Tegna Inc (TGNA) 2002 Q3 法說會逐字稿

Good morning, and welcome, ladies and gentlemen, to the Gannett third-quarter earnings conference call. At this time I would like to inform you that this conference is being recorded and that all participants are in a listen-only mode. At the request of the company we will open the conference up for questions and answers after the presentation. I will now turn the conference off to your host Ms. Gracia Martore, you may begin.

Good morning. Welcome to our conference call and Gannett's third-quarter results. We hope you've had a chance to review our press releases from this morning which can be found at WWW.Gannett.com.

With me today are Doug McCorkindale, Chairman, President and CEO and Larry Miller, Executive Vice-President of Operations and Chief Financial Officer. Very briefly as you saw, Gannett earned 99 cents per diluted share, a penny above the estimate we provided you in July and in line with current consensus in 2001, on a comparable basis we earned 85 cents per share, or a 16% increase year-over-year. As importantly after tax cash flow per share was $1.20 for the quarter versus $1.05 for the third quarter of 2001 again on a comparable basis.

As we told you previously at the beginning of 2002, we a adopted SFAS 142 which changed the rule for goodwill and intangible asset accounting. As a result third quarter 2001's previously reported diluted earnings per share was 66 cents was adjusted upward by 19 cents to 85 cents which was the number you saw this morning. This reflects the impact of the new rules as if they were in place during the beginning of 2001.

I'd like to detail a few other numbers that may be of interest. In the quarter newspaper print expense declined 23%, comprised of a little over 24% decline in prices and a 2% increase in usage. In the fourth quarter we anticipate Gannett's usage price will decline in the mid teen range. While there's a little evidence of sustained improvement in newsprint consumption, it appears that the general market price will rise at varying effective from late third quarter into the fourth quarter.

Gannett's management of inventories and orders allowed for no price increase impact for us during the third quarter. Historically increased demand for paper in the fourth quarter has been an easier period for producers to raise prices and this year's capacity management by large news print companies has mitigated a lengthy period of supply imbalance. While most market observers expect prices to rise, continued consumption so have appears to be threatening implementation of the full $50 hike. While not yet settled something less than $50 could occur.

Looking ahead there is growing speculation as to whether or not an increase can be sustained through the winter. Turning quickly to the balance sheet, total debt at quarter end, stood at $4.3 billion, and cash and marketable securities were at $68 million. At this point our all in cost of debt remains at 3.3%.

With respect to shares outstanding, basic shares at quarter end were 267.3 million, they averaged 267.1 million for the quarter, and 266.7 million for the year-to-date. Capital expenditures were $51 million, for the quarter, and $176 million year-to-date. We expect them to come in around 280 to $290 million for 2002. Finally before I turn the call over to Doug, the lawyers tell us that we need to tell you that both our conference call and webcast today may include forward-looking statements that are outlined in enormous details in our SEC filings. Doug.

Thanks, Gracia. Good morning, all. In our earnings call last quarter we said we hoped to report that revenue growth had resumed in the second half of the year. We went on to say that if this occurred it would have resulted in additional gains and profits and earnings per share. I think all of you had a chance to look at our third-quarter numbers which released this morning, will note that that prediction has come true.

Net income climbed 17% and operating revenues for the company increased 4%. Total pro forma advertising revenues for our newspaper segment rose 2% in the quarter. That's the first quarterly gain year-over-year since, the year 2000. Classified revenues in the newspaper segments got sequentially better during the quarter, up 4% in September after a gain of just 1% in July.

In employment, the numbers still aren't good but they are getting better. Automotive and real estate remain strong throughout the quarter. Retail revenues also improved and finished up 3% for the quarter. Financial, telecom and health showed good gains in the quarter while consumer electronics continues to be very soft. Natural advertising at both our local newspapers and at USA Today remains volatile. Finishing down 1% for the quarter. At U.S.A. Today, it is still difficult to make predictions about the near term trends.

Turning to the UK for a moment, which as some of you know is a significant part of the company, News Quest continues to be an important contributor to our results despite a softening advertising environment in the U.K. In the third quarter we continue see soft ad results in employment particularly in the south of England. But as some of you may recall, the employment was very strong for News Quest in the third quarter of 2001, it was up double digits. So we're going against strong numbers.

