gannett 3Q05transcript

GANNETT CO., INC.
THIRD QUARTER 2005
CONFERENCE CALL AND WEB CAST
OCTOBER 11, 2005

PRESENTATION

Operator
Operator: Good day, everyone, and welcome to Gannett's third quarter earnings
conference call.

Today's call is being recorded. Due to the large number of callers, we will limit
you to one question or comment. We greatly appreciate your cooperation and
courtesy.

Our speakers today will be Mr. Craig Dubow, President and Chief Executive
Officer, and Gracia Martore, Senior Vice President and Chief Financial Officer. At
this time I'd like to turn the call over to Ms. Gracia Martore. Please go ahead,
ma'am.

Gracia Martore - Gannett - CFO
Thanks very much and good morning. Welcome to our call and our Webcast to
review our third quarter results. We hope you have a chance to review our press
releases from this morning which also can be found at www.gannett.com.

With me today are Doug McCorkindale, Chairman, Craig Dubow, President and
CEO, and Jeff Heinz, Director of Investor Relations.

As we noted in our press releases, two separate transactions in the quarter had a
very significant impact on the reporting of our results. The first was our asset
exchange with Knight Ridder, in which Gannett received the Tallahassee (FL)
Democrat and cash consideration in exchange for newspapers in Olympia and
Bellingham, Washington, and Boise, Idaho.

The transaction was accounted for as a sale of discontinued operations and a
purchase of the Tallahassee newspaper. The contributions from the former

1

Gannett properties have been reclassified as discontinued operations in our
financial statement.

The asset exchange resulted in an after-tax gain which is also included in
discontinued operations for the third quarter. And we have also gone back and
reclassified last year's quarter to reflect the discontinued operations.

As you saw this morning Gannett earned $1.14 per diluted share from operations
this quarter including $0.01 per share, or approximately $3.6 million of after- tax
income from those discontinued operations. Basically, the income from
Bellingham, Boise and Olympia for the two months that we owned them in the
quarter.

The gain associated with the sale of these three properties for accounting
purposes was $18.8 million after-tax, or $0.08 per diluted share. That gain is also
included in discontinued operations.

And during the quarter we also reorganized the Detroit Newspaper Agency. As
part of that transaction Knight Ridder sold its newspaper interest in Detroit to
Gannett and MediaNews Group. Together we formed the Detroit Newspaper
Partnership.

We acquired the Detroit Free Press and MediaNews Group acquired the Detroit
News from us.

The Detroit transaction significantly impacts the results in our newspaper
segment.

As you saw from the release this morning, on a reported basis, newspaper
publishing revenues rose 7.1% while newspaper expenses increased 9%.
However, the reported numbers are not on a comparable basis year-over-year.

Beginning August 1st, 100% of Detroit's results have been fully consolidated in
each line of the financial statements of Gannett along with a minority interest
charge for MediaNews Group's interest. Prior to that date the NIBT from our
50% interest in Detroit had been reported as one line item in other operating
revenues.

So the reported results for the third quarter of 2005 include two months of 100%
consolidation and one month of a one line 50% NIBT item in other operating
revenue, while at the same time 2004's third quarter's reported results included
three months of a one line 50% NIBT item in other operating revenue.

2

To put this on a more comparable basis, pro forma - that is assuming we owned
100% of Detroit and some other small acquisitions that we completed, had been
included for all of the third quarter 2005, and all of the third quarter of 2004 -
then newspaper operating revenues would have increased 1.3% and newspaper
expenses would have increased 1.7%.

Hopefully you're still all with me on this. To put our expenses for the quarter
into further perspective, we reported that newsprint expense was up 7.7%, which
consisted of a 6.4% increase year-over-year in price and a little over 1% increase
in usage.

But again, Detroit impacted those numbers. So on a pro forma basis newsprint
expense actually was up about 1.5%, with an almost 6% increase in price, and
about a 4% decline in usage.

