1998 Annual Report More Than Meets The
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s GANNETT CO., INC. • MORE THAN MEETS THE EYE THAN MEETS MORE • 1998 ANNUAL 1998 ANNUAL REPORT GANNETT CO., INC. • 1100 WILSON BLVD. , ARLINGTON,VA 22234 • WWW.GANNETT.COM MORE THAN MEETS THE EYE 1998 ANNUAL REPORT FINANCIAL SUMMARY•1998 AT A GLANCE In thousands, except per share amounts 89 $3260 1998 1997 Change 90 $3170 Operating revenues $ 5,121,291 $4,729,491 8.3% 91 $3122 92 $3228 Operating income 1,443,502 1,316,268 9.7% 93 $3411 Income from continuing 94 $3583 operations before net 95 $3744 non-operating gain (1) 816,306 712,679 14.5% 96 $4421 Net income 999,913 712,679 40.3% 97 $4729 Income per share before net 98 $5121 non-operating gain – basic (1) 2.88 2.52 14.3% Operating revenues in millions Income per share before net non-operating gain – diluted (1) 2.86 2.50 14.4% 89 $374 Net income per share – basic 3.53 2.52 40.1% 90 $355 Net income per share – diluted 3.50 2.50 40.0% 91 $292 Operating cash flow (2) 1,753,708 1,617,341 8.4% 92 $341* 93 $389 Working capital 178,418 146,057 22.2% 94 $455 Long-term debt 1,306,859 1,740,534 (24.9%) 95 $459 Total assets 6,979,480 6,890,351 1.3% 96 $530o $624 Capital expenditures (3) 242,815 219,627 10.6% 97 $713 # Shareholders’ equity 3,979,824 3,479,736 14.4% 98 $816 $1000 Income from continuing operations in millions Dividends per share .78 .74 5.4% Average common shares outstanding – diluted 285,711 285,610 — 89 $1.16 90 $1.10 (1) Excluding a 1998 net non-operating gain principally from the 91 $.96 disposition of several businesses, including radio and alarm security, totaling $307 million pre-tax and $184 million on an after-tax basis 92 $1.18* ($.65 per share–basic and $.64 per share–diluted). 93 $1.32 (2) Represents operating income plus depreciation and amortization of 94 $1.57 intangible assets. 95 $1.63 96 $1.87o $2.20 (3) Excluding capitalized interest. 97 $2.50 98 $2.86# $3.50 Income per share (diluted) from continuing operations + # Before net non-operating gain principally from the disposition of several businesses, including radio and alarm security. o Before non-recurring gain from exchange of broadcast stations. * Before effect of accounting principle changes. + Adjusted to reflect the two-for-one stock split effective on Oct. 6, 1997. ? PRINTED ON RECYCLED PAPER COMPANY PROFILE 2 LETTER TO Gannett Co., Inc. is a diversified SHAREHOLDERS news and information company that publishes newspapers, operates 6 NEWSPAPERS broadcasting stations and cable television systems, and is engaged in 10 USA TODAY marketing, commercial printing, a newswire service, data services and 12 BROADCASTING news programming. Gannett is a AND CABLE nationwide company with headquar- ters in Arlington, Va., and operations 16 BOARD OF DIRECTORS in 45 states, the District of Columbia and Guam. 18 COMPANY AND Gannett is the USA’s largest DIVISIONAL OFFICERS newspaper group in terms of circulation. The company’s 75 daily newspapers have a combined daily paid circulation of more than 6.7 million. They include USA TODAY, the nation’s largest-selling daily news- paper, with a circulation of approxi- mately 2.2 million. In addition, Gannett owns a variety of non-daily publications, including USA WEEK- PAGE 7 PAGE 11 PAGE 13 END, a weekly newspaper magazine. TABLE OF CONTENTS 21 FINANCIALS TABLE The company owns and operates OF CONTENTS 21 television stations covering 16.7 percent of the USA and cable televi- 70 MARKETS WE SERVE sion systems in major U.S. markets. Gannett was founded by Frank E. 75 GLOSSARY OF Gannett and associates in 1906 and FINANCIAL TERMS incorporated in 1923. The company went public in 1967. Its nearly 280 76 GANNETT million shares of common stock are SHAREHOLDER held by more than 14,000 SERVICES shareholders of record in all 50 states and abroad. The company has approximately 39,400 employees. 2 Gannett Annual Report MORE THAN MEETS THE EYE Vice Chairman and President Douglas H. McCorkindale Gannett Chairman and CEO John J. Curley LETTER TO SHAREHOLDERS or the seventh year in a of $184 million we realized, economic recovery in row, Gannett achieved primarily from the sale of our February 1999. For the last F record revenues and five remaining radio stations several years, the U.S. econo- profits in 1998. Buoyed by in January and the sale of our my has enjoyed consistent strong advertising demand alarm security business in growth rather than the sharp across the board, operating March 1998. peaks and valleys that charac- revenues increased 8 percent Our operating cash flow in terized previous periods. From to $5.121 billion – exceeding 1998 totaled $1.75 billion, its our viewpoint, it’s better to the $5 billion mark for the first highest level ever. In