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Slide 1: GANNETT CO., INC. 0 0 U N N A R E P O 2 A R 0 L T TURN ING CHALLENGES INTO OPPORTUNI TIES
Slide 2: 2 0 0 0 F I N A N C I A L S U M M A R Y In thousands, except per share amounts 2000 Operating revenues Operating income Income from continuing operations before non-recurring gains (1) Net non-operating gains Income from continuing operations Earnings from discontinued operations, net Net income Income per share from continuing operations before non-recurring gains – diluted (1) Income per share from net non-operating gains – diluted Income per share from continuing operations – diluted Income per share from discontinued operations – diluted Net income per share – diluted Operating cash flow (2) 3.63 2.78 6.41 2,193,171 971,940 747,137 1,719,077 $ 6,222,318 1,817,256 1999 $ 5,095,362 1,563,101 Change 22.1% 16.3% 971,940 886,607 32,780 919,387 38,541 957,928 9.6% — 5.7% — 79.5% 91 92 93 94 95 96 97 98 99 00 Operating revenues in millions $2988 $3091 $3227 $3396 $3505 $4018 $4308 $4709 $5095 $6222 3.63 3.15 0.11 3.26 0.14 3.40 1,843,192 15.2% — 11.3% — 88.5% 19.0% 91 92 93 94 95 96 97 98 99 00 $292 $341 $389 $455 $457 $503 $681 $782 $886 $972 Income from continuing operations before net non-operating gains, in millions Working capital Long-term debt Total assets Capital expenditures (3) Shareholders’ equity Dividends per share Average common shares outstanding – diluted $ 128,335 5,747,856 12,980,411 339,413 5,103,410 .86 268,118 $ 191,444 2,463,250 9,006,446 239,438 4,629,646 .82 281,608 (33.0%) 133.3% 44.1% 41.8% 10.2% 4.9% (4.8%) 91 92 93 94 95 96 97 98 99 00 $.96 $1.18 $1.32 $1.57 $1.62 $1.78 $2.39 $2.74 $3.15 $3.63 Income per share (diluted) from continuing operations before net non-operating gains (1) Excluding a 1999 net non-operating gain principally from the exchange of KVUE-TV in Austin, Texas, for KXTV-TV in Sacramento, Calif., totaling $55 million pre-tax and $33 million after tax ($.11 per share-basic and diluted). (2) Represents operating income plus depreciation and amortization of intangible assets. (3) Excluding capitalized interest and discontinued operations.
Slide 3: T A B L E O F C O N T E N T S 2 6 10 12 14 16 18 21 70 76 77 LETTER TO SHAREHOLDERS NEWSPAPERS NEWSQUEST PLC USA TODAY BROADCASTING BOARD OF DIRECTORS COMPANY AND DIVISIONAL OFFICERS FINANCIALS TABLE OF CONTENTS MARKETS WE SERVE GLOSSARY OF FINANCIAL TERMS GANNETT SHAREHOLDER SERVICES C O M PA N Y P R O F I L E Gannett Co., Inc. is a diversified news and information company that publishes newspapers, operates broadcasting stations and is engaged in marketing, commercial printing, a newswire service, data services and news programming. Gannett is an international company with headquarters in Arlington, Va., and operations in 43 states, the District of Columbia, Guam, the United Kingdom, Belgium, Germany, Italy and Hong Kong. Gannett is the USA’s largest newspaper group in terms of circulation. The company’s 99 U.S. daily newspapers have a combined daily paid circulation of 7.8 million. They include USA TODAY, the nation’s largestselling daily newspaper, with a circulation of approximately 2.3 million. In addition, Gannett owns a variety of non-daily publications, and USA WEEKEND, a weekly newspaper magazine. Newsquest plc, a wholly owned Gannett subsidiary acquired in mid-1999, is one of the largest regional newspaper publishers in the United Kingdom with a portfolio of nearly 300 titles. Its publications include 15 daily newspapers with a combined circulation of approximately 600,000. Newsquest also publishes a variety of non-daily publications, including Berrow’s Worcester Journal, the oldest continuously published newspaper in the world. The company owns and operates 22 television stations covering 17.5 percent of the USA. Gannett was founded by Frank E. Gannett and associates in 1906 and incorporated in 1923. The company went public in 1967. Its more than 264 million shares of common stock are held by approximately 14,000 shareholders of record in all 50 states and several foreign countries. The company has approximately 53,400 employees. 1
Slide 4: L E T T E R T O S H A R E H O L D E R S G annett began the decade much as it closed out the last – with record rev- enues, profits and cash flow. In 2000, we had our ninth consecutive year of record revenues and our 31st year of record profits since 1967, when Gannett became a public company. Revenues exceeded $6 billion for the first time ever, reaching $6.2 billion. That was a 22 percent increase over 1999 due to solid advertising demand, the Olympics, electionrelated ad spending and our exciting round of strategic acquisitions. Operating cash flow rose 19 percent to almost $2.2 billion reflecting the strong operating results across our businesses and the incremental cash flow from our new properties. Earnings increased to $972 million, a 10 percent gain achieved despite higher newsprint expense and the additional interest and goodwill amortization expenses associated with the acquisitions. All of these numbers exclude the results of Multimedia Cablevision, Inc., which was sold on Jan. 31, 2000, for $2.7 billion. Our seasoned, solid management team and considerable financial strength allowed Gannett to take advantage of a number of terrific opportunities in a short time span in 2000. It was an exciting year for acquisitions. News Communications & Media plc (“Newscom”) became available in the spring and joined the company in June for approximately $700 million, plus Newscom’s existing debt. One of the United Kingdom’s largest regional newspaper publishers, Newscom brought 114 titles into the company, including four dailies and a number of weeklies and niche publications. Newscom is a wonderful fit geographically and philosophically with our existing Newsquest operations in the U.K. The combined company already is sharing the printing resources brought to the operation by Newscom, which had made a substantial investment in high-quality color printing prior to our acquisition. As a result of this and other synergies we are realizing under our talented management team in the U.K., Newscom has added to cash flow and earnings since we bought it. Newsquest, by the way, continues to exceed our expectations and has added solidly to cash flow and earnings since the day it joined us in mid-1999. While the Newscom deal was being completed, we were taking advantage of some great opportunities we found closer to home. On July 21, we bought 19 daily newspapers plus numerous weeklies and other publications in five states from Thomson Newspapers Inc. for a little more than $1 billion. Joining Gannett were eight dailies in Wisconsin, eight in Central Ohio and single newspaper groups in Lafayette, La., Salisbury, Md., and in the Utah resort town of St. George. Retired Gannett Chairman John J. Curley (left) and his successor, Chairman, President and CEO Douglas H. McCorkindale. 2
Slide 5: GANNETT’S GAME PLAN The Thomson newspapers were well run when they arrived and have had superior ad revenue growth over the last few years. But, with the consolidation of some printing operations in Wisconsin and the combination of their best practices with ours, we are achieving and expect further operating improvements. The crown jewel of acquisition activity in the summer of 2000 was the purchase of Central Newspapers, Inc., for $2.6 billion, plus Central’s existing debt. Central presented us with the exciting opportunity to add two fine flagship newspapers – The Arizona Republic and The Indianapolis Star – to the Gannett family, along with daily newspapers in Muncie, Ind., and Alexandria, La. The Arizona Republic expanded our presence in Phoenix, the 14th-largest market in the United States and the fastest-growing metro market in the country, where we already own one of the USA’s top-rated TV stations, KPNX. Convergence among the newspaper, TV station and Internet operations, sharing news coverage and other opportunities, is producing results for consumers there. And the Phoenix project is serving as a model for other parts of Gannett. The Central deal also put us in Indianapolis, the 29th-largest market in the USA and a strong journalism voice in the nation’s midsection. All told, the Central deal brought us a host of new talent and terrific revenue opportunities that will bolster our results over the next several years, especially when combined with the substantial cost savings we are realizing from the group, particularly in Indianapolis. Right off the top, we eliminated $14 million of Central’s corporate expenses and are working on additional savings. Seasoned Gannett veterans who understand good journalism and good business are now in place in Phoenix and Indianapolis and are encouraging both qualities at those locations. In September, one more acquisition added to our growing presence in Louisiana. The Opelousas Daily World was added to the new papers in Lafayette and Alexandria, and the two we already own in Monroe and Shreveport. Ownership of those five dailies gives us a combined circulation of more than 200,000 in the state. By the end of the year, Gannett had grown to 99 daily newspapers in the United States. This at a time when Wall Street was seriously undervaluing traditional newspaper companies and talk among investors again had turned to the demise of everything not dot-com. Repeatedly we were asked: “Why invest in these ‘old economy’ properties?” The answer is we are confident all these acquisitions are excellent investments and will deliver to Gannett’s bottom line for years to come. More importantly, and we can’t say this strongly enough, we believe newspapers are a great business and will continue to deliver growth for many generations. That’s solid growth by all measures: substantial revenue, positive cash flow and real earnings. As media fragment and proliferate, and questions arise about credibility and values, the role of newspapers as the most credible source for news and advertising remains strong and is increasing. And so our Gannett is an international, multi-billion dollar news, information and communications company that delivers quality products and results for its readers, viewers, advertisers and other customers. We believe that well-managed newspapers, television stations, Internet products, magazine/specialty publications and programming efforts will lead to higher profits for our shareholders. Our assets include: • USA TODAY, the nation's largest-selling daily newspaper; • Daily and weekly community newspapers and specialty publications in the United States, Guam and the United Kingdom; • Television stations in many Top 25 and growth markets; • Online news, information and advertising products and investments. Strategic Vision • Create, improve and expand quality products through innovation. • Make acquisitions and smart investments in news, information and communications and related fields that make strategic and economic sense. • Capitalize on Internet opportunities to expand our information and advertising businesses. Operating Principles • Respect and protect the First Amendment. • Provide effective leadership and efficient management. • Raise the standards and enhance the credibility of our products, because quality ultimately leads to higher profits. • Deliver customer satisfaction and expand our customer base. • Achieve a positive return on new and acquired products and properties in a reasonable period of time, while recognizing those with high growth potential may take more time. • Dispose of assets that have limited potential or when the disposition is in the best interests of the company and its shareholders. • Increase profitability and return on equity and investment over the long term. • Respect and be fair to employees, our smartest investments. • Offer a diverse environment where opportunity is based on merit. • Serve the communities in which we do business. 3
Slide 6: “IN A YEAR LIKE 2001, WE WILL DO WHAT WE DO BEST: AGGRESSIVELY GO AFTER REVENUES THROUGH BETTER PRODUCTS AND SMART DEALS. AND WE’LL USE OUR FINANCIAL DISCIPLINE TO DELIVER A SOLID PERFORMANCE. ” newspapers will continue to produce solid, consistent growth as they did this year with record revenues at our community newspaper group and at USA TODAY. But good business is not the only reason our newspapers succeed. Year 2000 saw a new Pulitzer Prize added to Gannett’s 42 others and new readership and quality initiatives designed to improve coverage and broaden our reach among younger readers. Eric Newhouse, projects editor at the Great Falls (Mont.) Tribune, won the explanatory reporting Pulitzer for his series “Alcohol: Cradle to Grave” about the devastating effects of alcohol abuse on a community. The series is an outstanding example of the kind of journalism we do best: taking issues of utmost importance to our communities and translating them into compelling and effective stories that sell newspapers and encourage change. Our Newspaper Division introduced Complete Community Coverage, the next generation of NEWS 2000, which is designed to foster more diverse and fair coverage of communities. Among the work undertaken in connection with this was a study of young readers by young journalists, members of the Generation X Task Force. What they found was that, contrary to popular thought, young people want and like to read newspapers. But these readers need to see topics of interest to them, such as travel, fitness and the Internet. The result was a host of new features in a number of papers around the country. Which brings us to Gannett’s continuing investment in the Internet. Our company has embraced the opportunity of the Web but we’ve done it with caution and sensibility, always putting it to the same test we apply to all our business ventures: Will it make money and add value for our shareholders? Even in the midst of the dot-com meltdown last year, our Web sites had revenues of about $63 million while losing just a few million dollars. As we closed the year, Gannett had 95 domestic newspaper publishing Web sites and sites in all 19 of our TV markets. Newsquest, as always, has a strong and expanding Internet presence while the newly redesigned USATODAY.com continues to be one of the most popular general news sites on the Web. To answer the question of what impact will the Web have on readership, we are learning that the Internet can actually spur interest in the newspaper, generating several thousand print subscriptions. A study completed by our St. Cloud, Minn., newspaper showed that its online version added three points of new audience to the print product's reach. Other studies underway preliminarily are confirming that finding. Gannett’s Broadcasting Division experienced another strong year in 2000. We were able to take great advantage of special advertising and news opportunities provided by the Olympics and the elections because of our strong lineup of stations. Our stations are No. 1 or No. 2 in 16 of our 19 markets and we have the four highest-rated news stations of all stations in the USA based on late news ratings. While our network relationships continue to be important to us, our success this year and in the future is not simply tied to the networks’ performance. Strong affiliates such as ours outperform by providing viewers with quality local news and programming. Among our programming initiatives in 2000 was bringing Broadcasting together with USA TODAY. USA TODAY LIVE takes stories from the paper and turns them into stories for our viewers. Networking the successful USA TODAY brand began with the Concorde crash in Paris, then blossomed for the political conventions and the Sydney Olympics. Our television group also expanded its presence in the Jacksonville, Fla., market in 2000. In March, we added WJXX, the ABC affiliate in Jacksonville, to WTLV, the NBC affiliate we already own there. The new Federal Communications Commission rules approved in the fall of 1999 allowed for this duopoly. Now the two stations are working together to provide a bigger and better “First Coast News” operation for our viewers in the Jacksonville area. The election of a new president produced another likely benefit for broadcasting. There’s a new mood at the FCC and we are hoping to see the end of cross-ownership rules that have so restricted our expansion into a number of markets. Our industry, hamstrung by these unnecessary rules, will seize the many opportunities that will arise when the rules change. Our work in the Phoenix market is showing us what the possibilities are. While 2000 was an incredibly exciting year at Gannett, it was one of mixed rewards for our shareholders. We have never seen better numbers, done better deals and had such an unsatisfactory reaction on Wall Street. 4
Slide 7: F A R E W E L L In response to the significant undervaluation of our businesses by the market, we bought back almost $1 billion of our company stock. Long term this will be another excellent investment. N o grandiose parties. No speeches. No drawn out good-byes. John Curley chose to leave Gannett pretty much the way he ran it: with humility, intelligence and the best interests of the company at heart. As an employee for more than 30 years, as an executive and, finally, as Gannett’s fifth chairman, Curley’s mark is everywhere in the company. With the skill and brains of his decades in the news business – the Associated Press as well as Gannett – Curley was instrumental in bringing about the kind of success that makes anyone with a stake in the company sleep well at night. Quality products. Editorial integrity. A Pulitzer Prize on his watch as head of Gannett News Service. The first editor of USA TODAY and its ardent defender. A stock value increase of 346 percent during his years as CEO. Facts vs. fiction. Fairness vs. bias. Strength vs. bombast. Curley presided over growth that made sense as well as money. He made local autonomy for Gannett’s papers a mantra and a reality. He peppered the company with brilliant, tough employees and promoted diversity. He has been everyone’s friend, and everyone’s boss. But most of all, John Curley has been a journalist: a savvy, street-smart journalist who knew how to get the story. And how to get the job done. John Curley: his Gannett years at a glance 1969: Joined Gannett as suburban editor, Times-Union, Rochester, N.Y. 1970: Named editor, Courier-News, Bridgewater, N.J. 1971: Named publisher, Courier-News, Bridgewater, N.J. 1974: Named chief of Washington bureau, Gannett News Service 1979: Named to the additional role of vice president/news, Gannett 1980: Gannett News Service with Curley at its head claims the Pulitzer Prize for Public Service, the first wire service to win that award. 1980: Named publisher of The News Journal, Wilmington, Del., and later president of then Mid-Atlantic Newspaper Group 1982: Named USA TODAY’s first editor 1983: Named senior vice president, Gannett and president/Newspaper Division; elected to Board of Directors 1984: Named president and COO 1986: Named president and CEO 1989: Named chairman, president and CEO Looking ahead, the year 2000 triumphs we’ve described are, in part, 2001’s challenges: The longest economic expansion in the nation’s history has slowed and may be coming to an end; special events such as the Olympics and elections will be absent in 2001; newsprint expenses will be much higher. And there will be another major change to accommodate in 2001: We will be moving into our new headquarters in McLean, Va. But Gannett has seen, and managed successfully through, change before. We’ve seen slower economic times and tough year-to-year comparisons in the past. In a year like 2001, we will do what we do best: aggressively go after revenues through better products and smart deals. And we’ll use our financial discipline to deliver a solid performance. We will make this new decade another rewarding one for our shareholders, our customers and our employees. John J. Curley Retired Chairman Douglas H. McCorkindale Chairman, President & CEO 5
Slide 8: EWS P A P E R S H I G H L I G H T S N I n a period of just 12 days last summer, Gannett added 25 newspapers to the company – giving the With the acquisition of Central Newspapers, Inc. and 19 daily newspapers from Thomson Newspaper Division supervision of 98 dailies in the U.S. and Guam. Newspapers, Gannett gained the top newspapers in Indiana (The Indianapolis Star) and in Arizona (The Arizona Republic in Phoenix). Gannett also substantially increased its number of newspapers in Wisconsin, Ohio, Indiana and Louisiana – and added daily newspapers in two additional states, Maryland and Utah. Later in 2000, Gannett acquired a fifth newspaper in Louisiana – this one in Opelousas – from the New York Times Co. The deals underscored Gannett’s belief that newspapers are crucial, trusted sources of local news and information. And, as more of the local newspapers go online, the credibility is extending to the Internet. In 2000, more than 20 of Gannett’s smaller newspapers launched Web sites, all using a centralized production process that permits them to operate high-quality sites at a manageable and controllable cost. Now there are 95 Newspaper Division publishing Web sites. By bundling print and online advertising sales at the units, pro forma ad revenues from online newspaper operations have grown a healthy 88 percent. Traffic at the sites is up too, at more than 150 million page views each month. Overall, the Newspaper Division continued its strong revenue performance. Total pro forma advertising revenues increased about 5 percent over 1999. Retail advertising gained 1 percent; national up 8 percent. Total classified revenues increased 3 percent over 1999. Total run-of-press volume increased about 3 percent, the equivalent of 59 pages a day. Pro forma circulation revenue finished 2000 up 2 percent from 1999. Average daily net paid circulation finished down slightly, about 1 percent. Single-copy volume trends improved. Attracting and keeping readers through enhanced content and new products was a focus of the division in 2000. Gannett News Service launched “e,” a guide to personal technology. (See story, page 7.) Full or partial “e” sections appear in more than 90 Gannett newspapers. The content is available on newspaper Web sites as well. Gannett News Service also worked with USA TODAY and USATODAY.com to bring newspaper readers, TV viewers and Internet users complete election and Summer Olympics coverage. (See story, page 13.) Publishers and editors across Gannett are working to incorporate the recommendations of the Generation X Task Force into their local publications. (See story, page 7.) The task force was created to find new ways to attract and hold readers ages 25-34. One reader requirement that never changes is the need for strong, solid journalism. Among the awards won by Gannett’s newspapers in 2000: the Pulitzer Prize for Explanatory Journalism. Eric Newhouse of The Great Falls (Mont.) Tribune (circ. 33,903) was awarded the prize for his extraordinary reporting on the effect of alcohol abuse on a community. (See story, page 8.) 6
Slide 9: NEWSPAPERS EXPAND READERSHIP WITH COMPLETE COMMUNITY COVERAGE TASK FORCE HELPS NEWSPAPERS REACH GENERATION X TECHNOLOGY SECTION REACHES MILLIONS IN PRINT AND ONLINE In the fall of 2000, the Newspaper Division launched a new initiative in news: Complete Community Coverage. This initiative takes elements from Gannett’s longstanding NEWS 2000 program – aimed at meeting the changing needs of readers – and adds steps to provide strong news reports online. The objective is to build readership by making each newspaper the best source of local news and information – whether readers come to the print or online version. Complete Community Coverage relies first on newspapers getting a deeper understanding of their readers’ interests through formal readership studies and informal contact. The newspapers also incorporate four Core Values in print and online operations: upholding First Amendment responsibilities; reflecting and serving diverse readers; achieving high-quality journalistic standards; and ensuring credibility in content and integrity in news gathering. To expand Complete Community Coverage in print, newspapers emphasize strong coverage of traditional local topics and target high-potential reader groups. To advance Complete Community Coverage online, newspapers add depth through the local-news online report. Online also provides significant breaking local news, not restricted by a print cycle. Under Complete Community Coverage, newspapers also may extend their reach through partnerships with other local media. Nineteen Gannett employees – all Generation Xers between 25 and 34 – were brought together in early 2000 to study ways for newspapers and Web sites to appeal to their age group. For several months, the task force researched the habits, likes, attitudes and preferences of Generation X and developed recommendations and prototypes. Among recommendations: ensure that newspapers consistently contain information GenXers are interested in, such as schools and commuting; present that information in an appealing, relevant way; promote content in the newspapers and on Web sites. Among changes already taking place: FLORIDA TODAY in Brevard is launching an improved daily Business section; Asbury Park (N.J.) Press refocused music coverage on clubs and concerts; Lansing (Mich.) State Journal redesigned its classifieds, adding high-interest topics; The Desert Sun in Palm Springs, Calif., launched a free alternative weekly and added pages on recreation and the outdoors to the sports section; Fort Collins Coloradoan debuted Xplore, a section focusing on outdoor recreation, then launched an interactive companion Web site; Rochester (N.Y.) Democrat and Chronicle put cameras on the NFL’s Buffalo Bills training fields and updated the photos each minute on the Web. Since last fall, “e” has been enhancing technology coverage at Gannett newspapers. Produced by Gannett News Service, “e” is a weekly guide to personal technology that includes information on computers, cell phones, digital television, MP3 players and more. The section also offers help and advice on the Internet, software and personal technology gadgets. There’s special content for parents and younger readers, including a “Computing with Kids” column and reviews of the latest video games. Full or partial sections of “e” appear in more than 90 Gannett newspapers. “Our niche is a consumer guide to technology,” says Craig Schwed, GNS projects editor. “We’re trying to help people use technology to make their lives better and have fun.” Gannett’s Digital Production Center also makes “e” content available to newspaper and broadcast Web sites. In October, the first full month of operation, “e” online got more than 1 million page views. 7
Slide 10: GREAT FALLS TRIBUNE CLAIMS PULITZER PRIZE DES MOINES OPENS NEW PRINTING PLANT, MAKES DESIGN CHANGES T he Great Falls (Mont.) Tribune received journalism’s top honor in 2000. Projects Editor Eric Newhouse won the Pulitzer Prize for explanatory reporting for the yearlong series, On March 13, 2000, The Des Moines Register began printing newspapers on a state-of-theart press at its new $52 million printing facility. The new Iowa plant is about eight miles from the Register building in downtown Des Moines, where most of the newspaper’s staffers work; about 150 production and distribution employees moved to the new building. Downtown staffers send news pages through high-speed fiber-optic lines to the printing facility. It takes just 15 seconds to send one page. The Register is among the first U.S. newspapers to use the MAN Roland Geoman offset press, which weighs more than a million pounds and stands five stories high. It prints up to 70,000 copies per hour, compared with 35,000 copies per hour on the newspaper’s old press. It features shaftless technology, which provides synchronization through a fiber-optic network, making the press run smoother. Vice President and Editor Dennis Ryerson says “the paper is just cleaner, more colorful, and people have indeed noticed.” Readers wrote to the newspaper to say they liked the new and improved Register, which included design changes to Page One and section fronts, expanded local news, a weekly Home & Garden section, a weekly technology section and a new stand-alone daily business section. The newspaper also is narrower now that it’s being produced on the new industry standard 50-inch web. “Alcohol – Cradle to Grave,” about the effects of alcohol abuse on Montana’s citizens. Each month, Newhouse reported on a different segment of the community affected by alcohol abuse, including alcoholic mothers, teenagers, victims of drunk drivers and residents of the Blackfeet Indian Reservation. People told Newhouse firsthand how alcohol addiction was destroying their lives. They let the Tribune’s Larry Beckner photograph them at their worst in hopes that Newhouse’s work could help others. “People here trust the Tribune. When we change things, they react as if we’d changed the living room furniture,” Newhouse says. “So when it came time to go out and talk to people, it was a lot easier to do.” Newhouse, a 12-year veteran of the paper, and Executive Editor Jim Strauss estimate that the series ran about 50,000 words on 50 pages throughout 1999. For the April 1999 installment, readers responded to a small ad that ran in the Tribune encouraging them to call Newhouse and tell him how alcohol abuse was affecting them personally. “We got more calls than I can remember. We took just two paragraphs from each of those calls and, using only first names, filled up a whole page with them. It said to me that this [problem] was even more wide-spread than I had believed,” Newhouse says. Newhouse met Bill Broderson, an alcoholic in the detox unit of a local hospital in the beginning stages of the series. Broderson agreed to be interviewed and photographed as Newhouse chronicled his struggle with alcohol addiction throughout the year. Newhouse related Broderson’s ups and downs – when he was sober and when he was on a drinking binge and living in the bushes along the Missouri River. The last part of the series featured Broderson, back in the detox unit. If personal accounts about the effects of alcohol abuse didn’t hook readers, the research on its fiscal impact did. Design and Graphics Editor Také Uda created numerous charts and graphs about the state’s alcohol consumption, revenue and costs. Newhouse found that about half of Montana’s welfare money goes to people who abuse alcohol. He added to that figure various others, including state money spent on substance abuse programs in prisons and medical bills stemming from alcoholism. He found, even using the most conservative estimates, that Montana spends more on treating the effects of alcohol abuse than it spends on its entire university system each year – $135 million compared with $120 million. For the series, Newhouse also won a national Nancy Dickerson Whitehead Medallion, which recognizes outstanding professionals in mass communication. 8
Slide 11: USA WEEKEND HITS RECORD CIRCULATION, REACHES MILESTONES TECHNOLOGY TOOLS ENHANCE SERVICE, INCREASE PRODUCTIVITY • Route Max (shown in photo above), a single-copy palm-top sales management system, was installed at The Journal News in Westchester County, N.Y., and Rochester (N.Y.) Democrat and Chronicle, as well as the Battle Creek (Mich.) Enquirer, The Courier-Journal in Louisville, Ky., and The Desert Sun in Palm Springs, Calif. Seven more newspapers are slated for 2001. Circulation staffers use the hand-held computers to electronically record single-copy delivery and sales information during route delivery. Back at the office, the devices are dropped into cradles, where data is automatically uploaded to Genesys. “Route Max saves time, eliminates key punching and gives us more accurate and timely sales information on our draws,” says Rosie Cassidy, director/circulation operations and technology. It enables newspapers to better serve over-the-counter dealers by maximizing sales and streamlining the billing process. USA WEEKEND in January 2001 reached the largest circulation in its history – 22.7 million. The record represents almost 1 million in added circulation in 2000, with the number of newspapers carrying the national weekly newspaper magazine totaling 555. To help its partner newspapers boost single-copy sales, USA WEEKEND in 2000 began offering an editorial special events promotional program. Papers that promoted a Britney Spears “fold-out poster” in a February issue saw up to a 4 percent increase in single-copy sales. In the fall, USA WEEKEND marked two milestones: its 15th anniversary and the 10th Make a Difference Day, the nation’s largest day of community service which USA WEEKEND created. About 2 million Americans participated in activities that helped 25 million others. Volunteers, including celebrities such as Miss America 2001, helped repair schools, cleaned the environment and visited sick children. All 50 U.S. state governors declared their support. Actor Paul Newman donated $100,000 in charitable awards. Artist Mary Engelbreit created a commemorative poster to benefit Make A Difference Day and First Book, a children’s literacy program; about 2,500 were sold. Dozens of celebrities donated items that were auctioned for charity on MissionFish.com. More than 2,500 Wal-Mart stores donated $1,000 each to projects working with charities in their communities. Newspaper Division circulation and market development staffers in 2000 began using three computer-based tools to improve customer service. • R-Logic gives newspapers more detailed information about reader retention. While Gannett’s database system, Genesys, measures the time lapse between subscriber “stops and starts,” R-Logic gives newspapers a more complete picture of subscriber activity by taking into account gaps caused by vacations and changes in service. This extra information aids newspapers’ retention efforts and helps employees spot trends. Circulation and market development staffers were introduced to R-Logic at a two-day Retention Marketing Seminar. More than 70 newspapers installed the system in 2000. The rest will have it in 2001. • IQube helps newspapers learn more about their customers by integrating existing Genesys data with external marketing data. It’s used to develop more detailed consumer analyses, improve contact management and more. Tested at The News Journal in Wilmington, Del., and at The Greenville (S.C.) News, it will be rolled out to other newspapers in 2001. 9
