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Article by DailyStocks_admin    (01-02-09 05:57 AM)

The Daily Magic Formula Stock for 01/02/2009 is Gannett Co Inc.
According to the Magic Formula Investing Web Site, the ebit yield is 26% and the EBIT ROIC is 50-75%.

Dailystocks.com only deals with facts, not biased journalism. What is a better way than to go to the SEC Filings? It's not exciting reading, but it makes you money. We cut and paste the important information from SEC filings for you to get started on your research on a specific company.

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Company Profile

Gannett was founded by Frank E. Gannett and associates in 1906 and incorporated in 1923. The company went public in 1967. It reincorporated in Delaware in 1972. Its more than 230 million outstanding shares of common stock are held by approximately 8,900 shareholders of record in all 50 states and several foreign countries. The company has approximately 46,100 employees. Its headquarters are in McLean, Va., near Washington, D.C.

The company is a leading international news and information company. In the United States, the company publishes 85 daily newspapers, including USA TODAY, and nearly 900 non-daily publications. Along with each of its daily newspapers, the company operates Web sites offering news, information and advertising that is customized for the market served and integrated with its publishing operations. USATODAY.com is one of the most popular news sites on the Web. The company is the largest newspaper publisher in the U.S.

Newspaper publishing operations in the United Kingdom, operating as Newsquest, include 17 paid-for daily newspapers, almost 300 non-daily publications, locally integrated Web sites and classified business Web sites with national reach. Newsquest is the second largest regional newspaper publisher in the U.K.

In broadcasting, the company operates 23 television stations in the U.S. with a market reach of more than 20 million households. Each of these stations also operates locally oriented Web sites offering news, entertainment and advertising content, in text and video format. Through its Captivate subsidiary, the broadcasting group delivers news, information and advertising to a highly desirable audience demographic through its video screens located in elevators of office towers and select hotels across North America.

Gannett’s total Online U.S. Internet Audience in January 2008 was 25.8 million unique visitors, reaching about 15.9% of the Internet audience, as measured by Nielsen//NetRatings.

Complementing its core publishing and broadcasting businesses, the company has made significant strides in its digital strategy through key business acquisitions, investments and partnerships in the online space. These include PointRoll, which provides online advertisers with rich media marketing services, and which has achieved significant revenue and profit growth since its acquisition in mid-2005. Through several important partnership investments, including CareerBuilder for employment advertising and Classified Ventures for auto and real estate ads, the company has successfully captured substantial online classified revenue for our local U.S. newspapers.

In late 2007, another joint venture in the digital space was created, Metromix LLC, with Tribune Company as an equal partner. Metromix focuses on a common model for local online entertainment sites, and then scales the sites into a national platform under the Metromix brand.

Through its acquisition of Schedule Star LLC, the company now operates HighSchoolSports.net, which is a digital content site serving the valuable high school sports audience, and the Schedule Star solution for local athletic directors. National platform opportunities will be developed from the many local footprints of this business.

The company continues to evolve to meet the demands of consumers and advertisers in the new digital environment and to optimize its opportunities at its core newspaper and broadcast operations.

The operating principles in place to achieve these objectives include:


Drive innovation through the company to create new digital offerings that either complement our news and information businesses, or that take us into new markets with new audiences. This effort will be bolstered by important executive appointments made in January 2008, with Chris D. Saridakis named as Senior Vice President and Chief Digital Officer. Saridakis will be responsible for expanding and enriching the company’s global digital operations. Saridakis was named CEO of PointRoll in 2005 after serving two years as the company’s chief operating officer. Prior to PointRoll, Saridakis was senior vice president and general manager of the Global TechSolutions division for DoubleClick Inc. Also, Jack Williams was named president of Gannett Digital Ventures, which will oversee Gannett’s portfolio of online classified companies and other diversified businesses.


Improve our core newspaper and television operations through transformation of our newsrooms into Information Centers. Our U.S. community newspapers achieved this goal in 2007 and our television stations will follow in 2008. The Information Center concept has enhanced our appeal to more customers in the markets we serve, with 24/7 updating and through several techniques and products, including video streaming, database information on wide-ranging topics and crowdsourcing to reflect information provided by our audiences. While our focus is on customer centricity, our Information Center initiatives also fulfill our responsibilities under the First Amendment.


Maximize the use and deployment of resources throughout the company. In 2007 we sold four local newspapers and donated a fifth to the Gannett Foundation to fund its charitable activities. The location of these newspapers made regionalization and optimization of resources impractical, limiting our opportunities to change and improve in today’s challenging environment. The company is committed to transforming its business activities, including more consolidation and centralization of functions that do not require a physical presence in our markets. This will achieve cost efficiencies and permit improved local focus on content and revenue-producing activities.


Maintain the company’s strong financial discipline and capital structure, preserving its flexibility to make acquisitions and affiliations while also providing a return of significant capital through dividends and share repurchases.


Strengthen the foundation of the company by finding, developing and retaining the best and the brightest employees through a robust Leadership and Diversity program. Gannett’s Leadership and Diversity Council has been charged with attracting and retaining superior talent and developing a diverse workforce that reflects the communities Gannett serves.

Business segments: The company has two principal business segments: newspaper publishing and broadcasting. Financial information for each of the company’s reportable segments can be found in our financial statements, as discussed under Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and as presented under Item 8 “Financial Statements and Supplementary Data” of this Form 10-K.

The company’s 85 U.S. daily newspapers have a combined daily paid circulation of approximately 6.9 million. They include USA TODAY, the nation’s largest-selling daily newspaper, with a circulation of approximately 2.3 million. All U.S. daily newspapers operate tightly integrated and robust online sites. Within the publishing segment, the company continues to diversify and expand its portfolio through business acquisitions and internal development. Some examples of this diversification are:


PointRoll, a leading rich media marketing company that provides Internet user-friendly technology that allows advertisers to expand their online space and impact.


USA WEEKEND, a weekly newspaper magazine carried by approximately 600 local newspapers with an aggregate paid circulation reach of 23 million.


Planet Discover, a provider of local, integrated online search and advertising technology.


Metromix, an online entertainment site model for our local properties which will be networked for national advertising opportunities.


Schedule Star LLC/HighSchoolSports.net, providing digital content for high school sports audiences and offering national advertising opportunities. HighSchoolSports.net is a leader in the increasingly competitive world of online high school sports, with more unique visitors than any other site in this market, according to Nielsen//NetRatings’ NetView.


Clipper Magazine, a direct mail advertising magazine that publishes more than 550 individual market editions under the brands Clipper Magazine, Savvy Shopper and Mint Magazine in 30 states.


Army Times Publishing, which publishes military and defense newspapers.


Gannett Healthcare Group, publisher of bi-weekly Nursing Spectrum and NurseWeek periodicals specializing in nursing news and employment advertising, which reach one million or nearly half of the registered nurses in the U.S.


Gannett Offset, a network of five commercial printing operations in the U.S.

Newspaper partnerships: The company owns a 19.49% interest in California Newspapers Partnership, which includes 24 daily California newspapers; a 40.64% interest in Texas-New Mexico Newspapers Partnership, which includes seven daily newspapers in Texas and New Mexico and four newspapers in Pennsylvania; and a 13.50% interest in Ponderay Newsprint Company in the state of Washington.

Joint operating agencies: The company’s newspaper subsidiaries in Detroit, Cincinnati and Tucson participate 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. Operating results for the Detroit and Cincinnati joint operating agencies are fully consolidated along with a charge for the minority partners’ share of profits. The operating results of the Tucson joint operating agency are accounted for under the equity method, and are reported as a net amount in “Equity income in unconsolidated investees, net.” The Cincinnati joint operating agency expired on Dec. 31, 2007. Henceforth, the company’s newspaper, The Cincinnati Enquirer, will be the sole daily newspaper in that market.

Strategic investments: In June 2007, the company acquired the Central Ohio Advertiser Network, a network of eight weekly shoppers with the Advertiser brand and a commercial print operation in Ohio.

