . . . . . . . . . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Quarterly Statements of Income (Unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SUPPLEMENTARY DATA
OTHER INFORMATION
Financial Statement Schedule for each of the three fiscal years in the period ended Dec. 30, 2012 Schedule II – Valuation and
Qualifying Accounts and Reserves* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
FINANCIAL STATEMENT SCHEDULE
* All other schedules prescribed under Regulation S-X are omitted because they are not applicable or not required.
Page
47
48
50
51
52
53
54
76
78
80
46
GANNETT CO., INC.
CONSOLIDATED BALANCE SHEETS
Dec. 30, 2012
Dec. 25, 2011
175,030 $
678,845
20,162
56,389
15,840
108,946
17,508
1,072,720
148,518
1,265,290
2,548,957
10,184
3,972,949
(2,454,271)
1,518,678
166,926
693,194
17,247
49,122
22,771
106,631
19,654
1,075,545
170,002
1,345,943
2,583,981
6,755
4,106,681
(2,466,454)
1,640,227
2,846,869
2,864,885
499,913
158,275
283,431
3,788,488
6,379,886 $
502,195
208,650
324,948
3,900,678
6,616,450
In thousands of dollars
Assets
Current assets
Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Trade receivables, less allowance for doubtful receivables of $22,006 and $34,646, respectively . . . . . . .
Other receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assets held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings and improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Machinery, equipment and fixtures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible and other assets
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Indefinite-lived and amortizable intangible assets, less accumulated amortization of $221,231 and
$188,333, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total intangible and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
48
GANNETT CO., INC.
CONSOLIDATED BALANCE SHEETS
In thousands of dollars
Liabilities and equity
Current liabilities
Accounts payable
Dec. 30, 2012
Dec. 25, 2011
Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
187,705 $
24,128
188,930
27,045
Accrued liabilities
Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Postretirement medical and life insurance liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other long-term liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Redeemable noncontrolling interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commitments and contingent liabilities (see Note 12)
Equity
Gannett Co., Inc. shareholders’ equity
Preferred stock, par value $1: Authorized, 2,000,000 shares: Issued, none . . . . . . . . . . . . . . . . . . . . . . . . .
Common stock, par value $1: Authorized, 800,000,000 shares: Issued, 324,418,632 shares . . . . . . . . . . .
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less Treasury stock, 94,376,534 shares and 87,381,638 shares, respectively, at cost . . . . . . . . . . . . . . . . .
Total Gannett Co., Inc. shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities, redeemable noncontrolling interest and equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
The accompanying notes are an integral part of these consolidated financial statements.
171,319
22,210
208,811
45,963
44,985
229,395
934,516
83,260
1,432,100
149,937
1,007,325
222,182
3,829,320
10,654
173,600
26,158
232,176
18,935
3,658
231,435
901,937
112,088
1,760,363
163,699
908,110
258,228
4,104,425
—
—
324,419
567,515
7,514,858
(701,141)
7,705,651
(5,355,037)
2,350,614
189,298
2,539,912
6,379,886 $
—
324,419
617,727
7,276,200
(595,839)
7,622,507
(5,294,616)
2,327,891
184,134
2,512,025
6,616,450
49
Dec. 30, 2012
Dec. 25, 2011
Dec. 26, 2010
GANNETT CO., INC.
CONSOLIDATED STATEMENTS OF INCOME
In thousands of dollars, except per share amounts
Fiscal year ended
Net operating revenues
Publishing advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Publishing circulation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Digital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Broadcasting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
All other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating expenses
Cost of sales and operating expenses, exclusive of depreciation. . . . . . . . . . . . . . . . . . .
Selling, general and administrative expenses, exclusive of depreciation . . . . . . . . . . . .
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of intangible assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Facility consolidation and asset impairment charges (see Notes 3 and 4). . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-operating (expense) income
Equity income in unconsolidated investees, net (see Notes 3 and 6). . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other non-operating items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss from the operation of discontinued operations, net of tax. . . . . . . . . . . . . . . . . . . .
Gain on disposal of publishing businesses, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to Gannett Co., Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2,355,922 $
1,117,042
718,949
906,104
255,180
5,353,197
2,511,025 $
1,063,890
686,471
722,410
256,193
5,239,989
2,943,847
1,303,427
160,746
33,293
122,129
4,563,442
789,755
22,387
(150,469)
8,734
(119,348)
670,407
195,400
475,007
—
—
475,007
(50,727)
424,280 $
2,961,097
1,223,485
165,739
31,634
27,243
4,409,198
830,791
8,197
(173,140)
(12,921)
(177,864)
652,927
152,800
500,127
—
—
500,127
(41,379)
458,748 $
Income from continuing operations attributable to Gannett Co., Inc. . . . . . . . . . . . $
Loss from the operation of discontinued operations, net of tax. . . . . . . . . . . . . . . . . . . .
Gain on disposal of publishing businesses, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to Gannett Co., Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
424,280 $
458,748 $
—
—
—
—
424,280 $
458,748 $
Earnings from continuing operations per share—basic. . . . . . . . . . . . . . . . . . . . . . . $
Earnings from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Discontinued operations per share—basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on disposal of publishing businesses per share—basic . . . . . . . . . . . . . . . . . . . . . .
Net income per share—basic. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Earnings from continuing operations per share—diluted . . . . . . . . . . . . . . . . . . . . . $
Earnings from discontinued operations
Discontinued operations per share—diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on disposal of publishing businesses per share—diluted . . . . . . . . . . . . . . . . . . . .
Net income per share—diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1.83 $
1.92 $
—
—
1.83 $
1.79 $
—
—
1.79 $
—
—
1.92 $
1.89 $
—
—
1.89 $
The accompanying notes are an integral part of these consolidated financial statements.
50
2,710,524
1,086,702
618,259
769,580
253,613
5,438,678
2,980,465
1,187,633
182,514
31,362
57,009
4,438,983
999,695
19,140
(172,986)
111
(153,735)
845,960
244,013
601,947
(322)
21,195
622,820
(34,619)
588,201
567,328
(322)
21,195
588,201
2.38
—
0.09
2.47
2.35
—
0.08
2.43
GANNETT CO., INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
In thousands of dollars
Fiscal year ended
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Redeemable noncontrolling interest
(income not available to shareholders) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (loss), before tax:
Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension and other postretirement benefit items:
Actuarial loss:
Dec. 30, 2012
Dec. 25, 2011
475,007 $
500,127 $
Dec. 26, 2010
622,820
(254)
(973)
(5,872)
18,107
5,342
(21,527)
Actuarial loss arising during the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(230,799)
55,372
(403,495)
43,345
(106,095)
51,819
Prior service cost:
Change in prior service (costs) credit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of prior service credit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension and other postretirement benefit items . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive loss before tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax effect related to components of other comprehensive loss . . . . . . . . . . . . . .
Other comprehensive loss, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Comprehensive income attributable to noncontrolling interests, net of tax. . . . . . . . . . .
Comprehensive income attributable to Gannett Co., Inc. . . . . . . . . . . . . . . . . . . . . . $
—
(11,501)
(3,429)
(190,357)
1,791
(170,459)
66,948
(103,511)
371,242
52,264
318,978 $
(1,297)
(11,930)
(295)
(373,672)
(5,469)
(373,799)
140,182
(233,617)
265,537
37,294
228,243 $
677
(12,646)
21,359
(44,886)
(2,488)
(68,901)
17,606
(51,295)
565,653
25,954
539,699
The accompanying notes are an integral part of these consolidated financial statements.
51
GANNETT CO., INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
In thousands of dollars
Fiscal year ended
Cash flows from operating activities
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Adjustments to reconcile net income to operating cash flows:
Gain on sale of discontinued operations, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of intangible assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Facility consolidation and asset impairment charges (see Notes 3 and 4). . . . . . . . . . . . . . .
Stock-based compensation — equity awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension expense, net of pension contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity income in unconsolidated investees, net (see Notes 3 and 6) . . . . . . . . . . . . . . . . . .
Other, net, including gains on asset sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decrease in trade receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decrease (increase) in other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decrease (increase) in inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decrease in accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase (decrease) in interest and taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase (decrease) in deferred income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in other assets and liabilities, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash flow from operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash flows from investing activities
Purchase of property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments for acquisitions, net of cash acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments for investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sale of certain assets, including discontinued operations in 2010 . . . . . . . . .
Net cash (used for) provided by investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash flows from financing activities
Proceeds from (payments of) borrowings under revolving credit facilities . . . . . . . . . . . . .
Proceeds from issuance of long-term debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments of unsecured floating rate term loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments of unsecured fixed rate notes and other indebtedness . . . . . . . . . . . . . . . . . . . . . .
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of common shares repurchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from issuance of common stock upon exercise of stock options . . . . . . . . . . . . . .
Repurchase of and distributions to noncontrolling membership interests . . . . . . . . . . . . . . .
Deferred payments for acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used for financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of currency exchange rate change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance of cash and cash equivalents at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance of cash and cash equivalents at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
The accompanying notes are an integral part of these consolidated financial statements.
52
Dec. 30, 2012 Dec. 25, 2011 Dec. 26, 2010
475,007 $
500,127 $
622,820
—
160,746
33,293
122,129
26,608
122,700
(95,377)
(22,387)
(36,056)
35,799
6,200
(7,167)
(3,284)
853
(5,294)
(57,030)
756,740
(91,874)
(67,244)
(2,501)
35,629
39,009
(86,981)
—
165,739
31,634
41,772
28,003
97,500
(42,330)
(8,197)
(1,639)
33,464
12,273
22,932
(12,614)
(57,173)
4,595
(1,950)
814,136
(72,451)
(23,020)
(19,406)
52,982
36,976
(24,919)
(21,195)
183,322
31,362
57,009
32,707
150,363
(124,864)
(19,140)
(3,996)
34,909
(5,182)
(10,434)
(15,199)
(98,270)
4,745
(46,073)
772,884
(69,070)
(15,164)
(10,984)
45,478
112,706
62,966
(30,000)
—
—
(306,571)
(158,822)
(153,948)
33,748
(47,100)
(1,027)
(663,720)
2,065
8,104
166,926
175,030 $
14,000
—
(180,000)
(433,432)
(47,946)
(53,037)
3,609
(108,691)
—
(805,497)
192
(16,088)
183,014
166,926 $
(1,160,000)
493,743
—
(50,000)
(38,216)
—
3,214
—
—
(751,259)
(372)
84,219
98,795
183,014
GANNETT CO., INC.
CONSOLIDATED STATEMENTS OF EQUITY
In thousands of dollars
Gannett Co., Inc. Shareholders’ Equity
Fiscal years ended Dec. 26, 2010,
Dec. 25, 2011, and Dec. 30, 2012
Common
stock
$1 par
value
Additional
paid-in
capital
Retained
earnings
Accumulated
other
comprehensive
income (loss)
Treasury
stock
Noncontrolling
Interests
Total
Balance: Dec. 27, 2009 . . . . . . . . . . . . . . . . . . . . . $
Net income, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . .
Redeemable noncontrolling interest. . . . . . . . . . . .
Other comprehensive income, net of tax . . . . . . . .
Total comprehensive income. . . . . . . . . . . . . . . . . .
Dividends declared, 2010: $0.16 per share . . . . . .
Acquisitions/dispositions . . . . . . . . . . . . . . . . . . . .
Stock options exercised . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . . . . . . . .
401(k) match. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax benefit derived from stock awards settled. . . .
Other treasury stock activity. . . . . . . . . . . . . . . . . .
Balance: Dec. 26, 2010 . . . . . . . . . . . . . . . . . . . . . $
Net income, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . .
Redeemable noncontrolling interest. . . . . . . . . . . .
Other comprehensive loss, net of tax . . . . . . . . . . .
Total comprehensive income. . . . . . . . . . . . . . . . . .
Dividends declared, 2011: $0.24 per share. . . . . . .
Distributions to noncontrolling membership
shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury stock acquired . . . . . . . . . . . . . . . . . . . . .
Stock options exercised . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . . . . . . . .
401(k) match. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax benefit derived from stock awards settled. . . .
Other treasury stock activity. . . . . . . . . . . . . . . . . .
Balance: Dec. 25, 2011 . . . . . . . . . . . . . . . . . . . . . $
Net income, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . .
Redeemable noncontrolling interest. . . . . . . . . . . .
Other comprehensive (loss) income, net of tax . . .
Total comprehensive income. . . . . . . . . . . . . . . . . .
Dividends declared, 2012: $0.80 per share . . . . . .
Distributions to noncontrolling membership
shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury stock acquired . . . . . . . . . . . . . . . . . . . . .
Stock options exercised . . . . . . . . . . . . . . . . . . . . .
Restricted stock awards settled. . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . . . . . . . .
Tax benefit derived from stock awards settled. . . .
Other treasury stock activity. . . . . . . . . . . . . . . . . .
Balance: Dec. 30, 2012 . . . . . . . . . . . . . . . . . . . . . $
815
34,619
(5,872)
(2,793)
143,550 $ 1,747,475
622,820
(5,872)
(51,295)
565,653
(38,146)
815
1,978
32,707
22,867
1,236
(512)
170,319 $ 2,334,073
500,127
(973)
41,379
(973)
63
(53,037)
2,352
28,003
16,627
1,257
(2,056)
184,134 $ 2,512,025
475,007
(254)
(103,511)
371,242
(185,622)
50,727
(254)
1,791
324,419 $
629,714 $ 6,324,586 $
(316,832) $ (5,357,962) $
588,201
(38,146)
(48,502)
(6,153)
32,707
(22,227)
1,236
(4,961)
8,131
45,094
4,449
324,419 $
630,316 $ 6,874,641 $
(365,334) $ (5,300,288) $
458,748
(57,189)
(7,294)
28,003
(24,714)
1,257
(9,841)
(230,505)
(3,112)
(233,617)
265,537
(57,189)
(23,542)
(23,542)
(53,037)
9,646
41,341
7,722
324,419 $
617,727 $ 7,276,200 $
(595,839) $ (5,294,616) $
424,280
(185,622)
(105,302)
(42,282)
(32,860)
26,608
9,243
(10,921)
567,515 $ 7,514,858 $
324,419 $
(153,948)
66,787
25,890
850
(701,141) $ (5,355,037) $
(47,100)
(47,100)
(153,948)
24,505
(6,970)
26,608
9,243
(10,071)
189,298 $ 2,539,912
The accompanying notes are an integral part of these consolidated financial statements.
53
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1
Summary of significant accounting policies
Fiscal year: The company’s fiscal year ends on the last Sunday of
the calendar year. The company’s 2012 fiscal year ended on Dec. 30,
2012, and encompassed a 53-week period. The company’s 2011 and
2010 fiscal years encompassed 52-week periods.
Consolidation: The consolidated financial statements include the
accounts of the company and its wholly and majority-owned
subsidiaries after elimination of all significant intercompany
transactions and profits. Investments in entities for which the
company does not have control, but has the ability to exercise
significant influence over operating and financial policies, are
accounted for under the equity method. Accordingly, the company’s
share of net earnings and losses from these ventures is included in
“Equity income in unconsolidated investees, net” in the
Consolidated Statements of Income.
Segment presentation: The Digital Segment includes results
from CareerBuilder, PointRoll, ShopLocal and Reviewed.com. The
Digital Segment and the digital revenues lines do not include online/
digital revenues generated by digital platforms that are associated
with the company’s publishing and broadcasting operating
properties. Such amounts are reflected within those segments and are
included as part of publishing revenues and broadcasting revenues in
the Consolidated Statements of Income.
Noncontrolling interests presentation: Noncontrolling interests
are presented as a component of equity on the Consolidated Balance
Sheet. This balance primarily relates to the noncontrolling owners of
CareerBuilder, LLC (CareerBuilder) for which Gannett’s ownership
percentage is at 52.9%. Net income in the Consolidated Statements
of Income reflects 100% of CareerBuilder results as the company
holds the controlling interest. Net income is subsequently adjusted to
remove the noncontrolling interest to arrive at Net income
attributable to Gannett Co., Inc. On Aug. 31, 2012, CareerBuilder
acquired 74% of Economic Modeling Specialists Intl. (EMSI), a
software firm that specializes in employment data and labor market
analytics. Shareholders for the remaining 26% of ownership hold put
rights that permit them to put their equity interest to CareerBuilder.
Since redemption of the noncontrolling interest is outside of the
Company’s control, their equity interest is presented on the
consolidated balance sheet in the caption “Redeemable
noncontrolling interest”.
Operating agencies: The company’s publishing subsidiary in
Detroit participates in a joint operating agency. The joint operating
agency performs the production, sales and distribution functions for
the subsidiary and another publishing company under a joint
operating agreement. Operating results for the Detroit joint operating
agency are fully consolidated along with a charge for the
noncontrolling partner’s share of profits.
Cash and cash equivalents: Cash and cash equivalents consist of
cash and investments with maturities of three months or less.
Trade receivables and allowances for doubtful accounts: Trade
receivables are recorded at invoiced amounts and generally do not
bear interest. The allowance for doubtful accounts reflects the
company’s estimate of credit exposure, determined principally on the
basis of its collection experience, aging of its receivables and
significant individual account credit risk.
Inventories: Inventories, consisting principally of newsprint,
printing ink and plate material for the company’s publishing
operations, are valued primarily at the lower of cost (first-in, first-
out) or market. At certain U.S. publishing operations however,
newsprint inventory is carried on a last-in, first-out basis.
Valuation of long-lived assets: In accordance with the
requirements included within ASC Topic 350, “Intangibles—
Goodwill and Other” (ASC Topic 350) and Topic 360, “Property,
Plant, and Equipment” (ASC Topic 360), the company evaluates the
carrying value of long-lived assets (mostly property, plant and
equipment and definite-lived intangible assets) to be held and used
whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. The carrying value of a
long-lived asset group is considered impaired when the projected
undiscounted future cash flows are less than its carrying value. The
company measures impairment based on the amount by which the
carrying value exceeds the fair value. Fair value is determined
primarily using the projected future cash flows, discounted at a rate
commensurate with the risk involved. Losses on long-lived assets to
be disposed of are determined in a similar manner, except that fair
values are reduced for the cost to dispose.
Property and depreciation: Property, plant and equipment is
recorded at cost, and depreciation is provided generally on a straight-
line basis over the estimated useful lives of the assets. The principal
estimated useful lives are: buildings and improvements, 10 to 40
years; and machinery, equipment and fixtures, 3 to 30 years.
Changes in the estimated useful life of an asset, which could happen
as a result of facility consolidations, can affect depreciation expense
and net income. Major renewals and improvements and interest
incurred during the construction period of major additions are
capitalized. Expenditures for maintenance, repairs and minor
renewals are charged to expense as incurred.
Goodwill and other intangible assets: Goodwill represents the
excess of acquisition cost over the fair value of assets acquired,
including identifiable intangible assets, net of liabilities assumed. In
accordance with the impairment testing provisions included in ASC
Topic 350, goodwill is tested for impairment on an annual basis or
between annual tests if events occur or circumstances change that
would more likely than not reduce the fair value of a reporting unit
below its carrying amount.
During the quarter ended Dec. 30, 2012, the company voluntarily
changed the date of its annual goodwill and indefinite-lived
intangible assets impairment testing from the last day of the fourth
quarter to the first day of the fourth quarter. This change is
preferable as it provides the company with additional time to
complete its annual goodwill and indefinite-lived intangible asset
impairment testing in advance of its year-end reporting and results in
better alignment with the company’s strategic planning and
forecasting process. In accordance with U.S. generally accepted
accounting principles, the company will continue to perform interim
impairment testing should circumstances requiring it arise. The
company believes that this accounting change is appropriate and
does not result in the delay, acceleration or avoidance of an
impairment charge. This change is not applied retrospectively as it is
impracticable to do so because retrospective application would
require application of significant estimates and assumptions with the
use of hindsight. Accordingly, the change will be applied
prospectively.
54
Under recent guidance, prior to performing the annual two-step
goodwill impairment test, the company is first permitted to perform
a qualitative assessment to determine if the two-step quantitative test
must be completed. The qualitative assessment considers events and
circumstances such as macroeconomic conditions, industry and
market conditions, cost factors and overall financial performance, as
well as company and specific reporting unit specifications. If after
performing this assessment, the company concludes it is more likely
than not that the fair value of a reporting unit is less than its carrying
amount, then it is required to perform a two-step quantitative test.
Otherwise, the two-step test is not required. In the first step of the
quantitative test, the company is required to determine the fair value
of each reporting unit and compare it to the carrying amount of the
reporting unit. Fair value of the reporting unit is determined using
various techniques, including multiple of earnings and discounted
cash flow valuation techniques. If the carrying amount of the
reporting unit exceeds the fair value of the reporting unit, the
company performs the second step of the impairment test, as this is
an indication that the reporting unit goodwill may be impaired. In
the second step of the impairment test, the company determines the
implied fair value of the reporting unit’s goodwill. If the carrying
value of a reporting unit’s goodwill exceeds its implied fair value,
then an impairment of goodwill has occurred and the company must
recognize an impairment loss for the difference between the carrying
amount and the implied fair value of goodwill.
In determining the reporting units, the company considers the
way it manages its businesses and the nature of those businesses.
