Gannett
Annual Report 2010

Plain-text annual report

GANNETT CO., INC. 7950 Jones Branch Dr. McLean, VA 22107 www.gannett.com 2 0 1 0 A N N U A L R E P O R T • G A N N E T T C O . , I N C . 20 10 A NNUAL REPORT 00075988 TABLE OF CONTENTS SHAREHOLDER SERVICES 2010 Financial Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Letter to Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Company and Divisional Officers . . . . . . . . . . . . . . . . . . . . . . 1 2 7 8 Form 10-K COMPANY PROFILE: Gannett is a media and marketing solutions company with a diverse portfolio of broadcast, digital, mobile and publishing companies. Gannett provides consumers easy access to the things that matter most to them – any way and anywhere. Gannett’s portfolio of trusted brands helps business customers connect with these highly engaged audiences through its industry- leading marketing services, customized solutions and national-to-local-to-personal reach. As Gannett builds on its valuable local brands and strong journalism, it also is expanding its mobile and digital businesses. It is a digital leader with a portfolio that includes a network of hundreds of local and national media organization web sites that reach 52 million unique users monthly; CareerBuilder.com, the nation’s top employment site, which is expanding rapidly internationally and is already in 18 countries outside the U.S.; and Gannett Digital Media Network, which includes top brands such as USATODAY.com, 81 local MomsLikeMe.com sites; HighSchoolSports.net, a top digital sports brand; and action sports network BNQT. USA TODAY, too, continues to be a leader in the mobile space, with more than 7 million total App downloads, including its iPad, iPhone and Android Apps. Gannett Broadcasting is helping to lead the development of Digital Mobile TV. At the same time, the company’s digital marketing companies offer innovative marketing solutions for any audience. PointRoll, an industry leader in rich media advertising solutions and technology, powers more than 50 percent of all rich media campaigns online and serves more than 150 billion ad impressions each year. ShopLocal is a leading provider of online marketing solutions that connect retailers with shoppers through innovative and effective marketing, enabling more than 100 of the nation’s top retailers to deliver localized promotions directly to shoppers. The company’s 82 U.S. daily newspapers, including USA TODAY, reach 11.6 million readers every weekday and 12 million readers every Sunday, providing important news and information from their customers’ neighborhoods and around the globe. USA TODAY, the nation’s No. 1 newspaper in print circulation, and USATODAY.com reach a combined 5.9 million readers daily. The Broadcasting Division’s 23 TV stations reach 21 million households, covering 18.2 percent of the U.S. population. Through its Captivate subsidiary, the Broadcasting Division delivers news, information and advertising to a highly desirable audience demo- graphic on 9,500 video screens located in elevators of office towers and select hotel lobbies in 25 major cities across North America. Newsquest is one of the U.K.’s leading regional community news providers, and its digital portfolio of newspaper and online-only brands attracts nearly 7.5 million unique users each month. It has a portfolio of 17 daily paid-for newspapers and more than 200 weekly newspapers, magazines and trade publications. Newsquest owns a successful online publisher called s1, which is a leading recruitment site in Scotland. For more information, visit www.gannett.com. GANNETT STOCK Gannett Co., Inc. shares are traded on the New York Stock Exchange with the symbol GCI. The company’s transfer agent and registrar is Wells Fargo Bank, N.A. General inquiries and requests for enrollment materials for the programs described below should be directed to Wells Fargo Shareowner Services, P.O. Box 64854, St. Paul, MN 55164-0854 or by telephone at 1-800-778-3299 or at www.wellsfargo.com/contactshareownerservices. DIVIDEND REINVESTMENT PLAN The Dividend Reinvestment Plan (DRP) provides Gannett shareholders the opportunity to purchase additional shares of the company’s common stock free of brokerage fees or service charges through automatic reinvestment of dividends and optional cash payments. Cash payments may range from a minimum of $10 to a maximum of $5,000 per month. AUTOMATIC CASH INVESTMENT SERVICE FOR THE DRP This service provides a convenient, no-cost method of having money automatically withdrawn from your checking or savings account each month and invested in Gannett stock through your DRP account. DIRECT DEPOSIT SERVICE Gannett shareholders may have their quarterly dividends electronically credited to their checking or savings accounts on the payment date at no additional cost. ANNUAL MEETING The annual meeting of shareholders will be held at 10 a.m. (E.T.) Tuesday, May 3, 2011, at Gannett headquarters. CORPORATE GOVERNANCE We have posted on our Web site (www.gannett.com) our principles of corporate governance, ethics policy and the charters for the audit, digital technology, nominating and public responsibility and executive compensation committees of our board of directors, and we intend to post updates to these corporate governance materials promptly if any changes (including through any amendments or waivers of the ethics policy) are made. This site also provides access to our annual report on Form 10-K, quarterly reports on Form 10-Q and cur- rent reports on Form 8-K as filed with the SEC. Our Chairman and Chief Executive Officer, Craig A. Dubow, and our Senior Vice President and Chief Financial Officer, Paul N. Saleh, have delivered, and we have filed with our 2010 Form 10-K, all certifications required by the rules of the SEC. Complete copies of our corporate governance materials and our Form 10-K may be obtained by writing our Secretary at our corporate headquarters. In accordance with the rules of the New York Stock Exchange, our Chairman and Chief Executive Officer, Craig A. Dubow, has certified, without qualification, that he is not aware of any violation by Gannett of the NYSE’s corporate governance listing standards. THIS REPORT WAS WRITTEN AND PRODUCED BY EMPLOYEES OF GANNETT. Vice President and Controller George Gavagan Director of Consolidations and Financial Reporting Cam McClelland Vice President/Corporate Communications Robin Pence Senior Manager/Publications Laura Dalton Creative Director/Designer Michael Abernethy Printing Action Printing, Fond du Lac, Wis. PHOTO CREDITS: Page 2: Dubow by Stacey Wolf, Gannett. Pages 3-6: David Yellen. Page 7: Directors’ photos by Stacey Wolf, Gannett. FOR MORE INFORMATION News and information about Gannett is available on our Web site. Quarterly earnings infor- mation will be available around the middle of April, July and October 2011. Shareholders who wish to contact the company directly about their Gannett stock should call Shareholder Services at Gannett headquarters, 703-854-6960. Printed on recycled paper. This report was printed using soy-based inks. The entire report contains 10% total recovered fiber/all post-consumer waste. Gannett Headquarters 7950 Jones Branch Drive McLean, VA 22107 703-854-6000 2010 FINANCIAL SUMMARY Operating revenues, in millions In thousands, except per share amounts 08 09 10 $6640 $5510 $5439 Income from continuing operations attributable to Gannett Co., Inc. before asset impairment and other special items, in millions 08 09 10 $775 (1) $438 (1) $591 (1) Income per share (diluted) from continuing operations before asset impairment and other special items 08 09 10 $3.40 (1) $1.85 (1) $2.44 (1) Operating revenues . . . . . . . . . . . . . . . Operating income . . . . . . . . . . . . . . . Income from continuing operations attributable to Gannett Co., Inc. . . . . . Income per share from continuing operations – diluted . . . . . . . . . . . . . . Income from continuing operations attributable to Gannett Co., Inc. before asset impairment and other special items (1) . . . . . . . . . . . . . . . . . Income per share from continuing operations before asset impairment and other charges – diluted (1) . . . . . . 2010 $ 5,438,678 $ 999,695 2009 $5,509,603 $ 718,918 Change (1%) 39% $ 567,328 $ 351,480 61% $ 2.35 $ 1.49 58% $ 590,524 $ 437,503 35% $ 2.44 $ 1.85 32% 1% 65% (23%) (5%) 2% 35% — $ 809,630 $ 148,939 $3,061,951 $7,148,432 $ 67,737 $1,603,925 0.16 $ $ 816,308 $ 245,948 $ 2,352,242 $ 6,816,844 $ 69,070 $ 2,163,754 0.16 $ Free cash flow (2) . . . . . . . . . . . . . . . . Working capital . . . . . . . . . . . . . . . . . Long-term debt . . . . . . . . . . . . . . . . . Total assets . . . . . . . . . . . . . . . . . . . . . Capital expenditures . . . . . . . . . . . . . Shareholders’ equity . . . . . . . . . . . . . . Dividends per share . . . . . . . . . . . . . . Weighted average common shares outstanding – diluted . . . . . . . . (1) Results for 2010 exclude pre-tax asset impairment and other special items of $71 million ($23 million after tax or $.10 per share). Results for 2009 exclude pre-tax asset impairment and other special items of $116 million ($86 million after tax or $.36 per share). Results for 2008 exclude pre-tax asset impairment and other special items of $8.36 billion ($7.40 billion after tax or $32.42 per share). These charges are more fully discussed in the Management’s Discussion and Analysis of Financial Condition and Results of Operations and the Consoli- dated Financial Statement sections of this report. 241,605 236,027 2% (2) See page 79 of Gannett’s Form 10-K for a reconciliation of free cash flow, a non- GAAP financial measure, to net cash flow from operating activities. A N N U A L 1 R E P O R T LETTER TO SHAREHOLDERS Craig A. Dubow | Chairman Chief Executive Officer, Gannett Co., Inc. 2010 was a year of great change and growth. Technology and social networking continued to transform society, culture and business. Media consumption was at an all time high as consumers fed an ever-expanding appetite for new ways to engage with one another and information, integrating traditional news platforms with new technologies. Gannett met these changing dynamics by making content, social networks and marketing tools readily available to our customers in the many different ways they desired. We delivered great journalism that put us at the top of the television ratings nationwide for the Winter Olympics and elections and garnered top industry awards including Edward R. Murrow awards for broadcasting, a Pulitzer Prize for photography and many other awards for excellence. With USA TODAY’s inaugural App for the iPad, we were at the forefront of one of the greatest game changers we have seen. For our business customers, we provided new opportunities to engage audiences and we developed marketing solutions to help their businesses grow. In short, we listened to what our customers want – and put it all within reach. FINANCIAL HIGHLIGHTS Providing engaging content any way consumers wish and finding new ways to connect businesses to these audiences are key to our success. By delivering on these efforts, we delivered strong results to our shareholders. In fact, since the National Bureau of Economic Research reported the recession was over June 30, 2009, Gannett has significantly outperformed the general market and peer group stock indexes. Gannett is stronger and more profitable today than we were a year ago. We achieved revenues of $5.4 billion and delivered sequential comparison improvement in our total operating revenues for each quarter in 2010. Broadcast had an exceptional year with revenues up 22 percent. Broadcasting operating income, excluding special items, was up 50 percent and exceeded operating income on the same basis in 2008 by $20 million. This is extraordinary given 2008 was a presidential election year. Our digital revenues companywide continued to grow and today represent 18 percent of Gannett’s total revenue. Our publishing segment revenue comparisons contin- ued to improve during the year but its overall performance mirrored the state of the U.S. and U.K. economies, with growth in some sectors and weak spots in others. However, we delivered a 15 percent increase in operating income, excluding special items, and with excellent leadership at U.S. Community Publishing, USA TODAY and at Newsquest, Publishing ended the year stronger than where we began. Gannett generated $1.3 billion in operating cash flow in 2010, excluding special items, 19 percent higher than in 2009 and we reduced our debt by $710 million. We completed a $500 million offering of senior notes and an extension of our revolving credit facilities that resulted in a very manageable debt matu- rity schedule and improved an already strong balance sheet. Our total free cash flow for 2010 was $816 million. We also made significant voluntary cash contributions to the Gannett Retirement Plan totaling $130 million. Combined with the strong investment A N N U A L 2 R E P O R T return on the plan’s assets in 2010, this greatly improved the funding of the plan at year end. OUR MISSION To enrich lives by informing and inspiring consumers, by providing the ease and accessi- bility to connect them with their communities of interest, and by being a catalyst for the conversations that are making a difference every day. To help clients succeed through our unparalleled local- to-international portfolio of trusted brands, our ability to provide integrated marketing solutions, and our insight into consumer behavior. To lead the transformation of the media and marketing solutions industries. OUR VISION To be the trusted, leading media and marketing solutions company at the forefront of a new era in human engagement. Net income from continuing operations attributable to Gannett, excluding special items, was $591 million, an increase of 35%. Early in 2010, I was pleased to announce the promotion of Gracia Martore to president and chief operating officer of the company. Gracia has been a friend and adviser and it is personally gratifying to recognize her work in this way. With her superb financial skills, as our former executive vice president and chief financial officer, and extensive knowledge of our business operations, she has done an outstanding job in her new role. We brought in Paul Saleh as our new senior vice president and CFO. He brings deep experience and an excellent track record leading the financial organizations of some great companies and we are very pleased to have him on board. BUILDING ON THE STRENGTH OF OUR LOCAL BRANDS Gannett’s unmatched local market franchises and exceptionally strong brands – both local and national – are true differentiators for our company and helped drive our results. In Broadcasting, we focused on the strengths of our local content with great success. Gannett Broadcasting led the nation in television ratings for election night and Olympics coverage with KSDK in St. Louis, KARE in Minneapolis and KUSA in Denver, ranking first, second and third respectively on election night for late news in the top 25 local markets in the key 25-54 advertising demographic. KUSA was the No. 1 rated station in the country for the Winter Olympics in the key 25-54 demographic and KSDK and KARE ranked third and fourth among this group. These rankings helped contribute to our strong financial results within Broadcasting. We extended the digital reach of our local television brands by joining with Datasphere, a leading provider of local web technology, to deliver very localized content on a community and neighborhood basis to consumers and hyper-local digital ad solutions for small businesses. By enabling business customers to target audiences down to specific neighborhoods, we make their services even more relevant to their customers. We launched 264 of these neighborhood web sites in 10 markets. Early sales results have been ahead of expectations. In U.S. Community Publishing (USCP), we took many innovative steps to leverage our local brands and market expertise to further expand our digital reach. We teamed with Yahoo! to launch an advertising partnership at all 81 community newspaper sites and seven broadcast properties. This partnership plays to the strength of our great local brands and relationships and Yahoo!’s broad digital audience and audience targeting capabilities. Together, we expect to extend our digital reach to as much as 80 percent on a local basis. Print continues to be important to many of our readers. Throughout the year, we focused on growing our paid Sunday home delivery circulation, build- ing on the strength of our local brands. We created content that’s geared toward the Sunday home environment where consumers are deeply involved with our product – both the content and advertising. We enhanced our content and design, giving readers a better experience and business customers an even more engaged audience. As a result, we increased Sunday home delivery volume for 20 of USCP’s largest 32 newspapers. A N N U A L 3 R E P O R T Our photojournalists are at the center of the news as it happens. This Pulitzer Prize-winning photo captured a dramatic rescue. Mary Chind | Photographer, The Des Moines Register LETTER TO SHAREHOLDERS Whether it’s the iPhoneTM, AndroidTM or iPadTM App, our product designs are based on consumer behavior and continue to set trends in the industry. Jeff Dionise | Vice President, Product Development and Design, USA TODAY REACHING CONSUMERS AND BUSINESS CUSTOMERS ON ALL PLATFORMS Throughout the year, we expanded the many different ways we reach people. From online to on-the-go, to print and broadcast, we connected consumers to the things that interest them most and business customers to a highly engaged audience. At the same time, we ramped up our cross platform sales efforts. USA TODAY’s iPad App has been enormously successful and demonstrates the importance of having great content – and great design – tailored to each particular platform. USA TODAY’s App has been one of the most popular news Apps on this device with more than 1.6 million downloads since it launched last April and advertiser support remains strong. USA TODAY’s iPad, iPhone and Android Apps combined had more than 7 million downloads. In January of this year, USA TODAY released an updated version, the 2.0, which includes USA TODAY’s popular Technology and Travel sections, and we recently announced that USA TODAY will be an inaugural App on the Motorola tablet. At the same time, PointRoll has produced some of the best, most innovative iPad advertising experiences the platform has seen. USA TODAY’s iPad App was named the Best Mobile App for Editorial Content in the 2010 MOBI Awards and Apple recognized it as the top free news iPad App of the year. 2010 was a breakout year for mobile content consumption, especially by those using smartphones. For Gannett, the smart- phone revolution means more people are seeking with greater frequency the trusted content we provide on our mobile sites and through our Apps. Across the company, USA TODAY and our local sites served over 1.6 billion mobile page views in 2010, up 267% from 2009. We also see signs of a growing market for local and national mobile advertising. To leverage this momentum, last fall we began build-out of a Gannett-wide mobile platform that gives our mobile sites a new look and feel and supports on-demand video for higher-end devices such as the iPhone. Most importantly, with this new platform we are now able to drive innovation across all Gannett mobile sites by pooling technical resources in an efficient and scalable manner. We also continued to play a leadership role in developing mobile digital TV, which provides consumers with the freedom to enjoy their favorite programming while on the go. Gannett joined with 11 other major broadcasting groups, including NBC and FOX, last year to develop a national mobile service. Early consumer response indicates mobile DTV will expand our viewing and attract younger viewers. As we continue to expand the many options consumers have to access our content, we have also begun to customize our content by platform. The content we produce for a small smart phone screen should be different than what we produce for someone reading online or in print. USA TODAY is again leading the industry, taking a very different approach to creating content not A N N U A L 4 R E P O R T . d e v r e s e r s t h g i r l l A . c n I , e l p p A f o k r a m e d a r t d e r e t s i g e r a s i d a P i Since WXIA launched its campaign to stop distracted driving, 17 other Gannett TV stations across the U.S. have joined the effort, with thousands of viewers taking a life-saving pledge to never text while driving. Donna Lowry | Education Reporter, WXIA-TV Industry leader PointRoll powers effective, interactive digital campaigns for more than two-thirds of the Fortune 500 brands. George Thomas | Director of Product Management, PointRoll only by platform but by audience, and tailoring both its content and marketing by segments such as travel and sports. We also began testing different paid content models at three USCP sites, providing subscribers several platform options to access news and information. These tests are helping us better understand consumer response to paid content and what type of business models are sustainable. We are finding that subscribers are much more engaged than non-subscribers, consuming four and five times as many pages per visit. We are pleased with the results we have received, which demonstrate consumers value our content and are willing to pay for it. This year, we joined with Ongo Inc., The New York Times Company and The Washington Post Company to launch a new personal digital news service for consumers. Called Ongo, this service is built on the cable pay model, allowing subscribers to customize and personalize how they receive information for a set monthly fee with the option to add on to their packages for an additional price. Content from USA TODAY and our community newspapers are featured on Ongo. Ongo is accessible through leading web browsers on web-enabled devices, including comput- ers, smartphones and tablets, complementing Gannett’s strategy to make content available to consumers anywhere they are. HELPING OUR CUSTOMERS SUCCEED Throughout the year, we continued to take bold steps to create a solutions-based approach to supporting our business customers. In our U.S. Community Publishing division, we launched five regional Gannett Client Solutions Groups to provide customized marketing solutions services such as strategic planning, campaign concept and design, digital media execution, event marketing and media buying. At the same time, we are focused on creating a customer-centric world-class sales organization in our local community publishing markets. As we changed the way we support our business customers, we also extended the capabilities of our marketing services companies, PointRoll, ShopLocal and CareerBuilder to further help our customers achieve their goals. PointRoll, the industry leader in rich media advertising, which powers more than 50 percent of all rich media campaigns online, helps our customers deliver their messages across multi- ple digital formats. Last year, PointRoll served over 150 billion ad impressions. ShopLocal, the retail division of PointRoll, is the leader in multi-channel shopping services. It connects over 100 of the nation’s top retailers with shoppers through measurable marketing solutions that include online circulars, display adver- tising as well as social media and mobile. In 2010, ShopLocal launched its “Gift Me This” feature for Facebook, which gives retail business customers a stronger opportunity to distribute local promotions. Facebook users can create a social wish list by A N N U A L 5 R E P O R T LETTER TO SHAREHOLDERS Gannett is helping to lead the development and rollout of mobile DTV, the next generation of television. pushing products they find in SmartCirculars to their Facebook News Feeds by clicking on the “Gift Me This” link. CareerBuilder, known for its industry leadership in online recruitment, is growing on a global scale and has evolved well beyond its origins as a job board, diversifying its product line, providing resources for everything from employment branding and social media management to data analysis on talent. CareerBuilder consistently outperforms competitors and continues to gain market share. It now operates sites in 18 countries outside of the U.S. and was a significant driver for the increase in our digital revenue. Robert Lydick | Project and Planning Analyst, Gannett Broadcasting OUR NEW BRAND In 2010, we accelerated our transformation. We continued to build on the strength of our great local brands and properties while forging into the many new and exciting areas mobile and digital have to offer. Our company has changed significantly in recent years. We broadened our portfolio and changed the ways in which we enable consumers and business customers to engage with each other and the things that matter most to them. We also have changed our philosophy. We no longer decide what consumers and businesses need. Our cus- tomers decide and we provide them with what they want. Now it’s time for our brand to reflect and promote our company as we are today Our new logo and tagline convey the many benefits we bring to consumers, businesses and our employees. For consumers, we provide easy access to the information they want, when they want it, everywhere they want it; for businesses, we deliver innovative marketing solutions that help put their business goals within reach; for employees, we offer rewarding careers and opportunities to grow. and the tremendous value we bring to our customers, employees, shareholders and industry. Toward that end, we launched a major corporate branding effort this year. We created new mission and vision statements that speak to what drives us today and the opportunities we will deliver tomorrow. We also have a new logo and tagline – “It’s all within reach” – which conveys the many benefits we bring to consumers, businesses and our employees. Our brand strategy represents the natural evolution of our transformation and, as our customers get to know us again and see the full value we bring, it will help us grow our company, attract and retain the best people and increase shareholder value. This is an extraordinary time to be in our sector – and to be at Gannett. These are unique and rather unprecedented times in the ways in which our products and technology are enhancing people’s lives. Our focus remains on providing a great customer experience. I look forward to all that lies ahead. Craig A. Dubow, Chairman Chief Executive Officer A N N U A L 6 R E P O R T BOARD OF DIRECTORS CRAIG A. DUBOW Chairman and chief executive officer, Gannett Co., Inc. Formerly: Chairman, president and CEO, Gannett Co., Inc. (2006 - 2010); President and CEO, Gannett Co., Inc. (2005 - 2006); Presi- dent and CEO, Gannett Broadcasting (2001-2005). Other directorships: Associated Press; Broadcast Music, Inc. Age 56. (b,c,f) JOHN E. CODY Former executive vice president and chief operating officer of Broadcast Music, Inc. Other Directorships: Tennessee Performing Arts Center. Age 64. HOWARD D. ELIAS President and chief operating officer, EMC Information Infrastructure and Cloud Services, Executive Office of the Chairman. Formerly: President, EMC Global Services and Resource Management Software Group, execu- tive vice president, EMC Corporation. Age 53. (b) ARTHUR H. HARPER Managing partner, GenNx360 Capital Partners, a private equity firm focused on business-to-business companies. Formerly: President and CEO of General Electric’s Equipment Services division. Other directorship: Monsanto Company. Age 55. (d,e) JOHN JEFFRY LOUIS Co-founder and former chairman, Parson Capital Corporation. Other directorships and trusteeships: S. C. Johnson & Son, Inc.; Johnson Finan- cial Group; Northwestern University; Chicago Council on Global Affairs; and a commissioner of the U.S./U.K. Fulbright Commission. Age 48. (a,b) MARJORIE MAGNER Managing partner, Brysam Global Partners, a private equity firm invest- ing in financial services with a focus on consumer opportunities. Formerly: Chairman and CEO, Citigroup’s Global Consumer Group. Other directorships: Accenture; Ally Financial Inc. Age 61. (a,c,d) SCOTT K. MCCUNE Vice president and director, Integrated Marketing, The Coca-Cola Company. Age 54. (b,e) DUNCAN M. MCFARLAND Retired chairman and chief executive officer, Wellington Management Com- pany, LLP. Other directorships: NYSE Euronext, Inc.; and The Asia Pacific Fund, Inc., a closed-end registered investment company traded on the New York Stock Exchange. Age 67. (a,c,d) DONNA E. SHALALA President, University of Miami. Other directorships: Lennar Corporation; MEDNAX, Inc. Age 70. (b,e) NEAL SHAPIRO President and chief executive officer, WNET.org. Other directorships and trusteeships: American Public Televi- sion; Investigative Reporters and Editors (IRE); the Board of Trustees, Tufts University and the alumni board of Communications and Media Studies program, Tufts University. Age 52. (b,e) KAREN HASTIE WILLIAMS Retired partner of law firm Crowell & Moring. Other directorships: The Chubb Corporation; SunTrust Banks, Inc.; and WGL Holdings, Inc., the parent company of Washington Gas Light Company. Age 66. (a,d) DUBOW CODY ELIAS HARPER LOUIS MAGNER MCCUNE MCFARLAND SHALALA SHAPIRO (a) Member of Audit Committee. (b) Member of Digital Technology Committee. (c) Member of Executive Committee. (d) Member of Executive Compensation Committee. (e) Member of Nominating and Public Responsibility Committee. (f) Member of Gannett Management Committee. HASTIE WILLIAMS A N N U A L 7 R E P O R T COMPANY AND DIVISIONAL OFFICERS Gannett’s principal management group is the Gannett Management Committee, which coordi- nates overall management policies for the company. The U. S. Community Publishing Operating Committee oversees operations of the company’s U.S. Community Publishing Division. The Gannett Broadcasting Operating Committee coordinates management policies for the company’s Broadcast Division. The Gannett Digital Division oversees the company’s digital operations. The members of these groups are identified below. The managers of the company’s various local operating units enjoy substantial autonomy in local policy, operational details, news content and political endorsements. Gannett’s headquarters staff includes specialists who provide advice and assistance to the company’s operating units in various phases of the company’s operations. Below is a listing of the officers of the company and the heads of its national and regional divisions. Officers serve for a term of one year and may be re-elected. Information about one officer who serves as a director (Craig A. Dubow) can be found on page 7. Lynn Beall, Executive vice president, Gannett Broadcasting, and president and general manager, KSDK-TV, St. Louis, MO. Age 50.◆ William A. Behan, Senior vice president, labor relations. Age 52.(cid:129) Sally K. Clurman, Vice president, taxes. Age 48. Tara J. Connell, Vice president, ContentOne. Age 61. Paul Davidson, Chairman and chief executive officer, Newsquest. Age 56.(cid:129) Robert J.Dickey, President, U.S. Community Publishing. Age 53.■(cid:129) Daniel S. Ehrman, Jr., Vice president, planning and development. Age 64. George R. Gavagan, Vice president and controller. Age 64. Michael A. Hart, Vice president and treasurer. Age 65. Roxanne V. Horning, Senior vice president, human resources. Age 61.(cid:129) David L. Hunke, President and publisher, USA TODAY. Age 58.(cid:129) David T. Lougee, President, Gannett Broadcasting. Age 52.◆(cid:129) Gracia C. Martore, President and chief operating officer. Age 59.(cid:129) Todd A. Mayman, Senior vice president, general counsel and secretary. Age 51.(cid:129) Karen R. Moreno, President, Gannett Supply. Age 55. Paul N. Saleh, Senior vice president and chief financial officer. Age 54.(cid:129) Barbara W. Wall, Vice president and senior associate general counsel. Age 56. John A. Williams, President, Gannett Digital Ventures. Age 60.(cid:129) Jane Ann Wimbush, Vice president, internal audit. Age 60. (cid:129) Member of the Gannett Management Committee. ■ Member of the U. S. Community Publishing Operating Committee. ◆ Member of the Gannett Broadcasting Operating Committee. A N N U A L 8 R E P O R T UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-K (Mark One) X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the f iscal year ended December 26, 2010 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______ to ______ Commission file number 1-6961 GANNETT CO., INC. (Exact name of registrant as specif ied in its charter) Delaware (State or Other Jurisdiction of Incor poration or Organization) 7950 Jones Branch Drive, McLean, Virginia (Address of principal executive offices) 16-0442930 (I.R.S. Employer Identification No.) 22107-0910 (Zip Code) Registrant’s telephone number, including area code: (703) 854-6000 Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Common Stock, par value $1.00 per share Name of Each Exchange on Which Registered The New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the re gistrant is well-known seasoned issuer, as def ined in Rule 405 of the Securities Act. Yes [X] No [ ] Indicate by check mark if the re gistrant is not required to f ile reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X] Indicate by check mark whether the registrant (1) has f iled all reports required to be f iled by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shor ter period that the registrant was required to file such reports), and (2) has been subject to such f iling requirements for the past 90 da ys. Yes [X] No [ ] Indicate by check mark whether the registrant has submitted electronically and posted on its cor porate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Re gulation S-T (232.405 of this chap- ter) during the preceding 12 months (or for such shor ter period that the registrant was required to submit and post such f iles). Yes [X] No [ ] Indicate by check mark if disclosure of delinquent f ilers pursuant to Item 405 of Re gulation S-K is not contained here- in, and will not be contained, to the best of re gistrant’s knowledge, in def initive proxy or information statements incorporat- ed by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] Indicate by check mark whether the registrant is a large accelerated f iler, an accelerated f iler, a non-accelerated f iler or a smaller reporting company. See the def initions of “large accelerated f iler,” “accelerated f iler” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (check one): Large accelerated f iler [X] Accelerated filer [ ] Non-accelerated f iler [ ] Smaller repor ting company [ ] Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes [ ] No [X] The aggregate market value of the voting common equity held by non-affiliates of the registrant based on the closing sales price of the registrant’s Common Stock as repor ted on The New York Stock Exchange on June 25, 2010, was $3,544,790,597. The registrant has no non-voting common equity. As of January 30, 2011, 239,686,303 shares of the registrant’s Common Stock were outstanding. The definitive proxy statement relating to the re gistrant’s Annual Meeting of Shareholders to be held on May 3, 2011, is incorporated by reference in Part III to the extent described therein. DOCUMENTS INCORPORATED BY REFERENCE 1 INDEX TO GANNETT CO., INC. 2010 FORM 10-K Item No. ––––––– 1. 1A. 1B. 2. 3. 4. 5. 6. 7. 7A. 8. 9. 9A. 10. 11. 12. 13. 14. Part I Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Part II Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities . . . . . . . . Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . Quantitative and Qualitative Disclosures about Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters . . . . . . . . . . . . . . . . . Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Part III Page –––– 3 24 25 25 26 26 27 29 29 47 48 82 82 84 84 84 84 84 15. Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 Part IV 2 PART I ITEM 1. BUSINESS Company Profile Gannett was founded by Frank E. Gannett and associates in 1906 and incorporated in 1923. The company went public in 1967. It reincor- porated in Delaware in 1972. Its more than 239 million outstanding shares of common stock are held b y approximately 8,800 sharehold- ers of record in all 50 states and se veral foreign countries. The com- pany has approximately 32,600 employees including 1,700 employ- ees for CareerBuilder, LLC. Gannett’s headquarters are in McLean, VA, near Washington, DC. Gannett is an international media and marketing solutions com- pany. The company provides consumers with the infor mation they want and connects them to their communities of interest through multiple platforms including the Internet, mobile, newspapers, maga- zines and TV stations. Gannett helps businesses grow by providing marketing solutions that reach and engage their customers across the company’s diverse platforms. Gannett is an Inter net leader with hun- dreds of newspaper and TV web sites and several national web sites, reaching 52 million unique users monthly or about 24% of the Internet audience, as measured by comScore Media Metrix. These web sites include CareerBuilder.com, the nation’s top employment site; USATODAY.com; 81 local MomsLikeMe.com sites; PointRoll, an industry leader in rich media adv ertising solutions; and ShopLocal, a leader in multichannel shopping and adv ertising servic- es. Gannett publishes 82 daily U.S. newspapers, including USA TODAY, the nation’s largest-selling daily print newspaper, and about 600 magazines and other non-dailies including USA WEEKEND. The company also operates 23 television stations in 19 U.S. markets and Captivate, which operates video screens in office elevators in key urban markets. Gannett subsidiary Newsquest is one of the United Kingdom’s leading regional community news providers with 17 daily paid-for titles, more than 200 w eekly newspapers, maga- zines and trade publications, and a network of web sites. In broadcasting, the company’s 23 television stations in 19 U.S. markets with a total market reach of more than 21 million house- holds cover 18.2% of the U.S. population. 