GANNETT CO., INC. 7950 JONES BRANCH DR., MCLEAN, VA 22107
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Creating a New Future
WWW.GANNETT.COM
2 0 1 4 A N N U A L R E P O R T
TABLE OF CONTENTS
FINANCIAL SUMMARY
2014 Financial Summary ...................................................... 1
Operating revenues, in millions
Letter to Shareholders ......................................................... 2
Board of Directors ................................................................ 7
Company and Divisional Officers ......................................... 8
12 $5353
13 $5161
14 $6008
Form 10-K
Net income attributable to Gannett Co., Inc. before asset
impairment and other special items, in millions
12
13
14
$473 (1)
$551 (1)
$634 (1)
Net income per diluted share before asset impairment and other
special items
12
13
14
$2.33 (1)
$2.02 (1)
$2.73 (1)
In thousands, except per share amounts
2014
Operating revenues ......................... $ 6,008,174
Operating income .......................... $ 1,058,031
Adjusted EBITDA (1) ................... $ 1,490,563
Net income attributable to
Gannett Co., Inc. ............................. $ 1,062,171
Net income per share – diluted ..... $
4.58
Net income attributable to
Gannett Co., Inc. before asset
impairment and other special
items (2) .......................................... $
Net income per diluted share
before asset impairment and
other charges (2) ............................. $
634,187
2.73
2013
$ 5,161,362
$ 739,243
$ 1,044,963
Change
16%
43%
43%
$ 388,680
1.66
$
173%
176%
$ 473,445
34%
$
2.02
35%
844,628
Free cash flow (3) ............................ $
Working capital ............................... $
352,529
Long-term debt .............................. $ 4,488,028
Total assets ...................................... $ 11,205,455
Capital expenditures ...................... $
161,874
Shareholders’ equity........................ $ 3,254,914
Dividends declared per share ......... $
0.80
Weighted average common
shares outstanding – diluted ............
(1%)
(1) See page 37 of Gannett’s Form 10-K for reconciliation of Adjusted EBITDA,
$ 470,491
$ 916,293
$ 3,707,010
$ 9,240,706
$ 110,407
$ 2,693,098
0.80
$
80%
(62%)
21%
21%
47%
21%
—
231,907
234,189
a non-GAAP financial measure, to net income attributable to Gannett.
(2) Results for 2014 exclude special items benefits of $428 million after tax or
$1.85 per share. Results for 2013 exclude asset impairment and other special
items charges of $85 million after tax or $.36 per share. Results for 2012
exclude asset impairment and other special items charges of $127 million
after tax or $.54 per share. These special items 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.
(3) See page 79 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 REPORT 1
LETTER TO SHAREHOLDERS
Dear Fellow Shareholders:
2014: A BANNER YEAR
2014 was without a doubt one of the
most exceptional years in Gannett’s
108-year history. We achieved a
number of milestones, enhanced the
offerings we provide to our audi-
ences and clients, and successfully
executed several important strate-
gic acquisitions. But perhaps most
importantly, 2014 was the year that
all of our hard work to transform
our business over the past three
years came to fruition and the “New
Gannett” – a higher margin, higher
growth, and more diversified busi-
ness positioned to compete fiercely
in today’s multi-platform landscape
– fully emerged.
One of our top headlines of the
year was our decision to create two
publicly traded companies: one
exclusively focused on our Broad-
cast and Digital businesses, and the
second focused on our Publishing
and affiliated digital businesses. Our
overarching goal in separating our
businesses is to have even sharper
management focus on and dedicate
capital and other resources to what
matters most to each of those busi-
nesses. By separating our businesses,
each company will be better posi-
tioned both financially and strategi-
cally to grow and develop with fewer
regulatory obstacles and to unlock
more value for our shareholders.
As you’ve seen in our quarterly
earnings reports, Gannett had an
outstanding year, fueled by the
exceptional work of our employees.
Company-wide revenue increased
by more than 16 percent driven by
growth in our Broadcasting and
Digital segments. The revenue
growth far outpaced expense growth
reflecting our unwavering diligence
in maximizing efficiency across each
and every corner of our business. As
a result, profitability improved dra-
matically. We achieved a 43 percent
jump in our Adjusted EBITDA to
$1.5 billion, expanded our Adjusted
EBITDA margin by approximately
460 basis points and reported free
cash flow of $845 million in 2014.
As we write this letter, our stock has
nearly tripled since we launched our
transformation journey and our per-
formance handily beat the S&P 500
and our peer group in the aggregate
over the past three years.
MAJOR STEPS FORWARD
ON DIGITAL FRONT
Our exciting news on the digital
front is clearly the acquisition of the
remaining 73 percent interest that we
didn’t already own in Cars.com. It is
experiencing robust growth as mar-
keters and advertisers continue to
shift more of their spending toward
digital solutions. This acquisition
doubled the size of our digital port-
folio and provides us with a highly
strategic position within the ever
important automotive vertical. With
Cars.com in a position of strength in
an industry anticipating significant
tailwinds, there has never been a
better time in Cars.com’s history for
Gannett to take full ownership.
Cars.com has progressed from
a startup that supported the publish-
ing businesses of its founding own-
ers in 1998 into a widely-respected,
industry-leading digital company
serving approximately 20,000 deal-
ers. From 2006 to 2013, revenue grew
at a compound annual growth rate
(CAGR) of almost 20 percent and
EBITDA increased at a CAGR of
almost 40 percent. As sole owner,
Gannett plans to accelerate this
extraordinary growth and leverage
all assets as we maximize the tight-
knit relationships Gannett has been
building in local communities for
over a century.
We see many avenues for
Cars.com and the rest of the dig-
ital portfolio to drive shareholder
value in 2015 and beyond. Not only
does full ownership of Cars.com
provide strong financial returns, it
gives Gannett an increased focus on
two of the most crucial advertising
verticals – automotive and talent
management solutions. Recent
growth for CareerBuilder has been
driven primarily by innovation and
the diversification of its products
and services. In 2014, it acquired
BroadBean, a leader in job distribu-
tion, candidate sourcing and big data
analytics software. This is the latest
step in CareerBuilder’s evolution as
the premier human resources Soft-
ware as a Service (SaaS) provider,
which enables CareerBuilder to give
recruiters and human resources
managers a faster, more convenient
and more cost-effective way to
acquire talent.
As we continue to connect with
our local audiences in increasingly
meaningful ways, we expect the
digital portfolio will provide even
greater value for shareholders.
BROADCASTING’S
EXPANDED PORTFOLIO
STRENGTHENS COMPANY
Our Broadcasting segment had an
outstanding year in 2014, achieving
revenue of $1.7 billion – a historic
high for Gannett. It was our first full
year operating with our significantly
expanded Broadcasting portfolio.
We’ve added geographic and
2 ANNUAL R EP ORT
GANNETT IN THE DRIVER’S SEAT
As a minority owner for years before the recent acquisition, Gannett knew exactly what
it was getting when it purchased the remaining interest in Cars.com it didn’t already own.
With approximately 30 million monthly visits, Cars.com is a leading independent research site
for car shoppers, providing credible and easy-to-understand information from consumers
and experts. Car buyers love going to Cars.com because the site provides them with
the information they need in an easily digestible way that makes shopping for
cars much less stressful. As auto marketers and advertisers rapidly shift their
spending to digital solutions, Cars.com, a top choice for consumers,
is poised to take a larger piece of an expanding pie. The potential
for growth is truly incredible.
ALL DRIVE. NO DRAMA.
ANNUAL REPORT 3
LETTER TO SHAREHOLDERS
network diversity, propelling us to
an industry-leading position where
we reach approximately one-third
of all television households in the
country. We continued to strengthen
our portfolio throughout 2014, add-
ing six stations in Texas. With this
acquisition, Gannett now reaches
83% of all Texas households.
The astounding growth in our
Broadcasting segment was driven
by several factors, including the
strength of our stations, their ability
to amplify every content and sales
opportunity, the addition of the
new TV stations which further
expanded our footprint across the
U.S., and the exceptional advertising
performances across our portfolio
during coverage of the Olympics and
political races in 2014. We achieved
record political advertising revenues
in a non-presidential election year
of $159 million – while revenues
from the Winter Olympics in Sochi
at our 17 owned or serviced NBC
stations demonstrated an outstand-
ing 65 percent growth over the
2010 Winter Games. From a ratings
perspective, Gannett NBC stations,
including those we service, took the
top four spots in prime and the top
three spots in every Olympic day
part among major-market NBC
stations within the most important
demographic, adults 25 to 54. In
prime time, KARE in Minneapolis-
St. Paul was #1; KUSA in Denver,
#2; KGW in Portland, OR, #3; and
KING in Seattle was #4. We also
saw very strong carry-over from
prime time to late night news. We
expect our retransmission revenue
to continue to grow, given our scale
and the strength of our stations. For
2014, we generated $362 million in
retransmission revenue.
4 A NNUAL R EP ORT
NATIONAL-TO-LOCAL STRATEGY
DRIVES PUBLISHING SEGMENT
In Publishing, our U.S. Community
Publishing (USCP) All Access
Content Subscription model – now
in its third year – has been tremen-
dously successful and continues to
be a driving force behind positive
momentum in that segment, includ-
ing the growth of digital subscribers.
In fact, what we’ve learned from
implementing our All Access Model
has been the inspiration for our
latest initiative: inserting national
USA TODAY content editions into
35 of our local USCP publications,
which has been a huge hit with
audiences.
Customer response was over-
whelmingly positive right off the
bat, which was further confirmed by
more formalized research later in
the year. Nearly half of subscribers
surveyed said they were more satis-
fied than prior to the initiative. And
perhaps more fascinating – certainly
from our advertisers’ perspective
– is that one-third of our readers
are more engaged with their print
products. In addition to delighting
our subscribers, this initiative has
allowed us to enjoy more flexibili-
ty with pricing and has yielded an
increase in circulation revenue at
U.S. publishing sites, significantly
surpassing our original projections.
This initiative made a big splash
by strengthening Gannett’s con-
nection to its local news audiences,
improving the publishing segment’s
profitability and contributing to
USA TODAY’s continued growth in
overall daily circulation. For the
second year in a row, the Alliance
for Audited Media reported that
USA TODAY was number one in total
daily circulation in the United States,
with daily circulation increasing over
40 percent compared to 2013, to more
than 4.1 million for the six months
ending September 30, 2014.
In January 2015, we began
syndicating the USA TODAY Local
Edition to non-Gannett newspapers,
with several newspapers taking the
Weekend Life product. We’ve also
created a Personal Finance product
that newspapers across the U.S.
have begun including. This is just the
first step in USA TODAY’s content
syndication strategy with its Local
Edition product.
In November, Gannett’s U.K.-
based Newsquest launched a market
test for The National, a new Scottish
daily publication. Initial demand for
the product was higher than antici-
pated and the print product was im-
mediately profitable. Profitability at
Newsquest more broadly improved
in 2014 compared to 2013, supported
primarily by a considerable increase
in digital revenue and a continued
focus on cost efficiencies.
Publishing will continue to
enhance its digital platforms to
strengthen its local franchises and
will benefit from a well-advanced
digital strategy with a leading port-
folio of local marketing solutions,
as well as content delivered on all
platforms.
LOOKING AHEAD
By all accounts, our three year
voyage to reshape and strengthen
all of our business segments has sur-
passed expectations. In adapting to
the digitization of the media space,
we have aligned ourselves even
more closely with the shifting needs
of our audiences and our advertisers.
The initiatives we have implement-
ed over the course of this journey
GROWING AUDIENCES THROUGH INNOVATION
Gannett employees are passionate about delivering outstanding, relevant content, growing
audiences through innovation and leveraging our local to national reach. One great example is
a partnership between The Des Moines Register and Gannett Digital. Together – in a journalistic
first – they used a combination of traditional print coverage and emerging digital technologies,
including emerging virtual reality technology, gaming technologies and 360-degree video,
to tell a powerful story about how the demographic, cultural, technological and economic
changes transforming America are playing out in the lives of four Iowa farm families.
The series, called “Harvest of Change,” was published across many of Gannett’s
other digital media properties. What makes this effort game-changing is its
ability to successfully merge strong reporting with emerging technologies
to enhance the impact of the story-telling and engage important new
audiences, including younger “Minecraft” audiences. The effort
created a buzz at the Online News Association’s annual
convention, where hundreds of journalists entered
Gannett’s “Harvest of Change” virtual reality stations.
For three days the chairs were rarely empty.
HARVEST OF CHANGE
ANNUAL REPORT 5
LETTER TO SHAREHOLDERS
way, bringing each of our businesses
to new heights as we prepare to take
the next big step in our transforma-
tion – the separation of our company
– and all of our core businesses are
up for the challenge.
At the foundation of it all are
our highly committed, determined
employees who make Gannett the
successful organization that it is and
who are committed to our purpose:
serving the greater good of the com-
munities we serve. The relationships
we share with local communities,
the connections we’ve forged with
people and the partnerships we’ve
solidified with our business partners
have all been fueled by the hard
work and unmatched talent of the
entire Gannett team.
We are passionate about
delivering the absolute best to our
customers and business partners,
and we are passionate about
delivering shareholder value. As we
enter 2015 and turn the page on a
new chapter in the Gannett story,
we look forward to delivering the
reliable value you’ve come to expect
from our company. We thank you,
as always, for your continued trust,
loyalty and support.
Marjorie Magner,
Chairman of the Board
Gracia Martore,
President and Chief Executive Officer
REWARDING JOURNALISM
Three of our TV stations were among
the winners of the prestigious
Alfred I. duPont-Columbia University
Awards, which honor excellence in broadcast, digital
and documentary journalism. Of the four awards that
went to local TV news investigations, three Gannett
Broadcasting stations were honored for their work:
KPNX, Phoenix, AZ; WLTX, Columbia, SC; and WTSP,
Tampa-St. Petersburg, FL.
have given each of our businesses
the scale, strength and credibility to
stand out among its peers, setting
the stage for the separation of our
businesses.
At Gannett, we pride ourselves
on precisely this type of innovation.
We are always looking for fresh
ways to strengthen ties both with
our local communities and our na-
tional audience by giving them the
news and information they crave.
Because we are so focused on giving
our audiences exactly what they
want – whenever, wherever, howev-
er they want it – our platforms are
even more attractive to advertisers,
improving profitability and creating
value for shareholders.
At the same time, we also pride
ourselves on delivering outstanding
journalism – trusted journalism –
which is what our audiences expect
from us. This year, as in years past,
our media organizations have been
honored by their peers for their ex-
ceptional work. The list of top awards
earned is long – from George Polk,
Peabody and Edward R. Murrow
awards to Alfred I. duPont awards
and a Pulitzer Prize. We don’t pursue
great journalism to win awards;
rather, these honors are a result of
our journalists’ deeply rooted passion
to serve the greater good through
their work. We are extremely proud
of our journalists and all of our
media organizations and applaud
their 2014 winning efforts to make a
difference in their communities.
As we move into 2015 and think
about Gannett’s future, we will
continue to strive for greatness. The
Gannett family – our employees, our
shareholders, our audiences and all
our other stakeholders – has a lot to
look forward to in the coming years.
We are energized by the planned
separation of our businesses later in
2015. We have supported each of our
business segments as they rethink
the way they connect with their audi-
ences, enhance advertising offerings,
and challenge our employees in new
and exciting ways. Everyone on the
Gannett team has responded in a big
6 ANNUAL R EP ORT
BOARD OF DIRECTORS
(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.
MAGNER
MARTORE
CODY
ELIAS
FONSECA
LOUIS
MCCUNE
NESS
PROPHET
SHAPIRO
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 65. (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;
and on the Board of Trustees of The Paley
Center for Media. Age 63. (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 68. (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 57. (c,d)
LIDIA FONSECA
Senior vice president and chief informa-
tion officer, Quest Diagnostics. Age 45. (c)
JOHN JEFFRY LOUIS
Co-founder and former chairman,
Parson Capital Corporation (1992-2007).
Other directorships: The Olayan Group;
S. C. Johnson & Son, Inc.; and chairman
of the U.S./ U.K. Fulbright Commission.
Age 52. (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 58. (b,c,e)
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:
Vital Voices Global Partnership; Committee
for Economic Development. Age 66. (a,e)
TONY PROPHET
Corporate vice president, Windows and
Search Marketing, Microsoft Corporation.
Formerly: Corporate vice president,
Windows Marketing, Microsoft Corporation
(2014-2015), Senior vice president, Opera-
tions Printing and Personal Systems (PPS),
Hewlett-Packard Company (2012-2014);
Senior vice president, Supply Operations,
Personal Systems Group, Hewlett-Packard
Company (2006-2012). Age 56. (b,e)
NEAL SHAPIRO
President and chief executive officer,
WNET.org. Other directorships and
trusteeships: Public Television Major
Market Group (MMG); Investigative
Reporters and Editors (IRE); Investigative
News Network (INN); the Board of Trust-
ees, Tufts University and the alumni board
of Communications and Media Studies
program, Tufts University. Age 56. (c,e)
ANNUAL REPORT 7
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.
Included 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.
Lynn Beall, Executive Vice President,
Gannett Broadcasting, and President
and General Manager, KSDK-TV,
St. Louis, MO. Age 54.u
William A. Behan, Senior Vice President,
Labor Relations. Age 56.•
Tom R. Cox, Vice President, Corporate
Development. Age 37.
Peter Diaz, Executive Vice President,
Gannett Broadcasting. Age 58.u
Robert J. Dickey, President, U.S. Com-
munity Publishing. Age 57.n•
Kevin E. Lord, Senior Vice President
and Chief Human Resources Officer.
Age 52.•
David T. Lougee, President, Gannett
Broadcasting. Age 56.u•
Todd A. Mayman, Senior Vice President,
General Counsel and Secretary. Age 55.•
David A. Payne, Senior Vice President
and Chief Digital Officer. Age 52.•
Barbara W. Wall, Vice President and
Senior Associate General Counsel.
Age 60.
Victoria D. Harker, Chief Financial
Officer. Age 50.•
John A. Williams, President, Gannett
Digital Ventures. Age 64.•
Michael A. Hart, Vice President and
Treasurer. Age 69.
Larry S. Kramer, President and Publish-
er, USA TODAY. Age 64.•
• Member of the Gannett Leadership Team.
n Member of the U. S. Community Publishing Operating Committee.
u Member of the Gannett Broadcasting Operating Committee.
8 ANNUAL R EP ORT
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 28, 2014
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 27, 2014, was $6,921,231,774.
The registrant has no non-voting common equity.
As of Feb. 1, 2015, 226,851,543 shares of the registrant’s Common Stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The definitive proxy statement relating to the registrant’s Annual Meeting of Shareholders to be held on April 29,
2015, is incorporated by reference in Part III to the extent described therein.
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INDEX TO GANNETT CO., INC.
2014 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
84
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, we inform and engage more than 115
million people every month. Our portfolio of trusted brands offers
marketers unmatched local-to-national reach and customizable,
innovative marketing solutions. As a digital media leader, we
provide access to content on many different platforms; digital
marketing services to businesses to help them more effectively use
digital technology to engage customers and reach their sales goals;
and Internet-based human resource solutions.
Our properties cover a wide range of geographies, demographics
and content areas. Our connection to, and understanding of, our
communities and local market relationships – many of which have
spanned decades – provides us with unparalleled advantages.
We provide consumers with the information and entertainment
they seek and connect them to their communities of interest through
multiple platforms including television stations, desktop,
smartphone, tablet products and print publications. We help
businesses grow by providing marketing solutions that reach and
engage their customers across diverse platforms.
We are focused on seizing the many opportunities presented by
new digital technologies leading to shifting consumer trends while
delivering leading-edge news and information and marketing
solutions to consumers and advertisers across multimedia platforms.
All of our businesses are focused on providing outstanding user
experiences throughout their portfolio of products and services.
We are organized along three business segments: Broadcasting,
Publishing and Digital. In 2014, we announced plans to create two
publicly traded companies: one primarily focused on our
Broadcasting and Digital businesses, and the other on our Publishing
business and their related digital assets. The expected timetable for
achieving that separation is mid-2015.
Within our Broadcasting Segment, we own or service (through
shared service agreements or other similar agreements) 46 television
stations in 38 markets. Excluding owner-operators, we are the No. 1
NBC affiliate group, No. 1 CBS affiliate group, and the No. 4 ABC
affiliate group. These stations cover almost one-third of the U.S.
population in markets with more than 35 million households. We are
the largest independent station group of major network affiliates in
the top 25 markets, with a uniquely diversified portfolio. Each
television station has a robust digital presence, including mobile, to
reach consumers wherever they are. About 32 million unique visitors
access Gannett Broadcasting media organizations every month
through desktops, smartphones and tablets, and there have been
close to 1.7 million downloads of Broadcasting’s apps on mobile
devices as consumer interest in mobile content delivery continues to
increase in popularity.
Our Publishing Segment has tremendous national-to-local reach,
comprising U.S. Community Publishing’s (USCP) rich portfolio of
81 unmatched, trusted local media organizations, a renowned
national brand in USA TODAY, and international scale with our
popular Newsquest media properties in the U.K. - along with
hundreds of engaging affiliated digital, mobile and non-daily print
products. USA TODAY is currently the nation’s number one
newspaper in consolidated print and digital circulation, according to
the Alliance for Audited Media’s September 2014 Publisher’s
Statement. In addition, the inclusion of a unique branded edition of
USA TODAY in 35 USCP local print editions provides local readers
with even more exceptional local, regional and national news and
information – all in one easily accessible package. USA TODAY in
3
February 2015 announced partnership deals with several non-
Gannett news organizations to include the USA TODAY Local
Edition as part of their print and digital offering to readers.
In the U.K, through our Newsquest group, we produce 18 daily
paid-for publications and more than 125 weekly publications,
magazines and trade publications. In late 2014, Newsquest launched
a new daily paid-for title focused on the community supporting
independence for Scotland from the rest of the U.K.
Publishing has a significant digital presence: Every month
approximately 73.5 million unique visitors access USA TODAY
content and approximately 30 million unique visitors seek out USCP
digital media through desktops, smartphones and tablets. In addition,
there have been more than 21 million downloads of USA TODAY’s
award-winning app on mobile devices and 2 million downloads of
USCP apps. Newsquest’s network of web sites attracts nearly 20
million unique visitors every month. Collectively, print products
reach approximately 9.7 million dedicated U.S. readers every
weekday, approximately 10.5 million every Sunday, and, in the
U.K., Newsquest has a total average readership of approximately 6
million every week.
We own and operate a number of stand-alone digital subsidiaries,
which are included in our Digital Segment, including two digital
leaders, Cars.com and CareerBuilder, as well as several other well-
positioned online companies.
Cars.com, which Gannett acquired full ownership of in October
2014, is the leading destination for online car shoppers, offering
credible information from consumers and experts to help car buyers
formulate opinions on what to buy, where to buy and how much to
pay for a car. CareerBuilder, a global leader in human capital
solutions, majority-owned by Gannett, provides services ranging
from labor market intelligence to talent management software and
other recruitment tools. It is the largest online job site in the U.S.,
measured both by traffic and revenue, has a presence in more than
60 markets worldwide and focuses on technology solutions and
niche sites. Having served the market for almost twenty years,
CareerBuilder continues to benefit from a history of building
customer relationships, having gained market share each of the last
nine years. Together, Cars.com and CareerBuilder provide our
advertising partners with access to two very important categories –
automotive and human capital solutions.
We generate revenues within our Broadcasting Segment through
advertising, fees paid for retransmission of our television signals on
satellite and cable networks and payments for other services, such as
producing advertising content. Advertising includes local advertising
focused on the immediate geographic area of the stations, national
advertising, and advertising on the stations’ desktop, smartphone and
tablet products. We generate revenue within our Publishing Segment
through advertising and subscriptions to our print and digital
publications. Our advertising teams sell retail, classified and national
advertising across multiple platforms including print, online, mobile
and tablet as well as niche publications. Across both Broadcasting
and Publishing Segments, we generate revenue by providing digital
marketing products and services, ranging from search to social
media to web site development. 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. Cars.com generates revenues through online
automotive advertising targeting car dealerships and national
advertisers through its own direct sales force as well as its affiliate
sales channels.
We have made substantial progress in our digital transformation,
In some markets, particularly those with younger demographics,
which has fundamentally changed the way we interact with our
audiences and advertisers. In step with changes in the media
landscape, we have used new technology to meet evolving consumer
demands and create valuable new revenue streams. We generate
digital revenues through online content subscription fees and
advertising on various digital platforms including more than 120
domestic web sites affiliated with our publishing and television
markets. In December, Gannett’s consolidated domestic Internet
audience was 115 million unique visitors reaching 46% of the
Internet audience, according to comScore Media Metrix Multi-
platform.
Our digital offerings are deeply integrated with publishing and
broadcasting product offerings, supported by shared infrastructure.
Many digital offerings are reported within the operating results of
our Publishing and Broadcasting Segments. As more fully described
under “Strategy,” and “Strategic Acquisitions,” we have a number of
initiatives underway supporting our digital transformation.
Strategy
In 2014, we made major strides toward achieving our transformation
goals, while remaining focused on successfully executing our
strategic growth initiatives, ensuring our continued evolution within
the ever-changing media landscape.
We are following an ambitious business strategy integrated with
a comprehensive capital allocation plan, which is designed to
leverage our 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 the 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
drive increased shareholder value.
We acquired Belo Corp. in December 2013, and Cars.com in
October 2014. The addition of these two businesses created a
dramatically more diversified, higher-margin and higher growth
multimedia business. The Belo acquisition added deep connections
in new markets, predominantly in Texas and the Northwest, and
provided us with even greater geographic and network
diversification. Cars.com is a leading independent research site for
car shoppers and its acquisition doubled the size of our Digital
Segment. The Digital and Broadcasting Segments on a combined
basis now generate more than two-thirds of our Adjusted EBITDA
and position us for sustainable growth and success in the digital age.
In addition to integrating these major acquisitions, during 2014
we continued to pursue and make significant progress on a number
of specific strategic initiatives which are integrated across all three
of our business segments: Broadcasting, Publishing and Digital.
Progress on these strategic initiatives, capital allocation plan, and
strategic acquisitions and dispositions follows:
All Access Content Subscription Model: In 2014, USCP
continued to successfully enhance the 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. In 2014, USCP engaged more than 1.6 million
digitally activated subscribers and saw an increase of more than 27%
in digital-only subscribers as well.
4
digital-only subscribers are approaching 10% of all accounts - and
growing. In 2011, before the launch of the All Access Model,
circulation revenues accounted for 29% of the division’s total
revenue. In 2014, circulation revenues accounted for 36% of USCP
total revenue.
The success of the All Access Content Subscription Model led us
to create a USCP and USA TODAY pilot at four local Gannett media
organizations. The project provided local consumers with an
enhanced news product that leverages our 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 of each local publication. The initiative leverages our
outstanding national content to further complement local reporting
and creates new revenue streams for content we are already
producing, creating added value. The added USA TODAY edition
includes national News, Money and lifestyle content seven days a
week. USA TODAY’s Sports coverage is integrated into local sports
sections and a Life edition is included every Sunday. Readers get an
average of approximately 70 pages of additional content per week in
print and e-Editions as a result of these integration efforts. Following
the success of the initiative in the pilot markets, we rolled out the
project to an additional 31 local daily publications across the country
in the first half of 2014. As a result of research, we know consumer
reaction to the additional content has been very positive, which
enhances the appeal of the local publications as preferred
information sources for readers and makes them attractive platforms
for advertisers looking to reach readers on both a local and national
scale.
Digital Relaunch & Mobile: In 2014, the Digital Relaunch
initiative was completed, providing all of Gannett’s Publishing and
Broadcast properties (excluding certain former Belo stations) with a
full suite of new products, including a proprietary content
management system, a new database storage tier, programming
tools, application frameworks and market-leading desktop sites,
mobile web sites and mobile apps. This collection of products and
services, known as the Gannett Digital Platform (the “GDP”),
consists of three major components: (i) authoring and classification
tools; (ii) a centralized data store managing over 25,000 new assets
such as articles, videos, photos or interactive features per day as well
as structured content and user data (including subscription
management); and (iii) programming tools and frameworks for
advertising and user experience that drive more than 600 digital
products.
The migration of all Publishing and Broadcast sites onto the
GDP has provided immediate benefits by enabling the sharing of
content and information quickly and efficiently, and driving editorial
and advertising innovation across applications. In 2014, new,
innovative, high-end advertising products were deployed across our
digital sites and applications, helping to drive digital advertising
revenue growth and increasing the average price paid for our desktop
advertising impressions. The launch of the new sites and applications
has also resulted in a significant increase in both users and
engagement across all platforms. Multi-platform unique visitors rose
23% year-over-year in December 2014 across divisions, according to
comScore Media Metrix. In fact, at the end of 2014, we ranked No. 3
in the News and Information category, up from No. 5 in 2013. Cross-
platform video plays have increased 51% year-over-year and for
USCP, minutes spent per visitor have set all-time records, up 41% in
December 2014.
In 2014, the Gannett Digital team also began preparing the
groundwork for the next evolution of the GDP. This next generation
platform will focus on the ability to create personalized experiences
by connecting users’ preferences and behaviors with our large store
of centralized content assets and advertising products.
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 2014, USA TODAY Sports Media Group
continued to build upon the growth of 2013, expanding its digital
presence to more than 42 million unique visitors each month. The
efforts resulted in a 27% increase in comScore cross-platform unique
visitor traffic year-over-year, with significant mobile audience
growth of 60% versus 2013. Group highlights included:
• Significant growth of “For The Win,” our social media sports
news and entertainment site, growing page views by 24% year-
over-year.
• Development of the College Football Fan Index, the only digital
index that combines social media activity and fan voting to
determine the ultimate college football fanbase.
• Launch of a new Fantasy section that includes information
related to managing fantasy teams as well as opportunities to
play in contests through Fantasy Score, a Weekly and Daily
Fantasy League.
• Launch of the new USA TODAY Sports App in February 2015.
The app includes trending sports news, scores, notifications and
a quick and entertaining take on sports stories. The app is
available for free of charge in the iOS App Store and Google
Play for Android phones.
USA TODAY Travel Media Group: The Travel Media Group
worked collaboratively with USCP markets to continue the roll-out
of local travel sections and now is part of nearly 30 local digital sites
as a new travel section. It provides local markets with USA
TODAY’s premium travel and lifestyle content, driving new
opportunities with incremental traffic and advertising inventory. The
Travel Media Group also completed the mobile-web roll-out for all
eight Experience web sites, which supported a 9% increase in mobile
web traffic in the fourth quarter 2014, vs. the third quarter 2014.
Experience America reported record high, cross-platform page views
of 13.8 million in October.
G/O Digital (Digital Marketing Services): G/O Digital offers a
wide array of leading-edge digital marketing solutions that enable
marketers and advertisers to better connect with local consumers
online through products that drive results. For local businesses, G/O
Digital offers an integrated digital marketing suite of products/
services from search to social media to website development. For
national brands and agencies, G/O Digital delivers local digital
activation at national scale powered by G/O Digital brands:
Shoplocal, BLiNQ Media and Key Ring.
G/O Digital partners with the nation’s top brands and retailers,
including P&G, Target, Walmart and Walgreens, and leads digital
marketing campaigns for thousands of local businesses across more
than 110 local markets. Driven by the strong partnership with USCP
and Broadcasting sales forces, G/O Digital again saw strong revenue
traction year-over-year from small to medium-sized business (SMB)
customers, with revenues from local advertisers up 66% over 2013,
led by increases across key product solutions, including search,
email and social marketing products.
5
Reinforcing its commitment to simplifying digital marketing and
helping small and medium-sized businesses to grow their businesses,
G/O Digital was recognized by Yahoo! as a Strategic Local
Ambassador, which is the highest Yahoo! partnership tier and adds to
its already strong search foundation as G/O Digital had previously
been named a Google Premier SMB Partner. In addition, G/O Digital
was ranked No. 2 nationwide by localseocompanies.com as the
“Best Local SEO Company.” In 2014, G/O Digital also launched its
“Leaders in Local” video series to highlight the value and benefits
G/O Digital delivers to local businesses across the country. The
launch was promoted via television and digital ads across Gannett
broadcast markets, as well as a native advertising campaign within
USATODAY.com.
Signaling its innovation and collaboration with national brands,
retailers, agencies and publishers, G/O Digital has been named a
finalist in the category of “Best In-Stream Video” at the 2015
Digiday Video Awards for its digital video advertising campaign for
Lowe’s Home Improvement. This accomplishment reinforces G/O
Digital’s mission to reshape the industry’s understanding and
expectations of content marketing to deliver dynamic, personalized
experiences and local store sales.
BLiNQ Media launched a first-to-market social marketing
product, AutoLiFT, to enable auto brands, agencies and dealers to
target in-market car shoppers with dynamic, localized incentives on
Facebook. The solution’s public launch marks a milestone in
automotive advertising.
Key Ring launched its latest features enhancement, known as
Key Ring Express. As a result, users now receive notifications
triggered by beacons and geo-fence targeting within 100 meters of
store locations. Signaling its top position as the go-to mobile
shopping app, Key Ring also was selected as the winner in the
category of “Best Mobile App for E-Commerce & Retail” at the
2014 Digiday Mobi Awards.
Gannett Publishing Services: In 2011, Gannett Publishing
Services (GPS) was formed to improve the efficiency of, and reduce
the cost associated with, the production and distribution of Gannett’s
printed products across all divisions in the U.S. In 2014, GPS
completed its third year of directly managing the production and
distribution functions for all of Gannett’s domestic publications,
including all community newspapers and USA TODAY. GPS
provides printing services in 35 U.S. locations and distribution
services in all 50 states. Providing an efficient, cost-effective print
platform and distribution network has resulted in substantial cost
savings and superior operational performance. GPS continues to
generate new revenue opportunities by leveraging its existing assets
to provide advertising production, printing and packaging, and
distribution services to third parties as an integrated nationwide
business.
During 2014, GPS reduced annualized distribution costs and
production costs by over $16 million as a result of consolidation,
automation and other efficiency efforts.
Sourcing: The Sourcing initiative focuses on leveraging
company-wide spending in key procurement categories and savings
from contract renegotiations, increasing the efficiencies of
operations as well as system enhancements to realize savings across
all divisions. The goal of this initiative is to continually review
consumption patterns and find efficient, productive ways to conduct
business through centralized sourcing and procurement from
negotiated partner agreements. In 2014, these efforts resulted in cost
reductions of $69 million in specifically targeted spending
categories.
Space Consolidation: The space consolidation initiative
continues to proceed as we closed on a number of real estate sales
opportunities and consolidated expiring leases. The real estate team
focuses continually 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, we have
sold 54 properties consisting of more than 3 million square feet of
space and more than 100 acres of excess land for a total of almost
$140 million. Recent examples include the Detroit Free Press
moving from a 100-year old building of approximately 326,000
square feet to a state-of-the-art, digital media facility in leased office
space of 85,000 square feet; and The Indianapolis Star’s move from
its 100-year old building of approximately 325,000 square feet to
104,000 square feet of space with a “mission-control” digital news
hub.
Capital Allocation: Our approach to capital allocation is a key
source of financial strength in support of current initiatives as well as
providing flexibility for future opportunities. We spent $76 million
in 2014 to repurchase 2.7 million of our shares, at an average price
per share of $28.13. This share repurchase program was temporarily
suspended upon the announcement of the Cars.com acquisition, but
was re-initiated in February of 2015, well ahead of the timeline we
had previously anticipated, as a result of our strong operating
performance and the strength of our balance sheet. We have
completed more than 50% of our $300 million authorization with 5.6
million shares repurchased at an average price of $27.03 per share.
In addition, dividends of $.80 per share were again distributed in
2014, allowing us to maximize the allocation of capital to provide
strong return to shareholders during our growth and expansion
efforts.
Strategic Actions, Acquisitions and Dispositions
In August 2014, we announced a plan to create two publicly traded
companies: one exclusively focused on the Broadcasting and Digital
businesses, and the other on the Publishing business. The transaction
will create two focused companies with increased opportunities to
grow organically across all businesses as well as pursue strategic
acquisitions and is expected to be completed in mid-2015.
Strategic acquisitions continue to be a key component of our
effort to grow our higher-margin businesses, and to accelerate
growth by entering into or expanding high potential businesses
across all of our segments. At the same time we announced the spin-
off of our Publishing business, we also announced an agreement to
acquire full ownership of Cars.com (formerly known as Classified
Ventures, LLC). In October 2014, we acquired the remaining 73%
interest in Cars.com, for $1.8 billion. Acquiring full ownership of
Cars.com doubled Gannett’s Digital Segment, further accelerated our
digital transformation and expanded our leading position in local
media and marketing services in the automotive sector, one of the
largest and most important categories for local marketing and
advertising revenue.
