gannett 4q2006transcript

GANNETT CO., INC.
FOURTH QUARTER AND FULL YEAR 2005
CONFERENCE CALL AND WEB CAST
JANUARY 27, 2006

PRESENTATION

Operator

Good day, everyone, and welcome to Gannett's fourth-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 would like to turn the call over to Gracia Martore. Please go ahead.

Gracia Martore - Gannett - CFO

Thanks very much and good morning. Welcome to our conference call and
Webcast today to review our fourth-quarter and full-year 2005 results. Hopefully
you have had 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.

Not a lot has changed since our presentations at the year-end conferences, and
since many of you heard those, we will keep our comments relatively brief to
allow time for your questions. As you saw from our press release, for the fourth
quarter we earned $1.44 per diluted share from continuing operations, which is
at the high end of the range we provided you in early December. In 2004, we
earned $1.44, on a comparable basis, for the quarter. Looking at the full year, we

1

earned $4.92 per diluted share, again from continuing operations, versus $4.84
last year.

A number of factors had an impact on our results for the quarter, which we
shared with you in early December. However, a strong finish in December by
USA TODAY contributed positively to the quarter. Our broadcasting segment
also had a better December than anticipated. But the challenge of recouping
politically related advertising demand, that totaled over $48 million in last year's
fourth quarter, was too big a mountain to climb over for the full quarter. Our
domestic community newspapers experienced double-digit revenue gains in
classified, employment and real estate, but again, auto remained very soft. Our
results at Newsquest continued to be impacted by the slowdown in the UK
economy. Craig will discuss our operations in more detail in a few moments.

Also impacting the quarter was our reorganization of the Detroit Newspapers
Partnership which we completed in August. The full consolidation of 100% of
Detroit's results had an impact on both revenues and expenses for the full
quarter and our margin for the newspaper segment. When we completed the
Detroit transaction, we shared with you that it would have a negative impact on
our margin in the near term. But we see opportunity to expand them over the
intermediate to long term.

Just a note on one change you heard about in the fourth quarter. On December
25th, the last day of our fiscal year, we completed the expansion and
reorganization of the Texas-New Mexico newspapers partnership with
MediaNews Group. We contributed one newspaper, for which we recognized a
minor non-monetary, non-operating gain in the quarter, and MediaNews
contributed three Pennsylvania newspapers. As a result, our interest in the
partnership is now approximately 41%, and MediaNews Group has become the
managing partner. This change does not impact operating results for the quarter,
but will result in a change in our accounting presentation. Going forward, our
percentage of the net results of the partnership will be included in other
operating revenues, similar to the California Newspapers Partnership.

Turning back to our results for the quarter, our reported expenses for the
newspaper segment increased 12%. However, Detroit and some other smaller
acquisitions completed this year had a big impact on that number. On a pro
forma basis, assuming we owned 100% of Detroit and the same complement of
properties in the fourth quarter of '05 and '04, newspaper expenses would have
been up less than 0.5%. Reported newsprint expense increased 14.9% in the
quarter, comprised of a less than 10% increase in prices and 4% greater usage.
Again, Detroit and those other acquisitions had an impact on those numbers, as

2

well. On a pro forma basis, newsprint expense was up 4.7% with usage down
almost 4.5% and prices up 9.5%. Finally, pro forma cash comp, excluding
newsprint, were down about 1% for the quarter.

Focusing on newsprint specifically, throughout 2005, Gannett benefited from
fixed-price newsprint agreements covering a substantial amount of our
requirements. As I mentioned, pro forma consumption in 2005 trailed the prior
year. Conservation measures will continue throughout 2006, including additional
Web-width reduction and expanded trials of lightweight newsprint. For the first
half of 2006, we have again secured stable price arrangements covering a vast
majority of our paper usage.

Moving to the balance sheet, total debt at year end stood at $5.4 billion, and cash
and marketables were about $167 million. Our all in cost of debt currently is 4.7%
with commercial paper at about 4.4%. Interest expense in the quarter, as you
saw, was $62 million, compared with 41 million in the same quarter last year.
The increase was attributable to both higher short-term interest rates and debt
outstanding related to share repurchase activities and acquisitions. With respect
to shares outstanding, basic shares at the end of the quarter were 237.8 million
and averaged 238.5 million in the quarter and 245 million for the full year. We
repurchased approximately 3.2 million shares during the quarter and
approximately 17.5 million shares for the full year.