In May 2007, the company, along with Microsoft Corp., Tribune Company and The McClatchy Company announced that Microsoft had purchased a minority stake in CareerBuilder.com, the U.S.’s largest online job site. In a separate agreement, MSN and CareerBuilder announced an extension of their strategic alliance, making CareerBuilder the exclusive content provider to the MSN Careers channel in the U.S. through 2013. Additionally, MSN and CareerBuilder broadened their alliance to include key MSN international sites, facilitating an accelerated expansion overseas for CareerBuilder.

In October 2007, the company acquired a controlling interest in Schedule Star LLC, which operates the popular HighSchoolSports.net and the Schedule Star solution for local athletic directors.

Also in 2007, the company, in conjunction with Tribune Company, announced a joint venture to expand a national network of local entertainment Web sites under the Metromix brand. The newly formed company, Metromix LLC, will focus on launching Metromix.com in the nation’s top 30 markets plus other key metro areas in the coming months. Metromix is owned equally by the two parent companies.

In December 2007, the company made an investment in Uloop. Uloop is an online classifieds Web site that is only available to consumers with the “.edu” domain in their email address. Uloop plans to be the local classifieds Web site for all universities – a campus marketplace focused on meeting the practical needs of college students.

Subsequent to the end of 2007, the company closed on the acquisition of X.com, Inc. (BNQT.com). X.com, Inc. operates an action sports digital network covering eight different action sports including surfing, snowboarding and skateboarding. X.com will be affiliated with the strong USA TODAY Sports brand.

In August 2006, the company made additional investments in CareerBuilder.com, ShopLocal.com, and Topix.net totaling $155 million, which increased the ownership stake in each of those businesses. At Dec. 30, 2007, the company held a 40.8% equity interest in CareerBuilder.com; a 42.5% equity interest in ShopLocal.com, a leading provider of Web-based marketing solutions for national and local retailers; and a 33.7% interest in Topix.net, an online news content aggregator.

In 2006, the company also acquired a minority interest in 4INFO, a Palo Alto, Calif., company. 4INFO is a leading mobile media and advertising company. They have the largest ad-supported text messaging network in the U.S.

The company owns a 23.6% stake in Classified Ventures, an online business focused on real estate and automotive advertising categories; and a 19.7% interest in ShermansTravel, an online travel news, advertising and booking service.

With all of these acquisitions and investments, the company is establishing important business relationships to leverage its publishing and online assets and operations to enhance its online footprint, revenue base and profits.

Newspaper Publishing/United States

The company’s U.S. newspapers, including USA TODAY, reach 14.8 million readers every weekday and 13 million readers every Sunday – providing critical news and information from their customers’ neighborhoods and from around the globe.

At the end of 2007, the company operated 85 U.S. daily newspapers, including USA TODAY, and almost 900 non-daily local publications in 31 states and Guam. The Newspaper Division and USA TODAY are headquartered in McLean, Va. On Dec. 30, 2007, U.S. newspapers had approximately 32,800 full- and part-time employees.

The company’s local newspapers are managed through its U.S. Newspaper Division. These newspapers are in large and small markets, and the geographical diversity is a core strength of the company.

Gannett publishes in major markets such as Phoenix, Ariz.; Indianapolis, Ind.; Cincinnati, Ohio; Des Moines, Iowa; Nashville, Tenn.; Asbury Park, N.J.; Louisville, Ky.; and Westchester, N.Y.

Mid-sized markets are represented by Salem, Ore.; Fort Myers, Fla.; Appleton, Wis.; Palm Springs, Calif.; Montgomery, Ala.; and Greenville, S.C.

St. George, Utah; Fort Collins, Colo.; Sheboygan, Wis.; Iowa City, Iowa; and Ithaca, N.Y., are examples of our smaller markets.

USA TODAY was introduced in 1982 as the country’s first national, general-interest daily newspaper. In 2007 it celebrated its 25th anniversary. It is available in all 50 states to readers on the day of publication throughout the U.S.

It is produced at facilities in McLean, Va., and is transmitted via satellite to offset printing plants around the country and internationally. It is printed at Gannett plants in 16 U.S. markets and at offset plants, not owned by Gannett, in 18 other U.S. markets.

USATODAY.com redesigned its Web site in 2007, adding more focus on users – with social networking, blogging and commentary along with breaking news 24/7, and is one of the most popular newspaper sites on the Web, with more than 43 million visits per month at the end of 2007.

All of the company’s local newspapers and affiliated Web sites are operated on a fully integrated basis.

Other businesses that complement, support or are managed and reported within the newspaper segment include: USA WEEKEND, PointRoll, Clipper Magazine, Army Times Publishing, Gannett Healthcare Group, Planet Discover and Gannett Offset. In addition, Gannett News Service provides news services for company newspaper operations and sells its services to independent newspapers; Gannett Retail Advertising Group represents the company’s local newspapers in the sale of advertising to national and regional franchise businesses; Gannett Direct Marketing offers direct-marketing services; and Gannett Media Technologies International develops and markets software and other products for the publishing industry, and provides technology support for the company’s newspaper and Web operations.

News and editorial matters: Gannett newspapers are the leading news and information source in their markets – with strong brand recognition that attracts readers and advertisers. We maintain and enhance the newspapers’ strengths with quality management and staff, who focus continuously on product improvements and customer service. Collectively, Gannett newspapers, their Web sites and their substantial portfolio of non-daily publications form a powerful network to distribute and share news and information across the nation. News and editorial decisions are made autonomously by local management.

In 2007, Gannett newsrooms underwent important changes in content and approach with the introduction of the Information Center concept that enhances their ability to deliver much more information on a 24/7 cycle and in many formats across multiple platforms. In addition to more traditional coverage, the new Information Centers have elevated the importance of such areas as multimedia and data delivery. The approach of breaking news online and updating in print has become the practice. Database information, social networking, crowdsourcing, and blogging features within the news product have been strengthened. Additionally, extensive training in video production for video streaming on webcasts has enhanced local content and viewership.

In the Phoenix market, company newspaper and television news staff work together to provide news coverage for their online site, AZcentral.com.

There is expanded emphasis on delivery of local content to readers – in the daily and Sunday print products, in non-daily publications and on the community sites online. Some groundbreaking efforts involving community interaction were undertaken, especially in the area of investigative journalism. The expanded use of special data centers online has sharply boosted Web traffic.

The company’s domestic daily newspapers receive Gannett News Service (GNS) and subscribe to The Associated Press, and some receive various supplemental news services and syndicated features. GNS is headquartered in McLean, Va., and operates bureaus in Washington, D.C., and five state capitals: Albany, N.Y., Baton Rouge, La., Trenton, N.J., Sacramento, Calif., and Tallahassee, Fla. GNS provides strong coverage of topics of high interest to individual newspapers through its regional reports, and it has expanded content for online and non-daily publications.

Gannett newspapers and staffers again were recognized nationally for outstanding work. The Courier-Journal in Louisville, Ky., was named a finalist in the Breaking News category of the Pulitzer Prize competition, and Mike Thompson of the Detroit Free Press was cited as a finalist in the Pulitzer Editorial Cartooning category. The News-Press at Fort Myers, Fla., and news-press.com won the Associated Press Managing Editors Innovation of the Year Award for its “culture of innovation.” James Carroll, Washington reporter for The Courier-Journal at Louisville, won two awards for regional reporting in the 2007 National Press Club Awards competition. AZcentral.com and The Arizona Republic won in the “Best Use of Interactive Media” category of the Newspaper Association of America Digital Edge Award.

Demonstrating excellence in diversity, Wanda Lloyd, executive editor of the Montgomery (Ala.) Advertiser, and Joe Grimm, recruiting and development editor at the Detroit Free Press, received Robert G. McGruder Awards for Diversity Leadership, and The Baxter Bulletin in Mountain Home, Ark., was one of three newspapers to receive the new top American Society of Newspaper Editors Diversity Pacesetter Awards.

