1. GANNETT CO., INC. FOURTH QUARTERAND FULL YEARCONFERENCE CALL AND WEBCAST January 30, 2009(Edited for clarity)PRESENTATION Operator Good day, everyone, and welcome to the Gannett fourth-quarter 2008 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 greatly appreciate your cooperation and courtesy.Our speakers today will be Craig Dubow, Chairman, President and CEO, and Gracia Martore, Executive Vice President and CFO. At this time I would like to turn the call over to Gracia Martore. Please go ahead.Gracia Martore - Gannett Co., Inc. - EVP, CFO Thanks and good morning. Welcome to our conference call and Web cast today to review our fourth-quarter results. We hope you've had the opportunity to review our press release this morning. It also can be found at www.gannett.com.With me today are Craig Dubow, Chairman, President and CEO, and Jeff Heinz, Director of Investor Relations. Today, Craig will provide an update on our efforts to manage Gannett in this extremely tough economic environment and position the company for the future. He also will provide a brief overview of our results for the quarter.I will go into a little more detail on our results, particularly our business segments. I will also discuss our anticipated impairment charge as well as the restructuring expenses for the fourth quarter. We supplied you with a detailed look at our

2. expectations for the quarter in mid-December, so we will keep our comments brief this morning. Craig?Craig Dubow - Gannett Co., Inc. - Chairman, President, CEO Thanks, Gracia, and good morning, all. Like virtually every other business, Gannett's results for the fourth quarter reflect the unprecedented turmoil in our economy and financial markets. The ongoing softness in our real estate markets, slowing auto sales, job losses and weak holiday sales took their toll.Even so, Gannett continued to innovate and transform our core businesses while at the same time managing through the cyclical downturn. This twin focus is a key to our strategy and will, I believe, serve us well over the next several months as we face the global economic downturn and position ourselves for any recovery.Today, I want to talk to you about our efforts on both of these fronts, while highlighting our ongoing innovation, an important acquisition, and our overall progress. First, let me tell you about our industry-leading innovation changes in Detroit.As we have noted on a number of occasions, we truly understand the changing media landscape and the consumers' desire to access content across multiple platforms. This is at the heart of our Detroit transformation.For those of you who don't know, we operate under a Joint Operating Agreement in Detroit. We own the Detroit Free Press, and Media News Group owns the Detroit News. Due to a combination of factors, namely a two-newspaper market and a very trying regional economy, we had to fundamentally change the way we deliver our content.Using a very research-based, customer-centered approach, the managements of the newspapers evaluated the market, talked to our readers and advertisers, and tailored a series of significant changes to meet these needs. The goal is to deliver what our customers want and what advertisers need while significantly reducing production and distribution costs.Beginning in this quarter, we will be offering a wider variety of digital information channels in Detroit, while continuing to provide home delivery of the newspaper on Thursdays, Fridays, and Sundays. Subscribers will have access seven days a week to improved daily electronic editions that are the exact copies of each day's printed newspapers and can be easily printed and navigated. Printed copies of the newspaper will be available at newsstands seven days a week. 3. Many Detroit advertisers have indicated their support of these efforts. I encourage you to access at www.freep.com to track the progress of these changes. This is a bold step and I applaud the Gannett leaders that are making this happen.Transformation is taking place on many other fronts as well, including the cornerstone of the Gannett Company, our content. Gathering and distributing reliable and relevant content is what it is all about for Gannett and will be a key to our success in this transformation.Our ContentOne initiative announced in December will fundamentally change the way we gather, manage, and use that content. Improving the efficiency of content development and our ability to more effectively share our content across properties and platforms are our initial goals.We will do that by working to eliminate duplication, which will give our journalists the ability to focus on quality and deep local coverage. One aspect of that will be managing major event coverage, both to be more efficient but also to be more attractive to national and local advertisers.We used the inauguration as a very early test and found both strengths and challenges. Our next test most likely will involve sports as we ramp up the project.ContentOne's major innovation ultimately will be the decoupling of the content solely for use in our news and information platforms and valuing that content for sale outside of Gannett. Viewing and managing our content as a product is a key goal of this transformation.On the digital front, we announced the purchase of Ripple6 in the middle of the fourth quarter. Ripple6 provides publishers and marketers with a proprietary social media platform with which they can build online communities.The platform has many unique aspects which make it easier for members of those communities to more simply communicate and share information. It also provides