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 on video screens located in elevators of office towers and select hotel lobbies across North America. Beginning in the third quar ter of 2008 and concur rent with the purchase of a controlling interest in CareerBuilder , LLC, the leading U.S. employment web site with expanding overseas operations, and ShopLocal, a provider of online marketing solutions, the company began reporting a separate Digital segment. In addition to CareerBuilder and ShopLocal, the Digital se gment also includes PointRoll, Planet Discover and Schedule Star. Results from CareerBuilder and ShopLocal were initially consolidated in the third quarter of 2008. Results for PointRoll, Planet Discover and Schedule Star, which had been reflected previously in the Publishing segment, have been reclassif ied to the Digital segment. PointRoll and ShopLocal, now operating together, provide online advertisers with rich media marketing services, and have achieved significant revenue and earnings gains. Through Schedule Star LLC, the company operates HighSchoolSports.net, a digital content site serving the high school spor ts audience, and the Schedule Star solu- tion for local athletic directors. National platfor m opportunities are being developed from the many local communities this business serves. Complementing its core publishing, digital and broadcasting busi- nesses, the company has made signif icant strides in its digital strate gy through key investments and partnerships in the online space. These include a partnership investment in Classif ied Ventures, which owns and operates the Cars.com and Apartments.com web sites. In March 2010, CareerBuilder expanded its reach in the U.K. when it purchased CareerSite.biz, parent of three successful career- related operations there. Founded in 2001, CareerSite.biz operates two online recruitment niche sites focusing on nursing and rail work- ers as well as a successful vir tual career fair business. In 2008, the company made strategic investments in QuadrantONE, a digital ad sales network; Fantasy Sports Ventures, which operates a group of fantasy sports content web sites; COZI Group, which owns family organization software; and Livestream, an Internet broadcasting service provider. In late 2007, Metromix LLC was created, which is a digital joint venture focusing on a common model for local online enter tainment sites, and then scaling the sites into a national platfor m under the Metromix brand. New developments include the purchase of an equity interest in Ongo Inc. Ongo is a personal ne ws service that gives consumers a fundamentally new way to read, discover and share digital news and information. Premiering with more than a dozen top-tier titles in a single interface designed for readability, Ongo delivers full articles and convenient customization features, along with editorial selection that surfaces vital and interesting stories be yond the day’s top head- lines. Ongo is accessible through any major web browser on comput- ers, smart phones and tablets – so subscribers enjoy their favorite publications on all the devices they own for a single monthly fee. USATODAY.com is among the titles now available from Ongo. In early January 2011, the company also announced the acquisi- tion of Reviewed.com, a group of 12 product-review web sites that provide comprehensive reviews for technology products such as digi- tal cameras, camcorders and high-def inition televisions. Reviewed.com’s operation will be integrated with USA TODAY as part of USA TODAY’s consumer media strategy. 3 Business Transformation and Initiatives: The company contin- ues to evolve internally to meet the needs of consumers and business customers in the digital environment and to optimize its oppor tuni- ties at its core publishing and broadcast operations. Important steps taken to achieve these objectives include: • Drive innovation throughout the company to create new digital offerings that either complement the company’s news and informa- tion businesses, or that take it into new markets with new audi- ences. Digital revenue companywide in 2010, including the Digital segment and all digital revenues generated by the other business segments, was approximately $1 billion. This represents 18% of total operating revenues, an increase of 8% from 2009. • Focus on the delivery of content from USA TODAY and the com- pany’s 100 plus local sites to mobile devices. In 2010, 1.6 billion mobile page views were served, up 267% from 2009. To leverage this mobile momentum, a build-out of a Gannett-wide mobile plat- form has begun that gives the company’s mobile sites a new look and feel and supports on-demand video for higher-end devices such as the iPhone. At the same time, USA TODAY and the com- pany’s local media organizations have the ability to customize their mobile sites to meet the needs of their customers. Most importantly, with this new platform the company is now able to drive innovation across all Gannett mobile sites b y pooling techni- cal resources in an efficient and scalable manner. Additionally, USA TODAY’s iPad, iPhone and Android Apps combined have more than 7 million downloads since launch and consistently ranked at or near the top of the general ne ws category. The USA TODAY App for the iPad received numerous honors in 2010 and has remained one of the most popular iP ad news Apps with more than 1.6 million downloads since launch. • Developed key business partnerships. In July 2010, Gannett and Yahoo! announced a local advertising partnership that brings together Gannett’s strong local media organization brands, sales capacities and leading web site audiences with Yahoo!’s high-qual- ity audience. All of Gannett’s 81 local publishing organizations and seven of its 23 television stations will sell Yahoo! advertising inventory as part of Gannett’s local advertising solutions. The roll- out to each of the business units be gan in the fall 2010 and will continue into 2011. As a result, local advertisers will benef it from expanded digital reach and audience targeting capabilities based on geography, user demographics, interests and more against that expanded audience. In addition, Gannett will be le veraging the tar- geting and ad ordering capabilities of the APT from Yahoo! Platform for local sales. This partnership will extend Gannett’s local media organization reach to cover as much as 80% of the total digital audience in each mark et. • Improved core publishing and television operations through trans- formation of newsrooms into Information Centers. The Information Center concept has enhanced the company’s appeal to more customers in the markets that are served, with 24/7 updating to produce unique top quality local content across multiple plat- forms. Watchdog journalism is emphasized, digital sites are positioned as the primary medium for breaking news and the daily newspapers focus on story depth, analysis and context. Creating superior Sunday newspaper editions is also an impor tant goal. Enhanced Sunday editions were complemented with effective advertiser and consumer sales initiatives, and the results have been very positive. Subscriber retention improved and Sunday home delivery circulation volume has grown at U.S. Community Publishing’s operations. Gannett’s Sunday home delivery was up on average compared to 2009 for the 32 lar gest local media organ- izations in the U.S. Community Publishing division. While the focus is on customer centricity, Information Center initiatives also fulfill the company’s responsibilities under the First Amendment. • Continued the development and enhancement of the ContentOne initiative, through which the company expects to fundamentally change the way content is gathered, shared and sold. ContentOne’s focus is to reduce duplication of ef fort in developing and gathering content and enhancing the sharing of content across the compan y. A key objective is to f ind new ways to generate revenue from the company’s content, demonstrating usefulness and value beyond its inclusion in the company’s newspapers, television broadcasts and web sites. ContentOne builds on the Infor mation Center initiative by creating a national focal point that will ser ve all of the compa- ny’s businesses. • Rollout of a companywide content-management system with instal- lation to begin in early 2011 to better support and leverage the Gannett Information Centers and ContentOne. The common con- tent-management system (CMS) enables U.S. Community Publishing to centralize design of all print products at f ive design studios which will offer higher-quality design than can be produced at many sites now and maximize efficiencies. Studios will be creat- ed in early 2011 in Asbury Park, NJ; Nashville, TN; Louisville, KY; Des Moines, IA; and Phoenix, AZ. • Reorganized USA TODAY to transform it from a newspaper brand to a media company focusing on efficient, compelling delivery of news and information across multiple platforms, and aligning all business activities in ways that fulf ill the needs of consumers and marketers in unique and progressive ways. Content verticals were launched in the areas of Travel, Your Life, Personal Finance and Diversions to create deep, relevant information presented in a vibrant style in the heritage of the USA TODAY brand. Early results have shown significant growth in audience in these content areas. The USA TODAY Sports Media Group was also created and designed to oversee and coordinate business strategy for national sports initiatives across all of Gannett, including USA TODAY, as well as Gannett’s community of newspaper properties, television stations, HighSchoolSports.net and BNQT.com. • Launched five regional Gannett Client Solutions Groups in the U.S. Community Publishing division to provide customized mar- keting solutions services such as strategic planning, campaign concept and design, digital media e xecution, event marketing and media buying. At the same time, the company continues its focus on creating a customer-centric world class sales organization in its local community publishing markets. 4 • Launched GannettLocal to focus on providing personal marketing specialists to small and medium sized b usinesses. These “Local Marketing Navigators” leverage their knowledge and the compa- ny’s delivery network to create affordable, customized local mar- keting solutions to meet customers’ needs. • Continued testing new subscription options at three U.S. Community Publishing sites, Greenville, SC; Tallahassee, FL; and St. George, UT, after establishing pay walls in front of their web sites. These tests are helping us better understand consumer response to paid content and what type of business models are sustainable. • Extended the digital reach of the company’s local television brands by joining with Datasphere, a leading provider of hyper-local web technology, to deliver very localized content on a community and neighborhood basis to consumers and hyper-local digital ad solu- tions for local small businesses. By enabling advertisers to target audiences down to specif ic neighborhoods, the company makes their services even more relevant to their customers. The company launched 264 of these neighborhood web sites in 10 markets. • Maximized the use and deployment of resources throughout the company. In 2010, the company continued its commitment to transforming its business activities, including more consolidation and centralization of functions that do not require a ph ysical pres- ence in each of the company’s markets. In this regard, the compa- ny has consolidated numerous production f acilities and established centralized accounting, credit and collection functions w hich now serve nearly all domestic business operations. These efforts have achieved cost efficiencies and permitted improved local focus on content and revenue-producing activities and these efforts will continue to be aggressively pursued in 2011. • Launched a resource sharing effort by its Phoenix publishing, broadcasting and online operations which brought the company’s channel 12 News television operation into the Republic Media building. The television station is broadcasting from a high-tech street-level studio. The combined new staff is part of a print, broadcast and online collaboration designed to add breadth and depth to coverage for readers and viewers, and initially is focusing on four areas: breaking news, sports, features/entertainment and photo/video. • Maintained the company’s strong financial discipline and capital structure, preserving its flexibility to make acquisitions, invest- ments and affiliations. The company generated $773 million of cash flow from operating activities in 2010, in the f ace of an uneven economy. As a result, during 2010 the compan y’s long-term debt was reduced by $710 million to $2.35 billion, and at the end of the year the company’s senior leverage ratio was 1.97 times, well within the limit of 3.5 times designated by the company’s principal financial covenant. In September 2010, the company completed the private placement of unsecured senior notes totaling $500 million in two tranches: $250 million due in 2015 and $250 million due in 2018. At the same time, the company amended its revolving credit agreements and extended the maturity date for the majority of its lenders from March 15, 2012 to Sept. 30, 2014. Total commitments under the amended revolving credit agreements are $1.63 billion through March 15, 2012 and total e xtended commitments from March 15, 2012 to Sept. 30, 2014 will be $1.14 billion. With these two actions, the company extended and greatly improved its debt maturity profile. • Improved the funded status of the Gannett Retirement Plan through voluntary contributions totaling $130 million. As a result of the contributions and a strong investment return for the plan’s assets for 2010, at the end of the y ear, the plan’s funded status improved to 85%. • Strengthened the foundation of the company by finding, develop- ing and retaining the best and the brightest emplo yees through a robust Leadership and Diversity program. Gannett’s Leadership and Diversity Council has been charged with attracting and retain- ing superior talent and developing a diverse workforce that reflects the communities Gannett serves. Business portfolio: The company operates a diverse business portfolio, established through acquisitions and inter nal development. Some examples of this diversification are: • CareerBuilder, the No. 1 employment web site in the U.S. • PointRoll, a leading rich media mark eting company that provides Internet user-friendly technology, allowing advertisers to expand their online space and impact. • ShopLocal, a leader in multichannel shopping and adv ertising • Expanded the Digital Employment Sales Center (DESC), a cen- services. tralized outbound telesales operation based at The Star in Indianapolis, which focuses on selling CareerBuilder.com and other employment advertising solutions in Gannett media markets around the country. Staffing at the DESC g rew in 2010 and sales more than tripled over the prior year. • Employed a customer-centric approach to developing and selling integrated marketing campaigns through a newly created national, cross-divisional sales organization called CustomerOne Solutions. • Planet Discover, a provider of local, integrated online search and advertising technology. • MomsLikeMe, an internally developed national brand for social networking among moms-site users at the local le vel, supplement- ed with helpful information moms can use. • QuadrantONE, a digital ad sales network formed with three other top media companies. • USA WEEKEND, a weekly newspaper magazine carried by more than 700 local newspapers with an aggregate circulation reach of 23 million. 5 In October 2010, the company purchased a minority stake in Ongo Inc., which operates a personal news service that gives con- sumers a fundamentally new way to read, discover and share digital news and information. Premiering with more than a dozen top-tier titles in a single interf ace designed for readability, Ongo delivers full articles and convenient customization features. Ongo is accessible through any major web browser on computers, smartphones and tablets. USATODAY.com is among the titles now available from Ongo. In March 2010, CareerBuilder purchased CareerSite.biz, parent of three successful career-related operations in the U.K. Founded in 2001, CareerSite.biz operates two online recruitment niche sites focusing on nursing and rail workers as well as a successful vir tual career fair business. In February 2009, the company purchased a minority interest in Homefinder. Homefinder is a leading national online mark etplace connecting homebuyers, sellers and real estate professionals. In August 2008, the company purchased Pearls Review, Inc., an online nursing certification and continuing education web site oper- ated within Gannett Healthcare Group. In July 2008, the company purchased a minority stake in Livestream, a company that provides Internet broadcasting services. In May 2008, the company purchased a minority stake in Cozi Group Inc. (COZI). COZI is a free web service that helps families manage busy schedules, stay in communication and share memories. In March 2008, the company purchased a minority stake in Fantasy Sports Ventures (FSV). FSV, also known as Big Lead Spor ts, owns a set of f antasy sports content sites and manages adv ertising across a group of affiliated sites. In February 2008, the company formed QuadrantONE, a new digital ad sales network, with three other top media companies. On Dec. 31, 2007, the company acquired X.com, Inc. (BNQT.com). BNQT.com operates a digital media group of affiliated sites covering eight different action sports including surf ing, snow- boarding and skateboarding. BNQT.com is affiliated with the USA TODAY Sports Media Group. In October 2007, the company, in partnership with another media company, announced the formation of Metromix LLC, a digital joint venture to expand a national network of local entertainment web sites under the Metromix brand. Metromix LLC focuses on a common model for local online enter tainment sites, and then scales the sites into a national platform under the Metromix brand. In October 2007, the company acquired Schedule Star LLC, which operates HighSchoolSports.net, a digital content site ser ving the high school sports audience, and the Schedule Star solution for local athletic directors. In May 2007, CareerBuilder became the exclusive content provider to the MSN Careers channel in the U .S. through 2013. Additionally, MSN and CareerBuilder broadened their alliance to include key MSN international sites, facilitating an accelerated expan- sion overseas for CareerBuilder. • Clipper Magazine, a direct mail adv ertising magazine that publish- es more than 700 individual market editions under the brands Clipper Magazine, Savvy Shopper and Mint Magazine in more than 30 states. • Gannett Government Media (formerly Army Times), which pub- lishes military and defense newspapers and has expanded into the broadcasting and online arenas. Gannett Government Media col- laborates with Gannett Washington, D.C. TV station WUSA to produce “This Week in Defense News” which airs on Sunday mornings. • Gannett Healthcare Group publishes Nursing Spectrum, NurseWeek and Nurse.com The Magazine, specializing in news, continuing education opportunities and employment opportunities for registered nurses (RNs) in a combined circulation of 720,000, as well as Today in PT and Today in OT, featuring news, continu- ing education opportunities and employment opportunities for allied health professionals. Gannett Healthcare Group also oper- ates Gannett Education, which delivers continuing education opportunities to RNs and allied health professionals and includes PearlsReview.com, an online nursing cer tification and continuing education web site. • Gannett Offset, a network of five commercial printing operations in the U.S. Newspaper partnerships: The company owns a 19.49% interest in California Newspapers Partnership, which includes 19 daily California newspapers; a 40.64% interest in Texas-New Mexico Newspapers Partnership, which includes six 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. Joint operating agencies: The company’s newspaper subsidiary in Detroit participates in a joint operating agenc y. The 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 joint operating agency are fully consolidated along with a charge for the minority partner’s share of prof its. Through May 2009, the company also published the Tucson Citizen through the Tucson joint operating agency in which the company held a 50% interest. Because of chal- lenges facing the publishing industry, combined with the difficult economy, particularly in the Tucson area, the company ceased publi- cation of the Tucson Citizen on May 16, 2009. The company retained its online site and 50% par tnership interest in the joint operating agency, which provides service to the remaining non-Gannett news- paper in Tucson. The company’s share of results for its share of the Tucson operations are accounted for under the equity method , and are reported as a net amount in “Equity income (losses) in unconsoli- dated investee, net.” Strategic investments: In early January 2011, the company announced the acquisition of Reviewed.com, a group of 12 product- review web sites that provide comprehensive reviews for technology products such as digital cameras, camcorders and high def inition tel- evisions. Reviewed.com’s operation will be integrated with USA TODAY as part of USA TODAY’s consumer media strategy. 6 The company owns a 23.6% stake in Classif ied Ventures, an online business focused on real estate and automoti ve advertising; and a 19.7% interest in Sher mansTravel, an online travel news, advertising and booking service. With these acquisitions and investments, the company has estab- lished important business relationships to leverage its publishing and online assets and operations to enhance its online footprint, re venue base and prof its. Business segments: The company has three principal business segments: publishing, digital and broadcasting. Beginning with the third quarter of 2008, the company began reporting the new “Digital” business segment, which includes CareerBuilder and ShopLocal results from the dates of their full consolidation, on Sept. 3, 2008 and June 30, 2008, respectively, as well as PointRoll, Planet Discover and Schedule Star. Prior period results for PointRoll, Planet Discover and Schedule Star have been reclassif ied from the publishing segment to the new digital segment. Operating results from the operation of web sites that are associated with publishing operations and broadcast stations are reported in the publishing and broadcast segments. Financial information for each of the company’s reportable seg- ments can be found in the compan y’s financial statements, as dis- cussed 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. Publishing/United States The company’s U.S. publishing operations, including USA TODAY, reach 11.6 million readers every weekday and 12.0 million readers every Sunday – providing critical news and information from their customers’ neighborhoods and around the globe. At the end of 2010, the compan y operated 82 U.S. daily newspa- pers, including USA TODAY, the nation’s largest-selling daily print newspaper. These newspapers have combined daily paid circulation of 5.1 million and also produce about 600 non-daily local publica- tions in 30 states and Guam. The U.S. Community Publishing (USCP) division and USA TODAY are headquartered in McLean, VA. At the end of 2010, USCP had approximately 22,400 full- and part-time employees. In 2010, USATODAY.com launched its f irst two new content verticals, Travel and YourLife. Travel’s post-launch average monthly page views increased 61% between 2009 and 2010. The YourLife vertical was launched in November 2010 and generated 2.5 million page views in its f irst month. The USA TODAY Sports Media Group was also created and designed to oversee and coordinate business strategy for national sports initiatives across all of Gannett, including USA TODAY, as well as Gannett’s community of local newspaper properties, television stations, HighSchoolSports.net and BNQT.com. USATODAY.com remains one of the most popular newspaper sites on the web having achieved an average of more than 60 million visits per month between January and December 2010, a 14% increase over the same time period in 2009. Other businesses that complement, suppor t or are managed and reported within the publishing segment include: USA WEEKEND, Clipper Magazine, Gannett Government Media, Gannett Healthcare Group and Gannett Offset. In 2009, Gannett News Service became part of ContentOne; Gannett Retail Advertising Group represents the company’s local newspapers in the sale of adv ertising to national and regional franchise businesses; Gannett Direct Marketing offers direct-marketing services; and Gannett Media Technologies International (GMTI) develops and markets software and other prod- ucts for the publishing industry and provides technology support for the company’s newspaper and web operations. News and editorial matters: The overarching mission of the Gannett Information Centers in 2010 was to produce unique, top- quality local content across multiple platfor ms. To protect excellent local journalism, the U.S. Community Publishing division pursued operational transformation. To be distinctive in local communities, the division emphasized credible journalism available from only its newspapers and digital products. The division outlined f ive priorities: • Enhance watchdog journalism, especially daily work. • Reposition digital sites as the primar y medium for breaking news and social networking. • Reposition daily newspapers to focus on depth, analysis and con- text. The company’s local newspapers are managed through its USCP • Create superior Sunday editions of newspapers. division. These newspapers are positioned in major, mid-size and small markets; this geographical diversity is a core strength of the company. Gannett publishes in major markets such as Phoenix, AZ; Indianapolis, IN; Cincinnati, OH; Des Moines, IA; Nashville, TN; Asbury Park, NJ; Louisville, KY; and Westchester, NY. Mid-sized markets are represented by Salem, OR; Fort Myers, FL; Appleton, WI; Palm Springs, CA; Montgomery, AL; and Greenville, SC. St. George, UT; Fort Collins, CO; Sheboygan, WI; Iowa City, IA; and Ithaca, NY, are examples of smaller markets. USA TODAY was introduced in 1982 as the countr y’s first national, general-interest daily newspaper. It is produced at f acilities in McLean, VA, and transmitted via satellite to of fset printing plants around the country. It is printed at Gannett plants in 12 U.S. markets and commercially at offset plants, not owned by Gannett, in 20 other U.S. markets. • Enhance the sites’ positions as local community leaders. The division’s commitment to watchdog journalism was demon- strated by a partnership with the Investigative Reporters and Editors (IRE) organization. IRE trained more than 250 Gannett repor ters and editors at three “watchdog bootcamps” held across the countr y and IRE’s annual conference. The depth and quality of investigative jour- nalism in daily newspapers improved dramatically as a result of the IRE investment. To enhance Sunday editions, editors at every site focused strate- gically on enhancements and additions tailored to highl y engaged Sunday readers. Advertising and consumer sales initiatives supported this initiative. Increased retention rates among new subscribers indicate that content and product improvements are enhancing loyalty among readers. Thirteen-week retention improved nearly 2.4% over the year before, while 26-week retention improved nearly 7.4%. 7 To support the quest for high-quality, unique local journalism, the division took three important steps to promote operational effi- ciency: • Work began on the rollout of a compan ywide content-management system. Cross-divisional teams worked on this massive project throughout 2010 and installation begins in early 2011. • The common content-management system (CMS) enables U.S. Community Publishing to centralize design of all print products at five design studios. These studios will offer higher-quality design that can be produced at many sites now and maximize the effi- ciencies of the new content management system. Studios will be created in early 2011 in Asbury Park, NJ; Nashville, TN; Louisville, KY; Des Moines, IA; and Phoenix, AZ. • A partnership with USA TODAY provides its branded content for use in community newspapers, freeing local journalists for local reporting. These projects promote top-quality jour nalism while seeking dra- matic operational transformation. The company’s domestic daily newspapers received Gannett’s wire service in 2010 and subscribe to The Associated Press. Some newspapers use supplemental news services and syndicated features. The ContentOne initiative helped to efficiently distribute content among sites. The company operates news bureaus in Washington, DC, and four state capitals – Albany, NY; Baton Rouge, LA; Trenton, NJ; and Tallahassee, FL. In 2010, Gannett newspapers and journalists received national recognition for excellent work. Des Moines (IA) Register photographer Mary Chind was award- ed the Pulitzer Prize in Breaking Ne ws Photography for her dramatic photo of a construction worker rescuing a woman from the Des Moines River. Chind’s winning photo showed the construction work- er dangling from a crane, reaching to g rab the woman from roiling flood waters. The Asbury Park (NJ) Press was named a f inalist in the Pulitzer Prize Public Service category for “Fighting New Jersey’s Tax Crush,” a series about the archaic proper ty tax system that hur ts low-income residents. The newspaper reported how the state’s tax structure bank- rupts families, destroys businesses and drives low- and moderate- income workers out of New Jersey. The National Press Foundation awarded Mark Silverman, editor and vice president/content and audience development of The Tennessean in Nashville, the Benjamin C. Bradlee Editor of the Year Award. The award was given to Silverman because of his newspa- per’s “outstanding coverage of unexpected floods in 2010 and its innovative use of social media platfor ms to extend that coverage and bind its community together.” The Tennessean’s coverage of the flood also received two other honors from the Online News Association annual competition: • First place in the breaking news/small category. • Citation in the Best Use of Multimedia/Ov er 50,000 category for coverage of the flooding. Other Gannett honors included these 2010 Associated Press Managing Editors (APME) Award winners: • The Asbury Park (NJ) Press won the Public Service Award for its work on the property tax system in New Jersey. • Two of the three f inalists for Innovator of the Year Award were from Gannett: The Rochester (NY) Democrat and Chronicle was cited for its Picture the Impossible augmented reality game devel- oped in partnership with the Rochester Institute of Technology; and the Statesman Journal in Salem, OR, was cited for its exten- sive use of social networking in all types of repor ting. • FLORIDA TODAY in Brevard won the Online Convergence Award for a multimedia package that look ed at the life of William Dillon, who spent 27 years behind bars for a crime he did not commit. It combined a special Flash presentation, a 44-minute documentary and stories. Photojournalist Bill Luster of The Courier-Journal at Louisville, KY, was the 2010 recipient of the National Press Photo graphers Association’s Joseph A. Sprague Memorial Award, the organization’s highest honor. APME also honored two Gannett journalists for their longstand- ing commitment to diversity in newspaper content and newsroom recruiting. The 2010 Robert G. McGruder Awards for Diversity Leadership were given to Randy Lovely, editor and vice president of The Arizona Republic in Phoenix, and Bill Church, e xecutive editor of the Statesman Journal in Salem, OR. Audience research: As Gannett’s publishing businesses continue their mission to meet consumers’ news and information needs any- time, anywhere and in any form, the company remains focused on an audience aggregation strategy. The company considers the reach and coverage of multiple products in their communities and measures the frequency with which consumers interact with each Gannett product. Results from 2010 studies indicate that man y Gannett local media organizations are reaching more people more often. F or exam- ple, in Wilmington, DE, the combination of all Gannett products reach 85% of the adult population, an a verage of 5.9 times a week for 2.05 million total impressions each w eek – a 6% increase since 2008. The company has gathered audience agg regation data for 49 Gannett markets and will continue to add more data in 2011. Aggregated audience data allows advertising sales staff to provide detailed information to advertisers about how best to reach their potential customers including the most effective product combination and frequency. This approach enables the company to increase its total advertising revenue potential while maximizing advertiser effec- tiveness. Six key advertiser segments were identified and perform- ance within each segment is measured in every study. Through digi- tal growth and the development of ancillary products, Gannett news- papers have maintained their high reach of approximately 70% or more of adults in each of the six se gments. The ad sales staff is con- tinually trained on how to best execute an audience-based selling strategy. 8 Scarborough Research measures 81 of the nation’s top markets. In a report on market penetration, the number of adults in a commu- nity who access a publication and its related web site, showed that 3 out of 4 adults in the Rochester , NY market in a given week either read the print version of the Rochester Democrat and Chronicle or visited its web site (democratandchronicle.com), making it the top- ranked newspaper in the country for integrated audience penetration. Gannett had three of the top four ne wspapers (Rochester, the Gannett East Wisconsin Newspapers and The Des Moines Register) in com- bined newspaper and web site penetration. These markets are indus- try leaders because they understand and aggressively pursue different audiences for different platforms – true audience aggregation. In addition to the audience-based initiative, the company contin- ues to measure customer attitudes, behaviors and opinions to better understand its customers’ web site use patterns and to use focus groups with audiences and advertisers to better determine their needs. In 2009, the U.S. Community Publishing research group launched an ongoing longitudinal study to measure audience and sentiment of consumers in key markets. To date, the group has con- ducted more than 11,500 inter views for the study. Circulation: Detailed information about the circulation of the company’s newspapers may be found beginning on page 18. Daily circulation declined in nearly all of the company’s newspaper mar- kets, a trend generally consistent with the domestic newspaper industry. However, 28 U.S. Community Publishing sites increased Sunday home delivery volume compared to the previous year based on the ABC September 2010 Publisher’s Statement, including Appleton,WI; Asheville, NC; Binghamton, NY; Burlington, VT; Cincinnati, OH; Clarksville, TN; Lafayette, IN, Des Moines, IA; Fort Myers, FL; Green Bay, WI; Greenville, SC; Lafayette, LA; Lansing, MI; Muncie, IN; Murfreesboro, TN; Nashville, TN; Palm Springs, CA; Pensacola, FL; Phoenix, AZ; Port Huron, MI; Poughkeepsie, NY; Reno, NV; Salem, OR; Salisbury, MD; Sioux Falls, SD; Springf ield, MO; Wausau, WI; and Wilmington, DE. In total, U.S. Community Publishing reported home delivery Sunday circulation was up 0.7% with the September 2010 Statement. Home-delivery prices for the company’s newspapers are estab- lished individually and range from $1.70 to $3.80 a w eek for daily local newspapers and $0.85 to $3.40 a cop y for Sunday newspapers. Price increases for certain elements of local circulation volume were initiated at f ive newspapers in 2010. Three U.S. Community Publishing sites – Greenville, SC; Tallahassee, FL; and St. George, UT – introduced three new con- sumer subscription options after establishing pay walls for their web sites. Subscriber options include: 1) print, e-Edition and w eb site; 2) e-Edition and web site; and 3) web site only. E-Editions are exact replicas of the print version, which are served electronically to the consumer. This new subscription model was established in July 2010 and is being closely monitored to identify technology improvements and evaluate consumer feedback. At the end of 2010, 69 of the company’s domestic daily newspa- pers, including USA TODAY, were published in the morning, and 13 were published in the evening. For local U.S. newspapers, excluding USA TODAY, morning circulation accounts for 98% of total dail y volume, while evening circulation accounts for 2%. On Dec. 8, 2008, the single cop y price of USA TODAY at news- stands and vending machines was increased from 75 cents to $1.00. Mail subscriptions are available nationwide and abroad, and home, hotel and office delivery is available in many markets. Approximately 47% of its net paid circulation results from single-cop y sales at news- stands, vending machines or to hotel guests, and the remainder is from home and office delivery, mail, educational and other sales. Advertising: U.S. Community Publishing newspapers have advertising departments that sell retail, classif ied and national adver- tising across multiple platforms including the print newspaper, online and niche publications. The company also has a national ad sales force to focus efforts on the largest national advertisers. The compa- ny also contracts with outside representative firms that specialize in the sale of national ads. Ad revenues from newspaper affiliated online operations are reported together with revenue from print pub- lishing. Retail display advertising is associated with local merchants or locally owned businesses. In addition, retail includes re gional and national chains – such as depar tment and grocery stores – that sell in the local market. Classified advertising includes the major categories of automo- tive, employment, legal, real estate/rentals and private party con- sumer-to-consumer business for merchandise and ser vices. Advertising for classif ied segments is published in the classif ied sec- tions, in other sections within the ne wspaper, on affiliated web sites and in niche magazines that specialize in the se gment. 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, typicall y stand-alone multiple page fliers that are inser ted in the newspaper. The division’s audience aggregation strategy gives it the ability to deliver specific audiences that advertisers want. Although some advertisers want mass reach, many want to target niche audiences by demographics, geography, consumer buying habits or customer behavior. In 2010, Gannett and Yahoo! announced a local advertising part- nership that brings together Gannett’s strong local media organization brands, sales capacities and leading web site audiences with Yahoo!’s high-quality audience. All of Gannett’s 81 local publishing organiza- tions will sell Yahoo! advertising inventory as part of Gannett’s local advertising solutions. As a result, local advertisers will benef it from expanded digital reach and audience targeting capabilities based on geography, user demographics, interests and more against that expanded audience. In addition, Gannett will be le veraging the tar- geting and ad ordering capabilities of the APT from Yahoo! Platform for local sales. This partnership will extend Gannett’s local media organization reach to cover as much as 80% of the total digital audi- ence in each market. Whether it is mass reach or a niche audience, the approach sites use is to identify an adv ertiser’s best target cus- tomers and develop advertising schedules that combine products within a site’s portfolio to best reach the desired audience with the appropriate frequency. 