2013 ANNUAL REPORT
2013
GANNETT CO., INC.
7950 JONES BRANCH DR.,
MCLEAN, VA 22107
WWW.GANNETT.COM
ANNUAL
REPORT
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TABLE OF CONTENTS
2013 Financial Summary ..................... 1
Letter to Shareholders ........................ 2
Board of Directors ............................... 7
Company and Divisional Officers ........ 8
Photo Credits .................................... 88
Form 10-K
COMPANY
PROFILE
Gannett is an inter-
national media and
marketing solutions
company and one
of the largest, most
geographically
diverse local media
companies in the U.S.
Through its powerful network of broad-
cast, digital, mobile and print products,
the company informs and engages more
than 110 million people every month.
The company’s portfolio of trusted
brands offers marketers unmatched
local-to-national reach and customiz-
able, innovative marketing solutions
across any platform. As a digital media
leader, the company provides access to
outstanding content on many different
platforms and digital marketing services
to businesses that help them use digital
technology more effectively.
Gannett’s iconic national brands,
such as USA TODAY and CareerBuilder,
as well as its unique local brands serving
112 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 owns or services through
shared service agreements or other
similar agreements 43 television stations.
Excluding owner-operators, Gannett is
the No. 1 NBC affiliate group; No. 1 CBS
affiliate group; and the No. 4 ABC
affiliate group. These stations cover 30%
of the U.S. population in markets with
nearly 35 million households.
Following the acquisition of Belo
Corp. in December 2013, Gannett became
the largest independent TV station group
of major network affiliates in the top 25
U.S. markets, with a strong, diversified
portfolio. Each TV station also has a
robust digital presence, including mobile,
to reach consumers wherever they are.
Overall, Gannett reaches more than
65 million unique visitors monthly or
about 29 percent of the U.S. Internet
audience via digital platforms, including
CareerBuilder.com, USATODAY.com,
USA TODAY Sports Digital Properties
and digital platforms affiliated with its
local media organizations across the
country. USA TODAY is one of the most
popular news sites and the USA TODAY
app is a top news app with more than
19 million downloads to date across iPad,
iPhone, Android, Windows and Kindle
Fire. USA TODAY mobile traffic contin-
ues to grow as monthly visitors are now
approximately 24 million.
The company operates 82 U.S. daily
publications, including USA TODAY,
and 443 non-daily local publications in
30 states and Guam. USA TODAY ranks
No. 1 in the industry in total daily circula-
tion, according to the Alliance for
Audited Media.
Affiliated digital products of the
company’s U.S. publications, including
USA TODAY, reach more than 39 million
unique visitors monthly. The print prod-
ucts reach more than 10 million readers
every weekday and more than 12 million
readers every Sunday. Together they
provide critical news and information
from neighborhoods, the nation and the
globe.
Gannett’s deeply rooted understand-
ing of its communities and its local
market relationships, many of which
have spanned decades, provide access
to content on more than 500 local mobile
and tablet products and leading appli-
cations for iPad, iPhone, Kindle and
Android. Through key acquisitions 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.
G/O Digital, Gannett’s digital marketing
services organization, is a full-service
media and marketing solutions company
with a suite of best-in-class digital prod-
ucts. G/O Digital offers a one-stop shop of
localized marketing solutions to national
and small to medium-sized businesses.
G/O Digital comprises Gannett’s full suite
of digital marketing services, including
marketing leaders Shoplocal, Key Ring,
Deal Chicken and BLiNQ - and puts them
to work in an integrated, complementary
way to transform local marketing and
connect advertisers with local consumers.
In addition, Gannett subsidiary
Newsquest 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 15 million unique
users access Newsquest’s network of
news web sites each month.
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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.
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.
ANNUAL MEETING
The annual meeting of shareholders will be held at 10 a.m. (E.T.), Thursday, May 1, 2014,
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 2013 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 2014. 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
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
Ben Fernando
Varun Kanwar
Suzanne Kuo
Lorraine Licayan
Mark Ramsey
Aisha Simpson
Eva Wrublesky
Director/Corporate
Communications
Laura Dalton
Creative Director/Designer
Michael Abernethy
Printing
Action Printing, Fond du Lac, WI
PHOTO CREDITS:
Page 7: Directors’ photos by
Stacey Wolf and Gretchen Ortega,
Gannett. Magner by Todd Plitt.
Photo credits for the Cover can
be found on Page 88 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.
FINANCIAL SUMMARY
Operating revenues, in millions
In thousands, except per share amounts
11 $5240
12 $5353
13 $5161
Net income attributable to Gannett Co., Inc. before asset
impairment and other special items, in millions
11
12
13
$518 (1)
$551 (1)
$473 (1)
Net income per diluted share before asset impairment and other
special items
11
12
13
$2.13 (1)
$2.33 (1)
$2.02 (1)
Operating revenues ..........................
Operating income ...........................
Net income attributable to
Gannett Co., Inc. ..............................
Net income per share – diluted ......
Net income attributable to
Gannett Co., Inc. before asset
impairment and other special
items (1) ...........................................
Net income per diluted share
before asset impairment and
other charges (1) ..............................
2013
2012
$ 5,161,362 $ 5,353,197
$ 739,243 $ 789,755
Change
(4%)
(6%)
$ 388,680 $ 424,280
1.79
$
1.66 $
(8%)
(7%)
$ 473,445 $ 551,061
(14%)
$
2.02 $
2.33
(13%)
(33%)
563%
159%
45%
20%
15%
—
$ 470,491 $ 697,994
$ 916,293 $ 138,204
$ 3,707,010 $ 1,432,100
$ 9,240,706 $ 6,379,886
$ 110,407 $
91,874
$ 2,693,098 $ 2,350,614
0.80
$
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 2013 exclude pre-tax asset impairment and other special items
of $171 million ($85 million after tax or $.36 per share). 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). These charges are more fully discussed in the
Management’s Discussion and Analysis of Financial Condition and Results of
Operations and the Consolidated Financial Statement sections of this report.
0.80 $
234,189
236,690
(1%)
(2) See page 75 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.
ANNUAL 1 REPORT
LETTER TO SHAREHOLDERS
Dear Fellow Shareholders:
strategic initiatives and investments
a non-GAAP basis were 2 percent
we launched in early 2012.
lower reflecting continued efficiency
2013: A WATERSHED YEAR
An amazing year of accomplish-
efforts. Operating cash flow totaled
2013 was a watershed year for
ments reflect our employees’ out-
$1.04 billion in 2013. On a non-GAAP
Gannett – a turning point in our
standing efforts. We’ve made huge
basis, operating income in 2013
107 year history, and a year in
strides in stabilizing our publishing
was $855.4 million and net income
which we took several steps toward
business and built out innovative
attributable to Gannett totaled
permanently changing the com-
new digital offerings that better meet
$473.4 million. Earnings per diluted
position of the Gannett portfolio.
the needs of our business customers
share on the same basis were $2.02.
From our acquisition of Belo Corp.
and consumers. In addition, as a
Our many different efforts to
and the expansion of our digital
result of our acquisition of Belo, we
strategically reshape our company
marketing services business, to the
have solidified our position as THE
are being noticed. Our total share-
growing success of our All Access
largest local media company in the
holder return has substantially
Content Subscription Model and
U.S., employing the greatest number
outpaced the S&P 500 over the past
the introduction of USA TODAY
of journalists with deep roots in
two years. In fact, Gannett’s total
content into our U.S. Community
112 communities nationwide.
shareholder return was 70% in 2013
Publishing media operations, we
We are very pleased with our
vs. 32% for the S&P 500. And since
have fundamentally changed how
overall 2013 results, despite some
the beginning of 2012, Gannett’s
we interact with our audiences and
challenging comparisons to 2012.
total shareholder return was 140%
our advertisers. This has enabled us
Total operating revenues for
vs. 54% for the S&P 500. In 2013, we
to compete more effectively in the
the full year were $5.16 billion, a
returned $183 million directly to you
constantly-evolving – but decidedly
decline of 3.6 percent compared
as dividends. We also repurchased
more digital – media landscape.
to 2012, which was primarily due
4.9 million shares for $117 million as
While continuing to stay true to
to the relative absence of a record
we believe Gannett continues to be a
our purpose, which is to serve the
$150 million in political advertising
great investment.
greater good of our nation and the
and $37 million associated with the
Many of the transformational
communities we serve, we raised the
Summer Olympic Games generated
initiatives we launched in 2012
bar on operational excellence, and
during 2012 and an extra week.
gained significant traction through-
at the same time, kept a laser-sharp
Excluding the net impact of both
out the year, demonstrating terrific
focus on the successful
Olympic and 2012 political spending
consumer and business customer
execution of the
– overall company revenues for 2013
appeal. But even more important-
were actually up compared to 2012
ly, this progress confirms that our
on a comparable week basis.
strategy to leverage our deep local
Operating expenses in 2013 on
connections and strong trusted
ANNUAL 2 REPORT
U.S. Community
Publishing and USA TODAY
have partnered to launch an innovative
content model that will add USA TODAY content
inside local U.S. Community Publishing news products in
our top 35 markets in the first quarter of 2014.
The effort takes advantage of Gannett’s unique ability to generate and
distribute national content that our readers desire, while enhancing our
ever-important local hometown coverage that is essential to their daily lives.
U.S. COMMUNITY PUBLISHING AND
USA TODAY TOGETHER
We are creating stronger, higher-value local products and extending the
reach of our great national USA TODAY brand. On average, the
partnership is expected to add as many as 70 pages of content per
week in these markets’ print editions and e-Editions.
This flexibility is something that sets Gannett apart from its
peers and will ensure that we continue to provide all of our
audiences with the highest quality and most useful
content via the platform or medium of
their choice.
brands for success in the digital age
the shifts we are seeing in the U.S. –
Content Subscription Model, this
is working.
although there are some nuances.
new way of interacting with our
The rationale behind the develop-
To gain a better understanding of
audiences has given us a more
ment of our All Access Content
how we can best reposition our
complete understanding of what
Subscription Model was to better
publications for our U.K. audiences,
today’s audiences value most. These
align our publishing offerings with
during the year we completed a set
insights are of tremendous value,
changing media consumption habits
of research and piloting initiatives.
and will serve as a springboard for
and preferences among our audienc-
The response was overwhelming:
the development of new and inno-
es. Media consumption has changed
Readers valued engaging content –
vative offerings that provide our au-
a great deal in just the last few years,
so much so that they were willing
diences with enhanced content and
and we have no doubt that it will
to pay more to ensure they receive
will ensure that we remain in step
continue to evolve in the foreseeable
the freshest, most useful content
with the changing needs and prefer-
future. We are positioning Gannett
available on the market.
ences of our readers and advertisers.
to seize the many opportunities
One example of how we are lever-
presented to us by new technologies
DEEPENING COMMUNITY ROOTS
aging these newly uncovered inroads
and shifting consumer trends.
AS WE GROW
to our audiences is an exciting new
Changes in the U.K. media
Beyond the tangible financial ben-
program that we piloted in four
landscape are largely in line with
efits associated with our All Access
local publishing markets starting in
ANNUAL 3 REPORT
Ganne t t ’ s
loca l s i te s – whe the r pub l i sh ing
o r b roadca s t – a l ready have g reat b rand
recogn i t ion at the loca l leve l w i th con sume r s and
adve r t i se r s and deep, r ich , t ru s ted re lat ion sh ip s w i th
ten s o f thou sand s o f bu s ine s se s . G /O D ig i ta l , ou r d ig i ta l
m a r ke t i n g s e r v i c e s g ro u p, c o n t i n u e s t o b u i l d u p o n t h o s e
r e l at i o n s h i p s a n d e x p a n d i t s f o o t p r i n t a c ro s s t h e c o u n t ry.
G /O D IG ITAL ANSWERS MARKET NEEDS
FOR D IG ITAL SOLUT IONS
I t ha s the un ique ab i l i ty to ge t re su l t s th rough an in teg rated su i te
o f loca l and nat iona l d ig i ta l so lu t ion s that inc lude eve ry th ing
f rom da i ly dea l s , SEO, and soc ia l med ia ma rke t ing to mob i le
con sume r loya l ty p rog ram s . In fac t , G /O D ig i ta l wa s
named to Goog le Adwo rd s™ P rem ie r SMB Pa r tne r
p rog ram , a se lec t p rog ram o f fe red to a
sma l l numbe r o f Goog le pa r tne r s
wo r ldw ide .
USA TODAY: THE NUMBER ONE
DAILY NEWSPAPER IN THE U.S.
This past October, USA TODAY
regained its position as the No. 1
newspaper in total daily circulation
in the U.S. for the first time since
2009, according to the Alliance
for Audited Media (AAM). Total
USA TODAY daily circulation
grew to 2,862,229 for the period
ending September 30, 2013. Total
circulation figures include daily
print, mobile and tablet usage
as well as the e-Edition of the
October 2013 and that we are rolling
Publishing or Broadcast communi-
newspaper.
out to our top 35 publishing markets
ties can be used wherever there is a
This milestone was the result
in the first quarter of 2014.
demand for it across our vast network.
of continued digital growth at our
With this new program, U.S.
Readers tell us that the addition
flagship national newspaper, which
Community Publishing operations
of content from the nation’s No. 1
has become part of the very fabric
are enhancing their ever-important
newspaper delivers terrific subscrib-
of American life in its 31 years of
hometown coverage while including
er value, and it means that reporters
existence. Total digital non-replica
a new section in the print editions
and editors in our local publishing
circulation of 1,484,078, includes
and e-Editions featuring the best of
markets have more time to focus
users of the USA TODAY tablet
USA TODAY’s News, Money and
on delivering more of what they do
and mobile phone apps, as well
Life sections. USA TODAY Sports
so well – deep, high-quality, local
as increased use of The Point –
news is included in the local sports
coverage.
USA TODAY’s growing digital
sections and on Sundays, a USA
The new program, which has been
solution for travelers. The upward
TODAY Life section complements
enthusiastically embraced by our
trajectory of USA TODAY’s digital
the local feature coverage.
subscribers and advertisers, and by
growth matches the shift in habits
This enables us to leverage our
our reporters and editors, provides
of consumers wanting their news
unparalleled national content and
local consumers with a significantly
on-the-go and reinforces the fact
scale it locally. Likewise, we can also
enhanced news product, and is a per-
that Gannett’s strategy to seize the
scale local content nationally – break-
fect example of what differentiates us
opportunities born out of the chang-
ing news covered in any of our local
from other media companies.
ing media landscape is succeeding.
ANNUAL 4 REPORT
G/O DIGITAL SERVES CONSTANTLY
Broadcast Super Group. It nearly
through each of these initiatives:
EVOLVING MARKETING NEEDS
doubled our Broadcast portfolio.
an emphasis on local. G/O Digital
Sharing our rich content across
An overarching component of
enables advertisers – particularly
multiple platforms and businesses
our ongoing transformation strategy
small and medium-sized businesses
is just one area in which Gannett
is diversification – which Belo
– to extend their reach and connect
has differentiated itself. We are also
delivered on a number of fronts:
with local consumers across multiple
making major investments in our
• Financial Diversification –
platforms, including social media.
digital marketing services business,
Our combination with Belo
And our U.S. Community Publishing
which we recently rebranded as
shifts our business mix mean-
– USA TODAY partnership ensures
G/O Digital. Our G/O Digital teams
ingfully; today, Broadcast – with
that our readers get the most in-depth
successfully work with clients to
strong margins historically –
local reporting possible, in addition
develop and execute customized
is projected to contribute more
to the national news that keeps them
multifaceted programs to solve their
than half of total company
on top of what’s happening outside
unique and continually evolving
EBITDA in 2014.
of their hometowns.
digital marketing needs in a way
• Geographic Diversification –
Our focus on all things local is
that is unparalleled in the market-
Belo added top performing
by design, and is another key
place. It comprises our full suite
stations in 12 new markets
component of our overall strategy.
of digital marketing solutions such
– many of which are in high-
People from all walks of life are
as multichannel marketing services,
growth geographic regions like
looking for ways to manage and
loyalty programs, social media
Texas and the Pacific Northwest.
effectively prioritize an ever-grow-
marketing and daily deals, and puts
• Network Diversification –
ing volume of digital news and
them to work in an integrated com-
The addition of Belo’s stations
information. This has resulted in a
plementary way to transform local
catapults Gannett to the #1 CBS
significantly increased emphasis on
marketing and connect advertisers
affiliate group, #4 ABC affiliate
hyper-local solutions.
with local consumers.
group, and widens our lead as
Local media connects people
TRANSFORMATIVE BELO
ACQUISITION MEANINGFULLY
the #1 NBC affiliate group,
with their communities by providing
excluding owner-operators.
them with the highly relevant
information that is critical to their
ACCELERATES OUR STRATEGY
DIGITAL AND SOCIAL MEDIA
day-to-day lives – information that
Gannett’s acquisition of Belo, which
ARE MAKING LOCAL
they will not find with larger media
closed on December 23, 2013, creat-
MORE RELEVANT THAN EVER
outlets. It also enables advertisers to
ed the largest independent station
While much was accomplished
use the specific makeup and subtle
group of major network affiliates
in 2013 across all of our business
nuances of a given community or
in the top 25 markets – a true
segments, a common thread runs
demographic category to make
ANNUAL 5 REPORT
#1
meaningful, relevant connections
As we embark on our 108th year
As we continue to adapt to the
that can go a long way toward
in business, there are many reasons
changing world around us, we
strengthening awareness of and
to be optimistic about what lies
remain passionate about helping to
interest in their businesses.
ahead for Gannett.
keep America’s communities strong
We tailored the investments we
• The integration of Belo is well
through our community leadership,
made this year – and those we are
underway, and the addition of
such as spearheading local food
planning for the future – toward the
its stations nearly doubles our
drives and the nationwide Make A
heart of these consumer patterns,
scale and shifts our business mix
Difference Day, and through our
and we are already seeing positive
toward higher-growth, higher
deep commitment to journalistic
impact to our top and bottom line.
margin revenue sources.
integrity and excellence. Millions
• We were extremely well
of consumers rely on us for the
2014 AND BEYOND
positioned to benefit from the
news and information vital to their
We are pleased with the remarkable
increased advertising demand
daily lives and tens of thousands of
progress we have made since we
associated with the Winter
advertisers count on our services
first announced our transformation
Olympics and are poised to see
to support their businesses. We are
strategy in early 2012. Our strategy
significant advertising sales
incredibly proud to play that role.
is built on the unique strengths that
related to 2014 political elections.
It is something that we intend to
set Gannett apart from other media
• But most importantly, we have
do for decades to come, and we are
companies: our hometown advan-
reshaped our business mix and
confident that – with your continued
tage, our brand advantage, and our
transformed the way in which
support – we will succeed.
commitment to sound financial
we serve and interact with our
stewardship that provides us with
consumers and advertisers to
the flexibility to pursue promising
stay in step with the changes we
new opportunities while continually
have seen – and anticipate that
delivering attractive value to our
we will see – in the evolving
shareholders.
media landscape.
Marjorie Magner,
Chairman of the Board
Gracia Martore,
President and Chief Executive Officer
ANNUAL 6 REPORT
BOARD OF DIRECTORS
MAGNER
MCCUNE
MARTORE
MCFARLAND
CODY
NESS
ELIAS
PROPHET
LOUIS
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.
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 64. (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; Associated Press.
Age 62. (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 67. (a,c)
HOWARD D. ELIAS
President and chief operating officer, EMC
Global Enterprise Services. Formerly:
President and chief operating officer,
EMC Information Infrastructure and
Cloud Services, Executive Office of the
Chairman. Age 56. (b,d)
JOHN JEFFRY LOUIS
Co-founder and former chairman, Parson
Capital Corporation (1992-2007). Other
directorships: The Olayan Group; S. C.
Johnson & Son, Inc.; Johnson Financial
Group, Inc.; and chairman of the U.S./ U.K.
Fulbright Commission. Age 51. (a,b)
SCOTT K. MCCUNE
CEO, McCune Sports and Entertainment
Ventures, a consulting firm focused on
the business of sports and entertainment.
Formerly: Vice president, Global Partner-
ships and Experiential Marketing, The
Coca-Cola Company. Age 57. (b,e)
DUNCAN M. MCFARLAND
Retired chairman and chief executive
officer, Wellington Management Company,
LLP. Other directorships: The Asia Pacific
Fund, Inc., a closed-end registered invest-
ment company traded on the New York
Stock Exchange. Age 70. (a,c,d)
SUSAN NESS
Senior fellow, Center for Transatlantic
Relations at Johns Hopkins University’s
School of Advanced International Studies
(SAIS), and Principal, Susan Ness Strate-
gies, a communications policy consulting
firm. Other directorships and trusteeships:
J. William Fulbright Foreign Scholarship
Board; Vital Voices Global Partnership;
Committee for Economic Development.
Age 65. (e)
TONY PROPHET
Senior vice president, Operations Printing
and Personal Systems (PPS), HewlettPack-
ard Company. Formerly: Senior vice
president, Supply Operations, Personal
Systems Group (2006-2012). Age 55.
NEAL SHAPIRO
President and chief executive officer,
WNET.org. Other directorships and trust-
eeships: Public Television Major Market
Group (MMG); Investigative Reporters
and Editors (IRE); Investigative News Net-
work (INN); the Board of Trustees, Tufts
University and the alumni board of Com-
munications and Media Studies program,
Tufts University. Age 55. (b,e)
ANNUAL 7 REPORT
COMPANY AND DIVISIONAL OFFICERS
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 Pub-
lishing 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 various
local operating units enjoy substantial
autonomy in local policy, operational details,
news content and political endorsements.
Gannett’s headquarters staff includes
specialists who provide advice and 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 45.•
Lynn Beall, Executive Vice President,
Gannett Broadcasting, and President
and General Manager, KSDK-TV,
St. Louis, MO. Age 53.u
William A. Behan, Senior Vice President,
Labor Relations. Age 55.•
Tom R. Cox, Vice President, Corporate
Development. Age 36.
Peter Diaz, Executive Vice President,
Gannett Broadcasting. Age 57.u
Robert J. Dickey, President, U.S. Com-
munity Publishing. Age 56.n•
Teresa S. Gendron, Vice President and
Controller. Age 44.
Victoria D. Harker, Chief Financial
Officer. Age 49.•
Michael A. Hart, Vice President and
Treasurer. Age 68.
Larry S. Kramer, President and Publish-
er, USA TODAY. Age 63.•
Kevin E. Lord, Senior Vice President
and Chief Human Resources Officer.
Age 51.•
David T. Lougee, President, Gannett
Broadcasting. Age 55.u•
Todd A. Mayman, Senior Vice President,
General Counsel and Secretary. Age 54.•
David A. Payne, Senior Vice President
and Chief Digital Officer. Age 51.•
Barbara W. Wall, Vice President and
Senior Associate General Counsel.
Age 59.
John A. Williams, President, Gannett
Digital Ventures. Age 63.•
Jane Ann Wimbush, Vice President,
Internal Audit. Age 63.
• Member of the Gannett Leadership Team.
n Member of the U. S. Community Publishing Operating Committee.
u Member of the Gannett Broadcasting Operating Committee.
ANNUAL 8 REPORT
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 29, 2013
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-6961
GANNETT CO., INC.
(Exact name of registrant as specified in its charter)
Delaware
(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 a 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 30, 2013, was $5,589,908,194.
The registrant has no non-voting common equity.
As of February 2, 2014, 227,365,020 shares of the registrant’s Common Stock were outstanding.
The definitive proxy statement relating to the registrant’s Annual Meeting of Shareholders to be held on May 1, 2014,
is incorporated by reference in Part III to the extent described therein.
DOCUMENTS INCORPORATED BY REFERENCE
Page
3
20
21
22
22
22
23
24
24
41
42
78
78
80
80
80
80
80
INDEX TO GANNETT CO., INC.
2013 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
80
2
PART I
ITEM 1. BUSINESS
Overview
Gannett is an international media and marketing solutions company
and one of the largest, most geographically diverse local content
providers in the U.S. Through a vast network of broadcast, digital,
mobile and print products, it informs and engages more than 110
million people every month. Gannett’s portfolio of trusted brands
offers marketers unmatched local-to-national reach and
customizable, innovative marketing solutions. As a digital media
leader, the company provides access to content on many different
platforms; digital marketing services to businesses to help them
more effectively use digital technology to reach their sales goals; and
Internet-based human resource solutions.
Gannett’s easily recognizable national brands, such as
USA TODAY and CareerBuilder, as well as its rich portfolio of
unique local brands serving 112 communities, set the company apart
and provide a strong advantage. Gannett’s properties cover a wide
range of geographies, demographics and content areas, which
combine to form a uniquely powerful and comprehensive portfolio
of offerings for consumers and commercial clients alike.
Gannett’s connection to, and understanding of, its communities
and its local market relationships – many of which have spanned
decades – provide the company with unparalleled advantages.
Gannett provides consumers with the information and
entertainment they seek and connects them to their communities of
interest through multiple platforms including television stations, web
sites, mobile and tablet products and print publications. Gannett
helps businesses grow by providing marketing solutions that reach
and engage their customers across the company’s diverse platforms.
Gannett is organized along three segments: Broadcasting,
Publishing and Digital. Within its Broadcasting Segment, Gannett
owns or services (through shared service agreements or other similar
agreements) 43 television stations. Excluding owner-operators,
following its acquisition of Belo Corp. in December 2013, Gannett is
the No. 1 NBC affiliate group, No. 1 CBS affiliate group, and the
No. 4 ABC affiliate group. These stations serve 30% of the U.S.
population in markets with nearly 35 million households.
Gannett is the largest independent station group of major network
affiliates in the top 25 markets, with a uniquely diversified portfolio.
Each television station also has a robust digital presence, including
mobile, to reach consumers wherever they are.
Within its Publishing Segment, Gannett provides content
through 82 local U.S. daily publications, including USA TODAY, a
multi-platform news and information media company, as well as
more than 400 non-daily local publications in 30 states and Guam.
USA TODAY ranks No. 1 in the industry in combined print and
digital circulation, according to the Alliance for Audited Media. In
addition, Gannett subsidiary Newsquest is one of the United
Kingdom’s leading regional community news providers, providing
its markets with 17 daily paid-for titles, more than 200 weekly print
products, magazines and trade publications. Newsquest is also a
digital leader in the U.K. where its network of web sites attracted
more than 15 million unique users in December 2013.
Gannett also owns and operates a number of stand-alone digital
subsidiaries, which are included in the company’s Digital Segment.
The largest of these include CareerBuilder, Shoplocal and PointRoll.
CareerBuilder is a global leader in human capital solutions,
providing everything from labor market intelligence to talent
management software and other recruitment solutions, with a
presence in more than 60 markets worldwide and a focus on
technology solutions and niche sites. CareerBuilder.com is the
largest online job site in the U.S., measured both by traffic and
revenue. Having served the market for almost twenty years,
CareerBuilder is now benefiting from a history of building customer
relationships, having gained market share for each of the last nine
years.
The company generates revenues within its Broadcasting
Segment through advertising, fees paid for retransmission of the
company’s television signals on satellite and cable networks, and
payments for other services, such as the production of advertising
content. Advertising includes local advertising focused on the
immediate geographic area of the stations, national advertising, and
advertising on the stations’ web, tablet and mobile products. The
company generates revenue within its Publishing Segment primarily
through advertising and subscriptions to Gannett’s print and digital
publications. Its advertising departments sell retail, classified and
national advertising across multiple platforms including print, web
sites, mobile, tablet and other specialty publications. CareerBuilder,
the largest company in the Digital Segment, generates revenues both
through its own sales force by providing talent and compensation
intelligence, human resource related consulting services and
recruitment solutions and through sales of employment advertising
placed by affiliated media organizations.
Gannett has made substantial progress in its digital
transformation, which has fundamentally changed the way the
company interacts with its audiences and advertisers. In step with
changes in the media landscape, Gannett has used new technology to
meet evolving consumer demands and create valuable new revenue
streams. The company generates its digital revenues through online
content subscription fees and advertising on its various digital
platforms including more than 120 domestic web sites affiliated with
its publishing and television markets, USA TODAY, Gannett
Government Media and Gannett Healthcare Group. In December
2013, Gannett’s consolidated domestic Internet audience share
increased nearly 20% from December of 2012 to over 65 million
unique visitors reaching more than 29% of the Internet audience,
according to comScore Media Metrix. USATODAY.com is one of
the most popular news sites and the USA TODAY app is a top news
app with more than 19 million downloads to date across iPad,
iPhone, Android, Windows and Kindle Fire. USA TODAY mobile
traffic continues to accelerate rapidly with monthly visitors
increasing 89% in December from a year ago to approximately 24
million.
Most of the company’s digital offerings are deeply integrated
with publishing or broadcasting product offerings, supported by
shared infrastructure. As a result, many digital offerings are reported
within the operating results of its Publishing and Broadcasting
Segments. In addition, as more fully described under “Strategy,”
and “Strategic Acquisitions,” Gannett has a number of initiatives
underway supporting its digital transformation.
3
Strategy
2013 was a highly transformative year at Gannett as the company
made major strides toward the achievement of its transformation
goals, while remaining focused on the successful execution of its
strategic growth initiatives, ensuring Gannett continues to evolve
quickly with the ever-changing media landscape.
The company follows an ambitious business strategy integrated
with a comprehensive capital allocation plan designed to leverage
its strong brands, deep community ties, and financial strength. The
strategy is centered on three themes:
• Enhance local core news and marketing operations to make local
franchises stronger and ties with the communities even deeper,
thereby growing Publishing and higher growth, higher margin
Broadcasting and Digital businesses;
• Leverage hometown and brand advantages to accelerate growth
by entering into or expanding high potential businesses; and
• Optimize assets on an ongoing basis to maintain a strong
financial profile to improve efficiency and effectiveness, and
driving increased shareholder value.
Gannett’s portfolio was permanently changed through its
acquisition of Belo Corp. in December 2013. This acquisition
positions Gannett as a more diversified, higher-margin, higher
growth multimedia business, adding deep connections in new
markets while providing the company with strong financial,
geographic and network diversification. As a result, Broadcasting
now represents about 50% of the company’s overall cash flow and
positions Gannett for sustainable growth and success in the digital
age.
In connection with implementing its growth strategy in 2012,
Gannett continued to pursue, and made significant progress on, a
number of specific strategic initiatives which are integrated across
all three of its business segments: Broadcasting, Publishing and
Digital. Progress on these strategic initiatives, capital allocation
plan, and strategic acquisitions and dispositions is highlighted
below.
All Access Content Subscription Model: U.S. Community
Publishing (USCP) continued to successfully enhance its All Access
Content Subscription Model for its local media across the U.S. All
subscriptions include full web, mobile, e-Edition and tablet access,
with subscription prices that vary according to the frequency of
print home delivery. Single-copy print editions continue to be sold
at retail outlets. Since the implementation of the model, the
company has achieved more than $100 million in operating income
benefits. In 2013, USCP reported more than 1.6 million digitally
activated subscribers, and USCP is making strides in acquiring
digital-only subscribers as well. In some markets, particularly those
with younger demographics, digital-only subscribers are
approaching 10% of all accounts – and growing. In 2011, prior to
the launch of the All Access Model, circulation revenues accounted
for 29% of the division’s total revenue. In 2013, after the annual
cycling of the launches, circulation revenues accounted for 35% of
USCP total revenue.
Learnings from the All Access Content Subscription Model led to
the creation of a USCP and USA TODAY pilot project at four local
Gannett media organizations. The project provided local consumers
with an enhanced news product that leverages Gannett’s unique
ability to generate and distribute national content while enhancing
its ever-important local hometown coverage. In addition to the local
units enhancing their publications with more unique and robust local
content, a local edition of USA TODAY is being included inside the
print edition and e-Edition. The added USA TODAY edition
includes national News, Money and lifestyle content seven days a
week. Also, USA TODAY’s Sports coverage is integrated into local
sports sections and a Life edition is included every Sunday. On
average, the integration is expected to result in approximately 70
new pages of content per week in print and e-Editions. Following
the success of the initiative in the pilot markets, the company will
roll out the project to an additional 31 local Gannett daily
publications across the country in the first quarter of 2014.
Digital Relaunch & Mobile: The Digital Relaunch initiative
focused on the deployment and continued enhancement of the
company’s new content management, publishing and integration
technology. The launch and roll out of the Gannett Digital platform
helped drive editorial and advertising innovation in new smartphone
and tablet applications and on desktop sites. Digital teams launched
hundreds of enhanced digital products, and migrated toward a
unified and streamlined production, programming and distribution
system. A new content management system provides the connective
tissue for all new products, enabling sharing of digital content
company-wide, seamless live video programming, breaking news
alerts and high-end creation and presentation of new, front-end
storytelling designs. Major core product launches and back-end
advertising product solutions allowed the redesigned and higher
performing services to deploy across dozens of broadcasting and
community publishing properties. The new products led to
significantly increased user reach and digital news and information
engagement. Unique visitors rose 13% year-over-year across
divisions, according to comScore Media Metrix. By the end of
2013, Gannett was ranked in the top five for the News and
Information category, up from the company’s No. 6 ranking in 2012.
In addition, as consumer consumption of video rapidly grows,
Gannett is well positioned to expand its video-focused approach to
delivering news and information. In 2013, the total number of video
plays at Gannett increased 95% over the year earlier, to 485 million
video plays across the company’s network of media properties.
Helping to expand that capability is Gannett’s Video Production
Center in Atlanta, which hosts, creates, collects, curates and
distributes video from Gannett’s many news organizations and then
disseminates that video across the company’s network.
USA TODAY Sports Media Group: USA TODAY Sports Media
Group covers sports from the local high school level through
college and professional teams and continues to build upon
USA TODAY’s 30-year relationship with American sports fans. Its
goal is to be the leading sports content provider by leveraging its
national and local content, investing in original content, and
acquiring additional distribution and content. In 2013, USA TODAY
Sports Media Group continued to build new digital products and re-
launch existing digital sports products, and maintain its place as one
of the nation’s top five digital sports destinations with over 33
million unique visitors each month. The efforts below resulted in a
24% increase in comScore cross platform unique visitor traffic year
over year, with significant mobile audience growth of 81% versus
2012. Group highlights included:
• Launching “For The Win” (ftw.usatoday.com), the first
mainstream sports media property focused exclusively on
“social news,” and The Q (q.usatoday.com), a platform that
delivers sports news to fans through curated analysis.
• Re-launching growth sports sites The Big Lead
(www.thebiglead.com), a fast-growing and highly social media
property where breaking sports news and commentary combine
with pop culture, Hoopshype (www.hoopshype.com), a popular
destination for NBA breaking news, and MMA Junkie
(www.mmajunkie.com) a popular mixed martial arts site.
4
• USA TODAY High School Sports re-launched 39 local high
Key Ring launched a new version of its mobile application that
school media sites across Gannett’s local properties, featuring
video, text, photo, and social media capabilities.
• USA TODAY Sports Images became the official photo partner
of Major League Soccer (MLS) and its business and marketing
subsidiary, Soccer United Marketing (SUM), as part of a multi-
year agreement.
• Expanded its Super Bowl ad-rating platform Ad Meter to The
Year in Sports where fans vote in categories like Best Sports
Marketing Campaign and Best Athlete Endorsement Ad.
USA TODAY Travel Media Group: The USA TODAY Travel
Media Group expanded its focus beyond business travelers to all
consumers in 2013. One way it expanded to a broader consumer
audience was by launching five “Experience Travel” multiplatform
products. The “Experience Travel” products help travelers make the
most of their trip by giving them planning tools and information
personalized to fit their lifestyle. The Experience Travel sites also
offer interactive community-oriented functionality enabling readers
to comment and share, and other features. The Travel Media Group
also expanded its hotel relationship with The Point, a guest-facing
digital news, information, travel utility and entertainment platform.
The Point is paired with a hotel’s WiFi network as a means to
provide real-time information and services to guests. In addition, the
Travel Media Group further leveraged its 10Best travel media brand
to more broadly include sports- and entertainment-themed content.
G/O Digital (Digital Marketing Services): Gannett launched a
new brand, G/O Digital, for its digital marketing services
organization. This new branding signals Gannett’s evolution as a
full-service media and marketing company with a suite of best in
class digital products. G/O Digital offers a one-stop shop of
localized marketing solutions to national and small to medium-sized
businesses. G/O Digital comprises Gannett’s full suite of digital
marketing services, including marketing leaders Shoplocal, Key
Ring, Deal Chicken and BLiNQ - and puts them to work in an
integrated, complementary way to transform local marketing and
connect advertisers with local consumers.
The market need for these integrated services was validated by
the tangible results achieved in 2013. For example, Staples charged
Gannett with creating a custom marketing campaign that increased
in-store foot traffic and sales in just 12 weeks. G/O Digital provided
a cost-efficient, turnkey solution that provided targeted messaging
to consumers, helping Staples exceed its ambitious sales goals.
G/O Digital saw strong revenue traction from small to medium-
sized business (SMB) customers with over 160% year-over-year
growth driven by the strong partnership with U.S. Community
Publishing and Broadcasting sales forces. Reflecting the deep
commitment and expertise G/O Digital provides to its small and
medium-sized clients, G/O Digital was named to Google
Adwords™ Premier SMB Partner program, a select program offered
to a small number of Google partners worldwide. G/O Digital also
integrated BLiNQ and Key Ring offerings with the overall G/O
Digital business.
BLiNQ Media won Facebook’s Preferred Marketing Developer
Innovation award in 2013 for its LocalLiFT offering – an innovative
social local product for retailers and brands that combines BLiNQ’s
best-in-class social media advertising capabilities with Shoplocal’s
unique content. This reinforces G/O Digital’s strategy to
differentiate BLiNQ Media as “leader in local social marketing”
with unique local solutions by leveraging Gannett assets.
expands Key Ring functionality from “Loyalty” to “Shopping
Utility” and includes new functionality such as shopping lists,
weekly sales listings for all retailers in ZIP code, and expanded
coupon offers. This new functionality leverages content from
Shoplocal, Deal Chicken and Clipper.
Gannett Publishing Services: In 2013, Gannett Publishing
Services (GPS) completed its second year of operations as the
centralized circulation, ad production, print and packaging
operations, and consumer sales and service functions for all of
Gannett’s domestic publishing operations. GPS provides printing
services in 39 U.S. locations. In addition to providing an efficient,
cost-effective print platform, this allows Gannett publishers to focus
on strengthening the core elements of their local business - which
are providing valued news and information, building advertising
sales and expanding their strong community ties. GPS continues to
generate new revenue opportunities by leveraging its existing assets
in third-party ad production, printing and packaging services, and
distribution services as an integrated nationwide business.
During 2013, GPS reduced annualized distribution costs,
production costs and customer call center costs by over $30 million
as a result of automation and other efficiency efforts.
Sourcing: The Sourcing initiative focuses on further leveraging
company-wide spending in key procurement categories and
driving areas of opportunity for savings from contract
renegotiations, increased efficiencies of operational shifts, and
policy and system enhancements to fully leverage the size and scale
of the company for savings across all divisions. The goal of this
initiative is to continually review patterns of consumption and find
efficient productive ways of doing business through centralized
sourcing and procurement from negotiated partner agreements. In
2013, these efforts resulted in 8% cost reduction in specifically
targeted spending categories.
Space Consolidation: In 2013, Gannett’s efforts to optimize its
physical footprint continued to progress very successfully. The
company sold several facilities and consolidated expiring leases.