Finally, looking at pro forma cash costs excluding newsprint, they were up about
1.5% for the quarter in the newspaper segment. That increase includes a couple
of million dollars related to higher fuel costs and some hurricane-related
expenses.

As we indicated when we completed the transactions, the full consolidation of
Detroit's results would have a negative impact on our margins in the near-term.
However, we see opportunity to expand them over the intermediate to long-
term.

Greater control of the partnership, the conversion of the Detroit News to a
morning publication, which will maintain two editorial voices in Detroit while
providing a stronger ad platform, and the benefit of the new press facility all are
opportunities for higher levels of profitability.

Let me make one further comment on newsprint. As we previously told you, we
have secured fixed price terms for newsprint through the end of this year for a
substantial amount of our newsprint requirements.

We know these are challenging times for paper makers and publishers and we
genuinely understand the economic pressures facing suppliers. However,
publishers also face similar challenges. Yet we remain hopeful that both sides
will continue efforts to minimize market volatility.

The ability to have set pricing over a six-month period is a good start. We are
confident that consistent pricing initiatives over longer periods will ultimately
support the health and stability of both of our industries.

3

Now let me finish up with some balance sheet items.

Total debt at quarter end stood at $5.4 billion and cash marketable securities
were $54 million. At this point, our all-in cost of debt is about 4.3%.

Capital expenditures for the quarter totaled $54 million roughly. We are on track
to spend around $275 million on capital expenditures for the year including the
ramp up of Captivate.

With respect to shares outstanding, basic shares at the end of the quarter were
240.9 million and averaged 242.9 million for the quarter. We repurchased 3.6
million shares during the quarter and year-to-date we have repurchased
approximately 14.3 million shares for almost $1.1 billion.

At these price levels we continue to think of Gannett as a very good investment
of our free cash flow.

Finally, before I turn the call over to Craig, 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 great detail 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
Web site.

And now I'll turn it over to Craig.

Craig Dubow - Gannett – President and CEO
Thank you, Gracia, and good morning to everyone.

Before I jump into the details regarding our quarterly results, I'd like to take a
moment to commend our employees in the Gulf Coast region, as well as the
Gannett employees that volunteered their help and efforts in the aftermath of
Hurricane Katrina and Rita.

As you saw from our press release this morning and as Gracia mentioned,
earnings per share for the third quarter excluding the gain from discontinued
operations totaled $1.14.

4

Operating revenues for continuing operations increased 4.1% to $1.9 billion for
the quarter. Operating cash flow from continuing operations was $541 million,
and income from continuing operations was approximately $275 million.

On a pro forma basis our operating revenues declined slightly less than 1% for
the quarter. Last year we had over $50 million of Olympic and political revenues
from our television stations, and USA TODAY also received about $4 million of
Olympics-related spending.

This was just too steep a mountain to climb in this challenging advertising
environment and with the U.K. economy slowing as it has.

Let's turn first to our newspaper business.

Pro forma local advertising in our newspapers rose just over 1% in the quarter. In
the U.S. across all products, the health, financial and telecommunications
categories were positive for the quarter, although the furniture, restaurant and
home improvement categories lagged last year's third quarter results.

In September of 2004, our pro forma local ad revenues were up over 10% - our
toughest monthly local ad comparison for the year.

Similarly, we faced a very tough quarterly comparison as third quarter of 2004
local revenues were up 7.5%. Pro forma local classified revenues in our U.S. and
U.K. community newspapers were up 1.4% in the quarter.

Help wanted revenues increased 2%. Real estate was up 3%, but auto was down
over 9%. These results reflect positive growth trends domestically offset partially
by the weakness in the U.K.

The strength in our domestic community newspapers this quarter, much like the
second quarter, came primarily from employment and real estate.

Our employment numbers in the U.S. continued to be a bright spot for us. For
both September and the third quarter the pro forma growth rate of employment
classified was approximately 14%.

The double-digit growth in employment continues to be driven primarily by the
West. Cities like Phoenix, Palm Springs and Fort Collins and in the South in
places like Broward and Fort Myers although they also had very good growth in
the Midwest as well.