Total revenues for News Quest were basically flat year-over-year but costs were very well contained and, as a result,, News Quest operating profits were up in the high single digits. In television we're having a very strong year. The Quarter enjoyed very heavy political and healthy automobile advertising. Thus far political has exceeded our expectations and was our strong number one or number two positions in each our markets we're well positioned to further maximize political advertising dollars for October and November.

As you know, our pacings have been improving for the past several months. Our latest pacings for the fourth quarter are up in the high 20s with October up almost 30% and November and December up in the 20s. Again, political advertising continues to be very strong. I want to caution you that pacings are still volatile and what I'm telling you reflects what we know right at this moment. We'll obviously keep you up to date on our monthly report as the quarter progresses.

On the Internet side we generated about $56 million in revenue year-to-date. That's up about 25%. Our Internet activities in the aggregate generated profits in the 3rd quarter and year-to-date. That's led by the domestic community websites and News Quest and also television is on the plus side for small profit overall. As most of you know earlier this month we acquired a 1/3 interest in Career Builders from our friends at Night Ryder and Tribute. That cost us over $98 million.

We're delighted to be part of Career Builder and our partnership with our friend at Tribune creates in our mind the most powerful integrated job network in print and online supported by over a 130 leading local newspapers. At Gannett we will be able to offer our local employment customers greater reach and distribution for their employment openings. Job seekers in our local markets will have more job opportunities nationwide and will have a greater reason to put their resumes in our service.

Looking ahead, we are optimistic about the remainder of the year, a little cautious but generally optimistic. The trends we've seen in the third quarter appear to be continuing into the fourth quarter, particularly in television as well as most of you know, advertising comparisons in the fourth quarter will be easier as we compare against of the post September 11th impact from last year. If conditions change we'll keep you up to date on the monthly reports and, of course, at the conference in December. But now I'll stop there and take your questions.

We're ready to take questions.

Thank you. The question-answer session will begin at this time. If you are using a speaker phone please pick up the handset before pressing any numbers. Should you have a question please press 14 on your push button telephone. If you wish to withdraw your question please press 13. Your question will be taken in the order it is received. Please stand by for your first question. Our first question comes from Lauren Fine. Please state your question.

Thank you. I guess I have two questions to start with. The cost, could you isolate for us what you are labor expense increase was and I guess I'm particularly interested in pension expense and how you're dealing with that. And then secondly, could you quantity final the contribution of political in the quarter?

Lauren, political is a big number. As the trend we're going now, we're running about neck-and-neck with Presidential year of 2000, so it's obviously stronger than we had anticipated. I don't know exactly what the contribution was, but it was clearly a big number and the trend through the first weeks here in October and looking ahead looks like it'll continue to be a very big number for October and the first week or two in November. Going back to your labor cost, I don't know unless we know. We're up 2%, 2% for the quarter on labor cost. The pension issue is obviously something we're going to have to face. We made a contribution last year. We'll be looking at maybe making another one this year. It's a little early to tell but obviously the pension results has not been up to expectations so we're going to have to face that issue.

One last question if we can. When you mentioned pacings on the TV side with you were you saying September was up also and if so which categories are you seeing the strength in.

Yes, I was saying September was also up 20%. Automobile is again leading the categories as it has except for political through the second half of the year and actually into the first half of the year. Then the rest of it is really spread all over the place. Retailing isn't bad. But it's automobile that's leading.

Great. Thank you.

Thank you. Our next question comes from Barney Crockett. Please state your question.

Okay. Great. I wanted to follow up on a question about TV there. With December up 20%, I was wondering if you have any sense of how much of that is attributable to perhaps some spill over, tightening of inventory from the political advertising in November if any.

There is some inventory issues that we have to face but the politicians are getting online first and under the law we have to let them run what they want to run. We're trying to balance that as well as we can. It's not a major problem. But it's certainly something we're focusing on because they are clearly spending money in all of our major markets whether a political issue. Both parties are stepping up and are writing checks.

Okay. And then you know, I was wondering, I know it's very early but is there any sense that you have, any early, you know, just sort of feel for what the TV trends might be looking into the first part of next year, you know, January is probably easier than February with the Olympics but do you have any sense there yet?

No, no, we simply don't have anything going out that far yet.

Okay. And then on another note. I was wondering if you could elaborate a little bit on terms of the help wanted trends. They're still down in the most recent the month lease, is there any chance to see growths in that line by the end of this year.