The real estate team is continually focused on portfolio optimization
which includes selling older, underutilized buildings, relocating to
more efficient, flexible, digitally oriented office space,
reconfiguring spaces to take advantage of leasing and subleasing
opportunities, and combining operations where possible. Since the
beginning of 2012, the company has sold 25 properties consisting of
approximately 1 million square feet of office space and more than
100 acres of excess land. Recent examples include The Des Moines
Register moving from a nearly 100-year old building of
approximately 225,000 square feet to a state-of-the-art, digital
media facility in leased office space of 79,000 square feet, and The
Indianapolis Star’s announcement that it will sell its 100-year old
building of approximately 325,000 square feet and relocate to
smaller, more efficient and digitally-oriented leased space.
Capital Allocation: Gannett’s approach to capital allocation is a
key source of financial strength in support of current initiatives as
well as providing flexibility for future opportunities. In June 2013,
Gannett announced an extension of its share buyback program
replacing its existing remaining share repurchase authorization with
a new $300 million authorization expected to be completed within
two years. During 2013, the company repurchased 4.9 million
shares for approximately $117 million at an average price of $23.59
per share. The company also will continue its existing dividend
payment program, currently at an annualized rate of $.80 per share.
5
Strategic Acquisitions and Dispositions
Strategic acquisitions are a key component of the company’s strategy
to grow its higher-margin businesses, and to accelerate growth by
entering into or expanding high potential businesses across all of the
company’s segments.
As highlighted earlier, Gannett’s acquisition of Belo Corp. in
December 2013 expanded the number of Gannett’s television
stations to 43 from 23, including seven stations serviced by Gannett
under shared services and similar arrangements.
The company is now the largest independent station group of
major network affiliates in the top 25 markets, with 21 stations in
those markets. Excluding owner operators, Gannett is now the
largest owner of CBS affiliates and expands its NBC affiliate group,
which is already No. 1. Gannett also is the No. 4 ABC affiliate
group.
Following the Belo acquisition, Gannett’s Broadcasting Segment
is projected to contribute more than half of the company’s total
operating cash flow in 2014 and beyond, and the Digital and
Broadcasting Segments combined are expected to contribute nearly
two-thirds.
Subsidiaries of Gannett and Sander Media, a holding company
that has a station-operation agreement with Gannett, agreed to sell
KMOV-TV in St. Louis, MO, to media company Meredith
Corporation (Meredith). Under a separate agreement, subsidiaries of
both companies also have agreed to sell Meredith two other stations,
KTVK-TV and KASW-TV in Phoenix, AZ. The purchase price for
the three stations is $407.5 million.
Also in 2013, Gannett partnered with Generation Partners, a
private equity firm with extensive experience in growth-oriented
investments, to fund the continued growth and expansion of the
Captivate Network. As a result, Captivate Network is now a separate
company co-owned by Gannett and Generation. Founded in 1997
and wholly owned by Gannett prior to the new partnership,
Captivate operates an IP-enabled digital place-based media network
with over 10,000 screens across more than 1,000 commercial office
buildings in the U.S. and Canada. This partnership will provide
Captivate with the necessary capital and strategic focus to drive
growth in the coming years.
In the Digital Segment, CareerBuilder made a number of
strategic acquisitions to expand and diversify its business, enabling it
to offer the human capital data, software, and advertising solutions
in a bundle that no other competitor in the marketplace has. These
acquisitions include Oil and Gas Job Search, the oil and gas
industry’s leading online job site outside North America,
headquartered in Manchester, England, supporting job postings
worldwide. CareerBuilder also continued to expand in the Asia
market with the acquisition of Vietnam Online Network
(KiemViec.com & HR Vietnam). KiemViec.com is Vietnam’s
second largest career site by revenue, and first by number of
registered users. HR Vietnam specializes in recruitment services and
human resource solutions for employers.
These acquisitions built upon investments made in 2012, which
included the acquisition of a controlling interest in EMSI, an
economic software firm that specializes in employment data and
labor market analysis. EMSI collects and interprets large amounts of
labor data, which is used in work force development and talent
strategy. Also in 2012, CareerBuilder acquired: JobScout24, which
solidified CareerBuilder’s position as one of the top three online
recruitment sites in Germany; JobsCentral, a leading jobs board in
Singapore that also has a fast-growing presence in Malaysia; Ceviu,
which is the leading information technology job board in Brazil; and
Top Language Jobs, Europe’s number one language specialist
recruitment job portal, operating the largest global network of job
boards dedicated to multilingual job seekers looking for work
internationally.
Other recent acquisitions have been targeted at expanding the
depth and breadth of the company’s digital offerings through smart
investments. They have enabled Gannett to generate valuable new
revenue streams by offering a full complement of products to
advertisers. These include Gannett’s purchase in 2012 of BLiNQ
Media, LLC, a leading global innovator of social engagement
advertising solutions for agencies and brands. BLiNQ helps
companies advertise and engage with consumers on Facebook and
other social networks. In addition, Gannett acquired Mobestream
Media, developer of the Key Ring consumer rewards mobile
platform (Key Ring), which is available on all major smartphones.
Consumers download the free Key Ring application to scan and
store existing loyalty cards, join new rewards programs, get mobile
coupons and other promotional offers delivered to their smartphones.
The 2012 acquisition of Rovion, whose primary product is Ad
Composer, provided the company with a self-service technology
platform that enables the full development and deployment of rich
media and mobile HTML5 ads.
Also in 2012, the company acquired the assets of Fantasy Sports
Ventures/Big Lead Sports, a leading sports digital site. This business
is an important addition to the USA TODAY Sports Media Group,
positioning it as one of the top five sports sites on the web.
General Company Information
Gannett was founded by Frank E. Gannett and associates in 1906
and was incorporated in 1923. The company listed shares publicly
for the first time in 1967. It reincorporated in Delaware in 1972. The
company’s 228 million outstanding shares of common stock are held
by approximately 7,600 shareholders of record in all 50 states and
several foreign countries. Gannett’s headquarters is in McLean, VA,
near Washington, DC.
Business Segments
The company has three principal business segments: Broadcasting,
Publishing and Digital. Operating revenues and income from web
sites, mobile and tablet products associated with publishing
operations and broadcasting stations are reported in the Publishing
and Broadcasting Segments, respectively.
Financial information for each of the company’s reportable
segments can be found under Item 7 “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” and
Item 8 “Financial Statements and Supplementary Data” of this Form
10-K.
Broadcasting Segment
Gannett Broadcasting’s 2013 was a year of strategic changes. On
Dec. 23, 2013, Gannett acquired Belo Corp., which, like Gannett,
values quality, award-winning journalism, operational excellence
and strong brand leadership. At the end of 2013, the company’s
broadcasting division, headquartered in McLean, VA, included 43
television stations, either owned or serviced through shared service
agreements or other similar agreements. Stations in the company’s
broadcasting division cover 30% of the U.S. population in markets
with nearly 35 million households.
The primary sources of the company’s broadcasting revenues
are: 1) core advertising which includes local and national non-
political advertising; 2) political advertising revenues which are
particularly seasonal with peaks occurring in even years (e.g. 2012,
2010) and particularly in the fourth quarter of those years; 3)
retransmission revenues representing fees paid by satellite and cable
networks and telecommunications companies to carry the company’s
television signals on their network; 4) digital revenues which
encompass advertising on the stations’ web and tablet and mobile
products; and 5) payments by advertisers to television stations for
other services, such as the production of advertising material.
6
The advertising revenues generated by a station’s local news
programs make up a significant part of its total revenues. Advertising
rates are influenced by the demand for advertising time. This
demand is influenced by a variety of factors, including the size and
demographics of the local population, the concentrations of retail
stores, local economic conditions in general, and the popularity of
the station’s programming. As the market fluctuates with supply and
demand, so does the station’s pricing. Almost all national advertising
is placed through independent advertising representatives. Local
advertising time is sold by each station’s own sales force.
Generally, a network provides programs to its affiliated
television stations and sells on its own behalf commercial
advertising for certain of the available ad spots within the network
programs. The company’s television stations produce local
programming such as news, sports, and entertainment.
Retransmission consent agreements: Pursuant to Federal
Communications Commission (FCC) rules, every three years a local
television station must elect to either (1) require cable and/or direct
broadcasting satellite operators to carry the station’s signal or (2)
enter into retransmission consent negotiations for carriage. At
present, the company has retransmission consent agreements with
the majority of cable operators and the primary satellite providers for
carriage of its television stations. The company has retransmission
agreements with several major telecommunications companies.
Revenue from television retransmission fees has increased
steadily in the last several years, better reflecting the value of the
content that Gannett Broadcasting provides. The year-over-year
increases for 2013 and 2012 were 52% and 21%, respectively. While
core advertising still represents a majority of broadcasting revenues,
the contribution from retransmission revenues continues to grow.
In 2013, the company completed retransmission negotiations
with several providers. These are multi-year agreements that provide
the company with significant and steady revenue streams. As a
result, retransmission revenues are expected to grow significantly in
2014 and beyond.
Programming and production: The costs of locally produced
and purchased syndicated programming are a significant portion of
television operating expenses. Syndicated programming costs are
determined based upon largely uncontrollable market factors,
including demand from the independent and affiliated stations within
the market. In recent years, the company’s television stations have
emphasized their locally produced news and entertainment
programming in an effort to provide programs that distinguish the
stations from the competition, to increase locally responsible
programming, and to better control costs.
Gannett television stations led the way in covering major news
events during 2013. From the inauguration of the president and the
naming of a new Pope, to the wildfires in the west, Gannett
Broadcasting provided outstanding news coverage on-air, online, for
mobile devices and in social media. The division also focused on
working closely with USA TODAY and USCP to develop and
enhance content for consumers.
For example, for the inauguration of President Obama, WUSA in
Washington, DC, worked with USA TODAY and CBS to bring
viewers 15 ½ hours of continuous coverage. WUSA was the only
local station to stream the day’s events to mobile devices and
coverage was made available to USA TODAY and all other Gannett
media properties.
In addition, when a new Pope was elected, WUSA, KSDK in St.
Louis, MO, and WGRZ in Buffalo, NY, reported live from Rome
and shared their work across the entire company.
Likewise, following the Boston Marathon bombings, Gannett
Broadcasting responded quickly both on-air and in social media,
dispatching news crews from WUSA, KUSA in Denver, KPNX in
Phoenix, and WCHS in Portland, ME, to Boston to cover the
7
unfolding story and provide live-stream breaking news for all
Gannett properties, including web and mobile device apps.
Other major stories captured both national and local interest,
including extensive wildfires in Colorado and Arizona. Gannett
Broadcasting quickly sent additional crews to assist local station
coverage and worked closely with USA TODAY and USCP to share
content and provide live streaming of coverage.
Advocacy continues to be an important focus for Gannett
Broadcasting. For instance, KUSA helped raise more than $1 million
for flood victims in Colorado. WTLV and WJXX, First Coast News
in Jacksonville, FL, helped provide free dental care for the working
poor. WBIR in Knoxville, TN, built a new home for a local charity
while WLTX in Columbia, SC, remodeled a home with Habitat for
Humanity. Broadcasting collectively made a difference in Gannett’s
local communities also by participating in USA WEEKEND’s
national Make A Difference Day. These are just a few examples of
how the company’s purpose is fulfilled by Gannett’s television
stations.
Gannett Broadcasting also finalized the rollout of a new graphics
and music package leveraging USA TODAY’s signature color-
coding system, which has been well received by viewers. The
Broadcasting Segment has also been recognized for its innovative
approach to displaying upcoming stories at the bottom of the screen,
which is seen as a real differentiator with viewers. Gannett stations
started the rollout of a new graphics play-out device with custom-
written software that makes workflow faster and more efficient.
Gannett Broadcasting won numerous national and local awards
in 2013. Dave Lougee, president of Gannett Broadcasting, was
honored by the Radio Television Digital News Association
(RTDNA) with a First Amendment Leadership Award. The award is
given annually by the Radio Television Digital News Foundation to
a leader who has made significant contributions to the protection of
the First Amendment and freedom of the press.
KUSA’s Patti Dennis was named News Director of the Year by
Broadcasting and Cable Magazine. In addition, Gannett
Broadcasting, including the former Belo stations, was honored with
six National and 74 Regional Edward R. Murrow Awards. Both
represent the largest number of awards for any broadcast group. At
the national level, KUSA and KARE received two awards each, and
WFAA and WTSP each won one award. Gannett Broadcasting
stations also received hundreds of nominations and awards in the
Regional Emmy and AP contests conducted throughout the United
States. KARE and KUSA were both recognized with Walter
Cronkite Awards for outstanding work in Political Reporting and
WFAA was recognized with a Gerald Loeb Award for excellence in
business journalism.
Competition: In each of its broadcasting markets, the company’s
stations and affiliated digital platforms compete for revenues with
other network-affiliated and independent television broadcasters and
with other advertising media, such as radio broadcasters, cable
television, newspapers, magazines, direct mail, out-of-home
advertising and Internet media. Other sources of present and
potential competition for the company’s broadcasting properties
include home video and audio recorders and players, direct
broadcasting satellite, low-power television, Internet radio, video
offerings (both wire line and wireless) of telephone companies as
well as developing video services. The stations also compete in the
emerging local electronic media space, which includes Internet or
Internet-enabled devices, handheld wireless devices such as mobile
phones and tablets, social media platforms, digital spectrum
opportunities associated with DTV and the new Internet-enabled
television. The company’s broadcasting stations compete principally
on the basis of their audience share, advertising rates and audience
composition.
FCC Regulations prohibit a television station owner from
owning a daily newspaper in cases where the station’s contour
encompasses the newspaper’s city of publication. In 2007, the FCC
granted a permanent waiver authorizing the company’s continued
ownership of both KPNX-TV and The Arizona Republic in Phoenix,
AZ. The FCC has commenced a new review of its ownership rules in
2010, as it is required to do every four years. In 2011, the FCC had
proposed to retain the local television ownership rule, and proposed
a modest relaxation of the newspaper/broadcast rule. The current
chair of the FCC has stated opposition to any modification of the
cross-ownership rule, and is likely to release an order determining
that certain joint sales agreements between stations will be treated as
attributable ownership interests, and a further notice of proposed
rulemaking seeking comment about shared services agreements and
local news agreements, including whether such arrangements should
be attributable for purposes of the ownership rules. An order in this
proceeding is expected in 2014. Gannett is a party to shared services
agreements with certain third parties that own stations in markets
where Gannett also owns television stations and/or daily
newspapers. The company cannot predict whether or how the FCC’s
rules in this area may change, or whether it will grandfather existing
agreements should it change the rules.
Congress and the FCC are considering possible changes to the
Communications Act and to the statutory cable and satellite
copyright regime, and to other FCC Regulations, respectively,
including the rules concerning good faith negotiation of
retransmission consent (which govern cable and satellite operators’
carriage of the signals of the company’s stations); and the rules and
policies concerning the specific amount and type of public-interest
programming required to be carried by broadcasting stations to
satisfy their license obligations and requirements concerning the
disclosure of such programming efforts. In addition, as authorized
by and pursuant to certain requirements established by Congress, the
FCC is seeking comment on rules to govern a “repacking” of the
television spectrum. The repacking may entail television stations
moving to different channels, having smaller service areas, and/or
accepting additional interference. Congress has required that the
FCC make “all reasonable efforts” to preserve the coverage area and
population served of full-power and Class A television stations. The
FCC has an open proceeding seeking comment on the interpretation
of this requirement and other issues related to the repacking. The
legislation authorizing the repacking establishes a $1.75 billion fund
for reimbursement of costs incurred by stations that are required to
change channels in the repacking. The rules concerning how the
reimbursement process will work have not yet been established.
Services such as Aereo and FilmOn X provide their subscribers
with streaming content from television stations, over the Internet.
Litigation is ongoing over the claims of certain broadcasters and
networks that such services, which are offered without broadcasters’
consent, violate copyright law. The Supreme Court has agreed to
hear an appeal of the Second Circuit’s decision affirming a district
court decision to deny a preliminary injunction against Aereo.
The Broadcasting Segment continues to focus on increasing
engagement on all platforms with local customers. As was the case
the last several years, Gannett television stations saw growth in
digital metrics as the stations’ content remains in high demand and
product improvements continue to be favorably received by
consumers. Overall in 2013, mobile saw tremendous growth with
mobile visitors increasing 65%, mobile page views up 72% and
mobile video plays up 190%. Desktop website and mobile app
product improvements for Gannett’s local stations are driving higher
engagement with consumers on these platforms. Mobile traffic data
includes tablets and the company expects greater consumer adoption
with increased tablet penetration.
Broadcasting is positioned to maximize engagement through
social media. The synergistic relationship between social media and
television is strong and research suggests social media engagement
can have a positive impact on television viewing consumption. From
major sporting events such as the Super Bowl and March Madness,
to signature television events like the Grammy or Academy Award
shows, to national breaking news events like the Navy Yard shooting
or the Boston bombing, to local news events, social media
influenced what people watched, what they shared and what they
talked about. Gannett Broadcasting Facebook fans increased 54% in
2013 and Twitter followers were up 66% as a result of increased
engagement.
Regulation: The company’s television stations are operated
under the authority of the FCC, the Communications Act of 1934, as
amended (Communications Act), and the rules and policies of the
FCC (FCC Regulations).
Television broadcast licenses are granted for periods of eight
years. They are renewable upon application to the FCC and usually
are renewed except in rare cases in which a petition to deny, a
complaint or an adverse finding as to the licensee’s qualifications
results in loss of the license. The company believes it is in
substantial compliance with all applicable provisions of the
Communications Act and FCC Regulations. The company continues
to file license renewal applications for its stations, including for
several stations with license renewal applications pending from the
last round of license renewals, and it expects these renewals to be
granted in the ordinary course.
FCC Regulations also limit concentration of broadcasting control
and regulate network and local programming practices. FCC
Regulations governing multiple ownership limit, or in some cases
prohibit, the common ownership or control of most communications
media serving common market areas (for example, television and
radio; television and daily newspapers; or radio and daily
newspapers). In addition, the Communications Act includes a
national ownership cap under which one company is permitted to
serve no more than 39% of all U.S. television households. The
market reach of stations that broadcast on UHF channels is
discounted by 50% (the “UHF discount”). The company’s 36
television stations (excluding seven stations currently serviced by
Gannett under shared services and similar arrangements) reach
approximately 23% of U.S. television households, applying the UHF
discount. The FCC has proposed repeal of the UHF discount, and
that proceeding remains pending. Without applying the UHF
discount, Gannett’s national reach would be approximately 28%.
FCC Regulations permit common ownership of two television
stations in the same market in certain defined circumstances,
provided that at least one of the commonly owned stations is not
among the market’s top four rated stations at the time of acquisition
and at least eight independent media “voices” remain after the
acquisition.
8
Publishing Segment
The company’s publishing business includes 82 U.S. daily
publications, including USA TODAY, and more than 400 non-daily
local publications in 30 states and Guam. In the U.K, through its
Newsquest subsidiary, the company also produces 17 daily paid-for
publications and more than 200 weekly publications, magazines and
trade publications. All of the company’s local publishing operations
and affiliated digital products are fully integrated with shared
support, sales and service platforms. Other businesses that are an
integral part of the publishing business include:
• USA WEEKEND, a weekly magazine carried by more than 760
local publishers with an aggregate circulation reach of more than
22 million.
• Clipper Magazine, a direct mail advertising magazine that
publishes hundreds of local market editions under the brands
Clipper Magazine, Savvy Shopper and Mint Magazine in 29
states to more than 27 million.
• Gannett Government Media, a worldwide multimedia business
with digital, print and broadcast media properties focused on
government, military and defense technology audiences.
• Gannett Healthcare Group, which publishes magazines
specializing in news, continuing education opportunities and
employment opportunities, reaching nurses and allied health
professionals nationwide. Its web sites, GannettHG.com,
Nurse.com and TodayinPT.com, feature news, continuing
education opportunities and information about employment
opportunities for allied health professionals. Gannett Healthcare
Group also operates Gannett Education, which delivers
continuing education opportunities to nurses and allied health
professionals and includes GannettEducation.com,
ContinuingEducation.com and PearlsReview.com, an online
nursing certification and continuing education web site.
The USCP division and USA TODAY are headquartered in
McLean, VA, and the company’s U.K. operations are managed from
Weybridge, England.
Affiliated digital products of the company’s U.S. publications,
including USA TODAY, reach more than 38 million unique visitors
monthly. The print products reach more than 10 million readers
every weekday and more than 12 million readers every Sunday.
Together they provide critical news and information from
neighborhoods, the nation and the globe.
USA TODAY ranks No. 1 in the industry in combined print and
digital circulation, according to the Alliance for Audited Media’s
September 2013 Publisher’s Statement, with total daily circulation of
2.9 million which includes daily print, digital replica and digital non-
replica. USA TODAY was introduced in 1982 as the country’s first
national, general-interest daily publication. In 2013, it solidified its
position as a leader in digital content. A completely re-imagined set
of digital products led to an increase in page views of 66%, a 21%
increase in unique visitors and 19% Internet reach. During 2013,
USATODAY.com hosted on average more than 24 million unique
visitors, with over 67 million visits and 281 million page views per
month. USA TODAY mobile page views increased 29% year over
year, to more than 6.15 billion page views in 2013.
Newsquest’s digital audience increased substantially during
2013, with audited average daily unique users rising by 35% to
687,000. The heraldscotland.com was named by ABC as the U.K.’s
fastest growing news web site, while Newsquest Specialist Media
was declared the U.K.’s B2B Digital Publisher of the year by the
Periodical Publishers Association.
USA TODAY is produced at facilities in McLean, VA, and
transmitted digitally to offset printing plants around the country. It is
printed at Gannett plants in 13 U.S. markets and commercially at
offset plants owned by other print providers in 23 other U.S.
markets.
The publication of non-daily products continued to be an
important part of Gannett’s market strategy for 2013. The company
produces non-daily publications in the U.S. including glossy lifestyle
magazines, community publications and publications focused on one
topic, such as health or cars.
The company’s strategy for non-daily publications is to appeal to
key advertising segments (e.g., affluent women, women with
children or young readers). Non-daily products help print operations
increase overall impressions and frequency for advertisers looking to
reach specific audience segments or in some cases, like community
weeklies, provide a lower price point alternative for smaller
advertisers with specific geographic targets, thus helping to increase
the local media organization’s local market share.
Audience research: As Gannett’s publishing businesses
relentlessly pursue their mission to meet consumers’ news and
information needs anytime, anywhere and in any form, the company
remains focused on an audience aggregation strategy. The company
considers the reach and coverage of multiple products in its
communities and measures the frequency with which consumers
interact with each Gannett product.
Results from 2013 studies in 10 of the company’s local domestic
publishing markets conducted by Thoroughbred Research Group
indicate that Gannett local media organizations reach more than two
in three adults each week - and nearly eight in 10 each month. Under
the All Access Content Subscription Model rolled out to 78 sites
during 2012, more than half of readers access Gannett content on
two or more platforms.
The company has gathered audience aggregation data for 53
Gannett markets and will continue to add more data in 2014.
Aggregated audience data allows advertising sales staff to provide
detailed information to advertisers about how best to reach their
potential customers and the most effective product combination and
frequency. This approach enables the company to increase its total
advertising revenue potential while maximizing advertiser
effectiveness.
In addition to the audience-based initiative, the company
continues to measure customer attitudes, behaviors and opinions to
better understand customers’ digital use patterns and use qualitative
research with audiences and advertisers to better determine their
needs. In 2009, the USCP research group launched an ongoing
longitudinal study to measure audience and consumer satisfaction in
key markets. To date, the group has conducted nearly 33,000
interviews for the study.
Advertising: The company has advertising departments that sell
retail, classified and national advertising across multiple platforms
including print, online, mobile, tablet and niche publications. The
company has a national ad sales force focused on the largest national
advertisers and a separate sales organization to support classified
employment sales - the Digital Employment Sales Center.
Additionally, G/O Digital provides marketing specialists to small
and medium-sized businesses, and Gannett Client Solutions groups
provide customized marketing solutions. The company also has
relationships with outside representative firms that specialize in the
sale of national ads.
Retail display advertising is associated with local merchants or
locally owned businesses. In addition, retail includes regional and
national chains - such as department and grocery stores - that sell in
the local market.
9
National advertising is display advertising principally from
Gannett continues to enjoy a long-standing relationship of trust
advertisers who are promoting national products or brands.
Examples are pharmaceuticals, travel, airlines, or packaged goods.
Both retail and national ads also include preprints, typically stand-
alone multiple page fliers that are inserted in the daily print product.
Classified advertising includes the major categories of
automotive, employment, legal, real estate/rentals and private party
consumer-to-consumer business for merchandise and services.
Advertising for classified segments is published in the classified
sections, in other sections within the publication, on affiliated digital
platforms and in niche magazines that specialize in the segment.
Proprietary research indicates that local and national advertisers
find it challenging to manage the complexity of their marketing
investments. They are seeking to reach an increasingly elusive
audience and are struggling to influence attitudes and behavior at
each stage of the purchase path. To help advertisers solve that, a
refined approach to media planning was created to present
advertisers with targeted, integrated solutions. The planning process
leverages the company’s considerable advantage in data analysis and
secondary research. The result is a tailored media/marketing plan
where the individual elements work in concert to amplify and
reinforce the advertiser’s message.
In addition, USCP continues to use online reader panels in 18
markets to measure advertising recall and effectiveness, article
response, and identify consumer sentiment and trends. The reader
panels include more than 30,000 opt-in respondents who have
provided valuable feedback on more than 8,100 advertisements and
5,800 news articles. This capability allows sales staff in markets to
provide deeper insights and return-on-investment metrics to
advertisers.
The company’s consultative multi-media sales approach has been
tailored to all levels of advertisers, from small, locally owned
merchants to large, complex businesses. Along with this sales
approach, the company has intensified its sales and management
training and improved the quality of sales calls. Digital product
integration, sales pipeline management and a Gannett five-step
consultative sales process were focus areas in 2013, with formal
training delivered in all Gannett markets. Front-line sales managers
in all USCP markets participated in intensive training to help them
coach their sales executives for top performance.
Online operations: In support of the All Access Content
Subscription Model, the company invested in a significant expansion
of mobile offerings across local markets, including native
applications for iPhone and Android smartphones and iPads and
tablet-optimized web sites. The mobile audience at the company’s
local domestic publishing markets continued to grow in 2013,
ultimately making up 13% of total page views, with mobile web
sites and the native iPhone applications leading the way.
Through the All Access Content Subscription Model, the
company made a clear commitment to provide consumers with the
content they most want on the devices they use to access news and
information about their local communities. Mobile page views
increased 4% and mobile visitors increased 11% in 2013 on a year-
over-year basis.
In 2013, the company implemented a social media content
management software tool to ensure the division’s journalists and
marketing and customer service teams could more effectively
manage multiple social media profiles and significantly increase
their responsiveness and engagement with consumers.
in local business communities. Its advertising sales staff delivers
solutions for its customers and helps small and medium-size
businesses navigate the increasingly complex and diverse world of
digital marketing. In 2013, the company further expanded its G/O
Digital suite of products and continued its partnership with Yahoo! to
offer more digital solutions to advertisers. Through this, Gannett is
able to offer its customers expanded digital reach.
The overriding objective of the company’s online strategy is to
provide compelling content that best serves its customers. A key
reason customers turn to a Gannett digital platform is to find local
news and information. The credibility of the local media
organization, a known and trusted information source, includes its
digital platforms (tablet, mobile applications and its web site) and
differentiates these online sources from competing online products.
This allows Gannett’s local media organizations to compete
successfully as information providers.
A second objective in the company’s online business
development is to leverage the natural synergies between the local
media organizations and local digital platforms. The local content,
customer relationships, news and advertising sales staff, and
promotional capabilities are all competitive advantages for Gannett.
The company’s strategy is to use these advantages to create strong
and timely content, sell packaged advertising products that meet the
needs of advertisers, operate efficiently and leverage the known and
trusted brand of the local media organization.
GMTI builds, manages and maintains the cloud infrastructure
that supports the desktop, mobile and native app digital presence
associated with Gannett’s U.S. newspaper and television businesses.
GMTI partners with Gannett development teams to design
applications and deliver platform enhancements in accelerated,
iterative cycles with stringent quality standards. GMTI also
provides application support and training for Gannett staff across the
country.
Circulation: USCP delivers content in print and online, via
mobile devices and tablets. In a trend generally consistent with the
domestic publishing industry, circulation volume declined in 2013.
However, year over year USCP circulation revenues increased 3%
and digital access increased across all publications, driven by the All
Access Content Subscription Model. USCP’s All Access Content
Subscription Model has more than 1.6 million digitally activated
subscribers, enabling them easy access to content-rich products.
EZ Pay, which enhances subscriber retention rates, grew from
approximately 59% at the end of 2012 to 64% in 2013 across all
USCP sites.
For USCP, single copy represents approximately 15% of daily
and 24% of Sunday net paid circulation volume.
The single copy price of USA TODAY at newsstands and
vending machines was $2.00 in 2013 (price increased September
2013). Mail subscriptions are available nationwide and abroad, and
home, hotel and office delivery is available in many markets.
Approximately 83% of its net paid circulation results are from
single-copy sales at newsstands, vending machines or provided to
hotel guests. The remainder is from home and office delivery, mail,
educational and other sales.
At the end of 2013, 71 of the company’s domestic daily
publications, including USA TODAY, were published in the
morning, and 11 were published in the evening.
10
The rate of development of opportunities in, and competition
from, digital media, including web site, tablet and mobile products,
is increasing. Through internal development, content distribution
programs, acquisitions and partnerships, the company’s efforts to
explore new opportunities in the news, information and
communications business and in audience generation will keep
expanding.
The company continues to seek more effective ways to engage
with its local communities using all available media platforms and
tools.
Environmental regulation: Gannett is committed to protecting
the environment. The company’s goal is to ensure its facilities
comply with federal, state, local and foreign environmental laws and
to incorporate appropriate environmental practices and standards in
its operations. The company is one of the industry leaders in the use
of recycled newsprint, increasing its purchase of newsprint
containing recycled content from 42,000 metric tons in 1989 to
152,023 metric tons in 2013. During 2013, 38% of the company’s
domestic newsprint purchases contained recycled content, with an
average recycled content of 32%. Additional information about the
company’s environmental and sustainability initiatives can be found
on page 13.
The company’s operations use inks, solvents and fuels. The use,
management and disposal of these substances are sometimes
regulated by environmental agencies. The company retains a
corporate environmental consultant who, along with internal and
outside counsel, oversee regulatory compliance and preventive
measures. Some of the company’s subsidiaries have been included
among the potentially responsible parties in connection with sites
that have been identified as possibly requiring environmental
remediation. Additional information about these matters can be
found in Part I, Item 3, Legal Proceedings, in this Form 10-K.
Raw materials: Newsprint, which is the basic raw material used
in print publication, has been and may continue to be subject to
significant price changes from time to time. During 2013, the
company’s total newsprint consumption was 404,173 metric tons,
including consumption by USA WEEKEND, USA TODAY, tonnage
at non-Gannett print sites and Newsquest. Newsprint consumption
was 11% less than in 2012. The company purchases newsprint from
20 domestic and global suppliers.
In 2013, global newsprint supplies were adequate. The company
continues to moderate newsprint consumption and expense through
press web-width reductions and the use of lighter basis weight paper.
The company believes that available sources of newsprint, together
with present inventories, will continue to be adequate to supply the
needs of its publishing operations.
Joint operating agencies: The company’s publishing subsidiary
in Detroit participates in a joint operating agency (JOA). The JOA
performs the production, sales and distribution functions for the
subsidiary and another publishing company under a joint operating
agreement. Operating results for the Detroit JOA are fully
consolidated along with a charge for the minority partner’s share of
profits. The company has a 50% partnership interest in a JOA in
Tucson, AZ, which provides service to a non-Gannett publication in
the city. The company’s share of results for the Tucson operations
are accounted for under the equity method, and are reported as a net
amount in “Equity income in unconsolidated investees, net.”
Production and distribution: In 2011, Gannett Publishing
Services, or GPS, was formed to improve the efficiency and reduce
the cost associated with the production and distribution of the
company’s printed products across all divisions in the U.S. GPS
directly manages all of the production and circulation operations for
all of Gannett’s domestic publishing operations including all
community newspapers and USA TODAY.
GPS leverages Gannett’s existing assets, including employee
talent and experience, physical plants and equipment, and its vast
national and local distribution networks. GPS is responsible for
imaging, ad production, internal and external printing and
packaging, internal and external distribution, consumer sales,
customer service and direct marketing services.
The Gannett Imaging and Ad Design Centers (GIADC) serve 79
publishing properties, including all USCP dailies with the exception
of Guam and Detroit. In addition to the USCP sites, the GIADC also
provides services to USA TODAY and Gannett Broadcasting
properties and completes special projects for other internal
businesses. GIADC is utilized for commercial imaging and/or ad
production by 34 external customers.
By the end of 2013, almost all USCP and USA TODAY
employees were utilizing a common content management system.
The common content management system enables communication
and collaboration needed to build strong design remotely. The
studios are operationally efficient while enhancing design in
publications across the company.
Newsquest operates its publishing activities around regional
centers to maximize the use of management, finance, printing and
personnel resources. This enables the group to offer readers and
advertisers a range of attractive products across the market. The
clustering of titles and, usually, the publication of a free print
product alongside a paid-for print product, allows cross-selling of
advertising serving the same or contiguous markets, satisfying the
needs of its advertisers and audiences.
Newsquest produces free and paid-for print products with quality
local editorial content. Newsquest also distributes a substantial
volume of advertising leaflets in the communities it serves. Most of
Newsquest’s paid-for distribution is outsourced to wholesalers,
although direct delivery is employed as well to maximize circulation
sales opportunities.
Newspaper partnerships: The company owns a 19.49% interest
in California Newspapers Partnership, which includes 19 daily
California newspapers; a 40.64% interest in Texas-New Mexico
Newspapers Partnership, which includes six daily newspapers in
Texas and New Mexico and four newspapers in Pennsylvania; and a
13.50% interest in Ponderay Newsprint Company in the state of
Washington.
Competition: The company’s publishing operations and
affiliated digital platforms compete with other media and digital
ventures for advertising. Publishing operations also compete for
circulation and readership against other professional news and
information operations and amateur content creators. Very few of the
company’s publishing operations have daily competitors that are
published in the same city. Most of the company’s print products
compete with other print products published in suburban areas,
nearby cities and towns, free-distribution and paid-advertising
publications (such as weeklies), and other media, including
magazines, television, direct mail, cable television, radio, outdoor
advertising, telephone directories, e-mail marketing, web sites and
mobile-device platforms. Newsquest’s publishing operations are in
competitive markets. Their principal competitors include other
regional and national newspaper and magazine publishers, other
advertising media such as broadcast and billboard, Internet-based
news and other information and communication businesses.
11
Digital Segment
The largest businesses within the company’s Digital Segment are
CareerBuilder, PointRoll and Shoplocal.
CareerBuilder is the global leader in human capital solutions,
helping companies target, attract and retain talent. Its online job site,
CareerBuilder.com, is the largest in North America with the most
revenue.
Headquartered in Chicago, IL, CareerBuilder and its subsidiaries
operate in the U.S., Europe, Canada, Asia and South America. Its
sites, combined with its partnerships, give CareerBuilder a presence
in more than 60 markets worldwide.
CareerBuilder offers a wide array of services from labor market
intelligence to talent management software and other recruitment
solutions. Most of the revenues are generated by its own sales force
but substantial revenues are also earned through sales of
employment advertising placed with CareerBuilder’s owners’
affiliated media organizations.
In 2013, CareerBuilder acquired KiemViec.com & HR Vietnam
(collectively Vietnam Online Network or VON), headquartered in
Ho Chi Minh City, Vietnam. KiemViec.com is one of Vietnam’s
largest career sites. HR Vietnam specializes in recruitment services
and human resource solutions for employers. Together,
CareerBuilder and VON will bring Vietnam’s employers and
workers a broader range of recruitment and job search resources.
During 2013, CareerBuilder also acquired Oil and Gas Job Search
(OilandGasJobSearch.com), continuing its expansion of niche online
job search platforms. Oil and Gas Job Search, headquartered in
Manchester, England, is the oil and gas industry’s leading online job
site outside North America with job postings worldwide.
CareerBuilder is changing the way companies source, engage
and re-engage talent. The company’s Talent Network solution is an
“always-on” recruiting engine that leverages SEO and popular
destinations like recruitment sites to match the right candidates with
open positions and help businesses build a pipeline of active and
passive candidates for current and future openings.
In 2012, CareerBuilder acquired EMSI, which collects and
interprets large amounts of employment data which is used in
workforce development and talent strategy. CareerBuilder is
leveraging the EMSI acquisition to enhance their workforce
analytics platform, creating an unmatched repository of historical
and real-time labor information.
CareerBuilder also continued to grow its global businesses with
the acquisitions of Top Language Jobs in the U.K., the leading global
online jobsite for multi-language jobs and candidates, and Ceviu, the
leading information technology job board in Brazil.
PointRoll is a multi-screen digital advertising technology and
services company. PointRoll enables advertisers, agencies, and
publishers to create, target, deploy, and optimize digital campaigns
in real time across any digital channel including display, rich media,
in-stream video, mobile, tablet and more. PointRoll provides the
creative tools, analytics and expertise marketers need to effectively
engage consumers and convert them into buyers and brand
supporters. Founded in May 2000, PointRoll has been instrumental
in the evolution of digital engagement and has evolved beyond the
expandable banner ad to offer marketers the ability to find
consumers wherever they are across any digital platform and deliver
a relevant brand or direct response experience, dramatically
improving ad effectiveness while gaining actionable insights.
PointRoll is headquartered in King of Prussia, PA, and maintains
offices across the U.S.
In October 2012, Gannett acquired Rovion. Rovion’s primary
product, Ad Composer, includes a self-service technology platform
that enables the full development and deployment of rich media and
mobile HTML5 ads by clients who do not have coding expertise.
Rovion is being integrated into PointRoll’s operations and
technology platform and will be leveraged across the entire Gannett
network to fulfill the needs of agencies and advertisers.
Shoplocal is the leader in turnkey local, at scale interactive
marketing that turns content into commerce for national retailers,
brands and agencies. Shoplocal offers a complete suite of innovative
digital advertising solutions to connect with shoppers along the path
to purchase, driving measurable in-store sales and ROI. Shoplocal
partners with more than 100 of the nation’s top retailers, including
CVS, Kohl’s, Lowe’s, Macy’s, Publix, Staples, Target, Walmart and
Walgreens, to deliver localized promotions to shoppers at national
scale through online circulars, display advertising, search, social
media, digital out of home and mobile. Shoplocal is headquartered in
Chicago, IL.
Competition: For CareerBuilder, the largest online employment
site in North America, the market for online recruitment solutions is
highly competitive with a multitude of online and offline
competitors. Competitors include other employment related web
sites, general classified advertising web sites, professional
networking and social networking web sites, traditional media
companies, Internet portals, search engines and blogs. The barriers
for entry into the online recruitment market are relatively low and
new competitors continue to emerge. Recent trends include the
rising popularity of professional and social media networking web
sites which have gained traction with employer advertisers. The
number of niche job boards targeting specific industry verticals has
also continued to increase. CareerBuilder’s ability to maintain its
existing customer base and generate new customers depends to a
significant degree on the quality of its services, pricing, product
innovation and reputation among customers and potential customers.