5

Pro forma classified real estate at our community newspapers was fairly solid as
well with growth rates approaching 7% in both September and the quarter.
Classified auto, as we have noted, continues to be very soft.

We continue to invest in our strategy to develop non-dailies and niche
publications which are affiliated with our local daily newspapers and are
profitably expanding the unduplicated reach we have in our markets. In the
quarter our non-dailies, which do not include publications such as Clipper,
Nursing Spectrum or Army Times, once again had mid-teens revenue growth.

As you saw from our report this morning, national advertising was flat for the
quarter. USA TODAY's ad revenues were down almost 3% once again reflecting
the tough comparisons primarily from the demand related to the Summer
Olympics in 2004's third quarter and the choppy national ad environment.

USA TODAY's ad revenues were down 1.2% in July, down 17% in August and
up over 8% in September. For the third quarter the entertainment and telecom
categories in addition to automotive were strong, while travel, package goods
and advocacy categories trailed results in the third quarter of 2004.

As I touched on briefly, our U.K. results continue to be negatively impacted by
the weak U.K. economy. Pro forma revenues for Newsquest for the quarter in
pounds were down 5%.

Newsquest management has done an excellent job controlling costs. Expenses for
the quarter, even including a 7% price increase on newsprint, declined over 2%
year-over-year. Newsquest's operating profit, again in pounds, declined 10%.

Classified revenues at Newsquest, which were almost 70% of ad revenues in the
quarter, continued to be soft with the auto or motors and the lucrative
employment categories the most hard hit.

Turning to online revenues for the entire Company, increased approximately
29% for quarter led by a 46% increase at our domestic community newspapers.
At this pace we are on track to have about $275 million to $300 million of revenue
from our Internet activities this year.

We are pleased with our Internet initiatives to date and we are particularly
enthused about the potential of PointRoll from both the business and the rich
media perspective.

We are very pleased as well with the progress CareerBuilder continues to make.

6

Revenue for the CareerBuilder network for the third quarter of 2005 was up 72%
year-over-year. CareerBuilder network traffic for September of 2005 was up 31%
to approximately 20 million unique users compared to last year.

Moving now to Broadcast.

As we noted in our earnings release, revenues for the quarter were down over
19%. Excluding Captivate, television revenues were down over 20%.

Ad revenues declined with a lack of over $20 million in political-driven ad
spending and almost $30 million in ad demand related to the Summer Olympic
games. Excluding political, the auto, retail, restaurants and telecommunications
categories were negative year-over-year, while the package goods, services and
medical and dental categories surpassed last year's results.

Local was down 11% for the quarter while national declined 33%.

Our latest pacings for the fourth quarter are down in the low to mid-teens,
reflecting roughly 48 million in ad revenues related to political ad spending that
benefited the fourth quarter of '04. November and December are stronger than
October which includes the lion’s share of political spending in 2004.

Local is stronger than national at this point.

Pacings continue to be highly volatile and subject to weekly change but this is
where we stand at this moment. We'll keep you updated in our monthly reports
as the quarter progresses.

Now looking forward into the fourth quarter. We face tough comparisons, again,
in the fourth quarter particularly in the broadcasting segment, which, as I just
noted, faces almost $50 million of politically-driven ad demand associated with
last year's fall election.

Our U.K. properties have responded to the economic downturn in the
challenging ad environment but unfortunately the economic outlook at the
moment continues to be difficult. Domestically, our community newspapers are
very well-positioned in the markets they serve to maximize the coverage with
advertisers and consumers.

Similarly, USA TODAY will continue to successfully leverage its brands and as
always we will continue to maintain our financial discipline and focus.

At this point we'll stop and be happy to take any of your questions. Thank you.

7

QUESTIONS AND ANSWERS

Peter Appert - Goldman Sachs - Analyst
Hi, thanks. Craig or Gracia, these cost controls are quite impressive in the
quarter. Any thoughts in terms of the level at which you can hold cost growth
going forward excluding newsprint?

