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Executives

Gracia C. Martore - Chief Financial Officer, Executive Vice President

Craig A. Dubow - Chairman of the Board, President, Chief Executive Officer

Analysts

Peter Salkowski - Goldman Sachs

John Janedis - Wachovia

Edward Atorino - Benchmark Capital

Michael Kupinski - Noble Financial Group

Jim Goss - Barrington Research

David Clark - Deutsche Bank

Alexia Quadrani - J.P. Morgan

Craig Huber - Lehman Brothers

Gannett Co., Inc. (GCI) Q2 2008 Earnings Call July 16, 2008 10:00 AM ET

Operator

Good day, everyone and welcome to Gannett's second quarter 2008 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.

Gracia C. Martore

Thanks, Cynthia and good morning. Welcome to our conference call and webcast to review Gannett's second quarter 2008 results. We hope that you’ve had the opportunity to review our press releases this morning. They can also be found at www.gannett.com. With me today are Craig Dubow, Chairman, President, and CEO; and Jeff Heinz, our Director of Investor Relations.

Clearly we’ve been busy since we last talked to you at the Deutsche Bank Media and Telecom Conference in early June. Our announcements earlier this month about our ad serving network and Shop Local are two additional parts of the puzzle we have been assembling over the last couple of years as we transform Gannett.

Our plan today is for Craig to put the pieces together, give clarity to the overall picture and update you on our progress, despite the very challenging economy. He also will discuss the results we announced this morning and touch on some of the items that affected them. Then I will get into more detail about the results, our segments, and how we are reshaping our operations as part of our transformation. We hope in the end to have given you a clearer view of where Gannett is heading in this unsettled media landscape and what these various strategic efforts will do for our businesses. Craig.

Craig A. Dubow

Thanks, Gracia and good morning, all. Our results for the quarter reflect, frankly, all the different forces weighing on the media sector at this time, not the least of which is a softening economy, both here and in the U.K. Unfortunately, the economy is tough at the moment and could be for the foreseeable future, but we have been in down cycles before and know how to manage through them, so we are concentrating on the initiatives that will change the game for all of us. These initiatives I believe ultimately will bolster our top line while at the same time recast our cost structure to position Gannett for a future we believe is filled with huge opportunity.

Two years ago, we began this strategic transformation. We told you that our plan was to grow a world-class digital business while enhancing our profitable core operations, newspaper and television. That remains our plan today, adjusted for the unexpected, the economy softening and certainly the credit crunch, and the ever evolving consumer and advertiser landscape. Our core operations this year will see the results of Olympics in August as well as political revenues until election day.

But we also are expecting much, much more of them. Our advertising -- or our newspapers and television stations are dramatically evolving the way they operate through the information center initiative for content development of our significant web presences in our communities, finding new sources of revenue and through centralizing and, in some cases, outsourcing routine functions to significantly reduce redundancies and manage costs.

To live up to the pledge in our strategic plan, to enhance our core we must change the way we have operated for the past 100 years. We are doing that and expect to have made strong progress by the end of 2008 and into 2009.

Content of course is at the center of all of our efforts, both in the core and in digital. Our content efforts are poised to move the company to new ways of thinking about audience, advertiser desires, and delivering on those needs. Creating and delivering content that consumers want is our mission. At the heart of our transformation is a realization that we are a content company. It’s our product and our future.

As you know, our strategic plan also calls for growing our digital business. It has been a keen focus of our company for the past two years. We have talked about building out our digital infrastructure. We have talked about becoming customer centric for both consumers and advertisers, and we have talked about making smart alliances and partnerships to accomplish these goals. We have done and are doing all of that.

This is a 180-degree turn from a collection of autonomous parts to a unified company. This enables us to harness the vast power of Gannett’s local content, local knowledge, and local operations for the benefit of advertisers, national advertisers as well as local advertisers. We can target, then grow our audiences and we can make it easy and cost effective for advertisers to reach the people they want when and how they want it.

Gannett can serve the digital world in ways no one else can. Today, an advertiser can come to Gannett and say I want to get my product in front of women ages 20 to 35 in small towns and large cities across the country. I want to create a national buzz but have a local connection that makes it easy for these customers to find me, and I don’t want to have to make hundreds of calls to get there. We can do that today. We have the content, lots of content. We have 60 local mom sites and a national version on the way. We have 104 local news websites. We have entertainment levers through Metro Mix and families who are organizing their kids sports through highschoolsports.net. We know who is going to these sites and we are getting better at these kinds of metrics every day.