The company has established its reporting units for publishing at or
one level below the segment level. These reporting units therefore
consist principally of U.S. Community Publishing, the USA TODAY
group, the U.K. group, and certain individual stand-alone publishing
businesses. For Digital, the reporting units are the stand-alone digital
businesses. For Broadcasting, goodwill is accounted for at the
segment level.
The company performs an impairment test annually, or more
often if circumstances dictate, of its indefinite-lived intangible
assets. Intangible assets that have finite useful lives are amortized
over those useful lives and are evaluated for impairment in
accordance with ASC Topic 350 as described above.
Investments and other assets: Investments where the company
does have significant influence are recorded under the equity method
of accounting. The company recognized impairment charges each
year from 2010-2012 related to such investments. See Note 3 for
additional information.
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. 30, 2012 and Dec. 25, 2011, such investments totaled
approximately $2 million. See Note 3 for additional information.
The company’s television stations are parties to program
broadcast contracts. These contracts are recorded at the gross amount
of the related liability when the programs are available for
telecasting. The related assets are recorded at the lower of cost or
estimated net realizable value. Program assets are classified as
current (as a prepaid expense) or noncurrent (as an other asset) in the
Consolidated Balance Sheets, based upon the expected use of the
programs in succeeding years. The amount charged to expense
appropriately matches the cost of the programs with the revenues
associated with them. The liability for these contracts is classified as
current or noncurrent in accordance with the payment terms of the
contracts. The payment period generally coincides with the period of
telecast for the programs, but may be shorter.
Revenue recognition: The company’s revenues include amounts
charged to customers for space purchased in the company’s
newspapers, digital ads placed on its digital platforms, advertising
and marketing service fees, commercial printing and advertising
broadcast on the company’s television stations. Publishing revenues
also include circulation revenues for newspapers, both print and
digital, purchased by readers or distributors, reduced by the amount
of any discounts taken. Broadcast revenues include revenues from
the retransmission of the company’s television signals on satellite
and cable networks. Advertising revenues are recognized, net of
agency commissions, in the period when advertising is printed or
placed on digital platforms or broadcast. Revenues for marketing
services are generally recognized as ads or services are delivered.
Commercial printing revenues are recognized when the product is
delivered to the customer. Circulation revenues are recognized when
purchased newspapers are distributed or made available on the
company’s digital platforms. Amounts received from customers in
advance of revenue recognition are deferred as liabilities.
Broadcasting retransmission fees are recognized over the contract
period based on a negotiated fee per subscriber.
Retirement plans: Pension and other postretirement benefit costs
under the company’s retirement plans are actuarially determined.
The company recognizes the cost of postretirement benefits
including pension, medical and life insurance benefits on an accrual
basis over the working lives of employees expected to receive such
benefits.
Stock-based employee compensation: The company’s stock
option awards generally have graded vesting terms and the company
recognizes compensation expense for these options on a straight-line
basis over the requisite service period for the entire award (generally
four years).
The company also grants restricted stock or restricted stock units
as well as performance shares to employees 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 for restricted stock and the three-year incentive
period for performance shares. Expense for performance share
awards for participants meeting certain retirement eligible criteria as
defined in the plan are recognized using the accelerated attribution
method. See Note 11 for further discussion.
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. 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 performance share 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 other comprehensive income (loss) in the Consolidated
Statement of Comprehensive Income and are classified as
accumulated other comprehensive income (loss) in the Consolidated
Balance Sheet and Statement of Equity.
55
Loss contingencies: The company is subject to various legal
proceedings, claims and regulatory matters, the outcomes of which
are subject to significant uncertainty. The company determines
whether to disclose or accrue for loss contingencies based on an
assessment of whether the risk of loss is remote, reasonably possible
or probable, and whether it can be reasonably estimated. The
company accrues for loss contingencies when such amounts are
probable and reasonably estimable. If a contingent liability is only
reasonably possible, the company will disclose the potential range of
the loss, if material and estimable.
New accounting pronouncements: In July 2012, the Financial
Accounting Standards Board (FASB) issued Accounting Standards
Update (ASU) 2012-02, Intangibles – Goodwill and Other: Testing
Indefinite-Lived Intangible Assets for Impairment. ASU 2012-02
permits an entity to first assess qualitative factors to determine
whether it is necessary to perform the quantitative impairment test in
accordance with Subtopic 350-30, Intangibles – Goodwill and Other
– General Intangibles Other than Goodwill. This guidance is
effective for annual and interim impairment tests performed for
fiscal years beginning after Sept. 15, 2012. The company does not
expect the adoption of this update to have a material impact on its
financial statements.
In June 2011, the FASB issued ASU 2011-05, Presentation of
Comprehensive Income. ASU 2011-05 revises the manner in which
entities present comprehensive income in their financial statements.
The recent guidance removes the presentation options in Accounting
Standards Codification 220 and requires entities to report
components of comprehensive income in either (1) a continuous
statement of comprehensive income or (2) two separate but
consecutive statements. ASU 2011-05 did not change the items that
must be reported in other comprehensive income. The company
adopted the provisions of ASU 2011-05 in the first quarter of 2012
and elected the second option.
NOTE 2
Acquisitions, investments and dispositions
2012: In January 2012, the company acquired the assets of Fantasy
Sports Ventures/Big Lead Sports, a leading sports digital site. This
business is an important addition to the USA TODAY Sports Media
Group, positioning it as one of the top five sports sites on the web.
In February 2012, the company invested in HotelMe LLC, a
company engaged in the business of providing authenticated hotel
and lodging travel reviews.
In April 2012, CareerBuilder acquired two new businesses:
Ceviu and Top Language Jobs. Ceviu is the leading information
technology job board in Brazil. Top Language Jobs is Europe’s
number one language specialist recruitment job portal. It operates
the largest global network of job boards dedicated to multilingual
job seekers looking for work internationally.
In June 2012, the company acquired Quickish. Quickish is a
sports aggregator that offers a summary and a link for sports stories
throughout the day.
In August 2012, Gannett completed the acquisition of BLiNQ
Media, LLC, a leading global innovator of social engagement
advertising solutions for agencies and brands. BLiNQ helps
companies advertise and engage with consumers on Facebook and
other social networks.
In September 2012, Gannett acquired Mobestream Media,
developer of the Key Ring consumer rewards mobile platform (“Key
Ring”) available on all major smartphones. Consumers download the
free Key Ring application to scan and store existing loyalty cards,
join new rewards programs and get mobile coupons and other
promotional offers delivered to their smartphones.
Also in September 2012, CareerBuilder acquired a controlling
interest in EMSI. EMSI is an economic software firm that
specializes in employment data and labor market analysis. EMSI
collects and interprets large amounts of labor data, which is used in
work force development and talent strategy.
In October 2012, Gannett acquired Rovion. Rovion’s primary
product, Ad Composer, includes a self-service technology platform
that enables the full development and deployment of rich media and
mobile HTML5 ads by clients who do not have coding expertise.
Total cash paid in 2012 for business acquisitions and investments
was $67.2 million and $2.5 million respectively.
2011: In January 2011, the company acquired Reviewed.com, a
group of product-review web sites that provide comprehensive
reviews for technology products such as digital cameras, camcorders
and high-definition televisions. Its operations have been expanded to
cover other household items and consumer services.
In May 2011, CareerBuilder acquired JobsCentral, a leading jobs
board in Singapore that also has a fast-growing presence in
Malaysia.
In June 2011, the company acquired Nutrition Dimension, which
provides continuing education, certification and review programs
and other educational content for nutrition, fitness and training
professionals.
In August 2011, the company acquired US PRESSWIRE, a
global leader in the creation and distribution of premium digital
sports images to media companies worldwide. US PRESSWIRE
operates within the USA TODAY Sports Media Group and provides
daily sports photo coverage for all of the company’s publishing and
broadcast properties.
56
In September 2011, CareerBuilder acquired JobScout24, which
NOTE 3
solidified CareerBuilder’s position as one of the top three online
recruitment sites in Germany.
In November 2011, the company acquired the mixed martial arts
web site, MMAjunkie.com, one of the leading online news
destinations for the sport and a content provider for several print,
online and TV outlets.
Also in November 2011, the company purchased a minority
stake in ShopCo Holdings, LLC (ShopCo). ShopCo provides a
common online shopping platform which allows advertisers to reach
consumers in order to assist them in making informed purchasing
decisions.
Total cash paid in 2011 for business acquisitions and investments
was $23.0 million and $19.4 million, respectively.
2010: In March 2010, CareerBuilder purchased CareerSite.biz,
parent of three successful career-related operations in the U.K., two
online recruitment niche sites targeted to nursing and rail workers as
well as a successful virtual career fair business.
In the second quarter of 2010, the company completed the sale of
The Honolulu Advertiser as well as a small directory publishing
operation in Michigan. In connection with these transactions, the
company recorded a net after tax gain of $21.2 million in
discontinued operations. Income from continuing operations for all
periods presented exclude operating results from these former
properties which have been reclassified to discontinued operations.
Amounts applicable to these discontinued operations are as follows:
Facility consolidation and asset impairment charges
For the years 2010-2012, the company recognized charges related to
facility consolidation efforts. The company also recorded non-cash
impairment charges to reduce the book value of goodwill, other
intangible assets and long-lived assets. Impairment charges for
certain minority-owned investments accounted for under the equity
or cost methods were also recorded.
A summary of these charges by year is presented below:
In thousands, except per share amounts
2012
Pre-Tax
Amount
After-Tax
Amount
Per Share
Amount(a)
Facility consolidation and asset impairment charges:
Goodwill - Digital . . . . . . . . . . . . . . . $ 90,053 $ 86,553 $
0.37
Property, plant and equipment -
Publishing. . . . . . . . . . . . . . . . . . .
Other - Publishing . . . . . . . . . . . . . . .
29,520
2,556
17,920
1,656
Total facility consolidation and asset
impairment charges against operations .
122,129
106,129
Non-operating charges:
Equity method investments. . . . . . . .
7,036
4,336
Total charges . . . . . . . . . . . . . . . . . . . . . $ 129,165 $ 110,465 $
(a)Total amounts may not sum due to rounding.
0.08
0.01
0.45
0.02
0.47
In thousands of dollars
In thousands, except per share amounts
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 32,710
Pretax Loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Net Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(758)
(322)
Gains (after tax) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 21,195
2010
Total cash paid in 2010 for business acquisitions and investments
was $15.2 million and $11.0 million, respectively.
2011
Pre-Tax
Amount
After-Tax
Amount
Per Share
Amount
Facility consolidation and asset impairment charges:
Property, plant and equipment -
Publishing . . . . . . . . . . . . . . . . . . . $ 17,085 $ 10,282 $
Other - Publishing . . . . . . . . . . . . . . .
10,158
7,261
Total facility consolidation and asset
impairment charges against operations .
27,243
17,543
Non-operating charges:
Equity method investments . . . . . . . .
Other investments . . . . . . . . . . . . . . .
15,739
14,529
9,539
8,729
Total charges. . . . . . . . . . . . . . . . . . . . . . $ 57,511 $ 35,811 $
0.04
0.03
0.07
0.04
0.04
0.15
57
In thousands, except per share amounts
NOTE 4
2010
Pre-Tax
Amount
After-Tax
Amount
Per Share
Amount(a)
Facility consolidation and asset impairment charges:
Goodwill - Digital . . . . . . . . . . . . . . . $ 10,932 $ 10,810 $
0.04
Other intangible assets: . . . . . . . . . . .
Publishing. . . . . . . . . . . . . . . . . . .
Digital. . . . . . . . . . . . . . . . . . . . . .
Total other intangible assets . . . . . . .
Property, plant and equipment: . . . . .
Publishing. . . . . . . . . . . . . . . . . . .
Broadcasting. . . . . . . . . . . . . . . . .
Total property, plant and equipment .
Other: . . . . . . . . . . . . . . . . . . . . . . . .
Publishing. . . . . . . . . . . . . . . . . . .
Broadcasting. . . . . . . . . . . . . . . . .
Total other . . . . . . . . . . . . . . . . . . . . .
Total facility consolidation and asset
impairment charges against operations .
Non-operating charges:
16,930
1,603
18,533
15,489
3,764
19,253
3,301
4,990
8,291
12,359
1,006
13,365
9,472
2,321
11,793
2,025
3,061
5,086
57,009
41,054
Equity method investments. . . . . . . .
2,731
1,634
Total charges . . . . . . . . . . . . . . . . . . . . . $ 59,740 $ 42,688 $
(a)Total amounts may not sum due to rounding.
0.05
—
0.06
0.04
0.01
0.05
0.01
0.01
0.02
0.17
0.01
0.18
In connection with the required annual impairment test of
goodwill and indefinite-lived intangibles, potential impairments
were indicated in 2012 and 2010 for certain reporting units in the
company’s Digital and Publishing Segments. The fair value of the
reporting units was determined based on a multiple of earnings
technique and/or a discounted cash flow technique. The company
then undertook the next step in the impairment testing process by
determining the fair value of assets and liabilities within these
reporting units. The implied value was less than the carrying value
and therefore the impairment charges were taken.
The impairment charge in 2010 for other intangible assets,
principally a masthead, was required because revenue results from
the underlying business had softened from what was expected at the
time the assets were last valued. Fair value was determined using a
relief-from-royalty method. Carrying values were reduced to fair
value for an indefinite lived asset and for certain definite-lived assets
in accordance with ASC Topic 350.
Facility consolidation plans led the company to recognize
charges associated with revising the useful lives of certain assets
over a shortened periods as well as shutdown costs. Charges were
recognized in the years 2010-2012. Certain assets classified as held-
for-sale in accordance with ASC Topic 360 resulted in charges being
recognized in 2012 as the carrying values were reduced to equal the
fair value less cost to dispose. These fair values were based on
estimates of prices for similar assets.
During 2010-2012, carrying values of certain investments in
which the company owns noncontrolling interests were written down
to fair value because the businesses underlying the investments had
experienced significant and sustained operating losses, leading the
company to conclude that they were other than temporarily
impaired.
Goodwill and other intangible assets
ASC Topic 350 requires that goodwill and indefinite-lived intangible
assets be tested for impairment at least annually. Recognized
intangible assets that have finite useful lives are amortized over their
useful lives and are subject to tests for impairment in accordance
with the requirements included within ASC Topic 350.
The company performed impairment tests on its goodwill and
intangible assets during 2012 and as a result recognized non-cash
impairment charges totaling $90 million on its goodwill in the
Digital Segment. The impairment charges coincide with the
reduction in advertising from a large customer during the fourth
quarter of 2012 as well as a change in strategy and the development
of updated financial projections reflective of these events.
Goodwill impairment tests completed in 2011 indicated no
impairment. In 2010, the company performed interim and year-end
impairment tests on its goodwill and other intangible assets and, as a
result, recognized non-cash impairment charges totaling $29 million.
The charges in 2010 included goodwill and other intangibles for the
Digital segment of $11 million and $2 million, respectively, and $17
million for other intangibles for the Publishing segment (for a
publication masthead in the U.K.).
The following table displays goodwill, indefinite-lived intangible
assets, and amortizable intangible assets at Dec. 30, 2012, and Dec.
25, 2011.
In thousands of dollars
Dec. 30, 2012
Gross
Accumulated
Amortization
Net
Goodwill . . . . . . . . . . . . . . . . . . $ 2,846,869 $
— $ 2,846,869
Indefinite-lived intangibles:
Mastheads and trade names . .
95,308
Television station FCC
licenses . . . . . . . . . . . . . . . . .
255,304
Amortizable intangible assets:
Customer relationships . . . . . .
Other. . . . . . . . . . . . . . . . . . . .
313,567
56,965
Total. . . . . . . . . . . . . . . . . . . . . . $ 3,568,013 $
Dec. 25, 2011
—
—
95,308
255,304
197,300
23,931
116,267
33,034
221,231 $ 3,346,782
Goodwill . . . . . . . . . . . . . . . . . . $ 2,864,885 $
— $ 2,864,885
Indefinite-lived intangibles:
Mastheads and trade names . .
93,163
Television station FCC
licenses . . . . . . . . . . . . . . . . .
255,304
Amortizable intangible assets:
—
—
93,163
255,304
Customer relationships . . . . . .
Other. . . . . . . . . . . . . . . . . . . .
298,437
43,624
169,499
18,834
128,938
24,790
Total. . . . . . . . . . . . . . . . . . . . . . $ 3,555,413 $
188,333 $ 3,367,080
Amortization expense was $33.3 million in 2012 and $31.6
million in 2011. The increase primarily reflects the impact of
additional acquisitions made in 2012. Customer relationships, which
include subscriber lists and advertiser relationships, are amortized on
a straight-line basis over periods ranging from three to 25 years.
Other intangibles primarily include internally developed technology,
patents and amortizable trade names and were assigned lives of
between three and 21 years and are amortized on a straight-line
basis.
58
Annual amortization expense relating to the amortizable
NOTE 5
intangibles is expected to be approximately $34 million in 2013 and
gradually decline to $13 million in 2017 assuming no acquisitions or
dispositions.
Supplemental cash flows information
Cash paid in 2012, 2011 and 2010 for income taxes and for interest
(net of amounts capitalized) was as follows:
The following table shows the changes in the carrying amount of
goodwill during 2012 and 2011.
In thousands of dollars
In thousands of dollars
Publishing
Digital
Broadcasting
Total
Goodwill
Income taxes . . . . . . . . . . . . . . . . . . . . $
81,559 $ 135,051 $ 195,253
Interest . . . . . . . . . . . . . . . . . . . . . . . . . $ 138,906 $ 161,960 $ 171,537
2012
2011
2010
1,618,563 $ 9,893,120
Interest in the amount of $477,000 was capitalized in 2010. No
interest was capitalized for 2011 and 2012.
Included in Repurchase of and distributions to noncontrolling
membership interests on the Consolidated Statement of Cash Flows
is $16 million of then unpaid distributions as of Dec. 25, 2011. These
funds were in restricted cash for this purpose and classified within
Investments and other assets, net on the Consolidated Balance Sheet
at Dec. 25, 2011. Other long-term liabilities on the Consolidated
Balance Sheet at Dec. 25, 2011 included a liability for this amount
which was subsequently paid in 2012.
(36,603)
(7,019,557)
Gross balance at
Dec. 26, 2010 . . . $ 7,599,030 $ 675,527 $
Accumulated
impairment losses
Net balance at
Dec. 26, 2010 . . . $
Acquisitions &
adjustments . . . . .
Foreign currency
exchange rate
changes . . . . . . . .
579,473 $ 638,924 $
(2,538)
11,215
17,500
1,789
— (7,056,160)
1,618,563 $ 2,836,960
—
28,715
(41)
(790)
Balance at
Dec. 25, 2011 . . . $
Gross balance at
Dec. 25, 2011 . . .
Accumulated
impairment losses
Net balance at
Dec. 25, 2011 . . . $
Acquisitions &
adjustments . . . . .
Impairment . . . . .
Foreign currency
exchange rate
changes . . . . . . . .
Balance at
Dec. 30, 2012 . . . $
Gross balance at
Dec. 30, 2012 . . .
Accumulated
impairment losses
Net balance at
Dec. 30, 2012 . . . $
592,477 $ 653,886 $
1,618,522 $ 2,864,885
7,643,255
680,489
1,618,522
9,942,266
(7,050,778)
(26,603)
— (7,077,381)
592,477 $ 653,886 $
1,618,522 $ 2,864,885
22,747
39,241
—
(90,053)
6,918
3,051
—
—
80
61,988
(90,053)
10,049
622,142 $ 606,125 $
1,618,602 $ 2,846,869
7,754,959
722,781
1,618,602
10,096,342
(7,132,817)
(116,656)
— (7,249,473)
622,142 $ 606,125 $
1,618,602 $ 2,846,869
59
NOTE 6
NOTE 7
Investments
The company’s investments include several that are accounted for
under the equity method. Principal among these are the following:
Wanderful Media, LLC . . . . . . . . . . . . . . . . . . . . . . . . . .
Ponderay Newsprint Company . . . . . . . . . . . . . . . . . . . .
Pearl, LLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Garnet Media . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
California Newspapers Partnership . . . . . . . . . . . . . . . . .
4Info. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Classified Ventures . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Livestream . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
HotelMe, LLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Homefinder.com . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Topix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Texas-New Mexico Newspapers Partnership . . . . . . . . .
Tucson Newspaper Partnership . . . . . . . . . . . . . . . . . . . .
% Owned
11.36%
13.50%
16.20%
18.10%
19.49%
23.49%
23.60%
26.60%
32.14%
33.33%
33.71%
40.64%
50.00%
The aggregate carrying value of equity investments at Dec. 30,
2012, was $123 million. Certain differences exist between the
company’s investment carrying value and the underlying equity of
the investee companies principally due to fair value measurement at
the date of investment acquisition and due to impairment charges
recorded by the company for certain of the investments. The
aggregate amount of pretax earnings recorded by the company for its
investments accounted for under the equity method was $22 million,
$8 million, and $19 million for 2012, 2011, and 2010, respectively.
Distributions received from the investees were $36 million, $53
million and $45 million in 2012, 2011, and 2010, respectively.
The company’s net equity income in unconsolidated investees
for 2012, 2011 and 2010 included $7 million, $16 million and $3
million, respectively, of impairment charges related to certain digital
business investments.
