#6. GANNETT CO. INC.
P.O. Box 7858 Washington, D.C. 20044 REVENUE: $2.2 billion PROFITS: $253.3 million EARNINGS PER SHARE: $3.16 DIVIDEND: $1.53 ASSETS: $2.3 billion STOCKHOLDERS' EQUITY: $1.3 billion RETURN ON EQUITY: 21.0 percent EXCHANGE: NYSE EMPLOYES: 32,000 TOP EXECUTIVES: Allen H. Neuharth, chairman and chief executive officer; John J. Curley, president and chief operating officer. FOUNDED: 1906
DESCRIPTION: Gannett, a diversified communications company, is the nation's largest newspaper chain. It publishes 91 daily newspapers, including USA Today, 40 nondaily newspapers and USA Weekend, a weekly newspaper magazine. Gannett also operates eight television stations, 15 radio stations and the largest outdoor advertising group in North America.
DEVELOPMENTS: Rosslyn-based Gannett posted its 18th consecutive year of record earnings in the year ended Dec. 29. Despite continued losses from USA Today and major acquisitions, Gannett's net income increased 13.1 percent in 1985.
Through the years, Gannett has grown through acquisitions, and 1985 was no exception. The company acquired more than $1 billion in media properties. In August, Gannett announced the largest merger in its history -- the $717 million acquisition of Detroit's Evening News Association. In that deal, Gannett acquired Washington's WDVM-TV, Channel 9; The Detroit News; KVUE-TV in Austin, Tex.; and four other newspapers. Gannett's other major deal in 1985 was the $200 million acquisition of The Des Moines Register and Tribune Co., which gave the company control of Iowa's leading newspaper. Even with these deals, Gannett is financially healthy, and its top executives remain interested in other major acquisitions.
Gannett expanded its outdoor-advertising business in 1985 through the purchase of Triangle Sign Co. of Chicago. That deal included more than 1,000 billboards and other structures. Gannett also acquired Family Weekly Magazine from CBS Inc. in 1985 for $42.5 million. Gannett converted Family Weekly into USA Weekend, a colorful weekly newspapaper magazine linked to USA Today.
Gannett's most ambitious creation -- USA Today -- continued to improve its financial performance, although it registered a loss in 1985. The newspaper's performance improved because of a price increase from 35 cents to 50 cents and a 67 percent jump in advertising revenue. USA Today's new classified advertising section and many other bonus sections helped advertising grow. Since USA Today was founded in 1982, Gannett has been working to convince Madison Avenue that USA Today is the right forum for national advertisers. Meanwhile, USA Today's total circulation has increased to more than 1.4 million, making it the nation's second-largest newspaper, after The Wall Street Journal. #7.PRIMARK CORP.
8251 Greensboro Dr., Suite 700 McLean, Va. 22102 REVENUE: $1.9 billion PROFITS: $51.2 million EARNINGS PER SHARE: $2.65 DIVIDEND: $1.05 ASSETS: $1.6 billion STOCKHOLDERS' EQUITY: $421.9 million RETURN ON EQUITY: 12.8 percent EXCHANGE: NYSE EMPLOYES: 5,190 TOP EXECUTIVE: Robert W. Stewart, chairman. FOUNDED: 1981
DESCRIPTION: Primark is a diversified energy and financial-services holding company. It produces, ships and sells natural gas throughout Michigan through its Michigan Consolidated Gas division. Its Primark Financial Services division operates insurance companies, mortgage lenders and a savings bank. The company also offers medical-education programs to hospitals through its Hospital Satellite Network unit.
DEVELOPMENTS: Because of sluggish natural-gas markets in 1985, primarily due to warmer weather, Primark posted profits of $51.2 million, up slightly from $49.5 million the year before. Earnings per share dropped to $2.65 from $5.26 last year because of a 2-for-1 stock split late in the year.
Primark's main business, Michigan Consolidated Gas, began offering benefits to consumers by purchasing lower-priced natural gas this year as a result of new federal rules meant to open up competition in natural-gas markets.
The Michigan Public Service Commission struck down a rate-increase request but gave the company permission to offer special contracts to retain industrial customers that can burn either natural gas or oil, depending on which fuel is cheaper.
