Tegna Inc (TGNA) 2001 Q1 法說會逐字稿

GANNETT FIRST QUARTER 2001 EARNINGS CONFERENCE CALL

You are listening to the Gannett Earnings Conference Call. Results for the first quarter of 2001 will be discussed. Now I will turn the call over to Gracia Martore, treasurer and vice president, investor relations. Gracia.

Thank you very much and good morning. Welcome to our conference call and web cast to review Gannett's First Quarter 2001 Earnings. We hope you have all had a chance to review our press releases, which went out early this morning detailing our earnings as well as our March results. These releases can be found on our website at www.gannett.com. With me today are Doug McCorkindale, chairman, CEO, and president and Larry Miller, executive vice president and chief financial officer. Very briefly, let me review the highlights of our earnings report for the first quarter. Gannett earned 66 cents per share from continuing operations on a fully diluted basis, which is consistent with the range we provided in late March. In 2000, Gannett earned 74 cents per share on a comparable basis. After tax cash flow per share defined as after tax income from continuing operations, cost depreciation, and amortization was $1.08 which was up from $1.03 for the first quarter of 2000. As we mentioned before, there is no clear guidance yet on how we will be required to report EPS once goodwill amortization is no longer deducted. Once the new rules take effect, we will provide you with current and historical numbers that will be on an apples-to-apples basis. I would also like to briefly detail a few other numbers that I believe you are interested in. Newsprint expense rose 35% in the quarter comprised of 22% increase in price and 11% increase in usage. Our usage numbers in the quarter obviously reflect the significant acquisition activity from mid 2000. On a pro forma basis, our newsprint expense would have been up 9% on an 11% decline in usage. Turning to the balance sheet, total debt in the quarter end stood at $5.5 billion, almost all of which is floating rate short-term debt. So, we continue to be favorably impacted by the 150 basis points of interest rate reductions so far this year. Cash and marketable securities were about 145 million at quarter end. Basic shares outstanding at quarter end were 264.6 million and averaged 264.5 million in the quarter. Capital expenditures were 64 million and our budget is to be about 335 million for the full year. The exchange rate on sterling averaged 1.46 for the quarter versus 1.60 for the first quarter of 2000. This decline in the exchange rate on the pound impacted earnings by a little over a penny in the first quarter. Finally, before I turn the call over to Doug, I need to tell you that both our conference call and web cast today may include forward-looking statements, which are subject to a number of risks and uncertainties that are outlined in detail in our SEC filings. Now, I will turn it to Doug McCorkindale.