deep and rich analytics to publishers and advertisers seeking to understand the value of that interaction. Finally, it allows brand managers to recruit people in their communities for research and focus groups online, creating new revenue streams for online publishers.The consumer's interaction with content is changing continually, and social networking is just one example how that interaction is evolving. These online communities are becoming more prevalent and entrenched; and we want to be in a position to benefit 4. from them. Ripple6 will help Gannett achieve that goal, just as it will help marketers and other publishers as well.We also experienced some firsts in our content distribution in the quarter. Our folks in Digital and at USA TODAY developed a USA TODAY news application for the iPhone that went live in late December. The app features the latest from USA TODAY based on the standard sections of news, money, sports, and life as well as tech and travel. A weather section based on GPS is featured, along with updated sports scores and schedules, photo galleries, and user polls.It also is a new and innovative way for marketers and advertisers to reach a very desirable audience. The USA TODAY app is getting great user reviews and has become one of the most popular for the iPhone, according to the Apple folks. It became the number one free news application soon after it was released. Last week, it ranked 58th among all free apps, and it has climbed steadily since to as high as sixth, a significant accomplishment considering there are over 15,000 individual apps available for the iPhone.Also in December, USA TODAY became available on the Amazon Kindle. We have seen solid response from a strong brand on yet another platform.One other note regarding USA TODAY. They are in the process of changing the business model for the international edition. USA TODAY will publish the final international edition next week. However, they are in discussions with our partners to move to a licensing model in which USA TODAY editorial staff will produce the content, while regional partners would pay a per-copy fee to print the newspaper and sell their own advertising.While we are transforming Gannett through innovation, we are at the same time using the same methods to manage our costs during this recession. We are assessing our costs from top to bottom, working to save money while delivering value to our customers.Unfortunately, that required some very tough decisions during the quarter regarding the size of our work force and operations. This restructuring resulted in a severance charge of roughly $56 million.We continue to centralize and streamline our operations. We announced furloughs for the first quarter of 2009 as a preemptive effort to limit expenses while working through the economic slowdown and assessing the coming year. Furloughs were the least invasive to our operations and the fairest to our employees, while addressing the financial challenges that we and most companies in the US and abroad are facing. 5. One final item to discuss is our annual goodwill impairment testing. We are nearing the end of that process and expect to take a non-cash impairment charge in the range of $5.1 billion to $5.9 billion pretax, or $4.5 billion to $5.2 billion after tax, reflecting the writedown of goodwill primarily. The impairment reflects the decline in ad demand and business conditions stemming from recessions both here and in the UK, as well as the decline in equity valuations generally and our stock price specifically.These are non-cash charges and do not, however, impact our ability to manage our business, pay down debt, or affect our ability to borrow in any way.As a reminder, in the fourth quarter last year we recognized a non-cash impairment charge of roughly $51 million after-tax. We also had an after-tax severance and facility consolidation cost of approximately $24 million.Before we turn to our results for the quarter, it's important for you to focus on the fact that Gannett is in a solid financial condition. We are profitable and generate substantial free cash flow. At the same time, we are pressing forward to transform Gannett and position it for the future.Now, turning to the results for the quarter. Preliminary earnings per share were $0.69. Excluding the restructuring expense, they would have been $0.85 per share. Our operating revenues totaled $1.7 billion.Total expenses including severance expenses were $1.5 billion, slightly lower than last year's fourth quarter. However, pro forma expenses, excluding severance expense in both years and the impairment charge in the fourth quarter of 2007, declined over 6%.Operating cash flow was about $328 million for the quarter.Our results reflect the stalled economy both here and in the UK primarily and its impact on advertising demand. We did, however, benefit from politically-related spending in television and solid results in the digital segment.In our publishing segment the advertising revenue trends through November we noted recently were slightly better in December. There was improvement in some categories; but overall, we finished the quarter in line with our results through November.Circulation revenue was down in the low single digits. However, circulation revenue domestically was relatively flat for the quarter but up in November and December. 