In July 2014, we acquired six of London Broadcasting
Company’s television stations in Texas for $215 million in an all-
cash transaction. The acquisition included KCEN (NBC) in Waco-
Temple-Bryan, KYTX (CBS) in Tyler-Longview, KIII (ABC) in
Corpus Christi, KBMT (ABC) and its digital sub-channel KJAC
(NBC) in Beaumont-Port Arthur, KXVA (FOX) in Abilene-
Sweetwater and KIDY (FOX) in San Angelo. The purchase of these
stations further deepened our broadcasting presence in the state of
Texas without any overlap of Gannett’s current local broadcast and
publishing portfolio.
In June 2014, we, along with Sander Media LLC, completed the
previously announced sale of KTVK-TV and KASW-TV in Phoenix,
AZ, to Meredith Corporation. As part of the sale, Sander Media
conveyed to Meredith substantially all of its assets used in the
operation of both KTVK-TV and KASW-TV, which Sander Media
acquired upon completion of the Gannett-Belo transaction on
December 23, 2013. We also conveyed certain other assets that we
used to provide services to both KTVK-TV and KASW-TV, which
we acquired from Belo upon close of the Gannett-Belo transaction.
At the closing, Meredith simultaneously conveyed KASW-TV to
SagamoreHill of Phoenix, LLC, which, through its affiliates, owns
and operates two television stations in two markets.
In February 2014, we, along with Sander Media LLC, completed
the sale of KMOV-TV in St. Louis, MO, to Meredith Corporation,
following the receipt of regulatory approvals. The total sale price of
the combined stations (KTVK-TV and KASW-TV in Phoenix and
KMOV-TV in St. Louis) was $407.5 million.
We are now the largest independent station group of major
network affiliates in the top 25 markets, with 18 stations in those
markets. Excluding owner operators, we are now the largest owner
of CBS affiliates and expanded our NBC affiliate group, which is
already No. 1. We are the No. 4 ABC affiliate group.
In the Digital Segment, CareerBuilder acquired Broadbean, a
leader in job distribution, candidate sourcing and big data analytics
software, in April 2014. This acquisition was the latest step in
CareerBuilder’s evolution as the premiere HR Software as a Service
(SaaS) provider and focuses on bring recruiters and HR managers a
faster, more convenient and more cost-effective way to acquire
talent. Broadbean posts jobs on more than 6,000 job boards and
social networks in 183 countries and has more than 60,000 users.
Broadbean distributes more than 2 million jobs and generates more
than 10 million job applications each month. Broadbean uses one
interface to seamlessly search across various resume databases and,
like CareerBuilder, offers powerful analytics around sourcing
candidates and hires.
After the end of our fiscal year, we sold Gannett Healthcare
Group (GHG) on December 29, 2014, to OnCourse Learning, an
online education and training provider. GHG is a leading provider of
continuing education, certification test preparation, online
recruitment, digital media, publications and related services for
nurses and other healthcare professionals in the United States.
General Company Information
Gannett was founded by Frank E. Gannett and associates in 1906
and was incorporated in 1923. We listed shares publicly for the first
time in 1967 and reincorporated in Delaware in 1972. Our 227
million outstanding shares of common stock are held by
approximately 7,200 shareholders of record in all 50 states and
several foreign countries. We are headquartered in McLean, VA, near
Washington, DC.
Business Segments
We have three principal business segments: Broadcasting, Publishing
and Digital. Operating revenues and income from desktop,
smartphone and tablet products associated with publishing
operations are reported in the Publishing Segment. Operating
revenues and income from desktop, smartphone and tablet products
associated with broadcasting stations are reported in the
Broadcasting Segment.
Financial information for each of our 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.
6
Broadcasting Segment
Our Broadcasting Segment continues to achieve strategic growth
following our acquisition of Belo Corp. on Dec. 23, 2013 and in
2014, six of London Broadcasting Company’s television stations in
Texas. The purchase of these stations further deepens our
broadcasting presence in the state of Texas without any overlap of
our current local broadcast and publishing portfolio.
With the Belo and London transactions, we now have a presence
in almost one-third of U.S. television households with a total market
reach of more than 35 million households. Our station portfolio has
doubled from 23 full-power stations to 46, including stations
serviced by Gannett through shared services or other similar
arrangements. Today we are more diversified by region and network
affiliation and are now a leading company in the industry. Other than
the Big Four networks themselves, we are the largest owner of Big
Four affiliated stations in the top 25 markets.
Broadcasting Segment revenue in 2014 more than doubled to a
new record and was up significantly on a pro forma basis as well.
We are ahead of schedule in achieving the synergies we projected at
the time we announced the Belo and London transactions, such as
achieving higher retransmission consent rates and reducing
redundant corporate costs. In addition, we are also increasing
revenue share, audience share, and increasing operating efficiencies
by applying numerous centralized services to those stations.
Broadcast affiliates and their network partners continue to have
the broadest appeal in terms of household viewership, viewing time,
and audience reach. The overall reach of events such as the
Olympics and NFL Football, along with our extensive local news
and non-news programming, continues to surpass the reach in
viewership of individual cable channels. Our ratings and reach are
driven by the quality of programs we and our network partners
produce and by the strong local connections we have to our
communities, which gives us a unique position among the numerous
program choices viewers have, regardless of platform. Regarding
retransmission consent revenues, broadcasters in each market
combined represent about a third of all viewing, but only about a
sixth of all subscriber fees. The market is continuing to align itself
between audience and subscriber fees.
The primary sources of our broadcasting revenues are: 1) core
advertising which includes local and national non-political
advertising; 2) political advertising revenues which are driven by
elections and peak in even years (e.g. 2014, 2012) and particularly in
the second half of those years; 3) retransmission revenues
representing fees paid by satellite and cable networks and
telecommunications companies to carry our television signals on
their network; 4) digital revenues which encompass digital
marketing services and advertising on the stations’ website, tablet
and mobile products; and 5) payments by advertisers to television
stations for other services, such as production of programming from
third parties and production of advertising material.
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 advertising spots within the
network programs. Our television stations produce local
programming such as news, sports, and entertainment.
Retransmission consent and affiliation 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, we have retransmission consent agreements
with the majority of cable operators and the primary satellite
providers for carriage of our television stations. We also have
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 our Broadcasting Segment provides. While core
advertising still represents a majority of broadcasting revenues, the
contribution from retransmission revenues continues to grow.
In 2014, we completed retransmission negotiations with more
than 300 providers. These are multi-year agreements that provide us
with significant and steady revenue streams. Retransmission
revenues are expected to grow significantly in 2015 and beyond.
On the affiliation agreement side, our ABC affiliation agreement
was just renewed through 2018, a deal that includes those stations
acquired from Belo and London Broadcasting as well as our original
Gannett stations. Other affiliation agreements with CBS and NBC
are staggered as a result of those recent acquisitions.
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, our television stations have emphasized
our 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 be
more cost effective.
Our television stations led the way in covering major news
events during 2014. We also lead our communities by rallying and
engaging people to participate in making our communities stronger,
better places to work and live. For example, we leveraged our broad
footprint for our coverage of the Ferguson, MO, civil unrest in 2014,
with our coverage spanning more than four months and including
journalists from across Gannett Broadcasting and USA TODAY.
However, we also focused on finding solutions and affecting positive
change through our #STL Together campaign, which created a
pathway for dialog. #STL Together brought community leaders
together to urge calm and promote unity. From the Ferguson police
shooting and rioting, to the school shooting outside of Seattle, WA,
to our nationwide Ebola coverage, Broadcasting provided strong
community leadership on the issues as well as outstanding in-depth
news coverage on-air, online and through our mobile devices.
Gannett television stations also led the way on the ratings side
for the 2014 Winter Olympics in Sochi, Russia. Gannett NBC-
affiliated stations, including those we service, took the top four spots
in prime time and the top three spots in every Olympic day part
among major market NBC stations within the most important
demographic, adults 25 to 54. In prime time, KARE in Minneapolis-
St. Paul was No. 1; KUSA in Denver, No. 2; KGW in Portland, OR,
No. 3; and KING in Seattle was No. 4. We also saw extremely strong
carry-over from prime time to late night news. Throughout the year,
the division continued working closely with USA TODAY and
USCP to develop and enhance content for consumers.
7
Stations collectively made a difference in their local
communities by participating in our national Make A Difference
Day. NBC joined the initiative this year, bringing more national
attention to the effort, which was fully supported by our
Broadcasting stations. Efforts ranged from 13,000 kids in Portland,
OR, receiving school supplies, thanks to KGW, to two soldiers in
Knoxville receiving a renovated and furnished home as a result of
WBIR leading the effort.
This year Gannett stations earned a number of prestigious
journalism awards including three Alfred I. DuPont awards (KPNX
in Phoenix, WLTX in Columbia, SC, and WTSP in Tampa-St.
Petersburg, FL), a George Polk Award, National Emmys, Peabody
and multiple Edward R. Murrow awards. The following six
broadcast properties received eight National Murrow Awards: WXIA
in Atlanta, WGRZ in Buffalo, WFAA in Dallas, KARE in
Minneapolis-St. Paul, KING in Seattle and WBIR in Knoxville,
which accepted the award for Overall Excellence. No other
broadcast company won as many national Murrow awards.
Competition: In each of its broadcast markets, our 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 our 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 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 technology that
enables consumers to receive news and information continues to
evolve. Our broadcasting stations compete principally on the basis of
their audience share, advertising rates and audience composition.
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. In 2014, total digital visitors were up 33% pro forma
while total digital page views were up 12% pro forma. Mobile,
including phones and tablets, apps and mobile web, grew
significantly in 2014 and now accounts for 43% of the total digital
page views. Digital video plays increased 34% pro forma as video
continues to be highly desired on all platforms. Product
enhancements to both the desktop and mobile digital products occur
every year and are part of a continuous cycle of improving the
customer experience and increasing consumer engagement.
Broadcasting is positioned to maximize engagement through
social media. The synergistic relationship between social media and
television is strong and we continue to explore ways to socially
engage consumers on all screens for all types of programs. 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 Ferguson police
shooting or local news events like record snow storms in Buffalo,
social media influences what people watch, what they share and
what they talk about. Our social media reach doubled in 2014 and
now counts over 8 million fans and followers for Twitter and
Facebook.
Regulation: Our 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. We believe we are in substantial
compliance with all applicable provisions of the Communications
Act and FCC Regulations. We continue to file license renewal
applications for our stations, including for several stations with
license renewal applications pending from the last round of license
renewals, and we expect 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 govern multiple media 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). 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). Our 42 television stations (excluding four
stations we currently service under shared services and similar
arrangements) reach approximately 24% 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, our national reach
would be approximately 29%. FCC Regulations permit common
ownership of two television stations in the same market in certain
defined circumstances, including situations where at least one of the
commonly owned stations is outside the market’s top four rated
stations at the time of acquisition and at least eight independent
media “voices” remain after the acquisition.
FCC Regulations prohibit a television station owner from
owning a daily newspaper in cases where the station’s contour
encompasses the newspaper’s city of publication. In 2007, the FCC
granted a permanent waiver authorizing our continued ownership of
both KPNX-TV and The Arizona Republic in Phoenix, AZ. The FCC
commenced a new review of its ownership rules in 2014, as it is
required to do every four years. The FCC has proposed to retain the
local television ownership rule, and proposed a modest relaxation of
the newspaper/broadcast rule. Also in 2014, the FCC determined that
certain joint sales agreements (JSAs) between television stations will
be treated as attributable ownership interests. We are not parties to
JSAs that will be made attributable under this rule. The FCC has
proposed to require disclosure of shared services agreements and
local news agreements. The current chair of the FCC has stated that
he expects the ownership review commenced in 2014 to be
completed by mid-2016. We are party to shared services agreements
with certain third parties that own stations in markets where we also
own daily newspapers. We are unable to predict whether or how the
FCC’s rules in this area may change.
Congress has adopted legislation requiring the FCC to make
changes to the rules concerning negotiation of retransmission
consent agreements (which govern cable and satellite operators’
carriage of our signals). It is possible that in the future, Congress and
the FCC will make additional changes to the Communications Act
and to the statutory cable and satellite copyright regime, and to other
FCC Regulations, respectively, including the rules concerning
negotiation of retransmission consent; local exclusivity with respect
to network and syndicated content; and other rules and policies
8
affecting our operations. As authorized by and pursuant to certain
requirements established by Congress, the FCC has adopted certain
rules and is seeking comment on additional rules to govern a
voluntary “incentive auction” to reallocate certain spectrum
currently occupied by television broadcast stations to mobile
wireless broadband services, along with a related “repacking” of the
television spectrum for remaining television stations. 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’s interpretation of this
requirement is subject to a judicial appeal. 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. It is too early to predict the
likelihood, timing or outcome of any additional FCC regulatory
action in this regard or the ultimate impact of the incentive auction
and repacking upon our business.
In December 2014, the FCC proposed to expand the definition of
multichannel video programming distributor (MVPD) to include
certain “over-the-top” distributors of video programming that stream
content to consumers over the Internet. If the FCC adopts this
proposal, it could result in changes to how our stations’ signals are
distributed, as well as how our video programming competitors
reach viewers. We are unable to predict at this time whether the FCC
will adopt this proposal or what the effect on our retransmission and
advertising revenues will be, if any.
Publishing Segment
Our publishing business comprises 100 daily publications and digital
platforms in the U.S. and U.K., including more than 400 non-daily
publications in the U.S. and more than 125 such titles in the U.K. All
of our local publishing operations and affiliated digital products
operate through fully integrated shared support, sales and service
platforms. Other businesses that are part of the publishing business
include:
• Clipper Magazine, a direct mail advertising magazine that
publishes hundreds of local market editions under the brands
Local Flavor, Clipper Magazine, Savvy Shopper and Mint
Magazine in 29 states to more than 27 million consumers.
• Gannett Government Media, a worldwide multimedia business
with digital, print and broadcast media properties focused on
government, military and defense technology audiences.
More than 73 million unique visitors access USA TODAY every
month through desktops, smartphones and tablets; and 30.1 million
unique visitors seek out USCP digital media monthly. Collectively,
U.S. print products reach approximately 9.7 million dedicated U.S.
readers every weekday, approximately 10.5 million every Sunday.
USA TODAY is currently the nation’s number one newspaper in
consolidated print and digital circulation, according to the Alliance
for Audited Media’s September 2014 Publisher’s Statement, with
total daily circulation of 4.1 million and Sunday circulation of 3.7
million, which includes daily print, digital replica, digital non-
replica, and branded editions. Our branded editions include the USA
TODAY Local sections that are inserted into 35 community
newspapers as of year-end. USA TODAY in February 2015
announced partnership deals with several non-Gannett news
organizations to include the USA TODAY Local Edition as part of
their print and digital offering to readers.
USA TODAY was introduced in 1982 as the country’s first
national, general-interest daily publication. In 2014, we continued to
build upon the success of 2013, solidifying our position as a leader
9
in digital content. Cross platform page views grew to an average of
more than 1.2 billion a month, an increase of 13% over 2013. Our
mobile products helped drive that growth, with an average 54%
growth in monthly page views, reaching a high of more than 450
million page views. USA TODAY mobile visitors totaled 44.8
million in December 2014, reaching 25% of the mobile audience.
This was a 33% increase from December 2013, according to
comScore Mobile Metrix. In addition, USA TODAY's award-
winning app is a top news app with 21.2 million downloads across
iPad, iPhone, Android, Windows and Kindle Fire.
Newsquest’s digital audience increased substantially during
2014, with audited average daily unique users rising by 36%.
Newsquest has a total average readership of approximately 6 million
every week. During the year, Newsquest journalists took top prizes
in five categories in the U.K.-wide Regional Press Awards.
USA TODAY digital and print content is produced at facilities in
McLean, VA, and transmitted digitally to offset printing plants
around the country. It is printed at our plants in 13 U.S. markets and
commercially at offset plants owned by other print providers in 23
other U.S. markets.
Publishing non-daily products continued to be an important part
of our market strategy in 2014. We produce non-daily publications in
the U.S., including glossy lifestyle magazines, community
publications and publications focused on a specific topic, such as
health or cars.
Our strategy for non-daily publications is to appeal to key
advertising segments (e.g., affluent women, families with children or
young readers). Non-daily products help our 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 our publishing businesses relentlessly
pursue their mission to meet consumers’ news and information needs
anytime, anywhere and on any platform, we remain focused on an
audience aggregation strategy. We consider the reach and coverage
of our products across multiple platforms and measure the frequency
with which consumers interact with each product to ensure our
audiences remain highly engaged.
For example, results from a 2014 Scarborough Newspaper
Penetration Report indicate two out of three adults in the Gannett
Wisconsin East markets either read the print version of our
publications (Appleton Post-Crescent/Fond du Lac Reporter/Green
Bay Press-Gazette/Manitowoc Herald Times Reporter/Oshkosh
Northwestern) or visit their web sites. This makes the Wisconsin
East group the top-ranked local publishing operation in the country
for integrated (combined print and online) audience penetration.
According to the same report, three other USCP media organizations
ranked in the Top 10: the Rochester (NY) Democrat and Chronicle
ranked No. 3; the Des Moines Register, No. 8; and The Courier-
Journal in Louisville, KY, No. 10.
We have gathered audience aggregation data for 55 of our
markets and will continue to add more data in 2015. 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 us to increase total advertising
revenue potential while maximizing advertiser effectiveness.
In addition to the audience-based initiative, we continue 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 2014, the USCP research group launched an ongoing
consumer satisfaction program in key markets. The initial wave
included more than 7,600 interviews with consumers in 12 markets.
The group also conducted extensive consumer research regarding
the integration of a USA TODAY edition into Gannett local
newspapers resulting in USA TODAY now being inserted in 35 of
our local USCP publications. Research showed that our subscribers
reacted very favorably with nearly half saying they were more
satisfied than before the addition of USA TODAY, and a third of
them reporting they spend more time with the newspaper because of
the additional USA TODAY content.
Advertising: We have advertising departments that sell retail,
classified and national advertising across multiple platforms
including print, online, mobile, tablet as well as niche publications.
We have a national advertising sales force focused on the largest
national advertisers and a separate sales organization to support
classified employment sales - the Digital Employment Sales Center.
G/O Digital provides marketing specialists to small and medium-
sized businesses, and our Client Solutions groups provide
customized marketing solutions. We have relationships with outside
representative firms that specialize in the selling of national ads.
Retail display advertising is associated with local merchants or
locally owned businesses. Retail includes regional and national
chains - such as department and grocery stores - that sell in the local
market.
National advertising is display advertising principally from
advertisers who are promoting national products or brands.
Examples are pharmaceuticals, travel, airlines, or packaged goods.
Both retail and national ads 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 and real estate/rentals. 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
investment, particularly digital solutions. 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 this problem, a refined approach to media planning
was created to present advertisers with targeted, integrated solutions.
The planning process leverages our 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.
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.
Our 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, we have
intensified our sales and management training and improved the
quality of sales calls. Digital product integration, sales pipeline
management and a five-step consultative sales process were focus
areas in 2014, with formal training delivered in all our 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, we continue to invest 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 our USCP
markets continued to grow in 2014, ultimately making up
approximately 30% of total page views, with mobile web sites and
the native iPhone applications leading the way.
Through the All Access Content Subscription Model, we 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 114% and
mobile visitors increased 184% in 2014 on a year-over-year basis.
In 2013, we implemented a social media content management
software tool to allow the division’s journalists and marketing and
customer service teams to more effectively manage multiple social
media profiles and significantly increase their responsiveness and
engagement with consumers.
We continue to enjoy a long-standing relationship of trust in our
local business communities. Our advertising sales staff delivers
solutions for our customers. Our digital marketing services provide
localized marketing solutions to national and small to medium-sized
businesses, helping them navigate the increasingly complex and
diverse world of digital marketing. In 2014, we further expanded our
G/O Digital suite of products and continued our partnership with
Yahoo! to offer more digital solutions to advertisers. Through this,
we are able to offer our customers expanded digital reach.
The overriding objective of our digital strategy is to provide
compelling content that best serves our customers. A key reason
customers turn to our digital platforms 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
digital sources from competing digital products. This allows our
local media organizations to compete successfully as information
providers.
A second objective in our digital 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 us. Our strategy is to
use these advantages to create strong and timely content, sell
packaged advertising products that meet the needs of advertisers,
operate efficiently and leverage the known and trusted brand of the
local media organization.
Gannett Media Technology International (GMTI) builds,
manages and maintains the infrastructure that supports the desktop,
mobile and native app digital presence associated with our 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
our teams across the country.
Circulation: USCP delivers content in print and online, via
mobile devices and tablets. 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. In a trend generally consistent with the
domestic publishing industry, print circulation volume declined in
2014.
EZ Pay, a payment system which automatically deducts
subscription payments from customers’ credit cards or bank
accounts, enhances the subscriber retention rate. At the end of 2014,
EZ Pay was used by 63% of all subscribers at our USCP sites.
10
For USCP, single copy represents approximately 15% of daily
Competition: Our publishing operations and affiliated digital
and 24% of Sunday net paid circulation volume.
The single copy price of USA TODAY at newsstands and
vending machines was $2.00 in 2014. Mail subscriptions are
available nationwide and abroad, and home, hotel and office delivery
is available in many markets. Approximately 82% 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 2014, 71 of our domestic daily publications,
including USA TODAY, were published in the morning, and 11 were
published in the evening.
Production and distribution: In 2011, Gannett Publishing
Services, or GPS, was formed to improve the efficiency and reduce
the cost associated with producing and distributing our printed
products across all divisions in the United States. GPS directly
manages the production and distribution operations for all of our
domestic publishing operations including all community newspapers
and USA TODAY.
GPS leverages our existing assets, including employee talent and
experience, physical plants and equipment, and its vast national and
local distribution networks. GPS is responsible for imaging,
advertising production, page processing, internal and external
printing and packaging, and internal and external distribution of our
printed products. We continue to benefit from consolidations of print
facilities and the optimization of our carrier force and routing
structure within our distribution network.
Gannett Imaging and Ad Design Centers (GIADC), which are
utilized for commercial imaging and advertising production, serve
81 publishing properties, including USA TODAY and all USCP
dailies with the exception of Guam, our Broadcasting properties, and
complete special projects for other internal businesses. GIADC is
utilized for commercial imaging and/or advertising production by 44
external customers. In 2014, we completed the centralization of our
page-release process into the GIADC centers, resulting in
standardization and efficiencies. The GIADC now handles the step
between the creation of the printed pages at our five regional Design
Studios and the production at both internal and external plants.
At the end of 2014, almost all USCP and USA TODAY
employees were utilizing a common content management system.
The common content management system enables the
communication and collaboration needed to build strong design
remotely. The studios are operationally efficient while enhancing
design in company-wide publications.
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 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: We own 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; a
13.50% interest in Ponderay Newsprint Company in the state of
Washington; and a 50% partnership interest in TNI Partners, which
provides service to a non-Gannett publication in Tucson, AZ.
11
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 our publishing
operations have daily competitors that are published in the same city.
Most of our 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, directories, e-mail marketing,
web sites and mobile-device platforms.
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, our efforts to explore new
opportunities in the news, information and communications business
and in audience generation will keep expanding.
We continue to seek more effective ways to engage with local
communities using all available media platforms and tools.
Environmental regulation: We are committed to protecting the
environment. Our goal is to ensure our facilities comply with
federal, state, local and foreign environmental laws and to
incorporate appropriate environmental practices and standards in our
operations. We are one of the industry leaders in the use of recycled
newsprint, increasing our purchase of newsprint containing recycled
content from 42,000 metric tons in 1989 to 138,980 metric tons in
2014. During 2014, 37% of our domestic newsprint purchases
contained recycled content, with an average recycled content of
45%. Additional information about our environmental and
sustainability initiatives can be found on page 13.
Our operations use inks, solvents and fuels. The use,
management and disposal of these substances are sometimes
regulated by environmental agencies. We retain a corporate
environmental consultant who, along with internal and outside
counsel, oversees regulatory compliance and preventive measures.
Some of our 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 2014, our total
newsprint consumption was 377,467 metric tons, including
consumption by USA TODAY, tonnage at non-Gannett print sites
and Newsquest. Newsprint consumption was 7% less than in 2013.
We purchase newsprint from 15 domestic and global suppliers.
In 2014, global newsprint supplies were adequate. We continue
to moderate newsprint consumption and expense through press web-
width reductions and the use of lighter basis weight paper. We
believe available sources of newsprint, together with present
inventories, will continue to be adequate to supply the needs of our
publishing operations.
Joint operating agencies: Our 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.
Digital Segment
The largest businesses within our Digital Segment are Cars.com,
CareerBuilder, PointRoll and Shoplocal.
In October 2014, we acquired the remaining 73% interest we did
not already own in Cars.com. With the acquisition, Cars.com joined
CareerBuilder.com and several other online companies in Gannett’s
digital business.
Launched in 1998, Cars.com is a leading independent research
site for car shoppers with approximately 30 million visits per month.
Independent automotive research sites have become an integral part
of today’s car shopping process. Today, nearly all consumers visit a
third-party site such as Cars.com during their shopping journey to
research vehicle and dealership information and build confidence in
the decision-making process. Cars.com offers credible and easy-to-
understand information from consumers and experts to provide car
buyers greater control over the shopping process. Leveraging its
growing audience, Cars.com informs digital marketing strategies
through consumer insights and innovative products, helping
automotive dealers and manufacturers more effectively reach in-
market car shoppers. Cars.com hosts approximately 4 million
vehicle listings and serves more than 20,000 customers that are
primarily franchise and independent car dealers in all 50 states. In
January 2015, Cars.com expanded into the area of service,
introducing a solution that provides information about reputable
repair shops and allows consumers to get estimates on potential
vehicle repairs. Cars.com is located in Chicago, IL.
CareerBuilder is the global leader in human capital solutions,
helping companies target, attract and retain talent. Through constant
innovation, unparalleled technology, and customer care delivered at
every touch point, CareerBuilder helps match the right talent with
the right opportunity more than any other site.
CareerBuilder offers a wide array of services and works with the
world’s top employers, providing everything from labor market
intelligence to talent management software and other recruitment
solutions. CareerBuilder is changing the way companies source,
engage and re-engage talent. CareerBuilder1 is a single sign-on HR
software solution that leverages advertising, data and technology
into one pre-hire platform so employers can hire the best talent,
faster. Most of the revenues are generated by its own sales force but
substantial revenues are earned through sales of employment
advertising placed with CareerBuilder’s owners’ affiliated media
organizations.
Its online job site, CareerBuilder.com, is the largest in North
America with the highest revenue.
Headquartered in Chicago, IL, CareerBuilder and its subsidiaries
operate in the U.S., Europe, Canada, Asia, Australia and South
America. Its sites, combined with its partnerships, give
CareerBuilder a presence in more than 60 markets worldwide.
In 2014, CareerBuilder acquired Broadbean Technology
Limited, Broadbean Incorporated and Broadbean Technology PTY
LTD (collectively Broadbean), headquartered in the U.K. Broadbean
is the global leader in providing sophisticated, yet easy-to-use
candidate sourcing tools that help recruiters improve efficiency and
increase return on investment. Broadbean’s software makes it easy to
distribute jobs and search for talent online, while providing tools that
optimize the recruitment process and integrate internal systems.
Broadbean’s analytics assist employers by giving insight on the most
successful sourcing channels as well as providing metrics to increase
effectiveness, ultimately lowering the cost of online recruitment
spend. Broadbean is a leader in job distribution, candidate sourcing
and big data analytics software.
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 advertising 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 advertising effectiveness while gaining actionable
insights. PointRoll is headquartered in King of Prussia, PA, and
maintains offices across the U.S.
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 and brands,
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 Cars.com, in recent years dealers have shifted
an increasing portion of their advertising budgets to new entrants
with niche advertising products. Dealers also continue to invest in
SEM and SEO to drive traffic directly to their own websites,
bypassing third-party sites while still investing in traditional media
such as television, radio and newspapers. Cars.com has maintained
its leadership position through its award-winning site and through
innovative new products for its advertisers. In the current
competitive climate, the need to innovate and to connect an
advertiser’s investment to eventual sales at a local level will be of
increasing importance.
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 websites 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
advertising 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
12
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 benefits from growth in
online-influenced offline retail sales. 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.
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. 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 of our properties leverage
certain aspects of user behavioral data in their solutions.
Employees
At the end of 2014, we and our subsidiaries had approximately
31,250 full-time and part-time employees including 2,800
CareerBuilder employees.
2014
2013
Broadcast. . . . . . . . . . . . . . . . . . . . . . . . . .
Publishing . . . . . . . . . . . . . . . . . . . . . . . . .
Digital . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate and unallocated . . . . . . . . . . . .
5,100
20,950
4,400
800
4,800
23,000
3,000
800
Total company . . . . . . . . . . . . . . . . . . . . .
31,250
31,600
Approximately 10% of our employees (including subsidiaries) in
the U.S. are represented by labor unions. They are represented by 67
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. We do not engage in
industry-wide or company-wide bargaining. Our U.K. subsidiaries
bargain with two unions over working practices, wages and health
and safety issues only.
Environmental and Sustainability Initiatives
We are committed to making smart decisions to protect the
environment and manage our environmental impact responsibly. We
have taken a number of steps to reduce our environmental impact
and underscore our commitment to sustainability.
We have 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 we use are soy-based rather than
petroleum-based, and delivered in reusable containers. Our waste ink
is recycled, either on-site or at the manufacturer’s facility. We
continue to minimize landfill usage by collecting used paper, plastics
and other materials for recycling and have substantially reduced
water usage by switching to dry methods of photo processing and
plate processing.
We have reduced greenhouse emissions by using newsprint
vendors who practice sustainability, switching to light-weight
newsprint, and reducing the web width of the newspapers printed.
We are focused on energy efficiency. We have relocated many
employees in older facilities to newer, more energy efficient offices.
We have also installed more energy efficient systems and appliances
in many of our buildings. Since 2012, our energy reduction program
has reduced estimated energy usage by almost 12 million kilowatt
hours annually. For 2015, we have identified new projects to reduce
power consumption further.
Our 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 our businesses and properties develop more
sustainable operating practices.
Many of our media organizations cover environmental and
sustainability issues. A good example is The Des Moines Register,
which – in a journalistic first – used a combination of traditional
print coverage and emerging digital technologies, including virtual
reality, to examine how Iowa farm families are responding to climate
change as well as cultural, economic and technological changes. The
series was published across many of our other digital media
properties.
Make A Difference Day is the nation’s largest day of
volunteering. For more than 20 years, we have mobilized millions of
people across the U.S. for this national day of service. 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 we do 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
KPNX-TV: azcentral.com/12news
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
WATL-TV: myatltv.com
WXIA-TV: 11alive.com
WMAZ-TV: 13wmaz.com
KTVB-TV(3): 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
KSDK-TV: ksdk.com
WGRZ-TV: wgrz.com
WCNC-TV: wcnc.com
WFMY-TV: digtriad.com
WKYC-TV: wkyc.com
KGW-TV(1)(2): kgw.com
WLTX-TV: wltx.com
WBIR-TV: wbir.com
KXVA-TV: myfoxzone.com
KVUE-TV: kvue.com
Bangor
Portland
Grand Rapids
Minneapolis-St. Paul
St. Louis
Buffalo
Charlotte
Greensboro
Cleveland
Portland
Columbia
Knoxville
Abilene-Sweetwater
Austin
Beaumont-Port Arthur KBMT-TV: 12newsnow.com
Corpus Christi
Dallas/Ft. Worth
Houston
San Angelo
San Antonio
Tyler-Longview
Waco-Temple-College
Station
Hampton/Norfolk
Seattle/Tacoma
KIII-TV: kiiitv.com
WFAA-TV: wfaa.com
KHOU-TV: khou.com
KIDY-TV: myfoxzone.com
KENS-TV: kens5.com
KYTX-TV: cbs19.tv
KCEN-TV: kcentv.com
Spokane
WVEC-TV: 13newsnow.com
KING-TV: king5.com
KONG-TV: king5.com
KREM-TV: krem.com
KSKN-TV: spokanescw22.com
Channel/
Network
Ch. 2/NBC
Ch. 12/NBC
Ch. 11/FOX
Ch. 18/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. 5/NBC
Ch. 2/NBC
Ch. 36/NBC
Ch. 2/CBS
Ch. 3/NBC
Ch. 8/NBC
Ch. 19/CBS
Ch. 10/NBC
Ch. 15/FOX
Ch. 24/ABC
Ch. 12/ABC
Ch. 3/ABC
Ch. 8/ABC
Ch. 11/CBS
Ch. 6/FOX
Ch. 5/CBS
Ch. 19/CBS
Ch. 9/NBC
Ch. 13/ABC
Ch. 5/NBC
Ch. 16/IND
Ch. 2/CBS
Ch. 22/CW
Affiliation
Agreement
Expires in
2017
2017
2016
2016
2015
2018
2016
2017
2015
2018
2017
2015
2016
2017
2015
2015
2018
2017
2016
2017
2017
2018
2017
2017
2017
2015
2015
2017
2015
2015
2017
2017
2018
2018
2018
2018
2017
2017
2017
2019
2016
2018
2015
2016
2016
Weekly
Audience (5) Founded
(6)
1,187,000
212,000
81,000
416,000
832,000
562,000
1,114,000
1,682,000
390,000
450,000
1,238,000
737,000
1,512,000
199,000
191,000
456,000
556,000
154,000
106,000
283,000
350,000
1,269,000
964,000
499,000
734,000
549,000
1,107,000
809,000
278,000
449,000
54,200
448,000
137,000
146,000
1,656,000
1,548,000
21,700
641,000
142,000
202,000
512,000
1,259,000
563,000
274,000
94,000
1970
1953
1967
1984
1955
1955
1988
1952
1949
1989
1957
1965
1954
1948
1953
1953
1950
1957
1955
1954
1953
1962
1953
1947
1954
1967
1949
1948
1956
1953
1956
2001
1971
1961
1964
1949
1953
1984
1950
2008
1953
1953
1948
1997
1954
1983
(1) We service these stations under shared services and similar arrangements.
(2) We also own KGWZ-LD, a low power television station in Portland, OR.
(3) We also own KTFT-LD (NBC), a low power television station in Twin Falls, ID.
(4) We also own WBXN-CA, a Class A television station in New Orleans, LA.
(5) Weekly audience is number of television households reached, according to the November 2014 Nielsen book.
(6) Audience numbers fall below minimum reporting standards.
We also have 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 our television stations in Texas, Washington, Oregon, Idaho, Louisiana and Arizona.
14
DAILY LOCAL MEDIA ORGANIZATIONS AND AFFILIATED DIGITAL PLATFORMS
Average 2014 Circulation - Print and
Digital Replica and Non-Replica
Afternoon
Morning
Sunday
30,918
Founded
1829
25,555
232,502
8,423
33,080
7,368
15,492
19,952
71,934
47,656
50,130
31,687
29,652
13,281
487,441
1890
1901
37,248
1927
1871
1859
25,118
1873
104,550
1871
81,283
1966
71,310
1884
44,720
1889
42,100
1905
12,286
1944
137,129
265,112
1903
22,541
20,422
9,616
86,773
10,079
30,253
1829
26,051
1899
14,194
1831
173,001
1849
1860
114,719
205,216
1868
15,350
21,936
21,540
4,409
32,736
13,752
20,517
1883
29,609
1865
25,937
1890
5,556
1939
49,304
1871
18,180
1900
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
DAILY LOCAL MEDIA ORGANIZATIONS AND AFFILIATED DIGITAL PLATFORMS
Average 2014 Circulation - Print and
Digital Replica and Non-Replica
Afternoon
Morning
Sunday
16,675
Founded
1900
11,663
173,215
35,254
9,222
15,050
20,392
46,090
29,206
22,195
35,133
80,722
10,244
35,860
20,261
14,021
10,834
28,896
12,862
9,405
21,479
96,444
57,865
28,415
867,821
1832
47,815
1855
13,181
1843
22,568
1900
25,637
1861
7,886
10,663
1897
53,774
1837
46,607
1893
24,838
1885
55,978
1870
119,495
1879
13,376
1884
47,618
1875
24,360
1879
16,962
1900
1864
38,687
1904
19,960
1828
1815
28,847
1785
138,159
1833
74,137
1829
40,236
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 2014 Circulation - Print and
Digital Replica and Non-Replica
Afternoon
Morning
Sunday
3,508
Founded
1923
7,607
9,311
1800
114,021
215,203
1841
3,528
5,179
7,462
4,375
1842
1856
9,114
1807
22,969
1885
7,180
1880
11,405
13,533
1820
2,218
1864
12,684
1852
36,280
1851
93,369
1874
56,061
1881
20,092
1808
21,460
1848
13,246
1848
208,357
1812
15,424
1963
27,707
1827
16,561
5,855
10,888
30,110
44,365
29,300
10,716
14,025
10,264
93,531
13,370
23,477
4,139,380
3,686,797
1982
12,217
34,610
9,206
38,977
9,007
11,634
13,162
15,043
1904
47,236
1853
11,963
1870
56,968
1915
10,633
1898
7,086
1927
16,199
1868
16,251
1907
14,325
18,230
1873
1903
1914
6,963
13,678
7,168
* USA TODAY morning and Sunday figure is the average print, digital replica, digital non-replica and branded editions according to the
Alliance for Audited Media’s September 2014 Publisher’s Statement.
