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Gannett Company, Inc. (NYSE:GCI)

Q2 2007 Earnings Call

July 18, 2007 10:00 am ET

Executives

Gracia Martore - CFO

Craig Dubow - Chairman, President and CEO

Analysts

Peter Appert - Goldman Sachs

Edward Atorino - Benchmark

Karl Choi - Merrill Lynch

Paul Ginocchio - Deutsche Bank

James Goss - Barrington Research

Craig Huber - Lehman Brothers

John Janedis - Wachovia Securities

Lisa Monaco - Morgan Stanley

Alexia Quadrani - Bear Stearns

Fred Searby – JP Morgan

Dan Jenkins - State of Wisconsin

Ursula Moran - Bear Stearns

Presentation

Operator

Good day, everyone and welcome to Gannett's second quarter 2007 earnings conference call. (Operator Instructions)

Our speakers today will be Mr. 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, ma'am.

Gracia Martore

Thanks, Shannon and good morning. Welcome to our conference call and webcast today to review Gannett's second quarter results. Hopefully you had the opportunity to review the press releases from this morning, but they also can be found at www.gannett.com.

You've heard a pretty comprehensive update of our strategic initiatives and our results through May at the midyear media review just a little over a month ago, so we will keep our comments relatively brief this morning.

As Shannon mentioned, with me today are Craig Dubow, President, Chairman and CEO and Jeff Heinz, Director of Investor Relations. Craig is going to begin with a brief overview of some of the initiatives we talked about at the midyear media review and also our results, and then I will follow-up with a little bit more detailed look at the quarter.

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Craig Dubow

Thanks, Gracia. Good morning all. There are a significant number of efforts going on at Gannett as we execute on our strategic plan, continue our transformation and focus on the potential opportunities. Consumers are changing the way they access content every day, and advertisers are working hard to find the best ways to reach them. Enhancing our core assets and building out our digital businesses is designed to provide solutions for consumers and advertisers.

We have summarized our strategic initiatives on several occasions, most notably at the midyear media review just four weeks ago, so I won't go over each point in the plan. I would, however, like to discuss with you the why of the importance of each of those to us.

First, the reconfiguration of our newsrooms to the information centers. Over the past several years we have researched what the consumer wants in each of our markets. Simply, local content dominated the responses and Gannett surpasses the competition in our markets as the most effective local information collector and information distributor. Our focus is on the local content franchise because it is what our consumers want and we excel in delivering it to them.

Creation of the information center allows us to concentrate specifically on what audiences want within that local context. It allows us to bring the audiences into the conversation, to help us provide the content that engages them and our goal is to deliver it to them on any platform, including the traditional ones we and they are accustomed to.

The information center facilitates that audience connection, whether through a niche online product or a mobile product or a product yet to be invented. Our effort to foster innovation goes hand-in-hand with the information center. This culture change is necessary to fuel our response to the ever-changing consumer demands.

Combined with the information center, the innovative mindset has resulted in new ways to engage our consumers, such as our mom sites or our database sites, and we are learning more and more every day. New ideas and products require a new approach to connecting consumers to advertisers, hence our audience-based selling efforts. We are changing fundamentally the structure of our sales staff, and this is much more a team-centered approach that is geared to provide solutions for advertisers and the growing number of advertisers that are using our products.

We are now linking these audiences with advertisers through a retrained sales force equipped for audience-based selling. It is still early, but we are convinced that this is the right direction to position Gannett for the future.

Now turning to our results for the quarter. There was very little change to the advertising environment or our results in the last ten days of the quarter. Overall, the quarter finished as we anticipated when we met with you just a month ago. As you saw on our release this morning, Gannett earned $1.25 per share from operations this quarter, including $0.01 per share or approximately $2 million of after-tax income from discontinued operations.

The discontinued operations reflect the divestiture of five of our newspaper properties. On May 7 we sold four of our papers, and on May 21 we contributed the Chronicle Tribune in Marion, Indiana to the Gannett Foundation. The transactions resulted in the $73.8 million after-tax gain or $0.31 per share that was also included in discontinued operations. So we earned $1.24 per share from continuing operations, a decline in EPS of just 3% from the second quarter of 2006, despite an extremely tough ad environment.

