Company Profile

Gannett Co., Inc. is a leading international news and information company. In the United States, the company publishes 90 daily newspapers, including USA TODAY, and nearly 1,000 non-daily publications. Along with each of its daily newspapers, the company operates Web sites offering news, information and advertising that is customized for the market served and integrated with its publishing operations. USA TODAY.com is one of the most popular news sites on the Web. The company is the largest newspaper publisher in the U.S.

Newspaper publishing operations in the United Kingdom, operating as Newsquest, include 17 paid-for daily newspapers, almost 300 non-daily publications, locally integrated Web sites and classified business Web sites with national reach. Newsquest is the second largest regional newspaper publisher in the U.K.

In broadcasting, the company operates 23 television stations in the U.S. with a market reach of more than 20.1 million households. Each of these stations also operates locally oriented Web sites offering news, entertainment and advertising content, in text and video format. Through its Captivate subsidiary, the broadcasting group delivers news, information and advertising to a highly desirable audience demographic through its video screens in office tower and select hotel elevators.

Gannett’s total Online U.S. Internet Audience in January 2007 was 23.2 million unique visitors, reaching about 14.8% of the Internet audience, as measured by Nielsen//NetRatings.

Complementing its publishing and broadcasting businesses, the company has made strategic investments in online advertising. These include PointRoll, which provides online advertisers with rich media marketing services, and Planet Discover, which provides our local Web sites with deep, robust local search technology, and through several important partnership investments, including CareerBuilder for employment advertising; Classified Ventures for auto and real estate ads; Topix.net, a news content aggregator; ShermansTravel, an online travel service; ShopLocal, a provider of online marketing solutions for local, regional and national advertisers of all types; and 4INFO, which provides mobile phone search services.

The company continues to evolve as it meets the demands of consumers and advertisers in the new digital environment. Three key initiatives have been set forth to take advantage of these opportunities.

Gannett was founded by Frank E. Gannett and associates in 1906 and incorporated in 1923. The company went public in 1967. It reincorporated in Delaware in 1972. Its more than 234 million outstanding shares of common stock are held by approximately 9,579 shareholders of record in all 50 states and several foreign countries. The company has approximately 49,675 employees. Its headquarters are in McLean, Va., near Washington, D.C.

Business segments: The company has two principal business segments: newspaper publishing and broadcasting. Financial information for each of the company’s reportable segments can be found in our financial statements, as discussed under Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and as presented under Item 8 “Financial Statements and Supplementary Data” of this Form 10-K.

The company’s 90 U.S. daily newspapers have a combined daily paid circulation of approximately 7.2 million. They include USA TODAY, the nation’s largest-selling daily newspaper, with a circulation of approximately 2.3 million. Within the publishing segment, the company continues to diversify and expand its portfolio through business acquisitions and internal development. Some examples of this diversification are:

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Newspaper partnerships: The company owns a 19.49% interest in California Newspapers Partnership, a partnership that includes 24 daily California newspapers; a 40.6% interest in Texas-New Mexico Newspapers Partnership, a partnership that includes seven daily newspapers in Texas and New Mexico and four newspapers in Pennsylvania; and a 13.5% interest in Ponderay Newsprint Company in the state of Washington.

The company’s newspaper subsidiaries in Detroit, Cincinnati and Tucson are participants in joint operating agencies. Each joint operating agency performs the production, sales and distribution functions for the subsidiary and another newspaper publishing company under a joint operating agreement. Operating results for the Detroit and Cincinnati joint operating agencies are fully consolidated along with a charge for the minority partners’ share of profits. The operating results of the Tucson joint operating agency are accounted for under the equity method, and are reported as a net amount in other operating revenues. The Cincinnati joint operating agency will not be renewed when it expires on Dec. 31, 2007.

Strategic investments: In August 2006, the company made additional investments in CareerBuilder.com, ShopLocal.com, and Topix.net totaling $155 million, which increased the ownership stake in each of those businesses. The company now holds a 42.5% equity interest in CareerBuilder.com, the leading national online service providing recruitment resources; a 42.5% equity interest in ShopLocal.com, a leading provider of Web-based marketing solutions for national and local retailers; and a 31.9% interest in Topix.net, an online news content aggregator.

In January 2006, the company acquired a minority interest in 4INFO, a Palo Alto, Calif., company which offers a comprehensive suite of mobile phone search services. The company also entered into a marketing and distribution agreement for its U.S. newspapers with 4INFO.

The company also owns a 23.6% stake in Classified Ventures, an online business focused on real estate and automotive advertising categories; and a 23.3% interest in ShermansTravel, an online travel news, advertising and booking service.

With all of these affiliates, the company has established important business relationships to leverage its publishing and online assets and operations to grow its revenue base and profits.

Newspaper Publishing/United States

The company’s U.S. newspapers reach 16.7 million readers every weekday and 14 million readers every Sunday – providing critical news and information from their customers’ neighborhoods and from around the globe.

At the end of 2006, the company operated 90 U.S. daily newspapers, including USA TODAY, and nearly 1,000 non-daily local publications in 36 states and Guam. The Newspaper Division and USA TODAY are headquartered in McLean, Va. On Dec. 31, 2006, this segment had approximately 37,575 full- and part-time employees.

The company’s local newspapers are managed through its U.S. Newspaper Division. These newspapers are in large and small markets, and the geographical diversity is a core strength of the company.

Gannett publishes in major markets such as Phoenix, Ariz.; Indianapolis, Ind.; Detroit, Mich.; Cincinnati, Ohio; Des Moines, Iowa; Nashville, Tenn.; Asbury Park, N.J.; Louisville, Ky.; and Westchester, N.Y.

Mid-sized markets are represented by Salem, Ore.; Fort Myers, Fla.; Appleton, Wis.; Palm Springs, Calif.; Montgomery, Ala.; and Greenville, S.C.