17
DAILY PAID-FOR LOCAL MEDIA ORGANIZATIONS AND AFFILIATED DIGITAL PLATFORMS/NEWSQUEST PLC
Local media organization/web site
City
Echo**: www.echo-news.co.uk
Basildon
Lancashire Telegraph: www.lancashiretelegraph.co.uk
Blackburn
The Bolton News: www.theboltonnews.co.uk
Bolton
Daily Echo: www.bournemouthecho.co.uk
Bournemouth
Telegraph & Argus: www.thetelegraphandargus.co.uk
Bradford
The Argus: www.theargus.co.uk
Brighton
The Gazette**: www.gazette-news.co.uk
Colchester
The Northern Echo: www.thenorthernecho.co.uk
Darlington
Evening Times: www.eveningtimes.co.uk
Glasgow
The Herald: www.heraldscotland.com
Glasgow
The National: www.thenational.scot
Glasgow
South Wales Argus: www.southwalesargus.co.uk
Newport
Oxford Mail: www.oxfordmail.co.uk
Oxford
Southern Daily Echo: www.dailyecho.co.uk
Southampton
Swindon Advertiser: www.swindonadvertiser.co.uk
Swindon
Dorset Echo: www.dorsetecho.co.uk
Weymouth
Worcester News: www.worcesternews.co.uk
Worcester
The Press: www.yorkpress.co.uk
York
* Circulation figures are according to ABC results for the period January - June 2014
** Publishes Monday-Friday
*** Founded in 2014. No certified circulation reported to date.
Circulation*
Monday-Saturday
22,961
13,092
12,351
18,049
18,906
14,370
11,706
30,735
33,397
37,728
***
13,197
12,773
22,397
11,987
13,267
8,885
19,643
Founded
1969
1886
1867
1900
1868
1880
1970
1870
1876
1783
2014
1892
1928
1888
1854
1921
1937
1882
Non-daily publications: Essex, London, Midlands, North East, North West, South Coast, South East, South and East Wales, South West,
Yorkshire
DIGITAL
Cars.com: www.cars.com
Headquarters: Chicago, IL
Sales offices: Abilene, TX; Albany, NY; Albuquerque, NM; Asheboro, NC; Atlanta, GA; Augusta, GA; Austin, TX; Bakersfield, CA; Baton
Rouge, LA; Bay Area, CA; Beaumont, TX; Billings, MT; Birmingham, AL; Boston, MA; Buffalo, NY; Carbondale, IL; Cedar Rapids, IA;
Champaign, IL; Charleston, SC; Chattanooga, TN; Columbus, OH; Corpus Christi, TX; Dayton, OH; Denver, CO; El Paso, TX; Erie, PA;
Eugene, OR; Evansville, IN; Fairfield, IL; Flint, MI; Ft. Wayne, IN; Greensboro, NC; Harrisburg, PA; Honolulu, HI; Houston, TX;
Huntington, WV; Huntsville, AL; Idaho Falls, ID; Jacksonville, FL; Jefferson City, MO; Knoxville, TN; La Crosse, WI; Las Vegas, NV;
Little Rock, AR; Long Island, NY; Longview, WA; Lubbock, TX; Lufkin, TX; Madison, WI
CareerBuilder: www.careerbuilder.com
Headquarters: Chicago, IL
Sales offices: Atlanta, GA; Boston, MA; Chicago, IL; Cincinnati, OH; Dallas, TX; Denver, CO; Detroit, MI; Edison, NJ; Houston, TX;
Irvine, CA; Kansas City, KS; Los Angeles, CA; Minneapolis, MN; Moscow, ID; Nashville, TN; New York, NY; Orlando, FL; Philadelphia,
PA; San Bruno, CA; Scottsdale, AZ; Washington, DC
International offices: Australia, Brazil, Canada, China, France, Germany, Greece, India, Indonesia, Italy, Malaysia, Netherlands,
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; www.aboutshoplocal.com
Headquarters: Chicago, IL
Sales office: Chicago, IL
Mobile and Tablet: We power more than 500 mobile and tablet products and partner with service providers to deliver push news alerts
and mobile marketing campaigns. We have also developed and deployed leading applications for iPad, iPhone, Kindle, Android,
Windows and BlackBerry.
18
USA TODAY/USATODAY.com
Headquarters and editorial offices: McLean, VA
Print sites: Albuquerque, NM; Atlanta, GA; Boston, MA; Cleveland, OH; Columbia, SC; Columbus, OH; Dallas, TX; Denver, CO; Des
Moines, IA; Detroit, MI; Eugene, OR; Fort Lauderdale, FL; Houston, TX; Indianapolis, IN; Kansas City, MO; Las Vegas, NV; Los Angeles,
CA; Louisville, KY; Milwaukee, WI; Minneapolis, MN; Mobile, AL; Nashville, TN; Oklahoma City, OK; Orlando, FL; Phoenix, AZ;
Rochester, NY; Rockaway, NJ; St. Louis, MO; St. Petersburg, FL; Salt Lake City, UT; San Jose, CA; Seattle, WA; Springfield, MO;
Springfield, VA; 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.Thebiglead.com; www.Thehuddle.com; www.Hoopshype.com; www.Mmajunkie.com;
www.Bnqt.com; www.Baseballhq.com; www.Quickish.com; www.Usatodayhss.com; ftw.usatoday.com; q.usatoday.com;
www.fantasyscore.com; www.spanningthesec.com; www.usatodaysportsimages.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
Reviewed.com: www.reviewed.com
Headquarters: Cambridge, MA
G/O Digital: G/O Digital: www.godigitalmarketing.com; BLiNQ Media: www.blinqmedia.com; Local Flavor: www.localflavor.com; Clipper
Digital: www.clippermagazine.com; Mobestream Media (Key Ring): www.keyringapp.com
Headquarters: Chicago, IL
Sales offices: Atlanta, GA; Chicago, IL; Dallas, TX; New York, NY; Phoenix, AZ
BLiNQ Media: www.blinqmedia.com
Headquarters: Atlanta, GA
Advertising offices: Atlanta, GA; Chicago, IL; New York, NY
Mobestream Media: www.keyringapp.com
Headquarters: Dallas, TX
Clipper Magazine: www.clippermagazine.com; www.localflavor.com; www.mintmagazine.com; www.totalloyalty.com
Headquarters: Mountville, PA
Gannett Government Media
Headquarters: Springfield, VA
Brands: Army Times: www.armytimes.com, Navy Times: www.navytimes.com, Marine Corps Times: www.marinecorpstimes.com, Air
Force Times: www.airforcetimes.com, Military Times: www.militarytimes.com, Federal Times: www.federaltimes.com, Defense News:
www.defensenews.com, Defense News with Vago Muradian: www.defensenewstv.com, C4ISR & Networks: www.c4isrnet.com, Military
Times Best for Vets: www.militarytimes.com/best-for-vets
Gannett Media Technologies International: www.gmti.com
Headquarters: Chesapeake, VA
Regional office: Cincinnati, OH
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 us is available on our web site, www.gannett.com. In addition to news and other information about
us, we provide access through this site to our annual report on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K and all
amendments to those reports as soon as reasonably practicable after we file or furnish them electronically to the Securities and Exchange Commission
(SEC). Certifications by our Chief Executive Officer and Chief Financial Officer are included as exhibits to our SEC reports (including to this Form 10-K).
We also provide access on this web site to our Principles of Corporate Governance, the charters of our Audit, Transformation, Executive Compensation
and Nominating and Public Responsibility Committees and other important governance documents and policies, including our Ethics and Inside Trading
Policies. Copies of all of these corporate governance documents are available to any shareholder upon written request made to our Secretary at the
headquarters address. We will disclose on this web site changes to, or waivers of, our corporate Ethics Policy.
19
ITEM 1A. RISK FACTORS
In addition to the other information contained or incorporated by
reference into this Form 10-K, prospective investors should consider
carefully the following risk factors before investing in our securities.
The risks described below may not be the only risks we face.
Additional risks that we do not yet perceive or that we currently
believe are immaterial may adversely affect our business and the
trading price of our securities.
Changes in economic conditions 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 regional and national economic factors.
A decline in economic conditions in the U.S. and U.K. could have a
significant adverse impact on our businesses, particularly publishing,
and could significantly impact all key advertising revenue
categories.
Competition from alternative forms of media may impair our
ability to grow or maintain revenue levels in core and new
businesses
Advertising produces the predominant share of our 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 affect our
ability to generate circulation revenues and our television audience.
New and emerging technologies such as subscription streaming
media services and mobile video are increasing competition for
household audiences and advertisers. 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.
The proposed separation of our Publishing business from our
Broadcasting and Digital businesses is subject to various risks
and uncertainties, and may not be completed on the terms or
timeline currently contemplated, if at all
On Aug. 5, 2014, we announced our plan to create two publicly
traded companies: one exclusively focused on our Broadcasting and
Digital businesses, and the other on our Publishing business. The
separation, which is expected to be completed mid-2015, is subject
to certain customary conditions, including final approval of our
Board of Directors. In addition, unanticipated developments,
including possible delays in obtaining various tax opinions or
rulings, regulatory approvals or clearances and uncertainty of the
financial markets, could delay or prevent the completion of the
proposed separation or cause the proposed separation to occur on
terms or conditions that are different from those currently expected.
As a result, we are unable to assure that we will complete the
proposed separation on the terms or the timeline that we announced,
if at all.
The proposed separation may not achieve some or all of the
anticipated benefits
Executing the proposed separation will require us to incur costs as
well as time and attention from our senior management and key
employees, which could distract them from operating our business,
disrupt operations, and result in the loss of business opportunities,
which could adversely affect our business, financial condition, and
results of operations. We may also experience increased difficulties
in attracting, retaining and motivating key employees during the
pendency of the separation and following its completion, which
could harm our businesses. Even if the proposed separation is
completed, we may not realize some or all of the anticipated benefits
from the separation and the separation may in fact adversely affect
our business. As independent, publicly traded companies, both
companies will be smaller, less diversified companies with a
narrower business focus and may be more vulnerable to changing
market conditions and competitive pressures, which could materially
and adversely affect their respective businesses, financial condition
and results of operations. Separating the businesses may also
eliminate or reduce synergies that existed before the separation, such
as the operation of the digital sites and applications for our
Publishing and Broadcasting properties as part of the integrated
Gannett digital platform, which could have an adverse effect on the
results of operations, financial condition and liquidity of each
business.
There can be no assurance that the combined value of the
common stock of the two publicly traded companies following the
completion of the proposed separation will be equal to or greater
than what the value of our common stock would have been had the
proposed separation not occurred.
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 to be impacted.
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 be insufficient to cover all of our
losses from any future breaches of our systems.
20
Volatility in the U.S. credit markets could significantly impact
our ability to obtain new financing to fund our operations and
strategic initiatives or to refinance our existing debt at
reasonable rates as it matures
At the end of 2014, we had approximately $4.5 billion in long-term
debt and approximately $625 million of additional borrowing
capacity under our revolving credit facilities. This debt matures at
various times during the years 2015-2027. While our cash flow is
expected to be sufficient to pay amounts when due, if operating
results deteriorate significantly, a portion of these maturities may
need to be refinanced. Access to the capital markets for longer term
financing is unpredictable, and volatile credit markets could make it
harder for us to obtain debt financings generally.
Volatility in global financial markets directly affects the value of
our pension plan assets and liabilities
Our three largest retirement plans, which account for 97% of total
pension plan assets, were underfunded as of Dec. 28, 2014, by $728
million on a U.S. GAAP basis. Changes in interest rates and future
investment returns can affect the funded status of our defined benefit
plans and cause volatility in the net periodic benefit cost and future
funding requirements of the plans.
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 2014 were translated to U.S. dollars at the
average rate of 1.65. 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
2014. 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. All of our television stations are required to hold
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.
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 be unable to successfully implement effective cost controls,
achieve expected synergies or increase revenues as a result of an
acquisition. Acquisitions may result in us assuming unexpected
liabilities and in management diverting its attention from the
operation of our business. 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 result in us having greater
exposure to the industry risks of the businesses underlying the
acquisition. Strategic investments and partnerships with other
companies expose us to the risk that we may be unable to control the
operations of our investee or partnership, which could decrease the
amount of benefits we realize from a particular relationship. We are
exposed to the risk that our partners in strategic investments and
infrastructure may encounter financial difficulties which could
disrupt investee or partnership activities, or impair assets acquired,
which would adversely affect future reported results of operations
and shareholders’ equity. In addition, we may be unable to obtain
financing necessary to complete acquisitions on attractive terms or at
all. The failure to obtain regulatory approvals may prevent us from
completing or realizing the anticipated benefits of acquisitions.
Furthermore, acquisitions may subject us to new or different
regulations which could have an adverse effect on our operations.
The value of our existing intangible assets may become impaired,
depending upon future operating results
Goodwill and other intangible assets were approximately $7.74
billion at Dec. 28, 2014, representing approximately 69% 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 non-cash charge to
earnings may be necessary, as occurred in 2012-2014 (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 11 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.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
21
Corporate facilities
We own the buildings where our headquarters and USA TODAY are
located in McLean, VA. We also own data and network operations
centers in nearby Silver Spring, MD, and in Phoenix, AZ.
Headquarters facilities are adequate for present operations. We also
lease space in our headquarters facilities to third-party tenants.
ITEM 3. LEGAL PROCEEDINGS
Information regarding legal proceedings may be found in Note 11 of
the Notes to Consolidated Financial Statements.
Environmental
From time to time, some of our 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 our liability for them, if
any, will be known.
In March 2011, the Advertiser Company, a 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, are undetermined.
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 our consolidated results of
operations or financial condition.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 2. PROPERTIES
Broadcasting
Our broadcasting facilities are adequately equipped with the
necessary television broadcasting equipment. We own or lease
transmitter facilities in 47 locations. All of our stations have
converted to digital television operations in accordance with
applicable FCC Regulations. Our broadcasting facilities are adequate
for present purposes. A listing of television stations can be found on
page 14.
Publishing
Generally, we own many of the plants that house most 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. 28, 2014, 23 non-
Gannett printers were used to print it in U.S. markets where we had
no company publishing sites with appropriate facilities. Non-Gannett
printers in 10 foreign countries publish and distribute an
international edition of USA TODAY under a royalty agreement.
Clipper Magazine also is printed under contracts with commercial
printing companies. Many of our local media organizations have
outside news bureaus and sales offices, which generally are leased.
In several markets, two or more of our local media organizations
share combined facilities; and in certain locations, facilities are
shared with other non-Gannett publishing properties. At the end of
2014, 64% of our U.S. daily publications were either printed by non-
Gannett printers or printed in combination with other Gannett
publications. Our publishing properties have rail siding facilities or
access to main roads for newsprint delivery purposes and are
conveniently located for distribution purposes.
During 2014, we continued our efforts to consolidate certain of
our U.S. publishing facilities to achieve ongoing savings and greater
efficiencies. Our 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 senior management
is based in central London. Newsquest reduced its printing facilities
from 6 to 5 in 2014 to achieve savings and efficiencies. The
remaining presses have good color capabilities and currently
sustainable levels of utilization including some printing for other
publishers. For those Newsquest publishing operations distant from a
press facility, printing is outsourced. 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, our digital businesses lease their facilities. This includes
facilities for executive offices, sales offices and data centers. Our
facilities are adequate for present operations. We believe 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
Our 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, 42 and 43 of this Form 10-K.
Information about debt securities sold in private transactions may be found on pages 41-42 of this Form 10-K.
Gannett Common stock prices
High-low range by fiscal quarters based on NYSE-composite prices.
Year
2010
2011
2012
Low
Quarter
First. . . . . . . . . . . . . . . . . . . . . . $ 12.77
Second . . . . . . . . . . . . . . . . . . . $ 13.48
Third . . . . . . . . . . . . . . . . . . . . . $ 11.66
Fourth . . . . . . . . . . . . . . . . . . . . $ 11.65
First. . . . . . . . . . . . . . . . . . . . . . $ 14.26
Second . . . . . . . . . . . . . . . . . . . $ 13.26
Third . . . . . . . . . . . . . . . . . . . . . $
8.28
8.90
Fourth . . . . . . . . . . . . . . . . . . . . $
First. . . . . . . . . . . . . . . . . . . . . . $ 13.16
Second . . . . . . . . . . . . . . . . . . . $ 12.17
Third . . . . . . . . . . . . . . . . . . . . . $ 13.16
Fourth . . . . . . . . . . . . . . . . . . . . $ 16.35
High
$ 17.33
$ 19.69
$ 15.28
$ 16.17
$ 18.93
$ 15.80
$ 14.70
$ 14.47
$ 16.26
$ 15.90
$ 19.09
$ 19.99
Year
2013
2014
2015
Low
Quarter
First. . . . . . . . . . . . . . . . . . . . . . $ 17.58
Second . . . . . . . . . . . . . . . . . . . $ 19.53
Third . . . . . . . . . . . . . . . . . . . . . $ 23.98
Fourth . . . . . . . . . . . . . . . . . . . . $ 23.75
First. . . . . . . . . . . . . . . . . . . . . . $ 25.96
Second . . . . . . . . . . . . . . . . . . . $ 25.53
Third . . . . . . . . . . . . . . . . . . . . . $ 29.88
Fourth . . . . . . . . . . . . . . . . . . . . $ 25.95
First*. . . . . . . . . . . . . . . . . . . . . $ 29.30
High
$ 22.11
$ 26.75
$ 26.90
$ 29.48
$ 30.43
$ 30.98
$ 35.70
$ 33.70
$ 35.20
* Through Feb. 24, 2015
Purchases of Equity Securities
On June 11, 2013, our Board of Directors approved a new $300 million share repurchase program. While the Board of Directors reviews the
program at least annually, there is no current expiration date for the new $300 million authorization. We spent $76 million in 2014 to
repurchase 2.7 million of our shares, at an average price per share of $28.13. This share repurchase program was temporarily suspended upon
the announcement of the Cars.com acquisition, but was re-initiated in February of 2015, well ahead of the timeline we had previously
anticipated, as a result of our strong operating performance and the strength of our balance sheet. We have completed more than 50% of our
$300 million authorization with 5.6 million shares repurchased at an average price of $27.03 per share.
23
Comparison of shareholder return – 2010 to 2014
The following graph compares the performance of our common
stock during the period Dec. 27, 2009, to Dec. 28, 2014, with the
S&P 500 Index, and a peer group index we selected.
Our peer group includes A.H. Belo Corp., AOL Inc., Discovery
Communications Inc., The E.W. Scripps Company, Journal
Communications, Inc., LinkedIn Corp., The McClatchy Company,
Media General, Inc. (on an adjusted basis to reflect its merger with
Young Broadcasting, LLC), Meredith Corp., Monster Worldwide
Inc., The New York Times Company, News Corp. (on an adjusted
basis to reflect the spin off by News Corporation), Nexstar
Broadcasting Group Inc., ReachLocal Inc., Sinclair Broadcast Group
Inc., and Yahoo Inc. (collectively, the “Peer Group”). Many of the
Peer Group companies have a strong publishing/broadcasting
orientation, but the Peer Group also includes companies in the digital
media industry.
The S&P 500 Index includes 500 U.S. companies in the
industrial, utilities and financial sectors and is weighted by market
capitalization. The total returns of the Peer Group also are weighted
by market capitalization.
The graph depicts representative results of investing $100 in our
common stock, the S&P 500 Index and Peer Group index at closing
on Dec. 27, 2009. It assumes that dividends were reinvested monthly
with respect to our common stock, daily with respect to the S&P 500
Index and monthly with respect to each Peer Group company.
2009
2010
2011
2012
2013
2014
Gannett Co., Inc. . $100 $102.77 $ 92.87 $131.35 $222.61 $ 246.76
S&P 500 Index. . . $100 $115.06 $117.49 $136.30 $180.44 $ 205.14
Peer Group . . . . . . $100 $109.94 $ 97.86 $133.27 $228.48 $ 235.72
24
ITEM 6. SELECTED FINANCIAL DATA
Selected financial data for the years 2010 through 2014 is contained
under the heading “Selected Financial Data” on page 78 and is
derived from our audited financial statements for those years.
The information contained in the “Selected Financial Data” is
not necessarily indicative of the results of operations to be expected
for future years, and should be read in conjunction with
“Management’s Discussion and Analysis of Financial Condition and
Results of Operations” included in Item 7 and the consolidated
financial statements and related notes thereto included in Item 8 of
this Form 10-K.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Certain factors affecting forward-looking statements
Certain statements in this Annual Report on Form 10-K contain
certain forward-looking statements regarding business strategies,
market potential, future financial performance and other matters. The
words “believe,” “expect,” “estimate,” “could,” “should,” “intend,”
“may,” “plan,” “seek,” “anticipate,” “project” and similar
expressions, among others, generally identify “forward-looking
statements,” which speak only as of the date the statements were
made. 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.
We are 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 our
results include, without limitation, the following factors:
(a) competitive pressures in the markets in which we operate;
(b) 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; (c) a decline
in viewership of major networks and local news programming
resulting from alternative forms of media, or other factors; (d)
macroeconomic trends and conditions; (e) economic downturns
leading to a continuing or accelerated decrease in circulation or
local, national or classified advertising; (f) potential disruption or
interruption of our operations due to accidents, extraordinary
weather events, civil unrest, political events, terrorism or cyber
security attacks; (g) an accelerated decline in general print
readership and/or advertiser patterns as a result of competitive
alternative media or other factors; (h) an inability to adapt to
technological changes or grow our online business; (i) an increase in
newsprint, syndication programming costs or reverse retransmission
payments over the levels anticipated; (j) labor relations, including,
but not limited to, labor disputes which may cause revenue declines
or increased labor costs; (k) an inability to realize benefits or
synergies from acquisitions of new businesses or dispositions of
existing businesses or to operate businesses effectively following
acquisitions or divestitures; (l) our ability to attract and retain
employees; (m) rapid technological changes and frequent new
product introductions prevalent in electronic publishing and digital
businesses; (n) an increase in interest rates; (o) a weakening in the
British pound to U.S. dollar exchange rate; (p) volatility in financial
and credit markets which could affect the value of retirement plan
assets and our ability to raise funds through debt or equity issuances
and otherwise affect our ability to access the credit and capital
markets at the times and in the amounts needed and on acceptable
terms; (q) changes in the regulatory environment which could
encumber or impede our efforts to improve operating results or the
value of assets; (r) credit rating downgrades, which could affect the
availability and cost of future financing; (s) adverse outcomes in
proceedings with governmental authorities or administrative
agencies; (t) the proposed separation of our Publishing business
from our Broadcasting and Digital businesses may be distracting to
management and may not be completed on the terms or timeline
currently contemplated, if at all; and (u) an other than temporary
decline in operating results and enterprise value that could lead to
non-cash goodwill, other intangible asset, investment or property,
plant and equipment impairment charges. We continue to monitor
the uneven economic recovery in the U.S. and U.K., 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
We are a leading international media and marketing solutions
company operating primarily in the United States and the United
Kingdom (U.K.). Approximately 91% of 2014 consolidated revenues
are generated by our domestic operations and approximately 9% by
our foreign operations, primarily in the U.K.
We implement our strategy and manage our operations through
three business segments: Broadcasting (television), Publishing, and
Digital. Through our Broadcasting Segment, we own or service
(through shared service agreements or similar arrangements) 46
television stations with affiliated digital platforms sites. These
stations serve almost one-third of the U.S. population in markets
with more than 35 million households.
The Publishing Segment’s operations comprise 100 daily
publications and digital platforms in the U.S. and the U.K., more
than 400 non-daily publications in the U.S., and more than 125 such
titles in the U.K. The Publishing Segment’s 82 U.S. daily
publications include USA TODAY, which is currently the nation’s
number one newspaper in consolidated print and digital circulation.
Together with 18 daily paid-for publications our Newsquest division
operates in the U.K., the total average daily print and digital
circulation of our 100 domestic and U.K. daily publications was
approximately 5.4 million for 2014. In the markets we serve, we also
operate desktop, smartphone and tablet products which are tightly
integrated with publishing operations. Our broadcasting and
publishing operations have strategic business relationships with
online affiliates including CareerBuilder, Cars.com, and
Shoplocal.com.
The Publishing Segment also includes commercial printing,
newswire, marketing and data services operations.
Our Digital Segment consists of Cars.com, CareerBuilder,
PointRoll and Shoplocal. Cars.com, of which we recently acquired
full ownership, is the leading destination for online car shoppers.
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 rapidly expanding its international
operations.
On August 5, 2014, following a strategic review of our growth
strategies and structure, we announced a plan to separate our
Publishing business into an independent publicly traded company.
We expect to complete the transaction as a tax-free spin-off in
mid-2015, subject to market, regulatory, and certain other
conditions. We also announced that Robert J. Dickey has been
appointed as CEO-designee of the standalone Publishing company
following separation. The separation is subject to risks, uncertainties
and conditions and there can be no assurance that the separation will
be completed on the terms or on the timing currently contemplated,
or at all. Please see the information in Item 1A Risk Factors of this
25
Form 10-K, which describes some of the risks and uncertainties
associated with the proposed separation.
Fiscal year: Our fiscal year ends on the last Sunday of the
calendar year. Our 2014 fiscal year ended on Dec. 28, 2014, and
encompassed a 52-week period. Our 2013 fiscal year encompassed a
52-week period and the 2012 fiscal year encompassed a 53-week
period.
Operating results summary: Company-wide operating revenues
were $6.01 billion in 2014, an increase of 16% from $5.16 billion in
2013.
Broadcasting revenues for 2014 increased 103% to $1.69 billion,
a record-high, driven primarily by the acquisitions of Belo and
London Broadcasting Company television stations as well as
substantially higher retransmission revenue, political and Winter
Olympics advertising.
Publishing revenues were $3.42 billion for 2014 or 4% below
2013 levels, reflecting a 6% decline in advertising revenues, and a
1% decline in circulation revenues.
Digital Segment revenues totaled $919 million for 2014, a record
high and an increase of 23%. The increase reflects strong results at
CareerBuilder driven by the strength of human capital software
solutions and the recent acquisition of Cars.com (formerly known as
Classified Ventures, LLC).
Digital revenues company-wide, including the Digital Segment
and all digital revenues generated by other business segments, were
approximately $1.72 billion in 2014, nearly 30% of total operating
revenues, a record-high, and an increase of 15% compared to 2013.
The increase was driven primarily by higher revenue associated with
digital advertising and marketing solutions across all segments,
strong growth at CareerBuilder and the Cars.com acquisition.
Total operating expenses increased by 12% to $4.95 billion for
2014, primarily due to the Belo and Cars.com acquisitions. This
increase was partially offset by lower volume-related expenses in
our Publishing Segment and continued cost efficiency efforts
company-wide.
Newsprint expense for publishing was 9% lower than in 2013
due to a decline in consumption and prices.
We reported operating income for 2014 of $1.06 billion
compared to $739 million in 2013, a 43% increase.
Company-wide operating margins improved significantly to 18%
in 2014 compared to 14% in 2013 driven by strong growth in
Broadcasting Segment results.
Our net equity income in unconsolidated investees for 2014 was
$167 million, an increase of $123 million over 2013, reflecting
primarily the gain in the second quarter from the sale of
Apartments.com by Classified Ventures, of which we owned 27%.
Interest expense was $273 million in 2014, an increase of $97
million compared to 2013, largely due to new debt associated with
the Belo and Cars.com acquisitions.
Other non-operating items totaled $404 million in 2014, an
increase of $452 million over 2013, primarily reflecting the write up
of our prior investment in Cars.com to fair value once we completed
the acquisition.
We reported net income attributable to Gannett of $1.06 billion
or $4.58 per diluted share for 2014 compared to $389 million or
$1.66 per diluted share for 2013.
Net income attributable to noncontrolling interests was $68
million in 2014, an increase of 19% or $11 million over 2013,
reflecting significantly improved operating results at CareerBuilder.
During 2014, we paid out $181 million in dividends and
repurchased 2.7 million shares at a cost of $76 million for an average
price of $28.13 per share.
Outlook for 2015: For 2015, we expect revenue in our
Broadcasting Segment to be impacted by challenging year-over-year
comparisons due to the cyclical absence of record political
advertising and significant Olympics revenues, which totaled $200
million in 2014. We anticipate Broadcasting Segment revenues in
2015 will benefit from higher retransmission revenues, television
digital revenue growth and Super Bowl revenue across our NBC
stations.
Business Combinations: We allocate 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.
Within our Publishing Segment, we intend to drive growth
Critical estimates in valuing certain identifiable assets include
opportunities by capitalizing on our national brand equity to increase
the integration of local and national content, enhance our position as
a trusted provider of local news through expanded digital offerings
and leverage our expertise to provide integrated solutions to
advertisers. While we expect traditional advertising and circulation
revenues to remain challenging, some of that decline will be offset
by growth in digital marketing services and other digital revenues.
As discussed above on page 25, we plan to separate our Publishing
business into an independent publicly traded company.
Digital Segment revenues are expected to increase significantly
primarily due to the addition of Cars.com and continued growth at
CareerBuilder.
Total operating expenses are also expected to increase in
comparison to 2014. Broadcasting Segment expenses are anticipated
to increase, commensurate with growth in revenue and reflecting
increased reverse retransmission fees as a part of programming
expenses. Publishing expenses will reflect lower spending due to
cost reductions and efficiency gains on initiatives as well as lower
newsprint expense, as consumption continues to decline.
The following 2015 outlook does not reflect the proposed
separation of our Publishing business from our Broadcasting and
Digital businesses:
• Depreciation expense is expected to be in the range of $210
million to $215 million in 2015. Capital expenditures are
expected to be approximately $135 million to $140 million.
• Amortization expense is expected to be in the range of $125
million to $140 million in 2015, a significant increase over 2014
primarily due to the Cars.com acquisition.
• We project our interest expense will increase slightly in 2015,
reflecting the full year impact of debt issued in the second half of
2014 in connection with the Cars.com acquisition.
Basis of reporting
Following is a discussion of the key factors that have affected our
accounting for or reporting on the business over the last three fiscal
years. This commentary should be read in conjunction with our
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 differ significantly from those estimates.
We believe the following discussion addresses our most critical
accounting policies, which are those that are important to the
presentation of our financial condition and results of operations and
require management’s most subjective and complex judgments.
but are not limited to expected long-term market growth; station
revenue shares within a market; future expected operating expenses;
cost 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. 28, 2014, goodwill represented
approximately 40% of our 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.
Before performing the annual two-step goodwill impairment test,
we are 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, we conclude it is more likely than not that the fair value
of a reporting unit is less than its carrying amount, then we are
required to perform a two-step quantitative test. Otherwise, the two-
step test is not required. In the first step of the quantitative test, we
are required to determine the fair value of each reporting unit and
compare it to the carrying amount of the reporting unit. Fair value of
the reporting unit is determined using various techniques, including
multiple of earnings and discounted cash flow valuation.
Determining the fair value of the reporting units is judgmental in
nature and involves the use of significant estimates and assumptions.
These estimates and assumptions include changes in revenue and
operating margins used to project future cash flows, discount rates,
valuation multiples of entities engaged in the same or similar lines of
business and future economic and market conditions. If the carrying
amount of the reporting unit exceeds the fair value of the reporting
unit, we perform 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, we determine 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 we must recognize an
impairment loss for the difference between the carrying amount and
the implied fair value of goodwill.
In 2014, following this testing, we recognized impairment
charges in our Publishing Segment of $22 million and in our Digital
Segment of $24 million. The 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.
We used both the qualitative and quantitative assessments for our
goodwill impairment testing during 2014.
26
We have 6 major reporting units (defined as reporting units with
goodwill in excess of $50 million) which accounted for 99% of our
goodwill balance at Dec. 28, 2014. 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
2,580
542
1,313
For the Broadcasting Segment, which is considered a single
reporting unit, the estimated value would need to decline by over
40% to fail step one of the quantitative goodwill impairment test.
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). For U.S. Community
Publishing, USA TODAY group and Newsquest, the estimated fair
value of each of these reporting units exceeded the carrying value at
the most recent test. In order for the reporting unit with the least
amount of headroom to fail step one of the quantitative goodwill
impairment test, the estimated value of the reporting unit would have
to decline by over 30%.
The Digital Segment balance represents primarily Cars.com and
CareerBuilder. For CareerBuilder, we performed a qualitative
assessment and concluded that it was more likely than not that the
fair value was greater than the carrying value. After the impairment
testing date, we completed our acquisition of Cars.com which is part
of the Digital Segment. The carrying value of Cars.com on the day
of acquisition was equal to its fair value.
Fair value of the reporting units depends on several factors,
including the future strength of the economy in our principal
broadcast, publishing and digital markets. Generally uneven
recoveries in the U.S. and U.K. markets have had an adverse effect
on most of our reporting units in recent years. 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 (on the first day of the
fourth quarter), or more frequently if events or changes in
circumstances suggest that the asset might be impaired. We are
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
more than its carrying amount. If that is the case, then we 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
27
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 for a new
entrant, (iii) future expected operating expenses, (iv) costs of capital
and (v) appropriate discount rates. We performed a qualitative
analysis on all of our 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.
We completed our acquisition of Belo in late 2013 and London
Broadcasting in mid-2014 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 negative changes
in any of the assumptions described in the above Greenfield
Approach. The discount rate used generally has a significant impact
to the Greenfield Approach valuation. For our 2014 impairment
testing date the discount rate had declined from when we completed
our acquisition of Belo. Future increases in the discount rate
assumptions could cause a decline in the fair value of our FCC
licenses which may result in an impairment charge.
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. We use 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. We do not
believe that any of our larger trade names or mastheads (those with
book values over $10 million) are at risk of requiring an impairment
charge in the foreseeable future.
After the impairment testing date, we completed our acquisition
of Cars.com and as a result recorded an indefinite-lived trade name
valued at $872 million. As this trade name was recorded at fair value
on the date of acquisition, any future declines in the fair value of the
trade name would result in an impairment charge.
Other Long-Lived Assets (Property, Plant and Equipment and
Amortizable Intangible Assets): Property, plant and equipment are
recorded at cost and depreciated on a straight-line method over the
estimated useful lives of such assets. Changes in circumstances, such
as technological advances or changes to our business model or
capital strategy, could result in actual useful lives differing from our
estimates. In cases where we determine the useful life of buildings
and equipment should be shortened, we would, after evaluating for
impairment, depreciate the asset over its revised remaining useful
life thereby increasing depreciation expense.
Accelerated depreciation was recorded in the years 2012-2014
for certain property, plant and equipment, reflecting specific
decisions to consolidate production and other business services,
primarily affecting the Publishing Segment.
If an indicator is present, we review our 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.
Our amortizable intangible assets consist mainly of customer
relationships, internally valued technology 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.
We do not believe that any of our larger amortizable intangible
assets (those with book values over $10 million) are at risk of
requiring an impairment in the foreseeable future.
Pension Accounting: We, along with our subsidiaries, have
various defined benefit retirement plans, under which substantially
all of the benefits have been frozen in previous years. We account
for our pension plans in accordance with the applicable accounting
guidance, which requires us to include the funded status of our
pension plans in our 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
Statements 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.
We establish 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. We apply the 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 our principal retirement plan.
For 2014, the assumption used for the discount rate was 4.05%
for our principal retirement plan obligations. 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 2014 would
have increased plan obligations by approximately $125 million. A 50
basis point change in the discount rate used to calculate 2014
expense would have changed total pension plan expense for 2014 by
approximately $1.8 million. We assumed a rate of 8.00% for our
long-term expected return on pension assets used for our principal
retirement plan. 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 2014 by approximately
$9.8 million.