We have our mobile network that can deliver local news and advertising to cell phones and last but definitely not least, we have our newspapers and niche publications and television stations. We can deliver for advertisers because we have the content and a range and depth of advertising options. We have classifieds with CareerBuilder and Classified Ventures. We have rich media through Point Roll and retail options through Shop Local. And just a word about this acquisition -- combining Shop Local with Point Roll will give us a broad depth of knowledge about advertisers’ needs and complete toolkit for retail advertisers.

Because of Point Roll, we have a unique opportunity to grow shop local in ways that no one else can. We are investing in it as we change their business model and expect to see the benefits of that next year. We also have a new ad serving network which we announced on Monday; the Gannett Digital Media Network has been rolled out across the company. Through this network, powered by AOL’s ad tech, advertisers can, with one call, place ads on hundreds of Gannett digital products with more than 25 million monthly uniques according to Nielsen net ratings.

And finally, there is Quadrant One, our national digital network in connection with our partners, the New York Times, Hearst, and Tribune. Through this company, which is dedicated to digital inventory, advertisers can reach a possible 70 million unique users covering 29 of the top 30 DMAs, so yes, we can reach the women our advertisers want and we are finding ways to reach their mothers, fathers, husbands, and children too, millions of them, with a wide variety of interest from the military to nurses, entertainment, sports, and beyond.

These are the initiatives that we have been working on over the past few years and we’ll continue these types of investments going forward. We are growing these capabilities every day while at the same time enhancing our profit-making traditional businesses. We believe a number of these investments will begin to pay off and contribute to the bottom line in 2009 but first, we need to get through these tough economic times.

As I mentioned, our results this quarter reflect the economy more than they demonstrate our dramatic changes.

Now, turning to these results, preliminary earnings per share from continuing operations were $1.02. These preliminary results do not include the non-cash impairment charge we will take for the quarter as previously reported. We also had a couple of other items that impacted these results, including a curtailment gain and offsetting severance expense. Gracia will give you more detail on these pieces in a few moments.

But I want to emphasize that the impairment charges are non-cash and do not impact our operation cash flow or hinder our ability to manage our business, make acquisitions or investments, or pay down debt. They reflect the tough business conditions in our space, as well as the decline in our stock price since our last impairment test.

So on our results -- our total operating revenues were $1.72 billion for the second quarter, down approximately 10%. Total reported expenses declined about $91 million, or 6.3%. Operating cash flow totaled about $430 million for the quarter. As I am sure all of you are aware, the U.S. economy softened in the second quarter and continued the severe pressure on advertising demand. In the U.K., unfortunately the consumer-driven downturn in the U.K. that started in the first quarter accelerated in the second quarter as well. Again, Gracia will dive deeper on these results but I want to highlight a couple of items of interest to you.

First, Olympics pacing continues to increase each week, though behind our record levels in 2004. Less brand sponsorships have been laid in ahead of time due to softer ad markets. Also, political advertising is on track with our third quarter projections so far. It’s accelerating each week with presidential spending now active on 13 of our stations. The expansion of the electoral map has only strengthened our uniquely strong footprint.

So based on where we stand today, we would expect revenues to be up in the mid- to high-single-digits in the third quarter, including our current projection for political revenues. As you can appreciate, the timing of political spending is difficult to predict but we will keep you updated certainly in our monthly reports.

Finally, results for our digital operations were positive for the quarter, up almost 6%, although digital is not immune to the economic environment. Domestic publishing online revenues increased about 3% as double-digit growth in the auto and retail categories was offset by the real estate and employment categories. Broadcasting was up over 17% and Newsquest growth rate exceeded 25%. In June, our domestic websites had 23.1 million unique users and reached 14.1% of the Internet audience. In the U.K., Newsquest’s monthly online audience totaled 7.5 million unique visitors with over 95 million page impressions.

To sum up, the economy has severely dampened the demand for advertising and that could continue for some time. But that should not hold us back as we make significant progress in transforming the company. We are putting the pieces together and moving toward our goal of building a strong, profitable, digital business and enhancing our core operations. We are laser-focused on working to grow the top line in a changing media landscape. At the same time, we are dramatically managing our cost structure to be more aligned with these opportunities.

With that, let me turn the call over to Gracia.

Gracia C. Martore

Thanks, Craig. First 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 for those measures to the most directly comparable GAAP measures in the press release and on the investor relations portion of our website.