The company also recorded revenue related to CareerBuilder and
Classified Ventures products for online advertisements placed on its
publishing affiliated digital platforms. Such amounts totaled
approximately $161 million for 2012, $154 million for 2011 and
$142 million for 2010. These revenues are recorded within
Publishing Segment advertising revenue.
Long-term debt
The long-term debt of the company is summarized below:
In thousands of dollars
Unsecured notes bearing fixed rate interest
at 6.375% repaid April 2012 . . . . . . . . . . $
— $
306,534
Dec. 30, 2012 Dec. 25, 2011
Borrowings under revolving credit
agreements expiring September 2014 . . .
Unsecured notes bearing fixed rate interest
at 8.75% due November 2014 . . . . . . . . .
Unsecured notes bearing fixed rate interest
at 10% due June 2015 . . . . . . . . . . . . . . .
Unsecured notes bearing fixed rate interest
at 6.375% due September 2015 . . . . . . . .
Unsecured notes bearing fixed rate interest
at 10% due April 2016 . . . . . . . . . . . . . . .
Unsecured notes bearing fixed rate interest
at 9.375% due November 2017 . . . . . . . .
Unsecured notes bearing fixed rate interest
at 7.125% due September 2018 . . . . . . . .
205,000
235,000
248,376
247,609
61,286
59,522
248,497
247,995
174,241
169,775
247,547
247,168
247,153
246,760
Total long-term debt. . . . . . . . . . . . . . . . . . . $
1,432,100 $
1,760,363
Total average debt outstanding in 2012 and 2011 was $1.7 billion
and $2.1 billion, respectively. The weighted average interest rate on
all debt was 7.7% for 2012 and 7.4% for 2011.
On Dec. 30, 2012, the company had unused borrowing capacity
of $922 million under its revolving credit agreements. In addition, its
revolving credit agreements allow the company to borrow at least
$1.25 billion of additional unsecured debt (unrestricted as to
purpose) guaranteed by the guarantor subsidiaries under these credit
agreements. This borrowing limit is subject to increases depending
upon the company’s total leverage ratio.
During 2010 and 2009, the company completed a series of
financing transactions which improved its debt maturity profile.
In September 2010, the company completed a private placement
offering of unsecured senior notes totaling $500 million in two
tranches: $250 million with a coupon of 6.375% due 2015 and $250
million with a coupon of 7.125% due 2018. The 2015 notes were
priced at 98.970% of face value, resulting in a yield to maturity of
6.625%. The 2018 notes were priced at 98.527% of face value,
resulting in a yield to maturity of 7.375%. On or after Sept. 1, 2014,
the 2018 notes may be redeemed or purchased by the company at the
applicable redemption price (expressed as a percentage of the
principal amount of the 2018 notes) plus accrued but unpaid interest
thereon to the redemption date, if redeemed during the 12-month
period commencing on Sept. 1 of the following years: 2014 –
103.563%, 2015 – 101.781% and 2016 and thereafter 100.000%.
The company used the net proceeds of the offering to partially repay
borrowings outstanding under its revolving credit agreements and its
then outstanding term loan.
In September 2010, the company amended its revolving credit
agreements and extended the maturity date with the majority of its
lenders from March 15, 2012 to Sept. 30, 2014. Total commitments
under the amended revolving credit agreements are $1.14 billion
through September 30, 2014.
60
On Aug. 21, 2009, Moody’s confirmed the company’s Ba1
corporate family rating and its Ba2 senior unsecured debt rating. In
addition, Moody’s rated the company’s bank debt, which included its
revolving credit facilities, Baa3. The Baa3 rating was also applicable
to most of the company’s long-term debt which has the same
subsidiary guarantees as the bank debt, while the Ba2 rating applied
to certain non-guaranteed senior long-term debt. On April 2, 2012,
following the redemption of the last tranche of the company’s non-
guaranteed long-term debt, Moody’s changed the company’s senior
unsecured debt rating to Ba1 and lowered the rating applicable to the
company’s revolving credit facilities and remaining guaranteed long-
term debt to Ba1 for consistency with the new senior unsecured debt
rating.
As of Dec. 30, 2012, the company had $205 million of
borrowings under its revolving credit agreements. The maximum
amount outstanding at any time during 2012 and 2011 was $521
million and $470 million, respectively. The daily average
outstanding balance of the revolving credit agreements during 2012
and 2011 was $353 million and $257 million, respectively. The
weighted average interest rate for 2012 was 2.8% and 2.6% for 2011.
The company has an effective universal shelf registration
statement under which an unspecified amount of securities may be
issued, subject to a $7 billion limit established by the Board of
Directors. Proceeds from the sale of such securities may be used for
general corporate purposes, including capital expenditures, working
capital, securities repurchase programs, repayment of debt and
financing of acquisitions. The company may also invest borrowed
funds that are not required for other purposes in short-term
marketable securities.
The following schedule shows the annual maturities of long term
debt:
In thousands of dollars
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
247,153
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,432,100
453,376
309,783
174,241
247,547
—
The company’s debt maturities may be repaid with cash flow
from operating activities or by accessing capital markets or a
combination of both.
In October 2009, the company completed a private placement
offering of $250 million in aggregate principal amount of 8.750%
senior notes due 2014 and $250 million in aggregate principal
amount of 9.375% senior notes due 2017. The 2014 notes were
priced at 98.465% of face value, resulting in a yield to maturity of
9.125%. The 2017 notes were priced at 98.582% of face value,
resulting in a yield to maturity of 9.625%. On or after November 15,
2013, the 2017 notes may be redeemed or purchased by the company
at the applicable redemption price (expressed as a percentage of the
principal amount of the 2017 notes) plus accrued but unpaid interest
thereon to the redemption date, if redeemed during the 12-month
period commencing on November 15 of the following years: 2013 –
104.688%, 2014 – 102.344% and 2015 and thereafter 100.000%.
In May 2009, the company completed a private exchange offer
related to its 5.75% fixed rate notes due June 2011 and its 6.375%
fixed rate notes due April 2012. The company exchanged
approximately $67 million in principal amount of its 2011 notes for
approximately $67 million principal amount of new 10% senior
notes due 2015, and approximately $193 million in principal amount
of its 2012 notes for approximately $193 million principal amount of
new 10% senior notes due 2016.
The notes issued during 2010 and 2009 with maturity dates in
2014 and thereafter were made available in private offerings that
were exempt from the registration requirements of the Securities Act
of 1933. These notes are guaranteed on a senior basis by the
subsidiaries of the company that guarantee its revolving credit and
term loan agreements discussed more fully below.
The company’s three revolving credit agreements require the
company to maintain a senior leverage ratio of less than 3.5x. The
agreements also require the company to maintain a total leverage
ratio of less than 4.0x. The total leverage ratio would also include
any subordinated debt the company may issue in the future.
Currently, all of the company’s debt is senior and unsecured. At Dec.
30, 2012, the senior leverage ratio was 1.41x.
Commitment fees since March 15, 2012 on the revolving credit
agreements are equal to 0.50% of the undrawn commitments. Prior
to this, the company paid a fee to the lenders that agreed in
September 2010 to extend their commitments from 2012 to 2014
based on the leverage ratio that ranged from 0 to 75 basis points for
drawn amounts and 25 basis points for undrawn amounts.
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%. The
applicable margin is determined based on the company’s leverage
ratio but will differ between Eurodollar base rate loans and loans
based on the higher of the Prime Rate or the Federal Funds Effective
Rate plus 0.50%. For borrowings at a margin above the Eurodollar
base rate, the margin varies from 2.00% to 3.25%. For borrowings at
a margin above the higher of the Prime Rate or the Federal Funds
Effective Rate plus 0.50%, the margin will vary from 1.00% to
2.25%. At its current leverage ratios, the company’s applicable
margins will be 2.25% and 1.25%, respectively.
In connection with each of its three revolving credit agreements
and its then outstanding loan agreement, the company agreed to
provide guarantees from a majority of its domestic wholly-owned
subsidiaries in the event that the company’s credit ratings from either
Moody’s or S&P fell below investment grade. In the first quarter of
2009, the company’s credit rating was downgraded below
investment grade by both S&P and Moody’s. Accordingly, the
guarantees were triggered and the existing notes then due in 2011
and 2012 and other unsecured debt of the company became
structurally subordinated to the revolving credit agreements and its
then outstanding term loan.
61
NOTE 8
Retirement plans
The company and its subsidiaries have various retirement plans,
including plans established under collective bargaining agreements.
The company’s principal retirement plan is the Gannett Retirement
Plan (GRP). The disclosure tables below also include the assets and
obligations of the Gannett Supplemental Retirement Plan (SERP),
the Newsquest Pension Scheme in the U.K., and the Newspaper
Guild of Detroit Pension Plan. The company uses a Dec. 31
measurement date for its retirement plans.
During 2008, substantially all of the participants in the GRP
and the SERP had their benefits under these plans frozen.
Amendments were made to the existing Gannett 401(k) Savings Plan
(401(k) Plan) and the Gannett Deferred Compensation Plan (DCP).
Most participants whose benefits were frozen under the GRP and, if
applicable, the SERP received higher matching contributions under
the 401(k) Plan. The matching contribution rate generally increased
from 50% of the first 6% of compensation that an employee elects to
contribute to the plan to 100% of the first 5% of contributed
compensation. The company also makes additional employer
contributions to the 401(k) Plan on behalf of certain long-service
employees. The DCP was amended to provide for Gannett
contributions on behalf of certain employees whose benefits under
the 401(k) Plan are capped by IRS rules. Participants whose benefits
were frozen will have their benefits periodically increased by a cost
of living adjustment until benefits commence.
In October 2010, after discussion with its pension plan trustees
and employees, the company decided to freeze the Newsquest
defined benefit plan, effective March 31, 2011. The plan freeze was
made to reduce pension expense and funding volatility and was part
of a package of measures to address the plan’s deficit. The company
recognized a pre-tax curtailment gain of $3.3 million in 2010 in
connection with this closure.
The company’s pension costs, which include costs for its
qualified and non-qualified plans, are presented in the following
table:
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
Change in benefit obligations
Dec. 30, 2012 Dec. 25, 2011
Benefit obligations at beginning of year . . . $
3,351,494 $
3,217,877
Service cost. . . . . . . . . . . . . . . . . . . . . . . . . .
Interest cost. . . . . . . . . . . . . . . . . . . . . . . . . .
Plan amendments . . . . . . . . . . . . . . . . . . . . .
Plan participants’ contributions . . . . . . . . . .
Actuarial loss . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation. . . . . . . . . . . . .
7,545
155,376
—
7
300,525
27,526
7,833
171,339
1,297
3,885
182,789
5,740
Gross benefits paid . . . . . . . . . . . . . . . . . . . .
(245,899)
(240,334)
Special termination benefit. . . . . . . . . . . . . .
—
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . .
(23,489)
1,068
—
Benefit obligations at end of year. . . . . . . . . $
Change in plan assets
Fair value of plan assets at beginning of
year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Actual return on plan assets . . . . . . . . . . . . .
Plan participants’ contributions . . . . . . . . . .
3,573,085 $
3,351,494
2,408,768 $
2,588,728
254,225
7
(6,537)
3,885
56,392
Employer contributions . . . . . . . . . . . . . . . .
137,499
Gross benefits paid . . . . . . . . . . . . . . . . . . . .
(245,899)
(240,334)
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation. . . . . . . . . . . . .
(23,489)
21,205
—
6,634
Fair value of plan assets at end of year . . . . $
2,552,316 $
2,408,768
Funded status at end of year . . . . . . . . . . . . . $ (1,020,769) $
Amounts recognized in Consolidated Balance Sheets
(942,726)
Accrued benefit cost—current . . . . . . . . . . . $
(13,444) $
(34,616)
Accrued benefit cost—long-term . . . . . . . . . $ (1,007,325) $
(908,110)
In thousands of dollars
2012
2011
2010
The funded status (on a projected benefit obligation basis) of the
company’s principal retirement plans at Dec. 30, 2012, is as follows:
Service cost—benefits earned during
the period . . . . . . . . . . . . . . . . . . . . . . . . $
Interest cost on benefit obligation . . . . .
7,545 $
7,833 $ 14,829
In thousands of dollars
155,376
171,339
176,738
Expected return on plan assets . . . . . . . .
(189,863)
(211,659)
(191,614)
Amortization of prior service costs . . . .
Amortization of actuarial loss . . . . . . . .
7,689
53,429
7,580
37,901
6,731
46,870
GRP . . . . . . . . . . . . . . . . . . . . $
SERP (a) . . . . . . . . . . . . . . . . .
Newsquest . . . . . . . . . . . . . . .
Pension expense for company-
sponsored retirement plans. . . . . . . . . . .
34,176
12,994
53,554
Newspaper Guild Plan. . . . . .
Fair Value of
Plan Assets
Benefit
Obligation
Funded
Status
1,868,164 $ 2,461,782 $
(593,618)
—
606,174
77,978
219,297
798,078
93,928
(219,297)
(191,904)
(15,950)
Curtailment gains . . . . . . . . . . . . . . . . . .
—
—
(3,840)
Settlement and special termination
benefit charge . . . . . . . . . . . . . . . . . . . . .
7,946
1,068
—
Total pension cost . . . . . . . . . . . . . . . . . . $ 42,122 $ 14,062 $ 49,714
Total. . . . . . . . . . . . . . . . . . . . $
(a) the SERP is an unfunded, unsecured liability
2,552,316 $ 3,573,085 $ (1,020,769)
For each of the company’s plans, both the accumulated benefit
obligation and the projected benefit obligation exceeded the fair
value of the plan assets. The accumulated benefit obligation for all
defined benefit pension plans was $3.55 billion and $3.32 billion at
Dec. 30, 2012 and Dec. 25, 2011, respectively.
Net actuarial losses recognized in accumulated other
comprehensive loss were $1.72 billion as of Dec. 30, 2012 and $1.53
billion as of Dec. 25, 2011. Prior service cost recognized in
accumulated other comprehensive loss was $61.3 million in 2012
and $69.0 million in 2011.
62
The primary objective of company-sponsored retirement plans is
to provide eligible employees with scheduled pension benefits: the
“prudent man” guideline is followed with regard to the investment
management of retirement plan assets. Consistent with prudent
standards for preservation of capital and maintenance of liquidity,
the goal is to earn the highest possible total rate of return while
minimizing risk. The principal means of reducing volatility and
exercising prudent investment judgment is diversification by asset
class and by investment manager; consequently, portfolios are
constructed to attain prudent diversification in the total portfolio,
each asset class, and within each individual investment manager’s
portfolio. Investment diversification is consistent with the intent to
minimize the risk of large losses. All objectives are based upon an
investment horizon spanning five years so that interim market
fluctuations can be viewed with the appropriate perspective. The
target asset allocation represents the long-term perspective.
Retirement plan assets will be rebalanced periodically to align them
with the target asset allocations. Risk characteristics are measured
and compared with an appropriate benchmark quarterly; periodic
reviews are made of the investment objectives and the investment
managers. The company’s actual investment return on its Gannett
Retirement Plan assets was 12.6% for 2012, 0.4% for 2011 and
14.0% for 2010.
Retirement plan assets include approximately 1.2 million shares
of the company’s common stock valued at approximately $22
million and $17 million at the end of 2012 and 2011, respectively.
The plan received dividends of approximately $1 million on these
shares in 2012.
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
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
222,956
2018-2022. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,095,723
217,673
214,648
208,975
215,860
The actuarial loss and prior service cost amounts expected to be
amortized from accumulated other comprehensive income (loss) into
net periodic benefit cost in 2013 are $60.8 million and $7.6 million,
respectively.
Other changes in plan assets and benefit obligations recognized
in other comprehensive loss consist of the following:
In thousands of dollars
Current year actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Amortization of actuarial loss . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of prior service costs . . . . . . . . . . . . . . . . . . . .
Actuarial gain due to settlement. . . . . . . . . . . . . . . . . . . . . . .
Currency loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2012
(236,163)
53,429
7,689
7,946
(11,585)
(178,684)
Pension costs: The following assumptions were used to
determine net pension costs:
Discount rate. . . . . . . . . . . . . . . . . . . . . . . . .
4.83%
Expected return on plan assets . . . . . . . . . . .
8.25%
Rate of compensation increase . . . . . . . . . . .
2.96%
2012
2011
5.49%
8.75%
2.95%
2010
5.88%
8.75%
2.88%
The expected return on plan assets 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 plan asset returns.
Benefit obligations and funded status: The following
assumptions were used to determine the year-end benefit obligations:
Discount rate . . . . . . . . . . . . . . . . . . . . . . . .
Rate of compensation increase. . . . . . . . . . .
4.08%
2.97%
4.86%
2.96%
Dec. 30, 2012 Dec. 25, 2011
During 2012, the company made contributions of $94 million to
the GRP. The company contributed $8 million to the U.K. retirement
plan in 2012. Early in fiscal year 2013, the company contributed $50
million to the GRP. As a result of this contribution, the company has
no further funding obligations to the GRP during 2013. The
company expects to contribute $37 million to the U.K retirement
plan in 2013.
Plan assets: The fair value of plan assets was approximately
$2.6 billion and $2.4 billion at the end of 2012 and 2011,
respectively. The expected long-term rate of return on these assets
was 8.25% for 2012, and 8.75% for 2011 and 2010. The asset
allocation for the GRP at the end of 2012 and 2011, and target
allocations for 2013, by asset category, are presented in the table
below:
Equity securities . . . . . . .
Debt securities. . . . . . . . .
Other . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . .
Target Allocation Allocation of Plan Assets
2013
47%
35
18
100%
2012
51%
35
14
2011
46%
39
15
100%
100%
63
Multi-employer plans that provide pension benefits: The company
contributes to a number of multi-employer defined benefit pension
plans under the terms of collective-bargaining agreements (CBA)
that cover its union-represented employees. The risks of
participating in these multi-employer plans are different from single-
employer plans in the following aspects:
• The company plays no part in the management of plan
investments or any other aspect of plan administration.
• Assets contributed to the multi-employer plan by one employer
may be used to provide benefits to employees of other
participating employers.
•
•
If a participating employer stops contributing to the plan, the
unfunded obligations of the plan may be borne by the remaining
participating employers.
If the company chooses to stop participating in some of its multi-
employer plans, the company may be required to pay those plans
an amount based on the unfunded status of the plan, referred to
as withdrawal liability.
The company’s participation in these plans for the annual period
ended Dec. 30, 2012, is outlined in the table below. The “EIN/
Pension Plan Number” column provides the Employee Identification
Number (EIN) and the three-digit plan number. Unless otherwise
noted, the two most recent Pension Protection Act (PPA) zone
statuses available are for the plan’s year-end at Dec. 31, 2011 and
Dec. 31, 2010, respectively. The zone status is based on information
that the company received from the plan and is certified by the
plan’s actuary. Among other factors, plans in the red zone are
generally less than 65% funded; plans in the orange zone are both a)
less than 80% funded and b) have an accumulated/expected funding
deficiency in any of the next six plan years, net of any amortization
extensions; plans in the yellow zone meet either one of the criteria
mentioned in the orange zone; and plans in the green zone are at
least 80% funded. The “FIP/RP Status Pending/Implemented”
column indicates plans for which a financial improvement plan (FIP)
or a rehabilitation plan (RP) is either pending or has been
implemented. The last column lists the expiration date(s) of the
collective-bargaining agreement(s) to which the plans are subject.
The company makes all required contributions to these plans as
determined under the respective CBAs. For each of the plans listed
below, Gannett’s contribution represented less than 5% of total
contributions to the plan.
The company incurred expenses for multi-employer withdrawal
liabilities of $3 million, $30 million and $4 million in 2012, 2011,
and 2010, respectively. Other long-term liabilities on the
Consolidated Balance Sheet as of Dec. 30, 2012 and Dec. 25, 2011
include $38 million and $42 million, respectively, for such
withdrawal liabilities. For plans representing $30 million of the total,
the actual withdrawal liabilities will not be known until 2013 or
2014 and no payments will be required until such determinations are
made. Expenses and liabilities recorded by the company for the
plans in 2011 were substantially higher than in previous years. The
costs and liabilities recorded in 2011 primarily relate to withdrawal
liabilities triggered upon the company’s decision in December 2011
to cease production activities at its Cincinnati publishing operations
and transition them to a non-Gannett publisher in Columbus, OH.
Multi-employer Pension Plans
Pension Plan Name
EIN Number/
Plan Number
AFTRA Retirement Plan (a) . . . . . . . . . . . . . . . 13-6414972/001
Zone Status
Dec. 31,
2012
Green
as of
Nov.
30,
2011
2011
Green
as of
Nov.