Income Taxes: Our annual tax rate is based on our income,
statutory tax regulations and rates, and tax planning opportunities
available in the various jurisdictions in which we operate.
Significant judgment is required in determining our annual tax
expense and in evaluating our tax positions.
Tax law requires certain items to be included in our tax returns at
different times than when the items are reflected in the financial
statements. The annual tax expense reflected in the Consolidated
Statements of Income is different than that reported in our tax
returns. Some of these differences are permanent, for example
expenses recorded for accounting purposes that are not deductible in
the returns such as non-deductible goodwill, 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 we believe are
more likely than not to be recovered. In evaluating the amount of
any such valuation allowance, we consider the existence of
cumulative income or losses in recent years, 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 our taxable jurisdictions. The latter two
factors involve the exercise of significant judgment. As of Dec. 28,
2014, deferred tax asset valuation allowances totaled $200 million,
primarily related to federal and state capital losses, foreign tax
credits, foreign losses and state net operating losses available for
carry forward to future years. Although realization is not assured, we
believe it is more likely than not that all other deferred tax assets for
which no valuation allowances have been established will be
realized. This conclusion is based on our history of cumulative
income in recent years and review of historical and projected future
taxable income.
We determine 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 our
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). We may be required to change our provision
for income taxes when the ultimate treatment 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. 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 2014 would have resulted in a change of $13 million in the
provision for income taxes and net income attributable to
Gannett Co., Inc.
28
RESULTS OF OPERATIONS
Consolidated summary
A consolidated summary of our results is presented below.
Broadcasting Segment revenues are grouped into five categories:
Core (Local and National), Political, Retransmission, Digital and
Other. The following table summarizes the year-over-year changes in
these select revenue categories.
In millions of dollars, except per share amounts
In millions
2014 Change
2013 Change
2012
Operating revenue:
Broadcasting . . . . . . . . . . $ 1,692
103% $ 835
Publishing advertising . . .
Publishing circulation . . .
All other Publishing . . . . .
Digital . . . . . . . . . . . . . . .
2,070
1,119
233
919
(6%)
(1%)
(7%)
23%
2,199
1,129
250
748
(8%)
(7%)
1%
(2%)
4%
Intersegment Elimination.
(25)
***
— ***
$ 906
2,356
1,117
255
719
—
Total operating revenues. . . $ 6,008
16% $ 5,161
Operating expenses . . . . . . . $ 4,950
12% $ 4,422
Operating income . . . . . . . . $ 1,058
43% $ 739
(4%)
(3%)
(6%)
$ 5,353
$ 4,563
$ 790
Non-operating (income)
expense, net . . . . . . . . . . . . . $ (298)
Net income:
***
$ 180
51% $ 119
Per share – basic . . . . . . . . $ 4.69
Per share – diluted . . . . . . $ 4.58
***
***
$ 1.70
$ 1.66
(7%)
(7%)
$ 1.83
$ 1.79
A discussion of operating results of our Broadcasting,
Publishing, and Digital Segments, along with other factors affecting
net income attributable to Gannett, is as follows:
Broadcasting Segment
2014 was a record year for our Broadcasting Segment. The largest
contributor was the significant expansion of our television station
portfolio. At the end of 2014, our broadcasting operations included
46 television stations either owned or serviced through shared
service agreements or other similar agreements. Stations in our
broadcasting division cover almost one-third of the U.S. population
in markets with more than 35 million households.
Broadcasting Segment revenues accounted for approximately
28% of our reported operating revenues in 2014. Broadcasting
Segment revenues accounted for approximately 16% of our reported
operating revenues in 2013 and 17% in 2012.
Over the last three years, Broadcasting Segment revenues,
expenses and operating income were as follows:
In millions of dollars
2014 Change
2013 Change
2012
Revenues . . . . . . . . . . . . . . $ 1,692
Expenses . . . . . . . . . . . . . .
Operating income . . . . . . . $
947
745
***
***
***
$
$
835
473
362
(8%)
2%
(18%)
$
$
906
462
444
2014
Reported(a)
1,046
159
362
98
28
1,692
Core (Local & National) $
Political . . . . . . . . . . . . .
Retransmission (c) . . . . .
Digital . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . $
(a) Numbers do not sum due to rounding.
Percentage Change From
2013
Reported
74%
***
145%
156%
(24%)
103%
Pro Forma (b)
(2%)
***
62%
19%
(1%)
19%
(b) The pro forma figures are presented as if the acquisition of Belo Corp. and the six
acquired London Broadcasting Company television stations as well as the Captivate
disposition had occurred at the beginning of 2013. See "Presentation of Pro Forma
Information" on page 39.
(c) Reverse compensation to network affiliates is included as part of
programming costs and therefore is excluded from this line.
Reported Broadcasting Segment revenues increased $857 million
to $1.69 billion or 103% for 2014, a record high, primarily driven by
the acquisition of Belo and London Broadcasting television stations,
as well as substantially higher retransmission revenue and record
non-presidential year political advertising. Core advertising
revenues, which consist of Local and National non-political
advertising, increased 74% to $1.05 billion in 2014 mainly due to
television station acquisitions and $41 million in advertising
associated with the Winter Olympics that was partially offset by
political advertising displacement. Political advertising reached $159
million compared to $13 million in 2013, driven by a strong political
footprint. Retransmission revenues increased 145% in 2014 resulting
from the expansion of our Broadcasting Segment portfolio and rate
increases. Within the Broadcasting Segment, digital revenue
increased 156% compared to 2013 reflecting continued growth from
digital marketing services products.
Broadcasting Segment costs doubled to $947 million in 2014.
The increase is driven primarily by the acquisitions as well as higher
investment in digital initiatives and reverse network compensation.
As a result of all of these factors, Broadcasting Segment
operating income more than doubled to $745 million in 2014.
Broadcasting Segment results 2013-2012: 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 advertising
revenues associated with the 2012 Summer Olympics as well as an
extra week in 2012’s results.
Core advertising 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 Segment 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.
29
Publishing Segment
Our publishing operations include USCP, Gannett Publishing
Services, USA TODAY group (which includes USA TODAY brand
properties), Newsquest, which produces daily and non-daily
publications in the U.K., Clipper Magazine, Gannett Government
Media and other advertising and marketing services businesses. The
Publishing Segment in 2014 contributed 57% of our revenues.
Publishing operating results were as follows:
Publishing operating results, in millions of dollars
2014(a) Change
Revenues . . . . . . . . . . . . . . $ 3,422
Expenses . . . . . . . . . . . . . .
3,193
(4%)
(2%)
Operating income . . . . . . . $
(a) Numbers do not sum due to rounding.
228
(27%)
2013 Change 2012(a)
$ 3,728
(4%)
$ 3,578
3,264
(3%)
3,360
$
314
(15%)
$
369
Foreign currency translation impacts: The average exchange
rate used to translate U.K. publishing results was 1.65 for 2014, 1.56
for 2013 and 1.58 for 2012. Translation fluctuations impact U.K.
publishing revenue, expense and operating income results.
Publishing Segment operating revenues: Publishing operating
revenues are derived principally from advertising sales which
accounted for 61% of total publishing revenues in 2014, and
circulation sales which accounted for 33% of total publishing
revenues in 2014. Advertising revenues include those derived from
advertising placed with print products as well as publishing related
Internet desktop, smartphone and tablet applications. These include
revenue in the classified, retail and national advertising categories.
Circulation revenues are derived principally from distributing our
publications on our digital platforms, from home delivery and from
single copy sales of our publications. Other publishing revenues are
mainly from commercial printing.
Publishing Segment revenue comparisons 2014-2013:
Advertising Revenue: Advertising revenues for 2014 decreased
$129 million or 6%. The decrease reflects lower advertising demand
due to ongoing secular pressures.
The tables below present the percentage change in 2014
compared to 2013 for each of the major advertising and classified
revenue categories, presented as if the Apartments.com sale, which
affected classified real estate revenue comparisons, occurred at the
beginning of 2013. Revenue recorded to classified real estate
advertising related to Apartments.com sales totaled approximately
$4 million in 2014 and $15 million in 2013.
The table below presents the percentage change for the retail,
national, and classified categories for 2014 compared to 2013.
Advertising Revenue Year Over Year Comparisons
U.S. Publishing
Newsquest
(in pounds)
Total Publishing
Segment
Retail . . . . . . . . . .
National . . . . . . . .
Classified . . . . . . .
Total . . . . . . . . . . .
(6%)
(14%)
(4%)
(7%)
(2%)
(4%)
(3%)
(3%)
(5%)
(12%)
(2%)
(6%)
Retail advertising revenues were down $62 million or 5% in
2014. In the U.S., revenues were down in all major categories. Retail
advertising revenues, in local currency, were down 2% in the U.K.
National advertising revenues were down $44 million or 12% in
2014, primarily due to lower advertising sales for USCP, Newsquest,
and USA TODAY.
The table below presents the percentage change in classified
categories for 2014 compared to 2013 as if the Apartments.com sale
occurred at the beginning of 2013.
The table below presents the principal components of Publishing
Classified Revenue Year Over Year Comparisons
Segment revenues for the last three years.
Publishing operating revenues, in millions of dollars
Automotive . . . . .
2014 Change
2013 Change
2012
Employment. . . . .
Advertising . . . . . . . . . . . . $ 2,070
Circulation . . . . . . . . . . . . .
1,119
Commercial printing and
other. . . . . . . . . . . . . . . . . .
233
Total. . . . . . . . . . . . . . . . . . $ 3,422
(6%)
(1%)
(7%)
(4%)
$ 2,199
(7%)
$ 2,356
Real Estate . . . . . .
1,129
1%
1,117
Legal . . . . . . . . . .
250
$ 3,578
(2%)
(4%)
255
$ 3,728
Other . . . . . . . . . .
Total . . . . . . . . . . .
U.S. Publishing
Newsquest
(in pounds)
Total Publishing
Segment
(2%)
(4%)
(4%)
(4%)
(8%)
(4%)
(6%)
7%
(9%)
—%
(6%)
(3%)
(2%)
1%
(4%)
(4%)
(6%)
(2%)
Classified advertising revenues declined 4% in the U.S. and 3%
in the U.K in 2014. Domestically, automotive advertising was down
2% for the year while employment and real estate both declined 4%
for the year. In the U.K., while most classified advertising categories
were lower, employment advertising improved 7% in local currency,
reflecting the recovery in the U.K. economy.
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
our continued focus on digital marketing services. Domestic U.S.
digital revenues were up 4%, while digital revenues at Newsquest
increased 21% in local currency.
The table below presents the principal components of Publishing
Segment advertising revenues for the last three years. These amounts
include advertising revenue from printed publications as well as
online advertising revenue from desktop, smartphone and tablets
affiliated with the publications.
Advertising revenues, in millions of dollars
2014 Change
2013 Change
2012
Retail . . . . . . . . . . . . . . . . . $ 1,095
(5%)
$ 1,157
National . . . . . . . . . . . . . . .
Classified . . . . . . . . . . . . . .
321
654
Total advertising revenue . $ 2,070
(12%)
(3%)
(6%)
365
677
$ 2,199
(6%)
(8%)
(7%)
(7%)
$ 1,230
396
730
$ 2,356
30
Circulation Revenue: Publishing Segment circulation revenues
decreased by $10 million or 1%. Circulation revenues decreased 1%
in 2014 at USCP, reflecting an increase in home delivery revenue
offset by a decrease in single copy revenue. Home delivery revenue
was boosted by the pricing impact of placing USA TODAY local
editions in 35 of our USCP units and the strength of our All Access
Content Subscription Model, adding engaging content which
allowed us to deploy strategic pricing initiatives. Circulation
revenues were 4% lower at USA TODAY and 1% lower in local
currency in the U.K., due to declines in print circulation volume,
partially offset by cover price increases, implemented in 2013.
Daily average print and digital, replica and non-replica
circulation, excluding USA TODAY, declined 9%, while Sunday net
paid circulation declined 3%.
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
2014 Change
2013 Change
2012
Local Publications
Morning. . . . . . . . . . . . .
2,715
(8%)
Evening . . . . . . . . . . . . .
145
(10%)
Total daily . . . . . . . . . . .
Sunday. . . . . . . . . . . . . .
2,860
4,569
(9%)
(3%)
2,967
161
3,128
4,729
(8%)
(9%)
(8%)
(5%)
3,240
177
3,417
5,003
Other Revenue: Commercial printing and other publishing
revenues were down 7% in 2014 and totaled $233 million, reflecting
the sale of a print business and a decrease in U.K. commercial print
revenues. Commercial printing revenues in the U.S. and U.K.
combined accounted for nearly 60% of total other revenues.
Publishing Segment revenue comparisons 2013-2012:
Advertising Revenue: Advertising revenues for 2013 declined
$157 million or 7%. The decrease reflecting lower advertising
demand due to secular pressures, a slow pace of the economic
recovery, and the extra week in 2012.
Ad revenues were lower in both the U.S. and the U.K. In the
U.K., in local currency, advertising revenues comparisons lagged
comparisons in the U.S. Newsquest advertising revenues were down
8% compared with 6% decline for U.S. publishing.
Retail advertising revenues were down $73 million or 6% in
2013. In the U.S., revenues were down in all major categories. Retail
advertising revenues were down 4% in the U.K. on a constant
currency basis.
National advertising revenues were down $31 million or 8% in
2013, primarily due to lower advertising sales for U.S. Community
Publishing, Newsquest, and as well as for USA TODAY and its
associated businesses.
Classified advertising 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 Segment circulation revenues
increased by $12 million or 1% over 2012, reflecting the second
consecutive annual company-wide circulation 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 USCP. 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%.
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 in 2013 were up for the
year in the U.S. as well as at Newsquest in the U.K. Revenues
benefited from our 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 Segment expense comparisons 2014-2013:
Publishing operating expense decreased to $3.19 billion in 2014
primarily due to continued cost reductions and efficiency efforts as
well as lower print volumes, partially offset by special charges for
transformation costs, asset impairments and workforce restructuring.
Publishing payroll costs were down 4% compared to 2013,
reflecting the impact of workforce restructuring.
Newsprint expense was down 9% in 2014 due to a decline in
consumption and prices.
Publishing Segment 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 our digital marketing services business.
Publishing payroll costs were down 3% compared to 2012,
reflecting the impact of workforce restructuring across certain
divisions.
Newsprint expense was down 14% in 2013 due to a decline in
consumption and prices.
31
Publishing Segment operating results 2014-2013: Publishing
Digital Segment expenses in 2014 increased 23% to $764
million, primarily due to the Cars.com acquisition and an increase in
expenses at CareerBuilder associated with its revenue growth. As a
result of these factors, Digital Segment operating income increased
to $155 million in 2014.
CareerBuilder, a global leader in human capital solutions
majority-owned by Gannett, provides services ranging from labor
market intelligence to talent management software and other
recruitment tools. It is the largest online job site in the U.S.,
measured both by traffic and revenue, has a presence in more than
60 markets worldwide and focuses on technology solutions and
niche sites. Its North American network revenue is driven mainly
from its own sales force but it also derives revenues from its owner
affiliated businesses, including our local media organizations, which
sell various CareerBuilder employment products including upsells of
print employment ads. North American revenue increased 3%,
compared to last year. CareerBuilder revenues in the Digital
Segment exclude amounts recorded at Gannett-owned local media
organizations.
Digital Segment results 2013-2012: Digital Segment revenues
increased $29 million or 4% over 2012, primarily reflecting a strong
increase in revenues at CareerBuilder.
Digital Segment 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.
Consolidated operating expenses
Over the last three years, our consolidated operating expenses were
as follows:
Consolidated operating expenses, in millions of dollars
2014 Change 2013(a) Change
2012
Cost of sales. . . . . . . . . . $ 3,049
Selling, general and
admin. expenses. . . . . . .
1,539
Depreciation . . . . . . . . .
Amortization of
intangible assets. . . . . . .
186
6%
$ 2,882
(2%)
$ 2,944
19%
21%
1,292
153
(1%)
(5%)
1,303
161
80
***
36
9%
33
Facility consolidation
and asset impairment
96
charges. . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . $ 4,950
65%
58
(52%)
122
12% $ 4,422
(3%)
$ 4,563
(a) Numbers do not sum due to rounding.
Total reported operating expenses increased 12% to $4.95 billion
in 2014, primarily due to the impact of the acquisitions of Belo and
the London Broadcasting Company television stations, as well as the
acquisition of Cars.com partly offset by continued cost efficiency
efforts company-wide as well as lower newsprint expense.
Depreciation expense was 21% higher in 2014, reflecting the
acquisitions of television stations as well as Cars.com.
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.
operating income decreased to $228 million in 2014 from $314
million in 2013. The principal factors affecting reported operating
results comparisons for the full year were the following:
• Lower operating results in the U.S. as advertising revenue
categories were affected by the impact of the secular pressure on
print advertising demand;
• Significant increase in digital revenue;
• Special charges for transformation costs and asset impairments
as well as workforce restructuring costs totaled $123 million in
2014 and $89 million in 2013;
• A decrease in newsprint expense.
Publishing Segment 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 advertising
revenue categories were affected by the impact of the soft
economy on advertising demand, partially offset by an increase
in circulation revenue at our USCP and U.K. operations;
• Strategic initiative spending in 2013 of $36 million;
• Special charges for transformation costs 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.
Digital Segment
The Digital Segment includes results for stand-alone digital
subsidiaries including Cars.com, CareerBuilder, PointRoll, and
Shoplocal.
On October 1, 2014, we completed the acquisition of the
remaining 73% interest that we did not already own in Cars.com.
Full year results for 2014 include Cars.com results following the
acquisition on October 1.
On April 1, 2014, CareerBuilder acquired Broadbean, a leader in
online recruitment software that enables job distribution, candidate
sourcing and big data analytics for employers. The Broadbean
acquisition, when combined with the addition of Economic
Modeling Specialists Intl. in 2012, represents the next step in
CareerBuilder’s transformation, positioning it as a leading company
in the rapidly growing software-as-a-service market for talent
management solutions.
Digital Segment revenues, expenses and operating income were
as follows:
In millions of dollars
2014 Change
2013 Change
2012
Revenues . . . . . . . . . . . . . . $
Expenses . . . . . . . . . . . . . .
Operating income . . . . . . . $
919
764
155
23% $
23%
21% $
748
620
128
4%
(8%)
***
$
$
719
677
42
Digital Segment revenues increased $171 million or 23% over
2013 to a record high of $919 million, primarily reflecting the
impact of the Cars.com acquisition, and continued growth in
revenues at CareerBuilder.
32
Payroll and benefits and newsprint costs (along with certain
other production material costs), the largest elements of our normal
operating expenses, are presented below, expressed as a percentage
of total pre-tax operating expenses.
Payroll and employee benefits . . . . . . . . . .
46.0% 47.6% 45.9%
Newsprint and other production material . .
8.6% 10.1% 11.2%
2014
2013
2012
Operating expense comparisons 2013-2012: 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.
Non-operating income and expense
Equity earnings: This income statement category reflects results
from unconsolidated minority interest investments, including our
equity share of operating results from our publishing partnerships,
including the California Newspapers Partnership, Texas-New
Mexico Newspapers Partnership, Tucson newspaper partnership and
other online/digital businesses including Cars.com before we
acquired it on October 1.
Our net equity income in unconsolidated investees for 2014 was
$167 million, an increase of $123 million over 2013. This increase
reflects primarily the gain on the sale of Apartments.com, partly
offset by the lower equity income from Classified Ventures as well
as softer results for newspaper partnerships.
Our 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.
Interest expense: 2014 interest expense increased by 55% to
$273 million compared to 2013 due to a higher average debt level of
$3.85 billion. The higher average debt level is related to additional
borrowings, partly offset by a lower average interest rate.
Interest expense in 2013 was higher compared to 2012, due to a
higher average debt level related to the issuance of $1.85 billion in
senior notes in the second half of 2013 primarily related to the Belo
acquisition which closed on Dec. 23, 2013.
We increased our long-term debt by $781 million or 21% in
2014. At the end of 2014, our leverage ratio was 2.96x, within the
financial covenants under its revolving credit agreements.
Other non-operating items totaled a net loss of $48 million in
2013 with the majority related 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.
We reported 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.
Provision for income taxes
We reported pre-tax income attributable to Gannett of $1.29
billion for 2014. The provision for income taxes reflects a special net
tax benefit from the sale of a non-strategic subsidiary at a loss, for
which a partial tax benefit was recognized. The effective tax rate on
pre-tax income is 17.5%.
We 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 lower tax rate for 2014 compared to 2013 is due to special
items contributing a net tax benefit that related primarily to the 2014
sale of a non-strategic subsidiary at a loss, for which a partial tax
benefit was recognized, partially offset by a reduction in audit
resolutions.
We 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 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.
Further information concerning income tax matters is contained
in Note 9 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
2014
Change
2013
Change
2012
Net income . . . . . . . . $ 1,062
Per basic share . . . . . $
Per diluted share. . . . $
4.69
4.58
***
***
***
$
$
$
389
1.70
1.66
(8%)
(7%)
(7%)
$
$
$
424
1.83
1.79
A further discussion of our borrowing and related interest cost is
Net income attributable to Gannett Co., Inc. consists of net
presented in the “Liquidity and capital resources” section of this
report beginning on page 40 and in Note 6 to the Consolidated
Financial Statements.
Other non-operating items: We reported a net gain of $404
million for other non-operating items in 2014. The majority reflects
the write-up of our prior 27% investment in Cars.com to fair value
post acquisition and a gain related to required accounting for the pre-
existing affiliate agreement between us and Cars.com. The net gain
was partially offset by acquisition costs and expenses incurred for
our previously announced separation in to two public companies.
income reduced by net income attributable to noncontrolling
interests, primarily from CareerBuilder. Net income attributable to
noncontrolling interests was $68 million in 2014, $57 million in
2013 and $51 million in 2012.
33
The income tax provision for 2014 reflects a tax benefit related
to our portfolio restructuring, the sale of a non-strategic investment,
and a charge related to the sale of our interest in television station
KMOV-TV in St. Louis, MO, in February 2014. The income tax
provision for 2013 included special credits related to reserve releases
as a result of federal exam resolution and lapse of certain statutes of
limitations. Results for 2012 included a credit related primarily to
tax settlements covering multiple years.
We discuss Adjusted EBITDA, a non-GAAP financial
performance measure that we believe offers a useful view of our
overall business operations. Adjusted EBITDA is defined as net
income attributable to Gannett before (1) net income attributable to
noncontrolling interests, (2) income taxes, (3) interest expense, (4)
equity income, (5) other non-operating items, (6) workforce
restructuring, (7) transformation costs, (8) asset impairment charges,
(9) depreciation and (10) amortization. When Adjusted EBITDA is
discussed in reference to performance on a consolidated basis, the
most directly comparable GAAP financial measure is Net income
attributable to Gannett.
We use non-GAAP financial performance measures for purposes
of evaluating business unit and consolidated company performance.
Therefore, we believe that each of the non-GAAP measures
presented provides useful information to investors by allowing them
to view our businesses through the eyes of our management and
Board of Directors, facilitating comparison of results across
historical periods, and providing a focus on the underlying ongoing
operating performance of our businesses. Many of our peer group
companies present similar non-GAAP measures to better facilitate
industry comparisons.
Discussion of special charges and credits affecting reported
results: We recorded workforce restructuring related costs totaling
$40 million ($26 million after-tax or $.11 per share) in 2014, $58
million ($37 million after-tax or $.16 per share) in 2013, and $49
million ($29 million after-tax or $.12 per share) in 2012. 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 our cost structure.
Company-wide transformation plans led us to recognize charges
in 2012-2014 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. Total charges for these matters were $79
million ($44 million after-tax or $.19 per share) in 2014, $25 million
($15 million after-tax or $.06 per share) in 2013, and $32 million
($20 million after-tax or $.08 per share) in 2012.
We performed impairment tests on certain assets including
goodwill and other intangible assets that resulted in the recognition
of impairment charges in 2012-2014. During 2014, we recorded non-
cash asset impairment charges of $51 million ($46 million after-tax
or $.20 per share). In 2013, non-cash asset impairment charges
totaled $33 million ($20 million after-tax or $.08 per share). In 2012,
non-cash asset impairment totaled $90 million ($87 million after-tax
or $.37 per share). These facility consolidation and non-cash
impairment charges are detailed in Notes 3 and 4 to the Consolidated
Financial Statements.
Operating results non-GAAP information
Presentation of non-GAAP information: We use 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.
We discuss 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;
• Equity income gain on the sale of Apartments.com by Classified
Ventures;
• Non-operating income from the write-up of our prior equity
investment in Cars.com to fair value post acquisition;
• Other non-operating expenses related to acquisition costs,
donations to our foundation and expenses incurred for our
previously announced spin-off of our publishing operation; and
• Special tax gains and charges, as well as the tax effect of the
above special items.
We believe 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 transformation
expenses primarily relate to incremental expenses we have incurred
to consolidate or outsource production processes and centralize other
functions. Workforce restructuring expenses include payroll and
related benefit costs as well as charges related to our partial
withdrawal from certain multi-employer pension plans.
Transformation costs include incremental expenses incurred by us to
execute on our transformation and growth plan and incremental
expenses associated with optimizing our real estate portfolio. Asset
impairment charges reflect non-cash charges to reduce the book
value of certain intangible assets to their respective fair value, as our
projections for the business underlying the related asset had
declined.
In 2014, we recorded a pre-tax gain of $148 million related to the
Classified Ventures sale of its Apartments.com business. This gain is
reflected in the line equity income in unconsolidated investees, net.
Other non-operating items for 2014 included special gains and
charges primarily related to (1) income related to the write-up of our
prior investment in Cars.com to fair value post acquisition and the
required accounting for the pre-existing affiliate agreement between
us and Cars.com, (2) costs for acquiring six London Broadcasting
Company television stations and the remaining outstanding shares of
Cars.com, (3) expenses related to the planned spin-off of our
publishing operation, (4) the early retirement of our 9.375% notes
due in 2017, and (5) non-cash donations to our charitable
foundation. Other non-operating items in 2013 included Belo
acquisition related expenses, a non-cash charge related to a sale of
interests in a business and a currency loss related to the weakening
of the British pound associated with the downgrade of the U.K.
sovereign credit rating.
34
Adjustments to remove special items from GAAP operating
income follow:
In millions of dollars
2014(a) Change
2013 Change 2012(a)
Operating income
(GAAP basis) . . . . . . . . . . . $ 1,058
Remove special items:
43% $ 739
(6%)
$ 790
Workforce restructuring. .
Transformation costs . . . .
Asset impairment
charges . . . . . . . . . . . . . .
40
79
(30%)
***
58
25
19%
(21%)
51
56%
33
(63%)
49
32
90
As adjusted
(non-GAAP basis). . . . . . . . $ 1,229
(a) Numbers do not sum due to rounding.
44% $ 855
(11%)
$ 960
Adjusted operating income increased 44% in 2014 over 2013 to
$1.23 billion. The increase reflects substantially higher revenue
growth in the Broadcasting and Digital Segments to record levels,
partially offset by a decline in the Publishing Segment. Broadcasting
Segment revenues and operating results were higher due to the Belo
and London Broadcasting Company television station acquisitions
and significant increases in Olympic and political spending as well
as retransmission revenue, partly offset by higher expense related to
revenue growth as well as higher reverse network compensation
fees. Publishing Segment results reflected lower advertising demand
and circulation revenue, partially offset by lower operating expenses
due primarily to continuing cost efficiency efforts. Digital Segment
revenues and operating results were higher primarily due to the
impact of the Cars.com acquisition and strong results at Cars.com
and CareerBuilder. Digital revenues company-wide including the
Digital Segment and all digital revenues generated by other business
segments were approximately $1.72 billion in 2014, nearly 30% of
operating revenues, and an increase of 15% compared to 2013.
Adjusted operating income decreased 11% in 2013 over 2012 to
$855 million. Broadcasting Segment revenues and operating results
were lower, reflecting the absence of significant political and
Olympic revenues generated in 2012. Publishing Segment revenues
reflected lower advertising demand, partially offset by a 1% increase
in circulation revenue. Digital Segment 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.
Other non-operating items totaled a gain of $542 million ($325
million after-tax or $1.40 per share) in 2014. The gain is primarily
from the $477 million write-up of our prior 27% investment in
Cars.com to fair value post acquisition and gain on the settlement of
the pre-existing affiliate agreement between us and Cars.com, as
well as our equity share of Classified Ventures’ gain on the sale of
Apartments.com in April of 2014 that totaled $148 million. Non-
operating charges in 2014 were primarily for acquisition costs for
the Cars.com and London Broadcasting Company acquisitions,
expenses incurred for our previously announced spin-off of our
publishing operations, non-cash donations to our charitable
foundation and the early retirement of our 9.375% notes due in 2017.
In 2013, non-operating items charges totaled $55 million ($41
million after-tax or $.17 per share) and primarily related to a loss
recognized on the Captivate transaction and Belo acquisition costs.
In 2012, non-operating items charges totaled $7 million ($4 million
after-tax or $.02 per share) related to asset impairments of a cost and
equity method investment.
In 2014, we recorded special net tax benefits that totaled $218
million or $.94 per share that were primarily driven by a
restructuring of our portfolio which included the sale of a non-
strategic equity investment. We also recorded a tax benefit of $28
million or $.12 per share related to resolution of several federal tax
claims in 2013. In 2012, we recorded $13 million or $.06 per share
related primarily to tax settlements covering multiple years.
Consolidated results
The following is a discussion of our 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
2014(a) Change
2013 Change 2012(a)
Operating expense
(GAAP basis) . . . . . . . . . . . $ 4,950
Remove special items:
12% $ 4,422
(3%)
$ 4,563
Workforce restructuring. .
(40)
(30%)
(58)
19%
Transformation costs . . . .
(79)
***
(25)
(21%)
Asset impairment
charges . . . . . . . . . . . . . .
(51)
56%
(33)
(63%)
(49)
(32)
(90)
As adjusted
(non-GAAP basis). . . . . . . . $ 4,779
(a) Numbers do not sum due to rounding.
11% $ 4,306
(2%)
$ 4,393
Adjusted operating expenses increased 11% in 2014 over 2013 to
$4.78 billion primarily due to the acquisitions of the Belo and
London Broadcasting Company television stations and Cars.com,
partly offset by continued efficiency efforts company-wide.
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, partly offset by an increase in Digital
Segment expenses related to the increase in revenue.
35
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:
Adjustments to remove special items from GAAP net income
attributable to Gannett Co., Inc. and diluted earnings per share
follow:
In millions of dollars
In millions of dollars, except per share amounts
2014 Change
2013 Change
2012
2014(a) Change 2013(a) Change 2012(a)
2014
2013
2012(a)
Workforce restructuring. .
Transformation costs . . . .
0.11
0.19
(31%)
***
0.16
0.06
33%
(25%)
0.12
0.08
$ 113
$ 195
charges . . . . . . . . . . . . . .
0.20
***
0.08
(78%)
0.37
Asset impairment
Net income attributable to
Gannett Co., Inc.
(GAAP basis) . . . . . . . . . . . $ 1,062
Remove special items (net
of tax):
***
$ 389
(8%)
$ 424
Workforce restructuring. .
Transformation costs . . . .
Asset impairment
charges . . . . . . . . . . . . . .
Other non-operating
items. . . . . . . . . . . . . . . .
Special tax benefits . . . . .
26
44
46
(325)
(218)
(30%)
***
***
***
***
37
15
26%
(23%)
20 —
41
(28)
***
***
29
20
87
4
(13)
As adjusted
(non-GAAP basis). . . . . . . . $ 634
Diluted earnings per share
(GAAP basis) . . . . . . . . . . . $ 4.58
Remove special items (net
of tax):
34% $ 473
(14%)
$ 551
***
$ 1.66
(7%)
$ 1.79
Other non-operating
items. . . . . . . . . . . . . . . .
Special tax benefits . . . . .
(1.40)
(0.94)
***
***
0.17
(0.12)
***
***
0.02
(0.06)
As adjusted
(non-GAAP basis). . . . . . . . $ 2.73
(a) Numbers do not sum due to rounding.
35% $ 2.02
(13%)
$ 2.33
Adjusted net income attributable to Gannett Co., Inc. increased
34% in 2014 (35% on a diluted per share basis) as a result of higher
as adjusted (non-GAAP basis) operating income in the Broadcasting
and Digital Segments, partially offset by lower operating income in
the Publishing Segment.
Adjusted net income attributable to Gannett Co., Inc. decreased
14% in 2013 over 2012 (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.
Total non-operating
(expense) income
(GAAP basis) . . . . . . . . . . . $ 298
Remove special items:
***
$ (180)
51% $ (119)
Other non-operating
items. . . . . . . . . . . . . . . . .
(542)
***
55
***
7
As adjusted
(non-GAAP basis). . . . . . . . $ (244)
95% $ (125)
11% $ (112)
Adjusted non-operating expense increased 95% in 2014 over
2013 to $244 million. This increase reflects higher interest expense
due to higher average debt levels from additional borrowings.
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.
A summary of the impact of special items on our effective tax
rate follows:
In millions of dollars
Provision for income taxes as reported
(GAAP basis) . . . . . . . . . . . . . . . . . . . . . . . . . $ 226
Remove special items:
Workforce restructuring . . . . . . . . . . . . . . .
Transformation costs . . . . . . . . . . . . . . . . .
Asset impairment charges . . . . . . . . . . . . .
15
36
5
Other non-operating items . . . . . . . . . . . . .
(217)
Special tax benefits . . . . . . . . . . . . . . . . . .
218
21
10
13
15
28
19
13
4
3
13
As adjusted (non-GAAP basis) . . . . . . . . . . . $ 283
$ 200
$ 246
As adjusted effective tax rate
(non-GAAP basis) . . . . . . . . . . . . . . . . . . . . .
(a) Numbers do not sum due to rounding.
30.9% 29.7% 30.9%
The adjusted effective tax rate in 2014 was 30.9% compared to
29.7% in 2013. The slightly higher rate for 2014 reflects a higher
proportion of income derived in the U.S., which is taxed at a higher
rate, mainly due to the income related to the acquisitions of Belo and
Cars.com, as well as fewer tax reserve releases due to expiring
statutes of limitations. 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.
36
Adjustments to reconcile GAAP net income attributable to
Gannett Co., Inc. to Adjusted EBITDA follow:
In millions of dollars
2014(a) Change 2013(a) Change 2012(a)
Net income attributable to
Gannett Co., Inc.
(GAAP basis) . . . . . . . . . . . $ 1,062
***
$ 389
(8%)
$ 424
Net income attributable to
noncontrolling interests. . . .
Provision for income taxes .
Interest expense. . . . . . . . . .
Equity income in
unconsolidated investees,
net . . . . . . . . . . . . . . . . . . . .
Other non-operating items .
68
226
273
19%
99%
55%
57
113
176
13%
(42%)
17%
(167)
(404)
***
***
(44)
96%
48
***
51
195
150
(22)
(9)
Operating income
(GAAP basis) . . . . . . . . . . . $ 1,058
Remove special items:
43% $ 739
(6%)
$ 790
Workforce restructuring. .
Transformation costs . . . .
Asset impairment charges
40
79
51
(30%)
***
56%
58
25
33
19%
(21%)
(63%)
49
32
90
Adjusted operating income
(non-GAAP basis). . . . . . . . $ 1,229
44% $ 855
(11%)
$ 960
Depreciation . . . . . . . . . . . .
186
21%
153
(5%)
161
Adjusted amortization
(non-GAAP basis). . . . . . . .
75
***
36
9%
33
Adjusted EBITDA
(non-GAAP basis). . . . . . . . $ 1,491
(a) Numbers do not sum due to rounding.
43% $ 1,045
(9%)
$ 1,154
Adjusted EBITDA increased 43% to $1.49 billion in 2014 from
$1.04 billion in 2013. Adjusted EBITDA margins increased
significantly to 24.8% in 2014. Both increases reflect the
acquisitions of Belo and Cars.com as well record results in our
Broadcasting and Digital Segments.
Adjusted EBITDA decreased 9% to $1.04 billion in 2013 from
$1.15 billion in 2012, driven by the absence of record political
spending achieved in 2012 and revenue associated with the Summer
Olympics along with a decrease in Publishing Segment results.
Segment results
The following is a discussion of our 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 our Broadcasting Segment is presented
below:
In millions of dollars
2014 Change
2013 Change
2012
Broadcasting Segment
operating expenses
(GAAP basis). . . . . . . . . . . . $ 947
Remove special items:
100% $ 473
2%
$ 462
Workforce restructuring . .
(4)
(74%)
Transformation costs . . . .