Operating revenues for the quarter totaled $1.9 billion. As always, we kept a very close eye on our expenses, which were down about 1.6% on a reported basis. As a result, the company generated $555.1 million in operating cash flow. We did have a fairly large swing in non-operating income, in particular stronger performance from our Internet investments, gains on other investments and the sale of land. The end result, income from continuing operations was almost $290 million for the quarter.

Overall, our results reflected a challenging advertising environment. In our newspaper segment, results were stronger at Newsquest in the UK than our domestic community newspapers.

Our broadcasting segment benefited from the addition of two stations that we acquired in the third quarter of 2006, which helped offset substantially lower political advertising compared to last year.

At our domestic community newspapers the advertising environment, particularly the classified category, continued to be very difficult. We continued to feel the dramatic impact the slowing real estate market is having on advertising demand, particularly in the West and Southeast. The impact on real estate flowed into some of the retail advertising in the US, as well. As you might imagine, we are working hard to position ourselves to benefit from the eventual turnaround in this cycle.

In national advertising, revenue growth at USA Today was down a little over 1% for the quarter. However, USA Today finished the quarter solidly as several categories improved significantly in June.

At Newsquest in the UK, the employment and real estate categories were in positive territory for the second quarter. The local and national category softened during June, which led to revenue decline in pounds in the low single-digits for the quarter. Expenses were controlled and declined in pace with revenues resulting in an increase in NIBT in pounds.

Pro forma revenues in our broadcast segment were down in the mid single-digits in the quarter due in large part to softer auto advertising and the absence of over $9 million in political that was generated in the second quarter of 2006. As presidential politics begin to heat up, the back half of the year could shape up differently than the usual off cycle election years. However, we still face the challenge of overcoming strong political advertising in the last half of 2006.

Continuing to build out our digital businesses is an absolute important focal point of our strategic initiatives. We are experiencing solid growth companywide in online revenues, up almost 17% for the quarter despite declines in classified print advertising. Our domestic newspapers generated over 12% growth while in the UK, Newsquest online growth was up about 49% in pounds. In the broadcasting segment that increase was about 34%, and at USA Today about 11%.

In terms of traffic, the numbers for June show that our domestic website had about 22 million unique users and reached approximately 14% of the Internet audience. In the UK, Newsquest online audience totaled 5.1 million unique visitors with 76.9 million page impressions.

At the CareerBuilder network, revenue continues to grow, up 16% for the quarter and traffic averaged over 22 million. In addition, we announced that Microsoft purchased a minority stake in CareerBuilder and in a separate agreement, CB and MSN extended their strategic alliance and broadened it to include MSN's international sites. The agreement helped accelerate CB's international expansion efforts.

Before I turn the call over to Gracia, I want to reiterate what we believe is happening in the marketplace and how we are responding. We are in the midst of a cyclical downturn while at the same time we and our advertisers are competing for the attention of an unpredictable consumer who increasingly has more choices.

Gannett is focused on the transformation to best position us to capture opportunities when the cycle eventually turns. Our digital results indicate that we are going in the right direction. As well, Newsquest performance demonstrates operating leverage will take hold when top line growth returns.

So with that, let me turn the call over to Gracia.

Gracia Martore

Thanks, Craig. Before we go into the details on our quarterly results I, as always, 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.

With that out of the way now, let me fill in some additional details on our results, starting with the publishing segment. As you saw this morning for the second quarter, our newspaper segment ad revenues were down 5.3% on both a reported and pro forma basis. As Craig said, our year-over-year results in the UK were better than our U.S. operations. As well, overall we benefited from the Sterling/dollar exchange rate so on a constant currency basis, pro forma ad revenues would have been 6.7% lower.

The decline in advertising revenues was driven primarily by continued softness in the classified verticals at our domestic community newspapers. Pro forma classified advertising companywide was 7.5% lower for the quarter, comprised of declines of almost 10% in real estate, a little over 7% in employment and 13.6% for automotive.