I’ll cover the following items this morning; some additional detail on the impairment charges, I’ll follow that up with a brief summary of our segment results for the quarter, including some detail on the curtailment gain and severance expenses, and finally I’ll cover some balance sheet items before we open the call for questions.

As Craig noted and we have previously discussed with you, we will incur non-cash impairment charges in the quarter that will range from $2.6 billion to $2.9 billion pretax and $2.4 billion to $2.7 billion after tax. We have fine-tuned those numbers since we first reported them.

As Craig mentioned, business conditions softened after the end of 2007 and the resulting pressure that put on our stock price required us to update our impairment testing. The impairment charges will impact three components of the financial statements: one, they will reduce the book value of newspaper publishing goodwill and other intangible assets, including goodwill; two, they will include accelerated depreciation for the write-down of the carrying value of certain newspaper property, plant, and equipment -- this is as a result of some of our cost restructuring efforts; and three, they will impact the carrying value of certain of the company’s investments in newspaper partnerships and other businesses.

As we’ve stated before, much of the impairment is related to our operations in the U.K. To a lesser degree, it includes our newspaper partnerships, particularly in the west, and some other smaller domestic pieces. And again, as Craig said, it’s important to underscore that these non-cash charges do not impact the way we manage our businesses, now will they hamper our transformation. We will finalize the numbers and include them when we file our 10-Q in early August.

Moving quickly to results for our segments, overall our operating revenues, as Craig mentioned, reflect the realities of the economic situation. For the second quarter, our total operating revenues declined around 10%. Advertising revenues for publishing were about 13.5% lower, reflecting declines of a little higher than that in the U.S. and about 12.5% in the U.K. in pounds.

Retail as you can see was over 8% lower, national declined in the mid-teens and classified was down in the high-teens. Softness in retail advertising continued in the second quarter. Weakness in the department store, furniture, and telecom categories led the decline. Lower spending in large traditional department stores drove the decrease, which offset positive growth for a number of our other advertisers in the category.

Classified advertising has been most impacted directly from the economic slowdown. For U.S. community publishing, classified was down about 21%, reflecting declines of 30% in real estate, about 29% in employment. Auto was a little more than 11% lower.

We are still experiencing much softer classified ad demand in our real estate-centric markets -- Arizona, California, Florida, and Nevada. Once again this quarter, 38% of the ad revenue decline for U.S. community publishing came from properties in those states, while they generated 25% of the revenue.

Turning to the U.K., Newsquest results were impacted by the weak real estate market which began to more directly affect consumers in the overall economy. Classified categories turned down over the course of the quarter, particularly real estate and employment.

While retail lagged for the quarter, other revenue, although not a big component of advertising revenue at just over 10%, showed steady positive growth over the quarter. Overall, national advertising revenues were challenged, primarily due to softer ad demand at USA Today. USA Today’s advertising revenues were down in the mid-teens in the quarter. Travel was nicely positive, as was the financial category. But the remainder of the top five, entertainment, auto, and technology, lagged last year, in part due to fewer new product launches.

Broadcasting segment revenues declined about 6% in the quarter. Politically related advertising was higher but did not offset the impact of the soft economy and its impact on the categories, primarily auto.

Now let me discuss for a moment the two items in the quarter that impacted results, the curtailment gain and severance expenses. The curtailment gain we recognized was $46.5 million pretax, or about $29 million after tax, $0.13 per share. The gain stems from our review of our benefit plans. As we have already announced, we enhanced our 401K plan and at the same time froze some of our domestic pension plans.

Severance expenses were a little over $26 million after tax for the quarter, or $0.12 per share. The severance expenses reflect both reductions in force and continued cost control efforts, both here and in the U.K.

Overall, our efforts to contain costs and create efficiencies company wide are reflected in our operating expenses in the quarter. As you saw, they were 6.3% lower. Breaking this down, in broadcast, expenses declined about 4.8%; corporate expenses were almost 53% lower in the quarter, with cost controls having a major impact. The curtailment gain also contributed to the decline.

In the publishing segment, operating expenses declined 5.7% due to our strong cost control efforts and lower newsprint expense. Newsprint expense was almost 12% lower as a 16% decline in volume more than offset a usage price increase of almost 5%.