Well, maybe. What's happening overall is in the small and medium size communities we are actually seeing positive numbers. They didn't go down as severe, and they've come back quicker and they are in a positive category. The larger the community, the more negative the number. Having said that, it's less negative as I said earlier for September than it was in August and than it was in July so it's gradually picking up. But whether it'll be enough of a pickup to overcome the negative for the fourth quarter I don't know. It's certainly positive in the small and medium size markets but the big cities are still recovering more slowly.

And we'll obviously have easier comps in the fourth quarter than we did even in the third quarter.

With that positive, positive, negative, I guess we need to come out with good news. But in the real terms we look at all the Gannett properties, we have a wonderful window and looking at 120 different parts of the country reporting in and the economy is clearly picking up, but slowly.

Okay. All right. And just to make sure I'm clear, did you guys say anything about the current consensus for the fourth quarter whether you're's comfortable with that.

No, we did not.

Okay.

Do you want us to be comfortable with it?. Well, you know, we always try to make you all look happy and if these trends continue we'll aim to keep the street happy.

Thank you.

Our next question comes from Steven Barlow, please state your question.

Good morning. Two quick ones. Could you describe the $6 million other expense to us, and whether that others might consider that one time and it's just regular course of business for you guys and secondly it appears that corporate expense was down about $200,000, I thought it would be up with bonus accruals what you're doing there and what is your bonus accrual strategy this year, thanks.

On the $6 million of other expense hopefully that's a one-time because it represented some mark to market on some investments we've had and hopefully if the market continues the trend of today that'll be a one-time issue. On the $200,000 on the corporate expense on bonus accruals, we did have lower bonuses but we did not eliminate bonuses last year so for us that's not going to be the big jump I think you may be seeing at other companies that totally eliminated bonuses last year.

And some of those are allocated from other distributions to.

Right.

Who settles you up with that corporate expense are set you up with that question about bonuses. It sounds like it came from one of our executives.

No, it didn't come from there but I was curious you must be doing other stuff, frankly, on the corporate stuff if the expense is down.

No, it's accrued on a monthly basis for the whole year so it doesn't balance month to month on the bonus.

Other things, ex-bonus that you're doing on the corporate side, I'm curious if that continues.

I think the trends for the quarter on corporate...

We'll be very tight, we'll be very, very tight.

We are not spending any money that doesn't bring in revenue.

Fair enough.

Hopefully that doesn't mean he was getting rid of the corporate staff. Anything else, Steve?

Our next question comes from Mandana Armowsi.

What are you seeing in terms of lead times both in terms of national print and the TV side. Is the lead time improving at all given the strength that we're seeing?

On the TV side it's improving. That may be forced a little bit by the political advertising taking up some inventory which we discussed earlier. It's getting a little bit better. It's not still the long historical window that we've become accustomed to. On the print side using USA Today as an example, it is it is firming up a little bit, but it's still a short window and there is still a good deal of volatility.

Thank you.

Thank you. Our next question comes from Christina Sober, please state your question.

Hi, guys. I was wondering if you could give some information on U.S.A Today., you mentioned that financial and technology advertising were weak, if you can remind what percent that makes up of the total and if you could talk a little bit about travel, advertising, again how that might be contributing to the volatility and if you could talk about pricing at USA Today, are you holding the line on rate card and one follow up.

On the pricing side, that's not an issue. It's strictly a volume question and travel as you know is 20% or so of the revenue and that's bouncing around a little. Actually it was a little bit up in the third quarter and pretty strong in September but those were bad comparables with September being last year. The tech side has been bouncing around, it's down for the year. It was about flat in first quarter, down in the second, up in the third so it's moving all over the place. And entertainment is another big category. That's about flat year to year will with a little up and down but improving in the last three to five months. The auto side at USA Today has been softer than it has been in our local newspapers or on television, and telecom is also been bouncing up and down although it was pretty strong in third quarter and weak in the second quarter.

Okay. And then just a quick question on pricing on the TV side. I understand that political tends to be bought at a lower rate and I don't know if you can comment on how that's affecting other pricing trends across-the-board and in other categories.