addition savor the steady duration of time. Each of our business to the acquisitions described good economic times than to segments – newspaper pub- below, we also reduced debt by rejoice in the quicker spikes lishing, television and cable – $444 million and made capital of the past. Looking forward, reported higher earnings for investments of $244 million. we recognize the uncertainty the year. As a result, Our shareholders received that surrounds the global and Gannett’s earnings advanced $219 million directly in U.S. economies in 1999. Our 15 percent to $816 million. dividends. tradition of managing for the Those earnings exclude the The economy entered its long term and consistent fiscal non-operating after-tax gain 95th month of the current restraint has served us well in Gannett Annual Report 3 A QUICK LOOK • Operating revenues increased 8 percent to $5.121 billion – exceeding the $5 billion mark for the first time. • Operating cash flow in 1998 totaled the past and will benefit us these fine properties to our readers in 1998: a Friday $1.75 billion, its highest level ever. whichever way the economy New Jersey Newspaper Group, travel section in Life; a weekly goes in 1999. which also includes the Asbury health/behavior feature to • USA TODAY had another solid year as advertising revenues gained Over the long term our Park Press and Home News complement a weekly science 12 percent, on top of strong gains for strategic goals have been to Tribune of East Brunswick. page; and more coverage of the last few years. Circulation grew to create and expand quality The latter two newspapers entrepreneurs and the global a daily average of 2,271,767 copies. products and to make appro- came on board in October 1997 economy in the Money section. • Over the last two years, our priate acquisitions in news, and their performance has In 1999, USA TODAY will shareholders have enjoyed a 33 percent information and related fields. exceeded expectations, adding complete a press expansion average annual return vs. 31 percent for the S&P 500. Our strategy doesn’t change to earnings in our first full project, which will help meet from year to year, but our year of ownership. The New the increased demand for color • Our tradition of managing for the opportunities do. Over the last Jersey Newspaper Group is from its advertisers. long term and consistent fiscal restraint several years, we have com- headed by Robert T. Collins, 1998 was a busy year for has served us well in the past and will benefit us whichever way the economy pleted a number of acquisi- who also is president and Gannett journalists. They goes in 1999. tions that have enhanced our publisher of the Asbury covered a never-ending stream growth rate and substantially Park Press, Home News of major news stories, from benefited our shareholders. Tribune and Ocean County presidential crises to pivotal Our newspapers enjoyed a Newspapers and was selected elections to military maneu- record year benefiting from Gannett’s Manager of the vers. And they chronicled the strong advertising demand, Year for 1998. He is pictured wonderful story of Mark particularly in classified, as on page 4 along with other top McGwire and Sammy Sosa as the economic expansion contin- company award winners. they engaged in friendly battle ued. We also enjoyed a sub- We also sold five small to break baseball’s single- stantially improved operating daily newspapers in Ohio, season home-run record. performance at The Detroit Illinois and West Virginia and Throughout the year, our News. These gains more than contributed our newspaper newspapers and television offset the 18 percent increase in Saratoga Springs, N.Y., to stations brought readers and in newsprint expense for the the Gannett Foundation. viewers the important local year. Gannett, the largest Subsequently, the Foundation news that affects their lives consumer of newsprint in the sold the newspaper and will on a daily basis. In some world, used 970,000 tons of use the proceeds to fund its instances, that meant provid- newsprint in 1998. In 1999, community grants. In 1998, ing life-saving tips and coping we expect market supply and the Foundation contributed information to help communi- pricing conditions to favor us more than $8 million to quali- ties weather the effects of and we are already seeing fied nonprofit organizations to devastating natural disasters. newsprint prices begin to improve the education, health An extended drought sparked decline. and advancement of the people wildfires that destroyed Our newspaper division who live in communities where dozens of homes and business- expanded its presence in New Gannett does business. es and thousands of acres in Jersey, acquiring two dailies USA TODAY had another Florida.