One quick comment on newsprint; as you are aware, publishers have grappled with an unprecedented hike in newsprint prices since December of last year. To that end, we are moving expeditiously to further reduce press web widths and convert to lower basis weights, given current market conditions. General market pricing through June has resulted in a sizable majority of North American newsprint machines making a financial contribution for their owners. Given that improvement, Gannett is meeting with good progress as we work with producers willing to take a more reasoned approach to the announced third quarter price increase.

Now let me step back for a moment to discuss our costs and cost structure overall. A closer look at the way we manage our businesses is critical as we transform the company to address the changing habits of the consumer and the advertiser, as well as the current economic environment.

It is essential in this environment that we change our cost structure to one that is more variable and efficient, from one that is heavily weighted toward fixed costs and local duplication.

We are focusing on a number of efforts in the company at the moment to gain these efficiencies. Those initiatives involve everything from centralizing and streamlining operations to taking advantage of new and evolving technology, to working with outside partners.

An important component of our successful transformation will be this changing of our expense structure to enable us to operate the company in the most efficient way, given the changing revenue opportunities and economic challenges. As Craig noted, the progress we are making will be more evident later this year and into 2009.

One final expense note before we move to the balance sheet -- interest expense was lower in the quarter. It totaled almost $44 million compared to a little over $66 million in 2007, reflecting both lower interest rates and debt balances.

And finally, moving to the balance sheet, we finished the quarter with cash and marketable securities totaling a little over $575 million, and total debt of $4.3 billion. Those cash balances and debt balances at quarter end include pre-funding at that point about half of the $1 billion convertible bond that, as we anticipated, was put back to us yesterday and was paid off this morning. We also closed on a three-year, $280 million credit facility that has been used to help refinance the convertible as well. At this point, our all-in cost of debt is approximately 4.3%.

Two last quick numbers for you; for the quarter, capital expenditures totaled approximately $30 million, and with respect to shares outstanding, shares at the end of the quarter were $227.9 million and the basic quarterly average was $228.3 million. We repurchased a little over 550,000 shares in the quarter.

Now we’ll stop and Craig and I will be pleased to take your questions. I’m turning it over to you, Cynthia.

Question-and-Answer Session

Operator

(Operator Instructions) We will take our first question from Peter Salkowski with Goldman Sachs. Please go ahead.

Peter Salkowski - Goldman Sachs

Thank you. Good morning, everybody. Gracia, a quick question on expenses, if you could kind of dive a little deeper into the newsprint expense; I know there’s been several price increases that have occurred in the first half of the year and others announced here for the second half. You mentioned something about negotiating with producers. What are your expectations going into the second half of the year on newsprint prices and newsprint expenses?

Gracia C. Martore

Well, Peter, clearly on newsprint, prices will be higher than they were last year. Our folks in Gannett supply are working diligently with, and having conversations with a number of producers who are more logically thinking about the current dynamics and the impact collectively on our best interests, both from a producer and a consumer standpoint. But given the price increases to date, clearly we’ll have higher newsprint expense, newsprint prices in the last six months but those will continue to be offset by the web width reductions and conservation efforts.

Peter Salkowski - Goldman Sachs

So you think on a year-over-year basis, you may still be able to keep expenses down, even -- obviously the LIFO accounting starting to, you know, come into that in the second half of the year?

Gracia C. Martore

We’re on FIFO accounting for our inventory and so certainly into the third quarter, we will do our very best to keep those expenses, as we indicated, in line and do a good job on that front.

Peter Salkowski - Goldman Sachs

All right, great. Thank you.

Operator

We will take our next question from John Janedis with Wachovia. Please go ahead.

John Janedis - Wachovia

Thank you. Gracia, looking back to 3Q04 in TV, I think you posted somewhere around $25 million to $30 million in political, and maybe $20 million or so in Olympics revenue. Can you just size your expectations in terms of what you are looking for in the budget this year? And how do you characterize your core TV categories outside of the political and Olympics? Thanks.

Gracia C. Martore

Let me just clarify the numbers and then I know Craig will want to comment; in the third quarter of ’04, we had about a little less than $29 million of Olympic revenue and, as you said, about $22 million of political.

Craig A. Dubow

John, as we look forward hear, certainly as we have suggested, the overall Olympic with the primary sponsor spenders is a little slower than we had anticipated. However, we are seeing the pick-up at this point from our political as we go across the board and certainly would anticipate that we are going to see that have some other impact to the positive as we move into the Olympics and certainly from that then into the bigger spending from September on to the election time.