Slide 12: E S T P L C H I G H L I G H T S EWS Q U G annett expanded its position as England’s largest publisher of regional newspapers – and became one of the top three publishers in Wales – with the June acquisition of News Communications & Media plc (Newscom). Newscom added 114 titles to the number published by Newsquest, Gannett’s operating arm in the United Kingdom. Newsquest now has nearly 300 titles, including 15 dailies, with a weekly circulation of nearly 11 million. Newscom was “a brilliant fit,” says Newsquest Executive Chairman Jim Brown. Newsquest acquired Southernprint in the deal. Southernprint is a state-of-the-art printing facility that prints and binds many of the U.K.’s top glossy magazines and catalogs. In 1997 and 2000, the facility was named Printing Company of the Year by the British Printing Industries Federation. By adding Southernprint to its 10 other presses, Newsquest can now offer a variety of newspaper, magazine and periodical printing services around the country. Ten Newsquest newspapers, especially in the London area, have improved production quality by using the state-of-the-art presses at Southampton and Weymouth. Many of Newsquest’s titles are more than 100 years old. With Newscom came the third-oldest surviving newspaper in the world, the Salisbury Journal. The Salisbury paper, founded in 1729, joined Berrow’s Worcester Journal as a Newsquest property. Berrow’s, established in 1690, is the oldest surviving newspaper. Newsquest continued to thrive in 2000. Advertising revenues, excluding Newscom, increased 11 percent while circulation revenue increased 4 percent. Circulation volume decreased 2 percent. Already successful Internet efforts grew further in 2000. “This is” sites, part of a nationwide network of local news and information sites, added CommuniGate to their offerings in 2000. CommuniGate lets clubs and organizations design their own Web pages and post their information. (See story, page 11.) Newsquest’s use of online products to extend its business is proving invaluable to advertisers: Regional digital media teams provide Web solutions for a range of business clients, from emerging dot-coms to well-established local retailers. The partnership of Fish4 remains one of the U.K.’s largest classified sites for jobs, autos and real estate. Shoppers World, an e-commerce site, provides key information about sales and deals to bargain hunters. Newsquest produces a portfolio of niche magazines and supplements and is quick to pounce on emerging trends, launching several new products in 2000. Several new newspapers were started, including The Ealing Times, which went from launch decision to street in eight hours. (See stories, page 11.) The U.K.’s largest regional press door-to-door distribution services are offered through Regional Letterbox Services (RLS). By taking advantage of RLS’ weekly distribution network, advertisers can have their leaflets, brochures, catalogs, supplements or product samples delivered to a few thousand or more than 6 million households at any one time. Editorially, Newsquest’s newspapers continue to pursue a variety of investigations that achieved results in their communities. The Northern Echo, for instance, prompted improvements in Britain’s National Health Service and the South Wales Argus rallied behind a successful campaign to help former miners suffering from respiratory diseases. 10 N
Slide 13: NEWSQUEST ROLLS OUT NEWSPAPERS, NICHE PRODUCTS ONLINE INITIATIVES DRAW RECORD TRAFFIC DESPITE DEVASTATING FLOODS, NEWSPAPERS ARE DELIVERED Newsquest expanded circulation and advertising sales in 2000, launching a number of new newspapers and several niche products. In eight hours last March, staffers put together, printed and distributed 60,000 copies of The Ealing Times in the West London town of Ealing. The weekly paper was launched posthaste after a competitor threatened to publish a product with the same name to steal Newsquest’s thunder. Newsquest had planned to introduce The Ealing Times three weeks later. To move up the date, distribution teams from the region were dispatched to deliver the first copies to newsagents all over Ealing. A promotional campaign announcing the launch followed. Six other Newsquest weeklies debuted in 2000 – three in the Bradford area and three in Newsquest’s Southern region – along with a weekend magazine covering Southampton, Weymouth and Bournemouth. Newsquest also created Scoop, a weekly quarterfold to attract small businesses that can’t afford to advertise in its larger papers. Available across most of the company’s regions, the newspaper carries no editorial content and is filled with bargain ads. Limited Edition, a glossy upscale national magazine launched in 1999, underwent significant expansion in 2000. Fourteen Newsquest centers now publish local versions of the publication, growing circulation from 257,000 in 1999 to nearly 500,000. Newsquest Digital Media in September began partnering with amateur clubs and non-profits in Newsquest newspaper communities via its new online initiative, CommuniGate.co.uk. The service helps the organizations create their own Web sites linked to Newsquest’s local and regional portals. The result is a lively online meeting place where members can communicate, plan and advertise activities, publish newsletters and photos. Newsquest developed the software and provides it to the groups for free. Ad staffers sell site sponsorships; newspapers republish in print the contacts, news and events posted on the sites. Within two weeks of CommuniGate’s start-up, more than 100 groups had registered with the service; within a month, there were more than 800 Web sites built. At the end of 2000, CommuniGate reported more than half a million page impressions. Those visitors contributed to record levels of traffic on Newsquest sites, up more than 335 percent in 2000. Among other online draws: the fall floods and the race for London’s mayor, an e-soap story on thisisyork.co.uk and a panoramic tour of Oxford on thisisoxfordshire.co.uk. Newsquest ranked in the Top 100 U.K. Online Media Properties list published by Revolution, a national magazine covering the digital economy. Weeks of torrential rains last fall triggered severe flooding on rivers across the U.K. – the worst in 50 years. At least 12 people died as a result of the Great Flood of 2000; thousands fled their homes. In York, 200 miles north of London and home to Newsquest’s Evening Press, water levels peaked at the highest level since 1625. Photographers and reporters braved adverse conditions to produce papers full of flood stories and essential information. For many York staffers, just getting to and from work was a daily nightmare of long detours through flooded, traffic-choked roads and train journeys that could be cancelled at any time. Two evacuation notices were served on the York newspaper building at the height of the floods. No one left. In southern Britain, waters rose around the Worcester Evening News building but the daily and weeklies continued to publish. Staffers spent long hours in the cold and wet covering stories of the deluge. Newspapers were even delivered by tractor (see photo above) as floods swept the city. The Evening Press published two special editions during the floods and a flood edition of its staff magazine, YorkTalk, telling the stories of how employees battled the crisis. Afterward, the Evening Press produced a fullcolor, 56-page magazine. 11
Slide 14: A T O D A Y H I G H L I G H T S U S U SA TODAY in 2000 focused on leveraging its assets to build a network across its many departments – and on providing a branded USA TODAY report via multiple media vehicles. USATODAY.com and USA TODAY editors collaborated throughout the year, learning how to use the power of the brand and to serve an aggregated audience. The network was best showcased at the national political conventions during the summer and later at the Summer Olympics in Sydney, Australia. Staffers for USA TODAY, USATODAY.com, Gannett News Service and USA TODAY LIVE, a multimedia venture launched with Gannett Broadcasting, worked side by side to provide the best coverage possible, whether online, in the newspaper or on Gannett television stations. (See stories, page 13.) Across the network, the USA TODAY brand saw positive results. USATODAY.com, the No. 1 newspaper site and a leading general interest news site on the Internet, had record-breaking traffic for 2000 with 2.4 billion page views for the year. That 50 percent increase over total traffic for 1999 reflects a continuing trend in increased traffic for USATODAY.com. More than 25 million monthly visitors are getting USA TODAY news and information through interactive features, graphics and other multimedia functions including audio, video and live webcasts. The USA TODAY network also allows advertising sales to bring additional value to advertisers. For instance, clients can now purchase advertising in the newspaper, online, in the international edition of USA TODAY and more. The reach of the network was expanded into collaborations between marketing, news and circulation. Advertising posted another strong year with revenues up more than 12 percent. Over five years, USA TODAY ad revenue has grown 115 percent. In 2000, all major advertising categories were up, with the entertainment and telecom categories topping the list. Entertainment was up 19 percent; telecom, up 78 percent. The network approach has enabled USA TODAY to increase the audience reach for key advertisers. Advertisers such as Vanguard Group Inc. extended print advertising by placing digital advertising on USA TODAY content delivered to Palm III, Palm V and Palm VII handheld devices. The newspaper made the conversion from a 54-inch web width to a 50-inch web. Readers say the narrower page makes it easier to carry, hold and fold – and it reduces newsprint expense. The newspaper also was redesigned to give it a fresh, updated look. To enhance on-time newspaper deliveries to customers, USA TODAY launched three new print sites in the U.S.: Lansing, Mich., Raleigh, N.C., and Las Vegas, Nev. Two European print sites were added in Belgium and Italy. USA TODAY completed its computer-to-plate project in March 2000, eliminating the use of film in production at all print sites. This reduces production time, which gives newsrooms later deadlines and lets newspapers reach circulation departments earlier. 12
Slide 15: COLLABORATION WAS KEY TO OLYMPICS COVERAGE USA TODAY COMES TO LOCAL TV NEWS IN MULTIMEDIA VENTURE INVESTIGATIVE REPORTING PROMPTS POSITIVE CHANGE The 2000 Summer Olympics were a first for USATODAY.com. Sydney’s Games, with their upside-down time zone, called for the kind of cooperation that media convergence demands: Reporters for both USA TODAY and its dot-com partner wrote for online first, print second. USATODAY.com offered Internet users the latest results as well as exclusive online chats with the athletes, pages of event photos and online fan surveys. USA G’Day featured Assistant Managing Editor/News Projects Joel Sucherman on video, talking about aspects of life Down Under. A new USA G’Day segment appeared on the USATODAY.com Sydney 2000 page every day, complementing online and print news coverage of the Games. The coverage paid off. USATODAY.com reported 226 million page views in the Olympic month of September, a 50 percent increase in year-over-year traffic. USA TODAY, as it has for Olympics past, published a daily bonus section with news, features, photos and graphics from the Games. New this year: a daily host city edition, which included a four-page sheet insert with the latest results from the previous day’s events. The Sydney edition and bonus section were printed at USA TODAY’s Hong Kong print site; the insert, by Xerox Corp. in Sydney. USA TODAY and Gannett Broadcasting in June launched USA TODAY LIVE, a new multimedia venture that produces the content of USA TODAY in electronic format and distributes it to Gannett TV stations and USATODAY.com. Unofficially, USA TODAY LIVE began with coverage of the crash of a Concorde jet outside Paris in July. The official debut came at the 2000 national political conventions. There, for the first time, reporters and columnists for USA TODAY and Gannett News Service were able to go on TV and the Internet with what readers of the newspaper have come to count on – the staff’s indepth knowledge and analysis of events. Gannett’s 22 TV stations nationwide received the segments for their exclusive use in news reports and USATODAY.com streamed audio and video to its Net users worldwide. USA TODAY LIVE has since rolled out different program segments, adding daily inserts to the morning newscasts at the TV stations. “A reporter from USA TODAY can now say to a news source: I can get you in the largest newspaper, on one of the largest Web sites and on the largest local affiliate station group. Nobody else in media can make that claim, and the result is we are breaking more stories than ever,” says USA TODAY President and Publisher Tom Curley. USA TODAY Investigative Reporter Peter Eisler spent 10 months examining more than 100,000 recently declassified documents for his series “Poisoned Workers & Poisoned Places.” Prompted by a tip from a source, Eisler began studying private companies where the government did nuclear weapons work in the ’40s and ’50s. His review showed how the government's secret contracting program risked the health and lives of thousands of Americans. A Congressional hearing was called and the first comprehensive list of nuclear weapons production sites was released. USA TODAY LIVE, working with Eisler, developed a companion series that aired in five Gannett TV markets where workers had been exposed to nuclear radiation. The TV version began airing the night before the story appeared in the newspaper, giving the Gannett stations a 12-hour jump on their competition. Stories on USATODAY.com received hundreds of thousands of page views. The story is still producing shockwaves on Capitol Hill and in communities across the nation. Local officials are scrambling to find out whether they have radioactive industrial sites in the middle of their neighborhoods. 13
Slide 16: C A S T I N G H I G H L I G H T S O A D B G R annett Broadcasting is taking advantage of one of the company’s greatest assets – the content generated by reporters and editors at USA TODAY and Gannett’s local newspapers and Web sites, as well as at its own TV stations. Broadcasting joined with USA TODAY to launch USA TODAY LIVE. The multimedia venture transforms the content of USA TODAY into video and distributes it to Gannett TV stations and USATODAY.com. (See story, page 13.) A similar cross-media relationship between KPNX-TV at Phoenix and The Arizona Republic allows for a sharing of content across both platforms. (See story, page 15.) Meanwhile, viewer appetite for morning news continues to grow. Three Gannett stations – KARE-TV at Minneapolis-St. Paul, KUSA-TV at Denver and KSDK-TV at St. Louis – are among the highest-ranked morning news stations in the U.S.’s largest markets for viewers in the key age group of 25–54. Late evening news continues to deliver the largest local news audience. Four Gannett stations – KARE-TV, KPNX-TV, KUSA-TV, and KSDK-TV – rank among the top 10 in the U.S.’s largest markets for the 25–54 age group. Gannett stations KARE-TV, KUSA-TV, KSDK-TV, WBIR-TV at Knoxville, Tenn., WCSH-TV at Portland, Maine, and WMAZ-TV at Macon, Ga., are ranked at the top in all key local news time periods. The importance of local television was apparent throughout the election year as viewers tuned into Gannett’s TV stations for the latest news and information. It was a banner year as well for campaign advertising in key states. Overall, revenues were bolstered by a strong political and issue advertising year and the solid performance of Gannett’s NBC stations during the Summer Olympics. Revenues were up 8 percent in 2000. Throughout the year, Broadcasting improved its staff development with three key initiatives: • • • Annual strategic planning. Each station’s management and staff continue to plan key initiatives Web site development. A corporate team is working to develop Web products and generate “Winning” programs. Key staffers from various stations are brought together to learn from one designed to improve the product. revenue. All stations now have Web sites. another. One such meeting in 2000 involved all newscasters and news management of Gannett TV stations’ morning newscasts. In 2000, Broadcasting continued to use research as a strategic planning tool, providing each station with an annual study tracking local viewer response to news. Use of research will be expanded in 2001 to provide stations with information detailing viewer interest in morning and evening news. Research projects are underway in Phoenix, Sacramento and Denver – three markets with rapidly expanding Hispanic populations – to determine how to meet those viewers’ unique needs and interests in all Gannett markets. Technology was improved as Gannett TV stations continued the transition to digital. Also, two Webbased systems were developed to share information among stations: a Broadcast intranet and Newsmaker, which stations use for sharing content and graphics over the Internet. (See story, page 15. ) 14
Slide 17: PARTNERSHIPS MOVE BROADCASTING IN NEW DIRECTIONS tage of the enterprise efforts of Gannett newspapers and Web sites. In Phoenix, KPNX-TV, The Arizona Republic and the newspaper’s two Web sites began sharing information on major investigations and events such as the Summer Olympics, election coverage and business reporting. By combining the media, Gannett now reaches nearly 90 percent of adults in the Phoenix market in an average week. Via USA TODAY LIVE, a venture between Broadcasting and USA TODAY, all Gannett stations now have unique access to the nation’s newspaper and USATODAY.com. (See story, page 13.) Partnerships with non-Gannett entities: • Eleven U.S. TV broadcast groups joined with Gannett to form iBlast Networks. When introduced in 2001, iBlast will use a portion of the digital TV capacity of 143 local stations in 102 markets to deliver music downloads, interactive games, enhanced video and other digital services nationwide. • Paxson Communications Corp. signed a joint sales agreement with seven of Gannett Broadcasting's NBC affiliates to let the local PAX stations re-broadcast the local newscasts of the Gannett-owned stations. The markets are: Atlanta, Buffalo, Cleveland, Denver, Minneapolis-St. Paul, Phoenix and Portland. • Hearst-Argyle Television and Gannett’s 13 NBC affiliates joined with General Electric’s NBC Enterprises and stations owned and operated by NBC to develop syndicated programming for the late morning and afternoon hours. NEW TECHNOLOGY HELPS STATIONS SPREAD THE NEWS Gannett TV stations in 2000 established a variety of unique partnerships – with sister stations, with Gannett newspapers and with other broadcasters. In March, Gannett made history when it acquired WJXX-TV, the ABC affiliate in Jacksonville, Fla., from Allbritton Communications and became the first company in the country to own and operate two “Big Three” network-affiliated stations in one TV market. Gannett has owned and operated WTLV-TV, Jacksonville’s NBC affiliate, since 1988. Both stations now operate out of WTLV’s newly renovated facilities and newscasts for both are simulcast under the brand of First Coast News. In Maine, WLBZ-TV at Bangor and WCSH-TV at Portland merged their technical operations with a centralized and automated master control room that runs both operations as if they were in the next room instead of 135 miles apart. While the two have produced “statewide” newscasts for more than 20 years, the two newsrooms are now linked by an advanced computer. The computer controls satellite dishes and digital file servers to record and play back programs and commercials for the stations. Installation of a fiber-optic line was completed in January 2001, linking the stations for multiple video, audio and data signals. Gannett TV stations provided viewers additional quality content by taking advan- Gannett TV stations in 2000 began using Newsmaker, a content-management technology developed at Atlanta’s WXIA-TV. Newsmaker lets stations share text and graphics on stories, then adapt that information for use on their Web sites. Staffers log on to Newsmaker’s virtual private network (VPN) and call up stories published by the other stations on their Web sites. A user interface allows them to customize the stories by inserting text, still images, and Internet links. Future versions of Newsmaker will be able to handle streamed video clips. A WXIA crew covering the Summer Games in Sydney used Newsmaker to publish Olympics stories to its Web site. WGRZ-TV at Buffalo, N.Y., WLTX-TV at Columbia, S.C., and KTHV-TV at Little Rock, Ark., also have employed the new technology. In 2001, Newsmaker will be rolled out to stations division-wide, serving as a contentmanagement system for all the stations’ Web sites. Above: Gannett Television’s Kevin Goff, Newsmaker’s creator, demonstrates Newsmaker at WXIA-TV in Atlanta. 15
Slide 18: B O A R D O F D I R E C T O R S DOUGLAS H. MCCORKINDALE H. JESSE ARNELLE MEREDITH A. BROKAW Chairman, president and chief executive officer, Gannett Co., Inc. Formerly: President, chief executive officer and vice chairman, Gannett Co., Inc. (2000-January 2001), Vice chairman and president, Gannett Co., Inc. (1997-2000), Vice chairman and chief financial and administrative officer, Gannett Co., Inc. (1985-1997). Other directorships: Continental Airlines, Inc.; and funds which are part of the Prudential group of mutual funds. Age 61. (b,d,e,f,g) Of counsel to Winston-Salem, N.C., law firm of Womble, Carlyle, Sandridge & Rice. Other directorships: FPL Group, Inc.; Textron Corporation; Eastman Chemical Co.; Armstrong World Industries; Waste Management, Inc. Age 67. (a,e) Founder, Penny Whistle Toys, Inc., New York City, and author of children’s books. Other directorships: Conservation International, Washington, D.C. Age 60. (b,d,e) SPECIAL THANKS John J. Curley and Stuart T.K. Ho retired from the board on Jan. 31, 2001. Curley is the former chairman and chief executive officer, Gannett Co., Inc. Ho is chairman of the board and president, Capital Investment of Hawaii, Inc. Josephine P. Louis, chairman and chief executive officer of Eximious Inc. and Eximious Ltd., retired on May 2, 2000. Drew Lewis, former chairman and chief executive officer of Union Pacific Corporation, retired on Nov. 27, 2000. 16
Slide 19: (a) Member of Audit Committee. (b) Member of Executive Committee. (c) Member of Executive Compensation Committee. (d) Member of Management Continuity Committee. (e) Member of Public Responsibility and Personnel Practices Committee. (f) Member of Gannett Management Committee. (g) Member of Contributions Committee. JAMES A. JOHNSON SAMUEL J. PALMISANO KAREN HASTIE WILLIAMS Chairman and chief executive officer, Johnson Capital Partners. Other directorships: Cummins Engine Co.; Goldman Sachs Group, Inc.; Target Corporation; Temple-Inland Corporation; United Health Group; KB Home Corporation; Chairman, John F. Kennedy Center for the Performing Arts; Chairman, board of trustees, The Brookings Institution. Age 57. (b,c,d) President and chief operating officer, International Business Machines Corporation; and a trustee of The Johns Hopkins University. Age 49. (a,c) Partner of Washington, D.C., law firm of Crowell & Moring. Other directorships: The Chubb Corporation; Continental Airlines, Inc.; Washington Gas Light Company; and a trustee of the Fannie Mae Foundation. Age 56. (a,c) 17
Slide 20: C O M P A N Y A N D D I V I S I O N A L O F F I C E R S Gannett’s principal management group is the Gannett Management Committee, which coordinates overall management policies for the company. The Gannett Newspaper Operating Committee oversees operations of the company’s newspaper division. The Gannett Broadcasting BENTLEY s BROWN CHAPPLE • CLAPP • Operating Committee coordinates management policies for the company’s television stations. The members of these three groups are identified at right and on the following pages. 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 assistance to the company’s operating units in various phases of the company’s operations. At right are brief descriptions of the business experience during the last five years 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 the officer who serves as a director (Douglas H. McCorkindale) can be found on page 16. CLARK-JOHNSON s COLEMAN s COLLINS s T. CURLEY• CHRISTOPHER W. BALDWIN SUSAN CLARK-JOHNSON Vice president, taxes. Age 57. SARA M. BENTLEY Chairman and CEO, Phoenix Newspapers, Inc., Senior group president, Gannett Pacific Newspaper Group. Formerly: Senior group president, Gannett Pacific Newspaper Group, and president and publisher, Reno (Nev.) Gazette-Journal (1994-2000). Age 54. s MICHAEL J. COLEMAN President, Gannett Northwest Newspaper Group, and president and publisher, Statesman Journal, Salem, Ore. Age 49. s JAMES T. BROWN Executive chairman, Newsquest. Age 65. THOMAS L. CHAPPLE Senior group president, Gannett South Newspaper Group, and president and publisher, FLORIDA TODAY at Brevard County. Age 57. s Senior vice president, general counsel and secretary. Age 53.• RICHARD L. CLAPP Senior vice president/human resources. Age 60.• ROBERT T. COLLINS President, New Jersey Newspaper Group, and president and publisher, Asbury Park Press, Home News Tribune, East Brunswick, N.J., and Ocean County Newspapers. Formerly: President and publisher, Asbury Park Press and Home News Tribune (19971998); president and publisher, Courier-Post, Cherry Hill, N.J. (1993-1997). Age 57. s 18
Slide 21: Pictured on these pages are members of the Gannett Management Committee, Gannett Newspaper Operating Committee and Gannett Broadcasting Operating Committee. • s Member of the Gannett Management Committee. CURRIE s DIERCKS x DUBOW x FELLER • x Member of the Gannett Newspaper Operating Committee. Member of the Gannett Broadcasting Operating Committee. IVEY s JASKE • MALLARY x MCCORKINDALE• THOMAS CURLEY DANIEL S. EHRMAN JR. JOHN B. JASKE Senior vice president, administration, and president and publisher, USA TODAY. Formerly: President and publisher, USA TODAY (1991-1998). Thomas Curley is the brother of John J. Curley. Age 52.• PHILIP R. CURRIE Vice president, planning and development. Formerly: Senior vice president, Gannett Broadcasting (1995-1997). Age 54. MILLICENT A. FELLER Senior vice president, labor relations and assistant general counsel. Age 56.• RICHARD A. MALLARY Senior vice president, Gannett Broadcasting. Age 58.x GRACIA C. MARTORE, Senior vice president, public affairs and government relations. Age 53.• LAWRENCE P. GASHO Senior vice president, news, Newspaper Division. Age 59. s ARDYTH R. DIERCKS Treasurer and vice president, investor relations. Formerly: Vice president, treasury services and investor relations (1996-1998); vice president, treasury services (19931996). Age 48. MYRON MASLOWSKY Vice president, financial analysis. Age 58. GEORGE R. GAVAGAN Senior vice president, Gannett Television. Formerly: President and general manager, KSDK-TV, St. Louis (1996-1998); president and general manager, KVUE-TV, Austin, Texas (1994-1996). Age 46.x CRAIG A. DUBOW Vice president and controller. Formerly: Vice president, corporate accounting services (1993-1997). Age 54. DENISE H. IVEY Vice president, internal audit. Age 46. President, Gannett Gulf Coast Newspaper Group, and president and publisher, Pensacola (Fla.) News Journal. Age 50. s President, Gannett Television. Formerly: Executive vice president, Gannett Television (1996-2000); president and general manager, WXIA-TV, Atlanta (1992-1996). Age 46.x continued on next page 19
Slide 22: C O M P A N Y A N D D I V I S I O N A L O F F I C E R S MILLER • MOON s OGDEN x RIDDLE s ROSENBURGH s SHERLOCK s STIER s VEGA s WALKER •x WATSON •s LARRY F. MILLER W. CURTIS RIDDLE WENDELL J. VAN LARE Executive vice president and chief financial officer. Formerly: Senior vice president, financial planning and controller (1991-1997). Age 62.• CRAIG A. MOON Senior group president, Gannett East Newspaper Group, and president and publisher, The News Journal, Wilmington, Del. Age 49. s CARLETON F. ROSENBURGH Vice president, senior labor counsel. Age 55. FRANK J. VEGA President and CEO, Detroit Newspapers. Age 52. s CECIL L. WALKER President, Piedmont Newspaper Group, and president and publisher, The Tennessean, Nashville. Formerly: Vice president, Gannett South Newspaper Group, and president and publisher, The Tennessean (1991-1999). Age 51. s ROGER OGDEN Senior vice president, Gannett Newspaper Division. Age 61. s GARY F. SHERLOCK Chairman and CEO, Gannett Broadcasting Division. Formerly: President and CEO, Gannett Broadcasting Division (1986-2000). Age 64.•x BARBARA W. WALL President, Gannett Atlantic Newspaper Group, and president and publisher, The Journal News, Westchester County, N.Y. Age 55. s MARY P. STIER Vice president, senior legal counsel. Age 46. GARY L. WATSON Vice president, Gannett Television, and president and general manager, KUSA-TV, Denver, Colo. Age 55. x Senior group president, Gannett Midwest Newspaper Group, and president and publisher, The Des Moines Register. Formerly: President, Gannett Midwest Newspaper Group, and president and publisher, Rockford (Ill.) Register Star (1993-2000). Age 43. s President, Gannett Newspaper Division. Age 55.•s 20
Slide 23: F I N A N C I A L S T A B L E O F C O N T E N T S 22 23 COMMON STOCK PRICES MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL STATEMENTS 23 MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL POSITION 34 36 37 38 CONSOLIDATED BALANCE SHEETS CONSOLIDATED STATEMENTS OF INCOME CONSOLIDATED STATEMENTS OF CASH FLOWS CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY 39 51 52 54 55 66 68 76 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS REPORT OF INDEPENDENT ACCOUNTANTS 11-YEAR SUMMARY NOTES TO 11-YEAR SUMMARY FORM 10-K INFORMATION QUARTERLY STATEMENTS OF INCOME SCHEDULES TO FORM 10-K INFORMATION GLOSSARY OF FINANCIAL TERMS 21
Slide 24: GANNETT COMMON STOCK PRICES High-low range by quarters based on NYSE-composite closing prices. 90 $19.75 $22.19 $17.75 $21.13 $14.94 $18.75 $15.32 $18.88 $17.88 $21.32 $19.88 $22.19 $19.69 $23.32 $17.94 $21.13 $21.13 $23.94 $20.75 $24.57 $21.94 $24.13 $23.00 $26.82 91 92 93 $25.32 $27.69 $23.75 $27.38 $23.88 $25.69 $23.75 $29.07 $26.69 $29.19 $25.32 $27.44 $24.19 $25.82 $23.38 $26.69 $25.07 $27.50 $26.00 $27.88 $26.50 $27.75 $26.44 $32.19 $29.63 $35.38 $32.25 $35.82 $32.00 $35.07 $34.75 $39.25 $35.81 $44.75 $40.50 $50.66 $48.00 $53.00 $51.13 $61.81 94 95 96 97 98 $57.25 $65.13 $55.81 $48.94 $69.94 $74.69 $73.56 $68.06 99 $61.81 $70.25 $61.81 $75.44 $66.81 $76.94 $68.81 $79.31 $61.75 $59.25 $49.25 $48.69 $60.06 $63.06 $61.06 $67.74• $83.25 $72.13 00 01 • Through Feb. 26, 2001 22
Slide 25: MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL STATEMENTS The management of the company has prepared and is responsible for the consolidated financial statements and related financial information included in this report. These financial statements were prepared in accordance with accounting principles generally accepted in the United States of America. These financial statements necessarily include amounts determined using management’s best judgments and estimates. The company’s accounting and other control systems provide reasonable assurance that assets are safeguarded and that the books and records reflect the authorized transactions of the company. Underlying the concept of reasonable assurance is the premise that the cost of control not exceed the benefit derived. Management believes that the company’s accounting and other control systems appropriately recognize this cost/benefit relationship. The company’s independent accountants, PricewaterhouseCoopers LLP, provide an independent assessment of the degree to which management meets its responsibility for fairness in financial reporting. They regularly evaluate the company’s system of internal accounting controls and perform such tests and other procedures as they deem necessary to reach and express an opinion on the financial statements. The PricewaterhouseCoopers LLP report appears on page 51. The Audit Committee of the Board of Directors is responsible for reviewing and monitoring the company’s financial reports and accounting practices to ascertain that they are appropriate in the circumstances. The Audit Committee consists of three nonmanagement directors, and meets to discuss audit and financial reporting matters with representatives of financial management, the internal auditors and the independent accountants. The internal auditors and the independent accountants have direct access to the Audit Committee to review the results of their examinations, the adequacy of internal accounting controls and the quality of financial reporting. MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL POSITION Basis of reporting Following is a discussion of the key factors that have affected the company’s business over the last three fiscal years. This commentary should be read in conjunction with the company’s financial statements, the 11-year summary of operations and the Form 10-K information that appear in the following sections of this report. The company’s fiscal year ends on the last Sunday of the calendar year. The company’s 2000 fiscal year ended on Dec. 31, 2000, and encompassed a 53-week period. The company’s 1999 and 1998 fiscal years each encompassed a 52-week period. In the fourth quarter of 2000, the company modified its method of accounting with respect to certain of its newspaper subsidiaries that are participants in joint operating agencies, in accordance with a pronouncement of the Financial Accounting Standards Board. Previously, the company included its pro-rata portion of these revenues and expenses generated by the operation of the agencies on a line-by-line basis in its statement of income. In fiscal 2000, the company’s operating results from its Detroit and Tucson joint operating agencies are accounted for under the equity method (as a single net amount which is in other operating revenue). All prior years’ statements of income have been restated to conform with the new pronouncement. This classification change within the statements of income has no effect on the company’s operating income or overall reported results of operations. However, this classification change results in a reduction of reported revenue of approximately $170 million in each of 2000, 1999, and 1998 with a corresponding reduction in operating expenses. Business acquisitions, exchanges and dispositions 2000 In May 2000, Gannett made a cash offer to acquire the entire issued and to be issued share capital of News Communications & Media plc (“Newscom”). Pursuant to the Offer, Newscom shareholders elected to receive 1800 pence (U.S. $28.44) per share in cash or Loan Notes, valuing the entire issued share capital of Newscom at approximately 444 million British pounds (U.S. $702 million). Gannett also financed the repayment of Newscom’s existing debt. On June 5, 2000, the company concluded the acquisition. With the Newscom acquisition, Newsquest (which includes Newscom) now publishes nearly 300 titles in the United Kingdom, including 15 daily newspapers. Douglas H. McCorkindale Chairman, President and Chief Executive Officer Larry F. Miller Executive Vice President and Chief Financial Officer 23