(18)
***
(14)
(1)
***
***
—
—
As adjusted
(non-GAAP basis) . . . . . . . . $ 925
Broadcasting Segment
operating income
(GAAP basis). . . . . . . . . . . . $ 745
Remove special items:
102% $ 458
(1%)
$ 462
106% $ 362
(18%)
$ 444
Workforce restructuring . .
4
(74%)
Transformation costs . . . .
18
***
14
1
***
***
—
—
As adjusted
(non-GAAP basis) . . . . . . . . $ 767
103% $ 377
(15%)
$ 444
Adjusted Broadcasting Segment operating expenses increased
102% in 2014 compared to 2013, driven primarily by acquisitions as
well as higher investment in digital initiatives and reverse network
compensation.
Adjusted Broadcasting Segment operating income increased
103% to $767 million in 2014, driven by record non-presidential
political revenues, the expansion of the television station portfolio,
Winter Olympics advertising, and a significant increase in
retransmission and digital revenue.
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.
37
A summary of the impact of workforce restructuring charges,
transformation costs and asset impairment charges on our Publishing
Segment is presented below:
In millions of dollars
2014(a) Change 2013(a) Change 2012(a)
Publishing Segment
operating expenses
(GAAP basis) . . . . . . . . . . . $ 3,193
Remove special items:
(2%)
$ 3,264
(3%)
$ 3,360
Workforce restructuring. .
(34)
(22%)
(43)
2%
Transformation costs . . . .
Asset impairment charges
(61)
(28)
***
29%
(24)
(25%)
(21)
***
(42)
(32)
—
As adjusted
(non-GAAP basis). . . . . . . . $ 3,071
Publishing Segment
operating income
(GAAP basis) . . . . . . . . . . . $ 228
Remove special items:
(3%)
$ 3,175
(3%)
$ 3,285
(27%)
$ 314
(15%)
$ 369
Workforce restructuring. .
Transformation costs . . . .
Asset impairment charges
34
61
28
(22%)
***
29%
As adjusted
(non-GAAP basis). . . . . . . . $ 351
(a) Numbers do not sum due to rounding.
(13%)
43
24
21
2%
(25%)
***
42
32
—
$ 402
(9%)
$ 443
Adjusted Publishing Segment operating expenses decreased 3%
in 2014 compared to 2013 due to continued cost efficiency efforts
and lower newsprint expense. On the same basis, adjusted
Publishing Segment operating income declined 13% in 2014
compared to 2013 due to lower advertising revenue, partially offset
by the positive impact of the All Access Content Subscription Model
and the addition of USA TODAY local editions at 35 of our USCP
operations.
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 advertising 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.
A summary of the impact of workforce restructuring charges and
asset impairment charges on our Digital Segment is presented below:
In millions of dollars
2014 Change 2013(a) Change
2012
Digital Segment operating
expenses
(GAAP basis) . . . . . . . . . . . $ 764
Remove special items:
23% $ 620
(8%)
$ 677
Workforce restructuring. .
(3)
***
— ***
—
Asset impairment
charges . . . . . . . . . . . . . .
(24)
***
(12)
(87%)
(90)
As adjusted
(non-GAAP basis). . . . . . . . $ 737
Digital Segment operating
income
(GAAP basis) . . . . . . . . . . . $ 155
Remove special items:
21% $ 609
4%
$ 587
21% $ 128
***
$
42
Workforce restructuring. .
3
***
— ***
Asset impairment
charges . . . . . . . . . . . . . .
24
***
12
(87%)
—
90
As adjusted
(non-GAAP basis). . . . . . . . $ 182
30% $ 140
6%
$ 132
(a) Numbers do not sum due to rounding.
Year-over-year adjusted operating expense comparisons for 2014
and 2013 reflect primarily the impact of the Cars.com acquisition
and higher expense related to strong revenue growth at
CareerBuilder. On the same basis, adjusted operating income
increased 30%, reflecting record revenues in our Digital Segment.
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 our Corporate
Segment is presented below:
In millions of dollars
Corporate Segment
operating expenses
(GAAP basis). . . . . . . . . . . . $
Remove special items:
2014 Change 2013(a) Change
2012
71
10% $
65 —% $
64
Workforce restructuring . .
— ***
— ***
(6)
As adjusted
(non-GAAP basis) . . . . . . . . $
(a) Numbers do not sum due to rounding.
71
11% $
64
11% $
58
38
Presentation of Pro Forma Information
Pro forma information is presented on the basis as if the acquisitions
of Cars.com as well as the Belo and London Broadcasting Company
televisions stations, the Captivate disposition, the sale of a print
business and the Apartments.com sale had occurred at the beginning
of 2013. 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 our results would have been had we operated the
businesses since the beginning of 2013.
Pro forma adjustments include revenues and expenses for the
former Belo stations acquired on December 23, 2013. The pro forma
adjustments exclude revenues and expenses for the former Belo
stations in Phoenix, AZ and St. Louis, MO. Certain of our
subsidiaries and Sander Media, a holding company that has a station-
operation agreement with us, agreed to sell these stations upon
receiving government approval. KMOV-TV, the television station in
St. Louis, was sold in February 2014 and the two television stations
in Phoenix were sold in June 2014. Pro forma adjustments include
the six television stations acquired from London Broadcasting
Company on July 8, 2014. Pro forma adjustments include revenues
and expenses for the acquisition of Cars.com on October 1, 2014.
The pro forma adjustments reflect depreciation expense and
amortization of intangibles related to the fair value adjustments of
the assets acquired and the alignment of accounting policies for all
acquisitions.
Pro forma adjustments include reductions to revenues and
expenses for Captivate since we sold our controlling interest in
Captivate in the third quarter of 2013. Adjustments also include
revenue and expense reductions related to the second quarter 2014
sale of a print business and the impact from the second quarter 2014
Classified Ventures sale of Apartments.com.
Reconciliations of our Broadcasting Segment, Digital Segment
and company-wide revenues and expenses on an as reported basis to
a pro forma basis for 2014 and 2013 are below:
In millions of dollars
Broadcasting
revenue:
2014(a)
Gannett
(as
reported)
Special
Items(b)
Pro Forma
Adjustments(c)
Gannett
Pro Forma
Combined
Core. . . . . . . . . . . $
1,046 $
— $
20 $
1,066
Political . . . . . . . .
Retransmission . .
Digital . . . . . . . . .
Other . . . . . . . . . .
Total broadcasting
revenue. . . . . . . . . .
Broadcasting
expenses . . . . . . . . .
Broadcasting
operating income . . $
159
362
98
28
1,692
—
—
—
—
—
947
(22)
1
4
1
2
27
23
745 $
22 $
4 $
160
366
98
30
1,719
948
771
(a) Numbers may not sum due to rounding.
(b) See reconciliation of special items beginning on page 34.
(c) We acquired six television stations from London Broadcasting Company on July
8, 2014. Results from these television stations from that date and forward are
included in the as reported numbers above. The pro forma combined numbers
above present results as if the acquisition had taken place on the first day of 2014.
39
In millions of dollars
Broadcasting
revenue:
2013(a)
Gannett
(as
reported)
Special
Items(b)
Pro Forma
Adjustments(c)
Gannett
Pro Forma
Combined
Core. . . . . . . . . . . $
600 $
— $
483 $
1,083
Political . . . . . . . .
Retransmission . .
Digital . . . . . . . . .
Other . . . . . . . . . .
13
148
38
36
—
—
—
—
9
78
44
(6)
22
226
82
30
1,442
914
529
—
456
473
835
607
(15)
15 $
151 $
362 $
Total broadcasting
revenue. . . . . . . . . .
Broadcasting
expenses . . . . . . . . .
Broadcasting
operating income . . $
(a) Numbers may not sum due to rounding.
(b) See reconciliation of special items beginning on page 34.
(c) The pro forma adjustments include additions to revenue and expenses for the
former Belo stations. They exclude revenues and expenses for the sale of
stations in Phoenix, AZ and St. Louis, MO. Subsidiaries of Gannett and
Sander Media, a holding company that has shared services agreement with
Gannett, agreed to sell these stations upon receiving government approval.
KMOV-TV, the television station in St. Louis, was sold in February 2014 and
the two television stations in Phoenix were sold in June 2014. Revenue and
expense adjustments were added for the acquisition of six London
Broadcasting Company television stations. The pro forma adjustments for
broadcasting expense reflect the addition of amortization for definite-lived
intangible assets as if the acquisition of Belo and London Broadcasting
Company television stations had occurred on the first day of 2013. Pro Forma
adjustments also include the reductions to revenue and expenses for Captivate,
as Gannett sold its controlling interest in Captivate in the third quarter of
2013.
Pro forma Broadcasting Segment revenue increased 19% in 2014
due to record non-presidential political spending as well as $41
million in Winter Olympic revenue. Retransmission revenue
increased 62% and digital revenue was up 19% due to continued
growth from digital marketing services products. Core advertising
was impacted by the displacement resulting from record political
advertising revenue and declined 2% on a pro forma basis.
Broadcasting Segment expenses were up 4% on a pro forma basis,
driven by the expenses associated with revenue growth initiatives at
our new and existing stations, as well as reverse compensation and
investments in sales and marketing tools in support of our sales
transformation initiative.
In millions of dollars
2014
Gannett
(as
reported)
Special
Items(a)
Pro Forma
Adjustments(b)
Gannett
Pro Forma
Combined
764
(27)
— $
378 $
919 $
Digital operating
revenue. . . . . . . . . . $
Digital operating
expense. . . . . . . . . .
Digital operating
income . . . . . . . . . . $
(a) See reconciliation of special items beginning on page 34.
(b) The pro forma adjustments include additions to revenue and expenses for the
acquisition of Cars.com. The pro forma adjustment reflects the addition of
revenue amortization for certain unfavorable contracts and amortization for
definite-lived intangible assets as if the acquisition of Cars.com had occurred
on the first day of 2014.
155 $
24 $
27 $
354
1,297
1,091
206
In millions of dollars
2013(a)
Gannett
(as
reported)
Special
Items(b)
Pro Forma
Adjustments(c)
Gannett
Pro Forma
Combined
Digital operating
revenue. . . . . . . . . . $
Digital operating
expense. . . . . . . . . .
748 $
— $
452 $
1,201
620
(12)
435
1,044
17 $
12 $
128 $
Digital operating
income . . . . . . . . . . $
(a) Numbers may not sum due to rounding.
(b) See reconciliation of special items beginning on page 34.
(c) The pro forma adjustments include additions to revenue and expenses for the
acquisition of Cars.com. The pro forma adjustment reflects the addition of
revenue amortization for certain unfavorable contracts and amortization for
definite-lived intangible assets as if the acquisition of Cars.com had occurred on
the first day of 2013. In 2014, a small online business was moved from the
Digital Segment to the Publishing Segment as a result of continued integration
with other Publishing businesses.
157
Digital Segment revenue on a pro forma basis increased 8% in
2014 primarily due to growth in Cars.com and CareerBuilder
revenues. Cars.com revenues on a pro forma basis reflect organic
growth in the markets in which they sell direct as well as price
increases for affiliates implemented October 1, 2014. Digital
Segment expenses were up 4% on a pro forma basis reflecting
increases in Cars.com and CareerBuilder expenses in support of
higher revenues.
In millions of dollars
2014
Gannett
(as
reported)
Special
Items(a)
Pro Forma
Adjustments(b)
Gannett
Pro Forma
Combined
Company-wide
operating revenue. . . $
Company-wide
operating expenses . .
Company-wide
operating income . . . $
6,008 $
— $
347 $
6,355
4,950
(171)
317
5,096
1,058 $
171 $
30 $
1,259
(a) See reconciliation of special items beginning on page 34.
(b) The pro forma adjustments include all the pro forma adjustments discussed
above.
In millions of dollars
2013
Gannett
(as
reported)
Special
Items(a)
Pro Forma
Adjustments(b)
Gannett
Pro Forma
Combined
Company-wide
operating revenue. . $
Company-wide
operating expenses .
Company-wide
operating income . . $
5,161 $
— $
969 $
6,130
4,422
(116)
803
5,109
Pro forma company-wide revenues were $6.36 billion in 2014, a
4% increase compared to 2013. The increase reflects a significant
increase in Broadcasting and Digital Segment revenues, partially
offset by a decrease in Publishing Segment revenues.
Pro forma company-wide expenses declined slightly to $5.10
billion in 2014 as a result of higher Broadcasting and Digital
Segment expenses, offset by lower Publishing Segment expenses.
As a result, company-wide pro forma operating income increased
23% to $1.26 billion in 2014, driven by a 46% increase in
Broadcasting Segment operating income and a 32% increase in
Digital Segment operating income.
FINANCIAL POSITION
Liquidity and capital resources
Our cash flow from operating activities was $821 million in 2014,
versus $511 million in 2013, primarily reflecting the strength of our
Broadcasting and Digital Segments propelled by strategic
acquisitions, successful growth initiatives and operating efficiencies.
Net cash tax payments were $83 million higher compared to 2013
due to higher earnings. Interest payments were up $116 million
reflecting the issuance of debt to fund the Belo and Cars.com
acquisitions.
Net cash used for investing activities totaled $1.66 billion for
2014. We received a $154.6 million cash distribution from Classified
Ventures related to its sale of Apartments.com as a return of
investment in 2014. Payments for acquisitions reflect the cash spent
to acquire Cars.com; six London Broadcasting television stations in
Texas, and CareerBuilder’s acquisition of Broadbean. Payments for
acquisitions also reflect the cash spent by us to acquire KMOV-TV,
KASW-TV and KTVK-TV television assets that were previously
owned by other parties. We purchased those assets pursuant to an
option agreement we had with the former owner. These assets and
other KMOV-TV, KASW-TV and KTVK-TV assets we already
owned were immediately sold to Meredith Corporation. Meredith
purchased the assets for $407.5 million plus working capital. We
used a portion of the proceeds in a tax efficient exchange to acquire
six London Broadcasting Company television stations from SunTX
Capital Partners, which closed early in our third quarter.
Cash provided by financing activities totaled $490 million in
2014. Proceeds from long term debt and term loans were $1.31
billion. These proceeds were used to partially finance the acquisition
of Cars.com, repay the unsecured notes that matured in November
2014 and for other general corporate purposes. We repurchased
approximately 2.7 million shares of our stock for $76 million, paid
dividends totaling $181 million and made dividend payments and
distributions to noncontrolling membership shareholders of $22
million.
Certain key measurements of the elements of working capital for
the last three years are presented in the following chart:
739 $
116 $
166 $
1,021
Working capital measurements
(a) See reconciliation of special items beginning on page 34.
(b) The pro forma adjustments include all the pro forma adjustments discussed
above.
2014
2013
2012
Current ratio . . . . . . . . . . . . . . . . . . . . . .
1.3-to-1
1.9-to-1
1.1-to-1
Accounts receivable turnover . . . . . . . . .
Newsprint inventory turnover . . . . . . . .
6.9
6.3
6.8
5.5
7.8
6.1
Our operations have historically generated strong positive cash
flow which, along with our program of maintaining bank revolving
credit availability, has provided adequate liquidity to meet our
requirements, including those for acquisitions.
40
650,000
650,000
On Dec. 28, 2014, we had unused borrowing capacity of $625
in a private offering that is exempt from the registration
requirements of the Securities Act of 1933. The 2021 and 2024
Notes are guaranteed on a senior basis by our subsidiaries that
guarantee our revolving credit facility, term loan and our other
outstanding notes.
In August 2013, we entered into an agreement to replace, amend
and restate our existing revolving credit facilities with a credit
facility expiring on Aug. 5, 2018, which was further amended on
Sept. 24, 2013 (the Credit Agreement). Total commitments under the
Credit Agreement are $1.3 billion. Subject to total leverage ratio
limits, the Credit Agreement eliminates our restriction on incurring
additional indebtedness. The Credit Agreement was amended as of
February 13, 2015. The maximum total leverage ratio permitted by
the Credit Agreement as amended, is 4.0x through September 30,
2016, reducing to 3.75x thereafter. Commitment fees on the
revolving credit agreement are equal to 0.375% - 0.50% of the
undrawn commitments, depending upon our leverage ratio, and are
computed on the average daily undrawn balance under the revolving
credit agreement and paid each quarter. Under the Credit Agreement,
we 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 our
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 our leverage ratio as of Dec. 28, 2014, our applicable
margins were 2.25% and 1.25%, respectively.
million under our revolving credit agreement.
We have 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. We may also invest borrowed funds that are not
required for other purposes in short-term marketable securities.
The following schedule of annual maturities of the principal
amount of total debt assumes we use available capacity under our
revolving credit agreement to refinance unsecured floating rate term
loans and notes due in 2015. Based on this refinancing assumption,
all of the obligations other than VIE unsecured floating rate term
loans due in 2015 are reflected as maturities for 2016 and beyond.
In thousands of dollars
2015 (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
7,854
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
232,883
39,454
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,276,385
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
600,000
Thereafter. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,365,000
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,521,576
(1) Maturities of principal amounts of debt due in 2015 (primarily the 10%
fixed rate notes due in June 2015 and 6.375% fixed rate notes due in
September 2015) are assumed to be repaid with funds from the revolving
credit agreement, which matures in 2018.
Long-term debt
Our long-term debt is summarized below:
In thousands of dollars
Dec. 28, 2014 Dec. 29, 2013
Unsecured floating rate term loan due
quarterly through August 2018. . . . . . . . . . . $
VIE unsecured floating rate term loans due
quarterly through December 2018 . . . . . . . .
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 . . . . . . . . . .
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 4.875% due September 2021 . . . . . . . . . .
Unsecured notes bearing fixed rate interest
at 6.375% due October 2023 . . . . . . . . . . . .
Unsecured notes bearing fixed rate interest
at 5.50% due September 2024 . . . . . . . . . . .
Unsecured notes bearing fixed rate interest
at 7.75% due June 2027 . . . . . . . . . . . . . . . .
Unsecured notes bearing fixed rate interest
at 7.25% due September 2027 . . . . . . . . . . .
123,200 $
154,800
33,379
39,270
—
250,000
66,568
66,568
250,000
250,000
193,429
193,429
—
250,000
640,000
—
250,000
250,000
600,000
600,000
600,000
600,000
350,000
—
325,000
—
200,000
200,000
240,000
240,000
Total principal long-term debt . . . . . . . . . . .
4,521,576
3,744,067
Other (fair market value adjustments and
discounts) . . . . . . . . . . . . . . . . . . . . . . . . . . .
(25,694)
(31,167)
Total long-term debt. . . . . . . . . . . . . . . . . . .
4,495,882
3,712,900
Less current portion of long-term debt
maturities of VIE loans. . . . . . . . . . . . . . . . .
7,854
5,890
Long-term debt, net of current portion. . . . . $
4,488,028 $
3,707,010
Our debt balance at year end 2014 increased by $781 million
primarily reflecting additional borrowings to fund the acquisition of
the remaining 73% of Cars.com we did not previously own. This
was partially offset by the early repayment of the 9.375% notes due
November 2017 and the repayment of the 8.75% notes due
November 2014 for $250 million each. We redeemed the 9.375%
notes by paying 104.688% of the outstanding principal amount in
accordance with the original terms. The early redemption of these
notes saved us approximately $19 million in interest expense for
2014.
In September 2014, and in support of the Cars.com acquisition,
we completed the private placement of $350 million in aggregate
principal amount of 4.875% senior unsecured notes due 2021 (the
2021 Notes). The 2021 Notes were priced at 98.531% of face value,
resulting in a yield to maturity of 5.125%. Subject to certain
exceptions, we are unable to redeem the 2021 Notes before Sept. 15,
2017. On the same day, we completed the private placement of $325
million in aggregate principal amount of 5.500% senior unsecured
notes due 2024 (the 2024 Notes). The 2024 Notes were priced at
99.038% of face value, resulting in a yield to maturity of 5.625%.
Subject to certain exceptions, we are unable to redeem the 2024
Notes before Sept. 15, 2019. The 2021 and 2024 Notes were issued
41
For 2015, we expect to contribute $12 million to the Gannett
Retirement Plan reflective of pension relief legislation enacted in
2014. We also expect to contribute $13 million to the Newsquest
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, we are unable to
reasonably estimate future contributions beyond 2015, and therefore
no plan contributions thereafter are reflected in the above table.
In December 1990, we 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 our
company. Benefits under the TCP include a severance payment of up
to three years’ compensation and continued life and medical
insurance coverage. We 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 August 2014, we adopted the Gannett Leadership Team
Transition Severance Plan (GLT Plan) to promote retention and
minimize disruption for certain senior executives in connection with
the potential spin-off of our publishing segment into a new,
independent publicly traded company.
No amounts have been included in the above contractual
obligation table for either the TCP or GLT plans.
Capital stock
In June 2013, we announced that our Board of Directors approved a
new program to repurchase up to $300 million of our common stock.
As of Dec. 28, 2014, the value of shares that may be repurchased
under the existing program is $149 million.
Stock repurchases
In millions
Repurchases made in fiscal year
2014
2013
2012
Number of shares purchased . . . . . . .
2.7
4.9
Dollar amount purchased . . . . . . . . . . $
76 $
117 $
10.3
154
The share repurchase program was temporarily suspended upon
the announcement of the Cars.com acquisition, but was re-initiated
in February 2015, well ahead of the timeline we had previously
anticipated, as a result of our strong operating performance and the
strength of our balance sheet. 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. Certain of the shares we previously
acquired have been reissued in settlement of employee stock awards.
The Gannett Co., Inc. 401(k) Savings Plan, our principal defined
contribution plan which was established in 1990, includes a
company matching contribution in the form of our stock. We fund
the match by buying our stock in the open market and depositing it
in the participant’s account.
Our common stock outstanding at Dec. 28, 2014, totaled
226,739,091 shares, compared with 227,568,888 shares at Dec. 29,
2013.
Our debt maturities may be repaid with cash flow from operating
activities, by accessing capital markets or a combination of both.
As previously noted, in August 2014, we announced our plan to
separate our Publishing business into an independent publicly traded
company. We expect to complete the separation in mid-2015. In
connection with this action, we are undertaking capital structure
planning for each company. We are working to ensure that each
separate business is well capitalized with financial flexibility to
pursue its strategic priorities.
Contractual obligations and commitments
The following table summarizes the expected cash outflows
resulting from financial contracts and commitments as of the end of
2014.
Contractual obligations
Payments due by period
Total 2015 2016-17 2018-19 Thereafter
331
8 $
In millions of dollars
Long-term debt (1) . . . . . . $4,522 $
Operating leases (2) . . . . . .
Purchase obligations (3) . .
Programming
contracts (4) . . . . . . . . . . . .
Other noncurrent
liabilities (5). . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . $5,595 $365 $
142
214
241
287
64
95
56
272 $ 1,877 $
2,365
104
67
107
58
67
32
12
54
96
—
—
119
608 $ 2,042 $
2,580
(1) See Note 6 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 11 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 we are liable for under purchase orders outstanding
at Dec. 28, 2014, 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. 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. Our under-funded plans include the Gannett
Retirement Plan, the G.B. Dealey Retirement Plan, the Newsquest Pension Scheme,
and the Detroit Free Press, Inc. Newspaper Guild of Detroit Pension Plan. Expected
employer contributions for these plans are included for the following fiscal year.
Contributions beyond the next fiscal year are excluded 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. 28, 2014, we are
unable to make reasonably reliable estimates of the period of cash
settlement. Therefore, $59 million of unrecognized tax benefits have
been excluded from the contractual obligations table above. See
Note 9 to the Consolidated Financial Statements for a further
discussion of income taxes.
In 2014, we shut down one of our publishing businesses and
incurred $21.0 million of shutdown costs associated with future
contractual promotional payments. These costs are accrued on our
balance sheet at the end of 2014 and will be primarily paid in 2015.
They have been excluded from the contractual obligations above.
42
Dividends
Dividends declared on common stock amounted to $181 million in
2014, compared with $183 million in 2013.
ITEM 7A. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
We believe that our market risk from financial instruments, such as
accounts receivable, accounts payable and debt, is not material. We
are exposed to foreign exchange rate risk on a limited basis primarily
due to our 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 2014.
Because we have $797 million in floating interest rate
obligations outstanding at Dec. 28, 2014, we are subject to changes
in the amount of interest expense we 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 $4
million.
Refer to Note 12 to the Consolidated Financial Statements for
information regarding the fair value of our long-term debt.
Cash dividends
Payment date
Per share
2014
4th Quarter . . . . . . . . . . . . . . . . . .
Jan. 2, 2015
3rd Quarter . . . . . . . . . . . . . . . . . .
Oct. 1, 2014
2nd Quarter . . . . . . . . . . . . . . . . .
Jul. 1, 2014
1st Quarter . . . . . . . . . . . . . . . . . .
Apr. 1, 2014
2013
4th Quarter . . . . . . . . . . . . . . . . . .
Jan. 2, 2014
3rd Quarter . . . . . . . . . . . . . . . . . .
Oct. 1, 2013
2nd Quarter . . . . . . . . . . . . . . . . .
Jul. 1, 2013
1st Quarter . . . . . . . . . . . . . . . . . .
Apr. 1, 2013
$
$
$
$
$
$
$
$
0.20
0.20
0.20
0.20
0.20
0.20
0.20
0.20
On Feb. 24, 2015, the Board of Directors declared a dividend of $.20
per share, payable on April 1, 2015, to shareholders of record as of
the close of business March 6, 2015.
Accumulated other comprehensive income (loss)
Our foreign currency translation adjustment, included in
accumulated other comprehensive income (loss) and reported as part
of shareholders’ equity, totaled $391 million at the end of 2014 and
$427 million at the end of 2013. The decrease reflected a weakening
of the British pound against the U.S. dollar. Newsquest’s assets and
liabilities at Dec. 28, 2014, were translated from British pounds to
U.S. dollars at an exchange rate of 1.56 versus 1.65 at the end of
2013. Newsquest’s financial results were translated at an average
rate of 1.65 for 2014, 1.56 for 2013 and 1.58 for 2012.
We recognized the funded status of our pension and retiree
medical benefit plans in the Consolidated Balance Sheets. At Dec.
28, 2014, accumulated other comprehensive loss includes a
reduction of equity of $1.17 billion and at Dec. 29, 2013, the
reduction of equity was $921 million, for losses that will be
amortized to pension and other postretirement costs in future years.
The increased reduction was driven by lower rates used to discount
our pension obligations as well as updates to assumed life
expectancies of the plan’s participants.
Effects of inflation and changing prices and other matters
Our results of operations and financial condition have not been
significantly affected by inflation. The effects of inflation and
changing prices on our 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.
We are exposed to foreign exchange rate risk primarily due to
our ownership of Newsquest, which uses the British pound as its
functional currency, which is then translated into U.S. dollars. Our
foreign currency translation adjustment, related principally to
Newsquest and reported as part of shareholders’ equity, totaled $391
million at Dec. 28, 2014. Newsquest’s assets and liabilities were
translated from British pounds to U.S. dollars at the Dec. 28, 2014,
exchange rate of 1.56. Refer to Item 7A for additional detail.
43
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheets at Dec. 28, 2014 and Dec. 29, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Income for each of the three fiscal years in the period ended Dec. 28, 2014. . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Comprehensive Income for each of the three fiscal years in the period ended Dec. 28, 2014 . . . . . . . . . .
Consolidated Statements of Cash Flows for each of the three fiscal years in the period ended Dec. 28, 2014 . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Equity for each of the three fiscal years in the period ended Dec. 28, 2014 . . . . . . . . . . . . . . . . . . . . . . . .
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. 28, 2014 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
45
46
48
49
50
51
52
78
80
82
44
GANNETT CO., INC.
CONSOLIDATED BALANCE SHEETS
Dec. 28, 2014
Dec. 29, 2013
118,484 $
912,004
72,763
38,861
158,648
69,998
109,707
1,480,465
191,530
1,270,401
2,411,821
28,117
3,901,869
(2,292,654)
1,609,215
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
4,499,927
3,790,472
3,239,593
63,647
312,608
8,115,775
11,205,455 $
1,477,231
—
379,886
5,647,589
9,240,706
In thousands of dollars
Assets
Current assets
Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Trade receivables, less allowance for doubtful receivables of $16,498 and $15,275, 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 $265,727 and
$201,178, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total intangible and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
46
GANNETT CO., INC.
CONSOLIDATED BALANCE SHEETS
In thousands of dollars
Liabilities and equity
Current liabilities
Accounts payable
Dec. 28, 2014
Dec. 29, 2013
Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
246,860 $
34,924
176,055
39,245
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 11)
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, 97,679,541 shares and 96,849,744 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.
225,704
64,929
273,995
45,309
11,267
217,094
7,854
1,127,936
56,578
650,372
4,488,028
97,648
941,715
333,435
6,567,776
7,695,712
20,470
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
—
324,419
546,406
8,602,369
(778,769)
8,694,425
(5,439,511)
3,254,914
234,359
3,489,273
11,205,455 $
—
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
(a) Our consolidated assets as of Dec. 28, 2014, include total assets of $60.0 million related to variable interest entities (VIEs) and our
consolidated assets as of Dec. 29, 2013, include $44.7 million of such assets. These assets can only be used to settle the obligations of the
VIEs. Consolidated liabilities as of Dec. 28, 2014 include total liabilities of $4.3 million related to VIEs and our consolidated liabilities as
of Dec. 29, 2013 include $2.7 million of such liabilities. The VIEs’ creditors have no recourse to us regarding these liabilities. See further
description in Note 1 - Summary of significant accounting policies.
47
GANNETT CO., INC.
CONSOLIDATED STATEMENTS OF INCOME
In thousands of dollars, except per share amounts
Dec. 28, 2014
Dec. 29, 2013
5,161,362 $
Dec. 30, 2012
5,353,197
Fiscal year ended
Operating revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
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 expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-operating (expense) income
Equity income in unconsolidated investees, net (see Notes 3 and 5). . . . . . . . . . . . . . . .
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
6,008,174 $
3,048,579
1,539,476
185,868
79,856
96,364
4,950,143
1,058,031
167,319
(273,244)
403,954
298,029
1,356,060
225,600
1,130,460
(68,289)
1,062,171 $
4.69 $
4.58 $
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 $
2,943,847
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
The accompanying notes are an integral part of these consolidated financial statements.
48
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. 28, 2014
Dec. 29, 2013
1,130,460 $
445,913 $
Dec. 30, 2012
475,007
(3,420)
(1,997)
(254)
(43,766)
9,055
18,107
Actuarial gain (loss) arising during the period. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(500,389)
46,489
286,778
64,381
Prior service cost:
Change in prior service 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.
37,986
(4,082)
—
23,628
(396,368)
—
(440,134)
147,718
(292,416)
834,624
57,167
777,457 $
319
(1,599)
3,077
(10,158)
342,798
2,363
354,216
(145,478)
208,738
652,654
56,888
595,766 $
(230,799)
55,372
—
(11,501)
7,946
(11,375)
(190,357)
1,791
(170,459)
66,948
(103,511)
371,242
52,264
318,978
49
GANNETT CO., INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
In thousands of dollars
Fiscal year ended
Cash flows from operating activities
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Adjustments to reconcile net income to operating cash flows:
Gain on Cars.com acquisition, net of tax. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of intangible assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Facility consolidation and asset impairment charges (see Notes 3 and 4). . . . . . . . . . . . . . .
Stock-based compensation — equity awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension expense, net of pension contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity income in unconsolidated investees, net (see Notes 3 and 5) . . . . . . . . . . . . . . . . . .
Other, net, including gains on asset sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decrease (increase) in trade receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decrease in other receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decrease (increase) in inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase (decrease) in accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase (decrease) in interest and taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decrease in deferred income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in other assets and liabilities, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash flows 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, net . . . . . . . . . .
Proceeds from unsecured fixed rate loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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 settlement of stock awards . . . . . . . . . . . .
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Dec. 28, 2014 Dec. 29, 2013 Dec. 30, 2012
1,130,460 $
445,913 $
475,007
(285,860)
185,868
79,856
112,472
33,882
1,200
(111,194)
(167,319)
(12,313)
(1,514)
7,504
10,032
66,740
(193,274)
(5,353)
(29,988)
821,199
—
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
(150,354)
(1,990,877)
(7,026)
180,809
305,347
(1,662,101)
(110,407)
(1,451,006)
(3,380)
63,408
113,895
(1,387,490)
640,000
666,732
(37,490)
(500,000)
(10,548)
(181,328)
(75,815)
26,672
(22,072)
(15,687)
490,464
(281)
(350,719)
469,203
118,484 $
(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
Supplemental cash flow information:
Cash paid for taxes, net of refunds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Cash paid for interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Non-cash investing and financing activities
207,038 $
242,190 $
124,378 $
126,180 $
64,838
138,906
Assets-held-for-sale proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Escrow deposit disbursement related to London Broadcasting Company television
stations acquisition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Capital expenditures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
146,428 $
(134,908) $
(11,520) $
— $
— $
— $
—
—
—
The accompanying notes are an integral part of these consolidated financial statements.
50
GANNETT CO., INC.
CONSOLIDATED STATEMENTS OF EQUITY
In thousands of dollars
Gannett Co., Inc. Shareholders’ Equity
Fiscal years ended Dec. 30, 2012, Dec. 29, 2013,
and Dec. 28, 2014
Common
stock
$1 par
value
Additional
paid-in
capital
Retained
earnings
Accumulated
other
comprehensive
income (loss)
Treasury
stock
Noncontrolling
Interests
Total
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 . . . . . . . . . . . . . . . . . . . . . $
Net income, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . .
Redeemable noncontrolling interest. . . . . . . . . . . .
Other comprehensive loss, net of tax . . . . . . . . . . .
Total comprehensive income. . . . . . . . . . . . . . . . . .
Dividends declared, 2014: $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. 28, 2014 . . . . . . . . . . . . . . . . . . . . . $
324,419 $
617,727 $ 7,276,200 $
(595,839) $ (5,294,616) $
424,280
(185,622)
(105,302)
(42,282)
(32,860)
26,608
9,243
(10,921)
567,515 $ 7,514,858 $
388,680
324,419 $
(153,948)
66,787
25,890
850
(701,141) $ (5,355,037) $
184,134 $ 2,512,025
475,007
50,727
(254)
(254)
(103,511)
1,791
371,242
(185,622)
(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)
57,233
(1,997)
207,086
1,652
208,738
652,654
(182,635)
(182,635)
(42,390)
(42,390)
(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) $
1,062,171
(180,705)
(284,714)
(2,101)
(116,639)
21,671
(10,480)
33,437
9,764
(10,501)
201,695 $ 2,894,793
1,130,460
(3,420)
(292,416)
834,624
(180,705)
68,289
(3,420)
(7,702)
(10,399)
(36,397)
33,882
12,437
(5,485)
(75,815)
24,634
22,493
(286)
324,419 $
546,406 $ 8,602,369 $
(778,769) $ (5,439,511) $
(22,072)
(22,072)
(75,815)
14,235
(13,904)
33,882
12,437
(8,202)
234,359 $ 3,489,273
(2,431)
The accompanying notes are an integral part of these consolidated financial statements.
51
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1
Summary of significant accounting policies
Fiscal year: Our fiscal year ends on the last Sunday of the calendar
year. Our 2014 fiscal year ended on Dec. 28, 2014, and encompassed
a 52-week period. Our 2013 fiscal year encompassed a 52-week
period and our 2012 fiscal year encompassed a 53-week period.
Use of estimates: The financial statements have been prepared in
accordance with generally accepted accounting principles and
necessarily include amounts based on estimates and assumptions by
management. Actual results could differ from those amounts.
Significant estimates include amounts for income taxes, pension and
other post-employment benefits and valuation of long-lived and
intangible assets.
Consolidation: The Consolidated Financial Statements include
our accounts and our wholly and majority-owned subsidiaries after
elimination of all intercompany transactions and profits. Investments
in entities for which we do not have control, but have the ability to
exercise significant influence over operating and financial policies,
are accounted for under the equity method. Our 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. We consolidate VIEs when we are the primary
beneficiary. In determining whether we are the primary beneficiary
of a VIE for financial reporting purposes, we consider whether we
have the power to direct the activities of the VIE that most
significantly impact the economic performance of the VIE and
whether we have the obligation to absorb losses or the right to
receive returns that would be significant to the VIE.
On Dec. 23, 2013, we 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), Delta Acquisition Corp., one of our wholly-owned
subsidiaries (Merger Sub), and us. Pursuant to the Merger
Agreement, Merger Sub merged with and into Belo (the Merger),
with Belo surviving the Merger as one of our wholly-owned
subsidiaries.