Peter, we'll continue to be very focused on the cost side of the equation with ad
demand particularly in the U.K. and in the TV side under some stress. Our folks
in the U.K., as I said, and Craig has pointed out, have done a wonderful job of
having lower year-over-year costs.

We've put in conservation measures on the newsprint side. We've taken a look at
each and every expenditure in making sure that it is warranted on a product or
return on investment equation. So we'll continue to do the best we can.

We'll have newsprint going against us again in the fourth quarter. But we will
continue to stay very focused.

Douglas Arthur - Morgan Stanley -;Analyst
Craig, a great job. I'm wondering, can you just delineate a little bit more clearly
the U.S. community newspaper ad trends both for September and the quarter, so
excluding the U.K. impact and USA TODAY?

And then as a follow-up, the strength in USA TODAY in September, do you see
that as sustainable into Q4? Thanks.

Doug, let me start with just the U.S. side of things.

If I excluded Newsquest on the ad revenue side, for period nine, on the U.S. side,
ad revenues would have been up in the 4% range. And for the quarter, again,
excluding Newsquest, advertising would have been up in about the 3% range.

USA TODAY did have a good month. They had a little bit easier comparison
than they did last year.

8

But what we've heard thus far from Craig Moon, who runs USA TODAY, is he's
feeling a little bit better about the fourth quarter and is seeing some
opportunities for the fourth quarter. We'll just have to see how that plays out.

The numbers are not going to be straight-lined and there'll be some choppiness
to them, but I'd say overall on the USA TODAY side, we're feeling cautiously
optimistic.

Doug McCorkindale - Gannett – Chairman

The big picture is the U. S. domestic newspapers are doing okay. I think a little
bit better than maybe some of the others in the industry are seeing. We're getting
hurt by the U.K. economy and Broadcasting is disappointing.

But if the U.K. and Broadcasting were just flat, we'd be having some big time
numbers here. So the U.S. side is doing very nicely.


The only other comment relative to USA TODAY, they have been doing
extraordinarily well with auto. And that is contrary to what we have seen in
Broadcast and certainly on the newspaper side and our hope is, is that we can see
that continue. But that's a big difference in where we are right now.

Craig Huber – Lehman Brothers - Analyst
Good morning. Thank you. Gracia, last quarter on your conference call you
mentioned about a curtailment of retiree medical and life insurance coverage,
which I think when the Q came out it helped by $0.05 to $0.06 in the quarter. I
was wondering this time around is there anything of a one-time nature other
than what you talked about for the swap in Detroit that either helped or hurt
your numbers one-time in nature that we should know about?

And then separate from that, I was just curious if you guys are seeing any light at
the end of the tunnel at all here on the auto side for TV or for the newspapers?
Thank you.

9

Craig, on the one-time items, yes, we did, as we mentioned on the call last
quarter, have a one time benefit on the retiree health side but that quarter was
also offset by some one-time items related to Detroit on depreciation of some of
our old presses there.

In this quarter we did have the remaining tail on the retiree health which was
several million dollars. But at the same time we also had some other pieces going
the opposite way that would have been one-time items. So net/net a very small
contribution from one-time items.

With respect to your question on auto, at this time we are not seeing any positive
movement in television regarding auto or with the domestic newspapers as well.

And then Craig, you know, autos, well, motors, as it's called, is also very soft in
the U.K. so the only positive number we're seeing is, as Craig Dubow mentioned
earlier, is at USA TODAY.

Steven Barlow – Prudential Equity - Analyst
Thanks. On the U.K., can you tell us your best guess at this point when margins
are going to stabilize there? Are they doing quite a bit of headcount reduction as
well? Thanks.

Steve, on the U.K. operation, interestingly they have done such a good job year-
over-year on the expense control side that their margins actually have not
suffered as you would otherwise have expected. As I mentioned earlier, they
have lowered year-over-year expenses by a couple percent.