9 In 2010, U.S. Community Publishing expanded the use of online reader panels to four additional mid-size markets for measuring advertising recall and effectiveness. The reader panels, now in 16 markets, include nearly 30,000 opt-in respondents who provide valu- able feedback regarding the ROI and effectiveness of more than 4,200 advertisements and 2,300 news articles. Reader panels are also used to identify consumer sentiment and trends. This capability allowed markets to provide deeper insights for advertisers and ROI metrics that are in high-demand from customers. The company’s audience-based sales efforts have been directed at all levels of advertisers, from small, locally owned merchants to large, complex businesses. Along with this sales approach, the com- pany has intensif ied its sales and management training and impro ved the quality of sales calls. Digital kno wledge and a Gannett f ive step consultative sales process were focus training topics in 2010 with formal training delivered in 34 Gannett markets. A major company priority is to restr ucture its sales organizations to match the needs of customers while creating additional efficien- cies to lower the cost of sale. The company’s newspapers redesigned their sales teams around three general g roups of customers: strategic national, key local and small local controllable accounts. The struc- ture aligns sales and suppor t resources to customers’ needs and pro- vides efficient service and affordable packages to smaller accounts and customized, innovative solutions to larger, more market-driven clients. The structure also includes digital specialists who work to expand the company’s online share in the local mark et for retail and classified verticals, Cars.com, Homefinder.com and CareerBuilder.com and product specialists in the company’s larger markets who focus on growing niche advertisers in non-daily publi- cations. To better serve top local customers and win more mark et share, the company created f ive Gannett Client Solutions Groups. Functioning much like local ad agencies, the g roups develop highly designed creative campaigns to give customers a competitive edge in the marketplace. The campaigns are comprehensive and often extend beyond the newspaper’s product portfolio, providing a high level of service. The national newspaper ad sales team is responsible for large national retail accounts. These resources give national customers one point of contact for all Gannett mark ets, enable the company to have more strategic conversations, respond better to customers’ needs, and permit local newspaper sales personnel to focus on adv ertisers in their markets. This national team works with the national sales resources for Digital, Broadcast and USA TODAY, to create multi-market, multi- platform solutions for national advertisers scalable across the country. Digital operations: The overriding objective of the company’s online strategy at Gannett newspapers is to provide compelling con- tent that best serves its customers. A key reason customers turn to a Gannett newspaper’s online site is to f ind local news and informa- tion. The credibility of the local newspaper, a known and trusted information source, extends to the newspaper’s web site and thus dif- ferentiates the web site from other Inter net sites. This factor allows Gannett newspapers to compete successfully as Internet information providers. A second objective in the company’s online business develop- ment is to maximize the natural syner gies between the local newspa- per and local web site. The local content, customer relationships, news and advertising sales staff, and 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 solutions that meet the needs of adv ertisers, operate effi- ciently and leverage the known and trusted brand of the newspaper. The company’s local newspaper web sites achieved significant growth in audience reach in 2010, as page vie ws were up 11%, and visitors rose 14% as measured inter nally using Omniture. In 2010, in coordination with the Digital division, U.S. Community Publishing successfully piloted a significant redesign of its web sites at two properties, www.indystar.com and www.newarkadvocate.com. The redesign is aimed at creating a more rele vant and enjoyable experi- ence for users, driving audience growth, and establishing unique mar- keting opportunities for advertisers. A rollout of the new design across all web sites will continue during the f irst quarter of 2011. Gannett continued to expand its online ad sales capabilities in 2010 locally and nationally. Locally, the company partnered with Yahoo! to enable local sales forces to sell Yahoo! advertising invento- ry as part of Gannett’s local advertising solutions. As a result, local advertisers will benef it from expanded digital reach. Throughout 2010, the national digital sales team sold an increasing amount of local inventory, continuing to execute a strategy established to aggre- gate the substantial inventory across the Gannett network. Both local and national sales efforts will continue in 2011. GMTI provides technological support and offerings for the com- pany’s domestic newspapers and Internet activities, including ad soft- ware and database management, editorial production and archi ving, and web site hosting. In addition, GMTI provides similar services to other newspaper companies. Non-daily operations: The publication of non-daily products continued to be an impor tant part of the company’s market strategy for 2010. The company publishes non-daily publications including glossy lifestyle magazines, community newspapers and publications catering to one topic, such as health or cars. The company’s strategy for non-daily publications is to appeal to k ey advertising segments (e.g. affluent women, women with children or young readers). Non- daily products help the company’s newspaper operations increase overall impressions and frequency for advertisers looking to reach specific audience segments or in some cases, lik e community week- lies, provide a lower price point alternative for smaller advertisers with specific geographic targets, thus helping to increase the ne wspa- per operation’s local market share. Gannett has been producing specialty publications across several markets to take advantage of market opportunities. The second First- Time Homebuyers Guide, pegged to the federal government’s home- buyer tax credits, was a glossy booklet with unifor m editorial content and local advertising. It was mailed to about 250,000 renters across 38 markets. Publication coverage included non-Gannett newspaper markets. 10 Production: Product quality and efficiency improvements contin- ue in several areas, as improved technology resulted in greater speed and accuracy and led to continued opportunities for consolidation of job functions. That trend will continue through 2011. In 2007, two Gannett Production Centers were established in Des Moines and Indianapolis to enhance print quality of the photos for the majority of its newspapers. This operation was expanded in 2010 with a commercial contract with another lar ge publisher to process their images. In January 2010, advertising production for the U.S. Community Publishing division was incorporated into these two cen- ters. The objective is to maintain high quality and ser vice for adver- tisers while improving efficiency. At the end of 2010, ad production work was being completed for 54 sites, producing nearl y 20,500 ads weekly. The remaining sites will transition to the centers b y mid-year 2011. At the end of 2010, all 82 domestic dail y newspapers were print- ed by the offset process, and the majority had con verted their presses to a 44-inch web. Presently, all U.S. Community Publishing daily newspapers are printed on 45 g ram paper. Also by year end, 68% of these newspapers have outsourced their printing to commercial print- ers or to other Gannett and non-Gannett newspapers. In addition, 54% of the newspapers are designed and paginated in centralized editing hubs. Competition: The company’s newspapers and affiliated web sites compete with other media for adv ertising principally on the basis of their performance in helping to sell the adv ertisers’ products or serv- ices. Newspapers also compete for circulation and readership against other professional news and information operations and individual content creators. While most of the company’s newspapers do not have daily newspaper competitors that are published in the same city, in select larger markets, there are competitors. Most of the compa- ny’s newspapers compete with other newspapers published in subur- ban areas, nearby cities and towns, free-distribution and paid-adver- tising publications (such as weeklies), and other media, including magazines, television, direct mail, cable television, radio, outdoor advertising, telephone directories, e-mail marketing, web sites and mobile-device platforms. Web sites which compete for the principal traditional classif ied advertising revenue streams such as real estate, employment and automotive, have had the most signif icant impact on the company’s revenue results. The rate of development of opportunities in, and competition from, digital communications media, including Inter net and mobile platforms, is increasing. Through internal development programs, acquisitions and partnerships, the company’s efforts to explore new opportunities in news, information, communications and audience generation will keep expanding. The company continues to seek more effective ways to engage with its local communities using all available media platforms and tools. Environmental regulation: Gannett is committed to protecting the environment. The company’s goal is to ensure its f acilities com- ply with federal, state, local and foreign en vironmental laws and to incorporate appropriate environmental practices and standards in its operations. The company is one of the industr y leaders in the use of rec ycled newsprint, increasing its purchases of newsprint containing recycled content from 42,000 metric tons in 1989 to 310,679 metric tons in 2010. During 2010, 69% of the compan y’s domestic newsprint pur- chases contained recycled content, with an average recycled content of 46%. The company’s newspapers use inks, photographic chemicals, solvents and fuels. The use, management and disposal of these sub- stances are sometimes regulated by environmental agencies. The company retains a corporate environmental consultant who, along with internal and outside counsel, oversees regulatory compliance and preventive measures. Some of the company’s newspaper sub- sidiaries have been included among the potentially responsible par- ties in connection with the alle ged disposal of ink or other w astes 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. 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 signif icant price changes from time to time. During 2010, the company’s total newsprint consumption was 539,000 met- ric tons, including consumption by USA WEEKEND, USA TODAY, tonnage at non-Gannett print sites and by Newsquest. Newsprint con- sumption was 10% lower than in 2009. The company purchases newsprint from 18 domestic and global suppliers. In 2010, newsprint supplies were adequate. The company has and continues to moderate newsprint consumption and expense through press web-width reductions and the use of lighter basis w eight paper. The company believes that available sources of newsprint, together with present inventories, will continue to be adequate to suppl y the needs of its newspapers. The average cost per ton of newsprint consumed in 2010 declined 15% compared to 2009, driven by reduced consumption and favorable supplier arrangements that acted to mitigate domes- tic price increases. In 2011, the compan y expects higher newsprint expenses in the U.S. and in the U.K. attributable to producer sup- ply rationalizations and increased offshore demand. Newsprint consumption is expected to decline in 2011. 11 Publishing/United Kingdom Newsquest publishes 17 daily paid-for newspapers and more than 200 weekly newspapers, magazines and trade publications in the U.K., as well as a wide range of niche products. Ne wsquest operates its pub- lishing activities around regional centers to maximize the use of man- agement, 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 adv ertis- ers and audiences. Newsquest produces free and paid-for newspapers with an attractive level of quality local editorial content. Ne wsquest also distributes a substantial volume of advertising leaflets in the communities it serves. Most of Newsquest’s paid-for newspaper dis- tribution is outsourced to wholesalers, although direct delivery is employed as well to maximize circulation sales oppor tunities. Newsquest’s newspapers operate in competitive markets. Their principal competitors include other regional and national newspaper and magazine publishers, other advertising media such as broadcast and billboard, Internet-based news and other information and com- munication businesses. In 2009, Newsquest exited one of its commercial printing units, Southernprint. Newsquest revenues for 2010 were approximately $525 million, down 6% in local cur rency excluding Southernprint, reflecting the continuing difficult economy. While most advertising revenue categories declined, growth of 1% was achieved in newspa- per property advertising, and digital revenues grew by 6%. As with U.S. newspapers, advertising, including ad revenue from online web sites affiliated with the publications, is the largest component of Newsquest’s revenue, comprising approximately 73%. Circulation represented 21% of revenue. Although experiencing declining vol- umes, audited copy sales for Newsquest’s daily paid-for titles outper- formed major competitor groups in the f irst half of the year (the most recent period for which audited data was available). Printing for third-party newspaper publishers accounts for most of the remainder of revenue. During 2010, Newsquest won additional third party com- mercial printing contracts, resulting in g rowth in that category of rev- enues of £1.6m (14%). back-office functions, particularly in pre-press, where the manage- ment of the transmission of the adv ertisements to outsourced providers was centralized. In October 2010, after discussion with its pension plan tr ustees and employees, the decision was made to close its Newsquest defined benefit plan to future accr ual, effective March 31, 2011. The plan closure was made to reduce pension e xpense and funding volatility and was part of a package of measures to address the plan’s deficit. The company expects that some of the savings from closing the defined benefit plan will be par tially offset by increased mem- bership in Newsquest’s defined contribution plan. Total costs f inished 9% down from 2009 in local currency, as a result of the range of cost reduction measures tak en. Digital operations: Newsquest actively seeks to maximize the value of its local media brands through digital channels. Ne wsquest’s most recent data indicated that an a verage of 7.5 million unique users accessed the Newsquest site network each month during the period July - December 2010. Newsquest’s total online revenue increased by 6% in local cur- rency. Online banner revenues grew by 16% from 2009, propelled by improved audiences and sales activity. During 2010, Newsquest’s 50% interest in the online employ- ment web site f ish4jobs.co.uk was substantially reduced as a result of Newsquest’s phased exit from Fish4. As of January 2011, Newsquest’s digital employment advertising began being served by Careerbuilder, increasing the potential audience to both Careerbuilder and Newsquest’s customers. In Scotland, the group’s wholly owned market leading recruit- ment web site, s1, increased revenues by 9% from 2009. Digital operations - Publishing and Broadcasting Gannett Digital’s mission is to provide its connected audience with the most interactive, real-time news and information delivered to any digital device. The company’s goal is to engage its local communities in a way that creates conversations and empowers its community members to connect and share common interests. The company’s advertisers leverage Gannett’s strong marketing services platform to gain access to Gannett’s wide, diverse audience in order to effectively brand and market their products. Editorial quality was recognized through the awards won in the The audience Gannett aggregates across the company’s 100-plus year. The Sunday Herald won the best weekly paper in the 2010 European Newspaper Awards and The Herald is the cur rent Scottish Daily Newspaper of the Year. Newsquest papers also won a number of other regional press awards. In the north of England, Newsquest launched Northern Farmer in 2010, a sister title to the The Scottish Farmer, immediately contribut- ing to revenues and earnings. Newsquest also established a Digital Employment Service Center sales operation in the U.K. following the same template as the U.S. community newspaper operation. In 2010, distribution to retailers was reorganized in two markets and outsourced to wholesalers. A centralized telephone operation to canvass lapsed customers from its direct deli very operations in a more cost effective manner was established in the year and is being rolled out. Significant restructuring in response to the economic unevenness and lower revenues resulted in reducing the number of employees at Newsquest to 4,800 at year end, a decrease of 6% compared to 2009. Cost reduction initiatives included the consolidation of a number of newspaper and broadcast online proper ties, combined with its uni- fied ad serving platform, enables it to create a large online ad net- work. In December 2010, Gannett’s total online U.S. Internet audi- ence totaled 52 million monthly unique visitors, reaching about 24% of the Internet audience, as measured by comScore Media Metrix. Given the scale across the company’s entire network, its strategy is to extend its value proposition beyond those premium brands to audi- ence segments through both contextual and behavioral ad targeting. In 2010, the national digital sales force reor ganized under new lead- ership and achieved solid success in executing this strategy. During the year, an increasing amount of inventory was monetized by the national sales force at premium CPMs, helping to decrease Gannett’s reliance on outside ad sales channels. The company continues to see benef its from the rollout of its unified advertising serving platform, including the establishment of more comprehensive analytics and reporting. To increase efficiency and better serve digital advertisers, in 2010 Gannett created a cen- tralized local advertising operations group based out of McLean, VA, and Fort Myers, FL. 12 In order to drive audience growth, in 2011 the company will roll out a major redesign of its core newspaper and broadcast web sites that it began piloting in 2010. The redesign is intended to create a more relevant and enjoyable experience for users and also establish an infrastructure that will allow for constant updates. This will allow the company to be more nimble in making future changes to its sites to benefit both users and advertisers. The company believes the redesign project will add appropriate social media and conte xtual tools to create better experiences for users and will establish unique advertising opportunities that will deliver better engagement and enable stronger connections between advertisers and consumers. In addition to the infrastr ucture that will allow for more constant updates to the sites, Gannett is also reor ganizing its product develop- ment processes, adopting new processes to enable faster releases. This will enable more rapid development and experimentation that will allow Gannett to compete in the rapidly evolving marketplace. Gannett also continues to execute on its vertical strategy of grow- ing niche audiences. The MomsLikeMe.com network had an average of over 800,000 monthly unique visitors in 2010, according to comScore. MomsLikeMe.com also made signif icant progress in attracting premier national advertisers, such as Kohl’s, Mederma and Nintendo. Video, both on-demand and live, remained a focus in 2010. Gannett has increased its monthly video views to 25 million in December 2010, by creating and licensing more video content and optimizing its video players for mobile sites and search engines. The company added new video monetization opportunities for advertisers in 2010, such as a video overlay ad unit. Gannett’s newspaper proper- ties leveraged Livestream to deliver compelling live video for users, including Louisville’s use of four live feeds simultaneously for its election night coverage and USA TODAY’s coverage of the Chilean miners rescue. As video represents a key growth area in the online marketplace, in 2011 the company will remain focused on both video content development and monetization. As Gannett innovates and builds its digital footprint on the w eb, it also continues to invest in the rapidly growing mobile sector. In 2010, Gannett’s properties served 1.6 billion mobile page views, experiencing growth of 267% year over year from 435 million in 2009. Additionally, Gannett invested in growing its staff dedicated to mobile, including a sales team and de velopers. Additionally, the mobile team is currently rolling out a new mobile content manage- ment system that will allow both centralized and local resources to build and manage content (including video), and mobile sites using a common development framework. USA TODAY continued its lead- ership role in the mobile space with its April launch on the iPad; by January its application reached more than 1.6 million downloads and continues to be ranked one of the top news Apps. The iPad applica- tion enjoyed considerable advertiser support with PointRoll-powered rich media advertising campaigns from brands such as Mar riott, Coca Cola, Capital One and Chr ysler. Combined with other USA TODAY mobile applications launched in 2008 and 2009, total appli- cation downloads topped 7 million through the end of 2010. Gannett’s text messaging program also saw significant growth in 2010, sending over 100 million messages for the y ear. Going forward, Gannett Digital will continue to in vest in opera- tions to remain competitive and efficient, and, as noted above, will build out and ref ine the company’s sales efforts to drive revenue growth. By leveraging impressive content and audience assets and combining them with technology platforms, Gannett intends to create the next generation of online advertising. Digital segment The digital business segment includes CareerBuilder, as well as PointRoll, ShopLocal, Planet Discover and Schedule Star. At the end of 2010, the digital segment had approximately 2,100 full-time and part-time employees. On Sept. 3, 2008, the company increased its ownership in CareerBuilder to 50.8% from 40.8%, obtaining a controlling interest, and therefore, the results of CareerBuilder since then ha ve been fully consolidated. On June 30, 2008, the compan y increased its owner- ship in ShopLocal to 100% from 42.5%, and from that date the results of ShopLocal have been fully consolidated. Prior to these increased investments, the company’s equity share of CareerBuilder and ShopLocal results were reported as equity earnings. Subsequent to the CareerBuilder acquisition, the company has reflected a non- controlling interest charge on its Statements of Income (Loss) related to the other partners’ ownership interest. CareerBuilder is the global leader in human capital solutions, helping companies to target, attract and retain talent. Its online job site, CareerBuilder.com, is the largest in North America with the most traffic and revenue. Currently, CareerBuilder operates web sites in 18 countries outside the U.S., including the U.K., France, Germany, Canada, India and China, and is looking to e xpand global operations further in 2011. CareerBuilder provides resources for everything from talent intelligence and employment branding to recruitment support. Most of the revenues are generated by its own sales force but substantial revenues are also earned through sales of employment advertising placed with CareerBuilder’s owners’ affiliat- ed newspapers. In March 2010, CareerBuilder purchased CareerSite.biz, parent of three successful career-related operations in the U.K. Founded in 2001, CareerSite.biz operates two online recruitment niche sites focusing on nursing and rail workers as well as a successful vir tual career fair business. CareerBuilder has a long-term strategic marketing agreement with Microsoft. CareerBuilder is headquar tered in Chicago, IL, and at the end of 2010, it had appro ximately 1,700 full-time and par t- time employees. PointRoll is the leading provider of digital marketing services and technology. PointRoll enables effective digital marketing by delivering the art and science of consumer engagement, allo wing advertisers, agencies and publishers to create, deliver and measure interactive and action-inspiring online rich media displa y, video, mobile, and social campaigns. PointRoll provides the creative tools, insights and analytics, distributed content, and expertise marketers need to effectively engage consumers, make an impression, and con- vert them into buyers and brand supporters. Powering more than 50% of all rich media campaigns online, P ointRoll works with over 1,000 advertisers, thousands of online publishers and serves over 150 billion ad impressions each year. Founded in April 2000, PointRoll has been instrumental in the evolution of digital engagement and has evolved beyond the expandable banner ad to offer marketers the abil- ity to f ind consumers wherever they are across any digital platform and deliver a relevant brand or direct response e xperience, dramati- cally improving ad effectiveness while gaining actionable insights. Recent innovations include dynamic ad creation solution AdControl, creative tool AdArchitect, interactive in-stream video ads, mobile rich media ads and several other best-of-breed technologies. PointRoll is headquartered in Conshohocken, PA, and maintains offices across the U.S. and Canada. PointRoll’s revenue and operat- ing profit improved significantly in 2010. 13 ShopLocal, the retail division of PointRoll and leader in multi- channel shopping services, connects retailers with shoppers through innovative, effective and measurable marketing solutions, enabling over 100 of the nation’s top retailers to deliver highly interactive, tar- geted and engaging localized promotions to shoppers through online circulars, display advertising, search, social media, digital out of home and mobile. The result is highly effective communications that deliver the right message, to the right person, at the right time. Pioneering the use of the Inter net for driving in-store sales with online circulars, ShopLocal has spent the past decade de veloping digital marketing solutions and building a powerful publisher net- work that connects one-to-one with shoppers. ShopLocal’s leading client base includes Target, Best Buy, Home Depot, CVS, Albertsons and Sears. ShopLocal is headquar tered in Chicago, IL, and is no w operated together with PointRoll. Its revenues and operating prof it also improved significantly in 2010. Planet Discover provides hosted search and advertising services that allow clients to offer consumers robust local information through search. Its innovative technology enables clients to provide specialized, private-label search functionality that gives users a sim- ple-to-use interface for f inding all the local infor mation they need, and gives advertisers valuable exposure to local consumers at that critical time when purchases are considered. Planet Discover is head- quartered in Fort Mitchell, KY. Schedule Star LLC is the No. 1 scheduling solution for high school athletic departments. The company has expanded HighSchoolSports.net into a top digital spor ts media brand, and into a content, technology and advertising solution for the USA TODAY Sports Media Group and a g rowing number of local newspapers and television stations. HighSchoolSports.net’s hyper-local focus, with a home page for over 16,000 U.S. high schools, has attracted national brand marketers by connecting them with a highly engaged audience of teens and parents through inte grated custom solutions like a national cheerleading video competition and interactive content fea- tures such as Massey Ratings, a computerized ranking of v arsity teams by league, state and nation. Schedule Star is headquar tered in suburban Pittsburgh, PA. Competition: For CareerBuilder, the market for online recruit- ment solutions is highly competitive with a multitude of online and offline competitors. Competitors include other employment related web sites, general classif ied advertising web sites, professional net- working and social networking web sites, traditional media compa- nies, Internet portals, search engines and blogs. The barriers for entry into the online recruitment market are relatively low and new com- petitors continue to emerge. Recent trends include the rising popular- ity of professional and social media netw orking web sites which have gained traction with employer advertisers. The number of niche job boards targeting specific industry verticals has also continued to increase. CareerBuilder’s ability to maintain its e xisting customer base and generate new customers depends to a signif icant degree on the quality of its ser vices, pricing and reputation among customers and potential customers. For PointRoll, the market for rich media advertising technology solutions is highly competitive with a dozen or so main competitors. Competitors include divisions of larger public media and technology companies, and several earlier-stage independent rich media, dynam- ic ad, video, mobile, and social adv ertising technology specialists. The barriers to entry in the rich media mark et are moderate. Recent trends include the shift towards audience-centric, exchange-based media buying, entry of dynamic ad generation specialists, the mo ve towards automated creative design tools, and the shift of video con- tent online with associated in-stream adv ertising opportunities. Increasingly, marketers and their agencies are looking for adv ertising technology providers that can scale across media platfor ms, includ- ing rich media, video and mobile. P ointRoll’s ability to maintain and grow its customer base and revenue depends largely on its continued product innovation, level of service quality, depth of marketing ana- lytics and ultimately the effectiveness of its rich media adv ertising and resulting customer satisfaction. For ShopLocal, the market for digital store promotions is highl y competitive and evolving as digital media transfor ms marketing pro- grams. ShopLocal competitors in the online circular space are also numerous. Recent trends include the increasingly rapid consumer media shift to digital for mats and the growth in research-online-buy- offline shopping behavior. These are driving an evolution and eventu- al transformation of marketing for the store which creates potential challenges from traditional as well as new competitors. The barriers to entry in the space are moderate. ShopLocal’s ability to retain and grow its client base and revenue depends largely on expansion of the types of promotions managed, innovation in distribution methods and continued high-quality service. Regulation and legislation (for digital segment businesses and digital operations associated with publishing and broadcasting busi- nesses): The U.S. Congress has passed legislation that regulates cer- tain aspects of the Inter net, including content, copyright infringe- ment, user privacy, advertising and promotional activities, taxation, access charges, liability for third-party activities and jurisdiction. In addition, federal, state, local and foreign governmental organizations have enacted and also are considering other le gislative and regulatory proposals that would regulate the Internet. Areas of potential regula- tion include, but are not limited to, libel, electronic contracting, pric- ing, quality of products and ser vices and intellectual property owner- ship. With regard to PointRoll and ShopLocal, there also are le gisla- tive and regulatory proposals that would regulate the Internet related to behavioral advertising, which specifically refers to the use of user behavioral data for the creation and deli very of more relevant, target- ed Internet advertisements. While PointRoll and ShopLocal leverage certain aspects of user behavioral data in their solutions, the compa- nies are in substantial compliance with all privacy laws and regula- tions applicable to their businesses. 14 Broadcasting At the end of 2010, the compan y’s broadcasting division, headquar- tered in McLean, VA, included 23 television stations in markets with 21 million households covering 18.2% of the U.S. population. The broadcasting division also includes Captivate Network. At the end of 2010, the broadcasting di vision had approximately 2,550 full-time and part-time employees, approximately 1% more than at the end of 2009. Broadcasting re venues accounted for approximately 14% of the company’s reported operating revenues in 2010, 11% in 2009 and 12% in 2008. 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 the compa- ny’s television signals on satellite and cable networks; 4) advertising on the stations’ web sites; and 5) payments by advertisers to televi- sion stations for other ser vices, such as the production of adv ertising material. The advertising revenues derived from a station’s local news programs make up a signif icant part of its total revenues. Captivate derives its revenue principally from national advertising on video screens in elevators of office buildings and select hotel lob- bies. As of year-end, Captivate had over 9,500 video screens located in 25 major cities across Nor th America. Advertising rates charged by a television station are based on the ability of a station to deliver a specif ic audience to an advertiser. The larger a station’s ratings in any particular day part, the more leverage a station has in asking for a price adv antage. As the market fluctuates with supply and demand, so does the station’s pricing. Almost all national advertising is placed through independent adv ertising repre- sentatives. 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 for cer- tain of the available ad spots within the network programs. The com- pany’s television stations produce local programming such as news, sports, and entertainment programming. The company broadcasts local newscasts in High Def inition (HD) in 12 cities: Denver, CO; Washington, DC; St. Louis, MO; Atlanta, GA; Cleveland, OH; Minneapolis, MN; Phoenix, AZ; Tampa, FL; Sacramento, CA; Jacksonville, FL; Little Rock, AR; and Columbia, SC. These telecasts have been well received given the dra- matic increase in sales of HD tele visions. Federal law required all full-power television broadcast stations to stop broadcasting in analog format and convert to an all-digital for- mat on June 12, 2009. The transition to DTV has provided the com- pany with the ability to offer additional services to its viewers. These include “multicast” channels that are made possib le by increased effi- ciencies associated with DTV transmissions. The company is very active in creating a Mobile DTV ser vice for viewers nationwide. In 2010, Gannett was one of a nine station group that founded Pearl, LLC. Pearl, in partnership with FOX, NBC and ION, formed a nationwide Mobile DTV business called Mobile Content Venture (MCV). In 2010, Gannett was part of a commercial trial in Washington, DC. MCV announced it will power up the mobile trans- mitter for the FOX and NBC station in each of the 21 mark ets where the joint venture owns either the FOX or NBC affiliate. Gannett will power up the mobile transmitters for eight of its markets in 2011. Programming and production: The costs of locally produced and purchased syndicated programming are a signif icant portion of television operating expenses. Syndicated programming costs are determined based upon largely uncontrollable market factors, includ- ing demand from the independent and af filiated stations within the market. In recent years, the company’s television stations have emphasized their locally produced news and entertainment program- ming in an effort to provide programs that distinguish the stations from the competition, to increase locally responsible programming, and to better control costs. The company’s television stations continue to ref ine their Information Centers with an emphasis on using ne w technologies that allow more journalists to be actively involved in the news gathering and disseminating processes. The stations have aggressively trained the rapidly growing number of Multi-Media Jour nalists (MMJs), which has led to more enter prise content and a more streamlined workflow. The unique, local entertainment content for the company’s local Metromix web sites has led to some special tele vision program- ming associated with that content and helps the compan y reach a more diverse demographic. Gannett Broadcasting launched hyperlocal sites in several markets in partnership with DataSphere in 2010. The properties expanded content and social networking capabilities on MomsLikeMe.com. Targeted products such as HighSchoolSpor ts.net, Moms Like Me, Metromix and the company’s local community sites allow us to provide hyper local targeted content to the company’s audiences and clients. For all of its stations, the compan y is party to network affiliation In early 2011, the company’s Phoenix station launched a resource agreements as well as cable and satellite carriage agreements. The company’s 12 NBC-affiliated stations have agreements that expire on Jan. 1, 2017. The agreements for the company’s six CBS affiliates expire on Dec. 31, 2015. The company’s three ABC affiliates have agreements which expire on Feb. 28, 2014. The company’s two MyNetworkTV-affiliated stations have agreements that expire in October 2011. In 2010, the company finalized a retransmission agreement with one of its largest distributors. Virtually all cable company, telephone company and satellite company retransmission deals were completed in 2008 and 2009. All are multi-year agreements that provide the company with signif icant and steady revenue streams. There are no incremental costs associated with this revenue and therefore all of these revenues contribute directly to operating income. Retransmission revenues are expected to grow again in 2011. sharing effort with the company’s Phoenix publishing and online operations which brought the company’s channel 12 News television operation into the Republic Media building. The television station is broadcasting from a high-tech street-level studio. The combined news staff is part of a print, broadcast and online collaboration designed to add breadth and depth to coverage for readers and viewers, and ini- tially is focusing on four areas: breaking ne ws, sports, fea- tures/entertainment and photo/video. The broadcast division achieved quality improvements and effi- ciencies by centralizing the graphics production through the Gannett Graphics Group (G3). Broadcasting installed infor mation technology tools to enable the sharing of weather information and music across the group. The stations are also moving toward an updated newsroom workflow solution that allows them to share content seamlessly throughout the entire company. 