gannett 3Q2007transcript

GANNETT CO., INC. THIRD QUARTER
CONFERENCE CALL AND WEBCAST
Oct. 17, 2007

________________________________________________________________________
Operator

Good day, everyone, and welcome to Gannett's third-quarter 2007 earnings conference
call. This call is being recorded. Due to the large number of callers, we will limit you to
one question or comment. We'd greatly appreciate your cooperation and courtesy. Our
speakers for today will be Craig Dubow, Chairman, President and Chief Executive
Officer, and Gracia Martore, Executive Vice President and Chief Financial Officer. At
this time I will turn the call over to Gracia Martore.

Gracia Martore - Gannett - EVP, CFO

Thanks, Shannon, and good morning. Welcome again to our conference call and
Webcast today to review our third-quarter 2007 results. Hopefully you've had a chance
to review the press releases from this morning which 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. Craig will begin with an overview of the quarter and an
update of the strategic initiatives we have undertaken and I'll follow Craig's remarks
with some additional details on the quarter. Craig?

Craig Dubow - Gannett - Chairman, President, CEO

Thanks, Gracia, and good morning to everyone. As you saw in the release this
morning, Gannett earned $1.01 per share from continuing operations during the third
quarter. These results reflect both the positives and negatives that have been impacting
us for a while now. On one hand, our financial discipline is the best in breed and our
strategic efforts, including the growth and development of online, are moving along
well. Plus, Newsquest performance continued to improve.

On the other hand, challenges of an extremely tough ad environment remain. This is
particularly true in a number of our markets hurt by the slowdown in real estate. There

also was the near absence of the political spending that boosted results for the third
quarter last year. Finally, we took over $14 million in severance expenses and facility
consolidation costs related to a number of efforts, both in the U.S. and in the UK.

We generated total operating revenues for the quarter of $1.8 billion. Despite the charge
that I mentioned, our operating expenses were down almost 2%. Operating cash flow
for the quarter was $473 million. Our Internet investment performance improved and
our interest expense was down considerably compared to third quarter last year. The
result was net income from continuing operations of $234 million.

Domestically at our community newspapers the advertising environment continued to
be very challenging with the classified category impacted the most dramatically. The
housing slowdown has hindered ad demand in several of our markets. Here's what I
mean: Our properties in Arizona, California, Florida and Nevada account for roughly
one-fourth of the advertising revenues for our domestic community newspapers,
including Detroit, in the quarter. But they also represented more than 40% of the decline
in advertising revenue at our domestic community properties and more than 55% of the
decline in NIBT.

Our planning for the rest of the year and for 2008 reflects our belief that the real estate
market slowdown and its impact on domestic advertising will continue well into next
year. Gracia will discuss this in more detail in a few moments.

We have a different situation in the UK. Results at Newsquest were much better than
our domestic community newspapers as they cycle out of their employment slump. The
restructuring efforts of the management team in the UK have led the way for the rest of
the company as we work through the cyclical issues evident in some of our U.S.
markets.

Several of our Newsquest advertising categories grew in the quarter in pounds with
trends moving in the right direction, particularly in classified. Employment improved
steadily over the course of the quarter as did real estate. Their efforts in finding new
revenue in restructuring their businesses are helping drive the positive trends and those
benefits will certainly continue in 2008.

Looking at USA TODAY, advertising revenue was down 6.6%. Although there was
solid growth in some categories, the paper's results for the quarter reflect the choppy
national advertising market. Pro forma revenues in our broadcasting segment were
down because they were matched against $19 million in political advertising that
helped the third quarter of last year. But there is some good news here: non-political
advertising in the quarter was up due to solid growth in several categories and results

for automotive were almost breakeven. You can be certain that our broadcasting folks
are looking forward to the Olympic Games in Beijing and what looks like a dynamic
election season in 2008. Online and revenue growth at Captivate partially mitigated the
gap as well.