So as suggested in the prepared comments, the result should be a nice positive in the third quarter for the overall with the political involved, assuming that all the political comes in the way that we are currently anticipating.

Gracia C. Martore

But I think the good news, as Craig said earlier, is that I think we already have presidential in 13 of our stations and in fact, we are seeing a bit of an expansion to the footprint that we originally anticipated with potentially Georgia and Virginia significantly in play this go-round, so we’re feeling very good. I know the President of our broadcast division, Dave Lougee, has done a fair amount of work on this and he’s feeling very good about the political outlook.

Craig A. Dubow

We are seeing week-by-week accelerations at this point and we are feeling pretty good about it.

John Janedis - Wachovia

Okay, and just on the core categories, when you think about TV and the other large categories, should we be thinking those seem to be down in the double-digits then, or --

Craig A. Dubow

You know, it’s going to vary. Obviously, as we have suggested, auto has been the most difficult category for certainly the broadcast side but it’s going to vary month to month and we will certainly keep you updated as we move along and move forward. But it’s a very, very difficult environment right now as far as the core categories are concerned.

John Janedis - Wachovia

Thank you very much.

Operator

We will take our next question from Edward Atorino with Benchmark Capital. Please go ahead.

Edward Atorino - Benchmark Capital

I was going to touch on the same questions that were already -- to the extent you have any “visibility” on some of the core retail categories for the summer, and do you think there is sort of a hold-back for the summer months, with maybe some more spending being pushed back toward the fourth quarter in the retail area?

Craig A. Dubow

Ed, I think the best way to put it, the visibility is extremely limited and that unfortunately I think as you look at the economy and other factors right now is really contributing to that cloudiness, if you will. But as we look forward, I don’t see that changing anytime soon.

You know, we do have, when you take a look on the community publishing side, from the Wal-Marts, the Targets, and the K-Marts, I mean, there has been some pick-up but obviously at this point not enough to offset what we have seen from the full retail side.

Edward Atorino - Benchmark Capital

Thanks a lot.

Operator

We will take our next question from Michael Kupinski with Noble Financial. Please go ahead.

Michael Kupinski - Noble Financial Group

Thank you for taking the question. In the past, USA Today seemed to benefit from special sections and advertising related to the Olympics. Can you talk a little bit about USA Today benefiting from the Olympics? And has the company decreased any of its products, particularly some of the launches that you had over the last several years that may have accounted for maybe a portion of some of the weakness in the revenues on the publishing side?

Craig A. Dubow

Thanks for the question, Mike. As just an answer on the USA Today Olympics, you know, that has not always been the largest piece but I will tell you from the USA Today perspective, we are continuing with the special production that we will do with USA Today and certainly the enhanced reporting, and I think between the work that Ken Paulson and Craig Moon are doing on that side, we’re pleased with where those accounts are right now and what has come in. As I said, the visibility on all of this has been much closer to the vest than we had seen in some previous Olympics, obviously, just due to the economic conditions. Gracia.

Gracia C. Martore

And Mike, with regard to your question about products, obviously in difficult economic times, one looks at each product and revisits them and to the extent that you had a, for instance, real estate product out there that was a terrifically profitable product, and particularly in those four states that we’ve talked about and you look at where real estate is in those markets, you might want to take a breather from that product at the moment because it’s not contributing as it has before. So clearly there’s rationalization in looking at those products that’s going to impact the top line at the moment.

Michael Kupinski - Noble Financial Group

If I may ask just one follow-up; you have obviously a lot of free cash flow and financial capacity. I was wondering, what are your uses of cash on your balance sheet at this point? You know, you obviously could be a more aggressive buyer of your stock. There appears to be some newspapers on the marketplace and traditional media on the marketplace, not that the market is going to give you credit for that, but what are your thoughts about your uses of cash at this point?

Gracia C. Martore

I think at this point, Mike, we’re focused on two things; number one, as we demonstrated with Shop Local and with a number of other pieces that we’re looking at, we are very interested in doing good strong, strategic acquisitions. Shop Local is a great case in point where we had the opportunity to buy in all of the pieces of Shop Local, now combine it with our Point Roll operations and really come up with one plus one equaling four. So we will continue to make those kinds of good strategic acquisitions.

But I think when you look at the current environment, particularly with the credit markets which have again become I think very difficult, I think certainly in the short to intermediate term, we’ll be focused on those kinds of acquisitions as well as paying down debt in the short to intermediate term.