Audience research: As Gannett newspapers continue to expand their non-daily and online products, our research focuses on audience aggregation. The company considers the reach and coverage of multiple products in their communities in their totality – as a family of connected products. This broader-based view is to establish the net reach of all products, or selected product offerings, in a single Gannett market. For example, in Phoenix, the combination of many Gannett products – including daily and Sunday newspapers, a strong local Web site, weeklies and Spanish-language products, among many others – reaches 76% of the adult population over seven days, or more than 2.1 million people, far more than the print edition of the daily newspaper, The Arizona Republic, reaches by itself.

Scarborough Research said in a report on market penetration –or the number of adults in a community who access a publication and its related Web site – that 79 percent of adults in the Rochester, N.Y., market read the print version of the Rochester Democrat and Chronicle, making it the top-ranked newspaper in the country for market penetration. If the Web site is included, Gannett Rochester reaches 81 percent of the market on a weekly basis. In all, Gannett had the top three newspapers for weekly market penetration (Rochester, the Gannett Wisconsin Newspapers and The Des Moines Register). The same three were tops in combined newspaper and Web site penetration. Scarborough studied 81 of the nation’s top markets.

The company has gathered audience aggregation data for more than 30 Gannett newspapers and will continue to add to that in 2008. While efforts are now focused on our larger properties, the initiative will be launched at all Gannett sites. Aggregated audience data allows advertising sales staff to provide detailed information to advertisers about how best to reach their potential customers, which products to use in which combination, and how often. As a result, our ability to use audience aggregation enables us to increase our total advertising revenue potential while enabling advertisers to enhance the effectiveness of their advertising spend. The training of ad sales staff on how to best execute this audience-based selling strategy is ongoing.

In addition to the audience-based initiative, the company continues to measure customer attitudes, behaviors and opinions to better understand our customers’ Web site patterns, and use focus groups with audiences and advertisers to more clearly determine their needs.

Circulation: Detailed information about the circulation of the company’s newspapers may be found later in this Form 10-K. Circulation declined in nearly all of our newspaper markets, a trend generally consistent with the domestic newspaper industry.

Home-delivery prices for the company’s newspapers are established individually for each newspaper and range from $1.50 to $3.40 a week for daily newspapers and from $.78 to $3.25 a copy for Sunday newspapers.

In 2007, a new strategic sales tool – The Campaign Manager –was developed to further support the Project 378 sales initiative that was rolled out in 2006. The goal of the program is to focus on long-term subscriber retention at the time sales orders are taken. The program details, through a step-by-step sales process, how to promote and sell new longer-term subscriptions. The Campaign Manager allows each newspaper to project future circulation volume based on actual and projected subscription starts by sales source, the frequency of delivery the customer receives and, where applicable, the reasons for stopped accounts. This tool tracks the detail of the accounts, allowing the newspaper to better manage the overall performance of circulation volume. In December 2007, subscriber retention of all new subscriptions when measured at 13 weeks of service compared to December 2006 had improved by 1%.

The company continued its emphasis on its automated payment plan, EZ-Pay. Total EZ-Pay subscribers grew from 40% of all subscribers at the end of 2006 to 44% at the end of 2007 – a 10% increase. EZ-Pay subscribers include those on recurring credit/debit cards as well as 52-week paid-in-advance customers. Subscriber retention among those who use EZ-Pay is consistently more than 25% higher than for subscribers who pay by mail. This higher retention improves circulation volume and provides for a higher return on investment for new subscriber start costs. The company’s goal for 2008 is to increase the number of EZ-Pay subscribers by 26% to cover 55% of all subscribers.

By the end of 2007, the company had completed its consolidation of all inbound customer service calling operations into three Centers of Excellence (COE) in Greenville, S.C., Louisville, Ky., and Tulsa, Okla. The COE goals are efficiency and standardization of procedures which will result in better customer service at a lower cost. State of the art technology was employed at the centers. The three COEs will handle an anticipated 15 million phone calls in 2008.

During 2007, 22 of Gannett’s largest daily newspapers participated in the Audit Bureau of Circulations (ABC) Insert Verification Service (IVS). This service involves conducting an audit of the Sunday preprint distribution process to assure advertisers that their messages are getting to the customers they are targeting. Results showed an average rating of over 99% proficiency for those newspapers.

At the end of 2007, 65 of the company’s domestic daily newspapers, including USA TODAY, were published in the morning and 20 were published in the evening. For local U.S. newspapers, excluding USA TODAY, morning circulation accounts for 92% of total daily volume, while evening circulation accounts for 8%.

USA TODAY is sold at newsstands and vending machines generally at 75 cents per copy. Mail subscriptions are available nationwide and abroad, and home, hotel and office delivery is offered in many markets. Approximately 62% of its net paid circulation results from single-copy sales at newsstands, vending machines or to hotel guests, and the remainder is from home and office delivery, mail, educational and other sales.

Advertising: Our newspapers have advertising departments that sell retail, classified and national advertising across multiple platforms including the print newspaper, online and niche publications. The Gannett Retail Advertising Group sells franchise business on behalf of the company’s local newspapers. The company also contracts with outside representative firms that specialize in the sale of national ads, and in 2008 a new national ad sales force will focus on national account business. Ad revenues from newspaper affiliated online operations are reported together with revenue from print publishing.

Local or retail display advertising is associated with local merchants or locally owned businesses. In addition, retail includes regional and national chains – such as department stores and grocery – that sell in the local market.

Classified advertising includes the major categories of automotive, employment and real estate/rentals as well as private party consumer-to-consumer business for merchandise and services. Advertising for classified segments is published in the classified sections, in other sections within the newspaper, on our affiliated Web sites and in niche magazines that specialize in the segment.

National advertising is display advertising principally from advertisers who are promoting national products or brands. Examples are pharmaceuticals, travel, airlines, or packaged goods. Both retail and national ads also include preprints, typically stand-alone multiple page fliers that are inserted in the newspaper.

Our audience aggregation approach to research and product development has allowed us to deliver the customer audiences that our advertisers want. Our audience-based selling approach identifies an advertiser’s best customers and then matches products and services across multi-platforms that best reach that audience. While there are still many advertisers that want mass reach, many others want to target specific audiences by demographics, geography, consumer buying habits or customer behavior. Our customer-centric sales model allows us to deliver powerful solutions that are customized for each advertiser. Our Information Center provides the reach of these diverse audiences in traditional and innovative media platforms. Our readership research defines the audience usage of these products, allowing us to combine various platforms to deliver a targeted reach and frequency.

The company’s audience-based sales efforts have been directed at all levels of advertisers, from the smallest, locally owned businesses to large, complex businesses. Along with this new sales approach, the company has intensified its sales and management training and improved the quality of sales calls.

A new local newspaper sales force structure was rolled out across all newspapers over the last two years. It aligns sales and support resources to the needs of the customer – based on how they want to do business with their local sales team, their level of advertising/marketing sophistication, and the complexity of the business and advertising goals. The new structure increases our staff productivity and efficiency and improves customer service.

In conjunction with this effort, all of the company’s top sales executives have participated in the T.I.D.E. program (Think. Identify. Develop. Execute.) to better deliver solutions that improve customers’ business. At the end of 2007, more than 800 newspaper, digital and broadcast executives had participated in this program. A new national newspaper ad sales team was launched in January 2008 which will take over responsibility for large national retail accounts from local newspaper advertising departments. These additional resources will enable the company to better respond to customer desires and permit local newspaper sales personnel to focus on advertisers in their markets.

Online operations: The company’s local newspaper Web sites achieved significant growth in audience reach in 2007, as page views were up 27% and unique visitors rose 8%. Solid online revenue growth was also achieved.