Although the election cycle is beginning to rev up, next quarter will be stacked up
against roughly $58 million in political advertising that occurred in the fourth quarter of
2006.

Our online initiatives are continuing to take shape and revenue growth in that area was
solid. Companywide, our online revenues were up more than 16%. Domestically the
community newspapers were about 7.5% higher and USA TODAY grew more than
18%. PointRoll's revenue was up again this quarter – about 26%. The increase in the
broadcast segment's online revenues was more than 37%. In the UK, Newsquest's online
revenues advanced a healthy 46% in pounds.

Traffic at our domestic sites for September totaled approximately 21 million uniques
and reached 13.4% of the Internet audience. Newsquest's sites had over 76 million page
impressions and about 5.2 million unique users. Finally, at CareerBuilder network,
revenue increased 17% for the quarter and traffic averaged over 22 million.

Let me discuss our digital strategy in a little more detail with you.

An important component of our digital strategy is linking our strength and knowledge
of local content with national scale. We believe this can create powerful platforms for
advertisers looking for solutions that are national as well as hyper-local. We see
tremendous opportunity for national brands that are the gateways to local content and
are actively seeking those prospects that have the same characteristics.

We also want to build digital brands that are national in scope, similar to what we have
done with CareerBuilder and Classified Ventures. CareerBuilder is the online
employment leader in the U.S. and is expanding overseas. Classified Ventures
announced in October that its cars.com site will be the exclusive provider of used car
listings and the exclusive listing service for private party sellers on Yahoo! autos. At the
same time, they are ramping up their promotion and marketing and expect a showcase
on the Super Bowl.

You'll recall that Classified Ventures also has a presence in the real estate market
through their apartments.com and HomeScape sites.

Another key element of our digital strategy is on the local front. When we are in a local
market, either in publishing or in TV, our goal is to become the go-to provider of local
content and information delivered on any platform. Underneath this burgeoning digital
operation is the infrastructure we are continuing to build out. To be truly platform
agnostic – delivering content where, when and how our customers want it – we are
investing in operations such as 4INFO in mobile, Planet Discover in local search and
PointRoll in rich media.

Meanwhile, a continuing aspect of our overall strategic plan is to support and enhance
our core businesses which continue to deliver strong free cash flow each and every day.
We are pushing forward aggressively on these strategic initiatives. We believe that the
ongoing execution of our strategic plan coupled with the financial discipline that you
have come to expect from the Gannett Company has positioned us very well for future
growth.

Finally, before I turn over the call to Gracia I want to welcome Dave Lougee to Gannett
as the President of Gannett Broadcasting. Dave brings a wealth of experience and
energy, plus strategic insight, to broadcasting as we move through this transformation.
So now let me turn the call over to Gracia.


Thanks, Craig, and good morning again. Before we go into the 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 today also includes certain non-GAAP financial measures. We've
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.

As Craig mentioned, I'll be digging a little deeper into our results beginning with the
publishing segment. As you saw, our advertising revenues for the third quarter were
down a little over 5.5% on a pro forma basis, and because we benefited from the U.S.
dollar/sterling exchange rate, they would have been a little less than 7% lower on a
constant currency basis. Local was down 3.9% while national also down about 4% and
classified declined 7.7%.

Our domestic newspapers did not perform as well as Newsquest due primarily to the
slowdown in the real estate market that had a significant negative impact on the
classified categories. Classified advertising at our domestic community newspapers

lagged last year by about 13.7%, but most of the decline was attributable to the four
markets Craig mentioned -- Arizona, California, Florida and Nevada. Once again the
percentage drop in advertising revenue was two times larger in those four states than in
our other community markets.

To put this in better perspective, those four markets generated 24% of ad revenue for
our domestic community newspapers in the quarter, but drove 43% of the ad revenue
declines for those properties.

Focusing for a few moments on the domestic classified categories, real estate
advertising was down over 21% in the quarter as real estate's slowdown continued. We
can't overstate the impact real estate is having on the economies in those markets. In
fact, three of the four markets we mentioned, Nevada, California and Florida, were
ranked as the top three states with the highest foreclosure rates in the country in August
and Arizona was among the top 10.