Michael Kupinski - Noble Financial Group

Okay. Thank you very much.

Operator

We will take our next question from Jim Goss with Barrington Research. Please go ahead.

Jim Goss - Barrington Research

Thank you and good morning. National content appears to be increasingly commoditized. It winds up being either through a wire service, AP, or whatever, or on Yahoo! and other portals. I’m wondering what the role of the newspapers will be as you see it. Is it all local? I know you’ve talked about local local being very important. And to the extent your national content does wind up on these other sites, is that a good thing or bad thing for you, and do you have any control over it or an interest in trying to make sure that doesn’t happen so you can take advantage of your own proprietary content?

Craig A. Dubow

Jim, thanks for the question. First of all, let me start toward the end; yes, we certainly do control that content and certainly plan to as we look at the future. But as I have said on a number of occasions, this company has been extremely focused. Our success and track record has been on local. We have really further enhanced that into a local content environment and frankly, our view is in the way that that can play out, use it as an example for moms. There is going to be local content as well as content that will then play for us on a full national, across all of the sites that we will have up, either our owned/operated sites or those that we will affiliate, or even in other markets that would be on the outside.

But our overall use of that will certainly apply I think in some very positive ways, but we will not turn our head at all on what is absolutely critical to this company and that we really enjoy, and that is the local local content that we do very successfully. We fully understand it and we’ll continue to exploit that as we move forward on both the local and national environments.

Jim Goss - Barrington Research

Okay, but to the extent that the content does wind up on portals, do you view that as a favorable thing or an unfavorable thing?

Craig A. Dubow

We like to protect the content in every way we can. Obviously there is content that we do share through other services that are out there, but in general we want to protect in the very best way we can so that we can serve that consumer through our content and then supplement that as appropriate. So the answer is we want to protect in every way we can as we go forward with our own content.

Jim Goss - Barrington Research

All right, thanks.

Operator

We will take our next question from David Clark with Deutsche Bank. Please go ahead.

David Clark - Deutsche Bank

Thank you. Good morning. We’ve read in the trade press recently that NBC had told its affiliates in May that they are going to start to seek reverse network compensation when they renew affiliate contracts going forward, and obviously you guys have strong ratings at your stations and you’ll do better than weaker NBC stations, but what sort of impact do you foresee on revenue as those contracts get renewed? And I guess also, what percentage of TV revenue currently comes from network compensation? Thanks.

Craig A. Dubow

David, as we look out, correct me, Gracia, but I believe our NBC contracts are through 2015 and so we are in a very solid position from that standpoint. You know, we have heard all this. There are obviously ongoing discussions with the network and certainly we will be participating in all of that. However, with these agreements going out through 2015, I think for a great period of time here we’ll be in a pretty substantial position.

Gracia C. Martore

And with respect to network compensation, that is a very minor, minor, minor number --

Craig A. Dubow

Very minor.

Gracia C. Martore

-- right now. Where I think we’ve talked in the past about the fact that our cash retransmission, we expect that that will get up and more than compensate for the loss of network compensation over the last few years.

Craig A. Dubow

That’s correct, yes.

David Clark - Deutsche Bank

Okay, great, that’s very helpful. And just a quick newspaper question; we saw Tribune recently declare they want to -- their target is a 50-50 news-hold to advertising ratio. I was just wondering what approximately average across all your newspapers your ratio was and what that trend has been over the last few years, and will it trend down from here? Thank you.

Craig A. Dubow

You know, I think if we look at it, I can’t say I have the exact number at my fingertip but it has probably been in that same range for quite some period of time and that is not something that is particularly new for us and the way that we have been operating, so I hope that’s responsive.

Gracia C. Martore

And as well, I think what you have to look at is the content reach that we have across the community. Some of that content reach is going to be in the single daily newspaper. In addition to that, there is going to be content reached through our various niche publications, as well as our website, so I think to just simply focus in on news-hold in the single daily newspaper product is missing the content penetration we have in those communities we serve.

Craig A. Dubow

You know, and that is where in a number of conferences, David, we have been talking quite specifically about the audience aggregation and how we are working that through the individual markets, and frankly when you take a look at some of the results of Phoenix, Rochester, and really the high 70s, low 80% that we are penetrating in those markets, we really look at all of this across multiple mediums and how ultimately we can best serve on these multiple platforms at local constituency. So that’s what we are really working from an effort standpoint to further secure. Those are some very, very big and solid numbers.