St. George, Utah; Fort Collins, Colo.; Sheboygan, Wis.; Iowa City, Iowa; and Ithaca, N.Y., are examples of our smaller markets.

USA TODAY was introduced in 1982 as the country’s first national, general-interest daily newspaper. It is available in all 50 states to readers on the day of publication throughout the U.S.

It is produced at facilities in McLean, Va., and is transmitted via satellite to offset printing plants around the country and internationally. It is printed at Gannett plants in 20 U.S. markets and at offset plants, not owned by Gannett, in 16 other U.S. markets.

USATODAY.com, one of the most popular newspaper sites on the Web, had more than 53 million visits per month at the end of 2006.

At all of the company’s local newspapers, Web sites are operated on a fully integrated basis.

Other businesses that complement, support or are managed and reported within the newspaper segment include: USA WEEKEND, PointRoll, Clipper Magazine, Army Times Publishing, Gannett Healthcare Group, Planet Discover and Gannett Offset. In addition, Gannett News Service provides news services for company newspaper operations and sells its services to independent newspapers; Gannett Retail Advertising Group represents the company’s local newspapers in the sale of advertising to national and regional franchise businesses; Telematch offers database management services; Gannett Direct Marketing offers direct-marketing services; and Gannett Media Technologies International develops and markets software and other products for the publishing industry, and provides technology support for the company’s newspaper and Web operations.

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News and editorial matters: Gannett newspapers are the leading news and information source in their markets – with strong brand recognition that attracts readers and advertisers. We maintain and enhance the newspapers’ strengths with quality management and staff, who focus continuously on product improvements and customer service. Collectively, Gannett newspapers, their Web sites and their expanding portfolio of non-daily publications form a powerful network to distribute and share news and information across the nation. News and editorial decisions are made autonomously by local management.

In 2006, Gannett newsrooms began sweeping changes in content and approach with the introduction of the Information Center concept that enhances their ability to deliver much more information on a 24/7 cycle and in many formats. In addition to more traditional coverage, the newsrooms have elevated such areas as multimedia, data delivery and custom content. The approach of breaking news online and updating in print has become the practice. Additionally, extensive newsroom training in video production for video streaming on webcasts has enhanced local content and viewership.

At the same time, there is expanded emphasis on delivery of local content to readers – in the daily and Sunday print products, in non-daily publications and on the community sites online. Some groundbreaking efforts involving community interaction were undertaken, especially in the area of investigative journalism.

The company’s domestic daily newspapers receive Gannett News Service (GNS) and subscribe to The Associated Press, and some receive various supplemental news services and syndicated features. GNS is headquartered in McLean, Va., and operates bureaus in Washington, D.C., and six state capitals: Albany, N.Y., Baton Rouge, La., Trenton, N.J., Sacramento, Calif., Springfield, Ill., and Tallahassee, Fla. GNS provides strong coverage of topics of high interest to individual newspapers through its regional reports.

Gannett newspapers and staffers were again recognized nationally for outstanding work. Jerry Mitchell, investigative reporter for The Clarion-Ledger in Jackson, Miss., won the George Polk Award for Justice Reporting for stories that led to the reopening of murder cases of three civil-rights activists and the conviction of the man behind the killings. Mitchell also received a career recognition award from the Investigative Reporters and Editors organization and he was a finalist for a Pulitzer Prize in the Beat Reporting category for the civil-rights work. Other Gannett Pulitzer finalists were Marshall Ramsey of The Clarion-Ledger and Mike Thompson of the Detroit Free Press, both in the Editorial Cartooning category. The Pacific Daily News in Guam received the Robert G. McGruder Award for Diversity Leadership and The Des Moines Register received an Overall Excellence Award from the Society of American Business Editors and Writers. The Daily Advertiser of Lafayette, La., won the 2006 Dart Award for Excellence in Reporting on Victims of Violence.

Audience research: As Gannett newspapers continue to expand their non-daily and online products, a new research approach, audience aggregation, was launched in 2005 and executed more fully in 2006. The company now considers the reach and coverage of multiple products in their communities in their totality – as a family of connected products. This broader-based view is to establish the net reach of all products, or selected product offerings, in a single Gannett market. For example, in Phoenix, the combination of many Gannett products – including daily and Sunday newspapers, a strong local Web site, weeklies and Spanish language products, among many others – reaches 76% of the adult population over seven days, more than 2.1 million people, far more than the print edition of the daily newspaper, The Arizona Republic, reaches by itself.

The company has gathered audience aggregation data for more than 30 Gannett newspapers and will continue to add to that in 2007. While efforts are now focused on our largest properties, the initiative will be launched at all Gannett sites. This aggregated data allows the sales staff to provide detailed information to advertisers about how best to reach their potential customers, which products to use in which combination, and how often. As a result, our ability to use audience aggregation will enable our sales staffs to increase our total advertising revenues while enabling advertisers to enhance the efficiencies of their advertising costs. The training of ad sales staff on how to best execute this audience-based selling strategy is also ongoing.

In addition to the audience-based initiative, the company continues to measure customer attitudes, behaviors and opinions, including conducting usability labs, to better understand our customers’ Web site patterns, and use focus groups with product users and advertisers to more clearly determine their needs.

Circulation: Detailed information about the circulation of the company’s newspapers may be found later in this Form 10-K. Nine of the company’s local newspapers reported gains in daily circulation in 2006, and eight increased Sunday circulation. Circulation declined in other markets, a trend generally consistent with the domestic newspaper industry.

Home-delivery prices for the company’s newspapers are established individually for each newspaper and range from $1.50 to $3.50 per week for daily newspapers and from $.71 to $2.75 per copy for Sunday newspapers.