15 Local news and information is highly important to a station’s success, and there is a g rowing emphasis on other for ms of program- ming that relate to the local community. Network and syndicated programming constitute the majority of all other pro gramming 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 players, direct broadcast satellite, Inter net- distributed video offerings, low-power television, video offerings (both wire line and wireless) of telephone companies as w ell as developing video services. Regulation: The company’s television stations are operated under the authority of the Federal Communications Commission (FCC), the Communications Act of 1934, as amended (Communications Act), and the rules and policies of the FCC (FCC Re gulations). Television broadcast licenses are g ranted for periods of eight years. They are renewable upon application to the FCC and usuall y are renewed except in rare cases in which a petition to deny, a com- plaint or an adverse finding as to the licensee’s qualifications results in loss of the license. The company believes it is in substantial com- pliance with all applicable provisions of the Communications Act and FCC Regulations. All of the company’s stations have converted to digital television operations in accordance with applicable FCC regu- lations. Nine of the company’s stations f iled for FCC license renewals in 2004, eight did so in 2005, another f ive in 2006 and the remaining station filed on Feb. 1, 2007. As of February 2010, 18 of the 23 appli- cations were granted and the company expects the remaining f ive pending renewals to be granted in the ordinary course. FCC Regulations also prohibit concentrations of broadcasting control and regulate network and local programming practices. 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 newspa- pers). In addition, the Communications Act includes a national own- ership cap under which one company is permitted to serve no more than 39% of all U.S. television households. (The company’s 23 tele- vision stations currently reach 18.2% of U.S. television households.) 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 mark et’s top four rated stations at the time of acquisition. It is under this standard that the company acquired additional television stations in Jacksonville, FL, Denver, CO, and Atlanta, GA. ContentOne has become an integral part of the day to day opera- tions of the stations. The Broadcast Division is working closely with USA TODAY and U.S. Community Publishing to share content on all platforms and reduce the amount of repetition in the ne ws-gather- ing processes. The divisions have worked together on breaking news, investigative reporting, severe weather situations, political conven- tions and elections, sports and many other day to day stories in order to enhance and differentiate coverage that affect Gannett’s customers locally, nationally and internationally. The Broadcast Division has established several centralized opera- tions including Gannett Graphics Group (G3), “hubbing centers” for each of its three network affiliate groups for master control monitor- ing, and the Center for Credit and Collections (CCC). Operational efficiencies and cost reductions have been realized from these centers. In 2010, the Broadcast Division established a centralized traffic center called Gannett Traffic Operation (GTO). While GTO created some efficiencies and permitted a slight reduction in workforce, the key strategic reason for centralizing was to give the company a mechanism to better standardize best practices with inventory, and better position us for future opportunities for business with a single point of entr y to our inventory. Broadcasting stations were recognized with several regional and national awards. Forty-four Regional Edward R. Murrow Awards were awarded to Gannett television stations including KARE in Minneapolis-St. Paul, WXIA in Atlanta, KUSA in Denver, and KTHV in Little Rock. Three stations were presented with National Edward R. Murrow Awards honoring outstanding achievements in electronic journalism from the Radio Television Digital News Association for a variety of locally produced work at KARE in Minneapolis-St. P aul, WXIA in Atlanta, and WGRZ in Buffalo. KUSA in Denver also won the DuPont Silver Baton Award for excellence in Broadcast Journalism. The DuPont awards are among the most prestigious in journalism. Competition: In each of its broadcasting mark ets, the company’s stations and affiliated web sites compete for revenues with other net- work-affiliated and independent television and radio broadcasters and with other advertising media, such as cable television, newspa- pers, magazines, direct mail, outdoor adv ertising and Internet media. The stations also compete in the emer ging local electronic media space, which includes Internet or Internet-enabled devices, handheld wireless devices such as mobile phones and iP ads and digital spec- trum 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. Gannett station’s ratings are very strong across the countr y. Through the 2009 downturn and this year’s mixed and uneven recov- ery, the broadcast division increased its percentage of resources devoted to local content and brand. As an indication of that, KUSA in Denver was the top rated station in the countr y for the 2010 Winter Olympics in Vancouver with the key advertising demographic of adults 25-54. KUSA also out-perfor med the national average rat- ing by 75% with adults 25-54. Two other Gannett NBC television stations joined KUSA in placing among the Top 5 highest rated local television stations: KSDK in St. Louis rank ed third and KARE in Minneapolis-St. Paul was fourth. In addition, WKYC in Cleveland placed eighth, giving Gannett NBC-affiliated stations four of the Top 10 stations with adults 25-54. And on election night in November 2010, among all stations in the top 25 mark ets, Gannett stations in St. Louis, Minneapolis, and Denver were ranked first, second, and third respectively in adults 25-54. 16 In 2007, the FCC revised its ownership regulations by adopting a modified cross-ownership rule. In adopting this new rule, the FCC granted a permanent waiver authorizing the company’s continued ownership of both KPNX-TV and The Arizona Republic in Phoenix, AZ. The revised rule may be of limited value in permitting expanded ownership opportunities because it contains presumptions that (i) common ownership of a television station and a daily newspaper may be permitted in the top 20 television markets only if the television station is not one of the top four rated stations, and (ii) in all other television markets, common ownership of a newspaper and television station in the same market is not in the public interest. (Most of the company’s stations are rated number one or tw o in their markets.) Applicants for proposed combinations that are presumed not to be in the public interest will be required to satisfy specif ied criteria to rebut the presumption against common ownership, including demon- strating (i) the level of concentration in the designated mark et area, (ii) a signif icant increase in the amount of local ne ws after the trans- action, (iii) the existence of separate editorial staffs; (iv) the f inancial condition of either property if a newspaper is f inancially troubled; and (v) the new owner’s commitment to invest in newsroom opera- tions. The FCC did not revise any other aspect of the FCC o wnership rules. The FCC decision is subject to agenc y reconsideration as well as review by a federal appeals cour t. An appeal is pending and is unlikely to be resolved until late in 2011 or earl y 2012. In addition, the FCC has commenced a new review of its ownership rules, and this review may result in additional rule modifications. This review process is expected to continue throughout 2011 and is lik ely to be followed by court appeals. Other FCC Regulations also have been proposed to be amended by the agency, including rules and policies concerning the specif ic amount and type of public-interest programming required to be car- ried by broadcast stations to satisfy their license ob ligations and requirements concerning the disclosure of such programming efforts. Employees At the end of 2010, the compan y and its subsidiaries had approxi- mately 32,600 full-time and par t-time employees including 1,700 for CareerBuilder. Headcount reductions were made in 2010 as par t of multiple efficiency and consolidation efforts taken in response to the uneven recoveries in the U.S. and U.K. economies and declining rev- enues, particularly in the company’s publishing businesses. Approximately 12% of those employed by the company and its subsidiaries in the U.S. are represented by labor unions. They are represented by 66 local bargaining units, most of which are affiliated with one of seven international unions under collective bargaining agreements. These agreements conform generally with the pattern of labor agreements in the publishing and broadcasting industries. The company does not engage in industr ywide or companywide bargain- ing. The company’s U.K. subsidiaries bargain with two unions over working practices, wages and health and safety issues onl y. The company provides competitive group life and medical insur- ance programs for full-time domestic employees at each location. The company pays a substantial portion of these costs and employees contribute the balance. The company and its subsidiaries have various retirement plans, including plans established under some collective bargaining agree- ments. The company has a 401(k) Savings Plan, which is available to most domestic non-represented employees and unionized employees who have bargained participation in the plan. In June 2008, the Board of Directors appro ved amendments to each of (i) the Gannett Retirement Plan; (ii) the Gannett Supplemental Retirement Plan (SERP); (iii) the Gannett 401(k) Savings Plan (401(k) Plan); and (iv) the Gannett Deferred Compensation Plan (DCP). The amendments were designed to improve the 401(k) Plan while reducing the amount and volatility of future pension expense. As a result of the amendments to the Gannett Retirement Plan and SERP, most participants in these plans had their benefits frozen as of Aug. 1, 2008. Participants whose Gannett Retirement Plan and, if applicable, SERP benef its were frozen will have their frozen benef its periodically increased by a cost of living adjustment until benef its commence. Effective Aug. 1, 2008, most participants whose benefits were frozen under the Gannett Retirement Plan and, if applicable, the SERP, receive higher match- ing contributions under the 401(k) Plan. Under the ne w formula, the matching contribution rate generally increased from 50% of the f irst 6% of compensation that an employee elects to contribute to the plan to 100% of the f irst 5% of compensation. The company also makes additional employer contributions to the 401(k) Plan on behalf of certain long service employees. The DCP was amended to provide for Gannett contributions on behalf of cer tain employees whose ben- efits under the 401(k) Plan are capped b y IRS rules. Newsquest employees have local staff councils for consultation and communication with local Newsquest management. Newsquest had provided the majority of its employees with the option to par tici- pate in a retirement plan that incor porates life insurance. In October 2010, after discussion with its pension plan tr ustees and employees, the decision was made to close its Newsquest defined benefit plan to future accrual, effective March 31, 2011. The plan closure was made to reduce pension expenses and funding volatility and was part of a package of measures to address the plan’s deficit. The company expects that some of the savings from closing the def ined benefit plan will be partially offset by increased membership in Newsquest’s defined contribution plan. A key initiative for the company is its Leadership and Diversity program that focuses on f inding, developing and retaining the best and the brightest employees and a diverse workforce that reflects the communities Gannett serves. Environmental Initiatives During 2010, the company continued “green” initiatives in the areas of recycling, waste paper and plastics, using rec ycled materials, reducing energy consumption, using environmentally safe products and maintaining “green” news sites to report environmental news and provide tips to consumers. In addition, the compan y invested about $500,000 (investment net of rebates and repair of fsets) to upgrade HVAC equipment at nine sites which reduced annual energy use by 4 million kilowatt hours and annual energy expense by $440,000. 17 MARKETS WE SERVE DAILY NEWSPAPERS AND AFFILIATED ONLINE SITES State Territory Alabama City Montgomery Newspaper/Online site Montgomery Advertiser www.montgomeryadvertiser.com The Arizona Republic www.azcentral.com The Baxter Bulletin www.baxterbulletin.com The Desert Sun www.mydesert.com The Salinas Californian www.thecalifornian.com Visalia Times-Delta/Tulare Advance-Register www.visaliatimesdelta.com www.tulareadvanceregister.com Fort Collins Coloradoan www.coloradoan.com The News Journal www.delawareonline.com FLORIDA TODAY www.floridatoday.com The News-Press www.news-press.com Pensacola News Journal www.pnj.com Tallahassee Democrat www.Tallahassee.com Pacific Daily News www.guampdn.com The Indianapolis Star www.indystar.com Journal and Courier www.jconline.com The Star Press www.thestarpress.com Palladium-Item www.pal-item.com The Des Moines Register www.desmoinesregister.com Iowa City Press-Citizen www.press-citizen.com The Courier-Journal www.courier-journal.com Alexandria Daily Town Talk www.thetowntalk.com The Daily Advertiser www.theadvertiser.com The News-Star www.thenewsstar.com Daily World www.dailyworld.com The Times www.shreveporttimes.com Morning 34,121 332,577 Circulation Afternoon Sunday 43,194 Founded 1829 483,495 1890 9,354 1901 40,214 46,115 1927 10,324 20,465 1871 1859 21,602 26,037 1873 87,757 66,758 67,492 111,368 1871 87,964 1966 89,333 1884 42,927 59,567 1889 37,746 47,714 1905 18,179 16,592 1944 180,382 27,843 22,656 10,568 111,193 10,610 161,268 22,038 30,588 27,588 5,963 42,800 279,387 36,188 28,687 15,873 204,573 234,065 27,593 42,848 29,449 7,300 54,832 1903 1829 1899 1831 1849 1860 1868 1883 1865 1890 1939 1871 Arizona Phoenix Arkansas Mountain Home California Palm Springs Salinas Visalia Colorado Fort Collins Delaware Wilmington Florida Brevard County Guam Indiana Fort Myers Pensacola Tallahassee Hagatna Indianapolis Lafayette Muncie Richmond Iowa Des Moines Iowa City Kentucky Louisville Louisiana Alexandria Lafayette Monroe Opelousas Shreveport 18 DAILY NEWSPAPERS AND AFFILIATED ONLINE SITES State Territory Maryland City Salisbury Circulation Afternoon Sunday 23,226 Founded 1900 Michigan Battle Creek Detroit Lansing Livingston County Port Huron Minnesota St. Cloud Mississippi Hattiesburg Jackson Missouri Springfield Montana Great Falls Nevada Reno New Jersey Asbury Park Bridgewater Cherry Hill East Brunswick Morristown Vineland New York Binghamton Elmira Ithaca Poughkeepsie Rochester Westchester County North Carolina Asheville Newspaper/Online site The Daily Times www.delmarvanow.com Battle Creek Enquirer www.battlecreekenquirer.com Detroit Free Press www.freep.com Lansing State Journal www.lansingstatejournal.com Daily Press & Argus www.livingstondaily.com Times Herald www.thetimesherald.com St. Cloud Times www.sctimes.com Hattiesburg American www.hattiesburgamerican.com The Clarion-Ledger www.clarionledger.com Springfield News-Leader www.news-leader.com Great Falls Tribune www.greatfallstribune.com Reno Gazette-Journal www.rgj.com Asbury Park Press www.app.com Courier News www.mycentraljersey.com Courier-Post www.courierpostonline.com Home News Tribune www.mycentraljersey.com Daily Record www.dailyrecord.com The Daily Journal www.thedailyjournal.com Press & Sun-Bulletin www.pressconnects.com Star-Gazette www.stargazette.com The Ithaca Journal www.theithacajournal.com Poughkeepsie Journal www.poughkeepsiejournal.com Rochester Democrat and Chronicle www.democratandchronicle.com The Journal News www.lohud.com Asheville Citizen-Times www.citizen-times.com Morning 18,284 15,823 264,645 44,984 12,229 18,106 22,991 63,655 40,172 27,664 43,706 22,890 491,812 67,397 16,656 28,854 31,786 12,939 16,112 76,679 66,124 29,835 54,564 112,765 159,716 18,437 50,967 35,033 23,732 13,974 37,641 17,267 11,994 28,577 122,823 82,640 34,724 22,218 65,288 42,595 26,281 53,746 25,936 38,464 177,445 103,304 51,113 1900 1832 1855 1843 1900 1861 1897 1837 1893 1885 1870 1879 1884 1875 1879 1900 1864 1904 1828 1815 1785 1833 1829 1870 19 DAILY NEWSPAPERS AND AFFILIATED ONLINE SITES State Territory Ohio City Bucyrus Circulation Afternoon Sunday Founded 1923 Chillicothe Cincinnati Coshocton Fremont Lancaster Mansfield Marion Newark Port Clinton Zanesville Oregon Salem South Carolina Greenville South Dakota Sioux Falls Tennessee Clarksville Jackson Murfreesboro Nashville St. George Utah Vermont Burlington Virginia McLean Staunton Wisconsin Appleton Fond du Lac Green Bay Manitowoc Marshfield Oshkosh Sheboygan Stevens Point Wausau Wisconsin Rapids 20 Newspaper/Online site Telegraph-Forum www.bucyrustelegraphforum.com Chillicothe Gazette www.chillicothegazette.com The Cincinnati Enquirer www.cincinnati.com Coshocton Tribune www.coshoctontribune.com The News-Messenger www.thenews-messenger.com Lancaster Eagle-Gazette www.lancastereaglegazette.com News Journal www.mansfieldnewsjournal.com The Marion Star www.marionstar.com The Advocate www.newarkadvocate.com News Herald www.portclintonnewsherald.com Times Recorder www.zanesvilletimesrecorder.com Statesman Journal www.statesmanjournal.com The Greenville News www.greenvilleonline.com Argus Leader www.argusleader.com The Leaf-Chronicle www.theleafchronicle.com The Jackson Sun www.jacksonsun.com The Daily News Journal www.dnj.com The Tennessean www.tennessean.com The Spectrum www.thespectrum.com The Burlington Free Press www.burlingtonfreepress.com USA TODAY www.usatoday.com The Daily News Leader www.newsleader.com The Post-Crescent www.postcrescent.com The Reporter www.fdlreporter.com Green Bay Press-Gazette www.greenbaypressgazette.com Herald Times Reporter www.htrnews.com Marshfield News-Herald www.marshfieldnewsherald.com Oshkosh Northwestern www.thenorthwestern.com The Sheboygan Press www.sheboyganpress.com Stevens Point Journal www.stevenspointjournal.com Central Wisconsin Sunday Wausau Daily Herald www.wausaudailyherald.com The Daily Tribune www.wisconsinrapidstribune.com Morning 4,194 161,635 19,294 7,989 13,619 38,349 58,857 35,789 15,279 24,029 11,944 130,657 18,875 32,504 1,817,405 14,648 41,104 9,531 11,412 256,662 5,262 4,508 7,349 8,567 10,242 28,268 9,579 12,775 15,513 3,430 15,215 46,676 100,511 54,682 19,402 31,149 16,275 202,781 21,969 42,239 16,813 56,598 10,984 14,202 45,590 68,120 10,881 12,854 8,811 15,360 15,131 20,603 19,443 19,367 23,297 8,571 16,810 8,612 1800 1841 1842 1856 1807 1885 1880 1820 1864 1852 1851 1874 1881 1808 1848 1848 1812 1963 1827 1982 1904 1853 1870 1915 1898 1927 1868 1907 1873 1903 1914 DAILY PAID-FOR NEWSPAPERS AND AFFILIATED ONLINE SITES/NEWSQUEST PLC Circulation 1868 1900 1867 1886 Bolton 27,504 26,599 24,845 23,825 31,129 20,858 28,044 25,746 25,271 29,115 Glasgow Brighton Bradford Saturday Blackburn Colchester Darlington Bournemouth City Basildon Founded 1969 Monday-Friday 31,721 Newspaper/Online site Echo www.echo-news.co.uk Lancashire Telegraph www.lancashiretelegraph.co.uk The Bolton News www.theboltonnews.co.uk Daily Echo www.bournemouthecho.co.uk Telegraph & Argus www.thetelegraphandargus.co.uk The Argus www.theargus.co.uk The Gazette www.gazette-news.co.uk The Northern Echo www.thenorthernecho.co.uk Evening Times www.eveningtimes.co.uk The Herald www.theherald.co.uk South Wales Argus www.southwalesargus.co.uk Oxford Mail www.oxfordmail.co.uk Southern Daily Echo www.dailyecho.co.uk Swindon Advertiser www.swindonadvertiser.co.uk Dorset Echo www.dorsetecho.co.uk Worcester News www.worcesternews.co.uk The Press www.thepress.co.uk Circulation figures are according to ABC results for the period Jan-Jun 2010. Non-daily publications: Essex, London, Midlands, North East, North West, South Coast, South East, South and East Wales, South West, Yorkshire Southampton Weymouth Worcester Swindon Glasgow Newport 17,858 Oxford 17,647 19,584 25,208 22,176 27,375 27,250 19,374 59,199 18,084 20,804 39,903 33,427 19,594 54,163 42,867 44,308 15,253 33,008 61,761 14,601 1854 1892 1880 1921 1937 1882 1928 1870 1783 1970 1888 1876 York GANNETT DIGITAL CareerBuilder: www.careerbuilder.com Headquarters: Chicago, IL Sales offices: Atlanta, GA; Boston, MA; Seattle, WA; Chicago, IL; Cincinnati, OH; Dallas, TX; Denver, CO; Detroit, MI; Edison, NJ; Houston, TX; Irvine, CA; Long Island, NY; Los Angeles; McLean, VA; Minneapolis, MN; Nashville, TN; New York, NY; Orlando, FL; Overland Park, KS; Philadelphia, PA; Phoenix, AZ; San Mateo, CA; Washington, DC International offices: Belgium; Canada; China; France; Germany; Greece; India; Italy; Netherlands; Spain; Sweden; United Kingdom Planet Discover: www.planetdiscover.com Headquarters and sales office: Cincinnati, OH Technology office: Cedar Rapids, IA PointRoll, Inc.: www.pointroll.com Headquarters: Conshohocken, PA Sales offices: Chicago, IL; Detroit, MI; Los Angeles, CA; New York, NY; San Francisco, CA ShopLocal: www.shoplocal.com Headquarters: Chicago, IL Sales office: Chicago, IL Mobile: Gannett powers more than 100 local mobile sites and mobile applications and also partners with 4INFO and other mobile service providers to power news alerts and mobile marketing campaigns via text messaging. Gannett has also developed and deployed leading applications for iPad, iPhone and Android. 21 TELEVISION STATIONS AND AFFILIATED ONLINE SITES State Arizona City Flagstaff Phoenix Arkansas Little Rock California Sacramento Colorado Denver District of Columbia Washington Florida Jacksonville Tampa-St. Petersburg Georgia Atlanta Maine Macon Bangor Portland Michigan Grand Rapids Minnesota Minneapolis-St. Paul Missouri St. Louis New York Buffalo North Carolina Greensboro Ohio Cleveland South Carolina Columbia Tennessee Knoxville Station/Online site KNAZ-TV KPNX-TV www.azcentral.com/12news KTHV-TV www.todaysthv.com KXTV-TV www.news10.net KTVD-TV www.my20denver.com KUSA-TV www.9news.com WUSA-TV www.wusa9.com WJXX-TV WTLV-TV www.firstcoastnews.com WTSP-TV www.wtsp.com WATL-TV www.myatltv.com WXIA-TV www.11alive.com WMAZ-TV www.13wmaz.com WLBZ-TV www.wlbz2.com WCSH-TV www.wcsh6.com WZZM-TV www.wzzm13.com KARE-TV www.kare11.com KSDK-TV www.ksdk.com WGRZ-TV www.wgrz.com WFMY-TV www.digtriad.com WKYC-TV www.wkyc.com WLTX-TV www.wltx.com WBIR-TV www.wbir.com Channel/Network Channel 2/NBC Channel 12/NBC Channel 11/CBS Channel 10/ABC Weekly Audience (a) (b) 1,276,000 Founded 1970 1953 437,000 887,000 Channel 20/MyNetworkTV 733,000 Channel 9/NBC Channel 9/CBS Channel 25/ABC Channel 12/NBC 1,223,000 1,826,000 434,000 482,000 Channel 10/CBS 1,180,000 Channel 36/MyNetworkTV 1,111,000 Channel 11/NBC 1,704,000 Channel 13/CBS Channel 2/NBC Channel 6/NBC Channel 13/ABC Channel 11/NBC Channel 5/NBC Channel 2/NBC Channel 2/CBS 203,000 108,000 317,000 406,000 1,400,000 1,018,000 516,000 597,000 Channel 3/NBC 1,150,000 Channel 19/CBS Channel 10/NBC 287,000 480,000 1955 1955 1988 1952 1949 1989 1957 1965 1954 1948 1953 1954 1953 1962 1953 1947 1954 1949 1948 1953 1956 Captivate Network: www.captivatenetwork.com Headquarters: Chelmsford, MA Advertising offices: Chicago, IL; Dallas, TX; Los Angeles, CA; New York, NY; Toronto, Canada. (a) Weekly audience is number of TV households reached, according to the November 2010 Nielsen book. (b) Audience numbers fall below minimum reporting standards. 22 USA TODAY: www.usatoday.com Headquarters and editorial offices: McLean, VA Print sites: Atlanta, GA; Brevard County, FL; Chandler, AZ; Columbia, SC; Denver, CO; Everett, WA; Fort Lauderdale, FL; Houston, TX; Indianapolis, Ind; Kankakee, IL; Las Vegas, NV; Lawrence, KS; Milwaukee, WI; Minneapolis, MN; Mobile, AL; Nashville, TN; Newark, OH; Norwood, MA; Plano, TX; Rockaway, NJ; St. Louis, MO; Salisbur y, NC; Salt Lake City, UT; San Bernardino, CA; San Jose, CA; Springf ield, VA; Sterling Heights, MI; Tampa, FL; Warrendale, PA; Wilmington, DE; Winston-Salem, NC Advertising offices: Atlanta, GA; Chicago, IL; Dallas, TX; Detroit, MI; Los Angeles, CA; McLean, VA; New York, NY; San Francisco, CA USATODAY.com Headquarters and editorial offices: McLean, VA Advertising offices: Atlanta, GA; Chicago, IL; Dallas, TX; Detroit, MI; Los Angeles, CA; McLean, VA; New York, NY; San Francisco, CA USA WEEKEND: www.usaweekend.com Headquarters and editorial offices: McLean, VA Advertising offices: Chicago, IL; Detroit, MI; Los Angeles, CA; New York, NY; San Francisco, CA Schedule Star/High School Sports: www.schedulestar.com; www.highschoolsports.net Headquarters: Bridgeville, PA Clipper Magazine: www.clippermagazine.com; www.couponclipper.com; www.doubletakedeals.com Headquarters: Mountville, PA Gannett Healthcare Group: www.gannetthg.com; www.getcedirect.com;www.Nurse.com; www.TodayinPT.com; www.TodayinOt.com; www.PearlsReview.com Headquarters: Falls Church, VA Regional offices: Dallas, TX; Hoffman Estates, IL; San Jose, CA Publications: Nursing Spectrum, NurseWeek, Today in PT, Today in OT Gannett Government Media Corp. Headquarters: Springfield, VA Regional office: Los Angeles, CA Publications: Army Times: www.armytimes.com, Navy Times: www.navytimes.com, Marine Corps Times: www.marinecorpstimes.com, Air Force Times: www.airforcetimes.com, Federal Times: www.federaltimes.com, Defense News: www.defensenews.com, Armed Forces Journal: www.armedforcesjournal.com, C4ISR Journal: www.c4isrjournal.com, Training and Simulation Journal: www.tsjonline.com, Military Times EDGE: www.militarytimesedge.com Gannett Media Technologies International: www.gmti.com: Headquarters: Norfolk, VA Regional offices: Cincinnati, OH; Phoenix, AZ ContentOne Headquarters: McLean, VA Bureau: Washington, DC Non-daily publications Weekly, semi-weekly, monthly or bimonthly publications in Alabama, Arizona, Arkansas, California, Colorado, Delaware, Florida, Guam, Indiana, Iowa, Kentucky, Louisiana, Maryland, Michigan, Minnesota, Mississippi, Missouri, Montana, Ne vada, New Jersey, New York, North Carolina, Ohio, Oregon, South Carolina, South Dakota, Tennessee, Utah, Vermont, Virginia, Wisconsin Gannett Media Sales Group: McLean, VA Gannett Offset: www.gannettoffset.com Headquarters: Springfield, VA Offset sites: Atlanta, GA; Minneapolis, MN; Norwood, MA; St. Louis, MO; Springf ield, VA Gannett Direct Marketing Services, Inc.: www.gdms.com: Headquarters: Louisville, KY Gannett Satellite Information Network: McLean, VA National Web Sites: www.bnqt.com; www.careerbuilder.com; www.highschoolsports.net; www.metromix.com; www.momslikeme.com; www.reviewed.com; www.usatoday.com www.usaweekend.com GANNETT ON THE NET: News and information about Gannett is available on its web site, www.gannett.com. In addition to news and other information about Gannett, the company provides access through this site to its annual report on Form 10-K, its quarterly reports on Form 10-Q, its current reports on Form 8-K and all amend- ments to those reports as soon as reasonably practicable after the company files or furnishes them electronically to the Securities and Exchange Commission (SEC). Certification by Gannett’s Chief Executive Officer and Chief Financial Officer are included as exhibits to the company’s SEC reports (including the company’s Form 10-K filed in 2010). Gannett also provides access on this web site to its Principles of Corporate Governance, the charters of its Audit, Digital Technology, Executive Compensation and Nominating and Public Responsibility Committees and other important governance documents and policies, including its Ethics and Inside Trading Policies. Copies of all of these corporate governance documents are available to any shareholder upon written request made to the company’s Secretary at our headquarters address. In addition, the company will disclose on this web site changes to, or waivers of, its corporate Ethics Policy. 23 ITEM 1A. RISK FACTORS In addition to the other infor mation contained or incorporated by ref- erence 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. Deterioration in economic conditions in the markets we serve in the U.S. and the UK may depress demand for our products and services Our operating results depend on the relati ve strength of the economy in our principal publishing, digital and television markets as well as the strength or weakness of national and regional economic factors. Generally soft economic conditions and uneven recoveries in the U.S. and U.K. have had a signif icant adverse impact on the compa- ny’s businesses, particularly publishing. If conditions remain challeng- ing or worsen in the U.S. or U.K. economy, all key advertising revenue categories could be signif icantly impacted. Competition from alternative forms of media may impair our ability to grow or maintain revenue levels in core and new businesses Advertising produces the predominant share of our pub lishing, broad- casting and affiliated web site revenues as well as digital segment rev- enues. With the continued development of alternative forms of media, particularly electronic media including those based on the Inter net, our businesses may face increased competition. Alternative media sources may also affect our ability to generate circulation revenues and television audience. This competition may make it difficult for us to grow or maintain our broadcasting, print adv ertising and circula- tion revenues, which we believe will challenge us to e xpand the con- tributions of our online and other digital b usinesses. A decline in the company’s credit ratings and continued volatility in the U.S. credit markets could significantly impact the compa- ny’s ability to obtain new financing to fund its operations and strategic initiatives or to refinance its existing debt at reasonable rates as it matures At the end of 2010, the compan y had approximately $2.35 billion in long-term debt, of which $221 million was in the form of borrowings under bank credit facilities, $180 million is a ter m loan and the bal- ance was in the form of unsecured notes. Approximately $613 million of this debt matures beginning in mid-2011 with remaining maturities in 2012-2018. While the company’s cash flow is expected to be suffi- cient to pay amounts when due, if operating results deteriorate signif i- cantly, a significant portion of these maturities may need to be ref i- nanced. Access to the capital markets may at times be affected by our credit ratings and conditions in the economy. A decline in our cor po- rate credit rating could make future borrowings more expensive, and volatile credit markets could make it harder for us to obtain debt financings generally. However, the company did access the capital markets in September 2010 with $500 million of unsecured financ- ing. In September, the company also amended its revolving credit agreements and extended the maturity date with the majority of its lenders from March 15, 2012 to September 30, 2014. Total commit- ments under the amended revolving credit agreements are $1.63 bil- lion through March 15, 2012 and total e xtended commitments from March 15, 2012 to September 30, 2014 will be $1.14 billion. At the end of 2010, the company had approximately $1.4 billion of addition- al borrowing capacity under its revolving credit facilities. Volatility in global financial markets directly affects the value of our pension plan assets While asset returns were strongly positive in 2010 and 2009, the com- pany’s principal U.S. retirement plan, the Gannett Retirement Plan, is underfunded by $346 million. Depending on various factors, includ- ing future investment returns, discount rates and potential pension legislative changes, the company may be required to make up this underfunding with contributions in future years. Foreign exchange variability could adversely affect our consolidated operating results Weakening of the British pound-to-U.S. dollar exchange rate could diminish Newsquest’s earnings contribution to consolidated results. Newsquest results for 2010 were translated to U.S. dollars at the aver- age rate of 1.55. CareerBuilder, with expanding overseas operations, also has foreign exchange risk but to a signif icantly lesser degree. Changes in the regulatory environment could encumber or impede our efforts to improve operating results or value of assets Our publishing and broadcasting operations are subject to go vernment regulation. Changing regulations, particularly FCC regulations which affect our television stations, may result in increased costs and adversely impact our future prof itability. For example, FCC regula- tions required us to constr uct digital television stations in all of our television markets, despite the fact that the new digital stations are unlikely to produce signif icant additional revenue. In addition, our television stations are required to possess tele vision 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 rene w our license applications that are currently pending in 2011. The degree of success of our investment and acquisition strategy may significantly impact our ability to expand overall profitability We will continue efforts to identify and complete strategic invest- ments, partnerships and business acquisitions. These efforts may not prove successful. Strategic investments and partnerships with other companies expose us to the risk that w e may not be able to control the operations of our investee or partnership, which could decrease the amount of benefits we reap from a par ticular relationship. The compa- ny is also exposed to the risk that its par tners in strategic investments and infrastructure may encounter financial difficulties which could lead to disruption of investee or partnership activities. 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 addi- tional debt or divert our capital from more prof itable expenditures, and might result in other unanticipated problems and liabilities. 24 During the past f ive years, new or substantial additions or remodel- ing of existing facilities have been completed or are at some stage of construction at 10 of the company’s publishing operations. Gannett continues to make investments in renovations where necessary for oper- ational efficiency. During 2010, the company continued its efforts to consolidate cer- tain of its U.S. publishing facilities to achieve savings and efficiencies. The company’s facilities are adequate for present operations. A listing of publishing centers and key properties may be found on pages 18-20. Publishing/United Kingdom Newsquest owns certain of the plants where its newspapers are pro- duced and leases other facilities. Newsquest headquarters is in Weybridge, Surrey. Additions to Newsquest’s printing capacity and color capabilities have been made since Gannett acquired Ne wsquest in 1999. Newsquest has consolidated certain of its facilities to achieve savings and efficiencies. Certain Newsquest operations have outsourced printing to non-Newsquest newspaper companies. All of Newsquest’s properties are adequate for present pur poses. A listing of Newsquest publishing centers and key properties may be found on page 21. Digital Generally, the company’s digital businesses lease their facilities. This includes facilities for executive offices, sales offices and data centers. The company’s facilities are adequate for present operations. The com- pany also believes that suitable additional or alternative space, includ- ing those under lease options, will be a vailable at commercially reason- able terms for future expansion. A listing of key digital facilities can be found on page 21. Broadcasting The company’s broadcasting facilities are adequately equipped with the necessary television broadcasting equipment. The company owns or leases transmitter facilities in 23 locations. All of the company’s sta- tions have converted to digital television operations in accordance with applicable FCC regulations. The company’s broadcasting facilities are adequate for present purposes. A listing of television stations can be found on page 22. Corporate facilities The company’s headquarters and USA TODAY are located in McLean, VA. The company also owns data and network operations centers in nearby Maryland and in Phoenix, AZ. Headquarters facilities are ade- quate for present operations. The value of our intangible assets may become impaired, depending upon future operating results Goodwill and other intangible assets were approximately $3.4 billion as of Dec. 26, 2010, representing appro ximately 49% of our total assets. We periodically evaluate our goodwill and other intangible assets to determine whether all or a por tion of their carrying values may no longer be recoverable, in which case a charge to earnings may be necessary, as occurred in the last three years (see Notes 3 and 4 to the Consolidated Financial Statements). Any future evaluations requir- ing an asset impairment charge for goodwill or other intangible assets would adversely affect future reported results of operations and share- holders’ equity, although such charges would not affect our cash flow. The collectability of accounts receivable under current soft eco- nomic conditions could deteriorate to a greater extent than provid- ed for in the company’s financial statements and in its projections of future results Generally soft economic conditions and uneven recoveries in the U.S. and U.K. have increased the company’s exposure to losses resulting from the potential bankruptcy of its advertising customers. The com- pany’s accounts receivable are stated at net estimated realizab le value and its allowance for doubtful accounts has been deter mined based on several factors, including receivable agings, significant individual credit risk accounts and historical experience. If such collectability estimates prove inaccurate, adjustments to future operating results could occur. ITEM 1B. UNRESOLVED STAFF COMMENTS None. ITEM 2. PROPERTIES Publishing/United States Generally, the company owns many of the plants that house all aspects of the publication process. Certain U.S. Community Publishing opera- tions have outsourced printing to non-Gannett newspapers or commer- cial printers. In the case of USA TODAY, at Dec. 26, 2010, 20 non- Gannett printers were used to print the newspaper in U.S. markets where there are no company publishing sites with appropriate facilities. Non-Gannett printers in 11 foreign countries publish and distribute an international edition of USA TODAY under a royalty agreement. USA WEEKEND, Clipper Magazine and Gannett Healthcare Group are also printed under contracts with commercial printing companies. Man y of the company’s newspapers have outside news bureaus and sales offices, which generally are leased. In several markets, two or more of the com- pany’s newspapers share combined facilities; and in certain locations, facilities are shared with other non-Gannett ne wspaper properties. At the end of 2010, 68% of the company’s U.S. daily newspapers were either printed by non-Gannett printers or printed in combination with other Gannett newspapers. The company’s publishing properties have rail siding facilities or access to main roads for ne wsprint delivery pur- poses and are conveniently located for distribution purposes. 