Nevada's foreclosure rate was three times the national average, one for every 165
households. California reported the most foreclosures of any single state, up 48% from
July and over 300% from August last year. And Florida reported twice as many as the
year before. It is those kinds of statistics that lead us to believe that the real estate
slowdown will linger into next year. We will be planning accordingly and position
ourselves to take advantage of our operating leverage when the cycle turns, as we have
done at Newsquest.

Employment was impacted as well domestically; it was down 14.8% in the quarter. The
percentage decline was almost four times greater in those four states than in our other
community newspapers. Automotive continued to be challenging as well, down 11.8%.

Moving to local advertising, it was 3.9% lower overall and 5.1% lower excluding
Newsquest. In the department store category, we were up against some heavy spending
from Federated May related to their name change last year. National advertising
declined a little over 4% in the quarter as USA TODAY’s advertising revenues lagged
last year. For the quarter, the travel, advocacy, pharmaceutical and restaurant categories
were up strongly, although their growth was offset by softness in tech, auto, Telecom,
financial and retail categories.

Reflecting the choppy nature of national advertising, USA TODAY's ad revenues were
almost 7% higher in August compared to a 7% decline in September. And it now looks
like USA TODAY's revenues will be positive in October.

Turning to the UK and Newsquest, total revenue for Newsquest was down slightly for
the quarter while ad revenues were almost 1% lower in pounds. National increased
almost 2% and real estate was up almost 5%. Newsquest had a strong finish to the
quarter. In September, Newsquest's classified revenue was 1.3% higher driven by
growth of almost 9% in real estate, a little over 2% in employment and almost 7% in
other classifieds. Operating expenses were down slightly as well, resulting in higher
NIBT in the quarter.

Total revenue in our broadcasting segment was 3.4% lower, and on a pro forma basis
5.1% lower. We did have a small amount of political spending in the quarter, but it was
nowhere near the $19 million that was generated in the third quarter last year. If you
exclude the impact of political, our net time sales were up 2.1% this quarter. Positive
growth in about every category, and particularly packaged goods and Telecom, drove
the increase. Auto was up in the high single digits in September and was down slightly
for the quarter.

Pacings for the fourth quarter are down in the mid-teens at this point compared to the
fourth quarter last year. Once again, as Craig mentioned, we are up against $58 million
in political spending that was achieved during that quarter in '06. The election cycle
turns back around in 2008 and, with the addition of the Olympics, as Craig said, the
members of our broadcasting group have every reason to be enthusiastic about next
year. Please keep in mind, though, that pacings information can be volatile and, as
always, we'll keep you updated in our monthly reports.

Moving now to expenses, total expenses for the Company declined almost 2% in the
quarter on a reported basis and were down 2.1% on a pro forma basis. We kept a keen
eye on cost control and benefited from lower newsprint expense as well. Expenses were
down despite the $14.5 million in severance and facility consolidation costs related to
continued efficiency efforts, both here and in the UK, and as well the impact of the
higher exchange rate. In fact, on a constant currency basis, excluding those severance
and consolidation costs, expenses were down 4% companywide.

Turning to the newspaper segment, expenses were down 2.1%. Newsprint declined
13.4% in the quarter. That decline reflected lower volume of about 10% and about 4%
lower newsprint prices. On a pro forma, constant currency, cash basis, newspaper
segment expenses – excluding the severance and consolidation costs – were 4.5% lower
in the quarter. In our broadcasting segment, as you saw, operating expenses were
almost 1% lower on a pro forma basis, but 1.4% higher on a reported basis due to the
acquisitions we completed in last year's third quarter.