To expand and enhance the resources required to meet the challenge of continuing our growth in the digital space, important executive appointments were made in January 2008 with Chris D. Saridakis named as Senior Vice President and Chief Digital Officer. Saridakis will be responsible for expanding and enriching the company’s global digital operations. Also, Jack Williams was named president of Gannett Digital Ventures, which will oversee Gannett’s portfolio of online classified companies and other diversified businesses. Digital ad selling initiatives are under way and online platform and infrastructure improvements have been and will continue to be made.

The overriding objective of our online strategy at Gannett newspapers is to provide compelling content to best serve our customers. A key reason customers turn to a Gannett newspaper’s online site is to find local news and information. The credibility of the local newspaper, the known and trusted information source, extends to the newspaper’s Web site and thus differentiates it from other Internet sites. This is a major factor that allows Gannett newspapers to compete successfully as Internet information providers.

A second objective in our online business development is to maximize the natural synergies between the local newspaper and local Web site. The local content already available, the customer relationships, the news and advertising sales staff, and the promotional capabilities are all competitive advantages for Gannett. The company’s strategy is to use these advantages to create strong and timely content, sell packaged advertising products that meet the needs of advertisers, operate efficiently and leverage the known and trusted brand of the newspaper.

Gannett Web sites for moms provide an example of executing this strategy. First launched in November 2006 at The Indianapolis Star’s Indymoms.com, there now are 58 moms.com sites across Gannett, 45 at newspapers and 13 at broadcast Web sites. Traffic has grown sharply, and combined, sites had on average over 7.5 million page views nationally, nearly 550,000 unique visitors and 900,000 visits. The key to the success of these sites is the online social networking among moms-site users at the local level, supplemented with helpful information the moms can use. Many of the discussions on moms.com sites are repurposed into pages of the newspapers.

Our U.S. newspapers are testing other online sites, including Make the Charts and Nimbus. Make the Charts is a music sharing site for local bands. Nimbus is a weather widget that delivers a zip-code based and sophisticated weather report to local Web sites. Online sites for dads, pets, college students and families are also being evaluated.

Our online business activities also include efforts to register users of Gannett Web sites in order to obtain zip code, age and gender. Such information allows us to better understand the needs of our customers along with providing better defined groups for advertisers.

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 2007. Strong growth in our online revenues also reflects the value of our digital joint ventures and partnerships with national online advertising providers including CareerBuilder and Classified Ventures.

Gannett Media Technologies International (GMTI) provides technological support and products for the company’s domestic newspapers and Internet activities, including ad software and database management, editorial production and archiving, and Web site hosting. In addition, GMTI provides similar services to other newspaper companies.

Non-daily operations: The publication of non-daily products continued as an important part of our market strategy for 2007. The company now publishes almost 900 non-daily publications in the U.S. The company’s strategy for non-daily publications is to target them at “communities of interest” defined in one of three ways: geographically, demographically (e.g., seniors, young readers or ethnic communities) or by lifestyle (e.g., golf or boating enthusiasts).

Production: Eighty-four domestic daily newspapers are printed by the offset process, and one is printed using the letterpress processes. This single site will be converted in 2010 to offset in the Berliner format.

In recent years, improved technology has resulted in greater speed and accuracy and in a reduction in the number of production hours worked at many of the company’s newspapers. That trend will continue in 2008 and further consolidation of job functions across multiple newspaper sites is expected. In 2007, two Gannett Regional Toning Centers were established which produce the photos for the majority of our newspapers, enhancing the images in our printed products at a reduced cost.

By the end of 2007, all of the company’s newspaper presses (except one letterpress) had recent web width reductions, and web reductions to 44 inches for 30 newspapers are planned for 2008. Also in 2007, nearly half of our newsprint consumption moved to light weight (45 gram) newsprint and plans are to move substantially more in 2008.

Product quality and efficiency improvements also continue to be made in other areas. The company completed its rollout of ink optimization software which allowed for savings due to reduced color ink consumption. Outsourcing of ad production was successfully tested and implemented for several newspapers in 2007 and further extension of this approach is planned for 2008.

Competition: The company’s newspapers and affiliated Web sites compete with other media for advertising principally on the basis of their performance in helping to sell the advertisers’ products or services and their advertising rates. They compete for circulation and readership against other news and information providers, as well as others seeking the time and attention of readers. 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 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, including magazines, television, direct mail, cable television, radio, outdoor advertising and Internet media.

The rate of development of opportunities in, and competition from, emerging digital 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.

Environmental regulation: Gannett is committed to protecting the environment. The company’s goal is to ensure its facilities comply with federal, state, local and foreign environmental laws and to incorporate appropriate environmental practices and standards in its operations. The company retains a corporate environmental consultant who is responsible for overseeing regulatory compliance and taking preventive measures where appropriate.

The company is one of the industry leaders in the use of recycled newsprint and increased its purchases of newsprint containing recycled content from 42,000 metric tons in 1989 to 630,000 metric tons in 2007. During 2007, all of the company’s newspapers consumed some recycled newsprint. For the year, 76% of the company’s domestic newsprint purchases contained recycled content.

The company’s newspapers use inks, photographic chemicals, solvents and fuels. The use, management and disposal of these substances are reviewed and updated by the company’s internal and external legal counsel. 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 wastes at disposal sites that have been subsequently identified as requiring remediation. Additional information about these matters can be found in Item 3, Legal Proceedings, in this Form 10-K. The company does not believe that these matters will have a material impact on its financial position or results of operations.

Raw materials – U.S. & U.K.: Newsprint, which is the basic raw material used to publish newspapers, has been and may continue to be subject to significant price changes from time to time. During 2007, the company’s total newsprint consumption was 1,058,000 metric tons, including the 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 11% lower than in 2006. The company purchases newsprint from 15 domestic and global suppliers, some of which are under contracts expiring in 2025.

In 2007, newsprint supplies were adequate. The company has and continues to moderate newsprint consumption and expense through press web-width reductions and the use of lighter basis weight paper. The company believes that available sources of newsprint, together with present inventories, will continue to be adequate to supply the needs of its newspapers.

The average cost per ton of newsprint consumed in 2007 declined slightly compared to 2006 cost. The average cost per ton of newsprint is expected to increase in 2008.


Craig A. Dubow

Mr. Dubow, 53, is Chairman, President and Chief Executive Officer of Gannett. He became President and Chief Executive Officer and a director of Gannett in July 2005, and Chairman of Gannett in July 2006. He was President and Chief Executive Officer of the Gannett Broadcast Division from 2001 to July 2005, and was President of the Gannett Broadcast Division from 2000 to 2001. He has served the Company in various other executive capacities since 1981. Mr. Dubow is also a director of Broadcast Music, Inc.

Donna E. Shalala

Ms. Shalala, 67, has served as President of the University of Miami since 2001. She was Secretary of the United States Department of Health and Human Services from 1993 to 2001. She is a director of Lennar Corporation. She has been a director of Gannett since 2001.

Neal Shapiro

Mr. Shapiro, 49, is President and CEO of Educational Broadcasting Corporation (EBC), the licensee of WNET (TV), New York, the largest public television station in the U.S. Before joining EBC in February 2007, he served in various executive capacities with the National Broadcasting Company beginning in 1993 and was President of NBC News from May 2001 to September 2005. He also is on the board of trustees of National Public Broadcasting, American Public Television, the advisory board of Investigative Reporters and Editors (IRE), and the alumni board of the Communications and Media Studies program at Tufts University.

Mr. Shapiro was introduced and recommended to our Nominating and Public Responsibility Committee by Mr. Dubow as a prospective director with broad expertise in broadcasting and news reporting as well as First Amendment issues. After meeting with Mr. Shapiro and reviewing his qualifications and experience in accordance with its charter mandate, the Nominating and Public Responsibility Committee unanimously recommended that he be elected to our Board of Directors. Our Board elected Mr. Shapiro as a director in October 2007.