Slide 26: On July 21, 2000, the company concluded the acquisition of 19 daily newspapers as well as numerous weekly and niche publications from Thomson Newspapers Inc. for an aggregate purchase price of $1.036 billion. The company acquired eight daily newspapers in Wisconsin, eight daily newspapers in central Ohio, and daily newspapers in Lafayette, La.; Salisbury, Md.; and St. George, Utah (collectively, “Thomson”). The company completed its acquisition of Central Newspapers, Inc. (“Central”), on August 1, 2000, for an approximate cash purchase price of $2.6 billion. The company also retired Central’s existing debt of approximately $206 million. Central’s properties include The Arizona Republic; The Indianapolis Star; three other dailies in Indiana and one daily in Louisiana; a direct marketing business; CNI Ventures, an Internet and technology investment management group; and other related media and information businesses. In March 2000, the company completed the acquisition of WJXX-TV, the ABC affiliate in Jacksonville, Fla. Gannett continues to own and operate WTLV-TV, the NBC affiliate in Jacksonville. The Newscom, Thomson, Central and WJXX-TV acquisitions were recorded under the purchase method of accounting. The aggregate purchase price, including liabilities assumed, for businesses and assets acquired in 2000 including Newscom, Thomson, Central, the Jacksonville television station and certain smaller newspaper publishing operations, totaled approximately $4.8 billion. The sale of the assets of the company’s cable division for $2.7 billion was completed on Jan. 31, 2000. Upon closing, an after-tax gain of approximately $745 million or $2.77 per diluted share was recognized which, along with the cable segment operating results, is reported as discontinued operations in the company’s financial statements. Early in the fourth quarter of 2000, the company contributed the assets of its newspapers, the Marin Independent Journal and the Classified Gazette, to the California Newspapers Partnership (a partnership that includes 21 daily California newspapers) in exchange for an increased ownership interest in the partnership. The company now has a 19.49% ownership interest in the partnership. In June 1999, the company completed a broadcast station transaction under which it exchanged its ABC affiliate KVUE-TV in Austin, Texas, and received KXTV-TV, the ABC affiliate in Sacramento, Calif., plus cash consideration. For financial reporting purposes, the company recorded the exchange as two simultaneous but separate events; that is, a sale of its Austin TV station for which a non-operating gain was recognized and the acquisition of the Sacramento station accounted for under the purchase method. In its second quarter, the company reported a net non-operating gain of $55 million ($33 million after tax) principally as a result of this transaction. The aggregate purchase price, including liabilities assumed, for businesses and assets acquired in 1999, including Newsquest, the Sacramento television station and certain smaller non-daily newspaper publishing operations, totaled approximately $1.8 billion. In March 1999, the company contributed The San Bernardino County Sun to the California Newspapers Partnership in exchange for a partnership interest. 1999 In June 1999, Gannett made a cash offer to acquire the stock of Newsquest plc (“Newsquest”). Newsquest’s principal activities are publishing and printing regional and local newspapers in England with a portfolio of 180 titles that includes paid-for daily and weekly newspapers and free weekly newspapers. The offer was for 460 pence (U.S. $7.26) in cash or loan notes for each of 200.4 million fully diluted shares, for a total price of approximately 922 million British pounds (U.S. $1.5 billion). Gannett also financed the repayment of Newsquest’s existing debt. In late July 1999, the company concluded the acquisition, which was recorded under the purchase method of accounting. 1998 In the first quarter of 1998, the company sold its five remaining radio stations, its alarm security business and its newspaper in St. Thomas, Virgin Islands. The company also contributed its newspaper in Saratoga Springs, N.Y., to the Gannett Foundation. The company recorded a net non-operating gain of $307 million ($184 million after tax), principally as a result of these transactions. The company purchased television stations WCSH-TV (NBC) in Portland, Maine, and WLBZ-TV (NBC) in Bangor, Maine, early in the first quarter and WLTX-TV (CBS) in Columbia, S.C., in April 1998. In the third quarter of 1998, the company sold five smallmarket daily newspapers in Ohio, Illinois and West Virginia and completed the acquisition of several newspapers in New Jersey, including The Daily Record in Morristown and the Ocean County Observer in Toms River. Also in the third quarter of 1998, the company completed a transaction with TCI Communications, Inc., under which it exchanged its subscribers and certain cable system assets in the suburban Chicago area for subscribers and certain cable system assets of TCI in Kansas. The aggregate purchase price for businesses and assets acquired in 1998 was approximately $370 million in cash. These acquisitions were accounted for under the purchase method of accounting. 24
Slide 27: RESULTS OF CONTINUING OPERATIONS Note that the company’s results of continuing operations discussed below do not include results from the cable business which was sold in January 2000. All cable operating results have been reclassified in the statements of income and related discussions as discontinued operations. Consolidated summary Operating earnings reached another record level in 2000. A consolidated summary of the company’s results is presented below. Note that this summary separates from ongoing results the second quarter 1999 net non-operating gain of $55 million ($33 million after tax) principally from the exchange of the Austin television station for the Sacramento television station, and the first quarter 1998 net non-operating gain of $307 million ($184 million after tax) principally from the sale of radio and alarm security businesses. In millions of dollars, except per share amounts 2000 Operating revenues $6,222 Change 22% 25% 16% 1999 $5,095 $3,532 $1,563 Change 8% 6% 13% 1998 $4,709 $3,323 $1,386 Change 9% 9% 10% A discussion of operating results of the company’s newspaper and broadcasting segments, along with other factors affecting net income follows. Operating cash flow amounts presented with business segment information represent operating income plus depreciation and amortization of intangible assets. Such cash flow amounts vary from net cash flow from operating activities presented in the Consolidated Statements of Cash Flows because cash payments for interest and taxes are not reflected therein, nor are the cash flow effects of non-operating items, discontinued operations or changes in certain operations-related balance sheet accounts. Operating expenses $4,405 Operating income Income from continuing operations, excluding gains on sale/exchange of properties After-tax gains on sale/exchange of properties Income from continuing operations, as reported Earnings per share from continuing operations, excluding gains on sale/exchange of properties Basic Diluted Earnings per share from gains on sale/exchange of properties Basic Diluted Earnings per share from continuing operations, as reported Basic Diluted $1,817 Newspapers In addition to its domestic local newspapers, the company’s newspaper publishing operations include USA TODAY, USA WEEKEND, Newsquest (including Newscom operations acquired in 2000), which publishes daily and non-daily newspapers in the United Kingdom, and Gannett Offset commercial printing. The newspaper segment in 2000 contributed 87% of the company’s revenues and 84% of its operating income. Record earnings were achieved by the newspaper segment in 2000, reflecting the results from the newly acquired Newscom, Thomson and Central operations and gains at most other U.S. and Newsquest newspapers. Newspaper earnings were aided during the first part of 2000 by favorable newsprint price comparisons. However, the last half of 2000 saw a marked increase over 1999 prices. For the year, newsprint prices were 3% higher than 1999. Newspaper operating results were as follows: In millions of dollars $ 972 10% $ 886 13% $ 782 15% 2000 $ 33 $ 184 Revenues Expenses $ 972 6% $ 919 (5%) $ 966 42% Operating income Operating cash flow $ 5,434 $ 3,912 $ 1,522 $ 1,825 Change 24% 27% 18% 22% 1999 $4,367 $3,075 $1,292 $1,499 Change 10% 7% 16% 16% 1998 $3,988 $2,879 $1,109 $1,294 Change 11% 11% 11% 11% $ 3.65 $ 3.63 15% 15% $ 3.18 $ 3.15 15% 15% $ 2.76 $ 2.74 15% 15% $ .11 $ .11 $ $ .65 .64 Newspaper operating revenues: Newspaper operating revenues are derived principally from advertising and circulation sales, which accounted for 73% and 21%, respectively, of total newspaper revenues in 2000. Ad revenues also include those derived from advertising placed with newspaper Internet products. Other newspaper publishing revenues are mainly from commercial printing businesses and also include earnings from the company’s 50% owned joint operating agencies in Detroit and Tucson. The table below presents these components of reported revenues for the last three years. Newspaper publishing revenues, in millions of dollars $ 3.65 $ 3.63 11% 11% $ 3.29 $ 3.26 (4%) (4%) $ 3.41 $ 3.38 42% 42% Advertising Circulation Commercial printing and other Total 2000 $3,973 $1,121 Change 28% 15% 1999 $3,115 $ 971 Change 12% 1% 1998 $2,773 $ 958 Change 12% 6% $ 340 $5,434 21% 24% $ 281 $4,367 9% 10% $ 257 $3,988 16% 11% 25
Slide 28: In the tables that follow, newspaper advertising linage, circulation volume statistics and related revenue results are presented on a pro forma basis for newspapers owned at the end of 2000, including the acquired properties from Newscom, Central and Thomson. The tables and related commentary include the portion of revenue and linage data for the company’s newspapers participating in joint operating agencies, consistent with prior years. For Newsquest, advertising and circulation revenues are fully reflected in the amounts below, as are daily paid circulation volumes. Advertising linage for Newsquest is not reflected, however. Advertising revenues, in millions of dollars (pro forma) 2000 Local National Classified Total Runof-Press Preprint and other advertising Total ad revenue $ 1,312 $ 792 Change 1% 10% 4% 4% 1999 $ 1,301 $ 717 $ 1,782 $ 3,800 Change 1% 13% 7% 6% 1998 $ 1,287 $ 632 $ 1,662 $ 3,581 Change 4% 9% 9% 7% $ 1,860 $ 3,964 Pro forma classified revenues in 2000 rose 4% on a 6% linage gain. Employment ad revenue gains were the strongest, followed by real estate and automotive. The continued strong economy throughout most of the year and tight labor market in the United States and the United Kingdom were key factors in these revenue gains, along with added marketing and sales resources. Revenues from the company’s United Kingdom operations were unfavorably impacted by the decline in the exchange rate for British pounds during 2000. If the exchange rate had remained constant year-over-year, pro forma local, national and classified ad revenues would have increased 2%, 11% and 6%, respectively, Advertising and other revenue from Internet activities for the newspaper segment totaled approximately $62 million in 2000 and $39 million in 1999. The company has Web sites at nearly all of its newspapers and other operating properties within the newspaper segment. 91 92 93 94 95 96 97 98 99 00 $1747 $1773 $1847 $1982 $2078 $2281 $2480 $2773 $3115 $3973 $ 693 10% 5% $ 630 $ 4,430 8% 6% $ 585 $ 4,166 3% 6% $ 4,657 Advertising linage, in millions of inches, and preprint distribution (pro forma) 2000 Local National Classified Total Runof-Press Preprint distribution (millions) 42.8 4.6 57.3 104.7 Change (1%) 11% 6% 3% 1999 43.1 4.1 54.0 101.2 Change 1% 16% 9% 6% 1998 42.8 3.5 49.4 95.7 Change 2% 6% 8% 5% Newspaper advertising revenues in millions, as reported 10,556 7% 9,869 4% 9,444 6% Reported newspaper advertising revenues for 2000 were $858 million greater than in 1999, a 28% increase, while pro forma revenues presented above reflect a 5% increase. The variance in these two comparisons relates principally to the full year effect of the Newsquest acquisition in 1999 and the Newscom, Thomson and Central acquisitions in 2000. Reported and pro forma newspaper revenue comparisons are positively impacted by the additional 53rd week in 2000. Pro forma local ad revenues were up 1% with linage down 1% for the full year. Ad spending by some of the largest retailers declined for the year, reflecting closings and consolidations. These revenue declines were offset by revenue increases from small and medium sized advertisers through expanded sales and marketing efforts. Pro forma national ad revenues rose 10% with linage up 11%, driven principally by USA TODAY, which reported a 12% gain in revenues on an 8% linage gain. National ad revenue growth also was strong in Phoenix and at several other larger daily newspaper properties. Looking to 2001, for our domestic newspapers, modest ad revenue and volume growth is anticipated in most categories depending on the health of the U.S. economy and the extent of further closings or consolidations within certain key industries, particularly retail. Changes in national economic levels, consumer confidence, and unemployment rates and the level of general economic growth will impact revenues at all of the company’s newspapers. Modest price increases are generally planned at most properties, and the company will continue to expand and refine marketing and sales efforts. More robust ad revenue growth is anticipated in 2001 for our Newsquest properties, depending on continued strong growth in the United Kingdom’s economy. Newspaper circulation revenues rose $150 million or more than 15% in 2000, due to incremental circulation revenues from the 1999 and 2000 acquisitions. On a pro forma basis, circulation revenues increased 1% in 2000. For local newspapers, morning circulation accounts for approximately 78% of total daily volume, while evening circulation accounts for 22%. On a pro forma basis, local morning, evening and Sunday circulation volumes declined 1%. Selected circulation price increases were implemented in 2000 at certain newspapers. Also during 2000, the Green Bay (Wis.) Press-Gazette converted from an evening to a morning publication. USA TODAY’s average daily circulation for 2000 rose 0.4% to 2,284,024. USA TODAY reported an average daily paid circulation of 2,257,774 in the ABC Publisher’s Statement for the six months ended Sept. 24, 2000, a 1% increase over the comparable period a year ago. 26
Slide 29: 91 92 93 94 95 96 97 98 99 00 $734 $763 $781 $789 $816 $873 $903 $958 $971 $1121 Newspaper circulation revenues in millions, as reported The company expects modest circulation revenue growth at most of its newspaper properties in 2001 with circulation price increases planned at certain newspapers. Pro forma circulation volume for the company’s local newspapers is summarized in the table below: Average net paid circulation volume, in thousands (pro forma) 2000 Local Newspapers Morning Evening Total daily Sunday 4,728 1,356 6,084 7,154 Change 1999 Change 1998 Change (1%) (1%) (1%) (1%) 4,758 1,366 6,124 7,260 (1%) (2%) (1%) (2%) 4,820 1,394 6,214 7,375 2% (2%) 1% (1%) Reported newspaper advertising revenues for 1999 were $342 million greater than in 1998, a 12% increase, while pro forma revenues presented above reflect a 6% increase. The variance in these two comparisons relates principally to the Newsquest properties acquired in July 1999. Pro forma local ad revenues and linage were up slightly for the full year. Ad spending by the larger retailers in our markets declined for the year, reflecting closings and consolidations, but this was mostly offset by greater revenue from expanded sales and marketing efforts directed toward small- and medium-sized advertisers. Pro forma national ad revenues and linage rose 13% and 16%, respectively, driven principally by USA TODAY, which reported a 19% gain in revenues on a 14% linage gain. National ad revenue growth also was strong at USA WEEKEND and at several large daily newspaper properties. Pro forma classified revenue in 1999 rose 7% on a 9% linage gain. Employment ad revenue gains were the strongest, followed by automotive and then real estate. The continued strong economy and the tight labor market were key factors in these revenue gains, along with added marketing and sales resources. Newspaper circulation revenues rose $13 million or slightly more than 1% in 1999. Incremental circulation revenues from Newsquest offset declines in domestic circulation revenue. On a pro forma basis, circulation revenues remained even. On a pro forma basis, local morning circulation declined 1%, evening circulation declined 2% and Sunday circulation declined 2%. Selected circulation price increases were implemented in 1999 at certain newspapers. During 1999, the St. Cloud (Minn.) Times and The Daily Journal at Vineland, N.J., converted from evening to morning publications. USA TODAY’s average daily circulation for 1999 rose 0.1% to 2,274,621. USA TODAY reported an average daily paid circulation of 2,235,808 in the ABC Publishers’ Statement for the six months ended Sept. 26, 1999, a 1% increase over the comparable period in 1998. Reported newspaper advertising revenues for 1998 were $293 million greater than in 1997, a 12% increase, while pro forma revenues presented above reflect a 6% increase. This reported/pro forma variance relates principally to newspaper acquisitions in 1998 and 1997. Pro forma local ad revenues and linage in 1998 rose 4% and 2%, respectively. Most local newspapers achieved gains in this category, particularly from medium and smaller accounts. Ad spending by major retailers was slightly lower in 1998. The overall gains in local revenues were spurred by the strong economy and enhanced sales and marketing efforts. Pro forma national ad revenues and linage rose 9% and 6%, respectively, in 1998 fueled principally by USA TODAY, which reported a 12% gain in total ad revenues and a 9% linage gain. Ad revenue growth at USA TODAY in 1998 followed a 12% gain in 1997 and a 30% gain in 1996. Pro forma classified revenues in 1998 rose 9% on an 8% linage gain. Employment advertising revenue gains were the strongest, followed by real estate and automotive. Newspaper circulation revenues rose $55 million or 6% in 1998. Incremental revenue from the newspaper businesses acquired in 1997 and 1998 contributed significantly to the gains, although most of the company’s local newspapers, along with USA TODAY and USA WEEKEND, reported higher circulation revenue as well. On a pro forma basis, local morning circulation rose 2%. Average evening circulation was 2% lower, continuing the national trend. Average Sunday circulation was 1% lower in 1998. During 1998, the Battle Creek (Mich.) Enquirer converted from an evening to a morning publication, and the 10 daily Gannett Suburban Newspapers were consolidated into one morning and Sunday publication, The Journal News, based in Westchester County, N.Y. Selected circulation price increases were implemented in 1998 at certain newspapers. USA TODAY’s average daily paid circulation for 1998 rose 2% to 2,271,767. USA TODAY reported an average daily paid circulation of 2,213,255 in the ABC Publisher’s Statement for the six months ended Sept. 27, 1998, a 2% increase over the comparable period in 1997. Newspaper operating expense: Newspaper operating costs rose $836 million, or 27%, in 2000. The increase was primarily due to incremental costs from the 1999 and 2000 acquisitions. Newsprint expense for the year, including the effect of acquisitions, was 20% higher in 2000. Both consumption and average newsprint prices were higher by 17% and 3%, respectively. The increase in consumption was tempered by a large number of newspapers converting to the new 50-inch web width format. Generally, a conversion from a 54-inch web width to a 50-inch web width will result in a more than 7% savings in newsprint consumption. Payroll costs for newspaper operations rose 26% in 2000, primarily due to the newly acquired properties and the impact of the 53rd week in 2000. 27
Slide 30: For 2001, newsprint consumption is expected to be significantly higher due to the full year impact of the 2000 acquisitions. This increase in consumption in 2001 will be tempered by the full year impact of web width reductions implemented in 2000 and planned web width reductions for 2001. For 2001, newsprint prices are expected to be higher than in 2000, particularly in the first half of the year. Newspaper operating expenses rose $197 million, or 7%, in 1999. The increase was caused principally by incremental costs from Newsquest properties acquired in July 1999. Newsprint expense for the year, including the effect of acquisitions, was 6% lower than in 1998. While consumption rose nearly 7% (due principally to Newsquest), average newsprint prices declined 12%. Payroll costs for newspaper operations rose 10% in 1999, in part because of the Newsquest acquisition but also because of staffing increases in marketing and ad sales and modest pay increases. Newspaper operating expenses rose $276 million or 11% in 1998. The increase was caused principally by incremental costs from newspaper properties acquired in 1997 and 1998. Newsprint expense for the year, including the effect of acquisitions, was 18% higher than in 1997. Both consumption and average prices were higher by approximately 9%. Payroll costs for newspaper operations rose 9% in 1998, in part because of acquired properties but also because of increases in headcount, particularly in marketing and ad sales, and pay increases. Newspaper operating income: The company’s newspapers produced record earnings in 2000. Operating profit rose $231 million or 18%. The increases are due largely to contributions from the Newsquest, Newscom, Thomson and Central acquisitions. But other U.S. local newspapers reported earnings gains as well. Newsquest financial results were translated from British pounds to U.S. dollars using a weighted average rate of $1.50 for 2000, as compared to $1.62 in 1999, which mitigated some of the strong earnings growth. For 2001, newspaper operating profits are expected to show continued growth, reflecting full year results for the 2000 acquisitions, modest revenue gains, strict cost controls and the benefit of further web width reductions to partially offset higher newsprint prices. Newspaper operating profit rose $182 million or 16% in 1999. The Newsquest properties acquired in July 1999 contributed to the profit gain. Earnings were strong at Detroit, the company’s New Jersey Group and at USA WEEKEND. Most of the company’s local U.S. newspapers reported earnings gains. For USA TODAY, 1999 saw operating profit growth. Newsquest financial results were translated from British pounds to U.S. dollars using a weighted average rate of $1.62 for the period it was owned in 1999. Newspaper operating profit rose $107 million or 11% in 1998. While newspaper properties acquired in 1997 and 1998 contributed significant earnings, most of the company’s local newspapers also reported higher profits. Earnings gains at Detroit and at USA TODAY were among the strongest. Broadcasting The company’s broadcasting operations at the end of 2000 included 22 television stations in markets reaching 17.5 percent of U.S. television homes. Over the last three years, reported broadcasting revenues, expenses, operating income and operating cash flows were as follows: In millions of dollars 2000 Revenues Expenses Operating income Operating cash flow $789 $429 $360 $425 Change 8% 10% 7% 6% 1999 $729 $391 $338 $400 Change 1% 4% (2%) (1%) 1998 $721 $377 $344 $404 Change 3% 1% 5% 5% Total broadcast revenues rose $60 million or 8% for 2000. Revenues were bolstered by strong political and issue advertising, revenues from the Australia Olympics on our NBC stations and the impact of the 53rd week in 2000. Local and national advertising revenues increased 2% and 19%, respectively, over 1999. Political and issue advertising in key states contributed to the increase in national revenues. Reported operating expenses for broadcast were up 10% due to the WJXX-TV acquisition and the full year impact of the 1999 Austin/Sacramento station exchange. On a pro forma basis, operating costs were up 7%. Pro forma payroll was up 6%. For 2001, television revenues and earnings comparisons versus 2000 levels will be challenging, as 2000 benefited significantly from the Summer Olympics and political and issue advertising. A summary of pro forma revenues for television stations owned at the end of 2000 follows: Pro forma broadcast revenues, in millions of dollars 2000 Revenues $789 Change 8% 1999 $732 Change (1%) 1998 $736 Change 6% 28
Slide 31: Total broadcast reported revenues rose $7 million or 1% for 1999. However, on a pro forma basis, giving effect to the Austin/Sacramento station exchange, total station revenues were down 1% for the year. Pro forma local revenues rose 5% for the year, while national revenues were down 7%. The decline in national ad revenue in comparison with 1998 reflects in part revenue gains in 1998 on CBS stations for the Winter Olympics and on NBC affiliates for the Super Bowl and the Seinfeld program, and from political and issue advertising. Reported operating expenses for broadcast were up 4%, reflecting the impact of the Austin/Sacramento station exchange. On a pro forma basis, operating costs were down slightly. Pro forma payroll was up 1%. Total reported broadcasting revenues rose $18 million or 3% in 1998. On a pro forma basis, broadcasting revenues rose 6% for the year. Pro forma local and national advertising revenues increased 6% and 9%, respectively, over 1997, reflecting strong advertising demand for NBC programming (12 company stations were NBC affiliates) and overall growth in the economy. Advertising revenues benefited from the Super Bowl broadcast on the company’s NBC stations and the Winter Olympics airing on its CBS stations. Strong political advertising contributed to the overall revenue growth as well. Reported operating expenses for broadcast were up 1% for 1998. On a pro forma basis, operating expenses increased 2%, with payroll costs up 4% and program costs up 1% over 1997. Operating income in 1998 from broadcasting reached a record high, climbing $15 million to $344 million. The 5% increase was the result of continued strong demand for television advertising in most markets throughout the year and cost controls. 91 92 93 94 95 96 97 98 99 00 $357 $371 $397 $407 $466 $687 $704 $721 $729 $789 Consolidated operating expenses Over the last three years, the company’s consolidated operating expenses were as follows: Consolidated operating expenses, in millions of dollars 2000 Cost of sales Selling, general and admin. expenses Depreciation Amortization of intangible assets $ 3,057 Change 24% 1999 $ 2,460 Change 4% 1998 $ 2,364 Change 10% $ $ 972 195 23% 15% $ 792 $ 169 12% 3% $ 705 $ 164 5% 7% $ 180 63% $ 111 23% $ 90 11% Broadcasting revenues in millions of dollars, as reported Cost of sales for 2000 were up $598 million or 24%, reflecting the full-year effect of the 1999 Newsquest acquisition, increased costs from the Newscom, Thomson and Central acquisitions and the impact of an extra week in 2000 over 1999. Newsprint expense increased 20% due primarily to a 17% increase in consumption, principally from acquisitions. Average newsprint prices increased 3% compared to 1999. SG&A was up 23% for the year also due primarily to the new businesses acquired in 1999 and 2000 and the extra week in 2000. Depreciation expense increased 15% during the year as a result of the Newsquest, Newscom, Thomson and Central acquisitions. Likewise, amortization of intangibles rose $70 million or 63% due to the 1999 and 2000 acquisitions. Cost of sales for 1999 were up $95 million or 4%, reflecting increased costs from businesses acquired in 1998 and 1999, particularly Newsquest. Newsprint expense decreased 6% despite a 7% increase in consumption (including acquisitions). Average newsprint prices dropped 12% as compared to 1998. SG&A was up 12% for the year due primarily to the Newsquest acquisition and generally higher newspaper advertising expenses. Depreciation expense increased 3% during the year as a result of the Newsquest acquisition. Amortization of intangibles rose $21 million or 23% due to 1998 and 1999 acquisitions, principally Newsquest. Cost of sales for 1998 increased $221 million or 10%. Newsprint expense rose 18% for the year because of a 9% increase in consumption (including acquisitions) and 9% higher average newsprint prices. Other costs from businesses acquired in 1997 and 1998 also contributed to this increase. SG&A rose 5% for 1998, mainly because of incremental newspaper advertising expenses from properties acquired in 1997 and 1998. 29
Slide 32: Depreciation expense in 1998 was up 7% from the prior year due to increased depreciation expense from capital additions and newly acquired properties. Amortization of intangibles rose $9 million or 11% because of costs associated with 1997 and 1998 acquisitions. Payroll and newsprint costs (along with certain other production material costs), the largest elements of the company’s operating expenses, are presented below, expressed as a percentage of total pre-tax operating expenses. 2000 Payroll and employee benefits Newsprint and other production material 44.0% 18.2% 1999 45.0% 19.2% 1998 45.1% 21.0% Provision for income taxes The company’s effective income tax rate for continuing operations was 39.6% in 2000, 39.8% in 1999 and 40.0% in 1998. The decrease in the effective tax rate each year reflects lower state taxes and lower taxes on foreign operations. Income from continuing operations In 2000, the company reported income from continuing operations of $972 million or $3.63 per diluted share, both record highs, up 10% and 15%, respectively, from record results in 1999 (excluding the 1999 net non-operating gain principally from the television station exchange transaction discussed on page 24). The company’s operating income was $1.817 billion for the year, an increase of $254 million or 16%. Each of the company’s segments reported higher earnings for the year, with interest expense up $125 million over 1999 as previously discussed. In 1999, the company reported income from continuing operations of $919 million or $3.26 per diluted share. However, this reflects the net non-operating gain principally from the television station exchange transaction discussed on page 24. This net gain totaled $55 million pre-tax ($33 million after tax or $.11 per diluted share). For 1998, the company reported income from continuing operations of $966 million or $3.38 per diluted share. This amount reflects the net non-operating gain principally from the sale of radio and alarm security businesses in the first quarter of the year. This net gain totaled $307 million pre-tax ($184 million after tax or $.64 per diluted share). For purposes of evaluating the company’s earnings progress from ongoing operations, the earnings summary below excludes the effect of these non-operating gains in 1999 and 1998. In millions of dollars, except per share amounts Non-operating income and expense Interest expense in 2000 increased $125 million due to significant commercial paper borrowings to fund the 1999 Newsquest acquisition, the Newscom acquisition in June 2000, the Thomson and Central acquisitions in the third quarter of 2000 and share repurchases. Higher interest rates in 2000, particularly in the second half of the year, also contributed to the increase, along with the 53rd week in 2000. The daily average commercial paper outstanding balance was $3.1 billion during 2000 and $1.3 billion during 1999. During the second half of 2000, the daily average outstanding balance was $4.9 billion. The weighted average interest rate was 6.5% for 2000 and 5.2% for 1999. The increase, however, was tempered by the pay-down of commercial paper borrowings from the net proceeds on the sale of the cable business in the first quarter of 2000 and from operating cash flows. The company’s financing activities are discussed further in the financial position section of this report. Interest expense in 2001 is expected to be significantly higher than 2000 due to the full year impact of increased commercial paper borrowings discussed above. Interest rates have declined significantly in the first quarter of 2001 following actions by the Federal Reserve Board. Interest income in 2000 increased $21 million over 1999 due primarily to interest earned on marketable securities from cable sale proceeds in the first half of the year. Non-operating expense in 2000 includes costs associated with minority investments in Internet businesses. Interest expense for 1999 increased $15 million or 19%, reflecting significantly increased commercial paper borrowings in the second half of 1999 as a result of the Newsquest acquisition. Other non-operating income for 1999 includes the second quarter net non-operating gain of $55 million principally from the exchange of the television stations discussed above. Interest expense for 1998 decreased $19 million or 19%, reflecting the paydown of fixed-rate debt and commercial paper borrowings from operating cash flow and the proceeds from the sale of certain businesses. Other non-operating income for 1998 includes the first quarter net non-operating gain of $307 million principally from the sale of radio and alarm security businesses. Earnings summary excluding 1999 and 1998 net non-operating gains 2000 Change Operating income Non-operating expense Interest expense Other Total Income before income taxes Provision for income taxes Income from continuing operations Earnings per share from continuing operations – diluted (219) 132% 11 (208) 1,609 637 159% 130% 9% 9% (95) 4 (91) 1,472 586 19% — 12% 13% 12% (80) (1) (81) 1,305 523 (19%) (87%) (25%) 13% 10% $1,817 16% 1999 $1,563 Change 13% 1998 $1,386 Change 10% $ 972 10% $ 886 13% $ 782 15% $ 3.63 15% $ 3.15 15% $ 2.74 15% 30