Thank you Gracia. For those of you who have followed us for a number of years, you can well know that the first quarter of 2001 was probably the most challenging quarter we have seen since the early 90s. Those of you who were at the December analysts meeting know that we told you we had some tough comparisons in the first half. That was based upon the fact that we had no millennium adspending, which had benefited us in January 2000. We had lower adspending by the dotcoms that particularly had benefited USA Today, and we had the higher interest and amortization expense from the acquisitions we'd completed last summer, and of course significantly higher newsprint expense. So while we knew the economy would be less robust this year, advertisers have been even more cautious about adspending than we had predicted. Because of the much softer and an uncertain economic environment, our advertising base businesses were certainly tested during the first quarter by this difficult environment. Turning first to our domestic newspapers, they were hurt by a couple of factors first out-of-business retailers have cost us several million dollars so far this year in retail and preprint revenue, and second, our highest margin classified category Help Wanted advertising has been impacted by higher increases and layoff announcements that started last fall in a minor way but have accelerated in the last few months and are continuing. On the other hand, on the retail side of the domestic, we fared pretty well in the first quarter. Our strongest ad category has been telecommunications, which was up over 20% and furniture. Our consumer electronics, financial, and growth rates have been much softer. Looking at a country as a whole, in the Plains area of the country, areas like Des Moines, Fort Collins, El Paso, and [_______________] they have been the strongest, while the Midwest part of the country which includes some of our bigger properties like Cincinnati, Detroit, and Louisville that has been the softest area in terms of local advertising. In classified, on the other hand, we are seeing softness across the whole nation. No area of the country is immune to the losses. The largest market such as Detroit, Cincinnati, and Nashville have been hit the hardest. Help Wanted, in our U.S. papers declined about 14% in the first quarter, and the rate of decline accelerated as we went through the quarter, and we faced the toughest comparison in this category in March. Also, automobile classified revenues were down in low single digits. The only strong spot has been real estate, which continues to be up in the low double-digit range for the quarter. At USA Today, as expected, advertising was lower in the first quarter. Some of you've heard us tell you that dotcom advertising in the first half of last year was about 3 million to 4 million per month, that's disappeared. By category, pharmaceutical and credit card ads were the bright spots while travel, entertainment, and automotive were each down about 10% and financial services were off even more. In the second quarter for USA Today, April and May will be the most difficult comparisons, while June will be our easiest comparison month. Turning to television, the quarter actually ended a little better than we indicated in late March when we met with some of you, it was down 7% in revenues. Automotive, which is the number one category for us in television and retail, were particularly soft and we are also impacted by the absence of several million dollars of issue efficacy advertising that we had in the first quarter of 2000. Overall, national advertising is much softer than local. Early reports of the second quarter show our pacings down in the mid teens, which is just about where we started the first quarter. Again, local is much better than national. We caution you that these pacings have been much more volatile in the last few months than they've been in the past. So we will keep you up to date as the quarter progresses. Despite this difficult operating environment, there have been some bright spots. The operating profit contribution from our recent acquisitions has been very good. Operating profits for both Thomson and Central are ahead of last year and in the case of Central, they are substantially ahead of last year. Significant operating improvements including staff level reduction, favorable labor contract negotiations, and other reductions in expenses have led to these results. For the quarter, Thomson and Central were just modestly diluted. Another positive aspect of the quarter was our operations in the U.K., Newsquest. Recruitment ads, which is their Help Wanted, was very strong with revenues up 25% on a constant currency basis. Real estate revenues were also up double digits, and as a result the Newsquest Newscom combination was solidly accretive in the first quarter. Turning to our internet activities, if any of you have any interest in internet these days, but we still have a business there. We have generated about $17 million of revenue in the first quarter, over one-third of our domestic publishing site, three of our television sites, and all of our Newsquest group made a profit on the internet activities in the first quarter. At usatoday.com, however, advertising revenue is down substantially as it is the sequence of other national sites. Other pluses, as Gracia mentioned, we are saving money on interest expense because short-term rates are down and most of our 5.5 billion debt is floating commercial paper. For those of you interested in the tax rate that will also be down slightly to 39.4% from 39.6%. As you would expect from Gannett, we are controlling cost very tightly. In the first quarter, pro forma newspaper segment expense excluding newsprint was down almost 5%, and television segment operating expenses excluding some amortizations from our partnership with NBC in Cleveland were virtually flat. We will continue to aggressively control cost during these uncertain times. Some of you've asked about newsprints. On the newsprint front, we think the fate of the newsprint price increase is still very uncertain. For April orders, nearly all of our supplier base again did not raise prices, and those who did saw their orders eliminated or significantly reduced. Consequently, the impact on our average price was negligible. Market fundamentals are weak. As you all know, publishers' inventories are ballooning as consumption registered double-digit declines on the year-over-year basis. This is simply the wrong time to try the force of price increase. Other than our own situation, we are hearing some producers are agreeing to accept or did agree to accept no price increase in March, and less than $50 they would like to have in April. This is obviously a movement in the right direction. Given the current condition, more than a few experienced industry watchers don't believe this increase can be sustained. In fact, some are beginning to forecast price decline. We will just have to wait and see how it comes out. Looking towards the second quarter as I have already mentioned, it appears that the advertising trends that we had seen in the first quarter are continuing in the second quarter. Let me put that more directly. We are seeing no positive signs in the economy. We will have difficult comparisons with newsprint in the second quarter with prices up in the high teens year over year. If these unfavorable trends persist for the entire quarter, we will not be able to achieve the same level of earnings we've reported in the second quarter of last year. Our outlook will remain cautious for the remainder of the year though since we simply don't have good visibility on what the second half of 2001 will bring, that being said, we will obviously grow on our financial strength to meet the challenge of an uncertain economy, and as you expect we'll control the expenses even tighter and produce the best products we can at the lowest possible cost. Let me stop there and have all of us take your questions.