That's from a combination of factors. Lower newsprint usage but also they have
been looking at headcount and, as appropriate, doing things to right-size where
we are not seeing revenue opportunities. We'll just have to see how that all turns
out.

10

William Bird –Citigroup Smith Barney - Analyst
I was wondering if you could just discuss your current thoughts on buy backs
versus acquisitions? And also just general update on the M&A environment.
Thank you.

I will start with the buy backs versus acquisitions and then turn it over to Doug
and Craig on the acquisition environment.

I think our current position remains similar to what it has always been, which is
that we will look at acquisitions and we will look at buy back at the same time
and do whatever makes the most economic sense for the Gannett company and
its shareholders. We have done a fair amount of share repurchases because,
frankly, on the acquisition side we haven't seen very many economically
attractive opportunities, and our stock represented the best investment for us.
That continues to be the case at the moment, but Craig and Doug, if you want
to…

Bill, I think Gracia's put it in focus there. There are some things for sale but at
prices that we don't find attractive. As you know, we've been doing this a long
time and when the numbers get out of focus as they did in the late ‘80s we
stepped out of the marketplace.

Right now we're involved in looking at a number of transactions - there are a
number of broadcasting stations for sale. There are some print properties for sale.
There are a number of technology plays that are on the marketplace. So we're in
all of them.

But we are not going to chase some of these properties to get to a purchase price
that we don't think can make money for Gannett shareholders. Others may see a
more optimistic view, but 16 times cash flow for a well-run television station
simply doesn't make economic sense to us. It's better for to us buy back Gannett
stock.

So the marketplace is not overly active, but it's busy and there are a lot of things
to look at and we're looking at all of them.

11

Debra Schwartz – Credit Suisse First Boston – Analyst
Hi. Thanks. It's Debra Schwartz on for Bill. Not to harp on the U.K., but I was
wondering if you could just quantify for us how much auto and help wanted
were down in the quarter in the U.K.? And also if you could just talk about
comps in those two categories for the rest of the year and when they might start
to ease?

Let me give you some numbers on a constant currency basis for Newsquest. On
the automotive side for the quarter, automotive was down in the low teens and
employment classified was down in the high teens.

Vis-a-vis the fourth quarter, I think they started to see a little bit of softness there
towards the tail end of the fourth quarter last year, so we have a little bit easier
comp towards the end of the quarter. But a lot will depend on the health of the
U.K. economy which at the moment we don't see really picking up to any degree
for the remainder of the year.

Especially in the South of England which is, as you know, their most positive
growth area, the numbers are most negative there. In the North of England and
in Scotland our numbers are actually a little bit better but the South is such a big
piece of the pie that unless that picks up you're not going to see positive results
overall.

And the follow to that would be with respect to the real estate sector itself which
at this time last year was in considerably different position. For 3Q it has turned
just slightly negative.

It's beginning to soften, the real estate picture in the U.K. As we said earlier, we
haven't seen that yet in the States but maybe things are slowing down a little bit
especially in the high-end properties.

12

Matthew Gourmand – UBS Warburg – Analyst
Good morning, it's Matthew Gourmand here for Brian. You talked about the
U.K. the auto and the employment sectors. Outside of those are there any
particular pockets of strength that you're seeing? Any positives at all?

And as well, you mentioned you saw hurricane-related expenses in the quarter.
Can you quantify these at all and can you give us a sense of the impact going
forward, any color at all? Thanks a lot.

On the hurricane side, as I said, we saw some additional expenses. We had a fair
amount of impact, the hurricanes did, on our folks in Hattiesburg, Mississippi,
and to a lesser extent, in Jackson, Mississippi.

As is typical of Gannett we moved in a lot of supplies, a lot of loaners, a lot of
people to keep the Hattiesburg folks up and running and able to put out their
newspaper. So clearly there are extra expenses associated with that.