Slide 33: Excluding non-recurring items, the company’s reported earnings from continuing operations in 1999 were $886 million, a 13% increase with diluted earnings per share at $3.15, up 15%; operating income reached $1.563 billion, an increase of $177 million or 13%. The strong, record showing in operating income and after-tax results for 1999 came from newspapers. Broadcast earnings were down 2%. Interest expense was 19% higher. Excluding non-recurring items, 1998 income from continuing operations was $782 million or $2.74 per diluted share, both up 15%. Operating income reached $1.386 billion, an increase of $124 million or 10%. Both the newspaper and broadcasting segments reported higher earnings for the year, with record results at USA TODAY and strong improvement at The Detroit News. Lower interest costs and a lower effective tax rate also contributed. 91 92 93 94 95 96 97 98 99 00 $292 $341* $389 $455 $457 $503o $681 $782o $886o $972 After-tax earnings from the cable business for the period it was owned, up to the date of sale, are also reported as income from discontinued operations and amounted to $2.4 million or $.01 per diluted share in 2000, $38.5 million or $.14 per diluted share in 1999 and $33.5 million or $.12 per diluted share in 1998. Net Income The company reported net income of $1.719 billion or $6.41 per diluted share in 2000, which includes after-tax earnings from discontinued operations of $747 million or $2.78 per diluted share. Average diluted shares outstanding for 2000 totaled 268,118,000, compared to 281,608,000 in 1999. Basic shares totaled 266,426,000 for 2000 and 279,048,000 for 1999. The decline in diluted and basic shares outstanding in 2000 is primarily due to the company’s repurchase of 14.7 million shares during the first half of 2000. The company’s return on shareholders’ equity, based on earnings from continuing operations, is presented in the table below. 91 92 93 94 95 96 97 98 99 00 16.2 21.9 22.3 24.4 23.0 19.8 21.3 21.0 20.6 20.0 Income from continuing operations in millions o Before net non-recurring gains from sale/exchange of businesses * Before effect of accounting principle changes Discontinued operations As part of the Multimedia purchase in 1995, the company acquired cable television and alarm security operations. In 1998, the company sold its alarm security business, which had been reported within the cable segment. On Jan. 31, 2000, the company completed the sale of its cable division for $2.7 billion. Upon closing, an after-tax gain of approximately $745 million or $2.77 per diluted share was recognized, which along with the cable segment operating results, are reported as discontinued operations in the company’s financial statements. Return on shareholders’ equity (before non-recurring gains and accounting principle changes) in percentages The percentage return on equity for 2000, 1999 and 1998 has declined from the prior years because non-recurring gains from the sale/exchange of businesses are included in shareholders’ equity, but are excluded from the amount of earnings from continuing operations used in the calculation. 31
Slide 34: FINANCIAL POSITION Liquidity and capital resources The principal changes in the company’s financial position for 2000 relate to the sale of the cable business in January 2000 for approximately $2.7 billion, share repurchases totaling $967 million in the first half of 2000 and the Newscom, Thomson and Central acquisitions, with an aggregate cost of approximately $4.6 billion, which were funded primarily by commercial paper borrowings. Changes in property, plant and equipment in 2000 reflect capital spending of $351 million plus amounts recorded in connection with the acquisitions in 2000, offset by the sale of cable division assets. The increase in intangible assets is due to amounts recorded in connection with the 2000 acquisitions with increases in working capital balances likewise due to the newly acquired properties, offset by the sale of cable division assets. The increase in investments and other assets in 2000 is primarily the result of the company’s contribution of the Marin Independent Journal and the Classified Gazette to the California Newspapers Partnership in exchange for an increased interest in the partnership. The company repurchased approximately 14.7 million shares of common stock at a cost of approximately $967 million in the first half of 2000. The company’s foreign currency translation adjustment, related to Newsquest (including the newly acquired Newscom properties in June 2000) and reported as part of shareholders’ equity, totaled ($66.4 million), net of tax, at Dec. 31, 2000. This reflects the weakening of the pound against the U.S. dollar since the Newsquest and Newscom acquisition dates. Newsquest’s assets and liabilities were translated from British pounds to U.S. dollars at the Dec. 31, 2000 exchange rate of $1.49. The company’s consolidated operating cash flow (defined as operating income plus depreciation and amortization of intangible assets) totaled $2.193 billion in 2000 compared to $1.843 billion in 1999 and $1.639 billion in 1998. The operating cash flow increase of 19% reflects significant operating income growth for the company’s newspaper segment largely due to 1999 and 2000 acquisitions. The table below presents operating cash flow as a percent of revenue over the last ten years. 91 92 93 94 95 96 97 98 99 00 Operating cash flow, as a percent of revenue Working capital, or the excess of current assets over current liabilities, totaled $128 million at the end of 2000 and $191 million at the end of 1999. Certain key measurements of the elements of working capital for the last three years are presented in the following chart: Working capital measurements 2000 Current ratio Accounts receivable turnover Newsprint inventory turnover 1.1-to-1 7.4 7.3 1999 1.2-to-1 7.0 7.3 1998 1.2-to-1 7.2 7.5 24.2 25.5 27.6 29.0 28.7 30.9 34.7 34.8 36.2 35.2 The company’s operations have historically generated strong positive cash flow, which, along with the company’s program of issuing commercial paper and maintaining bank revolving credit agreements, has provided adequate liquidity to meet the company’s requirements, including those for acquisitions. The company regularly issues commercial paper for cash requirements and maintains revolving credit agreements equal to or in excess of any commercial paper outstanding. The company’s commercial paper has been rated A-1 and P-1 by Standard & Poor’s and Moody’s Investors Service, respectively. The company’s senior unsecured long-term debt is rated A by Standard & Poor’s and A1 by Moody’s Investors Service. The company has a shelf registration statement with the Securities and Exchange Commission under which up to $1.5 billion of additional debt securities may be issued. The company’s Board of Directors has established a maximum aggregate level of $7 billion for amounts which may be raised through borrowings or the issuance of equity securities. Note 4 to the company’s financial statements on page 42 of this report provides further information concerning commercial paper transactions and the company’s $6.06 billion revolving credit agreements. The company has a capital expenditure program (not including business acquisitions) of approximately $335 million planned for 2001, including approximately $91 million for land and buildings or renovation of existing facilities, including costs associated with the new USA TODAY and corporate headquarters facility, which will be completed in the third quarter of 2001, $223 million for machinery and equipment, and $21 million for vehicles and other assets. Management reviews the capital expenditure program periodically and modifies it as required to meet current business needs. It is expected that the 2001 capital program will be funded from operating cash flow. 32
Slide 35: Capital stock In 2000, the company announced authorizations to repurchase up to $1 billion of its common stock and during 2000, the company repurchased approximately 14.7 million shares of common stock at a cost of $967 million. In 1998, the company announced authorizations to repurchase up to $750 million of its company stock. During 1998, the company repurchased a total of approximately 6 million shares of common stock at a cost of $329 million and in 1999, the company purchased approximately 2.4 million shares of its common stock at a cost of $163 million. Certain of the shares previously acquired by the company have been reissued in settlement of employee stock awards. An employee 401(k) Savings Plan was established in 1990, which includes a company matching contribution in the form of Gannett stock. To fund the company’s matching contribution, an Employee Stock Ownership Plan (ESOP) was formed which acquired 2,500,000 shares of Gannett stock from the company for $50 million. The stock purchase was financed with a loan from the company. The company’s common stock outstanding at Dec. 31, 2000, totaled 264,271,861 shares, compared with 277,926,431 shares at Dec. 26, 1999. Dividends Dividends declared on common stock amounted to $228 million in 2000, compared with $229 million in 1999, reflecting fewer shares outstanding in 2000, net of an increase in the dividend rate. . 91 92 93 94 95 96 97 98 99 00 Dividends declared per share Effects of inflation and changing prices and other matters The company’s results of operations and financial condition have not been significantly affected by inflation and changing prices. In all of its principal businesses, subject to normal competitive conditions, the company generally has been able to pass along rising costs through increased selling prices. Further, the effects of inflation and changing prices on the company’s property, plant and equipment and related depreciation expense have been reduced as a result of an ongoing capital expenditure program and the availability of replacement assets with improved technology and efficiency. The company is exposed to foreign exchange rate risk primarily due to its acquisition of Newsquest, which uses the British pound as its functional currency which is then translated into U.S. dollars. Effective Jan. 1, 2001, the company adopted Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities” (SFAS No.133), as amended. Based on the company’s current activities, the adoption of this standard is not expected to have any effect on the company’s results of operations or financial position. At Dec. 31, 2000, the company is not a party to any material derivative contracts. Certain factors affecting forward-looking statements Certain statements in the company’s 2000 Annual Report to Shareholders and its Annual Report on Form 10-K contain forward-looking information. The words “expect,” “intend,” “believe,” “anticipate,” “likely,” “will” and similar expressions generally identify forward-looking statements. These forward-looking statements are subject to certain risks and uncertainties which could cause actual results and events to differ materially from those anticipated in the forward-looking statements. Potential risks and uncertainties which could adversely affect the company’s ability to obtain these results include, without limitation, the following factors: (a) increased consolidation among major retailers or other events which may adversely affect business operations of major customers and depress the level of local and national advertising; (b) an economic downturn in some or all of the company’s principal newspaper or television markets leading to decreased circulation or local, national or classified advertising; (c) a decline in general newspaper readership patterns as a result of competitive alternative media or other factors; (d) an increase in newsprint or syndication programming costs over the levels anticipated; (e) labor disputes which may cause revenue declines or increased labor costs; (f) acquisitions of new businesses or dispositions of existing businesses; (g) a decline in viewership of major networks and local news programming; (h) rapid technological changes and frequent new product introductions prevalent in electronic publishing; (i) an increase in interest rates; (j) a weakening in the British pound to U.S. dollar exchange rate; and (k) general economic and business conditions. $.62 $.63 $.65 $.67 $.69 $.71 $.74 $.78 $.82 $.86 In October 2000, the quarterly dividend was increased from $.21 to $.22 per share. Cash dividends 2000 4th Quarter 3rd Quarter 2nd Quarter 1st Quarter 1999 4th Quarter 3rd Quarter 2nd Quarter 1st Quarter Payment date Jan. 2, 2001 Oct. 2, 2000 July 3, 2000 April 3, 2000 Jan. 3, 2000 Oct. 1, 1999 July 1, 1999 April 1, 1999 Per share $.22 $.22 $.21 $.21 $.21 $.21 $.20 $.20 33
Slide 36: CONSOLIDATED BALANCE SHEETS In thousands of dollars Assets Current assets Cash Marketable securities, at cost, which approximates market Trade receivables (less allowance for doubtful receivables of $37,465 and $30,694, respectively) Other receivables Inventories Prepaid expenses Total current assets Property, plant and equipment Land Buildings and improvements Cable systems (Note 2) Machinery, equipment and fixtures Construction in progress Total Less accumulated depreciation Net property, plant and equipment Intangible and other assets Excess of acquisition cost over the value of assets acquired (less accumulated amortization of $947,855 and $867,606, respectively) Investments and other assets (Note 5) Total intangible and other assets Total assets Dec. 31, 2000 Dec. 26, 1999 $ 69,954 123,242 875,363 56,469 128,321 48,987 1,302,336 $ 46,148 12 800,682 80,753 95,014 52,613 1,075,222 216,049 1,101,696 182,138 886,655 424,907 2,525,182 292,274 4,135,201 (1,673,802) 2,461,399 2,259,362 130,850 3,883,912 (1,660,060) 2,223,852 8,740,804 475,872 9,216,676 $12,980,411 5,398,227 309,145 5,707,372 $ 9,006,446 34
Slide 37: CONSOLIDATED BALANCE SHEETS In thousands of dollars Liabilities and shareholders’ equity Current liabilities Accounts payable Trade Other Accrued liabilities Compensation Interest Other Dividend payable Income taxes (Note 7) Deferred income Total current liabilities Deferred income taxes (Note 7) Long-term debt (Note 4) Postretirement medical and life insurance liabilities (Note 6) Other long-term liabilities Total liabilities Shareholders’ equity (Notes 4 and 8) Preferred stock, par value $1: Authorized, 2,000,000 shares: Issued, none Common stock, par value $1: Authorized, 800,000,000 shares and 400,000,000 shares, respectively: Issued, 324,420,732 shares, as to both years Additional paid-in capital Retained earnings Accumulated other comprehensive (loss) income Dec. 31, 2000 Dec. 26, 1999 $ 455,390 37,853 $ 312,277 36,312 144,535 4,051 177,318 58,118 144,599 152,137 1,174,001 274,829 5,747,856 403,528 276,787 7,877,001 120,581 5,230 145,684 58,297 77,553 127,844 883,778 479,547 2,463,250 304,400 245,825 4,376,800 324,421 170,715 6,995,965 (66,274) 7,424,827 324,421 153,267 5,504,810 25,377 6,007,875 (1,359,263) (18,966) 4,629,646 Less Treasury stock, 60,148,871 shares and 46,494,301 shares, respectively, at cost Deferred compensation related to ESOP (Note 8) Total shareholders’ equity Commitments and contingent liabilities (Note 9) Total liabilities and shareholders’ equity (2,307,793) (13,624) 5,103,410 $12,980,411 $ 9,006,446 35
Slide 38: CONSOLIDATED STATEMENTS OF INCOME In thousands of dollars Fiscal year ended Net operating revenues Newspaper advertising Newspaper circulation Broadcasting All other Total Operating expenses Cost of sales and operating expenses, exclusive of depreciation Selling, general and administrative expenses, exclusive of depreciation Depreciation Amortization of intangible assets Total Operating income Non-operating income (expense) Interest expense Interest income Other (Note 2) Total Income before income taxes Provision for income taxes Income from continuing operations Discontinued operations Income from the operation of discontinued operations, net of income taxes of $1,598, $27,700, and $24,200, respectively Gain on sale of cable business, net of income taxes of $889,300 Net income Earnings per share – basic Earnings from continuing operations Earnings from discontinued operations: Discontinued operations, net of tax Gain on sale of cable business, net of tax Net income per share – basic Earnings per share – diluted Earnings from continuing operations Earnings from discontinued operations: Discontinued operations, net of tax Gain on sale of cable business, net of tax Net income per share – diluted Dec. 31, 2000 Dec. 26, 1999 Dec. 27, 1998 $ 3,972,936 1,120,991 788,767 339,624 6,222,318 $ 3,115,250 971,114 728,642 280,356 5,095,362 $ 2,773,247 958,456 721,298 256,030 4,709,031 3,057,252 971,895 195,428 180,487 4,405,062 1,817,256 2,459,749 792,421 169,460 110,631 3,532,261 1,563,101 2,364,338 705,416 163,776 89,687 3,323,217 1,385,814 (219,228) 27,209 (16,397) (208,416) 1,608,840 636,900 971,940 (94,619) 5,739 52,966 (35,914) 1,527,187 607,800 919,387 (79,412) 19,318 286,005 225,911 1,611,725 645,300 966,425 2,437 744,700 $ 1,719,077 $ 38,541 33,488 957,928 $ 999,913 $3.65 $3.29 $3.41 .01 2.79 $6.45 .14 .12 $3.43 $3.53 $3.63 $3.26 $3.38 .01 2.77 $6.41 .14 .12 $3.40 $3.50 36
Slide 39: 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 Discontinued operations, net of tax Income taxes on sale of cable business Depreciation Amortization of intangibles Deferred income taxes Other, net, including gains on sales Decrease (increase) in receivables (Increase) decrease in inventories Increase (decrease) in accounts payable Increase in interest and taxes payable Change in other assets and liabilities, net Net cash flow from operating activities Cash flows from investing activities Purchase of property, plant and equipment Payments for acquisitions, net of cash acquired Change in other investments Proceeds from sale of certain assets Net cash (used for) provided by investing activities Cash flows from financing activities Proceeds from (payments of) long-term debt Dividends paid Cost of common shares repurchased Proceeds from issuance of common stock 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. 31, 2000 Dec. 26, 1999 Dec. 27, 1998 $ 1,719,077 $ 957,928 $ 999,913 (747,137) (889,300) 195,428 180,487 (169,290) (4,484) 39,850 (16,091) 8,833 186,133 (1,179) 502,327 (38,541) (33,488) 169,460 110,631 21,983 (49,269) (70,014) (7,624) (34,805) 11,555 75,582 1,146,886 163,776 89,687 40,105 (360,944) (29,732) 11,054 (14,777) 7,951 96,990 970,535 (350,580) (4,264,214) (78,531) 2,714,362 (1,978,963) (258,443) (1,496,649) (10,383) 38,450 (1,727,025) (244,425) (369,804) (13,835) 665,001 36,937 2,799,161 (228,391) (967,242) 21,225 1,624,753 (1,081) 147,036 46,160 $ 193,196 $ 915,865 (226,274) (163,228) 33,681 560,044 68 (20,027) 66,187 46,160 $ (470,207) (218,853) (328,956) 23,953 (994,063) 13,409 52,778 66,187 37
Slide 40: CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY In thousands of dollars Fiscal years ended December 27, 1998, December 26, 1999 and December 31, 2000 Balance: Dec. 28, 1997 Net income, 1998 Dividends declared, 1998: $.78 per share Treasury stock acquired Stock options exercised Stock issued under incentive plan Tax benefit derived from stock incentive plans Compensation expense related to ESOP Tax benefit from ESOP Balance: Dec. 27, 1998 Net income, 1999 Foreign currency translation adjustment, net of taxes of $9,130 Unrealized gain on securities, net of taxes of $7,095 Total comprehensive income Dividends declared, 1999: $.82 per share Treasury stock acquired Stock options exercised Stock issued under incentive plan Tax benefit derived from stock incentive plans Compensation expense related to ESOP Tax benefit from ESOP Balance: Dec. 26, 1999 Net income, 2000 Foreign currency translation adjustment, net of tax benefit of $51,555 Unrealized loss on securities, net of reclassification adjustments during the period, net of tax benefit of $7,041 Total comprehensive income Dividends declared, 2000: $.86 per share Treasury stock acquired Stock options exercised Stock issued under incentive plan Tax benefit derived from stock incentive plans Compensation expense related to ESOP Tax benefit from ESOP Balance: Dec. 31, 2000 Common stock $1 par value $ 324,421 Additional paid-in capital $ 104,366 Retained earnings $ 3,995,712 999,913 (220,718) Accumulated other comprehensive income (loss) $ Treasury stock (916,708) Deferred compensation related to ESOP $ (28,055) Total $ 3,479,736 999,913 (220,718) (328,956) 24,155 2,047 18,064 (328,956) 4,870 (1,255) 18,064 5,177 406 $ 324,421 $ 126,045 $ 4,775,313 957,928 $ 14,280 11,097 $ (1,223,077) $ (22,878) 19,285 3,302 5,177 406 $ 3,979,824 957,928 14,280 11,097 983,305 (228,781) (163,228) 7,916 (2,154) 21,460 3,912 350 $ 324,421 $ 153,267 $ 5,504,810 1,719,077 $ 25,377 $ (1,359,263) $ (18,966) 23,490 3,552 (228,781) (163,228) 31,406 1,398 21,460 3,912 350 $ 4,629,646 1,719,077 (80,638) (80,638) (11,013) (11,013) 1,627,426 (228,212) (967,242) 6,467 41 10,940 5,342 290 $ 324,421 $ 170,715 $ 6,995,965 $ (66,274) $ (2,307,793) $ (13,624) 13,261 5,451 (228,212) (967,242) 19,728 5,492 10,940 5,342 290 $ 5,103,410 38
Slide 41: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 Summary of significant accounting policies Fiscal year: The company’s fiscal year ends on the last Sunday of the calendar year. The company’s 2000 fiscal year ended on Dec. 31, 2000, and encompassed a 53-week period. The company’s 1999 and 1998 fiscal years each encompassed 52-week periods. Consolidation: The consolidated financial statements include the accounts of the company and its subsidiaries after elimination of all significant intercompany transactions and profits. Certain prior-year information has been reclassified to conform with the current year presentation. Operating agencies: Certain of the company’s newspaper subsidiaries are participants in joint operating agencies. Each joint operating agency performs the production, sales and distribution functions for the subsidiary and another newspaper publishing company under a joint operating agreement. Prior to fiscal 2000, the company included its appropriate portion of the revenues and expenses generated by the operation of the agencies on a line-byline basis in its statement of income. Effective in fiscal 2000, the company modified its method of accounting for its 50% owned joint operating agencies, in accordance with a pronouncement of the Financial Accounting Standards Board. The company’s operating results in the Detroit and Tucson joint operating agencies are now accounted for under the equity method, reported as a single net amount which is in other operating revenues. All prior years’ statements of income have been restated to conform with the new pronouncement. This classification change within the statements of income has no effect on the company’s operating income or overall reported results of operations. Inventories: Inventories, consisting principally of newsprint, printing ink, plate material and production film for the company’s newspaper publishing operations, are valued at the lower of cost (first-in, first-out) or market. 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; machinery, equipment and fixtures, four to 30 years. Major renewals and improvements and interest incurred during the construction period of major additions are capitalized. Expenditures for maintenance, repairs and minor renewals are charged to expense as incurred. Excess of acquisition cost over fair value of assets acquired: The excess of acquisition cost over the fair value of assets acquired represents the cost of intangible assets at the time operating properties were purchased. In accordance with Opinion 17 of the Accounting Principles Board of the American Institute of Certified Public Accountants, the excess acquisition cost of operating properties arising from acquisitions accounted for as purchases since Oct. 31, 1970, ($9.63 billion at Dec. 31, 2000) is being amortized generally over 40 years on a straight-line basis. Valuation of Long-Lived Assets: The company evaluates the carrying value of long-lived assets to be held and used, including the excess of acquisition cost over fair value of assets acquired, whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The carrying value of a long-lived asset, including the excess of acquisition cost over fair value of assets acquired, is considered impaired when the projected undiscounted future cash flows from the related business unit are less than its carrying value. The company measures impairment based on the amount by which the carrying value exceeds the fair market value. Fair market 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 market values are reduced for the cost to dispose. Other assets: The company’s television stations are parties to program broadcast contracts. These contracts are recorded at the gross amount of the related liability when the programs are available for telecasting. Program assets are classified as current (as a prepaid expense) or noncurrent (as an other asset) in the Consolidated Balance Sheets, based upon the expected use of the programs in succeeding years. The amount charged to expense appropriately matches the cost of the programs with the revenues associated with them. The liability for these contracts is classified as current or noncurrent in accordance with the payment terms of the contracts. The payment period generally coincides with the period of telecast for the programs, but may be shorter. Retirement plans: Pension costs under the company’s retirement plans are actuarially computed. The company’s policy is to fund costs accrued under its qualified pension plans. Postretirement benefits other than pensions: The company recognizes the cost of postretirement medical and life insurance benefits on an accrual basis over the working lives of employees expected to receive such benefits. Income taxes: The company accounts for certain income and expense items differently for financial reporting purposes than for income tax reporting purposes. Deferred income taxes are provided in recognition of these temporary differences. Per share amounts: The company reports earnings per share on two bases, basic and diluted. All basic income per share amounts are based on the weighted average number of common shares outstanding during the year. The calculation of diluted earnings per share also considers the assumed dilution from the exercise of stock options and from stock incentive rights. Foreign currency translation: The income statement of Newsquest (including Newscom operations acquired in 2000) has been translated to U.S. dollars using the average currency exchange rates in effect during the relevant period. Newsquest’s balance sheet has 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 Newsquest’s balance sheet is included in comprehensive income, net of tax, and is classified as accumulated other comprehensive income (loss) in shareholders’ equity. 39
Slide 42: Use of estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions that affect the reported amount of assets, liabilities, revenues and expenses. Actual results could differ from these estimates. Discontinued operations: In connection with the sale of the cable business in early fiscal 2000, the cable operating results are presented in the consolidated statements of income and related discussions as discontinued operations. The cable business (along with the alarm security business sold in 1998) was previously reported as a separate segment by the company. New accounting pronouncements: Effective Jan. 1, 2001, the company adopted SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” as amended. Based on the company’s current activities, the adoption of this standard is not expected to have any effect on the company’s results of operations or financial position. Refer to “Operating agencies” on page 39 for a discussion of changes in the company’s accounting for operating results of its 50% owned joint operating agencies. NOTE 2 Acquisitions, exchanges and dispositions 2000: In May 2000, Gannett made a cash offer to acquire the entire issued and to be issued share capital of News Communications & Media plc (“Newscom”). Pursuant to the Offer, Newscom shareholders elected to receive 1800 pence (U.S. $28.44) per share in cash or Loan Notes, valuing the entire issued share capital of Newscom at approximately 444 million British pounds (U.S. $702 million). Gannett also financed the repayment of Newscom’s existing debt. On June 5, 2000, the company concluded the acquisition. With the Newscom acquisition, Newsquest (which includes Newscom) now publishes nearly 300 titles in the United Kingdom, including 15 daily newspapers. On July 21, 2000, the company concluded the acquisition of 19 daily newspapers as well as numerous weekly and niche publications from Thomson Newspapers Inc., for an aggregate purchase price of $1.036 billion. The company acquired eight daily newspapers in Wisconsin, eight daily newspapers in central Ohio, and single daily newspapers in Lafayette, La.; Salisbury, Md.; and St. George, Utah (collectively, “Thomson”). The company completed its acquisition of Central Newspapers, Inc. ("Central") on August 1, 2000, for an approximate cash purchase price of $2.6 billion. The company also retired Central’s existing debt of approximately $206 million. Central’s properties include The Arizona Republic; The Indianapolis Star; three other dailies in Indiana and one daily in Louisiana; a direct marketing business; CNI Ventures, an Internet and technology investment management group; and other related media and information businesses. In March 2000, the company completed the acquisition of WJXX-TV, the ABC affiliate in Jacksonville, Fla. Gannett continues to own and operate WTLV-TV, the NBC affiliate in Jacksonville. The Newscom, Thomson, Central and WJXX-TV acquisitions were recorded under the purchase method of accounting. The aggregate purchase price, including liabilities assumed, for businesses and assets acquired in 2000 including Newscom, Thomson, Central, the Jacksonville television station and certain smaller newspaper publishing operations, totaled approximately $4.8 billion, of which $4.4 billion represents excess of acquisition cost over fair value of assets acquired. The purchase price allocations for Newscom, Thomson and Central are preliminary. The final allocations will be based on a complete evaluation of assets acquired and liabilities assumed. The sale of the assets of the company’s cable division for $2.7 billion was completed on Jan. 31, 2000. Upon closing, an after-tax gain of approximately $745 million or $2.77 per diluted share was recognized which, along with the cable segment operating results, is reported as discontinued operations in the company’s financial statements. Early in the fourth quarter of 2000, the company contributed the assets of its newspapers, the Marin Independent Journal and the Classified Gazette, to the California Newspapers Partnership (a partnership that includes 21 daily California newspapers) in exchange for an increased ownership interest in the partnership. The company now has a 19.49% ownership interest in the partnership. 1999: In June 1999, Gannett made a cash offer to acquire the stock of Newsquest plc (“Newsquest”). Newsquest’s principal activities are publishing and printing regional and local newspapers in England with a portfolio of 180 titles that include paid-for daily and weekly newspapers and free weekly newspapers. The offer was for 460 pence (U.S. $7.26) in cash or loan notes for each of 200.4 million fully diluted shares, for a total price of approximately 922 million British pounds (U.S. $1.5 billion). Gannett also financed the repayment of Newsquest’s existing debt. In late July 1999, the company concluded the acquisition, which was recorded under the purchase method of accounting. In June 1999, the company completed a broadcast station transaction under which it exchanged its ABC affiliate KVUE-TV in Austin, Texas, and received KXTV-TV, the ABC affiliate in Sacramento, Calif., plus cash consideration. For financial reporting purposes, the company recorded the exchange as two simultaneous but separate events; that is, a sale of its Austin TV station for which a non-operating gain was recognized and the acquisition of the Sacramento station accounted for under the purchase method. In its second quarter, the company reported a net non-operating gain of $55 million ($33 million after tax) principally as a result of this transaction. 40