At this time, I would like to remind everyone that if you wish to ask a question, press the number 1 on your telephone keypad. Your first question comes from Lauren Fine, with Merrill Lynch.

Thank you, a couple of, I think quick questions, one just on the ad trends that you are seeing, I am wondering it's specifically that isolate what you are seeing in Help Wanted so far in April on your domestic properties, and then secondly, I wanted to clarify on the cost containment that you were referring to the newspapers segment the decline of 5% excluding newsprint. Are those cash cost or does that include depreciation where we saw a lower depreciation number than we were expecting?

Lauren, this is Doug. Gracia is looking up your second part. We don't have any projections yet for Help Wanted for April, but in calling around to our largest property as I mentioned in my remark, we are seeing no positive sign in the Help Wanted category. So right now, we are just assuming that the second quarter will as tough as the first quarter or to be blunt, possibly even tougher. You have an

Yeah, Lauren, a part of that decrease in operating expenses is a decline in depreciation, but that's clearly not the most substantial piece of it.

Yeah. That's really very small piece of it. We are down about 5% on an apples-to-apples at newsprint, Lauren, and we are turning the screws on costs and expecting all or our managers to operate in a much tougher environment.

Okay and just one last question if I might, Garcia, do you know what your average exchange rate was in the second quarter a year ago so we can see how that comparison?

In the second quarter, it was $1.54.

Okay great, thank you

Yeah, and then in the third it was $1.48, in the fourth $1.45.

Great, thank you.

Your next question comes from Lee Westerfield UBS Warburg.

Hi, thank you very much. Gracia or Doug, I wonder if you could go into a little further detail in the United Kingdom, I have been hearing that Help Wanted is quite strong, continues to be at the moment offset by some other trends there. Could you isolate the United Kingdom and go through some categories there and discuss if the first quarter performance there is different from the outlook there?

Different from the outlook Lee, as I said in the comments, Help Wanted or Recruitment was up 25% there, the real estate is strong, up double digit. So, generally speaking you may be, can get into more specific but the U.K. is doing very, very well. We have not seen any sign of a softening economy in our properties in the U.K. They are doing better than we had predicted for 2001, and so far there are no negative signs on the horizon. Now with the foot-and-mouth disease, there might be some softening in some of the markets when they get to be close at the vacation time, but we are doing pretty good. A little softness in the national picture, but the local is up, and as I said, the classified categories are up. So, we are feeling very good about the U.K.

That's on a constant currency basically.

Okay, if I can followup on that with performance that you have experienced in United Kingdom, how encouraged are you at this stage about Bolton acquisitions in that arena?

Well, I mean we'll look at anything over there but there is nothing of size per sale, the one transaction that was rumored was RIM, as you probably know we and two other sizeable companies over there said we make a joint bid for RIM, the seller was not interested in the joint bid. So, that transaction is on hold, if not totally delayed at this point but there are no acquisitions on the horizon over there, at least nothing of significance. We are always buying smaller properties there, but nothing of size.

Okay Doug, Gracia thank you much.

Thanks Lee.

Your next question comes from Kevin Gruneich with Bear Stearns.

Thank you, a couple of questions, number one, I was wondering for the newspaper group, if you could provide pro forma change in operating income and EBITDA, and just a second question on the television group with the potential of our writers and our after-strike looming, I was wondering if you could discuss your exposure there and perhaps what contingency plans your broadcast group is undertaking?

Let me go to television first and then Gracia or Larry will go to your first question Kevin. To be blunt, with our profit margins at over 50%, we are turning whatever screws there are to turn to reflect as much management panel as we can bring to the forefront when the revenue picture is this soft. We don't have anything else that we can do, per se if the strike takes place, I mean, we are just going to have to face it like everyone else. So, we will be just watching every expense whether there is a strike or whether there is not, it's not going to affect our day-to-day operations in this retail and this automobile softness that we are seeing, and television, Gracia do you have

Yeah, Kevin on those operating income and operating cash flow for the newspaper segment, it was on a pro forma basis down in the mid-single digits for the quarter.