For PointRoll, the market for rich media advertising technology
solutions is highly competitive. Competitors include divisions of
larger public media and technology companies, and several earlier-
stage independent rich media, dynamic ad, video, mobile, and social
advertising technology specialists. The barriers to entry in the rich
media market are moderate. Recent trends include the shift towards
audience-centric, exchange-based media buying, entry of dynamic
ad generation specialists, the move towards automated creative
design tools, and the shift toward video content online with
associated in-stream advertising opportunities. Increasingly,
marketers and their agencies are looking for advertising technology
providers that can scale across media platforms, including rich
media, video and mobile. PointRoll’s ability to maintain and grow its
customer base and revenue depends largely on its continued product
innovation, level of service quality, depth of marketing analytics and
ultimately the effectiveness of its rich media advertising and
resulting customer satisfaction.
For Shoplocal, the market for digital store promotions is
highly competitive and evolving as digital media transforms
marketing programs. Shoplocal competitors in the online circular
space are few. Media fragmentation continues to challenge retailers
and Shoplocal is well positioned to deliver solutions to meet this
challenge. Shoplocal anticipates continued benefit from growth in
online-influenced offline retail sales (which Forrester Research
projects to exceed $1.42 billion in 2014). The scale of Shoplocal’s
proprietary retail database and its established distribution
partnerships is a source of advantage in this space. Shoplocal enables
delivery of all types of promotional content to any digitally
connected device across all platforms, a key factor with the
continued surge in mobile and social usage among consumers.
12
Regulation and legislation (impacting Digital Segment
businesses and digital operations associated with Publishing and
Broadcasting businesses): The U.S. Congress has passed legislation
which regulates certain aspects of the Internet, including content,
copyright infringement, taxation, access charges, liability for third-
party activities and jurisdiction. In addition, federal, state, local and
foreign governmental organizations have enacted and also are
considering other legislative and regulatory proposals that would
regulate the Internet. Areas of potential regulation include, but are
not limited to, user privacy and intellectual property ownership. With
respect to user privacy, the legislative and regulatory proposals could
regulate behavioral advertising, which specifically refers to the use
of user behavioral data for the creation and delivery of more
relevant, targeted Internet advertisements. Some Gannett properties
leverage certain aspects of user behavioral data in their solutions.
Employees
At the end of 2013, the company and its subsidiaries had
approximately 31,600 full-time and part-time employees including
2,600 for CareerBuilder and 2,250 employees from the Belo
acquisition.
2013
2012
Broadcast. . . . . . . . . . . . . . . . . . . . . . . . . .
Publishing . . . . . . . . . . . . . . . . . . . . . . . . .
Digital . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate. . . . . . . . . . . . . . . . . . . . . . . . . .
4,800
23,000
3,000
800
2,600
24,800
2,500
800
Total company . . . . . . . . . . . . . . . . . . . . .
31,600
30,700
Approximately 10% of those employed by the company and its
subsidiaries in the U.S. are represented by labor unions. They are
represented by 78 local bargaining units, most of which are affiliated
with one of eight international unions under collective bargaining
agreements. These agreements conform generally with the pattern of
labor agreements in the publishing and broadcasting industries. The
company does not engage in industry-wide or company-wide
bargaining. The company’s U.K. subsidiaries bargain with two
unions over working practices, wages and health and safety issues
only.
Environmental and Sustainability Initiatives
Gannett is committed to making smart decisions to protect the
environment and manage its environmental impact responsibly. The
company has taken a number of steps to reduce its environmental
impact and underscore its commitment to sustainability.
The company has been an industry pioneer in switching to
environmentally-friendly press products, such as low-VOC (Volatile
Organic Compound) washes and fountain solutions and citrus-based
press cleaners. All colored inks and many black inks the company
uses are soy-based rather than petroleum-based, and delivered in
reusable containers. Gannett’s waste ink is recycled, either on-site or
at the manufacturer’s facility. The company continues to minimize
landfill usage by collecting used paper, plastics and other materials
for recycling and has substantially reduced water usage by switching
to dry methods of photo processing and plate processing.
Gannett has reduced green house emissions by using newsprint
vendors who practice sustainability, switching to light-weight
newsprint, and reducing the size of the newspapers printed.
The company also is focused on being energy efficient. Its
headquarters building received the Leadership in Energy and
Environmental Design (LEEDS) EB certification, and the company
has relocated many employees in other facilities to newer, more
energy efficient offices.
Gannett has installed more energy efficient systems and
appliances in many of its buildings. In 2013 alone, Gannett’s energy
efficiency program resulted in a reduction of more than five million
kilowatt hours of annual electricity use. For 2014, Gannett has
identified new projects estimated to reduce power consumption by
another 10 million kilowatt hours annually.
The Gannett Green Operating Employee Group serves as a
forum to review and recommend “green” ideas and practices. The
group maintains an intranet site that provides an accessible,
informative and interactive resource highlighting new and innovative
green best practices which help Gannett businesses and properties
develop more sustainable operating practices.
Many of Gannett’s media organizations cover environmental and
sustainability issues. A good example is USA TODAY, which in
2013 did a recurring series on climate change. Many stories from
this series were also shared across Gannett through the USA TODAY
Network National News Desk.
Make A Difference Day, created by USA WEEKEND, is the
nation’s largest day of volunteering. For more than 20 years, the
group has mobilized millions of people across the U.S. for this
national day of service. Together with its hundreds of carrier
newspapers and longstanding partners, USA WEEKEND rallies
millions of people to help improve their communities. Volunteer
efforts often include environmentally beneficial projects such as
planting trees or gardens, cleaning up trash and planting sod.
The Gannett Foundation supports non-profit activities in
communities where the company does business and contributes to a
variety of charitable causes through its Community Grant Program.
One of Gannett Foundation’s community action grant priorities is
environmental conservation.
13
MARKETS WE SERVE
TELEVISION STATIONS AND AFFILIATED DIGITAL PLATFORMS
State/District
of Columbia
Arizona
Arkansas
California
Colorado
District of
Columbia
Florida
Georgia
Idaho
Kentucky
Louisiana
Maine
Michigan
Minnesota
Missouri
New York
North Carolina
Ohio
Oregon
South Carolina
Tennessee
Texas
Virginia
Washington
City
Flagstaff
Phoenix
Tucson
Little Rock
Sacramento
Denver
Washington
Jacksonville
Station/web site
KNAZ-TV: azcentral.com/12news
KASW-TV(1)(2): azfamily.com
KPNX-TV: azcentral.com/12news
KTVK-TV(1)(2): azfamily.com
KMSB-TV(1): tucsonnewsnow.com
KTTU-TV(1): tucsonnewsnow.com
KTHV-TV: todaysthv.com
KXTV-TV: news10.net
KTVD-TV: ktvd.com
KUSA-TV: 9news.com
WUSA-TV: wusa9.com
WJXX-TV: firstcoastnews.com
WTLV-TV: firstcoastnews.com
Tampa-St. Petersburg WTSP-TV: wtsp.com
Atlanta
Macon
Boise
Louisville
New Orleans
Bangor
Portland
Grand Rapids
Minneapolis-St. Paul
St. Louis
Buffalo
Charlotte
Greensboro
Cleveland
Portland
Columbia
Knoxville
Austin
Dallas/Ft. Worth
Houston
San Antonio
Hampton/Norfolk
Seattle/Tacoma
Spokane
WATL-TV: myatltv.com
WXIA-TV: 11alive.com
WMAZ-TV: 13wmaz.com
KTVB-TV(5): ktvb.com
WHAS-TV(1): whas11.com
WWL-TV: wwltv.com
WUPL-TV(4): wupltv.com
WLBZ-TV: wlbz2.com
WCSH-TV: wcsh6.com
WZZM-TV: wzzm13.com
KARE-TV: kare11.com
KMOV-TV(1)(2): kmov.com
KSDK-TV: ksdk.com
WGRZ-TV: wgrz.com
WCNC-TV: wcnc.com
WFMY-TV: digtriad.com
WKYC-TV: wkyc.com
KGW-TV(1)(3): kgw.com
WLTX-TV: wltx.com
WBIR-TV: wbir.com
KVUE-TV: kvue.com
WFAA-TV: wfaa.com
KHOU-TV: khou.com
KENS-TV: kens5.com
WVEC-TV: wvec.com
KING-TV: king5.com
KONG-TV: king5.com
KREM-TV: krem.com
KSKN-TV: spokanescw22.com
Channel/
Network
Ch. 2/NBC
Ch. 6/CW
Ch. 12/NBC
Ch. 3/IND
Ch. 11/FOX
Ch. 12/MNTV
Ch. 11/CBS
Ch. 10/ABC
Ch. 20/MNTV
Ch. 9/NBC
Ch. 9/CBS
Ch. 25/ABC
Ch. 12/NBC
Ch. 10/CBS
Ch. 36/MNTV
Ch. 11/NBC
Ch. 13/CBS
Ch. 7/NBC
Ch. 11/ABC
Ch. 4/CBS
Ch. 54/MNTV
Ch. 2/NBC
Ch. 6/NBC
Ch. 13/ABC
Ch. 11/NBC
Ch. 4/CBS
Ch. 5/NBC
Ch. 2/NBC
Ch. 36/NBC
Ch. 2/CBS
Ch. 3/NBC
Ch. 8/NBC
Ch. 19/CBS
Ch. 10/NBC
Ch. 24/ABC
Ch. 8/ABC
Ch. 11/CBS
Ch. 5/CBS
Ch. 13/ABC
Ch. 5/NBC
Ch. 16/IND
Ch. 2/CBS
Ch. 22/CW
Affiliation
Agreement
Expires in
2017
2016
2017
2016
2014
2015
2014
2014
2017
2015
2014
2017
2015
2016
2017
2015
2015
2014
2017
2014
2017
2017
2014
2017
2016
2017
2017
2015
2015
2017
2015
2015
2017
2014
2014
2017
2017
2014
2015
2016
2016
Weekly
Audience (6) Founded
(7)
562,000
1,240,000
750,000
190,000
81,000
421,000
85,300
536,000
1,171,000
1,803,000
404,000
501,000
1,262,000
793,000
1,556,000
206,000
198,000
514,000
543,000
169,000
107,000
310,000
394,000
1,300,000
997,000
984,000
513,000
769,000
582,000
1,114,000
809,000
291,000
460,000
488,000
1,694,000
1,595,000
629,000
539,000
1,370,000
618,000
282,000
95,000
1970
1995
1953
1955
1967
1984
1955
1955
1988
1952
1949
1989
1957
1965
1954
1948
1953
1953
1950
1957
1955
1954
1953
1962
1953
1954
1947
1954
1967
1949
1948
1956
1953
1956
1971
1949
1953
1950
1953
1948
1997
1954
1983
(1) Stations serviced by Gannett under shared services and similar arrangements.
(2) Meredith Corporation has agreed to purchase KMOV-TV, KTVK-TV and KASW-TV.
(3) The company also owns KGWZ-LD, a low power television station in Portland, OR.
(4) The company also owns WBXN-CA, a Class A television station in New Orleans, LA.
(5) The company also owns KTFT-LD (NBC), a low power television station in Twin Falls, ID.
(6) Weekly audience is number of television households reached, according to the November 2013 Nielsen book.
(7) Audience numbers fall below minimum reporting standards.
The company also has two regional news channels, Texas Cable News (TXCN) in Dallas/Fort Worth, TX, and Northwest Cable News (NWCN) in Seattle/
Tacoma, WA, and two local news channels, 24/7 NewsChannel in Boise, ID and NewsWatch on Channel 15 in New Orleans, LA. These operations provide
news coverage and certain other programming in a comprehensive 24-hour a day format using the resources of the company’s television stations in Texas,
Washington, Oregon, Idaho, Louisiana and Arizona.
14
DAILY LOCAL MEDIA ORGANIZATIONS AND AFFILIATED DIGITAL PLATFORMS
Average 2013 Circulation - Print and
Digital Replica and Non-Replica
Afternoon
Morning
Sunday
33,035
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
15
26,952
263,348
8,753
35,369
8,059
16,428
19,669
76,945
53,099
56,787
33,862
30,303
15,042
509,197
1890
1901
40,024
1927
1871
1859
24,835
1873
107,209
1871
86,394
1966
76,461
1884
48,495
1889
40,933
1905
12,746
1944
145,930
280,428
1903
24,775
21,849
10,088
90,982
10,359
33,240
1829
28,282
1899
15,097
1831
186,383
1849
1860
125,887
222,229
1868
16,605
24,430
23,696
4,867
34,946
15,447
22,242
1883
32,653
1865
26,561
1890
6,041
1939
51,955
1871
20,463
1900
DAILY LOCAL MEDIA ORGANIZATIONS AND AFFILIATED DIGITAL PLATFORMS
Average 2013 Circulation - Print and
Digital Replica and Non-Replica
Afternoon
Morning
Sunday
18,446
Founded
1900
13,019
193,420
38,770
9,913
16,482
20,925
50,950
32,039
23,479
38,046
90,859
12,082
41,217
23,720
16,152
11,700
31,425
14,102
10,113
22,756
101,113
64,022
29,820
784,243
1832
53,244
1855
14,452
1843
24,894
1900
27,210
1861
8,872
12,154
1897
60,307
1837
51,010
1893
26,669
1885
60,869
1870
133,276
1879
15,610
1884
53,575
1875
28,633
1879
19,720
1900
1864
41,697
1904
21,727
1828
1815
30,892
1785
140,239
1833
81,896
1829
43,845
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
16
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
Burlington
McLean
Staunton
Utah
Vermont
Virginia
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
Average 2013 Circulation - Print and
Digital Replica and Non-Replica
Afternoon
Morning
Sunday
3,818
Founded
1923
8,076
9,895
1800
122,900
236,689
1841
17,572
6,174
11,314
31,894
46,957
30,295
12,187
15,763
10,665
96,542
14,665
25,255
2,862,229
12,916
38,509
9,911
41,542
9,603
12,712
14,054
3,800
5,629
8,022
4,748
1842
1856
9,865
1807
25,187
1885
7,883
1880
11,821
14,437
1820
2,437
1864
13,325
1852
38,501
1851
92,288
1874
55,182
1881
16,785
1808
24,287
1848
14,784
1848
219,188
1812
17,029
1963
30,602
1827
1982
16,093
1904
50,722
1853
13,076
1870
61,666
1915
11,394
1898
7,608
1927
17,805
1868
17,639
1907
15,880
20,029
1873
1903
1914
7,500
14,855
7,657
* USA TODAY morning figure is the average Print and Digital Replica and Non-Replica circulation according to the Alliance for Audited
Media’s September 2013 Publisher’s Statement.
17
DAILY PAID-FOR LOCAL MEDIA ORGANIZATIONS AND AFFILIATED DIGITAL PLATFORMS/NEWSQUEST PLC
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.yorkpress.co.uk
Circulation*
Monday-Saturday
26,705
Founded
1969
18,293
17,199
22,007
21,641
16,622
12,889
35,196
39,234
41,030
19,748
16,569
26,846
15,506
15,195
11,922
22,057
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 2013
** Publishes Monday-Friday
Non-daily publications: Essex, London, Midlands, North East, North West, South Coast, South East, South and East Wales, South West,
Yorkshire
GANNETT DIGITAL
CareerBuilder: www.careerbuilder.com
Headquarters: Chicago, IL
Sales offices: Atlanta, GA; Boston, MA; Charlotte, NC; Chicago, IL; Cincinnati, OH; Dallas, TX; Denver, CO; Detroit, MI; Edison, NJ;
Los Angeles; Minneapolis, MN; Moscow, ID; Nashville, TN; New York, NY; Orlando, FL; Overland Park, KS; Philadelphia, PA; San
Bruno, CA; Scottsdale, AZ; Seattle, WA; Washington, DC
International offices: Brazil, Canada, China, France, Germany, Greece, India, Indonesia, Italy, Malaysia, Netherlands, Belgium, Norway,
Singapore, Spain, Sweden, United Kingdom, Vietnam
PointRoll, Inc.: www.pointroll.com
Headquarters: King of Prussia, PA
Sales offices: Atlanta, GA; Boston, MA; Chicago, IL; Detroit, MI; Los Angeles, CA; New York, NY; San Francisco, CA;
Shoplocal: www.shoplocal.com
Headquarters: Chicago, IL
Sales office: Chicago, IL
Mobile and Tablet: Gannett powers more than 500 local mobile and tablet products and also partners with mobile service providers to
power news alerts and mobile marketing campaigns. Gannett has also developed and deployed leading applications for iPad, iPhone,
Kindle, Android and Windows.
18
USA TODAY/USATODAY.com
Headquarters and editorial offices: McLean, VA
Print sites: Albuquerque, NM; Atlanta, GA; Columbia, SC; Denver, CO; Des Moines, IA; Eugene, OR; Fort Lauderdale, FL; Houston, TX;
Indianapolis, IN; Las Vegas, NV; Lawrence, KS; Los Angeles, CA; Louisville, KY; Milwaukee, WI; Minneapolis, MN; Mobile, AL;
Nashville, TN; Newark, OH; Norwood, MA; Oklahoma City, OK; Orlando, FL; Phoenix, AZ; Plano, TX; Rochester, NY; Rockaway, NJ; St.
Louis, MO; Salt Lake City, UT; San Jose, CA; Seattle, WA; Springfield, VA; Sterling Heights, MI; Tampa, FL; Warrendale, PA;
Wilmington, DE; Winston-Salem, NC
Advertising offices: Atlanta, GA; Chicago, IL; Dallas, TX; Detroit, MI; Los Angeles, CA; McLean, VA; New York, NY; San Francisco, CA
USA TODAY Sports Media Group: www.bigleadsports.com; www.kffl.com; www.thehuddle.com (subscription); www.hoopsworld.com;
hoopshype.com; mmajunkie.com; bnqt.com; www.baseballhq.com (subscription); www.quickish.com; www.venturethere.com;
www.schedulestar.com; www.usatodayhss.com; ftw.usatoday.com; q.usatoday.com
Headquarters: Los Angeles
Advertising offices: Los Angeles, CA; McLean, VA; New York, NY
USA TODAY Travel Media Group
Headquarters: McLean, VA
Advertising offices: McLean, VA
USA WEEKEND: www.usaweekend.com
Headquarters and editorial offices: McLean, VA
Advertising offices: Chicago, IL; Los Angeles, CA; New York, NY; San Francisco, CA
Reviewed.com: www.reviewed.com
Headquarters: Cambridge, MA
G/O Digital: BLiNQ Media: www.blinqmedia.com; Deal Chicken: www.dealchicken.com; Clipper Digital: www.clippermagazine.com;
www.DoubleTakeOffers.com; G/O Digital: www.godigitalmarketing.com; Mobestream Media (Key Ring): www.keyringapp.com
Headquarters: Chicago, IL
Sales offices: Atlanta, GA; Chicago, IL; Dallas, TX; McLean, VA; New York, NY; Phoenix, AZ
BLiNQ Media: www.blinqmedia.com; bam.blinqmedia.com
Headquarters: New York, NY
Advertising offices: Atlanta, GA; Chicago, IL; New York, NY
Mobestream Media: www.keyringapp.com
Headquarters: Dallas, TX
Clipper Magazine: www.clippermagazine.com; DoubleTakeOffers.com
Headquarters: Mountville, PA
Gannett Healthcare Group: www.GannettHG.com; www.GannettEducation.com; www.ContinuingEducation.com; www.Nurse.com;
www.TodayinPT.com; www.PearlsReview.com
Headquarters: Hoffman Estates, IL
Regional offices: Dallas, TX; San Jose, CA
Publications: Nurse.com, Today in PT, Today in OT
Gannett Government Media Corp.
Headquarters: Springfield, VA
Publications: Army Times: www.armytimes.com, Navy Times: www.navytimes.com, Marine Corps Times: www.marinecorpstimes.com, Air
Force Times: www.airforcetimes.com, Federal Times: www.federaltimes.com, Defense News: www.defensenews.com, C4ISR & Networks:
www.c4isrnet.com, Military Times EDGE: www.militarytimesedge.com
Gannett Media Technologies International: www.gmti.com
Headquarters: Norfolk, VA
Regional offices: Cincinnati, OH; Phoenix, AZ
Non-daily publications: Weekly, semi-weekly, monthly or bimonthly publications in Alabama, Arizona, Arkansas, California, Colorado,
Delaware, Florida, Guam, Indiana, Iowa, Kentucky, Louisiana, Maryland, Michigan, Minnesota, Mississippi, Missouri, Montana, Nevada,
New Jersey, New York, North Carolina, Ohio, Oregon, South Carolina, South Dakota, Tennessee, Utah, Vermont, Virginia, Wisconsin
Gannett Publishing Services: www.gannettpublishingservices.com
Headquarters: McLean, VA
Sales office: Atlanta, GA
Gannett Satellite Information Network: McLean, VA
GANNETT ON THE NET: News and information about Gannett is available on its web site, www.gannett.com. In addition to news and other information
about Gannett, the company provides access through this site to its annual report on Form 10-K, its quarterly reports on Form 10-Q, its current reports on
Form 8-K and all amendments to those reports as soon as reasonably practicable after the company files or furnishes them electronically to the Securities
and Exchange Commission (SEC). Certifications by Gannett’s Chief Executive Officer and Chief Financial Officer are included as exhibits to the company’s
SEC reports (including to this Form 10-K).
Gannett also provides access on this web site to its Principles of Corporate Governance, the charters of its Audit, Transformation, Executive
Compensation and Nominating and Public Responsibility Committees and other important governance documents and policies, including its Ethics and
Inside Trading Policies. Copies of all of these corporate governance documents are available to any shareholder upon written request made to the company’s
Secretary at the headquarters address. In addition, the company will disclose on this web site changes to, or waivers of, its corporate Ethics Policy.
19
Volatility in global financial markets directly affects the value of
our pension plan assets and liabilities
The company’s three largest retirement plans, which account for
more than 95% of total pension plan assets, were underfunded as of
Dec. 29, 2013 by $456 million on a U.S. GAAP basis. Various
factors, including future investment returns, discount rates and
potential pension legislative changes, impact the timing and amount
of pension contributions the company may be required to make in
the future.
Foreign exchange variability could adversely affect our
consolidated operating results
Weakening of the British pound-to-U.S. dollar exchange rate could
diminish Newsquest’s earnings contribution to consolidated results.
Newsquest results for 2013 were translated to U.S. dollars at the
average rate of 1.56. CareerBuilder, with expanding overseas
operations, also has foreign exchange risk but to a significantly
lesser degree.
Changes in the regulatory environment could encumber or
impede our efforts to improve operating results or the value of
assets
Our broadcasting, publishing and digital operations are subject to
government regulation. Changing regulations, particularly FCC
Regulations which affect our television stations (including changes
to our shared services and similar agreements), may result in
increased costs, reduced valuations for certain broadcasting
properties or other impacts, all of which may adversely impact our
future profitability. For example, the FCC is expected to release an
order determining that certain joint sales agreements between
stations will be treated as attributable interests and seek comment
about shared services agreements and local news agreements,
including whether such arrangements should be attributable for
purposes of the FCC’s ownership rules. In addition, the FCC is
seeking comment on rules governing a “repacking” of the broadcast
spectrum which may require certain stations to move to different
channels. All of our television stations are required to possess
television broadcasting licenses from the FCC; when granted, these
licenses are generally granted for a period of eight years. Under
certain circumstances the FCC is not required to renew any license
and could decline to renew either our current license applications
that are pending or those submitted in the future.
ITEM 1A. RISK FACTORS
In addition to the other information contained or incorporated by
reference into this Form 10-K, prospective investors should consider
carefully the following risk factors before investing in our securities.
The risks described below may not be the only risks we face.
Additional risks that we did not yet perceive or that we currently
believe are immaterial may also adversely affect our business and
the trading price of our securities.
Deterioration in economic conditions in the markets we serve in
the U.S., U.K. and other international markets we serve may
depress demand for our products and services
Our operating results depend on the relative strength of the economy
in our principal television, publishing and digital markets as well as
the strength or weakness of national and regional economic factors.
Generally soft economic conditions and uneven recoveries in the
U.S. and U.K. have had a significant adverse impact on the
company’s businesses, particularly publishing. If conditions remain
challenging or worsen in the U.S. or U.K. economy, all key
advertising revenue categories could be significantly impacted.
Competition from alternative forms of media may impair our
ability to grow or maintain revenue levels in core and new
businesses
Advertising produces the predominant share of our broadcasting,
publishing and digital revenues, with affiliated web site, mobile and
tablet revenues being an important component. With the continued
development of alternative forms of media, particularly electronic
media including those based on the Internet, our businesses may face
increased competition. Alternative media sources may also affect our
ability to generate circulation revenues and our television audience.
In addition, new and emerging technologies such as subscription
streaming media services and mobile video are increasing
competition for household audiences and advertisers. Services such
as Aereo and FilmOn X provide their subscribers with streaming
content from television stations, over the Internet. Litigation is
ongoing over the claims of certain broadcasters and networks that
such services, which are offered without broadcasters’ consent,
violate copyright law. The Supreme Court has agreed to hear an
appeal of the Second Circuit’s decision affirming a district court
decision to deny a preliminary injunction against Aereo.
This competition may make it difficult for us to grow or maintain
our print advertising, circulation and broadcasting revenues, which
we believe will challenge us to expand the contributions of our
online and other digital businesses.
Continued volatility in the U.S. credit markets could
significantly impact the company’s ability to obtain new
financing to fund its operations and strategic initiatives or to
refinance its existing debt at reasonable rates as it matures
At the end of 2013, the company had approximately $3.7 billion in
long-term debt and approximately $1.2 billion of additional
borrowing capacity under its revolving credit facilities. This debt
matures at various times during the years 2014-2027. While the
company’s cash flow is expected to be sufficient to pay amounts
when due, if operating results deteriorate significantly, a portion of
these maturities may need to be refinanced. Access to the capital
markets for longer term financing is unpredictable, and volatile
credit markets could make it harder for us to obtain debt financings
generally.
20
Our strategic acquisitions, investments and partnerships could
pose various risks, increase our leverage and may significantly
impact our ability to expand our overall profitability
Acquisitions involve inherent risks, such as increasing leverage and
debt service requirements and combining company cultures and
facilities, which could have a material adverse effect on our results
of operations or cash flow and could strain our human resources. We
may not be able to successfully implement effective cost controls,
achieve expected synergies or increase revenues as a result of any
acquisition. Acquisitions may result in our assumption of unexpected
liabilities and may result in the diversion of management’s attention
from the operation of our legacy business. In addition, disclosures
we make regarding past operating results of acquired entities and our
pro forma results are based on financial information provided to us
by acquired entities, which has not been reviewed by our auditors or
subject to our internal controls. Acquisitions may also result in us
having greater exposure to the industry risks of the businesses
underlying the acquisition. For example, our recent acquisition of
Belo escalated our dependency on network affiliation agreements
and beneficial retransmission agreements. Strategic investments and
partnerships with other companies expose us to the risk that we may
not be able to control the operations of our investee or partnership,
which could decrease the amount of benefits we realize from a
particular relationship. The company is also exposed to the risk that
its partners in strategic investments and infrastructure may encounter
financial difficulties which could lead to disruption of investee or
partnership activities, or impairment of assets acquired, which would
adversely affect future reported results of operations and
shareholders’ equity.
The value of our existing intangible assets may become impaired,
depending upon future operating results
Goodwill and other intangible assets were approximately $5.27
billion as of Dec. 29, 2013, representing approximately 57% of our
total assets. We periodically evaluate our goodwill and other
intangible assets to determine whether all or a portion of their
carrying values may no longer be recoverable, in which case a
charge to earnings may be necessary, as occurred in 2013 and 2012
(see Notes 3 and 4 to the Consolidated Financial Statements). Any
future evaluations requiring an asset impairment charge for goodwill
or other intangible assets would adversely affect future reported
results of operations and shareholders’ equity, although such charges
would not affect our cash flow.
Adverse results from litigation or governmental investigations
can impact our business practices and operating results
From time to time, we are parties to litigation and regulatory,
environmental and other proceedings with governmental authorities
and administrative agencies. Adverse outcomes in lawsuits or
investigations could result in significant monetary damages or
injunctive relief that could adversely affect our operating results or
financial condition as well as our ability to conduct our businesses as
they are presently being conducted. See Note 12 of the Notes to
Consolidated Financial Statements and Part I, Item 3. “Legal
Proceedings” contained elsewhere in this report for a description of
certain of our pending litigation and regulatory matters and other
proceedings with governmental authorities.
The value of our assets or operations may be diminished if our
information technology systems fail to perform adequately or if
we are the subject of a data breach or cyber attack
Our information technology systems are critically important to
operating our business efficiently and effectively. We rely on our
information technology systems to manage our business data,
communications, news and advertising content, digital products,
order entry, fulfillment and other business processes. The failure of
our information technology systems to perform as we anticipate
could disrupt our business and could result in transaction errors,
processing inefficiencies, late or missed publications, and loss of
sales and customers, causing our business and results of operations
to suffer.
Furthermore, attempts to compromise information technology
systems occur regularly across many industries and sectors, and we
may be vulnerable to security breaches beyond our control. We
invest in security resources and technology to protect our data and
business processes against risk of data security breaches and cyber
attack, but the techniques used to attempt attacks are constantly
changing. A breach or successful attack could have a negative
impact on our operations or business reputation. We maintain cyber
risk insurance, but this insurance may not be sufficient to cover all of
our losses from any future breaches of our systems.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
21
Corporate facilities
The company owns the buildings in which its headquarters and
USA TODAY are located in McLean, VA. The company also owns
data and network operations centers in nearby Maryland and in
Phoenix, AZ. Headquarters facilities are adequate for present
operations. The company also leases space in its headquarters
facilities to third-party tenants.
ITEM 3. LEGAL PROCEEDINGS
Information regarding legal proceedings may be found in Note 12 of
the Notes to Consolidated Financial Statements.
Environmental
From time to time, some of the company’s current and former
subsidiaries have been included among potentially responsible
parties in connection with sites that have been identified as possibly
requiring environmental remediation. These environmental
proceedings are highly complex, and require a variety of issues to be
resolved, including the extent of contamination, the nature and
extent of investigation and remedial action that may ultimately be
required, and the number of parties that will be required to
contribute to such investigation and remediation costs, before the
company’s liability for them, if any, will be known.
In March 2011, the Advertiser Company, a Gannett subsidiary
which publishes The Montgomery Advertiser, was notified by the
U.S. EPA that it has been identified as a potentially responsible party
for the investigation and remediation of groundwater contamination
in downtown Montgomery, AL. At this point in the investigation,
incomplete information is available about the site, other potentially
responsible parties and what further investigation and remediation
may be required. Accordingly, future costs at the site, and The
Advertiser Company’s share of such costs, if any, cannot yet be
determined. Some of The Advertiser Company’s fees and costs in
connection with this matter may be reimbursed under its liability
insurance policies.
Management does not expect that these pending proceedings will
have a material adverse effect upon the company’s consolidated
results of operations or financial condition.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 2. PROPERTIES
Broadcasting
The company’s broadcasting facilities are adequately equipped with
the necessary television broadcasting equipment. The company owns
or leases transmitter facilities in 40 locations. All of the company’s
stations have converted to digital television operations in accordance
with applicable FCC Regulations. The company’s broadcasting
facilities are adequate for present purposes. A listing of television
stations can be found on page 14.
Publishing
Generally, the company owns many of the plants that house all
aspects of the publication process. Certain U.S. Community
Publishing operations have outsourced printing to non-Gannett
publishers or commercial printers. In the case of USA TODAY, at
Dec. 29, 2013, 22 non-Gannett printers were used to print it in U.S.
markets where there were no company publishing sites with
appropriate facilities. Non-Gannett printers in 9 foreign countries
publish and distribute an international edition of USA TODAY under
a royalty agreement. USA WEEKEND, Clipper Magazine and
Gannett Healthcare Group are also printed under contracts with
commercial printing companies. Many of the company’s local media
organizations have outside news bureaus and sales offices, which
generally are leased. In several markets, two or more of the
company’s local media organizations share combined facilities; and
in certain locations, facilities are shared with other non-Gannett
publishing properties. At the end of 2013, 78% of the company’s
U.S. daily publications were either printed by non-Gannett printers
or printed in combination with other Gannett publications. The
company’s publishing properties have rail siding facilities or access
to main roads for newsprint delivery purposes and are conveniently
located for distribution purposes.
During 2013, the company continued its efforts to consolidate
certain of its U.S. publishing facilities to achieve ongoing savings
and greater efficiencies. The company’s facilities are adequate for
present operations. A listing of publishing centers and key properties
may be found on pages 15-17.
Newsquest owns certain of the plants where its publications are
produced and leases other facilities. Newsquest headquarters is in
Weybridge, Surrey. Additions to Newsquest’s printing capacity and
color capabilities have been made since Gannett acquired Newsquest
in 1999. Newsquest has consolidated certain of its facilities to
achieve savings and efficiencies. Certain Newsquest operations have
out-sourced printing to non-Newsquest publishers. All of
Newsquest’s properties are adequate for present purposes. A listing
of Newsquest publishing centers and key properties may be found on
page 18.
Digital
Generally, the company’s digital businesses lease their facilities.
This includes facilities for executive offices, sales offices and data
centers. The company’s facilities are adequate for present operations.
The company also believes that suitable additional or alternative
space, including those under lease options, will be available at
commercially reasonable terms for future expansion. A listing of key
digital facilities can be found on pages 18-19.
22
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
Gannett Co., Inc. shares are traded on the New York Stock Exchange with the symbol GCI.
Information regarding outstanding shares, shareholders and dividends may be found on pages 1, 6, 40 and 41 of this Form 10-K.
Information about debt securities sold in private transactions may be found on pages 38-40 of this Form 10-K.
Gannett Common stock prices
High-low range by fiscal quarters based on NYSE-composite closing prices.
Year
2009
2010
2011
Low
Quarter
First. . . . . . . . . . . . . . . . . . . . . . $
1.95
Second . . . . . . . . . . . . . . . . . . . $
2.20
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 . . . . . . . . . . . . . . . . . . . . . $
9.16
Fourth . . . . . . . . . . . . . . . . . . . . $
High
9.30
$
$
5.48
$ 10.14
$ 15.63
$ 17.25
$ 18.67
$ 15.11
$ 15.78
$ 17.19
$ 15.64
$ 14.60
$ 13.57
Year
2012
2013
2014
Low
Quarter
First. . . . . . . . . . . . . . . . . . . . . . $ 13.36
Second . . . . . . . . . . . . . . . . . . . $ 12.33
Third . . . . . . . . . . . . . . . . . . . . . $ 13.20
Fourth . . . . . . . . . . . . . . . . . . . . $ 16.63
First. . . . . . . . . . . . . . . . . . . . . . $ 18.01
Second . . . . . . . . . . . . . . . . . . . $ 19.85
Third . . . . . . . . . . . . . . . . . . . . . $ 24.06
Fourth . . . . . . . . . . . . . . . . . . . . $ 24.39
First*. . . . . . . . . . . . . . . . . . . . . $ 26.36
High
$ 15.61
$ 15.74
$ 18.75
$ 18.97
$ 22.07
$ 26.60
$ 26.67
$ 29.31
$ 30.04
* Through Feb. 18, 2014
Purchases of Equity Securities
Period
9/30/13 – 11/3/13. . . . . . . . . . . . . . .
11/4/13 – 12/1/13. . . . . . . . . . . . . . .
12/2/13 – 12/29/13. . . . . . . . . . . . . .
(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
398,000
945,000
75,000
$
$
$
$
26.42
26.81
26.73
26.69
398,000
945,000
75,000
1,418,000
$
$
$
$
252,084,536
226,751,369
224,746,379
224,746,379
Total 4th Quarter 2013 . . . . . . . . .
1,418,000
On June 11, 2013, the company’s Board of Directors approved a new $300 million share repurchase program (replacing the 2012 $300 million program). While
the Board of Directors reviews the program at least annually, there is no current expiration date for the new $300 million authorization. However, it is targeted
to be completed over the two years following the announcement.
23
Comparison of shareholder return – 2009 to 2013
The following graph compares the performance of the company’s
common stock during the period Dec. 31, 2008, to Dec. 31, 2013,
with the S&P 500 Index, and a peer group index selected by the
company.
The company’s peer group includes A.H. Belo Corp., Discovery
Communications Inc., The E.W. Scripps Company, Graham
Holdings Company, Journal Communications, Inc., The McClatchy
Company, Media General, Inc., Meredith Corp., Monster Worldwide
Inc., The New York Times Company, News Corp., and Yahoo Inc.
(collectively, the “Peer Group”). Many of the Peer Group companies
have a strong publishing/broadcasting orientation, but the Peer
Group also includes companies in the digital media industry.
The S&P 500 Index includes 500 U.S. companies in the
ITEM 6. SELECTED FINANCIAL DATA
Selected financial data for the years 2009 through 2013 is contained
under the heading “Selected Financial Data” on page 74 and is
derived from the company’s audited financial statements for those
years.
The information contained in the “Selected Financial Data” is
not necessarily indicative of the results of operations to be expected
for future years, and should be read in conjunction with
“Management’s Discussion and Analysis of Financial Condition and
Results of Operations” included in Item 7 and the consolidated
financial statements and related notes thereto included in Item 8 of
this Form 10-K.
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, 2008. It assumes that dividends were
reinvested monthly with respect to the company’s common stock,
daily with respect to the S&P 500 Index and monthly with respect to
each Peer Group company.
2008
2009
2010
2011
2012
2013
Gannett Co., Inc. . $100 $192.25 $197.57 $178.54 $252.50 $ 427.96
S&P 500 Index. . . $100 $126.46 $145.51 $148.59 $172.37 $ 228.19
Peer Group . . . . . . $100 $151.79 $164.25 $175.07 $239.98 $ 347.83
24
Certain factors affecting forward-looking statements
Certain statements in this Annual Report on Form 10-K contain
forward-looking information. The words “expect,” “intend,”
“believe,” “anticipate,” “likely,” “will” and similar expressions
generally identify forward-looking statements. These forward-
looking statements are subject to certain risks and uncertainties that
could cause actual results and events to differ materially from those
anticipated in the forward-looking statements. The company is not
responsible for updating or revising any forward-looking statements,
whether the result of new information, future events or otherwise,
except as required by law.