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, we restructured certain of Belo’s media holdings.
Simultaneously with the closing of the transactions contemplated by
the Merger Agreement, we 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. We 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. The Restructuring Assignees granted us (or our assignee)
the right to acquire such stations in the future, subject to applicable
law. To facilitate the efficient pricing of acquisition financing needs
of the Restructuring Assignees, we guaranteed debt incurred by the
Restructuring Assignees in connection with the closings under the
Restructuring Agreements.
Consolidated VIEs: We have concluded that the owner entities of
the seven stations constitute VIEs and the various agreements that
we have entered into related to these entities represented variable
interests in the VIEs. We have evaluated the arrangements with
respect to the power to direct the activities of the VIE and whether
we have significant benefits, as required under ASC Topic 810,
“Consolidation” (ASC Topic 810). We consolidate four stations in
the Louisville, KY; Portland, OR; and Tucson, AZ, television
markets 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 our consolidated balance sheets
as follows:
In thousands of dollars
Dec. 28, 2014 Dec. 29, 2013
Current assets . . . . . . . . . . . . . . . . . . . . . . . . $
20,541 $
Plant, property and equipment, net. . . . . . . .
Intangible and other assets . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . .
Current liabilities . . . . . . . . . . . . . . . . . . . . .
Noncurrent liabilities . . . . . . . . . . . . . . . . . .
10,084
29,412
60,037
11,635
26,028
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . $
37,663 $
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, we entered into forward sale
agreements to cause the sale of the assets of these stations to a third
party. The sale of the station in St. Louis was completed in February
of 2014 and the sale of the two stations in Phoenix was completed in
June of 2014. These three stations were not consolidated in our
financial statements before their sale dates due to our involvement
being limited to certain administrative, maintenance and monitoring
services.
Segment presentation: The Digital Segment includes results
from CareerBuilder, Cars.com, PointRoll and Shoplocal. The Digital
Segment and the digital revenues lines exclude online/digital
revenues generated by digital platforms that are associated with our
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.
52
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 our ownership
percentage is at 52.9%. Net income in the Consolidated Statements
of Income reflects 100% of CareerBuilder results as we hold 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 our control,
their equity interest is presented on the consolidated balance sheet in
the caption “Redeemable noncontrolling interest”.
Operating agencies: Our 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 our
estimate of credit exposure, determined principally on the basis of
our collection experience, aging of our receivables and significant
individual account credit risk.
Inventories: Inventories, consisting principally of newsprint,
printing ink and plate material for our publishing operations, are
valued 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), we reported assets held for sale in
our Broadcasting and Publishing Segments at Dec. 28, 2014, of $70
million and at Dec. 29, 2013, of 396 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, we
evaluate 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 their carrying value. We
measure impairment based on the amount by which the carrying
value exceeds the fair value. Fair value is determined primarily using
the projected future cash flows, discounted at a rate commensurate
with the risk involved. Losses on long-lived assets to be disposed of
are determined in a similar manner, except that fair values are
reduced for the cost to dispose.
Property and depreciation: Property, plant and equipment is
recorded at cost, and depreciation is provided generally on a straight-
line basis over the estimated useful lives of the assets. The principal
estimated useful lives are: buildings and improvements, 10 to 40
years; and machinery, equipment and fixtures, 3 to 30 years.
Changes in the estimated useful life of an asset, which, for example,
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 (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.
Before performing the annual two-step goodwill impairment test,
we are 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, we conclude it is more likely than not that the fair value
of a reporting unit is less than its carrying amount, then we are
required to perform a two-step quantitative test. Otherwise, the two-
step test is not required. In the first step of the quantitative test, we
are 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, we perform 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, we determine 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 we must recognize
an impairment loss for the difference between the carrying amount
and the implied fair value of goodwill.
In determining the reporting units, we consider the way we
manage our businesses and the nature of those businesses. We have
established our 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
such as Cars.com and CareerBuilder. For Broadcasting, goodwill is
accounted for at the segment level.
We perform an impairment test annually, or more often if
circumstances dictate, of our 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. We recognized impairment
charges each year from 2012 through 2014. See Note 3 for
additional information.
Investments and other assets: Investments where we have
significant influence are recorded under the equity method of
accounting. We recognized impairment charges each year from
2012-2014 related to such investments. See Note 3 for additional
information.
Investments in non-public businesses in which we do not have
control or do not exert significant influence are carried at cost and
losses resulting from periodic evaluations of the carrying value of
these investments are included as a non-operating expense. At
Dec. 28, 2014, such investments totaled approximately $8.3 million
and at Dec. 29, 2013, they totaled approximately $2.7 million.
Our 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
53
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: Our revenues include amounts charged to
customers for space purchased in our newspapers, digital ads placed
on our digital platforms, advertising and marketing service fees,
online subscription advertising products, commercial printing and
advertising broadcast on our 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 our 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
when advertisements or services are delivered. Online subscriptions
are recognized over the subscription period. 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 our 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 our defined benefit retirement plans are actuarially
determined. We recognize the cost of postretirement benefits
including pension, medical and life insurance benefits on an accrual
basis over the average life expectancy of employees expected to
receive such benefits for plans that have had their benefits frozen.
For active plans, costs are recognized over the estimated average
future service period.
Stock-based employee compensation: We grant restricted stock
or restricted stock units (RSU) 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 10 for further discussion.
Our stock option awards generally have graded vesting terms and
we recognize compensation expense for these options on a straight-
line basis over the requisite service period for the entire award
(generally four years). Stock options are no longer issued to our
employees.
Income taxes: We account 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 9 for further
discussion.
Per share amounts: We report 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
54
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: We are subject to various legal proceedings,
claims and regulatory matters, the outcomes of which are subject to
significant uncertainty. We determine 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. We accrue for loss contingencies when
such amounts are probable and reasonably estimable. If a contingent
liability is only reasonably possible, we will disclose the potential
range of the loss, if material and estimable.
New accounting pronouncements: In April 2014, the Financial
Accounting Standards Board (FASB) issued Accounting Standards
Update (ASU) 2014-08 Presentation of Financial Statements (Topic
205); Property, Plant, and Equipment (Topic 360), and Reporting
Discontinued Operations and Disclosures of Disposals of
Components of an Entity. ASU No. 2014-08 amends the
requirements for reporting and disclosing discontinued operations.
Under ASU No. 2014-08, a disposal of a component of an entity or a
group of components of an entity is required to be reported in
discontinued operations if the disposal represents a strategic shift
that has (or will have) a major effect on the entity’s operations and
financial results. ASU No. 2014-08 is effective for interim and
annual periods beginning after December 15, 2014, with early
adoption permitted and is to be applied prospectively. We adopted
the provisions of ASU No. 2014-08 in 2014 as it relates to a
publishing business that was shut down at the end of 2014 and one
that was sold in early 2015. Neither of these businesses had a major
impact on our operations or financial results and were not considered
discontinued operations.
In May 2014, FASB issued ASU 2014-09 Revenue from
Contracts with Customers (Topic 606) which supersedes the
guidance in Revenue Recognition (Topic 605). The core principle
contemplated by ASU 2014-09 is that an entity should recognize
revenue to depict the transfer of promised goods or services to
customers in an amount that reflects the consideration to which the
entity expects to be entitled in exchange for those goods or services.
New disclosures about the nature, amount, timing and uncertainty of
revenue and cash flows arising from contracts with customers are
also required.
We are required to adopt ASU 2014-09 in the first quarter of
2017 and early application is not permitted. However, we will need
to retroactively apply the standard to 2015 and 2016 at the time of
adoption. We can choose to apply the standard using either the full
retrospective approach or a modified retrospective approach where
we will recognize a cumulative catch up adjustment to the opening
balance of retained earnings. We are currently assessing the impact
of adopting this pronouncement and the transition method we will
use.
NOTE 2
Acquisitions, investments and dispositions
We made the following acquisitions, investments and dispositions in
the years 2012 through 2014:
2014: On Oct. 1, 2014, we acquired the remaining 73% interest
in Cars.com (formerly known as Classified Ventures, LLC) for $1.83
billion. We funded the acquisition with additional borrowings and
cash on hand. As part of the acquisition, Cars.com entered into new
five year affiliation agreements with each of the former newspaper
investors at economic terms much more favorable to Cars.com.
Acquiring full ownership of Cars.com further accelerated our digital
transformation and expanded our position in local media and
marketing services in the automotive sector.
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 . . . . . . . . . . . . . . . . . .
Plant, property and equipment . . . . . . . . . . . . . . . . . . . . . . .
Indefinite-lived intangible assets . . . . . . . . . . . . . . . . . . . . .
43,767
108,577
17,399
872,320
Definite-lived intangible assets:
Customer relationships . . . . . . . . . . . . . . . . . . . . . . . . . . .
789,540
Internally developed technology . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments and other noncurrent assets . . . . . . . . . . . . . . .
Goodwill. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets acquired. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other noncurrent liabilities. . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities assumed. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: acquisition date fair value of 26.9% equity interest . .
69,500
2,860
14,598
715,970
2,634,531
106,970
132,606
239,576
2,394,955
563,757
Acquisition purchase price . . . . . . . . . . . . . . . . . . . . . . . . . . $
1,831,198
We recognized a $476.7 million pre-tax non-cash gain ($285.9
million after-tax) on the acquisition of Cars.com, which is comprised
of a $396.7 million gain on the write-up of our prior 27% investment
in Cars.com to fair value and an $80.0 million gain related to the
required accounting for the pre-existing affiliate agreement between
us and Cars.com. The net gain is included in Other non-operating
items on the Consolidated Statements of Income. The impact to our
Consolidated Statements of Income, net of intersegment
eliminations, since the Oct. 1, 2014, acquisition date was $129.0
million of revenue and $33.6 million of operating income.
Customer relationships are being amortized over a weighted
average life of eleven years and internally developed technology is
being amortized over a weighted average life of seven years.
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. We expect the
purchase price allocated to goodwill and other indefinite-lived
intangibles will be deductible for tax purposes. The initial purchase
price allocation is preliminarily based upon all information available
to us at the present time and is subject to change, and such changes
could be material. We continue to review the underlying assumptions
and valuation techniques utilized to calculate the fair value of
primarily the Indefinite-lived and Definite-lived intangibles.
Pro forma information. The following table sets forth unaudited
pro forma results of operations, assuming that the Cars.com
acquisition, along with transactions necessary to finance the
acquisition, occurred at the beginning of 2013:
In thousands of dollars
Unaudited
2014
2013
Total revenues. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,340,703 $ 5,563,472
Net income attributable to Gannett Co., Inc. . . . . $ 754,851 $ 356,354
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 our results would have been had we operated the
businesses since the beginning of the annual period presented. The
pro forma adjustments reflect amortization of intangibles and
unfavorable contracts related to the fair value adjustments of the
assets and liabilities acquired, additional interest expense related to
the financing of the transactions, alignment of accounting policies
and the related tax effects of the adjustments. Changes in affiliation
agreements between Cars.com and its former investors that went in
to effect on Oct. 1, 2014, were excluded from the pro forma
adjustments dating back to the beginning of 2013. The pro forma
table excludes adjustments for any other acquisitions in 2013 or
2014.
We incurred and expensed a total of $9.3 million of acquisition
costs related to Cars.com for the year ended Dec. 28, 2014. Such
costs were reflected in Other non-operating items in the
Consolidated Statements of Income. These acquisition costs and the
$285.9 million after-tax gain on the acquisition of Cars.com are not
included in the pro forma amounts above as they are specifically
related to the acquisition.
In February 2014, we completed the previously announced sale
of KMOV-TV in St. Louis, MO, to Meredith Corporation, following
regulatory approval. As a condition of the sale, Sander Media
conveyed to Meredith Corporation substantially all of its assets used
to operate KMOV-TV, which Sander Media acquired when the
Gannett-Belo transaction closed on December 23, 2013. We
conveyed certain other assets needed to provide services to KMOV-
TV, which we also acquired from Belo.
55
In March 2014, Classified Ventures, in which we owned a 27%
interest, agreed to sell Apartments.com to CoStar Group, Inc. for
$585 million. This transaction closed on April 1, 2014. As a result of
our ownership stake, we received a special $154.6 million
distribution from Classified Ventures after the close of the
transaction.
Early in the second quarter, our subsidiary CareerBuilder
acquired Broadbean. Broadbean is a leading international job
distribution, candidate sourcing and big data analytics software
company. Broadbean is headquartered in London, United Kingdom
and has offices in the U.S., France, Germany, the Netherlands and
Australia.
In June 2014, we, along with Sander Media, LLC, completed the
previously announced sale of KTVK-TV and KASW-TV in Phoenix,
AZ, to Meredith Corporation. As part of the sale, Sander Media
conveyed to Meredith substantially all of its assets used in the
operation of both stations, which Sander Media acquired when the
Belo transaction was completed in December 2013. We also
conveyed certain other assets we used to provide services to both
stations, which we acquired from the Belo transaction. At the
closing, Meredith simultaneously conveyed KASW-TV to
SagamoreHill of Phoenix, LLC, which through its affiliates, owns
and operates two television stations in two markets. The total sale
price of the Phoenix and St. Louis stations was $407.5 million plus
working capital.
In July 2014, we acquired six London Broadcasting Company
television stations in Texas for approximately $215.0 million in an
all-cash transaction. We used proceeds of $134.9 million from the
sale of the Phoenix and St. Louis stations to partially pay for these
London Broadcasting Company stations via a tax efficient exchange.
The acquisition included KCEN (NBC) in Waco-Temple-Bryan,
KYTX (CBS) in Tyler-Longview, KIII (ABC) in Corpus Christi,
KBMT (ABC) and its digital sub-current KJAC (NBC) in
Beaumont-Port Arthur, KXVA (FOX) in Abilene-Sweetheart and
KIDY (FOX) in San Angelo.
In August 2014, we announced our plan to create two publicly
traded companies: one focused on our Broadcasting and Digital
business, and the other on our Publishing business. The planned
separation of the Publishing business will be implemented through a
tax-free distribution of shares, of a new entity formed to hold our
Publishing assets to our shareholders. We expect to complete the
transaction mid-2015, subject to a number of customary conditions,
including final approval of our Board of Directors, receipt of an
opinion from tax counsel regarding the tax-free nature of the
distribution, the effectiveness of Form 10 registration statement to be
filed with the SEC in regard to the shares of the entity formed to
hold our Publishing assets, and other customary matters. There can
be no assurance regarding the ultimate timing of the proposed
transaction or that it will be completed.
On Dec. 29, 2014, which was after the end of our fiscal year, we
sold Gannett Healthcare Group (GHG) to OnCourse Learning, an
online education and training provider. GHG is a leading provider of
continuing education, certification test preparation, online
recruitment, digital media, publications and related services for
nurses and other healthcare professionals in the U.S. Net assets of
$14.8 million for GHG were included in Assets held for sale on our
Consolidated Balance Sheet as of Dec. 28, 2014.
2013: On Dec. 23, 2013, we 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 that we paid in the
acquisition consisted of additional borrowings and 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. The final allocated fair value of 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 . . . . . . . . . . . . . . . . . . . . . . . .
Indefinite-lived FCC licenses. . . . . . . . . . . . . . . . . . . . . . . . .
Definite-lived intangible assets:
Retransmission agreements . . . . . . . . . . . . . . . . . . . . . . .
Network affiliation agreements . . . . . . . . . . . . . . . . . . . .
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments and other noncurrent assets . . . . . . . . . . . . . . . .
38,107
163,326
431,513
254,267
835,900
99,803
33,978
52,782
52,902
Goodwill. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
928,739
Total assets acquired. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,891,317
Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other noncurrent liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
87,073
514,450
76,500
741,708
Total liabilities assumed. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,419,731
Net assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1,471,586
The retransmission agreements intangible assets are being
amortized over a weighted average life of eight years and network
affiliate agreements intangible assets are being amortized over a
weighted average life of nine years. Acquired property and
equipment are being 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. We expect 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 final allocation
presented above is based upon our estimate of the fair values using
valuation techniques including income, cost and market approaches.
Certain measurement period adjustments have been made since
the initial allocation in the fourth quarter of 2013, which were not
material to our consolidated financial statements.
Under the acquisition method of accounting, the results of the
acquired operations for the 17 consolidated television stations are
included in our financial statements beginning Dec. 23, 2013. Net
broadcasting revenues and operating income of these stations
included in our Consolidated Statements of Income were immaterial
for the year ended Dec. 29, 2013.
We incurred and expensed a total of $33.0 million of acquisition
costs for the year ended Dec. 29, 2013, related to the Belo
acquisition. Such costs were reflected in Other non-operating items
in the Consolidated Statements of Income.
56
In March 2013, CareerBuilder acquired Vietnam Online Network
NOTE 3
(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.
2012: In January 2012, we acquired the assets of Fantasy Sports
Ventures/Big Lead Sports, a leading sports digital site.
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, we completed the acquisition of BLiNQ Media,
LLC, a leading global innovator of social engagement advertising
solutions for agencies and brands.
In September 2012, we acquired Mobestream Media, developer
of the Key Ring consumer rewards mobile platform (Key Ring)
available on all major 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, we 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 which lack coding expertise.
Facility consolidation and asset impairment charges
For each year presented, we recognized charges related to facility
consolidations efforts, and in certain of these periods, we also
recorded non-cash impairment charges to reduce the book value of
goodwill, other intangible assets, long-lived assets, certain
investments in which we hold a non-controlling interest which are
accounted for under the equity method, and charges to write off
certain publishing and broadcasting assets that were donated during
2014 and 2013.
A summary of these charges by year is presented below:
In thousands, except per share amounts
2014
Pre-Tax
Amount
After-Tax
Amount
Per Share
Amount
Facility consolidation and asset impairment charges:
Goodwill:
Publishing. . . . . . . . . . . . . . . . . . . $ 21,881 $ 18,881 $
Digital. . . . . . . . . . . . . . . . . . . . . .
Total goodwill. . . . . . . . . . . . . . . .
Other intangible assets - Publishing .
Property, plant and equipment -
Publishing . . . . . . . . . . . . . . . . . . . . .
Other:
23,700
45,581
3,548
23,700
42,581
2,148
19,467
13,467
Broadcasting. . . . . . . . . . . . . . . . .
Publishing. . . . . . . . . . . . . . . . . . .
Total other. . . . . . . . . . . . . . . . . . .
13,720
14,048
27,768
8,219
8,049
16,268
Total facility consolidation and asset
impairment charges against operations .
Non-operating charges:
96,364
74,464
Equity method investments
Other - Broadcasting . . . . . . . . . . . . .
3,063
16,108
2,163
6,508
Total charges . . . . . . . . . . . . . . . . . . . . . $ 115,535 $ 83,135 $
0.08
0.10
0.18
0.01
0.06
0.04
0.03
0.07
0.32
0.01
0.03
0.36
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
57
NOTE 4
Goodwill and other intangible assets
The following table displays goodwill, indefinite-lived intangible
assets, and amortizable intangible assets at Dec. 28, 2014, and Dec.
29, 2013.
In thousands of dollars
Dec. 28, 2014
Gross
Accumulated
Amortization
Net
Goodwill . . . . . . . . . . . . . . . . . . $ 4,499,927 $
— $ 4,499,927
Indefinite-lived intangibles:
Television station FCC
licenses . . . . . . . . . . . . . . . . .
1,191,950
Mastheads and trade names . .
951,776
— 1,191,950
—
951,776
Amortizable intangible assets:
Customer relationships . . . . . .
1,078,738
Other. . . . . . . . . . . . . . . . . . . .
282,856
Total. . . . . . . . . . . . . . . . . . . . . . $ 8,005,247 $
Dec. 29, 2013
(212,438)
(53,289)
866,300
229,567
(265,727) $ 7,739,520
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
(177,515)
(23,663)
113,330
190,127
Total. . . . . . . . . . . . . . . . . . . . . . $ 5,468,881 $
(201,178) $ 5,267,703
Amortization expense was $79.9 million in 2014 and $36.4
million in 2013. The increase primarily reflects the impact of the
Cars.com acquisition in 2014 and the Belo acquisition in late 2013.
Customer relationships, which include subscriber lists and advertiser
relationships, are amortized on a straight-line basis over their useful
lives. Other intangibles primarily include retransmission agreements,
network affiliations, internally developed technology, patents and
amortizable trade names and are amortized on a straight-line basis
over their useful lives.
The following table shows the projected annual amortization
expense, as of Dec. 28, 2014, related to amortizable intangibles
assuming no acquisitions or dispositions:
In thousands of dollars
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
124,536
116,495
109,641
106,772
102,737
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 . . . . . . . . . . . . . . .
29,520
17,920
2,556
1,656
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 connection with the required annual impairment test of
goodwill and indefinite-lived intangibles, potential impairments
were indicated in certain of the years presented for certain reporting
units in our 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. We 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 impairment charges were taken.
During 2014 and 2013, we recorded non-cash impairment
charges for certain intangible assets, principally trade names and a
masthead, after the qualitative assessments indicated it was more
likely than not that the carrying values exceeded the respective fair
values. Accordingly, we prepared quantitative assessments in both
years which also indicated that impairments existed. As a results of
these assessments, we recorded non-cash impairment charges to
reduce the carrying value of each asset to its respective fair value.
Fair values were determined using a relief-from-royalty method. The
impairments recorded were principally a result of revenue
projections which were lower than expected. In 2014, the revised
revenue projections were also coupled with a decrease in royalty
rates of comparable arrangements thus negatively impacting our
royalty assumptions.
Facility consolidation plans led us to recognize charges
associated with revising the useful lives of certain assets over a
shortened period as well as shutdown costs. Charges were
recognized in each year presented. Certain assets classified as held-
for-sale in accordance with ASC Topic 360 resulted in charges also
being recognized 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.
In each year presented, carrying values of certain investments in
which we own noncontrolling interests were written down to fair
value because the businesses underlying the investments had
experienced significant and sustained operating losses, leading us to
conclude that they were other than temporarily impaired.
We recorded non-operating charges to write off certain
Publishing and Broadcasting Segment assets that were donated
during 2014 and 2013.
58
Goodwill
Gross balance at
Dec. 30, 2012 . . . . $
Accumulated
impairment losses.
Net balance at
Dec. 30, 2012 . . . . $
Acquisitions &
adjustments. . . . . .
Impairment . . . . . .
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 . . . . $
Acquisitions &
adjustments. . . . . .
Assets held for
sale . . . . . . . . . . . .
Impairment . . . . . .
Foreign currency
exchange rate
changes. . . . . . . . .
Balance at
Dec. 28, 2014 . . . . $
Gross balance at
Dec. 28, 2014 . . . .
Accumulated
impairment losses.
Net balance at
Dec. 28, 2014 . . . . $
The following table shows the changes in the carrying amount of
NOTE 5
goodwill during 2014 and 2013.
In thousands of dollars
Broadcasting Publishing
Digital
Total
Investments
Our investments include several that are accounted for under the
equity method. Principal among these are the following:
1,618,602 $ 7,754,959 $
722,781 $10,096,342
— (7,132,817)
(116,656)
(7,249,473)
Ponderay Newsprint Company . . . . . . . . . . . . . . . . . . . . . .
Captivate Holdings, LLC . . . . . . . . . . . . . . . . . . . . . . . . . .
1,618,602 $
622,142 $
606,125 $ 2,846,869
California Newspapers Partnership . . . . . . . . . . . . . . . . . . .
Dispositions . . . . .
(19,000)
—
—
943,841
2,266
28,115
974,222
—
(8,430)
(11,614)
(20,044)
(19,000)
Wanderful Media, LLC . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4Info . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Livestream . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pearl, LLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Homefinder.com . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(110)
3,903
4,632
8,425
Topix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,543,333 $
619,881 $
627,258 $ 3,790,472
2,543,333
7,807,416
755,528
11,106,277
Garnet Media. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Texas-New Mexico Newspapers Partnership . . . . . . . . . . .
TNI Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
% Owned
Dec. 28, 2014
13.50%
16.74%
19.49%
19.50%
24.53%
27.73%
32.10%
33.33%
33.71%
34.00%
40.64%
50.00%
— (7,187,535)
(128,270)
(7,315,805)
The aggregate carrying value of equity investments at Dec. 28,
2014, was $95.7 million and $164.9 million at Dec. 29, 2013.
Certain differences exist between our 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 we recorded for certain of the investments.
Our 2014 results included a pre-tax gain of $148.4 million
related to the sale of Apartments.com by Classified Ventures. This
gain is reflected in the Equity income in unconsolidated investees,
net line.
2,543,333 $
619,881 $
627,258 $ 3,790,472
35,268
4,579
749,250
789,097
—
—
—
(6,288)
—
(6,288)
(21,881)
(23,700)
(45,581)
(11,134)
(16,639)
(27,773)
2,578,601 $
585,157 $ 1,336,169 $ 4,499,927
2,578,601
7,662,543
1,488,139
11,729,283
— (7,077,386)
(151,970)
(7,229,356)
2,578,601 $
585,157 $ 1,336,169 $ 4,499,927
59
193,429
193,429
In August 2013, we entered into an agreement to replace, amend
In September 2014, and in support of the Cars.com acquisition,
we completed the private placement of $350 million in aggregate
principal amount of 4.875% senior unsecured notes due 2021 (the
2021 Notes). The 2021 Notes were priced at 98.531% of face value,
resulting in a yield to maturity of 5.125%. Subject to certain
exceptions, we are unable to redeem the 2021 Notes before Sept. 15,
2017. On the same day, we completed the private placement of $325
million in aggregate principal amount of 5.500% senior unsecured
notes due 2024 (the 2024 Notes). The 2024 Notes were priced at
99.038% of face value, resulting in a yield to maturity of 5.625%.
Subject to certain exceptions, we are unable to redeem the 2024
Notes before Sept. 15, 2019. The 2021 and 2024 Notes were issued
in a private offering that is exempt from the registration
requirements of the Securities Act of 1933. The 2021 and 2024
Notes are guaranteed on a senior basis by our subsidiaries that
guarantee our revolving credit facility, term loan and our other
outstanding notes.
and restate our existing revolving credit facilities with a credit
facility expiring on Aug. 5, 2018, which was further amended on
Sept. 24, 2013 (the Credit Agreement). Total commitments under the
Credit Agreement are $1.3 billion. Subject to total leverage ratio
limits, the Credit Agreement eliminates our restriction on incurring
additional indebtedness. The Credit Agreement was amended as of
February 13, 2015. The maximum total leverage ratio permitted by
the Credit Agreement as amended, is 4.0x through September 30,
2016, reducing to 3.75x thereafter. Commitment fees on the
revolving credit agreement are equal to 0.375% -0.50% of the
undrawn commitments, depending upon our leverage ratio, and are
computed on the average daily undrawn balance under the revolving
credit agreement and paid each quarter. Under the Credit Agreement,
we 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 our
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 our leverage ratio as of Dec. 28, 2014, our applicable
margins were 2.25% and 1.25%, respectively.
On Dec. 28, 2014, we had unused borrowing capacity of $625.5
million under our revolving credit agreement.
We have 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. We may also invest borrowed funds that are not
required for other purposes in short-term marketable securities.
NOTE 6
Long-term debt
Our long-term debt is summarized below:
In thousands of dollars
Dec. 28, 2014 Dec. 29, 2013
Unsecured floating rate term loan due
quarterly through August 2018. . . . . . . . . . . $
VIE unsecured floating rate term loans due
quarterly through December 2018 . . . . . . . .
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 . . . . . . . . . .
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 4.875% due September 2021 . . . . . . . . . .
Unsecured notes bearing fixed rate interest
at 6.375% due October 2023 . . . . . . . . . . . .
Unsecured notes bearing fixed rate interest
at 5.50% due September 2024 . . . . . . . . . . .
Unsecured notes bearing fixed rate interest
at 7.75% due June 2027 . . . . . . . . . . . . . . . .
Unsecured notes bearing fixed rate interest
at 7.25% due September 2027 . . . . . . . . . . .
123,200 $
154,800
33,379
39,270
—
250,000
66,568
66,568
250,000
250,000
—
250,000
640,000
—
250,000
250,000
600,000
600,000
600,000
600,000
350,000
—
650,000
650,000
325,000
—
200,000
200,000
240,000
240,000
Total principal long-term debt . . . . . . . . . . .
4,521,576
3,744,067
Other (fair market value adjustments and
discounts) . . . . . . . . . . . . . . . . . . . . . . . . . . .
(25,694)
(31,167)
Total long-term debt. . . . . . . . . . . . . . . . . . .
4,495,882
3,712,900
Less current portion of long-term debt
maturities of VIE loans. . . . . . . . . . . . . . . . .
7,854
5,890
Long-term debt, net of current portion. . . . . $
4,488,028 $
3,707,010
Our debt balance at year end 2014 increased by $781 million
primarily reflecting additional borrowings to fund the acquisition of
the remaining 73% of Cars.com we did not previously own. This
was partially offset by the early repayment of the 9.375% notes due
November 2017 and the repayment of the 8.75% notes due
November 2014 for $250 million each. We redeemed the 9.375%
notes by paying 104.688% of the outstanding principal amount in
accordance with the original terms. The early redemption of these
notes saved us approximately $19 million in interest expense for
2014.
60
Our pension costs, which include costs for our qualified and non-
qualified plans, are presented in the following table:
In thousands of dollars
2014
2013
2012
Service cost—benefits earned during
the period . . . . . . . . . . . . . . . . . . . . . . . . $
Interest cost on benefit obligation . . . . .
5,311 $
7,538 $
7,545
168,991
141,030
155,376
Expected return on plan assets . . . . . . . .
(234,862)
(198,216)
(189,863)
Amortization of prior service costs . . . .
Amortization of actuarial loss . . . . . . . .
Pension expense (benefit) for company-
sponsored retirement plans. . . . . . . . . . .
7,566
45,731
7,566
63,212
7,689
53,429
(7,263)
21,130
34,176
Settlement charge . . . . . . . . . . . . . . . . . .
Total pension cost (benefit) . . . . . . . . . . $ (7,263) $ 24,207 $ 42,122
7,946
3,077
—
The following table provides a reconciliation of pension benefit
obligations (on a projected benefit obligation measurement basis),
plan assets and funded status of company-sponsored retirement
plans, along with the related amounts that are recognized in the
Consolidated Balance Sheets.
In thousands of dollars
Change in benefit obligations
Dec. 28, 2014 Dec. 29, 2013
Benefit obligations at beginning of year . . . $
3,672,249 $
3,573,085
Service cost. . . . . . . . . . . . . . . . . . . . . . . . . .
Interest cost. . . . . . . . . . . . . . . . . . . . . . . . . .
Plan amendments . . . . . . . . . . . . . . . . . . . . .
Plan participants’ contributions . . . . . . . . . .
Actuarial loss (gain) . . . . . . . . . . . . . . . . . . .
Foreign currency translation. . . . . . . . . . . . .
5,311
168,991
—
5
438,296
(57,779)
7,538
141,030
177
4
(104,131)
21,758
Gross benefits paid . . . . . . . . . . . . . . . . . . . .
(227,269)
(230,979)
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 . . . . . . . . . . . . .
—
—
274,510
(10,743)
3,999,804 $
3,672,249
3,028,467 $
2,552,316
180,033
364,652
Plan participants’ contributions . . . . . . . . . .
5
4
Employer contributions . . . . . . . . . . . . . . . .
103,933
107,086
Gross benefits paid . . . . . . . . . . . . . . . . . . . .
(227,269)
(230,979)
Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . .
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
Foreign currency translation. . . . . . . . . . . . .
(42,655)
229,774
(10,743)
16,357
Fair value of plan assets at end of year . . . . $
3,042,514 $
3,028,467
Funded status at end of year . . . . . . . . . . . . . $
Amounts recognized in Consolidated Balance Sheets
(957,290) $
(643,782)
Noncurrent assets . . . . . . . . . . . . . . . . . . . . . $
— $
3,684
Accrued benefit cost—current . . . . . . . . . . . $
(15,575) $
(15,271)
Accrued benefit cost—noncurrent . . . . . . . . $
(941,715) $
(632,195)
The following schedule of annual maturities of the principal
amount of total debt assumes we use available capacity under our
revolving credit agreement to refinance unsecured floating rate term
loans and notes due in 2015. Based on this refinancing assumption,
all of the obligations other than VIE unsecured floating rate term
loans due in 2015 are reflected as maturities for 2016 and beyond.
In thousands of dollars
2015 (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,854
232,883
39,454
1,276,385
600,000
2,365,000
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
4,521,576
(1) Maturities of principal amount of debt due in 2015 (primarily the 10%
fixed rate notes due in June 2015 and the 6.375% fixed rate notes due in
September 2015) are assumed to be repaid with funds from the revolving
credit agreement, which matures in 2018.
Our debt maturities may be repaid with cash flow from operating
activities, by accessing capital markets or a combination of both.
NOTE 7
Retirement plans
We, along with our subsidiaries, have various defined benefit
retirement plans, including plans established under collective
bargaining agreements. Our principal retirement plan is the Gannett
Retirement Plan (GRP). The disclosure tables below include the
assets and obligations of the GRP, the Gannett Supplemental
Retirement Plan (SERP), the Newsquest Pension Scheme in the U.K.
(Newsquest Plan), the Newspaper Guild of Detroit Pension Plan, and
The G. B. Dealey Retirement Pension Plan (Dealey Plan). We use a
Dec. 31 measurement date convention for our retirement plans.
Substantially all participants in the GRP, Dealey Plan and SERP
had their benefits frozen before 2009. Participants of the Newsquest
Plan had their benefits frozen effective March 31, 2011.
61
The funded status (on a projected benefit obligation basis) of our
Other changes in plan assets and benefit obligations recognized
principal retirement plans at Dec. 28, 2014, is as follows:
in other comprehensive loss consist of the following:
In thousands of dollars
In thousands of dollars
Fair Value of
Plan Assets
Benefit
Obligation
Funded
Status
1,973,928 $ 2,392,208 $
(418,280)
GRP . . . . . . . . . . . . . . . . . . . . $
SERP (a) . . . . . . . . . . . . . . . . .
Newsquest . . . . . . . . . . . . . . .
Dealey . . . . . . . . . . . . . . . . . .
All other. . . . . . . . . . . . . . . . .
—
716,519
259,320
92,747
216,049
970,674
314,755
106,118
Total. . . . . . . . . . . . . . . . . . . . $
(a) The SERP is an unfunded, unsecured liability
3,042,514 $ 3,999,804 $
(216,049)
(254,155)
(55,435)
(13,371)
(957,290)
The accumulated benefit obligation for all defined benefit
pension plans was $3.98 billion at Dec. 28, 2014, and $3.65 billion
at Dec. 29, 2013.
The following table presents information for our retirement plans
for which accumulated benefits exceed assets:
In thousands of dollars
Accumulated benefit obligation . . . . . . . . . . $
3,979,493 $
3,568,021
Dec. 28, 2014 Dec. 29, 2013
Current year actuarial gain (loss) . . . . . . . . . . . . . . . . . . . . . $
Amortization of actuarial loss . . . . . . . . . . . . . . . . . . . . . . .
Amortization of prior service costs . . . . . . . . . . . . . . . . . . .
Foreign currency gain. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2014
(493,124)
45,731
7,566
26,511
(413,316)
Pension costs: The following assumptions were used to
determine net pension costs:
Discount rate. . . . . . . . . . . . . . . . . . . . . . . . .
4.75%
Expected return on plan assets . . . . . . . . . . .
7.93%
Rate of compensation increase . . . . . . . . . . .
2.97%
2014
2013
4.08%
7.94%
2.97%
2012
4.83%
7.95%
2.96%
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.
Fair value of plan assets . . . . . . . . . . . . . . . . $
3,042,514 $
2,938,480
Benefit obligations and funded status: The following
The following table presents information for our retirement plans
for which projected benefit obligations exceed assets:
In thousands of dollars
Projected benefit obligation . . . . . . . . . . . . . $
3,999,804 $
3,585,947
Fair value of plan assets . . . . . . . . . . . . . . . . $
3,042,514 $
2,938,480
Dec. 28, 2014 Dec. 29, 2013
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
assumptions were used to determine the year-end benefit obligations:
Discount rate . . . . . . . . . . . . . . . . . . . . . . . .
Rate of compensation increase. . . . . . . . . . .
3.96%
2.96%
4.75%
2.97%
Dec. 28, 2014 Dec. 29, 2013
During 2014, we made the following contributions to our
principal retirement plans: $56.1 million to the GRP, $20.1 million to
the Dealey Plan and $14.7 million to the Newsquest Plan. In 2015,
we expect to contribute $12.0 million to the GRP and $12.8 million
to the Newsquest Plan.