6. We benefited from the price increases as well as demand for election day coverage, particularly at USA TODAY. An additional 400,000 copies of that edition sold, bringing total circulation to roughly 2.8 million.Political revenue helped to boost results in our broadcasting segment. We exceeded our projections for the fourth quarter of 2008, with political spending totaling about $58 million. As anticipated, our stations in Denver, Minneapolis, Cleveland, St. Louis, Washington, DC, Atlanta, and Phoenix saw significant political advertising.Broadcasting revenue was up slightly for the quarter. Television revenue, which excludes Captivate, was up almost 2% for the quarter. Online revenue and broadcasting was up about 7% in the quarter.However, several ad categories in broadcasting were under significant pressure, and we expect that to continue into the first quarter. Based on our current outlook and results to date, we expect television revenue to be down in the mid teens in the first quarter of 2009.Moving to the digital segment, this is the first quarter in which CareerBuilder has been consolidated for the entire quarter. As I noted, we acquired Ripple6 in November, so their results are included in the digital segment in addition to CareerBuilder, PointRoll, ShopLocal, Planet Discover, and Schedule Star.Reported digital segment revenues totaled $170 million, while operating expenses were $146 million. Operating cash flow for the segment was just over $34 million due to solid results for CareerBuilder, ShopLocal, and PointRoll.We continue to carefully invest in our digital businesses. On a pro forma basis, assuming CareerBuilder and ShopLocal had been fully consolidated for all of 2008 and 2007 fourth quarters, operating revenues in the digital segment would have been 1.4% higher; operating expenses 5% lower; and operating cash flow would have increased almost 64%.In order to help you better understand CareerBuilder results, we will start with what has typically been shared with you in the past, CareerBuilder's network North American revenue. This is comprised of total revenue from CareerBuilder's own sales efforts in addition to the revenue from the network of owner-affiliated newspapers. CareerBuilder network North American revenue for the fourth quarter totaled $163 million, an 11% decline from the same quarter in 2007. 7. Over 80% of the total came from CareerBuilder directly, while the balance was derived from the owner-affiliated newspapers, ours as well as Tribunes and McClatchys. The decline was due primarily to fewer upsell opportunities as print employment advertising continued to fall.CareerBuilder's own directly sourced or generated revenue was up about 2% compared to the fourth quarter of 2007. Average network traffic for the quarter was up about 8% from a year ago to 20.1 million visitors. In December, CareerBuilder network traffic jumped 24% and it increased 6% for all of 2008 compared to 2007.For consolidation purposes, we included CareerBuilder network revenues, less those revenues for CareerBuilder already accounted for in our and other companies' publishing segments.On a pro forma basis, assuming CareerBuilder had been consolidated for 2007 and 2008, revenues rose 3% for the quarter and 14% year to date.Aggregating online revenue company-wide, including online revenue generated in our publishing and broadcasting segments, total online revenue in the fourth quarter was over $260 million. On a reported basis, online revenue company-wide was $684 million.If we had consolidated CareerBuilder and ShopLocal for the entire year, pro forma online revenue would have been about $1.1 billion.With that, let me turn the call over to Gracia.Gracia Martore - Gannett Co., Inc. - EVP, CFO Thanks, Craig. Before we go into detail on our quarterly results, I need to remind you that our conference call and Webcast today may include forward-looking statements and our actual results may differ. Factors that might cause them to differ are outlined in our SEC filings.This presentation also includes certain non-GAAP financial measures, and we have provided a reconciliation of those measures to the most directly comparable GAAP measures in the press release and on the investor relations portion of our Website.This morning, I will provide some additional detail on our publishing segment, our expenses company-wide, and give you some detail on the severance expense and its impact. Finally, I will cover some of our non-operating and balance sheet items. 8. Let's first go to publishing, where the global economic recession, as we have noted, continued to pressure advertising demand throughout the quarter. Advertising revenues declined 22.7% as ad revenue was 17.7% lower in the US and 29.3% lower in the UK on a constant currency basis.Overall, retail was about 14% lower; national down about 18%; and classified down about 37%. As Craig noted, December's results overall were better in comparison to November's results both in the U.S. and the UK.Retail advertising continued to be soft in December, although it improved relative to November. In the US, across all of our products in retail, the majority of the decline -- similar to the third quarter -- was due to continued weakness in the department store, furniture, and telecom categories. However, financial performed well in the quarter, as it did in the third quarter.Lower advertising demand at USA TODAY drove the decline in national advertising in the quarter. The telecom, financial, and advocacy categories all grew; but the gains were more than offset by softer results in the entertainment, automotive, retail, and travel categories.Moving to classified, the trends in U.S. Community Publishing classified advertising we noted for the first two months of the quarter continued in December. Classified advertising was down roughly 31%, consisting of declines in auto, about 26%; employment, about 