Potential risks and uncertainties which could adversely affect the
company’s results include, without limitation, the following factors:
(a) increased consolidation among major retailers or other events
which may adversely affect business operations of major customers
and depress the level of local and national advertising; (b) a potential
increase in competition for the company’s Digital Segment
businesses; (c) a decline in viewership of major networks and local
news programming resulting from increased competition or other
factors; (d) a continuance of the generally soft economic conditions
in the U.S. and the U.K. or a further economic downturn leading to a
continuing or accelerated decrease in circulation or local, national or
classified advertising; (e) a further decline in general print readership
and/or advertiser patterns as a result of competitive alternative media
or other factors; (f) an increase in newsprint or syndication
programming costs over the levels anticipated; (g) labor disputes
which may cause revenue declines or increased labor costs;
(h) acquisitions of new businesses or dispositions of existing
businesses; (i) rapid technological changes and frequent new product
introductions prevalent in electronic publishing; (j) an increase in
interest rates; (k) a weakening in the British pound to U.S. dollar
exchange rate; (l) volatility in financial and credit markets which
could affect the value of retirement plan assets and the company’s
ability to raise funds through debt or equity issuances; (m) changes
in the regulatory environment; (n) credit rating downgrades, which
could affect the availability and cost of future financing; (o) adverse
outcomes in proceedings with governmental authorities or
administrative agencies; (p) cyber security breaches (q) general
economic, political and business conditions; and (r) an other than
temporary decline in operating results and enterprise value that could
lead to further non-cash goodwill, other intangible asset, investment
or property, plant and equipment impairment charges. The company
continues to monitor the uneven economic recovery in the U.S., as
well as new and developing competition and technological change,
to evaluate whether any indicators of impairment exist, particularly
for those reporting units where fair value is closer to carrying value.
Executive Summary
Gannett Co., Inc. is a leading international media and marketing
solutions company operating primarily in the United States and the
United Kingdom (U.K.). Approximately 90% of 2013 consolidated
revenues are generated by its domestic operations and approximately
10% by its foreign operations, primarily in the U.K.
Gannett implements its strategy and manages its operations
through three business segments: Broadcasting (television),
Publishing, and Digital. Through its Broadcasting Segment, the
company owns or services (through shared service agreements or
similar arrangements) 43 television stations with affiliated digital
platforms sites. These stations serve 30% of the U.S. population in
markets with a total of nearly 35 million households.
The Publishing Segment includes the operations of 99 daily
publications in the U.S., U.K. and Guam, more than 400 non-daily
local publications in the United States and Guam and more than 200
such titles in the U.K. Its 82 U.S. daily publications, including
USA TODAY, the nation’s number one newspaper in combined print
and digital circulation, with an average circulation of approximately
2.9 million, have a combined daily average circulation of
5.6 million, which is the nation’s largest publishing group in terms of
circulation. Together with the 17 daily paid-for publications its
Newsquest division operates in the U.K., the total average daily print
and digital circulation of its 99 domestic and U.K. daily publications
was approximately 6.0 million for 2013. Daily newspapers also
operate web sites, mobile and tablet products which are tightly
integrated with publishing operations. The company’s broadcasting
and publishing operations also have strategic business relationships
with online affiliates including CareerBuilder, Classified Ventures,
Shoplocal.com and Topix.
The Publishing Segment also includes commercial printing,
newswire, marketing and data services operations.
The largest businesses within the company’s Digital Segment are
CareerBuilder, PointRoll and Shoplocal. CareerBuilder is the global
leader in human capital solutions, helping companies to target,
attract and retain talent. Its online job site, CareerBuilder.com, is the
largest in North America with the highest revenue. CareerBuilder is
also rapidly expanding its international operations.
Fiscal year: The company’s fiscal year ends on the last Sunday
of the calendar year. The company’s 2013 fiscal year ended on Dec.
29, 2013, and encompassed a 52-week period. The company’s 2012
fiscal year encompassed a 53-week period and the 2011 fiscal year
encompassed a 52-week period.
Operating results summary: Company-wide operating revenues
were $5.16 billion in 2013, a decrease of 4% from $5.35 billion in
2012. This decline was primarily due to the relative absence of a
record $150 million in political advertising and $37 million of
advertising associated with the Summer Olympic Games generated
during 2012. On a comparable 52 week basis, total company
revenues excluding the incremental impact of political and Olympic
advertising revenues, were up slightly.
Broadcasting revenues for 2013 were $835 million or 8% lower
than 2012 levels, as a significant increase in retransmission revenues
was offset by the absence of significant political spending which
reached record levels in 2012. The comparison to 2012 was also
impacted by the Olympic spending in 2012. On a comparable 52
week basis, broadcasting revenues, excluding the incremental impact
of political and Olympic advertising, were 13% higher.
Publishing revenues were $3.58 billion for 2013 or 4% below
2012 levels, reflecting a 7% decline in advertising revenues, partially
offset by a 1% increase in circulation revenues. The increase in
circulation revenues represents the second consecutive year of
higher circulation revenues and reflects the impact of the All Access
Content Subscription Model as well as cover price increases at
Newsquest and USA TODAY.
Digital Segment revenues totaled $748 million for 2013, an
increase of 4%, reflecting stronger results at CareerBuilder driven by
additional partner programs, the strength of human capital software
solutions, the recent vertical acquisition of Oil & Gas Job Search and
geographical expansion into Vietnam.
Digital revenues company-wide, including the Digital Segment
and all digital revenues generated by other business segments, were
approximately $1.47 billion in 2013, nearly 30% of total operating
revenues and an increase of 16% compared to 2012. The increase
was driven primarily by the impact of the All Access Content
Subscription Model as well as higher revenue associated with digital
advertising and marketing solutions across all segments, and
CareerBuilder.
Total operating expenses decreased by 3% to $4.42 billion for
2013, due to lower circulation print volumes in Publishing and
continued cost efficiency efforts company-wide.
Newsprint expense for publishing was 14% lower than in 2012
due to a decline in consumption and prices.
The company reported operating income for 2013 of $739
million compared to $790 million in 2012, a 6% decrease.
The company’s net equity income in unconsolidated investees
for 2013 was $44 million, an increase of $21 million over 2012. This
increase reflects better results at Classified Ventures as well as
reduced impairment charges in 2013.
Interest expense was $176 million in 2013, an increase of $26
million compared to 2012, largely due to new debt associated with
the Belo transaction.
The company reported net income attributable to
Gannett Co., Inc. of $389 million or $1.66 per diluted share for 2013
compared to $424 million or $1.79 per diluted share for 2012.
Net income attributable to noncontrolling interests was $57
million in 2013, an increase of 13% or $7 million over 2012,
reflecting significantly improved operating results at CareerBuilder.
During 2013, the company paid out $183 million in dividends
and repurchased 4.9 million shares at a cost of $117 million for an
average price of $23.59 per share.
Outlook for 2014: For 2014, the company expects significant
revenue growth in its Broadcasting Segment, Publishing Segment
revenues to be flat to down in the low single-digit percentages, and
growth in the Digital Segment consistent with 2013. The projected
increase in Broadcasting Segment revenues is due primarily to the
impact of the Belo acquisition, political and Olympic even year
peaks, higher retransmission revenues and television digital revenue
growth. Broadcasting Segment revenues are expected to increase in
the range of 95% to 100%, reflecting 125% to 130% growth in
retransmission revenues combined with incremental revenues from
political, the Winter Olympics, and continued growth in digital
advertising.
Publishing revenues will be positively impacted by the continued
growth of digital marketing services, which may be diminished by
secular declines in print advertising. Digital Segment revenues are
expected to increase primarily due to continued growth at
CareerBuilder consistent with past trends.
Total operating expenses are also expected to increase in
comparison to 2013. Broadcasting Segment expenses are anticipated
to nearly double, commensurate with growth in revenue, reflecting a
full year of Belo operating expenses and increased reverse
retransmission costs as a part of programming expenses. Publishing
expenses will reflect increased spending on initiatives such as the
integration of USA TODAY content into local publications and
digital marketing services as well as increased costs for Broadcasting
and Digital Segments associated with strong revenue growth.
Newsprint expense is also expected to be lower as consumption
continues to decrease.
25
Amortization expense is expected to be in the range of $50
million to $60 million in 2014, an increase over 2013 primarily due
to the Belo acquisition.
The company expects its interest expense to be up in 2014,
reflecting the full year impact of debt issued in the second half of
2013 primarily in connection with the Belo acquisition.
Basis of reporting
Following is a discussion of the key factors that have affected the
company’s accounting for or reporting on the business over the last
three fiscal years. This commentary should be read in conjunction
with the company’s financial statements, selected financial data and
the remainder of this Form 10-K.
Critical accounting policies and the use of estimates: The
preparation of financial statements in conformity with generally
accepted accounting principles requires management to make
estimates and assumptions about future events that affect the
amounts reported in the financial statements and accompanying
notes. Actual results could significantly differ from those estimates.
The company believes that the following discussion addresses the
company’s most critical accounting policies, which are those that are
important to the presentation of the company’s financial condition
and results of operations and require management’s most difficult,
subjective and complex judgments.
Business Combinations: The company allocates the fair value
of purchase consideration to the tangible assets acquired, liabilities
assumed and intangible assets acquired, based on their estimated fair
values. The excess of the fair value of purchase consideration over
the values of these identifiable assets and liabilities is recorded as
goodwill. When determining the fair value of assets acquired and
liabilities assumed, management makes significant estimates and
assumptions, especially with respect to intangible assets.
Critical estimates in valuing certain identifiable assets include
but are not limited to expected long-term market growth; station
revenue shares within a market; future expected operating expenses;
costs of capital; and appropriate discount rates. Management’s
estimates of fair value are based upon assumptions believed to be
reasonable, but which are inherently uncertain and unpredictable
and, as a result, actual results may differ from estimates.
Goodwill: As of Dec. 29, 2013, goodwill represented
approximately 41% of the company’s total assets. Goodwill
represents the excess of acquisition cost over the fair value of assets
acquired, including identifiable intangible assets, net of liabilities
assumed. Goodwill is tested for impairment on an annual basis (first
day of fourth quarter) or between annual tests if events occur or
circumstances change that would more likely than not reduce the fair
value of a reporting unit below its carrying amount.
Under recent guidance, prior to performing the annual two-step
goodwill impairment test, the company is first permitted to perform
a qualitative assessment to determine if the two-step quantitative test
must be completed. The qualitative assessment considers events and
circumstances such as macroeconomic conditions, industry and
market conditions, cost factors and overall financial performance, as
well as company and specific reporting unit specifications. If after
performing this assessment, the company concludes it is more likely
than not that the fair value of a reporting unit is less than its carrying
amount, then it is required to perform a two-step quantitative test.
Otherwise, the two-step test is not required. In the first step of the
quantitative test, the company is required to determine the fair value
of each reporting unit and compare it to the carrying amount of the
reporting unit. Fair value of the reporting unit is determined using
various techniques, including multiple of earnings and discounted
cash flow valuation. Determining the fair value of the reporting units
is judgmental in nature and involves the use of significant estimates
and assumptions. These estimates and assumptions include changes
26
in revenue and operating margins used to project future cash flows,
discount rates, valuation multiples of entities engaged in the same or
similar lines of business and future economic and market conditions.
If the carrying amount of the reporting unit exceeds the fair value of
the reporting unit, the company performs the second step of the
impairment test, as this is an indication that the reporting unit
goodwill may be impaired. In the second step of the impairment test,
the company determines the implied fair value of the reporting unit’s
goodwill. If the carrying value of a reporting unit’s goodwill exceeds
its implied fair value, then an impairment of goodwill has occurred
and the company must recognize an impairment loss for the
difference between the carrying amount and the implied fair value of
goodwill.
The company used both the qualitative and quantitative
assessments for its goodwill impairment testing during 2013.
In 2013, the company recognized impairment charges in its
Publishing Segment of $8 million and its Digital Segment of $12
million. Both charges were to bring the recorded goodwill equal to
implied fair value based on future projections for each reporting unit.
The impairment charges coincide with updated financial projections
for each of these reporting units.
The company has 5 major reporting units (defined as reporting
units with goodwill in excess of $50 million) which accounted for
97% of its goodwill balance at Dec. 29, 2013. The following table
shows the aggregate goodwill for these units summarized at the
segment level:
In millions of dollars
Segment
Broadcasting. . . . . . . . . . . . . . . . . . . . . . . . . . . $
Publishing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Digital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Goodwill Balance
2,544
553
576
For the Broadcasting Segment, which is considered a single
reporting unit, estimated fair value exceeded carrying value on the
date of the impairment test by over 100%. Subsequent to the
impairment testing date, the company completed its acquisition of
Belo which is part of the Broadcasting Segment. The carrying value
of Belo on the day of acquisition was equal to its fair value. At the
end of 2013, in order for the Broadcasting reporting unit to fail step
one of the goodwill impairment test, its estimated fair value would
have to decline by over 40%.
In the case of the Publishing Segment there are three major
reporting units that comprise the goodwill balance shown above.
These consist of U.S. Community Publishing (including Gannett
Publishing Services), Newsquest and USA TODAY group (which
includes USA TODAY brand properties and USA WEEKEND). The
company performed a qualitative assessment for the USA TODAY
group and concluded that it was more likely than not that the fair
value was greater than the carrying value. For U.S. Community
Publishing and Newsquest, the aggregate estimated fair value of
these reporting units exceeded the carrying value at the most recent
test. In order for these reporting units to fail step one of the goodwill
impairment test, the estimated value of the reporting units would
have to decline by over 40%.
The Digital Segment balance represents CareerBuilder, where
the company performed a qualitative assessment and concluded that
it was more likely than not that the fair value was greater than the
carrying value.
Fair value of the reporting units depends on several factors,
including the future strength of the economy in the company’s
principal broadcast, publishing and digital markets. Generally soft
and uneven recoveries in the U.S. and U.K. markets have had an
adverse effect on most of the company’s reporting units in recent
years. As a result, the differences between fair value and carrying
value have narrowed particularly for certain less significant
reporting units in the Publishing Segment. New and developing
competition as well as technological change could also adversely
affect future fair value estimates. Any one or a combination of these
factors could lead to declines in reporting unit fair values and result
in goodwill impairment charges.
Indefinite Lived Intangibles: This asset grouping consists of
FCC licenses for television stations and mastheads and trade names
for publishing and digital businesses.
Indefinite lived assets are not subject to amortization and as a
result they are tested for impairment annually (first day of the fourth
quarter), or more frequently if events or changes in circumstances
suggest that the asset might be impaired. The company is permitted
to perform a qualitative assessment to determine if it is more likely
than not that the fair value of the indefinite lived asset is less than its
carrying amount. If that is the case, then the company would not
have to perform the quantitative analysis. The qualitative assessment
considers events and circumstances such as macroeconomic
conditions, industry and market conditions, cost factors and overall
financial performance of the indefinite lived asset.
Television FCC licenses are not subject to amortization and are
tested for impairment annually (first day of fourth quarter), or more
frequently if events or changes in circumstances indicate that the
asset might be impaired. If the licenses are not tested qualitatively,
then the quantitative impairment test consists of a comparison of the
fair value of the license with its carrying amount. Fair value is
estimated using an income approach referred to as the “Greenfield
Approach.” This method requires multiple assumptions relating to
the future prospects of each individual television station including,
but not limited to: (i) expected long-term market growth
characteristics, (ii) station revenue shares within a market, (iii) future
expected operating expenses, (iv) costs of capital and (v) appropriate
discount rates. The company performed a qualitative analysis on
both of its FCC licenses on the impairment testing date and
concluded that it was more likely than not that the fair value was
more than the carrying value for each license. In addition, the
company does not believe that either of these FCC licenses is at risk
of requiring an impairment charge for the foreseeable future.
Subsequent to the impairment testing date, the company
completed its acquisition of Belo and as a result recorded FCC
licenses for all stations acquired. As these FCC licenses were
recorded at fair value on the date of acquisition, any future declines
in the fair value of the FCC license would result in an impairment
charge. Factors that could cause the fair value to decline would be a
decrease in any of the assumptions described in the above Greenfield
Approach.
Local mastheads (publishing periodical titles and web site
domain names) and other trade names are not subject to amortization
and as a result they are tested for impairment annually (first day of
the fourth quarter), or more frequently if events or changes in
circumstances suggest that the asset might be impaired. The
quantitative impairment test consists of a comparison of the fair
value of each masthead/domain name or trade name with its carrying
amount. The company uses a “relief from royalty” approach which
utilizes a discounted cash flow model to determine the fair value of
each masthead/domain name or trade name. Management’s
judgments and estimates of future operating results in determining
the reporting unit fair values are consistently applied to each
underlying business in determining the fair value of each intangible
asset. For two trade names and one masthead the fair value of each
was less than the carrying value and impairment charges totaling $12
million were incurred during 2013. The majority of the impairment
charge related to a trade name in the company’s Publishing Segment
that will not be a meaningful part of the business going forward. For
certain mastheads and other trade names, a deterioration in operating
results at the underlying business units could lead to future
impairment charges.
Other Long-Lived Assets (Property, Plant and Equipment and
Amortizable Intangible Assets): Property, plant and equipment are
recorded at cost and are depreciated on a straight-line method over
the estimated useful lives of such assets. Changes in circumstances,
such as technological advances or changes to the company’s
business model or capital strategy, could result in actual useful lives
differing from company estimates. In cases where the company
determines that the useful life of buildings and equipment should be
shortened, the company would depreciate the asset over its revised
remaining useful life thereby increasing depreciation expense.
Accelerated depreciation was recorded in the years 2011-2013
for certain property, plant and equipment, reflecting specific
decisions to consolidate production and other business services,
primarily affecting the Publishing Segment.
The company reviews its property, plant and equipment assets
for potential impairment at the asset group level (generally at the
local business level) by comparing the carrying value of such assets
with the expected undiscounted cash flows to be generated by those
asset groups/local business units. Due to expected continued cash
flow in excess of carrying value from its businesses, no property,
plant or equipment assets were considered impaired.
The company’s amortizable intangible assets consist mainly of
customer relationships and retransmission agreements. These asset
values are amortized systematically over their estimated useful lives.
An impairment test of these assets would be triggered if the
undiscounted cash flows from the related asset group (business unit)
were to be less than the asset carrying value. Impairment charges
totaled less than $1 million in 2013 for amortizable intangible assets.
For certain of these amortizable intangible assets, a significant
deterioration in operating results at the underlying business unit
could lead to future impairment charges.
27
Pension Accounting: The company and its subsidiaries have
various retirement plans, under which substantially all of the benefits
have been frozen in previous years. The company accounts for its
pension plans in accordance with the applicable accounting
guidance, which requires it to include the funded status of its
pension plans in the balance sheets, and to recognize, as a
component of other comprehensive income (loss), the gains or losses
that arise during the period, but are not recognized in pension
expense. Pension expense is reported on the consolidated statement
of income as “Cost of sales and operating expenses,” or “Selling,
general and administrative expenses”.
The determination of pension plan obligations and expense is
dependent upon a number of assumptions regarding future events,
the most important of which are the discount rate applied to pension
plan obligations and the expected long-term rate of return on plan
assets. The discount rate assumption is based on investment yields
available at year-end on corporate bonds rated AA and above with a
maturity to match the expected benefit payment stream. A decrease
in discount rates would increase pension obligations, thus changing
the funded status recorded on the company’s consolidated balance
sheet.
The company establishes the expected long-term rate of return
by developing a forward-looking, long-term return assumption for
each pension fund asset class, taking into account factors such as the
expected real return for the specific asset class and inflation. A
single, long-term rate of return is then calculated as the weighted
average of the target asset allocation percentages and the long-term
return assumption for each asset class. The company applies its
expected long-term rate of return to the fair value of its pension
assets in determining the dollar amount of its expected return.
Changes in the expected long-term return on plan assets would
increase or decrease pension plan expense. The effects of actual
results differing from these assumptions are accumulated as
unamortized gains and losses. A corridor approach is used in the
amortization of these gains and losses, by amortizing the balance
exceeding the greater of 10% of the beginning balances of the
projected benefit obligation or the fair value of the plan assets. The
amortization period is based on the average life expectancy of plan
participants, which is currently estimated to be approximately 22
years for the company’s principal retirement plan.
For 2013, the assumption used for the discount rate was 4.85%
for obligations of the company’s principal retirement plan. As an
indication of the sensitivity of pension liabilities to the discount rate
assumption, a 50 basis point reduction in the discount rate at the end
of 2013 would have increased plan obligations by approximately
$118 million. A 50 basis point change in the discount rate used to
calculate 2013 expense would have changed total pension plan
expense for 2013 by approximately $1.8 million. The company’s
long-term expected return on pension assets used was an assumption
of 8.25%. As an indication of the sensitivity of pension expense to
the long-term rate of return assumption, a 50 basis point decrease in
the expected rate of return on pension assets would have increased
estimated pension plan expense for 2013 by approximately $9.1
million.
Income Taxes: The company’s annual tax rate is based on its
income, statutory tax regulations and rates, and tax planning
opportunities available to it in the various jurisdictions in which it
operates. Significant judgment is required in determining the
company’s annual tax expense and in evaluating its tax positions.
Tax law requires items to be included in the company’s tax
returns at different times than when the items are reflected in the
financial statements. As a result, the annual tax expense reflected in
the consolidated statements of income is different than that reported
in the tax returns. Some of these differences are permanent, such as
expenses recorded for accounting purposes that are not deductible in
the returns, and some differences are temporary and reverse over
time, such as depreciation expense. Temporary differences create
deferred tax assets and liabilities. Deferred tax liabilities generally
represent tax expense recognized in the financial statements for
which payment has been deferred, or expense for which a deduction
has been taken already in the tax return but the expense has not yet
been recognized in the financial statements. Deferred tax assets
generally represent items that can be used as a tax deduction or
credit in tax returns in future years for which a benefit has already
been recorded in the financial statements. Valuation allowances are
established when necessary to reduce deferred income tax assets to
the amounts the company believes are more likely than not to be
recovered. In evaluating the amount of any such valuation
allowance, the company considers the reversal of existing temporary
differences, the existence of taxable income in prior carry back
years, available tax planning strategies and estimates of future
taxable income for each of its taxable jurisdictions. The latter two
factors involve the exercise of significant judgment. As of Dec. 29,
2013, deferred tax asset valuation allowances totaled $84 million,
primarily related to foreign tax credits, foreign losses and state net
operating losses available for carry forward to future years. Although
realization is not assured, the company believes it is more likely than
not that all other deferred tax assets for which no valuation
allowances have been established will be realized. Review of
historical and projected future taxable income is the principal basis
upon which this assumption is made.
The company determines whether it is more likely than not that a
tax position will be sustained upon examination by the appropriate
taxing authorities before any part of the benefit is recorded in the
financial statements. A tax position is measured as the portion of the
tax benefit that is greater than 50% likely to be realized upon
settlement with a taxing authority (that has full knowledge of all
relevant information). The company may be required to change its
provision for income taxes when the ultimate deductibility of certain
items is challenged or agreed to by taxing authorities, when
estimates used in determining valuation allowances on deferred tax
assets significantly change, or when receipt of new information
indicates the need for adjustment in valuation allowances.
Additionally, future events, such as changes in tax laws, tax
regulations, or interpretations of such laws or regulations, could have
an impact on the provision for income tax and the effective tax rate.
Any such changes could significantly affect the amounts reported in
the consolidated financial statements in the year these changes occur.
The effect of a one percentage point change in the effective tax
rate for 2013 would have resulted in a change of $5 million in the
provision for income taxes and net income attributable to
Gannett Co., Inc.
28
RESULTS OF OPERATIONS
Over the last three years, broadcasting revenues, expenses and
Consolidated summary
A consolidated summary of the company’s results is presented
below.
In millions of dollars, except per share amounts
2013 Change
2012 Change
2011
Operating revenues . . . . . . . $ 5,161
Operating expenses . . . . . . . $ 4,422
Operating income . . . . . . . . $ 739
Non-operating expense, net . $ 180
Net income
(4%)
(3%)
(6%)
$ 5,353
$ 4,563
2%
3%
$ 5,240
$ 4,409
$ 790
(5%)
$ 831
51% $ 119
(33%)
$ 178
Per share – basic . . . . . . . . $ 1.70
Per share – diluted . . . . . . $ 1.66
(7%)
(7%)
$ 1.83
$ 1.79
(5%)
(5%)
$ 1.92
$ 1.89
A discussion of operating results of the company’s Broadcasting,
Publishing, and Digital Segments, along with other factors affecting
net income attributable to Gannett, is as follows:
Broadcasting Segment
Gannett Broadcasting’s 2013 was a year of strategic changes. On
Dec. 23, 2013, Gannett acquired Belo Corp., which, like Gannett,
values quality, award-winning journalism, operational excellence
and strong brand leadership. At the end of 2013, the company’s
broadcasting operations included 43 television stations either owned
or serviced through shared service agreements or other similar
agreements. Stations in the company’s broadcasting division cover
30% of the U.S. population in markets with nearly 35 million
households.
On Sept. 25, 2013 the company contributed the assets of
Captivate to a new company that is jointly owned by Gannett and
Generation Partners. As a result, the company ceased consolidating
the results of Captivate as of that date.
Broadcasting revenues accounted for approximately 16% of the
company’s reported operating revenues in 2013. Broadcasting
revenues accounted for approximately 17% of the company’s
reported operating revenues in 2012 and 14% in 2011.
operating income were as follows:
In millions of dollars
2013 Change
2012 Change
2011
Revenues . . . . . . . . . . . . . . $
Expenses . . . . . . . . . . . . . .
Operating income . . . . . . . $
835
473
362
(8%)
2%
(18%)
$
$
906
462
444
25% $
10%
47% $
722
420
302
Reported broadcasting revenues decreased $71 million to $835
million or 8% for 2013. The 2013 year-over-year comparison is
impacted by the absence of a record level of political spending and
ad revenues associated with the 2012 Summer Olympics as well as
an extra week in 2012’s results. On a comparable 52 week basis,
broadcasting revenues, excluding the incremental impact of political
and Summer Olympics revenue, were up 13%.
Core ad revenues, while impacted by the displacement of record
political revenues, were up 3% in 2013, reflecting strong growth in
the media, medical, and services categories. Retransmission
revenues increased 52% in 2013 and digital television revenues
increased 21% compared to 2012.
Broadcasting costs increased 2% to $473 million in 2013. The
increase reflects higher digital sales and marketing costs in 2013
associated with online revenue growth and workforce restructuring
costs associated with the Belo transaction.
As a result of all of these factors, Broadcasting Segment
operating income decreased 18% to $362 million in 2013.
Broadcasting results 2012-2011: Broadcasting revenues
increased $184 million or 25% for 2012. Year-over-year revenue
comparisons were favorably impacted by a record level $183 million
in ad revenues associated with the summer Olympics and political/
election-related advertising in 2012. Political revenues totaled $150
million in 2012 while summer Olympics generated $37 million in
revenue, of which $4 million was also political. Core ad revenues
while impacted by the displacement effect of record political
revenues, were up 5% in 2012, reflecting strong growth in
automotive, banking and medical categories. Retransmission and
digital television revenue were also significantly higher in 2012 from
2011, up 21% and 11%, respectively.
Broadcasting costs increased 10% to $462 million in 2012. The
increase reflects higher sales and marketing costs in 2012 associated
with higher revenues.
Operating income increased 47% to $444 million in 2012,
benefiting from the impact of the Summer Olympics and a record
level of political revenues.
29
Publishing Segment
In addition to its domestic local publications and affiliated digital
platforms, the company’s publishing operations include Gannett
Publishing Services, USA TODAY group (which includes
USA TODAY brand properties and USA WEEKEND), Newsquest,
which produces daily and non-daily publications in the U.K., Clipper
Magazine, Gannett Healthcare Group, Gannett Government Media
and other advertising and marketing services businesses. The
Publishing Segment in 2013 contributed 69% of the company’s
revenues.
Publishing operating results were as follows:
Publishing operating results, in millions of dollars
Revenues . . . . . . . . . . . . . . $ 3,578
2013 Change 2012(a) Change 2011(a)
$ 3,831
$ 3,728
(3%)
(4%)
Publishing revenue comparisons 2013-2012:
Advertising Revenue: Advertising revenues for 2013 decreased
$157 million or 7%. The decrease reflects lower advertising demand
due to secular pressures, a slow pace of the economic recovery, and
the extra week in 2012.
The table below presents the percentage change in 2013
compared to 2012 for each of the major ad revenue categories, by
quarter.
Advertising Revenue Comparisons by Quarter
Retail . . . . . . . . . . . . . . . . . . . .
National . . . . . . . . . . . . . . . . . .
Classified . . . . . . . . . . . . . . . . .
Total advertising . . . . . . . . . . .
Q1
(3%)
(5%)
(6%)
(5%)
Q2
(6%)
(1%)
(7%)
(5%)
Q3
(4%)
(10%)
(6%)
(6%)
Q4 (a)
(5%)
(10%)
(6%)
(6%)
Expenses . . . . . . . . . . . . . .
3,264
(3%)
3,360 —%
3,354
Operating income . . . . . . . $
314
(15%)
$
369
(23%)
$
478
(a) The extra week in the fourth quarter of 2012 is excluded for
comparability.
(a) Numbers do not sum due to rounding.
Foreign currency translation impacts: The average exchange
rate used to translate U.K. publishing results was 1.56 for 2013, 1.58
for 2012 and 1.60 for 2011. Translation fluctuations impact U.K.
publishing revenue, expense and operating income results.
Publishing operating revenues: Publishing operating revenues
are derived principally from advertising and circulation sales, which
accounted for 61% and 32%, respectively, of total publishing
revenues in 2013. Ad revenues include those derived from
advertising placed with print products as well as publishing related
Internet web sites, mobile and tablet applications. These include
revenue in the classified, retail and national ad categories. Other
publishing revenues are mainly from commercial printing.
The table below presents the principal components of publishing
revenues for the last three years.
Publishing operating revenues, in millions of dollars
2013 Change
2012 Change
2011
Advertising . . . . . . . . . . . . $ 2,199
(7%)
$ 2,356
(6%)
$ 2,511
Circulation . . . . . . . . . . . . .
1,129
1%
1,117
5%
1,064
Commercial printing and
other. . . . . . . . . . . . . . . . . .
250
Total. . . . . . . . . . . . . . . . . . $ 3,578
(2%)
(4%)
255 —%
256
$ 3,728
(3%)
$ 3,831
The table below presents the principal components of publishing
advertising revenues for the last three years. These amounts include
ad revenue from printed publications as well as online ad revenue
from web sites, mobile and tablets affiliated with the publications.
Advertising revenues, in millions of dollars
2013 Change
2012 Change
2011
Retail . . . . . . . . . . . . . . . . . $ 1,157
National . . . . . . . . . . . . . . .
Classified . . . . . . . . . . . . . .
365
677
Total ad revenue . . . . . . . . $ 2,199
(6%)
(8%)
(7%)
(7%)
$ 1,230
(6%)
$ 1,303
396
730
$ 2,356
(11%)
(4%)
(6%)
446
762
$ 2,511
Ad revenues were lower in both the U.S. and the U.K during
2013. In the U.K., in local currency, ad revenues comparisons lagged
comparisons in the U.S.. Newsquest ad revenues were down 8%
compared with a 6% decline for U.S. publishing.
The table below presents the percentage change for the retail,
national, and classified categories for 2013 compared to 2012.
Advertising Revenue Year Over Year Comparisons
U.S. Publishing
Newsquest
(in pounds)
Total Publishing
(constant currency)
Retail . . . . . . . . . .
National . . . . . . . .
Classified . . . . . . .
Total . . . . . . . . . . .
(6%)
(7%)
(7%)
(6%)
(4%)
(16%)
(8%)
(8%)
(6%)
(8%)
(7%)
(7%)
Retail ad revenues were down $73 million or 6% in 2013. In the
U.S. revenues were down in all major categories. Retail ad revenues
were down 4% in the U.K. on a constant currency basis.
National ad revenues were down $31 million or 8% in 2013,
primarily due to lower ad sales for U.S. Community Publishing,
Newsquest, and as well as for USA TODAY and its associated
businesses.
The table below presents the percentage change in classified
categories for 2013 compared to 2012.
Classified Revenue Year Over Year Comparisons
U.S. Publishing
Newsquest
(in pounds)
Total Publishing
(constant currency)
Automotive . . . . .
Employment. . . . .
Real Estate . . . . . .
Legal . . . . . . . . . .
Other . . . . . . . . . .
Total . . . . . . . . . . .
(2%)
(10%)
(5%)
(12%)
(8%)
(7%)
(10%)
(4%)
(9%)
—%
(10%)
(8%)
(3%)
(8%)
(6%)
(12%)
(8%)
(7%)
30
Classified ad revenues declined $53 million or 7% in 2013 with a
decline of 7% in the U.S. and 8% in the U.K. Domestically,
automotive advertising was down 2% for the year while employment
declined 10%. Real estate continued to reflect the housing issues
nationwide and was down 5% for the year. Most classified
advertising results in the U.K. lagged results in the U.S. as
automotive, employment and real estate declined in local currency
10%, 4% and 9%, respectively.
Circulation Revenue: Publishing circulation revenues increased
by $12 million or 1% over 2012, reflecting the second consecutive
company-wide circulation annual revenue increase. Circulation
revenues were up as a result of the implementation of the All Access
Content Subscription Model in 2012. Circulation revenues increased
3% in 2013 at the company’s local domestic publishing units.
Circulation revenue in the U.K. was up 3% compared to last year in
local currency reflecting increases in cover prices.
Revenue comparisons reflect generally lower circulation
volumes more than offset by price increases. Daily average print and
digital, replica and non-replica circulation, excluding USA TODAY,
declined 8%, while Sunday net paid circulation declined 5%.
Circulation revenues were lower at USA TODAY, reflecting
lower average print daily circulation volume, partially offset by price
increases.
For local publishing operations in the U.S. and U.K., morning
circulation accounted for approximately 95% of total daily volume,
while evening circulation accounted for 5%.
Local publishing circulation volume is summarized in the table
below.
Total average circulation volume, print and digital, replica and non-replica
in thousands
2013 Change
2012 Change
2011
Local Publications
Morning. . . . . . . . . . . . .
2,967
Evening . . . . . . . . . . . . .
Total daily . . . . . . . . . . .
Sunday. . . . . . . . . . . . . .
161
3,128
4,729
(8%)
(9%)
(8%)
(5%)
3,240
177
3,417
5,003
(8%)
(8%)
(8%)
(3%)
3,512
193
3,705
5,150
Other Revenue: Commercial printing and other publishing
revenues were down 2% in 2013 and totaled $250 million. Declines
in other publishing revenues were partially offset by an increase in
commercial print revenues. Commercial printing revenues in the
U.S. and U.K. combined, accounted for approximately 60% of total
other revenues.
Publishing Segment digital revenues were up for the year in the
U.S. as well as at Newsquest in the U.K. Revenues benefited from
the company’s continued focus on digital marketing services and the
All Access Content Subscription Model. Domestic U.S. digital
revenues were up 34%, while digital revenues at Newsquest
increased 13% in local currency.
Publishing revenue comparisons 2012-2011:
Advertising Revenue: Advertising revenues for 2012 declined
$155 million or 6% reflecting the impact of the soft economy on
advertising demand.
Ad revenues were lower in both the U.S. and the U.K. In the
U.K., in local currency, ad revenues were comparable to that of the
U.S. Due to a slightly lower average exchange rate for 2012, in U.S.
dollars, Newsquest ad revenues were down 7% compared with 6%
decline for U.S. publishing.
Retail ad revenues were down $73 million or 6% in 2012. In the
U.S., revenues were down in most principal categories, with the
more significant declines occurring in the financial and
telecommunications categories, partially offset by an increase in
retail online advertising. Retail ad revenues were down 4% in the
U.K. on a constant currency basis.
National ad revenues were down $51 million or 11% in 2012,
primarily due to lower ad sales for USA TODAY and its associated
businesses, as well as for U.S. Community Publishing.
Classified ad revenues decreased $32 million or 4% in 2012 with
a decline of 3% in the U.S. and 8% in the U.K. Domestically,
automotive advertising was up 2% for the year while employment
declined 3%. Real estate reflected the housing issues across the
country and was down 11% for the year. Classified advertising in the
U.K. was worse than in the U.S. as automotive, employment and real
estate declined in local currency 13%, 4% and 9%, respectively.
Digital revenues in the Publishing Segment were up for 2012 in
the U.S. as well as at Newsquest in the U.K. U.S. Community
Publishing digital revenues were up 6%, reflecting increases in the
automotive and retail categories. Digital ad revenues at
USA TODAY and its associated brands were up by 38% for the year,
while digital revenues at Newsquest increased 10% in local
currency.
Circulation Revenue: Publishing circulation revenues increased
$53 million in 2012 or 5% over 2011, reflecting the first company-
wide circulation revenue increase since 2006. Circulation revenues
were up as a result of the implementation of the All Access Content
Subscription Model throughout 2012 and the favorable impact of the
extra week in 2012. Late in the fourth quarter of 2012, the company
completed the final phase of the All Access roll out across 78 U.S.
community publishing markets. Circulation revenues increased 8%
in 2012 at the company’s local domestic publishing units.
Circulation revenue in the U.K. was flat compared to 2011 in local
currency.
Revenue comparisons reflect generally lower circulation
volumes more than offset by price increases. Daily average paid and
verified circulation, excluding USA TODAY, declined 8%, while
Sunday average paid and verified circulation declined 3%.
Circulation revenues were lower at USA TODAY, reflecting
lower average daily circulation volume. USA TODAY’s average
daily circulation for 2012 declined 2%.
For local publishing operations in the U.S. and U.K., morning
circulation accounted for approximately 95% of total daily volume,
while evening circulation accounted for 5%.
Other Revenue: Commercial printing and other publishing
revenues totaled $255 million in 2012 and were flat compared to
2011 due primarily to a decrease in commercial printing revenues
that were more than offset by the impact of the extra week in 2012.
Commercial printing revenues in the U.S. and U.K. accounted for
approximately 58% of total other revenues.
31
Newsprint expense was down 14% in 2013 due to a decline in
Expenses . . . . . . . . . . . . . .
Digital Segment
The largest businesses within the company’s Digital Segment are
CareerBuilder, PointRoll and Shoplocal.
Digital revenues, expenses and operating income were as
follows:
In millions of dollars
Revenues . . . . . . . . . . . . . . $
Operating income . . . . . . . $
2013 Change
2012 Change
2011
748
620
128
4%
(8%)
***
$
$
719
677
5%
21%
42
(67%)
$
$
686
561
125
Digital revenues increased $29 million or 4% over 2012,
primarily reflecting a strong increase in revenues at CareerBuilder.
Digital expenses in 2013 decreased 8% to $620 million,
primarily due to a $78 million decrease in impairment charges in
2013 partly offset by an increase in expenses at CareerBuilder
associated with its revenue growth.
As a result of these factors, Digital Segment operating income
increased to $128 million in 2013.
CareerBuilder operations are predominately based in North
America, although expansion efforts continue in parts of Europe,
Asia and South America. CareerBuilder is the nation’s largest online
recruitment and career advancement source for employers,
employees, recruiters and job seekers. Its North American network
revenue is driven mainly from its own sales force but it also derives
revenues from its owner affiliated businesses, including the
company’s local media organizations, which sell various
CareerBuilder employment products including upsells of print
employment ads. North American network revenue increased 3%,
compared to last year, with substantially all the increase attributable
to revenues CareerBuilder derived from its own sales efforts.
Revenues derived from its owner-affiliated newspapers were down
10% in 2013, while revenues from its own sales efforts were up 5%
in 2013. Since CareerBuilder is consolidated, for Gannett’s financial
reporting purposes, CareerBuilder revenues exclude amounts
recorded at Gannett-owned local media organizations.
Digital results 2012-2011: Digital revenues increased $32
million or 5% over 2011, reflecting primarily a significant increase
in revenues at CareerBuilder.