Turning back to newsprint for a second, newsprint prices continued to slowly erode
throughout the third quarter. Market fundamentals remain in a state of imbalance
driven by soft consumption and inflated producer and publisher inventories. This
disconnect between supply and demand prevented producers from raising prices on
September 1st as planned. Several producers have now announced another price
increase for November 1st. Whether pricing continues to drift lower or not we'll work to
ensure that we strategically position ourselves with the best deals available.

Turning to the non-operating area, the growth in operating income for the quarter was
due in part to very solid results for our digital investments like CareerBuilder and
Classified Ventures and interest on some financial investments. We also benefited from
lower interest expense, due primarily to lower average debt outstanding.

Moving over to the balance sheet, total debt at quarter end stood at $4.4 billion and cash
and marketable securities were $91 million. At this point our all-in cost of debt is 5.25%
with commercial paper at 5.5%, but that rate will fall further over the next month.

During the quarter we entered into interest rate swaps fixing the rate on our $750
million floating-rate notes due in 2009. Those notes were priced at three-month LIBOR
plus 20 basis points. The swaps will save us about $1.5 million versus the floating-rate
notes from their inception in August through the end of November.

Capital expenditures for the quarter totaled approximately $34 million and $94 million
year-to-date.

With respect to shares outstanding, basic shares at the end of the quarter were 232
million and the quarterly average was 232.4 million. We repurchased 1.1 million shares
in the third quarter and 2.8 million shares year-to-date. Additionally, as you know, our
Board of Directors approved in July a 29% increase in the quarterly dividend to $0.40
per share. Now we'll stop and take your questions. Shannon?

QUESTIONS AND ANSWERS

Craig Huber - Lehman Brothers - Analyst

In light of what happened with Belo and Scripps breaking up their companies recently
-- we've asked this before -- do you have any inclination to split off your TV group here,
particularly ahead of a political/Olympic year next year?


Take a look, first of all, at Belo. Two-thirds of that company is on the broadcast side, it
makes sense. When you look at our portfolio, we're virtually the opposite. Then shift
over very quickly to Scripps and what they did yesterday. Their core side, with
newspaper and TV staying together, really suggests the position we are in and are
staying in, at least at this particular time.


Have your thoughts, though, changed on that front at all? Do you guys contemplate
perhaps this?


We look at all of these things and discuss them, but at this time, no, our position has
not changed.


Okay. And then switching to the newspapers. As you guys think out strategically
about your pricing for your newspaper advertising for next year’s cost categories, what
should investors think about here for potential ad rate hikes across the categories? Is
there any potential for increased discounts as we go into the new year?


As you know, Craig, we are in the throes of budgeting for next year and we will share
all of that information with the investment community in early December when we go
to the media conferences. As a general statement, pricing varies category by category
and market by market, so it's much too early to make a blanket statement about pricing
going forward.


Do you think investors, though, should expect any material changes versus your
pattern over the last five, 10 years?


I don't think there will be any material changes vis-a-vis our pattern over the last few
years.


And then the last little nitpick: What were the net network revenues in the quarter for
CareerBuilder? Thank you.


For CareerBuilder the network revenues -- we'll try to quickly look that up as maybe
we go to the next question.

Alexia Quadrani - Bear Stearns - Analyst

Looking at those four markets that you highlighted as being the worst hit -- Arizona,
California, Florida, Nevada. Knowing that the real estate downturn, as you said in your
opening comments, is likely to persist for a while in those markets, is there any way you
can really try to help the profitability the way you did at Newsquest when we were in
that period of downturn in those markets?

And then a second question: Again on those main markets, are you seeing worse retail
or local advertising as sort of a ripple effect into the other areas of your advertising in
those markets than you are in the rest of the country?


We are taking a number of steps, both in those four markets as well as in other areas, to
address efficiencies and look at further consolidations and centralization of various
processes where that makes sense and where we can drive cost savings.

We continue, as we did at Newsquest, to look at restructuring and bringing the expense
side in sync with the revenue opportunity. At the same time, we don't want to let a
short-term economic cycle, which we believe the real estate boom/bust cycle is, lead us
to do things that are not in ultimately the best interest of the local franchises that we
have. So it's a very careful balancing act. And your second question …?