Capital expenditures in the fourth quarter were a little over $101 million, and for
the full year they totaled about 263 million. I also want to note some other items
that will have an impact on our results in 2006 and should be considered as you
think about quarterly results. The first is the exchange rate. During the fourth
quarter, the exchange rate averaged 1.75 versus 1.84 in the previous year,
creating a headwind for us in the quarter. We expect that trend to continue in
2006, with the first quarter representing our toughest comparison, as the pound
averaged 1.89 in 2005's first quarter.

The second factor is the expensing of options. As we noted at the year-end
conferences, we will begin expensing options this year, and expect the impact
will be approximately $45 million of pretax expense in the year, spread evenly
over the quarters.

One comment on a transaction that took place after the close of the quarter -- on
January 17th, we announced a minority investment in 4INFO, as well as a
marketing and distribution agreement. By investing in 4INFO, Gannett readers
and viewers benefit by gaining access to free, accurate and thorough information
on a number of relevant topics that will add depth and timeliness to USA
TODAY and other media that Gannett owns.

3

And then finally, before I turn the call over to Craig, our conference call and Web
cast 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.

Sorry I couldn't come up with a better introduction for Craig, but here's Craig
Dubow.

Craig A. Dubow - Gannett – President and CEO

Thanks, Gracia, and good morning to everyone. In December, we told you that
2005 looked like it would be a record year, in terms of revenues. Our release this
morning confirmed those results, and I am pleased to say total operating
revenues reached $7.6 billion for the year. It's particularly pleasing, because we
achieved these record results in an advertising environment that has both been
challenging and choppy. Our 2005 results reflect solid ad demand in classified,
employment and real estate in our domestic community newspapers on top of a
tough 2004 comparison. Growth in local advertising was boosted by revenue
growth from our non-dailies and niche publications. Our newspaper segment
results were tempered by the UK economy's impact on Newsquest. And auto
advertising was soft throughout the year in both the UK and US.

Our broadcasting segment saw soft auto advertising and faced comparisons to a
record level of political and Olympic ad revenues that contributed to results in
2004. But the year ended strongly for broadcasting and for USA TODAY, with
both posting good results in December. As you saw from our press release,
operating revenues from continuing operations advanced over 6% to
approximately $2.1 billion in the quarter and increased over 4% for the year.

Let me give you some additional details on our results, starting with our
newspaper segment. Newspaper operating revenues advanced almost 9% for the
quarter and over 6% for the year. This includes the results for the full
consolidation in the third quarter of Detroit, after the JOA was reorganized, and
for Tallahassee, which we acquired in an asset swap with Knight Ridder.
Assuming that we owned the same newspapers in both years, total advertising
revenues in the newspaper segment declined 1% for the quarter and rose 1.6%
for the year. Overall, our results in the US were better than those in the UK, with

4

US ad revenues for the quarter increasing over 1%. Pro forma local advertising in
the newspaper segment declined slightly over 1% in the quarter. In the US, local
advertising was down slightly. Across all products, health, financial and home
improvement categories gained, and helped offset the lagging results from
department stores, furniture, grocery, restaurants and telecommunications.

Trends that we have seen all year in classified advertising continued in the fourth
quarter. Employment advertising for the Company as a whole increased slightly
for the quarter, on top of an increase of more than 18% in 2004. Domestic
classified employment results were significantly better than our results in the
UK. In the US, community newspaper classified employment increased almost
14% for the quarter. The strength came primarily from our Pacific and South
groups, both generating double-digit gains in employment.

For the entire Company, real estate was fairly strong throughout the quarter. For
the US community newspapers, real estate increased almost 14% for the quarter.
Again, US results in real estate were stronger than in the UK, although the UK's
results were positive.

Automotive, as we have been saying for quite some time, remained soft in both
our domestic community and UK newspapers in the quarter, decreasing over
16%. In our US community newspapers in the quarter, the automotive category
was down more than 15%, reflecting declines in all regions, but most heavily in
the Atlantic Coast and interstate groups

National advertising revenue was down slightly for the quarter, as decreases
from the community newspapers were offset in part by growth at USA TODAY,
where ad revenues were up over 2% for the quarter. During the quarter, the
technology, auto and advocacy categories at USA TODAY were very strong,
while travel, retail and pharmaceutical lagged last year's results. As we noted,
USA TODAY had a robust finish to the year, with ad revenues up 13% for
December.