30,
2010
FIP/RP Status
Pending/
Implemented
Contributions
(in thousands)
2011
2010
2012
Surcharge
Imposed
Expiration
Dates of
CBAs
NA
$ 965 $ 896 $ 858
NA
CWA/ITU Negotiated Pension Plan. . . . . . . . . . 13-6212879/001
Red
Red
Implemented
572
146
169
GCIU—Employer Retirement Benefit Plan (a). 91-6024903/001
The Newspaper Guild International Pension
Plan (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52-1082662/001
IAM National Pension Plan (a) . . . . . . . . . . . . . 51-6031295/002 Green Green
Red
Red
Red
Red
Implemented
380
280
331
Implemented
NA
415
341
385
308
392
315
Teamsters Pension Trust Fund of Philadelphia
and Vicinity (a) . . . . . . . . . . . . . . . . . . . . . . . . . 23-1511735/001 Yellow Yellow Implemented
876
1,054
995
No
No
No
NA
NA
Central Pension Fund of the International
Union of Operating Engineers and
Participating Employers (a) . . . . . . . . . . . . . . . . 36-6052390/001
Central States Southeast and Southwest Areas
Pension Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . 36-6044243/001
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(a) This plan has elected to utilize special amortization provisions provided under the Preservation of Access to Care for Medicare Beneficiaries and Pension
$3,967 $ 3,604 $ 3,569
Implemented
6/30/2013
4/30/2013
Red
Red
343
260
372
158
163
166
NA
NA
No
Relief Act of 2010.
Green
as of
Jan.
31,
2012
Green
as of
Jan.
31,
2011
64
7/13/2012
6/30/2013
12/16/2013
11/13/2012-
3/27/2016
4/13/2011-
1/31/2015
11/13/2012
12/20/2012
4/30/2013
12/14/2012
3/11/2013
NOTE 9
Postretirement benefits other than pensions
The company provides health care and life insurance benefits to
certain retired employees who meet age and service requirements.
Most of the company’s retirees contribute to the cost of these
benefits and retiree contributions are increased as actual benefit costs
increase. The cost of providing retiree health care and life insurance
benefits is actuarially determined and accrued over the service
period of the active employee group. The company’s policy is to
fund benefits as claims and premiums are paid. The company
eliminated postretirement medical and life insurance benefits for
most U.S. employees under 50 years of age effective Jan. 1, 2006.
The company uses a Dec. 31 measurement date for these plans.
Postretirement benefit cost for health care and life insurance
included the following components:
In thousands of dollars
The actuarial loss and prior service credit estimated to be
amortized from accumulated other comprehensive loss into net
periodic benefit cost in 2013 are $1.9 million and $9.2 million,
respectively.
Other changes in plan assets and benefit obligations recognized
in other comprehensive (loss) consist of the following:
In thousands of dollars
Current year actuarial gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Amortization of actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . .
2012
5,364
1,943
Amortization of prior service credit . . . . . . . . . . . . . . . . . . . . . .
(19,190)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (11,883)
Postretirement benefit costs: The following assumptions were
used to determine postretirement benefit cost:
2012
2011
2010
2012
2011
2010
Discount rate . . . . . . . . . . . . . . . . . . . . . . . .
4.75%
5.30%
5.80%
Service cost – benefits earned during the
period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Interest cost on net benefit obligation. . . . .
545 $
611 $
713
7,744
9,205
10,606
Health care cost trend rate assumed for
next year . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of prior service credit . . . . . .
(19,190)
(19,510)
(19,377)
Ultimate trend rate . . . . . . . . . . . . . . . . . . .
Amortization of actuarial loss. . . . . . . . . . .
1,943
5,444
4,949
Year that ultimate trend rate is reached. . . .
Net periodic postretirement benefit . . . . . . $ (8,958) $ (4,250) $ (3,109)
6.50%
5.00%
2016
6.50%
5.00%
2015
6.50%
5.00%
2014
The table below provides a reconciliation of benefit obligations
and funded status of the company’s postretirement benefit plans:
In thousands of dollars
Change in benefit obligations
Dec. 30, 2012 Dec. 25, 2011
Net benefit obligations at beginning of year $
184,131 $
191,282
Service cost. . . . . . . . . . . . . . . . . . . . . . . . . .
Interest cost. . . . . . . . . . . . . . . . . . . . . . . . . .
Plan participants’ contributions . . . . . . . . . .
Actuarial (gain) loss . . . . . . . . . . . . . . . . . . .
Gross benefits paid . . . . . . . . . . . . . . . . . . . .
Federal subsidy on benefits paid . . . . . . . . .
Net benefit obligations at end of year . . . . . $
Change in plan assets
Fair value of plan assets at beginning of year $
Employer contributions . . . . . . . . . . . . . . . .
Plan participants’ contributions . . . . . . . . . .
545
7,744
10,362
(5,877)
(29,245)
1,932
611
9,205
10,896
2,482
(32,386)
2,041
169,592 $
184,131
— $
18,883
10,362
—
21,490
10,896
Gross benefits paid . . . . . . . . . . . . . . . . . . . .
(29,245)
(32,386)
Fair value of plan assets at end of year . . . . $
— $
—
Benefit obligation at end of year . . . . . . . . . $
169,592 $
184,131
Accrued postretirement benefit cost:
Current . . . . . . . . . . . . . . . . . . . . . . . . . . . $
19,655 $
20,432
Noncurrent . . . . . . . . . . . . . . . . . . . . . . . . $
149,937 $
163,699
Net actuarial losses recognized in accumulated other
comprehensive loss were $23.5 million in 2012 and $30.8 million in
2011. Prior service credits recognized in accumulated other
comprehensive loss were $24.9 million as of Dec. 30, 2012 and
$44.1 million as of Dec. 25, 2011.
Benefit obligations and funded status: The following
assumptions were used to determine the year-end benefit obligation:
Dec. 30, 2012 Dec. 25, 2011
Discount rate. . . . . . . . . . . . . . . . . . . . . . . . .
Health care cost trend rate assumed for
next year . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ultimate trend rate . . . . . . . . . . . . . . . . . . . .
Year that ultimate trend rate is reached . . . .
3.80%
6.50%
5.00%
2016
4.75%
6.50%
5.00%
2015
Assumed health care cost trend rates have an 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 $7.0 million in the 2012 postretirement benefit
obligation and a $0.3 million change in the aggregate service and
interest components of the 2012 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
2013 . . . . . . . . . . . . . . . . . . . . . . . $
2014 . . . . . . . . . . . . . . . . . . . . . . . $
2015 . . . . . . . . . . . . . . . . . . . . . . . $
2016 . . . . . . . . . . . . . . . . . . . . . . . $
2017 . . . . . . . . . . . . . . . . . . . . . . . $
2018-2022. . . . . . . . . . . . . . . . . . . $
Benefit Payments Subsidy Benefits
19,655 $
19,154 $
18,559 $
17,751 $
16,927 $
69,422 $
4,360
3,626
3,592
3,501
3,439
15,361
The amounts above exclude the participants’ share of the benefit
cost. The company’s policy is to fund benefits as claims and
premiums are paid.
65
NOTE 10
Income taxes
The provision (benefit) for income taxes on income from continuing
operations consists of the following:
In thousands of dollars
2012
Current
Deferred
Total
Federal . . . . . . . . . . . . . . . . . . . . . . . $
82,200 $
106,000 $ 188,200
State and other . . . . . . . . . . . . . . . . .
Foreign. . . . . . . . . . . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . . . $
(2,600)
(6,900)
17,100
(400)
14,500
(7,300)
72,700 $
122,700 $ 195,400
In thousands of dollars
2011
Current
Deferred
Total
Federal . . . . . . . . . . . . . . . . . . . . . . . $
81,500 $
74,600 $ 156,100
State and other . . . . . . . . . . . . . . . . .
(800)
30,100
29,300
Foreign. . . . . . . . . . . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . . . $
(25,400)
(7,200)
(32,600)
55,300 $
97,500 $ 152,800
In thousands of dollars
2010
Current
Deferred
Total
Federal . . . . . . . . . . . . . . . . . . . . . . . $ 135,442 $
129,829 $ 265,271
State and other . . . . . . . . . . . . . . . . .
(51,252)
Foreign. . . . . . . . . . . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . . . $
9,460
19,150
1,384
(32,102)
10,844
93,650 $
150,363 $ 244,013
The components of income from continuing operations
attributable to Gannett Co., Inc. before income taxes consist of the
following:
In thousands of dollars
2012
2011
2010
Domestic . . . . . . . . . . . . . . . . . . . . . $ 538,988 $
530,660 $ 729,485
Foreign . . . . . . . . . . . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . . . $ 619,680 $
80,692
80,888
81,856
611,548 $ 811,341
The provision for income taxes on continuing operations varies
from the U.S. federal statutory tax rate as a result of the following
differences:
2012
2011
2010
U.S. statutory tax rate . . . . . . . . . . . . . . . . . . . .
35.0% 35.0% 35.0%
Increase (decrease) in taxes resulting from: . . .
Non-deductible goodwill impairment . . . . .
State/other income taxes net of federal
income tax . . . . . . . . . . . . . . . . . . . . . . . .
Statutory rate differential and permanent
differences in earnings in foreign
jurisdictions . . . . . . . . . . . . . . . . . . . . . . .
Audit resolutions . . . . . . . . . . . . . . . . . . . . .
Permanent stock basis deductions . . . . . . . .
Lapse of statutes of limitations net of
federal income tax . . . . . . . . . . . . . . . . . .
5.2
2.2
(5.6)
(4.6)
—
—
3.0
(5.4)
(4.2)
(1.8)
0.6
3.5
(2.7)
—
—
(1.8)
(1.6)
(7.2)
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effective tax rate . . . . . . . . . . . . . . . . . . . . . . .
—
1.1
31.5% 25.0% 30.1%
0.9
The permanent stock basis deduction is primarily related to the
disposal of certain business assets in 2011. An impairment charge for
these assets had been recorded in previous years, however no related
tax benefit had been taken as the formal disposal of the assets did not
occur until 2011.
66
Absent the effect of facility consolidation, asset impairment and
workforce restructuring charges in the years 2010-2012, the special
net tax benefit from the release of certain tax reserves due to audit
settlements and the lapse of statutes of limitations for the years from
2010 to 2012, and the special net tax benefit from the permanent
stock basis deduction for 2011, the company’s effective tax rate
would have been 30.9% for 2012, 31.6% for 2011, and 33.1% for
2010.
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 2010.
Taxes provided on the earnings from discontinued operations
include amounts reclassified from previously reported income tax
provisions and totaled $11.7 million for 2010, covering U.S. federal
and state income taxes and representing an effective rate of 36%.
Also included in discontinued operations for 2010 is a recognized
gain of $21.2 million, which is net of tax. Taxes provided on the
gains from the disposals totaled approximately $12.2 million for
2010, covering U.S. federal and state income taxes and represent an
effective rate of 36%.
Deferred income taxes reflect temporary differences in the
recognition of revenue and expense for tax reporting and financial
statement purposes. Amortization of intangibles represents the
largest component of the deferred provision. Deferred tax liabilities
and assets are adjusted for enacted changes in tax laws or tax rates of
the various tax jurisdictions. The amounts of such adjustments for
2012, 2011 and 2010 are not significant.
Deferred tax liabilities and assets were composed of the
following at the end of 2012 and 2011:
In thousands of dollars
Liabilities
Dec. 30, 2012 Dec. 25, 2011
Accelerated depreciation . . . . . . . . . . . . . . . $
255,612 $
295,391
Accelerated amortization of deductible
intangibles . . . . . . . . . . . . . . . . . . . . . . . . . .
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred tax liabilities . . . . . . . . . . . . .
Assets
Accrued compensation costs . . . . . . . . . . . .
Pension . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Postretirement medical and life . . . . . . . . . .
Federal tax benefits of uncertain state tax
positions . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Partnership investments including
impairments . . . . . . . . . . . . . . . . . . . . . . . . .
Loss carryforwards . . . . . . . . . . . . . . . . . . . .
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred tax assets . . . . . . . . . . . . . . . .
Valuation allowance . . . . . . . . . . . . . . . . . . .
174,229
26,989
456,830
77,684
368,803
65,573
121,679
29,890
446,960
97,532
346,000
71,674
31,002
43,631
39,542
58,596
66,164
707,364
76,419
52,344
44,452
77,035
732,668
54,287
231,421
Total net deferred tax assets . . . . . . . . . . . . . $
Amounts recognized in Consolidated Balance Sheet
174,115 $
Net current deferred tax assets . . . . . . . . . . . $
15,840 $
22,771
Net long-term deferred tax assets . . . . . . . . . $
158,275 $
208,650
Included in total deferred tax assets are valuation allowances of
approximately $76 million and $54 million in 2012 and 2011,
respectively, primarily related to foreign tax credits, foreign losses,
and state net operating losses available for carry forward to future
years. The change in valuation allowance from 2011 to 2012 is
related primarily to additional foreign and state losses.
Realization of deferred tax assets for which valuation allowances
have not been established is dependent upon generating sufficient
future taxable income. The company expects to realize the benefit of
these deferred tax assets through future reversals of its deferred tax
liabilities, through the recognition of taxable income in the allowable
carryback and carryforward periods, and through implementation of
future tax planning strategies. Although realization is not assured,
the company believes it is more likely than not that all deferred tax
assets for which valuation allowances have not been established will
be realized.
The company’s legal and tax structure reflects acquisitions that
have occurred over the years as well as the multi-jurisdictional
nature of the company’s businesses.
The following table summarizes the activity related to
unrecognized tax benefits, excluding the federal tax benefit of state
tax deductions:
In thousands of dollars
Change in unrecognized tax benefits
Balance at beginning of year . . . . . . . . . . . . $
110,282 $
153,531
Dec. 30, 2012 Dec. 25, 2011
Additions based on tax positions related to
the current year. . . . . . . . . . . . . . . . . . . . . . .
Additions for tax positions of prior years. . .
Reductions for tax positions of prior years .
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . .
Reductions due to lapse of statutes of
limitations. . . . . . . . . . . . . . . . . . . . . . . . . . .
9,093
11,929
(30,110)
(7,857)
10,958
17,009
(44,155)
(15,618)
(7,157)
(11,443)
Balance at end of year . . . . . . . . . . . . . . . . . $
86,180 $
110,282
The total amount of unrecognized tax benefits that, if recognized,
would impact the effective tax rate was $63 million as of Dec. 30,
2012, and $78 million as of Dec. 25, 2011. This amount includes the
federal tax benefit of state tax deductions.
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, and it recognizes interest credits for the reversal of interest
expense previously recorded for uncertain tax positions which are
subsequently released. The company recognized income from
interest and the release of penalty reserves of $8 million, $4 million
and $40 million in 2012, 2011 and 2010, respectively. The amount of
accrued interest and penalties payable related to unrecognized tax
benefits was $29 million and $35 million as of Dec. 30, 2012 and
Dec. 25, 2011, respectively.
The company files income tax returns in the U.S. and various
state and foreign jurisdictions. The 2009 through 2011 tax years
remain subject to examination by the IRS. The 2005 through 2011
tax years generally remain subject to examination by state
authorities, and the years 2010 and 2011 are subject to examination
in the U.K. In addition, tax years prior to 2005 remain subject to
examination by certain states primarily due to the filing of amended
tax returns as a result of the settlement of the IRS examination for
these years and due to ongoing audits.
It is reasonably possible that the amount of unrecognized benefit
with respect to certain of the company’s unrecognized tax positions
will significantly increase or decrease within the next 12 months.
These changes may be the result of settlement of ongoing audits,
lapses of statutes of limitations or other regulatory developments. At
this time, the company estimates that the amount of its gross
unrecognized tax positions may decrease by up to approximately $50
million within the next 12 months primarily due to lapses of statutes
of limitations and settlement of ongoing audits in various
jurisdictions.
67
NOTE 11
Shareholders’ equity
Capital stock and earnings per share
The company’s earnings per share (basic and diluted) for 2012, 2011
and 2010 are presented below:
In thousands, except per share amounts
2012
2011
2010
Net income attributable to
Gannett Co., Inc. . . . . . . . . . . . . . . . . . . . . $424,280 $458,748 $588,201
Weighted average number of common
shares outstanding (basic) . . . . . . . . . . . . .
232,327
239,228
238,230
Effect of dilutive securities
Stock options . . . . . . . . . . . . . . . . . . . . . . .
Restricted stock . . . . . . . . . . . . . . . . . . . . .
Performance Shares. . . . . . . . . . . . . . . . . .
401(k) employer match . . . . . . . . . . . . . . .
867
2,552
944
—
1,189
2,147
—
204
1,354
1,720
—
301
Weighted average number of common
shares outstanding (diluted). . . . . . . . . . . .
Earnings per share (basic) . . . . . . . . . . . . . $
Earnings per share (diluted) . . . . . . . . . . . $
236,690
242,768
241,605
1.83 $
1.92 $
1.79 $
1.89 $
2.47
2.43
The diluted earnings per share amounts exclude the effects of
approximately 6.5 million stock options outstanding for 2012, 18.3
million for 2011 and 19.6 million for 2010, as their inclusion would
be antidilutive.
Share repurchase program
In February 2012, the company announced that its Board of
Directors approved a new program to repurchase up to $300 million
in Gannett common stock (replacing a former repurchase program of
$1 billion). During 2012, 10.3 million shares were purchased under
the programs for $154 million. In 2011, 4.9 million shares were
purchased under the former program for $53 million and no shares
were purchased in 2010. As of Dec. 30, 2012, the value of shares
that may be repurchased under the existing program is $150 million.
The shares may be repurchased at management’s discretion,
either in the open market or in privately negotiated block
transactions. Management’s decision to repurchase shares will
depend on price and other corporate developments. Purchases may
occur from time to time and no maximum purchase price has been
set. There is no expiration date for the $300 million stock repurchase
program. However, it is targeted to be completed over the two years
following the announcement. 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 company’s shareholders approved the adoption of
the Omnibus Incentive Compensation Plan (the Plan). The Plan is
administered by the Executive Compensation Committee of the
Board of Directors and was amended and restated as of May 4, 2010
to increase the number of shares reserved for issuance to up to 60.0
million shares of company common stock for awards granted on or
after the amendment date. The Plan provides for the granting of
stock options, stock appreciation rights, restricted stock, restricted
stock units, performance shares 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.
During 2011, the company established a performance share plan
for senior executives pursuant to which awards were first made with
a grant date of Jan.1, 2012. Under this plan, the company may issue
shares of company common stock (Performance Shares) to senior
executives following the completion of a three-year period
beginning on the grant date. Generally, if an executive remains in
continuous employment with the company during the full three-year
incentive period, the number of performance share units (PSU) that
an executive will receive will be determined based upon how the
company’s total shareholder return (TSR) compares to the TSR of a
peer group of media companies during the three-year period. The
PSU agreement provides for pro rata vesting if an executive’s
employment terminates prior to the end of the performance period
due to death, disability, retirement, as defined in the award
agreement. Non-vested units are forfeited upon termination for any
other reason. Long-term equity awards – consisting of performance
shares and restricted stock units – are generally made with a grant
date of January 1.
The fair value and compensation expense of each PSU grant is
determined by a Monte Carlo valuation model. Though the value of
the PSU grant may change for each participant, the compensation
expense recorded by the company is determined on the date of grant.
Each PSU is equal to and paid in one share of the company’s
common stock, but carries no voting or dividend rights. The number
of shares ultimately issued for each PSU award may range from 0%
to 200% of the award's target.
The company issues stock-based compensation to employees in
the form of restricted stock units (RSUs). 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.
Under the plan, no more than 500,000 RSUs may be granted to any
participant in any fiscal year.
The Plan also permits the company to issue restricted stock.
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. Under the Plan, no more than
500,000 restricted shares may be granted to any participant in any
fiscal year.
The Plan also permits the company to issue stock options. 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. The company discontinued annual stock
option grants to senior executives in connection with the adoption of
the performance share plan.
The company issued stock options to certain members of its
Board of Directors as compensation for meeting fees and retainer
fees, as well as long-term awards. Meeting fees paid as stock options
fully vest upon grant. Retainers paid in the form of stock options
vest in equal quarterly installments over one year. Long-term stock
option awards vest in equal annual installments over four years.
Expense is recognized on a straight-line basis over the vesting period
based on the grant date fair value. During 2012, 2011 and 2010,
members of the Board of Directors were awarded 74,611, 61,897
and 72,681 shares, respectively, of stock options as part of their
compensation plan.
The company also issued restricted stock to certain members of
its Board of Directors as compensation for meeting fees and retainer
fees, as well as annual long-term awards. Meeting fees paid as
restricted stock fully vest upon grant. Retainers paid in the form of
restricted shares vest in equal quarterly installments over one year.
Long-term awards vest in equal monthly installments over three
years. Expense is recognized on a straight-line basis over the vesting
period based on the grant date fair value. During 2012, 2011 and
2010, members of the Board of Directors were awarded 31,929
shares, 27,523 shares and 21,062 shares, respectively, of restricted
stock as part of their compensation plan. All vested shares will be
issued to directors when retiring from the Board.
The Executive Compensation Committee may grant other types
of awards that are valued in whole or in part by reference to or that
are otherwise based on fair market value of the company’s common
stock or other criteria established by the Executive Compensation
Committee including the achievement of performance goals. The
maximum aggregate grant of performance shares that may be
awarded to any participant in any fiscal year shall not exceed
500,000 shares of common stock. The maximum aggregate amount
of performance units or cash-based awards that may be awarded to
any participant in any fiscal year shall not exceed $10,000,000.
In the event of a change in control as defined in the Plan, unless
otherwise specified in the award agreement, (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; (3) all non-performance based
restricted stock units will fully vest; and (4) target payment
opportunities attainable under all outstanding awards of
performance-based restricted stock, performance units and
performance shares will be paid as specified in the Plan.