Digital expenses in 2012 increased 21% to $677 million,
primarily due to an increase in expenses at CareerBuilder associated
with its revenue growth. Expenses were also higher due to $90
million impairment charges recognized in 2012. As a result of all
these factors, Digital Segment operating income decreased 67% to
$42 million in 2012.
Publishing expense comparisons 2013-2012: Publishing
operating expense decreased to $3.26 billion in 2013 as continued
cost efficiency efforts were partially offset by strategic initiative
spending of $36 million. A majority of the strategic spending in 2013
was in conjunction with digital relaunches and the investments made
in the company’s digital marketing services business.
Publishing payroll costs were down 3% compared to 2012
reflecting the impact of workforce restructuring across certain
divisions.
consumption and prices.
Publishing expense comparisons 2012-2011: Publishing
operating expense increased slightly to $3.36 billion in 2012,
primarily due to the impact of continued cost control and efficiency
efforts, offset by strategic initiative spending of $68 million, higher
pension expense and the impact of the extra week in 2012. A
majority of the strategic spending in 2012 was in conjunction with
the roll out of the All Access Content Subscription Model, digital
relaunches and the investments made in the company’s digital
marketing services business.
Publishing payroll costs were relatively unchanged, reflecting
the impact of headcount reductions across certain divisions offset by
the additional week in 2012.
Newsprint expense was down 6%, reflecting lower consumption,
down 7%, offset by a 1% increase in usage prices.
Publishing operating results 2013-2012: Publishing operating
income decreased to $314 million in 2013 from $369 million in
2012. The principal factors affecting reported operating results
comparisons for the full year were the following:
• Lower operating results in the U.S. and U.K. as ad revenue
categories were affected by the impact of the soft economy on
advertising demand, partially offset by an increase in circulation
revenue at the company’s U.S. Community Publishing and U.K.
operations;
• Strategic initiative spending in 2013 of $36 million;
• Special charges for facility consolidation and asset impairments
as well as workforce restructuring totaled $89 million in 2013
and $74 million in 2012;
• Significant increase in digital revenue;
• Negative impact of the extra week in 2012; and
• A decrease in newsprint expense.
Publishing operating results 2012-2011: Publishing operating
income decreased to $369 million in 2012 from $478 million in
2011. The principal factors affecting reported operating results
comparisons for the full year were the following:
• Lower operating results at most U.S. and U.K. properties as ad
revenue categories were affected by the impact of the soft
economy on advertising demand;
• A decrease in newsprint expense due to a decline in usage;
• Higher charges in 2012 from workforce restructuring efforts and
consolidations;
• Positive impact of a significant increase in digital revenue; and
• Positive impact of the extra week in 2012.
32
Consolidated operating expenses
Over the last three years, the company’s consolidated operating
expenses were as follows:
Consolidated operating expenses, in millions of dollars
2013(a) Change
2012 Change
2011
Cost of sales. . . . . . . . . . $ 2,882
Selling, general and
admin. expenses. . . . . . .
1,292
Depreciation . . . . . . . . .
Amortization of
intangible assets. . . . . . .
153
(2%)
$ 2,944
(1%)
$ 2,961
(1%)
(5%)
1,303
7%
161
(3%)
1,223
166
36
9%
33
5%
Facility consolidation
and asset impairment
58
charges. . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . $ 4,422
(52)%
122
(3%)
$ 4,563
***
3%
(a) Numbers do not sum due to rounding.
32
27
$ 4,409
Total reported operating expense decreased 3% to $4.42 billion
in 2013, due to continued cost efficiency efforts company-wide,
lower facility consolidation and asset impairment charges as well as
lower newsprint expense. These were partially offset by $58 million
in workforce restructuring charges and $41 million of strategic
initiative investments made throughout the year.
Depreciation expense was 5% lower in 2013, reflecting certain
assets reaching the end of their depreciable life.
The non-cash facility consolidation and asset impairment charges
for all years are more fully discussed beginning on page 34 and in
Notes 3 and 4 to the Consolidated Financial Statements.
Payroll, benefits and newsprint costs (along with certain other
production material costs), the largest elements of the company’s
normal operating expenses, are presented below, expressed as a
percentage of total pre-tax operating expenses.
Payroll and employee benefits . . . . . . . . . .
47.6% 45.9% 46.8%
Newsprint and other production material . .
10.1% 11.2% 12.1%
2013
2012
2011
Operating expense comparisons 2012-2011: Total reported
operating expense increased 3% to $4.56 billion in 2012. Payroll
increased by 2% in 2012 as a result of recent acquisitions and the
impact of the extra week in 2012, partially offset by reduced
headcount in certain divisions. Strong cost controls were in place
throughout the company, however expenses increased 10% in the
Broadcasting Segment and 20% in the Digital Segment associated
with significant increases in their revenue. Cost savings were also
offset by an increase in facility consolidation and asset impairment
charges, higher pension expense, the extra week in 2012 and $74
million of strategic initiative investments made throughout the year.
Depreciation expense was 3% lower in 2012, reflecting reduced
depreciation of certain assets reaching the end of their depreciable
life.
33
Non-operating income and expense
Equity earnings: This income statement category reflects results
from unconsolidated minority interest investments, including the
company’s equity share of operating results from its publishing
partnerships, including the Tucson joint operating agency, the
California Newspapers Partnership and the Texas-New Mexico
Newspapers Partnership, as well as from investments in certain other
digital/new technology businesses.
The company’s net equity income in unconsolidated investees
for 2013 was $44 million, an increase of $21 million over 2012. This
increase reflects better results at Classified Ventures, the California
Newspapers Partnership, as well as reduced impairment charges
recognized in 2013.
The company’s net equity income in unconsolidated investees
for 2012 was $22 million, an increase of $14 million over 2011. This
increase reflects better results at Classified Ventures as well as
reduced impairment charges recognized in 2012.
Interest expense: 2013 interest expense increased by 17% to
$176 million compared to 2012 due to a higher average debt level of
$2.01 billion. The higher average debt level is related to the issuance
of $1.85 billion in senior notes during the second half of 2013
primarily related to the Belo acquisition which closed on Dec. 23,
2013.
Interest expense in 2012 was lower compared to 2011, as lower
average debt levels were offset by higher average rates and the extra
week in 2012.
The company increased its long-term debt by $2.27 billion or
159% in 2013. At the end of 2013, the company’s leverage ratio was
3.24x, within the financial covenants under its revolving credit
agreements.
A further discussion of the company’s borrowing and related
interest cost is presented in the “Liquidity and capital resources”
section of this report beginning on page 38 and in Note 7 to the
Consolidated Financial Statements.
Other non-operating items: The company reported a net loss of
$48 million for other non-operating items in 2013. The majority
relates to costs associated with the Belo transaction and a non-cash
charge associated with the change in control and sale of interests
related to Captivate. These costs were partly offset by interest
income earned in 2013.
Other non-operating items totaled a net gain of $9 million in
2012 with the majority related to a gain on distribution from a cost
method investment and interest income earned during 2012.
The company reported a net loss of $13 million in 2011 as the
company recorded $15 million of non-cash charges for the write-
down of certain minority investments.
Provision for income taxes
The company reported pre-tax income attributable to Gannett of
$502 million for 2013. The provision for income taxes reflects
certain state audit settlements and a special net tax benefit from the
release of certain tax reserves due to a multi-year federal audit
settlement in 2013. The effective tax rate on pre-tax income is
22.6%.
The company reported pre-tax income attributable to Gannett of
$620 million for 2012. The provision for income taxes reflects an
impairment of non-deductible goodwill, certain state audit
settlements and a special net tax benefit from the release of certain
tax reserves due to a federal audit settlement in 2012. The effective
tax rate on pre-tax income is 31.5%.
The company believes that such expenses, charges and credits
are not indicative of normal, ongoing operations and their inclusion
in results makes for more difficult comparisons between years and
with peer group companies. Workforce restructuring and facility
consolidation expenses primarily relate to incremental expenses the
company has incurred to consolidate or outsource production
processes and centralize other functions. These expenses include
payroll and related benefit costs. Transformation costs include
incremental expenses incurred by the company to execute on its
transformation and growth plan, including those related to the
company’s recently completed Belo acquisition and incremental
expenses associated with optimizing the company’s real estate
portfolio. Non-cash asset impairment charges were recorded to
reduce the book value of certain intangible assets and investments
accounted for under the equity and cost methods to fair value, as the
businesses underlying these assets had experienced significant and
sustained unfavorable operating results. Other non-operating charges
include a non-cash charge related to the change in control and sale of
interests in the company’s Captivate business and a currency loss in
the first quarter of 2013 related to the weakening of the British
pound associated with the downgrade of the U.K. sovereign credit
rating. Results for 2013 also include credits to the income tax
provision related to reserve releases as a result of federal exam
resolution and lapse of a statute of limitation. Results for 2012
included a credit related primarily to tax settlements covering
multiple years.
Management uses non-GAAP financial performance measures
for purposes of evaluating business unit and consolidated company
performance. The company therefore believes that each of the non-
GAAP measures presented provides useful information to investors
by allowing them to view the company’s businesses through the eyes
of management and the Board of Directors, facilitating comparison
of results across historical periods, and providing a focus on the
underlying ongoing operating performance of its businesses. In
addition, many of the company’s peer group companies present
similar non-GAAP measures to better facilitate industry
comparisons.
Discussion of special charges and credits affecting reported
results: For the years 2013, 2012, and 2011 the company recorded
workforce restructuring related costs totaling $58 million ($37
million after-tax or $.16 per share), $49 million ($29 million after-
tax or $.12 per share), and $74 million ($46 million after-tax or $.19
per share), respectively. These charges were taken in connection with
workforce reductions related to facility consolidation and
outsourcing efforts and as part of a general program to
fundamentally change the company’s cost structure.
Company-wide transformation plans led the company to
recognize charges in 2011-2013 associated with revising the useful
lives of certain assets over a shortened period, as well as shutdown
costs and charges to reduce the carrying value of assets held for sale
to fair value less costs to sell. Additionally, costs from the company’s
recent acquisition of Belo are included as part of transformation
costs. Total charges for these matters were $61 million ($45 million
after-tax or $.19 per share), $32 million ($20 million after-tax or
$.08 per share), and $27 million ($18 million after-tax or $.07 per
share) in 2013, 2012, and 2011, respectively.
The lower effective tax rate for 2013 compared to 2012 is due to
special items contributing a net tax benefit that related primarily to a
multi-year federal audit settlement recognized in 2013 as well as a
non-deductible goodwill impairment charge incurred in 2012.
The company reported pre-tax income attributable to Gannett of
$612 million for 2011. The provision for income taxes reflects a
special net tax benefit from the release of certain tax reserves due to
audit settlements and a permanent stock basis deduction associated
with the disposal of certain business assets in 2011. An impairment
charge for these assets had been recorded in previous years, however
no related tax benefit had been recognized as the formal disposal of
the assets did not occur until 2011. The effective tax rate on pre-tax
income was 25.0%.
The lower effective tax rate for 2011 compared to 2012 is due to
the stock basis deduction associated with previous impairment
charges and the release of foreign tax reserves upon audit settlements
recognized in 2011 as well as a non-deductible goodwill impairment
charge incurred in 2012.
Further information concerning income tax matters is contained
in Note 10 of the Consolidated Financial Statements.
Net income attributable to Gannett Co., Inc.
Net income attributable to Gannett Co., Inc. and related per share
amounts are presented in the table below.
In millions of dollars, except per share amounts
2013
Change
2012
Change
2011
Net income . . . . . . . . $
Per basic share . . . . . $
Per diluted share. . . . $
389
(8%)
1.70
(7%)
1.66
(7%)
$
$
$
424
(8%)
1.83
(5%)
1.79
(5%)
$
$
$
459
1.92
1.89
Net income attributable to Gannett Co., Inc. consists of net
income reduced by net income attributable to noncontrolling
interests, primarily from CareerBuilder. Net income attributable to
noncontrolling interests was $57 million, $51 million and $41
million in 2013, 2012 and 2011, respectively.
Operating results non-GAAP information
Presentation of non-GAAP information: The company uses
non-GAAP financial performance and liquidity measures to
supplement the financial information presented on a GAAP basis.
These non-GAAP financial measures should not be considered in
isolation from or as a substitute for the related GAAP measures, and
should be read in conjunction with financial information presented
on a GAAP basis.
The company discusses in this report non-GAAP financial
performance measures that exclude from its reported GAAP results
the impact of special items consisting of:
• Workforce restructuring charges;
• Transformation costs;
• Non-cash asset impairment charges;
• A non-cash charge related to a change in control and sale of
interests in a business;
• Non-cash charges related to certain investments accounted for
under the equity method;
• A currency-related loss recognized in other non-operating items;
and
• Certain credits to its income tax provision.
34
The company performed impairment tests on certain assets
including goodwill, other intangible assets, other long-lived assets
and investments accounted for under the equity and cost methods,
that resulted in the recognition of impairment charges in 2011-2013.
During 2013, the company recorded operating and non-operating
non-cash asset impairment charges of $34 million ($20 million after-
tax or $.09 per share). In 2012, non-cash asset impairment charges to
operating and non-operating expense totaled $97 million ($91
million after-tax or $.38 per share). In 2011, non-cash asset
impairment and investment charges to non-operating expense totaled
$30 million ($18 million after-tax or $.08 per share). These non-
cash impairment charges are detailed in Notes 3 and 4 to the
Consolidated Financial Statements.
During 2011, the company recorded a $15 million ($9 million
after-tax or $.04 per share) incremental charge for the disability-
related retirement of the company’s former chairman and chief
executive officer.
Other non-operating item charges in 2013 totaled $19 million
($10 million after-tax or $.04 per share) and are primarily related to
a loss recognized on the Captivate transaction and a currency related
loss related to the weakening of the British pound.
The company recorded a tax benefit of $28 million or $.12 per
share related to resolution of several federal tax claims in the first
quarter of 2013. In 2012, the company recorded $13 million or $.06
per share related primarily to tax settlements covering multiple
years. In addition, the company recorded net special benefits of $31
million ($.13 per share) during 2011 related to tax audit settlements
covering multiple years and a permanent stock basis deduction
related to the disposal of certain business assets.
Consolidated results
The following is a discussion of the company’s as adjusted non-
GAAP financial results. All as adjusted (non-GAAP basis) measures
are labeled as such or “adjusted”.
Adjustments to remove special items from GAAP operating
expense follow:
In millions of dollars
2013 Change 2012(a) Change
2011
Operating expense
(GAAP basis) . . . . . . . . . . . $ 4,422
Remove special items:
(3%)
$ 4,563
3%
$ 4,409
Workforce restructuring. .
(58)
19%
(49)
(34)%
Transformation costs . . . .
(25)
(21)%
(32)
18%
(33)
(63)%
(90)
***
(74)
(27)
—
Asset impairment
charges . . . . . . . . . . . . . .
Former Chairman and
CEO incremental
retirement charges . . . . .
— ***
— ***
(15)
As adjusted
(non-GAAP basis). . . . . . . . $ 4,306
(a) Numbers do not sum due to rounding.
(2%)
$ 4,393
2%
$ 4,293
Adjusted operating expenses decreased 2% in 2013 over 2012 to
$4.31 billion, due to continued efficiency efforts company-wide and
the extra week in 2012, partially offset by an increase in Digital
Segment expenses related to the increase in revenue.
Adjusted operating expenses increased 2% in 2012 over 2011 to
$4.39 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 efficiency efforts
company-wide.
35
Adjustments to remove special items from GAAP operating
income follow:
In millions of dollars
2013 Change 2012(a) Change
2011
Operating income
(GAAP basis) . . . . . . . . . . . $ 739
Remove special items:
(6%)
$ 790
(5%)
$ 831
Workforce restructuring. .
Transformation costs . . . .
Asset impairment
charges . . . . . . . . . . . . . .
Former Chairman and
CEO incremental
retirement charges . . . . .
58
25
19%
(21)%
33
(63)%
49
32
90
(34)%
18%
***
— ***
— ***
74
27
—
15
As adjusted
(non-GAAP basis). . . . . . . . $ 855
(a) Numbers do not sum due to rounding.
(11%)
$ 960
1%
$ 947
Adjusted operating income decreased 11% in 2013 over 2012 to
$855 million. Broadcasting revenues and operating results were
lower reflecting the absence of significant political and Olympic
revenues generated in 2012. Publishing revenues reflected lower
advertising demand partially offset by a 1% increase in circulation
revenue due. Digital revenues increased, reflecting solid revenue
growth at CareerBuilder. Digital revenues company-wide including
the Digital Segment and all digital revenues generated by other
business segments were approximately $1.47 billion in 2013, nearly
30% of operating revenues and an increase of 16% compared to
2012.
Adjusted operating income increased 1% in 2012 over 2011 to
$960 million reflecting the first year-over-year increase in company-
wide revenue since 2006. Broadcasting revenues and operating
results were the best results ever for the Broadcasting Segment,
driven by a record level of political and Summer Olympic revenue
achieved in 2012. 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
significantly, reflecting stronger revenue growth at CareerBuilder.
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
2013(a) Change
2012 Change
2011
Total non-operating
(expense) income
(GAAP basis) . . . . . . . . . . . $ (180)
Remove special items:
51% $ (119)
(33%)
$ (178)
Transformation costs . . . .
36
***
— ***
Asset impairment and
investment charges. . . . .
Other non-operating
items. . . . . . . . . . . . . . . . .
1
(90%)
7
(77%)
19
***
— ***
—
30
—
As adjusted
(non-GAAP basis). . . . . . . . $ (125)
(a) Numbers do not sum due to rounding.
11% $ (112)
(24%)
$ (148)
2013
2012
2011
Transformation costs . . . .
Workforce restructuring. .
Adjusted non-operating expense increased 11% in 2013 over
2012 to $125 million reflecting higher interest expense due to higher
average debt levels principally related to the issuance of senior notes
related to the Belo transaction.
Adjusted non-operating expense declined 24% in 2012 over
2011 to $112 million reflecting lower interest expense due to a
significantly lower average debt levels, partially offset by higher
average interest rates and the extra week in 2012.
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) . . . . . . . . . . . . . . . . . . . . . . . . . $ 113
Remove special items:
$ 195
$ 153
Workforce restructuring . . . . . . . . . . . . . . .
Transformation costs . . . . . . . . . . . . . . . . .
Asset impairment and investment
charges . . . . . . . . . . . . . . . . . . . . . . . . . . .
Former Chairman and CEO
incremental retirement charges . . . . . . . .
Other non-operating items . . . . . . . . . . . . .
Special tax benefits . . . . . . . . . . . . . . . . . .
21
16
14
—
8
28
19
13
6
—
—
13
28
10
12
6
—
31
As adjusted (non-GAAP basis) . . . . . . . . . . . $ 200
$ 246
$ 240
As adjusted effective tax rate
(non-GAAP basis) . . . . . . . . . . . . . . . . . . . . .
29.7% 30.9% 31.6%
The adjusted effective tax rate in 2013 was 29.7% compared to
30.9% in 2012. The lower rate for 2013 reflects higher reserve
releases due to audit settlements and the lapse of certain statutes of
limitations.
Adjustments to remove special items from GAAP net income
attributable to Gannett Co., Inc. and diluted earnings per share
follow:
In millions of dollars, except per share amounts
2013 Change 2012(a) Change 2011(a)
Net income attributable to
Gannett Co., Inc.
(GAAP basis) . . . . . . . . . . . $ 389
Remove special items (net
of tax):
(8%)
$ 424
(8%)
$ 459
Asset impairment and
investment charges. . . . .
Former Chairman and
CEO incremental
retirement charges . . . . .
Other non-operating
items. . . . . . . . . . . . . . . .
Special tax benefits . . . . .
37
45
26%
***
20
(78)%
29
20
91
(35)%
12%
***
— ***
— ***
46
18
18
9
10
(28)
***
***
— ***
(13)
(57)%
—
(31)
As adjusted
(non-GAAP basis). . . . . . . . $ 473
(14%)
$ 551
6%
$ 518
Diluted earnings per share
(GAAP basis) . . . . . . . . . . . $ 1.66
(7%)
$ 1.79
(5%)
$ 1.89
Remove special items (net
of tax):
Workforce restructuring. .
Transformation costs . . . .
0.16
0.19
33%
***
0.12
0.08
(37)%
14%
Asset impairment and
investment charges. . . . .
0.09
(76)%
0.38
***
0.19
0.07
0.08
Former Chairman and
CEO incremental
retirement charges . . . . .
— ***
— ***
0.04
Other non-operating
items. . . . . . . . . . . . . . . .
0.04
Special tax benefits . . . . .
(0.12)
***
***
— ***
—
(0.06)
(54)%
(0.13)
As adjusted
(non-GAAP basis). . . . . . . . $ 2.02
(a) Numbers do not sum due to rounding.
(13%)
$ 2.33
9%
$ 2.13
Adjusted net income attributable to Gannett Co., Inc. decreased
14% in 2013 (13% on a diluted per share basis) as a result of lower
as adjusted (non-GAAP basis) operating income in the Broadcasting
and Publishing Segments partially offset by higher operating income
in the Digital Segment.
Adjusted net income attributable to Gannett Co., Inc. increased
6% in 2012 over 2011 (9% on a diluted per share basis) as a result of
higher Broadcasting and Digital Segment revenue, partially offset by
an increase in their expenses.
36
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 workforce restructuring charges and
transformation costs on the company’s Broadcasting Segment is
presented below:
In millions of dollars
2013 Change
2012 Change 2011(a)
Broadcasting Segment
operating expenses
(GAAP basis). . . . . . . . . . . . $ 473
Remove special items:
2%
$ 462
10% $ 420
Workforce restructuring . .
Transformation costs . . . .
(14)
(1)
***
***
— ***
— ***
(1)
—
As adjusted
(non-GAAP basis) . . . . . . . . $ 458
Broadcasting Segment
operating income
(GAAP basis). . . . . . . . . . . . $ 362
Remove special items:
(1%)
$ 462
10% $ 420
(18%)
$ 444
47% $ 302
Workforce restructuring . .
14
***
Transformation costs . . . .
1 —
— ***
— ***
1
—
As adjusted
(non-GAAP basis) . . . . . . . . $ 377
(a) Numbers do not sum due to rounding.
(15%)
$ 444
47% $ 303
Adjusted Broadcasting Segment operating expenses decreased
1% in 2013 compared to 2012 due to lower expenses associated with
the record level of political spending achieved in 2012 and the
Summer Olympics. Adjusted Broadcasting Segment operating
income decreased 15% to $377 million in 2013, reflecting the
absence of record political spending and Summer Olympic revenue
achieved in 2012.
Adjusted Broadcasting Segment operating expenses increased
10% in 2012, due to higher sales and marketing costs in 2012
associated with higher revenues and the extra week in 2012.
Adjusted Broadcasting Segment operating income increased 47% in
2012 to $444 million, as a result of significantly higher political and
Olympic advertising revenues, as well as higher core, retransmission
and digital television revenues, and lower expenses.
A summary of the impact of workforce restructuring charges,
transformation costs and asset impairment charges on the company’s
Publishing Segment is presented below:
In millions of dollars
2013(a) Change 2012(a) Change 2011(a)
Publishing Segment
operating expenses
(GAAP basis) . . . . . . . . . . . $ 3,264
Remove special items:
(3%)
$ 3,360 — $ 3,354
Workforce restructuring. .
(43)
2%
(42)
(42)%
Transformation costs . . . .
(24)
(25%)
(32)
18%
Asset impairment charges
(21)
***
— ***
(73)
(27)
—
As adjusted (non-GAAP
basis) . . . . . . . . . . . . . . . . . . $ 3,175
Publishing Segment
operating income
(GAAP basis) . . . . . . . . . . . $ 314
Remove special items:
(3%)
$ 3,285
1%
$ 3,253
(15%)
$ 369
(23%)
$ 478
Workforce restructuring. .
Transformation costs . . . .
Asset impairment charges
43
24
21
2%
(25%)
***
42
32
(42)%
18%
— ***
73
27
—
As adjusted
(non-GAAP basis). . . . . . . . $ 402
(a) Numbers do not sum due to rounding.
(9%)
$ 443
(23%)
$ 578
Adjusted Publishing Segment operating expenses decreased 3%
in 2013 compared to 2012 as continued cost efficiency efforts were
partially offset by strategic initiative spending of $36 million.
Adjusted Publishing Segment operating income declined 9% in
2013 compared to 2012 due to lower ad revenue in the U.S. and
U.K., $36 million of strategic initiative spending, the negative
impact of the extra week in 2012, partially offset by a 1% increase in
circulation revenue, and a decrease in newsprint expense.
Adjusted Publishing Segment operating expenses increased 1%
in 2012 over 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 over 2011 to $443 million, reflecting the impact of the soft
economy on advertising demand and higher strategic initiative
spending, pension expense, partially offset by an increase in
circulation revenue, a decrease in newsprint expense, and the
positive impact of the extra week in 2012.
37
A summary of the impact of workforce restructuring charges and
asset impairment charges on the company’s Digital Segment is
presented below:
In millions of dollars
2013(a) Change
2012 Change
2011
Digital Segment operating
expenses (GAAP basis) . . . $
Remove special items:
620
(8%)
$ 677
21% $ 561
the company paid $288 million to redeem unsecured notes issued by
Belo and assumed by Gannett in the acquisition. The company also
repurchased approximately 4.9 million shares of the company’s
stock for $117 million, paid dividends totaling $183 million and
made dividend payments and distributions to noncontrolling
membership shareholders of $43 million.
Certain key measurements of the elements of working capital for
the last three years are presented in the following chart:
Workforce restructuring .
— ***
— ***
Asset impairment
charges . . . . . . . . . . . . .
As adjusted (non-GAAP
basis) . . . . . . . . . . . . . . . . . $
Digital Segment operating
income (GAAP basis) . . . . $
Remove special items:
Asset impairment
charges . . . . . . . . . . . . .
As adjusted
(non-GAAP basis) . . . . . . . $
(12)
(87%)
(90)
***
609
4%
$ 587
5%
$ 561
128
***
$
42
(67%)
$ 125
12
(87%)
90
***
140
6%
$ 132
5%
$ 125
—
—
—
—
Workforce restructuring .
— ***
— ***
(a) Numbers do not sum due to rounding.
Year-over-year adjusted operating expense comparisons for 2013
and 2012 reflect increases in expenses at CareerBuilder associated
with its revenue growth. The CareerBuilder revenue growth also
drove the year-over-year improvements in adjusted Digital Segment
operating income.
A summary of the impact of special charges on the company’s
Corporate Segment is presented below:
In millions of dollars
2013(a) Change
2012 Change 2011(a)
Corporate Segment
operating expenses
(GAAP basis). . . . . . . . . . . . $
Remove special items:
65 — $
64
13% $
74
Workforce restructuring . .
— ***
(6)
***
—
Former Chairman and
CEO incremental
retirement charges . . . . .
— ***
— ***
(15)
As adjusted
(non-GAAP basis) . . . . . . . . $
(a) Numbers do not sum due to rounding.
64
11% $
58
(2%)
$
60
FINANCIAL POSITION
Liquidity and capital resources
The company’s cash flow from operating activities was $511 million
in 2013, versus $757 million in 2012, primarily reflecting the
absence of incremental cash flow from the 2012 Summer Olympics
and substantially higher political advertising in 2012. Net cash tax
payments were $60 million higher in 2013 due in part to the timing
of deductions.
Net cash used for investing activities totaled $1.39 billion. This
reflects capital spending of $110 million, $1.45 billion for
acquisitions, primarily the acquisition of Belo Corp., and $3 million
for equity investments, which were partially offset by proceeds from
the sale of certain assets of $114 million and proceeds from
investments of $63 million.
Cash provided by financing activities totaled $1.17 billion in
2013. Proceeds from long term debt and term loans were $2.02
billion. These proceeds were used to partially finance the acquisition
of Belo, repay the outstanding credit revolver borrowings and for
other general corporate purposes. Following the acquisition of Belo,
38
Working capital measurements
2013
2012
2011
Current ratio . . . . . . . . . . . . . . . . . . . . . .
1.9-to-1
1.1-to-1
1.2-to-1
Accounts receivable turnover . . . . . . . . .
Newsprint inventory turnover . . . . . . . .
6.8
5.5
7.8
6.1
7.4
5.7
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.
Long-term debt
The long-term debt of the company is summarized below:
In thousands of dollars
Dec. 29, 2013 Dec. 30, 2012
Unsecured floating rate term loan due
quarterly through August 2018. . . . . . . . . . . $
VIE unsecured floating rate term loans due
quarterly through December 2018 . . . . . . . .
154,800 $
39,270
—
—
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 (a). . . . . . . .
Borrowings under revolving credit
agreement expiring August 2018 . . . . . . . . .
Unsecured notes bearing fixed rate interest
at 7.125% due September 2018 . . . . . . . . . .
Unsecured notes bearing fixed rate interest
at 5.125% due October 2019 . . . . . . . . . . . .
Unsecured notes bearing fixed rate interest
at 5.125% due July 2020 . . . . . . . . . . . . . . .
Unsecured notes bearing fixed rate interest
at 6.375% due October 2023 . . . . . . . . . . . .
Unsecured notes bearing fixed rate interest
at 7.75% due June 2027 . . . . . . . . . . . . . . . .
Unsecured notes bearing fixed rate interest
at 7.25% due September 2027 . . . . . . . . . . .
250,000
250,000
66,568
66,568
250,000
250,000
193,429
193,429
250,000
250,000
—
205,000
250,000
250,000
600,000
600,000
650,000
200,000
240,000
—
—
—
—
—
Total principal long-term debt . . . . . . . . . . .
3,744,067
1,464,997
Other (fair market value adjustments and
discounts) . . . . . . . . . . . . . . . . . . . . . . . . . . .
(31,167)
(32,897)
Total long-term debt. . . . . . . . . . . . . . . . . . .
3,712,900
1,432,100
Less current portion of long-term debt
maturities of VIE loans. . . . . . . . . . . . . . . . .
5,890
—
Long-term debt, net of current portion. . . . . $
3,707,010 $
1,432,100
(a) On Feb. 5, 2014 the company sent notice of its intent to redeem the
9.375% notes on March 14, 2014. The notes will be redeemed for
104.688% of the outstanding principal amount, pursuant to the original
terms.
Total average debt outstanding in 2013 and 2012 was $2.0 billion
and $1.7 billion, respectively. The weighted average interest rate on
all debt was 7.7% for both 2013 and 2012.
On Dec. 29, 2013, the company had unused borrowing capacity
of $1.2 billion under its revolving credit agreement that expires in
August 2018.
In connection with the company’s acquisition of Belo on Dec.
23, 2013 (the Belo Acquisition), the company assumed $715 million
in principal amount of long-term debt issued by Belo to include $275
million in aggregate principal amount of its 8.00% senior unsecured
notes due 2016 (the 2016 Notes), $200 million in aggregate principal
amount of its 7.75% senior unsecured notes due June 2027 and $240
million in aggregate principal amount of its 7.25% senior unsecured
notes due September 2027 (the 2027 Notes). The 2016 Notes were
subsequently redeemed in December 2013. Contemporaneous with
the Belo Acquisition, the Amended and Restated Competitive
Advance and Revolving Credit Facility Agreement between Belo
and JPMorgan Chase Bank, N.A., Sun Trust Bank, Royal Bank of
Canada, and other lenders, which was scheduled to mature on Aug.
15, 2016, was terminated.
In connection with the Belo Acquisition, the company acquired
four television stations and simultaneously sold designated assets,
equipment, programming and distribution rights and the Federal
Communications Commission (FCC) licenses to unrelated third
parties. The acquisition of these assets was 100% financed by a
group of financial institutions and this debt is guaranteed by the
company’s wholly-owned material domestic subsidiaries. These four
television stations were considered variable interest entities (VIEs,
see Note 1) and the company concluded that it was the primary
beneficiary and as such, has consolidated these entities and the
accompanying debt is reflected in the company’s consolidated
balance sheet as of Dec. 29, 2013. These loans are due March 2014
through December 2018. The borrower may borrow at an applicable
margin above the Eurodollar base rate (LIBOR loan) or the higher of
the Prime Rate, the Federal Funds Effective Rate plus 0.50%, or the
one month LIBOR rate plus 1.00% (ABR loan). The applicable
margin is determined based on the company’s leverage ratio but
differs between LIBOR loans and ABR loans. The interest rate as of
Dec. 29, 2013 was 4.25%. Separate from the above transaction, but
also part of the Belo transaction, the company acquired three
television stations and simultaneously sold designated assets,
equipment, programming and distribution rights and the FCC
licenses of these stations to an unrelated third party. The acquisition
of these assets was 100% financed and this debt is guaranteed by the
company’s wholly-owned material domestic subsidiaries. These
three television stations were considered VIEs, however the
company is not the primary beneficiary and therefore did not
consolidate these entities. The principal amount of the debt is $66.9
million and it is due March 2014 through December 2018. These
unconsolidated VIEs are subject to forward sales agreements and
this debt is expected to be repaid upon the sale of these stations in
2014, at which time the guarantees will be released. The company
believes the likelihood of the guarantees being called is remote.
In July 2013, the company completed the private placement of
$600 million in aggregate principal amount of its 5.125% senior
unsecured notes due 2020 (the 2020 Notes). The 2020 Notes were
priced at 98.566% of face value, resulting in a yield to maturity of
5.375%. Subject to certain exceptions, the 2020 Notes may not be
redeemed by the company prior to July 15, 2016. The 2020 Notes
were issued in a private offering that is exempt from the registration
requirements of the Securities Act of 1933. The 2020 Notes are
guaranteed on a senior basis by the subsidiaries of the company that
guarantee its revolving credit facility, term loan and its notes
maturing in 2014 and thereafter, except for the 2027 Notes. The
company used the net proceeds to repay the outstanding
indebtedness under its revolving credit facilities and to extinguish
the 2016 Notes. Remaining proceeds are being used for general
corporate purposes.
In October 2013, the company completed the private placement
of $600 million in aggregate principal amount of its 5.125% senior
unsecured notes due 2019 (the 2019 Notes) and $650 million in
aggregate principal amount of its 6.375% senior unsecured notes due
2023 (the 2023 Notes, and collectively with the 2019 Notes, the
Merger Financing Notes). The 2019 Notes were priced at 98.724%
of face value, resulting in a yield to maturity of 5.375%. Subject to
certain exceptions, the 2019 Notes may not be redeemed by the
company prior to Oct. 15, 2016. The 2023 Notes were priced at
99.086% of face value, resulting in a yield to maturity of 6.500%.
Subject to certain exceptions, the 2023 Notes may not be redeemed
by the company prior to Oct. 15, 2018. The Merger Financing Notes
were issued in a private offering that is exempt from the registration
requirements of the Securities Act of 1933. The Merger Financing
Notes are guaranteed on a senior basis by the subsidiaries of the
company that guarantee its revolving credit facility, term loan and its
notes maturing in 2014 and thereafter, except for the 2027 Notes.
The proceeds from the sale of the Merger Financing Notes plus
available cash were used to finance the Belo acquisition.
In August 2013, the company entered into an agreement to
replace, amend and restate its existing revolving credit facilities with
a credit facility expiring on Aug. 5, 2018, which was further
amended on Sept. 24, 2013 (the Amended and Restated Credit
Agreement). Total commitments under the Amended and Restated
Credit Agreement are $1.2 billion. Subject to total leverage ratio
limits, the Amended and Restated Credit Agreement eliminates the
company’s restriction on incurring additional indebtedness. The
maximum total leverage ratio permitted by the Amended and
Restated Credit Agreement after the Belo Acquisition is 4.0x for the
first 18 months following the closing date of the Amended and
Restated Credit Agreement (Aug. 5, 2013), reducing to 3.75x from
the 18th to the 30th month anniversary of the closing date, and then
reducing to 3.50x thereafter. Commitment fees on the revolving
credit agreement are equal to 0.375% - 0.50% of the undrawn
commitments, depending upon the company’s leverage ratio, and are
computed on the average daily undrawn balance under the revolving
credit agreement and paid each quarter. Under the Amended and
Restated Credit Agreement, the company may borrow at an
applicable margin above the Eurodollar base rate (LIBOR loan) or
the higher of the Prime Rate, the Federal Funds Effective Rate plus
0.50%, or the one month LIBOR rate plus 1.00% (ABR loan). The
applicable margin is determined based on the company’s leverage
ratio but differs between LIBOR loans and ABR loans. For LIBOR
based borrowing, the margin varies from 1.75% to 2.5%. For ABR
based borrowing, the margin will vary from 0.75% to 1.50%. Based
on the company’s leverage ratio as of Dec. 29, 2013, the company’s
applicable margins were 2.50% and 1.50%, respectively. The
company also borrowed $154.8 million under a new five-year term
loan. The interest rate on the term loan is equal to the rate for a
LIBOR loan under the Amended and Restated Credit Agreement.
Both the revolving credit loan and the term loan are guaranteed by a
majority of the company’s wholly-owned material domestic
subsidiaries.
The company has an effective universal shelf registration
statement under which an unspecified amount of securities may be
issued, subject to a $7.0 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.
39
The following schedule of annual maturities of the principal
amount of total debt assumes the company uses available capacity
under its revolving credit agreement to refinance unsecured floating
rate term loans and notes due in 2014. Based on this refinancing
assumption, all of the obligations other than VIE unsecured floating
rate term loans due in 2014 are reflected as maturities for 2015 and
beyond.
In thousands of dollars
2014 (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
5,890
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
356,022
232,883
289,454
569,818
Thereafter. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,290,000
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,744,067
(1) Maturities of principal amount of debt due in 2014 (primarily the 8.75%
fixed rate notes due in November 2014) are assumed to be repaid with
funds from the revolving credit agreement.
The company’s debt maturities may be repaid with cash flow
from operating activities, 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
2013.
Contractual obligations
Payments due by period
In millions of dollars
Total 2014 2015-16 2017-18 Thereafter
Long-term debt (1). . . . . . $5,266 $227 $
989 $ 1,208 $
2,842
Operating leases (2) . . . . .
Purchase obligations (3). .
281
193
53
115
85
66
Programming
contracts (4) . . . . . . . . . . .
Other noncurrent
liabilities (5) . . . . . . . . . . .
229
79
128
399
135
64
59
10
21
61
84
2
1
139
Total . . . . . . . . . . . . . . . . . $6,368 $609 $ 1,332 $ 1,359 $
3,068
(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. 29, 2013, 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. In addition, this also includes amounts
fixed or currently accrued under network affiliation agreements.
(5) Other long-term liabilities consist of both unfunded and under-funded
postretirement benefit plans. Unfunded plans include the Gannett Supplemental
Executive Retirement Plan and the Gannett Retiree Welfare Plan. Employer
contributions, which equal the expected benefit payments, are reflected in the table
above over the next ten year period. The company’s under-funded plans include the
Gannett Retirement Plan, the G.B. Dealey Retirement Plan and the Newsquest
Pension Scheme. Expected employer contributions for these plans are included for
the following fiscal year. Contributions beyond the next fiscal year are not included
due to uncertainties regarding significant assumptions involved in estimating these
contributions, such as interest rate levels as well as the amount and timing of
invested asset returns.
Due to uncertainty with respect to the timing of future cash flows
associated with unrecognized tax benefits at Dec. 29, 2013, the
company is unable to make reasonably reliable estimates of the
period of cash settlement. Therefore, $57 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.