As it has done since the inception of the National Do Not Call Registry in 2003, the company continued to aggressively diversify its circulation start sources – using more direct mail, kiosk and crew sales efforts. A new sales program called Project 378 was developed and rolled out to all newspapers in 2006. The goal of the program is to focus on long-term subscriber retention at the time sales orders are taken. The program details, through a step-by-step sales process, how to promote and sell new subscriptions that last for a longer period of time. In December 2006, subscriber retention of all new subscriptions when measured at 13-weeks of service had improved by 13.3% and by 6.2% when measured at 26 weeks.

The company continued its emphasis on its automated payment plan, EZ-Pay. Total EZ-Pay subscribers grew from 33.5% of all subscribers at the end of 2005 to 40.0% of all subscribers at the end of 2006 – a 19% increase. EZ-Pay subscribers include those on recurring credit/debit cards as well as 52-week paid-in-advance customers. Subscriber retention among those who use EZ-Pay is currently 29% higher than for subscribers who pay the traditional way, by mail. This higher retention improves circulation volume and provides for a higher return on investment for new subscriber start costs. The company’s goal for 2007 is to increase the number of EZ-Pay subscribers by 25%.

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Additionally, the company is consolidating all circulation inbound customer service calling operations into three Centers of Excellence (COE) across the country. The COE goals are efficiency and standardization of procedures which will result in better customer service at a lower price. State of the art technology will be employed to help realize the efficiency savings. The first COE opened in Greenville, S.C., in November 2006. All three will be fully functional by the fourth quarter of 2007.

Additional circulation efforts have focused on a fee-for-delivery concept. This was successfully implemented in the Nashville, Tenn., market and the company continues to look to expand this effort to other newspaper properties.

During 2006, the Audit Bureau of Circulations (ABC) announced a new program called Insert Verification Service (IVS). This service involves conducting an audit of the Sunday preprint distribution process to assure advertisers that their messages are getting to the customers they are targeting. Gannett’s 22 largest daily newspapers have signed up for IVS in 2007.

At the end of 2006, 68 of the company’s domestic daily newspapers, including USA TODAY, were published in the morning and 22 were published in the evening. For local U.S. newspapers, excluding USA TODAY, morning circulation accounts for 92% of total daily volume, while evening circulation accounts for 8%.

USA TODAY is sold at newsstands and vending machines generally at 75 cents per copy. Mail subscriptions are available nationwide and abroad, and home, hotel and office delivery is offered in many markets. Approximately 62% of its net paid circulation results from single-copy sales at newsstands, vending machines or to hotel guests, and the remainder is from home and office delivery, mail, educational and other sales.

Advertising: The newspapers have advertising departments that sell retail, classified and national advertising across multiple platforms including the newspaper, online and niche publications. The Gannett Retail Advertising Group sells regional and national franchise business on behalf of the company’s local newspapers. The company also contracts with outside representative firms that specialize in the sale of national ads. Ad revenues from newspaper Internet operations are reported together with revenue from print publishing.

Local or retail display advertising is associated with local merchants or locally owned businesses. In addition, retail includes regional and national chains – such as department stores and grocery – that sell in the local market.

Classified advertising includes the major categories of automotive, employment and real estate as well as private consumer-to-consumer business for other merchandise and services. While traditional placement for these ad segments has been the classified section, ads also run in other sections within the newspaper, on our Web sites and in niche magazines that specialize in the business segment.

National advertising is display advertising principally from advertisers who are promoting national products or brands. Examples are pharmaceuticals, travel, airlines, or packaged goods. Both retail and national ads also include preprints, typically stand-alone multiple pages that are inserted in the newspaper.

Our audience aggregation approach to research and product development has allowed us to go to market with a new sales approach. Formerly, our salespeople were product experts, focusing on the unique features and benefits of our diverse product line. In the past year, we have intensified our audience-based selling approach which first identifies the advertiser’s best customers and then matches products that best reach that audience. While there are still many advertisers who want to attain mass reach, many others want to target specific audiences by demographics, geography, consumer buying habits or customer behavior. Our Information Center approach allows us to reach these diverse audiences in different ways: through new products, new media options and through repurposing and repackaging news and information in a variety of formats. Our readership research also defines the audience usage of these products and allows us to create customer-centric solutions that will provide enhanced results for advertisers. The company’s audience-based sales efforts have been directed to all levels of advertisers from the smallest locally owned businesses to large complex businesses. Along with this new sales approach, the company has intensified its sales and management training and improved the quality of sales calls.

A new sales force structure was rolled out across our largest 20 newspapers in 2006. The new structure will be in place at all newspapers by the end of 2007. It aligns sales and support resources to the needs of the customer – based on staff experience with advertising planning and customer contact. The new structure increases our staff productivity and improves customer service. To maximize our outbound-calling efforts to generate new business, an Internet-based outbound telesales training program was launched companywide. We also completed a full rollout of Gannett’s unique classified recruitment sales lead application.

In conjunction with this effort, all of the company’s sales force is undertaking the T.I.D.E. program (Think. Identify. Develop. Execute.) in order to better address advertiser needs. More than 800 newspaper, digital and broadcast executives are participating in this program.

Online operations: The overriding objective of our online strategy at Gannett newspapers is to provide compelling content to best serve our customers. A key reason customers turn to a Gannett newspaper’s online site is to find local news and information. The credibility of the local newspaper, the known and trusted information source, extends to the newspaper’s Web site and thus differentiates it from other Internet sites. This is a major factor that allows Gannett newspapers to compete successfully as Internet information providers.

A second objective in our online business development is to maximize the natural synergies between the local newspaper and local Web site. The local content already available, the customer relationships, the news and advertising sales staff, and the promotional capabilities are all competitive advantages for Gannett. The company’s strategy is to use these advantages to create strong and timely content, sell packaged advertising products that meet the demands of advertisers, operate efficiently and leverage the known and trusted brand of the newspaper.