Plan assets: The asset allocation for the GRP at the end of 2014
and 2013, and target allocations for 2015, by asset category, are
presented in the table below:
Dec. 28, 2014 Dec. 29, 2013
Target Allocation Allocation of Plan Assets
Equity securities . . . . . . .
Debt securities. . . . . . . . .
Other . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . .
2015
65%
20
15
100%
2014
65%
20
15
2013
64%
22
14
100%
100%
Net actuarial losses. . . . . . . . . . . . . . . . . . . . $ (1,811,857) $ (1,390,975)
Prior service cost . . . . . . . . . . . . . . . . . . . . .
(46,383)
(53,949)
Amounts in accumulated other
comprehensive income (loss) . . . . . . . . . . . . $ (1,858,240) $ (1,444,924)
The actuarial loss amounts expected to be amortized from
accumulated other comprehensive income (loss) into net periodic
benefit cost in 2015 are $60.5 million. The prior service cost
amounts expected to be amortized from accumulated other
comprehensive income (loss) into net periodic benefit cost in 2015
are $7.6 million.
The increased reduction to accumulated other comprehensive
income was driven by lower rates used to discount our pension
obligations as well as updates to assumed life expectancies of the
plan’s participants.
62
The primary objective of company-sponsored retirement plans is
to provide eligible employees with scheduled pension benefits; the
“prudent man” guideline is followed with regard to the investment
management of retirement plan assets. Consistent with prudent
standards for preservation of capital and maintenance of liquidity,
the goal is to earn the highest possible total rate of return while
minimizing risk. The principal means of reducing volatility and
exercising prudent investment judgment is diversification by asset
class and by investment manager; consequently, portfolios are
constructed to attain prudent diversification in the total portfolio,
each asset class, and within each individual investment manager’s
portfolio. Investment diversification is consistent with the intent to
minimize the risk of large losses. All objectives are based upon an
investment horizon spanning five years so that interim market
fluctuations can be viewed with the appropriate perspective. The
target asset allocation represents the long-term perspective.
Retirement plan assets will be rebalanced periodically to align them
with the target asset allocations. Risk characteristics are measured
and compared with an appropriate benchmark quarterly; periodic
reviews are made of the investment objectives and the investment
managers. Our actual investment return on our Gannett Retirement
Plan assets was 5.2% for 2014, 16.4% for 2013 and 12.6% for 2012.
Retirement plan assets include approximately 1.2 million shares
of our common stock valued at approximately $39.7 million at the
end of 2014 and $36.7 million at the end of 2013. The plan received
dividends of approximately $1.0 million on these shares in 2014 and
2013.
Cash flows: We estimate we will make the following benefit
payments (from either retirement plan assets or directly from our
funds), which reflect expected future service, as appropriate:
In thousands of dollars
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
222,327
225,846
230,012
229,063
232,081
2020-2024. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1,146,800
401(k) savings plan
Substantially all our employees (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 our principal defined contribution plan, The Gannett
Co., Inc. 401(k) Savings Plan. Employees can elect to save up to
50% of compensation on a pre-tax basis subject to certain limits.
For most participants, the plan’s matching formula is 100% of
the first 5% of employee contributions. We also make additional
employer contributions on behalf of certain long-term employees.
Compensation expense related to 401(k) contributions was $48.1
million in 2014, $47.5 million in 2013, and $51.3 million in 2012.
We settled the 401(k) employee match obligation by buying our
stock in the open market and depositing it in the participants’
accounts.
Multi-employer plans that provide pension benefits: We
contribute to a number of multi-employer defined benefit pension
plans under the terms of collective-bargaining agreements (CBA)
that cover our union-represented employees. The risks of
participating in these multi-employer plans are different from single-
employer plans in the following aspects:
• We play 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 we choose to stop participating in some of our multi-employer
plans, we may be required to pay those plans an amount based on
the unfunded status of the plan, referred to as withdrawal
liability.
63
Our participation in these plans for the annual period ended
Dec. 28, 2014, 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. The zone status is based on information that we 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.
We make all required contributions to these plans as determined
under the respective CBAs. For each of the plans listed below, our
contribution represented less than 5% of total contributions to the
plan except for one plan where we contributed approximately 13%
of the total contributions to the Newspaper Guild International
Pension Plan. This calculation is based on the plan financial
statements issued at the end of December 31, 2013. At the date we
issue our financial statements, Forms 5500 were unavailable for the
plan years ending after December 31, 2013.
We incurred expenses for multi-employer withdrawal liabilities
of $8.2 million in 2014 and $3.8 million in 2012. Other noncurrent
liabilities on the Consolidated Balance Sheet include $41.2 million
as of Dec. 28, 2014, and $34.1 million as of Dec. 29, 2013, for such
withdrawal liabilities.
Multi-employer Pension Plans
Pension Plan Name
Plan Number
2014
2013
EIN Number/
Zone Status
Dec. 31,
FIP/RP Status
Pending/
Implemented
Contributions
(in thousands)
2013
2014
2012
Surcharge
Imposed
Expiration
Dates of
CBAs
NA
$ 973 $ 988 $ 965
NA
AFTRA Retirement Plan (a)
13-6414972/001
Green
as of
Nov.
30,
2013
CWA/ITU Negotiated Pension Plan
13-6212879/001
Red
Green
as of
Nov.
30,
2012
Red
Red
GCIU—Employer Retirement Benefit Plan
(a), (b)
The Newspaper Guild International
Pension Plan (a)
IAM National Pension Plan (a)
Teamsters Pension Trust Fund of
Philadelphia and Vicinity (a)
Central Pension Fund of the International
Union of Operating Engineers and
Participating Employers (a)
Central States Southeast and Southwest
Areas Pension Fund (b)
Total
91-6024903/001
Red
Implemented
433
242
572
Implemented
71
216
380
52-1082662/001
Red
51-6031295/002
Green
Red
Green
Implemented
NA
244
403
279
736
415
341
23-1511735/001 Yellow
Yellow
Implemented
1,298
1,355
876
Green
as of
Jan.
31,
2014
Green
as of
Jan.
31,
2013
36-6052390/001
NA
153
160
158
36-6044243/001
Red
Red
Implemented
—
40
260
$ 3,575 $4,016 $3,967
No
No
No
NA
NA
NA
No
5/31/2015
9/11/2015
4/18/2017
2/1/2015
11/8/2015
2/23/2016
N/A
2/23/2016
4/30/2016
7/29/2015
2/23/2016
4/30/2016
N/A
(a) This plan has elected to utilize special amortization provisions provided under the Preservation of Access to Care for Medicare Beneficiaries and Pension
Relief Act of 2010.
(b) We have no ongoing participation in these plans.
64
NOTE 8
Postretirement benefits other than pensions
We provide health care and life insurance benefits to certain retired
employees who meet age and service requirements. Most of our
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. Our policy is to fund benefits as claims and
premiums are paid. Commencing July 1, 2014, for certain Medicare-
eligible retirees, our approach to deliver postretirement healthcare
moved to a private retiree exchange. For those individuals, we began
providing a stipend which is accessible through a Health
Reimbursement Account. We eliminated postretirement medical and
life insurance benefits for most U.S. employees under 50 years of
age effective Jan. 1, 2006. We use 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
2014
2013
2012
Service cost – benefits earned during the
period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Interest cost on net benefit obligation. . . . .
369 $
529 $
545
4,711
5,656
7,744
Amortization of prior service credit . . . . . .
(11,648)
(9,165)
(19,190)
Amortization of actuarial loss. . . . . . . . . . .
758
1,169
1,943
Net periodic postretirement benefit credit . $ (5,810) $ (1,811) $ (8,958)
The table below provides a reconciliation of benefit obligations
and funded status of our postretirement benefit plans:
In thousands of dollars
Change in benefit obligations
Dec. 28, 2014 Dec. 29, 2013
Net benefit obligations at beginning of year $
146,809 $
169,592
Service cost. . . . . . . . . . . . . . . . . . . . . . . . . .
Interest cost. . . . . . . . . . . . . . . . . . . . . . . . . .
Plan participants’ contributions . . . . . . . . . .
Plan amendments . . . . . . . . . . . . . . . . . . . . .
Actuarial loss (gain) . . . . . . . . . . . . . . . . . . .
Gross benefits paid . . . . . . . . . . . . . . . . . . . .
Federal subsidy on benefits paid . . . . . . . . .
Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . .
369
4,711
5,133
(37,986)
6,954
(18,739)
683
—
529
5,656
9,629
(496)
(16,476)
(28,022)
4,169
2,228
Net benefit obligations at end of year . . . . . $
Change in plan assets
107,934 $
146,809
Fair value of plan assets at beginning of year $
— $
Employer contributions . . . . . . . . . . . . . . . .
Plan participants’ contributions . . . . . . . . . .
13,606
5,133
—
18,393
9,629
Gross benefits paid . . . . . . . . . . . . . . . . . . . .
(18,739)
(28,022)
Fair value of plan assets at end of year . . . . $
— $
—
Benefit obligation at end of year . . . . . . . . . $
Amounts recognized in Consolidated Balance Sheets
(107,934) $
(146,809)
Accrued benefit cost—current . . . . . . . . . . . $
(10,286) $
(17,731)
Accrued benefit cost—noncurrent . . . . . . . . $
(97,648) $
(129,078)
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. 28, 2014 Dec. 29, 2013
Net actuarial losses. . . . . . . . . . . . . . . . . . . . $
(12,594) $
Prior service credit . . . . . . . . . . . . . . . . . . . .
42,542
(6,087)
16,204
Amounts in accumulated other
comprehensive income (loss) . . . . . . . . . . . . $
29,948 $
10,117
The actuarial loss and prior service credit estimated to be
amortized from accumulated other comprehensive loss into net
periodic benefit cost in 2015 are $1.5 million and $10.0 million,
respectively.
Other changes in plan assets and benefit obligations recognized
in other comprehensive (loss) consist of the following:
In thousands of dollars
Current year actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . $
Change in prior service cost . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of actuarial loss . . . . . . . . . . . . . . . . . . . . . . .
Amortization of prior service credit . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2014
(7,265)
37,986
758
(11,648)
19,831
Postretirement benefit costs: The following assumptions were
used to determine postretirement benefit cost:
2014
2013
2012
Discount rate . . . . . . . . . . . . . . . . . . . . . . . .
4.50%
3.80%
4.75%
Health care cost trend rate assumed for
next year . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ultimate trend rate . . . . . . . . . . . . . . . . . . .
Year that ultimate trend rate is reached. . . .
6.26%
5.00%
2018
7.17%
5.00%
2017
6.50%
5.00%
2016
Benefit obligations and funded status: The following
assumptions were used to determine the year-end benefit obligation:
Dec. 28, 2014 Dec. 29, 2013
Discount rate. . . . . . . . . . . . . . . . . . . . . . . . .
Health care cost trend rate assumed for
next year . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ultimate trend rate . . . . . . . . . . . . . . . . . . . .
Year that ultimate trend rate is reached . . . .
4.00%
6.26%
5.00%
2018
4.75%
7.17%
5.00%
2017
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 $0.3 million in the 2014 postretirement benefit
obligation and no measurable change in the aggregate service and
interest components of the 2014 expense.
65
Cash flows: We expect to make the following benefit payments,
The components of net income attributable to Gannett Co., Inc.
which reflect expected future service, and to receive the following
federal subsidy benefits as appropriate:
before income taxes consist of the following:
In thousands of dollars
2014
2013
2012
Domestic . . . . . . . . . . . . . . . . . . . . . $1,207,669 $
426,162 $ 538,988
Foreign . . . . . . . . . . . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . . . $1,287,771 $
80,102
75,718
80,692
501,880 $ 619,680
The provision for income taxes on varies from the U.S. federal
statutory tax rate as a result of the following differences:
U.S. statutory tax rate . . . . . . . . . . . . . . . . . . . .
35.0% 35.0% 35.0%
2014
2013
2012
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 . . . . . . . . . . . . . . . . . . . . .
1.2
3.6
(2.0)
(0.1)
Loss on sale of subsidiary . . . . . . . . . . . . . .
(19.0)
Lapse of statutes of limitations net of
federal income tax . . . . . . . . . . . . . . . . . .
Domestic manufacturing deduction . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effective tax rate . . . . . . . . . . . . . . . . . . . . . . .
(0.5)
(1.7)
1.0
—
2.7
(5.7)
(7.9)
—
(2.6)
(2.1)
3.2
5.2
2.2
(5.6)
(4.6)
—
(1.8)
(1.7)
2.8
17.5% 22.6% 31.5%
Absent the impact of facility consolidation, asset impairment,
certain gains and expenses recognized in non-operating categories
and workforce restructuring charges, the special net tax benefit from
the release of certain tax reserves due to audit settlements, and the
lapse of statutes of limitations, all for the years from 2012 to 2014,
as well as the special net tax benefit from the sale of a non-strategic
subsidiary in 2014, our effective tax rate would have been 30.9% for
2014, 29.7% for 2013, and 30.9% for 2012.
Deferred income taxes reflect temporary differences in the
recognition of revenue and expense for tax reporting and financial
statement purposes. Deferred tax liabilities and assets are adjusted
for enacted changes in tax laws or tax rates of the various tax
jurisdictions. The amounts of such adjustments for 2014, 2013 and
2012 were not significant.
In thousands of dollars
Benefit
Payments
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
10,287
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
9,109
8,502
8,578
7,970
2020-2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
32,087
The amounts above exclude the participants’ share of the benefit
cost. Our policy is to fund benefits as claims, stipends and premiums
are paid. We expect no subsidy benefits for 2015 and beyond.
NOTE 9
Income taxes
The provision (benefit) for income taxes consists of the following:
In thousands of dollars
2014
Current
Deferred
Total
Federal . . . . . . . . . . . . . . . . . . . . . . . $ 217,500 $
(38,000) $ 179,500
State and other . . . . . . . . . . . . . . . . .
5,800
Foreign. . . . . . . . . . . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . . . $ 224,400 $
1,100
37,200
2,000
43,000
3,100
1,200 $ 225,600
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
66
Deferred tax liabilities and assets were composed of the
Realization of deferred tax assets for which valuation allowances
have not been established is dependent upon generating sufficient
future taxable income. We expect to realize the benefit of these
deferred tax assets through future reversals of our 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, we
believe it is more likely than not that all deferred tax assets for which
valuation allowances have not been established will be realized.
The following table summarizes the activity related to
unrecognized tax benefits, excluding the federal tax benefit of state
tax deductions:
In thousands of dollars
Change in unrecognized tax benefits
Balance at beginning of year . . . . . . . . . . . . $
57,324 $
86,180
Dec. 28, 2014 Dec. 29, 2013
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. . . . . . . . . . . . . . . . . . . . . . . . . . .
12,426
868
(4,563)
(129)
29,470
4,710
(33,109)
(1,246)
(7,040)
(28,681)
Balance at end of year . . . . . . . . . . . . . . . . . $
58,886 $
57,324
The total amount of unrecognized tax benefits that, if recognized,
would impact the effective tax rate was $46.8 million as of Dec. 28,
2014, and $46.5 million as of Dec. 29, 2013. This amount includes
the federal tax benefit of state tax deductions.
We recognize interest and penalties related to unrecognized tax
benefits as a component of income tax expense. We also recognize
interest income attributable to overpayment of income taxes and
from the reversal of interest expense previously recorded for
uncertain tax positions which are subsequently released as a
component of income tax expense. We recognized income from
interest and the release of penalty reserves of $4.6 million in 2014,
$17.2 million in 2013, and $7.8 million in 2012. The amount of
accrued interest and penalties payable related to unrecognized tax
benefits was $6.9 million as of Dec. 28, 2014 and $11.5 million as of
Dec. 29, 2013.
We file income tax returns in the U.S. and various state and
foreign jurisdictions. The 2011 through 2014 tax years remain
subject to examination by the IRS. The 2010 through 2014 tax years
generally remain subject to examination by state authorities, and the
tax year 2014 is subject to examination in the U.K. Tax years before
2010 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 our 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,
we estimate the amount of our gross unrecognized tax positions may
decrease by up to approximately $4.8 million within the next 12
months primarily due to lapses of statutes of limitations and
settlement of ongoing audits in various jurisdictions.
following at the end of 2014 and 2013:
In thousands of dollars
Liabilities
Dec. 28, 2014 Dec. 29, 2013
Accelerated depreciation . . . . . . . . . . . . . . . $
262,657 $
302,650
Accelerated amortization of deductible
intangibles . . . . . . . . . . . . . . . . . . . . . . . . . .
Partnership investments including
impairments . . . . . . . . . . . . . . . . . . . . . . . . .
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred tax liabilities . . . . . . . . . . . . .
Assets
Accrued compensation costs . . . . . . . . . . . .
Pension . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Postretirement medical and life . . . . . . . . . .
Federal tax benefits of uncertain state tax
positions . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Partnership investments including
impairments . . . . . . . . . . . . . . . . . . . . . . . . .
Loss carryforwards . . . . . . . . . . . . . . . . . . . .
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred tax assets . . . . . . . . . . . . . . . .
Valuation allowance . . . . . . . . . . . . . . . . . . .
589,014
678,744
244,582
18,961
—
24,882
1,115,214
1,006,276
64,255
343,566
37,794
75,492
219,413
55,921
12,135
12,474
—
361,133
77,977
896,860
200,123
1,140
74,018
84,738
523,196
83,579
(566,659)
Total net deferred tax assets (liabilities). . . . $
Amounts recognized in Consolidated Balance Sheets
(418,477) $
Current deferred tax assets . . . . . . . . . . . . . . $
158,648 $
21,245
Assets held for sale. . . . . . . . . . . . . . . . . . . . $
9,600 $
Noncurrent deferred tax assets . . . . . . . . . . . $
63,647 $
—
—
Noncurrent deferred tax liabilities . . . . . . . . $
(650,372) $
(587,904)
As of Dec. 28, 2014, we had approximately $728.8 million of
capital loss carryforwards for federal and state purposes which, if not
used prior to 2020, will expire, and can only be utilized to the extent
capital gains are recognized. As of Dec. 28, 2014, we also had
approximately $16.8 million of foreign tax credits, $1.8 million of
state credits, $278.4 million of foreign net operating loss
carryforwards, $489.0 million of apportioned state net operating loss
carryovers, and $35.3 million of foreign capital loss carryforwards.
The foreign tax credits expire in various amounts beginning in 2016
through 2024, the state credits expire between 2016 and 2023 in
various amounts, and the state and foreign net operating loss
carryovers expire in various amounts beginning in 2015 through
2034. The foreign capital losses can be carried forward indefinitely.
Included in total deferred tax assets are valuation allowances of
approximately $200.1 million in 2014 and $83.6 million in 2013,
primarily related to federal and state capital losses, foreign tax
credits, foreign losses and state net operating losses available for
carry forward to future years. The increase in the valuation
allowance from 2013 to 2014 is related primarily to the $96.3
million valuation allowance with respect to additional federal and
state capital loss carryforwards for which it was determined, based
on an analysis of future sources of taxable income and other sources
of positive and negative evidence, it is not more likely than not that
the capital losses will be utilized before their expiration.
67
NOTE 10
Shareholders’ equity
Capital stock and earnings per share
Our earnings per share (basic and diluted) for 2014, 2013, and 2012
are presented below:
In thousands, except per share amounts
2014
2013
2012
Net income attributable to
Gannett Co., Inc. . . . . . . . . . . . . . . . . . . $1,062,171 $ 388,680 $ 424,280
Weighted average number of common
shares outstanding (basic) . . . . . . . . . . .
Effect of dilutive securities
226,292
232,327
228,541
Restricted stock . . . . . . . . . . . . . . . . . . .
Performance shares . . . . . . . . . . . . . . . .
Stock options . . . . . . . . . . . . . . . . . . . . .
2,624
1,999
992
2,839
1,649
1,160
2,552
944
867
Weighted average number of common
shares outstanding (diluted). . . . . . . . . .
Earnings per share (basic) . . . . . . . . . . . $
Earnings per share (diluted) . . . . . . . . . $
231,907
234,189
236,690
4.69 $
1.70 $
4.58 $
1.66 $
1.83
1.79
The diluted earnings per share amounts exclude the effects of
approximately 0.8 million stock options outstanding for 2014, 2.4
million for 2013 and 6.5 million for 2012, as their inclusion would
be antidilutive.
Share repurchase program
In June 2013, we announced that our Board of Directors approved a
new program to repurchase up to $300 million in our common stock.
During 2014, 2.7 million shares were purchased under the current
program for $75.8 million. In 2013, 4.9 million shares were
purchased under the current and former programs for $116.6 million
and in 2012, 10.3 million shares were purchased for $153.9 million.
Repurchased shares are included in the Consolidated Balance Sheets
as Treasury Stock. As of Dec. 28, 2014, the value of shares that may
be repurchased under the existing program is $148.9 million. This
share repurchase program was temporarily suspended upon the
announcement of the Cars.com acquisition in 2014, but was re-
initiated in February of 2015, well ahead of the timeline we had
previously anticipated, as a result of our strong operating
performance and the strength of our balance sheet.
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. Certain of the shares we previously acquired have been
reissued in settlement of employee stock awards.
Equity-based awards
In May 2001, our 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 our 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 our employees and members of
the Board of Directors. The Plan provides that shares of common
stock subject to awards granted become available again for issuance
if such awards are canceled or forfeited.
During 2011, we established a performance share award plan for
senior executives pursuant to which awards were first made with a
grant date of Jan. 1, 2012. Pursuant to the terms of this award, we
may issue shares of our 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 us 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 our 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 before 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 is
determined on date of grant by using a Monte Carlo valuation
model. Each PSU is equal to and paid in one share of our 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.
We issue 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. For RSU grants after 2014, the
grants generally vest 25% per year. Under the plan, no more than
500,000 RSUs may be granted to any participant in any fiscal year.
The Plan also permits us 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 us to issue stock options. Stock options
may be granted as either non-qualified stock options or incentive
stock options. Options may be granted to purchase our common
stock at not less than 100% of the fair market value on the day of
grant. Options may be 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. We discontinued annual stock option
grants to senior executives when we began issuing Performance
Shares.
68
We issued stock options to certain members of our 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. Members of the Board of Directors were
awarded no stock options as part of their compensation in 2014,
22,558 shares in 2013 and 74,611 shares in 2012. We ceased issuing
stock options to members of the Board of Directors in May 2013.
We issued restricted stock to certain members of our Board of
Directors as compensation for meeting fees and retainer fees, as well
as annual long-term awards. Meeting fees paid as restricted stock
fully vest upon grant. Retainers paid in the form of restricted shares
vest in equal quarterly installments over one year. Long-term awards
vest in equal monthly installments over three years. Expense is
recognized on a straight-line basis over the vesting period based on
the grant date fair value. Members of the Board of Directors were
awarded 40,530 shares of restricted stock in 2014, 57,531 shares in
2013 and 31,929 shares in 2012, as part of their compensation plan.
All vested shares will be issued to directors when they retire 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 our 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 – We determined the fair
value of Performance Shares using the Monte Carlo valuation
model. This model considers our likelihood, and the likelihood of
our peer group companies’, share prices ending at various levels
subject to certain price caps at the conclusion of the three-year
incentive period. We determined the fair value of stock options using
the Black-Scholes option-pricing formula. Key inputs into the Monte
Carlo valuation model and the Black-Scholes option-pricing formula
include expected term, expected volatility, risk-free interest rate and
expected dividend yield. Each assumption is discussed below.
Expected term – The expected term represents the period that our
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, considering 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
our common stock and also our peer group when the Monte Carlo
method is used. The time frame used is equal to the expected term.
Risk-free interest rate – We base 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.
Expected dividend – The dividend assumption is based on our
expectations about our dividend policy on the date of grant.
Estimated forfeitures – When estimating forfeitures, we consider
voluntary termination behavior as well as analysis of actual
forfeitures.
The following assumptions were used to estimate the fair value
of performance share awards and stock options:
Performance Shares
Granted During
Expected term . . . . . . . . .
2014
3 yrs.
Expected volatility . . . . . .
39.32%
Risk-free interest rate. . . .
Expected dividend yield. .
0.78%
2.70%
Stock Options Granted
During(a)
Average expected term. . .
Expected volatility . . . . . .
Weighted average
volatility . . . . . . . . . . . . . .
Risk-free interest rates . . .
Expected dividend yield. .
Weighted average
expected dividend . . . . . .
2013
3 yrs.
40.80%
0.36%
4.44%
2013
4.5 yrs.
61.94%
61.94%
0.75%
3.00%
2012
3 yrs.
69.47%
0.41%
2.39%
2012
4.5 yrs.
65.74 -
66.95%
66.56%
0.84%
5.00%
3.00%
5.00%
(a) No stock options were granted after 2013
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
2014
2013
2012
Restricted stock and
RSUs . . . . . . . . . . . . . . . . $
Performance shares . . . . .
Stock options and other . .
Total stock-based
compensation . . . . . . . . . .
Income tax benefit . . . . . .
Stock-based
compensation, net of tax . $
17,754 $
18,105 $
14,362
14,850
1,278
33,882
12,875
12,331
3,001
33,437
12,706
7,991
4,255
26,608
10,111
21,007 $
20,731 $
16,497
Per diluted share impact. . $
0.09 $
0.09 $
0.07
69
Restricted Stock and RSUs: As of Dec. 28, 2014, there was
$30.2 million of unrecognized compensation cost related to non-
vested restricted stock and RSUs. This amount will be adjusted for
future changes in estimated forfeitures and recognized on a straight-
line basis over a weighted average period of 2.4 years. The tax
benefit realized from the settlement of RSUs was $9.5 million in
2014. The tax benefit realized in 2013 was $7.0 million and $5.4
million in 2012.
A summary of restricted stock and RSU awards is presented
below:
2014 Restricted Stock and RSU Activity
Shares
Weighted
average
fair value
Outstanding and unvested at beginning of year .
4,193,985 $
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,048,516 $
Settled. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,263,702) $
Canceled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(401,201) $
Outstanding and unvested at end of year . . . . . .
3,577,598 $
13.92
27.26
15.92
16.13
16.97
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
Performance Shares: As of Dec. 28, 2014, there was $8.1
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.
A summary of our performance shares awards is presented
below:
2014 Performance Shares Activity
Target
number of
shares
Weighted
average
fair value
Outstanding and unvested at beginning of year .
1,760,488 $
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canceled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
436,340 $
(96,713) $
Outstanding and unvested at end of year . . . . . .
2,100,115 $
16.92
37.31
21.41
20.95
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(127,421) $
Outstanding and unvested at end of year . . . . . .
982,452 $
—
14.21
14.12
14.23
Stock Options: During 2014, options were exercised from which
we received $14.2 million of cash. The intrinsic value of the options
exercised was approximately $15.0 million. The actual tax benefit
realized from the option exercises was $3.0 million.
During 2013, options were exercised from which we received
$21.7 million of cash. The intrinsic value of the options exercised
was approximately $16.7 million. The actual tax benefit realized
from the option exercises was $2.8 million.
During 2012, options exercised from which we received $24.5
million of cash. The intrinsic value of the options exercised was
approximately $21.3 million. The actual tax benefit realized from the
option exercises was $3.9 million.
Option exercises are satisfied through the issuance of shares
from treasury stock.
The total grant date fair value for options vested during 2014 was
$6.0 million, $8.6 million for options vested during 2013 and $11.6
million for options vested during 2012.
70
A summary of our stock option awards is presented below:
Weighted
average
remaining
contractual
term
(in years)
Weighted
average
exercise
price
Aggregate
intrinsic
value
Shares
Accumulated other comprehensive income (loss)
The elements of our 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):
2014 Stock Option
Activity
Outstanding at
beginning of year . .
5,575,401 $
Exercised. . . . . . . . .
(968,891) $
Canceled/expired. . .
(1,599,852) $
29.76
14.47
53.89
3.2 $46,988,804
In thousands of dollars
2014
Retirement
Plans
Foreign
Currency
Translation
Total
Outstanding at end
of year . . . . . . . . . . .
Options exercisable
at year end . . . . . . . .
3,006,658 $
21.84
2.8 $37,497,113
2,818,658 $
22.23
2.7 $34,543,513
Weighted
average
remaining
contractual
term
(in years)
Weighted
average
exercise
price
Aggregate
intrinsic
value
Shares
11,344,018 $
3.2 $16,902,892
2013
2013 Stock Option
Activity
Outstanding at
beginning of year . .
Granted . . . . . . . . . .
22,558 $
Exercised. . . . . . . . .
(1,598,902) $
Canceled/expired. . .
(4,192,273) $
43.50
20.48
13.44
73.11
Outstanding at end
of year . . . . . . . . . . .
Options exercisable
at year end . . . . . . . .
Weighted average
grant date fair value
of options granted
during the year . . . . $
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
Balance at beginning of year . . . $ (921,232) $
427,177 $ (494,055)
Other comprehensive income
before reclassifications. . . . . . . .
(276,219)
(36,064)
(312,283)
Amounts reclassified from
accumulated other
comprehensive income. . . . . . . .
Balance at end of year . . . . . . . . $ (1,169,882) $
27,569
—
27,569
391,113 $ (778,769)
In thousands of dollars
Retirement
Plans
Foreign
Currency
Translation
Total
Balance at beginning of year . . . $ (1,119,263) $
418,122 $ (701,141)
Other comprehensive income
(loss). . . . . . . . . . . . . . . . . . . . . .
156,974
9,055
166,029
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). . . . . . . . . . . . . . . . . . . . . .
(123,409)
18,107
(105,302)
3.5 $17,184,761
Balance at end of year . . . . . . . . $ (1,119,263) $
418,122 $ (701,141)
2012 Stock Option
Activity
Outstanding at
beginning of year . .
20,340,291 $
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 . . . . . . .
Weighted average
grant date fair value
of options granted
during the year . . . . $
Accumulated Other Comprehensive Loss components are
included in the computation of net periodic postretirement costs (see
Notes 7 and 8 for more detail). Reclassifications out of Accumulated
Other Comprehensive Loss related to these postretirement plans
include the following:
11,344,018 $
43.50
3.2 $16,902,892
8,942,897 $
51.35
2.6 $ 8,845,944
In thousands of dollars
5.43
2014
2013
Amortization of prior service credit . . . . . . . . . . $
(4,082) $
(1,599)
Amortization of actuarial loss . . . . . . . . . . . . . .
46,489
Settlement charge . . . . . . . . . . . . . . . . . . . . . . . .
—
Total reclassifications, before tax. . . . . . . . . . . .
42,407
64,381
3,077
65,859
Income tax effect . . . . . . . . . . . . . . . . . . . . . . . .
(14,838)
(24,802)
Total reclassifications, net of tax . . . . . . . . . . . . $
27,569 $
41,057
71
NOTE 11
Commitments, contingent liabilities and other matters
Litigation: We, along with a number of our subsidiaries, are
defendants in judicial and administrative proceedings involving
matters incidental to their business. We do not believe that any
material liability will be imposed as a result of these matters.
Leases: Approximate future minimum annual rentals payable
under non-cancelable operating leases, primarily real-estate related,
are as follows:
In thousands of dollars
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Later years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
64,309
55,292
49,209
36,550
30,057
96,036
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
331,453
Total minimum annual rentals have not been reduced for future
minimum sublease rentals aggregating $6.1 million. Total rental
costs reflected in 2014 were $67.5 million, $58.4 million in 2013
and $64.6 million in 2012.
Program broadcast contracts: We have $213.5 million of
commitments under programming contracts that include television
station commitments to purchase programming to be produced in
future years. This also includes amounts fixed or currently accrued
under network affiliation agreements.
Purchase obligations: We have commitments under purchasing
obligations totaling $240.9 million related to printing contracts,
capital projects, interactive marketing agreements, wire services and
other legally binding commitments. Amounts which we are liable for
under purchase orders outstanding at Dec. 28, 2014, are reflected in
the Consolidated Balance Sheet as accounts payable and accrued
liabilities and are excluded from the $240.9 million.
Self insurance: We are self-insured for most of our employee
medical coverage and for our 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 $80.4 million at the end of
2014 and $92.0 million at the end of 2013.
Other matters: In December 1990, we 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 our company. Benefits under the TCP include a severance
payment of up to three years’ compensation and continued life and
medical insurance coverage. We 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 August 2014, we adopted the Gannett Leadership Team
Transition Severance Plan (GLT Plan) to promote retention and
minimize disruption for certain senior executives in connection with
the potential spin-off of our publishing segment into a new,
independent publicly traded company.
In March 2011, the Advertiser Company, one of our subsidiaries
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, are undetermined.
Some of The Advertiser Company’s fees and costs related to this
matter may be reimbursed under its liability insurance policies.
In 2014, we exited one of our publishing businesses and
incurred $21.0 million of shutdown costs included in Selling, general
and administrative expenses, exclusive of depreciation in the
Consolidated Statements of Income. These costs, which are
associated with future contractual promotional payments, were
accrued on our Consolidated Balance Sheet at the end of 2014 and
will be primarily paid in 2015.
We are contingently liable for earnout payments to previous
owners, depending upon the achievement of certain financial and
performance metrics related to certain business acquisitions. During
2014, we paid $22.4 million as the result of payments and
adjustments to fair value.
72
The following tables set forth by level within the fair value
hierarchy the fair values of our pension plans assets:
Pension Plan Assets/Liabilities
In thousands of dollars
Fair value measurement as of Dec. 28, 2014(a)
Level 1
Level 2
Level 3
Total
Assets:
Fixed income:
U.S. government-
related securities . $
Mortgage backed
securities . . . . . . .
Other government
bonds . . . . . . . . . .
Corporate bonds . .
— $
4,005 $
— $
4,005
—
—
—
3,995
4,562
24,628
—
95
—
382
4,090
4,562
25,010
— 924,294
Corporate stock . . . . .
924,294
Real estate . . . . . . . . .
—
— 109,102
109,102
Interest in common/
collective trusts:
Equities . . . . . . . . .
— 890,201
Fixed income. . . . .
6,592
310,128
— 890,201
— 316,720
Interest in reg. invest.
companies . . . . . . . .
Interest in 103-12
investments . . . . . . .
Partnership/joint
venture interests. . . .
Hedge funds . . . . . . . .
Derivative contracts . .
152,359
44,406
— 196,765
—
—
—
24,359
36,517
20,166
—
24,359
145,764
182,281
325,673
345,839
3,135
Total. . . . . . . . . . . . . . . $1,083,253 $1,365,970 $ 581,140 $3,030,363
Liabilities:
3,003
124
8
Derivative liabilities . $
Total
$
(13) $
(13) $
(2,529) $
(2,008) $
(4,550)
(2,529) $
(2,008) $
(4,550)
Cash and other . . . . . . .
Total net fair value of
plan assets . . . . . . . . . . $1,097,279 $1,366,103 $ 579,132 $3,042,514
16,701
14,039
2,662
—
(a) We use a Dec. 31 measurement date for our retirement plans.
NOTE 12
Fair value measurement
We measure and record certain assets and liabilities at fair value in
the accompanying consolidated financial statements. 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
our 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 our own
estimates and assumptions, 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. 28, 2014
Level 1
Level 2
Level 3
Total
Assets:
Employee compensation
related investments. . . . . $ 41,017 $
Sundry investments . . . . .
36,641
Total Assets . . . . . . . . . . . . $ 77,658 $
Liabilities:
— $
—
— $
— $ 41,017
—
36,641
— $ 77,658
Contingent consideration
payable . . . . . . . . . . . . . . $
Total Liabilities. . . . . . . . . $
— $
— $
— $
— $
9,912 $
9,912 $
9,912
9,912
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
Under certain acquisition agreements, we have 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
15% and 27% depending on the risk associated with the cash flows.
Changes to the fair value of earn-outs are reflected in “Selling,
general and administrative expenses” on our Condensed
Consolidated Statements of Income. For the year ended Dec. 28,
2014, the contingent consideration decreased by $22.4 million as a
result of payments and adjustments to fair value.
73
In thousands of dollars
Fair value measurement as of Dec. 29, 2013(a)
Level 1
Level 2
Level 3
Total
Corporate stock. . . . .
892,883
Assets:
Fixed income:
U.S. government-
related securities. $
Mortgage backed
securities . . . . . .
Other government
bonds . . . . . . . . .
Corporate bonds . .
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 . . . . . . .
— $
3,313 $
— $
3,313
—
—
—
—
—
—
—
—
—
4,210
4,947
29,599
—
397
—
856
—
— 98,909
908,673
213,698
28,691
—
—
—
—
36,402
148,550
22,685
249,991
281,029
42,610
4,607
4,947
30,455
892,883
98,909
908,673
213,698
323,639
28,691
184,952
272,676
Derivative contracts .