47%; and real estate, about 33%. Again, we continue to see more softness in our classified categories in Arizona, California, Florida, and Nevada, relative to our other markets.In the UK, the current economic picture is similar to ours here in the US, although the downturn occurred later but much more quickly. In fact it was announced last week that the UK is officially in recession, with the economy contracting by 1.5% in the last quarter of 2008, the worst performance in more than 28 years.Results for Newsquest -- and for that matter, the rest of the regional press in the UK -- pointed in that direction for most of the year. However, Newsquest advertising revenue during December was consistent with November's trend. The management team at Newsquest is continually assessing their expense structure and working to align it more closely with business conditions.Craig covered the broadcasting and digital segment detail. So let me move to the impact of severance expenses on each of our segments in the fourth quarter. 9. We continue to be very disciplined and focused on transforming our expense structure in every way possible. As a result of those efforts to restructure, we had severance expenses of roughly $56 million in the quarter, with all of our segments experiencing some level of expense.The majority of it, about three-quarters, was in the publishing division; roughly 10% each was in broadcasting and corporate; with the balance in the digital segment.We expect the impact of these efforts to be about $190 million in annualized compensation expense savings.As you also saw, we announced one-week furloughs for the first quarter. Although we expect significant savings from them, it is a bit early to quantify it for you. We will provide an update when we report our first-quarter earnings.Now moving to expenses company-wide, total reported operating expenses were down slightly in the quarter. We had severance expenses in both quarters of 2008 and 2007, and we also had a small impairment charge in last year's fourth quarter. So if you exclude the severance expenses in both years and the impairment charges, our pro forma expenses were 6.3% lower.Operating expenses in the publishing segment fell almost 11%. Excluding severance expense and impairment charges, operating expenses were actually 6.8% lower. Our efficiency and cost control efforts, although offset partially by higher newsprint costs, drove the decline.For the fourth quarter, newsprint expense was up 2%. A 19% decline in consumption was more than offset by an increase in usage prices of over 26%.Focusing for a moment on newsprint and where we stand currently, newsprint prices turned lower in the fourth quarter of 2008 and continued to fall as suppliers experienced a global decline in demand. Suppliers are also facing orders at anemic levels as a result of lower consumption and higher publisher inventories.More specifically, a substantial regional price variance continues to grow between East and West in excess of $50 per metric ton. It is unlikely this price variance can be sustained.Gannett has taken steps to effectively manage our newsprint pricing in recognition of these market realities. We continue to encourage suppliers to work with us and other 10. publishers to establish less pricing volatility, as we all face the weakest economic conditions in memory.Drilling down a bit more on the expenses for our other segments, broadcasting expenses as reported were relatively unchanged in the quarter and totaled about $121 million. Excluding severance, operating expenses there were actually 4% lower.Reported digital expenses were about $146 million for the quarter and increased significantly, primarily due to the consolidation of CareerBuilder and ShopLocal for the full quarter. On a pro forma basis, operating expenses there were actually down about 5%.There were some severance expenses in digital, primarily at CareerBuilder, as well in the quarter. Excluding those severance expenses, the decline was over 6%.One final note on expenses, corporate expenses were about 19% higher in the quarter due primarily to severance, but were actually down almost 8% excluding severance.We also had some significant swings in our nonoperating items, so let me provide a little more detail there. The equity income line was about $5.8 million lower year-over- year, driven primarily by the absence of CareerBuilder earnings this quarter, which are now fully consolidated in our numbers. As well, lower results from our newspaper partnerships and additional investment in new businesses like Metromix, Mogulus, and Cozi also had an impact.Other non-operating items moved to a loss of $7.7 million this quarter, primarily the result of our minority interest charges for CareerBuilder and lower investment income. That was, however, partially offset by a gain on the partial redemption of our May 2009 public debt and other small asset sales.Turning to our tax rate, our rate on earnings before severance costs and impairment was lower in the quarter at 25.1%, compared to a tax rate on similar earnings in the fourth quarter of last year of 32.8%. Several favorable state tax settlements; the release of some tax reserves as the statute of limitations expired; and a lower statutory tax rate in the UK all contributed to the lower rate. We expect a more normalized tax rate in the first quarter.Interest expense totaled $51.5 million in the quarter, about 10% lower than the fourth quarter last year, reflecting both lower interest rates and debt balances. 