One example of executing this strategy is The Indianapolis Star’s Indymoms.com. In December, this newly launched site attracted 600,000 page views by focusing on a community of stay-at-home and working mothers, with a print edition planned to debut in March 2007. Several Gannett newspapers have launched similar sites with family-oriented content, calendars and forums, helping moms connect on neighborhood news, schools, parenting

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issues and family activities including Wilmington, Del., Louisville, Ky., and Cincinnati; others, including Des Moines, Rochester, N.Y., Westchester, N.Y., Nashville, Fort Myers, Fla., Fort Collins, Colo., and Monroe, La., plan to launch similar products in early 2007.

Complementing this work are efforts to register users of Gannett Web sites in order to obtain zip code, age and gender. Such information allows us to better understand the needs of our customers along with providing better defined groups for advertisers.

This strategy has served Gannett well in the development of our newspaper Internet efforts. The aggressive local focus, including advertising sales efforts, combined with effective use of national economies of scale and standardized technology, resulted in solid results in 2006. Strong growth in our online revenues also reflects the value of our digital joint ventures and partnerships with national online advertising providers including CareerBuilder and Classified Ventures. Recent traffic on our sites totaled more than 74 million visits and more than 451 million page views per month. Online revenue for local newspaper Web sites increased by 24% in 2006.

Gannett Media Technologies International (GMTI) provides technological support and products for the company’s domestic newspapers and Internet activities, including ad software and database management, editorial production and archiving, and Web site hosting. In addition, GMTI provides similar services to other newspaper companies.

Non-daily operations: The growth of non-daily and online products continued in 2006. The company now publishes nearly 1,000 non-daily publications in the U.S. The company’s strategy for non-daily publications is to target them at “communities of interest” defined in one of three ways: geographically, demographically (e.g. seniors, young readers or ethnic communities) or by lifestyle (e.g. golf or boating enthusiasts).

Production: Eighty-seven domestic daily newspapers are printed by the offset process, and three newspapers are printed using various letterpress processes.

In recent years, improved technology has resulted in greater speed and accuracy and in a reduction in the number of production hours worked at the company’s newspapers. The company expects this trend to continue in 2007 and also expects to consolidate some job functions across multiple newspapers sites. New state-of-the-art presses came on line in 2006 in Binghamton, N.Y., Rockford, Ill., and Lafayette, Ind. In Binghamton, the production of three newspapers was centralized and in Lafayette, a “Berliner” type press was installed. In 2007, press refurbishment and further production consolidation efforts will take place.

During 2006, 24 additional newspapers moved to a 48-inch web width from a 50-inch width, and the three new press launches came on line at 48 inches. An additional 12 press sites will complete the conversion to 48-inch web in 2007.

In 2006, light-weight (45 gram) newsprint was tested and 15 sites began running it daily. The company plans to increase the use of light-weight newsprint in 2007.

Newspaper efficiency improvements also continue to be made in other areas of production. The company introduced new ink optimization software which allowed for savings due to less color ink consumption. Synergies are also planned through the consolidation of toning centers throughout the company network.

Competition: The company’s newspapers and affiliated Web sites compete with other media for advertising principally on the basis of their performance in helping to sell the advertisers’ products or services and their advertising rates. They compete for circulation and readership against other news and information providers, as well as others seeking the time and attention of readers. While most of the company’s newspapers do not have daily newspaper competitors that are published in the same city, in certain of the company’s larger markets, there is such competition. Most of the company’s newspapers compete with other newspapers published in nearby cities and towns and with free-distribution and paid-advertising weeklies, as well as other print and non-print media, including magazines, television, direct mail, cable television, radio, outdoor advertising and Internet media.

The rate of development of opportunities in, and competition from, emerging digital communications services, including those related to the Internet, is increasing. Through internal development programs, acquisitions and partnerships, the company’s efforts to explore new opportunities in news, information and communications businesses have expanded and will continue to do so.

Joint operating agencies: At the end of 2006, The Cincinnati Enquirer, the Detroit Free Press and the Tucson (Ariz.) Citizen were published under joint operating agreements with non-Gannett newspapers located in the same cities. All of these agreements provide for joint business, advertising, production and circulation operations and a contractual division of profits. The editorial and reporting staffs of the company’s newspapers, however, are separate and autonomous from those of the non-Gannett newspapers. In January 2004, the company provided notice to The E.W. Scripps Company, as required under the terms of the Joint Operating Agreement (JOA) involving The Cincinnati Enquirer, The Cincinnati Post and The Kentucky Post, that the JOA would not be renewed when it expires on Dec. 31, 2007.

Environmental regulation: Gannett is committed to protecting the environment. The company’s goal is to ensure its facilities comply with federal, state, local and foreign environmental laws and to incorporate appropriate environmental practices and standards in its operations. The company retains a corporate environmental consultant who is responsible for overseeing regulatory compliance and taking preventive measures where appropriate.

The company is one of the industry leaders in the use of recycled newsprint and increased its purchases of newsprint containing some recycled content from 42,000 metric tons in 1989 to 749,000 metric tons in 2006. During 2006, all of the company’s newspapers consumed some recycled newsprint. For the year, 77% of the company’s newsprint purchases contained recycled content.

The company’s newspapers use inks, photographic chemicals, solvents and fuels. The use, management and disposal of these substances may be regulated by federal, state, local and foreign agencies. Some of the company’s newspaper subsidiaries have been included among the potentially responsible parties in connection with the alleged disposal of ink or other wastes at disposal sites that have been subsequently identified as requiring remediation. Additional information about these matters can be found in Item 3, Legal Proceedings, in this Form 10-K. The company does not believe that these matters will have a material impact on its financial position or results of operations.

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Raw materials – U.S. & U.K.: Newsprint, which is the basic raw material used to publish newspapers, has been and may continue to be subject to significant price changes from time to time. During 2006, the company’s total newsprint consumption was 1,216,000 metric tons, including the portion of newsprint consumed at joint operating agencies, consumption by USA WEEKEND, USA TODAY tonnage consumed at non-Gannett print sites and consumption by Newsquest. Newsprint consumption was lower than in 2006, down 2% on an as reported basis and 4% lower on a pro forma basis. The company purchases newsprint from 19 domestic and global suppliers, some of which are under contracts expiring in 2025.