Great, thanks, if I can just follow up on that first question, you may not have it handy but I was wondering what Gannett broadcasting's exposure was in terms of percent of revenues that emanate from primetime and then from late news?

Oh, we wouldn't have that handy, Gracia can, may be, look that up. Obviously, late news would be more profitable for us than primetime because that is mostly local advertising, and as I said in the earlier comments, we are seeing the softness in national much more than we are seeing at local. So, to the extent that we are getting some solid local advertising when we have good ratings which we do for our late news, that's more helpful to us than the network programming.

Right, okay, thanks.

Thanks Kevin.

Your next question comes from Rudy Hokanson with CIBC.

Thank you. This isn't as much a numbers question as a larger issue question that's been getting a lot of press, and I was wondering if you could just comment on the comment you made, it's a comment on a comment that you made earlier Doug, and that was cutting costs while keeping the high quality of the product out there. What are you noticing perhaps as the most difficult challenge in cutting costs right now and keeping the high quality of a product because a lot of the newspaper companies are themselves getting bad press right now over the notion of cutting cost at the expense of editorial quality, etc. And I was wondering if you could maybe put a perspective on that?

Well, yeah, from our point of view you won't see us announcing any major layoffs or cutbacks, because we've run the company on a day-to-day basis in good times and bad times with a number of employees we think we need. So we don't have a lot of extra bodies to layoff and you won't see us announcing that we're at least laying off 200 people or 100 people. We just won't do that because we didn't have extra people to begin with. So, what we're doing is, is just cutting out, marketing studies, may be a product that we were planning that doesn't fit in this environment, especially say the new automobile product. If the advertises are not going to support it, we wouldn't go ahead with it. It's just a lot of things. All of our managers have a checklist of things that they can do and tighten up, you tighten up is the advertising cutback. We're not taking any whacks at any product. We were not taking any whacks at any of our employee count. We're just managing. Obviously, we're not hiring new people. We're just doing everything we do on a day-to-day basis, but just taking every discretionary item and examining it and probably either cutting it out or delaying it.

Okay, thank you.

Your next question comes from Bill Bird with Salomon Smith Barney.

Hi, thanks a lot. Just a couple of quick questions. Doug, I was wondering if you can just talk a little bit, what's your view on the economy, do you see many parallels between the current economic slowdown and 1991. Second, I was wondering if you can give us any level of quantification of margin expansion experienced by Central, and then third, just depreciating FASB rules aren't file yet, could you give us at least a goodwill number for 2001? Thank you.

Gracia and Larry will get on the goodwill number, but Bill, on the economy I think this differs somewhat from 1991 where 1991 was driven by a lot of retail bankruptcies and cutbacks and followed by some employment advertising, where this one was clearly led by employment advertising, as you know, we're following our numbers closely, we saw a little softness in November, picked up a little in December, and then began to soften in January, and then just fell right off the cliff in February. So, I think the difference might be in the origin plus the acceleration to which this softness affected our advertising picture. It came much quicker without the normal warnings that we had seen over the years, and as I said right now, we're not seeing any signs of positive economic indicators in any of our market. Now, the retail is okay as I mentioned, but with that amount of Help Wanted classifieds dropping for those of you, who have followed our business for many years, that's a very negative sign for the economy and we've been telling our friends here in Washington that not withstanding their views of the economy. We think it has softened and is softening very, very rapidly and then with the real estate numbers you saw this morning, I think, that's just another indication of what we're predicting, which is not good news. So, we're managing on the assumption we're in a recession or about to enter one. What was the...

On the goodwill number Bill, I think it's going to be around $235 to $240 million for the full year. We've got operating margins for central, and if we were looking for the first quarter at operating margins in the high teens last year, they're probably in the mid-to-high 20s in the first quarter of this year, despite newsprint, despite all of those...