They have legal live the right to get the lowest rate so you have to sell it to them at that rate. It's very many large dollars so we're welcoming the volume on the positive side, but it doesn't really affect the rest of the marketplace except in terms of inventory and they're taking some inventory that we really have to balance it. It's mostly the relevant regular advertiser that's coming in late to the process who's finding that they can't get the time or if they can it's going to be more expensive. But that's okay. It's not a big issue and the dollars are coming to the bottom line and television's profits are up will significantly as you've seen from the releases on the segment reporting. They're doing very well on return on sales and cash.

So just one quick. So you're -- with the regular advertisers do you get the sense that their budgets is up then if they're coming in late or where's the spending pattern there?

No, I don't think they're up. They're about where we expected them they're actually, they can't get time because the political advertiser has taken most of the inventory in the favorite spot so what's happening is some of them are just waiting a little bit for the political season to be over, and that's why those pacings for November and December look pretty good. I think some of the regular advertisers are going to come back and fill the time.

Thank you.

Our next question comes from Michael Caprinski. Please state your question.

Most of my questions have been answered but can you quantify how much political you had in the quarter for television and if that mostly fell in September I suppose and particularly if you can drill down a little bit on the television side local versus national, are you seeing anything excluding political and automobile, if you could strip out those two categories, give me a feel for the local and national components of television.

Mike, you may talk to Gracia later, I don't have the actual breakout. Political as we said, earlier though is really strong for the third quarter. That's where most of the number was and if we continue at the trend that we saw for political in the year 2000, actually right now, we're trending higher than we did during our Presidential election. So right now, you know, September was a big number. August, September, very little in the first and second quarter, and it's really coming in very, very strong in October and November. At the present trend I would guess that October and November will probably equal the political spending for the whole first three-quarters of the year.

Mike, on the difference between national, local, national is much stronger than local in part because of some of the it comes coming in from the parties that Doug alluded to and some issue advertising. I think the one thing to focus on though is while political has been indicating is very, very strong, in the August, September time frame, political on the year-over-year gain that we had in revenues in TV, political wasn't all of it. We still had strong categories in auto, movies, some strength in retail as well. So, you know, it's a good percentage but maybe it's a, you know, two-thirds, one-third split as to political being two-thirds or less of the gain and the rest of the business contributing the rest of the gain.

Is most political then coming in issue advertising because if I recall, you're not bound by legal low rate card on issue advertising, you can charge whatever the market it bear; is that correct?

Yes, some of it is clearly issue it's a market by market situation, Mike. If you go to Minneapolis where Senator Wellstone and 9 republicans are having a wonderful contest, that's not issue. That's right on candidate advertising and it's significant spending. There's some Colorado, North Carolina, Missouri, I'm just thinking of a few other places, there are some just head on political fights going on, and since we are generally the number one station in town, we're getting significant dollars.

We're getting a combination of the two but, for instance, in Maine we're getting political coming in over the transom this past month which is for that market is pretty impressive.

Well, thanks for being a little bit more optimistic about the advertising picture versus last quarter, Doug.

Okay.

Thank you. Our next question comes from Kevin Grenide, please state your question.

Thanks, a few questions. I was wondering if you could comment on the increase in non-newsprint cash cost in the publishing group. Secondly, understanding that your the Internet business probably had much to do with the other revenue spurred, I was wondering if you could comment on Detroit. It sounds like things are getting better there in terms of the bottom line. And finally, circulation volumes look a little bit softer. I suspect some of that's a comparison with post 9-11 but I was wondering if you could comments on that and specifically what "U.S.A. Today's" circulation looks as of the September 30th audit?

I don't have the U.S.A. Today circulation numbers here, we'll find that for you, Kevin and get back to you.

Yeah, my sense was that they were up a little bit but we just don't have the numbers yet. With regard to the other revenue line, you're right. In part it's some of the better results from our 's but also commercial printing has been stronger this year plus we did a small acquisition of a company called "Action Advertising" that's contributing into that line as well. So we've seen some strength pretty much across the board in that line. On Detroit, yeah, they've had a better quarter and so that obviously contributed to that bottom line improvement. And the circulation volume again as you said, I think it's -- I think in the third quarter of last year we had a pretty strong gain because of the post September 11th surge in circulation. And I think that in part that's some of the comparison against that.

Gracia, can you break out the non-news print?