In 2006, newsprint supplies were adequate. The company has and continues to moderate newsprint consumption and expense through press web-width reductions and the printing of some publications on lighter basis weights. The company believes that available sources of newsprint, together with present inventories, will continue to be adequate to supply the needs of its newspapers.

The average cost per ton of newsprint consumed in 2006 increased 9% compared to the 2005 cost. The average cost per ton of newsprint is expected to decline slightly in 2007.

Newspaper Publishing/United Kingdom

Newsquest publishes almost 300 titles in the United Kingdom, including 17 daily paid-for newspapers. Newsquest operates its publishing activities around geographic clusters to maximize the use of management, finance, printing and personnel resources. This approach enables the group to offer readers and advertisers a range of attractive products across the market. The clustering of titles and, usually, the publication of a free newspaper alongside a paid-for newspaper, allows cross-selling of advertising among newspapers serving the same or contiguous markets, thus satisfying the needs of its advertisers and audiences. At the end of 2006, Newsquest had 17 such clusters in the United Kingdom. Newsquest’s policy is to produce free and paid-for newspapers with an attractive level of quality local editorial content. Newsquest also distributes a substantial volume of advertising leaflets in the communities it serves and it offers a travel/vacation booking service.

Newsquest newspapers operate in competitive markets. Their principal competitors include other regional and national newspaper and magazine publishers, other advertising media such as radio and billboard, Internet-based news and other information and communication businesses.

At the end of 2006, Newsquest had approximately 8,600 full-time and part-time employees. Newsquest’s revenues for 2006 were approximately $1.2 billion. As with U.S. newspapers, advertising is the largest component of revenue, comprising approximately 78%. Circulation revenue represents 13% of revenues and printing activities account for much of the remainder. During 2006, Newsquest restructured several back office operations to reduce costs.

Newsquest continued to increase color availability in its papers with the installation of a new color tower in Essex. Efficiency improvements have also come through the ink optimization software which was rolled out across the print sites in 2006. Further production improvements were made through the introduction of computer to plate technology at two sites and a mechanical inserter at one site.

Products: Product quality was again recognized by annual awards. Newsquest (Herald & Times) in Glasgow won both Media Company and Publishing Company of the Year at the Drum Scottish Media Awards. For the fifth year, The Northern Echo won North East Newspaper of the Year at the North East Press Awards, while in the south of England, the Oxford Times won a special award for Paid-For Weekly Newspaper of the Year at the Newspaper Society Weekly Newspaper Awards.

Product changes in the year included rationalizing edition structures and making daily products available earlier in many markets. The Argus Lite was launched in February 2006. This free daily product targets commuters traveling by train from Brighton to London each weekday morning. Broadsheet titles the Wiltshire Gazette & Herald and The Wilts & Glos Standard were also converted into tabloid format.

Online operations: Newsquest actively seeks to maximize the value of its local information expertise through development of opportunities offered by the Internet. Through internal growth and in partnership with other businesses, Newsquest has established a number of local and national Web sites that offer news and other information of special interest to its communities, as well as classified and retail advertising and shopping services.

By the end of 2006, all of Newsquest’s dailies were producing video reports of dramatic and newsworthy events as well as mobile phone clips sent in by readers that captured the attention of local audiences on the Web. For example, the Brighton Argus invited readers to send mobile phone pictures from a New Year’s Day concert by a locally-based U.K. dance music star. Newsquest papers also reached out in other ways to make themselves relevant to younger people. In November in Newport, an electronic ‘book of condolence’ for four teenage victims of a car crash was established by the South Wales Argus. This attracted nearly 300 tributes –largely from young people – and 200 of the comments were reverse published into an eight-page supplement for the paper.

By the end of 2006, online audience for Newsquest’s Web sites reached 43 million monthly page views from approximately 3.3 million unique users. Newsquest owns 25% of fish4, an online employment Web site. In the National Online Recruitment Audience Survey 2007, fish4 was the U.K.’s most popular recruitment Web site with more than 2.5 million unique visitors per month. Additionally, Newsquest’s wholly owned business s1 was the most popular recruitment Web site in Scotland in the same survey, attracting 316,000 Scottish-based job seekers per month, compared to 114,000 for its nearest rival.

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Broadcasting

At the end of 2006, the company’s broadcasting division, headquartered in McLean, Va., included 23 television stations in markets with a total of more than 20.1 million households covering 18% of the U.S. The broadcasting division also includes Captivate Network, Inc.

At the end of 2006, the broadcasting division had approximately 3,000 full-time and part-time employees. Broadcasting revenues accounted for approximately 11% of the company’s reported operating revenues in 2006, 10% in 2005 and 11% in 2004.

The principal sources of the company’s television revenues are: 1) local advertising focusing on the immediate geographic area of the stations; 2) national advertising; 3) retransmission of content on satellite and cable networks; 4) advertising on the stations’ Web sites; and 5) payments by advertisers to television stations for other services, such as the production of advertising material. The advertising revenues derived from a station’s local news programs make up a significant part of its total revenues. Captivate derives its revenue principally from national advertising on video screens in elevators of office buildings and select hotels. As of year-end, Captivate had over 7,600 video screens located in 22 major cities across North America.

Advertising rates charged by a television station are based on the ability of a station to deliver a specific audience to an advertiser. The larger a station’s ratings in any particular daypart, the more leverage a station has in asking for a price advantage. As the market fluctuates with supply and demand, so does the station’s pricing. Practically all national advertising is placed through independent advertising representatives. Local advertising time is sold by each station’s own sales force.

Generally, a network provides programs to its affiliated television stations and sells on its own behalf commercial advertising announcements for certain of the available ad spots within the network programs.