Let me focus a bit on the classified categories and start with our domestic properties. And generally as Craig said, the trends that we noted at the midyear media review continued for the final couple of weeks in the quarter.

One of the most significant trends as we have been saying was the impact on our domestic classified categories of the softening real estate market in the West and Southeast, specifically California, Florida, Arizona and Nevada where we have some significant operations. In the U.S. community newspapers real estate advertising was off over 19% against a very tough year-over-year comparison of up almost 17% in the second quarter of last year. As we said, what was our hottest category has become among our coldest.

To put this in perspective, percentage real estate advertising declined in the four markets I mentioned were almost 2.5 times greater than in all our other domestic community markets.

We experienced an even wider gap in the employment category. Domestic employment revenues were 13.7% lower in the second quarter. But once again, the declines in California, Florida, Arizona and Nevada were about four times greater.

Automotive remains soft in the second quarter and was down over 14% at our domestic community newspapers, again almost two times the rate of losses in those four states versus the rest of our properties domestically.

Pro forma local advertising in the newspaper segment was down about 4% in the quarter, domestically the decline was 5%. We continue to see lower department store advertising as that category struggles with strategic positioning and their own marketing efforts. Losses in other categories like furniture, consumer electronics and home improvement are due in part to the cyclical slowdown in the real estate and housing markets.

Turning to national advertising, that category was down 2.8% in the quarter. USA Today's ad revenues were down slightly over 1%, but ad revenues grew in June by 7.4%. For the quarter at USA Today the technology, telecommunications, home and building, retail, package goods, pharmaceutical and credit card categories were all up nicely while the entertainment and automotive categories lagged last year.

Point Roll, our rich media company, had a very strong quarter with revenues up about 33%.

Turning to the UK and Newsquest, revenues were down slightly over 2% in the quarter, and ad revenues were about 2.5% lower. As Craig mentioned, real estate and employment ad demand were both up 3.1% and 1.3%, respectively in pounds. These categories, by the way, make up over 60% of Newsquest classified advertising so the continued positive trend is both important and encouraging. Expenses once again were lower in the quarter year over year, resulting in a nice increase in Newsquest NIBT.

Turning to broadcast, total reported revenues for that segment declined slightly for the quarter. Revenue from our TV station acquisitions, as well as a 34% jump in online revenues and a 12% increase in Captivate's revenue offset substantially lower political advertising and softer auto advertising.

Looking ahead, the latest pacings for the third quarter overall are down in the low single-digits compared to last year's third quarter. However, that is this moment in time, and as a reminder we generated over $77 million in political advertising in the back half of 2006, including over $19 million in the third quarter, so we would anticipate that our pacings will be volatile and will change as the quarter progresses. We will, as always, keep you updated in our monthly reports.

Moving over to expenses briefly, our total reported expenses were down 1.6% for the quarter, and on a pro forma basis were down 2%. Continued focus on cost control and lower newsprint expense had a positive impact. However, severance and accelerated depreciation due to plant consolidations totaling almost $9 million, the TV station acquisitions and the higher exchange rate all contributed to the expense line in the quarter.

In the newspaper segment, reported expenses were 2% lower. Reported newsprint expense, as you saw, dropped 7.8%. The decline reflects approximately 9% lower volume and slightly higher newsprint prices for the company. But those higher newsprint prices were due to higher newsprint prices in the UK and the higher exchange rate. On a pro forma constant currency basis, newsprint prices were actually down. So overall when we slice and dice it, pro forma, constant currency cash expenses for the segment were 3.7% lower in the quarter.

In our broadcasting segment operating expenses were 4.6% higher on a reported basis, reflecting our acquisitions but were 1.9% lower on a pro forma basis. Let me switch back to newsprint for a minute and update you on pricing.

As you have seen demand for newsprint continues to soften and continued to throughout the second quarter resulting in further price declines for publishers. Reduced industry wide consumption was the primary driver for this downward price pressure. Despite this, certain producers have announced a price increase of $25 per metric ton for September 1. While we certainly understand current struggles for newsprint suppliers, we believe price increases or decreases occur on the merits of market fundamentals. Gannett will, as always, continue to address these conditions as warranted while maintaining a focused commitment to control newsprint expenses going forward.