Determining fair value
Valuation and amortization method – The company determined
the fair value of stock options using the Black-Scholes option-
pricing formula and the fair value of Performance Share using the
Monte Carlo valuation model. This model considers the likelihood
of Gannett and the peer group companies' share prices ending at
various levels subject to certain price caps at the conclusion of the
three-year incentive period. Key inputs into the Black-Scholes
option-pricing formula and the Monte Carlo valuation model include
expected term, expected volatility, expected dividend yield and the
risk-free rate. Each assumption is discussed below. The 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 for
stock options. Expense for Performance Share awards for
participants meeting certain retirement eligible criteria defined in the
plan is recognized using the accelerated attribution method.
Expected term – The expected term represents the period that the
company’s stock-based awards are expected to be outstanding. The
expected term for Performance Share awards is based on the
incentive period. For stock options, it 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 volatility factors calculated using historical market data for
the company’s common stock and also the company’s peer group
when the Monte Carlo method is used. The time frame used is equal
to the expected term.
Expected dividend – The dividend assumption is based on the
company’s expectations about its dividend policy on the date of
grant.
Risk-free interest rate – The company bases the risk-free interest
rate on the yield to maturity at the time of the award grant on zero-
68
A summary of the company’s stock-option awards is presented
below:
Weighted
average
remaining
contractual
term
(in years)
Weighted
average
exercise
price
Aggregate
intrinsic
value
Shares
2012 Stock Option
Activity
Outstanding at
beginning of year . .
20,340,291 $
Granted . . . . . . . . . .
109,699 $
Exercised. . . . . . . . .
(2,716,637) $
3.5 $17,184,761
47.66
14.33
9.38
Canceled/Expired . .
(6,389,335) $
70.76
Outstanding at end
of year . . . . . . . . . . .
Options exercisable
at year end . . . . . . . .
11,344,018 $
43.50
3.2 $16,902,892
8,942,897 $
51.35
2.6 $ 8,845,944
Weighted average
grant date fair value
of options granted
during the year . . . . $
5.43
Weighted
average
remaining
contractual
term
(in years)
Weighted
average
exercise
price
Aggregate
intrinsic
value
Shares
2011 Stock Option
Activity
Outstanding at
beginning of year . .
23,649,290 $
Granted . . . . . . . . . .
1,333,597 $
Exercised. . . . . . . . .
(496,749) $
3.9 $28,819,223
52.08
15.79
5.71
Canceled/Expired . .
(4,145,847) $
67.61
Outstanding at end
of year . . . . . . . . . . .
Options exercisable
at year end . . . . . . . .
20,340,291 $
47.66
3.5 $17,184,761
15,857,692 $
57.26
2.7 $10,644,474
Weighted average
grant date fair value
of options granted
during the year . . . . $
7.63
Weighted
average
remaining
contractual
term
(in years)
Weighted
average
exercise
price
Aggregate
intrinsic
value
Shares
2010 Stock Option
Activity
Outstanding at
beginning of year . .
25,243,251 $
Granted . . . . . . . . . .
3,451,481 $
Exercised . . . . . . . .
(332,060) $
4.1 $33,560,103
58.68
15.23
6.00
Canceled/Expired . .
(4,713,382) $
63.70
Outstanding at end
of year. . . . . . . . . . .
Options exercisable
at year end . . . . . . .
Weighted average
grant date fair value
of options granted
during the year . . . . $
23,649,290 $
52.08
3.9 $28,819,223
17,075,622 $
66.48
2.8 $ 8,698,148
7.22
coupon U.S. government bonds having a remaining life equal to the
award’s expected life.
Estimated forfeitures – When estimating forfeitures, the
company considers voluntary termination behavior as well as
analysis of actual forfeitures.
The following assumptions were used to estimate the fair value
of stock option and performance share awards:
Stock Options
Granted During
2012
Average expected term
4.5 yrs.
2011
4.5 yrs.
2010
4.5 yrs.
Expected volatility. . . . 65.74 - 66.95% 62.46 - 64.39% 59.41 - 62.24%
Weighted average
volatility. . . . . . . . . . . .
Risk-free interest rates.
Expected dividend
yield . . . . . . . . . . . . . . .
Weighted average
expected dividend . . . .
66.56%
0.84%
62.54%
61.01%
0.87 - 2.21%
1.51 - 2.65%
5.00%
1.00 - 2.00%
1.00%
5.00%
1.06%
1.00%
Performance Shares
Granted During
Expected term . . . . . . .
Expected volatility. . . .
Risk-free interest rate .
Expected dividend
yield . . . . . . . . . . . . . . .
2012
3 yrs.
69.47%
0.41%
2.39%
2011
2010
—
—
—
—
—
—
—
—
Stock-based Compensation Expense: The following table shows
the stock-based compensation related amounts recognized in the
Consolidated Statements of Income for equity awards:
In thousands, except per share amounts
2012
2011
2010
Restricted stock and RSUs . . . . . . . . . . . . $ 14,362 $ 12,868 $ 13,897
Performance shares . . . . . . . . . . . . . . . . . .
Stock options and other . . . . . . . . . . . . . . .
Total stock-based compensation . . . . . . . .
Income tax benefit . . . . . . . . . . . . . . . . . . .
7,991
4,255
26,608
10,111
—
15,135
28,003
10,641
—
18,810
32,707
12,429
Stock-based compensation, net of tax . . . . $ 16,497 $ 17,362 $ 20,278
Per diluted share impact . . . . . . . . . . . . . . $
0.07 $
0.07 $
0.08
Stock Options: As of Dec. 30, 2012, there was $4.4 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 1.7 years.
During 2012, options were exercised from which the company
received $24.5 million of cash. The intrinsic value of the options
exercised was approximately $22.4 million. The actual tax benefit
realized from the option exercises was $9.2 million.
During 2011, options exercised from which the company
received $2.4 million of cash. The intrinsic value of the options
exercised was approximately $3.9 million. The actual tax benefit
realized from the option exercises was $1.3 million.
During 2010, options exercised from which the company
received $2.0 million of cash. The intrinsic value of the options
exercised was approximately $3.1 million. The actual tax benefit
realized from the option exercises was $1.2 million.
Option exercises are satisfied through the issuance of shares
from treasury stock.
69
Restricted Stock and RSUs: As of Dec. 30, 2012, there was
$28.0 million of unrecognized compensation cost related to non-
vested restricted stock and RSUs. This amount will be adjusted for
future changes in estimated forfeitures and recognized on a straight-
line basis over a weighted average period of 2.4 years.
A summary of restricted stock and RSU awards is presented
below:
2012 Restricted Stock and RSU Activity
Shares
Weighted
average
fair value
Outstanding and unvested at beginning of year .
3,731,033 $
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,937,512 $
Settled. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(997,584) $
Canceled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(601,452) $
Outstanding and unvested at end of year . . . . . .
4,069,509 $
10.73
12.33
3.29
11.95
12.98
2011 Restricted Stock and RSU Activity
Shares
Weighted
average
fair value
Outstanding and unvested at beginning of year .
4,421,437 $
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
175,023 $
Settled. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(469,634) $
Canceled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(395,793) $
Outstanding and unvested at end of year . . . . . .
3,731,033 $
12.19
13.21
33.51
11.94
10.73
2010 Restricted Stock and RSU Activity
Shares
Weighted
average
fair value
Outstanding and unvested at beginning of year .
3,293,293 $
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,934,351 $
Settled. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(490,716) $
Canceled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(315,491) $
Outstanding and unvested at end of year . . . . . .
4,421,437 $
13.62
14.91
31.94
12.97
12.19
Performance Shares: As of Dec. 30, 2012, there was $5.9
million of unrecognized compensation cost related to non-vested
performance shares. This amount will be adjusted for future changes
in estimated forfeitures and recognized on a straight-line basis over a
weighted average period of 2 years.
The following table summarizes the activity for non-vested
performance share units during the year ended Dec. 30, 2012:
Performance Shares Activity
Target
number of
shares
Weighted
average
fair value
Outstanding and unvested at beginning of year .
— $
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,109,873 $
Canceled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(127,421) $
Outstanding and unvested at end of year . . . . . .
982,452 $
—
14.21
14.12
14.23
401(k) savings 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 401(k) Plan. Employees can elect to
save up to 50% of compensation on a pre-tax basis subject to certain
limits.
On Aug. 1, 2008, the company approved amendments to its
principal domestic retirement plans and to its 401(k) Plan. For most
participants, the 401(k) Plan matching formula was changed to
100% of the first 5% of employee contributions. Prior to this change,
the company generally matched 50% of the first 6% of employee
contributions. The company also now makes additional 401(k)
employer contributions on behalf of certain long-term employees.
Compensation expense related to 401(k) contributions was $51.3
million in 2012, $49.6 million in 2011, and $46.0 million in 2010. In
2011 and 2010, the company’s 401(k) match was settled with a
combination of cash and treasury shares. In 2012, such settlements
were all in cash.
Accumulated other comprehensive income (loss)
The elements of the company’s Accumulated Other Comprehensive
Loss consisted of the following items (net of tax): Pension, retiree
medical and life insurance liabilities – a reduction of equity of $1.12
billion at Dec. 30, 2012, and $996 million at Dec. 25, 2011; and
foreign currency translation gains – an increase of equity of $418
million at Dec. 30, 2012, and $400 million at Dec. 25, 2011.
NOTE 12
Commitments, contingent liabilities and other matters
Litigation: The company and a number of its subsidiaries are
defendants in judicial and administrative proceedings involving
matters incidental to their business. The company does not believe
that any material liability will be imposed as a result of these
matters.
Leases: Approximate future minimum annual rentals payable
under non-cancelable operating leases, primarily real-estate related,
are as follows:
In thousands of dollars
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Later years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
73,788
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 277,730
53,809
47,847
40,920
33,193
28,173
Total minimum annual rentals have not been reduced for future
minimum sublease rentals aggregating $19.4 million. Total rental
costs reflected in 2012 were $65 million, $63 million in 2011 and
$72 million in 2010.
70
Program broadcast contracts: The company has $52 million of
commitments under programming contracts that include television
station commitments to purchase programming to be produced in
future years.
Purchase obligations: The company has commitments under
purchasing obligations totaling $186 million related to printing
contracts, capital projects, interactive marketing agreements, wire
services and other legally binding commitments. Amounts which the
company is liable for under purchase orders outstanding at Dec. 30,
2012, are reflected in the Consolidated Balance Sheet as accounts
payable and accrued liabilities and are excluded from the $186
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 $105 million at the
end of 2012 and $120 million at the end of 2011.
Other matters: In December 1990, the company adopted a
Transitional Compensation Plan (the TCP). The TCP 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 TCP include a
severance payment of up to three years’ compensation and continued
life and medical insurance coverage. The company amended the TCP
in April 2010 to provide that new participants will not be entitled to
the benefit of the TCP's excise tax gross-up or modified single
trigger provisions.
In March 2011, the Advertiser Company, a Gannett subsidiary
which publishes The Montgomery Advertiser, was notified by the
U.S. EPA that it has been identified as a potentially responsible party
for the investigation and remediation of groundwater contamination
in downtown Montgomery, AL. At this point in the investigation,
incomplete information is available about the site, other potentially
responsible parties and what further investigation and remediation
may be required. Accordingly, future costs at the site, and The
Advertiser Company’s share of such costs, if any, cannot yet be
determined. Some of The Advertiser Company's fees and costs in
connection with this matter may be reimbursed under its liability
insurance policies.
In connection with certain business acquisitions, the company is
contingently liable for earnout payments to previous owners,
depending upon the achievement of certain financial and
performance metrics. During 2012, the company paid $7.8 million as
the result of acquisitions.
NOTE 13
Fair value measurement
The company measures and records in the accompanying
consolidated financial statements certain assets and liabilities at fair
value. ASC Topic 820, “Fair Value Measurement,” establishes a fair
value hierarchy for those instruments measured at fair value that
distinguishes between assumptions based on market data (observable
inputs) and the company’s own assumptions (unobservable inputs).
The hierarchy consists of three levels:
Level 1 – Quoted market prices in active markets for identical
assets or liabilities;
Level 2 – Inputs other than Level 1 inputs that are either directly
or indirectly observable; and
Level 3 – Unobservable inputs developed using estimates and
assumptions developed by the company, which reflect those that a
market participant would use.
The financial instruments measured at fair value in the
accompanying consolidated balance sheets consist of the following:
Company Owned Assets
In thousands of dollars
Fair value measurement as of Dec. 30, 2012
Level 2
Level 1
Level 3
Total
Assets:
Employee compensation
related investments. . . . . . . $ 23,043 $
Sundry investments . . . . . . .
29,090
Total Assets . . . . . . . . . . . . . . $ 52,133 $
Liabilities:
— $
—
— $
— $ 23,043
— 29,090
— $ 52,133
Contingent consideration
payable . . . . . . . . . . . . . . . . $
Total Liabilities. . . . . . . . . . . $
— $
— $
— $ 26,170 $ 26,170
— $ 26,170 $ 26,170
In thousands of dollars
Fair value measurement as of Dec. 25, 2011
Level 2
Level 1
Level 3
Total
Assets:
Employee compensation
related investments. . . . . . . $ 17,224 $
Sundry investments . . . . . . .
26,162
Total Assets . . . . . . . . . . . . . . $ 43,386 $
Liabilities:
— $
—
— $
— $ 17,224
— 26,162
— $ 43,386
Contingent consideration
payable . . . . . . . . . . . . . . . . $
Total Liabilities. . . . . . . . . . . $
— $
— $
— $ 15,808 $ 15,808
— $ 15,808 $ 15,808
Under certain acquisition agreements entered into during 2011
and 2012, the company has agreed to pay the sellers earn-outs based
on the financial performance of the acquired businesses. Contingent
consideration payable in the table above represents the estimated fair
value of future earn-outs payable under such agreements. The fair
value of the contingent payments was measured based on the present
value of the consideration expected to be transferred. The discount
rate is a significant unobservable input in such present value
computations. Discount rates ranged between 10% and 29%
depending on the risk associated with the cash flows. For the year
ended Dec. 30, 2012, the contingent consideration was increased by
$18.2 million as a result of new acquisitions and adjustments to fair
value. The increase was partially offset by payments of $7.8 million.
71
The following tables set forth by level within the fair value
hierarchy the fair values of the company’s pension plan assets:
Pension Plan Assets/Liabilities
In thousands of dollars
Fair value measurement as of Dec. 30, 2012(a)
Level 1
Level 2
Level 3
Total
Assets:
Fixed income
U.S. government-
related securities . . . $
— $ 100,140 $
— $ 100,140
Mortgage backed
securities. . . . . . . . .
Other government
bonds . . . . . . . . . . .
—
—
30,317
Corporate bonds . . . .
— 136,640
Corporate stock . . . . . . .
722,619
Real estate . . . . . . . . . . .
—
818
—
Interest in common/
collective trusts . . . . . .
71,641
—
71,641
Corporate stock . . . . . .
613,976
—
797
30,317
137,437
— 723,437
Real estate . . . . . . . . . .
Interest in common/
collective trusts
Equities . . . . . . . . . .
—
—
97,385
97,385
Fixed income . . . . . .
24,632
92,840
19,927
Equities . . . . . . . . . . .
— 604,003
Fixed income . . . . . .
12,630
180,990
— 604,003
— 193,620
Interest in reg. invest.
companies . . . . . . . . . .
Interest in 103-12
investments . . . . . . . . .
Partnership/joint
venture interests . . . . .
Hedge funds . . . . . . . . .
Derivative contracts . . .
104,196
24,222
— 128,418
—
—
—
84,956
—
84,956
— 130,995
130,995
77,520
158,924
236,444
55,457
Total . . . . . . . . . . . . . . . . $ 839,478 $1,366,171 $ 388,601 $2,594,250
Liabilities:
54,924
500
33
Derivative liabilities . . . $
(21) $ (56,339) $ (2,008) $ (58,368)
Liability to purchase
U.S. government and
other securities . . . . . .
Total . . . . . . . . . . . . . . . . $
Cash and other . . . . . . . . .
Total net fair value of
plan assets. . . . . . . . . . . . $ 875,752 $1,289,971 $ 386,593 $2,552,316
(21) $ (83,221) $ (2,008) $ (85,250)
(26,882)
(26,882)
43,316
36,295
7,021
—
—
—
(a) The company uses a Dec. 31 measurement date for its retirement plans.
In thousands of dollars
Fair value measurement as of Dec. 25, 2011(a)
Level 2
Level 1
Level 3
Total
Assets:
Fixed income
U.S. government-
related securities . . $
Mortgage backed
securities . . . . . . . .
Other government
bonds . . . . . . . . . . .
Corporate bonds. . . .
Interest in reg. invest.
companies . . . . . . . . .
Interest in 103-12
investments . . . . . . . .
Partnership/joint
venture interests . . . . .
Hedge funds . . . . . . . . .
— $
50,582 $
— $
50,582
165,651
1,271
166,922
—
—
—
—
—
—
38,246
135,635
999
1,441
2,070
—
— 93,620
434,693
348,736
79,432
—
—
—
—
— 128,121
76,801
156,016
39,687
137,705
614,975
93,620
434,693
373,368
112,767
79,432
128,121
232,817
Derivative contracts . . .
53,826
Total. . . . . . . . . . . . . . . . $ 731,448 $ 1,404,293 $ 382,774 $ 2,518,515
Liabilities:
53,591
235
—
Derivative liabilities . . . $
(15) $
(54,139) $ (2,517) $
(56,671)
Liability to purchase
—
U.S. government and
other securities . . . . . .
Total. . . . . . . . . . . . . . . . $
Cash and other . . . . . . . .
Total net fair value of
plan assets . . . . . . . . . . . $ 749,568 $ 1,278,943 $ 380,257 $ 2,408,768
(15) $ (126,015) $ (2,517) $ (128,547)
(71,876)
(71,876)
18,800
18,135
665
—
—
(a) The company uses a Dec. 31 measurement date for its retirement plans.
Items included in “Cash and other” in the table above primarily
consist of amounts categorized as cash and cash equivalents and
pending purchases and sales of securities.
Valuation methodologies used for assets and liabilities measured
at fair value are as follows:
U.S. government-related securities are treasury bonds, bills and
notes that are primarily obligations to the U.S. Treasury. Values are
obtained from industry vendors who use various pricing models or
quotes for identical or similar securities. Mortgage-backed securities
are typically not actively quoted. Values are obtained from industry
vendors who use various pricing models or use quotes for identical
or similar securities. Investments categorized in Level 3 are thinly
traded with values derived using unobservable inputs.
Other government and corporate bonds are mainly valued based
on institutional bid evaluations using proprietary models, using
discounted cash flow models or models that derive prices based on
similar securities. Corporate bonds categorized in Level 3 are
primarily from distressed issuers for whom the values represent an
estimate of recovery in a potential or actual bankruptcy situation.
Corporate stock is valued primarily at the closing price reported
on the active market on which the individual securities are traded.
Investments in direct real estate have been valued by an
independent qualified valuer in the U.K. using a valuation approach
that capitalizes any current or future income streams at an
appropriate multiplier. Investments in real estate funds are mainly
valued utilizing the net asset valuations provided by the underlying
private investment companies.
72
Interest in common/collective trusts and interest in 103-12
investments are valued using the net asset value as provided monthly
by the fund family or fund company. Shares in the common/
collective trusts are generally redeemable upon request. The
investments classified in Level 1 are money market funds with a
constant net asset value.
Two of these investments are fixed income funds which use
individual subfunds to efficiently add a representative sample of
securities in individual market sectors to the portfolio. These funds
are generally redeemable with a short-term written or verbal notice.
Also included is a fund that invests in a select portfolio of large cap
domestic stocks perceived to have superior growth characteristics.
Shares in this fund are generally redeemable on any business day,
upon two-day notice. There are no unfunded commitments related to
these types of funds.
Interest in registered investment companies is valued using the
published net asset values as quoted through publicly available
pricing sources. The investments in Level 2 are proprietary funds of
the individual fund managers and are not publicly quoted.
Investments in partnerships and joint venture interests are valued
based on an assessment of each underlying investment, considering
items such as expected cash flows, changes in market outlook and
subsequent rounds of financing. These investments are included in
Level 3 of the fair value hierarchy because exit prices tend to be
unobservable and reliance is placed on the above methods. Most of
the partnerships are general leveraged buyout funds, others include a
venture capital fund, a fund formed to invest in special credit
opportunities, an infrastructure fund and a real estate fund. Interest
in partnership investments cannot be redeemed. Instead, distributions
are received as the underlying assets of the funds are liquidated. It is
estimated that the underlying assets of the funds will be liquidated
within approximately the next 10 to 12 years. There are future
Pension Plan Assets/Liabilities
In thousands of dollars
For the year ended Dec. 30, 2012
funding commitments of $40 million as of Dec. 30, 2012 and $33
million as of Dec. 25, 2011.
Investments in hedge funds are valued at the net asset value as
reported by the fund managers. Within this category is a fund of
hedge funds whose objective is to produce a return that is
uncorrelated with market movements. Other funds categorized as
hedge funds were formed to invest in mortgage and credit trading
opportunities. Shares in the hedge funds are generally redeemable
twice a year or on the last business day of each quarter with at least
60 days written notice subject to potential 5% holdback. There are
no unfunded commitments related to the hedge funds.
Derivatives primarily consist of forward and swap contracts.