For 2014, the company expects to contribute $69 million to the
Gannett Retirement Plan, $16 million to the G. B. Dealey Retirement
Pension Plan and $16 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 2014, 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 June 2013, the company announced that its Board of Directors
approved a new program to repurchase up to $300 million in Gannett
common stock (replacing the former $300 million program). As of
Dec. 29, 2013, the value of shares that may be repurchased under the
existing program is $225 million.
Stock repurchases
In millions
Repurchases made in fiscal year
2013
2012
2011
Number of shares purchased . . . . . . .
4.9
10.3
Dollar amount purchased . . . . . . . . . . $
117 $
154 $
4.9
53
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.
40
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 $427 million at Dec. 29, 2013. Newsquest’s assets
and liabilities were translated from British pounds to U.S. dollars at
the Dec. 29, 2013, exchange rate of 1.65. 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 2013.
Because the company has $194 million in floating interest rate
obligations outstanding at Dec. 29, 2013, 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
approximately $1 million.
Refer to Note 7 to the Consolidated Financial Statements for
information regarding the fair value of the company’s long-term
debt.
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. 29, 2013,
totaled 227,568,888 shares, compared with 230,042,098 shares at
Dec. 30, 2012.
Dividends
Dividends declared on common stock amounted to $183 million in
2013, compared with $186 million in 2012.
Cash dividends
Payment date
Per share
2013
4th Quarter . . . . . . . . . . . . . . . . . .
Jan. 2, 2014
3rd Quarter . . . . . . . . . . . . . . . . . .
Oct. 1, 2013
2nd Quarter . . . . . . . . . . . . . . . . .
Jul. 1, 2013
1st Quarter . . . . . . . . . . . . . . . . . .
Apr. 1, 2013
2012
4th Quarter . . . . . . . . . . . . . . . . . .
Jan. 2, 2013
3rd Quarter . . . . . . . . . . . . . . . . . .
Oct. 1, 2012
2nd Quarter . . . . . . . . . . . . . . . . .
Jul. 2, 2012
1st Quarter . . . . . . . . . . . . . . . . . .
Apr. 2, 2012
$
$
$
$
$
$
$
$
0.20
0.20
0.20
0.20
0.20
0.20
0.20
0.20
On Feb. 25, 2014, the Board of Directors declared a dividend of
$.20 per share, payable on April 1, 2014, to shareholders of record as
of the close of business March 7, 2014.
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 $427 million at the end of 2013 and
$418 million at the end of 2012. The increase reflected a
strengthening of the British pound against the U.S. dollar.
Newsquest’s assets and liabilities at Dec. 29, 2013 were translated
from British pounds to U.S. dollars at an exchange rate of 1.65
versus 1.62 at the end of 2012. Newsquest’s financial results were
translated at an average rate of 1.56 for 2013, 1.58 for 2012 and 1.60
for 2011.
The company has recognized the funded status of its pension and
retiree medical benefit plans in the statement of financial position. At
Dec. 29, 2013 and Dec. 30, 2012, accumulated other comprehensive
loss includes a reduction of equity of $921 million and $1.12 billion,
respectively, for losses that will be amortized to pension and other
postretirement costs in future years.
41
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. 29, 2013 and Dec. 30, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Income for each of the three fiscal years in the period ended Dec. 29, 2013. . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Comprehensive Income for each of the three fiscal years in the period ended Dec. 29, 2013 . . . . . . . . . .
Consolidated Statements of Cash Flows for each of the three fiscal years in the period ended Dec. 29, 2013 . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Equity for each of the three fiscal years in the period ended Dec. 29, 2013 . . . . . . . . . . . . . . . . . . . . . . . .
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. 29, 2013 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
43
44
46
47
48
49
50
74
76
78
42
Report of Ernst & Young LLP,
Independent Registered
Public Accounting Firm
Board of Directors and Shareholders of Gannett Co., Inc.:
We have audited the accompanying consolidated balance sheets
of Gannett Co., Inc. as of December 29, 2013 and December 30,
2012, and the related consolidated statements of income,
comprehensive income, cash flows, and equity for each of the three
fiscal years in the period ended December 29, 2013. Our audits also
included the financial statement schedule listed in the accompanying
index in Item 8. These financial statements and schedule are the
responsibility of the Company’s management. Our responsibility is
to express an opinion on these financial statements and schedule
based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Gannett Co., Inc. at December 29, 2013 and December 30, 2012, and
the consolidated results of its operations and its cash flows for each
of the three fiscal years in the period ended December 29, 2013, in
conformity with U.S. generally accepted accounting principles. Also,
in our opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken as a
whole, presents fairly in all material respects the information set
forth therein.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States),
Gannett Co., Inc.’s internal control over financial reporting as of
December 29, 2013, based on criteria established in Internal Control
– Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (1992 framework) and
our report dated February 26, 2014, included in Item 9A, expressed
an unqualified opinion thereon.
McLean, Virginia
February 26, 2014
43
GANNETT CO., INC.
CONSOLIDATED BALANCE SHEETS
Dec. 29, 2013
Dec. 30, 2012
469,203 $
834,052
28,592
49,950
21,245
395,851
124,592
1,923,485
237,554
1,239,719
2,506,121
24,485
4,007,879
(2,338,247)
1,669,632
175,030
678,845
20,162
56,389
15,840
17,508
108,946
1,072,720
148,518
1,265,290
2,548,957
10,184
3,972,949
(2,454,271)
1,518,678
3,790,472
2,846,869
1,477,231
—
379,886
5,647,589
9,240,706 $
499,913
158,275
283,431
3,788,488
6,379,886
In thousands of dollars
Assets
Current assets
Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Trade receivables, less allowance for doubtful receivables of $15,275 and $22,006, respectively . . . . . . .
Other receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assets held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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 $201,178 and
$221,231, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total intangible and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
44
GANNETT CO., INC.
CONSOLIDATED BALANCE SHEETS
In thousands of dollars
Liabilities and equity
Current liabilities
Accounts payable
Dec. 29, 2013
Dec. 30, 2012
Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
176,055 $
39,245
187,705
24,128
Accrued liabilities
Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion of long-term debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Postretirement medical and life insurance liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other noncurrent liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total noncurrent liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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, 96,849,744 shares and 94,376,534 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.
214,434
58,575
226,153
45,645
17,791
223,404
5,890
1,007,192
49,748
587,904
3,707,010
129,078
632,195
218,168
5,324,103
6,331,295
14,618
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
2,894,804
3,829,320
10,654
—
324,419
552,368
7,720,903
(494,055)
8,103,635
(5,410,537)
2,693,098
201,695
2,894,793
9,240,706 $
—
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
(a) Consolidated assets as of Dec. 29, 2013 include total assets of $44.7 million of variable interest entities (VIEs) that can only be used to
settle the obligations of the VIEs. Consolidated liabilities as of Dec. 29, 2013 include $2.7 million of total liabilities of the VIEs for which
the VIEs’ creditors have no recourse to the company. See Note 1 to the Consolidated Financial Statements.
45
GANNETT CO., INC.
CONSOLIDATED STATEMENTS OF INCOME
In thousands of dollars, except per share amounts
Fiscal year ended
Net operating revenues
Broadcasting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Publishing advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Publishing circulation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
All other Publishing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Digital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to Gannett Co., Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Net income per share—basic. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Net income per share—diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Dec. 29, 2013
Dec. 30, 2012
Dec. 25, 2011
835,113 $
906,104 $
2,198,719
1,129,060
250,025
748,445
5,161,362
2,882,449
1,291,858
153,203
36,369
58,240
4,422,119
739,243
43,824
(176,064)
(47,890)
(180,130)
559,113
113,200
445,913
(57,233)
388,680 $
1.70 $
1.66 $
2,355,922
1,117,042
255,180
718,949
5,353,197
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
(50,727)
424,280 $
1.83 $
1.79 $
722,410
2,511,025
1,063,890
256,193
686,471
5,239,989
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
(41,379)
458,748
1.92
1.89
The accompanying notes are an integral part of these consolidated financial statements.
46
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 gain (loss):
Dec. 29, 2013
Dec. 30, 2012
445,913 $
475,007 $
Dec. 25, 2011
500,127
(1,997)
(254)
(973)
9,055
18,107
5,342
Actuarial gain (loss) arising during the period. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
286,778
64,381
(230,799)
55,372
Prior service cost:
Change in prior service (costs) credit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of prior service credit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlement charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension and other postretirement benefit items . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (loss) before tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax effect related to components of other comprehensive income (loss) . . . . . .
Other comprehensive income (loss), net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Comprehensive income attributable to noncontrolling interests, net of tax. . . . . . . . . . .
Comprehensive income attributable to Gannett Co., Inc. . . . . . . . . . . . . . . . . . . . . . $
The accompanying notes are an integral part of these consolidated financial statements.
319
(1,599)
3,077
(10,158)
342,798
2,363
354,216
(145,478)
208,738
652,654
56,888
595,766 $
—
(11,501)
7,946
(11,375)
(190,357)
1,791
(170,459)
66,948
(103,511)
371,242
52,264
318,978 $
(403,495)
43,345
(1,297)
(11,930)
—
(295)
(373,672)
(5,469)
(373,799)
140,182
(233,617)
265,537
37,294
228,243
47
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:
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 (increase) in trade receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decrease 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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used for investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash flows from financing activities
Proceeds from (payments of) borrowings under revolving credit facilities . . . . . . . . . . . . .
Proceeds from issuance of long-term debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from (payments of) unsecured floating rate term loans . . . . . . . . . . . . . . . . . . . . .
Payments of unsecured fixed rate notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments of debt issuance and financing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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 provided by (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.
48
Dec. 29, 2013 Dec. 30, 2012 Dec. 25, 2011
445,913 $
475,007 $
500,127
153,203
36,369
61,014
33,437
53,900
(82,878)
(43,824)
(4,673)
(17,884)
9,329
4,489
(29,310)
(53,101)
(12,233)
(42,263)
511,488
(110,407)
(1,451,006)
(3,380)
63,408
113,895
(1,387,490)
(205,000)
1,827,799
194,070
(287,719)
(41,960)
(183,233)
(116,639)
31,435
(42,608)
(6,132)
1,170,013
162
294,173
175,030
469,203 $
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)
(30,000)
—
—
(306,571)
—
(158,822)
(153,948)
33,748
(47,100)
(1,027)
(663,720)
2,065
8,104
166,926
175,030 $
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)
14,000
—
(180,000)
(433,432)
—
(47,946)
(53,037)
3,609
(108,691)
—
(805,497)
192
(16,088)
183,014
166,926
GANNETT CO., INC.
CONSOLIDATED STATEMENTS OF EQUITY
In thousands of dollars
Gannett Co., Inc. Shareholders’ Equity
Fiscal years ended Dec. 25, 2011, Dec. 30, 2012,
and Dec. 29, 2013
Common
stock
$1 par
value
Additional
paid-in
capital
Retained
earnings
Accumulated
other
comprehensive
income (loss)
Treasury
stock
Noncontrolling
Interests
Total
Balance: Dec. 26, 2010 . . . . . . . . . . . . . . . . . . . . . $
Net income, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . .
Redeemable noncontrolling interest. . . . . . . . . . . .
Other comprehensive loss, net of tax . . . . . . . . . . .
Balance: 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 activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance: Dec. 25, 2011 . . . . . . . . . . . . . . . . . . . . . $
Net income, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . .
Redeemable noncontrolling interest. . . . . . . . . . . .
Other comprehensive income (loss), 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 activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance: Dec. 30, 2012 . . . . . . . . . . . . . . . . . . . . . $
Net income, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . .
Redeemable noncontrolling interest. . . . . . . . . . . .
Other comprehensive income, net of tax . . . . . . . .
Total comprehensive income. . . . . . . . . . . . . . . . . .
Dividends declared, 2013: $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 activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance: Dec. 29, 2013 . . . . . . . . . . . . . . . . . . . . . $
324,419 $
630,316 $ 6,874,641 $
(365,334) $ (5,300,288) $
458,748
(57,189)
(230,505)
(7,294)
28,003
(24,714)
1,257
(9,841)
(53,037)
9,646
41,341
7,722
324,419 $
617,727 $ 7,276,200 $
(595,839) $ (5,294,616) $
41,379
(973)
(3,112)
170,319 $ 2,334,073
500,127
(973)
(233,617)
265,537
(57,189)
(23,542)
(23,542)
(53,037)
2,352
28,003
16,627
1,257
(2,056)
184,134 $ 2,512,025
475,007
(254)
50,727
(254)
63
424,280
(185,622)
(105,302)
1,791
(103,511)
371,242
(185,622)
(42,282)
(32,860)
26,608
9,243
(10,921)
567,515 $ 7,514,858 $
388,680
324,419 $
(153,948)
66,787
25,890
850
(701,141) $ (5,355,037) $
207,086
(182,635)
(18,518)
(31,707)
33,437
9,764
(8,123)
(116,639)
40,189
21,227
(277)
324,419 $
552,368 $ 7,720,903 $
(494,055) $ (5,410,537) $
(47,100)
(47,100)
(153,948)
24,505
(6,970)
26,608
9,243
(10,071)
189,298 $ 2,539,912
445,913
(1,997)
208,738
652,654
(182,635)
57,233
(1,997)
1,652
(42,390)
(42,390)
(116,639)
21,671
(10,480)
33,437
9,764
(10,501)
201,695 $ 2,894,793
(2,101)
The accompanying notes are an integral part of these consolidated financial statements.
49
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 2013 fiscal year ended on Dec. 29,
2013, and encompassed a 52-week period. The company’s 2012 and
2011 fiscal years encompassed 53-week and 52-week periods,
respectively.
Consolidation: The consolidated financial statements include the
accounts of the company and its wholly and majority-owned
subsidiaries after elimination of all 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.
Variable Interest Entities (VIE): A variable interest entity is an
entity that lacks equity investors or whose equity investors do not
have a controlling interest in the entity through their equity
investments. The company consolidates VIEs when it is the primary
beneficiary. In determining whether the company is the primary
beneficiary of a VIE for financial reporting purposes, the company
considers whether it has the power to direct the activities of the VIE
that most significantly impact the economic performance of the VIE
and whether the company has the obligation to absorb losses or the
right to receive returns that would be significant to the VIE.
On Dec. 23, 2013, Gannett completed the previously announced
merger transaction contemplated in the Agreement and Plan of
Merger, dated June 12, 2013 (the Merger Agreement), among Belo
Corp. (Belo), Gannett, and Delta Acquisition Corp., a wholly-owned
subsidiary of Gannett (Merger Sub). Pursuant to the Merger
Agreement, Merger Sub merged with and into Belo (the Merger),
with Belo surviving the Merger as a wholly-owned subsidiary of
Gannett.
The total cash consideration for the Merger was approximately
$1.47 billion, in addition to the assumption of $715 million in
principal amount of outstanding Belo debt.
As part of the transactions contemplated by the Merger
Agreement, Gannett and Belo restructured certain of Belo’s media
holdings. Simultaneously with the closing of the transactions
contemplated by the Merger Agreement, Gannett closed on Asset
Purchase Agreements (collectively, the Restructuring Agreements)
with Sander Holdings, LLC and certain of its subsidiaries and
Tucker Operating Co. LLC (the Restructuring Assignees).
Pursuant to the Restructuring Agreements, the Belo subsidiaries
that owned and operated Belo’s seven stations located in the
Louisville, KY; Phoenix, AZ; Portland, OR; St. Louis, MO; and
Tucson, AZ television markets entered into their respective
Restructuring Agreement and thereupon assigned, transferred, and
conveyed to the Restructuring Assignees designated assets, including
the applicable Federal Communications Commission (FCC) licenses,
and certain operating equipment and programming and distribution
agreements relating to the respective stations. As previously
announced, the closing of the Restructuring Agreements for station
KMOV-TV in St. Louis, MO, was subject to the terms of a proposed
consent decree with the U.S. Department of Justice, which requires a
divestiture of that station. Gannett also entered into, effective after
closing of the Merger and the conveyance under the Restructuring
Agreements, shared services or other support agreements with the
Restructuring Assignees. In addition, the Restructuring Assignees
granted Gannett (or its assignee) the right to acquire such stations in
the future, subject to applicable law. In order to facilitate the
efficient pricing of acquisition financing needs of the Restructuring
Assignees, Gannett guaranteed debt incurred by the Restructuring
Assignees in connection with the closings under the Restructuring
Agreements.
Consolidated VIEs: The company has concluded that the owner
entities of the seven stations constitute VIEs and the various
agreements that the company has entered into related to these
entities represented variable interests in the VIEs. Accordingly, the
company has evaluated the arrangements with respect to the power
to direct the activities of the VIE and whether it has significant
benefits, as required under ASC Topic 810, “Consolidation” (ASC
Topic 810). Four stations in the Louisville, KY; Portland, OR; and
Tucson, AZ, television markets are consolidated by the company
based on these evaluations.
As of the dates indicated, the carrying amounts and classification
of the assets and liabilities of the consolidated VIEs mentioned
above which have been included in the company’s consolidated
balance sheets as of Dec. 29, 2013 were as follows:
In thousands of dollars
Dec. 29, 2013
Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Plant, property and equipment, net . . . . . . . . . . . . . . . . . . .
Intangible and other assets . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncurrent liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
4,677
8,061
32,008
44,746
7,827
34,173
42,000
Non-consolidated VIEs: With respect to two stations located in
Phoenix, AZ, and one in St. Louis, MO, the company has entered
into forward sale agreements to cause the sale of the assets of these
stations to a third party. The station in St. Louis is expected to be
sold by the end of March 2014. The sale of the two stations in
Phoenix is expected to take place later in 2014. These three stations
are not consolidated due to the company’s involvement being limited
to certain administrative, maintenance and monitoring services.
50
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.
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.
Segment presentation: The Digital Segment includes results
from CareerBuilder, PointRoll and Shoplocal. 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.
Assets held for sale: In accordance with the guidance on the
disposal of long-lived assets under ASC Topic 360, “Property, Plant
and Equipment” (ASC Topic 360), the company reported assets held
for sale primarily in its Broadcasting Segment at Dec. 29, 2013 of
$395.9 million.
Valuation of long-lived assets: In accordance with the
requirements included within ASC Topic 350, “Intangibles—
Goodwill and Other” (ASC Topic 350) and 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.
51
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 2011-2013 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. 29, 2013 and Dec. 30, 2012, such investments totaled
approximately $2.7 million and $1.9 million, respectively. See Note
3 for additional information.
The company’s television stations are parties to program
broadcasting 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. Broadcasting revenues include revenues
from the retransmission of the company’s television signals on
satellite and cable networks. Retransmission fees are recognized
over the contract period based on a negotiated fee per subscriber.
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. Revenue from sales agreements that contain
multiple deliverable elements is allocated to each element based on
the relative best estimate of selling price. Elements are treated as
separate units of accounting if there is standalone value upon
delivery. Amounts received from customers in advance of revenue
recognition are deferred as liabilities.
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.
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 February 2013, the
Financial Accounting Standards Board (FASB) issued Accounting
Standards Update (ASU) 2013-02, Comprehensive Income -
Reporting of Amounts Reclassified Out of Accumulated Other
Comprehensive Income (AOCI). ASU 2013-02 requires an entity to
provide information about the amounts reclassified out of
accumulated other comprehensive income by component. The new
guidance requires an entity to present either on the face of the
statement where net income is presented or in the notes, significant
amounts reclassified out of accumulated other comprehensive
income by the respective line items of net income but only if the
amount reclassified is required under U.S. GAAP to be reclassified
to net income in its entirety in the same reporting period. For other
amounts, a cross-reference to other disclosures is required to provide
additional detail about those amounts. The company adopted the
provision of ASU 2013-02 in the first quarter of 2013 and the new
disclosures are included in Note 11 – Shareholder’s Equity.
52
Under the acquisition method of accounting, the results of the
acquired operations for the 17 consolidated television stations are
included in the financial statements of the company beginning Dec.
23, 2013. Net broadcasting revenues and operating income of these
stations included in the company’s consolidated statements of
operations were immaterial for the year ended Dec. 29, 2013.
Pro forma information. The following table sets forth unaudited
pro forma results of operations, assuming that the Belo acquisition,
along with transactions necessary to finance the acquisitions,
occurred at the beginning of 2012:
In thousands of dollars
Unaudited
2013
2012
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5,738,051 $5,948,945
Net income attributable to Gannett Co., Inc.. . . . . $ 415,774 $ 427,917
This pro forma financial information is based on historical
results of operations, adjusted for the allocation of the purchase price
and other acquisition accounting adjustments, and is not necessarily
indicative of what the company’s results would have been had the
company operated the businesses since the beginning of the annual
period presented. The pro forma adjustments reflect depreciation
expense and amortization of intangibles related to the fair value
adjustments of the assets acquired, additional interest expense
related to the financing of the transactions, alignment of accounting
policies and the related tax effects of the adjustments. The pro forma
information excludes the revenues and net income of the three non-
consolidated VIEs.
The company incurred and expensed a total of $33.0 million of
acquisition costs for the year ended Dec. 29, 2013. Such costs were
reflected in Other non-operating items in the consolidated statements
of income. These costs were removed in the pro forma amounts
above as they are specifically related to the acquisition.
In March 2013, CareerBuilder acquired Vietnam Online Network
(KiemViec.com & HR Vietnam), Vietnam’s second largest career
site by revenue, and first by number of registered users, specializing
in recruitment services and human resource solutions for employers.
In April 2013, CareerBuilder acquired Oil and Gas Job Search
(OilandGasJobSearch.com). Headquartered in England, Oil and Gas
Job Search is the oil and gas industry’s leading online job site
outside North America with job postings worldwide.
Total cash paid in 2013 for business acquisitions and
investments, net of cash acquired was $1.45 billion and $3.4 million
respectively.
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.
NOTE 2
Acquisitions, investments and dispositions
2013: On Dec. 23, 2013, Gannett completed the acquisition of Belo.
The total cash consideration was $1.47 billion in addition to the
assumption of $715 million in principal amount of outstanding Belo
debt.
The source of the aggregate purchase price paid by Gannett in
the Merger consisted of the net proceeds from the sale of Gannett’s
$600 million aggregate principal amount of 5.125% Senior Notes
due 2019 and $650 million aggregate principal amount of 6.375%
Senior Notes due 2023, and approximately $214 million of cash on
hand.
The purchase price was allocated to the tangible assets and
identified intangible assets acquired based on their estimated fair
values. The excess purchase price over those fair values was
recorded as goodwill. At the acquisition date, the purchase price
assigned to the acquired assets and assumed liabilities is summarized
as follows:
In thousands of dollars
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . $
Receivables and other current assets . . . . . . . . . . . . . . . . . .
Assets held for sale. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plant, property and equipment, net. . . . . . . . . . . . . . . . . . . .
Indefinite-lived FCC licenses. . . . . . . . . . . . . . . . . . . . . . . .
Definite-lived intangible assets: . . . . . . . . . . . . . . . . . . . . . .
Retransmission agreements . . . . . . . . . . . . . . . . . . . . . .
Network affiliation agreements . . . . . . . . . . . . . . . . . . .
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments and other noncurrent assets . . . . . . . . . . . . . . .
Goodwill. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets acquired. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other noncurrent liabilities. . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
38,107
161,498
429,186
254,489
835,900
99,161
37,030
48,782
53,478
943,841
2,901,472
86,128
525,550
76,500
741,708
Total liabilities assumed. . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,429,886
Net assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1,471,586
The retransmission agreements and network affiliate agreements
intangible assets will be amortized over a weighted average life of
eight years and nine years, respectively. Acquired property and
equipment will be depreciated on a straight-line basis over the
respective estimated remaining useful lives. Goodwill is calculated
as the excess of the consideration transferred over the fair value of
the identifiable net assets acquired and represents the future
economic benefits expected to arise from other intangible assets
acquired that do not qualify for separate recognition, including
assembled workforce and non-contractual relationships, as well as
expected future synergies. The company expects that the purchase
price allocated to goodwill and other indefinite-lived intangibles will
not be deductible for tax purposes as no new tax basis in these
intangibles was created due to the acquisition being a stock
acquisition. The initial purchase price allocation is preliminarily
based upon all information available to the company at the present
time and is subject to change, and such changes could be material.
The company continues to review the underlying assumptions and
valuation techniques utilized to calculate the fair value of primarily
the Indefinite-lived and Definite-lived intangibles, Plant, property
and equipment, Investments and Deferred income taxes.
53
NOTE 3
Facility consolidation and asset impairment charges
For the years 2011-2013, 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. In addition, the company
recorded charges to write off certain publishing assets that were
donated during 2013.
A summary of these charges by year is presented below:
In thousands, except per share amounts
2013
Pre-Tax
Amount (a)
After-Tax
Amount(a)
Per Share
Amount(a)
Facility consolidation and asset impairment charges:
Goodwill:
Publishing. . . . . . . . . . . . . . . . . . . $
8,430 $
4,930 $
Digital. . . . . . . . . . . . . . . . . . . . . .
Total goodwill. . . . . . . . . . . . . . . .
Other intangible assets - Publishing..
Property, plant and equipment -
Publishing . . . . . . . . . . . . . . . . . . . . .
Other:
11,614
20,044
12,952
6,914
11,844
7,852
14,756
8,856
Broadcasting. . . . . . . . . . . . . . . . .
Publishing. . . . . . . . . . . . . . . . . . .
1,033
9,454
Total other. . . . . . . . . . . . . . . . . . .
10,487
533
5,754
6,287
Total facility consolidation and asset
impairment charges against operations .
Non-operating charges:
58,240
34,840
Equity method investments. . . . . . . .
Other - Publishing . . . . . . . . . . . . . . .
731
2,774
431
1,774
Total charges . . . . . . . . . . . . . . . . . . . . . $ 61,745 $ 37,045 $
(a) Total amounts may not sum due to rounding.
0.02
0.03
0.05
0.03
0.04
—
0.02
0.03
0.15
—
0.01
0.16
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 $
Property, plant and equipment -
Publishing . . . . . . . . . . . . . . . . . . . . .
Other - Publishing . . . . . . . . . . . . . . .
17,920
29,520
1,656
2,556
Total facility consolidation and asset
impairment charges against operations .
Non-operating charges:
122,129
106,129
Equity method investments . . . . . . . .
7,036
4,336
Total charges. . . . . . . . . . . . . . . . . . . . . . $ 129,165 $110,465 $
(a) Total amounts may not sum due to rounding.
0.37
0.08
0.01
0.45
0.02
0.47
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 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, net of cash acquired 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
broadcasting properties.
In September 2011, CareerBuilder acquired JobScout24, which
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 television outlets.
Also in November 2011, the company purchased a minority
stake in Wanderful Media, LLC (Wanderful). Wanderful 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, net of cash acquired was $23.0 million and $19.4
million, respectively.
54
In thousands, except per share amounts
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 $
Total property, plant and equipment.
17,085
10,282
Other:
Publishing. . . . . . . . . . . . . . . . . . .
Total other. . . . . . . . . . . . . . . . . . . . .
10,158
10,158
7,261
7,261
Total facility consolidation and asset
impairment charges against operations .
Non-operating charges:
27,243
17,543
Equity method investments. . . . . . . .
Other investments . . . . . . . . . . . . . . .
15,739
14,529
9,539
8,729
Total charges . . . . . . . . . . . . . . . . . . . . . $ 57,511 $ 35,811 $
0.04
0.04
0.03
0.03
0.07
0.04
0.04
0.15
In connection with the required annual impairment test of
goodwill and indefinite-lived intangibles, potential impairments
were indicated in 2012 and 2013 for certain reporting units in the
company’s Publishing and Digital 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 charges in 2013 for other intangible assets,
principally trade names and a masthead, were required because
revenue results from the underlying business had softened from what
was expected. Fair value was determined using a relief-from-royalty
method. Carrying values were reduced to fair value for these assets.
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 2011-2013. Certain assets classified as held-
for-sale in accordance with ASC Topic 360 resulted in charges being
recognized in 2012 and 2013 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 2011-2013, 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.
In addition, the company recorded non-operating charges to
write off certain publishing assets that were donated during 2013.
NOTE 4
Goodwill and other intangible assets
ASC Topic 350 requires that goodwill and indefinite-lived intangible
assets be tested for impairment at least annually. Recognized
intangible assets that have finite useful lives are amortized over their
useful lives and are subject to tests for impairment in accordance
with the requirements included within ASC Topic 350.
The company performed impairment tests on its goodwill and
intangible assets during 2013 and as a result recognized non-cash
impairment charges totaling $33.0 million. The charges include
goodwill and other intangibles for the Publishing Segment of $8.4
million and $13.0 million, respectively, and $11.6 million of
goodwill for the Digital Segment. The impairment charges coincide
with changes in strategy and the development of updated financial
projections reflective of these events.
The company performed impairment tests on its goodwill and
intangible assets during 2012 and as a result recognized non-cash
impairment charges totaling $90.1 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.
The following table displays goodwill, indefinite-lived intangible
assets, and amortizable intangible assets at Dec. 29, 2013, and Dec.
30, 2012.
In thousands of dollars
Dec. 29, 2013
Gross
Accumulated
Amortization
Net
Goodwill . . . . . . . . . . . . . . . . . . $ 3,790,472 $
— $ 3,790,472
Indefinite-lived intangibles:
Television station FCC
licenses . . . . . . . . . . . . . . . . .
1,091,204
Mastheads and trade names . .
82,570
— 1,091,204
—
82,570
Amortizable intangible assets:
Customer relationships . . . . . .
Other. . . . . . . . . . . . . . . . . . . .
290,845
213,790
Total. . . . . . . . . . . . . . . . . . . . . . $ 5,468,881 $
Dec. 30, 2012
177,515
23,663
113,330
190,127
201,178 $ 5,267,703
Goodwill . . . . . . . . . . . . . . . . . . $ 2,846,869 $
— $ 2,846,869
Indefinite-lived intangibles:
Television station FCC
licenses . . . . . . . . . . . . . . . . .
Mastheads and trade names . .
Amortizable intangible assets:
255,304
95,308
—
—
255,304
95,308
Customer relationships . . . . . .
Other. . . . . . . . . . . . . . . . . . . .
313,567
56,965
197,300
23,931
116,267
33,034
Total. . . . . . . . . . . . . . . . . . . . . . $ 3,568,013 $
221,231 $ 3,346,782
Amortization expense was $36.4 million in 2013 and $33.3
million in 2012. The increase primarily reflects the impact of
additional acquisitions made in 2013. Customer relationships, which
include subscriber lists and advertiser relationships, are amortized on
a straight-line basis over periods ranging from less than 1 to 25
years. Other intangibles primarily include retransmission
agreements, network affiliations, 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.
55
The following table shows the projected annual amortization
expense related to amortizable intangibles assuming no acquisitions
or dispositions:
In thousands of dollars
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
57,473
48,147
40,389
35,546
33,593
NOTE 5
Supplemental cash flows information
Cash paid in 2013, 2012 and 2011 for income taxes and for interest
(net of amounts capitalized) was as follows:
In thousands of dollars
Income taxes, net of refunds . . . . . . . . $ 124,378 $
64,838 $ 128,874
Interest . . . . . . . . . . . . . . . . . . . . . . . . . $ 126,180 $ 138,906 $ 161,960
2013
2012
2011
The following table shows the changes in the carrying amount of
NOTE 6
goodwill during 2013 and 2012.
In thousands of dollars
Broadcasting Publishing
Digital
Total
Investments
The company’s investments include several that are accounted for
under the equity method. Principal among these are the following:
Goodwill
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 . . . . $
Acquisitions &
adjustments . . . . . .
Impairment . . . . . .
1,618,522 $ 7,643,255 $
680,489 $ 9,942,266
— (7,050,778)
(26,603)
(7,077,381)
Wanderful Media, LLC . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ponderay Newsprint Company . . . . . . . . . . . . . . . . . . . . . .
1,618,522 $
592,477 $
653,886 $ 2,864,885
Captivate Holdings, LLC . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
80
22,747
39,241
61,988
—
(90,053)
(90,053)
6,918
3,051
10,049
1,618,602 $
622,142 $
606,125 $ 2,846,869
1,618,602
7,754,959
722,781
10,096,342
— (7,132,817)
(116,656)
(7,249,473)
1,618,602 $
622,142 $
606,125 $ 2,846,869
California Newspapers Partnership . . . . . . . . . . . . . . . . . . .
4Info . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Livestream . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Classified Ventures (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pearl, LLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
HotelMe, LLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Homefinder.com . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Topix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Garnet Media. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Texas-New Mexico Newspapers Partnership . . . . . . . . . . .
Tucson Newspaper Partnership . . . . . . . . . . . . . . . . . . . . . .
% Owned
Dec. 29, 2013
12.73%
13.50%
18.00%
19.49%
24.53%
26.03%
26.90%
32.10%
32.14%
33.33%
33.71%
34.00%
40.64%
50.00%
943,841
2,266
28,115
974,222
(1) The acquisition of Belo increased the ownership percentage in Classified
—
(8,430)
(11,614)
(20,044)
(19,000)
Dispositions . . . . .
(19,000)
—
—
Foreign currency
exchange rate
changes . . . . . . . . .
Balance at
Dec. 29, 2013 . . . . $
Gross balance at
Dec. 29, 2013 . . . .
Accumulated
impairment losses .
Net balance at
Dec. 29, 2013 . . . . $
(110)
3,903
4,632
8,425
2,543,333 $
619,881 $
627,258 $ 3,790,472
2,543,333
7,807,416
755,528
11,106,277
— (7,187,535)
(128,270)
(7,315,805)
2,543,333 $
619,881 $
627,258 $ 3,790,472
Ventures from 23.6% to 26.9%.
The aggregate carrying value of equity investments at Dec. 29,
2013, was $164.9 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 company’s net equity income in unconsolidated investees
included impairment charges related primarily to certain digital
business investments for 2013, 2012 and 2011 of $0.7 million, $7.0
million and $15.7 million, respectively.
The company also recorded revenue related to Classified
Ventures and Homefinder.com products for online advertisements
placed on its publishing affiliated digital platforms. Such amounts
totaled approximately $98.3 million for 2013, $90.2 million for 2012
and $82.7 million for 2011. These revenues are recorded within
Publishing Segment advertising revenue.
56
In connection with the Belo Acquisition, the company acquired
four television stations and simultaneously sold designated assets,
equipment, programming and distribution rights and the Federal
Communications Commission (FCC) licenses to unrelated third
parties. The acquisition of these assets was 100% financed by a
group of financial institutions and this debt is guaranteed by the
company’s wholly-owned material domestic subsidiaries. These four
television stations were considered variable interest entities (VIEs,
see Note 1) and the company concluded that it was the primary
beneficiary and as such, has consolidated these entities and the
accompanying debt is reflected in the company’s consolidated
balance sheet as of Dec. 29, 2013. These loans are due March 2014
through December 2018. The borrower may borrow at an applicable
margin above the Eurodollar base rate (LIBOR loan) or the higher of
the Prime Rate, the Federal Funds Effective Rate plus 0.50%, or the
one month LIBOR rate plus 1.00% (ABR loan). The applicable
margin is determined based on the company’s leverage ratio but
differs between LIBOR loans and ABR loans. The interest rate as of
Dec. 29, 2013 was 4.25%. Separate from the above transaction, but
also part of the Belo transaction, the company acquired three
television stations and simultaneously sold designated assets,
equipment, programming and distribution rights and the FCC
licenses of these stations to an unrelated third party. The acquisition
of these assets was 100% financed and this debt is guaranteed by the
company’s wholly-owned material domestic subsidiaries. These
three television stations were considered VIEs, however the
company is not the primary beneficiary and therefore did not
consolidate these entities. The principal amount of the debt is $66.9
million and it is due March 2014 through December 2018. These
unconsolidated VIEs are subject to forward sales agreements and
this debt is expected to be repaid upon the sale of these stations in
2014, at which time the guarantees will be released. The company
believes the likelihood of the guarantees being called is remote.
In July 2013, the company completed the private placement of
$600 million in aggregate principal amount of its 5.125% senior
unsecured notes due 2020 (the 2020 Notes). The 2020 Notes were
priced at 98.566% of face value, resulting in a yield to maturity of
5.375%. Subject to certain exceptions, the 2020 Notes may not be
redeemed by the company prior to July 15, 2016. The 2020 Notes
were issued in a private offering that is exempt from the registration
requirements of the Securities Act of 1933. The 2020 Notes are
guaranteed on a senior basis by the subsidiaries of the company that
guarantee its revolving credit facility, term loan and its notes
maturing in 2014 and thereafter, except for the 2027 Notes. The
company used the net proceeds to repay the outstanding
indebtedness under its revolving credit facilities and to extinguish
the 2016 Notes. Remaining proceeds are being used for general
corporate purposes.
NOTE 7
Long-term debt
The long-term debt of the company is summarized below:
In thousands of dollars
Dec. 29, 2013 Dec. 30, 2012
Unsecured floating rate term loan due
quarterly through August 2018. . . . . . . . . . . $
VIE unsecured floating rate term loans due
quarterly through December 2018 . . . . . . . .
154,800 $
39,270
—
—
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 (a). . . . . . . .
Borrowings under revolving credit
agreement expiring August 2018 . . . . . . . . .
Unsecured notes bearing fixed rate interest
at 7.125% due September 2018 . . . . . . . . . .
Unsecured notes bearing fixed rate interest
at 5.125% due October 2019 . . . . . . . . . . . .
Unsecured notes bearing fixed rate interest
at 5.125% due July 2020 . . . . . . . . . . . . . . .
Unsecured notes bearing fixed rate interest
at 6.375% due October 2023 . . . . . . . . . . . .
Unsecured notes bearing fixed rate interest
at 7.75% due June 2027 . . . . . . . . . . . . . . . .
Unsecured notes bearing fixed rate interest
at 7.25% due September 2027 . . . . . . . . . . .
250,000
250,000
66,568
66,568
250,000
250,000
193,429
193,429
250,000
250,000
—
205,000
250,000
250,000
600,000
600,000
650,000
200,000
240,000
—
—
—
—
—
Total principal long-term debt . . . . . . . . . . .
3,744,067
1,464,997
Other (fair market value adjustments and
discounts) . . . . . . . . . . . . . . . . . . . . . . . . . . .
(31,167)
(32,897)
Total long-term debt. . . . . . . . . . . . . . . . . . .
3,712,900
1,432,100
Less current portion of long-term debt
maturities of VIE loans. . . . . . . . . . . . . . . . .
5,890
—
Long-term debt, net of current portion. . . . . $
3,707,010 $
1,432,100
(a) On Feb. 5, 2014 the company sent notice of its intent to redeem the
9.375% notes on March 14, 2014. The notes will be redeemed for
104.688% of the outstanding principal amount, pursuant to the original
terms.
Total average debt outstanding in 2013 and 2012 was $2.0 billion
and $1.7 billion, respectively. The weighted average interest rate on
all debt was 7.7% for both 2013 and 2012.
On Dec. 29, 2013, the company had unused borrowing capacity
of $1.2 billion under its revolving credit agreement that expires in
August 2018.
In connection with the company’s acquisition of Belo on Dec.