The other areas of advertising in those markets: Are you seeing a ripple effect, any
weakening in retail more so than the rest of the country?


Yes. I think we're particularly seeing in furniture, where there are number of
foreclosures, there are less new houses being built or being occupied. Furniture sales
reflect those kinds of activities. It is having an impact in those four markets on other
categories in which the consumer would be sensitive to spending.


You mentioned you're expecting a bounce back in USA TODAY in October. I believe
you said that in your comments. Generally, though, for other parts of your business, are
you seeing similar trends in October or September?


It's probably a little bit too early to say. When we look at our domestic operations, on
the broadcast side we're up against some very significant numbers in political in the
quarter. In the U.S. community newspapers, it's very early in the quarter, but I would
say, in general, we don't see any material changes one way or another in the quarter -
again, excluding that 53rd week that had an impact on the fourth quarter last year. So
on a 52-week to 52-week basis, the quarter seems at least to be starting out not
dissimilar to the way it ended. Newsquest has continued to make progress. We would
hope that they will continue to make progress as well in the fourth quarter.

Fred Searby - JPMorgan - Analyst

A couple quick questions. One is following up on CareerBuilder. If you could give us
any thoughts on what the plans are potentially to monetize. I guess in the past you all
have been somewhat dismissive of the idea. But if there's any rethinking there. And
then secondly, with Newsquest, it sounds like real estate classifieds are quite strong. So
what are your thoughts given some of the issues that are materializing in the mortgage
market in the UK? Thank you.


Fred, you've given me a good entree to catch up on the very first question.
CareerBuilder network revenues were $200 million in the third quarter. They increased
about 17% over the third quarter of '06. Just to clean up that little housekeeping item.

With regard to CareerBuilder, I would not say we've been dismissive of the idea. What
we've indicated is that we continue to enjoy, as do our partners, operating
CareerBuilder as it is. They have made tremendous strides. Being a private company
has not impeded their ability to grow the business very importantly. But all of us look
at ways to unlock value in our companies and if, down the road, that was the
appropriate thing to do we would certainly consider it. At the moment we believe the
way we are operating CareerBuilder is in the best interest of all the partners.

As to Newsquest and their real estate revenues: We have seen a nice pickup in real
estate revenues. They are entering into that sweet spot where houses are being put on
the market and are not being sold right away. Houses are starting to stay on the market
a little bit longer and that is good for advertising. That is where we are beginning to be.
We'll have to see how that plays out. We don't have a sense that there's going to be a
demonstrably different trend in the fourth quarter at Newsquest on the real estate side,
but we'll see as the numbers come in.

Karl Choi - Merrill Lynch - Analyst

I wonder if you can give me the figure for FTEs? How much it was down at the end of
the quarter, year-over-year. Also, should we expect a similar amount of severance in the
fourth quarter?


Yes, with regard to FTEs: On an apples-to-apples basis, FTEs are down in the 6% range
year-over-year. Vis-a-vis the fourth quarter, there is the potential for additional
severance costs. As you know, our Detroit newspaper partnership announced a buyout
offer there for a number of positions and we'll see how that plays out. And yes, there
will be additional severance costs. We'll give you a better sense of that probably at the
December conference.


And Gracia, can you give us the newsprint price decline excluding currency? Because I
think the 4% that you gave probably included currency, right?


Yes, it did. Let me dig that out and I will come back to you with that number.


Also, do you have a figure for cash expenses excluding newsprint, how much it was
down in the quarter?


Not excluding newsprint I don't. I have cash expenses, pro forma constant currency
excluding the severance for the newspaper group, down about 4.5%.

John Janedis - Wachovia - Analyst

Thank you. Craig and Gracia, you're in a lot of markets. When you look at the U.S.
portfolio beyond the four that you mentioned: Can you share some thoughts on what
you're seeing in the local markets and your sense of the tone as we head toward the end
of the year? And then sneaking in a quarter question? In terms of the cost side can you
give us a 13-week pro forma expense number for the fourth quarter of last year?