Now let me turn to the balance sheet for a moment. During the quarter we took the opportunity to refinance about $1 billion of our commercial paper through a convertible note offering. The interest rate on the debt, LIBOR minus 23 basis points, is about 25 to 30 basis points lower than our current commercial paper rate and we expect interest expense savings of $2.5 million to $3 million annually. Based on the structure of the convertible, however, we expect it may be put back to us at the first anniversary date. Additionally, given the conversion premium, we do not expect any dilution from the transaction.

Total debt, including that convertible at quarter end stood at $4.6 billion and cash and marketable securities were $177 million. At this point, our all-in cost of debt is 5.4%, which is the same rate for commercial paper, as well.

Capital expenditures for the quarter totaled approximately $31 million and have tallied $60 million year-to-date. As I mentioned at the midyear media review, we now expect CapEx to be about $170 million for the year.

With respect to shares outstanding, basic shares at the end of the quarter were 233 million, and the quarterly average was 234.2 million. We repurchased, as you saw, 1.5 million shares in the second quarter.

Now we will stop and take your questions, and I will turn it back to Shannon.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from Peter Appert - Goldman Sachs.

Peter Appert - Goldman Sachs

Gracia, can you quantify please the FX impact on EPS and related to that within the non-operating items, is there any greater granularity you could give us in terms of what the contribution from CB was and other more operating items versus more one-time items? Thanks.

Gracia Martore

Sure, Peter. With regard to foreign exchange and the currency impact for the quarter, similar to other quarters we benefited by about $0.02 in the quarter from the currency. Typically in the past the swing has been in that $0.01 to $0.02 range.

With regard to the non-operating area, there were really three primary drivers of the significant swing year over year. First one was improved performance from our Internet investments, including CareerBuilder and Classified Ventures, particularly. So we saw about a mid single-digit million swing in the totality of those Internet investments led by CareerBuilder and Classified Ventures.

I would suggest, however, that you have to be careful about that because those results can be a little bit more volatile because of the timing of marketing spend and the rest. But that is what was achieved in the second quarter, and obviously we are very, very pleased with the progress that CareerBuilder and Classified Ventures made.

The second piece was a sale of some land here in McLean and again, that was sort of a mid single-digit kind of net gain.

The last piece was some interest income and some changes in value of some marketable securities that we hold and that also contributed probably the rest of the swing. So hopefully that gives you a little bit better granularity on those items.

Operator

Your next question comes from Edward Atorino - Benchmark.

Edward Atorino - Benchmark

If I look at the depreciation and interest line would we run out depreciation at the second quarter rate? It looks like interest expense might tail off for the second half with the debt where it is, compared to the first half.

Gracia Martore

Ed, let me address those two. On the depreciation line actually, as I mentioned in our prepared remarks, that line was impacted this quarter by some accelerated depreciation related to some plant consolidations that we've done in a couple of places. So I think if you look at the assumption that we made at the midyear media review for depreciation expense, I think that is a good number to look at for the full year.

With regard to interest expense, if in the absence of us doing anything on the share repurchase front or anything on the acquisition or divestiture front in the second half, you're absolutely right. We would anticipate that interest expense would be lower in the second half. But again, as always, that will be a function of the level of share repurchases that we do, as well as any opportunities we have on the acquisition/disposition front.

Operator

Your next question comes from Karl Choi - Merrill Lynch.

Karl Choi - Merrill Lynch

Gracia, I just want to clarify the $9 million that you mentioned, was it related to both severance and accelerated depreciation or just accelerated depreciation?

Gracia Martore

No, it was related to both severance and accelerated depreciation.

Karl Choi - Merrill Lynch

Related to that, could give us how the headcount changed at the end of the quarter, year over year?

Gracia Martore

Yes, our headcount in total for our operating divisions was probably down in the mid single-digit range year over year. We would anticipate that we will continue to look at our operations and all of our expenses in light of the challenged revenue environment we are currently in. You may see additional redundancy costs, as they call them in the UK or severance costs, in some future quarters. But that is what we did in the second quarter.