23, 2013 (the Belo Acquisition), the company assumed $715 million
in principal amount of long-term debt issued by Belo to include $275
million in aggregate principal amount of its 8.00% senior unsecured
notes due 2016 (the 2016 Notes), $200 million in aggregate principal
amount of its 7.75% senior unsecured notes due June 2027 and $240
million in aggregate principal amount of its 7.25% senior unsecured
notes due September 2027 (the 2027 Notes). The 2016 Notes were
subsequently redeemed in December 2013. Contemporaneous with
the Belo Acquisition, the Amended and Restated Competitive
Advance and Revolving Credit Facility Agreement between Belo
and JPMorgan Chase Bank, N.A., Sun Trust Bank, Royal Bank of
Canada, and other lenders, which was scheduled to mature on Aug.
15, 2016, was terminated.
57
The following schedule of annual maturities of the principal
amount of total debt assumes the company uses available capacity
under its revolving credit agreement to refinance unsecured floating
rate term loans and notes due in 2014. Based on this refinancing
assumption, all of the obligations other than VIE unsecured floating
rate term loans due in 2014 are reflected as maturities for 2015 and
beyond.
In thousands of dollars
2014 (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,890
356,022
232,883
289,454
569,818
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,290,000
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
3,744,067
(1) Maturities of principal amount of debt due in 2014 (primarily the 8.75%
fixed rate notes due in November 2014) are assumed to be repaid with
funds from the revolving credit agreement.
The company’s debt maturities may be repaid with cash flow
from operating activities by accessing capital markets or a
combination of both.
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., the Newspaper Guild of
Detroit Pension Plan, and The G.B. Dealey Retirement Pension Plan
(Belo Plan). The company uses a Dec. 31 measurement date for its
retirement plans.
Substantially all participants in the GRP, Belo Plan and SERP
had their benefits frozen prior to 2009. Participants of the
Newsquest plan had their benefits frozen effective March 31, 2011.
The company’s pension costs, which include costs for its
qualified and non-qualified plans, are presented in the following
table:
In thousands of dollars
2013
2012
2011
Service cost—benefits earned during
the period . . . . . . . . . . . . . . . . . . . . . . . . $
Interest cost on benefit obligation . . . . .
7,538 $
7,545 $
7,833
141,030
155,376
171,339
Expected return on plan assets . . . . . . . .
(198,216)
(189,863)
(211,659)
Amortization of prior service costs . . . .
Amortization of actuarial loss . . . . . . . .
7,566
63,212
7,689
53,429
7,580
37,901
Pension expense for company-
sponsored retirement plans. . . . . . . . . . .
Settlement and special termination
benefit charge . . . . . . . . . . . . . . . . . . . . .
21,130
34,176
12,994
3,077
7,946
1,068
Total pension cost. . . . . . . . . . . . . . . . . . $ 24,207 $ 42,122 $ 14,062
In October 2013, the company completed the private placement
of $600 million in aggregate principal amount of its 5.125% senior
unsecured notes due 2019 (the 2019 Notes) and $650 million in
aggregate principal amount of its 6.375% senior unsecured notes due
2023 (the 2023 Notes, and collectively with the 2019 Notes, the
Merger Financing Notes). The 2019 Notes were priced at 98.724%
of face value, resulting in a yield to maturity of 5.375%. Subject to
certain exceptions, the 2019 Notes may not be redeemed by the
company prior to Oct. 15, 2016. The 2023 Notes were priced at
99.086% of face value, resulting in a yield to maturity of 6.500%.
Subject to certain exceptions, the 2023 Notes may not be redeemed
by the company prior to Oct. 15, 2018. The Merger Financing Notes
were issued in a private offering that is exempt from the registration
requirements of the Securities Act of 1933. The Merger Financing
Notes are guaranteed on a senior basis by the subsidiaries of the
company that guarantee its revolving credit facility, term loan and its
notes maturing in 2014 and thereafter, except for the 2027 Notes.
The proceeds from the sale of the Merger Financing Notes plus
available cash were used to finance the Belo acquisition.
In August 2013, the company entered into an agreement to
replace, amend and restate its existing revolving credit facilities with
a credit facility expiring on Aug. 5, 2018, which was further
amended on Sept. 24, 2013 (the Amended and Restated Credit
Agreement). Total commitments under the Amended and Restated
Credit Agreement are $1.2 billion. Subject to total leverage ratio
limits, the Amended and Restated Credit Agreement eliminates the
company’s restriction on incurring additional indebtedness. The
maximum total leverage ratio permitted by the Amended and
Restated Credit Agreement after the Belo Acquisition is 4.0x for the
first 18 months following the closing date of the Amended and
Restated Credit Agreement (Aug. 5, 2013), reducing to 3.75x from
the 18th to the 30th month anniversary of the closing date, and then
reducing to 3.50x thereafter. Commitment fees on the revolving
credit agreement are equal to 0.375% - 0.50% of the undrawn
commitments, depending upon the company’s leverage ratio, and are
computed on the average daily undrawn balance under the revolving
credit agreement and paid each quarter. Under the Amended and
Restated Credit Agreement, the company may borrow at an
applicable margin above the Eurodollar base rate (LIBOR loan) or
the higher of the Prime Rate, the Federal Funds Effective Rate plus
0.50%, or the one month LIBOR rate plus 1.00% (ABR loan). The
applicable margin is determined based on the company’s leverage
ratio but differs between LIBOR loans and ABR loans. For LIBOR
based borrowing, the margin varies from 1.75% to 2.5%. For ABR
based borrowing, the margin will vary from 0.75% to 1.50%. Based
on the company’s leverage ratio as of Dec. 29, 2013, the company’s
applicable margins were 2.50% and 1.50%, respectively. The
company also borrowed $154.8 million under a new five-year term
loan. The interest rate on the term loan is equal to the rate for a
LIBOR loan under the Amended and Restated Credit Agreement.
Both the revolving credit loan and the term loan are guaranteed by a
majority of the company’s wholly-owned material domestic
subsidiaries.
The company has an effective universal shelf registration
statement under which an unspecified amount of securities may be
issued, subject to a $7.0 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.
58
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.
The funded status (on a projected benefit obligation basis) of the
company’s principal retirement plans at Dec. 29, 2013, is as follows:
In thousands of dollars
Fair Value of
Plan Assets
Benefit
Obligation
Funded
Status
In thousands of dollars
Change in benefit obligations
Dec. 29, 2013 Dec. 30, 2012
GRP . . . . . . . . . . . . . . . . . . . . $
SERP (a) . . . . . . . . . . . . . . . . .
Newsquest . . . . . . . . . . . . . . .
Benefit obligations at beginning of year . . . $
3,573,085 $
3,351,494
Belo . . . . . . . . . . . . . . . . . . . .
2,009,228 $ 2,194,517 $
(185,289)
—
699,478
229,774
89,987
190,791
925,280
274,510
87,151
(190,791)
(225,802)
(44,736)
2,836
(643,782)
All other. . . . . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . $
(a) the SERP is an unfunded, unsecured liability
3,028,467 $ 3,672,249 $
Service cost. . . . . . . . . . . . . . . . . . . . . . . . . .
Interest cost. . . . . . . . . . . . . . . . . . . . . . . . . .
Plan amendments . . . . . . . . . . . . . . . . . . . . .
Plan participants’ contributions . . . . . . . . . .
7,538
141,030
177
4
Actuarial (gain) loss . . . . . . . . . . . . . . . . . . .
(104,131)
Foreign currency translation. . . . . . . . . . . . .
21,758
7,545
155,376
—
7
300,525
27,526
Gross benefits paid . . . . . . . . . . . . . . . . . . . .
(230,979)
(245,899)
274,510
(10,743)
—
(23,489)
3,672,249 $
3,573,085
The accumulated benefit obligation for all defined benefit
pension plans was $3.65 billion and $3.55 billion at Dec. 29, 2013
and Dec. 30, 2012, respectively.
The following table presents information for those company
retirement plans for which accumulated benefits exceed assets:
In thousands of dollars
2,552,316 $
2,408,768
364,652
254,225
Accumulated benefit obligation . . . . . . . . . . $
3,568,021 $
3,546,819
Fair value of plan assets . . . . . . . . . . . . . . . . $
2,938,480 $
2,552,316
Dec. 29, 2013 Dec. 30, 2012
Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . .
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . .
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 . . . . . . . . . .
4
7
Employer contributions . . . . . . . . . . . . . . . .
107,086
137,499
Gross benefits paid . . . . . . . . . . . . . . . . . . . .
(230,979)
(245,899)
Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . .
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation. . . . . . . . . . . . .
229,774
(10,743)
16,357
—
(23,489)
21,205
The following table presents information for those company
retirement plans for which projected benefit obligations exceed
assets:
In thousands of dollars
Dec. 29, 2013 Dec. 30, 2012
Fair value of plan assets at end of year . . . . $
3,028,467 $
2,552,316
Projected benefit obligation . . . . . . . . . . . . . $
3,585,947 $
3,573,085
Funded status at end of year . . . . . . . . . . . . . $
Amounts recognized in Consolidated Balance Sheets
(643,782) $ (1,020,769)
Noncurrent assets . . . . . . . . . . . . . . . . . . . . . $
3,684 $
—
Accrued benefit cost—current . . . . . . . . . . . $
(15,271) $
(13,444)
Accrued benefit cost—noncurrent . . . . . . . . $
(632,195) $ (1,007,325)
Fair value of plan assets . . . . . . . . . . . . . . . . $
2,938,480 $
2,552,316
The following table summarizes the amounts recorded in
accumulated other comprehensive income (loss) that have not yet
been recognized as a component of pension expense as of the dates
presented (pre-tax):
In thousands of dollars
Dec. 29, 2013 Dec. 30, 2012
Net actuarial losses. . . . . . . . . . . . . . . . . . . . $ (1,390,975) $ (1,717,674)
Prior service cost . . . . . . . . . . . . . . . . . . . . .
(53,949)
(61,338)
Amounts in accumulated other
comprehensive income (loss) . . . . . . . . . . . . $ (1,444,924) $ (1,779,012)
59
The actuarial loss and prior service cost amounts expected to be
amortized from accumulated other comprehensive income (loss) into
net periodic benefit cost in 2014 are $44.1 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 gain . . . . . . . . . . . . . . . . . . . . . . . . . . $
Change in prior service cost . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of actuarial loss . . . . . . . . . . . . . . . . . . . . . . .
Amortization of prior service costs . . . . . . . . . . . . . . . . . . .
Recognition of settlement. . . . . . . . . . . . . . . . . . . . . . . . . . .
Currency loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2013
270,568
(177)
63,212
7,566
3,077
(10,158)
334,088
Pension costs: The following assumptions were used to
determine net pension costs:
Discount rate. . . . . . . . . . . . . . . . . . . . . . . . .
4.08%
Expected return on plan assets . . . . . . . . . . .
7.94%
Rate of compensation increase . . . . . . . . . . .
2.97%
2013
2012
4.83%
7.95%
2.96%
2011
5.49%
8.46%
2.95%
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:
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 16.4% for 2013, 12.6% for 2012 and
0.4% for 2011.
Retirement plan assets include approximately 1.2 million shares
of the company’s common stock valued at approximately $36.7
million and $22.4 million at the end of 2013 and 2012, respectively.
The plan received dividends of approximately $1.0 million on these
shares in 2013.
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:
Dec. 29, 2013 Dec. 30, 2012
In thousands of dollars
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
225,471
226,259
228,646
234,066
232,890
2019-2023. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1,168,924
Discount rate . . . . . . . . . . . . . . . . . . . . . . . .
Rate of compensation increase. . . . . . . . . . .
4.75%
2.97%
4.08%
2.97%
During 2013, the company made contributions of $50.0 million
to the GRP. The company contributed $35.2 million to the U.K.
retirement plan in 2013. In 2014, the company expects to contribute
$69.0 million to the GRP, $15.9 million to the U.K retirement plan
and $15.5 million to the Belo Plan.
Plan assets: The fair value of plan assets was approximately
$3.0 billion and $2.6 billion at the end of 2013 and 2012,
respectively. The expected long-term rate of return on these assets
was 7.94% for 2013, 7.95% for 2012, and 8.46% for 2011. The asset
allocation for the GRP at the end of 2013 and 2012, and target
allocations for 2014, by asset category, are presented in the table
below:
Equity securities . . . . . . .
Debt securities. . . . . . . . .
Other . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . .
Target Allocation Allocation of Plan Assets
2014
65%
20
15
100%
2013
64%
22
14
2012
51%
35
14
100%
100%
60
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. 29, 2013, 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, 2013 and
Dec. 31, 2012, 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 $0.3 million, $3.8 million and $30.0 million in 2013,
2012, and 2011, respectively. Other noncurrent liabilities on the
Consolidated Balance Sheet as of Dec. 29, 2013 and Dec. 30, 2012
include $34.1 million and $37.9 million, respectively, for such
withdrawal liabilities. The actual withdrawal liabilities will not be
known until at least 2014 and no material 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 other 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,
2013
Green
as of
Nov.
30,
2012
2012
Green
as of
Nov.
30,
2011
FIP/RP Status
Pending/
Implemented
Contributions
(in thousands)
2012
2011
2013
Surcharge
Imposed
Expiration
Dates of
CBAs
NA
$ 988 $ 965 $ 896
NA
CWA/ITU Negotiated Pension Plan. . . . . . . . . . 13-6212879/001
Red
Red
Implemented
242
572
146
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
216
380
280
Implemented
NA
279
736
415
341
385
308
Teamsters Pension Trust Fund of Philadelphia
and Vicinity (a) . . . . . . . . . . . . . . . . . . . . . . . . . 23-1511735/001 Yellow Yellow Implemented
1,355
876
1,054
No
No
No
NA
NA
Central Pension Fund of the International
Union of Operating Engineers and
Participating Employers (a) . . . . . . . . . . . . . . . . 36-6052390/001
NA
160
158
163
NA
4/30/2016
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
$4,016 $ 3,967 $ 3,604
Implemented
6/30/2013
260
372
No
40
Relief Act of 2010.
Green
as of
Jan.
31,
2013
Red
as of
Dec.
31,
2012
Green
as of
Jan.
31,
2012
Red
as of
Dec.
31,
2011
61
5/31/2015
9/11/2015
8/17/2013
2/1/2014
10/15/2014
11/8/2014
12/31/2015
1/31/2015
11/13/2015
4/30/2016
3/13/2013
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. 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 following table summarizes the amounts recorded in
accumulated other comprehensive income (loss) that have not yet
been recognized as a component of net periodic postretirement
benefit credit as of the dates presented (pre-tax):
In thousands of dollars
Dec. 29, 2013 Dec. 30, 2012
Net actuarial losses. . . . . . . . . . . . . . . . . . . . $
(6,087) $
(23,467)
Prior service credit . . . . . . . . . . . . . . . . . . . .
16,204
24,874
Amounts in accumulated other
comprehensive income (loss) . . . . . . . . . . . . $
10,117 $
1,407
The actuarial loss and prior service credit estimated to be
amortized from accumulated other comprehensive loss into net
periodic benefit cost in 2014 are $0.6 million and $8.4 million,
respectively.
Other changes in plan assets and benefit obligations recognized
2013
2012
2011
in other comprehensive (loss) consist of the following:
Service cost – benefits earned during the
period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Interest cost on net benefit obligation. . . . .
529 $
545 $
611
5,656
7,744
9,205
Amortization of prior service credit . . . . . .
(9,165)
(19,190)
(19,510)
Amortization of actuarial loss. . . . . . . . . . .
1,169
1,943
5,444
Net periodic postretirement benefit credit . $ (1,811) $ (8,958) $ (4,250)
The table below provides a reconciliation of benefit obligations
and funded status of the company’s postretirement benefit plans:
In thousands of dollars
Current year actuarial gain . . . . . . . . . . . . . . . . . . . . . . . . . . $
Change in prior service cost . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of actuarial loss . . . . . . . . . . . . . . . . . . . . . . .
Amortization of prior service credit . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2013
16,210
496
1,169
(9,165)
8,710
Dec. 29, 2013 Dec. 30, 2012
used to determine postretirement benefit cost:
Postretirement benefit costs: The following assumptions were
In thousands of dollars
Change in benefit obligations
Net benefit obligations at beginning of year $
169,592 $
184,131
Service cost. . . . . . . . . . . . . . . . . . . . . . . . . .
Interest cost. . . . . . . . . . . . . . . . . . . . . . . . . .
Plan participants’ contributions . . . . . . . . . .
Plan amendments . . . . . . . . . . . . . . . . . . . . .
Actuarial gain . . . . . . . . . . . . . . . . . . . . . . . .
Gross benefits paid . . . . . . . . . . . . . . . . . . . .
Federal subsidy on benefits paid . . . . . . . . .
Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . .
529
5,656
9,629
(496)
(16,476)
(28,022)
4,169
2,228
545
7,744
10,362
—
(5,877)
(29,245)
1,932
—
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 . . . . . . . . . .
146,809 $
169,592
— $
18,393
9,629
—
18,883
10,362
Gross benefits paid . . . . . . . . . . . . . . . . . . . .
(28,022)
(29,245)
Fair value of plan assets at end of year . . . . $
— $
Benefit obligation at end of year . . . . . . . . . $
Amounts recognized in Consolidated Balance Sheets
146,809 $
—
169,592
Accrued benefit cost—current . . . . . . . . . . . $
17,731 $
19,655
Accrued benefit cost—noncurrent . . . . . . . . $
129,078 $
149,937
2013
2012
2011
Discount rate . . . . . . . . . . . . . . . . . . . . . . . .
3.80%
4.75%
5.30%
Health care cost trend rate assumed for
next year . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ultimate trend rate . . . . . . . . . . . . . . . . . . .
Year that ultimate trend rate is reached. . . .
7.17%
5.00%
2017
6.50%
5.00%
2016
6.50%
5.00%
2015
Benefit obligations and funded status: The following
assumptions were used to determine the year-end benefit obligation:
Dec. 29, 2013 Dec. 30, 2012
Discount rate. . . . . . . . . . . . . . . . . . . . . . . . .
Health care cost trend rate assumed for
next year . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ultimate trend rate . . . . . . . . . . . . . . . . . . . .
Year that ultimate trend rate is reached . . . .
4.75%
7.17%
5.00%
2017
3.80%
6.50%
5.00%
2016
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 $5.4 million in the 2013 postretirement benefit
obligation and a $0.2 million change in the aggregate service and
interest components of the 2013 expense.
62
Cash flows: The company expects to make the following benefit
The provision for income taxes on varies from the U.S. federal
payments, which reflect expected future service, and to receive the
following federal subsidy benefits as appropriate:
statutory tax rate as a result of the following differences:
2013
2012
2011
In thousands of dollars
Benefit Payments Subsidy Benefits
U.S. statutory tax rate . . . . . . . . . . . . . . . . . . . .
35.0% 35.0% 35.0%
2014 . . . . . . . . . . . . . . . . . . . . . . . $
2015 . . . . . . . . . . . . . . . . . . . . . . . $
2016 . . . . . . . . . . . . . . . . . . . . . . . $
2017 . . . . . . . . . . . . . . . . . . . . . . . $
2018 . . . . . . . . . . . . . . . . . . . . . . . $
2019-2023. . . . . . . . . . . . . . . . . . . $
17,731 $
16,857 $
15,998 $
15,123 $
15,077 $
60,528 $
2,812
2,738
2,649
2,580
2,495
10,530
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 . . . . . . . . . . . . . . . . . . . . .
The amounts above exclude the participants’ share of the benefit
Permanent stock basis deductions . . . . . . . .
cost. The company’s policy is to fund benefits as claims and
premiums are paid.
NOTE 10
Lapse of statutes of limitations net of
federal income tax . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effective tax rate . . . . . . . . . . . . . . . . . . . . . . .
—
2.7
(5.7)
(7.9)
—
(2.6)
1.1
5.2
2.2
(5.6)
(4.6)
—
(1.8)
1.1
—
3.0
(5.4)
(4.2)
(1.8)
(1.6)
—
22.6% 31.5% 25.0%
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.
Absent the effect of facility consolidation, asset impairment and
workforce restructuring charges in the years 2011-2013, 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
2011 to 2013, and the special net tax benefit from the permanent
stock basis deduction for 2011, the company’s effective tax rate
would have been 29.7% for 2013, 30.9% for 2012, and 31.6% for
2011.
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
2013, 2012 and 2011 are not significant.
Income taxes
The provision (benefit) for income taxes consists of the following:
In thousands of dollars
2013
Current
Deferred
Total
Federal . . . . . . . . . . . . . . . . . . . . . . . $
95,000 $
39,400 $ 134,400
State and other . . . . . . . . . . . . . . . . .
(36,700)
Foreign. . . . . . . . . . . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . . . $
1,000
8,000
6,500
(28,700)
7,500
59,300 $
53,900 $ 113,200
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
The components of net income attributable to Gannett Co., Inc.
before income taxes consist of the following:
In thousands of dollars
2013
2012
2011
Domestic . . . . . . . . . . . . . . . . . . . . . $ 426,162 $
538,988 $ 530,660
Foreign . . . . . . . . . . . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . . . $ 501,880 $
75,718
80,692
80,888
619,680 $ 611,548
63
Deferred tax liabilities and assets were composed of the
The following table summarizes the activity related to
following at the end of 2013 and 2012:
In thousands of dollars
Liabilities
unrecognized tax benefits, excluding the federal tax benefit of state
tax deductions:
Dec. 29, 2013 Dec. 30, 2012
In thousands of dollars
Dec. 29, 2013 Dec. 30, 2012
Accelerated depreciation . . . . . . . . . . . . . . . $
302,650 $
255,612
Change in unrecognized tax benefits
174,229
26,989
456,830
77,684
368,803
65,573
Balance at beginning of year . . . . . . . . . . . . $
86,180 $
110,282
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. . . . . . . . . . . . . . . . . . . . . . . . . . .
29,470
4,710
(33,109)
(1,246)
(28,681)
Balance at end of year . . . . . . . . . . . . . . . . . $
57,324 $
9,093
11,929
(30,110)
(7,857)
(7,157)
86,180
The total amount of unrecognized tax benefits that, if recognized,
would impact the effective tax rate was $46.5 million as of Dec. 29,
2013, and $63.2 million as of Dec. 30, 2012. 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 $17.2 million, $7.8
million and $4.5 million in 2013, 2012 and 2011, respectively. The
amount of accrued interest and penalties payable related to
unrecognized tax benefits was $11.5 million and $29.1 million as of
Dec. 29, 2013 and Dec. 30, 2012, respectively.
The company files income tax returns in the U.S. and various
state and foreign jurisdictions. The 2010 through 2012 tax years
remain subject to examination by the IRS. The 2009 through 2012
tax years generally remain subject to examination by state
authorities, and the tax year 2012 is subject to examination in the
U.K. In addition, tax years prior to 2009 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 $8
million within the next 12 months primarily due to lapses of statutes
of limitations and settlement of ongoing audits in various
jurisdictions.
Accelerated amortization of deductible
intangibles . . . . . . . . . . . . . . . . . . . . . . . . . .
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
678,744
24,882
Total deferred tax liabilities . . . . . . . . . . . . .
1,006,276
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 . . . . . . . . . . . . . . . . . . .
75,492
219,413
55,921
1,140
74,018
84,738
523,196
83,579
12,474
31,002
39,542
58,596
66,164
707,364
76,419
174,115
Total net deferred tax assets (liabilities). . . . $
Amounts recognized in Consolidated Balance Sheets
(566,659) $
Net current deferred tax assets . . . . . . . . . . . $
21,245 $
15,840
Net noncurrent deferred tax assets
(liabilities) . . . . . . . . . . . . . . . . . . . . . . . . . . $
(587,904) $
158,275
Included in total deferred tax assets are valuation allowances of
approximately $83.6 million and $76.4 million in 2013 and 2012,
respectively, primarily related to foreign tax credits, foreign losses,
and state net operating losses available for carry forward to future
years. The increase in the valuation allowance from 2012 to 2013 is
related primarily to additional foreign losses, partially offset by the
releases of valuation allowances on state operating losses in
jurisdictions where future income projections and other positive
evidence support the company’s ability to utilize the net operating
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.
64
NOTE 11
Shareholders’ equity
Capital stock and earnings per share
The company’s earnings per share (basic and diluted) for 2013, 2012
and 2011 are presented below:
In thousands, except per share amounts
2013
2012
2011
Net income attributable to
Gannett Co., Inc. . . . . . . . . . . . . . . . . . . . . $388,680 $424,280 $458,748
Weighted average number of common
shares outstanding (basic) . . . . . . . . . . . . .
232,327
228,541
239,228
Effect of dilutive securities
Stock options . . . . . . . . . . . . . . . . . . . . . . .
Restricted stock . . . . . . . . . . . . . . . . . . . . .
Performance shares . . . . . . . . . . . . . . . . . .
401(k) employer match . . . . . . . . . . . . . . .
1,160
2,839
1,649
—
867
2,552
944
—
1,189
2,147
—
204
Weighted average number of common
shares outstanding (diluted). . . . . . . . . . . .
Earnings per share (basic) . . . . . . . . . . . . . $
Earnings per share (diluted) . . . . . . . . . . . $
234,189
236,690
242,768
1.70 $
1.83 $
1.66 $
1.79 $
1.92
1.89
The diluted earnings per share amounts exclude the effects of
approximately 2.4 million stock options outstanding for 2013, 6.5
million for 2012 and 18.3 million for 2011, as their inclusion would
be antidilutive.
Share repurchase program
In June 2013, the company announced that its Board of Directors
approved a new program to repurchase up to $300 million in Gannett
common stock (replacing the former $300 million program). During
2013, 4.9 million shares were purchased under the programs for
$116.6 million. In 2012, 10.3 million shares were purchased under
the former program for $153.9 million and in 2011 4.9 million
shares were purchased for $53.0 million. As of Dec. 29, 2013, the
value of shares that may be repurchased under the existing program
is $224.7 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.
65
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.
RSUs generally vest on a pro rata basis if an executive’s
employment terminates due to death, disability or retirement. 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 2013, 2012 and 2011,
members of the Board of Directors were awarded 22,558 shares,
74,611 shares and 61,897 shares, respectively, of stock options as
part of their compensation plan. The company ceased issuing stock
options to members of the Board of Directors in May 2013.
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 1 year.
Long-term awards vest in equal monthly installments over 3 years.
Expense is recognized on a straight-line basis over the vesting period
based on the grant date fair value. During 2013, 2012 and 2011,
members of the Board of Directors were awarded 57,531 shares,
31,929 shares and 27,523 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 million.
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 Shares 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.
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.
66
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-
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
2013
Average expected term. . .
4.5 yrs.
Expected volatility . . . . . .
Weighted average
volatility . . . . . . . . . . . . . .
Risk-free interest rates . . .
Expected dividend yield. .
Weighted average
expected dividend . . . . . .
61.94%
61.94%
0.75%
3.00%
2012
4.5 yrs.
65.74 -
66.95%
66.56%
0.84%
5.00%
2011
4.5 yrs.
62.46 -
64.39%
62.54%
0.87 - 2.21%
1.00 - 2.00%
3.00%
5.00%
1.06%
Performance Shares
Granted During
Expected term . . . . . . . . .
2013
3 yrs.
Expected volatility . . . . . .
40.80%
Risk-free interest rate. . . .
Expected dividend yield. .
0.36%
4.44%
2012
3 yrs.
69.47%
0.41%
2.39%
2011
—
—
—
—
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
2013
2012
2011
Restricted stock and
RSUs . . . . . . . . . . . . . . . . $
Performance shares . . . . .
Stock options and other . .
Total stock-based
compensation . . . . . . . . . .
Income tax benefit . . . . . .
Stock-based
compensation, net of tax . $
18,105 $
14,362 $
12,868
12,331
3,001
33,437
12,706
7,991
4,255
26,608
10,111
—
15,135
28,003
10,641
20,731 $
16,497 $
17,362
Per diluted share impact. . $
0.09 $
0.07 $
0.07
Stock Options: As of Dec. 29, 2013, there was $1.5 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 1.1 years.
During 2013, options were exercised from which the company
received $21.7 million of cash. The intrinsic value of the options
exercised was approximately $25.2 million. The actual tax benefit
realized from the option exercises was $9.8 million.
During 2012, options 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.
Option exercises are satisfied through the issuance of shares
from treasury stock.
Restricted Stock and RSUs: As of Dec. 29, 2013, there was
$28.7 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 2.3 years.
A summary of restricted stock and RSU awards is presented
A summary of the company’s stock-option awards is presented
below:
20,340,291 $
3.5 $17,184,761
Outstanding and unvested at end of year . . . . . .
3,731,033 $
below:
2013 Stock Option
Activity
Outstanding at
beginning of year . .
Outstanding at end
of year . . . . . . . . . . .
Options exercisable
at year end . . . . . . . .
Weighted average
grant date fair value
of options granted
during the year . . . . $
Weighted
average
remaining
contractual
term
(in years)
Weighted
average
exercise
price
Aggregate
intrinsic
value
Shares
11,344,018 $
Granted . . . . . . . . . .
22,558 $
Exercised. . . . . . . . .
(1,598,902) $
Canceled/expired. . .
(4,192,273) $
3.2 $16,902,892
43.50
20.48
13.44
73.11
5,575,401 $
29.76
3.2 $46,988,804
4,574,619 $
32.85
2.8 $33,348,296
8.20
Weighted
average
remaining
contractual
term
(in years)
Weighted
average
exercise
price
Aggregate
intrinsic
value
Shares
2012 Stock Option
Activity
Outstanding at
beginning of year . .
Granted . . . . . . . . . .
109,699 $
Exercised. . . . . . . . .
(2,716,637) $
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 . . . . . . .
Weighted average
grant date fair value
of options granted
during the year . . . . $
20,340,291 $
47.66
3.5 $17,184,761
15,857,692 $
57.26
2.7 $10,644,474
7.63
67
2013 Restricted Stock and RSU Activity
Shares
Weighted
average
fair value
Outstanding and unvested at beginning of year .
4,069,509 $
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,588,628 $
Settled. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,035,256) $
Canceled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(428,896) $
Outstanding and unvested at end of year . . . . . .
4,193,985 $
12.98
15.80
13.95
13.40
13.92
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) $
12.19
13.21
33.51
11.94
10.73
Performance Shares: As of Dec. 29, 2013, there was $8.5
million of unrecognized compensation cost related to non-vested
performance shares. This amount will be adjusted for future changes
in estimated forfeitures and recognized over a weighted average
period of 1.7 years.
The following tables summarize the activity for non-vested
performance share units during the years ended Dec. 29, 2013 and
Dec. 30, 2012:
2013 Performance Shares Activity
Target
number of
shares
Weighted
average
fair value
Outstanding and unvested at beginning of year .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canceled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
982,452 $
813,783 $
(35,747) $
Outstanding and unvested at end of year . . . . . .
1,760,488 $
14.23
20.12
15.86
16.92
2012 Performance Shares Activity
Target
number of
shares
Weighted
average
fair value
Outstanding and unvested at beginning of year .
— $
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,109,873 $
Canceled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding and unvested at end of year . . . . . .
(127,421) $
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.
For most participants, the 401(k) Plan matching formula is 100%
of the first 5% of employee contributions. The company also makes
additional 401(k) employer contributions on behalf of certain long-
term employees. Compensation expense related to 401(k)
contributions was $47.5 million in 2013, $51.3 million in 2012, and
$49.6 million in 2011. In 2011, the company’s 401(k) match was
settled with a combination of cash and treasury shares. In 2013 and
2012, such settlements were all in cash.
Accumulated other comprehensive income (loss)
The elements of the company’s Accumulated Other Comprehensive
Loss consisted of pension, retiree medical and life insurance
liabilities and foreign currency translation gains. The following
tables summarize the components of, and changes in, Accumulated
Other Comprehensive Loss (net of tax and noncontrolling interests):
In thousands of dollars
2013
Retirement
Plans
Foreign
Currency
Translation
Total
Balance at beginning of year . . . $ (1,119,263) $
418,122 $ (701,141)
Accumulated Other Comprehensive Loss components are
included in the computation of net periodic postretirement costs (see
Notes 8 and 9 for more detail). Reclassifications out of
Accumulated Other Comprehensive Loss related to these
postretirement plans include the following:
In thousands of dollars
Amortization of prior service credit. . . . . . . . . . . . . . . . . . $
Amortization of actuarial loss . . . . . . . . . . . . . . . . . . . . . .
Settlement charge. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total reclassifications, before tax . . . . . . . . . . . . . . . . . . .
Income tax effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total reclassifications, net of tax . . . . . . . . . . . . . . . . . . . . $
2013
(1,599)
64,381
3,077
65,859
(24,802)
41,057
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:
Other comprehensive income
before reclassifications. . . . . . . .
156,974
9,055
166,029
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
In thousands of dollars
53,325
46,531
38,388
33,786
25,538
83,856
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Later years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
281,424
Total minimum annual rentals have not been reduced for future
minimum sublease rentals aggregating $3.0 million. Total rental
costs reflected in 2013 were $58.4 million, $64.6 million in 2012
and $62.9 million in 2011.
Amounts reclassified from
accumulated other
comprehensive income. . . . . . . .
Balance at end of year . . . . . . . . $ (921,232) $
41,057
—
41,057
427,177 $ (494,055)
In thousands of dollars
2012
Retirement
Plans
Foreign
Currency
Translation
Total
Balance at beginning of year . . . $ (995,854) $
400,015 $ (595,839)
Other comprehensive income
(loss). . . . . . . . . . . . . . . . . . . . . .
Balance at end of year . . . . . . . . $ (1,119,263) $
(123,409)
18,107
(105,302)
418,122 $ (701,141)
In thousands of dollars
2011
Retirement
Plans
Foreign
Currency
Translation All Other
Total
Balance at
beginning of year $ (762,380) $
394,673 $
2,373 $ (365,334)
Other
comprehensive
income (loss). . . .
(233,474)
5,342
(2,373)
(230,505)
Balance at end of
year . . . . . . . . . . . $ (995,854) $
400,015 $
— $ (595,839)
68
Program broadcast contracts: The company has $229.1 million
of commitments under programming contracts that include television
station commitments to purchase programming to be produced in
future years. In addition, this also includes amounts fixed or
currently accrued under network affiliation agreements.
Purchase obligations: The company has commitments under
purchasing obligations totaling $192.6 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. 29,
2013, are reflected in the Consolidated Balance Sheet as accounts
payable and accrued liabilities and are excluded from the $192.6
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 $92.0 million at the
end of 2013 and $104.7 million at the end of 2012.
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.
contingently liable for earnout payments to previous owners,
depending upon the achievement of certain financial and
performance metrics. During 2013, the company paid $6.8 million as
the result of acquisitions.
69
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. 29, 2013
Level 1
Level 2
Level 3
Total
Assets:
Employee compensation
related investments. . . . . $ 28,117 $
Sundry investments . . . . .
34,227
Total Assets . . . . . . . . . . . . $ 62,344 $
Liabilities:
— $
—
— $
— $ 28,117
—
34,227
— $ 62,344
Contingent consideration
payable . . . . . . . . . . . . . . $
Total Liabilities. . . . . . . . . $
— $
— $
— $ 32,267 $ 32,267
— $ 32,267 $ 32,267
In thousands of dollars
Fair value measurement as of Dec. 30, 2012
Level 1
Level 2
Level 3
Total
Assets:
Employee compensation
related investments. . . . . $ 23,043 $
Total Assets . . . . . . . . . . . . $ 52,133 $
Liabilities:
— $
—
— $
— $ 23,043
—
29,090
— $ 52,133
Contingent consideration
payable . . . . . . . . . . . . . . $
Total Liabilities. . . . . . . . . $
— $
— $
— $ 26,170 $ 26,170
— $ 26,170 $ 26,170
Under certain acquisition agreements, 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 30% depending on the risk associated
with the cash flows. For the year ended Dec. 29, 2013, the
contingent consideration was increased by $12.9 million as a result
of new acquisitions and adjustments to fair value. The increase was
partially offset by payments of $6.8 million.
In connection with certain business acquisitions, the company is
Sundry investments . . . . .
29,090
The following tables set forth by level within the fair value
hierarchy the fair values of the company’s pension plans assets:
Pension Plan Assets/Liabilities
In thousands of dollars
Fair value measurement as of Dec. 29, 2013(a)
Level 1
Level 2
Level 3
Total
Assets:
Fixed income
U.S. government-
related securities
Mortgage backed
securities
Other government
bonds
Corporate bonds
$
— $
3,313 $
— $
3,313
—
—
—
3,975
72,748
29,834
—
—
1,253
3,975
72,748
31,087
Corporate stock
892,883
158,667
— 1,051,550
Real estate
Interest in common/
collective trusts
Equities
Fixed income
Interest in reg. invest.
companies
Interest in 103-12
investments
Partnership/joint
venture interests
Hedge funds
Derivative contracts
Total
Liabilities:
—
—
98,909
98,909
— 750,006
— 145,897
— 750,006
— 145,897
281,029
42,610
— 323,639
—
—
—
22
28,691
—
28,691
36,402
148,550
184,952
22,685
10,956
249,991
272,676
163
11,141
$1,173,934 $1,305,784 $ 498,866 $2,978,584
Derivative liabilities
Total
$
$
(8) $
(8) $
(9,486) $ (2,008) $ (11,502)
(9,486) $ (2,008) $ (11,502)
Cash and other
Total net fair value of
plan assets
60,271
1,114
—
61,385
$1,234,197 $1,297,412 $ 496,858 $3,028,467
(a) The company uses a Dec. 31 measurement date for its retirement plans.
In thousands of dollars
Fair value measurement as of Dec. 30, 2012(a)
Level 2
Level 1
Level 3
Total
Assets:
Fixed income
U.S. government-
related securities . . $
Mortgage backed
securities . . . . . . . .
Other government
bonds . . . . . . . . . . .
Corporate bonds. . . .
Corporate stock . . . . . .
722,619
Real estate . . . . . . . . . .
Interest in common/
collective trusts
Equities . . . . . . . . . .
Fixed income . . . . . .
Interest in reg. invest.
companies . . . . . . . . .
Interest in 103-12
investments . . . . . . . .
Partnership/joint
venture interests . . . . .
Hedge funds . . . . . . . . .
— $
100,140 $
— $
100,140
71,641
—
71,641
—
—
—
—
—
—
—
—
—
30,317
136,640
818
—
797
—
— 97,385
604,003
193,620
84,956
—
—
—
—
— 130,995
77,520
158,924
30,317
137,437
723,437
97,385
604,003
193,620
128,418
84,956
130,995
236,444
104,196
24,222
Derivative contracts . . .
55,457
Total. . . . . . . . . . . . . . . . $ 826,848 $ 1,378,801 $ 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 . . . . . . . . . . . $ 863,122 $ 1,302,601 $ 386,593 $ 2,552,316
(83,221) $ (2,008) $
(26,882)
36,295
43,316
(21) $
7,021
—
—
(85,250)
(26,882)
(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.
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 classified as level 1 is valued primarily at the
closing price reported on the active market on which the individual
securities are traded. The investments in level 2 are primarily
commingled funds recorded at fair value as determined by the
sponsor of the respective funds based upon closing market quotes of
the underlying assets.
70
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.
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.
Three of these investments in collective trusts are fixed income
funds which use individual subfunds to efficiently add a
representative sample of securities in individual market sectors to the
portfolio. Two funds in the collective trust fund are equity 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 classified
in level 3 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
Pension Plan Assets/Liabilities
In thousands of dollars
For the year ended Dec. 29, 2013
of the funds are liquidated. It is estimated that the underlying assets
of the funds will be liquidated within approximately the next 9 to 11
years. There are future funding commitments of $27.7 million as of
Dec. 29, 2013 and $39.8 million as of Dec. 30, 2012. Investments in
partnerships and joint venture interests classified as level 2
represents a limited partnership commingled fund valued using the
net asset value as reported by the fund manager.