They're up significantly as I mentioned because of the expense reductions we've been able to find in both Phoenix and in Indian outlook. We had a very straightforward labor settlement in Indian outlook that was quite a bit more favorable to us than the Central folks had predicted when we did the acquisition.

Great, thank you.

Your next question comes from Edward Atorino with Dresdner Kleinwort.

Hello. Good morning.

Hello Ed.

Tough times. Two questions, it looks like you focused, maybe I'm misinterpreting, is a little more on debt reduction and share repurchase in the quarter and could you talk about your appetite going forward. And secondly, on this newsprint issue, if prices did roll back, what seems to me it's a little bit of a pyrrhic victory and would you expect the prices to come bouncing back the minute demand perks up? I mean that Abitibi and Board seem be up to their ankles are now in the sand.

Well on the newsprint, Gracia is our expert, now let her jump in here. They are making a comfortable profit at this price level and we obviously believe they should continue to make comfortable profit. We just think under these economic conditions, they should not be forcing through a price increase that we don't believe is realistic.

Right

Ed, we would welcome a rebound in our business and advertising demand, and we will be happy to pay a price increase under that scenario. But, I think at the moment, supply and demand just doesn't quite get through there.

And what about share repurchase versus debt reduction going forward?

We're reducing debt right now, Ed. We have told our rating agencies and have an understanding with them that to maintain our commercial paper rating and our long-term debt rating, we will reduce debt and hold back on share repurchase at this time. As a matter of fact, we're going to be meeting with the rating agencies this week, and we'll be confirming all of the numbers that we've talked to them about in the past and having a good A1/P1 rating and borrowing at 5% or less is a good way to help our numbers this year. We keep looking at repurchase when appropriate but it's not appropriate at this time, and we have authority to do it and can get additional authority from the board if and when we decide to make that move.

Thank you very much.

Your next question comes from Jim Goss with Barrington Research.

One more question on newsprint. If no further change in price levels occurred for the balance of the year, could you give us an idea of what the year-to-year average newsprint price comparison would be, and did you say that the second quarter right now look to be like a low teens increase in prices in newsprint cost versus the 9% comparable basis when you reported in the first quarter. And then a separate issue, there seems to be more talk about a potential fall in the cross-ownership restrictions. Are there opportunities that look interesting on one side or another, or is this just a bad time to be considering any moves along those lines?

Let [_______________] jump in here, Jim. I think our newsprint, I said that in the second quarter, we expect prices to be up in the high teens.

High teens.

That's prices.

That's prices year over year.

Now proforma expense, obviously, if we continue to see the same usage decline in the second quarter as we saw in the first quarter, you probably would see a number that is less than that pro forma 9% increase in the first quarter. We will have to see.

On cross-ownership, Jim, there's nothing on the horizon that we're looking at that the new rule would make us accelerate any discussions; however, what's happened is that a number of transactions that in the past we haven't been able to pursue because of the cross-ownership may come up again and we'll be happy to talk about it. We're having some interesting positive results in Phoenix with the newspaper and the TV station down there. We're beginning to get some advertising. I don't want to overemphasize that. It's very hard to measure any economic benefit at this time, but it's certainly positive. So, what it does is that it just opens up the door of discussion with folks that in the past the transaction was so complicated that you couldn't have the deductions or at least it wasn't worth taking the time and energy. So, having said that, there's nothing on the horizon though, and we'll all wait. I'm hoping, as I said in March, that by mid summer here we'll have some results from the FDC. The signals are certainly very positive from the chairman and, I believe, he may have a full commission in place with a little bit of luck here in the upcoming months.

I am sorry. Jim, to finish your question on newsprint, if we had no increase for the remainder of the year, year-over-year prices would be up probably in the low-to-mid teens.

Okay. Thank you.

You're welcome.

Your next question comes from William Drewery with Credit Suisse First Boston.

Hi, thanks. Several questions actually. One is could you discuss the automotive category newspapers versus TV, in other words give us little more color on the auto category and the TV. It seems like it's turning a lot worse in that medium versus newspapers. The second question is could you just remind us what Help Wanted is as a percent of the newspaper revenue, or as a percent of classified revenue whichever is easier, and then also remind us what your U.K. properties are as a percent in newspaper revenue as well?