Slide 43: The aggregate purchase price, including liabilities assumed, for businesses and assets acquired in 1999 including Newsquest, the Sacramento television station and certain smaller non-daily newspaper publishing operations, totaled approximately $1.8 billion. In March 1999, the company contributed The San Bernardino County Sun to the California Newspapers Partnership in exchange for a partnership interest. 1998: In the first quarter of 1998, the company sold its five remaining radio stations, its alarm security business and its newspaper in St. Thomas, Virgin Islands. The company also contributed its newspaper in Saratoga Springs, N.Y., to the Gannett Foundation. The company recorded a net non-operating gain of $307 million ($184 million after tax), principally as a result of these transactions. The company purchased television stations WCSH-TV (NBC) in Portland, Maine, and WLBZ-TV (NBC) in Bangor, Maine, early in the first quarter and WLTX-TV (CBS) in Columbia, S.C., in April 1998. In the third quarter of 1998, the company sold five smallmarket daily newspapers in Ohio, Illinois and West Virginia and completed the acquisition of several newspapers in New Jersey, including The Daily Record in Morristown and the Ocean County Observer in Toms River. Also in the third quarter of 1998, the company completed a transaction with TCI Communications, Inc., under which it exchanged its subscribers and certain cable system assets in the suburban Chicago area for subscribers and certain cable system assets of TCI in Kansas. The aggregate purchase price for businesses and assets acquired in 1998 was approximately $370 million in cash. These acquisitions were accounted for under the purchase method of accounting. An unaudited earnings summary of the company’s income from continuing operations, excluding the net non-operating gains in 1999 and 1998 discussed above, is as follows: In millions of dollars, except per share amounts (unaudited) from continuing operations for 2000 and 1999 of $.15 and $.12, respectively (excluding the 1999 net non-operating gain previously discussed). However, this pro forma combined statement does not necessarily reflect the results of operations as they would have been if the combined companies had constituted a single entity during those years. In millions, except per share amounts (pro forma and unaudited) Fiscal year Operating revenues* Income before taxes* Income* Income per share* – Basic Income per share* – Diluted *from continuing operations 2000 $ 6,880 $ 1,543 $ 932 $3.50 $3.48 1999 $ 6,598 $ 1,419 $ 854 $3.06 $3.03 NOTE 3 Statement of cash flows For purposes of this statement, the company considers its marketable securities, which are readily convertible into cash (with original maturity dates of less than 90 days) and consist of short-term investments in government securities, commercial paper and money market funds, as cash equivalents. Cash paid in 2000, 1999 and 1998 for income taxes and for interest (net of amounts capitalized) was as follows: In thousands of dollars 2000 Income taxes Interest $1,454,465 $ 209,240 1999 $596,873 $100,547 1998 $626,409 $ 84,808 2000 Income from continuing operations Earnings per share from continuing operations – Basic – Diluted Change 1999 Change 1998 Change $ 972 10% $ 886 13% $ 782 15% $ 3.65 $ 3.63 15% 15% $ 3.18 $ 3.15 15% 15% $ 2.76 $ 2.74 15% 15% The following table summarizes, on an unaudited, pro forma basis, the estimated combined results of operations of the company and its subsidiaries as though the fiscal year 2000 and 1999 acquisitions, exchanges and dispositions noted above were made at the beginning of 1999. On this basis, these transactions would have resulted in a pro-forma decrease in income per diluted share The 2000 income taxes paid amount includes amounts paid in connection with the company’s sale of the cable business. Liabilities assumed in connection with 2000 acquisitions totaled $578 million, with $485 million related to Newscom and Central outstanding debt obligations. Liabilities assumed in connection with 1999 acquisitions totaled approximately $365 million, with $181 million related to Newsquest outstanding debt obligations. Liabilities assumed in connection with 1998 acquisitions totaled approximately $17 million. In December 2000, the company issued 118,352 shares of common stock in settlement of previously granted stock incentive rights for the four year period 1997-2000 and the $6.3 million compensation liability for these rights was transferred to shareholders’ equity. In January following the years ended 1999 and 1998, the company issued 137,168 and 161,646 shares of common stock, respectively, in settlement of stock incentive rights whose four-year grant periods ended in December of those years and the compensation liabilities for those rights, which equaled $6.3 million and $5.5 million, respectively, were transferred to shareholders’ equity. 41
Slide 44: NOTE 4 Long-term debt The long-term debt of the company is summarized below. In thousands of dollars Dec. 31, 2000 Unsecured promissory notes Notes due 5/1/00, interest at 5.85% Other indebtedness Total long-term debt $ 5,461,205 — 286,651 $ 5,747,856 Dec. 26, 1999 $ 2,113,763 249,982 99,505 $ 2,463,250 The unsecured promissory notes at Dec. 31, 2000, were due from Jan. 4, 2001 to Mar. 23, 2001, with rates varying from 6.4% to 6.63%. The unsecured promissory notes at Dec. 26, 1999, were due from Dec. 27, 1999, to Jan. 31, 2000, with rates varying from 5.50% to 6.03%. At Dec. 31, 2000, the unsecured promissory notes were supported by the $6.06 billion revolving credit agreements discussed below and, therefore, are classified as long-term debt. The maximum amount of such promissory notes outstanding at the end of any period during 2000 and 1999 was $5.7 billion and $2.2 billion, respectively. The daily average outstanding balance was $3.1 billion during 2000 and $1.3 billion during 1999. The weighted average interest rate was 6.5% for 2000 and 5.2% for 1999. Other indebtedness includes the loan notes issued by the company to the former shareholders of Newsquest plc and Newscom plc in connection with their acquisitions, as more fully discussed in Note 2. The notes bear interest at .5% below the London Interbank Offered Rate subject to a cap of 6.75%. Interest is payable semiannually. The notes are due on Dec. 31, 2006 and Dec. 31, 2007, respectively, but may be redeemed by the company on each interest payment date. The remaining other indebtedness at Dec. 31, 2000, has maturities ranging from 2001 to 2013 at interest rates ranging from 5% to 10%. At Dec. 31, 2000, the company had $6.06 billion of credit available under two revolving credit agreements. The agreements provide for revolving credit periods which permit borrowings from time to time to the maximum commitments. The 1998 $3.0 billion agreement revolving credit period extends to July 1, 2003. The 2000 $3.06 billion agreement consists of a $1.53 billion 364-day facility which extends to July 2001 and a $1.53 billion 5-year facility which extends to July 2005. At the end of the 364-day period, any borrowings outstanding under the 364-day credit facility are convertible into a 2-year term loan at Gannett’s option. The commitment fee rate for the 1998 revolving credit agreement may range from .07% to .175%, depending on Standard & Poor’s or Moody’s credit rating of the company’s senior unsecured long-term debt. The rate in effect on Dec. 31, 2000 was .09%. At the option of the company, the interest rate on borrowings under this agreement may be at the prime rate, at rates ranging from .13% to .35% above the London Interbank Offered Rate or at rates ranging from .255% to .50% above a certificate of deposit-based rate. The prime rate was 9.5% at the end of 2000 and 8.5% at the end of 1999. The percentages that apply depend on Standard & Poor’s or Moody’s credit rating of the company’s senior unsecured long-term debt. The commitment fee rates for the 2000 revolving credit agreement may range from .05% to .09%, depending on Standard & Poor’s or Moody’s credit rating of the company’s senior unsecured long-term debt. The rates in effect on Dec. 31, 2000, were .05% for the 364-day facility and .07% for the 5-year facility. At the option of the company, the interest rate on borrowings under this agreement may be at .13% to .19% above the prime rate, the Eurodollar base rate or the Federal Funds Effective Rate plus .50%. The percentages that apply depend on Standard & Poor’s or Moody’s credit rating of the company’s senior unsecured long-term debt. The revolving credit agreements contain a restrictive provision that requires the maintenance of net worth of at least $2.5 billion. At Dec. 31, 2000, and Dec. 26, 1999, net worth was $5.1 billion and $4.6 billion, respectively. Approximate annual maturities of long-term debt, assuming that the company had used the $6.06 billion revolving credit agreements as of the balance sheet date to refinance existing unsecured promissory notes on a long-term basis, are as follows: In thousands of dollars 2001 2002 2003 2004 2005 Later years Total $ 1,530,000 286,651 5,747,856 $ 3,931,205 At Dec. 31, 2000, and Dec. 26, 1999, the company estimates that the amount reported on the balance sheet for financial instruments, including long-term debt, cash and cash equivalents, trade and other receivables, and other long-term liabilities, approximates fair value. 42
Slide 45: NOTE 5 Retirement plans The company and its subsidiaries have various retirement plans, including plans established under collective bargaining agreements and separate plans for joint operating agencies, under which substantially all full-time employees are covered. The Gannett Retirement Plan is the company’s principal retirement plan and covers most U.S. employees of the company and its subsidiaries. Benefits under the Gannett Retirement Plan are based on years of service and final average pay. The company’s retirement plan assets include marketable securities such as common stocks, bonds and U.S. government obligations and interest-bearing deposits. The tables below also include the assets and obligations of the former Central Newspapers, Inc. Retirement Plan, which was merged into the Gannett Retirement Plan effective December 31, 2000, and Newscom’s Retirement Plan. The company’s pension costs for 2000, 1999 and 1998 are presented in the following table: In thousands of dollars The following table provides a reconciliation of benefit obligations, plan assets and funded status of the company’s retirement plans. The related amounts that are recognized in the Consolidated Balance Sheets for the company’s retirement plans also are provided. In thousands of dollars Dec. 31, 2000 Change in benefit obligation Net benefit obligation at beginning of year Service cost Interest cost Plan participants’ contributions Plan amendments Actuarial loss (gain) Acquisitions/plan mergers Gross benefits paid Net benefit obligation at end of year Change in plan assets Fair value of plan assets at beginning of year Actual return on plan assets Plan participants’ contributions Employer contributions Acquisitions/plan mergers Gross benefits paid Fair value of plan assets at end of year Funded status at end of year Unrecognized net actuarial gain Unrecognized prior service credit Unrecognized net transition asset Net amount recognized at end of year Amounts recognized in Consolidated Balance Sheet Prepaid benefit cost Accrued benefit cost $ $ 142,807 82,670 $ $ 1,763,141 29,546 6,080 8,471 614,594 (111,864) $ 2,309,968 $ 263,685 (6,024) (197,324) (200) 60,137 45,636 444,522 (111,864) $ 2,046,283 $ 1,470,403 61,905 129,601 6,080 Dec. 26, 1999 $ 1,474,411 60,834 103,412 1,947 253 (185,452) 106,090 (91,092) $ 1,470,403 2000 Service cost - benefits earned during the period Interest cost on benefit obligation Expected return on plan assets Amortization of transition asset Amortization of prior service credit Amortization of actuarial (gain) loss Pension expense for company-sponsored retirement plans Union and other pension cost Pension cost $ $ 61,905 129,601 (194,010) (28) (9,498) (4,306) 1999 $ 60,834 103,412 (146,168) (984) (3,754) 1,407 1998 $ 51,249 94,171 (135,484) (4,226) (3,773) 443 $ 1,470,826 264,905 1,947 5,354 111,201 (91,092) $ 1,763,141 $ 292,738 (218,942) (35,783) (232) $ 37,781 (16,336) 7,432 (8,904) 14,747 5,071 $ 19,818 $ 2,380 5,357 7,737 $ 111,232 $ 73,451 The net benefit obligation was determined using an assumed discount rate of 7.625% and 8.0% at the end of 2000 and 1999, respectively. The assumed rate of compensation increase was 4.5% and 5% at the end of 2000 and 1999, respectively. The assumed long-term rate of return on plan assets used in determining pension cost was 10%. Retirement plan assets include 1,242,300 shares of the company’s common stock valued at $78 million and $101 million at the end of 2000 and 1999, respectively. 43
Slide 46: NOTE 6 Postretirement benefits other than pensions The company provides health care and life insurance benefits to certain retired employees who meet age and service requirements. The cost of providing retiree health care and life insurance benefits is actuarially determined and accrued over the service period of the active employee group. Postretirement benefit cost for health care and life insurance for 2000, 1999 and 1998 included the following components: In thousands of dollars 2000 Service cost - benefits earned during the period Interest cost on net benefit obligation Amortization of prior service credit Amortization of actuarial (gain) loss Net periodic postretirement benefit cost $ 5,247 19,865 (7,018) (240) $ 17,854 1999 $ 3,796 14,901 (8,478) 20 $10,239 1998 $ 3,118 14,378 (5,578) 235 $12,153 The table below provides a reconciliation of benefit obligations and funded status of the company’s postretirement benefit plans: In thousands of dollars At Dec. 31, 2000, the accumulated postretirement benefit obligation was determined using a discount rate of 7.625% and a health care cost trend rate of 8% for pre-age 65 benefits, decreasing to 5% in the year 2005 and thereafter. For post-age 64 benefits, the health care cost trend rate used was 12%, decreasing to 5% in the year 2005 and thereafter. At Dec. 26, 1999, the accumulated postretirement benefit obligation was determined using a discount rate of 8.0% and a health care cost trend rate of 7.5% for pre-age 65 benefits, decreasing to 5% in the year 2005 and thereafter. For post-age 64 benefits, the health care cost trend rate used was 5.5%, declining to 5% in the year 2001 and thereafter. The company’s policy is to fund the above-mentioned benefits as claims and premiums are paid. The effect of a 1% increase in the health care cost trend rate used would result in increases of approximately $27 million in the 2000 postretirement benefit obligation and $2 million in the aggregate service and interest components of the 2000 expense. The effect of a 1% decrease in the health care cost trend rate used would result in decreases of approximately $24 million in the 2000 postretirement benefit obligation and $2 million in the aggregate service and interest components of the 2000 expense. Dec. 31, 2000 Change in benefit obligation Net benefit obligation at beginning of year Service cost Interest cost Plan participants’ contributions Actuarial loss (gain) Acquisitions/plan mergers Gross benefits paid Net benefit obligation at end of year Change in plan assets Fair value of plan assets at beginning of year Employer contributions Plan participants’ contributions Gross benefits paid Fair value of plan assets at end of year Funded status at end of year Unrecognized net actuarial (loss) gain Unrecognized prior service credit Accrued postretirement benefit cost –– 19,739 5,626 (25,365) –– $ 363,767 (19,950) 59,711 $ 403,528 $ 215,593 5,247 19,865 5,626 40,801 102,000 (25,365) $ 363,767 Dec. 26, 1999 $ 238,346 3,796 14,901 4,656 (28,142) 3,392 (21,356) $ 215,593 –– 16,700 4,656 (21,356) –– $ 215,593 21,519 67,288 $ 304,400 44
Slide 47: NOTE 7 Income taxes The provision for income taxes on income from continuing operations consists of the following: In thousands of dollars 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 were composed of the following at the end of 2000 and 1999: Total In thousands of dollars Dec. 31, 2000 Liabilities Accelerated depreciation Accelerated amortization of deductible intangibles Pension Other Total deferred tax liabilities Assets Accrued compensation costs Postretirement medical and life Other Total deferred tax assets (75,411) (157,737) (87,932) (321,080) $ 274,829 (63,095) (118,310) (20,784) (202,189) $ 479,547 $ 341,786 117,302 26,858 109,963 595,909 $ 403,846 114,547 15,085 148,258 681,736 Dec. 26, 1999 2000 Federal State and other Foreign Total In thousands of dollars Current $ 518,413 75,865 25,041 $ 619,319 Deferred $ 13,414 1,963 2,204 $ 17,581 $ 531,827 77,828 27,245 $ 636,900 1999 Federal State and other Foreign Total In thousands of dollars Current $ 505,902 72,927 10,863 $ 589,692 Deferred $ 14,791 2,132 1,185 $ 18,108 Total $ 520,693 75,059 12,048 $ 607,800 1998 Federal State and other Total Current $ 528,800 80,609 $ 609,409 Deferred $ 31,144 4,747 $ 35,891 Total $ 559,944 85,356 $ 645,300 Net deferred tax liabilities In addition to the income tax provision presented above for continuing operations, the company also recorded federal and state income taxes payable on discontinued operations of $891 million in 2000, $28 million in 1999 and $24 million in 1998. The provision for income taxes on continuing operations exceeds the U.S. federal statutory tax rate as a result of the following differences: Fiscal year U.S. statutory tax rate Increase in taxes resulting from: State/other income taxes net of federal income tax benefit Goodwill amortization not deductible for tax purposes Other, net Effective tax rate 2000 35.0% 1999 35.0% 1998 35.0% 3.1 2.2 (0.7) 39.6% 3.2 1.7 (0.1) 39.8% 3.5 1.9 (0.4) 40.0% 45
Slide 48: NOTE 8 Capital stock, stock options, incentive plans The company’s earnings per share from continuing operations (basic and diluted) for 2000, 1999 and 1998 are presented below: In thousands, except per share amounts 2000 Income from continuing operations Weighted average number of common shares outstanding (basic) Effect of dilutive securities Stock options Stock incentive rights Weighted average number of common shares outstanding (diluted) Earnings per share from continuing operations (basic) Earnings per share from continuing operations (diluted) $971,940 1999 $919,387 1998 $966,425 266,426 1,557 135 279,048 2,217 343 283,097 2,197 417 268,118 $3.65 $3.63 281,608 $3.29 $3.26 285,711 $3.41 $3.38 The 2000, 1999 and 1998 diluted earnings per share amounts exclude the effects of 5,366,310, 3,150,090 and 2,500,210 stock options outstanding, respectively, as their inclusion would be antidilutive. In 1998, the Board authorized the company to repurchase up to $750 million of company stock. In 2000, the Board approved an authorization for the company to repurchase up to $1 billion in additional common stock. The company purchased approximately 6 million shares of common stock in 1998 for $329 million, approximately 2.4 million shares in 1999 for $163 million, and approximately 14.7 million shares in 2000 for $967 million. In May 2000, the company’s shareholders approved an amendment to the company’s certificate of incorporation to increase the authorized number of shares to 802,000,000, of which 800,000,000 shares shall be common stock and 2,000,000 shares shall be preferred stock, both with a $1 par value. The company’s 1978 Executive Long-Term Incentive Plan (the Plan) provides for the granting of stock options, stock incentive rights and option surrender rights to executive officers and other key employees. The Plan restricts the granting of options to any participant in any fiscal year to no more than 350,000 shares of common stock and the exercise period for any stock options presently issued under the Plan is 10 years after the date of the grant thereof. The Plan provides that shares of common stock subject to a stock option or other award that is canceled or forfeited again be available for issuance under the Plan. Stock options are granted to purchase common stock of the company at not less than 100% of the fair market value on the day the option is granted. The exercise period is eight years for options granted prior to Dec. 10, 1996, and 10 years for options granted on or subsequent to that date. The options become exercisable at 25% per year after a one-year waiting period. In December 2000, the company elected not to grant stock incentive rights. These rights entitled employees to receive one share of common stock at the end of a four-year incentive period conditioned on the employees’ continued employment with the company. In lieu of receiving stock incentive rights, employees may receive stock options. Previously granted stock incentive rights will continue to mature over their original four-year term. Under the Plan, all outstanding awards will be vested if there is a change in control of the company. Stock options become 100% exercisable immediately upon a change in control. Option surrender rights have been awarded, which relate one-for-one to all outstanding stock options. These rights are effective only upon a change in control and entitle the employee to receive cash for option surrender rights equal to 100% of the difference between the exercise price of the related stock option and the change-in-control price (which is the highest price paid for a share of stock as part of the change in control). The Plan also provides for the payment in cash of the value of stock incentive rights based on the change-incontrol price. 46
Slide 49: A summary of the status of the company’s stock option and stock incentive rights awards as of Dec. 31, 2000, Dec. 26, 1999, and Dec. 27, 1998, and changes thereto during the years then ended is presented below: 2000 Stock Option Activity Shares Outstanding at beginning of year Granted Exercised Canceled Outstanding at end of year Options exercisable at year end Weighted average fair value of options granted during the year 1999 Stock Option Activity Shares Outstanding at beginning of year Granted Exercised Canceled Outstanding at end of year Options exercisable at year end Weighted average fair value of options granted during the year 1998 Stock Option Activity Shares Outstanding at beginning of year Granted Exercised Canceled Outstanding at end of year Options exercisable at year end Weighted average fair value of options granted during the year 9,234,421 2,514,210 (931,604) (244,291) 10,572,736 5,365,913 $17.32 10,572,736 3,180,365 (1,158,304) (187,956) 12,406,841 6,236,725 $25.04 Weighted average exercise price $36.00 65.00 26.91 40.49 43.59 31.93 12,406,841 5,714,830 (846,478) (507,380) 16,767,813 7,478,603 $19.63 Weighted average exercise price $43.59 74.21 30.04 52.47 52.57 38.43 Weighted average exercise price $52.57 55.07 30.18 64.44 54.19 45.85 Further information about stock options outstanding at Dec. 31, 2000, follows: Weighted average remaining contractual life (yrs) 2.5 5.8 7.0 9.5 9.0 9.9 8.2 Range of exercise prices $23-28 32-38 41-49 50-60 61-68 70-75 Number outstanding at 12/31/00 1,428,658 2,934,780 31,460 7,006,605 2,396,295 2,970,015 16,767,813 Weighted average exercise price $25.56 $35.18 $46.17 $55.84 $64.93 $74.28 $54.19 Number exercisable at 12/31/00 1,428,658 2,934,780 31,460 1,098,319 1,181,048 804,339 7,478,604 Weighted average exercise price $25.56 $35.18 $46.17 $59.50 $64.97 $74.09 $45.85 Stock Incentive Rights As discussed above, the company elected not to grant stock incentive rights in December 2000. Awards made earlier in 2000, and in 1999 and in 1998 were as follows: 2000 Awards granted 10,700 1999 169,290 1998 168,785 Awards for 1998 are for the four-year period 1999-2002. Awards for 1999 and 2000 are for the four-year period 2000-2003. In December 2000, 118,352 shares of common stock were issued in settlement of previously granted stock incentive rights for the incentive period ended December 2000. Shares available: Shares available for future grants under the Plan totaled 11,721,088 at Dec. 31, 2000. Pro forma results: SFAS No. 123, “Accounting for Stock-Based Compensation,” establishes a fair value-based method of accounting for employee stock-based compensation plans and encourages companies to adopt that method. However, it also allows companies to continue to apply the intrinsic value-based method currently prescribed under Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (APB 25). The company has chosen to continue to report stock-based compensation in accordance with APB 25, and provides the following pro forma disclosure of the effects of applying the fair value method to all applicable awards granted. Under APB Opinion 25 and related Interpretations, no compensation cost has been recognized for its stock options. The compensation cost that has been charged against income for its stock incentive rights was $6.5 million for 2000, $8 million for 1999 and $7 million for 1998. Those charges were based on the grant price of the stock incentive rights recognized over the four-year earnout periods. Had compensation cost for the company’s stock options been determined based on 47
Slide 50: the fair value at the grant date for those awards as permitted (but not required) under the alternative method of SFAS No. 123, the company’s results of operations and related per share amounts would have been reduced to the pro forma amounts indicated below: In thousands, except per share amounts 2000 Net income As reported Pro forma Income from continuing operations As reported Pro forma Net income per share – basic As reported Pro forma Net income per share – diluted As reported Pro forma Income from continuing operations per share – basic As reported Pro forma Income from continuing operations per share – diluted As reported Pro forma $3.63 $3.53 $3.65 $3.55 $6.41 $6.32 $6.45 $6.36 $971,940 $946,202 $1,719,077 $1,693,339 1999 $957,928 $942,733 1998 $999,913 $991,385 $919,387 $904,192 $3.43 $3.38 $3.40 $3.35 $966,425 $957,897 $3.53 $3.50 $3.50 $3.47 $3.29 $3.24 $3.41 $3.38 $3.26 $3.21 $3.38 $3.35 The fair value of each option is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions used for grants in 2000, 1999 and 1998, respectively: dividend yield of 1.26%, 1.38%, and 1.69%; expected volatility of 27.04%, 22.31% and 20.62%; risk-free interest rates of 5.63%, 6.34% and 4.66%; and expected lives of seven years each. SFAS No. 123 applies to stock compensation awards granted in fiscal years that began after Dec. 15, 1994. Options are granted by the company primarily in December and begin vesting over a four-year period. Options granted in December 1995 and thereafter are subject to the pronouncement. To calculate the pro forma amounts shown above, compensation cost was recognized over the four-year period of service during which the options will be earned. As a result, options granted in December of each year (beginning with December 1995) impact pro forma amounts for following years but not the year in which they were granted. 401(k) Savings Plan In 1990, the company established a 401(k) Savings Plan. Most employees of the company (other than those covered by a collective bargaining agreement) who are scheduled to work at least 1,000 hours during each year of employment are eligible to participate in the Plan. Employees may elect to save up to 15% of compensation on a pre-tax basis subject to certain limits. The company matches with company common stock to 50% of the first 6% of employee contributions. To fund the company’s matching contribution, an Employee Stock Ownership Plan (ESOP) was formed in 1990 which acquired 2,500,000 shares of Gannett stock from the company for $50 million. The stock purchase was financed with a loan from the company, and the shares are pledged as collateral for the loan. The company makes monthly contributions to the ESOP equal to the ESOP’s debt service requirements less dividends. All dividends received by the ESOP are used to pay debt service. As the debt is paid, shares are released as collateral and are available for allocation to participants. The company follows the shares allocated method in accounting for its ESOP. The cost of shares allocated to match employee contributions or to replace dividends that are used for debt service are accounted for as compensation expense. The cost of unallocated shares is reported as deferred compensation in the financial statements. The company, at its option, may repurchase shares from employees who leave the Plan. The shares are purchased at fair market value, and the difference between the original cost of the shares and fair market value is expensed at the time of purchase. All of the shares initially purchased by the ESOP are considered outstanding for earnings per share calculations. Dividends on allocated and unallocated shares are recorded as reductions of retained earnings. Compensation expense for the 401(k) match and repurchased shares was $9.1 million in 2000, $8.9 million in 1999 and $7.3 million in 1998. The ESOP shares as of the end of 2000 and 1999 were as follows: 2000 Allocated shares Shares released for allocation Unreleased shares Shares distributed to terminated participants ESOP shares 1,825,911 44,332 629,757 (72,337) 2,427,663 1999 1,559,218 44,812 895,970 (53,563) 2,446,437 48
Slide 51: In May 1990, the Board of Directors declared a dividend distribution of one Preferred Share Purchase Right (“Right”) for each common share held, payable to shareholders of record on June 8, 1990. The Rights become exercisable when a person or group of persons acquires or announces an intention to acquire ownership of 15% or more of the company’s common shares. Holders of the Rights may acquire an interest in a new series of junior participating preferred stock, or they may acquire an additional interest in the company’s common shares at 50% of the market value of the shares at the time the Rights are exercised. The Rights are redeemable by the company at any time prior to the time they become exercisable, at a price of $.01 per Right. In May 2000, the company announced that its Board of Directors approved an amendment to its Shareholder Rights Plan to extend the expiration date of the Rights to May 31, 2010 and increase the initial exercise price of each preferred stock purchase right to $280. In November 1999, the Board authorized 2,000,000 shares of common stock to be registered in connection with a savings related share option plan, available to eligible employees of Newsquest. NOTE 9 Commitments and contingent liabilities Litigation: The company and a number of its subsidiaries are defendants in judicial and administrative proceedings involving matters incidental to their business. The company’s management does not believe that any material liability will be imposed as a result of these matters. Leases: Approximate future minimum annual rentals payable under non-cancelable operating leases are as follows: In thousands of dollars 2001 2002 2003 2004 2005 Later years Total $ 49,689 33,738 29,694 24,986 22,999 80,300 $ 241,406 Total minimum annual rentals have not been reduced for future minimum sublease rentals aggregating approximately $8 million. Total rental costs reflected in continuing operations were $62 million for 2000, $48 million for 1999 and $43 million for 1998. Program broadcast contracts: The company has commitments under program broadcast contracts totaling $92.3 million for programs to be available for telecasting in the future. The company presently owns a 64% interest in WKYC-TV and National Broadcasting Company (NBC) owns a 36% interest. In December 1998, the company entered into a Put-Call agreement with NBC which later was amended. Terms of the agreement permit (but don’t require) either party to initiate a purchase/sale of some or all of NBC’s shares in WKYC-TV over a six-year period. A put was made by NBC in each of April 1999 and December 2000 whereby Gannett acquired an additional 7% and 6%, respectively of WKYC shares. The company’s maximum aggregate remaining potential commitment under the agreement is approximately $156 million. In December 1990, the company adopted a Transitional Compensation Plan (“Plan’’) which provides termination benefits to key executives whose employment is terminated under certain circumstances within two years following a change in control of the company. Benefits under the Plan include a severance payment of up to three years’ compensation and continued life and medical insurance coverage. 49