Continuing Directors

The following directors are currently serving on the Board for a term that ends at the 2009 Annual Meeting:

Marjorie Magner

Ms. Magner, 58, is a co-founder of Brysam Global Partners, a private equity firm that invests in financial services firms with a focus on consumer opportunities in emerging markets. She was Chairman and Chief Executive Officer of Citigroup’s Global Consumer Group from August 2003 until her departure in October 2005. She served in various roles at Citigroup, and a predecessor company, CitiFinancial (previously Commercial Credit), since 1987. She currently serves as a director of Accenture Ltd. and Charles Schwab Corporation. She has been a director of Gannett since 2006.

Duncan M. McFarland

Mr. McFarland, 64, was Chairman and Chief Executive Officer of Wellington Management Company, LLP from 1994 until his retirement in 2004. He served in various roles at Wellington Management Company since 1965. He is a director of NYSE Euronext, Inc., The Asia Pacific Fund, Inc., a closed-end registered investment company traded on the NYSE, and a trustee of the Financial Accounting Foundation. He has been a director of Gannett since 2004.

Karen Hastie Williams

Ms. Williams, 63, is a retired partner at the law firm of Crowell & Moring, Washington, DC. She is a director of The Chubb Corporation, Continental Airlines, Inc., SunTrust Banks, Inc. and WGL Holdings, Inc., the parent company of Washington Gas Light Company. She has been a director of Gannett since 1997.

The following Directors are currently serving on the Board for a term that ends at the 2010 Annual Meeting:

Charles B. Fruit

Mr. Fruit, 61, has served as Senior Advisor in Marketing, Strategy and Innovation to The Coca-Cola Company since March 2006. He is also President of Gardner Williams Consulting, LLC, an independent marketing consulting firm. Prior to assuming his current position with The Coca-Cola Company, Mr. Fruit served that company in various executive capacities since 1991, including as Senior Vice President and Chief Marketing Officer from June 2004 to March 2006. He is a director of the Advertising Council, Inc. and TiVo, Inc. He has been a director of Gannett since February 2007.

Arthur H. Harper

Mr. Harper, 52, has served as Managing Partner of GenNx360 Capital Partners, a private equity firm focused on business to business companies, since 2006. He is a former President and Chief Executive Officer of General Electric’s Equipment Services division. He is also a director of Monsanto Company. He has been a director of Gannett since 2006.

John Jeffry Louis

Mr. Louis, 45, has served as Chairman and Co-Founder of Parson Capital Corporation, a Chicago-based private equity and venture capital firm, since 1992. He is also a director of S.C. Johnson and Son, Inc. and Johnson Financial Group, Inc., President of the Board of Trustees of Deerfield Academy, and a trustee of Northwestern University, Shedd Aquarium and the Chicago Council on Global Affairs. He has been a director of Gannett since 2006.


Gannett Co., Inc. is a leading international news and information company operating primarily in the United States and the United Kingdom (U.K.). Approximately 84% of our 2007 consolidated revenues are from domestic operations in 42 states, the District of Columbia and Guam, and approximately 16% are from our foreign operations primarily in the U.K.

The company’s goal is to be the leading source of news and information in the markets we serve, and be customer centric by delivering quality products and results for our readers, viewers, advertisers and other customers. We believe that well-managed newspapers, television stations, Internet products, magazine/ specialty publications and programming efforts will maximize profits for our shareholders. To that end, our strategy has the following elements:


Become the digital destination for local news and information in all our markets.


Create new business opportunities in the digital space through internal innovation, acquisitions or affiliations.


Maintain strong financial discipline throughout our operations.


Maximize existing resources through efforts to enhance revenues and control or reduce costs. For businesses that do not fit with our long-term strategic goals, a reallocation of resources will be undertaken.


Strengthen the foundation of the company by finding, developing and retaining the best and brightest employees through a robust Leadership and Diversity program.

We implement our strategy and manage our operations through two business segments: newspaper publishing and broadcasting (television). The newspaper publishing segment includes the operations of 102 daily newspapers in the U.S. and U.K., nearly 900 non-daily local publications in the United States and Guam and almost 300 such titles in the U.K. Our 85 U.S. daily newspapers,

including USA TODAY, the nation’s largest-selling daily newspaper, with an average circulation of approximately 2.3 million, have a combined daily average paid circulation of 6.9 million, which is the nation’s largest newspaper group in terms of circulation. Together with the 17 daily paid-for newspapers our Newsquest division publishes in the U.K., the total average daily circulation of our 102 domestic and U.K. daily newspapers was approximately 7.5 million for 2007. All of our daily newspapers also operate Web sites which are tightly integrated with publishing operations. Our newspapers also have strategic business relationships with online investee companies including CareerBuilder, Classified Ventures, ShopLocal.com, Topix.net and Metromix LLC.

The newspaper publishing segment also includes PointRoll, an Internet ad services business; Planet Discover, a provider of local, integrated online search and advertising technology; Schedule Star LLC, which operates HighSchoolSports.net; commercial printing; newswire; marketing and data services operations.

Through our broadcasting segment, we own and operate 23 television stations with affiliated Web sites covering 18.2% of the U.S. in markets with more than 20 million households. We also include in this segment the results of Captivate Network, a national news and entertainment network that delivers programming and full-motion video advertising through video screens located in elevators of office towers and select hotels across North America.

2007 operating summary and key business transactions: The company’s fiscal year ends on the last Sunday of the calendar year. The company’s 2007 fiscal year ended on Dec. 30, 2007, and encompassed a 52-week period. The company’s 2006 and 2005 fiscal years encompassed 53-week and 52-week periods, respectively.

Unless stated otherwise, as in the section titled “Discontinued Operations,” all of the information contained in Management’s Discussion and Analysis of Financial Condition and Results of Operations relates to continuing operations. Therefore, the results of the Norwich (Conn.) Bulletin, the Rockford (Ill.) Register Star, the Observer-Dispatch in Utica, N.Y., and The Herald-Dispatch in Huntington, W.Va., which were sold to Gatehouse Media, Inc. in May 2007, and the Chronicle-Tribune in Marion, Ind., which was contributed to the Gannett Foundation in May 2007, are excluded for all periods covered by this report. Similarly, the results of The (Boise) Idaho Statesman, and two newspapers in the state of Washington, The (Olympia) Olympian and The Bellingham Herald, which were disposed of in an asset exchange in 2005 as discussed later, are excluded for all periods covered by this annual report. These transactions are discussed in more detail in the business acquisitions, investments, exchanges, dispositions and discontinued operations section of this report, which follows on page 23.

In 2007, the company recorded a pre-tax non-cash intangible asset impairment charge of $72.0 million ($50.8 million after tax and $0.22 per diluted share). This charge is reflected in income from continuing operations and reduced the carrying value of certain U.S. and U.K. mastheads to fair value. The non-cash intangible asset impairment charge did not affect the company’s operations or cash flow. Refer to Note 3 to the Consolidated Financial Statements for further details of this charge.

Net income per diluted share was $4.52 for 2007 compared to $4.90 for 2006. Earnings from continuing operations per diluted share were $4.17 for 2007 and $4.81 for 2006.

Operating revenues declined 5% to $7.4 billion for 2007 reflecting the significant impact the real estate crisis and the softening economy had on advertising along with the effect of competitive forces. Revenue comparisons are also adversely affected by the near absence of $112 million in advertising revenues associated with the Olympics and political elections in 2006 as well as the absence of the additional week in 2006.

The overall softness in newspaper and broadcasting revenue was partially offset by lower costs for newsprint, reflecting significantly lower consumption and slightly lower prices, other cost reduction efforts and the absence of the impact of the additional week of operations in 2006. Cost reduction efforts were partially offset by employee severance and facility consolidation costs of approximately $65 million and the non-cash impairment charge. Consequently, operating income declined 13% to $1.65 billion.

Interest expense was lower for the year – down $28.2 million or 10%, reflecting lower average debt levels, but slightly higher borrowing rates.