11,141
Total . . . . . . . . . . . . . . $1,173,934 $ 1,305,784 $ 498,866 $ 2,978,584
Liabilities:
10,956
163
22
(8) $
Derivative liabilities . $
Total . . . . . . . . . . . . . . $
Cash and other. . . . . . .
Total net fair
value of plan assets . . $1,234,197 $ 1,297,412 $ 496,858 $ 3,028,467
(9,486) $ (2,008) $
(9,486) $ (2,008) $
60,271
61,385
1,114
(8) $
(11,502)
(11,502)
—
(a) We use a Dec. 31 measurement date for our 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.
Investments in direct real estate have been valued by an
independent qualified valuation professional 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.
Nine of the investments in collective trusts are fixed income
funds, one of which uses individual subfunds to efficiently add a
representative sample of securities in individual market sectors to the
portfolio. The remaining twelve investments in collective trusts are
equity funds that are recorded at fair value as determined by the
sponsor of the respective fund based upon closing market quotes of
the underlying assets.
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 could be sold on
the secondary market but cannot be redeemed. Instead, distributions
are received as the underlying assets of the funds are liquidated. It is
estimated that the underlying assets of the funds will be liquidated
within approximately the next 8 to 10 years. There are future
funding commitments of $22.9 million as of Dec. 28, 2014, and
$27.7 million as of Dec. 29, 2013. 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.
74
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.
We review appraised valued, audited financial statements and
additional information to evaluate fair value estimates from our
investment managers or fund administrator. The tables below set
forth a summary of changes in the fair value of our pension plan
assets and liabilities, categorized as Level 3, for the fiscal year ended
Dec. 28, 2014, and Dec. 29, 2013:
Pension Plan Assets/Liabilities
In thousands of dollars
For the year ended Dec. 28, 2014
Assets:
Fixed income:
Mortgage-backed securities . . . . . . . . . . . . . . . . . . $
Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Partnership/joint venture interests . . . . . . . . . . . . . . . .
Hedge funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Derivative contracts . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Liabilities:
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
397 $
856
98,909
148,550
249,991
163
— $
2 $
(304) $
— $
116
279
586
10,469
—
(125)
—
21,785
899
17
(465)
9,914
(25,157)
64,314
(56)
—
—
—
—
—
95
382
109,102
145,764
325,673
124
498,866 $
11,450 $
22,578 $
48,246 $
— $
581,140
Derivative liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . $
(2,008) $
— $
— $
— $
— $
(2,008)
(1) Our policy is to recognize transfers in and transfers out as of the beginning of the reporting period.
Pension Plan Assets/Liabilities (continued)
In thousands of dollars
For the year ended Dec. 29, 2013
Assets:
Fixed income: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mortgage backed securities. . . . . . . . . . . . . . . . . . . $
Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Partnership/joint venture interests . . . . . . . . . . . . . . . .
Hedge funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Derivative contracts . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Liabilities:
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
— $
797
97,385
130,995
158,924
500
— $
199
1,865
11,972
17,613
(376)
(3) $
(4)
—
13,327
803
—
400 $
(136)
(341)
(9,576)
74,483
39
388,601 $
31,273 $
14,123 $
64,869 $
— $
—
—
1,832
(1,832)
—
— $
397
856
98,909
148,550
249,991
163
498,866
Derivative liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . $
(2,008) $
— $
— $
— $
— $
(2,008)
(1) Our policy is to recognize transfers in and transfers out as of the beginning of the reporting period.
75
The fair value of our total long-term debt, determined based on
the bid and ask quotes for the related debt (Level 2), totaled $4.65
billion at Dec. 28, 2014. The fair value of our total long-term debt,
determined based on the bid and ask quotes for the related debt
(Level 2), totaled $3.93 billion at Dec. 29, 2013. 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. 28, 2014, and Dec. 29, 2013:
Non-Financial Assets
In thousands of dollars
Fair value measurement as of Dec. 28, 2014
Asset held for sale - Quarter 4. . $
— $ — $ 69,998 $ 69,998
Goodwill - Quarter 4 . . . . . . . . . $
— $ — $
8,250 $
8,250
Level 1 Level 2 Level 3
Total
Non-Financial Assets
In thousands of dollars
Fair value measurement as of Dec. 29, 2013
Level 1 Level 2 Level 3
Total
Asset held for sale - Quarter 4 $ — $ — $395,851 $
395,851
Goodwill - Quarter 4 . . . . . . . $ — $ — $ 21,790 $
21,790
The quantitative test of goodwill during the fourth quarter of
2014 for a reporting unit in our Digital Segment 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 17.5%. If the growth rate
and discount rate were to change by 1%, the impact to the valuation
would have been approximately $2.8 million.
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 our Digital Segment. For the
impaired asset in our 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.
NOTE 13
Business operations and segment information
We have determined that our reportable segments based on our
management and internal reporting structure are Broadcasting,
Publishing, and Digital.
At the end of 2014, our Broadcasting Segment included 46
television stations and affiliated online sites, including stations
serviced by Gannett under shared services and similar agreements.
These stations serve more than 35 million households covering
almost one-third of the U.S. population.
Our Publishing Segment includes 100 daily publications and
digital platforms in the U.S. and U.K., including more than 400 non-
daily publications in the U.S. and more than 125 such titles in the
U.K. The Publishing Segment also includes Clipper, Gannett
Government Media, a network of offset presses for commercial
printing and several small businesses.
The largest businesses within our Digital Segment are
CareerBuilder, Cars.com, PointRoll and Shoplocal. The Digital
Segment and the digital revenues line exclude online/digital
revenues generated by digital platforms that are associated with our
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.
Our foreign revenues, principally from publishing businesses in
the United Kingdom and CareerBuilder’s international subsidiaries,
totaled approximately $539.3 million in 2014, $519.8 million in
2013 and $546.2 million in 2012. Our long-lived assets in foreign
countries, principally in the United Kingdom, totaled approximately
$498.3 million at Dec. 28, 2014, $566.4 million at Dec. 29, 2013,
and $529.8 million at Dec. 30, 2012.
Separate financial data for each of our business segments is
presented in the table that follows. The accounting policies of the
segments are those described in Note 1. We evaluate the
performance of our 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 our segments.
Corporate assets include cash and cash equivalents, property,
plant and equipment used for corporate purposes and certain other
financial investments.
76
In thousands of dollars
Business segment financial information
2014
2013
2012
Operating revenues
Broadcasting. . . . . . . . . . . . . . . . . $ 1,692,304 $
835,113 $
906,104
Publishing. . . . . . . . . . . . . . . . . . .
3,421,729
3,577,804
3,728,144
Digital. . . . . . . . . . . . . . . . . . . . . .
919,270
748,445
718,949
—
Intersegment eliminations (3) . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . $ 6,008,174 $ 5,161,362 $ 5,353,197
Operating income
(25,129)
—
Broadcasting (2) . . . . . . . . . . . . . . . . $
745,383 $
361,915 $
443,808
Publishing (2) . . . . . . . . . . . . . . . . . .
Digital (2) . . . . . . . . . . . . . . . . . . . . . .
228,307
155,482
313,697
128,264
368,644
41,700
Corporate (1) (2) . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . $ 1,058,031 $
789,755
Depreciation, amortization and facility consolidation and asset impairment
739,243 $
(71,141)
(64,633)
(64,397)
charges
Broadcasting (2) . . . . . . . . . . . . . . . . $
94,125 $
29,625 $
28,007
Publishing (2) . . . . . . . . . . . . . . . . . .
Digital (2) . . . . . . . . . . . . . . . . . . . . . .
167,134
81,974
Corporate (1) (2) . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . $
Equity income (losses) in unconsolidated investees, net
362,088 $
18,855
153,380
46,415
18,392
247,812 $
147,750
123,990
16,421
316,168
Broadcasting. . . . . . . . . . . . . . . . . $
(1,667) $
(94) $
(597)
Publishing (4) . . . . . . . . . . . . . . . . . .
Digital (4) . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . $
Identifiable assets
10,646
158,340
18,724
25,194
167,319 $
43,824 $
2,855
20,129
22,387
Broadcasting. . . . . . . . . . . . . . . . . $ 4,773,481 $ 5,077,114 $ 2,001,979
Publishing (4) . . . . . . . . . . . . . . . . . .
2,154,368
2,573,384
2,830,083
Digital (4) . . . . . . . . . . . . . . . . . . . . . .
3,602,494
1,041,622
1,030,653
Corporate (1) . . . . . . . . . . . . . . . . . . .
517,171
Total . . . . . . . . . . . . . . . . . . . . . . . $ 11,205,455 $ 9,240,706 $ 6,379,886
Capital expenditures
675,112
548,586
Broadcasting. . . . . . . . . . . . . . . . . $
42,147 $
18,394 $
Publishing. . . . . . . . . . . . . . . . . . .
Digital. . . . . . . . . . . . . . . . . . . . . .
Corporate (1) . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . $
81,776
36,395
1,556
62,480
27,800
1,733
161,874 $
110,407 $
91,874
17,473
56,597
17,220
584
(1) Corporate amounts represent those not directly related to our three
business segments.
(2) Results for 2014 include pre-tax facility consolidation and asset
impairment charges of $14 million for Broadcasting, $59 million for
Publishing, and $24 million for Digital. 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. Refer to Notes 3 and 4 of the Consolidated Financial Statements
for more information.
(3) Includes intersegment eliminations of $5 million for Publishing and $20
million for Digital.
(4) Publishing and Digital amounts for 2013 and 2012 have been
reclassified to reflect the acquisition of Cars.com.
77
SELECTED FINANCIAL DATA (Unaudited)
(See notes a and b on page 79)
2014
4,588,055
185,868
79,856
96,364
4,950,143
1,058,031
In thousands of dollars, except per share amounts
Operating revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,008,174
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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,062,171
Income from continuing operations per share:
167,319
(273,244)
403,954
298,029
1,356,060
225,600
1,130,460
(68,289)
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:
4.69
4.58
0.80
2.73
2013
$ 5,161,362
2012
$ 5,353,197
2011
$ 5,239,989
2010
$ 5,438,678
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
4,247,274
160,746
33,293
122,129
4,563,442
789,755
22,387
(150,469)
8,734
(119,348)
670,407
195,400
475,007
4,184,582
165,739
31,634
27,243
4,409,198
830,791
8,197
(173,140)
(12,921)
(177,864)
652,927
152,800
500,127
4,168,098
182,514
31,362
57,009
4,438,983
999,695
19,140
(172,986)
111
(153,735)
845,960
244,013
601,947
(57,233)
(50,727)
(41,379)
(34,619)
$
$
$
$
$
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
basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
226,292
231,907
228,541
234,189
232,327
236,690
239,228
242,768
238,230
241,605
$ 3,707,010
14,618
$
$ 2,693,098
$ 9,240,706
470,491
$
15.4%
Financial position and cash flow
Long-term debt, excluding current maturities. . . . . . . . . . . . . $ 4,488,028
20,470
Redeemable noncontrolling interest . . . . . . . . . . . . . . . . . . . . $
Shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,254,914
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11,205,455
844,628
Free cash flow (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
35.7%
Return on equity (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Percentage increase (decrease)
As reported, earnings from continuing operations per share:
basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends declared per share . . . . . . . . . . . . . . . . . . . . . . . . .
Credit ratios
1.41x
Leverage ratio (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Times interest expense earned (5). . . . . . . . . . . . . . . . . . . . . .
6.4x
(1) See page 34 for a reconciliation of income from continuing operations per share presented in accordance with GAAP.
(2) See page 79 for a reconciliation of free cash flow to net cash flow from operating activities, which we believe is the most directly comparable measure
$ 1,432,100
10,654
$
$ 2,350,614
$ 6,379,886
697,994
$
18.1%
$ 1,760,363
$
$ 2,327,891
$ 6,616,450
775,261
$
20.4%
$ 2,352,242
84,176
$ 2,163,754
$ 6,816,844
816,308
$
30.1%
(4.7%)
(5.3%)
233.3%
(19.3%)
(19.6%)
50.0%
175.9%
175.9%
—%
(7.1%)
(7.3%)
—%
58.7%
57.7%
—%
2.96x
4.5x
3.24x
4.9x
1.67x
5.5x
1.97x
6.2x
— $
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 our revolving credit agreement and term loan agreement. Currently, we are required to maintain a leverage
ratio of less than 4.0x. These agreements are described more fully on page 41 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.
78
NOTES TO SELECTED FINANCIAL DATA (Unaudited)
(a) We, along with our 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, we 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 2010-2014
Significant acquisitions and dispositions since the beginning of 2010 are shown below.
Acquisitions 2010-2014
Year
2010 CareerSite.biz Limited
2011 Reviewed.com
Name
JobsCentral
Nutrition Dimension
US PRESSWIRE
JobScout24
MMA Junkie
Location
U.K.
Cambridge, MA
Singapore
Falls Church, VA
Atlanta, GA
Germany
St. Petersburg, FL
2012 Fantasy Sports Ventures/Big Lead Sports New York, NY
Ceviu
Top Language Jobs
Quickish
BLiNQ Media, LLC
Mobestream Media
Economic Modeling Specialist Intl.
Rovion
2013 10Best, Inc.
Vietnam Online Network
Oil and Gas Job Search
Tripology
Belo Corp.
2014 Broadbean
London Broadcasting Company
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
Social engagement advertising solutions for agencies and brands
Developer of the Key Ring consumer rewards mobile platform
Economic software firm specializing in employment data/analysis
Self-service technology platform for rich media
Travel advice services for travelers in the U.S. and internationally
Recruitment services and human resource solutions for employers
Online recruitment catering to the oil and gas industry
Offers an interactive travel referral service
Owner and operator of 20 television stations in 15 markets across
the U.S.
Brazil
Europe
Bethesda, MD
New York City, NY
Dallas, TX
Moscow, ID
Boston, MA
Greenville, SC
Vietnam
Manchester, England
McLean, VA
Arizona, Idaho, Kentucky,
Louisiana, Missouri, North
Carolina, Oregon, Texas,
Virginia, Washington
London, United Kingdom Global recruitment technology company
Abilene, Beaumont, Bryan,
Corpus Christi, Longview,
Port Arthur, San Angelo,
Sweetwater, Temple, Tyler,
Waco all in Texas
Six Texas based television stations
Classified Ventures LLC (d/b/a Cars.com) Chicago, IL
Netherlands
SocialReferral B.V.
Independent search site for car shoppers
Software to power employee referral programs utilizing social media
Dispositions 2010-2014
Year
Name
2010 The Honolulu Advertiser
Michigan Directory Company
2013 Captivate Network, Inc.
2014 KMOV-TV
KTVK/KASW-TV
Schedule Star
Location
Honolulu, HI
Pigeon, MI
Chelmsford, MA
St. Louis, MO
Phoenix, AZ
Wheeling , WV
Publication times or business
Daily newspaper
Directory publishing operation
News and entertainment network
Broadcast station
Broadcast stations
High School athletic management and scheduling software
Free cash flow reconciliation
Our free cash flow was $844.6 million for the year ended Dec. 28, 2014. Free cash flow is a non-GAAP liquidity measure that is defined as “net cash
flow from operating activities” as reported on the Consolidated Statements 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. We
believe 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 our capital program, repay indebtedness, add to our
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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2014
821,199 $
(150,354)
—
—
(7,026)
180,809
844,628 $
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
79
QUARTERLY STATEMENTS OF INCOME (Unaudited)
In thousands of dollars, except per share amounts
Fiscal year ended Dec. 28, 2014
Operating revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . $
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)
1,404,066 $
1,460,004 $
1,443,137 $
1,700,967 $
Total
6,008,174
767,532
775,627
757,301
748,119
3,048,579
355,213
44,764
17,743
14,820
1,200,072
203,994
353,779
44,850
14,471
28,775
1,217,502
242,502
347,123
46,681
14,894
6,621
1,172,620
270,517
483,361
49,573
32,748
46,148
1,359,949
341,018
8,491
(69,648)
(20,748)
(81,905)
122,089
52,500
69,589
(10,430)
59,159 $
156,540
(64,148)
(2,982)
89,410
331,912
106,000
225,912
(17,445)
208,467 $
1,756
(65,931)
(17,450)
(81,625)
188,892
48,900
139,992
(21,476)
118,516 $
532
(73,517)
445,134
372,149
713,167
18,200
694,967
(18,938)
676,029 $
1,539,476
185,868
79,856
96,364
4,950,143
1,058,031
167,319
(273,244)
403,954
298,029
1,356,060
225,600
1,130,460
(68,289)
1,062,171
0.26 $
0.25 $
0.20 $
0.92 $
0.90 $
0.20 $
0.52 $
0.51 $
0.20 $
2.99 $
2.92 $
0.20 $
4.69
4.58
0.80
(1) Results for the first quarter of 2014 include special charges affecting operating income. Workforce restructuring and transformation costs totaled $22.8
million ($13.4 million after-tax or $.06 per share). Non-operating items include $20.4 million ($12.1 million after-tax or $.05 per share) primarily related
to the redemption of our 2017 notes. Offsetting these was a $23.8 million special tax charge ($.10 per share) related to the sale of the KMOV-TV station in
St. Louis, MO. Refer to the discussion beginning on page 34 and Notes 3 and 4 to the Consolidated Financial Statements for more information on special
items.
(2) Results for the second quarter of 2014 include special charges affecting operating income. Workforce restructuring charges, transformation costs and non-
cash asset impairments totaled $51.7 million ($37.4 million after-tax or $.02 per share). Non-operating items include $143.5 million ($91.2 million after-
tax or $.39 per share) primarily related to the pre-tax gain from the sale of Apartments.com. Refer to the discussion beginning on page 34 and Notes 3 and
4 to the Consolidated Financial Statements for more information on special items.
(3) Results for the third quarter of 2014 include special charges affecting operating income. Workforce restructuring charges and transformation costs totaled
$9.6 million ($7.2 million after-tax or $.03 per share). Non-operating items include $20.5 million ($16.2 million after-tax or $.07 per share) primarily
related to transaction costs. Special tax items include a tax benefit of $5.6 million ($.02 per share). Refer to the discussion beginning on page 34 and Notes
3 and 4 to the Consolidated Financial Statements for more information on special items.
(4) Results for the fourth quarter of 2014 include special charges affecting operating income. Workforce restructuring charges, transformation costs and non-
cash asset impairments totaled $87.2 million ($57.7 million after tax or $.03 per share). Non-operating items include $439.2 million ($262.3 million after-
tax or $1.13 per share) primarily related to the write-up of our equity investment in Cars.com offset partially by transaction related costs. Special tax items
include a tax benefit of $236.6 million ($1.02 per share) related to the sale of an investment. Refer to the discussion beginning on page 34 and Notes 3 and
4 to the Consolidated Financial Statements for more information on special items.
80
QUARTERLY STATEMENTS OF INCOME (Unaudited)
In thousands of dollars, except per share amounts
Fiscal year ended Dec. 29, 2013
Operating revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . $
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)
1,237,735 $
1,302,699 $
1,252,890 $
1,368,038 $
Total
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 statute of limitations. Refer to the
discussion beginning on page 34 and Notes 3 and 4 to the Consolidated Financial Statements 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 our acquisition of Belo. Refer to the discussion beginning on page 34 and Notes 3 and 4 to the Consolidated Financial
Statements 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 our acquisition of Belo. Refer to the discussion
beginning on page 34 and Notes 3 and 4 to the Consolidated Financial Statements 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 our acquisition of Belo. Refer to the discussion beginning on page 34 and Notes 3 and 4 to the
Consolidated Financial Statements 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.
81
SCHEDULE II – Valuation and qualifying accounts and reserves
In thousands of dollars
Allowance for doubtful receivables
Fiscal year ended Dec. 28, 2014. . . . . $
Fiscal year ended Dec. 29, 2013. . . . . $
Fiscal year ended Dec. 30, 2012. . . . . $
(1) Includes foreign currency translation adjustments in each year.
(2) Consists of write-offs, net of recoveries in each year.
15,275 $
22,006 $
34,646 $
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
13,029 $
11,519 $
9,736 $
2,031 $
(385) $
24 $
(13,837) $
(17,865) $
(22,400) $
16,498
15,275
22,006
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 (2013 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. 28, 2014.
Management’s assessment of and conclusion on the effectiveness
of internal control over financial reporting did not include the
internal controls of Cars.com, which is included in the 2014
consolidated financial statements of Gannett Co., Inc. On Oct. 1,
2014, we completed our acquisition of Cars.com. In connection with
this, we began consolidating results of Cars.com and it represented
approximately 1% of our total assets at Dec. 28, 2014, and 2% of our
total revenue for the year ended Dec. 28, 2014. Due to the timing of
this acquisition and as permitted by SEC guidance, management
excluded Cars.com from its Dec. 28, 2014, assessment of internal
control over financial reporting.
The effectiveness of our internal control over financial reporting
as of Dec. 28, 2014, 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 our internal control over financial
reporting that occurred during our fiscal quarter ended Dec. 28,
2014, that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.
82
PART III
ITEM 11. EXECUTIVE COMPENSATION
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND
CORPORATE GOVERNANCE
The information captioned “Your Board of Directors,” “Information
about Directors - The Board’s Nominees,” “Committees of the Board of
Directors,” “Committee Charters” and “Ethics Policy” under the heading
“PROPOSAL 1 –ELECTION OF DIRECTORS” and the information
under “SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING
COMPIANCE” in our 2015 proxy statement is incorporated herein by
reference.
William A. Behan
Senior Vice President, Labor Relations, Gannett (2010-present).
Formerly: Vice President, Labor Relations (2007-2010). Age 56.
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 57
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 50.
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 64.
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 52.
David T. Lougee
President, Gannett Broadcasting (July 2007-present). Age 56.
Gracia C. Martore
President and Chief Executive Officer (October 2011-present).
Formerly: President and Chief Operating Officer (February 2010-
October 2011); Executive Vice President and CFO (2006-2010). Age 63.
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 55.
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 52.
John A. Williams
President, Gannett Digital Ventures (January 2008-present). Age 64.
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 our
2015 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 our 2015 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 our 2015 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 our 2015 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 44.
(2) Financial Statement Schedules.
As listed in the Index to Financial Statements and Supplementary
Data on page 44.
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 86-90 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.
84
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
10-3
10-3-1
10-3-2
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 8-K dated July 29, 2014 and filed on August 1, 2014.
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.
Incorporated by reference to Exhibit 4.8 to Gannett Co., Inc.’s
Form 10-K for the fiscal year ended December 29, 2013.
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.
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.
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.
86
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.*
10-6-3
Form of Director Restricted Stock Award Agreement.*
10-6-4
Form of Executive Officer 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.
Incorporated by reference to Exhibit 10-6-4 to Gannett Co.,
Inc.’s Form 10-K for the fiscal year ended December 28, 2008.
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
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.*
Incorporated by reference to Exhibit 10-6-8 to Gannett Co.,
Inc.’s Form 10-K for the fiscal year ended December 29, 2013.
10-6-9
Form of Director Restricted Stock Unit Award Agreement.*
Attached.
10-6-10
10-6-11
10-7
Form of Executive Officer Restricted Stock Unit Award
Agreement. *
Form of Executive Officer Performance Share Award
Agreement. *
Attached.
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.
87
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.
88
10-9
10-10
10-11
10-12
10-12-1
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.
Increased Facility Activation Notice, dated May 5, 2014,
pursuant to the Amended and Restated Competitive Advance
and Revolving Credit Agreement, dated as of August 5, 2013,
by and among Gannett Co., Inc., JP Morgan 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.
Incorporated by reference to Exhibit 10-1 to Gannett Co.,
Inc.’s Form 10-Q for the fiscal quarter ended June 29, 2014.
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.*
10-20
10-21
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.
89
10-22
10-23
Omnibus Amendment to Terms and Conditions of Stock Unit
Awards dated as of December 31, 2008.*
Incorporated by reference to Exhibit 10-18 to Gannett Co.,
Inc.’s Form 10-K for the fiscal year ended December 28, 2008.
Omnibus Amendment to Terms and Conditions of Stock
Option Awards dated as of December 31, 2008.*
Incorporated by reference to Exhibit 10-19 to Gannett Co.,
Inc.’s Form 10-K for the fiscal year ended December 28, 2008.
10-24
Gannett Leadership Team Transitional Severance Plan*
Incorporated by reference to Exhibit 10-1 to Gannett Co., Inc.
Form 10-Q for the fiscal quarter ended September 28, 2014.
Incorporated by reference to Exhibit 2-1 to Gannett Co., Inc.
Form 8-K filed on August 5, 2014.
10-25
21
23
31-1
31-2
32-1
32-2
101
Unit Purchase Agreement, dated as of August 5, 2014, by and
among Gannett Co., Inc., Classified Ventures, LLC, the unit
holders of Classified Ventures, LLC (the “sellers”), certain
subsidiaries of the Sellers, Gannett Satellite Information
Network, Inc., and Belo Ventures, Inc.
Subsidiaries of Gannett Co., Inc.
Attached.
Consent of Independent Registered Public Accounting Firm.
Attached.
Attached.
Attached.
Attached.
Attached.
Attached.
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 28,
2014, formatted in XBRL includes: (i) Consolidated Balance
Sheets at December 28, 2014 and December 29, 2013, (ii)
Consolidated Statements of Income for the 2014, 2013 and
2012 fiscal years, (iii) Consolidated Statements of
Comprehensive Income for the 2014, 2013 and 2012 fiscal
years, (iv) Consolidated Cash Flow Statements for the 2014,
2013 and 2012 fiscal years; (v) Consolidated Statements of
Equity for the 2014, 2013 and 2012 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.
We agree 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 our total consolidated assets.
* Asterisks identify management contracts and compensatory plans or arrangements.
90
GLOSSARY OF FINANCIAL TERMS
Presented below are definitions of certain key financial and operational terms
that we hope will enhance the reading and understanding of our 2014 Form
10-K.
ADJUSTED EBITDA – Net income attributable to Gannett before (1) net
income attributable to noncontrolling interests, (2) income taxes, (3) interest
expense, (4) equity income, (5) other non-operating items, (6) workforce
restructuring, (7) other transformation costs, (8) asset impairment charges, (9)
depreciation and (10) amortization.
ADVERTISING REVENUES – Amounts charged to customers for space
purchased in our 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 our earnings that represents the write
off of intangible assets over the projected life of the assets.
EQUITY EARNINGS FROM INVESTMENTS – For those investments in
which we own 50% or less, an income or loss entry is recorded in the
Statements of Income representing our 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.
BALANCE SHEET – A summary statement that reflects our assets,
liabilities and equity at a particular point in time.
INVENTORIES – Raw materials, principally newsprint, used in the
business.
BROADCASTING REVENUES – Primarily amounts charged to customers
for commercial advertising aired on our television stations.
CIRCULATION – The number of newspapers sold to customers each day
(paid circulation). We keep separate records of morning, evening and Sunday
circulation.
CIRCULATION REVENUES – Amounts charged to readers of our
subscription-based newspapers (print or online) or distributors reduced by the
amount of discounts. Charges vary from city to city and depend on the type
of sale (i.e., subscription or single copy) and distributor arrangements.
CURRENT ASSETS – Cash and other assets that are expected to be
converted to cash within one year.
CURRENT LIABILITIES – Amounts owed that will be paid within one
year.
DEFERRED INCOME – Revenue derived principally from advance
subscription payments for newspapers and advance fees for recruitment
solutions. Revenue is recognized in the period in which it is earned (as
newspapers are delivered or made available on our digital platforms; or as
recruitment solutions delivered).
DEPRECIATION – A charge against our earnings that allocates the cost of
property, plant and equipment over the estimated useful lives of the assets.
DIGITAL/ONLINE REVENUES – These include revenue from advertising
placed on all digital platforms that are associated with our 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 (human capital solutions),
Cars.com (website for car shoppers) and PointRoll (technology/marketing
services revenue).
DIGITAL SEGMENT – Our reportable segment that includes the results of
CareerBuilder, Cars.com, PointRoll and Shoplocal.
DIVIDEND – A payment we make to our shareholders of a portion of our
earnings.
EARNINGS PER SHARE (basic) – Our earnings divided by the average
number of shares outstanding for the period.
EARNINGS PER SHARE (diluted) - Our 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.
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 our total shareholder return (TSR) compares
to the TSR of a representative peer group of companies.
PURCHASE – A business acquisition. The acquiring company records at its
cost the acquired assets less liabilities assumed. The reported income of an
acquiring company includes the operations of the acquired company from the
date of acquisition.
RESTRICTED STOCK – An award that gives key employees the right to
shares of our stock, pursuant to a vesting schedule.
RETAINED EARNINGS – Our earnings not paid out as dividends to
shareholders.
STATEMENT OF CASH FLOWS – A financial statement that reflects cash
flows from operating, investing and financing activities, providing a
comprehensive view of changes in our cash and cash equivalents.
STATEMENT OF COMPREHENSIVE INCOME – A financial statement
that reflects our changes in equity (net assets) 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
our common stock, retained earnings and other equity accounts.
STATEMENT OF INCOME – A financial statement that reflects our profit
by measuring revenues and expenses.
STOCK-BASED COMPENSATION – The payment to employees for
services received with equity instruments such as restricted stock,
performance share units and stock options.
STOCK OPTION – An award that gives key employees the right to buy
shares of our 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.
91
COMPANY PROFILE
SHAREHOLDER SERVICES
Gannett is an international media and
marketing solutions company and one of
the largest, most geographically diverse
local content providers in the U.S.
It is focused on quickly seizing the many
opportunities presented by new digital tech-
nologies and shifting consumer trends while
delivering leading-edge news and informa-
tion and marketing solutions to consumers
and advertisers across multimedia platforms.
All of the company’s businesses are focused
on providing outstanding user experiences
throughout their portfolio of products and
services.
The company’s employees are deeply
passionate about their purpose to serve
their communities’ greater good. Millions of
consumers rely on our journalists to provide
news and information vital to their daily
lives. The company’s journalists are focused
on delivering outstanding, trusted journal-
ism that makes a difference and support-
ing a free and vital press. Gannett media
organizations, too, continue to be honored
by their peers for their excellent work with
top awards, ranging from Pulitzer Prizes to
national Edward R. Murrow awards.
In 2014, Gannett announced its plans
to create two publicly traded companies:
one focused on its Broadcasting and Digital
businesses, and the other on its Publishing
business and related digital assets.
Part of this powerful mix is G/O Digital,
which helps businesses – big and small
– grow by delivering digital marketing
solutions to connect with consumers locally
and drive results. G/O Digital supports the
more than 110 current Gannett Publishing
and Broadcasting markets and partners with
more than 100 of the nation’s top retailers
and brands. G/O Digital’s results are
reported in three segments: Broadcasting,
Publishing and Digital.
Gannett Broadcasting comprises one
of the largest, most geographically diverse
broadcasters in the U.S. and includes 46
television stations (including stations ser-
viced by Gannett through shared services
or other similar arrangements). It is the
largest independent station group of major
network affiliates in the top 25 markets. The
TV stations reach approximately one-third
of all television households nationwide
and represent the #1 NBC affiliate group,
#1 CBS affiliate group and #4 ABC affiliate
group (excluding owner-operators). The
stations connect consumers, communities
and businesses located in 22 states and
Washington, D.C., and have a national reach
through their digital products and services.
Approximately 32 million desktop,
smartphone and tablet unique visitors access
Gannett Broadcasting media organizations
every month and there have been close to
1.7 million downloads of Broadcasting’s apps
on mobile devices as consumer interest in
mobile only continues to increase.
Digital includes two top companies,
Cars.com and CareerBuilder, as well as sev-
eral other well-positioned online companies.
Cars.com, which Gannett recently
acquired full ownership of, is the leading
destination for online car shoppers, offering
credible information from consumers and
experts to help car buyers formulate opinions
on what to buy, where to buy and how much
to pay for a car. CareerBuilder, a global leader
in human capital solutions majority-owned by
Gannett, provides services ranging from labor
market intelligence to talent management
software and other recruitment tools. It is
the largest online job site in the U.S., mea-
sured both by traffic and revenue, and has a
presence in more than 60 markets world-
wide. Together, Cars.com and CareerBuilder
provide the company’s advertising partners
with access to two very important categories
– human capital solutions and automotive.
According to comScore, about 22 million
desktop, smartphone and tablet unique
U.S. visitors access CareerBuilder every
month and 13 million unique visitors seek
out Cars.com. In addition, there have been
3.2 million downloads of CareerBuilder’s
apps on mobile devices.
Looking ahead, the Broadcasting and
Digital company will have the opportunity
to pursue value-enhancing acquisitions with
fewer regulatory obstacles as the businesses
continue to add new customers, expand
their solutions and accelerate growth.
The Publishing and affiliated digital
business has tremendous national-to-local
reach with a rich portfolio of 81 unmatched,
trusted local media organizations, the
renowned national brand USA TODAY, and
international scale with the company’s pop-
ular Newsquest media properties in the U.K.
– plus hundreds of engaging affiliated digital
and mobile products.
The Publishing business is at the forefront
of redefining the future of the media business
through the strength of its industry leadership,
ground-breaking ventures and its innovative
multimedia approach to providing outstand-
ing news and information whenever, wherever
consumers demand it, on any device.
It serves as a strong community connec-
tor, connecting consumers, communities and
businesses – located in 30 states plus Guam
and more than 80 communities across the
U.S. and 16 communities in the U.K. as
well. Newsquest is one of the U.K.’s leading
regional community news providers with 18
paid-for titles, more than 125 weekly print
products, magazines and trade publications,
and a strong network of affiliated digital
products.
The Publishing business has strong digital
expertise and powers market-leading digital
brands. At the same time, it has the ability to
deliver robust, best-in-class digital marketing
services to businesses large and small.
Importantly, Publishing is deeply com-
mitted to providing engaging content across
print, digital, social and video platforms.
Publishing’s advanced All Access Con-
tent Subscription Model for its U.S. Commu-
nity Publishing (USCP) local media organiza-
tions aligns digital and publishing offerings
with changing consumer behaviors and puts
the focus on its highly valued content.
The addition of a unique USA TODAY
edition in 35 USCP local print editions pro-
vides local readers with even more of what
they value most, which is exceptional local,
regional and national news and information
– all in one handy, easily accessible package.
USA TODAY also has partnership deals with
several non-Gannett news organizations
to include the USA TODAY Local Edition
as part of their print and digital offering to
readers.
Publishing, along with the company’s
digital operations, recently launched the
first-of-its-kind explanatory journalism proj-
ect using emerging virtual reality technology
and 360-degree video, again positioning
itself as an industry leader.
Publishing’s reach is immense: 73.5 mil-
lion desktop, smartphone and tablet unique
visitors access USA TODAY every month;
30 million unique visitors seek out USCP
digital media. In addition, Gannett is a lead-
er in mobile apps, with more than 21 million
downloads of USA TODAY’s award-winning
app on mobile devices and 2 million down-
loads of USCP apps. Newsquest’s digital
products attract nearly 20 million unique
visitors every month. Collectively print
products reach approximately 9.7 million
dedicated U.S. readers every weekday,
approximately 10.5 million every Sunday, and
in the U.K., Newsquest has a total average
issue readership of 6 million every week.
The Publishing business is being spun
off virtually debt free with strong cash flow,
and will have the ability to invest in products
and services that make sense for consumers,
business clients and shareholders.
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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.), Wednesday, April 29, 2015,
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 2014 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 2015. 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.
Acting Controller
Cam McClelland
Assistant Controller
John Dalton
Corporate Consolidations Team
Dimeterice Ferguson
Ben Fernando
Varun Kanwar
Suzanne Kuo
Lorraine Licayan
Mark Ramsey
Aisha Simpson
Evan Strong
Eva Wrublesky
Director/Corporate
Communications
Laura Dalton
Creative Director/Designer
Michael Abernethy
Printing
Action Printing, Fond du Lac, WI
PHOTO CREDITS:
Page 3: Images provided by
Cars.com. Page 5: Images provid-
ed by the Des Moines Register
and Gannett Digital. Oculus Rift
image provided by Oculus VR.
Page 6: Images provided by
KPNX-TV, WLTX-TV and WTSP-TV.
Page 7: Directors’ photos by
Stacey Wolf and Gretchen Ortega,
Gannett. Magner by Todd Plitt.
Martore by Chad Dowling.
Printed on recycled paper.
This report was printed using
soy-based inks. The entire report
contains 10% total recovered
fiber/all post-consumer waste.
GANNETT CO., INC. 7950 JONES BRANCH DR., MCLEAN, VA 22107
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Creating a New Future
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