25 ITEM 3. LEGAL PROCEEDINGS Information regarding legal proceedings may be found in Note 12 of the Notes to Consolidated Financial Statements. Environmental Some of the company’s newspaper subsidiaries have been identif ied as potentially responsible parties (PRP) for cleanup of contaminated sites as a result of their alle ged disposal of ink or other w astes at dis- posal sites that have been subsequently identified as requiring remedi- ation. In four such matters that in volve a governmental authority as a party, the company’s liability could exceed $100,000. Poughkeepsie Newspapers is required by a consent order with the U.S. EPA to fund a por tion of the remediation costs at the Her tel Landfill site in Plattekill, NY. Poughkeepsie Newspapers has paid and expensed its share of the initial clean up b ut remains liable for a share of follow-up testing and potential fur ther remediation at the site. Such remaining liability is not expected to be material. In conjunction with the sale of proper ty in Norwich, CT, in May 2007, Gannett Satellite Information Network, Inc. (GANSAT) sub- mitted a Transfer of Establishment form to the Connecticut Department of Environmental Protection (CDEP). Because there is evidence of soil and g roundwater contamination at the proper ty, GANSAT will conduct a site investigation, and, if necessary, remedia- tion, in accordance with the requirements of the Connecticut Transfer Act. The site investigation cost is not expected to be material. The cost of remediation, if any, will not be known until the conclusion of the site investigation. In December 2004, the U.S. Forest Service advised by letter that it considers “Shiny Rock Mining Corporation” to be legally responsible for a release of hazardous substances at a closed mine site in Ore gon. Shiny Rock Mining Corporation is a former Gannett subsidiary that donated the property at issue to Friends of Opal Creek (Friends) in 1992. Gannett tendered this matter to F riends pursuant to an indemni- fication agreement, and Friends and the Forest Service entered into a Consent Agreement to conduct a site investigation. Friends has been funding the investigation by using proceeds from an insurance polic y, now expired. In December 2008, Friends notified Gannett that it may not have sufficient resources to fund its indemnif ication responsibili- ties if site costs exceed the proceeds available under the insurance policy. Whether Gannett will be required to fund fur ther site work, and how much that might cost, depends on w hether additional site investigation and/or remediation will be required, both unknown at this time. Gannett Suburban Newspapers has been identif ied as a PRP – along with approximately 200 other governmental and private entities – at the Ellis Road Superfund site in Jackson ville, FL. Pursuant to an Administrative Order on Consent entered into in 1989, Gannett and other PRPs paid for cer tain cleanup actions at the site. Gannett w as allocated approximately 0.06% of the cost of that cleanup, resulting in a payment of $3,250. In 2009, EPA determined that additional investi- gation and cleanup of the Ellis Road Site is required. Because EP A has not yet disclosed the scope and cost of an y additional cleanup, Gannett is unable to reasonably estimate its potential liability with respect to this matter; however, Gannett expects such liability will be nominal. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. 26 PART II ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Gannett Co., Inc. shares are traded on the Ne w York Stock Exchange with the symbol GCI. Information regarding outstanding shares, shareholders and dividends may be found on pages 1, 3 and 46 of this Form 10-K. Information about debt securities sold in pri vate transactions may be found on pages 43 and 44 of this Form 10-K. Gannett Common stock prices High-low range by fiscal quarters based on NYSE-composite closing prices. Year 2000 2001 2002 2003 2004 2005 Quarter First . . . . . . . . . . . . . . . . Second . . . . . . . . . . . . . . Third . . . . . . . . . . . . . . . Fourth . . . . . . . . . . . . . . First . . . . . . . . . . . . . . . . Second . . . . . . . . . . . . . . Third . . . . . . . . . . . . . . . Fourth . . . . . . . . . . . . . . First . . . . . . . . . . . . . . . . Second . . . . . . . . . . . . . . Third . . . . . . . . . . . . . . . Fourth . . . . . . . . . . . . . . First . . . . . . . . . . . . . . . . Second . . . . . . . . . . . . . . Third . . . . . . . . . . . . . . . Fourth . . . . . . . . . . . . . . First . . . . . . . . . . . . . . . . Second . . . . . . . . . . . . . . Third . . . . . . . . . . . . . . . Fourth . . . . . . . . . . . . . . First . . . . . . . . . . . . . . . . Second . . . . . . . . . . . . . . Third . . . . . . . . . . . . . . . Fourth . . . . . . . . . . . . . . Low $61.75 $59.25 $49.25 $48.69 $56.50 $59.58 $55.55 $58.55 $65.03 $71.50 $63.39 $66.62 $67.68 $70.43 $75.86 $77.56 $84.50 $84.95 $79.56 $78.99 $78.43 $71.13 $66.25 $59.19 High $83.25 $72.13 $60.06 $63.06 $67.74 $69.38 $69.11 $71.10 $77.85 $79.87 $77.70 $79.20 $75.10 $79.70 $79.18 $88.93 $90.01 $91.00 $86.78 $85.62 $82.41 $80.00 $74.80 $68.62 Year 2006 2007 2008 2009 2010 2011 Quarter First . . . . . . . . . . . . . . . . Second . . . . . . . . . . . . . . Third . . . . . . . . . . . . . . . Fourth . . . . . . . . . . . . . . First . . . . . . . . . . . . . . . . Second . . . . . . . . . . . . . . Third . . . . . . . . . . . . . . . Fourth . . . . . . . . . . . . . . First . . . . . . . . . . . . . . . . Second . . . . . . . . . . . . . . Third . . . . . . . . . . . . . . . Fourth . . . . . . . . . . . . . . First . . . . . . . . . . . . . . . . Second . . . . . . . . . . . . . . Third . . . . . . . . . . . . . . . Fourth . . . . . . . . . . . . . . First . . . . . . . . . . . . . . . . Second . . . . . . . . . . . . . . Third . . . . . . . . . . . . . . . Fourth . . . . . . . . . . . . . . First* . . . . . . . . . . . . . . . Low $58.81 $53.22 $51.67 $55.92 $55.76 $54.12 $43.70 $35.30 $28.43 $21.79 $15.96 $06.09 $01.95 $02.20 $03.18 $09.76 $13.53 $13.73 $11.98 $11.76 $14.49 High $64.80 $60.92 $57.15 $61.25 $63.11 $59.79 $55.40 $45.85 $39.00 $30.75 $21.67 $17.05 $09.30 $05.48 $10.14 $15.63 $17.25 $18.67 $15.11 $15.78 $17.18 * Through February 11, 2011 Purchases of Equity Securities There were no repurchases of common stock in 2010. The dollar value of shares that may yet be purchased under the compan y’s share repurchase program described on page 46 is $808,936,610. While there is no expiration date for the repurchase pro gram, the Board of Directors reviews the authorization of the program annually and did so in October 2010. 27 Comparison of shareholder return - June 30, 2009 to Dec. 31, 2010 The following graph compares the total retur n to shareholders of the company’s common stock during the period from June 30, 2009 (the date the National Bureau of Economic Research announced as the end of the recession in the U .S.) to December 31, 2010 with the performance of the S&P 500 Media Inde x, the S&P 500 Publishing Index and the company’s 2010 Peer Group over the same period of time. The graph depicts the results of investing $100 in the compa- ny’s common stock, the S&P 500 Media Inde x, the S&P 500 Publishing Index and the company’s Peer Group at closing prices on June 30, 2009, assuming that di vidends are reinvested on a monthly basis. Comparison of Cumulative Total Return The S&P 500 Media Index is comprised of Cablevision, Systems Corporation, CBS Corporation, Comcast Corporation, The DirecTV Group, Inc., Discovery Communications Inc., Gannett Co., Inc., The Interpublic Group of Companies, Inc., The McGraw-Hill Companies, Inc., Meredith Cor poration, News Corporation, Omnicom Group, Inc., Scripps Networks Interactive, Inc., Time Warner Cable Inc., Time Warner Inc., Viacom Inc., The Walt Disney Company, and The Washington Post Company and the S&P 500 Publishing Index consists of Gannett Co., Inc., The McGraw-Hill Companies, Inc., Meredith Cor poration, and The Washington Post Company. Comparison of shareholder return - 2006 to 2010 The following graph compares the performance of the company’s common stock during the period Dec. 25, 2005, to Dec. 26, 2010, with the S&P 500 Index, and a Peer Group Index selected by the company. The company has established an index of peer group companies because of changes in 2007 to the S&P 500 Pub lishing Index. At the end of 2006, the S&P 500 Pub lishing Index included Gannett Co., Inc., Dow Jones & Co., Inc., The McGraw-Hill Companies, Meredith Corporation, The New York Times Company and Tribune Company. During 2007, Dow Jones was purchased by News Corp. and Tribune Company was taken private, and both companies there- fore were removed from the S&P 500 Pub lishing Index. The Washington Post Company, which holds substantial non-publish- ing/broadcast interests, was added to the S&P 500 Pub lishing Index. Because of these changes, the compan y believes the S&P 500 Publishing Index no longer comprises a representative group of peer companies. The company therefore selected a Peer Group which it believes to be more representative based upon the strong publishing/broadcasting orientation of the companies selected. This Peer Group is comprised of Gannett Co., Inc., A.H. Belo Corp., The E.W. Scripps Company, Journal Communications, Inc., Lee Enterprises, Inc., The McClatchy Company, Media General, Inc. and The New York Times Company. The S&P 500 Index includes 500 U.S. companies in the indus- trial, utilities and f inancial sectors and is weighted by market capi- talization. The graph depicts the results of investing $100 in the compa- ny’s common stock, the S&P 500 Inde x and the Peer Group Index at closing on Dec. 25, 2005. It assumes that di vidends were rein- vested monthly with respect to the compan y’s common stock, daily with respect to the S&P 500 Inde x and monthly with respect to the Peer Group. Comparison of Cumulative Five Year Total Return Gannett Co., Inc. . . . . . . . . . S&P 500 Index . . . . . . . . . . . Peer Group . . . . . . . . . . . . . . 2005 100 100 100 2007 2006 67.76 101.89 115.79 122.16 67.70 98.27 2008 15.42 76.96 17.55 2010 2009 30.47 29.65 97.33 111.99 37.50 37.96 28 ITEM 6. SELECTED FINANCIAL DATA Selected financial data for the years 2006 through 2010 is contained under the heading “Selected Financial Data” on page 78 and is derived from the company’s audited f inancial statements for those years. Certain reclassifications have been made to previously reported financial data to reflect the creation of a new digital seg- ment, as more fully discussed in Note 1 to the Consolidated Financial Statements. The information contained in the “Selected F inancial Data” is not necessarily indicative of the results of operations to be e xpected for future years, and should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Item 7 and the consolidated financial statements and related notes thereto included in Item 8 of this Form 10-K. ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Certain factors affecting forward-looking statements Certain statements in this Annual Report on Form 10-K contain forward-looking information. The words “expect,” “intend,” “believe,” “anticipate,” “likely,” “will” and similar expressions gen- erally identify forward-looking statements. These forward-looking statements are subject to cer tain risks and uncertainties that could cause actual results and events to differ materially from those antic- ipated in the forward-looking statements. The company is not responsible for updating or revising any forward-looking state- ments, whether the result of new information, future events or oth- erwise, except as required by law. Potential risks and uncertainties which could adversely affect the company’s results include, without limitation, the follo wing factors: (a) increased consolidation among major retailers or other e vents which may adversely affect business operations of major customers and depress the level of local and national adv ertising; (b) a contin- uance of the generally soft economic conditions in the U.S. and the U.K. or a further economic downturn leading to a continuing or accelerated decrease in circulation or local, national or classif ied advertising; (c) a further decline in general newspaper readership and/or advertiser patterns as a result of competitive alternative media or other factors; (d) an increase in newsprint or syndication programming costs over the levels anticipated; (e) labor disputes which may cause revenue declines or increased labor costs; (f) acquisitions of new businesses or dispositions of existing business- es; (g) a decline in viewership of major networks and local news programming; (h) rapid technological changes and frequent new product introductions prevalent in electronic publishing; (i) an increase in interest rates; (j) a w eakening in the British pound to U.S. dollar exchange rate; (k) volatility in f inancial and credit mar- kets which could affect the value of retirement plan assets and the company’s ability to raise funds through debt or equity issuances; (l) changes in the regulatory environment; (m) an other than temporar y decline in operating results and enter prise value that could lead to further non-cash goodwill, other intangible asset, investment or property, plant and equipment impair ment charges; (n) credit rating downgrades, which could affect the availability and cost of future financing; and (o) general economic, political and business condi- tions. Executive Summary Gannett Co., Inc. is a leading inter national media and marketing solutions company operating primarily in the United States and the United Kingdom (U.K.). Approximately 90% of 2010 consolidated revenues are from domestic operations and approximately 10% are from foreign operations, primarily in the U.K. The company’s goal is to be the leading source of ne ws and information in the markets it serves, and be customer centric by delivering quality products and results for readers, vie wers, advertis- ers and other customers. Gannett believes that well-managed news- papers, television stations, electronic media including Inter net and mobile products and services, magazine/specialty publications and programming efforts will maximize prof its for the company’s share- holders as will our customer-centric solutions approach to advertis- ing. To that end, the company’s strategy has the following elements: • Become a leading digital destination for consumers and adv er- tisers. • Create new business opportunities in the digital space through internal innovation, acquisitions or affiliations. The company established a new Digital segment in 2008. • Transform its sales organization from transactional advertising to a culture of customer-focused marketing solutions and ideas. • Create highly relevant content that delivers what consumers want and advertisers need to engage with their audiences on multiple platforms. • Maintain strong f inancial discipline throughout its operations. • Maximize existing resources through efforts to enhance revenues and control or reduce costs. F or businesses that do not fit with the company’s long-term strategic goals, a realloca- tion of resources will be under taken. • Strengthen the foundation of the compan y by finding, develop- ing and retaining the best and brightest emplo yees through a robust Leadership and Diversity program. Gannett implements its strategy and manages its operations through three business segments: publishing, digital and broadcast- ing (television). The publishing segment includes the operations of 99 daily newspapers in the U.S., U.K. and Guam, about 600 non- daily local publications in the United States and Guam and more than 200 such titles in the U.K. Its 82 U.S. daily newspapers, including USA TODAY, the nation’s largest-selling daily print newspaper, with an average circulation of approximately 1.8 mil- lion, have a combined daily average paid circulation of 5.3 million, which is the nation’s largest newspaper group in terms of circula- tion. Together with the 17 daily paid-for newspapers its Newsquest division publishes in the U.K., the total average daily circulation of its 99 domestic and U.K. daily newspapers was approximately 5.7 million for 2010. All daily newspapers also operate web sites which are tightly integrated with publishing operations. The com- pany’s newspapers also have strategic business relationships with online affiliates including CareerBuilder, Classified Ventures, ShopLocal.com, Topix and Metromix LLC. The publishing segment also includes commercial printing; newswire; marketing and data services operations. 29 Results from continuing operations and special charges and credits: Income from continuing operations attrib utable to Gannett Co., Inc. for 2010 was $567 million or $2.35 per share. The table below reconciles diluted earnings per share from continuing operations reported in accordance with GAAP to adjusted earnings per share excluding special items: Diluted Earnings Per Share Earnings (loss) per share from continuing operations (GAAP basis) . . . . . . . . . . . . . . . . . Operating items: Facility consolidation and asset impairment charges . . . . . . . . . . Workforce restructuring and related expenses . . . . . . . . . . . . . Pension gain . . . . . . . . . . . . . . . . Non-operating items: Impairment of newspaper publishing partnerships and other equity method investments . . . . . Debt exchange gain . . . . . . . . . . Impairment of publishing assets sold . . . . . . . . . . . . . . . . . . . . . . . Tysons land sale gain . . . . . . . . . Fifty-two Fifty-two weeks ended weeks ended weeks ended Dec. 26, 2010 Dec. 27, 2009 Dec. 28, 2008 Fifty-two $2.35 $1.49 $(29.02) 0.17 0.03 — 0.01 — 0.37 31.20 0.08 (0.10) 0.33 (0.13) 0.03 (0.11) 1.09 — — — 0.10 — — (0.07) Release of prior year tax reserves, net . . . . . . . . . . . . . . . . . . Adjusted earnings per share $1.85(a) (non-GAAP basis) . . . . . . . . . . . . . (a) Total per diluted share amount does not sum due to rounding. (0.11) $2.44(a) — — $3.40 Discussion of special charges and credits affecting reported results: Difficult business conditions required the company to per- form impairment tests on certain assets including goodwill, other intangible assets, other long lived assets and investments accounted for under the equity method during 2010, 2009 and 2008. As a result, the company has recorded non-cash impair ment charges to reduce the book value of certain of those assets of $60 million ($43 million after-tax or $.18 per share), $142 million ($95 million after - tax or $.40 per share) and $8.3 billion ($7.4 billion after -tax or $32.29 per share) in 2010, 2009 and 2008, respecti vely. In addition, an impairment charge of $28 million ($24 million after -tax or $.10 per share) was taken in 2009 to reduce the v alue of certain commer- cial printing assets which were then sold. The 2008 and 2009 impairment charges were driven by poor business trends amid reces- sions in the U.S. and U.K. Concurrent with the decline in business conditions, there was broad-based downward pressure on equity share values in 2008 and early 2009 and the company’s stock price declined significantly. These factors led to the reassessment of asset carrying values and the determination that non-cash impairment write downs to underlying estimated fair value were required. These non-cash impairment charges are detailed in Notes 3 and 4 to the Consolidated Financial Statements. Through its broadcasting segment, the company owns and oper- ates 23 television stations with affiliated web sites covering 18.2% of the U.S. population in markets with a total of more than 21 mil- lion households. This segment also includes the results of Captivate Network, a national news and entertainment network that delivers programming and full-motion video advertising on video screens located in elevators of office towers and select hotel lob- bies across North America. Fiscal year: The company’s fiscal year ends on the last Sunday of the calendar year. The company’s 2010 f iscal year ended on Dec. 26, 2010, and encompassed a 52-week period. The company’s 2009 and 2008 f iscal years also encompassed 52-week periods. Discontinued operations: Unless stated otherwise, as discussed in the section titled “Discontinued operations,” all of the infor mation contained in Management’s Discussion and Analysis of Financial Condition and Results of Operations relates to continuing opera- tions. Therefore, the results of The Honolulu Advertiser and its relat- ed assets, which were sold to Oahu Publications in May 2010, and a small directory publishing operations sold to Yellow Book in June 2010, are excluded for all periods covered by this report. These transactions are discussed in more detail on page 32 in the business acquisitions, investments, dispositions and discontinued operations section of this report. Presentation of certain pro forma and non-GAAP informa- tion: The discussion below is focused mainly on changes in histor- ical financial results, however certain operating information for the newly formed Digital Segment is also presented on a pro for ma basis, which assumes that all proper ties owned at the end of 2010 were owned throughout the periods covered by the discussion. The company consistently uses, for individual businesses and for aggregated business data, pro forma reporting of operating results in its internal financial reports because it enhances measurement of performance by permitting comparisons with prior period his- torical data. Likewise, the company uses this same pro for ma data in its external reporting of key financial results and benchmarks. In addition to the results repor ted in accordance with account- ing principles generally accepted in the United States (“GAAP”), the company has provided in this report amounts for operating expenses, operating income, non-operating expenses, income taxes, income from continuing operations, net income attrib utable to Gannett Co., Inc. and ear nings per share excluding certain spe- cial items (non GAAP basis). Management belie ves results exclud- ing these items better reflect the ongoing perfor mance of the com- pany and enables management and investors to meaningfully trend, analyze and benchmark the perfor mance of the company’s opera- tions. These measures are also more comparab le to f inancial meas- ures reported by the company’s competitors. These results should not be considered a substitute for amounts calculated and reported in accordance with GAAP. 30 For the years 2010, 2009 and 2008 the compan y recorded work- Broadcast revenues for 2010 were $770 million or 22% better force restructuring related costs totaling $12 million ($7 million after-tax or $.03 per share), $28 million ($18 million after -tax or $.08 per share), and $115 million ($75 million after -tax or $.33 per share), respectively. These charges were taken in connection with workforce reductions related to f acility consolidation and outsourc- ing efforts and as part of a general program to fundamentally change the company’s cost structure. In 2010, the company booked a net tax benef it of $28.7 million ($.12 per share) primarily due to the expiration of the statutes of limitations including the release of certain reserves related to the sale of a business in a prior y ear. The benefit was partially offset by a $2.2 million ($.01 per share) tax char ge related to health care reform legislation and the resultant loss of tax deductibility for cer- tain health care costs covered by Medicare retiree drug subsidies. During 2009, the company reached an agreement with one of its unions for a complete withdrawal from the union’s underfunded pen- sion plan and release from any future obligations with respect there- to. As a result of this ag reement, the company recognized a pension settlement gain of $40 million ($25 million after-tax or $.10 per share). During 2008, the company made changes to its domestic bene- fit plans by improving its 401(k) plan while freezing benef its under certain company sponsored def ined benefit pension plans. As a result, the company recognized a curtailment gain from its domestic pension plans of $47 million ($29 million after-tax or $.13 per share). In connection with the debt exchange offer completed in May 2009, the company recorded a gain of appro ximately $43 million ($26 million after-tax or $.11 per share) w hich is classif ied in “Other non-operating items” in the Statement of Income (Loss). This gain resulted from recording its ne w 2015 and 2016 notes at fair value as of the time of the e xchange and extinguishing the old notes at their historical book values. In 2008, the company realized a $26 million ($16 million after- tax or $.07 per share) gain on the sale of a parcel of land adjacent to its headquarters building in McLean, VA. Operating results summary: Operating revenues were $5.4 bil- lion in 2010, a decline of 1% from $5.5 billion in 2009. Total rev- enue comparisons sequentially improved quarterly throughout the year and modest revenue growth was achieved in the third and fourth quarters of 2010. Publishing revenues were $4.1 billion for 2010 or 6% below 2009 levels. The rate of decline nar rowed over the course of the year as economic conditions continued to impro ve. Digital segment revenues totaled $618 million for 2010, an increase of 5%, reflecting strong revenue growth at CareerBuilder, PointRoll and ShopLocal. than 2009 levels, reflecting advertising revenue of $107 million associated with elections and Winter Olympic Games, as well as higher core television advertising and signif icant growth at Captivate. Digital revenues company-wide including the Digital segment and all digital revenues generated by other business segments were approximately $1.0 billion, 18% of total operating re venues and an increase of 8% over last year. As indicated, total revenue comparisons sequentially improved throughout the year and modest revenue growth was achieved in the third and fourth quarters of 2010. The table below presents the percent- age change in revenues compared to 2009 for each quar ter and for the full year, for the company as a whole and for its three business seg- ments. Revenue Comparison 2010 vs. 2009 Publishing . . . . . . . . . . . . . . Digital . . . . . . . . . . . . . . . . . Broadcast . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . Q1 (7%) (2%) 17% (4%) Q2 (6%) 8% 20% (2%) Q3 (5%) 10% 22% 0.0% Q4 (5%) 5% 27% 0.4% Full Year (6%) 5% 22% (1%) Total operating costs declined 7% to $4.44 billion for 2010, prima- rily due to the impact of cost ef ficiency efforts company-wide and a substantial decline in newsprint expense, offset partially by higher expenses in broadcasting related to higher re venue. There was also a substantial decline in impairment and restructuring charges in 2010 compared with 2009. Operating costs, excluding these special items discussed above, declined 6% for the year. Newsprint expense for publishing was significantly less than in 2009, declining 23% as a 10% reduction in consumption w as com- bined with a 15% decrease in average usage prices. The company reported operating income for 2010 of $1.0 bil- lion compared to $719 million in 2009, a 39% increase. These amounts include net special items charges in 2010 of $69 million compared to $121 million in 2009. Absent the special items from both years, the company’s operating income would have been $1.07 billion for 2010, an increase of 27% compared to 2009. The company reported income of $19 million from its equity share of results from unconsolidated investees for 2010, a signif i- cant increase over 2009, due to better results from its ne wspaper publishing partnerships and certain digital investments, as well as a reduction in the amount of impair ment charges taken for certain investees. Absent these special impairment charges in 2010 ($3 million) and 2009 ($9 million), equity income in unconsolidated investees would have increased 65% to $22 million. Interest expense was $173 million in 2010, down 2% from 2009, reflecting signif icantly lower average debt balances partially offset by higher average interest rates. From its strong operating cash flow and its tightly disciplined liquidity management, the company reduced its long-term debt by $710 million or 23% in 2010 and by $1.46 billion or 38% over the last two years. 31 The company reported net income attributable to Gannett Co., Inc. of $588 million or $2.43 per diluted share for 2010 compared to $355 million or $1.51 per diluted share for 2009. Income from continuing operations attributable to Gannett Co., Inc. w as $567 million or $2.35 per diluted share for 2010. Absent the special items in both years, the company would have reported an increase in income from continuing operations attrib utable to Gannett and diluted earnings per share of 35% and 32%, respecti vely. Net income attributable to noncontrolling interests was $35 million in 2010, an increase of 28% or $8 million o ver 2009, reflecting significantly improved operating results at CareerBuilder. Challenges for 2011: Looking forward to 2011, the company faces several challenges including comparisons against $107 mil- lion of political and Olympic advertising in its broadcast segment in 2010, higher newsprint prices as well as uncertainty surrounding the U.S. and U.K. economies. Basis of reporting Following is a discussion of the k ey factors that have affected the company’s accounting for or repor ting on the business over the last three fiscal years. This commentary should be read in conjunction with the company’s financial statements, Selected Financial Data and the remainder of this Form 10-K. Critical accounting policies and the use of estimates: The company prepares its f inancial statements in accordance with generally accepted accounting principles (GAAP) w hich require the use of estimates and assumptions that af fect the reported amount of assets, liabilities, revenues and expenses and related disclosure of contingent matters. The company bases its estimates on historical experience, actuarial studies and other assumptions, as appropriate, concerning the carrying values of its assets and liabilities and disclosure of contingent matters. The company re-evaluates its estimates on an ongoing basis. Actual results could differ from these estimates. Critical accounting policies for the company involve its assess- ment of the recoverability of its long-lived assets, including goodwill and other intangible assets, which are based on such f actors as esti- mated future cash flows and current fair value estimates of business- es. Similarly the company evaluates the recoverability of the carrying value of its property, plant and equipment and its in vestments in minority-owned unconsolidated investees, including its newspaper publishing partnerships and certain online/new technology business investments. The company’s accounting for pension and retiree medical bene- fits requires the use of various estimates concerning the work force, interest rates, plan investment return, and involves the use of advice from consulting actuaries. The company’s accounting for income taxes in the U.S. and foreign jurisdictions is sensitive to interpreta- tion of various laws and regulations therein, and to accounting r ules regarding the repatriation of ear nings from foreign sources. The com- pany must also exercise significant judgment in assessing the recov- erability of its deferred tax assets. Refer to Note 1 to the Consolidated F inancial Statements for a more complete discussion of all of the compan y’s significant accounting policies. Reclassifications of certain items within the Consolidated Financial Statements: In the third quarter of 2008, the company began reporting a new digital segment and a separate digital re v- enues line in its Statements of Income (Loss). This revenue line includes only revenue from the businesses that comprise the new digital segment. It therefore includes all revenues from CareerBuilder and ShopLocal beginning with the full consolida- tion of these businesses in the third quar ter of 2008, and revenues from PointRoll, Schedule Star and Planet Discover. Revenues from PointRoll, Schedule Star and Planet Discover had previously been reported within the publishing segment and were included in the “All other” revenue line in the Statement of Income (Loss). “All other” revenue is now comprised principally of commercial print- ing revenues. All periods presented reflect these reclassif ications. Operating results from web sites that are associated with pub- lishing operations and broadcast stations continue to be repor ted in the publishing and broadcast segments. Business acquisitions, investments, dispositions and discontin- ued operations 2010: In March 2010, CareerBuilder expanded its reach in the U.K. when it purchased CareerSite.biz, parent of three successful career- related operations there. Founded in 2001, CareerSite.biz operates two online recruitment niche sites focusing on nursing and rail work- ers as well as a successful vir tual career fair business. In October 2010, the company purchased a minority stake in Ongo Inc. Ongo is a personal ne ws service that gives consumers a fundamentally new way to read, discover and share digital news and information. In the second quarter of 2010, the company completed the sale of The Honolulu Advertiser as well as a small director y publishing operation in Michigan. In connection with these transactions, the company recorded a net after tax gain of $21.2 million in discontin- ued operations. Income from continuing operations for all periods presented exclude operating results from these for mer properties which have been reclassif ied to discontinued operations. Amounts applicable to these discontinued operations are as follo ws: In thousands of dollars 2010 Revenues . . . . . . . . . . . . . . . . . . . . . . . . $32,710 (758) Pretax (loss)/income . . . . . . . . . . . . . . . (322) Net (loss)/income . . . . . . . . . . . . . . . . . . 21,195 Gains (after tax) . . . . . . . . . . . . . . . . . . . 2009 $103,390 6,262 3,790 — 2008 $127,968 (33,753) (20,626) — Total cash paid in 2010 for business acquisitions and in vestments was $15.2 million and $11.0 million, respecti vely. In early January 2011, the company also announced the acquisi- tion of Reviewed.com, a group of 12 product-review web sites that provide comprehensive reviews for technology products such as digi- tal cameras, camcorders and high-def inition televisions. Reviewed.com’s operation will be integrated with USA TODAY as part of USA TODAY’s consumer media strategy. 32 2009: In February 2009, the company purchased a minority inter- est in Homef inder, a leading national online mark etplace connecting homebuyers, sellers and real estate professionals. In July 2009, Newsquest sold one of its commercial printing busi- nesses, Southernprint Limited. Total cash paid in 2009 for business acquisitions (principall y post-acquisition consideration) and investments was $9.6 million and $9.7 million, respectively. 2008: On Dec. 31, 2007, the f irst day of the company’s 2008 fiscal year, the company purchased X.com, Inc. (BNQT.com), which operates a digital media g roup of affiliated sites covering eight different action sports including surf ing, snowboarding and skateboarding. BNQT.com is affiliated with the USA TODAY Sports Media Group. In February 2008, the company formed QuadrantONE, a new digital ad sales network, with three other large media companies. In March 2008, the company purchased a minority stake in Fantasy Sports Ventures (FSV). FSV, also known as Big Lead Sports, owns a set of f antasy sports content sites and manages advertising across a group of affiliated sites. In May 2008, the company purchased a minority stake in Cozi Group Inc. (COZI). COZI is a free w eb service that helps families manage busy schedules, stay in communication and share memo- ries. In July 2008, the company purchased a minority stake in Livestream, a company that provides Internet broadcasting servic- es. Also in July 2008, the company increased its investment in 4INFO, maintaining its approximate ownership interest. In August 2008, the company purchased 100% of the outstand- ing shares of Pearls Review, Inc., an online nursing cer tification and continuing education review site, which is operated with Gannett Healthcare Group. In June 2008, the company acquired from Tribune Company and The McClatchy Company their minority ownership interests in ShopLocal LLC, a leading marketing and database services compa- ny for major retailers in the U.S. The company now owns 100% of ShopLocal and began consolidating its results in the digital se g- ment at the beginning of the third quar ter of 2008. ShopLocal col- laborates with PointRoll to create ads that dynamically connect retail advertisers and consumers, online and in the store. In September 2008, the company acquired an additional 10% stake in CareerBuilder from Tribune Company increasing its invest- ment to 50.8% so that it became the majority and controlling owner. The total cash paid in 2008 for business acquisitions w as $168.6 million and for investments was $46.8 million. RESULTS OF OPERATIONS Consolidated summary – continuing operations A consolidated summary of the company’s results is presented below. In millions of dollars, except per share amounts Operating revenues . . . . . . . . . . Operating expenses . . . . . . . . . . Operating income (loss) . . . . . . Non-operating expense, net . . . Income (loss) from continuing operations 2010 Change $ 5,439 $ 4,439 $ 1,000 $ 154 2009 Change $ 5,510 (1%) (7%) $ 4,791 39% $ 719 $ 149 3% (17%) (64%) *** (72%) 2008 $ 6,640 $13,368 $ (6,728) 537 $ Per share – basic . . . . . . . . . Per share – diluted . . . . . . . $ 2.38 $ 2.35 59% $ 1.50 58% $ 1.49 *** *** $ (29.02) $ (29.02) Results for all periods reflect cer tain special items that are included in either operating or non-operating e xpense and which are further discussed on page 30 and in Notes 3 and 4 to the Consolidated Financial Statements. In the tables below and in certain other tables and discussions that follow, the effect of these special items has been remo ved from key financial measures to better reflect the ongoing perfor mance of the company. Operating and non-operating expenses adjusted to remove the effect of certain special items are as follows: In millions of dollars 2010 Change 2009(a) Change Operating expense (GAAP basis) . $4,439 Remove favorable (unfavorable) special items: $4,791 (64%) (7%) 2008(a) $13,368 Facility consolidation and asset impairment charges . . . . . . . . . . Workplace restructuring and related expenses . . . . . . . . . . . . Pension gains . . . . . . . . . . . . . . $ (57) (57%) $ (133) (98%) $ (7,940) $ (12) $ — (59%) *** $ $ (28) 40 (75%) (14%) $ (115) 47 $ Adjusted operating expenses $4,370 (non-GAAP basis) . . . . . . . . . . . . . (a) Numbers do not sum due to rounding. (6%) $4,669 (13%) $5,359 In millions of dollars 2010 Change 2009(a) Change 2008 Non-operating expense,(b) net (GAAP basis) . . . . . . . . . . . . . . . . . Remove favorable (unfavorable) special items: $154 3% $ 149 (72%) $ 537 Impairment of newspaper publishing partnerships and other equity method investments . . . . Debt exchange gain . . . . . . . . . . Impairment of publishing assets sold . . . . . . . . . . . . . . . . . Tysons land sale gain . . . . . . . . $ (3) $ — (71%) *** $ (9) $ 43 (98%) *** $ — $ — *** *** $ (28) $ — *** *** $(382) $ — $ — $ 26 Adjusted nonoperating expense (non-GAAP basis) . . . . . . . . . . . . . $151 (a) Numbers do not sum due to rounding. (b) Includes interest expense, equity income in unconsolidated investees and other non-operating items. (15%) $ 154 (2%) $ 181 33 Operating income adjusted to remove the effect of certain special items is as follows: In millions of dollars Operating expenses for publishing include the effects of the special items which are more fully discussed on page 30 and in Notes 3 and 4 to the Consolidated Financial Statements. Operating expenses adjusted for the effect of special items are as follows: Operating income (GAAP basis) Remove (favorable) unfavorable special items: $1,000 39% $ 719 *** $(6,728) In millions of dollars 2010(a) Change 2009 Change 2008 Facility consolidation and asset impairment charges . . . Workforce restructuring and related expenses . . . . . . . Pension gains . . . . . . . . . . . . $ 57 (57%) $ 133 (98%) $ 7,940 12 $ $ — (59%) *** $ 28 $ (40) (75%) (14%) $ $ 115 (47) Adjusted operating income (non-GAAP basis) . . . . . . . . . . . $1,068 (a) Numbers do not sum due to rounding. 