Forward contracts are valued at the spot rate, plus or minus forward
points between the valuation date and maturity date. Swaps are
valued at the mid-evaluation price using discounted cash flow
models. Items in Level 3 are valued based on the market values of
other securities for which they represent a synthetic combination.
Liability to purchase U.S. government and other securities
relates to buying and selling contracts in federal agency securities
that have not yet been opened up for public trading. In these
instances the investment manager has sold the securities prior to
owning them, resulting in a negative asset position. These securities
are valued in the same manner as those noted above in U.S.
government-related securities.
The company reviews appraised valued, audited financial
statements and additional information to evaluate fair value
estimates from its investment managers or fund administrator. The
tables below set forth a summary of changes in the fair value of the
company’s pension plan assets and liabilities, categorized as Level 3,
for the fiscal year ended Dec. 30, 2012 and Dec. 25, 2011:
Actual Return on Plan Assets
Relating to
Relating to
assets sold
assets still
during the
held at report
period
date
Balance at
beginning
of year
Purchases,
sales, and
settlements
Transfers in
and/or out
of Level 3(1)
Balance at
end of year
Assets:
Fixed income
Mortgage-backed securities . . . . . . . . . . . . . . . . . . $
1,271 $
Other government bonds . . . . . . . . . . . . . . . . . . . . .
Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Partnership/joint venture interests . . . . . . . . . . . . . . . .
Hedge funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Derivative contracts . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Liabilities:
1,441
2,070
93,620
128,121
156,016
235
— $
—
83
(4,788)
(1,817)
9,590
265
— $
— $
(1,271) $
—
(589)
—
(20,781)
(8,271)
—
—
—
8,553
25,472
1,589
—
(1,441)
(767)
—
—
—
—
—
—
797
97,385
130,995
158,924
500
382,774 $
3,333 $
(29,641) $
35,614 $
(3,479) $
388,601
Derivative liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . $
(2,517) $
16 $
(4) $
— $
497 $
(2,008)
(1) The company’s policy is to recognize transfers in and transfers out as of the beginning of the reporting period.
73
Pension Plan Assets/Liabilities (continued)
In thousands of dollars
For the year ended Dec. 25, 2011
Actual Return on Plan Assets
Relating to
assets still
held at report
date
Relating to
assets sold
during the
period
Balance at
beginning
of year
Purchases,
sales, and
settlements
Transfers in
and/or out
of Level 3(1)
Balance at
end of year
Assets:
Fixed income
Mortgage-backed securities . . . . . . . . . . . . . . . . . . $
— $
(11) $
— $
1,282 $
Other government bonds . . . . . . . . . . . . . . . . . . . . .
Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Partnership/joint venture interests . . . . . . . . . . . . . . . .
Hedge funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Derivative contracts . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Liabilities:
1,526
5,896
90,344
117,698
163,349
104
65
(133)
(503)
20,706
(1,632)
(265)
—
7
—
—
(150)
(76)
(150)
205
3,779
(10,283)
(7,151)
(28)
— $
—
(3,905)
—
—
1,600
500
1,271
1,441
2,070
93,620
128,121
156,016
235
378,917 $
18,227 $
(219) $
(12,346) $
(1,805) $
382,774
Derivative liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . $
(453) $
(8) $
(733) $
1,183 $
(2,506) $
(2,517)
(1) The company’s policy is to recognize transfers in and transfers out as of the beginning of the reporting period.
The fair value of the company’s total long-term debt, determined
based on the bid and ask quotes for the related debt (Level 2), totaled
$1.6 billion and $1.9 billion at Dec. 30, 2012 and Dec. 25, 2011,
respectively. Certain assets are measured at fair value on a
nonrecurring basis; that is, the instruments are not measured at fair
value on an ongoing basis but are subject to fair value adjustments
only in certain circumstances (for example, when there is evidence
of impairment).
The following table summarizes the non-financial assets
measured at fair value on nonrecurring basis in the accompanying
consolidated balance sheet as of Dec. 30, 2012:
Non-Financial Assets
In thousands of dollars
Fair value measurement as of Dec. 30, 2012
Asset held for sale - Quarter 4. . $
Goodwill - Quarter 4 . . . . . . . . . $
— $
— $
— $ 17,508 $ 17,508
— $ 29,610 $ 29,610
Level 1 Level 2 Level 3
Total
The quantitative test of goodwill during 2012 was based on a
valuation that considered discounted cash flows and market-based
information. Significant unobservable inputs in the discounted cash
flows method included the ending year growth rate of 2% and the
discount rate applied to the cash flows of 15.5%. If the growth rate
and discount rate were to change by 1%, the impact to the valuation
would have been approximately $2 million and $3 million,
respectively.
74
NOTE 14
Business operations and segment information
The company has determined that its reportable segments based on
its management and internal reporting structure are Publishing,
Digital and Broadcasting.
The Publishing Segment at the end of 2012 consisted of 82 U.S.
daily publications with affiliated online sites in 30 states and one
U.S. territory, including USA TODAY, a national, general-interest
daily publication; USATODAY.com; USA WEEKEND, a magazine
supplement for publishing companies; Clipper; Gannett Healthcare
Group; and Gannett Government Media. The Publishing Segment
also includes Newsquest, which is a regional publisher in the United
Kingdom that includes 17 paid-for daily publications and more than
200 weekly publications, magazines and trade publications. The
Publishing Segment in the U.S. also includes about 480 non-daily
publications, a network of offset presses for commercial printing and
several smaller businesses.
The Digital Segment includes results from CareerBuilder,
PointRoll, ShopLocal and Reviewed.com. The Digital Segment and
the digital revenues line do not include online/digital revenues
generated by digital platforms that are associated with the company’s
publishing and broadcasting operating properties. Such amounts are
reflected within those segments and are included as part of
publishing revenues and broadcasting revenues in the Consolidated
Statements of Income.
At the end of 2012, the company’s Broadcasting Segment
included 23 television stations and affiliated online sites in markets
with nearly 21 million households covering 18.1% of the U.S.
population. Captivate Network is also part of the Broadcasting
Segment.
The company’s foreign revenues, principally from publishing
businesses in the United Kingdom and CareerBuilder’s international
subsidiaries, totaled approximately $546 million in 2012, $568
million in 2011 and $564 million in 2010. The company’s long-lived
assets in foreign countries, principally in the United Kingdom,
totaled approximately $530 million at Dec. 30, 2012, $543 million at
Dec. 25, 2011, and $556 million at Dec. 26, 2010.
Separate financial data for each of the company’s business
segments is presented in the table that follows. The accounting
policies of the segments are those described in Note 1. The company
evaluates the performance of its segments based on operating
income. Operating income represents total revenue less operating
expenses, including depreciation, amortization of intangibles and
facility consolidation and asset impairment charges. In determining
operating income by industry segment, general corporate expenses,
interest expense, interest income, and other income and expense
items of a non-operating nature are not considered, as such items are
not allocated to the company’s segments.
Corporate assets include cash and cash equivalents, property,
plant and equipment used for corporate purposes and certain other
financial investments.
In thousands of dollars
Business segment financial information
2012
2011
2010
Operating revenues
Publishing . . . . . . . . . . . . . . . . . . . $ 3,728,144 $ 3,831,108 $ 4,050,839
Digital . . . . . . . . . . . . . . . . . . . . . .
Broadcasting . . . . . . . . . . . . . . . . .
718,949
906,104
686,471
722,410
618,259
769,580
Total. . . . . . . . . . . . . . . . . . . . . . . . $ 5,353,197 $ 5,239,989 $ 5,438,678
Operating income
Publishing (2) . . . . . . . . . . . . . . . . $
368,644 $
477,583 $
647,741
Digital (2) . . . . . . . . . . . . . . . . . . .
Broadcasting (2) . . . . . . . . . . . . . .
41,700
443,808
125,340
302,140
83,355
329,245
Corporate (1) (2) . . . . . . . . . . . . . .
(64,397)
(74,272)
(60,646)
Total. . . . . . . . . . . . . . . . . . . . . . . . $
789,755 $
830,791 $
999,695
Depreciation, amortization and facility consolidation and asset impairment
charges
Publishing (2) . . . . . . . . . . . . . . . . $
147,750 $
148,537 $
170,073
Digital (2) . . . . . . . . . . . . . . . . . . .
123,990
Broadcasting (2) . . . . . . . . . . . . . .
Corporate (1) (2) . . . . . . . . . . . . . .
28,007
16,421
30,693
28,926
16,460
43,313
40,460
17,039
Total. . . . . . . . . . . . . . . . . . . . . . . . $
316,168 $
224,616 $
270,885
Equity income (losses) in unconsolidated investees, net
Publishing . . . . . . . . . . . . . . . . . . . $
23,380 $
8,543 $
19,337
Digital . . . . . . . . . . . . . . . . . . . . . .
Broadcasting . . . . . . . . . . . . . . . . .
(396)
(597)
(184)
(162)
(197)
—
Total. . . . . . . . . . . . . . . . . . . . . . . . $
22,387 $
8,197 $
19,140
Identifiable assets
Publishing . . . . . . . . . . . . . . . . . . . $ 2,850,915 $ 3,032,605 $ 3,162,655
Digital . . . . . . . . . . . . . . . . . . . . . .
1,009,821
1,014,805
1,057,898
Broadcasting . . . . . . . . . . . . . . . . .
2,001,979
1,994,051
2,003,929
Corporate (1) . . . . . . . . . . . . . . . . .
517,171
574,989
592,362
Total. . . . . . . . . . . . . . . . . . . . . . . . $ 6,379,886 $ 6,616,450 $ 6,816,844
Capital expenditures
Publishing . . . . . . . . . . . . . . . . . . . $
56,597 $
40,175 $
Digital . . . . . . . . . . . . . . . . . . . . . .
Broadcasting . . . . . . . . . . . . . . . . .
Corporate (1) . . . . . . . . . . . . . . . . .
17,220
17,473
584
15,673
15,263
1,340
36,776
11,883
19,694
717
Total. . . . . . . . . . . . . . . . . . . . . . . . $
91,874 $
72,451 $
69,070
(1) Corporate amounts represent those not directly related to the company’s
three business segments.
(2) Results for 2012 include pre-tax facility consolidation and asset
impairment charges of $32 million for Publishing and $90 million for
digital. Results for 2011 include pre-tax facility consolidation charges of
$27 million for Publishing. Results for 2010 include pre-tax facility
consolidation and asset impairment charges of $36 million for
Publishing, $13 million for Digital and $9 million for Broadcasting.
Refer to Notes 3 and 4 of the Consolidated Financial Statements for more
information.
75
SELECTED FINANCIAL DATA (Unaudited)
(See notes a and b on page 77)
2012
In thousands of dollars, except per share amounts
Net operating revenues
Publishing advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,355,922
1,117,042
Publishing circulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
718,949
Digital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
906,104
Broadcasting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
All other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
255,180
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,353,197
Operating expenses
Costs and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . .
Facility consolidation and asset impairment charges . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-operating (expense) income
Equity income (loss) in unconsolidated investees, net . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other non-operating items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income (loss) before income taxes . . . . . . . . . . . . . . . . . . . . . . . . .
Provision (benefit) for income taxes . . . . . . . . . . . . . . . . . . . . . . . . .
Income (loss) from continuing operations . . . . . . . . . . . . . . . . . .
Income from continuing operations attributable to
noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income (loss) from continuing operations attributable to
Gannett Co., Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 424,280
Income (loss) from continuing operations per share:
4,247,274
160,746
33,293
122,129
4,563,442
789,755
22,387
(150,469)
8,734
(119,348)
670,407
195,400
475,007
(50,727)
2011
2010
2009
2008
$2,511,025
1,063,890
686,471
722,410
256,193
5,239,989
$2,710,524
1,086,702
618,259
769,580
253,613
5,438,678
$2,888,034
1,144,539
586,174
631,085
259,771
5,509,603
$ 4,040,890
1,196,745
281,378
772,533
348,136
6,639,682
4,184,582
165,739
31,634
27,243
4,409,198
830,791
8,197
(173,140)
(12,921)
(177,864)
652,927
152,800
500,127
4,168,098
182,514
31,362
57,009
4,438,983
999,695
19,140
(172,986)
111
(153,735)
845,960
244,013
601,947
4,417,146
207,652
32,983
132,904
4,790,685
718,918
3,927
(175,745)
22,799
(149,019)
569,899
191,328
378,571
5,168,557
228,259
31,211
7,939,563
13,367,590
(6,727,908)
(374,925)
(190,839)
28,430
(537,334)
(7,265,242)
(645,273)
(6,619,969)
(41,379)
(34,619)
(27,091)
(6,970)
$ 458,748
$ 567,328
$ 351,480
$(6,626,939)
basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Other selected financial data
Dividends declared per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Non-GAAP income from continuing operations per diluted share (1) . $
Weighted average number of common shares outstanding
in thousands:
1.83
1.79
0.80
2.33
$
$
$
$
1.92
1.89
0.24
2.13
$
$
$
$
2.38
2.35
0.16
2.44
$
$
$
$
1.50
1.49
0.16
1.85
$
$
$
$
(29.02)
(29.02)
1.60
3.40
basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
232,327
236,690
239,228
242,768
238,230
241,605
233,683
236,027
228,345
228,345
Financial position and cash flow
Long-term debt, excluding current maturities . . . . . . . . . . . . . . . . . . $1,432,100
Redeemable noncontrolling interest . . . . . . . . . . . . . . . . . . . . . . . . . $
10,654
Shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,350,614
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $6,379,886
Free cash flow (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 697,994
Return on equity (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
18.1%
Percentage increase (decrease)
As reported, earnings from continuing operations, after-tax,
per share:
— $
$1,760,363
$
$2,327,891
$6,616,450
$ 775,261
20.4%
$2,352,242
84,176
$2,163,754
$6,816,844
$ 816,308
30.1%
$3,061,951
$
78,304
$1,603,925
$7,148,432
$ 809,630
26.7%
$ 3,816,942
$
72,840
$ 1,055,882
$ 7,796,814
832,615
$
(132.0%)
basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends declared per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Credit ratios
Senior leverage ratio (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.97x
Times interest expense earned (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.2x
(1) See page 40 for a reconciliation of income from continuing operations per share presented in accordance with GAAP.
(2) See page 77 for a reconciliation of free cash flow to net cash flow from operating activities, which the company believes is the most directly comparable
(797.6%)
(799.3%)
12.7%
(105.2%)
(105.1%)
(90.0%)
(4.7%)
(5.3%)
233.3%
(19.3%)
(19.6%)
50.0%
58.7%
57.7%
—%
1.67x
5.5x
2.63x
4.8x
2.56x
6.7x
1.41x
6.4x
measure calculated and presented in accordance with GAAP.
(3) Calculated using income from continuing operations attributable to Gannett Co., Inc. plus earnings from discontinued operations (but excluding the gain
in 2010 on the disposal of discontinued operations).
(4) The senior leverage ratio is calculated in accordance with the company’s revolving credit agreements and term loan agreement. Currently, the company
is required to maintain a senior leverage ratio of less than 3.5x. These agreements are described more fully on page 43 in Management’s Discussion and
Analysis of Financial Condition and Results of Operations. More information regarding the computation can be found in Exhibits 10.3, 10.4, and 10.5 to
the Form 10-Q for the quarterly period ended Sept. 28, 2008, filed on Nov. 6, 2008.
(5) Calculated using operating income adjusted to remove the effect of certain special items. These special items are described more fully beginning on
page 38 in Management’s Discussion and Analysis of Financial Condition and Results of Operations.
76
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 below.
Note 2 of the consolidated financial statements contains further information concerning certain of these acquisitions and dispositions.
Acquisitions and dispositions 2008-2012
Significant acquisitions since the beginning of 2008 are shown below. The company has disposed of several significant businesses during this
period, which are presented below.
Acquisitions 2008-2012
Name
Location
Publication times or business
Year acquired
2008
2010
2011
2012
X.com, Inc. (BNQT.com)
ShopLocal
CareerBuilder
Pearls Review
CareerSite.biz Limited
Reviewed.com
JobsCentral
Nutrition Dimension
US PRESSWIRE
JobScout24
MMA Junkie
Fantasy Sports Ventures/Big Lead
Sports
Ceviu
Top Language Jobs
Quickish
Action sports web site
Marketing and database services company
Pasadena, CA
Chicago, IL
Chicago, IL, Atlanta, GA Job search, employment and careers web site
A nursing certification and education web site
St. Petersburg, FL
Online recruitment niche sites focusing on nursing and rail
U.K.
workers
A technology product review web site
Job search, employment and career web site
A continuing education, certification and review program
focused on nutrition
A digital sports photography business
Job search, employment and career web site
Independent sports information web site
Independent digital sports property
Atlanta, GA
Germany
St. Petersburg, FL
New York, NY
Somerville, MA
Singapore
Falls Church, VA
Brazil
Europe
Bethesda, MD
BLiNQ Media, LLC
New York City, NY
Mobestream Media
Dallas, TX
Economic Modeling Specialist Intl. Moscow, ID
Rovion
Boston, MA
Information technology job board
Global online jobsite for multi-language jobs and candidates
Aggregator that offers a summary and a link for sports stories
throughout the day
Innovator of social engagement advertising solutions for
agencies and brands
Developer of the Key Ring consumer rewards mobile platform
Economic software firm that specializes in employment data
and labor market analysis
A self-service technology platform that enables the full
development and deployment of rich media
Dispositions 2008-2012
Year disposed
2008
2009
2010
Name
Telematch
Southernprint Limited
The Honolulu Advertiser
Michigan Directory Company
Location
Springfield, VA
U.K.
Honolulu, HI
Pigeon, MI
Publication times or business
Database marketing services company
Commercial printing
Daily newspaper
Directory publishing operation
Free cash flow reconciliation
Free cash flow is a non-GAAP liquidity measure used in addition to and in conjunction with results presented in accordance with GAAP. Free cash
flow should not be relied upon to the exclusion of GAAP financial measures. Free cash flow is a non-GAAP liquidity measure that is defined as “Net
cash flow from operating activities,” as reported on the statement of cash flows reduced by “Purchases of property, plant and equipment” as well as
“Payments for investments” and increased by “Proceeds from investments” and voluntary pension contributions, net of related tax benefit. The
company believes that free cash flow is a useful measure for management and investors to evaluate the level of cash generated by operations and the
ability of its operations to fund investments in new and existing businesses, return cash to shareholders under the company’s capital program, repay
indebtedness, add to the company’s cash balance, or to use in other discretionary activities. Management uses free cash flow to monitor cash available
for repayment of indebtedness and in its discussions with the investment community.
In thousands of dollars
Net cash flow from operating activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Purchase of property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Voluntary pension employer contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax benefit for voluntary pension employer contributions . . . . . . . . . . . . . . . . .
Payments for investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Free cash flow. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2012
756,740 $
(91,874)
—
—
(2,501)
35,629
697,994 $
2011
814,136 $
(72,451)
—
—
(19,406)
52,982
775,261 $
2010
772,884 $
(69,070)
130,000
(52,000)
(10,984)
45,478
816,308 $
2008
2009
866,580 $ 1,015,345
(165,000)
(67,737)
—
—
—
—
(46,779)
(9,674)
29,049
20,461
832,615
809,630 $
77
QUARTERLY STATEMENTS OF INCOME (Unaudited)
In thousands of dollars, except per share amounts
Fiscal year ended Dec. 30, 2012
Net operating revenues
Publishing advertising. . . . . . . . . . . . . . . . . . . . . . . . . . $
Publishing circulation . . . . . . . . . . . . . . . . . . . . . . . . . .
Digital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Broadcasting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
All other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating expenses
Cost of sales and operating expenses, exclusive of
depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative expenses,
exclusive of depreciation . . . . . . . . . . . . . . . . . . . . .
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of intangible assets . . . . . . . . . . . . . . . . .
Facility consolidation and asset impairment charges . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-operating (expense) income
Equity income in unconsolidated investees, net . . . . . .
Interest expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other non-operating items . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before income taxes . . . . . . . . . . . . . . . . . . . .
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to noncontrolling interests . . .