Let me take the last question first. We didn't release pro forma numbers for the quarter
ex the additional week. What we did say about the fourth quarter last year was that the
53rd week for the company added about $0.04 to $0.05 in EPS. That's the guidance that
we gave. Getting back to the question on newsprint: constant currency price was down
about 5%.


John, with respect to the other markets, as you requested: What we're seeing is a better
opportunity. I would say it is nowhere near as uneven as what has occurred in the four
states. The Midwest frankly has done a bit better for us. I don't want to get ahead of
that, but it is doing a bit better in the key areas. Beyond that, it's slightly ahead. When
you extract these four key states, you can pretty well lay out what the other key
categories are going to represent.

John Janedis - Wachovia - Analyst

In terms of advertisers, are you feeling, on the margin ex classifieds, any better or
worse than maybe you felt a quarter or two quarters ago?


You know, it's probably about the same. I don't think there is any tremendous
improvement, at this time anyhow. With the exception of the UK – and our
management team called it over there – it is beginning to happen on the employment
side, as well in the real estate side. In the UK, it's a bit of a different story and a number
of months ahead of where we are domestically.

Peter Appert - Goldman Sachs - Analyst

I'm hoping you might share with us how your thinking is evolving in terms of
priorities and capital allocation. And I'm wondering if in particular the slight increase in
share repurchase activity in the third quarter might point to more in that direction?


Peter, thank you for the question. We want to look it very opportunistically and we will
continue share repurchases as it is appropriate. On the other hand, you saw what we
have done with the dividend increase from our last Board meeting. Aside from that, I
think we're going to continue to look for strategic investments in the best way possible.
As I said in the comments, we are very much looking at how we can tie local
opportunities that will scale nationally.

Those three keys areas are really where our focus is. Beyond that, again, if there are
other opportunities on the core side – either with duopoly possibilities or with other
areas that can provide consolidation for printing or other synergies – we are staying
very open to those possibilities as well.


The strategic acquisitions, Craig, have been relatively small thus far. Are you thinking
of perhaps stepping up the pace of activity there?


We would love to if there is something appropriate that would fit with our plan. As
you know, we look at and continue to look at everything that is out there. As yet, the
very large-sized ones have not fit or have not been priced in a way that made economic
sense to us or were how we're trying to go about this.


There are a couple of things we may be talking about in the short-term in those areas
that speak to the strategic initiatives Craig talked about.


Okay, great. One other thing. Have we reached the point where the operating income
contribution from Classified Ventures, CareerBuilder, some of the other Internet assets,
are sufficient that this other income line could be a consistent positive on a go-forward
basis?


You know, it's hard to say because there are swings in the timing on those investments
in terms of marketing expense and activities. In the fourth quarter of last year, for
instance, we had about $11 million of non operating income which was a function of a
sale of some investments. It should be in the positive category, but again, its level may
shift depending on some specific one-off items quarter-to-quarter.

Paul Ginocchio - Deutsche Bank - Analyst

Help me understand the level of severance in the third quarter. Is it $14 million? What's
it been averaging over the last couple quarters, to help me size it? And if I can sneak
another one in on display CPM rates: How much are they up and is the improvement
accelerating or decelerating? On the display side?


I'll start with the severance costs and then Craig can talk about display. On the
severance costs, of the $14.5 million, a little over $12 million was severance. The other $2
million was related to consolidations and press transfers which are reflected in the
depreciation line. There's a couple of million dollars of additional depreciation in the
newspaper segment.

In the last couple of quarters, we have identified when we have had sizable severance
costs. Last quarter, they were much more nominal. They were sizable in the fourth
quarter of last year and we highlighted that for you. We'll continue to highlight them
when they are of a size that they are fairly material.