Slide 52: NOTE 10 Business operations and segment information The company has determined that its reportable segments based on its management and internal reporting structure are newspaper publishing, which is the largest segment of its operations; and secondly, broadcasting (television). As discussed in Note 2, the cable division’s operating results, identifiable assets and capital expenditures have been retroactively excluded from the segment data presented herein as the division has been reclassified in the statements of income and related discussions as discontinued operations. The newspaper segment at the end of 2000 consisted of 99 U.S. daily newspapers in 40 states and one U.S. territory, including USA TODAY, a national, general-interest daily newspaper; and USA WEEKEND, a magazine supplement for newspapers. The newspaper segment also includes Newsquest (including Newscom, acquired in 2000) which is a regional newspaper publisher in the United Kingdom with a portfolio of about 300 titles that includes 15 paid-for daily newspapers, paid-for weekly newspapers, free weekly newspapers and other publications. The newspaper segment in the U.S. also includes over 300 non-daily publications, a nationwide network of offset presses for commercial printing and several smaller businesses. Newsprint, which is the principal product used in newspaper publishing, has been and may continue to be subject to significant price changes from time to time. As discussed in Note 1, the company modified its method of accounting for its 50% owned joint operating agencies in Detroit and Tucson to the equity method of accounting (as a single net amount which is in other operating revenue for the newspaper segment). All prior years have been restated. This classification change within the statements of income has no effect on the company’s operating income or overall reported results of operations. However, this change results in a reduction of reported revenue of approximately $170 million in 2000, 1999 and 1998 with a corresponding reduction in operating expenses. The broadcasting segment’s activities for 2000 include the operation of 22 U.S. television stations reaching 17.5 percent of U.S. television homes. The company’s foreign revenues in 2000 and 1999 totaled approximately $674 million and $239 million, respectively, principally from publications distributed in the United Kingdom. The company’s long-lived assets in foreign countries totaled approximately $2.4 billion at Dec. 31, 2000, principally in the United Kingdom. Separate financial data for each of the company’s business segments is presented in the table which follows. The accounting policies of the segments are those described in Note 1. The company evaluates the performance of its segments based on operating income and operating cash flow. Operating income represents total revenue less total operating expenses, including depreciation and amortization of intangibles. In determining operating income by industry segment, general corporate expenses, interest expense, interest income, and other income and expense items of a non-operating nature are not considered, as such items are not allocated to the company’s segments. Operating cash flow represents operating income plus depreciation and amortization of intangible assets. Corporate assets include cash and marketable securities, certain investments, long-term receivables and plant and equipment primarily used for corporate purposes. Interest capitalized has been included as a corporate capital expenditure for purposes of segment reporting. In thousands of dollars Business segment financial information 2000 Operating revenues Newspaper publishing Broadcasting Operating income Newspaper publishing Broadcasting Corporate (3) Depreciation and amortization Newspaper publishing Broadcasting Corporate (3) $ Operating cash flow (4) Newspaper publishing Broadcasting Corporate (3) Identifiable assets (1) Newspaper publishing Broadcasting Corporate (3) Capital expenditures (2) Newspaper publishing Broadcasting Corporate (3) $ $ 199,885 49,829 100,866 350,580 $ 169,259 24,831 51,055 $ 245,145 $ 164,479 25,548 32,032 $ 222,059 $10,434,274 1,978,438 567,699 $12,980,411 $5,599,506 1,915,976 378,437 $7,893,919 $3,682,839 1,872,351 355,236 $5,910,426 $ 1,824,894 425,165 (56,888) $ 2,193,171 $1,499,385 400,398 (56,591) $1,843,192 $1,293,939 403,535 (58,197) $1,639,277 $ 302,544 65,210 8,161 375,915 $ 207,720 62,861 9,510 $ 280,091 $ 184,718 60,023 8,722 $ 253,463 $ 1,522,350 359,955 (65,049) $ 1,817,256 $1,291,665 337,537 (66,101) $1,563,101 $1,109,221 343,512 (66,919) $1,385,814 $ 5,433,551 788,767 $ 6,222,318 $4,366,720 728,642 $5,095,362 $3,987,733 721,298 $4,709,031 1999 1998 (1) Excludes assets related to discontinued operations totaling $1,112,527 in 1999 and $1,069,054 in 1998. (2) Excludes capital expenditures made for discontinued operations totaling $13,298 for 1999 and $22,366 for 1998. (3) Corporate amounts represent those not directly related to the company’s two business segments. (4) Operating cash flow amounts represent operating income plus depreciation and amortization of intangible assets. 50
Slide 53: REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Shareholders of Gannett Co., Inc. In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, of cash flows and of changes in shareholders’ equity present fairly, in all material respects, the financial position of Gannett Co., Inc. and its subsidiaries at Dec. 31, 2000 and Dec. 26, 1999, and the results of their operations and their cash flows for each of the three years in the period ended Dec. 31, 2000 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. Washington, D.C. February 8, 2001 51
Slide 54: 11-YEAR SUMMARY In thousands of dollars, except per share amounts 2000 Net operating revenues Newspaper advertising Newspaper circulation Broadcasting All other Total (Notes a and b, see page 54) Operating expenses Costs and expenses Depreciation Amortization of intangible assets Total Operating income Non-operating (expense) income Interest expense Other Income before income taxes Provision for income taxes Income from continuing operations Discontinued operations: Income from the operation of discontinued businesses (net of income taxes) (12) Gain on sale of discontinued businesses (net of income taxes) (13) Total Income before cumulative effect of accounting principle changes Cumulative effect on prior years of accounting principle changes for: Income taxes Retiree health and life insurance benefits Net income Operating cash flow (5) Per share amounts (1) Income from continuing operations before cumulative effect of accounting principle changes: basic / diluted Net income: basic / diluted Dividends declared (2) Weighted average number of common shares outstanding in thousands: basic/diluted (2) Financial position Working capital Long-term debt excluding current maturities Shareholders’ equity Total assets Selected financial percentages and ratios Percentage increase (decrease) Earnings from continuing operations, after tax (4) Earnings from continuing operations, after tax, per share: basic/diluted (4) Dividends declared per share Return on equity (3) Credit ratios Long-term debt to shareholders’ equity Times interest expense earned (1) (2) (3) (4) 1999 $ 3,115,250 971,114 728,642 280,356 5,095,362 3,252,170 169,460 110,631 3,532,261 1,563,101 (94,619) 58,705 (11) 1,527,187 607,800 919,387 (11) 1998 $ 2,773,247 958,456 721,298 256,030 4,709,031 3,069,754 163,776 89,687 3,323,217 1,385,814 (79,412) 305,323 (9) 1,611,725 645,300 966,425 (9) 1997 $ 2,479,828 903,309 703,558 221,470 4,308,165 2,812,218 152,964 80,741 3,045,923 1,262,242 (98,242) (9,047) 1,154,953 473,600 681,353 $ 3,972,936 1,120,991 788,767 339,624 6,222,318 4,029,147 195,428 180,487 4,405,062 1,817,256 (219,228) 10,812 1,608,840 636,900 971,940 2,437 744,700 747,137 1,719,077 38,541 38,541 957,928 33,488 33,488 999,913 31,326 31,326 712,679 $ 1,719,077 $ 2,193,171 $ 957,928 $ 1,843,192 $ 999,913 $ 1,639,277 $ 712,679 $ 1,495,947 $3.65/$3.63 $6.45/$6.41 .86 266,426/268,118 $ 128,335 5,747,856 5,103,410 12,980,411 $3.29/$3.26 (11) $3.43/$3.40 .82 279,048/281,608 $ 191,444 2,463,250 4,629,646 9,006,446 $3.41/$3.38 (9) $3.53/$3.50 .78 283,097/285,711 $ 178,418 1,306,859 3,979,824 6,979,480 $2.41/$2.39 $2.52/$2.50 .74 283,360/285,610 $ 146,057 1,740,534 3,479,736 6,890,351 9.6% 14.8%/15.2% 4.9% 20.0% 112.6% 8.3X (5) (6) (7) 13.3% (10) 14.9%/14.9% (10) 5.1% 20.6% 53.2% 17.1X 14.9% (8) 14.5%/14.6% (8) 5.4% 21.0% 32.8% 21.3X 35.4% 36.9%/34.3% 4.2% 21.3% 50.0% 12.8X Per share amounts have been based upon average number of shares outstanding during each year, giving retroactive effect to adjustment in (2). Shares outstanding and dividends declared have been converted to a comparable basis by reflecting retroactively the 2-for-1 stock split effective Oct. 6, 1997. Based upon average shareholders’ equity (and income from continuing operations before non-recurring gains and accounting principle changes). Before cumulative effect of accounting principle changes. Operating cash flow represents operating income plus depreciation and amortization of intangible assets. Excludes 1996 after-tax gain on exchange of broadcast stations of $93 million or $.33 per share. Includes pre-tax gain on exchange of broadcast stations of $158 million (after-tax gain of $93 million or $.33 per share). Note: The amounts above reflect the classification change made to report the operating results from the company’s 50% owned joint operating agencies on the equity method of accounting (as a net amount in other operating revenue). 52
Slide 55: 1996 $ 2,281,071 872,969 686,936 177,237 4,018,213 2,776,171 147,721 75,043 2,998,935 1,019,278 (135,563) 155,825 (7) 1,039,540 442,900 596,640 (7) 1995 $ 2,078,190 816,474 466,187 144,636 3,505,487 2,499,696 141,151 47,509 2,688,356 817,131 (52,175) 3,754 768,710 312,084 456,626 1994 $ 1,982,260 789,375 406,608 218,000 3,396,243 2,410,404 146,054 44,110 2,600,568 795,675 (45,624) 14,945 764,996 309,600 455,396 1993 $ 1,846,791 781,205 397,204 202,040 3,227,240 2,336,668 147,248 43,771 2,527,687 699,553 (51,250) 5,350 653,653 264,400 389,253 1992 $ 1,773,460 762,729 370,613 184,035 3,090,837 2,303,468 139,080 39,197 2,481,745 609,092 (50,817) 7,814 566,089 224,900 341,189 1991 $ 1,747,118 733,943 357,383 149,489 2,987,933 2,265,948 139,268 39,621 2,444,837 543,096 (71,057) 14,859 486,898 194,400 292,498 1990 $ 1,810,825 691,332 396,693 137,562 3,036,412 2,219,438 135,294 39,649 2,394,381 642,031 (71,567) 10,689 581,153 226,600 354,553 51,867 294,580 346,447 943,087 20,636 20,636 477,262 10,003 10,003 465,399 8,499 8,499 397,752 4,491 4,491 345,680 34,000 (180,000) $ 199,680 $ 787,369 9,151 9,151 301,649 22,410 22,410 376,963 $ 943,087 $ 1,242,042 $ 477,262 $ 1,005,791 $ $ 465,399 985,839 $ $ 397,752 890,572 $ $ 301,649 721,985 $ $ 376,963 816,974 $2.12/$2.11 (7) $3.35/$3.33 .71 281,782/283,426 $ 47,609 1,880,293 2,930,818 6,349,597 $1.63/$1.62 $1.70/$1.69 .69 280,312/282,323 $ 41,312 2,767,880 2,145,648 6,503,800 $1.58/$1.57 $1.61/$1.60 .67 288,552/290,148 $ 123,783 767,270 1,822,238 3,707,052 $1.33/$1.32 $1.36/$1.35 .65 292,948/294,659 $ 302,818 850,686 1,907,920 3,823,798 $1.18/$1.18 $.69/$.69 .63 288,296/290,174 $ 199,896 1,080,756 1,580,101 3,609,009 $.97/$.96 $1.00/$.99 .62 301,566/303,267 $ 192,266 1,335,394 1,539,487 3,684,080 $1.11/$1.10 $1.18/$1.17 .61 320,094/322,830 $ 168,487 848,633 2,063,077 3,826,145 10.2% (6) 8.0%/9.9% (6) 2.9% 19.8% 64.2% 8.7X 0.3% 3.2%/3.2% 3.0% 23.0% 129.0% 15.7X 17.0% 18.8%/18.9% 3.1% 24.4% 42.1% 17.8X 14.1% 12.3%/11.9% 3.2% 22.3% 44.6% 13.8X 16.6% 22.0%/22.9% 1.6% 21.9% 68.4% 12.1X (17.5%) (12.4%)/(12.7%) 2.5% 16.2% 86.7% 7.9X (5.3%) (4.6%)/(5.2%) 9.0% 17.5% 41.1% 9.1X (8) Excludes 1998 $184 million after-tax net non-operating gain principally from the disposition of the radio and alarm security businesses ($.65 per share-basic and $.64 per share-diluted). (9) Includes pre-tax net non-operating gain principally from the disposition of the radio and alarm security businesses of $307 million (after-tax gain of $184 million or $.65 per share-basic and $.64 per share-diluted). (10) Excludes 1999 $33 million after-tax net non-operating gain principally from the exchange of KVUE-TV for KXTV-TV ($.11 per share). (11) Includes pre-tax net non-operating gain principally from the exchange of KVUE-TV for KXTV-TV of $55 million (after-tax gain of $33 million or $.11 per share). (12) Includes results from businesses sold and accounted for as discontinued operations (cable - 1995 to 2000; security - 1995 to 1998; entertainment 1995 to 1996; outdoor - 1990 to 1996). (13) Includes gain from businesses sold and accounted for as discontinued operations (cable - 2000; outdoor - 1996). 53
Slide 56: NOTES TO 11-YEAR SUMMARY (a) The company and its subsidiaries made the 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. Note 2 of the consolidated financial statements on page 40 contains further information concerning certain of these acquisitions. Acquisitions 1990-2000 1990 March 28 May 17 June 18 Sept. 7 Dec. 27 Dec. 28 1991 Feb. 11 April 3 Aug. 30 Great Falls (Mont.) Tribune Ye Olde Fishwrapper The Shopper Advertising, Inc. Desert Community Newspapers North Santiam Newspapers Pensacola Engraving Co. The Add Sheet New Jersey Publishing Co. The Times Journal Co., including The Journal Newspapers, The Journal Printing Co. (now Springfield Offset) and Telematch Gulf Breeze Publishing Co. Graphic Publications, Inc. The Honolulu Advertiser Tulare Advance-Register Nursing Spectrum Altoona Herald-Mitchellville Index and the Eastern ADvantage KTHV-TV, Little Rock Multimedia, Inc. WTSP-TV, Tampa-St. Petersburg, Fla. WZZM-TV, Grand Rapids, Mich. WGRZ-TV, Buffalo, N.Y. Printed Media Companies KNAZ-TV, Flagstaff, Ariz. KMOH-TV, Kingman, Ariz. Mary Morgan, Inc. Army Times Publishing Co., Inc. New Jersey Press, Inc. Apr. 7 May 10 June 2 June 5 June 30 July 21 1998 Jan. 5 Jan. 5 April 30 May 31 July 7 July 7 July 7 Aug. 31 Aug. 31 1999 March 17 March 29 June 1 June 1 July 26 Sept. 28 Sept. 29 2000 Jan. 3 Jan. 4 Feb. 1 Mar. 17 Mar. 31 WCSH-TV, Portland, Maine WLBZ-TV, Bangor, Maine WLTX-TV, Columbia, S.C. Classified Gazette, San Rafael, Calif. Ocean County Observer, Toms River, N.J. Daily Record, Morristown, N.J. Manahawkin Newspapers, Manahawkin, N.J. TCI Cable Kansas New Castle County Shopper’s Guide, Brandywine Valley Weekly and Autos plus, Wilmington, Del. The Reporter, Melbourne, Fla. Lehigh Acres News-Star, Lehigh Acres, Fla. Dealer Magazine, Reno, Nev. KXTV-TV, Sacramento, Calif. Newsquest plc, United Kingdom Tucker Communications, Inc., Westchester Co., N.Y. Pennypower Shopping News, Branson & Springfield, Mo. The Pioneer Republican and other publications, Iowa Buyers’ Digest, Franklin County, Vt. The Clarion, Redcar, United Kingdom WJXX-TV, Jacksonville, Fla. Mason Valley News and Fernley Leader-Dayton Courier, Lyon Co., Nev. Brevard Technical Journal, Brevard County, Fla. Dickson Shoppers, Middle Tennessee Greenville Parent Magazine, Greenville County, S.C. News Communications & Media plc, United Kingdom Space Coast Press, Brevard County, Fla. Certain assets of Thomson Newspapers Inc., including 8 dailies in Wisconsin; 8 dailies in central Ohio; daily newspapers in Lafayette, La.; Salisbury, Md.; and St. George, Utah; and numerous weeklies and niche publications. Central Newspapers, Inc., including The Arizona Republic, The Indianapolis Star, and other daily newspapers in Indiana and Louisiana; and related media and information businesses. Daily World, Opelousas, La. Windsor Beacon, Windsor, Colo. 50+ Lifestyles and other monthly magazines, Des Moines, Iowa (b) During the period, the company sold or otherwise disposed of substantially all of the assets or capital stock of certain other subsidiaries and divisions of other subsidiaries. Note 2 of the consolidated financial statements on page 40 contains further information concerning certain of these dispositions. Oct. 3 1992 April 24 1993 Jan. 30 April 24 1994 May 2 June 9 Dec. 1 1995 Dec. 4 1996 Dec. 9 1997 Jan. 31 Jan. 31 May 5 May 27 May 27 July 18 Aug. 1 Oct. 24 Aug. 1 Sept. 7 Oct. 30 Dec. 1 54
Slide 57: FORM 10-K INFORMATION Business of the company Gannett Co., Inc. is a diversified information company that operates primarily in the U.S. and the United Kingdom. Approximately 89% of its revenues are from domestic operations. In addition to operations in the United Kingdom, it has limited foreign operations in certain European and Asian markets. Its corporate headquarters is in Arlington, Va., near Washington, D.C. It was incorporated in New York in 1923 and was reincorporated in Delaware in 1972. The company presently reports two principal business segments: newspaper publishing and television broadcasting. The company’s newspapers make up the largest newspaper group in the U.S. in circulation. In 2000, the company acquired Newscom plc, one of the largest regional publishers in the United Kingdom; 19 daily newspapers and numerous weekly and niche publications from Thomson Newspapers Inc.; and Central Newspapers, Inc., with six daily newspapers and other related media and information businesses. At the end of 2000, the company operated 114 daily newspapers, with a total average daily circulation of approximately 8.4 million, including USA TODAY. The company also publishes USA WEEKEND, a weekend newspaper magazine, and in excess of 300 non-daily publications in the United States and nearly 300 non-daily publications in the United Kingdom. The newspaper segment includes the following: Gannett News Service, which provides news services for its newspaper operations; Gannett Retail Advertising Group, which represents the company’s local newspapers in the sale of advertising to national and regional retailers and service providers; and Gannett Offset, which is composed of the Gannett Offset print group and Gannett Marketing Services Group. The Gannett Offset print group includes seven non-heatset printing plants and two heatset printing facilities. Gannett Offset’s dedicated commercial printing plants are located in Atlanta, Ga.; Chandler, Ariz.; Minneapolis, Minn.; Miramar, Fla.; Nashville, Tenn.; Norwood, Mass.; Pensacola, Fla.; St. Louis, Mo.; and Springfield, Va. Gannett Marketing Services Group coordinates the sale of direct-marketing services through: Telematch, a database management and data enhancement company; Gannett Direct Marketing Services, a direct-marketing company with operations in Louisville, Ky.; and Gannett TeleMarketing, a telephone sales and marketing company. The company also owns USATODAY.com and other Internet services at most of its local newspapers and television stations; Gannett Media Technologies International, which develops and markets software and other products for the publishing industry; Nursing Spectrum, publisher of biweekly periodicals specializing in advertising for nursing employment; Army Times Publishing Company, which publishes military and defense newspapers; and a 19.49% interest in California Newspapers Partnership, a partnership that includes 21 daily California newspapers. On Dec. 31, 2000, the broadcasting division included 22 television stations in markets with more than 17.9 million households. The company’s cable business was sold on Jan. 31, 2000, and its results for 2000 and prior years are treated as discontinued operations in the company’s statements of income and related discussions elsewhere in this report. Newspaper publishing/United States On Dec. 31, 2000, the company operated 99 daily newspapers, including USA TODAY, and more than 300 non-daily local publications, in 40 states and Guam. The Newspaper Division is headquartered in Arlington, Va., and on Dec. 31, 2000, it had approximately 41,000 full-time and part-time employees. USA TODAY was introduced in 1982 as the country’s first national, general-interest daily newspaper. It is available in all 50 states and is available to readers on the day of publication in the top 100 metropolitan markets in the U.S. USA TODAY is produced at facilities in Arlington, Va., and is transmitted via satellite to offset printing plants around the country. It is printed at Gannett plants in 21 U.S. markets and under contract at offset plants in 15 other U.S. markets. It is sold at newsstands and vending machines generally at 50 cents a copy. Mail subscriptions are available nationwide and abroad, and home and office delivery is offered in many markets. Approximately 67% of its net paid circulation results from single-copy sales at newsstands or vending machines and the remainder is from home and office delivery, mail and other sales. For 2000, USA TODAY’s advertising revenues and volume rose 12% and 8%, respectively. USA TODAY International is printed from satellite transmission under contract in London, Frankfurt, Hong Kong, Milan and Belgium, and is distributed in Europe, the Middle East, Africa and Asia. It is available in more than 60 foreign countries. USATODAY.com reached more than 25 million visitors per month by the end of 2000 and its revenue increased 18%. Gannett News Service (GNS) is headquartered in Arlington, Va., and has bureaus in eight other states (see page 72 for more information). GNS provides national and regional news coverage and sports, features, photo and graphic services to Gannett newspapers. GNS also is distributed by syndication to several non-Gannett newspapers, including ones in Chicago, Salt Lake City, Boston and Seattle. The newspaper publishing segment also includes USA WEEKEND, which is distributed as a weekend newspaper magazine in 555 newspapers throughout the country, with a total circulation of 22.7 million as of January 2001. Also included is Nursing Spectrum, publisher of biweekly periodicals advertising nursing employment. Nursing Spectrum’s circulation reaches over a million registered nurses each month, or almost half of the registered nurses in the United States. By the end of 2000, Nursing Spectrum’s award-winning Web site had about 500,000 unique visitors each month. At the end of 2000, 70 of the company’s daily newspapers, including USA TODAY, were published in the morning and 29 were published in the evening. Individually, Gannett newspapers are the leading news and information source with strong brand recognition in their markets. Their durability lies in the quality of their management, their flexibility, their focus on such customer-directed programs as Complete Community Coverage in News, cross-branding of the daily newspaper, online, and weekly products, ADQ, and their capacity to invest in new technology. Collectively, they form a powerful network to distribute news and advertising information across the nation. 55
Slide 58: News departments across Gannett continued to emphasize coverage of local news as the key to successful news reporting. Under the Complete Community Coverage model developed in 2000, the vast majority of newsrooms expanded the amount of local news on their Web sites. The objective is to be the primary source of local news and information, reaching more people interested in local news in more ways. To advance that objective in 2000, online training sessions were held for top editors and many online newsroom editors. An internal corporate News Web site was established to provide further guidance for newsrooms on a variety of topics, ranging from readership information to online delivery of news. To help expand the readership base, especially among younger readers, a new weekly section on technology was developed. Called “e, your guide to personal technology,” the section is produced at Gannett News Service and distributed electronically or on CD-ROM to all Gannett newspapers. The newspapers use part or all of the section for their readers. Local advertising staffs provide advertising content for the section. Additionally, an online version is produced by the corporate Digital Production Center and made available for each newspaper Web site. Gannett Broadcast Web sites have begun using the online version as well. All of the company’s daily newspapers receive Gannett News Service. In addition, all subscribe to The Associated Press, and some receive various supplemental news and syndicated features services. In 2000, Gannett News Service staffers joined with USA TODAY reporters and editors to provide Gannett newspapers with coverage of the two national political conventions, the Summer Olympics in Australia, and the presidential debates and election. In 2000, the company continued to implement plans to increase its revenues from medium and smaller advertisers in each market it serves. Revenues from these types of advertisers increased again in 2000. Initiatives focused on sales and rate management and the construction of pre-packaged programs scalable to the company’s largest and smallest markets. Sales management initiatives included allocating proper resources to increase the number and quality of sales calls, improving sales compensation and providing consistent sales training. Rate management programs focused on selling multiple advertising insertions and reviewing rates and rate structures to assure they match the opportunities in the market. The company operates an extranet site to provide its advertising management with up-to-date information and sales programs 24 hours a day, seven days a week. The company regularly calculates market potential and adjusts its strategic plans accordingly. Significant efforts will continue to be taken in 2001 to make the company’s personnel increasingly competitive in their leadership, strategic thinking and marketing skills. The newspaper division’s continuous improvement quality initiative, known as ADQ, produced its sixth straight year of sharply improving ad and bill quality. ADQ, which has reduced credit costs significantly since its 1995 start-up, is being introduced to the newspapers acquired in 2000. The online strategy at Gannett local newspapers has been consistent from the start of our online efforts. This has been built around several major principles. First, the expenditures for the business must be justified by additional revenues, additional customers and additional profits. Second, the company concentrates on serving our local markets. The reason a consumer will turn to the local newspaper’s online site is local news and information. This differentiates the paper, which is the known and trusted source for such information today, from other Internet sites. This will be a major factor allowing newspapers to compete successfully as Internet information providers. Lastly, the company takes advantage of the natural synergies between the local newspaper and local Web site. The local content already available, the customer relationships, the news and advertising sales forces, and the promotional vehicle, are all advantages for the newspaper. The company’s strategy is to use these advantages to create the best content, create packaged advertising products that serve the advertisers, hold costs down, and leverage the known and trusted brand of the newspaper. This strategy has served Gannett well in the development of our newspaper Internet efforts. The aggressive local focus, including advertising sales efforts, combined with effective use of national economies of scale and standardized technology resulted in solid results in 2000. Pro forma advertising revenue for local newspaper Web sites increased by 88% in 2000, which followed a 68% increase in 1999. Recent traffic on our sites was more than 40 million visitors and over 150 million pages viewed per month. Twenty-five of local Gannett newspapers’ Web sites made a profit in 2000. The company achieved these results in a year that Web sites for virtually all smaller market Gannett newspapers were launched. New launches were accomplished through centralized production to provide consistent high quality Web sites while limiting costs. Except for a few small markets, all Gannett newspapers now have operational Web sites. The company is also pursuing opportunities to develop national Internet businesses. Through minority partnerships and investments, the strength of a large and broad base of the company’s and other newspaper franchises is leveraged with sophisticated, flexible Internet capabilities. The business plans of these ventures are developing to deliver information, services and advertising both nationally and locally. These ventures are also the source of additional content, advertising opportunities and technical resources that augment our local newspaper efforts to build and improve their Internet businesses. 56
Slide 59: Two such businesses which are important to the company’s Internet plans include Classified Ventures and InfiNet. Classified Ventures, owned by a consortium of media companies, operates Internet businesses on the national level in the real estate and automotive categories by networking local newspaper sites and offerings. Along with the new national opportunities for Classified Ventures, the company’s local newspaper sites are also enhanced by new customers, content and technology from their association with Classified Ventures and its other participating newspapers. InfiNet, a partnership with other major media companies which provides Internet site hosting expertise, enables the company’s papers to have better, more cost-efficient and reliable basic hosting technology than could be provided on a site-by-site basis. The senior executive of each newspaper is the publisher, and the newspapers have advertising, business, information systems, circulation, news, market development, human resources, online and production departments. Newsroom editorial system replacements were installed in Brevard, Fort Myers, Bridgewater, Tucson, Nashville and Asheville in 2000. In 2001, new editorial systems will be installed in Lansing, Rochester, the Wisconsin Winnebego group of six newspapers, Battle Creek, St. George and Salisbury. The newer systems have Web-conversion capabilities that make it easier and quicker for newspapers to post stories to their Web sites. Gannett newsrooms continue to make the conversion to digital photography, which enables our newspapers to provide photos with very late-breaking stories and to be more competitive on their Web sites. By the end of 2001, 45 Gannett news photo departments are expected to be 100 percent digital. The Mobile Advertising Sales System, or MASS, is Gannett’s sales force automation software. Designed to run on laptops and be used on sales calls, the technology provides account executives with up-to-date customer and order information; an electronic Rate Calculator for pricing retail ads; productivity tools for managing their accounts and schedules; and software for sales presentations. Twenty-five percent of Gannett’s newspapers have eliminated handwritten ad insertion orders and are utilizing the MASS software to electronically enter and process them on the laptops. A new laptop-based sales program was tested at three newspapers in 2000. Called the Rate Matrix, it is a program for selling multiple ads across multiple product lines and packaging them into one buy for the customer. This program embodies significant change from how newspapers traditionally sell advertising, which is by individual product. A typical Rate Matrix package might include a retail display ad that runs four times, a classified help wanted ad, a print and deliver insert targeted to specific zones, and an online banner ad. The test newspapers used a new laptop-based sales tool, called the Rate Matrix Calculator, to calculate package prices while on sales calls. Based on the program’s success at test newspapers, it will be rolled out to more newspapers in 2001. Gannett Creative Link was launched in early 2000 as a means for Gannett newspapers to share published and speculative ads. It is a Web based system that enables account executives and artists to view and use advertising concepts created by other Gannett newspapers. Gannett Media Technologies International (GMTI) transitioned from delivering its Celebro for Real Estate on desktop computers to providing real estate and other application services via the Internet. Celebro.com automates the scheduling and production of real estate ads, freeing newspapers from production requirements. Real Estate companies are now linked directly to GMTI’s database servers running automation software that builds the ads and sends complete, digitized ad files to our newspapers for pagination and printing. GMTI converted a number of Gannett newspapers to Celebro.com in 2000 including Cincinnati, Detroit, Nashville, Tucson, Louisville and Ft. Collins. Thirteen non-Gannett newspapers and six Real Estate companies are also using Celebro.com’s ASP solution. Notable non-Gannett properties purchasing Celebro.com in 2000 include the San Francisco Newspaper Agency, Coldwell Banker Moore in Denver and The News-Tribune in Tacoma, Washington. In mid-2000, GMTI launched its Celebro.com CarsPlus service producing auto ads at the Rockford Register Star. GMTI also signed an agreement with Classified Ventures linking its Celebro CarsPlus print advertising automation software to cars.com Web-based used car database to facilitate one-stop multimedia advertising packages. Celebro CityServer, GMTI’s software for building online shopping and commerce guides on Web sites, moved from pilot test to firststage rollout to 25 Gannett properties this year. The Digital Collections integrated asset management system has now been installed at 66 Gannett newspapers and 16 non-Gannett newspapers. DC Version 4.0, a revision based on non-proprietary Web browsers coupled with an Oracle database, was introduced in 2000. This version increases the number of data types that can be stored, bringing to users the capability to archive and re-purpose digital assets that include audio and video files. In addition, DC Version 4.0 has an interface to MagnaCash incorporated in the product. This will enable publishers to market their archives and allow consumers to charge the purchased articles to credit card accounts. 57