Net income attributable to Gannett Co., Inc. . . . . . . $
Per share computations
Net income per share—basic . . . . . . . . . . . . . . . . . . . $
Net income per share—diluted . . . . . . . . . . . . . . . . . $
Dividends per share. . . . . . . . . . . . . . . . . . . . . . . . . . . $
1st Quarter(1)
2nd Quarter(2) 3rd Quarter(3)
4th Quarter(4)
Total
551,438 $
263,336
168,352
176,173
59,288
1,218,587
594,262 $
263,938
181,326
205,381
62,133
1,307,040
552,676 $
276,655
182,022
237,039
60,869
1,309,261
657,546 $
313,113
187,249
287,511
72,890
1,518,309
2,355,922
1,117,042
718,949
906,104
255,180
5,353,197
722,240
720,889
720,941
779,777
2,943,847
308,319
39,703
7,879
4,788
1,082,929
135,658
316,301
40,157
8,078
5,097
1,090,522
216,518
318,385
40,460
8,045
4,231
1,092,062
217,199
360,422
40,426
9,291
108,013
1,297,929
220,380
4,312
(39,571)
2,035
(33,224)
102,434
26,600
75,834
(7,611)
68,223 $
8,663
(36,142)
(2,280)
(29,759)
186,759
51,200
135,559
(15,670)
119,889 $
3,005
(35,829)
2,933
(29,891)
187,308
38,700
148,608
(15,525)
133,083 $
6,407
(38,927)
6,046
(26,474)
193,906
78,900
115,006
(11,921)
103,085 $
1,303,427
160,746
33,293
122,129
4,563,442
789,755
22,387
(150,469)
8,734
(119,348)
670,407
195,400
475,007
(50,727)
424,280
0.29 $
0.28 $
0.20 $
0.51 $
0.51 $
0.20 $
0.58 $
0.56 $
0.20 $
0.45 $
0.44 $
0.20 $
1.83
1.79
0.80
(1) Results for the first quarter of 2012 include net special charges affecting operating income related to facility consolidations and workforce restructuring. Facility consolidation
charges totaled $4.8 million ($2.9 million after tax or $0.01 per share) reflecting primarily accelerated depreciation costs associated with the transfer of production activities for
The Cincinnati Enquirer to a third-party printer in Columbus, Ohio announced in the fourth quarter of 2011. Workforce restructuring charges of $16.3 million ($9.7 million after
tax or $0.04 per share) reflect principally the impact of an early retirement offer plan announced in the first quarter of 2012. Refer to the discussion beginning on page 38 and
Notes 3 and 4 to the Consolidated Financial Statement for more information on special items.
(2) Results for the second quarter of 2012 include $20.3 million of special charges affecting operating income. Facility consolidation non-cash charges totaled $5.1 million ($3.1
million after tax or $0.01 per share) reflecting primarily accelerated depreciation costs associated with the transfer of production activities. Workforce restructuring charges in the
Publishing Segment of $9.7 million ($5.8 million after tax or $0.02 per share) reflect principally the impact of employee acceptances during the second quarter of an early
retirement plan announced in early 2012. Results for the second quarter of 2012 also included pension settlement charges totaling $5.4 million ($3.2 million after tax or $0.01 per
share). Refer to the discussion beginning on page 38 and Notes 3 and 4 to the Consolidated Financial Statement for more information on special items.
(3) Results for the third quarter of 2012 include $14.7 million of special charges affecting operating income. Non-cash facility consolidation charges totaled $4.2 million ($2.4
million after tax or $0.01 per share) reflecting primarily accelerated depreciation costs primarily associated with the transfer of production activities. Workforce restructuring
charges in the Publishing Segment of $7.9 million ($4.9 million after tax or $0.02 per share) reflect principally the impact of employee acceptances of an early retirement plan
during the third quarter of 2012. Results for the third quarter of 2012 also include a pension settlement termination charge totaling $2.5 million ($1.5 million after tax or $0.01
per share). Non-operating items included $3.2 million ($2.0 million after tax or $0.01 per share) of non-cash charges for a newspaper partnership investment. Offsetting these
was a tax benefit of $13.1 million ($0.06 per share) related primarily to a tax settlement covering multiple years. Refer to the discussion beginning on page 38 and Notes 3 and 4
to the Consolidated Financial Statement for more information on special items.
(4) Results for the fourth quarter of 2012 include special charges affecting operating income. Non-cash asset impairments, efficiency-driven facility consolidation and workforce
restructuring charges totaled $114.6 million ($101.9 million after tax or $0.44 per share). Non-operating items include a $3.8 million ($2.3 million after tax or $0.01 per share)
non-cash charge related to the impairment of a minority owned investment. Refer to the discussion beginning on page 38 and Notes 3 and 4 to the Consolidated Financial
Statement for more information on special items.
78
QUARTERLY STATEMENTS OF INCOME (Unaudited)
In thousands of dollars, except per share amounts
Fiscal year ended Dec. 25, 2011
Net operating revenues
Publishing advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Publishing circulation. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Digital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Broadcasting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
All other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating expenses
Cost of sales and operating expenses, exclusive of
depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative expenses,
exclusive of depreciation . . . . . . . . . . . . . . . . . . . . . . .
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of intangible assets. . . . . . . . . . . . . . . . . . .
Facility consolidation and asset impairment charges. . . .
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-operating (expense) income
Equity income in unconsolidated investees, net . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other non-operating items . . . . . . . . . . . . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before income taxes . . . . . . . . . . . . . . . . . . . . .
Provision for income taxes. . . . . . . . . . . . . . . . . . . . . . . .
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to noncontrolling interests . . . . .
Net income attributable to Gannett Co., Inc. . . . . . . . $
Per share computations
Net income per share—basic. . . . . . . . . . . . . . . . . . . . . $
Net income per share—diluted . . . . . . . . . . . . . . . . . . . $
Dividends per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1st Quarter(1) 2nd Quarter(2) 3rd Quarter(3) 4th Quarter(4)
Total
601,736 $
268,213
157,594
163,882
59,836
1,251,261
646,864 $
265,433
173,447
184,353
64,842
1,334,939
591,676 $
262,099
173,930
174,340
63,989
1,266,034
670,749 $ 2,511,025
1,063,890
268,145
686,471
181,500
722,410
199,835
256,193
67,526
5,239,989
1,387,755
717,515
739,654
721,888
782,040
2,961,097
297,547
41,638
8,289
7,656
1,072,645
178,616
297,196
42,070
7,871
6,394
1,093,185
241,754
297,001
41,263
7,721
—
1,067,873
198,161
331,741
40,768
7,753
13,193
1,175,495
212,260
3,458
(46,629)
1,297
(41,874)
136,742
38,600
98,142
(7,649)
90,493 $
7,973
(44,741)
3,841
(32,927)
208,827
43,300
165,527
(14,000)
151,527 $
2,563
(40,939)
(3,205)
(41,581)
156,580
44,800
111,780
(11,992)
99,788 $
(5,797)
(40,831)
(14,854)
(61,482)
150,778
26,100
124,678
(7,738)
116,940 $
1,223,485
165,739
31,634
27,243
4,409,198
830,791
8,197
(173,140)
(12,921)
(177,864)
652,927
152,800
500,127
(41,379)
458,748
0.38 $
0.37 $
0.04 $
0.63 $
0.62 $
0.04 $
0.42 $
0.41 $
0.08 $
0.49 $
0.49 $
0.08 $
1.92
1.89
0.24
(1) Results of the first quarter of 2011 include the following special items: $8 million of non-cash charges associated with facility consolidations ($5 million after-tax or $0.02 per
share) and $6 million in costs due to workforce restructuring ($4 million after-tax or $0.02 per share). Refer to the discussion beginning on page 38 and Notes 3 and 4 to the
Consolidated Financial Statement for more information on special items.
(2) Results of the second quarter of 2011 include the following special items: $6 million of non-cash charges associated with facility consolidations ($4 million after-tax or $0.02 per
share); $9 million in costs due to workforce restructuring ($5 million after-tax or $0.02 per share), and a $20 million in net tax benefit related primarily to a tax settlement
covering multiple years ($0.08 per share). Refer to the discussion beginning on page 38 and Notes 3 and 4 to the Consolidated Financial Statement for more information on
special items.
(3) Results of the third quarter of 2011 include the following special items: $2 million of non-cash impairment for an investment in an online business ($1 million after-tax) and $9
million in costs due to workforce restructuring ($5 million after-tax or $0.02 per share). Refer to the discussion beginning on page 38 and Notes 3 and 4 to the Consolidated
Financial Statement for more information on special items.
(4) Results of the fourth quarter of 2011 include the following special items: $13 million of non-cash charges associated with facility consolidations ($9 million after-tax or $0.04 per
share); $50 million in costs due to workforce restructuring ($31 million after-tax or $0.13 per share); $15 million in costs due to incremental retirement charges ($9 million after-
tax or $0.04 per share) and a $11 million in net tax benefit related primarily to a stock basis deduction ($0.04 per share). In non-operating income, special charges related to the
impairment of certain minority-owned investments totaled $28 million ($17 million after-tax or $0.07 per share). Refer to the discussion beginning on page 38 and Notes 3 and 4
to the Consolidated Financial Statement for more information on special items.
79
SCHEDULE II – Valuation and qualifying accounts and reserves
In thousands of dollars
Allowance for doubtful receivables
34,646 $
Fiscal year ended Dec. 30, 2012 . . . . . $
39,419 $
Fiscal year ended Dec. 25, 2011 . . . . . $
46,255 $
Fiscal year ended Dec. 26, 2010 . . . . . $
(1) Also includes foreign currency translation adjustments in each year.
(2) Consists of write-offs, net of recoveries 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.
Balance
at beginning
of period
Additions
charged to
cost and expenses
Additions/
(reductions)
for acquisitions/
dispositions (1)
Deductions
from reserves (2)
Balance
at end
of period
9,736 $
11,574 $
18,241 $
24 $
(97) $
(3,643) $
(22,400) $
(16,250) $
(21,434) $
22,006
34,646
39,419
Management’s Report on Internal Control Over Financial
Reporting
Our management is responsible for establishing and maintaining
adequate internal control over financial reporting, as such term is
defined in Exchange Act Rule 13a-15(f). Under the supervision and
with the participation of our management, including our principal
executive officer and principal financial officer, we conducted an
evaluation of the effectiveness of our internal control over financial
reporting based on the framework in “Internal Control – Integrated
Framework” issued by the Committee of Sponsoring Organizations
of the Treadway Commission. Based on our evaluation under the
framework in “Internal Control – Integrated Framework,” our
management concluded that our internal control over financial
reporting was effective as of Dec. 30, 2012.
The effectiveness of our internal control over financial reporting
as of Dec. 30, 2012, has been audited by Ernst & Young LLP, an
independent registered public accounting firm, as stated in its report
which is included elsewhere in this item.
Changes in Internal Control Over Financial Reporting
There has been no change in the company’s internal control over
financial reporting that occurred during the company’s fiscal quarter
ended Dec. 30, 2012, that has materially affected, or is reasonably
likely to materially affect, the company’s internal control over
financial reporting.
80
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND
CORPORATE GOVERNANCE
The information captioned “Your Board of Directors,” “Director
Biographies,” “Committees of the Board of Directors,” “Committee
Charters” and “Ethics Policy” under the heading “PROPOSAL 1 –
ELECTION OF DIRECTORS” and the information under “OTHER
MATTERS – Section 16(A) Beneficial Ownership Reporting
Compliance” in the company’s 2013 proxy statement is incorporated
herein by reference.
Maryam Banikarim
Senior Vice President and Chief Marketing Officer, Gannett (2011-
present). Formerly: Senior Vice President, Integrated Sales Marketing,
NBC Universal (2009-2011); Chief Marketing Officer, Univision
Communications (2002-2009). Age 44.
William A. Behan
Senior Vice President, Labor Relations, Gannett (2010-present).
Formerly: Vice President, Labor Relations (2007-2010). Age 54.
Paul Davidson
Chairman and Chief Executive Officer, Newsquest (2003-present). Age
58. U.K. citizen.
Robert J. Dickey
President, U.S. Community Publishing, (February 2008-present).
Formerly: Senior Group President, Gannett’s Pacific Group and
Chairman of Phoenix Newspapers Inc. (2005-2008). Age 55.
Teresa S. Gendron
Vice President and Controller, Gannett (2011-Present). Formerly Vice
President and Controller, NII Holdings, Inc. (2010-2011); Vice President
and Assistant Controller, NII Holdings, Inc. (2008 – 2010); Vice
President Financial Compliance, NII Holdings, Inc. (2005-2008). Age 43.
Victoria D. Harker
Chief Financial Officer (July 2012-present). Formerly: Executive Vice
President, Chief Financial Officer and President of Global Business
Services, AES Corporation (2006-2012). Age 48.
Larry S. Kramer
President and Publisher, USA TODAY (May 2012-present). Formerly:
Professor of Media Management, Newhouse School of Communications,
Syracuse University (2009-2012); Senior Advisor, Polaris Venture
Partners (2008-2010); President of CBS Digital Media (2005-2006) and
Advisor to CBS (2006-2008); and Chairman, CEO and Founder,
MarketWatch, Inc. (1997-2005). Age 62.
Kevin E. Lord
Senior Vice President and Chief Human Resources Officer (October
2012-present). Formerly: Executive Vice President, Human Resources,
NBC News (2007-2012). Age 50.
David A. Payne
Senior Vice President and Chief Digital Officer, Gannett (2011-present).
Formerly: President and CEO, ShortTail Media, Inc. (2008-2011); and
Senior Vice President and General Manager, CNN.com (2004-2008).
Age 50.
John A. Williams
President, Gannett Digital Ventures (January 2008-present). Age 62.
ITEM 11. EXECUTIVE COMPENSATION
The information captioned “EXECUTIVE COMPENSATION,”
“DIRECTOR COMPENSATION,” “OUTSTANDING DIRECTOR
EQUITY AWARDS AT FISCAL YEAR-END” AND “PROPOSAL
1–ELECTION OF DIRECTORS – Compensation Committee
Interlocks and Insider Participation; Related Transactions” in the
company’s 2013 proxy statement is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The information captioned “EQUITY COMPENSATION PLAN
INFORMATION” and “SECURITIES BENEFICIALLY OWNED
BY DIRECTORS, EXECUTIVE OFFICERS AND PRINCIPAL
SHAREHOLDERS” in the company’s 2013 proxy statement is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information captioned “Director Independence” and
“Compensation Committee Interlocks and Insider Participation;
Related Transactions” under the heading “PROPOSAL 1 –
ELECTION OF DIRECTORS” in the company’s 2013 proxy
statement is incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information captioned “PROPOSAL 1 – ELECTION OF
DIRECTORS – Report of the Audit Committee” in the company’s
2013 proxy statement is incorporated herein by reference.
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT
SCHEDULES
(a) Financial Statements, Financial Statement Schedules and
David T. Lougee
President, Gannett Broadcasting (July 2007-present). Age 54.
Exhibits.
(1) Financial Statements.
Gracia C. Martore
President and Chief Executive Officer (October 2011-present); Director
for Gannett Co., Inc., FM Global and MeadWestvaco Corporation
Formerly: President and Chief Operating Officer (February 2010-
October 2011); Executive Vice President and CFO (2006-2010). Age 61.
Todd A. Mayman
Senior Vice President, General Counsel and Secretary (April 2009-
present). Formerly: Vice President, Associate General Counsel, Secretary
and Chief Governance Officer (2007-2009). Age 53.
As listed in the Index to Financial Statements and Supplementary
Data on page 46.
(2) Financial Statement Schedules.
As listed in the Index to Financial Statements and Supplementary
Data on page 46.
Note: All other schedules are omitted as the required information
is not applicable or the information is presented in the consolidated
financial statements or related notes.
(3) Exhibits.
See Exhibit Index on pages 84-88 for list of exhibits filed with
this Form 10-K. Management contracts and compensatory plans or
arrangements are identified with asterisks on the Exhibit Index.
82
EXHIBIT INDEX
Exhibit
Number
Exhibit
Location
3-1
3-2
4-1
4-2
4-3
4-4
4-5
4-6
4-7
4-8
10-1
10-1-1
10-2
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.
Amended by-laws of Gannett Co., Inc.
Incorporated by reference to Exhibit 3-2 to Gannett Co., Inc.’s
Form 10-Q for the fiscal quarter ended June 27, 2010.
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.
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.
Second Supplemental Indenture dated as of June 1, 1995,
among Gannett Co., Inc., NationsBank, N.A., as Trustee, and
Crestar Bank, as Trustee.
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 to Gannett Co., Inc.’s
Form 8-K filed on November 9, 1986.
Incorporated by reference to Exhibit 4 to Gannett Co., Inc.’s
Form 8-K filed on June 15, 1995.
Incorporated by reference to Exhibit 4.16 to Gannett Co.,
Inc.’s Form 8-K filed on March 14, 2002.
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.
Fifth Supplemental Indenture, dated as of May 26, 2006,
between Gannett Co., Inc. and Wells Fargo Bank, N.A., as
Trustee.
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 June 25, 2006.
Incorporated by reference to Exhibit 4.5 to Gannett Co., Inc.’s
Form 10-Q for the fiscal quarter ended July 1, 2007.
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.
Supplemental Executive Medical Plan Amended and Restated
as of January 1, 2011.*
Incorporated by reference to Exhibit 10-2 to Gannett Co.,
Inc.’s Form 10-K for the fiscal year ended December 26, 2010.
Amendment No. 1 to the Supplemental Executive Medical
Plan Amended and Restated as of January 1, 2012.*
Attached.
Supplemental Executive Medical Plan for Retired Executives
dated December 22, 2010 and effective January 1, 2011.*
Incorporated by reference to Exhibit 10-2-1 to Gannett Co.,
Inc.’s Form 10-K for the fiscal year ended December 26, 2010.
10-3
Gannett Supplemental Retirement Plan Restatement.*
Incorporated by reference to Exhibit 10-2 to Gannett Co.,
Inc.’s Form 10-Q for the fiscal quarter ended September 30,
2007.
10-3-1
10-3-2
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.
Amendment No. 2 to the Gannett Co., Inc. Supplemental
Retirement Plan dated December 22, 2010.*
Incorporated by reference to Exhibit 10-3-2 to Gannett Co.,
Inc.’s Form 10-K for the fiscal year ended December 26, 2010.
84
10-4
10-4-1
10-4-2
10-4-3
10-4-4
10-4-5
10-5
10-5-1
10-5-2
10-6
10-6-1
Gannett Co., Inc. Deferred Compensation Plan Restatement
dated February 1, 2003 (reflects all amendments through July
25, 2006).*
Incorporated by reference to Exhibit 10-4 to Gannett Co.,
Inc.’s Form 10-K for the fiscal year ended December 31, 2006.
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.
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.
Amendment No. 2 to the Gannett Co., Inc. Deferred
Compensation Plan Rules for Post-2004 Deferrals dated
December 9, 2008.*
Amendment No. 3 to the Gannett Co., Inc. Deferred
Compensation Plan Rules for Post-2004 Deferrals dated
October 27, 2009.*
Amendment No. 4 to the Gannett Co., Inc. Deferred
Compensation Plan Rules for Post-2004 Deferrals dated
December 22, 2010.*
Gannett Co., Inc. Transitional Compensation Plan
Restatement.*
Incorporated by reference to Exhibit 10-4-3 to Gannett Co.,
Inc.’s Form 10-K for the fiscal year ended December 28, 2008.
Incorporated by reference to Exhibit 10-4-4 to Gannett Co.,
Inc.’s Form 10-K for the fiscal year ended December 27, 2009.
Incorporated by reference to Exhibit 10-4-5 to Gannett Co.,
Inc.’s Form 10-K for the fiscal year ended December 26, 2010.
Incorporated by reference to Exhibit 10-1 to Gannett Co.,
Inc.’s Form 10-Q for the fiscal quarter ended September 30,
2007.
Amendment No. 1 to Gannett Co., Inc. Transitional
Compensation Plan Restatement dated as of May 4, 2010.*
Incorporated by reference to Exhibit 10-3 to Gannett Co.,
Inc.’s Form 10-Q for the fiscal quarter ended March 28, 2010.
Amendment No. 2 to Gannett Co., Inc. Transitional
Compensation Plan Restatement dated as of December 22,
2010.*
Incorporated by reference to Exhibit 10-5-2 to Gannett Co.,
Inc.’s Form 10-K for the fiscal year ended December 26, 2010.
Gannett Co., Inc. Omnibus Incentive Compensation Plan, as
amended and restated as of May 4, 2010.*
Incorporated by reference to Exhibit 10-2 to Gannett Co.,
Inc.’s Form 10-Q for the fiscal quarter ended March 28, 2010.
Gannett Co., Inc. 2001 Inland Revenue Approved Sub-Plan for
the United Kingdom.*
Incorporated by reference to Exhibit 10-1 to Gannett Co.,
Inc.’s Form 10-Q for the fiscal quarter ended September 26,
2004.
10-6-2
Form of Director Stock Option Award Agreement.*
Incorporated by reference to Exhibit 10-7-3 to Gannett Co.,
Inc.’s Form 10-K for the fiscal year ended December 30, 2007.
10-6-3
Form of Director Restricted Stock Award Agreement.*
Incorporated by reference to Exhibit 10-6-4 to Gannett Co.,
Inc.’s Form 10-K for the fiscal year ended December 28, 2008.
10-6-4
Form of Executive Officer Stock Option Award Agreement.*
Incorporated by reference to Exhibit 10-6-5 to Gannett Co.,
Inc.’s Form 10-K for the fiscal year ended December 28, 2008.
10-6-5
10-6-6
10-7
Form of Executive Officer Restricted Stock Unit Award
Agreement.*
Incorporated by reference to Exhibit 10-6-6 to Gannett Co.,
Inc.’s Form 10-K for the fiscal year ended December 28, 2008.
Form of Executive Officer Performance Share Award
Agreement.*
Incorporated by reference to Exhibit 99-1 to Gannett Co., Inc’s
Form 8-K/A filed on December 9, 2011.
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.
85
10-8
10-8-1
10-8-2
10-8-3
10-8-4
10-8-5
10-9
10-9-1
10-9-2
10-9-3
10-9-4
10-9-5
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.
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.
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.
Third Amendment, dated as of September 28, 2009, to
Competitive Advance and Revolving Credit Agreement, dated
as of February 27, 2004 and effective as of March 15, 2004.