Craig Dubow

Just for note, this is something that we do on an ongoing basis. We are always sizing this and each of the divisions has done, I think, a Herculean job despite the challenges that we've seen through this tough economic time.

Karl Choi - Merrill Lynch

There were some press reports about maybe Federated may step up spending in the second half of the year. Just wondered if you have seen anything like that?

Gracia Martore

Actually I think our folks are meeting with the Macy's folks today. So we will have a better handle on that after lunch.

Operator

Your next question comes from Paul Ginocchio - Deutsche Bank.

Paul Ginocchio - Deutsche Bank

Gracia, don’t comps get a little easier as we go into the third quarter? Are July trends looking better or do you think that easier comps make trends improve from here? Thanks.

Gracia Martore

That is a little tough to say at this point. The first week of the quarter is impacted by July Fourth, and that can have various impacts. I would say we are looking at a bit of a mixed bag so far, I don't think we've seen anything demonstrably better or demonstrably worse than what we've seen in the last few months. But you're absolutely right, the comparisons in some areas do get a little bit easier.

I would also say on the USA Today front as you saw, June was a nice positive month for them. But if you recall last year we saw that same kind of impact. Starting out in the third quarter they are probably a little bit softer but then as they look at the end of the third quarter they are very, very encouraged by what they are seeing. So month to month it is a bit volatile. Ad placements are being placed very close to the end date, and so we will just have to keep you updated in our monthly reports.

Craig Dubow

The only other add to that Paul, would be on the broadcast side from political, and Gracia noted that. Really the big headwind that we are going to run into as we go into this back half and certainly Q4 is going to be the most significant, but she mentioned over $19 million of that certainly being within Q3. So it is something we are looking at obviously; there are other opportunities that are coming on the political side. But needless to say, we need to note that, as well.

Operator

Your next question comes from James Goss - Barrington Research.

James Goss - Barrington Research

Gannett's economic crystal ball has historically been pretty good due to its many touch points. I was wondering if using that you could look at the intensifying softness in the principal classified categories – auto, real estate and employment -- and your sense of how these trends are going to play out. It seems like real estate is the toughest one in terms of the intensification but some additional color on that score.

Craig Dubow

You're absolutely right, Jim. I mean, real estate compared to where we were last year is virtually a 180, and that is what is so problematic. Obviously that has other impacts as we then look across retail, other outlets from furniture; I mean, all the things that are directly in line with either the resale or the new development of new product in the real estate side. So each of those are impacted.

I think the critical point to really note and I will get back to the categories in a second, really has to do with the regionality of this and the impact. That is why Gracia went through really those comparisons that she did. But just to emphasize how strongly regional this is in the West and Southeast in particular.

In addition to that the next category of biggest concern certainly falls in that of employment and how far that has continued to fall. We are seeing a bit different then as you look across the pond at the UK, obviously some positive notes there.

Again, the continuation on the auto side, certainly for the domestic community newspapers here, as well as in the UK continues to be a concern. That is more in an overall basis across the businesses.

James Goss - Barrington Research

Craig, a related thing. Are you concerned that the sub-prime issue extends to the better loans and that keeps this intensification in place for longer than you'd like?

Craig Dubow

Well obviously we are paying very close attention to everything that is being reported, but at this point, no, we are holding as steady as we can with everything from our view. We will just have to wait and see.

Operator

Your next question comes from Craig Huber - Lehman Brothers.

Craig Huber - Lehman Brothers

I wanted to focus if we could on retail store advertising. Roughly first half of the year retail is 43% overall advertising. The biggest change we are seeing here, down 7% year over year adjusting for currency in both May and June. Just looking back at monthly data over the last 15 years that is the worst fall-off the company has seen. Can you just talk a little bit further about why that category right now is falling off at such an accelerated rate here?

Gracia Martore

Certainly, Craig. With regard to department store advertising and the consolidations that have gone on there as well as some of the newer marketing strategies that I would say based on some of the retail sales numbers I've seen, you have to question whether those are working or not by some of these folks, have had an impact on the department store category. We will see how that comes and turns in the back half of the year. We will just have to see how that all plays out.