Bill, I don't know the answer offhand on the U.K. properties; maybe we can find that out as I'm trying to respond to your other question. In the U.S., Help Wanted is about 40% a little over 40% of our classified picture, automobile is about 25%-30%, and turning to the automobile category, it is worse in television than we are seeing in print. As a general statement, the imported automobile manufacturers are advertising more aggressively than the domestics. The ones that are in Detroit are cutting more significantly in television and in national advertising. Welco, as I said, is down, but it's more of a market-by-market and we are seeing some automobile dealers locally increasing their advertising. As a general statement, it's down more severe in television, less severe in prints. It's obviously down in USA Today also which is in the national category, but domestic is worse, imports the second, and television is the worst of all three or four different ways to measure it.

Bill, interestingly on Help Wanted in the U.K. as a percentage of classified, it's about 40%. So, it's a little bit more from U.S. where it's a little bit over 40%.

Okay, and just a followup on that. On the auto side, I mean that's a pretty big chunk of revenue as well. What has been the trend over the last three or four months on the print side, on the newspaper side locally? Does it look like it's hitting a bottom yet or is it continuing to turn down like Help Wanted has been?

I think automobile is trending downwards Bill. We thought we were going to see a little pickup in March, but we didn't and some of our properties were a little bit more optimistic in February about the automobile picture. So, without any specific detail, the sense of our print properties is that it is still trending downwards except again, this is domestic I'm talking about, this is where most of the negative is coming out on the domestic side.

Okay and just one final question. On that newsprint assumption that you talked about for the second quarter, being up I think in the mid teens, does that assume that you don't see any further realization to Gannett of that price increase or no?

First of all we said that we assume it's going to be up in the high teens, but given our inventory levels and the fact that we are on [_______________], there is really no impact even if we had a price increase in the second quarter.

Okay, great. Thank you very much.

Your next question comes from Peter Appert with Deutsche Bank.

Hi guys. Back to the cross-ownership thing, in Phoenix specifically, are you seeing any benefits or are there any programs you've initiated to enhance the revenue dynamic there because the cross-ownership situation or maybe you can talk broadly about how you've taken advantage of the opportunity?

Yes, Peter. We are getting some additional revenue in Phoenix, not a heck of a lot, less than a million dollars in fact I think it's less than half million dollars. So it's just beginning to kick in, and I can't really tell you how significant it is or will be. What we are doing is we're doing some joint news covering or having the paper-covering event that the television station might cover. We are getting up a little bit of journalistic savings there, but nothing that you can really measure. We are getting a lot of cross promotion, which, of course, is helping the newspaper as well as the television station, and together we're also doing a joint operation on our internet side and we are putting those two pieces together. I think in this economy though it's pretty hard to measure what the pluses are here. There are pluses, there is certainly no negative, but they are not significant and we wouldn't go out and try to manufacture a deal based upon the synergies of cross-ownership. The operations would still have to stand on their own two feet and we'd analyze them as we would do any other transaction, but there are certainly some positives.

So, obviously your cost saving are at the minimus from the cross-ownership side, it's all about the renegotiated labor contracts etc.?

Yeah. From the cross-ownership it's minimus at this point and the revenue picture is just very slightly positive, it's not a lot of money.

So it doesn't sound like, going back to an earlier question, that you necessarily would be enthusiastically responding to change in cross-ownership rules in terms of more aggressive acquisition strategy?

Oh, no, not at all. We would definitely be enthusiastic about a change in the cross-ownership rules because what it has done is that it prohibited us from pursuing a number of acquisitions. Nothing big, but a number of acquisitions where some smaller companies have prints and broadcasting, would like to chat with us but the overlap has resulted in so many properties that would've had to be sold basically on a buy or sell basis that we didn't want to take the risk and therefore we wouldn't have stepped up to the transaction. And it also may lead to us trading some properties in some of the markets where we have prints or broadcasting and some others may want to move the television or newspaper around, so it gives you deal flexibility. So, we're clearly in favor of it. I just don't want to overemphasize big economic gains from a change in the rule because I think it's too early to tell that.