Slide 60: With respect to newspaper production, 67 daily newspaper plants print by the offset process, and 14 plants print using various letterpress processes. To date, there are 70 newspapers (including certain of the new acquisitions) that have converted to the new 50 inch web width format. Readers have found this new format size to be easier to handle and use. The 50 inch format change equates to more than a seven percent savings in newsprint consumption. More of the company’s newspapers are scheduled for web width reduction in 2001. In recent years, improved technology for all of the newspapers has resulted in greater speed and accuracy and in a reduction in the number of production hours worked. The company expects this trend to continue in 2001. The principal sources of newspaper revenues are circulation and advertising. Circulation: Thirty of the company’s local newspapers reported gains in daily circulation in 2000, and 13 increased Sunday circulation. Home-delivery prices for the company’s newspapers are established individually for each newspaper and range from $1.50 to $2.86 per week for daily newspapers and from $.71 to $2.33 per copy for Sunday newspapers. Price increases for certain elements of local circulation volume were initiated at 34 newspapers in 2000 and similar targeted increases are planned at 27 newspapers in 2001. Additional information about the circulation of the company’s newspapers may be found on pages 26-27, 60 and 70-72 of this annual report. Advertising: The newspapers have advertising departments that sell retail, classified and national advertising. The Gannett Retail Advertising Group also sells advertising on behalf of the company’s local newspapers to national and regional retailers and service providers. The company also contracts with outside representative firms that specialize in the sale of national advertising. Analyses of newspaper advertising revenues are presented on pages 26 and 60 of this report. Retail advertising is display advertising associated with local merchants, such as department and grocery stores. Classified advertising includes ads listed together in sequence by the nature of the ads, such as automobile sales, real estate sales and “help wanted.” National advertising is display advertising principally from advertisers who are promoting products or brand names nationally. Retail and national advertising may appear in the newspaper itself or in preprinted sections. Generally there are different rates for each category of advertising, and the rates for each newspaper are set independently, varying from city to city. The newspapers have made continuing efforts to serve their readers and advertisers by introducing complete market coverage programs and by targeting specific market segments desired by many advertisers through the use of specially zoned editions and other special publications. Continuing and comprehensive efforts are also underway to combine Web site and newspaper marketing and advertising sales opportunities. Competition: The company’s newspapers compete with other media for advertising principally on the basis of their advertising rates and their performance in helping to sell the advertisers’ products or services. They compete for circulation principally on the basis of their content and price. While most of the company’s newspapers do not have daily newspaper competitors that are published in the same city, in certain of the company’s larger markets, there is such direct competition. Most of the company’s newspapers compete with other newspapers published in nearby cities and towns and with free distribution and paid advertising weeklies, as well as other print and non-print media. The rate of development of opportunities in, and competition from, emerging electronic communications services, including those related to the Internet, is increasing. Through internal development programs, acquisitions and partnerships, the company’s efforts to explore new opportunities in news, information and communications businesses have expanded and will continue to do so. At the end of 2000, The Cincinnati Enquirer, The Detroit News, The Honolulu Advertiser and the Tucson (Ariz.) Citizen were published under joint operating agreements with non-Gannett newspapers located in the same cities. All of these agreements provide for joint business, advertising, production and circulation operations and a contractual division of profits. The editorial and reporting staffs of the company’s newspapers, however, are separate and autonomous from those of the non-Gannett newspapers. Refer to Note 1 in the notes to consolidated financial statements for a discussion of an accounting method change with respect to two of the company’s newspaper subsidiaries that are participants in joint operating agencies. Properties: Generally, the company owns the plants that house all aspects of the newspaper publication process. In the case of USA TODAY, at Dec. 31, 2000, 15 non-Gannett printers were used to print the newspaper in U.S. markets where there are no company newspapers with appropriate facilities. Five non-Gannett printers in foreign countries are used to print USA TODAY International. USA WEEKEND and Nursing Spectrum are also printed under contracts with commercial printing companies. Many of the company’s newspapers have outside news bureaus and sales offices, which generally are leased. In a few markets, two or more of the company’s newspapers share combined facilities; and in certain locations, facilities are shared with other newspaper properties. The company’s newspaper properties have rail siding facilities or access to main roads for newsprint delivery purposes and are conveniently located for distribution purposes. 58
Slide 61: During the past five years, new or substantial additions or remodeling of existing facilities have been completed or are at some stage of construction at 25 of the company’s newspaper operations. Gannett continues to make significant investments in renovations or new facilities, where the investment improves the products for its readers and advertisers as well as productivity and operating efficiency. The company’s facilities are adequate for present operations. Regulation: Gannett is committed to protecting the environment. The company’s goal is to ensure its facilities comply with federal, state, local and foreign environmental laws and to incorporate appropriate environmental practices and standards in our operations. The company employs a corporate environmental manager responsible for overseeing not only regulatory compliance but also preventive measures. The company is one of the industry leaders in the use of recycled newsprint. The company increased its domestic purchases of newsprint containing some recycled content from 42,000 metric tons in 1989 to 885,000 metric tons in 2000. The company’s newspapers use inks, photographic chemicals, solvents and fuels. The use and disposal of these substances may be regulated by federal, state and local agencies. Through its environmental compliance plan, the company is taking effective measures to comply with environmental laws. Any release into the environment may create obligations to private and governmental entities under a variety of statutes and rules regulating the environment. Some of the company’s newspaper subsidiaries have been included among the potentially responsible parties in connection with the alleged disposal of ink or other chemical wastes at disposal sites which have been subsequently identified as inactive hazardous waste sites by the U.S. Environmental Protection Agency or comparable state agencies. Generally, the company’s subsidiaries are de minimus parties. At one such site, the amount in controversy may exceed $100,000. The company believes its liability is substantially less and is defending the case. The company provides for costs associated with these matters in accordance with generally accepted accounting principles. The company does not believe that these matters will have any significant impact on its financial position or results of operations. Additional information about the company’s newspapers may be found on pages 70-73 of this report. Newspapers/United Kingdom In the second quarter of 2000, the company purchased all of the stock of News Communications & Media plc (“Newscom”), a large, regional newspaper publisher in the United Kingdom, with 114 publications in total, including 4 evening dailies. In addition, Newscom operates a contract printing and magazine publishing business. The 2000 Newscom acquisition increased the group’s presence in the prosperous southern area of the United Kingdom. The acquisition was accounted for under the purchase method of accounting. This acquisition has been integrated into the company’s existing U.K. operation, Newsquest. Altogether, Newsquest now publishes nearly 300 titles in the United Kingdom, including 15 daily newspapers. Newsquest manages its newspaper publishing activities around geographic clusters to maximize the use of management, finance, printing and personnel resources. This approach enables the group to offer readers and advertisers a range of attractive products covering the market. The clustering of titles and, usually, the publication of a free newspaper alongside a paid-for newspaper allows cross-selling of advertising among newspapers serving the same or contiguous markets, thus satisfying the needs of its advertisers and audiences. At the end of 2000, Newsquest had 16 such clusters in the United Kingdom. Newsquest’s policy is to produce free and paid-for newspapers with an attractive level of quality local editorial content. Newsquest also distributes a substantial volume of advertising leaflets in the communities it serves and it offers a travel/ vacation booking service. Newsquest’s full year pro forma revenues for 2000 were in excess of $700 million (including Newscom). As with U.S. newspapers, advertising is the largest component of revenue, comprising approximately 82%. Circulation revenue represents 11% and printing activities account for much of the remainder. Printing revenue increased in 2000 mainly as a result of the contract printing activities acquired with Newscom. Compared to U.S. newspaper operations, ad revenue at Newsquest is a greater percent of total revenue and circulation revenue is a lesser percent, reflecting the greater volume and importance of free non-daily publications among Newsquest’s titles. Newsquest is actively seeking to maximize the value of its local information expertise through development of opportunities offered by the Internet. Through internal growth and in partnership with other businesses, Newsquest has established a number of local and national Web sites which offer news and other information of special interest to its communities, as well as classified and retail advertising and shopping services. During 2000, Newsquest became a minority investor in FS Auctions, the auction subsidiary of one of the U.K.’s largest Internet service providers, and in Schoolsnet, an education oriented site. These investee operations complement the local editorial content and classified advertising offered by Newsquest newspapers. 59
Slide 62: Newsquest owns certain of the plants where its newspapers are produced and leases other facilities. Its headquarters is in Morden, Surrey. All of its properties are adequate for present purposes. A listing of Newsquest publishing centers and key properties may be found on page 74. A new printing plant is being developed at Lostock to replace the existing press and add color capacity. At the end of 2000, Newsquest had approximately 8,400 full-time and part-time employees. Newsquest employees have local staff councils for consultation and communication with Newsquest subsidiary management. Newsquest provides its employees with the option to participate in a retirement plan that incorporates life insurance and a stock option linked savings plan. Newsquest newspapers operate in competitive markets. Their principal competitors include other regional and national newspaper and magazine publishers, other advertising media such as radio and billboard, and Internet-based news, information and communication businesses. Key revenue and expense data – for all newspapers combined The table that follows summarizes the circulation volume and revenues of U.S. newspapers owned by the company at the end of 2000, including USA TODAY. The table also includes circulation revenue for all Newsquest publications and circulation volume for Newsquest’s fifteen paid daily newspapers. This table assumes that all newspapers owned by the company at the end of 2000 were owned during all years shown. For 2000, the amounts are based on a 53-week period. For purposes of presenting pro forma information, the tables and related commentary below include net paid circulation and its pro rata portion of the revenue and linage data for the company’s newspapers participating in joint operating agencies, consistent with prior years. Circulation: newspapers owned on Dec. 31, 2000 Circulation revenues in thousands 2000 1999 1998 1997 1996 $1,306,780 $1,290,559 $1,290,236 $1,259,935 $1,198,944 Daily net paid circulation 8,368,000 8,399,000 8,486,000 8,399,000 8,369,000 Sunday net paid circulation 7,154,000 7,260,000 7,375,000 7,452,000 7,536,000 The following chart summarizes the advertising linage (in six-column inches) and advertising revenues of the newspapers owned by the company at the end of 2000. For Newsquest, advertising revenues are reflected, but linage is not. The chart assumes that all of the newspapers owned at the end of 2000 were owned throughout the years shown. For 2000, the amounts are based on a 53week period. Advertising: newspapers owned on Dec. 31, 2000 Advertising revenues (ROP) in thousands 2000 1999 1998 1997 1996 $3,964,193 $3,800,395 $3,580,739 $3,347,434 $3,045,551 Inches of advertising, excluding preprints 104,700,000 101,253,000 95,696,000 90,826,000 84,940,000 60
Slide 63: Total newspaper ad revenues on a pro forma basis rose 5% in 2000. Most major advertising classifications showed solid year-overyear growth during 2000. Ad spending by larger retailers declined for the year, reflecting closings and consolidations, but this was mostly offset by greater revenue from small and medium sized advertisers. Classified advertising revenues grew 4% on the strength of employment, automotive, and real estate categories. National advertising revenues increased 10%. Preprint revenues grew 10%. The company’s newspaper segment advertising and other revenues from Internet activities totaled approximately $62 million in 2000 and $39 million in 1999. For 2001, ad revenue and volume growth is anticipated in all categories. Generally modest price increases are planned at most properties, and the company will continue to expand and refine sales and marketing efforts. Changes in economic factors such as interest rates, employment levels and the rate of general economic growth will have an impact on revenue at all of the company’s newspapers. Raw materials: Newsprint is the basic raw material used to publish newspapers. During 2000, the company’s total newsprint consumption was 1,211,000 metric tons, including the company’s portion of newsprint consumed at joint operating agencies, consumption by USA WEEKEND, USA TODAY tonnage consumed at non-Gannett print sites and consumption by Newsquest. Newsprint consumption was up 17% in 2000 due principally to consumption by acquired properties in 2000 and 1999. Newsprint consumption savings were realized due to web width reductions at a number of the company’s properties in 1999 and 2000. The company purchases newsprint from 24 North American, European and other offshore suppliers under contracts that expire at various times through 2010. During 2000, all of the company’s newspapers consumed some recycled newsprint. For the year, more than 80% of the company’s domestic newsprint purchases contained recycled content. In 2000, newsprint supplies were adequate. The company believes that the available sources of newsprint, together with present inventories, will continue to be adequate to supply the needs of its newspapers. The average cost per ton of newsprint consumed in 2000 increased 3% compared to the 1999 average cost. Broadcasting On December 31, 2000, the company’s television division, headquartered in Arlington, Va., included 22 television stations in markets with a total of more than 17.9 million households. On March 17, 2000, the company completed the acquisition of WJXX-TV, the ABC affiliate in Jacksonville, Fla. The company continues to own WTLV-TV, the NBC affiliate in Jacksonville. At the end of 2000, the broadcasting division had approximately 3,100 full-time and part-time employees. Broadcasting revenues accounted for approximately 13% of the company’s reported operating revenues from continuing operations in 2000, 14% in 1999 and 15% in 1998. The principal sources of the company’s broadcasting revenues are: 1) local advertising focusing on the immediate geographic area of the stations; 2) national advertising; 3) compensation paid by the networks for carrying commercial network programs; and 4) payments by advertisers to television stations for other services, such as the production of advertising material. The advertising revenues derived from a station’s local news programs make up a significant part of its total revenues. Advertising rates charged by a television station are based primarily upon the station’s ability to attract viewers, demographics and the number of television households in the area served by the station. Practically 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, sells commercial advertising announcements within the network programs and compensates the local stations by paying an amount based on the television station’s network affiliation agreement. For all of its stations, the company is party to network affiliation agreements. The company’s three ABC affiliates have agreements which expire between 2005-2007. The agreements for all of its six CBS affiliates run through 2004-2005. The company’s 13 NBC affiliated stations have agreements that will expire in December 2005. The company will continue to receive compensation under these new agreements at the 2000 compensation level with the exception of one smaller market station. Programming: 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 and in some cases from cable operations. In recent years, the company’s television stations have emphasized their locally produced news and entertainment programming in an effort to provide programs that distinguish the stations from the competition and to better control costs. 61
Slide 64: Properties: The company’s broadcasting facilities are adequately equipped with the necessary television broadcasting equipment. The company owns transmitter sites in 23 locations and leases sites in 8 others. During the past five years, new broadcasting facilities or substantial improvements to existing facilities were completed in Phoenix, Jacksonville, Knoxville, Columbia and Atlanta. A new facility was completed in December 2000 in Cleveland. Facility expansion to accommodate Digital Television (DTV) was completed at five sites in 1998/1999 and three sites in 2000. Additional station facilities may be converted to DTV in future years. The company’s broadcast facilities are adequate for present purposes. Competition: In each of its broadcasting markets, the company’s stations compete for revenues with other network-affiliated and independent television and radio broadcasters and with other advertising media, such as cable television, newspapers, magazines and outdoor advertising. The stations also compete in the emerging local electronic media space, which includes Internet or Internet-enabled devices and any digital spectrum opportunities associated with DTV. The company’s broadcasting stations compete principally on the basis of their market share, advertising rates and audience composition. Local news is most important to a station’s success, and there is a growing emphasis on other forms of programming that relate to the local community. Network and syndicated programming constitute the majority of all other programming broadcast on the company’s television stations, and the company’s competitive position is directly affected by viewer acceptance of this programming. Other sources of present and potential competition for the company’s broadcasting properties include pay cable, home video and audio recorders and video disc players, direct broadcast satellite and low power television. Some of these competing services have the potential of providing improved signal reception or increased home entertainment selection, and they are continuing development and expansion. Pursuant to the Satellite Home Viewer Improvement Act of 1999, several of the company’s television stations are currently being delivered by satellite carriers to subscribers within the stations’ market. The company has entered into retransmission consent agreements with satellite carriers that authorize such delivery that expire in mid-2004. This law also permits satellite carriers to retransmit distant network television stations into areas served by local television stations if it is determined, using FCC-approved signal strength measurement standards, that local stations do not deliver an acceptable viewing signal. Regulation: The company’s television stations are operated under the authority of the Federal Communications Commission (FCC) under 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 by broadcasters upon application to the FCC and usually are renewed except in rare cases in which a conflicting application, a petition to deny, a complaint or an adverse finding as to the licensee’s qualifications results in loss of the license. The company believes it is in substantial compliance with all applicable provisions of the Communications Act and FCC Regulations. FCC Regulations also prohibit concentrations of broadcasting control and regulate network programming. FCC Regulations governing multiple ownership limit, or in some cases, prohibit the common ownership or control of most communications media serving common market areas (for example, television and radio; television and daily newspapers; radio and daily newspapers; or television and cable television). The FCC’s broadcast ownership rules permit common ownership of two television stations in the same market, provided eight independently owned television stations remain in the market following the combination and provided that at least one of the commonly owned stations is not among the market’s top four rated stations. It is under this standard that the company acquired a second television station in the Jacksonville, Fla., market in March 2000. The FCC has instituted a rule-making proceeding to examine possible modifications to the daily newspaper/television broadcast ownership restrictions. The FCC rules permit common ownership of a number (depending on market size) of radio stations and television stations serving the same community but continue to prohibit a party from having attributable interests in television stations which collectively reach more than 35 percent of all U.S. television households. The FCC will continue to review this limitation as required by Congress. Presently, the company’s 22 television stations reach an aggregate of 17.5% of U.S. TV households. Additional information about the company’s television stations may be found on page 73 of this annual report. 62
Slide 65: Corporate facilities The company leases office space for its headquarters in Arlington, Va., and also owns data processing facilities in nearby Maryland. The present lease will expire in 2001. In September 1996, the company purchased 30 acres of land in Fairfax County, Va., for use as a future site for USA TODAY and corporate headquarters. Building construction began in 1999 and is scheduled to be completed in mid 2001. Employee relations At the end of 2000, the company and its subsidiaries had approximately 53,400 full-time and part-time employees. Four of the company’s newspapers were published in 2000 together with non-company newspapers pursuant to joint operating agreements, and the employment numbers above include the company’s pro-rata share of employees at those joint production and business operations. Approximately 14% of those employed by the company and its subsidiaries are represented by labor unions. They are represented by 91 local bargaining units affiliated with nine international unions under collective bargaining agreements. These agreements conform generally with the pattern of labor agreements in the newspaper and broadcasting industries. The company does not engage in industrywide or companywide bargaining. The company’s UK subsidiaries bargain with two unions over wages and health and safety issues only. The company strives to maintain good relationships with its employees. On July 13, 1995, approximately 2,500 workers from six unions began a strike against The Detroit News, the Detroit Newspaper Agency and the Detroit Free Press, the company’s agency partner. The strike was precipitated by unrealistic and excessive demands by the unions for wage increases and position levels. Throughout the strike and despite union efforts to stop delivery of the newspapers through intimidation and violence, the newspapers published every day. The strike ended in mid February 1997 when six striking unions made an unconditional offer to return to work. The unions, however, continued to attempt a subscriber and advertiser boycott. In February 1999 the Detroit Typographical Union reached a 10-year labor agreement with the company and in January 2001 the remaining five formerly striking unions also reached labor agreements with the employers and agreed to cease their boycott attempts and participate in a program to increase the circulation of the newspapers. The company provides competitive group life and medical insurance programs for full-time domestic employees at each location. The company pays a substantial portion of these costs and employees contribute the balance. Virtually all of the company’s units provide retirement or profit-sharing plans which cover eligible full-time employees. In 1990, the company established a 401(k) Savings Plan, which is available to most of its domestic non-union employees. 63
Slide 66: Acquisitions and dispositions 1996-2000 The growth of the company has resulted from acquisitions of businesses, as well as from internal expansion. Its significant acquisitions since the beginning of 1996 are shown below. The company has disposed of several businesses during this period, which are presented on the following page. Acquisitions 1996-2000 Year acquired 1996 1997 WTSP-TV WZZM-TV WGRZ-TV Printed Media Companies KNAZ-TV KMOH-TV Mary Morgan, Inc. Army Times Publishing Co., Inc. New Jersey Press, Inc. 1998 WCSH-TV WLBZ-TV WLTX-TV Ocean County Observer Daily Record Manahawkin Newspapers Classified Gazette New Castle County Shopper’s Guide Brandywine Valley Weekly Autos plus TCI Cable Kansas 1999 The Reporter Lehigh Acres News-Star Dealer Magazine KXTV-TV Newsquest plc Tucker Communications, Inc. Pennypower Shopping News 2000 Name Location Tampa-St. Petersburg, Fla. Grand Rapids, Mich. Buffalo, N.Y. Minneapolis, Minn. Flagstaff, Ariz. Kingman, Ariz. Green Bay, Wis. Springfield, Va. Asbury Park and East Brunswick, N.J. Portland, Maine Bangor, Maine Columbia, S.C. Toms River, N.J. Morristown, N.J. Manahawkin, N.J. San Rafael, Calif. Wilmington, Del. Wilmington, Del. Wilmington, Del. Kansas Melbourne, Fla. Lehigh Acres, Fla. Reno, Nev. Sacramento, Calif. United Kingdom Westchester Co., N.Y. Branson & Springfield, Mo. Des Moines, Iowa Franklin County, Vt. Redcar, United Kingdom Jacksonville, Fla. Lyon County, Nev. Brevard County, Fla. Middle Tennessee Greenville County, S.C. United Kingdom Brevard County, Fla. Wisconsin, Ohio, Louisiana, Maryland, Utah Arizona, Indiana, Louisiana Opelousas, La. Windsor, Colo. Des Moines, Iowa Publication times or business Television station Television station Television station Commercial printing Television station Television station Commercial printing Weekly and monthly periodicals Two daily newspapers Television station Television station Television station Daily newspaper Daily newspaper Weekly newspapers Semi-weekly newspaper Weekly advertising shopper Weekly advertising shopper Weekly advertising shopper Cable television systems Weekly newspaper Weekly newspaper Weekly magazine Television station Daily and weekly newspapers Weekly newspaper Weekly newspaper Weekly newspapers Weekly newspaper Weekly newspaper Television station Weekly newspapers Monthly magazine Weekly newspapers Monthly magazine Daily and weekly newspapers and other publications Weekly newspaper 19 daily and numerous weekly newspapers 6 daily newspapers; other related businesses Daily newspaper Weekly newspaper Monthly magazines The Pioneer Republican and other publications Buyers’ Digest The Clarion WJXX-TV Mason Valley News, Fernley Leader-Dayton Courier Brevard Technical Journal Dickson Shoppers Greenville Parent Magazine News Communications & Media plc Space Coast Press Certain assets of Thomson Newspapers Inc. Central Newspapers, Inc. Daily World Windsor Beacon 50+ Lifestyles and other publications 64
Slide 67: Dispositions 1996-2000 Year disposed 1996 Name WMAZ/WAYS-FM Gannett Outdoor Group Multimedia Entertainment Louis Harris and Associates, Inc. Gannett Community Directories KIIS/KIIS-FM KSDO/KKBH-FM WDAE/WUSA-FM 1997 WLWT-TV KOCO-TV Niagara Gazette The Observer North Hills News Record Valley News Dispatch 1998 The Virgin Islands Daily News WGCI/WGCI-FM KKBQ/KKBQ-FM KHKS-FM The Saratogian Multimedia Security Service Commercial-News Chillicothe Gazette Gallipolis Daily Tribune The Daily Sentinel Point Pleasant Register Multimedia Cable Illinois 1999 2000 The San Bernardino County Sun KVUE-TV Multimedia Cable Marin Independent Journal Classified Gazette Space News Macon, Ga. Various major markets, U.S. and Canada New York, N.Y. New York, N.Y. Paramus, N.J. Los Angeles, Calif. San Diego, Calif. Tampa, Fla. Cincinnati, Ohio Oklahoma City, Okla. Niagara Falls, N.Y. Moultrie, Ga. North Hills, Pa. Tarentum, Pa. St. Thomas, V.I. Chicago, Ill. Houston, Texas Dallas, Texas Saratoga Springs, N.Y. Wichita, Kan. Danville, Ill. Chillicothe, Ohio Gallipolis, Ohio Pomeroy, Ohio Point Pleasant, W.Va. Suburban Chicago, Ill. San Bernardino, Calif. Austin, Texas Location Publication times or business Radio stations Outdoor advertising Television entertainment programming Polling and research Community directories Radio stations Radio stations Radio stations Television station Television station Daily newspaper Daily newspaper Daily newspaper Daily newspaper Daily newspaper Radio stations Radio stations Radio station Daily newspaper Alarm security business Daily newspaper Daily newspaper Daily newspaper Daily newspaper Daily newspaper Cable television systems Daily newspaper Television station Kansas, Oklahoma, North Carolina Marin, Calif. San Rafael, Calif. Springfield, Va. Cable television systems Daily newspaper Semi-weekly newspaper Weekly newspaper 65
Slide 68: QUARTERLY STATEMENTS OF INCOME In thousands of dollars Fiscal year ended December 31, 2000 Net operating revenues Newspaper advertising Newspaper circulation Broadcasting All other Total Operating expenses Cost of sales and operating expenses, exclusive of depreciation Selling, general and administrative expenses, exclusive of depreciation Depreciation Amortization of intangible assets Total Operating income Non-operating (expense) income Interest expense Other Total Income before income taxes Provision for income taxes Income from continuing operations Discontinued operations Income from discontinued operations, net Gain on sale of cable business, net of tax Net income Basic earnings per share Basic earnings from continuing operations (1) Basic earnings from discontinued operations: Discontinued operations, net of tax Gain on sale of cable business, net of tax (1) Net income per share – basic (1) Diluted earnings per share Diluted earnings from continuing operations (1) Diluted earnings from discontinued operations: Discontinued operations, net of tax Gain on sale of cable business, net of tax (1) Net income per share – diluted (1) 1st Quarter $ 830,250 254,146 166,789 70,135 1,321,320 2nd Quarter $ 911,949 251,524 205,413 78,921 1,447,807 3rd Quarter $1,004,280 286,890 183,352 83,998 1,558,520 4th Quarter $ 1,226,457 328,431 233,213 106,570 1,894,671 Total $ 3,972,936 1,120,991 788,767 339,624 6,222,318 667,486 215,942 46,608 33,766 963,802 357,518 (20,175) (1,326) (21,501) 336,017 133,000 203,017 2,437 744,700 $ 950,154 $.74 .01 2.72 $3.47 $.74 .01 2.69 $3.44 $ 683,084 227,593 47,070 35,379 993,126 454,681 (22,666) 7,947 (14,719) 439,962 174,200 265,762 788,209 245,735 51,509 52,082 1,137,535 420,985 (75,962) (260) (76,222) 344,763 136,500 208,263 918,473 282,625 50,241 59,260 1,310,599 584,072 (100,425) 4,451 (95,974) 488,098 193,200 294,898 3,057,252 971,895 195,428 180,487 4,405,062 1,817,256 (219,228) 10,812 (208,416) 1,608,840 636,900 971,940 2,437 744,700 265,762 $1.01 $ 208,263 $.79 $ 294,898 $1.12 $ 1,719,077 $3.65 .01 2.79 $1.01 $1.00 $.79 $.79 $1.12 $1.11 $6.45 $3.63 .01 2.77 $1.00 $.79 $1.11 $6.41 (1) As a result of rounding and share repurchases made during the year, the total of the four quarters’ earnings per share does not equal the earnings per share for the year. Note: The statements of income reflect the classification change made to report the operating results from the company’s 50% owned joint operating agencies on the equity method of accounting (as a net amount in other operating revenue). 66