Then as Craig mentioned in some of the other categories that had been traditionally stronger for us, the furniture and some of those other kind of home improvement areas, clearly we see some direct correlation to the softness in those categories against the housing slump that we are seeing most severely in those four states that I alluded to earlier.

I think the positives, though, that we need to also focus in on are the tremendous efforts that Sue Clark-Johnson and the community newspaper division are doing with regard to their audience based selling strategies and looking to garner more advertising from some of those small to medium-sized advertisers in the communities we serve. We are just beginning to see some of the fruits of those initiatives. So it is very early in that process.

But I think that those are going to be real positives for us into the end of this year and certainly in the years to come. So we are going to have to deal with the retail spending issues of the big department stores. We are going to have to deal with some of the cyclical headwinds that we are feeling. But we feel good about a number of the initiatives that we have going on, particularly geared to those smaller to medium-sized advertisers.

Craig Dubow

Additionally, the other thing that we are also watching very closely, although it is very early, is some of the outlets that had been predominately involved with Internet, online or other type of platform selling have taken an example from Apple, and the number of new retail outlets that they have created and the success they are having. When you start tracking a number of those companies that have moved in that direction, there is some very interesting touch points with the consumer and somewhat of a shift from what Gracia had noted in the very beginning from a number of companies that certainly from a CMO perspective may be looking or re-looking at some of the plans that had originally been put out there.

But from our perspective we are keeping a very close eye on this and a whole series of things that relate to that as we look at this category.

Craig Huber - Lehman Brothers

As a follow-on can you just give us a little sense in those four states in particular for the quarter how much retail was down here in the US?

Also you mentioned some of these marketing strategies, the dollars are moving elsewhere; can you tell us where are they going? Internet, direct mail, broadcasting? Where are these all going or are they just evaporating? Thank you.

Gracia Martore

I'm not sure I follow you on the last part of your question with regard to retail.

Craig Huber - Lehman Brothers

These other marketing strategies that you are alluding to where some of the ad dollars are going to; where exactly do you think they are going in some of your markets? Or do you think the overall budgets are coming down for local retailers?

Gracia Martore

I think in some cases those dollars are not being spent. If fewer houses are being sold, particularly in those four markets, furniture sales are impacted by that. I think we've seen that across those four states in some of the numbers that we've seen out of the furniture store categories. Other pieces, as well that we've talked about in the past on, for instance, the auto category clearly impacted.

So I think it is a combination of spending that is just not being done, as well as some spending that marketers and companies are experimenting clearly with a variety of different initiatives. Whether they will be successful and as well, the various initiatives that we are putting together to address those, we feel as though we are going to be a very strong player on all those platforms.

So if those dollars are morphing to other platforms, we will be there through a variety of other things we are doing to capture some of those dollars.

Craig Dubow

Those were the real keys that as we've been moving along certainly in time here, Sue has been diligent in really bringing the sales group to speed and going from the more linear sale that we had truly to this multiplatform opportunity. So that's where we are.

Craig Huber - Lehman Brothers

I'm sorry, do you have the number on those four states on how much retail is down, please? Thank you.

Gracia Martore

I don't have it handy, but we will call you after. Jeff will give you a holler after the call.

Operator

Your next question comes from John Janedis - Wachovia.

John Janedis - Wachovia

Can you talk about some of the options with CareerBuilder? Are there any scenarios where your partners there can put the assets, allowing you to increase the stake to as much as 100%?

Gracia Martore

John, you'd probably have to chat with our partners, but I can tell you that certainly within the agreements that we have in place there is the right for any one of the partners to sell their share, but we would have the right to match any offer they would have for their shares. That would be true in the case of McClatchy or true in the case of Tribune. I haven't heard any news out of Tribune that they are interested in selling their CareerBuilder share. They seem to be pretty happy with it, as are we. So yes, there are certainly some scenarios under which we could increase our exposure to CareerBuilder.

Operator

Your next question comes from Lisa Monaco - Morgan Stanley.

Lisa Monaco - Morgan Stanley

Just following up on the retail question. Gracia, could you just outline for us what the top three or four retail categories are right now? I imagine department stores are still up there, and kind of roughly what percentage of total retail sales they account for?