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. 29, 2013 and Dec. 30, 2012:
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
Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . $
797 $
199 $
Real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Partnership/joint venture interests . . . . . . . . . . . . . . . .
Hedge funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Derivative contracts . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Liabilities:
97,385
130,995
158,924
500
1,865
11,972
17,613
(376)
(7) $
—
13,327
803
—
264 $
(341)
(9,576)
74,483
39
388,601 $
31,273 $
14,123 $
64,869 $
— $
—
1,832
(1,832)
—
— $
1,253
98,909
148,550
249,991
163
498,866
Derivative liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . $
(2,008) $
— $
— $
— $
— $
(2,008)
(1) The company’s policy is to recognize transfers in and transfers out as of the beginning of the reporting period.
71
Pension Plan Assets/Liabilities (continued)
In thousands of dollars
For the year ended Dec. 30, 2012
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 . . . . . . . . . . . . . . . . . . $
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.
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
$3.93 billion and $1.62 billion at Dec. 29, 2013 and Dec. 30, 2012,
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 tables summarize the non-financial assets
measured at fair value on nonrecurring basis in the accompanying
consolidated balance sheet as of Dec. 29, 2013 and Dec. 30, 2012:
Non-Financial Assets
In thousands of dollars
Fair value measurement as of Dec. 29, 2013
Asset held for sale - Quarter 4
$
— $ — $ 395,851 $395,851
Goodwill - Quarter 4 . . . . . . . . . $
— $ — $ 21,790 $ 21,790
Level 1 Level 2 Level 3
Total
Non-Financial Assets
In thousands of dollars
Fair value measurement as of Dec. 30, 2012
Level 1 Level 2 Level 3
Total
Asset held for sale - Quarter 4 $ — $ — $ 17,508 $
Goodwill - Quarter 4 . . . . . . . $ — $ — $ 29,610 $
17,508
29,610
The quantitative test of goodwill during 2013 for both impaired
assets 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 3% and the discount rate applied to the cash flows of
16.0% for the impaired asset in the company’s Digital Segment. For
the impaired asset in the company’s Publishing Segment, the ending
year growth rate of 3% and discount rate of 20.5% were significant
unobservable inputs in the discount cash flow method. If the growth
rate and discount rate were to change by 1%, the combined impact to
the valuations would have been approximately $1.4 million and $2.7
million, respectively.
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 $2.3 million and $3.5 million,
respectively.
72
In thousands of dollars
Business segment financial information
2013
2012
2011
Operating revenues
Broadcasting . . . . . . . . . . . . . . . . . $
835,113 $
906,104 $
722,410
Publishing . . . . . . . . . . . . . . . . . . .
3,577,804
3,728,144
3,831,108
Digital . . . . . . . . . . . . . . . . . . . . . .
748,445
718,949
686,471
Total. . . . . . . . . . . . . . . . . . . . . . . . $ 5,161,362 $ 5,353,197 $ 5,239,989
Operating income
Broadcasting (2) . . . . . . . . . . . . . . . . . $
Publishing (2) . . . . . . . . . . . . . . . . . . .
Digital (2) . . . . . . . . . . . . . . . . . . . . . .
Corporate (1) (2) . . . . . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . . $
361,915 $
443,808 $
302,140
313,697
128,264
368,644
41,700
477,583
125,340
(64,633)
(64,397)
(74,272)
739,243 $
789,755 $
830,791
Depreciation, amortization and facility consolidation and asset impairment
charges
Broadcasting (2) . . . . . . . . . . . . . . . . . $
Publishing (2) . . . . . . . . . . . . . . . . . . .
Digital (2) . . . . . . . . . . . . . . . . . . . . . .
Corporate (1) (2) . . . . . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . . $
29,625 $
28,007 $
28,926
153,380
46,415
18,392
147,750
123,990
16,421
148,537
30,693
16,460
247,812 $
316,168 $
224,616
Equity income (losses) in unconsolidated investees, net
Broadcasting . . . . . . . . . . . . . . . . . $
(94) $
(597) $
Publishing . . . . . . . . . . . . . . . . . . .
44,265
23,380
Digital . . . . . . . . . . . . . . . . . . . . . .
(347)
(396)
(162)
8,543
(184)
Total. . . . . . . . . . . . . . . . . . . . . . . . $
43,824 $
22,387 $
8,197
Identifiable assets
Broadcasting . . . . . . . . . . . . . . . . . $ 5,077,114 $ 2,001,979 $ 1,994,051
Publishing . . . . . . . . . . . . . . . . . . .
2,632,651
2,850,915
3,032,605
Digital . . . . . . . . . . . . . . . . . . . . . .
Corporate (1). . . . . . . . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . . $ 9,240,706 $ 6,379,886 $ 6,616,450
1,009,821
1,014,805
982,355
548,586
517,171
574,989
15,263
40,175
15,673
1,340
Capital expenditures
Broadcasting . . . . . . . . . . . . . . . . . $
18,394 $
17,473 $
Publishing . . . . . . . . . . . . . . . . . . .
Digital . . . . . . . . . . . . . . . . . . . . . .
Corporate (1). . . . . . . . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . . $
62,480
27,800
1,733
56,597
17,220
584
110,407 $
91,874 $
72,451
(1) Corporate amounts represent those not directly related to the company’s
three business segments.
(2) Results for 2013 include pre-tax facility consolidation and asset
impairment charges of $1 million for Broadcasting, $46 million for
Publishing, and $12 million for Digital. 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. Refer to
Notes 3 and 4 of the Consolidated Financial Statements for more
information.
NOTE 14
Business operations and segment information
The company has determined that its reportable segments based on
its management and internal reporting structure are Broadcasting,
Publishing, and Digital.
At the end of 2013, the company’s Broadcasting Segment
included 43 television stations and affiliated online sites, including
stations serviced by Gannett under shared services and similar
agreements. These stations serve nearly 35 million households
covering 30.0% of the U.S. population.
The Publishing Segment at the end of 2013 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 more than 400 non-
daily publications, a network of offset presses for commercial
printing and several smaller businesses.
The largest businesses within the company’s Digital Segment are
CareerBuilder, PointRoll and Shoplocal. 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.
The company’s foreign revenues, principally from publishing
businesses in the United Kingdom and CareerBuilder’s international
subsidiaries, totaled approximately $519.8 million in 2013, $546.2
million in 2012 and $567.7 million in 2011. The company’s long-
lived assets in foreign countries, principally in the United Kingdom,
totaled approximately $566.4 million at Dec. 29, 2013, $529.8
million at Dec. 30, 2012, and $542.9 million at Dec. 25, 2011.
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.
73
SELECTED FINANCIAL DATA (Unaudited)
(See notes a and b on page 75)
In thousands of dollars, except per share amounts
Net operating revenues
Broadcasting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Publishing advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Publishing circulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
All other Publishing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Digital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating expenses
Costs and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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 . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from continuing operations . . . . . . . . . . . . . . . . . .
Income from continuing operations attributable to
noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from continuing operations attributable to
Gannett Co., Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Income from continuing operations per share:
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:
2013
2012
2011
2010
2009
835,113
2,198,719
1,129,060
250,025
748,445
5,161,362
4,174,307
153,203
36,369
58,240
4,422,119
739,243
43,824
(176,064)
(47,890)
(180,130)
559,113
113,200
445,913
$
$
906,104
2,355,922
1,117,042
255,180
718,949
5,353,197
4,247,274
160,746
33,293
122,129
4,563,442
789,755
$
722,410
2,511,025
1,063,890
256,193
686,471
5,239,989
4,184,582
165,739
31,634
27,243
4,409,198
830,791
22,387
(150,469)
8,734
(119,348)
670,407
195,400
475,007
8,197
(173,140)
(12,921)
(177,864)
652,927
152,800
500,127
769,580
2,710,524
1,086,702
253,613
618,259
5,438,678
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
$
631,085
2,888,034
1,144,539
259,771
586,174
5,509,603
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
(57,233)
(50,727)
(41,379)
(34,619)
(27,091)
388,680
1.70
1.66
0.80
2.02
$
$
$
$
$
424,280
1.83
1.79
0.80
2.33
$
$
$
$
$
458,748
1.92
1.89
0.24
2.13
$
$
$
$
$
567,328
2.38
2.35
0.16
2.44
$
$
$
$
$
351,480
1.50
1.49
0.16
1.85
basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
228,541
234,189
232,327
236,690
239,228
242,768
238,230
241,605
233,683
236,027
— $
$ 1,432,100
$
10,654
$ 2,350,614
$ 6,379,886
697,994
$
18.1%
Financial position and cash flow
Long-term debt, excluding current maturities . . . . . . . . . . . . $ 3,707,010
Redeemable noncontrolling interest . . . . . . . . . . . . . . . . . . . $
14,618
Shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,693,098
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,240,706
Free cash flow (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
470,491
Return on equity (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15.4%
Percentage increase (decrease)
As reported, earnings from continuing operations per share:
basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends declared per share . . . . . . . . . . . . . . . . . . . . . . . .
Credit ratios
Leverage ratio (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Times interest expense earned (5) . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1) See page 36 for a reconciliation of income from continuing operations per share presented in accordance with GAAP.
(2) See page 75 for a reconciliation of free cash flow to net cash flow from operating activities, which the company believes is the most directly comparable
$ 2,352,242
84,176
$ 2,163,754
$ 6,816,844
816,308
$
30.1%
$ 1,760,363
$
$ 2,327,891
$ 6,616,450
775,261
$
20.4%
$ 3,061,951
$
78,304
$ 1,603,925
$ 7,148,432
809,630
$
26.7%
(105.2%)
(105.1%)
(90.0%)
(4.7%)
(5.3%)
233.3%
(19.3%)
(19.6%)
50.0%
(7.1%)
(7.3%)
—%
58.7%
57.7%
—%
1.67x
5.5x
1.41x
6.4x
1.97x
6.2x
2.63x
4.8x
3.24x
4.9x
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 publishing businesses).
(4) The leverage ratio is calculated in accordance with the company’s revolving credit agreement and term loan agreement. Currently, the company is
required to maintain a leverage ratio of less than 4.0x. These agreements are described more fully on page 39 in Management’s Discussion and Analysis
of Financial Condition and Results of Operations. More information regarding the computation can be found in Exhibit 10.3 to the Form 10-Q for the
quarterly period ended Sept. 29, 2013, filed on Nov. 6, 2013.
(5) Calculated using operating income adjusted to remove the effect of certain special items. These special items are described more fully beginning on
page 34 in Management’s Discussion and Analysis of Financial Condition and Results of Operations.
74
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 2009-2013
Significant acquisitions since the beginning of 2009 are shown below. The company has disposed of several significant businesses during
this period, which are presented below.
Acquisitions 2009-2013
Year acquired
2010
2011
2012
2013
Name
CareerSite.biz Limited
Reviewed.com
JobsCentral
Nutrition Dimension
US PRESSWIRE
JobScout24
MMA Junkie
Fantasy Sports Ventures/Big
Lead Sports
Ceviu
Top Language Jobs
Quickish
Location
U.K.
Cambridge, MA
Singapore
Falls Church, VA
Atlanta, GA
Germany
St. Petersburg, FL
New York, NY
Brazil
Europe
Bethesda, MD
BLiNQ Media, LLC
New York City, NY
Mobestream Media
Economic Modeling Specialist
Intl.
Rovion
Dallas, TX
Moscow, ID
Boston, MA
10Best, Inc.
Vietnam Online Network (Kiem
Viec.com & HR Vietnam)
Oil and Gas Job Search
Tripology
Greenville, SC
Vietnam
Manchester, England
McLean, VA
Belo Corp.
Arizona, Idaho, Kentucky,
Louisiana, Missouri, North
Carolina, Oregon, Texas,
Virginia, Washington
Dispositions 2009-2013
Publication times or business
Online recruitment niche sites focusing on nursing and rail workers
A technology product review web site
Job search, employment and career web site
A continuing nutrition education, certification and review program
A digital sports photography business
Job search, employment and career web site
Independent sports information web site
Independent digital sports property
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
Travel advice services for travelers in the U.S. and internationally
Specializes in recruitment services and human resource solutions
for employers
Online recruitment catering to the oil and gas industry
Offers an interactive travel referral service focused on connecting
travelers with qualified travel specialist
Owner and operator of 20 television stations in 15 markets across
the U.S.
Year disposed
2009
2010
2013
Name
Southernprint Limited
The Honolulu Advertiser
Michigan Directory Company
Captivate Network, Inc.
Location
U.K.
Honolulu, HI
Pigeon, MI
Chelmsford, MA
Publication times or business
Commercial printing
Daily newspaper
Directory publishing operation
News and entertainment network
Free cash flow reconciliation
The company’s free cash flow was $470.5 million for the year ended Dec. 29, 2013. 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 “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. 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.
Reconciliations from “Net cash flow from operating activities” to “Free cash flow” follow:
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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2013
511,488 $
(110,407)
15,507
(6,125)
(3,380)
63,408
470,491 $
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 $
2009
866,580
(67,737)
—
—
(9,674)
20,461
809,630
75
QUARTERLY STATEMENTS OF INCOME (Unaudited)
In thousands of dollars, except per share amounts
Fiscal year ended Dec. 29, 2013
Net operating revenues
Broadcasting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Publishing advertising. . . . . . . . . . . . . . . . . . . . . . . . . .
Publishing circulation . . . . . . . . . . . . . . . . . . . . . . . . . .
All other Publishing . . . . . . . . . . . . . . . . . . . . . . . . . . .
Digital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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(5)
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
191,580 $
526,499
285,972
58,762
174,922
1,237,735
211,962 $
562,476
279,655
62,100
186,506
1,302,699
203,364 $
520,189
274,999
62,891
191,447
1,252,890
228,207 $
589,555
288,434
66,272
195,570
1,368,038
835,113
2,198,719
1,129,060
250,025
748,445
5,161,362
719,724
726,869
713,369
722,487
2,882,449
314,115
38,926
9,128
4,785
1,086,678
151,057
320,615
38,467
9,368
4,498
1,099,817
202,882
315,677
38,195
8,071
5,880
1,081,192
171,698
341,451
37,615
9,802
43,077
1,154,432
213,606
7,794
(35,405)
(1,583)
(29,194)
121,863
5,400
116,463
(11,898)
104,565 $
9,424
(36,174)
(9,791)
(36,541)
166,341
39,600
126,741
(13,121)
113,620 $
11,711
(41,628)
(17,580)
(47,497)
124,201
26,700
97,501
(17,753)
79,748 $
14,895
(62,857)
(18,936)
(66,898)
146,708
41,500
105,208
(14,461)
90,747 $
1,291,858
153,203
36,369
58,240
4,422,119
739,243
43,824
(176,064)
(47,890)
(180,130)
559,113
113,200
445,913
(57,233)
388,680
0.46 $
0.44 $
0.20 $
0.50 $
0.48 $
0.20 $
0.35 $
0.34 $
0.20 $
0.40 $
0.39 $
0.20 $
1.70
1.66
0.80
(1) Results for the first quarter of 2013 include special charges affecting operating income. Workforce restructuring and transformation costs totaled $10.2
million ($6.2 million after-tax or $.03 per share). Non-operating items include $3.7 million ($3.1 million after-tax or $.01 per share) primarily related to a
currency related loss and a non-cash impairment charge relating to an investment accounted for under the equity method. Offsetting these was tax benefits
of $27.8 million ($.12 per share) related to the reserve releases as a result of federal exam resolution and the lapse of a statue of limitations. Refer to the
discussion beginning on page 34 and Notes 3 and 4 to the Consolidated Financial Statement for more information on special items.
(2) Results for the second quarter of 2013 include special charges affecting operating income. Workforce restructuring charges and transformation costs totaled
$26.2 million ($15.8 million after-tax or $.07 per share). Non-operating items include $9.5 million ($5.7 million after-tax or $.02 per share) of
transformation costs related to the company’s recent acquisition of Belo. Refer to the discussion beginning on page 34 and Notes 3 and 4 to the
Consolidated Financial Statement for more information on special items.
(3) Results for the third quarter of 2013 include special charges affecting operating income. Workforce restructuring charges and transformation costs totaled
$15.1 million ($9.2 million after-tax or $.04 per share). Non-operating items include $21.0 million ($10.8 million after-tax or $.05 per share) related to the
loss from the change in control and sale of interests in a business as well transformation costs related to the company’s recent acquisition of Belo. Refer to
the discussion beginning on page 34 and Notes 3 and 4 to the Consolidated Financial Statement for more information on special items.
(4) Results for the fourth quarter of 2013 include special charges affecting operating income. Workforce restructuring charges, transformation costs and non-
cash asset impairments totaled $64.6 million ($40.8 million after tax or $.18 per share). Non-operating items include $21.0 million ($20.9 million after tax
or $.09 per share) of charges primarily related to the company’s recent acquisition of Belo. Refer to the discussion beginning on page 34 and Notes 3 and 4
to the Consolidated Financial Statement for more information on special items.
(5) As a result of rounding and the required method of computing shares in interim periods, the total of the quarterly earnings per share amounts may not equal
the earnings per share amount of the year.
76
QUARTERLY STATEMENTS OF INCOME (Unaudited)
In thousands of dollars, except per share amounts
Fiscal year ended Dec. 30, 2012
Net operating revenues
Broadcasting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Publishing advertising. . . . . . . . . . . . . . . . . . . . . . . . . .
Publishing circulation . . . . . . . . . . . . . . . . . . . . . . . . . .
All other Publishing . . . . . . . . . . . . . . . . . . . . . . . . . . .
Digital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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
176,173 $
551,438
263,336
59,288
168,352
1,218,587
205,381 $
594,262
263,938
62,133
181,326
1,307,040
237,039 $
552,676
276,655
60,869
182,022
1,309,261
287,511 $
657,546
313,113
72,890
187,249
1,518,309
906,104
2,355,922
1,117,042
255,180
718,949
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 special charges affecting operating income. Workforce restructuring charges and transformation costs totaled
$21.1 million ($12.6 million after-tax or $.05 per share). Refer to the discussion beginning on page 34 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 special charges affecting operating income. Workforce restructuring charges and transformation costs totaled
$20.3 million ($12.2 million after-tax or $.05 per share). Refer to the discussion beginning on page 34 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 special charges affecting operating income. Workforce restructuring charges and transformation costs totaled
$14.7 million ($8.9 million after-tax or $.04 per share). Non-operating items included $3.2 million ($2.0 million after tax or $.01 per share) of non-cash
charges for a newspaper partnership investment. Offsetting these was a tax benefit of $13.1 million ($.06 per share) related primarily to a tax settlement
covering multiple years. Refer to the discussion beginning on page 34 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. Workforce restructuring charges, transformation costs and non-
cash asset impairments totaled $114.6 million ($101.9 million after tax or $.44 per share). Non-operating items include a $3.8 million ($2.3 million after
tax or $.01 per share) non-cash charge related to the impairment of a minority owned investment. Refer to the discussion beginning on page 34 and Notes 3
and 4 to the Consolidated Financial Statement for more information on special items.
77
SCHEDULE II – Valuation and qualifying accounts and reserves
In thousands of dollars
Allowance for doubtful receivables
Fiscal year ended Dec. 29, 2013. . . . . $
Fiscal year ended Dec. 30, 2012. . . . . $
Fiscal year ended Dec. 25, 2011. . . . . $
(1) Also includes foreign currency translation adjustments in each year.
(2) Consists of write-offs, net of recoveries in each year.
22,006 $
34,646 $
39,419 $
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
11,519 $
9,736 $
11,574 $
(385) $
24 $
(97) $
(17,865) $
(22,400) $
(16,250) $
15,275
22,006
34,646
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 (1992 framework) issued by the Committee of
Sponsoring Organizations of the Treadway Commission. Based on
our evaluation, our management concluded that our internal control
over financial reporting was effective as of Dec. 29, 2013.
Management’s assessment of and conclusion on the effectiveness
of internal control over financial reporting did not include the
internal controls of Belo Corp., which is included in the 2013
consolidated financial statements of Gannett Co., Inc. On Dec. 23,
2013, the company completed its acquisition of Belo. In connection
with this, the company began consolidating results of Belo and it
represented approximately 31% of the company’s total assets at Dec.
29, 2013. Due to the timing of this acquisition and as permitted by
SEC guidance, management excluded Belo from its Dec. 29, 2013
assessment of internal control over financial reporting.
The effectiveness of our internal control over financial reporting
as of Dec. 29, 2013, 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. 29, 2013, that has materially affected, or is reasonably
likely to materially affect, the company’s internal control over
financial reporting.
78
Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the
risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
In our opinion, Gannett Co., Inc. maintained, in all material
respects, effective internal control over financial reporting as of
December 29, 2013, based on the COSO criteria.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
2013 consolidated financial statements of Gannett Co., Inc. and our
report dated February 26, 2014 expressed an unqualified opinion
thereon.
McLean, Virginia
February 26, 2014
Report of Independent Registered Public Accounting Firm, on
Internal Control Over Financial Reporting
Board of Directors and Shareholders of Gannett Co., Inc.:
We have audited Gannett Co., Inc.’s internal control over
financial reporting as of December 29, 2013, based on criteria
established in Internal Control-Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway
Commission (1992 framework) (the COSO criteria). Gannett’s
management is responsible for maintaining effective internal control
over financial reporting, and for its assessment of the effectiveness
of internal control over financial reporting included in the
accompanying Management’s Report on Internal Control Over
Financial Reporting. Our responsibility is to express an opinion on
the company’s internal control over financial reporting based on our
audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over
financial reporting was maintained in all material respects. Our audit
included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists,
testing and evaluating the design and operating effectiveness of
internal control based on the assessed risk, and performing such
other procedures as we considered necessary in the circumstances.
We believe that our audit provides a reasonable basis for our
opinion.
A company’s internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over
financial reporting includes those policies and procedures that
(1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the
assets of the company; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of
management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the company’s assets
that could have a material effect on the financial statements.
As indicated in the accompanying Management’s Report on
Internal Control Over Financial Reporting, management’s
assessment of and conclusion on the effectiveness of internal control
over financial reporting did not include the controls of Belo Corp.,
which are included in the 2013 consolidated financial statements of
Gannett Co., Inc. and constituted 31 percent of total assets as of
December 29, 2013. Our audit of internal control over financial
reporting of Gannett Co., Inc. also did not include an evaluation of
the internal control over financial reporting of the Belo Corp.
79
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 2014 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 45.
William A. Behan
Senior Vice President, Labor Relations, Gannett (2010-present).
Formerly: Vice President, Labor Relations (2007-2010). Age 55.
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 56.
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). Age 44.
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 49.
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 63.
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 51.
David T. Lougee
President, Gannett Broadcasting (July 2007-present). Age 55.
Gracia C. Martore
President and Chief Executive Officer (October 2011-present); Director
for Gannett Co., Inc., MeadWestvaco Corporation,
FM Global and Associated Press. Formerly: President and Chief
Operating Officer (February 2010-October 2011); Executive Vice
President and CFO (2006-2010). Age 62.
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 54.
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 51.
John A. Williams
President, Gannett Digital Ventures (January 2008-present). Age 63.
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 2014 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 2014 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 2014 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
2014 proxy statement is incorporated herein by reference.
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT
SCHEDULES
(a) Financial Statements, Financial Statement Schedules and
Exhibits.
(1) Financial Statements.
As listed in the Index to Financial Statements and Supplementary
Data on page 42.
(2) Financial Statement Schedules.
As listed in the Index to Financial Statements and Supplementary
Data on page 42.
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 82-86 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.
80
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Dated: February 26, 2014
Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned thereunto duly
authorized.
Dated: February 26, 2014 GANNETT CO., INC. (Registrant)
Dated: February 26, 2014
John E. Cody, Director
Howard D. Elias, Director
By:
Victoria D. Harker,
Chief Financial Officer
(principal financial officer)
Dated: February 26, 2014
John Jeffry Louis, Director
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant in the capacities and on the dates indicated.
Dated: February 26, 2014
Marjorie Magner,
Director, Chairman
Dated: February 26, 2014
Dated: February 26, 2014
Dated: February 26, 2014
Dated: February 26, 2014
Gracia C. Martore, Director
Gracia C. Martore,
President and Chief Executive
Officer (principal executive
officer)
Dated: February 26, 2014
Scott K. McCune, Director
Victoria D. Harker,
Chief Financial Officer
(principal financial officer)
Dated: February 26, 2014
Duncan M. McFarland, Director
Dated: February 26, 2014
Susan Ness, Director
Teresa S. Gendron,
Vice President and Controller
(principal accounting officer)
Dated: February 26, 2014
Tony A. Prophet, Director
Dated: February 26, 2014
Neal Shapiro, Director
81
EXHIBIT INDEX
Exhibit
Number
Exhibit
Location
2-1
3-1
3-2
4-1
4-2
4-3
4-4
4-5
4-6
4-7
4-8
4-9
10-1
10-1-1
10-2
Agreement and Plan of Merger, dated as of June 12, 2013, by
and among Gannett Co., Inc., Belo Corp. and Delta
Acquisition Corp.
Incorporated by reference to Exhibit 2.1 to Gannett Co., Inc.’s
Form 8-K filed on June 18, 2013.
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 March 31, 2013.
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.
Eleventh Supplemental Indenture, dated as of October 3, 2013,
between Gannett Co., Inc. and U.S. Bank National Association
as Trustee.
Attached.
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.*
Incorporated by reference to Exhibit 10-1-1 to Gannett Co.,
Inc.’s Form 10-K for the fiscal year ended December 30, 2012.
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.
82
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
10-6-7
10-6-8
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.
Form of Executive Officer Restricted Stock Unit Award
Agreement.*
Incorporated by reference to Exhibit 10-2 to Gannett Co.,
Inc.’s Form 10-Q for the fiscal quarter ended March 31, 2013.
Form of Executive Officer Performance Share Award
Agreement.*
Attached.
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.
83
Incorporated by reference to Exhibit 10-1 to Gannett Co.,
Inc.’s Form 10-Q for the fiscal quarter ended September 29,
2013.
10-8
Amendment and Restatement Agreement, dated as of August
5, 2013, to each of (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, as amended by the First Amendment thereto, dated as
of February 28, 2007 and effective as of March 15, 2007, as
further amended by the Second Amendment thereto, dated as
of October 23, 2008 and effective as of October 31, 2008, as
further amended by the Third Amendment thereto, dated as of
September 28, 2009, as further amended by the Fourth
Amendment thereto, dated as of August 25, 2010 and as
further amended by the Fifth Amendment and Waiver, dated as
of September 30, 2010 (the “2002 Credit Agreement”), among
Gannett Co., Inc., a Delaware corporation (“Gannett”), the
several banks and other financial institutions from time to time
parties to the Credit Agreement (the “2002 Lenders”),
JPMorgan Chase Bank, N.A., as administrative agent (in such
capacity, the “2002 Administrative Agent”), JPMorgan Chase
Bank, N.A. and Citibank, N.A., as syndication agents, and
Barclays Bank PLC, as documentation agent, (ii) the
Competitive Advance and Revolving Credit Agreement, dated
as of February 27, 2004 and effective as of March 15, 2004, as
amended by the First Amendment thereto, dated as of
February 28, 2007 and effective as of March 15, 2007, as
further amended by the Second Amendment thereto, dated as
of October 23, 2008 and effective as of October 31, 2008, as
further amended by the Third Amendment thereto, dated as of
September 28, 2009, as further amended by the Fourth
Amendment thereto, dated as of August 25, 2010, and as
further amended by the Fifth Amendment and Waiver, dated as
of September 30, 2010 (the “2004 Credit Agreement”), among
Gannett, the several banks and other financial institutions from
time to time parties to the Credit Agreement (the “2004
Lenders”), JPMorgan Chase Bank, N.A., as administrative
agent (in such capacity, the “Administrative Agent”),
JPMorgan Chase Bank, N.A. and Citibank, N.A., as
syndication agents, and Barclays Bank PLC and SunTrust
Bank, as documentation agents and (iii) the Competitive
Advance and Revolving Credit Agreement, dated as of
December 13, 2004 and effective as of January 5, 2005, as
amended by the First Amendment thereto, dated as of
February 28, 2007 and effective as of March 15, 2007, as
further amended by the Second Amendment thereto, dated as
of October 23, 2008 and effective as of October 31, 2008, as
further amended by the Third Amendment thereto, dated as of
September 28, 2009, as further amended by the Fourth
Amendment thereto, dated as of August 25, 2010 and as
further amended by the Fifth Amendment and Waiver, dated as
of September 30, 2010 (the “2005 Credit Agreement” and,
together with the 2002 Credit Agreement and the 2004 Credit
Agreement, the “Credit Agreements”), among Gannett, the
several banks and other financial institutions from time to time
parties to the Credit Agreement (the “2005 Lenders” and,
together with the 2002 Lenders and the 2004 Lenders, the
“Lenders”), JPMorgan Chase Bank, N.A., as administrative
agent (in such capacity, the “2005 Administrative Agent” and,
together with the 2002 Administrative Agent and the 2004
Administrative Agent, the “Administrative Agent”), JPMorgan
Chase Bank, N.A. and Citibank, N.A., as syndication agents,
and Barclays Bank PLC, as documentation agent, by and
between Gannett, the Guarantors under the Credit Agreements
as of the date hereof, the Administrative Agent, JPMorgan
Chase Bank, N.A. and Bank of America, N.A., as issuing
lenders and the Lenders party thereto.
84
10-9
10-10
10-11
10-12
10-13
10-14
10-14-1
10-14-2
10-15
10-16
10-17
10-18
Master Assignment and Assumption, dated as of August 5,
2013, by and between each of the lenders listed thereon as
assignors and/or assignees.
Incorporated by reference to Exhibit 10-2 to Gannett Co.,
Inc.’s Form 10-Q for the fiscal quarter ended September 29,
2013.
Amended and Restated Competitive Advance and Revolving
Credit Agreement, dated as of August 5, 2013, by and among
Gannett, the several banks and other financial institutions from
time to time parties thereto, JPMorgan Chase Bank, N.A., as
administrative agent, and JPMorgan Chase Bank, N.A. and
Citibank, N.A. as syndication agents
Sixth Amendment, dated as of September 24, 2013, to the
Competitive Advance and Revolving Credit Agreement, dated
as of December 13, 2004 and effective as of January 5, 2005,
as amended by the First Amendment thereto, dated as of
February 28, 2007 and effective as of March 15, 2007, as
further amended by the Second Amendment thereto, dated as
of October 23, 2008 and effective as of October 31, 2008, as
further amended by the Third Amendment thereto, dated as of
September 28, 2009, as further amended by the Fourth
Amendment thereto, dated as of August 25, 2010, as further
amended by the Fifth Amendment and Waiver, dated as of
September 30, 2010, and as further amended and restated
pursuant to the Amended and Restated Competitive Advance
and Revolving Credit Agreement, dated as of August 5, 2013,
by and among Gannett Co., Inc., JPMorgan Chase Bank, N.A.,
as administrative agent, and the several banks and other
financial institutions from time to time parties thereto.
Increased Facility Activation Notice, dated September 25,
2013, pursuant to the Amended and Restated Competitive
Advance and Revolving Credit Agreement, dated as of August
5, 2013, by and among Gannett Co., Inc., JPMorgan Chase
Bank N.A., as administrative agent, and the several banks and
other financial institutions from time to time parties thereto.
Incorporated by reference to Exhibit 10-3 to Gannett Co.,
Inc.’s Form 10-Q for the fiscal quarter ended September 29,
2013.
Incorporated by reference to Exhibit 10-4 to Gannett Co.,
Inc.’s Form 10-Q for the fiscal quarter ended September 29,
2013.
Incorporated by reference to Exhibit 10-5 to Gannett Co.,
Inc.’s Form 10-Q for the fiscal quarter ended September 29,
2013.
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 March 31, 2013.
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 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.
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.
85
10-20
10-21
10-22
10-23
10-24
21
23
31-1
31-2
32-1
32-2
101
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.
Form of Voting and Support Agreement and Irrevocable Proxy,
dated as of June 12, 2013, by and among Belo Corp., Gannett
Co., Inc. and the persons signatory thereto.
Incorporated by reference to Exhibit 10.1 to Gannett Co.,
Inc.’s Form 8-K filed on June 18, 2013.
Attached.
Attached.
Attached.
Attached.
Attached.
Attached.
Attached.
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 29,
2013, formatted in XBRL includes: (i) Consolidated Balance
Sheets at December 29, 2013 and December 30, 2012, (ii)
Consolidated Statements of Income for the 2013, 2012 and
2011 fiscal years, (iii) Consolidated Statements of
Comprehensive Income for the 2013, 2012 and 2011 fiscal
years, (iv) Consolidated Cash Flow Statements for the 2013,
2012 and 2011 fiscal years; (v) Consolidated Statements of
Equity for the 2013, 2012 and 2011 fiscal years; and (vi) the
Notes to Consolidated Financial Statements.
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.
86
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
2013 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.
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.
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).
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.
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.
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.
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 and Shoplocal.
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.
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.
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.
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.
VARIABLE INTEREST ENTITY (VIE) - A variable interest entity is an
entity that lacks equity investors or whose equity investors do not have a
controlling interest in the entity through their equity investments.
87
Photo Credits
1: Byron Houlgrave, The Des Moines Register
2: Andy Barron, Reno Gazette-Journal
3: Craig Bailey, FLORIDA TODAY
4: Erin Brethauer, Asheville Citizen-Times
5: Kyle Grantham, The News Journal
6: Ron Page, Post-Crescent Media
7: Nick Oza, The Arizona Republic
8: Tim Loehrke, USA TODAY
9: Kimm Anderson, St. Cloud Times
10: Scott Morgan, for The Des Moines Register
11: Courtesy of KTVB-TV
8
11
10
2
5
3
4
9
6
1
7
Smaller PhotoS by: Lukas Keapproth/Press-Gazette Media; Eileen Blass/USA TODAY; Kristopher Radder/Press & Sun-Bulletin;
H. Darr Beiser/USA TODAY; David Wallace/The Arizona Republic; Rod Sanford/Lansing State Journal; Jack Gruber/USA TODAY; Tim Dunn/
Reno Gazette-Journal; Trevor Christensen/The Spectrum; Danielle Peterson/Statesman Journal; Jeff Swinger/The Cincinnati Enquirer; Andy
Barron/Reno Gazette- Journal; Rodney White/The Des Moines Register; Tom Tingle/The Arizona Republic; Kobbi R. Blair/Statesman Journal;
Charlie Litchfield/The Des Moines Register; Amanda Sowards/Montgomery Advertiser; Craig Bailey/FLORIDA TODAY; Bart Boatwright/
The Greenville News; Rob Schumacher/The Arizona Republic; Nick Oza/The Arizona Republic; Byron Houlgrave, The Des Moines Register.
88
TABLE OF CONTENTS
2013 Financial Summary ..................... 1
Letter to Shareholders ........................ 2
Board of Directors ............................... 7
Company and Divisional Officers ........ 8
Photo Credits .................................... 88
Form 10-K
COMPANY
PROFILE
Gannett is an inter-
national media and
marketing solutions
company and one
of the largest, most
geographically
diverse local media
companies in the U.S.
Through its powerful network of broad-
cast, digital, mobile and print products,
the company informs and engages more
than 110 million people every month.
The company’s portfolio of trusted
brands offers marketers unmatched
local-to-national reach and customiz-
able, innovative marketing solutions
across any platform. As a digital media
leader, the company provides access to
outstanding content on many different
platforms and digital marketing services
to businesses that help them use digital
technology more effectively.
Gannett’s iconic national brands,
such as USA TODAY and CareerBuilder,
as well as its unique local brands serving
112 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 owns or services through
shared service agreements or other
similar agreements 43 television stations.
Excluding owner-operators, Gannett is
the No. 1 NBC affiliate group; No. 1 CBS
affiliate group; and the No. 4 ABC
affiliate group. These stations cover 30%
of the U.S. population in markets with
nearly 35 million households.
Following the acquisition of Belo
Corp. in December 2013, Gannett became
the largest independent TV station group
of major network affiliates in the top 25
U.S. markets, with a strong, diversified
portfolio. Each TV station also has a
robust digital presence, including mobile,
to reach consumers wherever they are.
Overall, Gannett reaches more than
65 million unique visitors monthly or
about 29 percent of the U.S. Internet
audience via digital platforms, including
CareerBuilder.com, USATODAY.com,
USA TODAY Sports Digital Properties
and digital platforms affiliated with its
local media organizations across the
country. USA TODAY is one of the most
popular news sites and the USA TODAY
app is a top news app with more than
19 million downloads to date across iPad,
iPhone, Android, Windows and Kindle
Fire. USA TODAY mobile traffic contin-
ues to grow as monthly visitors are now
approximately 24 million.
The company operates 82 U.S. daily
publications, including USA TODAY,
and 443 non-daily local publications in
30 states and Guam. USA TODAY ranks
No. 1 in the industry in total daily circula-
tion, according to the Alliance for
Audited Media.
Affiliated digital products of the
company’s U.S. publications, including
USA TODAY, reach more than 39 million
unique visitors monthly. The print prod-
ucts reach more than 10 million readers
every weekday and more than 12 million
readers every Sunday. Together they
provide critical news and information
from neighborhoods, the nation and the
globe.
Gannett’s deeply rooted understand-
ing of its communities and its local
market relationships, many of which
have spanned decades, provide access
to content on more than 500 local mobile
and tablet products and leading appli-
cations for iPad, iPhone, Kindle and
Android. Through key acquisitions 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.
G/O Digital, Gannett’s digital marketing
services organization, is a full-service
media and marketing solutions company
with a suite of best-in-class digital prod-
ucts. G/O Digital offers a one-stop shop of
localized marketing solutions to national
and small to medium-sized businesses.
G/O Digital comprises Gannett’s full suite
of digital marketing services, including
marketing leaders Shoplocal, Key Ring,
Deal Chicken and BLiNQ - and puts them
to work in an integrated, complementary
way to transform local marketing and
connect advertisers with local consumers.
In addition, Gannett subsidiary
Newsquest 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 15 million unique
users access Newsquest’s network of
news web sites each month.
I
B
N
D
N
G
I
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.
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.
ANNUAL MEETING
The annual meeting of shareholders will be held at 10 a.m. (E.T.), Thursday, May 1, 2014,
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 2013 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 2014. 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
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
Ben Fernando
Varun Kanwar
Suzanne Kuo
Lorraine Licayan
Mark Ramsey
Aisha Simpson
Eva Wrublesky
Director/Corporate
Communications
Laura Dalton
Creative Director/Designer
Michael Abernethy
Printing
Action Printing, Fond du Lac, WI
PHOTO CREDITS:
Page 7: Directors’ photos by
Stacey Wolf and Gretchen Ortega,
Gannett. Magner by Todd Plitt.
Photo credits for the Cover can
be found on Page 88 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.
2013 ANNUAL REPORT
2013
GANNETT CO., INC.
7950 JONES BRANCH DR.,
MCLEAN, VA 22107
WWW.GANNETT.COM
ANNUAL
REPORT
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