Some of that we'll pick up from insurance. So it didn't have a major or significant
impact but on the margin it had an impact. I'm sorry, your question on the U.K.
again? Was there something positive that we can report on?

Other than auto and employment.

Well, as I said earlier, Scotland is doing okay and the North of England is doing
okay. But as a general statement, no, we're seeing softness in employment and
motors and the real estate is beginning to get a little less robust.

The biggest positive in the U.K. is that we have a terrific management team there
that understands how to respond to this kind of economic downturn. And when
the economy turns around as it will, they will again post the great numbers that
they have for the last five years.

13

Paul Ginocchio – Deutsche Bank Securities – Analyst
Thank you. I guess this question is for Craig. Your view on dividends, obviously
the shares have been under a lot of pressure and the market's got a relatively
bearish view on the future newspapers right now. What would it take for you to
change your view on being more aggressive on paying out a bigger dividend?
Thanks.

Craig and I have chatted about this a lot and I think our feeling is that at the
moment we're returning value to our shareholders through a share repurchase
program, a very significant share repurchase program both last year and this
year. And there really hasn't been a lot of call for us to increase our dividend in a
significantly more meaningful way.

Every year we've increased our dividend. In July, we announced a $0.02
increase.

I think we want to continue to maintain the flexibility we have on the share
repurchase side as we look at the potential for acquisition opportunities down
the road, should the FCC ever get to a point where they change the rules that
have been, I think, tempering acquisition opportunities for the last couple of
years. So I think we'll stay the course on the share repurchase front unless
something were to change dramatically and we would react to that.

Ed Atorino – Benchmark Capital – Analyst
Good morning. Could you remind us what the political contribution and
Olympic contribution might have been in 2002, the last off year?

In 2002, Ed, we had about, call it $80 million, a little over $80 million of political
and almost $24 million of Olympics. So it was a significant year in '02.

But we're looking forward to some pretty good numbers in '06, Ed, looking at
that as a frame of reference. It won't be as great as in '04 but it should be pretty
good numbers because our ratings on our television stations are still excellent.

14

Jim Goss – Barrington Research Associates – Analyst
I was thinking along the same lines with the political and Olympic issues. Have
you looked at the races in the local markets that you're affected by in terms of
broadcasting?

And in terms of Olympics, it seems you've been stepping up your activity with
USA TODAY with special sections and getting more like a broadcaster in that
way in that vein and the Olympics hit in the first quarter this year, maybe you
can comment on that a little bit since it's a near-term event.

Sure. With respect to the Olympics USA TODAY will continue its participation
as it has. It's a big focus for what Craig Moon and his group are doing. And we
look forward to certainly all Torino has to bring from that aspect.

Every year it gets a little better, Jim, you know, we've, USA TODAY being the
nation's newspaper gets a lot of play, we have a very good working relationship
with the Olympic folks. You'll see us take advantage of that and being part and
parcel of it as much as we can.

And Craig may comment on [any] local races we have. It's not something we
spend a lot of time worrying about.

At this point our groups are going through a budgeting process. We know at this
point really very little, but what we do know is that there is some optimism in
what we are seeing.

We're just going to have to get through that entire process and probably in the
next couple of months we'll have that pretty well ironed out. But Doug
commented earlier based on the rating performance of the television stations
certainly we would expect some very, very positive results as we move forward.

And the other key is just the strategic location that we have, and if you take a
look at a number of the markets where there will be local or state elections we're
going to have certainly proper positioning there as well.

15

Alexia Quadrani –Bear, Stearns & Company – Analyst
Thank you. Craig, I believe you spent the last several weeks visiting many of
Gannett's newspaper properties and I was wondering if anything notable or
surprising came out of those visits?

And secondly, I know it's a bit early, but any preliminary thoughts on how ad
rate hikes may look in '06 versus '05?

As far as the visits are concerned, we have had, in fact last week, some
tremendous opportunities to spend time with the employees and in particular
we went down and visited the new acquisition that Gracia had mentioned in
Tallahassee and learned a lot. We've got a very, very eager and aggressive group
there and so we're looking for some positive opportunities as we go into the
future and they blend into the Gannett culture.