Secondly on share repurchases, given the stock price performance I'm surprised you didn't buy back more shares in the quarter, given that you didn't in the first quarter. Can you just give us an update in terms of how you're thinking of uses of free cash flow?

Gracia Martore

Sure. On the categories that we have contained in our local numbers and looking at the domestic community newspapers, department stores, and any in the department store category, we include both the traditional department stores as well as the Targets, the Wal-Marts, the Kmarts of the world. That was in the high teens in terms of its percentage of revenue in the second quarter, and it was down that category again in the domestic community newspapers, was down about 9 or 10%.

Furniture is another significant category, about 9% of revenues on the local side in the second quarter. Again, these are all percentages of local. That was, again, down in the 9% to 10% range. Consumer electronics, grocery, down, both of them in the 5% range, one down 3%, one down in the high single-digits. Financial also down, a category that is about 5%, down in the double-digit range. So those would be some of the bigger categories.

But one bright spot was telecom, which is about 9% of local revenues, and it was up in the high single-digits.

With regard to share repurchases, clearly we stepped up our activity in the second quarter as you can see the level of repurchases in the second quarter versus the first quarter. That is something that obviously as we saw the stock price and where it was, we felt that we wanted to step up our activities. We will just have to see where things go in the third and fourth quarters, but we will I think continue to be active in Gannett stock and continue to be a good dividend payer.

We have some decisions there coming up in our board meeting next week and then we will continue to look at acquisition opportunities, nothing substantial on the plate right now in that area, but looking at some small acquisitions that look, could be very potentially very interesting.

Lisa Monaco - Morgan Stanley

On CareerBuilder the revenue growth figure I think it was 16%. Is that a pro forma figure? Because I think we're cycling through the loss of some of the Knight-Ridder papers or does that reflect the loss?

Gracia Martore

No. That is a reported number, not a pro forma number.

Operator

Your next question comes from Alexia Quadrani - Bear Stearns.

Alexia Quadrani - Bear Stearns

Following up on your commentary about use of cash, I didn't hear any mention of potentially buying anymore newspaper properties and with the Connecticut purchase off the table at least for now, is that something that you would no longer consider unless maybe the retail environment gets better or is that still market by market?

Craig Dubow

No.

Gracia Martore

I think I said that it would also depend on acquisitions and dispositions. The acquisitions would include acquisitions in our traditional space or in the digital space. I think Connecticut was a great example of our willingness in a particular opportunity where we had a great potential to cluster a couple of newspapers with some others we own that we are more than pleased to step out at the right price to buy something like that. So no, we would still be amenable to buying properties in our traditional spaces of broadcast or newspapers and also the digital space.

Alexia Quadrani - Bear Stearns

On the Newsquest business, you've done a great job on the cost side but any sense of what the normalized top line growth we should expect longer-term in that business?

Gracia Martore

It is a little early to say right now; we are just going to have to see how that market plays out. We are just right now appreciating the fact that they have done a superb job on the expense side. We are beginning as we said, to see some traction on the employment classified and continue to see traction on the real estate side. So we just are looking to see continuous improvement there on the revenue picture. Too early to say where we ultimately think it can go.

Craig Dubow

Yes, we shall see. There is a key point here, and as we've been saying with Paul Davidson and our management team there, we believe they've done just a terrific job in the restructure. Certainly we are very well positioned. But the key that we already had mentioned, Alexia, really happened in the employment and real estate areas.

I guess we can say London was probably a bit of an anomaly because it never did completely slow down to the degree that we are seeing here in the U.S., and those prices frankly are kind of amazing. But needless to say, this is very early in this but we are well, well positioned.

Operator

Your next question comes from Fred Searby - JP Morgan.

Fred Searby - JP Morgan

I just wondered if you could break out what the growth was on the Internet, newspaper Internet operations overall and whether you're seeing a deceleration there?

Secondly in some of your better markets if you've done this exercise it would be great, just thinking about if you strip out real estate and the collateral impact on help wanted, and retail to a lesser degree in some of the markets we have favorable demographic trends and we are seeing growth, a couple years ago like Arizona, what do you think it would be? Thanks.