Sure. Those expenses were up in about the four percentage range. You know, as we reminded everyone last quarter, we were pretty early to the expense control expense reduction party and so we were doing a fair amount of that in, you know, very early in 2001 and even late 2000 so we're beginning to fight a little bit against that, but we also have as we mentioned previously medical and pension cost that we would allocate out to the divisions and so that's a piece of that as well.

Thank you.

Thank you. Our next question comes from Peter Abert. Please state your question.

I was hoping you could give us you are your thoughts on why the dichotomy between the revenue performance of the broadcasting and publishing, that is so large apart from the difference in political advertising.

Well, if you take the political out, Peter, actually, the automobile positive numbers we're seeing in television, we're also seeing in the newspaper, the consumer newspaper or the community newspaper division. It's USA Today at the national level that we're seeing the firming trend but still soft trends. So, you know, television and the community newspapers ex-political are not that far apart. Television is clearly doing a little bit better. But it's really not that far apart. It's USA Today at the national level where you're seeing the difference.

And the retail category specifically, is that also true?

Well, in retail, you know, as you saw retail revenues were up 5% in period nine and they were up 3% for the quarter in newspapers and obviously, you know, the folks in broadcasters are seeing good strength there as well.

Okay. And then the profitability of USA Today I understand you're seeing improvement on a year-to-year basis despite the revenue weakness. Can you talk about the current level of profitability of USA Today of a margin perspective versus levels you were doing at the peak and I can cycle 5 couple of years ago and whether or not that's realistic expectation in terms of getting back from those levels.

I don't think we've ever broken out the profitability of USA Today. It's profits are up significantly this year because of the almost all of it related to the news print sector which is helping them a lot. It'll get back up there if the advertising comes in, but, you know, year-over-year it's doing fine. Will it ever be as profitable as the Gannett newspaper in Guam? No, but it'll do very, very well for us it just needs a little advertising help because all the other pieces are very much in place and they're doing a good job on the news side and circulation side. So when that national advertising picture turns, Peter, we should see significant dollars come to the bottom line for "U.S.A. Today".

Okay. And last thing, Doug, anything interesting from a geographic perspective in terms the revenue growth rates you're seeing?

Yeah, one thing that you should be aware of is that any part of the U.S. economy that is manufacturing based or oriented, that's where we're seeing the slowest recovery, and that's where we're seeing the slowest improvement year-over-year on an employment advertising trend. Those parts of the country that are not manufacturing oriented, the numbers are picking up quicker and faster.

Great.

So basically, you know, some parts of the midwest, some parts of New York state, places like that that are more manufacturing oriented, the recovery is slowest.

Great. Thank you.

Thanks, Peter.

Our next question comes from Douglas Arthur. Please state your question.

Most of my questions have been answered. I know you don't want to talk about 03, but you said looking at the favorable impact from lower news prints, political advertising, and very low interest rates, there are going to be a couple of mountains to climb next year. Is it safe to say that you had very slow to no growths in the newspaper top line that that's kind of your ace in the hole, in 03 assuming the economy gets better?

Well, we're certainly hoping the economy gets better, Doug and that the whole bottom line will benefit from it.

The news print as Gracia covered earlier is going to be slowly increasing but not as great as the suppliers would like and if the employment comes back I think we'll have a okay year. We are going to have tough comparisons on the television side with the Olympics and the political, but again if the economy picks up we're set to bring some serious dollars to the bottom line.

Great. Thanks.

Thank you. As a reminder, ladies and gentlemen, please dial 14 to ask your question and 13 to withdraw. Our next question comes from Jim Glus, please state your question.

A couple on the publishing side first. One related to news print. I'm wondering if you think your FIFO accounting coupled with the strategy of not accepting a price increase unless it's going to be driven by a higher demand is sort of a ace in the hole and having the higher cost being matched by higher revenues later on and separately as you look at it now and now you're investing more in the career builder, do you think that is one of the real issues, the Internet market share that's being taken that's hurting the classifieds in addition to the employment classifieds in addition to the economy itself?