Before I turn to our online revenues, let me talk for a minute about the extent of
our reach when you combine our print products with online in any one
community. Together, our daily newspapers, our non-daily and niche
publications and our online products achieved a high level of audience
aggregation and reach, in many cases in excess of 75%. The success of our focus
on this aggregation strategy is reflected in the revenue growth from our non-
daily products and online. Revenues for our local non-daily products, which do
not include the Army Times, Nursing Spectrum or Clipper Magazine, increased
over 10% in the fourth quarter and almost 13% for the year.

5

Turning to the Internet side of the business, our online revenues for the total
company, including PointRoll, were more than $300 million for the year. That's
an increase of 49% for the year and 59% for the quarter. Growth in online
revenues was driven by our domestic community newspapers, which had
growth rates of 47% for the quarter and more than 50% for the year. Our latest
monthly numbers, which are for December, show our domestic websites at about
21 million unique users and reached 13.5% of the Internet audience. In the UK,
Newsquest's online audience totaled 2.7 million unique visitors, with 31.1 million
page impressions. CareerBuilder also continues to perform well for us. Overall in
2005 compared with 2004, CareerBuilder experienced a 20% increase in unique
visitors. For the fourth quarter, revenues grew 67% compared to the same
quarter last year.

Focusing on the UK briefly, Newsquest, as we have been noting, has felt the
impact of the changes in the UK economy, particularly in automobile and
employment. Revenues for Newsquest in pounds were down almost 6% in the
quarter and about 4% for the year. Newsquest operating profit, again in pounds,
was 16% lower for the quarter and over 8% for the year. In response, expenses
were tightly controlled and were lower year over year. These down cycles
typically last 18 to 24 months, so we believe that we are about halfway through
this. We expect to see modest ad revenue growth in the latter half of this year.

Moving to broadcast, total revenues for the broadcast division including
Captivate declined 11% for the quarter. At our TV stations, total revenues were
approximately 12% lower compared to last year. Local ad revenues increased 1%
while national decreased 28%. This decrease reflects the lack of more than $48
million in advertising demand related to the elections in the fourth quarter of
2004. However, several advertising categories firmed up in December, led by
auto, retail, banking and finance. This resulted in revenue growth of over 5% for
the month.

Looking ahead, our latest pacings for first quarter overall are up in the high
single digits compared to last year's first quarter. January is down in the very
low single digits. February is up over 30%. Local is stronger than national at this
point. These pacings reflect the ad demand associated with the Winter Olympic
Games in Turin that will be broadcast on our NBC station in February. Again, I
want to caution you the pacings are very volatile and reflect where we are right
at this moment, we will keep you updated on our monthly reports as the quarter
progresses.

Before we go to questions, let me provide a few words about 2006. We are
enthusiastic about the possibilities and opportunities we see in our markets, as
more consumers access our content in even more ways. Our investment in

6

4INFO is just one small but interesting example of our effort to deliver content in
ways consumers want it. In 2006, our domestic community newspapers will take
advantage of the market coverage and an array of products to generate positive
revenue growth. USA TODAY will benefit from the value of its brand as we find
more ways to deliver its content, and there will be an advertising rate increase.

In broadcasting, the Olympic Games and politically-driven ad demand, in
addition to new business initiatives, are expected to contribute significantly to
revenue growth as we take advantage of our strong local news ratings. For
Newsquest, we expect and anticipate some stabilization in revenues in the first
half and revenue growth in the second half.

Overall, Gannett is committed to our focus on local coverage and local content.
Delivering that content wherever and however the customer wants it is our
mission, and that will drive our results.

Now we will be happy to stop and take your questions.

QUESTIONS AND ANSWERS

Christa Quarles, Thomas Weisel Partners

I just had a quick question on the online side. It appears you are outperforming
pretty much everybody else in the online space, perhaps other than Google. And
I was just wondering if you feel that that is just pent-up demand for your
properties, pricing improvements or is that’s something that can be sustainable?

Then on CareerBuilder, we are hearing news that they're thinking about moving
internationally. I was just wondering if you guys have any comments on that and
the resulting profitability there.