Right, I understand. Great, thank you.

Your next question comes from Michael Beebe with Goldman Sachs.

Actually my questions have been answered. Thanks.

Thanks Michael.

Okay Mike.

The next question comes from John [_______________] with [_______________].

Hi, a couple of things. What's your new thinking on capex and remind me what your old thinking was and then I have another question.

Our new and old thinking is $335 million for the year.

What were you thinking about two or three months ago?

The same.

The same thing as at this point John. We're not moving a lot of money around on capex. We can control that and as you know as you get through the year, the timing may move some money into 2002, but the overall number is still 335.

Okay. My second point is actually not a question but perhaps [_______________] point of advice. This year is now shaping up as a throw away year. I mean it really doesn't matter what Gannet earns, I don't even know what the street estimates are 220 or 226 or 218 or 229, it doesn't matter anymore. You have the currency in terms of cash. You have the quality, equity securities in the entire media industry. This is a great time to get aggressive on the acquisition front; a buyer's market and you have got the goods.

You have anything to sell, John?

No. You can start with Sinclair and Young, and the names that we always respect.

Well, we agree with you regarding our performance. I think our first quarter is going to be down obviously at 10% or so and based upon what we have heard most of the other folks are down between 20% and 80%. It doesn't seem to be make any difference what you do.

Right. But I'm just saying that any acquisition target would love to have Gannett stock in an acquisition given the pressure that lot of these companies are under. Anyway, thanks a lot.

Okay, thank you John.

And a followup question from Lee Westerfield with UBS Warburg.

And actually to pickup on Mr. [_______________] comments [_______________] obviously you really do have a capitalization to your advantage when you move into an acquisition arena, Doug, but what I want to get at the moment here is when you conceive of how much to pay and whether to use your balance sheet and therefore cash and acquisitions or whether do you stock, what do you think the 2002 and 2003 advertising environment hold in store when you think about how much properties are worth?

Well, Lee, it will depend completely on how the economy responds here. Longer term, we obviously believe that advertising will grow and we will get our share of it, so it will be the right business to be in whether it's prints or broadcasting or internet or any of the other advertising related businesses, but whether that's 2002 or 2003 I don't know. I mean, we would place normal multiples on it. You're not going to see us paying 16 times cash flow for a number one television station that may have nowhere to go expect down. On the other hand, we'll step up to the transactions that make sense, whether it's prints or broadcasting or other related businesses. We'll do the same analysis we've been doing for 30 years and make sure we make money. That's why Thomson and Central and Newscom and Newsquest have come in better than we predicted. We have the same discipline no matter what the market place has to offer. If a number of folks want to chat with us, as John [_______________] was just suggesting, we would be happy to talk to them.

Okay. Thanks for your thoughts.

Our next question comes from Doug Arthur from Morgan Stanley.

Doug, I know that the internet is not a very popular subject these days, but are you continuing to believe or see no particular market share impact on either auto, classified, or Help Wanted from internet platforms and if you are seeing an impact, is that an area that also might enter on the acquisition radar?

We're still not seeing much of an impact at all, Doug. As I mentioned earlier, about a third of our domestic newspaper site [_______________]USA.com are now making money. Actually, business is picking up very nicely there. We're getting some classified, automotive employment. So we're not really seeing any competitive force there that's giving us concern. On the other hand, we're building the site because we want to take advantage of those areas. So right now, there is no negative impact from outside forces and our own activities are growing.

Great, thanks.

At this time, I would like to remind everyone that if you wish to ask a question, press the number 1 on your telephone keypad. At this time, there are no further questions.

Thanks very much for joining us this morning. If you have any further questions, please give me a call at 703-284-6918. We'll be happy to try to answer them for you.

Thanks all, I'd appreciate it.

Thank you for participating in today's Gannett conference call. Analysts with additional questions should contact Gracia Martore at 703-284-6918 or via e-mail at gmartore@gci1.gannett.com. Members of the media with questions should call Tara Connell at 703-284-6049 or via e-mail at tconnell@gci1.gannett.com.