Taking advantage of deregulation in the airline industry, Primark bought the Aviation Group Inc. of North Carolina in 1985 for $132 million. Aviation Group is one of the largest independent operators of aircraft in the country. The Aviation Group's services division provides scheduling, operations and maintenance services principally to the small-package air-express delivery industry, which has enjoyed significant growth.
Primark Financial Services, which includes insurance companies and a mortgage corporation, turned a slight profit in 1985. Primark decided to sell the division's Westmark Savings Bank of Newport Beach, Calif., because of new operating regulations that impeded the growth of the thrift.
Hospital Satellite Network, Primark's hospital education, information and communications-services company, is expected to turn a profit toward the end of 1986. The company logged a 165 percent increase in the number of hospitals contracting for its service, bringing the total to 463. An additional 300 hospitals are expected to be on the network by year-end. #8. USAIR GROUP INC.
1911 Jefferson Davis Hwy. Arlington, Va. 22202 REVENUE: $1.8 billion PROFITS: $117.1 million EARNINGS PER SHARE: $3.98 DIVIDEND: 12 cents ASSETS: $2 billion STOCKHOLDERS' EQUITY: $956 million RETURN ON EQUITY: 13.4 percent EXCHANGE: NYSE EMPLOYES: 13,789 TOP EXECUTIVE: Edwin I. Colodny, chairman and president. FOUNDED: 1939
DESCRIPTION: USAir Group Inc. is a holding company whose rapidly expanding USAir Inc. subsidiary once was the regional carrier known as Allegheny Airlines. Operating out of a hub in Pittsburgh, the airline principally serves East Coast and midwestern markets but also flies to Denver and cities in Texas, Arizona and California. It is the nation's sixth-largest airline in number of passengers served and the 11th-largest in terms of revenue passenger miles. Recently the holding company has expanded by acquiring two commuter airlines and creating a new subsidiary that will provide aviation-related services, including aircraft leasing.
DEVELOPMENTS: USAir acquired Pennsylvania Airlines, an Allegheny Commuter associate, in May 1985, and has reached an agreement to acquire Suburban Airlines, another Allegheny Commuter airline based in Pennsylvania. In late 1985, the holding company formed a new subsidiary, USAir Leasing Inc., to provide aviation-related services.
During the year, the company took delivery of 11 new Boeing 737-300s, bringing the size of its fleet to 143 jet aircraft. The company also ordered 20 Fokker 100 aircraft -- 105-seat jets -- with an option to buy 20 more. The airline added four new destinations to its routes: Milwaukee, Green Bay, Wis., Myrtle Beach, S.C., and Newport News, Va. #9. POTOMAC ELECTRIC POWER CO.
1900 Pennsylvania Ave. NW Washington, D.C. 20068 REVENUE: $1.3 billion PROFITS: $183.6 million EARNINGS PER SHARE: $3.59 DIVIDEND: $2.16 ASSETS: $3 billion STOCKHOLDERS' EQUITY: $1 billion RETURN ON EQUITY: 17.6 percent EXCHANGE: NYSE EMPLOYES: 5,409 TOP EXECUTIVES: W. Reid Thompson, chairman; Edward F. Mitchell, president. FOUNDED: 1896
DESCRIPTION: Pepco is an investor-owned electric utility that serves more than 570,000 customers in the District of Columbia, major portions of Montgomery and Prince George's counties in Maryland and a small part of Arlington, Va. It has agreed to sell its Virginia customer service area, which provides about 2.3 percent of its revenue, to Virginia Power, pending approval of the Virginia State Corporation Commission.
A two-year-old wholly owned subsidiary, Potomac Capital Investment Corp., holds about 12 percent of Pepco's assets and last year accounted for about 9 percent of its earnings. The subsidiary invests cash generated by the utility that is not needed to finance new plant and equipment purchases or operating expenses.
Another smaller wholly owned subsidiary, Energy Use Management Corp., installs energy-saving equipment, provides financing and shares resulting savings with customers.