The company is currently broadcasting local newscasts in High Definition (HD) in seven cities: Denver, Washington, D.C., St. Louis, Atlanta, Cleveland, Minneapolis and Phoenix. Denver converted to HD for its local newscasts in 2004, and Washington, D.C., in May 2005. St. Louis, Atlanta, Cleveland, Minneapolis and Phoenix converted in 2006. These telecasts have been well received given the dramatic increase in sales of HD televisions.

During 2006, the company acquired the TV station KTVD in Denver and the TV station WATL in Atlanta. Both stations operate as duopoly stations, alongside KUSA in Denver and WXIA in Atlanta. Both stations are affiliated with MyNetworkTV.

For all of its stations, the company is party to network affiliation agreements. The company’s three ABC affiliates have agreements which expire on Feb. 28, 2014. The agreements for the company’s six CBS affiliates expire on Dec. 31, 2015. The company’s 12 NBC-affiliated stations have agreements that expire on Dec. 31, 2016. The company’s two MyNetworkTV-affiliated stations have agreements that expire on the last day of the 2011-2012 television season.

Programming: The costs of locally produced and purchased syndicated programming are a significant portion of television operating expenses. Syndicated programming costs are determined based upon largely uncontrollable market factors, including demand from the independent and affiliated stations within the market. In recent years, the company’s television stations have emphasized their locally produced news and entertainment programming in an effort to provide programs that distinguish the stations from the competition and to better control costs.

Competition: In each of its broadcasting markets, the company’s stations and affiliated Web sites compete for revenues with other network-affiliated and independent television and radio broadcasters and with other advertising media, such as cable television, newspapers, magazines, direct mail, outdoor advertising and Internet media. The stations also compete in the emerging local electronic media space, which includes Internet or Internet-enabled devices, handheld wireless devices such as mobile phones and iPods and any digital spectrum opportunities associated with digital television (DTV). The company’s broadcasting stations compete principally on the basis of their audience share, advertising rates and audience composition.

Local news is most important to a station’s success, and there is a growing emphasis on other forms of programming that relate to the local community. Network and syndicated programming constitute the majority of all other programming broadcast on the company’s television stations, and the company’s competitive position is directly affected by viewer acceptance of this programming. Other sources of present and potential competition for the company’s broadcasting properties include pay cable, home video and audio recorders and video disc players, direct broadcast satellite, low-power television, video offerings (both wireline and wireless) of telephone companies as well as developing video services. Some of these competing services have the potential of providing improved signal reception or increased home entertainment selection, and they are continuing development and expansion.

Pursuant to the Satellite Home Viewer Extension Reauthorization Act of 2004, a number of the company’s television stations are currently being delivered by satellite carriers to subscribers within the stations’ local markets. The company has entered into retransmission consent agreements with satellite carriers that authorize such delivery, one of which expires in May 2009 and the other in 2010. This law also permits satellite carriers, in certain limited circumstances, to retransmit distant network television stations into areas served by local television stations if it is determined, using FCC-approved signal strength measurement standards, that local stations do not deliver an acceptable over-the-air viewing signal.

Regulation: The company’s television stations are operated under the authority of the Federal Communications Commission (FCC) under the Communications Act of 1934, as amended (Communications Act), and the rules and policies of the FCC (FCC Regulations).

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Television broadcast licenses are granted for periods of eight years. They are renewable by broadcasters upon application to the FCC and usually are renewed except in rare cases in which a conflicting application, a petition to deny, a complaint or an adverse finding as to the licensee’s qualifications results in loss of the license. The company believes it is in substantial compliance with all applicable provisions of the Communications Act and FCC Regulations. By the end of 2004, all of the company’s stations had converted to digital television operations in accordance with applicable FCC regulations. Nine of the company’s stations filed for FCC license renewals in 2004, eight did so in 2005, another five in 2006 and the remaining station filed on Feb. 1, 2007. As of February 2007, three of the eight applications filed in 2004 were granted and all others remain pending. The company expects all pending renewals to be granted in the ordinary course.

FCC Regulations also prohibit concentrations of broadcasting control and regulate network programming. FCC Regulations governing multiple ownership limit, or in some cases prohibit, the common ownership or control of most communications media serving common market areas (for example, television and radio; television and daily newspapers; or radio and daily newspapers). FCC rules permit common ownership of two television stations in the same market in certain circumstances provided that at least one of the commonly owned stations is not among the market’s top four rated stations at the time of acquisition. It is under this standard that the company acquired television stations in Jacksonville, Fla., Denver, Colo., and Atlanta, Ga.

In 2003, the FCC substantially changed its ownership rules to allow greater media ownership opportunities, including 1) permitting common ownership of different properties in the same market (depending on market size) but retaining limitations in markets of three or fewer television stations where cross-ownership is prohibited; 2) permitting ownership of a number of television stations in a market (depending on market size); and 3) increasing the national TV ownership cap, covering the number of U.S. TV households one company is permitted to serve from 35% to 45%. In January 2004, Congress passed legislation setting the national ownership cap figure at 39%. Presently the company’s 23 television stations reach an aggregate of 18% of U.S. TV households.

In 2004, a federal appeals court found that the FCC had not adequately justified some of the rule changes and remanded the matter back to the FCC. In February 2005, the company, in a joint filing with the Newspaper Association of America, sought review of the decision in the U.S. Supreme Court. The Court refused to take the appeal and therefore, the FCC’s pre-2003 ownership rules remain in effect while the FCC deals with the issues raised in the remand. In July 2006, the FCC commenced a proceeding to address the issues raised by the appellate court and other possible revisions to the ownership rules. The company is unable to predict the outcome of these proceedings, which are likely to continue into 2008. If the FCC modifies the current restrictions, it could present opportunities for the company to acquire additional properties in markets it currently serves.

Under current FCC rules, the company may continue to own a newspaper-television combination in Phoenix, Ariz., pending FCC action on its application for permanent waiver filed with the KPNX-TV license renewal in June 2006. The company does not anticipate any action on the application until the FCC resolves the issues addressed in the current ownership proceeding.