11. Looking at our debt structure, we finished the year with long-term debt totaling $3.8 billion. As you know, we drew down on our revolving credit facilities amounts sufficient to repay all of our commercial paper. The total amount outstanding under the revolving credit facilities at year-end was approximately $1.9 billion.We also completed, as I said, the partial tender of our bonds maturing in May of 2009. After the tender, approximately $632 million of these bonds remain outstanding, which will be refinanced through borrowing in the capital markets or under our revolving credit agreements and through free cash flow.We also have public debt maturing in June of 2011 totaling $500 million; another $500 million maturing in April of '12. Finally, we have a $280 million bank facility that matures in July of '11.Our all-in cost of debt is about 4.4% at the moment. We expect we will have about $3.7 billion in debt outstanding at the end of the first quarter.A couple of reminders regarding amendments to our credit facilities. We amended all of them and our term loan during the quarter. We replaced the minimum net worth covenant with a debt-to-EBITDA covenant of 3.5 times. We also reduced the size of the revolving credit facilities to $3.1 billion until the end of this year, at which point they go to $2.75 billion.At this point, we have about $1.2 billion of capacity under those facilities. That gives us, together with our strong free cash flow, ample capacity to fund our 2009 maturities. And as I mentioned, we have no other debt due until 2011.The amendments to the credit agreements are included in our third-quarter 10-Q which we filed in November.Given the economic turmoil and current situation in the capital markets, we will continue to be focused on paying down our debt with that substantial free cash flow we generate.Updating you quickly on CapEx, they were about $62 million for the quarter, including about $5 million for CareerBuilder, and ended the year at $165 million.Before we turn the call over for questions, a couple of reminders as we look to the first quarter of 2009 in comparison to the first quarter of 2008. First off, we will go against the toughest revenue comparisons, particularly for the UK. At the same time, the 12. exchange rate for the British pound will be a headwind. It averaged 1.98 in the first quarter of 2008 and is roughly 1.42 currently.In addition, the first quarter is seasonally the weakest quarter for our digital investments, as some, such as CareerBuilder, will incur significant promotional costs in the quarter.Newsprint costs are moving down; but we will be up against the lowest prices we had in 2008 in the quarter. As well, we are on primarily a FIFO inventory method.Results for the first quarter of 2008 also included gains on the sale of land which totaled $25.5 million pretax and $15.8 million after-tax, and some other operating asset sales that we will not have in this quarter.Finally, we expect to have, as I said, a more normalized tax rate in the quarter, in the 36% range. So you will need to factor in all of these first-quarter items as you do your models.Now we will stop, and Craig and I will be pleased to take your questions.QUESTION AND ANSWER John Janedis - Wachovia Capital Markets - Analyst Good morning. Thank you. Gracia, on the digital front, I think you said last month that October-November combined was up in the 5% range. With the quarter coming in at at 1.4%, I'm wondering what you saw in December and whether or not that is carried into the new year. Thanks.Gracia Martore - Gannett Co., Inc. - EVP, CFO Thanks, John. What we saw coming into the end of the quarter I think was a little bit of a mixed bag. At Newsquest and in our US properties, where employment upsells are still an important part of the mix, we continue to see pressure on online revenues as a result of fewer ads to upsell.Conversely, in banner advertising, particularly in the U.S. Community Publishing side as well as in Newsquest, we actually saw very, very nice gains. And as well in our U.S. 13. Community Publishing side, we saw a very nice year-over-year gain in automotive online advertising.Again, CareerBuilder had just a terrific quarter, given the economic backdrop they had to contend with and they were held back by the newspaper upsells or the diminished newspaper upsells there. They saw very nice increase, albeit off a small base, on the international side.So overall, I think we are pleased with where we ended up the year on the digital front.John Janedis - Wachovia Capital Markets - Analyst Okay. Just one related question. How much seasonality is there in the cash flow for 4Q for the digital segment?Gracia Martore - Gannett Co., Inc. - EVP, CFO As I said, John, particularly CareerBuilder, which is the lion's share of our digital segment, they have significant -- as they do every year -- promotional spending and advertising investment in the first quarter, which is moderated as the quarters progress during the year. Then the fourth quarter is their most significant quarter.In the first quarter, we would expect with CareerBuilder we would be in more of an investment mode; and then as the year progresses we will see that nice uptick in the bottom line and in EBITDA.Alexia Quadrani - JPMorgan - Analyst Thank you. On the Newsquest business, you have always been very diligent on the cost side in a weak ad market. I was just wondering if you can give us some general color on how the profitability of the Newsquest properties compared to your domestic community papers.And just a quick one on the broadcast business. We are hearing much worse pacings from others - in the mid-teens, the down mid-teens - that you suggested. How much of a benefit do you get from the Super Bowl maybe in the outlook?Craig Dubow - Gannett Co., Inc. - Chairman, President, CEO We will see some nice improvement with the Super Bowl. But in general, as I commented, we will be down in the mid-teens for the quarter. 