David Clark - Deutsche Bank

I appreciate that color. Thank you.

Operator

We will take our next question from Alexia Quadrani with J.P. Morgan. Please go ahead.

Alexia Quadrani - J.P. Morgan

Thank you. On the publishing side, could you just comment how July is looking, and specifically on USA Today, how July is trending there? And then secondly, if you can give us some sense of how much you think online classified declined in the quarter?

Craig A. Dubow

First, just on the publishing side, you know, as we are experiencing for June, or had experienced for June, the visibility, Alexia, is very, very limited and we are seeing probably more of the same as to what we have experienced. And go back to June 9th when we were at the conference in New York, we have seen not unlike the April and May, the further deceleration in June. It’s around those same type of position at this point.

And then with USA Today, it’s been very interesting. I mean, certainly as Gracia has also talked about, certainly from a travel and financial standpoint, we have seen some ups but there as well, on a national platform, that visibility is extremely limited as well.

Gracia C. Martore

And with regard, Alexia, to the online revenue, clearly domestically we are seeing the impact of the declines in our classifieds print side impacting the online side of the equation. But we have strong retail and some auto growth as well, so that’s helped to offset it.

When you look at Newsquest where they’ve really ramped up their online efforts, even though a great deal of their online revenue is generated from classified up-sells, they are still seeing strong growth, as we mentioned earlier, in that category.

I think we --

Alexia Quadrani - J.P. Morgan

Would you say that the -- would it be fair to assume though that the real estate and help wanted online classified declines are a bit more modest than the print, or are they about the same levels?

Gracia C. Martore

They are more modest than the print declines, clearly.

Alexia Quadrani - J.P. Morgan

And any comments on CareerBuilder in the quarter?

Gracia C. Martore

You know, I don’t have those numbers in front of me. I understand that they had good traffic growth over the year-ago period but I apologize, I don’t have those numbers in front of me. But I know that if you can give Jeff a call, he’ll certainly get that information for you.

Alexia Quadrani - J.P. Morgan

Thank you.

Gracia C. Martore

I think we have time for one more question.

Operator

We will take our last question from Craig Huber with Lehman Brothers. Please go ahead.

Craig Huber - Lehman Brothers

Good morning. Thank you. Just a three-part question, Gracia; this new credit facility of $280 million, how did you refinance the rest of the $1 billion convert that was put to you yesterday?

Gracia C. Martore

In commercial paper.

Craig Huber - Lehman Brothers

Okay, so where is your commercial paper at right now in total for your company?

Gracia C. Martore

It’s about at $2 billion. I can get you a more refined number but it’s right around there.

Craig Huber - Lehman Brothers

And do you think you have more room that you could tap into that if you needed to, or wanted to?

Gracia C. Martore

You know, we have $3.9 billion of revolving credit facilities that back-stop that, so we do have some room for strategic acquisitions but let’s all remember that we have extraordinarily strong free cash flow and we continue to have extraordinarily strong free cash flow, so that certainly provides us with capacity and capability going forward for those kinds of strategic acquisitions we’ve talked about.

Craig A. Dubow

And then my other two questions, Gracia; one, what was the non-newsprint cash costs percent change in the quarter, adjusting for these two one-time items?

Gracia C. Martore

Our non-newsprint cash costs in the publishing segment were down about almost 5.5%.

Craig A. Dubow

And that’s adjusted for these two one-time items?

Gracia C. Martore

Adjusted, constant currency, which really currency was a little bit against us this quarter but adjusted for those two items.

Craig Huber - Lehman Brothers

And then also, if I could ask, those two one-time items you mentioned in the second paragraph, the pension curtailment and the restructuring charge, how do those numbers break out between your three segments?

Gracia C. Martore

You know, I don’t have that detail right in front of me but I know that if you give Jeff a call, he’ll dig out the schedule and give you some information. Obviously the lion’s share of that, both the restructuring and the curtailment gain, would be in the publishing segment.

Craig Huber - Lehman Brothers

Okay, great. Thank you.

Operator

This will conclude today’s question-and-answer session. I will now turn the call back over to Ms. Martore for closing comments.

Gracia C. Martore

Thanks very much for joining us today. If you have any follow-up questions, please feel free to call Jeff Heinz at 703-854-6917 or me at 6918. Have a terrific day.

Operator

Ladies and gentlemen, this will conclude the Gannett second quarter 2008 earnings conference call. We do thank you for your participation and you may disconnect at this time.

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