With regard to CareerBuilder and international, we look at a variety of things in
the partnership. And if we all believe, together with our good partners at
Tribune and Knight Ridder, that an international expansion is appropriate, and
we can ultimately make money there, then we would certainly contemplate that.
But we are very focused on being successful, as we have been here domestically.

7

Douglas H. McCorkindale - Gannett – Chairman

With our operation over in the UK, we're doing very, very well in online and our
relationship with CareerBuilder is a positive there, because the UK folks and the
CareerBuilder folks do exchange information. That should add a little plus on the
international big picture.


As far as the overall for online, as you know, we have had an extraordinary focus
on that for the last several years. And I think we are beginning to see the fruits of
our labors there, if you will. It is going to continue to be a major focus in all
categories across the company. You probably also saw the emphasis we are
putting toward that with the introduction of our new president of Gannett
Digital. Jack Williams will take over and will continue every effort to further
coordinate this as we go into the future, recognizing the importance of this for
the forward view.

Craig Huber – Lehman Brothers - Analyst

January -- any thoughts on newspapers? Is it much different than what we've
seen in the fourth quarter? And also, this comparable newspaper cost, down 1%
in the fourth quarter -- you guys have been very, very tight on costs for many
years. And I applaud you for that. But how many more years can you guys -- or
how long can you go with non-newsprint costs down 1% or so without actually
hurting the franchise?


Those are cash costs at newsprint. All of our divisions are focused on making
sure that our expense picture reflects our revenue picture. And to the extent that
we had some difficulties in the fourth quarter and during the year, particularly
over in the UK with the economy there and in some softening demand on the
auto side, our folks have responded in an appropriate way to those revenue
shortfalls. I know they will continue to do that, to the extent that it is necessary.
But we are very focused as well on growing that top line and getting those
revenues moving. That's very important to us.

On the newspaper side, for January, I would say probably nothing different than
what we were talking about at the December conferences on the USA TODAY

8

side. We continue to see choppiness. A wonderful month in December. We'll see
how January plays out. For the full quarter, we're anticipating that we will do a
pretty good job; but, again, we're seeing some choppiness on the national side
and no trend from month to month.

Auto continues to be a real challenge at the community newspaper level, but at
the same time, real estate has been a very good ad category and certainly
continued to be in December. And we'll see how that goes for the remainder of
this quarter.

Brian Shipman –UBS - Analyst

I was wondering if you could quantify -- you have done this in the past -- if you
could quantify how much Olympics and Super Bowl will affect the numbers in
1Q, and also if you could quantify what you are expecting in political advertising
for the full year? Thank you.


As far as the Olympics are concerned, it is not domestic. So it's going to probably
be slightly less than what we achieved out of Salt Lake. Overall, the sales are
okay; they are not absolutely terrific. But in general, we're fine with it.

For political, we're anticipating a fairly robust year. I think that the real key here
is when everything will begin. There was anticipation that we would see some
political beginning in January. To date, that has been very, very slow. So that
would be slightly behind what we had anticipated. In general, from all the
people that we have spoken with, we're anticipating a very robust year .


In '04, I think you came in a bit north of $120 million in political?


No, that included Olympics.


9

Oh, that did include Olympics?


Yes. On the political side, we are about $90 million to $95 million. In 2002, that
number was in the low eighties.


So you're thinking in the $90's for '06 or possibly even slightly better?


I don't think that's exactly what we said. Remember that 2004 was a presidential
election year, whereas 2002 was a congressional election year. I think that maybe
at this moment, given how early it is in the year, we would think it would be
more comparable to a non-presidential year than a presidential year. But we
were surprised in '04, positively, so we will just have to see how the year plays
out.

John Janedis –Banc of America Securities - Analyst

I just wanted to check in on the Denver TV station. I know it wasn't a big deal,
but given you plans, assuming that goes independent?


I think the key is we certainly have interest in the station, but we need to
understand where all of this will shake out with CW and what those
ramifications will be. That has yet to fully unfold here for us.

John Janedis –Banc of America Securities - Analyst

10

When is that supposed to close?


A couple of months, subject to FCC approval. But we have to look at what the
CW arrangement means, as Craig indicated. So that may slow down the closing.