And as well we spent time in Pensacola. And what we found after Ivan hit,
created all the issues for that community, is a tremendous response to the
community from the people at the newspaper. And our view is that the kind of
response they had will really pay dividends as we move into the future and that
commitment will pay out in multiple ways.

We've gone around to a number of other properties and various things have
come out but we are looking very forward with Sue (Clark-Johnson) in her new
role to completing our visits and really working on the planning part. Gracia,
you may want to comment briefly on the ad side.

I think we'll be looking at similar kinds of increases as we have in the past year,
but again, that varies market to market and product by product, and we are just
about to launch into our 2006 budgeting. We'll have a much better handle on that
when we see what the folks in the field believe that they can do. We're not
anticipating anything significantly different than what we have been seeing over
the last year or two.

16

Crista Quarles – Thomas Weisel & Partners – Analyst
You mentioned that you were cautiously optimistic on USA TODAY and I was
wondering, obviously they have some pretty easy comps in Q4 so I was
wondering if that's what's giving some of the optimism?

You also mentioned auto at USA TODAY is actually an area of strength, if you
could highlight some of the other categories?

And then, you mentioned that your non-traditionals are up sort of mid-teens. I
was wondering where on a run rate you think that will come out for the year?
Thanks.

On the USA TODAY side you're quite right. As we said, we have easier comps in
the fourth quarter, but I think it's more than that that makes us cautiously
optimistic on the USA TODAY side.

Craig has shared with us that a number of advertisers are looking at
opportunities to advertise with us, some new advertisers that we haven't seen
before, as well as others that perhaps haven't been in the paper for a little bit of
time.

And on the auto side, the fourth quarter usually turns into a pretty good quarter
for us. So given what they've done thus far this year on top of what they've done
in previous years on the auto side that gives us confidence in what they can
accomplish there.

Crista Quarles – Thomas Weisel & Partners – Analyst
Is it fair to say the visibility will be increasing then?

I'm not sure if it's increasing. If anything it’s about the same, probably on the
Broadcast side it's a little bit shorter, but at USA TODAY it's probably about the
same. We just are responding to what we're hearing right now in some of the
advertisers that are approaching us.

17

Fred Searby – JP Morgan Chase & Company – Analyst
Comment on the consolidation of department store category and how much of
an impact you're seeing? We've kind of been monitoring it and if it really is
having a major impact and what your thoughts going forward are there? Thank
you.

I think as we had mentioned before we are impacted in 12 of our Gannett
newspaper markets as we go forward. Overall it is a fairly significant number
but certainly the group is working very hard to figure out any of the other
opportunities we have from an overlap standpoint in how we can move forward.

But Gracia, you may want to fill in a little bit here on some of the other
information that we've come in with just recently?

Sure. Fred, we have seen a little bit of a pull back on a combined basis from
Federated and May as frankly we've been expecting. We have said we fully
expect that Macy's is going to reduce their spending over time because of the
overlap in those 12 markets.

But at the same time, interestingly enough, we are seeing some increased
spending from the Wal-Marts and the Targets and frankly the K-Mart/Sears
combination.

So while we've seen some pull back there, we are seeing some positives out of
some others. We continue, as you know, to focus on those small to medium-size
advertisers and on the non-daily side. Also in response to Crista's question on
the non-daily side, we are continuing to see good follow-through as we
concentrate on those small to medium-size advertisers and provide them with
those additional products that are perhaps at better price points for some of
those smaller advertisers. We would anticipate that on the non-daily side we'll
continue to see good follow-through for the remainder of the year.

Fred, also on the Federated/May pieces where they have overlaps and they have
to sell some of the stores, as you know, they're being asked to sell to competing
department stores. From what we understand that is going very well and there

18

will be competing brands in those markets which will obviously be more positive
to us than otherwise.