On a segment basis, total newspaper publishing revenues were $6.7 billion for 2007, a decrease of 5% from 2006. These revenues are derived principally from sales of advertising (including sales of Internet advertising) and circulation, which accounted for 74% and 19%, respectively, of total newspaper publishing revenues for 2007. Our Newsquest operations generated approximately 19% and 12% of these advertising and circulation revenues, respectively. Other newspaper publishing revenues were produced primarily by our commercial printing operations and PointRoll.

Newspaper publishing expenses decreased 2.8% over 2006 to $5.2 billion, due to lower newsprint costs, strong cost control efforts and the absence of the impact of the additional week of operations in 2006. These factors were partially offset by the $72.0 million impairment charge, the impact of the U.K. exchange rate on expenses and severance and facility consolidation costs.

Through our broadcasting segment, we produced $789 million in revenues for 2007, a decrease of 8% from 2006. Broadcasting expenses for 2007 decreased slightly to $474 million reflecting cost controls and lower ad selling costs.

Challenges for 2008: Looking forward to 2008, the company faces several important challenges, including:


Advertising revenue for our newspapers will be affected by the continuing real estate crisis, softening national economic conditions in the U.S. and the U.K. and strong competition for customer ad spending;


Newsprint prices are expected to increase due to newsprint industry consolidation. We will continue to manage our newsprint cost carefully by further web width reductions and use of lighter basis weight paper;


We will continue our efforts to align expenses with revenue levels through further centralization and consolidation actions and other cost control measures.

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, Selected Financial Data and the remainder of this Form 10-K.

Critical accounting policies and the use of estimates: The company prepares its financial statements in accordance with generally accepted accounting principles (GAAP) which require the use of estimates and assumptions that affect the reported amount of assets, liabilities, revenues and expenses and related disclosure of contingent matters. The company bases its estimates on historical experience, actuarial studies and other assumptions, as appropriate, concerning the carrying values of its assets and liabilities and disclosure of contingent matters. The company re-evaluates its estimates on an ongoing basis. Actual results could differ from these estimates.

Critical accounting policies for the company involve its assessment of the recoverability of its long-lived assets, including goodwill and other intangible assets, which are based on such factors as estimated future cash flows and current fair value estimates of businesses. The company’s accounting for pension and retiree medical benefits requires the use of various estimates concerning the work force, interest rates, plan investment return, and involves the use of advice from consulting actuaries. The company’s accounting for income taxes in the U.S. and foreign jurisdictions is sensitive to interpretation of various laws and regulations therein, and to accounting rules regarding the repatriation of earnings from foreign sources.

Refer to Note 1 to the Consolidated Financial Statements for a more complete discussion of all of the company’s significant accounting policies.

Reclassifications of certain items within the Consolidated Statements of Income: Beginning with this report, the company’s equity share of operating results from its newspaper partnerships, including Tucson, which participates in a joint operating agency, the California Newspapers Partnership and the Texas-New Mexico Newspapers Partnership, have been reclassified from the “All other” revenue category and are reflected in a separate line in the Non-Operating section of the Statements of Income titled “Equity income in unconsolidated investees, net.” Reclassifications have been made for all prior periods presented. “All other” revenue is now comprised principally of commercial printing revenues and revenue from PointRoll.

“Equity income in unconsolidated investees, net” includes earnings from newspaper partnerships, as discussed above, and equity income and losses from online/new technology businesses which were previously classified in “Other” non-operating items.

Business acquisitions, investments, exchanges, dispositions and discontinued operations

2007 : In May 2007, the company completed the sale of the Norwich (Conn.) Bulletin, the Rockford (Ill.) Register Star, the Observer-Dispatch in Utica, N.Y., and The Herald-Dispatch in Huntington, W.Va., to GateHouse Media, Inc. and contributed the Chronicle-Tribune in Marion, Ind., to the Gannett Foundation. In connection with these transactions, the company recorded a net after-tax gain of $73.8 million in discontinued operations. For all periods presented, results from these businesses have been reported as discontinued operations.

In January 2007, the company acquired Central Florida Future, the independent student newspaper of the University of Central Florida.

In June 2007, the company acquired the Central Ohio Advertiser Network, a network of eight weekly shoppers with the Advertiser brand and a commercial print operation in Ohio.

In October 2007, the company acquired a controlling interest in Schedule Star LLC, which operates HighSchoolSports.net and the Schedule Star solution for local athletic directors. HighSchoolSports.net is a leader in the increasingly competitive world of online high school sports.

At the end of October 2007, the company, in conjunction with Tribune Company, announced a joint venture to expand a national network of local entertainment Web sites under the Metromix brand. The newly formed company, Metromix LLC, will focus on launching Metromix.com in the nation’s top 30 markets plus other key metro areas in the coming months. Metromix is owned equally by the two parent companies.

The total cash paid in 2007 for business acquisitions was $30.6 million and for investments was $40.0 million. The financial statements reflect an allocation of purchase price that is preliminary for the acquisitions.

2006 : In January 2006, the company acquired a minority equity interest in 4INFO, a leading mobile and media advertising company with the largest ad-supported text messaging content network in the U.S.


Gracia C. Martore

Thanks, Sean and good morning. Again, welcome to our conference call and webcast to review Gannett's third quarter 2008 results. Hopefully you’ve had a chance to review our press release from earlier this morning. It also can be found at www.gannett.com. With me today are Craig Dubow, Chairman, President, and CEO; and Jeff Heinz, Director of Investor Relations.

Our goal today is to help you understand how we are moving forward at Gannett even as the financial crisis and its impact on the economy continue to put pressure on the demand for advertising. Craig will begin by discussing our transformation in light of the current economic environment. He will provide a brief overview of our quarterly results as well. I will then provide more detail, including a look at our segments and particularly our new digital segment.

Because of our acquisition of Shop Local and a controlling interest in CareerBuilder and the resulting consolidation of their results, we have established this new segment. Craig.

Craig A. Dubow

Thanks, Gracia and good morning, all. Given what has been happening on Wall Street for the past several weeks, I probably don’t need to point out the global financial crisis and health of the economy have influenced our results this quarter. Advertising demand in particular has been profoundly impacted, both here and in the U.K. I will discuss that in a minute.

But all of this turmoil also gives me an opportunity to share four key thoughts about Gannett -- first, I believe all of this makes it clearer than ever just how much our industry has been in the throes of a downturn that is more cyclical than secular. Next, I want to remind you that Gannett has faced cyclical downturns before and we have a proven ability to manage through them. That hasn’t changed.

Also, I will stress my confidence that once this downturn cycles through, our core revenues will rebound and together with that improvement in the core, we will see continued growth in digital.

Finally, most importantly, I want to talk about the plan that we have for growing revenues when the economy returns. This plan already is helping us confront the very secular changes in our industry and is setting the stage for us to grow our digital revenues as every opportunity arises.

First to the cyclical effects, as you know, the economy’s problems are rooted in housing and we have been a leading indicator of the downturn there. Weak real estate undermined the local economies in many of our markets we serve. Consumer confidence fell, retail spending was curtailed, and unemployment rose. Demand for all ad categories waned but the critical real estate, retail, and employment categories were stung the most profoundly.

In fact, many of the states most severely impacted are ones in which we have a significant presence in either publishing or broadcasting or both. California, Nevada, Arizona, and Florida, among others. Managing through these downturns is something that we do very well. We have done it a number of times in the last generation so we understand the cyclical dynamics. But this time we have approached our efforts somewhat differently because we understand there are secular forces at work that need to be addressed. Our goal has been to bring expenses in line with revenues as always, while at the same time being focused on the future. This has meant centralizations, outsourcing, insourcing, and an emphasis on protecting content and sales. We are transforming the way we work. This has meant a huge cultural shift for us but it is happening and continues to be an area of strong focus for us. We need to be ready because we have always bounced up from the bottom. We will again when this economy returns.

When we do, our strategic plan is in place and our company will be lean and ready to move very quickly.