Dave Clark –Deutsche Bank - Analyst

USA TODAY ad yields were very strong in 4Q, particularly December. Could
you give us the color on why that was? And also, could you give us an update on
Detroit, how the transition is going?


I'll take the USA TODAY, and I know Craig will jump in on Detroit. They
benefited from the price increase we put in at the beginning of the year, which
was in the 8% range. They also benefited from the mix of advertising. As you
know, a color page carries a nice premium to a black and white page. That
impacts the yield they get, as well.


Detroit is moving forward. I think Dave (Hunke) and his group have been
working exceptionally hard up there. But what we have to have is some better
economics. As everyone is very aware, it has been a very difficult ad
environment in that town. And with what has happened in the auto industry,
they have really felt some very significant impacts. Overall, we are moving
forward, but it is a real, real difficult economy.


I'd say, to add to what Craig has said. He's covering the revenue side. On the
expense side, they are doing a very good job, with a new plant (press facility)

11

coming online here in the last quarter; they have really realized the kinds of
savings that we were anticipating from that very significant project. And I know
they are going to be very focused on the cost side of the equation, as well.

Fred Searby – JP Morgan - Analyst

If you strip out the UK and USA TODAY in 2006, what would be a good number
for you on the smaller market, in terms of ad revenue growth? What do you
think in the more community-oriented newspapers would be a good number?


The assumptions that we gave out in early December with respect to ad revenue
growth numbers continue to be where we think things are shaping up, at least at
this moment. They are in low, potentially, to mid-single digits. Again, auto being
a continuing drag on those numbers. But the assumptions we gave out in
December continue to be appropriate, at least this early in the year.

Douglas Arthur – Morgan Stanley - Analyst

On USA TODAY, you threw out some caveats in terms of choppy start to 2006.
But are you starting to feel more confident vis-a-vis some of the major categories
that USA TODAY has turned the corner?

And Gracia, you had mentioned back in December pretty strong demand at USA
TODAY, surrounding the Winter Olympics. Is that still the case?


Craig Moon mentioned he would see some good advertising pickup surrounding
the Olympics, and our sense is he is seeing that. Clearly, it's not anything like
what we have seen on the broadcast side; it's measured in single millions of
dollars rather than the double-digit millions that we've seen on the broadcast
side.

12

Yes, I think we're feeling good about the job that USA TODAY is doing. They
had a very strong finish to December in a lot of categories, particularly auto,
technology, telecommunications. They are feeling a little bit better about business
conditions than they did at the beginning of December. But again, it's been
choppy, so we don't want to get ahead of ourselves as we look at the remainder
of 2006.

Alexia Quadrani – Bear Stearns - Analyst

Just some further color on the UK? We obviously saw some deterioration in the
fourth quarter versus the full year. I just wanted to get a sense: Are you seeing
further deterioration in the UK early in the first quarter? Also I think at one point
you were concerned that the real estate advertising in that market was beginning
to look a little bit worrisome. It looks like it did okay in Q4. Do you think that's
likely to be stable going forward, or is there still some risk on the real estate side?


Overall, what Paul Davidson had called back in December is holding very true.
We had mentioned how difficult their auto -- they call it motors -- is in that
market. Certainly, their employment side was also very specific as a concern.

Following up on your real estate question, we’re doing moderately well. It is in
the low singles, but it is positive at this point, despite some of the issues they
have been having. Depending on which part of the country you are talking
about, we see either some more positive or some more negative. The comment
that it is very choppy over there is consistent. Again, being about midway into
the economic cycle, we are still anticipating this first half to have some
difficulties.

Peter Appert – Goldman Sachs - Analyst

Back to the UPN/WB combination, can you give us your perspective on what
you think that new competitor might mean to you in your markets from a ratings
perspective? Whether you think there is perhaps some incremental pressure on
programming costs for syndicated product, in terms of a new independent
competitor in the market? Then finally, any perspective you can give us on
trends in network compensation for your station group?

13


Overall, I think CW will add some interesting opportunities. You are very clear
on the struggles that were taking place with WB and UPN before. The
combination this will add – if I'm correct, I believe it's 30 hours of prime
programming that will be added into this – I think that will have an impact.
Ultimately, it's going to have impacts on overall availability of inventory, so I
think that is going to be tighter. What we understand at this point and what they
are trying to do -- it should produce some interesting changes for what they were
trying to accomplish on UPN and where they were going.