Brad Dyland –Deutsche Asset Management – Analyst
Good morning. At what point with your stock at the level it's at, would you look
to utilize your balance sheet more to be more aggressive in buy backs? And
along those lines, how important you is your single quot;Aquot; credit rating?

And then my last question is, if it's possible to include more balance sheet and
cash flow statement information in the quarterly press releases.

Taking that last question first, in very short order, we will be filing our 10-Q and
that will have a very complete and thorough reporting on all of our cash flow
statistics. We'll have our 10-Q out by the end of the month.

Vis-a-vis using our balance sheet further on share repurchases, as I said earlier,
we are constantly balancing leveraging up the balance sheet on share
repurchases with the potential for acquisition opportunities. I think as long as we
are in that mode in the short-term to intermediate-term we'll continue to balance
that equation carefully.

If we were to find down the road that we needed to go in a different direction we
certainly would do that.

We have said in the past that we very much like having a solid investment grade
credit rating. But at the same time if the right opportunity came along we would
stretch our balance sheet for that opportunity, but as we have in the past, then
we would quickly look to focus on bringing the balance sheet back so that we
have the flexibility and ability to respond to additional opportunities as they
come down the pike.

James Peters – S&P Equity Research – Analyst
Yes, good morning. You talked about margins being adversely affected by
Detroit in the near-term and seeing opportunities in the medium-term. If you
could just remind me what you're defining as the near and medium-term and
also in the medium-term if what you're saying is that the margins for the
company overall will return to sort of pre-Detroit levels? Thank you.

19

Well, the impact on the margin comes about in part because previously we had
been including the net of Detroit's results, 50% of the net of Detroit's results as a
one line item in other operating revenue. Which means there was very little
expense that offset that line. Now we are fully consolidating Detroit into all of
our numbers, and as we have said, the margin in Detroit is not where we want it
to be either in the short, intermediate or long-term.

That's the opportunity in Detroit. And so while there may be some margin
pressure from Detroit in the very short-term, and by short-term I mean over the
next year, we certainly are looking at opportunities to improve Detroit's
performance when the new press project comes on board later this fall, when we
go to the A.M. conversion we will do in early next year, and then as we continue
to look at opportunities to improve operations over the next two to three years in
Detroit.

So we understand that Detroit has that impact but our management team there
understands the need for us to move in a very positive direction in Detroit very
quickly.

Dan Jenkins – State of Wisconsin Investment Board
Good morning. I was wondering if you could give me what your debt to capital
is at the end of this quarter versus at the end of the third quarter last year or
maybe at the end of the year last year? And then kind of reiterating what the
earlier caller said, it would be nice if we could get a balance sheet with the
release.

And then how far are you planning to push that for further share repurchases,
that leverage? Are you intending to add more leverage from where you're at now
or are you just going to use free cash flow for that going forward?

As I mentioned previously, you will have a full balance sheet by the end of the
month. I did provide some guidance that we had about $5.4 billion of debt at
quarter end. I don't have last year’s quarter end but you can go to our Web site,
www.gannett.com and our financials are available there.

20

We'll continue to look at the deployment of free cash flow, whether it be share
repurchase or whether it be acquisition and are continuously evaluating that.
And we'll do what is right and we'll do what adds the most value to our
shareholders on an intermediate to long-term basis.

Operator
It appears there are no further questions at this time. Ms. Martore I'd like to turn
the conference back over to you for any additional or closing comments.

Thanks very much for joining us this morning. If you have any additional
questions please call either Jeff Heinz at 703-854-6917 or me at 703-854-6918.
We'll both be here for the rest of the day to answer any other questions you may
have. Thanks again for joining us.

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

21

gannett 3Q05transcript

Recommended

Recommended

More Related Content

What's hot

What's hot (17)

Viewers also liked

Viewers also liked (6)

Similar to gannett 3Q05transcript

Similar to gannett 3Q05transcript (20)

More from finance30

More from finance30 (20)

Recently uploaded

Recently uploaded (20)

gannett 3Q05transcript