Gracia Martore

I will try to answer that second part of the question. To be honest with you, Fred, we slice and dice things in a variety of ways, but we really haven't tried to forecast what it would look like absent the slump in those particular markets on any specific basis. Obviously, as we said, the real estate slowdown in those markets is having an impact across all the categories and what we know is that last year these were among our very best markets. We had real estate up 30%, 40%, 50% in some of those markets. Clearly that has been somewhat reversed this year. Hard for us to try to do that analysis in a substantially meaningful way and I'm not sure we want our folks spending their time doing that as much as we want them spending their time going out and finding the advertising dollars from those communities.

I'm sorry, your first question Fred?

Fred Searby - JP Morgan

I didn't see the newspaper Internet operations, if you broke that out what percent of revenues and what the growth was. Are you seeing a deceleration there? I assume you are, given the classified impact on the Internet, as well.

Gracia Martore

Very definitely I would imagine that all of us are seeing the impact of reduced employment spending and auto spending on the print side impacting our online numbers. Classified online revenues still represent about 50% of our domestic community newspaper online revenues. So when those categories are impacted, the total overall online number is going to be impacted.

That being said, what we are very pleased about is the growth that we are seeing in the retail categories in online in our community newspapers. Those numbers have increased very, very nicely as we have focused more of our efforts there. We've used Planet Discover and a variety of other initiatives to really hone in those opportunities. So you're absolutely right, they are impacted by the slowdown in the classified categories.

Fred Searby - JP Morgan

Can you break out what percent?

Gracia Martore

To be honest with you I don't have it available here, but Jeff, again, will call you after the call.

Operator

Your next question comes from Dan Jenkins - State of Wisconsin.

Dan Jenkins - State of Wisconsin

I did want to ask if you could expand a little bit on Point Roll. You mentioned revenues were up 33% there, if you could talk a little bit more about what is going on with that and what you see the opportunity with that.

Craig Dubow

We are thrilled with what Chris and the group is doing. Certainly I think you are seeing the extreme opportunities that are being provided. We have really expanded the client base. That has gone very, very well this past half, anyway.

As we go forward a couple of the new initiatives that they are working on that would appear to have some promise will really fall into the political side. They have established a new platform that are being presented to certainly the political agencies and the candidates themselves for a one-stop shop in how they can serve from flash as well as full motion video within that type of environment. We are very excited with what that is bringing to the company. Again, it is on the small side, but where it is going with the kind of increases are extremely healthy.

Gracia Martore

Adding on to what Craig said, in March Point Roll announced with AOL a two-year strategic alliance where they are going to be providing AOL with rich media formats and AOL will become Point Roll's preferred portal partner. So a lot of positive things going on as Craig said, at Point Roll, and not only is the top line benefiting, but the bottom line is up nicely, as well.

I think we just have time for one more question.

Operator

Your final question comes from Ursula Moran - Bear Stearns.

Ursula Moran - Bear Stearns

My lucky day. I apologize if this is not of general interest, and I am happy to take it offline if it is not, but Yahoo's call yesterday, they spent a lot of time talking about the newspaper business and the things that they hope to accomplish with the newspaper association. I am not sure if you are in that and I wondered if you could comment on it if you are a participant.

Craig Dubow

No, at this point we are not. We have said on a number of occasions that we are continuing to look at the opportunities. We think it is very early on yet in that overall establishment in that space for our commitment.

A couple of the key things, and we have said this on a number of occasions now, we are most interested in understanding the total governance of what that opportunity will be overall so that we can get a better handle then on creating the revenue potentials and opportunities.

Obviously that platform or a similar platform is really what is in question here. As I said, our opportunity right now is that we are continuing our conversations and will continue those with all of the parties involved from other companies, as well. We think there is a lot of opportunity as we go forward with it and want to be positioned that way.

Operator

I will now turn the conference back over to Ms. Martore.

Gracia Martore

Thanks very much for joining us this morning. If you have any additional questions, please feel free to call Jeff Heinz at 703-854-6917 or me at extension 6918. Have a great day.

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