14. There are some hard-hit categories, particularly the auto and retail categories that have been hit fairly hard. But in general, I would say that the Super Bowl will be of help to Dave and the group as we move forward.Gracia Martore - Gannett Co., Inc. - EVP, CFO Alexia, on the profit margin question, viz-a-viz Newsquest and our Community Publishing segment: actually Newsquest, through the very strong efforts that the management team there has taken on restructuring and really refocusing and recasting their cost structure, their margins continue to be quite strong and comparable with our U.S. Community Publishing margins -- despite the fact that they have much more of a focus on the classified side as a part of their advertising total.Craig Huber - Barclays Capital - Analyst Yes, good morning. My first question, Gracia, about your pension. A year ago, I think it was underfunded by almost $150 million. It looked like a year ago you had about $3.4 billion of assets in the pension portfolio. I have got to assume the pension, like everybody else, probably dropped a good 20% this year in 2008.Does that mean you guys are roughly underfunded on the pension by roughly $750 million, $850 million? And if that is the case, do you have roughly seven years to get that back to breakeven?Gracia Martore - Gannett Co., Inc. - EVP, CFO Actually, what you are looking at also includes our SERP, which is unfunded. If you look at our domestic qualified plan here in the States, it reflects the significant declines that we've seen in the markets last year. And our plan, like everybody else's plan, has been impacted by that.Our unfunded obligation, though, on that plan domestic qualified at the end of 2008 is going to be somewhere in the $575 million to $590 million range. There are a lot of factors at play. There are discount rates; how the market continues to fare; and there is a possibility for some governmental relief.But as things stand today, that number would be funded over the next seven years. And we don't have any cash contributions required in 2009. 15. We will just continue to look at it as we always do. We will continue to monitor it and monitor the various factors and see if there may be some thought to doing some discretionary contributions. But we have no required contributions for '09.Craig Huber - Barclays Capital - Analyst Then also, about the dividend, Gracia. I know you have thought about this a lot, you and your Board and your senior management. Are there plans during the first quarter, just given what is going on with the economy, cyclic pressures, etc., to cut the dividend significantly here, to conserve cash to focus on paying down debt?Gracia Martore - Gannett Co., Inc. - EVP, CFO Craig, I think every company globally is very focused on conserving cash. I think that you will find -- we had to look at the dividend back in October and I think the Board wisely wanted to see what the impact of a burgeoning credit crisis and more difficult economic conditions would bring.The next time the Board has to act on the dividend is in February. And I know that there will be significant conversation around that in the context of where credit markets are, where the economies are, and where cash conservation comes into play across the country. We will take that up with the Board again in February and we will act appropriately.Craig Huber - Barclays Capital - Analyst If I could just slip one more in, Craig? What percent would you say of your newspapers in the U.S. did you maintain the ad rates on average/flat for the year or even perhaps down? Do you have a ballpark number?Gracia Martore - Gannett Co., Inc. - EVP, CFOMaintain rates?Craig Huber - Barclays Capital - AnalystYes, maintain or maybe --?Craig Dubow - Gannett Co., Inc. - Chairman, President, CEO 16. On a maintenance basis, considerable. Yes. And out of USA TODAY, we would have actually increased rates.Craig Huber - Barclays Capital - Analyst Would you have a sense maybe -- I am asking perhaps how many did you -- percent roughly -- did you actually lower ad rates? Or perhaps maybe none. I just want to hear your answer.Gracia Martore - Gannett Co., Inc. - EVP, CFO It is almost impossible to answer that question because there may be some newspaper in a couple of different categories that did some things that were specific to a market. I would say overall that we have, as we said previously, maintained rates, or in some cases judiciously increased them.But this is not a year of looking at dramatic ad rate increases. It is really a year focusing in on gaining market share and doing the right job for the advertiser.Craig Dubow - Gannett Co., Inc. - Chairman, President, CEOThat's correct, yes. Catriona Fallon - Citigroup - Analyst Just wanted to build a little bit on Craig's first question about the dividend and cash flow; and maybe jump into some of the other drivers for cash flow.On CapEx, how much of the CapEx is growth versus maintenance? What could CapEx become if you decided to cut the growth CapEx?And then, are you planning to conserve cash on acquisitions and also on common stock this year? Buybacks.Gracia Martore - Gannett Co., Inc. - EVP, CFO Catriona, I think that we indicated at the end of the year, that with regard to uses of free cash flow, that we would be very focused on paying down debt and that it was unlikely in the short to intermediate term we would be buying back stock. 