Let me go with the latter first and then Gracia can cover the news print situation. The answer is no, we don't. All of the Gannett newspapers are now part of the career builder group, have their own websites. When we're selling the classified employment advertising which as I said is picking up but picking up very slowly. We sell it as a package if the advertiser wants it that way. We're simply not seeing that to be a significant problem either way. It's not a significant positive, it's not a significant negative. It's now just part of the revenue stream. We're in the market. We're doing well. All of our websites that have employment on them and all of them do -- are getting their share of the market but generally speaking, the employment market is so soft that it's hard to measure at this point. But, you know, I don't see it, Jim, as an issue, our Internet activities are doing fine and that's a business as we've been saying for a number of years when people didn't believe it was a business. It's supposed to make money. We're running it as base. It is making money at Gannett, and it'll be just part of the action. Hopefully one of these years it may become a new segment in the reporting, but right now it's just part of the action.

Yeah. I'd also add, Jim, that the dichotomy between our larger and smaller markets is driven by the fact that the larger markets went into the recession earlier and deeper than the smaller markets. They are coming out of it, but it will be a bit of a slower thing , but I don't think it's because internet advertising has taken away employment from them. I think the just the size and the market that those will happen to be like a Detroit or, Rochester where there's issues with companies in that marketplace.

For those of us who've been doing this for 30 years, the trends that we're seeing now are not really different than before we ever had dot com or Internet or anything, it's the same sort of slow economic recovery that you get when a lot of the industry in the U.S. slows down and people do not hire until they feel more comfortable about the future and that goes back to the '70s and '80s and early '90s, there are different parts of the economy that have different negative and positive impacts but of the trends are the same and the Internet is simply not having an impact either way.

And with regard to the news prints, that obviously fifo, when news print prices are going up, it's helpful to us because of the lag effect and the converse when they're coming down it lags a little bit. The other thing we have in play is obviously News Quest which is in round numbers about 10% of our news print, those contracts are set once a year and given what's going on in the in Continental Europe and the lack of demand there, even though the UK is better off than continental Europe we don't anticipate pricing there to increase last year. If anything, it could on the margin decline a little bit. So we'll have a couple of things that'll help us as well on the news print fronts that you've alluded to.

Okay. Thanks. And a couple of quick things on broadcast side. Network scatter has been very strong and it's spilled over into cable networks and elsewhere. And I'm wondering if you're seeing any sense that that's also factoring into the strength and international spot or even your local ultimately. And also to the extent that part of the political advertising is incremental and part sort of replacement for what's there, what sort of percentage gain in television do you need on the same-station basis next year to match this year's revenue level?

David, if you can come up with the answer to the second question we've got a job for you down here.

Okay.

That's big question and that's what we're going to have to be working on. So we don't know. But as I said political is so strong that we're going to replace a big peels it have that have good comparisons for next year and your question on the scatter and your assumption is correct. We're seeing some positive from that but with this much political coming in, it's a little hard to compare apples and apples and see where all the pieces fit. So let's wait till after early part of November and then we'll get a better feel. But it is a positive, just how much I don't know yet.

Is December looking any different from November, you know, as you get closer to it because that would be a nonpolitical month?

Well, as I said November and December are both pacings 20% plus so it is not looking any different yet. But it is a little early to tell. But they're both very positive.

Okay. Thank you very much.

Thank you. Our next question comes from Lauren Fine. Please state your question.

Just a quick one on what you're seeing out there on the transaction side in terms of stations or newspapers. And I guess related to that what you think the timing might be of the SEC deliberations?

I don't know we've been talking about the SEC, Lauren, forever. The latest we hear that is they're going to be doing some of their review work and paperwork in January. They, as you know, I think have suggested they'll have an answer in the spring. Spring by SEC standards may be later than it is by our standards. But, you know, let's hope for the spring. What was your other question was on?

Activity given the uncertainty --.

There's a significant amount of discussion going on. I don't think any it have by the way is related to SEC action although everybody's assuming that the cross ownership rule will go away if not a hundred percent than almost a 100%. So they're making that assumption and the discussions are based on the fact that we'll be able to have some broadcasting or print properties that overlap with what we now have, and just go on with the transaction. I'd say the activity level is picking up a little bit. It's active in the UK as well as in the states. There's some amount of television on the market. More print seems to be coming up for discussion. As you know, we'll run the same math and if it makes sense we'll step up. If it doesn't we'll pass on them. And I think the broadcasting sales or the sellers may be a little bit more optimistic about what they think they can get for the stations than we will be willing to pay. But that's a market by market decision.

Thanks. And then also were there any share repurchases in the quarter.

No.

Thank you.