27% $ 840 (34%) $ 1,280 On an as adjusted basis using non-GAAP amounts for expenses, operating results were as follows: In millions of dollars Operating expenses (GAAP basis) . . . . . . . . . . . . . . Remove favorable (unfavorable) special items: Facility consolidation and asset impairment charges . . Workforce restructuring and related expenses . . . . . . Pension gains . . . . . . . . . . . . 2010(a) Change 2009(a) Change 2008 $3,403 (10%) $3,776 (70%) $12,578 $ (36) (64%) $ (99) (99%) $ (7,915) (64%) $ (10) $ — *** $ (27) 40 $ (72%) $ 7% $ (98) 37 Adjusted operating expenses (non-GAAP basis) . . . . . . . . . . $3,358 (a) Numbers do not sum due to rounding. (9%) $3,689 (20%) $ 4,602 Operating revenues . . . . . . . . . . Operating expenses . . . . . . . . . . Operating income . . . . . . . . . . . Non-operating expense . . . . . . Income from continuing operations per share-diluted . . . $ 2.44 (a) Numbers do not sum due to rounding. Consolidated Summary-Non-GAAP Basis Publishing operating results excluding the effects of the above spe- 2010(a) Change 2009(a) Change 2008(a) $6,640 $5,510 $ 5,439 (1%) $5,359 (6%) $ 4,370 $4,669 $1,280 27% $ 840 $ 1,068 $ 181 $ 154 (2%) $ 151 (17%) (13%) (34%) (15%) cial items were as follows: In millions of dollars Publishing Summary-Non-GAAP Basis 2010 Change 2009 Change 2008 32% $ 1.85 (46%) $ 3.40 Operating revenues . . . . . . . . . . Operating expenses . . . . . . . . . . $ 4,051 $ 3,358 Operating income . . . . . . . . . . $ 693 (6%) (9%) 15% $4,292 $3,689 (23%) (20%) $ 5,586 $ 4,602 $ 603 (39%) $ 984 A discussion of operating results of the compan y’s publishing, digital and broadcasting segments, along with other f actors affecting net income attributable to Gannett, is as follows: Publishing segment In addition to its domestic local ne wspapers and affiliated web sites, the company’s publishing operations include USA TODAY, USA WEEKEND, Newsquest, which publishes daily and non-daily news- papers in the U.K., Clipper Magazine, Gannett Healthcare Group, Gannett Government Media, Gannett Offset commercial printing and other advertising and marketing services businesses. The pub- lishing segment in 2010 contributed 74% of the compan y’s rev- enues. Publishing operating results were as follows: In millions of dollars 2010 Change 2009 Change 2008 Revenues . . . . . . . . . . . . . . . . . . Expenses . . . . . . . . . . . . . . . . . . $4,051 $3,403 (6%) (10%) $4,292 $3,776 (23%) (70%) $ 5,586 $12,578 Operating income (loss) . . . . . . $ 648 25% $ 516 *** $(6,992) 34 Foreign currency translation: The average exchange rate used to translate U.K. publishing results was 1.55 for 2010, 1.56 for 2009 and 1.86 for 2008. Therefore, publishing segment revenue, expense and operating income trend lower from 2008 to 2009 and 2009 to 2010 because of rate declines. Publishing operating revenues: Publishing operating revenues are derived principally from advertising and circulation sales, which accounted for 67% and 27%, respecti vely, of total publish- ing revenues in 2010. Ad revenues include those derived from advertising placed with affiliated Internet sites which include rev- enue in the classif ied, retail and national ad cate gories. Other pub- lishing revenues are mainly from commercial printing. The table below presents the principal components of pub lish- ing revenues for the last three y ears. Publishing operating revenues, in millions of dollars Advertising . . . . . . . . . . . . . . . . Circulation . . . . . . . . . . . . . . . . Commercial printing and other . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . $ 4,051 (a) Numbers do not sum due to rounding. 2010(a) Change 2009(a) Change $ 2,711 $ 1,087 $2,888 $1,145 (29%) (4%) (6%) (5%) 2008 $4,041 $1,197 $ 254 (2%) (6%) $ 260 (25%) $ 348 $4,292 (23%) $5,586 The table below presents the principal components of pub lish- ing advertising revenues for the last three y ears. These amounts include ad revenue from printed publications as well as online ad revenue from web sites affiliated with the publications. Advertising revenues, in millions of dollars Retail . . . . . . . . . . . . . . . . . National . . . . . . . . . . . . . . . Classified . . . . . . . . . . . . . . Total ad revenue . . . . . . . . . 2010 $1,384 $ 501 $ 826 $2,711 Change (6%) (4%) (7%) (6%) 2009 $1,480 $ 522 $ 886 $2,888 Change (22%) (22%) (40%) (29%) 2008 $1,896 $ 670 $1,475 $4,041 Publishing revenue comparisons 2010-2009: Advertising Revenue: Advertising revenues for 2010 decreased $178 million or 6%. The rate of decline generally nar- rowed over the course of the y ear as economic conditions slowly stabilized and sales initiatives took hold. Early in the year, revenue declines were the most pronounced due in lar ge measure to the more severe global economic conditions. The table below presents the percentage change in 2010 com- pared to 2009 for each of the major ad re venue categories, by quarter. Advertising Revenue Comparisons by Quarter Retail . . . . . . . . . . . . . . . . . . . . . National . . . . . . . . . . . . . . . . . . . Classified . . . . . . . . . . . . . . . . . Total advertising . . . . . . . . . . . . Q1 (9%) (4%) (9%) (8%) Q2 (6%) (4%) (6%) (6%) Q3 (6%) 1% (6%) (5%) Q4 (5%) (8%) (6%) (6%) Ad revenues were lower in both the U.S. and the U.K. In the U.K., in local cur rency, ad revenues were down more than in the U.S. U.K. ad revenue declines were impacted by a slightly lower average exchange rate for 2010. In U.S. dollars, Newsquest ad revenues were down 8% compared with a 5% decline for U.S. publishing. The table below presents the percentage change for the retail, national, and classif ied categories for 2010 compared to 2009. National ad revenues were down $21 million or 4% in 2010, primarily due to lower ad sales for USA TODAY and its associated businesses, partially offset by an increase in national ad revenues for U.S. Community Publishing. At USA TODAY, print ad rev- enues were down 13% for the year, reflecting weakness in travel, telecommunications and pharmaceutical, partially offset by an increase in the automotive and retail categories. Paid ad pages were down 1% for the year and totaled 2,299 in 2010 compared to 2,326 in 2009. National advertising revenues excluding USA TODAY and USA WEEKEND were 3% higher in 2010. The table below presents the percentage change in classified categories for 2010 compared to 2009. Classified Revenue Year Over Year Comparisons U.S. Publishing Automotive . . . . . Employment . . . . Real Estate . . . . . . Legal . . . . . . . . . . Other . . . . . . . . . . Total . . . . . . . . . . . 5% 3% (19%) (3%) (7%) (4%) Newsquest Total Publishing (constant currency) (in pounds) 3% (7%) (5%) (17%) (13%) 1% (3%) — (8%) (10%) (6%) (9%) Classified ad revenues decreased $60 million or 7% in 2010 with a decline of 4% in the U.S. and 10% in the U.K. Domestically, classified advertising improved sequentially throughout the year. Automotive and employment were especially strong and were up 5% and 3%, respectively. Real estate continued to reflect the housing issues nationwide and w as down 19% for the year. Classified advertising in the U.K. continues to remain chal- lenging. Real estate was a bright spot and w as up 1% in pounds for the year, while automotive and employment were down 7% and 17%, respectively. Digital revenues in the publishing segment were up for the year in the U.S. as well as at Newsquest in the U.K. U.S. Community Publishing digital revenues were up 11%, reflecting strong increas- es in most categories. Digital revenues at USA TODAY increased 12% for the year, while digital revenues at Newsquest increased 6% in local cur rency. Advertising Revenue Year Over Year Comparisons Publishing advertising revenues in millions. U.S. Publishing Retail . . . . . . . . . . National . . . . . . . . Classified . . . . . . . Total . . . . . . . . . . . (7%) (3%) (4%) (5%) Newsquest Total Publishing (constant currency) (in pounds) (6%) (5%) (3%) (5%) (6%) (9%) (6%) (8%) Retail ad revenues were down $96 million or 6% in 2010. In the U.S., revenues were lower in most principal categories, with the more significant declines occurring in the department store, f inan- cial and telecommunications categories, partially offset by an increase in retail online advertising. Retail ad revenues were slight- ly better in the U.K. and on a constant cur rency basis were down 5% in 2010. Retail revenue declines narrowed throughout the year, and the fourth quarter was the best comparison quar ter of the year. 08 09 10 $4041 $2888 $2711 Looking to 2011, the company expects continuing challenges in the retail and national segments and in the real estate cate gory of classified. If the economy moves forward, continued gains in auto and employment may be achieved. 35 Circulation Revenue: Newspaper circulation revenues Publishing revenue comparisons 2009-2008: Advertising Revenue: Advertising revenues for 2009 decreased $1.15 billion or 29%. The rate of decline nar rowed over the course of the year as economic conditions slowly stabilized. Early in the year, revenue declines were the most pronounced due in large measure to the severe global economic recession. Real estate and employment advertising were especially hampered by the recession. As the year progressed, ad revenue declines nar- rowed in each successive quarter. Ad revenues were lower in both the U.S. and the U.K. In the U.K., in local cur rency, ad revenues were down more than in the U.S. U.K. ad revenue declines were exacerbated by a lower average exchange rate for 2009. In U.S. dollars, Newsquest ad revenues were down 44% compared with a 25% decline for U.S. publishing. Retail ad revenues were down $416 million or 22% in 2009. In the U.S., revenues were lower in most principal categories, with the more significant declines occurring in the department store, furni- ture, entertainment, financial and telecommunications categories. Retail ad revenues declined at a g reater rate in the U.K. due to the currency impact. On a constant cur rency basis, retail ad revenues in the U.K. were down 19%. Retail revenue declines narrowed in the third and again in the four th quarter. National ad revenues were down $148 million or 22% in 2009, primarily due to lower ad sales for USA TODAY branded publica- tions and national ad revenues for U.S. Community Publishing. In the fourth quarter, the decline in national ad re venues moderated significantly and in the month of December national ad re venues were higher than 2008 levels. At USA TODAY, ad revenues were down 29% for the year, reflecting the continued slowdown in the travel and lodging industries. Paid ad pages were down 26% for the year and totaled 2,326 in 2009 compared to 3,158 in 2008. Fourth quarter comparisons were the best of the y ear. Classified ad revenues decreased $589 million or 40% in 2009 with a decline of 35% in the U.S. and 50% in the U.K. The curren- cy impact contributed to the U.K. decline. On a constant cur rency basis, classified ad revenues in the U.K. were down 39%. Classified revenue in both countries was affected by the global recession and particularly the weakness in employment and hous- ing. Classified revenue declines occurred in all three principal cat- egories of employment (down 58%), real estate (down 43%), and automotive (down 34%). Declines in all cate gories narrowed over the course of the year. declined $58 million or 5% over 2009 as circulation revenues for both U.S. and U.K. newspapers were generally lower. Revenue comparisons reflect generally lower circulation volumes partially offset by limited price increases. Daily net paid circulation, exclud- ing USA TODAY, declined 7%, while Sunday net paid circulation declined 4%. Daily and Sunday net paid circulation comparisons improved sequentially throughout the year as greater focus was placed on increasing home delivery circulation. U.S. Community Publishing newspapers reported that Sunday home delivery circu- lation was up 1% in the September 2010 Pub lisher’s Statement, with 28 publishing sites showing year over year Sunday circulation gains. Circulation revenues were lower at USA TODAY, reflecting lower average daily circulation. USA TODAY’s average daily circu- lation for 2010 decreased 5% to 1,817,405. USA TODAY reported an average daily paid circulation of 1,830,594 in the Audit Bureau of Circulations (ABC) Publisher’s Statement for the 26 weeks ended Sept. 26, 2010, a 4% decrease o ver the comparable period in 2009. In the fourth quarter of 2010, average daily net paid circula- tion comparisons for USA TODAY improved sequentially and were only 6,000 copies lower than the fourth quarter of 2009. For local newspapers, morning circulation accounted for approximately 94% of total daily volume, while evening circula- tion accounted for 6%. Publishing circulation revenues in millions. 08 09 10 $1197 $1145 $1087 Circulation volume for the company’s local newspapers is sum- marized in the table below. In 2010, the company reclassified certain net paid circulation volume from evening to morning distribution due to changes in delivery times. All prior periods have been restated to conform to the new classifications. Average net paid circulation volume, in thousands 2009 Change 2010 Change 2008 Local Newspapers Morning . . . . . . . . . . . . Evening . . . . . . . . . . . . . Total daily . . . . . . . . . . . Sunday . . . . . . . . . . . . . . 3,700 229 3,929 4,845 (7%) (8%) (7%) (4%) 3,969 249 4,218 5,030 (12%) (12%) (12%) (7%) 4,495 283 4,778 5,396 Other Revenue: Commercial printing and other publishing revenues decreased 2% to $254 million in 2010 due primaril y to the sale of a U.K. commercial printing business early in the third quarter of 2009, partially offset by gains in delivery revenue for non-company publications. 36 Circulation Revenue: Newspaper circulation revenues declined $52 million or 4% over 2008 as circulation revenues for U.S. and U.K. newspapers were lower. Revenue comparisons reflect lower circulation volumes partially offset by price increases. Daily net paid circulation, excluding USA TODAY, declined 12%, while Sunday net paid circulation declined 7%. Volumes were affected, in part, by single copy and home delivery price increases at most U.S. newspapers and by selective culling of distribution in certain areas. Circulation revenues were lower at USA TODAY, reflecting lower average daily circulation, partially offset by a December 2008 increase in the single copy price of the newspaper at news- stands and vending machines from $.75 to $1.00. USA TODAY’s average daily circulation for 2009 decreased 16% to 1,904,362. USA TODAY reported an average daily paid circulation of 1,900,116 in the Audit Bureau of Circulations (ABC) Pub lisher’s Statement for the 26 weeks ended Sept. 27, 2009, a 17% decrease over the comparable period in 2008. The circulation volume decline at USA TODAY reflected the general recessionar y economic condi- tions particularly as they contributed to lower business and leisure travel. For local newspapers, morning circulation accounted for approximately 94% of total daily volume, while evening circula- tion accounted for 6%. Other Revenue: Commercial printing and other publishing revenues declined 25% to $260 million in 2009 due primaril y to generally lower commercial printing revenue in the U.S. and U.K. and from the sale of a U.K. commercial printing business early in the third quarter of 2009. Publishing expense comparisons 2010-2009: Publishing oper- ating costs declined 10% to $3.4 billion in 2010, primaril y due to the impact of strategic efforts to implement operating efficiencies and facility consolidations and signif icantly lower newsprint expense. Absent special items in both y ears, as reflected in the tab le on page 34, publishing segment expense was down 9%. Significant cost savings were achieved through tight cost con- trol measures in the U.S. and the U.K. as well as by permanently restructuring the company’s cost base and creating operating ef fi- ciencies wherever possible. Efforts included numerous facility con- solidations, centralization, compensation actions and outsourcing. Savings reflect the impact of headcount reductions in 2010 and 2009. Lower newsprint expense was also a significant contributor to the savings. Publishing payroll costs were down 5%, reflecting the impact of headcount reductions partially offset by lower savings from fur- loughs in 2010 than in 2009. Newsprint expense was down 23%, reflecting lower consump- tion, down 10%, including savings from web width reductions and greater use of light weight newsprint. Newsprint usage prices rose throughout the year but still f inished down 15% for the full year. Other factors contributing to the decline in costs include the impact of a lower U.K. exchange rate, and the sale in the earl y third quarter of 2009 of a commercial printing business in the U .K. Publishing expense comparisons 2009-2008: Publishing oper- ating costs declined 70% to $3.78 billion in 2009, primaril y due to non cash impairment charges incurred in 2008. Absent the special items in both years, as reflected in the tab le on page 34, publishing segment expense was down 20% from 2008. Significant cost savings were achieved in 2009 through strict cost control measures in the U.S. and the U.K. as well as by means of permanently restructuring the company’s cost base and creating efficiencies wherever possible. Efforts included numerous facility consolidations, centralization, furloughs and outsourcing. Savings reflect the impact of substantial headcount reductions in 2009 and 2008. Lower newsprint expense was also a signif icant contributor to the savings. Publishing payroll costs were down 23% in 2009, reflecting the impact of headcount reductions in both y ears as well as the fur- loughs the majority of company employees were required to take in the first and second quarters of 2009. Newsprint expense was down 34%, reflecting sharply lower consumption, down 31%, including savings from web width reduc- tions and greater use of light weight newsprint. Newsprint usage prices declined sharply throughout the second half of the y ear and finished down 4% for the full year. Other factors contributing to the decline in costs include the impact of a lower U.K. exchange rate, and the sale in the earl y third quarter of 2009 of a commercial printing business in the U .K. partially offset by higher pension cost. Outlook for 2011: The company expects publishing expenses to decline in 2011, reflecting headcount reductions, f acility consolida- tions and lower pension expense. These factors will be partially off- set by higher newsprint expense driven by higher prices partially off- set by lower consumption. Publishing operating results 2010-2009: Publishing operating income increased to $648 million in 2010 from $516 million in 2009. The principal factors affecting reported operating results comparisons for the full year were the following: • higher reported operating results at many of the company’s larg- er domestic daily newspapers and signif icantly lower newsprint expense; higher reported operating results at Newsquest over 2009; continued cost containment efforts throughout U.S. and U.K. operations; and lower charges in 2010 from special items, par ticularly those related to facility consolidations and asset impairment. • • • Excluding special items described in more detail on page 34 and Notes 3 and 4 of the Consolidated F inancial Statements, pub- lishing operating income increased 15%. 37 Reported digital revenues increased $32 million or 5% o ver 2009, reflecting signif icant gains at CareerBuilder, PointRoll and ShopLocal. Digital expenses in 2010 decreased 1% to $535 million, prima- rily due to a decrease in asset impair ment charges, which totaled $13 million in 2010 and $25 million in 2009. Excluding special impairment charges, operating costs for digi- tal increased 1%. Operating income e xcluding special items rose $29 million or 43%, reflecting strong gains in 2010 for CareerBuilder, PointRoll and ShopLocal. CareerBuilder operations are predominately based in North America, however expansion efforts are underway in parts of Europe and Asia. CareerBuilder is the nation’s largest online recruitment and career advancement source for employers, employ- ees, recruiters and job seekers. Its North American network rev- enue is driven mainly from its own sales force but it also derives revenues from its owner affiliated newspapers, including the com- pany’s newspapers, which sell various CareerBuilder employment products including upsells of print employment ads from newspa- pers. For the company’s financial reporting purposes, CareerBuilder revenues exclude amounts recorded at Gannett- owned newspapers. North American network revenue increased 3%, compared to last year, with all of the increase attributable to revenues CareerBuilder derived from its own sales efforts. Revenues derived from its owner-affiliated newspapers were down slightly, while revenues from its own sales efforts were up 4% in 2010. Digital results 2009-2008: Reported digital revenues increased $305 million and reported digital costs increased $280 million from 2008. The year-over-year increase is primarily due to the full consolidation of CareerBuilder and ShopLocal be ginning with the third quarter of 2008. Digital costs in 2009 also include $25 mil- lion in special impairment charges, while costs in 2008 include $17 million in special workforce restructuring and impairment charges. Operating income excluding special items rose $32 mil- lion or 89%. Operating income for the digital se gment reflects solid results in 2009 for CareerBuilder, PointRoll and ShopLocal. Earnings from these businesses were partially offset by invest- ments in other digital b usinesses. On a pro forma basis, digital revenues decreased 15% in 2009. This reflects softer employment advertising demand that impacted CareerBuilder results, offset partially by strong revenue growth at PointRoll and ShopLocal. Excluding the special items and on a pro forma basis, operating costs for digital w ould have been 21% lower, reflecting signif icant savings at CareerBuilder and ShopLocal. Outlook for 2011: The company expects digital segment rev- enues and prof its to grow again in 2011, with improved results at its key business units. Publishing operating results 2009-2008: Publishing operating income increased to $516 million in 2009 from a loss of $6.99 bil- lion in 2008. Excluding special items described in more detail on page 34 and Notes 3 and 4 of the Consolidated F inancial Statements, publishing operating income declined 39%. However, operating income comparisons excluding special items improved each quarter of 2009. The principal factors affecting operating results comparisons for the full y ear were the following: • lower operating results at most U.S. and U.K. properties as all ad revenue categories were affected by difficult economic con- ditions. Operating results improved throughout the year and many properties had increased operating income against last year in the fourth quarter; ad revenue losses attributed to increased competition from other media, particularly the Internet; sharply lower newsprint usage and a decline in usage price led to significant savings; favorable impact in 2009 of workforce restructuring actions; furloughs in the f irst and second quarter for the majority of employees; negative impact of cur rency translation at a lower rate in 2009; and cost control efforts throughout U.S. and U.K. operations con- tributed to signif icant year-over-year savings. • • • • • • Digital Beginning with 2008, a new digital business segment was reported, which includes CareerBuilder and ShopLocal from the dates of their full consolidation, as well as PointRoll, Planet Discover, and Schedule Star. Prior period results for PointRoll, Planet Discover and Schedule Star have been reclassif ied from the publishing seg- ment to the new digital segment. On Sept. 3, 2008, the company increased its ownership in CareerBuilder to 50.8% from 40.8%, obtaining a controlling interest, and therefore, the results of CareerBuilder since then ha ve been fully consolidated. On June 30, 2008, the company increased its ownership in ShopLocal to 100% from 42.5%, and from that date the results of ShopLocal have been fully consolidated. Prior to the increased investment ownership, the company’s equity share of CareerBuilder and ShopLocal results were reported as equity earn- ings. Subsequent to the CareerBuilder consolidation, the compan y reflects a noncontrolling interest charge in its Statements of Income (Loss) related to the other par tners’ ownership interest. This charge is reflected as “Net income attributable to noncontrol- ling interests.” Over the last three years since the digital segment was formed, reported digital revenues, expenses and operating income were as follows: In millions of dollars Revenues . . . . . . . . . . . . . Expenses . . . . . . . . . . . . . Operating income . . . . . . 2010 $618 $535 $ 83 Change 5% (1%) 93% 2009 $586 $543 $ 43 Change *** *** *** 2008 $281 $262 $ 19 38 Broadcasting The company’s broadcasting operations at the end of 2010 included 23 television stations and affiliated web sites in markets with a total of more than 21 million households reaching 18.2% of the U.S. population. The Broadcasting Division also includes Captivate Network. Broadcasting revenues accounted for approximately 14%, 11% and 12% of the company’s reported operating revenues in 2010, 2009 and 2008, respectively. Over the last three years, broadcasting revenues, expenses and operating income were as follows: In millions of dollars Revenues . . . . . . . . . . . . . . Expenses . . . . . . . . . . . . . . Operating income . . . . . . . . (a) Numbers do not sum due to rounding. 2010(a) $770 $440 $329 Change 22% 6% 52% 2009 $631 $415 $216 Change (18%) (11%) (29%) 2008 $773 $467 $306 Broadcast revenues increased $138 million or 22% for 2010. Year-over-year revenue comparisons were favorably impacted by $107 million in ad revenues associated with the Winter Olympics and political/election-related advertising in 2010. Excluding the impact of Olympic and political-related advertising in both years, broadcast revenues were up 8% in 2010. This reflects a signif icant increase in core advertising, led by the automotive and f inancial categories. Higher retransmission and Captivate revenues also con- tributed to the increase. Excluding Captivate, broadcast revenues increased 22%. Local television revenues increased 12% while national revenues increased 44%. Excluding the impact of political in both y ears, local revenues increased 7% and national revenues 17%. Broadcast costs increased 6% to $440 million in 2010. Excluding special item charges in both years, broadcast expenses increased 6%. The increase reflects higher sales and mark eting costs in 2010 associated with higher re venues, partially offset by the absence of furlough savings in 2010 compared to 2009. Reported operating income increased 52% to $329 million in 2010 reflecting higher political, Olympic, core, retransmission and Captivate revenue, partially offset by modestly higher expense associated with the increased revenue. Broadcast results 2009-2008: Broadcast revenues decreased $141 million or 18% for 2009. Year-over-year revenue compar- isons were unfavorably impacted by $118 million in ad revenues associated with the 2008 Summer Olympics and political/election- related advertising. Excluding the impact of Olympic- and politi- cal-related advertising in both years, broadcast revenues were down 6% in 2009. This decline reflects losses in several core cate- gories, especially automotive, partially offset by an almost three- fold increase in retransmission revenues. Excluding Captivate, broadcast revenues declined 19%. Local television revenues declined 21% while national revenues declined 31%. Excluding the impact of political in both y ears, local rev- enues declined 18% and national revenues 15%. Broadcast costs declined 11% to $415 million in 2009. Excluding special item charges in both years, broadcast expenses declined 11%. The decline reflects ongoing efforts to control costs and create efficiencies, the carryover impact of workforce restruc- turing in 2008 as well as payroll savings from furloughs and salar y reductions in the f irst and second quarters of 2009. Reported operating income declined 29% to $216 million in 2009 reflecting the impact of lower core revenues and the absence of incremental Olympic and political revenue achieved in 2008. These factors were partially offset by increased retransmission rev- enue in 2009 and continued savings from strong efforts to control costs. Broadcasting revenues in millions, as reported. 08 09 10 $631 $773 $770 Outlook for 2011: Revenue comparisons for 2011 will be chal- lenging against the strong 2010 Ol ympics and politically related advertising of $107 million, as well as the absence of the Super Bowl from the company’s CBS stations. Partially offsetting the absence of these revenues, the company expects core advertising and retransmission revenue improvement for television and higher revenues at Captivate. Operating prof its are expected to be lower, however. 39 Consolidated operating expenses Over the last three years, the company’s consolidated operating expenses were as follows: Consolidated operating expenses, in millions of dollars 2009 $ 3,230 Change (8%) 2010 $ 2,980 Change (18%) 2008 $ 3,916 $ 1,188 183 $ — (12%) $ 1,187 208 $ (5%) (9%) $ 1,253 228 $ Payroll, benefits and newsprint costs (along with cer tain other production material costs), the largest elements of the company’s normal operating expenses, are presented below, expressed as a percentage of total pre-tax operating e xpenses (excluding the spe- cial items discussed on page 30). Payroll and employee benefits . . . . . . . Newsprint and other production material . . . . . . . . . . . . . . . 2010 48.2% 2009 47.4% 2008 47.8% 12.2% 13.4% 16.8% $ 31 (5%) $ 33 6% $ 31 Operating expense comparisons 2009-2008: The 13% decline Cost of sales . . . . . . . . . . . . Selling, general and admin. expenses . . . . . . . . . . Depreciation . . . . . . . . . . . . Amortization of intangible assets . . . . . . . . . . Facility consolidation and asset impairment charges . . Total . . . . . . . . . . . . . . . . . . . in 2009 in consolidated operating costs e xcluding special items is attributable in part to sharply lower newsprint expense (down 34%) reflecting lower consumption and lower prices. Payroll savings were also significant, from reduced headcount resulting from consolida- tions and other restructuring/downsizing efforts as well as from fur- loughs. Other savings were achieved from generally strong overall cost controls and cost comparisons were also favorably affected by a lower foreign exchange rate for U.K. expenses. The effect of these cost reduction factors was partially offset by the consolidation of CareerBuilder and ShopLocal for only part of 2008 but for all of 2009. Total reported operating expense decreased 64% to $4.79 billion primarily due to the special items in 2008. On a pro for ma basis and excluding special items, total operating e xpense declined 18%. Selling, general and administrative expenses declined $66 million or 5% reflecting strong cost controls, furloughs in the f irst and sec- ond quarters of 2009, savings from workforce restructuring in prior periods, partially offset by the full consolidation of CareerBuilder and ShopLocal for all of 2009. Depreciation expense was 9% lower in 2009, reflecting reduced capital spending, reduced depreciation resulting from recent impair- ment charges and certain assets reaching the end of their depreciab le life. The non-cash facility consolidation and asset impair ment charges for all years are more fully discussed on page 30 and in Notes 3 and 4 to the Consolidated Financial Statements. Outlook for 2011: Excluding the effect of special items charges in 2010, the company expects that total operating expenses may increase modestly in 2011, reflecting higher newsprint expense and added digital segment costs associated with higher anticipated revenues. Payroll, pension and depreciation expenses are expected to be lower in 2011. With respect to potential goodwill impair ment charges, the company does not believe that any of its major repor ting units, including the U.K. and U.S. community newspaper publishing and broadcast groups and its principal digital business, are at risk of requiring an impairment charge in the foreseeable future. Refer to Note 1 to the Consolidated F inancial Statements for a discussion of the goodwill impairment test. The company will undertake further facility consolidation, workforce restructuring and other actions, depending upon devel- oping business conditions. $ 57 $ 4,439 (57%) (7%) $ 133 $ 4,791 (98%) (64%) $ 7,940 $13,368 Total operating expenses adjusted to remove the effect of certain special items are as follows: In millions of dollars 2010 Change 2009(a) Change 2008(a) Operating expenses (GAAP basis) . . . . . . . . . . . Remove favorable (unfavorable) special items: $ 4,439 (7%) $ 4,791 (64%) $13,368 $ (57) Facility consolidation and asset impairment charges Workforce restructuring and related expenses . . . . Pension gains . . . . . . . . . Adjusted operating expenses (non-GAAP basis) . . . . . . . . (a) Numbers do not sum due to rounding. $ (12) $ — $ 4,370 (57%) $ (133) (98%) $(7,940) (59%) *** $ (28) 40 $ (75%) (14%) $ (115) 47 $ (6%) $ 4,669 (13%) $ 5,359 Total reported operating expense decreased 7% to $4.44 billion in 2010. Consolidated operating costs excluding special items declined 6%. Both operating expenses and non-GAAP operating expenses declined due in par t to sharply lower newsprint expense (down 23%) reflecting lower consumption and lower prices. Payroll savings were also signif icant, from reduced headcount resulting from consolidations and other restructuring efforts, partially offset by lower furlough savings in 2010 than in 2009. Strong cost controls were in place throughout the company, however expenses increased modestly in broadcasting associated with the signif icant increase in revenue. Depreciation expense was 12% lower in 2010, reflecting reduced capital spending, reduced depreciation resulting from recent impair- ment charges and certain assets reaching the end of their depreciab le life. The non-cash facility consolidation and asset impair ment charges for all years are more fully discussed on page 30 and in Notes 3 and 4 to the Consolidated Financial Statements. 40 Provision (benefit) for income taxes on income (loss) from continuing operations The company reported pre-tax income attributable to Gannett of $811 million for 2010. This pre-tax income includes f acility con- solidation and asset impairment charges and workforce restructur- ing costs as described on page 30. In addition, the provision for income taxes reflects a special net tax benef it primarily from the release of certain state tax reserves due to the lapse of statutes of limitations. The effective tax rate on this pre-tax income is 30.1%. Excluding the effects of all special items, the company’s effective tax rate is 33.1%. The company reported pre-tax income attributable to Gannett of $543 million for 2009. This pre-tax income includes f acility consolidation and asset impairment charges, workforce restructur- ing costs and certain gains, as described on page 30. The effective tax rate on this pre-tax income is 35.2%. Excluding the effects of all special items, the company’s effective tax rate is 33.6%. The company reported a pre-tax loss attrib utable to Gannett of $7.27 billion for 2008. This pre-tax loss includes impair ment charges for intangible and other assets, the majority of w hich are not deductible for income tax pur poses. Therefore, the effective tax benefit rate on the pre-tax losses, including the impair ment charges, was 8.9%. Excluding the effects of all special items, the company’s effective tax rate was 28.7%. The lower effective tax rate for 2010 compared to 2009 is due to the release of state tax reser ves primarily related to the sale of a business in a prior year upon the expiration of statutes of limita- tions, as further noted in the Discussion of Special Char ges and Credits on page 30. For 2009, excluding the effect of special items, the increase in the company’s effective tax rate compared with 2008 is due prima- rily to the benef its in 2008 of f avorable U.S. state and U.K tax set- tlements and the release of cer tain state tax reserves upon the expi- ration of statutes of limitations. Further information concerning income tax matters is con- tained in Note 10 of the Consolidated Financial Statements. Non-operating income and expense Equity earnings: This income statement category reflects results from unconsolidated minority interest investments, including the company’s equity share of operating results from its ne wspaper part- nerships, including the Tucson joint operating agency, the California Newspapers Partnership and the Texas-New Mexico Newspapers Partnership, as well as from investments in certain other digital/new technology businesses. The company’s net equity income in unconsolidated in vestees for 2010 was $19 million, an increase of $15 million o ver 2009. Both years included impairment charges related to certain digital business investments totaling $3 million in 2010 and $9 million in 2009. Absent special impairment charges, the company’s net equity income in unconsolidated investees would have increased $9 million or 65% in 2010. This increase reflects better results at cer tain news- paper partnerships and digital investments, particularly Classified Ventures. The company’s net equity loss in unconsolidated in vestees for 2008 includes $382 million of impair ment charges related to equity investments in newspaper partnerships and certain other businesses (discussed more fully on page 30 of this report and Note 3 to the Consolidated Financial Statements). Absent the special impairment charges in 2009 and 2008, the compan y’s net equity income in unconsolidated investees increased $8 million for 2009, reflecting significantly improved performance at certain of the company’s dig- ital investments, particularly Classified Ventures. Interest expense: Interest expense decreased $3 million or 2% in 2010 as compared to 2009, reflecting signif icantly lower aver- age debt balances, partially offset by higher rates. Interest expense decreased $15 million or 8% in 2009 as com- pared to 2008, reflecting lower average debt balances and lower rates. The company reduced its long-term debt by $710 million or 23% in 2010. At the end of 2010, the compan y’s senior leverage ratio was 1.97x, well under the ceiling designated b y the financial covenant under its revolving credit facilities. A further discussion of the company’s borrowing and related interest cost is presented in the “Liquidity and capital resources” section of this report beginning on page 43, and in Note 7 to the Consolidated Financial Statements. Other non-operating items: In 2010, the company realized net gains on its investments offset by currency losses resulting in non- operating income of $111,000. In 2009, the compan y realized a $43 million non-cash debt exchange gain offset partially by a $28 mil- lion non-cash charge for the write-down of certain publishing busi- ness assets sold. In 2008, the company realized a gain on the sale of a parcel of land adjacent to its headquar ters building along with several other gains including those realized from the sale of investments and other assets. These gains were partially offset by foreign currency losses. Outlook for 2011: The company expects its net interest expense to be flat for the y ear, reflecting lower average debt bal- ances, offset by higher rates due to the recent f ixed rate debt financing and revolving credit agreement extensions. 