Slide 69: QUARTERLY STATEMENTS OF INCOME In thousands of dollars Fiscal year ended December 26, 1999 Net operating revenues Newspaper advertising Newspaper circulation Broadcasting All other Total Operating expenses Cost of sales and operating expenses, exclusive of depreciation Selling, general and administrative expenses, exclusive of depreciation Depreciation Amortization of intangible assets Total Operating income Non-operating (expense) income Interest expense Other Total Income before income taxes Provision for income taxes Income from continuing operations Discontinued operations Income from discontinued operations, net Gain on sale of cable business, net of tax Net income Basic earnings per share Basic earnings from continuing operations Basic earnings from discontinued operations: Discontinued operations, net of tax Gain on sale of cable business, net of tax Net income per share – basic Diluted earnings per share Diluted earnings from continuing operations (1) Diluted earnings from discontinued operations: Discontinued operations, net of tax Gain on sale of cable business, net of tax Net income per share – diluted (1) 1st Quarter $ 676,204 240,390 161,194 64,892 1,142,680 2nd Quarter $ 744,848 236,024 194,480 63,690 1,239,042 3rd Quarter $ 776,117 243,085 166,770 67,536 1,253,508 4th Quarter $ 918,081 251,615 206,198 84,238 1,460,132 Total $ 3,115,250 971,114 728,642 280,356 5,095,362 597,490 182,969 42,715 22,914 846,088 296,592 (16,592) 2,368 (14,224) 282,368 112,400 169,968 8,925 $ 178,893 $.61 .03 $.64 $.61 .03 $.64 584,728 185,903 42,130 23,170 835,931 403,111 (13,852) 55,305 (2) 41,453 444,564 176,950 267,614 (2) 9,356 $ 276,970 (2) $.96 (2) .03 $.99 (2) $.95 (2) .03 $.98 (2) 623,388 201,929 44,325 30,500 900,142 353,366 (26,474) 1,588 (24,886) 328,480 130,700 197,780 9,699 $ 207,479 $.70 .04 $.74 $.70 .04 $.74 654,143 221,620 40,290 34,047 950,100 510,032 (37,701) (556) (38,257) 471,775 187,750 284,025 10,561 $ 294,586 $1.02 .04 $1.06 $1.01 .04 $1.05 2,459,749 792,421 169,460 110,631 3,532,261 1,563,101 (94,619) 58,705 (2) (35,914) 1,527,187 607,800 919,387 (2) 38,541 $ 957,928 (2) $3.29 (2) .14 $3.43 (2) $3.26 (2) .14 $3.40 (2) Earnings summary, excluding non-recurring net non-operating gains In thousands of dollars Fiscal year ended December 26, 1999 Income from continuing operations, as reported Less: after-tax gains on sale/exchange of businesses (2) Income from continuing operations, as adjusted Diluted earnings per share from continuing operations, as adjusted (1) 1st Quarter $ 169,968 $ 169,968 $.61 2nd Quarter $ 267,614 32,780 $ 234,834 $.84 3rd Quarter $ 197,780 $ 197,780 $.70 4th Quarter $ 284,025 $ 284,025 $1.01 Total $ 919,387 32,780 $ 886,607 $3.15 (1) As a result of rounding, the total of the four quarters’ earnings per share does not equal the earnings per share for the year. (2) Includes second quarter net gain principally from the exchange of KVUE-TV in Austin, Texas, for KXTV-TV in Sacramento, Calif., ($55 million pre-tax, $33 million after-tax, $.11 per share-basic and diluted). Note: The statements of income reflect the classification change made to report the operating results from the company’s 50% owned joint operating agencies on the equity method of accounting (as a net amount in other operating revenue). 67
Slide 70: SCHEDULES TO FORM 10-K INFORMATION In thousands of dollars Property, plant and equipment Classification Dec. 27, 1998 Land Buildings and improvements Cable and security systems Machinery, equipment and fixtures Construction in progress and deposits on contracts $ 175,884 840,157 548,219 2,140,148 50,429 $ 3,754,837 Dec. 26, 1999 Land Buildings and improvements Cable Machinery, equipment and fixtures Construction in progress and deposits on contracts $ 180,786 839,210 413,059 2,123,468 110,220 $ 3,666,743 Dec. 31, 2000 Land Buildings and improvements Cable Machinery, equipment and fixtures Construction in progress and deposits on contracts $ 182,138 886,655 424,907 2,259,362 130,850 $ 3,883,912 Notes (A) Includes assets at acquisition net of adjustments for prior years’ acquisitions. (B) Includes assets at acquisition net of adjustments for prior years’ acquisitions. (C) Includes assets at acquisition net of adjustments for prior years’ acquisitions. (D) Principally the effect of current foreign currency translation adjustment. (E) Includes capitalized interest of $1,610 in 1998, $5,707 in 1999 and $11,167 in 2000. (F) Generally the rates of depreciation range from 2.5% to 10% for buildings and improvements, 3.3% to 20% for cable and 4% to 30% for machinery, equipment and fixtures. (G) Includes depreciation expense from cable and security reflected in earnings from discontinued operations of $2,759 in 2000, $31,806 in 1999 and $37,907 in 1998. $ (17,551) $ 175,470 $ 471,120 $ 33,066 183,971 4 451,276 153,383 $ 821,700 (C)(E) $ 4,374 20,639 424,911 107,822 223 $ 557,969 $ 5,219 51,709 0 (77,634) 8,264 $(12,442) (D) $ 216,049 1,101,696 0 2,525,182 292,274 $ 4,135,201 $ 5,901 83,975 13,680 308,547 21,810 $ 433,913 (B)(E) $ 4,853 37,189 1,821 171,525 1,318 $ 216,706 $ $ 304 659 (11) (1,128) 138 (38)(D) $ 182,138 886,655 424,907 2,259,362 130,850 $ 3,883,912 $ 7,769 10,022 24,218 126,006 58,859 $ 226,874 (A)(E) $ 987 13,790 159,634 140,424 133 $ 314,968 $ $ (1,880) 2,821 256 (2,262) 1,065 0 $ 180,786 839,210 413,059 2,123,468 110,220 $ 3,666,743 Balance at beginning of period Additions at cost Retirements or sales Other changes Balance at end of period 68
Slide 71: SCHEDULES TO FORM 10-K INFORMATION In thousands of dollars Accumulated depreciation and amortization of property, plant and equipment Balance at beginning of period Dec. 27, 1998 Buildings and improvements Cable Machinery, equipment and fixtures $ 324,080 83,106 1,155,609 $ 1,562,795 Dec. 26, 1999 Buildings and improvements Cable Machinery, equipment and fixtures $ 345,891 77,675 1,179,394 $ 1,602,960 Dec. 31, 2000 Buildings and improvements Cable Machinery, equipment and fixtures $ 346,433 101,294 1,212,333 $ 1,660,060 (D)(F)(G) See page 68 Valuation and qualifying accounts Balance at beginning of period $18,020 $19,143 $30,694 Additions charged to costs and expenses $22,077 $26,213 $28,072 Additions/(reductions) for acquisitions/ dispositions $ (1,240) $ 9,419 $ 10,456 Deductions from reserves $19,714 $24,081 $31,757 Balance at end of period $19,143 $30,694 $37,465 $ 30,371 2,697 165,119 $ 198,187 (F) (G) $ (6,055) 103,991 85,976 $ 183,912 $ $ 4,330 0 (4,863) (533)(D) $ 387,189 0 1,286,613 $ 1,673,802 $ 22,056 24,862 154,348 $ 201,266 (F) (G) $ 16,511 1,243 126,421 $ 144,175 $ $ (5,003) 0 5,012 9 (D) $ 346,433 101,294 1,212,333 $ 1,660,060 $ 25,434 31,134 145,115 $ 201,683 (F)(G) $ 12,941 36,369 112,208 $ 161,518 $ $ 9,318 (196) (9,122) 0 $ 345,891 77,675 1,179,394 $ 1,602,960 Additions charged to costs and expenses Retirements or sales Other changes Balance at end of period Allowance for doubtful receivables Year ended Dec. 27, 1998 Year ended Dec. 26, 1999 Year ended Dec. 31, 2000 Supplementary income statement information (from continuing operations) Fiscal year ended Maintenance and repairs Taxes other than payroll and income tax Property Other Total $28,074 $12,660 $40,734 $23,101 $08,243 $31,344 $20,736 $08,327 $29,063 Dec. 31, 2000 $51,424 Dec. 26, 1999 $42,208 Dec. 27, 1998 $41,053 69
Slide 72: MARKETS WE SERVE ADDITIONAL OPERATIONS Newspapers Guam Hawaii Newsquest plc United Kingdom (see page 74) s q 5 w D A I LY N E W S PA P E R S U S AT P R I N T S I T E S GNS BUREAUS T E L E V I S I O N S TAT I O N S USAT Print Sites Belgium United Kingdom Germany Hong Kong Italy NEWSPAPERS AND NEWSPAPER DIVISION Daily newspapers State Territory Alabama Arizona Arkansas California Colorado Connecticut Delaware Florida Georgia Guam Hawaii Idaho Illinois City Montgomery Phoenix Tucson Mountain Home Palm Springs Salinas Tulare Visalia Fort Collins Norwich Wilmington Brevard County Fort Myers Pensacola Gainesville Hagatna Honolulu Boise Rockford Newspaper Montgomery Advertiser The Arizona Republic Tucson Citizen The Baxter Bulletin The Desert Sun The Californian Tulare Advance-Register Visalia Times-Delta Fort Collins Coloradoan Norwich Bulletin The News Journal FLORIDA TODAY The News-Press Pensacola News Journal The Times Pacific Daily News The Honolulu Advertiser The Idaho Statesman Rockford Register Star Morning 53,500 469,812 11,345 52,327 19,304 Circulation Afternoon Sunday 67,042 582,371 39,543 54,917 8,291 21,836 28,775 28,807 122,118 86,980 88,159 62,817 22,124 21,482 112,410 64,573 70,755 35,348 34,334 143,113 110,714 106,328 81,806 26,188 20,608 186,926 86,680 82,074 Founded 1829 1890 1870 1901 1927 1871 1882 1859 1873 1791 1871 1966 1884 1889 1947 1944 1856 1864 1855 Joined Gannett v 1995 (64) 2000 (93) 1976 (31) 1995 (65) 1986 (58) 1977 (37) 1993 (63) 1977 (38) 1977 (39) 1981 (51) 1978 (44) 1966 (9) 1971 (24) 1969 (11) 1981 (50) 1971 (23) 1993 (62) 1971 (16) 1967 (10) 70
Slide 73: Daily newspapers State Territory Indiana City Fishers Indianapolis Lafayette Marion Muncie Richmond Vincennes Des Moines Iowa City Louisville Alexandria Lafayette Monroe Opelousas Shreveport Salisbury Battle Creek Detroit Lansing Port Huron St. Cloud Hattiesburg Jackson Springfield Great Falls Reno Asbury Park Bridgewater Cherry Hill East Brunswick Morristown Toms River Vineland Binghamton Elmira Ithaca Poughkeepsie Rochester Utica Westchester County Asheville Bucyrus Cincinnati Chillicothe Coshocton Fremont Lancaster Mansfield Marietta Marion Newark Port Clinton Zanesville Iowa Kentucky Louisiana Maryland Michigan Minnesota Mississippi Missouri Montana Nevada New Jersey New York North Carolina Ohio Newspaper The Daily Ledger The Indianapolis Star Journal and Courier Chronicle-Tribune The Star Press Palladium-Item Vincennes Sun-Commercial The Des Moines Register Iowa City Press-Citizen The Courier-Journal Alexandria Daily Town Talk The Daily Advertiser The News-Star Daily World The Times The Daily Times Battle Creek Enquirer The Detroit News The Detroit News and Free Press Lansing State Journal Times Herald St. Cloud Times Hattiesburg American The Clarion-Ledger Springfield News-Leader Great Falls Tribune Reno Gazette-Journal Asbury Park Press Courier News Courier-Post Home News Tribune Daily Record Ocean County Observer The Daily Journal Press & Sun-Bulletin Star-Gazette The Ithaca Journal Poughkeepsie Journal Rochester Democrat and Chronicle Observer-Dispatch The Journal News Asheville Citizen-Times Telegraph-Forum The Cincinnati Enquirer Chillicothe Gazette Coshocton Tribune The News-Messenger Lancaster Eagle-Gazette News Journal The Marietta Times The Marion Star The Advocate News Herald Times Recorder Morning 246,957 37,238 19,847 33,534 Circulation Afternoon 11,231 Sunday 363,275 44,225 22,142 36,429 22,858 14,179 249,085 296,546 41,772 51,866 41,243 12,958 85,670 31,118 34,787 750,696 91,659 42,729 38,111 27,014 119,638 93,452 39,107 85,156 220,198 41,107 96,579 76,620 47,386 9,741 76,385 41,217 52,895 241,750 57,022 173,733 70,094 19,150 12,149 155,930 14,897 231,685 36,001 44,663 36,708 11,643 69,625 27,183 25,725 237,403 70,171 30,831 28,364 22,681 103,040 64,239 33,903 67,833 157,997 41,354 83,254 68,822 44,656 10,055 17,548 60,442 29,303 18,605 40,370 174,676 47,022 144,309 56,408 7,033 202,467 15,988 7,543 14,054 15,482 34,656 12,073 14,818 21,350 5,960 21,582 Founded 1870 1903 1829 1867 1899 1831 1804 1849 1860 1868 1883 1865 1890 1939 1871 1900 1900 1873 1855 1900 1861 1897 1837 1893 1885 1870 1879 1884 1875 1879 1900 1850 1864 1904 1828 1815 1785 1833 1817 1829 1870 1923 1841 1800 1842 1856 1807 1885 1864 1880 1820 1864 1852 Joined Gannett v 2000 (94) 2000 (95) 1971 (17) 1971 (20) 2000 (96) 1976 (30) 2000 (97) 1985 (55) 1977 (41) 1986 (60) 2000 (98) 2000 (74) 1977 (43) 2000 (99) 1977 (42) 2000 (75) 1971 (18) 1986 (57) 1971 1970 1977 1982 1982 1977 1990 1977 1997 1927 1959 1997 1998 1998 1986 1943 1906 1912 1977 1918 1922 1964 1995 2000 1979 2000 2000 1975 2000 2000 1974 2000 2000 1975 2000 (15) (12) (36) (53) (52) (35) (61) (32) (70) (5) (7) (71) (72) (73) (59) (6) (1) (2) (34) (3) (4) (8) (66) (76) (45) (77) (78) (28) (79) (80) (27) (81) (82) (29) (83) 313,864 15,934 7,930 16,056 44,104 16,088 22,179 22,032 71
Slide 74: Daily newspapers State Territory Oklahoma Oregon Pennsylvania South Carolina South Dakota Tennessee City Muskogee Salem Chambersburg Lansdale Greenville Sioux Falls Clarksville Jackson Nashville El Paso St. George Burlington Arlington Staunton Bellingham Olympia Huntington Appleton Fond du Lac Green Bay Manitowoc Marshfield Oshkosh Sheboygan Stevens Point Wausau Wisconsin Rapids Newspaper Muskogee Daily Phoenix and Times-Democrat Statesman Journal Public Opinion The Reporter The Greenville News Argus Leader The Leaf-Chronicle The Jackson Sun The Tennessean El Paso Times The Spectrum The Burlington Free Press USA TODAY The Daily News Leader The Bellingham Herald The Olympian The Herald-Dispatch The Post-Crescent The Reporter Green Bay Press-Gazette Herald Times Reporter Marshfield News-Herald Oshkosh Northwestern The Sheboygan Press Stevens Point Journal Central Wisconsin Sunday Wausau Daily Herald Daily Tribune Morning 19,096 57,658 Circulation Afternoon Sunday 20,091 66,100 Founded 1888 1851 1869 1870 1874 1881 1808 1848 1812 1879 1963 1827 1982 1904 1890 1889 1909 1853 1870 1915 1898 1927 1868 1907 1873 1903 1914 Joined Gannett v 1977 (40) 1974 1971 1980 1995 1977 1995 1985 1979 1972 2000 1971 1982 1995 1971 1971 1971 2000 2000 1980 2000 2000 2000 2000 2000 (26) (14) (49) (67) (33) (68) (56) (46) (25) (84) (13) (54) (69) (21) (19) (22) (85) (86) (47) (87) (88) (89) (90) (91) 20,660 18,532 99,020 52,828 21,823 37,678 185,230 76,848 21,461 50,809 2,284,024 18,583 24,496 38,546 35,469 54,901 18,330 56,647 16,455 14,581 22,806 24,550 13,548 22,819 13,749 133,503 74,763 25,821 42,844 263,268 95,659 22,552 61,838 21,549 31,383 44,923 41,361 71,511 20,476 82,713 16,805 26,637 26,615 16,640 30,305 Texas Utah Vermont Virginia Washington West Virginia Wisconsin 1980 (48) 2000 (92) v Number in parentheses notes chronological order in which existing newspapers joined Gannett. Army Times Publishing Co. Headquarters: Springfield, Va. Publications: Army Times, Navy Times, Marine Corps Times, Air Force Times, Federal Times, Defense News Nursing Spectrum Offices: Falls Church, Va. (serving Washington, D.C./Baltimore); Hoffman Estates, Ill. (serving Illinois and Indiana); Ft. Lauderdale, Fla. (serving Ft. Lauderdale and Tampa); King of Prussia, Pa. (serving Philadelphia and the Delaware Valley); Westbury, N.Y. (serving New York and New Jersey); Lexington, Mass. (serving New England states) Non-daily publications Weekly, semi-weekly or monthly publications in Alabama, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Guam, Hawaii, Idaho, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maryland, Michigan, Minnesota, Mississippi, Missouri, Montana, Nevada, New Jersey, New York, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin and Juarez, Mexico USA WEEKEND Circulation 22.7 million in 555 newspapers Headquarters: Arlington, Va. Advertising offices: Chicago; Detroit; Los Angeles; New York Gannett Media Technologies International Cincinnati, Ohio Gannett Offset Headquarters: Springfield, Va. Offset sites: Atlanta, Ga.; Chandler, Ariz.; Minneapolis, Minn.; Miramar, Fla.; Nashville, Tenn.; Norwood, Mass.; Olivette, Mo.; Pensacola, Fla.; Springfield, Va. Gannett Offset Marketing Services Group Gannett Direct Marketing Services, Inc. Louisville, Ky. Gannett TeleMarketing, Inc. Headquarters: Springfield, Va. Operations: Cambridge, Mass.; Cincinnati, Ohio; Columbia, Mo.; Louisville, Ky.; Nashville, Tenn.; Silver Spring, Md.; Towson, Md. Telematch Gannett Retail Advertising Group Gannett Satellite Information Network Springfield, Va. Chicago, Ill. Arlington, Va. Gannett News Service Headquarters: Arlington, Va. Bureaus: Albany, N.Y.; Baton Rouge, La.; Columbus, Ohio; Harrisburg, Pa.; Indianapolis, Ind.; Sacramento, Calif.; Springfield, Ill.; Tallahassee, Fla. 72
Slide 75: USA TODAY Headquarters: Arlington, Va. Print sites: Arlington, Texas; Atlanta; Batavia, N.Y.; Brevard County, Fla.; Chandler, Ariz.; Chicago; Columbia, S.C.; Fort Collins, Colo.; Fort Myers, Fla.; Gainesville, Ga.; Hattiesburg, Miss.; Kankakee, Ill.; Lansing, Mich.; Las Vegas, Nev.; Lawrence, Kan.; Mansfield, Ohio; Marin County, Calif.; Miramar, Fla.; Nashville, Tenn.; Newark, Ohio; Norwood, Mass.; Olympia, Wash.; Pasadena, Texas; Port Huron, Mich.; Raleigh, N.C.; Richmond, Ind.; Rockaway, N.J.; St. Cloud, Minn.; St. Louis; Salisbury, N.C.; Salt Lake City; San Bernardino, Calif.; Springfield, Va.; Tarentum, Pa.; White Plains, N.Y.; Wilmington, Del. International print sites: Charleroi, Belgium; Frankfurt, Germany; Hong Kong; London, England; Milan, Italy Regional offices: Atlanta; Boston; Buffalo, N.Y.; Charlotte, N.C.; Chicago; Cincinnati; Cleveland; Columbus, Ohio; Dallas; Denver; Detroit; Houston; Indianapolis; Kansas City, Mo.; Las Vegas; Los Angeles; Milwaukee; Minneapolis-St. Paul; Miramar, Fla.; Mountainside, N.J.; Nashville, Tenn.; New Orleans; Orlando, Fla.; Philadelphia; Phoenix, Ariz.; Pittsburgh; Port Washington, N.Y.; St. Louis; San Francisco; Seattle; Springfield, Va. International offices: Hong Kong; London, England; Paris, France; Singapore Advertising offices: Arlington, Va.; Atlanta; Chicago; Dallas; Detroit; London, England; Los Angeles; New York; San Francisco USA TODAY Baseball Weekly Editorial and advertising offices: USATODAY.com Arlington, Va. Arlington, Va. BROADCASTING Television stations State Arizona City Flagstaff Kingman Phoenix Little Rock Sacramento Denver Washington Jacksonville Tampa-St. Petersburg Atlanta Macon Bangor Portland Grand Rapids Minneapolis-St. Paul St. Louis Buffalo Greensboro Cleveland Columbia Knoxville Station KNAZ-TV KMOH-TV KPNX-TV KTHV-TV KXTV-TV KUSA-TV WUSA-TV WJXX-TV WTLV-TV WTSP-TV WXIA-TV WMAZ-TV WLBZ-TV WCSH-TV WZZM-TV KARE-TV KSDK-TV WGRZ-TV WFMY-TV WKYC-TV WLTX-TV WBIR-TV Channel/Network Channel 2/NBC Channel 6/NBC Channel 12/NBC Channel 11/CBS Channel 10/ABC Channel 9/NBC Channel 9/CBS Channel 25/ABC Channel 12/NBC Channel 10/CBS Channel 11/NBC Channel 13/CBS Channel 2/NBC Channel 6/NBC Channel 13/ABC Channel 11/NBC Channel 5/NBC Channel 2/NBC Channel 2/CBS Channel 3/NBC Channel 19/CBS Channel 10/NBC Weekly Audience • v v Founded 1970 1988 1953 1955 1955 1952 1949 1989 1957 1965 1948 1953 1954 1953 1962 1953 1947 1954 1949 1948 1953 1956 Joined Gannett 1997 1997 1979 1994 1999 1979 1986 2000 1988 1996 1979 1995 1998 1998 1997 1983 1995 1997 1988 1995 1998 1995 Arkansas California Colorado District of Columbia Florida Georgia Maine Michigan Minnesota Missouri New York North Carolina Ohio South Carolina Tennessee 1.209,000 377,000 1,039,000 1,235,000 1,857,000 388,000 459,000 1,212,000 1,578,000 208,000 123,000 334,000 394,000 1,354,000 1,086,000 503,000 545,000 1,399,000 245,000 434,000 • Weekly audience is number of TV households reached, according to the November 2000 Nielsen book. v Audience numbers fall below minimum reporting standards. 73
Slide 76: NEWSQUEST PLC s D A I LY N E W S PA P E R S SHADED AREA IN MAP TO LEFT REPRESENTS DAILY AND NON-DAILY CIRCULATION AREAS Daily newspapers City Basildon Blackburn Bolton Bournemouth Bradford Brighton Colchester Darlington Newport Oxford Southampton Swindon Weymouth Worcester York Newspaper Evening Echo Lancashire Evening Telegraph Bolton Evening News Daily Echo Telegraph & Argus Evening Argus Evening Gazette The Northern Echo South Wales Argus Oxford Mail Southern Daily Echo Evening Advertiser Dorset Echo Worcester Evening News Evening Press Morning Circulation Afternoon 42,372 42,639 41,746 43,393 52,977 47,873 28,761 34,803 30,735 58,980 25,826 20,670 22,869 42,278* Saturday 36,634 30,708 39,321 49,511 44,345 Founded 1969 1886 1867 1900 1868 1880 1970 1870 1892 1928 1888 1854 1921 1937 1882 Joined Gannett v 1999 1999 1999 2000 1999 1999 1999 1999 2000 1999 2000 1999 2000 1999 1999 65,290* 29,807 28,378 57,178 21,495 21,070 19,106 * Monday-Saturday inclusive Non-daily publications North West, Yorkshire, North East, Midlands, South East, South West, Essex, London, South Coast, South Wales 74
Slide 77: GANNETT ON THE NET News and information about Gannett is available on our Web site, www.gannett.com. The following Gannett properties also offer online services or informational sites on the Internet: NEWSPAPERS AND NEWSPAPER DIVISION USA TODAY USA TODAY Baseball Weekly USA WEEKEND Alexandria (La.) Daily Town Talk The Post-Crescent, Appleton, Wis. Asbury Park (N.J.) Press Asheville (N.C.) Citizen-Times Battle Creek (Mich.) Enquirer The Bellingham (Wash.) Herald Press & Sun-Bulletin, Binghamton, N.Y. FLORIDA TODAY, Brevard County Courier News, Bridgewater, N.J. The Idaho Statesman, Boise The Burlington (Vt.) Free Press Public Opinion, Chambersburg, Pa. Courier-Post, Cherry Hill, N.J. The Cincinnati Enquirer The Leaf-Chronicle, Clarksville, Tenn. The Des Moines Register The Detroit News Home News Tribune, East Brunswick, N.J. Star-Gazette, Elmira, N.Y. El Paso (Texas) Times The Daily Ledger, Fishers, Ind. The Reporter, Fond du Lac, Wis. Fort Collins Coloradoan The News-Press, Fort Myers, Fla. The News-Messenger, Fremont, Ohio The Times, Gainesville, Ga. Great Falls (Mont.) Tribune Green Bay (Wis.) Press-Gazette The Greenville (S.C.) News Pacific Daily News, Hagatna, Guam Hattiesburg (Miss.) American The Honolulu Advertiser The Herald-Dispatch, Huntington, W.Va. The Indianapolis Star Iowa City (Iowa) Press-Citizen The Ithaca (N.Y.) Journal The Clarion-Ledger, Jackson, Miss. The Jackson (Tenn.) Sun Journal and Courier, Lafayette, Ind. The Reporter, Lansdale, Pa. Lansing (Mich.) State Journal The Courier-Journal, Louisville, Ky. The Daily Advertiser, Lafayette, La. Herald Times Reporter, Manitowoc, Wis. The Marietta (Ohio) Times Chronicle-Tribune, Marion, Ind. Marshfield (Wis.) News-Herald The News-Star, Monroe, La. The Baxter Bulletin, Mountain Home, Ark. The Montgomery (Ala.) Advertiser Daily Record, Morristown, N.J. The Star Press, Muncie, Ind. The Tennessean, Nashville The Olympian, Olympia, Wash. Daily World, Opelousas, La. Oshkosh (Wis.) Northwestern The Desert Sun, Palm Springs, Calif. Pensacola (Fla.) News Journal The Arizona Republic, Phoenix News Herald, Port Clinton, Ohio Times Herald, Port Huron, Mich. Poughkeepsie (N.Y.) Journal Reno (Nev.) Gazette-Journal Palladium-Item, Richmond, Ind. Rochester (N.Y.) Democrat and Chronicle Rockford (Ill.) Register Star The Californian, Salinas www.usatoday.com www.totalbaseballweekly.com www.usaweekend.com www.thetowntalk.com www.wisinfo.com/postcrescent www.app.com www.citizen-times.com www.battlecreekenquirer.com www.bellinghamherald.com www.pressconnects.com www.flatoday.com www.c-n.com www.idahostatesman.com www.burlingtonfreepress.com www.publicopiniononline.com www.courierpostonline.com enquirer.com www.theleafchronicle.com DesMoinesRegister.com detnews.com www.injersey.com/hnt www.star-gazette.com www.elpasotimes.com www.topics.com www.wisinfo.com/thereporter www.coloradoan.com www.news-press.com www.thenews-messenger.com www.gainesvilletimes.com www.greatfallstribune.com www.greenbaypressgazette.com greenvilleonline.com www.guampdn.com www.hattiesburgamerican.com www.honoluluadvertiser.com www.hdonline.com www.starnews.com www.press-citizen.com www.theithacajournal.com www.clarionledger.com www.jacksonsun.com www.jconline.com www.thereporteronline.com www.lsj.com www.courier-journal.com www.acadiananow.com www.wisinfo.com/heraldtimes www.mariettatimes.com www.chronicle-tribune.com www.wisinfo.com/newsherald www.thenewsstar.com www.baxterbulletin.com www.montgomeryadvertiser.com www.dailyrecord.com www.thestarpress.com www.tennessean.com www.theolympian.com www.dailyworld.com www.wisinfo.com/northwestern www.thedesertsun.com www.PensacolaNewsJournal.com www.arizonarepublic.com www.portclintonnewsherald.com www.thetimesherald.com www.poughkeepsiejournal.com www.rgj.com www.pal-item.com www.democratandchronicle.com www.rrstar.com www.californianonline.com The Daily Times, Salisbury, Md. The Sheboygan (Wis.) Press Argus Leader, Sioux Falls, S.D. St. Cloud (Minn.) Times The Spectrum, St. George, Utah Statesman Journal, Salem, Ore. The Times, Shreveport, La. Springfield (Mo.) News-Leader Stevens Point (Wis.) Journal Ocean County Observer, Toms River, N.J. Tucson (Ariz.) Citizen Tulare (Calif.) Advance-Register Observer-Dispatch, Utica, N.Y. Vincennes (Ind.) Sun-Commercial The Daily Journal, Vineland, N.J. Visalia (Calif.) Times-Delta Wausau (Wis.) Daily Herald The Journal News, Westchester County, N.Y. The News Journal, Wilmington, Del. Daily Tribune, Wisconsin Rapids, Wis. Army Times Navy Times Marine Corps Times Air Force Times Federal Times Defense News Military City Military Market Nursing Spectrum Gannett Offset Gannett Direct Marketing Services Gannett Media Technologies International www.thedailytimesonline.com www.wisinfo.com/sheboyganpress www.argusleader.com www.sctimes.com www.thespectrum.com www.statesmanjournal.com www.shreveporttimes.com www.ozarksnow.com www.wisinfo.com/journal www.injersey.com/observer www.tucsoncitizen.com www.tulareadvanceregister.com www.uticaod.com www.vincennes.com www.thedailyjournal.com www.visaliatimesdelta.com www.wausaudailyherald.com www.thejournalnews.com www.delawareonline.com www.wisinfo.com/dailytribune www.armytimes.com www.navytimes.com www.marinetimes.com www.airforcetimes.com www.federaltimes.com www.defensenews.com www.militarycity.com www.militarymarket.com www.nursingspectrum.com www.gannettoffset.com www.gdms.com www.gmti.com NEWSQUEST PLC Newsquest Media Group Evening Echo, Basildon Lancashire Evening Telegraph, Blackburn Bolton Evening News, Bolton Daily Echo, Bournemouth Telegraph & Argus, Bradford Evening Argus, Brighton Evening Gazette, Colchester The Northern Echo, Darlington South Wales Argus, Newport Oxford Mail, Oxford Southern Daily Echo, Southampton Evening Advertiser, Swindon Dorset Echo, Weymouth Worcester Evening News, Worcester Evening Press, York www.newsquest.co.uk www.thisisessex.co.uk www.thisislancashire.co.uk www.thisisbolton.co.uk www.thisisdorset.net www.thisisbradford.co.uk www.thisisbrightonandhove.co.uk www.thisisessex.co.uk www.thisisthenortheast.co.uk www.southwalesargus.co.uk www.thisisoxfordshire .co.uk www.thisishampshire.net www.thisiswiltshire.co.uk www.thisisdorset.net www.thisisworcestershire.co.uk www.thisisyork.co.uk BROADCASTING WXIA-TV, Atlanta WLBZ-TV, Bangor, Maine WGRZ-TV, Buffalo, N.Y. WKYC-TV, Cleveland, Ohio WLTX-TV, Columbia, S.C. KUSA-TV, Denver WZZM-TV, Grand Rapids-Kalamazoo-Battle Creek, Mich. WFMY-TV, Greensboro, N.C. WTLV-TV/WJXX-TV, Jacksonville, Fla. WBIR-TV, Knoxville, Tenn. KTHV-TV, Little Rock, Ark. WMAZ-TV, Macon, Ga. KARE-TV, Minneapolis-St. Paul KPNX-TV, Phoenix, Ariz. WCSH-TV, Portland, Maine KXTV-TV, Sacramento, Calif. KSDK-TV, St. Louis, Mo. WTSP-TV, Tampa-St. Petersburg, Fla. WUSA-TV, Washington, D.C. www.11alive.com www.wlbz.com www.wgrz.com www.wkyc.com www.wltx.com www.9news.com www.wzzm13.com www.wfmy2.com www.firstcoastnews.com www.wbir.com www.kthv.com www.13wmaz.com www.kare11.com www.12news.com www.wcsh6.com www.kxtv.com www.ksdk.com www.wtsp.com www.wusatv9.com 75
Slide 78: GLOSSARY OF FINANCIAL TERMS Presented below are definitions of certain key financial and operational terms that we hope will enhance your reading and understanding of Gannett’s 2000 Annual Report. ADVERTISING LINAGE – Measurement term for the volume of space sold as advertising in the company’s newspapers; refers to number of column inches, with each newspaper page composed of six columns. BALANCE SHEET – A summary statement that reflects the company’s assets, liabilities and shareholders’ equity at a particular point in time. BROADCASTING REVENUES – Primarily amounts charged to customers for commercial advertising aired on the company’s television stations as well as radio stations prior to 1998. CIRCULATION – The number of newspapers sold to customers each day (“paid circulation”). The company keeps separate records of morning, evening and Sunday circulation. CIRCULATION REVENUES – Amounts charged to newspaper readers or distributors. Charges vary from city to city and depend on the type of sale (i.e., subscription or single copy) and distributor arrangements. COMPREHENSIVE INCOME – The change in equity (net assets) of the company from transactions and other events from non-owner sources. Comprehensive income comprises net income and other items previously reported directly in shareholders’ equity, principally foreign currency translation adjustment. 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. DEPRECIATION – A charge against the company’s earnings that allocates the cost of property, plant and equipment over the estimated useful lives of the assets. DISCONTINUED OPERATION – A principal business that has been sold and is reported separately from continuing operations in the statement of income. DIVIDEND – Payment by the company to its shareholders of a portion of its earnings. EARNINGS PER SHARE (BASIC) – The company’s earnings divided by the average number of shares outstanding for the period. EARNINGS PER SHARE (DILUTED) – The company’s earnings divided by the average number of shares outstanding for the period, giving effect to assumed dilution from outstanding stock options and stock incentive rights. EXCESS OF ACQUISITION COST OVER FAIR VALUE OF ASSETS ACQUIRED – In a business purchase, this represents the excess of amounts paid over fair value of tangible assets acquired (also referred to as intangible assets or goodwill). Generally this cost is written off against operations over periods of up to 40 years. (Also see “Purchase.”) INVENTORIES – Raw materials, principally newsprint, used in the business. NEWSPAPER ADVERTISING REVENUES – Amounts charged to customers for space (“advertising linage”) purchased in the company’s newspapers. 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. OPERATING CASH FLOW – Operating income adjusted for major non-cash expenses, depreciation and amortization of intangible assets. PRO FORMA – A manner of presentation intended to improve comparability of financial results; it assumes business purchases/ dispositions were completed at the beginning of the earliest period discussed (i.e., results are compared for all periods but only for businesses presently owned). PURCHASE – A business acquisition. The acquiring company records at its cost the acquired assets less liabilities assumed. The reported income of an acquiring company includes the operations of the acquired company from the date of acquisition. RESULTS OF CONTINUING OPERATIONS – A key section of the statement of income which presents operating results for the company’s principal ongoing businesses (newspaper and broadcasting). RETAINED EARNINGS – The earnings of the company not paid out as dividends to shareholders. STATEMENT OF CASH FLOWS – A financial statement that reflects cash flows from operating, investing and financing activities, providing a comprehensive view of changes in the company’s cash and cash equivalents. STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY – A statement that reflects changes in the common stock, retained earnings and other equity accounts. STATEMENT OF INCOME – A financial statement that reflects the company’s profit by measuring revenues and expenses. STOCK INCENTIVE RIGHTS – An award that gives key employees the right to receive shares of the company’s stock without payment at the end of an incentive period, conditioned on their continued employment throughout the incentive period. STOCK OPTION – An award that gives key employees the right to buy shares of the company’s stock at the market price of the stock on the date of the award. 76
Slide 79: THIS REPORT WAS WRITTEN AND PRODUCED BY EMPLOYEES OF GANNETT. Senior Vice President/Public Affairs and Government Relations Mimi Feller S H A R E H O L D E R S E R V I C E S Treasurer and Vice President/ Investor Relations Gracia Martore Vice President and Controller George Gavagan 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 Minnesota, 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. Gannett is pleased to offer the following shareholder services: 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. FORM 10-K Information provided by Gannett in its Form 10-K annual report to the Securities and Exchange Commission has been incorporated in this report. Copies of the complete Form 10-K annual report may be obtained by writing the Secretary, Gannett Co., Inc., 1100 Wilson Blvd., Arlington, VA 22234. ANNUAL MEETING The annual meeting of shareholders will be held at 10 a.m. Tuesday, May 8, 2001 at Gannett headquarters. FOR MORE INFORMATION News and information about Gannett is available on our Web site (www.gannett.com). Quarterly earnings information will be available around the middle of April, July and October 2001. Shareholders who wish to contact the company directly about their Gannett stock should call Shareholder Services at Gannett headquarters, 703-284-6960. GANNETT HEADQUARTERS 1100 Wilson Boulevard Arlington, VA 22234 703-284-6000 Director/Consolidation Accounting and Financial Reporting Wallace Cooney Director/Public Affairs and Government Relations Tara Connell Senior Manager/Publications Laura Dalton Art Director/Designer Michael Abernethy Corporate Writers Mary Hardie, Marlene Lozada Printing Monroe Litho, Rochester, N.Y. Photo Credits: Cover photograph by Tenley TruxellSvenson, Gannett. Page 2: Curley and McCorkindale by Truxell-Svenson, Gannett. Page 5: Curley by TruxellSvenson, Gannett. Page 7: Complete Community Coverage by Dean Curtis, Springfield (Mo.) News-Leader; “e” paper by Truxell-Svenson, Gannett. Page 8: Printing press by Gary Fandell, The Des Moines (Iowa) Register; Page 9: Route Max by Kevin Kreisler, The Desert Sun, Palm Springs, Calif. Page 11: Floods by John MacBrayne, Worcester Evening News. Page 13: USA TODAY LIVE by Stacey Tate, Gannett. Page 15: Partnerships by Truxell-Svenson, Gannett; Goff by Ed Wolkis. Pages 16-17: Truxell-Svenson, Gannett. Pages 18-20: Truxell-Svenson, Gannett. ? Printed on recycled paper 77
Slide 80: s 1100 WILSON BLVD. , ARLINGTON, VA 22234 WWW.GANNETT.COM