Now let me talk about the plan for just a second -- it is all about enhancing our core business while growing the digital products our advertisers and consumers want. Creating desirable and relevant content is what Gannett does and that is the heart of the plan. Numerous efforts are underway to better align our current content production with customer and advertiser demand. We continue to refine our efforts to deliver that content across multiple platforms 24/7.

At the same time, we are aligning our sales efforts to deliver the right audience to advertisers, regardless of platforms. We know this works. Pulling in an audience and monetizing that audience is occurring more frequently as we deliver digital as well as print solutions for our local small to medium-sized accounts. In some places, we have achieved record audience levels.

Our digital strategy is moving forward on many fronts. This focus is on growing, partnering, affiliating, or acquiring digital businesses, finding audiences, and delivering solutions for advertisers.

On one hand, we have built out the infrastructure. Among other steps, we created the quadrant one ad network and rolled out ad tech, our internal ad serving platform. Ad tech by the way has provided greater insight into our audience analytics and the ability to monetize our online inventory for both the local and national audience. We already are getting some lift from this and expect more in the coming year.

In July, we made a minority investment in Mogulus, an Internet video platform. Mogulus complements Gannett's already robust multimedia infrastructure by adding the capabilities of its broadcast studio-in-a-box to journalists for information gathering toolkits. Using Mogulus technology, our publishing units have made news throughout the political campaign by airing video interviews with candidates. We also use Mogulus to break local events ranging from high school football games to incoming hurricanes.

Let me explain just a little about the significance of the Shop Local acquisition. It was an opportunity that Gannett was uniquely positioned to capture because of our ownership of Point Roll. Shop Local’s relationship with a majority of the nation’s top retailers when combined with Point Roll’s ability to create rich, interactive digital circulars means that we have an end-to-end solution for retailers, not to mention a richer shopping environment for consumers. Importantly, Shop Local has already turned profitable.

The other trajectory of our digital strategy is to grow niche websites that use our deep well of content and expertise to find new local audiences but can be national plays for advertisers. We rebranded our very popular Mom sites during this quarter to momslikeme.com and rolled out nationally with more than 80 sites, including all of the top 30 metro areas.

The metro mix entertainment vertical has expanded and is now in 28 cities. Football season saw highschoolsports.net, which has access to audiences in over 40% of the high schools in this country, up almost 1 million unique visitors from August to September. Now, we are working at leveraging our content on the military through military times papers and health through nursing spectrum into these types of local to national plays.

That is the overview of where we are and where we are going, despite the upheaval in the credit markets, the equity markets, and the economy in general. Underlying it all is the not insignificant fact that we are a solid business with a very good balance sheet, strong margins, and strong cash flow. Having that free cash flow means that we can continue to strategically invest and grow in our future.

Now, turning to the results for the quarter, reported earnings per share were $0.69. They would have been $0.76 per share except for about $23 million in severance expense. Our total operating revenues were $1.64 billion. Total expenses, including severance expenses from the efficiencies I mentioned, declined about 2.2% to $1.38 billion. However, pro forma expenses excluding the severance were down 5.3%. Operating cash flow was about $324 million for the quarter.

Looking at the segments, it is clear that there was no escaping the impact of this economy. Our publishing segment continued to be pressured from the decline in advertising demand rooted in the housing downturn and spreading to retail and employment. Broadcasting supplied a bright spot as we captured the revenue we expected from the Olympics and political.

Olympic advertising for the quarter totaled about $24 million and achieved our expectations, given the weakness of the economy. Our folks in broadcasting did a great job taking advantage of ratings and adding revenue through their local sales efforts. Political advertising came in at about $26 million for the quarter and continues to grow as we get close to the elections. Significant growth was achieved by almost all of our stations, although the biggest drivers were Cleveland, Denver, Minneapolis, St. Louis, our Maine stations, Washington, D.C., and Tampa. We are on pace to meet our projections as our footprint lines up well with some key states in the presidential election. Colorado, Florida, Minnesota, Ohio, North Carolina, and Virginia. We also aligned with some of the most contested senate races in Minnesota, North Carolina, Georgia, Maine, and Colorado.

Looking to the fourth quarter, based on our current outlook we expect television revenues to be up in the low-single-digits. Pacings are volatile and the election season and the economy will only add to that volatility.

Now let’s turn to our digital segment, online revenues overall and the impact of the consolidation of CareerBuilder's and Shop Local. The digital segment now includes the results for Point Roll, Planet Discover, and Schedule Star, which is the parent company of highschoolsports.net and Shop Local, for the full quarter. It also includes one month of CareerBuilder's results. These latter two are the primary drivers of the increase in the segment’s revenues.

Total revenues for the digital segment were almost $78 million. Operating cash flow for the segment was just over $10 million, reflecting positive results from CareerBuilder, Shop Local, and Point Roll. These positives were offset somewhat by our continued investment in Schedule Star and in our digital infrastructure.

Looking at CareerBuilder's results a little more closely, let’s first begin with the North American network revenue, which is what CareerBuilder and we have shared with you in the past. This represents a combination of total revenues generated by CareerBuilder from its sales efforts, which represent about 75% of the total, plus total revenues generated by the CareerBuilder network of newspapers made up of affiliated owners GAAP, Tribune, and McClatchy. These revenues were approximately $189 million, down about 5% from 2007’s third quarter. The decline is primarily due to the economic climate and the downturn in employment advertising at the affiliated network of newspapers. CareerBuilder's own directly sourced or generated revenue on the other hand maintained a positive momentum and was up about 10% compared to the third quarter of 2007. We believe that reflects in part that CareerBuilder continues to take share domestically.

Network traffic for the quarter was up about 1% from a year ago to 22.7 million visitors. Further, CareerBuilder continues to expand internationally and now operates websites in 15 countries outside of the U.S.

For consolidation purposes, we included CareerBuilder network revenues less those revenues from CareerBuilder already accounted for in our and other companies’ publishing segments. On a pro forma basis, assuming CareerBuilder had been consolidated for 2007 and for the first nine months of 2008, revenues rose 14% for the quarter and 18% year-to-date. In addition to the revenues from businesses in our digital segment, some of our online revenues still are derived locally and are included in the results of the publishing and broadcasting. So total online revenue company-wide including the digital segment grew about 7% for the quarter on a pro forma basis and was about $177 million on a reported basis, a 49% increase.

U.S. community publishing online revenues were pressured by the economy’s effect on classified advertising but strong growth was achieved in other areas. The automotive category was up 20% while the national category advanced 31%, and local was about 13% higher. However, the real estate and employment categories were down 24% and 25% respectively. Roughly 75% of our online revenue in the quarter was non-up-sell business. Overall, online revenues in U.S community publishing were about 7% lower.

Broadcasting online revenues increased about 15% and Newsquest was up about 10% in pounds. But in terms of audience, sites domestically garnered a total of 25.4 million unique visitors in September, about 15.6% of the Internet audience, while Newsquest’s audience totaled 6.5 million unique visitors, with about 86 million page impressions.

Now I’ll turn the call over to Gracia, but just a word about our response to the Wall Street funding crisis. It was a challenge but our people did an amazing job and we funded ourselves successfully throughout this entire ordeal. With that, let me turn the call over to Gracia.

Gracia C. Martore

Thanks, Craig. Before we go into detail on our quarterly results, I need to remind you that our conference call and webcast today may include forward-looking statements and our actual results may differ. Factors that might cause them to differ are outlined in our SEC filings. This presentation also includes certain non-GAAP financial measures and we have provided a reconciliation of those measures to the most directly comparable GAAP measures in the press release and on the investor relations portion of our website.

This morning I will provide some detail on our segments, particularly our digital segment. As Craig mentioned, the consolidation of CareerBuilder and Shop Local had an impact on several items on the income statement so I will cover those changes. I will also discuss the impact severance expenses had on each of the segments and finally I will summarize our debt picture and what transpired during the quarter.