17. On the CapEx front, as I said, we spent about $165 million on CapEx in 2008, including a small piece for CareerBuilder since its consolidation.We gave guidance in December that our CapEx plan including CareerBuilder would be in about the $148 million range. However, that is a plan that we will continue to review as we proceed through the year. I would expect that we would come in lower, clearly lower, than that number.It's a little early in the year to forecast where we will end up. But we are taking a look at every expenditure and making sure that the return is there before we spend the dollars, and deferring anything that there are any question marks around.Catriona Fallon - Citigroup - AnalystOkay, great. Just one other that is really quick. On the digital business, definitely margins there were significantly higher than I think what we had expected and what you had guided to. How much of that was possibly due to Ripple6?And can you give a little bit more detail on the margin for CareerBuilder? Because it looks like the margin there is still lower than monster.com. Where do you think those margins can go longer-term? Thank you.Gracia Martore - Gannett Co., Inc. - EVP, CFO First of all, we are delighted to have Ripple6 as part of the Gannett family. We think it is a terrific investment and a great management team there that will do very strong things for us.But quite frankly, it is an extraordinarily small piece of the digital business segment, although we are looking forward to its becoming a much bigger piece of it.As we said before, CareerBuilder, PointRoll, and ShopLocal are really the key drivers in the digital segment. I won't comment on what CareerBuilder's margins are or Monster's margins are. I will only tell you that we are very pleased with where CareerBuilder and PointRoll are today.We acquired the pieces of ShopLocal that we did not own because we knew there was an opportunity there to combine them with some things we did at PointRoll. And we are achieving better results as a result of that. 18. Right now, we are extremely pleased at where those margins are on all of those businesses -- margins that allow us to continue to grow those businesses as well.Edward Atorino - The Benchmark Company - Analyst Hi. How does your first-quarter guidance compare with January? Is there any sign out there that the checkbooks are beginning to loosen up a little bit after the disastrous start to the year?Craig Dubow - Gannett Co., Inc. - Chairman, President, CEO You know, Ed, overall, visibility right now, as I commented already, it is just very, very limited. We are not seeing checkbooks just coming open. But we do understand there is opportunity in the pipeline.Again, visibility is extremely limited and, frankly, it has been slower to come to fruition than we anticipated thus far. But we do realize and understand there is some business out there.Edward Atorino - The Benchmark Company - AnalystAny auto business of any significance in there?Craig Dubow - Gannett Co., Inc. - Chairman, President, CEO Well, the auto business had a very significant decline this past year. It is still down significantly. Right now, I am not seeing anything to suggest there is going to be any near-term ups in that.Jim Goss - Barrington Research - Analyst Thank you. Gracia, you mentioned that newsprint prices had turned lower in the fourth quarter. I am wondering what sort of trend you are looking at in terms of both prices and the consumption side, because you were doing well there last year. Overall in terms of the costs, between the newsprint issue and the impact of furloughs, are you looking at like a 10% or more decline in overall costs in the first quarter as you look into the period?Gracia Martore - Gannett Co., Inc. - EVP, CFO 19. Jim, based on a number of the initiatives we have in place on web-width reductions, consolidations and a variety of other initiatives I know Bob Dickey and the USCP has -- and Newsquest and others have -- we would anticipate that consumption would be down more than what you have seen in the fourth quarter.Looking at all of these initiatives together, both on the newsprint side as well as on the furloughs side, it is just a little early in the quarter to really frame the exact reduction in expenses. A lot is going to depend on where volumes are, where business trends go for the remainder of the quarter.You can be sure that we will continue to be as focused and disciplined on the cost side as we have demonstrated over the last several years. We will do all of the right things to make sure that our expenses are in line with the revenue opportunities we see out there.Jim Goss - Barrington Research - Analyst In your digital area, how does your revenue mix breakdown between advertising versus service enhancements and widgets and all the other things you've done? Because it seems like you are having better experience than a lot of others are having in the area, and I suspect it is because you are not just ad focused.Craig Dubow - Gannett Co., Inc. - Chairman, President, CEOYes, I think that is a fair approach to look at it from, Jim. In general, I would say we have been predominantly ad driven. But there are other pieces to this that I think you are very aware of, that have come into it really over the last three quarters, that have helped us in some of the other arenas.You are going to see that continue as we move forward. Right now, CPMs are pressured. I don't think there is any surprise in that on the digital side as we have gone into Q1 here.Hopefully that will show some improvement but we are not seeing that at this point. That is in general where we are at this time.Michael Kupinski - Noble Financial Group - Analyst Thanks for taking the question. Media General reported yesterday that they are seeing some silver linings in its newspapers, particularly from retail in the first quarter. I was just wondering if you might be seeing any signs of stabilization in that category particularly. 