Competitively, at this point, it is very early to try and call anything as far as
longer-range impacts for us. With the primary networks that our portfolio is
made up of, we feel very comfortable. But I think in general, it does change some
of the market dynamics as you begin to look forward.


And how about programming costs, specifically?


As far as programming costs, again, that's something we are going to have to
look at further. Clearly, there would be some differences, depending on where
and what direction we head. There will be a broader need for syndicated
product, so we will have to look very closely. It's very early to try and get to read
as to how those markets will react, and certainly the kind of product we put on
our local station.


And any direction in network comp?


14

You know, I think you have seen over the course of the last number of years,
there has been a reduction in that. We are still participating in it. However, there
is a reduction that we talked about…I guess it was a couple years ago, when it
was brought up. There are some other combinations of working with the
networks that have been publicized with respect to the NCAA and the NFL
football. Beyond that, there's really nothing new we have to report to you.


All of our deals are locked down, so we are not seeing any changes in the
upcoming year.


The other piece is, as we have seen network comp come down, there have been
other pieces that have come in to help replace it on the retransmission side and
other initiatives that Roger and his team have been effective at. So for us, as we
said a long time ago, network comp was never a huge piece of the pie. It’s come
down, but again, our TV team has done a good job of replacing some of that with
other sources of income.

Steven Barlow – Prudential Equity Group - Analyst

Can you talk a little bit, please, Craig, about the NBC effect? Obviously, the
ratings are down for primetime. How is that hurting your primetime revenue?
And then could you discuss, related to that, your indexing of news? In the past,
you have over-indexed, I think, the general NBC stations that are out there. How
much has that, maybe, declined or how has that changed year over year?


Frankly, the overall NBC programming, no doubt, has had some impact,
certainly in our prime numbers. It is a 30% plus part of the overall revenue
picture, when you take a look at it. So yes, there are some impacts there.

15

But when you translate that to the news, what we have done – and we talked
about this a bit last year – where we had increased some of our marketing
budgets at the stations to try and offset any possibility of our late news declines.
Frankly, after the November sweeps, we are very happy to report the results we
had. We are in very, very solid position across the board. From an indexing
standpoint, we are again right where we want to be.

Does it make it more difficult? Absolutely. There is no doubt from that
perspective. On the other hand, when you consider some of the increases we
have seen, certainly on the ABC side for the three ABC properties as well as the
six CBS stations, there is a degree of offset. The coming back to NBC with the
Olympics, it really is balancing up. But it has had some impact. I know the effort
at NBC is working to try to create further improvements. As we go into this
quarter, we are going to be buoyed to a great extent by the Olympics here in
February. Then the added advantage that we are going to have, from a political
perspective, again because of the strong demographics Roger and his team have
been able to continue on the news side.

Steven Barlow – Prudential Equity Group - Analyst

Is there a way to quantify, on an EPS basis, what NBC has hurt you by?


No. I don't think there's any way you could piece that together. It would be a
very difficult maneuver.

William Bird – William Bird - Analyst

I was wondering if you could talk about whether there really are any new
strategies you are looking at to reduce expenses more materially? Then, overall,
current thoughts on non-newsprint expense rise for '06?


I'm not sure there are a lot of new things we can do. It's just more of the same
blocking and tackling that the company has always done, and just looking in

16

every nook and cranny. There are some little things. For instance, we mentioned
at the December conferences an ink optimization project that we are doing in the
UK and the US that may save in the millions. But it's a lot of just blocking and
tackling, and making sure that our expense picture is appropriate in light of the
revenue outlook, and that's always what we are focused on.


The managers clearly understand the need to continue our tight control, and
each of the divisions understands that most directly.

William Bird – William Bird - Analyst

On non-newsprint, I was wondering what your outlook is for '06.


The assumptions that we gave in December with regard to expenses continue to
hold. But as always, we will adjust those accordingly, depending on what the
revenue outlook is. If it's a more positive outlook, then that may require us to
make more investments. If it's a less positive outlook, then we will have to
appropriately make sure we continue to fund the right investments, at the same
time focusing on those items that we can either defer or put aside for the time
being.

Debra Schwartz – Credit Suisse First Boston - Analyst

I was wondering if you could tell us where USA TODAY's margins ended in
2005. And Gracia, given what you said earlier about ad trends, where do you
expect that to go in 2006?