Now quickly moving through our segments, as Craig mentioned the publishing segment was severely impacted by the weakening economic situation and the pressure that has put on advertisers and consumers. Pro forma advertising revenues were 17.6% lower in the quarter, reflecting declines of 14.9% in the U.S. and 23.6% in the U.K. Looking at the categories, retail was down about 10%, national almost 8% lower, and classified down about 29%. Retail advertising was challenging during the quarter here in the U.S. Across all of our products in retail, the department store furniture and telecom categories drove most of the decline. However, financial was positive in the quarter. Online advertising in retail was up significantly, as Craig mentioned.

Lower national advertising in the quarter was down, primarily reflecting softer ad demand at USA Today. The advocacy category was particularly strong in the quarter and the financial, home and building categories also were positive. Declines in some of the major categories, entertainment, travel, auto, and technology, however, more than offset those gains.

Moving to classified advertising, U.S. community publishing classified advertising was down about 27% in the quarter. It trended down slightly over the course of the quarter, driven by softer employment advertising. Auto was down about 19%, employment almost 37%, and real estate declined over 33%. Again, as Craig noted, Arizona, California, Florida, and Nevada have had much larger declines in classified advertising relative to the rest of our markets and that continued again in the third quarter. Properties in those states produced about 23% of ad revenue in the U.S. community publishing, yet they drove 36% of the ad revenue decline.

The U.K. economy took a big step down at the end of the first quarter and the economy there is suffering from these same issues, if not a little worse, than we are in the U.S. That is reflected in classified advertising at Newsquest, which trended down in the quarter, due primarily to real estate and employment.

Some anecdotes regarding the economic situation in the U.K. include the fact that mortgage lending fell to its lowest point in 3.5 years during September. The number of people out of work in the U.K. rose materially in the three months to August, the biggest drive in 17 years. And as reported this morning, Britain’s economy shrank in the third quarter by 0.5%.

Craig covered our broadcasting business in some detail so I will turn now to digital. With the creation of the digital segment, hopefully it will help you understand a bit more about several of our digital businesses. The timing of the transactions has complicated the picture for this quarter so let me go through the various pieces for you. As Craig mentioned, CareerBuilder, Shop Local, Point Roll, Planet Discover, and Schedule Star are now in that segment. We acquired our partners’ ownership stakes in Shop Local on June 30th, the first day of the third quarter. We began consolidating Shop Local at that point, so their results are included in the digital segment for the entire quarter.

We acquired an additional 10% of CareerBuilder on September 3rd, bringing our ownership to 50.8%. We began consolidating CareerBuilder at that date so their results are included in the digital segment for roughly the last month of the quarter.

Before this consolidation, our equity share and the results of these two companies was reported in equity earnings. Therefore, the line item equity income or losses from unconsolidated investees includes roughly two months of our equity share of CareerBuilder's results and no longer includes Shop Local, as it did last year.

Also due to the consolidation, we now have a minority interest expense related to CareerBuilder, that part of it that we do not own, that is in other non-operating items. Obviously next quarter’s results will present a much clearer picture as digital will contain a full quarter of both of their results.

Revenue in the digital segment was about $78 million this quarter. Expenses were roughly $71 million and operating cash flow was over $10 million. On a pro forma basis, assuming we owned CareerBuilder and Shop Local for the entire third quarter in 2008, digital revenue would have been in the range of $175 million to $185 million, and operating cash flow would have been in the $20 million to $25 million range.

One other item related to the consolidation of CareerBuilder and Shop Local and the new digital segment -- these businesses have significant variances month to month not only from a revenue perspective but also from an expense perspective. At the same time, they have become, as you can see, a much larger piece of our revenues. This will clearly make month-to-month revenue reporting somewhat more volatile and not necessarily correlate to the expense picture quarter to quarter. Therefore, for the time being, we will be eliminating our monthly revenue and statistical reports. We will, however, update you on our revenue picture toward the end of each quarter to help you understand directionally where revenues are and help you fine-tune your models.

With that, I want to turn to another factor that had an impact on our results for the quarter, our expense efforts and specifically the severance expenses related to those efforts.

As you saw, total severance expense was $23 million for the quarter and impacted primarily the publishing segment. As you may know, during the quarter we had over 1,000 FTE reductions in the U.S. community publishing group. The full impact of the expense reduction associated with these FTEs will be realized in this quarter, the fourth quarter.

So as you can see, total reported operating expenses were down 2.2%. However, on a pro forma basis and excluding severance expenses, they were actually 5.3% lower. Operating expenses purely in the publishing segment fell 6.6% on a reported basis and 7.1% on a pro forma basis, excluding severance. The declines reflect our efficiency efforts and lower newsprint expense. Newsprint expense was 3.4% lower. Usage prices were up significantly, almost 16%, although that was offset by a decline in consumption of almost 17%.

Let me quickly update you on newsprint -- after three quarters of unprecedented price moves by producers, the market appears poised to challenge the sustainability of continued increases. Cost pressures used by producers to justify aggressive price increases have eased considerably in recent months. A stronger U.S. dollar has significantly improved revenues for Canadian producers. Energy costs continue to decline and pricing for old newspaper used to manufacture recycled newsprint has fallen 17%. These cost advantages for producers, combined with lower consumption and rising inventories, have weakened market fundamentals for higher prices. In fact, a sizable price variance has developed between east and west and despite plans by eastern producers to raise prices in the fourth quarter, western producers decided against an October implementation. These developments leave producer plans to raise prices yet again during the fourth quarter clearly in question.

Jumping back to segment expenses and turning to broadcast, their expenses in the quarter were 4.3% lower and were about 6% lower excluding severance.

Corporate expenses were over 19% lower in the quarter, primarily reflecting compensation accrual adjustments.

The last item I want to cover before I discuss our current debt structure is fittingly interest expense. It was almost 26% lower in the quarter and totaled $46.8 million, compared to $63 million in the third quarter last year. The decline was due to both lower interest rates and debt balances.

Moving to our debt structure, as many of you are aware, we have traditionally been a significant user of commercial paper, around $2 billion in June and July. When the credit market seized up in September and early October, the commercial paper market essentially froze and became at best an overnight market. We continued to fund ourselves with commercial paper despite the market conditions, although at very unattractive rates.

In mid-September, we partially drew down on our committed revolving credit facilities to reduce dependence on very short-term CP. Given continued market dislocation and the somewhat tenuous situation with the federal bailout plan, as a prudent liquidity measure we drew an additional $1.2 billion on the revolver. That brought the total to about $1.9 billion, funds sufficient to repay all of our outstanding commercial paper obligations. We paid down some of our commercial paper immediately and invested roughly $830 million to pay down the balance as it matured.

At this point, there is approximately $203 million in commercial paper outstanding and we have a similar amount in investments to cover those maturities. The bulk of commercial paper still outstanding will mature by the end of this month, with the rest roughly $25 million, maturing during November and December.

So at this point, in addition to commercial paper, amounts drawn under the facilities and the $280 million bank facility, we have public debt of about $1.75 billion. Total debt is about $4.1 billion and our actual net debt excluding investments set aside to repay commercial paper, is about $3.9 billion. Our all-in cost of debt is about 5% at the moment. We expect we will have about $3.8 billion in debt outstanding at the end of the fourth quarter.

A few of you have asked about our revolving credit facilities. We have now received commitments from our banks to substitute a debt-to-EBITDA coverage ratio in place of the existing minimum shareholders’ equity covenant. We will close on that amendment next week.

A couple of other balance sheet items before we go to questions. Capital expenditures totaled approximately $45 million for the quarter and $103 million year-to-date. One note here as well -- with the consolidation of CareerBuilder, we will now account for 100% of their capital expenditures in our numbers, so CareerBuilder will add about $13 million to CapEx through year-end. CareerBuilder, however, as you know, funds its own capital expenditures so this is not a cash outlay by Gannett.

We expect capital expenditures for the year, including CareerBuilder, to be in the range of $160 million to $170 million.

With respect to shares outstanding, shares at the end of the quarter and basic quarterly average were both $227.9 million.

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