On the CPM question, from an online perspective: We are seeing some modest
increases, as we're going along here. That has been pretty consistent from quarter to
quarter in what we've been able to do in virtually each of the areas from a division
standpoint.


As we’ve been able to do some additional targeting, we've seen better CPMs on the
video side where our video streams have increased dramatically. We've been able to see
some attractive CPMs versus the normal display CPM.


And to piggyback on the subject of video with what Sue and the broadcast division
have done by working together. Video is continuing to be exploited in a significant way
with the training that has continued now for about a year and a half. By looking at the
sites you can see dramatic use of video at this time. The advertising sales folks are
working very hard on further developing that in a consistent way as we all move
forward. We're very excited with where that one is heading.

Joe Arns - Banc of America - Analyst

With respect to your cost efforts, do you consider your staff reductions this year
permanent? And second, you mentioned site consolidation, but are you also looking to
offshore certain functions?


With regard to the staff reductions, a number of those are permanent as they relate to,
for instance, the consolidation of our circulation call centers, which is underway. Those
would be permanent reductions as we consolidate about 65 centers down to three. In
other areas where we're using technology more efficiently and effectively, those would
be permanent reductions. To the extent there are business conditions which will
ultimately pick up, then there are some areas in which we would add back some
staffing.


That would be specific really in the advertising sales area, the feet on the street
opportunities as improvements come.


With regard to off shoring: I know in the newspaper division we are looking at some
ad production overseas. But we have a number of initiatives going on right now where
we're looking at both domestically consolidating things and centralizing things. And
then also looking at whether it makes more sense to outsource overseas or to keep them
domestically and simply centralize.

James Goss - Barrington Research - Analyst

One related to your Internet activities: Aside from the components that wind up in the
other income category, is there any way or any willingness on your part to size that
revenue base relative to the total as it currently exists? Also look at the operating
margins to the extent that you can make what you feel are appropriate allocations. Are
they more or less profitable right now than your traditional businesses?


In terms of sizing it, Jim, each year we indicate at the end of the year the total size of
our online operations. We talked about the fact that last year online revenues were over
$400 million. We give growth rates each quarter to help with that process and we will
report at the end of the year where we stand on the online side.

That being said, as you mentioned, that doesn't include the pieces of the joint ventures
that are held out in the network and other places. Vis-a-vis the operating margins, we
try to do our very best to fully allocate costs to our online efforts. Without the joys of
newsprint and ink, those margins are seemingly better than our print margin or our
broadcast margin. But that will play out over the long-term and we'll see where all of
that takes us.

James Goss - Barrington Research - Analyst

Another question -- and maybe Craig can address this. I think you mentioned time
sales up slightly excluding political in the broadcast area. Next year the Olympics will
be in the summer period which is right about when the conventions are being held. I'm
wondering how much you do increase the time slots available to advertising and do
they sort of conflict with one another so you're not been able to take full advantage of a
strong political season? You'll have both political and Olympic sort of competing for
time at the same time and squeezing out other advertisers? How does that seem to work
in general?


Frankly, with what will be a scarcity of inventory as we go through that, it will play out
in a very positive way for us. As we are anticipating right now, the political will really
be picking up as we go from quarter to quarter. Again, we're not as concerned with the
overall inventory because we can really leverage that in an appropriate way because of
all the opportunities we have from our local news perspective. We can take advantage
of the individual slots that we have available as well.

When you look at the other networks and what they are going to have from an
availability standpoint, I think there is going to be enough that we can disperse and
positively move this forward. I look at it very specifically as an advantage to us.

Michael Kupinski - Noble Financial - Analyst

Most of my questions have been answered, but I had a follow-up question on the
political and Olympic year next year. USA TODAY historically did well in Olympic and
political years with a boost from Olympic advertising. I know you guys have done
specials in USA TODAY in the past. Are you seeing any dollar commitment for
Olympic advertising at this stage or is it too early? And if you can remind me what USA
TODAY did in Olympic revenues in maybe 2006 but more comparatively in 2004?