With regard to 2006 on ad trends – again, I hate to keep hearkening back to our
assumptions we gave out in early December but those continue to be operative.

17

Specifically, at USA TODAY, they put in a price increase at the beginning of the
year in the 6% range, and they anticipate they will get very good follow-through
on that price increase, as they have on prior price increases.

On the margin side at USA TODAY, I think we continue to look at mid teens
kinds of margins there. Obviously, we'd love to see those margins do a little bit
better.

Karl Choi – Merrill Lynch - Analyst

Gracia, I wonder if you could help us size the net impact of the consolidation of
the Texas-New Mexico Newspapers Partnership? And just really quickly, if you
can let us know how the option expense should be split between the divisions
and corporate?


With regard to Texas-New Mexico, we will need to get back to you on those
specifics. I don't have them right at my fingertips. About stock option expensing,
if you look at it on the basis of the split among the divisions on the revenue side,
that's a pretty good proxy for the way the option expensing will be split plus a
chunk at the corporate level, as well.

John Kornreich – Sandler Capital - Analyst

Can you give us some flavor on the ad rate increases for local retail, and also for
the classified categories? And related to that, given that you wound up with a 2%
decline in daily circulation and more than 3% on Sunday, could there be, should
there be some pushback from whatever rate increases you are trying to get?


Let me start with your last question first, about pushback on rate increases. With
regard to preprint advertising, that is a direct correlation between paid
circulation and the dollars we achieve from that. There's a very direct correlation
there. About our ad pricing otherwise, I think that our advertisers focus on what

18

we are delivering in the total spectrum of the community. Whether that is 27,222
paid circulation or 28,143, they are not as focused on that as the kind of market
coverage we provide, as well as the audience aggregation and the eyeballs we
bring to their advertising.

As long as they are comfortable we are being successful in driving traffic into
their stores, we are going to be successful in being able to look at the ad pricing
side. When you look at specific ad pricing on the local and classified, again, that
varies market to market, product to product. In some of our markets where there
is a strong ad demand, we will have more flexibility on ad rate increases. In other
markets where, for a variety of reasons including dependence on auto-related
communities, we're going to have to be careful and cautious in what we do on
the ad rate side. It's less of a factor on specific circulation than it is what we are
doing with respect to the total market.

John Kornreich – Sandler Capital - Analyst

So it would be fair to say, perhaps, you are averaging -- whether that's
meaningful or not, but you are averaging somewhere in the 3% to 4% area?


That's not a bad ballpark.

Dan Jenkins – State of Wisconsin Investment Board - Analyst

I was wondering if you could give a little color on real estate and then the UK
employment situation? I think you said the US was up about 14% in the quarter,
so I was kind of curious how much the UK was down. And at what point will
those comps kind of get easier? Because I think it's been declining for a few
quarters now. So at some point, I would think you would see less of a decline
there. On the real estate, I was wondering what percentage of your classified ads
are real estate.


19

Let me answer your last question first. With regard to real estate as a percentage
of our total classified for the total company, it's about 23% or 24%. For
Newsquest alone, it's right in that same ballpark, both for our domestic and our
US newspapers.

On the UK employment side, we will have easier comps beginning in the first
quarter, and those comps will get a little bit easier as the year progresses in the
UK on the employment side. We have said that in the UK, they have had high
teens declines in both employment and auto. We need some help from the
economy in the UK, as well as easier comparisons. And we will just have to see
how the economy there plays out.

Real estate has continued to be a very good category. Domestically and in the
UK, while we were anticipating that we might see a bit of a falloff there, in fact
that continued to be positive in the first quarter. And I think Paul Davidson and
his team are feeling a little bit more comfortable that the real estate picture will
not have a hard fall but will stabilize, depending on what happens on the interest
rate side.


One of the aspects of the real estate market is, as houses stay on the market
longer, that's a positive to us because people have to continue to advertise for a
longer period of time. So the slight slowdown in the market is an advertising
plus to the newspaper business.