Employee relations

At the end of 2006, the company and its subsidiaries had approximately 49,675 full-time and part-time employees. Three of the company’s newspapers were published in 2006 together with non-company newspapers pursuant to joint operating agreements, and the employment total above includes the appropriate share of employees at those joint production and business operations.

Approximately 13.5% of those employed by the company and its subsidiaries in the U.S. are represented by labor unions. They are represented by 89 local bargaining units, most of which are affiliated with one of eight international unions under collective bargaining agreements. These agreements conform generally with the pattern of labor agreements in the newspaper and broadcasting industries. The company does not engage in industrywide or companywide bargaining. The company’s U.K. subsidiaries bargain with three unions over working practices, wages and health and safety issues only.

The company provides competitive group life and medical insurance programs for full-time domestic employees at each location. The company pays a substantial portion of these costs and employees contribute the balance. Nearly all of the company’s units provide retirement or profit-sharing plans that cover all eligible part-time and full-time employees.

In 1990, the company established a 401(k) Savings Plan, which is available to most of its domestic non-represented employees and a small number of unionized employees who have bargained for the plan.

Newsquest employees have local staff councils for consultation and communication with local Newsquest management. Newsquest has provided the majority of its employees with the option to purchase Gannett shares through a share incentive plan along with a retirement plan that incorporates life insurance.

The company strives to maintain good relationships with its employees.

A key initiative for the company is its Leadership and Diversity program that focuses on finding, developing and retaining the best and the brightest employees. Gannett’s Diversity Council has been charged with attracting and retaining superior talent and developing a diverse workforce that reflects the communities Gannett serves.

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Non-daily publications: see listing of U.S. non-daily locations on page 14.

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Daily newspapers

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NEWSPAPERS AND NEWSPAPER DIVISION (continued)

Times News Group, Inc. (Army Times Publishing Co.)

Headquarters: Springfield, Va.

Advertising offices: Chicago, Ill.; Los Angeles, Calif.; New York, N.Y.

Publications: Army Times, Navy Times, Marine Corps Times, Air Force Times, Federal Times, Defense News, Armed Forces Journal, C4ISR Journal, Training and Simulation Journal

Clipper Magazine

Headquarters: Mountville, Pa.

Gannett Healthcare Group

Offices: Bala Cynwyd, Pa. (serving Philadelphia and the Delaware Valley); Dallas/Fort Worth, Texas (serving Texas and Louisiana); Falls Church, Va. (serving Washington, D.C., Northern Virginia and Baltimore, Md.); Fort Lauderdale, Fla. (serving Fort Lauderdale, Orlando and Tampa); Hoffman Estates, Ill. (serving Illinois, Indiana, Michigan and Ohio); San Jose, Calif. (serving California and Western states); Westbury, N.Y. (serving New York, New Jersey and New England states)

Non-daily publications

Weekly, semi-weekly, monthly or bimonthly publications in Alabama, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Guam, Hawaii, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maryland, Michigan, Minnesota, Mississippi, Missouri, Montana, Nevada, New Jersey, New York, North Carolina, Ohio, Oregon, South Carolina, South Dakota, Tennessee, Utah, Vermont, Virginia, West Virginia, Wisconsin

Gannett Media Technologies International: Cincinnati, Ohio; Norfolk, Va.; Tempe, Ariz.

Gannett Offset

Headquarters: Springfield, Va.

Offset sites: Atlanta, Ga.; Minneapolis, Minn.; Miramar, Fla.; Norwood, Mass.; St. Louis, Mo.; Springfield, Va.

Gannett Offset Marketing Services Group

Gannett Direct Marketing Services, Inc.: Louisville, Ky.

Telematch: Springfield, Va.

Gannett Retail Advertising Group: Chicago, Ill.

Gannett Satellite Information Network: McLean, Va.

Gannett News Service

Headquarters: McLean, Va.

Bureau: Washington, D.C.

State bureaus: Albany, N.Y.; Baton Rouge, La.; Trenton, N.J.; Sacramento, Calif.; Springfield, Ill.; Tallahassee, Fla.

PointRoll, Inc.

Headquarters: Conshohocken, Pa.

Sales offices: Chicago, Ill.; Detroit, Mich.; London, England; Los Angeles, Calif.; New York, N.Y.; San Francisco, Calif.; Washington, D.C.

USA TODAY

Headquarters and editorial offices: McLean, Va.

Print sites: Arlington, Texas; Atlanta, Ga.; Batavia, N.Y.; Brevard County, Fla.; Chandler, Ariz.; Columbia, S.C.; Fort Collins, Colo.; Fort Myers, Fla.; Hattiesburg, Miss.; Kankakee, Ill.; Honolulu, Hawaii; Lansing, Mich.; Las Vegas, Nev.; Lawrence, Kan.; Mansfield, Ohio; Marin County, Calif.; Milwaukee, Wis.; Minneapolis, Minn.; Miramar, Fla.; Nashville, Tenn.; Newark, Ohio; Norwood, Mass.; Olympia, Wash.; Pasadena, Texas; Port Huron, Mich.; Raleigh, N.C.; Richmond, Ind.; Rockaway, N.J.; St. Louis, Mo.; Salisbury, N.C.; Salt Lake City, Utah; San Bernardino, Calif.; Springfield, Va.; Tampa, Fla.; Warrendale, Pa.; White Plains, N.Y.; Wilmington, Del.