20. And are you seeing similar trends in December continuing into the first quarter? And I have just one more question after that.Gracia Martore - Gannett Co., Inc. - EVP, CFO You know, Mike, on retail it is going to vary market to market. Each company has different markets, different geographic concentrations. It is very early in the quarter to really try to predict any trends or any real strong idea of where things are going, given the limited visibility we have.We are continuing to do a good job on realizing all of the advertising dollars that are available in the retail space in the markets we serve. But it is just a little too early to be perhaps as optimistic as others. Again, it depends on what markets you are in and focused on.Craig Dubow - Gannett Co., Inc. - Chairman, President, CEO Michael, just to add to that, with what our USCP group has done under Bob's leadership, they are really working hard in driving that one-call opportunity from the national perspective. We are consolidating and trying to listen to the advertisers as clearly as we can, so we can minimize the amount of time and effort to purchase across all markets.There are lots of efforts from the listening standpoint that we are trying to convert. Frankly, as the year goes along, I believe we will see some good results from that.Michael Kupinski - Noble Financial Group - Analyst In terms of the first quarter, how is it shaping up as we relate to the fourth quarter of 08?Craig Dubow - Gannett Co., Inc. - Chairman, President, CEO As it relates? You are seeing a continuation of where we have been. Some areas are a little bit better than others, but I would say in general it is not terrific. But, as I said a little bit earlier, there is business out there.With the efforts from each of the divisions, there are good prospects. It is not very robust at this point and visibility is just very, very limited. 21. Michael Kupinski - Noble Financial Group - Analyst In terms of the pacing information in the guidance that you have given for your broadcast division, I believe you didn't really have any political advertising in the first quarter of '08, if I recall. I was just wondering if you can break down what you are seeing in terms of local versus national in the quarter.Craig Dubow - Gannett Co., Inc. - Chairman, President, CEO There was, I would say, in the $5 million range or so in Q1 of political from '08, Michael. I think as you take a look at the way this is breaking down, it is fairly consistent at this point on a percentage basis in the way it is coming in.Traditionally, national is not going to be quite as strong in this market; obvious from the local efforts that are out there. But that -- and that is fairly consistent as we go forward right now.Matthew Miller - Invesco - AnalystHi. If I could just focus on two issues: the headcount reduction and a follow-on to Craig's question about pension. What was the total headcount impacted by the $56 million -- or covered by the $56 million severance charge?Gracia Martore - Gannett Co., Inc. - EVP, CFOThat was about 4,000 FTEs across all of our segments. Matthew Miller - Invesco - AnalystOkay, and if I could clarify your response to the pension question. If you have got an unfunded obligation of $575 million at the low end, that is a greater than 10% deficit to your PBO.The Pension Protection Act of 2006 requires a linear or quasi-linear funding over a seven-year period. How is it that you avoid cash funding in 2009 regarding that issue?Gracia Martore - Gannett Co., Inc. - EVP, CFOWe also have some pension credits, so that would help with that contribution issue. 22. Matthew Miller - Invesco - AnalystIs it fair to assume that you would start to linearly fund that deficit in 2010?Gracia Martore - Gannett Co., Inc. - EVP, CFO Not necessarily. I think it is much, much too early to determine where we are all going to be. A lot has to evolve. And, it's a very complicated calculation that you have to do to determine how that funding goes if you have to do it.It would be difficult for us at this moment to give you really a finite answer as to how you would fund it over those several years.OperatorThat does conclude our Q&A session for today. I would like to turn the call back to Gracia Martore for any closing comments.Gracia Martore - Gannett Co., Inc. - EVP, CFO Thanks very much for joining us this morning. If you have any additional questions I know that Jeff Heinz, who you can reach at 703-854-6917, would be happy to answer them. Or you can reach me at 6918. Thanks and have a terrific day.Certain statements in this transcript may be forward looking in nature or forward lookingstatements as defined in the Private Securities Litigation Reform Act of 1995. The forwardlooking statements contained in this transcript are subject to a number of risks, trends anduncertainties that could cause actual performance to differ materially from these forward lookingstatements. A number of those risks, trends and uncertainties are discussed in the companysSEC reports, including the companys annual report on Form 10-K and quarterly reports on Form10-Q. Any forward looking statements in this transcript should be evaluated in light of theseimportant 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.