David Winters – Wintergreen Advisors - Analyst

I would like to ask Doug a question. You are one of my heroes. You've done an
incredible job over the years. And Gannett is, I think -- it's one of the greatest
companies on the planet. You have been brilliant about allocating capital and
being thoughtful. I'd just love to hear your sort of longer-term thoughts on the
newspaper business, because Wall Street, despite the obsession with the short
term, is so gloomy. Yet this is such a great company and you are so long-term
thoughtful. So I'd just like to hear your general thoughts about the business,
because people are just -- they are so negative, and it's sort of sad in a way.


20

Well, David, you are right on, and yet it's an interesting buying opportunity for
us. Keep in mind that the Street was going to put us out of business in 1999, and
there were going to put us out of business in the early '90s. I can go all the way
back to the early '70s, and when that attitude prevails, there are some interesting
opportunities, such as when we acquired Multimedia at a very good price. Now,
the acquisition market has not reflected the Wall Street attitude completely, but it
has reflected it somewhat. As you know, there are assets for sale in the UK that
are quite interesting to us, and things going on the US, and things that are not yet
public, maybe some things going to happen in the broadcasting market, for all
the reasons that were mentioned earlier on this call.

Yes, it's tougher; the revenue is not as easy as it was 15 or 20 years ago. But we
are generating a couple of billion dollars of cash. We can put it to very good use,
both in traditional businesses and into some of the new businesses that Craig and
Gracia have mentioned and have been announced elsewhere. Our Internet world
is going very, very well at $300 million plus. Now, compared to $7.6 billion it's
not the end of the world, but there's a good upside there.

I own a lot of Gannett stock. And you don't see any announcements of me selling
it. I think it will come back, and I think the Street will recognize all the positive
economics of the business. But is it as easy as it was? No, but it's not going away,
either.


Thanks, Doug. I wish all of you the best, and thanks for being rational in what
has been a very negative Wall Street, emotional environment.


Well, David, we have been rational for as long as I've been here. And I think the
younger management will be just as rational.


As long as they follow your example, Doug, Gannett is a long-term winner.

21


Well, I'm right next to them. So they are not going away.


I think we have time for one more question.

Mike Foss – Alex Brown - Analyst

Wow, I don't have anything that could come close to following up on that one.
Going back to the completely mundane, I was just wondering if you guys could
give us any lead indicators of improvement in the UK, just lead economic
indicators that you guys look at, to give us a sense of when that economy might
start to be perking up again.


The best lead indicator we have is probably looking at each one of the regions
that we are in, in the UK, and seeing how things are playing out, similar to what
we do here domestically. We also look at retail sales and home sales and all the
other economic indicators you would imagine we look at.


We have been over there for five years now, and have hit a home run just about
every year until the slowdown took place in January of '05. As Craig mentioned
earlier, these cycles in the UK historically last for 18 months to two years. It
might be shorter than that this time, but it was market by market for a while, and
then the whole country. And we do have some spots over there that are doing a
little bit better. The slowdown in motors in the UK is for different reasons than it
is in the US. The employment numbers and the softness, especially in the growth
areas in the south of England, were a little bit of a surprise. So it's very much of a
mixed message. The national scene over there was much softer than the local

22

scene, and their retail environment on High Street, as they call it, was pretty
negative. Which would give you an indication that the consumer in the UK is
holding on to their pounds at this point and waiting to see some developments
that would be more positive.

Also the housing prices got, in my view, a little silly. Relative to the average
income of the buyer of a house over there, that's got to have an effect as people
begin to step back and figure out what their cost of living is. Lots of mixed
messages, unfortunately, and nothing that's very specific. I just have a gut feeling
that it's going to pick up a little bit sooner than the historic trends would suggest.

Mike Foss – Alex Brown - Analyst

Thanks a lot, guys. I have to concur with Mr. Winters on our outlook versus the
Market's. But good luck and keep up the good work.


Thanks for joining us, and if you have any further questions, you can reach Jeff
or me after the call. Have a great day.

Operator

That does conclude today's teleconference. Thank you very much 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.

23

gannett 4q2006transcript

Empfohlen

Empfohlen

Weitere ähnliche Inhalte

Was ist angesagt?

Was ist angesagt? (14)

Andere mochten auch

Andere mochten auch (18)

Ähnlich wie gannett 4q2006transcript

Ähnlich wie gannett 4q2006transcript (20)

Mehr von finance30

Mehr von finance30 (20)

Kürzlich hochgeladen

Kürzlich hochgeladen (20)

gannett 4q2006transcript