Thank you. Our next question comes from William Drury. Please state your question.

Hi, just a couple questions. One on T. V. not to beat a dead horse here, if you go back and look historically at like 1993 which is probably a pretty good comparable year for 03 given it's second year of recovery and post political, as I remember your TV was actually up that year, not as much as the prior year, ex-political but it was still in positive territory. So I guess the question is that going into next year, especially CBS and NBC continue to have strong scatter, it's not a foregone conclusion that you're going to be in negative territory on TV revenue and two, if you were in negative territory to some degree how much leeway would you have on the cost side, you know, to bring that down and keep the profits at flat or above?

Well, the cost are pretty well controlled in TV. As you know, they were started going down last year and we've been maintaining. They're up a little in the third quarter here because of some programming issues that are generally always incurred in the September time frame, but we're not going into 2003 assuming it'll be a down year, Bill. That is not acceptable behavior at the Gannett Company but it will put pressure on our television folks with this very strong political picture and the Olympics were good. They were not as good as they were in 2000, so the comparison is not quite as tough. So I think we'll do okay if the economy picks up. I mean, the automobile advertisers are still coming on strong. The local dealers will I think pick up some of the slack when they get room on the political leaves the video screen. And I think it'll be okay, but it is going to be a challenge primarily because of the very strong political picture.

Just two other quick questions. You mentioned News Quest was flat in revenue for the quarter. If you look back sequentially the last couple quarters has that situation been stable getting better, getting worst, and then on pension expense, I know it's probably early thinking about making another contribution but if you did have to put some more money in there would it be similar to the 300 that you did last year? Thanks.

News Quest to your first question, has been about flat. The south of England which is the growing part of England or the fastest growing part of England has been soft. And that's very employment advertising driven. Actually the real estate picture over there is almost as strong as it is over here. Maybe even stronger in some markets so they control the cost to reflect the marketplace and it did not go down as aggressively as it did in the states. And, therefore, it's coming back from a lower, from a higher base rather of negative numbers so they're going to be fine. They will be about what we expected them to do for this year because they react well and are able to manage the picture. On the pension side it's a little early to tell but we have lot of cash. We generate a good deal of cash so making a contribution to reflect the poor earnings performance of the whole pension world won't be the biggest deal in the world for us, and it will's help save us some expenses in 2003.

Thanks so much.

Thank you. Our final question comes from Brian Shipman, please state your question.

Thanks. Good morning. Couple questions here. First on circulation trends going forward. Guidance at the start of the year had been for flat circulation revenues if I recall correctly and we've seen couple quarters in a row now of down a half a percent or so, where should we expect to see that go in the coming quarters? And also December of 2001, it had one less week than 2000, December of 2000, are there any comparison issues like that in the upcoming December month or for the quarter in? Thanks.

Well, no. That 53rd week which we get every seven years I guess you won't have any problems because we compare apples and apples and last year we gave you a four week comparison to four weeks. So you'll have matching numbers to work on from that point of view. On your circulation question, I getting it's a little bit softer than we predicted but actually a number of newspapers are doing fine. I don't really have -- Gracia, do you have any specifics?

Right. The comparison, exactly.

If we said it was flat, then we were we are a little behind what we should be, and we're continuing to emphasize circulation. We're more specifically continuing to emphasize readership and the readership numbers as you know from the new ABC audit are beginning to come in and they're coming in positive and that's giving a good result to the advertisers because they're really counting eyeballs.

Okay that's helpful. Could I follow up on non-newspaper print costs? Looking into fourth quarter is it fair to extrapolate similar trends as we saw on third quarter on non-news print cost side, if you could maybe breakdown by cost category what you expect to see in 4 q, thanks.

I think we will probably see a continuation. The only thing I would remind you is that in the fourth quarter of 2001, the newspaper segment pro form excluding news print, newspaper segment expenses were down 7% so we are cycling a very low base on the expense side and as we talked about, we've got the medical and pension and some other cost factors plus news print as we mentioned earlier which was down about 23% this quarter will be down in the mid-teens next quarter. So you'll have those factors that'll be impacting the comparison year-over-year.

Thanks.

Thank you. If there are no further questions I will turn the conference back to Gracia Martore to conclude.

Thanks very much more for joining us today and if you have any other questions you can reach me of at 703-854-6918. Have a great day.