DEVELOPMENTS: Pepco is one of a number of fortunate electric utilities around the nation that serve a prosperous area but have no large construction projects under way to add significantly to their generating capacity. The combination of growing demand and low investment outlays last year produced strong earnings growth and a balance sheet so healthy that Moody's Investors Service raised its rating on Pepco bonds from Aa1 to Aaa, its highest.
Operating revenue rose 9.9 percent in 1985 as total energy sales climbed 4.2 percent and average prices per kilowatt-hour went up 5.4 percent. Pepco's net income increased 9.2 percent to $183.6 million, and the average return on stockholder equity rose from 16.9 percent to 17.6 percent.
Demand for electricity on an annual basis and the peak load, reached on hot days in the summer, both have been rising considerably faster than the company had projected. Representatives of some customer groups are questioning Pepco's plans to avoid adding substantial new generating capacity until the mid-1990s by buying power generated by other companies and by shaving peak load requirements.
Late last year the utility got permission from the D.C. Public Service Commission to implement some proposals to reduce peak load by about 100 megawatts in the early 1990s, but others were rejected. If demand continues to grow rapidly, company officials concede that construction of a new $800 million generating plant -- designed to burn gas created from coal processed at the site -- may have to be built sooner than the mid-1990s, as now planned.
For now, however, Pepco has more cash coming in than it needs and is plowing the excess into its investment subsidiary. The bulk of the subsidiary's $378 million in assets was invested in preferred stocks and specialized mutual funds and other money market instruments. About $75 million was invested in equity participations in leveraged equipment lease financings. Among the items financed are a Boeing 747 and communications equipment aboard several satellites. #10. THE WASHINGTON POST CO.
1150 15th St. NW Washington, D.C. 20071 REVENUE: $1.1 billion PROFITS: $114.3 million EARNINGS PER SHARE: $8.66 DIVIDEND: 96 cents ASSETS: $885.1 million STOCKHOLDERS' EQUITY: $349.5 million RETURN ON EQUITY: 31.3 percent EXCHANGE: Amex EMPLOYES: 6,300 TOP EXECUTIVES: Katharine Graham, chairman and chief executive officer; Richard D. Simmons, president and chief operating officer. FOUNDED: 1933
DESCRIPTION: The Washington Post Co. is a diversified publishing and communications company. Slightly more than half of its revenue comes from The Washington Post and other parts of its newspaper division, including the Everett, Wash., Herald.
Newsweek magazine accounts for another third, while VHF television stations in Detroit, Miami, Hartford, Conn., and Jacksonville contribute one-seventh.
In addition, the company operates 53 cable-television systems, 120 educational centers that help students preparing for various academic and professional exams, and Legi-Slate, a database publisher of information on federal legislative and regulatory activity. The company also holds interests in the Los Angeles Times-Washington News Service, the International Herald Tribune, Cowles Media Co. -- owner of the Minneapolis Star and Tribune -- a number of cellular radio systems, several newsprint and timber companies and other properties.
DEVELOPMENTS: Operating revenue of the Washington Post Co. rose 10 percent in 1985 to pass the $1 billion mark for the first time. Net income, including an after-tax gain of $12.3 million on the sale of some assets, rose 33 percent to $114.3 million. Earnings per share rose 27 percent.
Early this year, the company purchased 53 cable television systems from Capital Cities Communications Inc., for $350 million. During last year, it also paid $71 million for a 20 percent interest in Cowles Media Co. And in April 1985, it completed repurchase of 1.2 million shares of Class B common stock at a cost of $134.6 million. The repurchase lowered the number of shares outstanding to 13.2 million and helped boost earnings per share by 27 percent to $7.73. The repurchase also lowered the value of shareholder equity, but with less equity, the return on average shareholders' equity rose from 24.6 percent in 1984 to 31.3 percent last year.
By concentrating on holding down costs, the company had a significantly greater increase in operating income in its newspaper and Newsweek divisions. In the former, operating income rose 21 percent to $115 million, while revenue went up only 8 percent to $556 million. At Newsweek, the number of ad pages fell 11 percent and total revenue by 2 percent. Nevertheless, Newsweek's operating income rose 32 percent to $29 million. Both operating revenue and income increased 14 percent at Post-Newsweek television stations, with division revenue reaching $155 million.