We’ll have to take a look at the comparisons and Gracia will pull that. At this point, it's
a little bit early yet in what we're seeing from the USA TODAY perspective. I know we
will have a terrific effort over there and, as we have done in the past, will do very fine
job with it. Gracia, do you have a sense?


USA TODAY for Olympics has a good showing and is typically measured in the single
millions of dollars. On the broadcast side in 2004, with the summer games in Athens for
instance, we had almost $29 million of net Olympic revenue; in the winter games in '06
a little over $22 million in Olympic revenues.

Michael Kupinski - Noble Financial - Analyst

Right. Also, did USA TODAY pick up political advertising in '04? Because, if I recall,
there was a little bit of displacement off of television into USA TODAY in advocacy.


The advocacy category definitely, and again we're talking single millions of dollars. It’s
not the level that we saw in the broadcast side, but it will play a part. To the extent that
the political season turns out to be as robust as the pundits are suggesting, I suspect
USA TODAY will fare very well in comparison to other years.

Edward Atorino - Benchmark Capital - Analyst

You've talked about the new initiatives and stuff. Could you maybe give us some sense
of whether there are any dollars starting to come from all these efforts other than Web
site hits and all that stuff?


The key here is we're continuing to press ahead. When you look at some of the most
visible elements right now, the mom sites are beginning from a revenue standpoint.
From the number of uniques we are seeing, we are finding quite specific ways of
increasing traffic through social networking, in particular. That is coming together in a
very nice way for us. What you're going to see as we go along is a continuance. As we
further develop new areas in a very short fashion here that will continue.


To add on to what Craig said, on the video side we're beginning to see the dollars
accumulate, albeit they're small dollars at this point. They're in the seven figure range.
In other areas such as our sales restructuring efforts and our sales training efforts in the
newspaper division, where we have really focused on those small to midsize
advertisers, we're beginning to see nice additions to the number of accounts as well as
the dollars coming out of those accounts. The large department stores are going to do
what they do and we'll have to see where the fourth quarter takes us with the large
department stores.

But in the areas where we are focusing, both on the digital side as well as the sales
restructuring side, yes, as Craig said, we are seeing those dollars come in. But we are in
the nascent stages of those efforts rather than really in the mature stage of those efforts.

Peter Jacobs - Wells Fargo - Analyst

Thank you. This is a follow-up question to the question that related to the size of the
online revenue. If we look at the $400 million you cited back at the end of 2006, is that

spread both in the newspaper publishing business segment and the broadcasting?
Meaning does it include the Captivate business as well?


No, when I'm giving you those digital revenues, we are counting the online revenues
that our broadcast stations are producing; we are not including Captivate in that
number. And it is spread across Newsquest, broadcast, our community newspapers,
PointRoll -- USA TODAY.


But it's in the broadcasting business segment?


Yes, it is.


Okay.


And we've reported on the growth of that business each quarter.


Right, so I'll be able to go back…?


Yes, absolutely.

Operator

That is all the time we have for questions. Ms. Martore, I'll turn the conference back
over to you for any additional or closing comments.


Thanks very much for joining us today. If you have any further questions, you can give
Jeff a call at 703-854-6917, or me at 6918. Have a great day.

Operator

That does conclude today's teleconference. Thank you for your participation and have
a wonderful day.

Certain statements in this transcript may be forward looking in nature or “forward looking
statements” as defined in the Private Securities Litigation Reform Act of 1995. The forward
looking statements contained in this transcript are subject to a number of risks, trends and
uncertainties that could cause actual performance to differ materially from these forward looking
statements. A number of those risks, trends and uncertainties are discussed in the company’s
SEC reports, including the company’s annual report on Form 10-K and quarterly reports on Form
10-Q. Any forward looking statements in this transcript should be evaluated in light of these
important risk factors. Gannett Co., Inc. is not responsible for updating the information contained
in this transcript beyond the published date, or for changes made to this document by wire
services or Internet service providers.

gannett 3Q2007transcript

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