International print sites: Frankfurt, Germany; Gosselies, Belgium; Hong Kong; London, England

National offices: Atlanta, Ga.; Boston, Mass.; Buffalo, N.Y.; Charleston, S.C.; Charlotte, N.C.; Chicago, Ill.; Cincinnati, Ohio; Cleveland, Ohio; Columbus, Ohio; Dallas, Texas; Denver, Colo.; Detroit, Mich.; Fort Wayne, Ind.; Houston, Texas; Kansas City, Mo.; Las Vegas, Nev.; Los Angeles, Calif.; Memphis, Tenn.; Miami, Fla.; Milwaukee, Wis.; Minneapolis, Minn.; Murfreesboro, Tenn.; Nashville, Tenn.; New Orleans, La.; New York, N.Y.; Oklahoma City, Okla.; Orlando, Fla.; Philadelphia, Pa.; Phoenix, Ariz.; Pittsburgh, Pa.; Raleigh, N.C.; Salt Lake City, Utah; San Antonio, Texas; San Francisco, Calif.; Seattle, Wash.; St. Louis, Mo.; Tampa, Fla.; Tulsa, Okla.; Washington, D.C.

International offices: Hong Kong; London, England; Singapore

Advertising offices: Atlanta, Ga.; Chicago, Ill.; Dallas, Texas; Detroit, Mich.; London, England; Los Angeles, Calif.; McLean, Va.; New York, N.Y.; San Francisco, Calif.

USA TODAY SPORTS WEEKLY

Editorial offices: McLean, Va.

Advertising offices: McLean, Va.; New York, N.Y.

USATODAY.com

Headquarters and editorial offices: McLean, Va.

Advertising offices: Atlanta, Ga.; Chicago, Ill.; Dallas, Texas; Detroit, Mich.; Los Angeles, Calif.; McLean, Va.; New York, N.Y.; San Francisco, Calif.

USA WEEKEND

Headquarters and editorial offices: McLean, Va.

Print sites: Atglen, Pa.; Dickson, Tenn.; Mt. Morris, Ill.; Reno, Nev.

Advertising offices: Chicago, Ill.; Detroit, Mich.; Los Angeles, Calif.; New York, N.Y.; San Francisco, Calif.

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Daily paid-for newspapers/Newsquest PLC

Non-daily publications: Essex, London, Midlands, North East, North West, South Coast, South East, South and East Wales, South West, Yorkshire

BROADCASTING

Television stations

Captivate Network, Inc.

Headquarters: Westford, Mass.

Advertising offices: Atlanta, Ga.; Chicago, Ill.; Dallas, Texas; Los Angeles, Calif.; New York, N.Y.; San Francisco, Calif.; Toronto, Ontario.

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GANNETT ON THE NET

News and information about Gannett is available on our Web site, www.gannett.com. In addition to news and other information about our company, we provide access through this site to our annual report on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K and all amendments to those reports as soon as reasonably practicable after we file or furnish them electronically to the Securities and Exchange Commission.

We also provide access on this Web site to our Principles of Corporate Governance, the charters of our Audit, Executive Compensation and Nominating and Public Responsibility Committees and other important governance documents and policies, including our Ethics and Inside Trading Policies. Copies of all of these corporate governance documents are available to any shareholder upon written request made to our Secretary at our headquarters address. In addition, we will disclose on this Web site changes to, or waivers of, our corporate Ethics Policy.

Gannett properties also offer online services or informational sites on the Internet as follows, listed alphabetically by market:

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In addition to the other information contained or incorporated by reference into this Form 10-K, prospective investors should consider carefully the following risk factors before investing in our securities. The risks described below may not be the only risks we face. Additional risks that we do not yet perceive or that we currently believe are immaterial may also adversely affect our business and the trading price of our securities.

Competition from alternative forms of media may impair our ability to achieve revenue growth

Advertising produces the predominant share of our newspaper and broadcasting revenues. With the continued development of alternative forms of media, particularly those based on the Internet, our traditional print and television businesses are facing increasing competition. Alternative media sources also affect our ability to increase our circulation revenues and television audience. This competition could make it difficult for us to grow our advertising and circulation revenues, which we believe will challenge us to expand the contributions of our online and other digital businesses.

The variable nature of our operating and interest expenses make it difficult to control our costs and could reduce our profitability

We continue to face upward pressure on labor and benefit costs, along with volatility in newsprint prices and interest rates. Our ability to control and manage these costs is somewhat limited due to competition and market factors.

Changes in economic conditions in the markets we serve may produce volatility in demand for our products and services

Our operating results depend on the relative strength of the economy in our principal newspaper and television markets as well as the strength or weakness of national and regional economic factors.

Foreign exchange variability could adversely affect our consolidated operating results

Any weakening of the British pound-to-U.S. dollar exchange rate could adversely impact Newsquest’s earnings contribution to consolidated results.

Changes in regulatory environment may encumber or impede our efforts to improve operating results

Our newspaper and broadcasting operations are subject to government regulation. Changing regulations, particularly FCC regulations which affect our television stations, may result in increased costs and adversely affect our future profitability. FCC regulations required us to construct digital television stations in all of our television markets, despite the fact that the new digital stations are unlikely to produce significant additional revenue until consumers have purchased a substantial number of digital television receivers. Congress established Feb. 17, 2009, as the date by which each television station will be required to return one of the two channels currently assigned to it and operate as a digital facility exclusively.

All of the company’s stations have converted to digital television; however, we cannot predict how the transition will affect our broadcast results. In addition, our television stations are required to possess television broadcast licenses from the FCC; when granted, these licenses are generally granted for a period of eight years. Under certain circumstances the FCC is not required to renew any license and could decline to renew our license applications that are currently pending in 2007.

The degree of success of our investment and acquisition strategy may significantly impact our ability to expand overall profitability

We intend to continue efforts to identify and complete strategic investments, partnerships and business acquisitions. These efforts may not prove successful. Strategic investments and partnerships with other companies expose us to risks that we may not be able to control the operations of our investee or partnership, which could decrease the amount of benefits we reap from a particular relationship. Acquisitions of other businesses may be difficult to integrate with our existing operations, could require an inefficiently high amount of attention from our senior management, might require us to incur additional debt or divert our capital from more profitable expenditures, and might result in other unanticipated problems and liabilities.

None.