Incorporated by reference to Exhibit 10-2 to Gannett Co.,
Inc.’s Form 10-Q for the fiscal quarter ended September 27,
2009.
Fourth Amendment, dated as of August 25, 2010 to
Competitive Advance and Revolving Credit Agreement, dated
as of February 27, 2004 and effective as of March 15, 2004.
Incorporated by reference to Exhibit 10-3 to Gannett Co.,
Inc.’s Form 10-Q for the fiscal quarter ended September 26,
2010.
Fifth Amendment, dated as of September 30, 2010 to
Competitive Advance and Revolving Credit Agreement, dated
as of February 27, 2004 and effective as of March 15, 2004.
Incorporated by reference to Exhibit 10-8-5 to Gannett Co.,
Inc. Form 10-K for the fiscal year ended December 26, 2010.
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. Form 10-K for the fiscal year ended December 26, 2004.
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.
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.
Third Amendment, dated as of September 28, 2009, to
Competitive Advance and Revolving Credit Agreement, dated
as of December 13, 2004 and effective as of January 5, 2005.
Incorporated by reference to Exhibit 10-1 to Gannett Co.,
Inc.’s Form 10-Q for the fiscal quarter ended September 27,
2009.
Fourth Amendment, dated as of August 25, 2010, to
Competitive Advance and Revolving Credit Agreement, dated
as of December 13, 2004, and effective as of January 5, 2005.
Incorporated by reference to Exhibit 10-4 to Gannett Co.,
Inc.’s Form 10-Q for the fiscal quarter ended September 26,
2010.
Fifth Amendment, dated as of September 30, 2010, to
Competitive Advance and Revolving Credit Agreement, dated
as of December 13, 2004, and effective as of January 5, 2005.
Incorporated by reference to Exhibit 10-9-5 to Gannett Co.,
Inc. Form 10-K for the fiscal year ended December 26, 2010.
86
10-10
10-10-1
10-10-2
10-10-3
10-10-4
10-10-5
10-11
10-12
10-13
10-13-1
10-13-2
10-14
10-15
10-16
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. Form 10-K for the fiscal year ended December 26, 2004.
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.
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.
Third Amendment, dated as of September 28, 2009, to
Amended and Restated Competitive Advance and Revolving
Credit Agreement, dated as of March 11, 2002 and effective as
of March 18, 2002, as amended and restated as of December
13, 2004 and effective as of January 5, 2005.
Fourth Amendment, dated as of August 25, 2010, to Amended
and Restated Competitive Advance and Revolving Credit
Agreement, dated as of March 11, 2002 and effective as of
March 18, 2002, as amended and restated as December 13,
2004 and effective as of January 5, 2005.
Fifth Amendment, dated as of September 30, 2010, to
Amended and Restated Competitive Advance and Revolving
Credit Agreement, dated as of March 11, 2002 and effective as
of March 18, 2002, as amended and restated as December 13,
2004 and effective as of January 5, 2005.
Master Assignment and Assumption Agreement, dated
September 30, 2010 to (i) the Amended and Restated
Competitive Advance and Revolving Credit Agreement, dated
as of March 11, 2002 and effective as of March 18, 2002, as
amended and restated as of December 13, 2004 and effective
as of January 5, 2005; (ii) the Competitive Advance and
Revolving Credit Agreement, dated as of February 27, 2004
and effective as of March 15, 2004; and (iii) the Competitive
Advance and Revolving Credit Agreement, dated as of
December 13, 2004 and effective as of January 5, 2005.
Incorporated by reference to Exhibit 10-3 to Gannett Co.,
Inc.’s Form 10-Q for the fiscal quarter ended September 27,
2009.
Incorporated by reference to Exhibit 10-5 to Gannett Co.,
Inc.’s Form 10-Q for the fiscal quarter ended September 26,
2010.
Incorporated by reference to Exhibit 10-10-5 to Gannett Co.,
Inc.’s Form 10-K for the fiscal year ended December 26, 2010.
Incorporated by reference to Exhibit 10-11 to Gannett Co.,
Inc.’s Form 10-K for the fiscal year ended December 26, 2010.
Description of Gannett Co., Inc.’s Non-Employee Director
Compensation.*
Incorporated by reference to Exhibit 10-1 to Gannett Co.,
Inc.’s Form 10-Q for the fiscal quarter ended June 24, 2012.
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.
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.
Amendment, dated as of December 24, 2010, to Employment
Agreement dated February 27, 2007.*
Incorporated by reference to Exhibit 10-14-2 to Gannett Co.,
Inc.’s Form 10-K for the year ended December 26, 2010.
Termination Benefits Agreement dated as of November 15,
2010 between Gannett Co., Inc. and Paul N. Saleh.*
Incorporated by reference to Exhibit 99-2 to Gannett Co.,
Inc.’s Form 8-K filed on November 17, 2010.
Termination Benefits Agreement dated as of March 16, 2011
between Gannett Co., Inc. and David A. Payne.*
Incorporated by reference to Exhibit 10-15 to Gannett Co.,
Inc.’s Form 10-K for the year ended December 25, 2011.
Termination Benefits Agreement dated as of July 23, 2012
between Gannett Co., Inc. and Victoria D. Harker.*
Incorporated by reference to Exhibit 99-2 to Gannett Co.,
Inc.’s Form 8-K filed on June 22, 2012.
87
10-17
10-18
Amendment for section 409A Plans dated December 31,
2008.*
Incorporated by reference to Exhibit 10-14 to Gannett Co.,
Inc.’s Form 10-K for the fiscal year ended December 28, 2008.
Executive Life Insurance Plan document dated December 31,
2008.*
Incorporated by reference to Exhibit 10-15 to Gannett Co.,
Inc.’s Form 10-K for the fiscal year ended December 28, 2008.
10-19
Key Executive Life Insurance Plan dated October 29, 2010.*
Form of Participation Agreement under Key Executive Life
Insurance Plan.*
Incorporated by reference to Exhibit 10-1 to Gannett Co.,
Inc.’s Form 10-Q for the fiscal quarter ended September 26,
2010.
Incorporated by reference to Exhibit 10-2 to Gannett Co.,
Inc.’s Form 10-Q for the fiscal quarter ended September 26,
2010.
Omnibus Amendment to Terms and Conditions of Restricted
Stock Awards dated as of December 31, 2008.*
Incorporated by reference to Exhibit 10-17 to Gannett Co.,
Inc.’s Form 10-K for the fiscal year ended December 28, 2008.
Omnibus Amendment to Terms and Conditions of Stock Unit
Awards dated as of December 31, 2008.*
Incorporated by reference to Exhibit 10-18 to Gannett Co.,
Inc.’s Form 10-K for the fiscal year ended December 28, 2008.
Omnibus Amendment to Terms and Conditions of Stock
Option Awards dated as of December 31, 2008.*
Incorporated by reference to Exhibit 10-19 to Gannett Co.,
Inc.’s Form 10-K for the fiscal year ended December 28, 2008.
Attached.
Attached.
Attached.
Attached.
Attached.
Attached.
Attached.
Attached.
Letter re change in accounting principles.
Subsidiaries of Gannett Co., Inc.
Consent of Ernst & Young LLP, Independent Registered
Public Accounting Firm.
Certification Pursuant to Rule 13a-14(a) under the Securities
Exchange Act of 1934.
Certification Pursuant to Rule 13a-14(a) under the Securities
Exchange Act of 1934.
Section 1350 Certification.
Section 1350 Certification.
The following financial information from Gannett Co., Inc.
Annual Report on Form 10-K for the year ended December 30,
2012, formatted in XBRL includes: (i) Consolidated Balance
Sheets at December 30, 2012 and December 25, 2011, (ii)
Consolidated Statements of Income for the 2012, 2011 and
2010 fiscal years, (iii) Consolidated Statements of
Comprehensive Income for the 2012, 2011 and 2010 fiscal
years, (iv) Consolidated Cash Flow Statements for the 2012,
2011 and 2010 fiscal years; (v) Consolidated Statements of
Equity for the 2012, 2011 and 2010 fiscal years; and (vi) the
Notes to Consolidated Financial Statements.
10-20
10-21
10-22
10-23
18
21
23
31-1
31-2
32-1
32-2
101
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.
88
GLOSSARY OF FINANCIAL TERMS
Presented below are definitions of certain key financial and operational terms
that Gannett hopes will enhance the reading and understanding of Gannett’s
2012 Form 10-K.
ADVERTISING REVENUES – Amounts charged to customers for space
purchased in the company’s print products and/or associated digital
platforms. 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.
AMORTIZATION – A charge against the company’s earnings that
represents the write off of intangible assets over the projected life of the
assets.
BALANCE SHEET – A summary statement that reflects the company’s
assets, liabilities and equity at a particular point in time.
BROADCASTING REVENUES – Primarily amounts charged to customers
for commercial advertising aired on the company’s television stations.
CIRCULATION – The number of newspapers sold to customers each day
(“paid circulation”). The company keeps separate records of morning,
evening and Sunday circulation.
CIRCULATION REVENUES – Amounts charged to readers of the
company’s subscription-based newspapers (print or online) 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.
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 and advance fees for recruitment
solutions. Revenue is recognized in the period in which it is earned (as
newspapers are delivered or made available on the company’s digital
platforms; or as recruitment solutions delivered).
DEPRECIATION – A charge against the company’s earnings that allocates
the cost of property, plant and equipment over the estimated useful lives of
the assets.
DIGITAL/ONLINE REVENUES – These include revenue from advertising
placed on all digital platforms 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 digital
platforms including its web site) and PointRoll (technology/marketing
services revenue).
DIGITAL SEGMENT – A reportable segment for the company that includes
the results of CareerBuilder, PointRoll, ShopLocal and Reviewed.com.
DISCONTINUED OPERATIONS – A term which refers to businesses
which have been sold or disposed of by the company. To achieve
comparability in financial reporting for all remaining operations, the results
from discontinued operations are reclassified from the normal operating
section of the Statements of Income and presented in a separate section
entitled “Discontinued Operations.”
DIVIDEND – Payment by the company to its shareholders of a portion of its
earnings.
EARNINGS PER SHARE (basic) – The company’s earnings divided by the
average number of shares outstanding for the period.
EARNINGS PER SHARE (diluted) – The company’s earnings divided by
the average number of shares outstanding for the period, giving effect to
assumed dilution from outstanding stock options and restricted stock units.
EQUITY EARNINGS FROM INVESTMENTS – For those investments
which are 50% or less owned by the company, an income or loss entry is
recorded in the Statements of Income representing the company’s ownership
share of the operating results of the investee company.
FOREIGN CURRENCY TRANSLATION – The process of reflecting
foreign currency accounts of subsidiaries in the reporting currency of the
parent company.
FREE CASH FLOW – Net cash flow from operating activities reduced by
purchase of property, plant and equipment as well as payments for
investments and increased by proceeds from investments and voluntary
pension contributions, net of related tax benefit.
GAAP – Generally accepted accounting principles.
GOODWILL – In a business purchase, this represents the excess of amounts
paid over the fair value of tangible and other identified intangible assets
acquired net of liabilities assumed.
INVENTORIES – Raw materials, principally newsprint, used in the
business.
NET INCOME ATTRIBUTABLE TO NONCONTROLLING
INTERESTS – The portion of equity and net earnings in consolidated
subsidiaries that is owned by others.
PERFORMANCE SHARE UNIT – An equity award that gives key
employees the right to earn a number of shares of common stock over an
incentive period based on how the company’s total shareholder return (TSR)
compares to the TSR of a representative peer group of companies.
PURCHASE – A business acquisition. The acquiring company records at its
cost the acquired assets less liabilities assumed. The reported income of an
acquiring company includes the operations of the acquired company from the
date of acquisition.
RESTRICTED STOCK – An award that gives key employees the right to
shares of the company’s stock, pursuant to a vesting schedule.
RETAINED EARNINGS – The earnings of the company not paid out as
dividends to shareholders.
STATEMENT OF CASH FLOWS – A financial statement that reflects cash
flows from operating, investing and financing activities, providing a
comprehensive view of changes in the company’s cash and cash equivalents.
STATEMENT OF COMPREHENSIVE INCOME – A financial statement
that reflects changes 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.
STATEMENT OF EQUITY – A financial statement that reflects changes in
the company’s common stock, retained earnings and other equity accounts.
STATEMENT OF INCOME – A financial statement that reflects the
company’s profit by measuring revenues and expenses.
STOCK-BASED COMPENSATION – The payment to employees for
services received with equity instruments such as restricted stock,
performance share units and stock options.
STOCK OPTION – An award that gives key employees the right to buy
shares of the company’s stock, pursuant to a vesting schedule, at the market
price of the stock on the date of the award.
89
Photo CredIts
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90
Cover Images
1: Scott Utterback, The Courier-Journal
2: Rob Schumacher, USA TODAY
3: Jim Hudelson, The Times
4: Holly McQueen, The Des Moines Register
5: Mary Frank, Asbury Park Press
6: Masako Watanabe, Pacific Daily News
7: Chris Bergin for Gannett
8: Trevor Jones, Coshocton Tribune
9: Cheryl Evans, The Arizona Republic
10: Debi Pittman Wilkey, The News-Press
11: Tim Dunn, Reno Gazette-Journal
12: Debi Pittman Wilkey, The News-Press
13: Val Horvath Davidson, The Times
14: Peter Ackerman, Asbury Park Press
15: Jae S. Lee, The Tennesean
16: Christopher Gannon, The Des Moines
Register
17: Holly McQueen, The Des Moines Register
18: Amanda Davidson, The Cincinnati Enquirer
19: Daniel Melograna, News Journal
20: Henrietta Wildsmith, The Times
21: Nick Oza, The Arizona Republic
22: John Fletcher, Asheville Citizen-Times
23: Tanya Breen, Asbury Park Press
24: Marilyn Newton, Reno Gazette-Journal
25: Henrietta Wildsmith, The Times
26: Erin Brethauer, Asheville Citizen-Times
27: Holly McQueen, The Des Moines Register
28: Thomas P. Costello, Asbury Park Press
Photo CredIts
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3
Pages 2-3 Images
1: Jarrad Henderson, Detroit Free Press
2: Joseph Fuqua II, The Cincinnati Enquirer
3: Suchat Pederson, The News Journal
4: Toby Jorrin for USA WEEKEND
5: Toby Jorrin for USA WEEKEND
6: Robbin Steed, WXIA-TV, Atlanta
7: Joseph Fuqua II, The Cincinnati Enquirer
8: Courtesy of the Detroit Free Press
Page 5 Images
1: Jack Kurtz, The Arizona Republic
2: Courtesy of KUSA-TV, Denver
3: Jason Miller for USA TODAY
4: Courtesy of USA TODAY
5: Courtesy of Detroit Free Press
6: Courtesy of KUSA-TV, Denver
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TABLE OF CONTENTS
2012 Financial Summary ..................... 1
Letter to Shareholders ........................ 2
Board of Directors ............................... 7
Company and Divisional Officers ........ 8
Photo Credits .................................... 90
Form 10-K
C O M PA N Y P R O F I L E
Gannett is a leading international media
and marketing solutions company, deliv-
ering best-in-class content and services
across an integrated, multi-platform
portfolio. It is committed to serving the
greater good of the nation and the com-
munities it serves.
It is Gannett’s vast portfolio of iconic
national brands, such as USA TODAY
and CareerBuilder, as well as its unique
local media organizations in more than
100 communities across the U.S., which
sets the company apart. Gannett provides
consumers with the information they
seek and connects them to their com-
munities of interest through multiple
platforms including web sites, mobile
and tablet products, print publications
and TV stations.
Gannett’s understanding of its
communities and its local market rela-
tionships, many of which have spanned
decades, gives the company a strong
advantage.
As a digital media leader, the com-
pany provides access to content on more
than 400 local mobile and tablet products
and leading applications for iPad, iPhone,
Kindle and Android. Through key acquisi-
tions and partnerships, Gannett continues
to accelerate its digital strategy.
Gannett also helps businesses grow
by providing marketing solutions that
reach and engage their customers across
the company’s diverse platforms. Gannett
Digital Marketing Services serves as a
one-stop shop for digital marketing
services to help tens of thousands of
small and medium-sized businesses use
digital technology to more effectively
reach their customers.
Gannett’s properties cover a wide
range of geographies, demographics and
content areas, which combine to form a
uniquely powerful and comprehensive
portfolio of offerings for consumers and
clients alike.
Gannett reaches 54.6 million unique
visitors monthly or about 24.7% of the
U.S. Internet audience via digital plat-
forms, including CareerBuilder.com, the
nation’s top human capital solutions site,
USATODAY.com, USA TODAY Sports
Digital Properties and more than 100
digital platforms affiliated with its local
media organizations across the country.
Gannett also provides its content through
82 daily U.S. publications, including
USA TODAY, a multi-platform news and
information media company and the
nation’s largest-selling daily print publi-
cation. The company publishes about
480 magazines and other non-dailies
including USA WEEKEND.
Likewise, Gannett subsidiary News-
quest is one of the United Kingdom’s
leading regional community news provid-
ers with 17 daily paid-for titles, more than
200 weekly print products, magazines
and trade publications, and a network of
web sites. More than 9 million unique
users access Newsquest’s network of
news web sites each month.
In addition, the company operates 23
television stations in 19 U.S. markets with
a total market reach of nearly 21 million
households, 18.1% of the U.S. popula-
tion. Each of these stations also operates
locally oriented digital platforms offering
news, entertainment and advertising
content. Through its Captivate subsidiary,
which operates video screens in elevators
of office buildings and select hotel lobbies
across North America, the company’s
broadcasting group delivers news, infor-
mation and advertising to a highly desir-
able demographic in key urban markets.
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SHAREHOLDER SERVICES
GANNETT STOCK
Gannett Co., Inc. shares are traded on the New York Stock Exchange with the symbol GCI.
The company’s transfer agent and registrar is Wells Fargo Bank, N.A. General inquiries and
requests for enrollment materials for the programs described below should be directed to
Wells Fargo Shareowner Services, P.O. Box 64854, St. Paul, MN 55164-0854 or by telephone at
1-800-778-3299 or at www.wellsfargo.com/contactshareownerservices.
DIVIDEND REINVESTMENT PLAN
The Dividend Reinvestment Plan (DRP) provides Gannett shareholders the opportunity to
purchase additional shares of the company’s common stock free of brokerage fees or service
charges through automatic reinvestment of dividends and optional cash payments. Cash
payments may range from a minimum of $10 to a maximum of $5,000 per month.
AUTOMATIC CASH INVESTMENT SERVICE FOR THE DRP
This service provides a convenient, no-cost method of having money automatically
withdrawn from your checking or savings account each month and invested in Gannett stock
through your DRP account.
THIS REPORT WAS WRITTEN
AND PRODUCED BY EMPLOYEES
OF GANNETT.
Vice President and Controller
Teresa S. Gendron
Assistant Controller
Cam McClelland
Corporate Consolidations Team
John Dalton
Dimeterice Ferguson
Suzanne Kuo
Lorraine Licayan
Mark Ramsey
Aisha Simpson
Eva Wrublesky
DIRECT DEPOSIT SERVICE
Gannett shareholders may have their quarterly dividends electronically credited to their
checking or savings accounts on the payment date at no additional cost.
Director/Corporate
Communications
Laura Dalton
ANNUAL MEETING
The annual meeting of shareholders will be held at 10 a.m. (E.T.) Tuesday, May 7, 2013, at
Gannett headquarters.
CORPORATE GOVERNANCE
We have posted on our web site (www.gannett.com) our principles of corporate governance,
ethics policy and the charters for the audit, transformation, nominating and public
responsibility and executive compensation committees of our board of directors, and we
intend to post updates to these corporate governance materials promptly if any changes
(including through any amendments or waivers of the ethics policy) are made. This site also
provides access to our annual report on Form 10-K, quarterly reports on Form 10-Q and
current reports on Form 8-K as filed with the SEC. Our chief executive officer and our chief
financial officer have delivered, and we have filed with our 2012 Form 10-K, all certifications
required by the rules of the SEC. Complete copies of our corporate governance materials and
our Form 10-K may be obtained by writing our Secretary at our corporate headquarters.
In accordance with the rules of the New York Stock Exchange, our chief executive officer,
has certified, without qualification, that such officer is not aware of any violation by Gannett
of the NYSE’s corporate governance listing standards.
FOR MORE INFORMATION
News and information about Gannett is available on our web site. Quarterly earnings infor-
mation will be available around the middle of April, July and October 2013. Shareholders
who wish to contact the company directly about their Gannett stock should call Shareholder
Services at Gannett headquarters, 703-854-6960.
Gannett Headquarters
7950 Jones Branch Drive
McLean, VA 22107
703-854-6000
Creative Director/Designer
Michael Abernethy
Printing
Action Printing, Fond du Lac, WI
PHOTO CREDITS:
Page 7: Directors’ photos by
Stacey Wolf, Gannett and
Gretchen Ortega. Martore by
Ralph Alswang.
Photo credits for the Cover and
Pages 2-5 can be found on
Page 90 of the 10-K.
Printed on recycled paper.
This report was printed using
soy-based inks. The entire report
contains 10% total recovered
fiber/all post-consumer waste.
20 12 A NN UA L RE P ORT
GANNETT CO., INC. • 7950 JONES BRANCH DR., MCLEAN, VA 22107 • WWW.GANNETT.COM
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