41 Income (loss) from continuing operations attributable to Gannett Co., Inc. Income (loss) from continuing operations attrib utable to Gannett Co., Inc. and related per share amounts are presented in the tab le below. In millions of dollars, except per share amounts Income (loss) . . . . . . . . Per diluted share . . . . . . 2010 $ 567 $2.35 Change 61% 58% 2009 $ 351 $1.49 Change *** *** 2008 $(6,627) $(29.02) Income (loss) attributable to Gannett Co., Inc. consists of income from continuing operations reduced by net income attribut- able to noncontrolling interests, primarily from CareerBuilder. Net income attributable to noncontrolling interests was $35 million, $27 million and $7 million in 2010, 2009 and 2008, respecti vely. The increase in 2009 from 2008 is attributable to the full consolidation of CareerBuilder beginning in September of 2008. The 2010 results reflect unf avorable operating and non-operat- ing after-tax special items charges of $50 million and $26.5 million in special net tax benef its. The 2009 results reflect unf avorable operating and non-operat- ing after-tax special items of $86 million, w hile 2008 reflects unfa- vorable operating and non-operating after-tax special items of $7.40 billion. The special items refer red to in the preceeding parag raphs are described in detail on page 30 of this report. Income from continuing operations attributable to Gannett Co., Inc. and related per share amounts e xcluding the impact of special items are presented in the tab le below. In millions of dollars, except per share amounts Income . . . . . . . . . . . . . Per diluted share . . . . . . 2010 $ 591 $2.44 Change 35% 32% 2009 $ 438 $1.85 Change (44%) (46%) 2008 $ 775 $3.40 Discontinued operations Earnings from discontinued operations represent the combined operating results (net of income taxes) of The Honolulu Advertiser and its related assets as well as a small director y publishing opera- tion in Michigan, each sold during the second quar ter of 2010. The revenues and expenses from each of these proper ties have, along with associated income taxes, been removed from continuing oper- ations and reclassif ied into a single line item amount on the Statements of Income (Loss) titled “(Loss) income from the opera- tion of discontinued operations, net of tax” for each period pre- sented. The loss from discontinued operations for 2008 reflects the intangible and other asset impair ment charges recorded that year that were associated with these two businesses. In 2010 the company reported earnings per diluted share of $.08 for the gain on the disposition of these proper ties. Discontinued Operations In thousands, except per share amounts 2010 Change 2009 Change 2008 (Loss) income from operation of discontinued operations, net of tax . . . . Per share – diluted . . . . . . Gain on disposal of publishing businesses, net of tax . . . . . . . . . . . . . . Per share – diluted . . . . . . $ (322) *** — *** $3,790 $0.02 *** *** $(20,626) (0.09) $ $21,195 $0.08 *** *** — — *** *** — — Net income (loss) attributable to Gannett Co., Inc., and related per share amounts are presented in the tab le below, and include income from continuing and discontinued operations. In millions of dollars, except per share amounts Net income (loss) . . . . . . . . Per basic share . . . . . . . . . . Per diluted share . . . . . . . . . 2010 $588 $2.47 $2.43 Change 66% 63% 61% 2009 $355 $1.52 $1.51 Change *** *** *** 2008 $(6,648) $(29.11) $(29.11) 42 FINANCIAL POSITION Liquidity and capital resources The company’s cash flow from operating activities was $773 mil- lion in 2010, down from $867 million in 2009, primaril y reflecting the impact of voluntary pension contributions to the Gannett Retirement Plan of $130 million. Net cash provided by investing activities totaled $63 million. This reflects capital spending of $69 million, $15 million for acqui- sitions, and $11 million for equity in vestments, which were more than offset by proceeds from the sale of cer tain assets of $113 mil- lion and proceeds from investments of $45 million. Cash used for financing activities totaled $751 million in 2010. This reflects the payment of dividends of $38 million, the payment of borrowings under revolving credit facilities of $1,160 million and payments of other indebtedness totaling $50 million. These financing cash flows were partially offset by proceeds of $494 mil- lion from private debt offerings completed in September 2010. Certain key measurements of the elements of w orking capital for the last three years are presented in the following chart: Working capital measurements Current ratio . . . . . . . . . . . . . . . . . . . . . Accounts receivable turnover . . . . . . . . Newsprint inventory turnover . . . . . . . . 2010 1.3-to-1 7.4 5.1 2009 1.2-to-1 6.9 4.5 2008 1.1-to-1 7.4 5.7 The company’s operations have historically generated strong positive cash flow which, along with the company’s program of maintaining bank revolving credit availability, has provided adequate liquidity to meet the company’s requirements, including those for acquisitions. Long-term debt The long-term debt of the company is summarized below: In thousands of dollars Dec. 26, 2010 Dec. 27, 2009 Unsecured notes bearing f ixed rate interest at 5.75% due June 2011 . . . . . . . $ 433,196 $ 432,648 Unsecured floating rate term loan due July 2011 . . . . . . . . . . . . . . . . . . . . . . . . . 180,000 230,000 Unsecured notes bearing f ixed rate interest at 6.375% due April 2012 . . . . . . 306,397 306,260 Borrowings under revolving credit agreements expiring September 2014 . . . 221,000 1,381,000 Unsecured notes bearing f ixed rate interest at 8.75% due November 2014 . . . 246,924 246,304 Unsecured notes bearing f ixed rate interest at 10% due June 2015 . . . . . . . . . 58,007 56,684 Unsecured notes bearing f ixed rate interest at 6.375% due September 2015 . 247,535 — Unsecured notes bearing f ixed rate interest at 10% due April 2016 . . . . . . . . 165,950 162,531 Unsecured notes bearing f ixed rate interest at 9.375% due November 2017 . . 246,830 246,524 Unsecured notes bearing f ixed rate interest at 7.125% due September 2018 . Total long-term debt . . . . . . . . . . . . . . . . . . $ 246,403 2,352,242 — 3,061,951 $ Total average debt outstanding in 2010 and 2009 w as $2.7 billion and $3.6 billion, respectively. The weighted average interest rate on all debt was 6.0% for 2010 and 4.5% for 2009. During 2010 and 2009, the compan y completed a series of financing transactions which significantly improved its debt matu- rity profile. In September 2010, the company completed a private place- ment offering of unsecured senior notes totaling $500 million in two tranches: $250 million with a coupon of 6.375% due 2015 and $250 million with a coupon of 7.125% due 2018. The 2015 notes were priced at 98.970% of f ace value, resulting in a yield to matu- rity of 6.625%. The 2018 notes were priced at 98.527% of f ace value, resulting in a yield to maturity of 7.375%. On or after Sept. 1, 2014, the 2018 notes may be redeemed or purchased b y the company at the applicable redemption price (expressed as a per- centage of the principal amount of the 2018 notes) plus accr ued but unpaid interest thereon to the redemption date, if redeemed during the 12-month period commencing on Sept. 1 of the follow- ing years: 2014 – 103.563%, 2015 – 101.781% and 2016 and thereafter 100.000%. The company used the net proceeds of the offering to partially repay borrowings outstanding under its revolv- ing credit facilities and term loan. In September 2010, the company amended its revolving credit agreements and extended the maturity date with the majority of its lenders from March 15, 2012 to Sept. 30, 2014. Total commit- ments under the amended revolving credit agreements are $1.63 billion through March 15, 2012 and total e xtended commitments from March 15, 2012 to Sept. 30, 2014 will be $1.14 billion. In October 2009, the company completed a private placement offering of $250 million in agg regate principal amount of 8.750% senior notes due 2014 and $250 million in agg regate principal amount of 9.375% senior notes due 2017. The 2014 notes were priced at 98.465% of f ace value, resulting in a yield to maturity of 9.l25%. The 2017 notes were priced at 98.582% of f ace value, resulting in a yield to maturity of 9.625%. On or after No vember 15, 2013, the 2017 notes may be redeemed or purchased b y the company at the applicable redemption price (expressed as a per- centage of principal amount of the 2017 notes) plus accr ued but unpaid interest thereon to the redemption date, if redeemed during the 12-month period commencing on November 15 of the follow- ing years: 2013 – 104.688%, 2014 – 102.344% and 2015 and thereafter 100.000%. The company used the net proceeds from the offering to partially repay borrowings outstanding under its revolv- ing credit facilities and term loan. In May 2009, the company completed a private exchange offer related to its 5.75% f ixed rate notes due June 2011 and its 6.375% fixed rate notes due April 2012. The company exchanged approxi- mately $67 million in principal amount of its 2011 notes for approximately $67 million principal amount of ne w 10% senior notes due 2015, and approximately $193 million in principal amount of its 2012 notes for appro ximately $193 million principal amount of new 10% senior notes due 2016. 43 In connection with the May 2009 exchange transactions and in accordance with the modif ications and extinguishments require- ments of ASC Topic 470, “Debt,” the company recorded a gain of approximately $42.7 million which was classified in “Other non- operating items” in the Statement of Income (Loss) for the second quarter of 2009. This gain resulted from recording the notes at fair value as of the time of the e xchange and extinguishing the old notes at their historical book v alues. Fair value of the notes was based on their trading prices on and shor tly after the exchange date. The discount created by recording the notes at fair value instead of face value is being amortized over the term of the notes to interest expense. The notes issued during 2010 and 2009 with maturity dates in 2014 and thereafter were made available in private offerings that were exempt from the registration requirements of the Securities Act of 1933 (Securities Act). These notes are guaranteed on a sen- ior basis by the subsidiaries of the compan y that guarantee its revolving credit and term loan agreements discussed more fully below. The company’s three revolving credit agreements and its term loan agreement require the company to maintain a senior leverage ratio of less than 3.5x. The agreements also require the company to maintain a total leverage ratio of less than 4.0x. The total leverage ratio would also include any subordinated debt the company may issue in the future. Cur rently, all of the company’s debt is senior and unsecured. At Dec. 26, 2010, the senior le verage ratio was 1.97x. Until March 15, 2012, commitment fees for the re volving cred- it facilities may range from 0.125% to 0.25% depending on credit ratings for the company’s senior unsecured debt from Moody’s Investor Services (Moody’s) and Standard & Poor’s (S&P). The rate currently in effect is 0.25%. After March 15, 2012, commit- ment fees will equal 0.50% of the undra wn commitments. In addi- tion, the company pays a fee to the lenders that ag reed in September 2010 to extend their commitments from 2012 to 2014 based on the leverage ratio that ranges from 0 to 75 basis points for drawn amounts and 25 basis points for undra wn amounts. At the current leverage ratio, the additional fee is 25 basis points for both the drawn and undrawn amounts. No extension fees are payable after March 15, 2012. Under each of the ag reements, the company may borrow at an applicable margin above the Eurodollar base rate or the higher of the Prime Rate or the Federal Funds Effective Rate plus 0.50%. Until March 15, 2012, the applicab le margin for such bor rowings ranges from 1.00% to 2.25% depending on credit ratings. Under the term loan agreement, the applicable margin varies from 1.25% to 2.25%. At its current ratings the company will pay an applicable margin of 2.25% under each of the re volving credit agreements and the term loan agreement. After March 15, 2012, the applica- ble margin will be determined based on the company’s leverage ratio. In connection with each of its three re volving credit agree- ments and its term loan agreement, the company agreed to provide guarantees from a majority of its domestic w holly-owned sub- sidiaries in the event that the company’s credit ratings from either Moody’s or S&P fell below investment grade. In the f irst quarter of 2009, the company’s credit rating was downgraded below investment grade by both S&P and Moody’s. Accordingly, the guarantees were triggered and the existing notes due 2011 and 2012 and other unsecured debt of the compan y became structurally subordinated to the revolving credit agreements and the term loan. In September 2009, the company further amended the terms of its three revolving credit agreements and its term loan agreement to provide for the issuance of up to $500 million of additional long-term debt carrying the same guarantees put in place for the revolving credit agreements and term loan. In addition, the compa- ny also amended one of the credit ag reements to permit it to obtain up to $100 million of letters of credit from the lenders, w hich would count toward their commitments. On Aug. 21, 2009, Moody’s confirmed the company’s Ba1 cor- porate family rating and its Ba2 senior unsecured note rating. In addition, Moody’s rated the company’s bank debt, which includes its revolving credit agreements and term loan, Baa3. The Baa3 rat- ing also applies to most of the company’s long-term debt which has the same subsidiary guarantees as the bank debt. The compa- ny’s debt is rated BB b y Standard and Poor’s. In August 2010, the company further amended the terms of its three revolving credit agreements and its term loan agreement to allow for the issuance of up to $750 million of additional long- term debt carrying the same guarantees put in place for the re volv- ing credit agreements and term loan. As of Dec. 26, 2010, the compan y had $221 million of bor row- ings under its revolving credit facilities. The maximum amount outstanding at the end of an y period during 2010 and 2009 w as $1.3 billion and $2.5 billion, respectively. The daily average out- standing balance of the revolving credit facilities during 2010 and 2009 was $852 million and $2.0 billion, respecti vely. The weighted average interest rate for 2010 and 2009 w as 2.6% and 3.1%, respectively. During the f irst quarter of 2009, the company repurchased $68.8 million in principal amount of its floating rate notes in pri- vately negotiated transactions at a discount. In connection with these transactions, the company recorded a gain of appro ximately $1.1 million which is classif ied in “Other non-operating items” in the Statement of Income. This gain is net of $0.6 million reclassi- fied from accumulated other comprehensive loss for related inter- est rate swap agreements. In December 2008, the company launched a tender offer to purchase any and all of its outstanding floating rate notes due in May 2009 at a purchase price of $950 per $1,000 in principal amount plus accrued and unpaid interest. In response to the of fer, $98.4 million in aggregate principal amount of notes, representing approximately 13.5 percent of the then outstanding notes, w ere purchased at this price in December 2008. Prior to the tender of fer, the company had repurchased $19.4 million in principal amount of the floating rate notes in a pri vately negotiated transaction. In con- nection with these transactions, the compan y recorded a gain of approximately $4 million which was classified in “Other non-oper- ating items” in the Statement of Income (Loss). This gain was net of $1.7 million in losses reclassif ied from accumulated other com- prehensive income (loss) related to the interest rate s wap agree- ments. 44 In July 2008, the company received proceeds of $280 million from borrowings under a new term loan agreement with certain bank lenders. The term loan is payable in full on July 14, 2011. The loan carries interest at a floating rate and ma y be prepaid at any time without penalty. The company prepaid $50 million of this loan in each of October 2010 and October 2009 reducing the bal- ance to $180 million. During part of 2008, the company utilized commercial paper as a source of f inancing. The maximum amount of such commercial paper outstanding at the end of an y period during 2008 was $2.0 billion. The daily average outstanding balance of promissor y notes was $883 million during 2008. The weighted average interest rate on such notes was 3.5% for 2008. In June 2008, the compan y repaid $500 million in unsecured notes bearing interest at 4.125% with proceeds from bor rowings in the commercial paper mark et. Beginning in September 2008, liquidity in the commercial paper market became highly constrained and the company elected to bor- row under its revolving credit agreements to repay commercial paper outstanding as it matured. In August 2007, the company entered into three interest rate swap agreements totaling a notional amount of $750 million in order to mitigate the volatility of interest rates. These agreements, which expired in May 2009, effectively fixed the interest rate on the $750 million in floating rate notes due Ma y 2009 at 5.0125%. These instruments were designated as cash flow hedges in accor- dance with ASC Topic 815, “Derivatives and Hedging,” and changes in fair value were recorded through accumulated other comprehensive income with a cor responding adjustment to other long-term liabilities. As a result of the tender of fer and other repur- chases discussed above, the cash flow hedging treatment was dis- continued for interest rate swaps associated with approximately $118 million of notional value on the retired floating rate notes. Amounts recorded in accumulated other comprehensive income (loss) related to the discontinued cash flo w hedges were reclassi- fied into earnings and subsequent changes to the f air value of these interest rate swaps were being recorded through ear nings. In June 2007, the company issued $1.0 billion agg regate prin- cipal amount of unsecured senior convertible notes in an under- written public offering. Proceeds from the notes were used to repay commercial paper obligations. The convertible notes bore interest at a floating rate equal to one month LIBOR, reset monthl y, minus twenty-three basis points. As anticipated, on July 15, 2008, the holders of the convertible notes required the company to repur- chase the convertible notes for cash at a price equal to 100% of the principal amount of the notes submitted for repurchase, plus accrued and unpaid interest. Industrial revenue bonds with a principal amount of appro xi- mately $17 million were repaid in full in 2008. Prior to repa yment, the bonds bore interest at v ariable interest rates based on a munici- pal bond index. In May 2006, the company issued $500 million agg regate prin- cipal amount of 5.75% notes due 2011 and $750 million agg regate principal amount of floating rate notes due 2009 in an underwrit- ten public offering. The net proceeds of the offering were used to pay down commercial paper bor rowings. The unsecured f ixed rate notes bearing interest at 6.375% w ere issued in March 2002 and mature in 2012 . The company has an effective universal shelf registration state- ment under which an unspecif ied amount of securities may be issued, subject to a $7 billion limit estab lished by the Board of Directors. Proceeds from the sale of such securities ma y be used for general corporate purposes, including capital expenditures, working capital, securities repurchase programs, repayment of debt and f inancing of acquisitions. The company may also invest borrowed funds that are not required for other pur poses in short-term marketable securities. The following schedule of annual maturities of long-ter m debt assumes the company uses available capacity under its revolving credit agreements to ref inance the unsecured floating rate notes and term loan due in 2011. Based on this ref inancing assumption, all of the obligations are reflected as maturities for 2012 and be yond. $ In thousands of dollars 2011 (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2014 (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1) Notes and term loan due of $613 million are assumed to be repaid with — 306,397 — 1,081,120 305,542 165,950 246,830 246,403 $ 2,352,242 funds from revolving credit agreements. (2) Notes due of $247 million plus $834 million as deemed as due under the revolving credit agreements. Notwithstanding the assumptions used in the tab le above, the company’s debt maturities might be repaid with cash flo w from operating activities and with the possible benefit of a further extension of the company’s revolving credit agreements or a com- bination of both. The fair value of the company’s total long-term debt, determined based on the bid and ask quotes for the related debt, totaled $2.5 billion and $2.9 billion at Dec. 26, 2010 and Dec. 27, 2009, respec- tively. The company has a capital expenditure program (not including business acquisitions) of approximately $75 million planned for 2011, including approximately $4 million for renovation of existing facilities, $60 million for machiner y and equipment, and $11 mil- lion for vehicles and other assets. Management reviews the capital expenditure program periodically and modif ies it as required to meet current business needs. It is e xpected that the 2011 capital pro- gram will be funded from cash flo w from operations. 45 Capital stock In February 2004, the company announced the reactivation of its share repurchase program that had last been utilized in F ebruary 2000. On July 25, 2006, the authorization to repurchase shares w as increased by $1 billion, and as of Dec. 26, 2010, appro ximately $808.9 million may yet be expended under the program. Under the program, the company purchased $72.8 million (2.3 million shares) in 2008. No shares were purchased in 2010 and 2009. Shares may be repurchased at management’s discretion, either in the open market or in privately negotiated block transactions. Management’s decision to repurchase shares will depend on price, availability and other cor porate developments. Purchases may occur from time to time and no maximum purchase price has been set. While there is no expiration date for the repurchase pro gram, the company’s Board of Directors reviews the share repurchase authorization annually, the last such review having occurred in October 2010. Certain of the shares previously acquired by the company have been reissued in settlement of emplo yee stock awards. At this time, the company does not anticipate repurchasing its shares for the near ter m. An employee 401(k) Savings Plan was established in 1990, which includes a company matching contribution in the form of Gannett stock. To fund the company’s matching contribution, an Employee Stock Ownership Plan (ESOP) was formed which acquired 2,500,000 shares of Gannett stock from the compan y for $50 million. The stock purchase was financed with a loan from the compan y. In June 2003, the debt was fully repaid and all of the shares had been full y allocated to participants. The company elected not to add additional shares to the ESOP and began funding contributions in cash. Through 2008, the ESOP used the cash match to purchase on the open mark et an equivalent number of shares of company stock on behalf of par tici- pants. In early 2009, the company began funding the 401(k) Savings Plan company matching contributions through the issuance of treas- ury shares. Beginning in 2010, the company funded the 401(k) Savings Plan match through the issuance of a 50/50 combination of treasury shares and shares purchased on the open mark et with cash. The company’s common stock outstanding at Dec. 26, 2010, totaled 239,509,020 shares, compared with 237,156,663 shares at Dec. 27, 2009. Contractual obligations and commitments The following table summarizes the expected cash outflows result- ing from f inancial contracts and commitments as of the end of 2010. Contractual obligations In millions of dollars $ 790 Long-term debt (1) . . . . . . . . . 76 Operating leases (2) . . . . . . . . 12 Purchase obligations (3) . . . . . — Programming contracts (4) . . . 175 Other long-term liabilities (5) . Total $1,053 . . . . . . . . . . . . . . . . . (1) See Note 7 to the Consolidated F inancial Statements. The amounts included above include periodic interest payments. Interest payments are based on interest rates in effect at year-end and assume term debt is outstanding for the life of the revolving credit agreements. Payments due by period 2011 $147 55 159 10 98 $469 2012-13 2014-15 Thereafter $ 802 81 143 67 73 $1,166 Total $3,083 267 390 112 418 $4,270 $1,344 55 76 35 72 $1,582 (2) See Note 12 to the Consolidated F inancial Statements. (3) Includes purchase obligations related to printing contracts, capital projects, interactive marketing agreements, wire services and other legally binding commitments. Amounts which the company is liable for under purchase orders outstanding at Dec. 26, 2010, are reflected in the consolidated bal- ance sheets as accounts payable and accrued liabilities and are excluded from the table above. (4) Programming contracts include television station commitments to pur- chase programming to be produced in future y ears. (5) Other long-term liabilities primarily consist of amounts expected to be paid related to under-funded postretirement benef it plans. Due to uncertainty with respect to the timing of future cash flows associated with unrecognized tax benef its at Dec. 26, 2010, the company is unable to make reasonably reliable estimates of the period of cash settlement, if necessar y. Therefore, $154 million of unrecognized tax benef its have been excluded from the contractual obligations table above. See Note 10 to the Consolidated F inancial Statements for a further discussion of income taxes. The company’s principal retirement plan, the Gannett Retirement Plan, had assets of $1.9 billion and liabilities of $2.3 billion at Dec. 26, 2010. Due to uncer tainties regarding significant assumptions involved in estimating future contrib utions, such as interest rate levels and the amount and timing of asset retur ns, the company is unable to reasonably estimate its future contrib utions beyond 2011. In December 1990, the company adopted a Transitional Compensation Plan (the Plan). The Plan provides termination benefits to key executives whose employment is terminated under certain circumstances within two years following a change in control of the company. Benefits under the Plan include a se ver- ance payment of up to three y ears’ compensation and continued life and medical insurance coverage. 46 Dividends Dividends declared on common stock amounted to $38 million in 2010, compared with $37 million in 2009. Dividends declared per share. 08 09 10 $.16 $.16 Cash dividends 2010 2009 4th Quarter . . . . . . . . . . . . . . 3rd Quarter . . . . . . . . . . . . . . 2nd Quarter . . . . . . . . . . . . . . 1st Quarter . . . . . . . . . . . . . . 4th Quarter . . . . . . . . . . . . . . 3rd Quarter . . . . . . . . . . . . . . 2nd Quarter . . . . . . . . . . . . . . 1st Quarter . . . . . . . . . . . . . . $1.60 Per share $.04 $.04 $.04 $.04 $.04 $.04 $.04 $.04 Payment date Jan. 3, 2011 Oct. 1, 2010 July 1, 2010 April 1, 2010 Jan. 4, 2010 Oct. 1, 2009 July 1, 2009 April 1, 2009 On Feb. 23, 2011, the Board of Directors declared a di vidend of $.04 cents per share, payable on April 1, 2011, to shareholders of record as of the close of business March 4, 2011. Accumulated other comprehensive income (loss) The company’s foreign currency translation adjustment, included in accumulated other comprehensive income (loss) and repor ted as part of shareholders’ equity, totaled $395 million at the end of 2010 and $416 million at the end of 2009. The decrease reflected a weakening of Sterling against the U.S. dollar. Newsquest’s assets and liabilities at Dec. 26, 2010 w ere translated from Sterling to U.S. dollars at an exchange rate of 1.54 versus 1.60 at the end of 2009. Newsquest’s financial results were translated at an average rate of 1.55 for 2010, 1.56 for 2009 and 1.86 for 2008. The company has recognized the funded status of its pension and retiree medical benef it plans in the statement of f inancial posi- tion. At Dec. 26, 2010 and Dec. 27, 2009, accumulated other com- prehensive loss includes a reduction of equity of $762 million and $735 million, respectively, for the aggregate excess of retirement plan liabilities over plan assets. In August 2007, the company entered into three interest rate swap agreements totaling a notional amount of $750 million in order to mitigate the volatility of interest rates. These agreements, which expired in May 2009, effectively fixed the interest rate on the $750 million in floating rate notes due Ma y 2009 at 5.0125%. These instruments were designated as cash flow hedges in accordance with ASC Topic 815, “Derivatives and Hedging,” and changes in f air value were recorded through accumulated other comprehensive loss with a corresponding adjustment to other long-ter m liabilities. As a result of a tender offer and strategic redemptions of part of the float- ing rate notes during the four th quarter of 2008 and f irst quarter of 2009, the cash flow hedging treatment was discontinued for interest rate swaps associated with approximately $186.6 million of notional value on the retired floating rate notes. Amounts recorded in accu- mulated other comprehensive loss related to the discontinued cash flow hedges were reclassified into earnings and subsequent changes to the fair value of the interest rate swaps were recorded through earnings. Expense in 2009 associated with the deri vatives designated as hedges under ASC Topic 815, which is classif ied as “Interest expense” on the company’s Consolidated Statement of Income (Loss), was $7.7 million. Expense in 2009 associated with the deri v- atives not designated as hedges under ASC Topic 815, which is clas- sified as “Other non-operating items” on the company’s Consolidated Statement of Income (Loss), was $0.6 million. Effects of inflation and changing prices and other matters The company’s results of operations and f inancial condition have not been signif icantly affected by inflation. The company’s princi- pal operating costs have not generally been subject to signif icant inflationary pressures. Further, the effects of inflation and changing prices on the company’s property, plant and equipment and related depreciation expense have been reduced as a result of an ongoing capital expenditure program and the availability of replacement assets with improved technology and efficiency. The company is exposed to foreign exchange rate risk primarily due to its ownership of Newsquest, which uses the British pound as its functional currency, which is then translated into U.S. dollars. The company’s foreign currency translation adjustment, related principally to Newsquest and reported as part of shareholders’ equi- ty, totaled $395 million at Dec. 26 2010. Newsquest’s assets and liabilities were translated from British pounds to U.S. dollars at the Dec. 26, 2010, exchange rate of 1.54. Refer to Item 7A for addi- tional detail. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The company believes that its market risk from f inancial instru- ments, such as accounts receivable, accounts payable and debt, is not material. The company is exposed to foreign exchange rate risk primarily due to its operations in the United Kingdom, for w hich the British pound is the functional cur rency. Translation gains or losses affecting the Consolidated Statements of Income (Loss) have not been signif icant in the past. If the price of the British pound against the U.S. dollar had been 10% more or less than the actual price, operating income, excluding the special items described on page 30, 2010 would have increased or decreased approximately 1%. Because the company has $401 million in floating interest rate obligations outstanding at Dec. 26, 2010, the compan y is subject to changes in the amount of interest e xpense it might incur. A 1/2% increase or decrease in the average interest rate for these obligations would result in an increase or decrease in annual interest e xpense of $2.0 million. Refer to Note 7 to the Consolidated F inancial Statements for information regarding the fair value of the company’s long-term debt. 47 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA FINANCIAL STATEMENTS Report of Ernst & Young LLP, Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consolidated Balance Sheets at Dec. 26, 2010 and Dec. 27, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consolidated Statements of Income (Loss) for each of the three f iscal years in the period ended Dec. 26, 2010 . . . . . . . . . . . . . . . . . . Consolidated Statements of Cash Flows for each of the three f iscal years in the period ended Dec. 26, 2010 . . . . . . . . . . . . . . . . . . . Consolidated Statements of Equity for each of the three f iscal years in the period ended Dec. 26, 2010 . . . . . . . . . . . . . . . . . . . . . . . Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 50 52 53 54 55 Page —— Quarterly Statements of Income (Unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 SUPPLEMENTARY DATA Financial Statement Schedule for each of the three f iscal years in the period ended Dec. 26, 2010 FINANCIAL STATEMENT SCHEDULE Schedule II – Valuation and Qualifying Accounts and Reserves* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78 OTHER INFORMATION * All other schedules prescribed under Re gulation S-X are omitted because the y are not applicable or not required. 48 Report of Ernst & Young LLP, Independent Registered Public Accounting Firm Board of Directors and Shareholders of Gannett Co., Inc.: We have audited the accompanying consolidated balance sheets of Gannett Co., Inc. as of December 26, 2010 and December 27, 2009, and the related consolidated statements of income (loss), cash flows, and equity for each of the three f iscal years in the peri- od ended December 26, 2010. Our audits also included the f inan- cial statement schedule listed in the accompan ying index in Item 8. These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to e xpress an opinion on these f inancial statements and schedule based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the f inancial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the f inancial statements. An audit also includes assessing the accounting principles used and signif icant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the f inancial statements referred to above present fairly, in all material respects, the consolidated f inancial position of Gannett Co., Inc. at December 26, 2010 and December 27, 2009, and the consolidated results of its operations and its cash flows for each of the three f iscal years in the period ended December 26, 2010, in confor mity with U.S. generally accepted accounting principles. Also, in our opinion, the related f inancial statement schedule, when considered in relation to the basic f inan- cial statements taken as a whole, presents fairly in all material respects the information set forth therein. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Gannett Co., Inc.’s internal control over financial reporting as of December 26, 2010, based on criteria estab lished in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 23, 2011, included in Item 9A, e xpressed an unqualified opinion thereon. McLean, Virginia February 23, 2011 49 GANNETT CO., INC. CONSOLIDATED BALANCE SHEETS In thousands of dollars Assets Current assets Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trade receivables, less allowance for doubtful receivables of $39,419 and $46,255, respectively . . . . Other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Assets held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Property, plant and equipment Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Buildings and improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Machinery, equipment and fixtures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Intangible and other assets Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Indefinite-lived and amortizable intangible assets, less accumulated amor tization of $197,454 and $170,182, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Investments and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total intangible and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The accompanying notes are an integral part of these consolidated financial statements. Dec. 26, 2010 Dec. 27, 2009 $ 183,014 717,377 30,746 72,025 21,254 95,064 19,654 1,139,134 172,786 1,366,361 2,615,796 15,797 4,170,740 (2,412,629) 1,758,111 $ 98,795 759,934 20,557 63,752 19,577 86,427 — 1,049,042 203,937 1,426,150 2,782,595 16,177 4,428,859 (2,457,041) 1,971,818 2,836,960 2,854,247 518,797 170,385 393,457 3,919,599 6,816,844 $ 565,610 302,360 405,355 4,127,572 $ 7,148,432 50 GANNETT CO., INC. CONSOLIDATED BALANCE SHEETS In thousands of dollars Liabilities and equity Current liabilities Accounts payable Dec. 26, 2010 Dec. 27, 2009 Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 200,827 32,125 $ 216,721 35,864 Accrued liabilities Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dividends payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Postretirement medical and life insurance liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pension liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150,926 26,738 217,278 9,680 31,565 224,047 893,186 137,497 2,352,242 168,322 619,340 228,008 4,398,595 143,182 25,281 201,711 9,703 45,085 222,556 900,103 206,115 3,061,951 185,433 708,133 260,918 5,322,653 Redeemable noncontrolling interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84,176 78,304 Commitments and contingent liabilities (see Note 12) Equity Gannett Co., Inc. shareholders’ equity Preferred stock, par value $1: Authorized, 2,000,000 shares: Issued, none . . . . . . . . . . . . . . . . . . . . . . Common stock, par value $1: Authorized, 800,000,000 shares: Issued, 324,418,632 shares . . . . . . . . Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less Treasury stock, 84,909,612 shares and 87,261,969 shares, respectively, at cost . . . . . . . . . . . . . . Total Gannett Co., Inc. shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 324,419 630,316 6,874,641 (365,334) 7,464,042 (5,300,288) 2,163,754 170,319 2,334,073 — 324,419 629,714 6,324,586 (316,832) 6,961,887 (5,357,962) 1,603,925 143,550 1,747,475 Total liabilities, redeemable noncontrolling interest and equity . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,816,844 $ 7,148,432 The accompanying notes are an integral part of these consolidated financial statements. 51 GANNETT CO., INC. CONSOLIDATED STATEMENTS OF INCOME (LOSS) In thousands of dollars, except per share amounts Fiscal year ended Net operating revenues Publishing advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Publishing circulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Digital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Broadcasting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . All other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating expenses Cost of sales and operating expenses, exclusive of depreciation . . . . . . . . . . . . . Selling, general and administrative expenses, exclusive of depreciation . . . . . . . Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amortization of intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Facility consolidation and asset impair ment charges (see Notes 3 and 4) . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-operating (expense) income Equity income (losses) in unconsolidated investees, net (see Notes 3 and 6) . . . Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other non-operating items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income (loss) before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Provision (benefit) for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income (loss) from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . (Loss) income from the operation of discontinued operations, net of tax . . . . . . Gain on disposal of newspaper businesses, net of tax . . . . . . . . . . . . . . . . . . . . . Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net income attributable to noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . Net income (loss) attributable to Gannett Co., Inc. . . . . . . . . . . . . . . . . . . . . . Income (loss) from continuing operations attributable to Gannett Co., Inc. (Loss) income from the operation of discontinued operations, net of tax . . . . . . Gain on disposal of publishing businesses, net of tax . . . . . . . . . . . . . . . . . . . . . Net income (loss) attributable to Gannett Co., Inc. . . . . . . . . . . . . . . . . . . . . . Earnings (loss) from continuing operations per share - basic . . . . . . . . . . . . Earnings from discontinued operations Discontinued operations per share - basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gain on disposal of newspaper businesses per share - basic . . . . . . . . . . . . . . . . Net income (loss) per share - basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Earnings (loss) from continuing operations per share - diluted . . . . . . . . . . . Earnings from discontinued operations Discontinued operations per share - diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gain on disposal of newspaper businesses per share - diluted . . . . . . . . . . . . . . Net income (loss) per share - diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dec. 26, 2010 Dec. 27, 2009 Dec. 28, 2008 $ 2,710,524 1,086,702 618,259 769,580 253,613 5,438,678 2,980,465 1,187,633 182,514 31,362 57,009 4,438,983 999,695 $ $ $ 19,140 (172,986) 111 (153,735) 845,960 244,013 601,947 (322) 21,195 622,820 (34,619) 588,201 567,328 (322) 21,195 588,201 $2.38 — 0.09 $2.47 $2.35 — 0.08 $2.43 $ 2,888,034 1,144,539 586,174 631,085 259,771 5,509,603 3,230,176 1,186,970 207,652 32,983 132,904 4,790,685 718,918 $ $ $ 3,927 (175,745) 22,799 (149,019) 569,899 191,328 378,571 3,790 — 382,361 (27,091) 355,270 351,480 3,790 — 355,270 $1.50 0.02 — $1.52 $1.49 0.02 — $1.51 $ 4,040,890 1,196,745 281,378 772,533 348,136 6,639,682 3,915,549 1,253,008 228,259 31,211 7,939,563 13,367,590 (6,727,908) (374,925) (190,839) 28,430 (537,334) (7,265,242) (645,273) (6,619,969) (20,626) — (6,640,595) (6,970) $ (6,647,565) $ (6,626,939) (20,626) — $ (6,647,565) $(29.02) (0.09) — $(29.11) $(29.02) (0.09) — $(29.11) The accompanying notes are an integral part of these consolidated financial statements. 52 Dec. 26, 2010 Dec. 27, 2009 Dec. 28, 2008 $ 622,820 $ 382,361 $ (6,640,595) GANNETT CO., INC. CONSOLIDATED STATEMENTS OF CASH FLOWS In thousands of dollars Fiscal year ended Cash flows from operating activities Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Adjustments to reconcile net income (loss) to operating cash flo ws: . . . . . . . . . Debt exchange gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gain on sale of discontinued operations, net of tax . . . . . . . . . . . . . . . . . . . . . . . Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amortization of intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Facility consolidation and asset impair ment charges (see Notes 3 and 4) . . . . . . Stock-based compensation – equity awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Provision (benefit) for deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . Pension (benefit) expense, net of pension contributions . . . . . . . . . . . . . . . . . . . Equity (income) loss in unconsolidated investees, net (see Notes 3 and 6) . . . . . Other, net, including gains on asset sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Decrease in trade receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Decrease (increase) in other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Decrease (increase) in inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Increase (decrease) in accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Increase (decrease) in interest and taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . Increase (decrease) in deferred income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Change in other assets and liabilities, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net cash flow from operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash flows from investing activities Purchase of property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Payments for acquisitions, net of cash acquired . . . . . . . . . . . . . . . . . . . . . . . . . . Payments for investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Proceeds from investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Proceeds from sale of cer tain assets, including discontinued operations . . . . . . Net cash provided by (used for) investing activities . . . . . . . . . . . . . . . . . . . . . Cash flows from financing activities (Payments of) proceeds from bor rowings under revolving credit facilities . . . . . Proceeds from issuance of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Payments of unsecured promissory notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Payments of unsecured f ixed rate notes and other indebtedness . . . . . . . . . . . . . . Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cost of common shares repurchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Proceeds from issuance of common stock upon e xercise of stock options . . . . . Distributions to noncontrolling interest shareholders . . . . . . . . . . . . . . . . . . . . . . Net cash used for financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Effect of currency exchange rate change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . Balance of cash and cash equivalents at beginning of year . . . . . . . . . . . . . . . . . Balance of cash and cash equivalents at end of year . . . . . . . . . . . . . . . . . . . . — (21,195) 183,322 31,362 57,009 32,707 150,363 (124,864) (19,140) (3,996) 34,909 (5,182) (10,434) (15,199) (98,270) 4,745 (46,073) 772,884 (69,070) (15,164) (10,984) 45,478 112,706 62,966 (1,160,000) 493,743 — (50,000) (38,216) — 3,214 — (751,259) (372) 84,219 98,795 183,014 $ $ (42,746) — 209,826 32,983 160,939 25,373 54,213 (12,563) (3,927) 14,668 105,184 26,951 56,768 (66,765) 64,526 (50,300) (90,911) 866,580 (67,737) (9,581) (9,674) 20,461 31,908 (34,623) (526,000) 492,618 — (680,505) (119,328) — 402 — (832,813) 702 (154) 98,949 98,795 The accompanying notes are an integral part of these consolidated financial statements. — — 230,987 31,211 7,976,418 22,646 (801,988) (66,260) 374,925 (54,996) 132,143 16,285 (26,856) 50,256 (165,700) (24,375) (38,756) 1,015,345 (165,000) (168,570) (46,779) 29,049 78,541 (272,759) 1,907,000 280,000 (833,876) (1,628,458) (366,748) (72,764) — (200) (715,046) (5,840) 21,700 77,249 98,949 $ 53 GANNETT CO., INC. CONSOLIDATED STATEMENTS OF EQUITY In thousands of dollars Fiscal years ended December 28, 2008, December 27, 2009, and December 26, 2010 Balance: Dec. 30, 2007 . . . . . . . . Net income (loss), 2008 . . . . . . . . Redeemable noncontrolling interest accretion . . . . . . . . . . . . . Foreign currency translation adjustment . . . . . . . . . . . . . . . . . . Interest rate swap . . . . . . . . . . . . . Pension and other postretirement benefit liability adjustment, net of tax benef it of $315,832 . . . Other . . . . . . . . . . . . . . . . . . . . . . . Total comprehensive loss . . . . . . . Dividends declared, 2008: $1.60 per share . . . . . . . . . . . . . . . Acquisitions . . . . . . . . . . . . . . . . . Treasury stock acquired . . . . . . . . Stock option and restricted stock compensation . . . . . . . . . . . Other treasury stock activity . . . . Balance: Dec. 28, 2008 . . . . . . . . Net income, 2009 . . . . . . . . . . . . . Redeemable noncontrolling interest accretion . . . . . . . . . . . . . Foreign currency translation adjustment . . . . . . . . . . . . . . . . . . Interest rate swap . . . . . . . . . . . . . Pension and other postretirement benefit liability adjustment, net of tax provision of $74,051 . . Other . . . . . . . . . . . . . . . . . . . . . . . Total comprehensive income . . . . Dividends declared, 2009: $0.16 per share . . . . . . . . . . . . . . . Stock options exercised . . . . . . . . Stock option and restricted stock compensation . . . . . . . . . . . 401(k) match . . . . . . . . . . . . . . . . Tax benefit derived from stock awards settled . . . . . . . . . . . . . . . Other treasury stock activity . . . . Balance: Dec. 27, 2009 . . . . . . . . Net income, 2010 . . . . . . . . . . . . . Redeemable noncontrolling interest accretion . . . . . . . . . . . . . Foreign currency translation adjustment . . . . . . . . . . . . . . . . . . Pension and other postretirement benefit liability adjustment, net of tax benefit of $17,606 . . . . Other . . . . . . . . . . . . . . . . . . . . . . . Total comprehensive income . . . . Dividends declared, 2010: $0.16 per share . . . . . . . . . . . . . . . Acquisitions/dispositions . . . . . . . Stock options exercised . . . . . . . . Stock option and restricted stock compensation . . . . . . . . . . . 401(k) match . . . . . . . . . . . . . . . . Tax benefit derived from stock awards settled . . . . . . . . . . . . . . . Other treasury stock activity . . . . Balance: Dec. 26, 2010 . . . . . . . . Common stock $1 par value $ 324,419 Gannett Co., Inc. Shareholders’ Equity Accumulated other comprehensive income (loss) $ 430,891 Additional paid-in capital $ 721,205 Retained earnings $ 13,019,143 (6,647,565) (421,845) 3,445 (481,743) Treasury stock $ (5,478,499) Noncontrolling Interests 340 $ 6,970 Total $ 9,017,499 (6,640,595) (1,736) (1,736) 000 000 (421,845) 3,445 (364,825) (72,764) 22,646 (652) $ 743,199 $ 324,419 $ 6,006,753 355,270 $(469,252) 2,026 $ (5,549,237) 60,934 5,075 84,355 2,056 (37,437) (678) 25,373 (139,919) 94 1,645 $ 629,714 $ 324,419 986 185,444 $ 6,324,586 588,201 $(316,832) 4,845 $ (5,357,962) (21,527) (27,280) 305 (38,146) 8,131 45,094 (6,153) 32,707 (22,227) 1,236 (4,961) $ 630,316 $ 324,419 0001,330 000 000 111,902 000 000 000 $ 118,806 27,091 (5,463) 3,116 $ 143,550 34,619 (5,872) (2,793) 815 (481,743) 1,330 (7,541,144) (364,825) 111,902 (72,764) 22,646 1,374 $ 1,174,688 382,361 (5,463) 60,934 5,075 84,355 5,172 532,434 (37,437) 308 25,373 45,525 94 6,490 $ 1,747,475 622,820 (5,872) (21,527) (27,280) (2,488) 565,653 (38,146) 815 1,978 32,707 22,867 1,236 (512) $ 2,334,073 The accompanying notes are an integral part of these consolidated financial statements. 54 $ 6,874,641 $(365,334) 4,449 $ (5,300,288) $ 170,319 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 Summary of significant accounting policies Fiscal year: The company’s fiscal year ends on the last Sunday of the calendar year. The company’s 2010 f iscal year ended on Dec. 26, 2010, and encompassed a 52-week period. The company’s 2009 and 2008 f iscal years also encompassed 52-week periods. Consolidation: The consolidated f inancial statements include the accounts of the company and its wholly and majority-owned sub- sidiaries after elimination of all signif icant intercompany transactions and profits. Investments in entities for which the company does not have control, but has the ability to e xercise significant influence over operating and f inancial policies, are accounted for under the equity method. Accordingly, the company’s share of net ear nings and losses from these ventures is included in “Equity income (losses) in uncon- solidated investees, net” in the Consolidated Statements of Income (Loss). Segment presentation: In the third quarter of 2008, the company began reporting a new digital segment and a separate digital revenues line in its Statements of Income (Loss). This revenue line includes only revenue from the businesses that comprise the new digital seg- ment. It therefore includes all revenues from CareerBuilder and ShopLocal beginning with the full consolidation of these businesses in the third quarter of 2008, and revenues from PointRoll, Schedule Star and Planet Discover. Revenues from PointRoll, Schedule Star and Planet Discover had previously been reported within the publish- ing segment and were included in the “All other” revenue line in the Consolidated Statements of Income (Loss). “All other” revenue is now comprised principally of commercial printing revenues. All peri- ods presented reflect these reclassif ications. The digital segment and the digital revenues line do not include online/digital revenues generated by web sites that are associated with the company’s publishing and broadcasting operating proper ties. Such amounts are reflected within those se gments and are included as part of publishing advertising revenues and broadcasting revenues in the Consolidated Statements of Income (Loss). Noncontrolling interests presentation: Noncontrolling inter- ests is presented as a component of equity on the Consolidated Balance Sheet. This balance primarily relates to the noncontrolling owners of CareerBuilder, LLC (CareerBuilder). Redeemable non- controlling interest in the mezzanine section of the balance sheet represents redeemable stock held by a noncontrolling owner in CareerBuilder. The redeemable stock is exercisable within 30 days after Jan. 1, 2014. Net income (loss) in the Consolidated Statements of Income (Loss) reflects 100 percent of CareerBuilder results as the company holds the controlling interest. Net income (loss) is subsequently adjusted to remove the noncontrolling inter- est to arrive at Net income (loss) attributab le to Gannett Co., Inc. Reclassification of certain items within the Consolidated Statements of Cash Flows: Certain amounts in the Consolidated Statements of Cash Flows in prior years have been reclassif ied to conform to current year presentation. Operating agencies: The company’s newspaper subsidiary in Detroit participates in a joint operating agenc y. The 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 joint operating agency are fully consolidated along with a charge for the noncontrolling partner’s share of prof its. Through May 2009, the company also published the Tucson Citizen through the Tucson joint operating agency in which the com- pany held a 50% interest. Because of challenges facing the publish- ing industry and the difficult economy, particularly in the Tucson area, the company ceased publishing the Citizen on May 16, 2009. The company retained its online site and 50% par tnership interest in the joint operating agency which provides services to the remaining non-Gannett newspaper in Tucson. The company’s share of results for its share of Tucson operations are accounted for under the equity method, and are reported as a net amount in “Equity income (losses) in unconsolidated investees, net.” Critical accounting policies and the use of estimates: The com- pany prepares its f inancial statements in accordance with generally accepted accounting principles which require the use of estimates and assumptions that affect the reported amount of assets, liabilities, revenues and expenses and related disclosure of contingent matters. The company bases its estimates on historical e xperience, actuarial studies and other assumptions, as appropriate. The company re-evaluates its estimates on an ongoing basis. Actual results could differ from these estimates. Critical accounting policies for the company involve its assess- ment of the recoverability of its long-lived assets, including goodwill and other intangible assets and property, plant and equipment. These assessments are based on factors such as estimated future cash flo ws and current fair value estimates of businesses. The company’s accounting for pension and retiree medical bene- fits requires the use of various estimates concerning the work force, interest rates, plan investment return, and involves the use of advice from consulting actuaries. The company periodically evaluates its investments in unconsoli- dated entities for impairment. When the company determines that an impairment is other-than-temporary, an impairment is recognized equal to the excess of the investment’s carrying amount over its esti- mated fair value. In making such a deter mination, the company con- siders recent f inancial results and forward looking projections. The company also considers various qualitative factors. These factors include the intent and ability of the compan y to retain its investment in the entity and the f inancial condition and long-term prospects of the entity. If the company believes that the decline in the f air value of the investment is temporary, then no impairment is recorded. The company’s accounting for income taxes in the U.S. and for- eign jurisdictions is sensitive to interpretation of various laws and regulations therein, and to company policy and expectations as to the repatriation of earnings from foreign sources. Defer red tax assets and liabilities are measured using enacted tax rates e xpected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. If cur rently available information raises doubt as to the realization of the defer red tax assets, a valua- tion allowance is established. The company must exercise significant judgment in evaluating the amount and timing of reco gnition of deferred tax liabilities and assets, including projections of future tax- able income. These judgments and estimates are reviewed on a con- tinual basis as regulatory and business factors change. A valuation allowance for deferred tax assets may be required if the amount of taxes recoverable through loss carryback declines, if tax planning strategies are not available, or if the company projects lower levels of future taxable income. 55 A more complete discussion of all of the compan y’s significant accounting policies follows. Cash and cash equivalents: Cash and cash equivalents consist of cash and investments with maturities of three months or less. Trade receivables and allowances for doubtful accounts: Trade receivables are recorded at invoiced amounts and generally do not bear interest. The allowance for doubtful accounts reflects the com- pany’s estimate of credit exposure, determined principally on the basis of its collection experience, aging of its receivables and signif i- cant individual account credit risk. Inventories: Inventories, consisting principally of newsprint, printing ink and plate material for the company’s publishing opera- tions, are valued primarily at the lower of cost (f irst-in, first-out) or market. At certain U.S. publishing operations however, newsprint inventory is carried on a last-in, f irst-out basis. Valuation of long-lived assets: In accordance with the require- ments included within ASC Topic 350, “Intangibles - Goodwill and Other” (ASC Topic 350) and Topic 360, “Property, Plant, and Equipment” (ASC Topic 360), the company evaluates the carrying value of long-lived assets (mostly property, plant and equipment and definite-lived intangible assets) to be held and used w henever events or changes in circumstances indicate that the car rying amount may not be recoverable. The carrying value of a long-lived asset group is considered impaired when the projected undiscounted future cash flows are less than its car rying value. The company measures impair- ment based on the amount by which the carrying value exceeds the fair value. Fair value is determined primarily using the projected future cash flows, discounted at a rate commensurate with the risk involved. Losses on long-lived assets to be disposed of are deter- mined in a similar manner, except that fair values are reduced for the cost to dispose. Property and depreciation: Property, plant and equipment is recorded at cost, and depreciation is provided generally on a straight- line basis over the estimated useful lives of the assets. The principal estimated useful lives are: buildings and improvements, 10 to 40 years; and machinery, equipment and f ixtures, three to 30 years. Changes in the estimated useful life of an asset, w hich could happen as a result of f acility consolidations, can affect depreciation expense and net income (loss). Major renewals and improvements and interest incurred during the construction period of major additions are capi- talized. Expenditures for maintenance, repairs and minor rene wals are charged to expense as incurred. Goodwill and other intangible assets: Goodwill represents the excess of acquisition cost over the fair value of assets acquired, including identifiable intangible assets, net of liabilities assumed. In accordance with the impairment testing provisions included in ASC Topic 350, goodwill is tested for impair ment on an annual basis or between annual tests if events occur or circumstances change that would more likely than not reduce the f air value of a reporting unit below its carrying amount. The company’s annual measurement date is the end of its f iscal year. The company is required to deter mine the fair value of each reporting unit and compare it to the car rying amount of the reporting unit. Fair value of the reporting unit is deter- mined using various techniques, including multiple of ear nings and discounted cash flow valuation techniques. If the car rying amount of the reporting unit exceeds the fair value of the reporting unit, the company performs the second step of the impair ment test, as this is an indication that the repor ting unit goodwill may be impaired. In the second step of the impair ment test, the company determines the 56 implied fair value of the reporting unit’s goodwill. If the car rying value of a reporting unit’s goodwill exceeds its implied fair value, then an impairment of goodwill has occur red and the company must recognize an impairment loss for the difference between the carrying amount and the implied f air value of goodwill. In deter mining the reporting units, the company considers the way it manages its busi- nesses and the nature of those b usinesses. The company has estab- lished its reporting units for publishing at or one level below the seg- ment level. These reporting units therefore consist principally of U.S. Community Publishing, the USA TODAY group, the U.K. newspaper group, and certain individual stand-alone publishing businesses. For Digital, the reporting units are the stand-alone digital b usinesses. For Broadcasting, goodwill is accounted for at the se gment level. The company performs an impairment test annually, or more often if circumstances dictate, of its indef inite-lived intangible assets. Intangible assets that have finite useful lives are amortized over those useful lives and are evaluated for impairment in accordance with ASC Topic 350 as described above. Investments and other assets: Investments in non-public businesses in which the company does not have control or does not exert significant influence are carried at cost and losses resulting from periodic evaluations of the carrying value of these investments are included as a non-operating e xpense. At Dec. 26, 2010, and Dec. 27, 2009, such investments aggregated approximately $16 million. Investments where the company does have significant influence are recorded under the equity method of accounting. See Note 6 for further discussion of these investments. The company’s television stations are parties to program broad- cast contracts. These contracts are recorded at the g ross amount of the related liability when the programs are available for telecasting. The related assets are recorded at the lo wer of cost or estimated net realizable value. Program assets are classif ied as current (as a pre- paid expense) or noncurrent (as an other asset) in the Consolidated Balance Sheets, based upon the e xpected use of the programs in suc- ceeding years. The amount charged to expense appropriately matches the cost of the programs with the revenues associated with them. The liability for these contracts is classif ied as current or noncurrent in accordance with the payment terms of the contracts. The payment period generally coincides with the period of telecast for the pro- grams, but may be shorter. Revenue recognition: The company’s revenues include amounts charged to customers for: space purchased in the compan y’s newspa- pers, digital ads placed on its w eb sites, digital marketing service agreement fees, commercial printing jobs, and adv ertising broadcast on the company’s television stations. Newspaper revenues also include circulation revenues for newspapers purchased by readers or distributors, reduced by the amount of discounts tak en. Broadcast revenues include revenues from the retransmission of the compan y’s television signals on satellite and cable networks. Advertising rev- enues are recognized, net of agency commissions, in the period when advertising is printed or placed on w eb sites or broadcast. Revenues for digital marketing services are generally recognized as web site ad impressions are delivered. Commercial printing revenues are recog- nized when the job is delivered to the customer. Circulation revenues are recognized when purchased newspapers are distributed. Amounts received from customers in advance of revenue recognition are deferred as liabilities. Broadcasting retransmission fees are reco g- nized over the contract period based on a ne gotiated fee per sub- scriber. Retirement plans: Pension and other postretirement benef it costs under the company’s retirement plans are actuarially determined. The company recognizes the cost of postretirement benef its including pension, medical and life insurance benef its on an accrual basis over the working lives of employees expected to receive such benef its. Stock-based employee compensation: Effective Dec. 26, 2005, the first day of its 2006 f iscal year, the company adopted the fair value recognition provisions of SFAS No. 123(R), “Share-Based Payments,” as subsequently codified in ASC Topic 718, “Compensation-Stock Compensation,” using the modif ied prospec- tive transition method. Under this transition method, stock-based compensation costs recognized in the income statement be ginning in 2006 include (a) compensation e xpense for all unvested stock- based awards that were granted through Dec. 25, 2005, based on the grant date fair value estimated in accordance with the original provisions of SFAS No. 123 and (b) compensation e xpense for all share-based payments granted after Dec. 25, 2005, based on g rant date fair value estimated in accordance with the pro visions of SFAS No. 123(R). The company’s stock option awards generally have graded vesting terms and the company recognizes compensation expense for these options on a straight-line basis o ver the requisite service period for the entire award (generally four years). See Note 11 for further discussion. The company also grants restricted stock or restricted stock units to employees and members of its Board of Directors as a for m of compensation. The expense for such awards is based on the g rant date fair value of the award and is recognized on a straight-line basis over the requisite service period, which is generally the four-year incentive period. Income taxes: The company accounts for certain income and expense items differently for f inancial reporting purposes than for income tax reporting purposes. Deferred income taxes are provided in recognition of these temporary differences. See Note 10 for fur- ther discussion. Per share amounts: The company reports earnings per share on two bases, basic and diluted. All basic income per share amounts are based on the weighted average number of common shares outstand- ing during the year. The calculation of diluted ear nings per share also considers the assumed dilution from the e xercise of stock options and from restricted stock units. Loss amounts per share consider onl y basic shares outstanding due to the antidiluti ve effect of adding shares for stock option exercises and restricted stock units. Foreign currency translation: The income statements of foreign operations have been translated to U.S. dollars using the average cur- rency exchange rates in effect during the relevant period. The balance sheets have been translated using the cur rency exchange rate as of the end of the accounting period. The impact of currency exchange rate changes on the translation of the balance sheets are included in comprehensive income (loss) and are classif ied as accumulated other comprehensive income (loss) in shareholders’ equity. Loss contingencies: The company is subject to various legal pro- ceedings, claims and regulatory matters, the outcomes of which are subject to signif icant uncertainty. The company determines whether to disclose or accrue for loss contingencies based on an assessment of whether the risk of loss is remote, reasonab ly possible or probable, and whether it can be reasonably estimated. The company accrues for loss contingencies when such amounts are probable and reasonably estimable. If a contingent liability is onl y reasonably possible, the company will disclose the potential range of the loss, if material and estimable. New accounting pronouncement: In October 2009, the FASB issued Accounting Standards Update (ASU) 2009-13, Multiple Element Arrangements. ASU 2009-13 addresses the deter mination of when the individual deliverables included in a multiple ar rangement may be treated as separate units of accounting. ASU 2009-13 also modifies the manner in which the transaction consideration is allo- cated across separately identified deliverables and establishes defini- tions for determining fair value of elements in an ar rangement. The new guidance applies prospectively to agreements entered after 2010. The company is currently assessing the impact of adoption of this pronouncement. NOTE 2 Acquisitions, investments and dispositions 2010: In March 2010, CareerBuilder expanded its reach in the U.K. when it purchased CareerSite.biz, parent of three successful career- related operations there. Founded in 2001, CareerSite.biz operates two online recruitment niche sites focusing on nursing and rail w ork- ers as well as successful virtual career fair business. In October 2010, the company purchased a minority stake in Ongo Inc. Ongo is a personal ne ws service that gives consumers a fundamentally new way to read, discover and share digital news and information. In the second quarter of 2010, the company completed the sale of The Honolulu Advertiser as well as a small director y publishing operation in Michigan. In connection with these transactions, the company recorded a net after tax gain of $21.2 million in discontin- ued operations. Income from continuing operations for all periods presented exclude operating results from these for mer properties which have been reclassif ied to discontinued operations. Amounts applicable to these discontinued operations are as follo ws: In thousands of dollars 2010 Revenues . . . . . . . . . . . . . . . . . . . . . . . . $32,710 (758) Pretax (loss)/income . . . . . . . . . . . . . . . (322) Net (loss)/income . . . . . . . . . . . . . . . . . . 21,195 Gains (after tax) . . . . . . . . . . . . . . . . . . . 2009 $103,390 6,262 3,790 — 2008 $127,968 (33,753) (20,626) — Total cash paid in 2010 for business acquisitions and in vestments was $15.2 million and $11.0 million, respecti vely. In early January 2011, the company also announced the acquisi- tion of Reviewed.com, a group of 12 product-review web sites that provide comprehensive reviews for technology products such as digi- tal cameras, camcorders and high-def inition televisions. Reviewed.com’s operation will be integrated with USA TODAY as part of USA TODAY’s consumer media strategy. 2009: In February 2009, the company purchased a minority interest in Homef inder, a leading national online mark etplace con- necting homebuyers, sellers and real estate professionals. In July 2009, Newsquest sold one of its commercial printing businesses, Southernprint Limited. Total cash paid in 2009 for business acquisitions (principall y post-acquisition consideration) and investments was $9.6 million and $9.7 million, respectively. 57 2008: On Dec. 31, 2007, the f irst day of the company’s 2008 A summary of these charges by year is presented below: In August 2008, the company purchased Pearls Review, Inc., an Asset impairment and other charges In millions except per share amounts Asset impairment and other charges Goodwill: Digital . . . . . . . . . . . . . . . . . . . . . . Total goodwill . . . . . . . . . . . . . . . . . . Other intangible assets: Publishing . . . . . . . . . . . . . . . . . . . . Digital . . . . . . . . . . . . . . . . . . . . . . Total other intangible assets . . . . . . . Property, plant and equipment: Publishing . . . . . . . . . . . . . . . . . . . . Broadcasting . . . . . . . . . . . . . . . . . . Total property, plant and equipment Other: Publishing . . . . . . . . . . . . . . . . . . . . Broadcasting . . . . . . . . . . . . . . . . . Total other . . . . . . . . . . . . . . . . . . . . . Total asset impairment and other charges-operations . . . . . . . . . . . . . . . . Non-operating charges: Pre-Tax Amount 2010 After-Tax Amount (a) Per Share Amount(a) $ 11 11 17 2 19 15 4 19 3 5 8 $ 11 11 12 1 13 9 2 12 2 3 5 $0.04 0.04 0.05 — 0.06 0.04 0.01 0.05 0.01 0.01 0.02 $ 57 $ 41 $0.17 Equity method investments . . . . . . . Total charges . . . . . . . . . . . . . . . . . . . . . $ (a) Total amounts may not sum due to rounding. 3 60 $ 2 43 0.01 $0.18 In millions except per share amounts Pre-Tax Amount 2009 After-Tax Amount (a) Per Share Amount $ $ 17 16 33 9 9 76 3 79 7 5 12 10 16 26 5 5 47 2 50 4 3 7 $0.04 0.07 0.11 0.02 0.02 0.20 0.01 0.21 0.02 0.01 0.03 $ 133 $ 88 $0.37 Goodwill: Publishing . . . . . . . . . . . . . . . . . . . . Digital . . . . . . . . . . . . . . . . . . . . . . Total goodwill . . . . . . . . . . . . . . . . . . Other intangible assets: Digital . . . . . . . . . . . . . . . . . . . . . . Total other intangible assets . . . . . . . Property, plant and equipment: Publishing . . . . . . . . . . . . . . . . . . . . Broadcasting . . . . . . . . . . . . . . . . . . Total property, plant and equipment Other: Publishing . . . . . . . . . . . . . . . . . . . . Broadcasting . . . . . . . . . . . . . . . . . Total other . . . . . . . . . . . . . . . . . . . . . Total asset impairment and other charges-operations . . . . . . . . . . . . . . . . Non-operating charges: Publishing assets sold . . . . . . . . . . . Equity method investments . . . . . . . Total charges . . . . . . . . . . . . . . . . . . . . . (a) Total amounts may not sum due to rounding. 28 9 24 7 $ 119 0.10 0.03 $0.50 $ 170 fiscal year, the company purchased X.com, Inc. (BNQT.com), which operates a digital media g roup of affiliated sites covering eight different action sports including surf ing, snowboarding and skateboarding. BNQT.com is affiliated with the USA TODAY Sports Media Group. In February 2008, the company formed QuadrantONE, a new digital ad sales network, with three other large media companies. In March 2008, the company purchased a minority stake in Fantasy Sports Ventures (FSV). FSV, also known as Big Lead Sports, owns a set of f antasy sports content sites and manages advertising across a group of affiliated sites. In May 2008, the company purchased a minority stake in Cozi Group Inc. (COZI). COZI is a free w eb service that helps families manage busy schedules, stay in communication and share memo- ries. In June 2008, the company acquired from Tribune Company and The McClatchy Company their minority ownership interests in ShopLocal LLC, a leading marketing and database services com- pany for major retailers in the U.S. The company now owns 100% of ShopLocal and began consolidating its results in the digital se g- ment at the beginning of the third quar ter of 2008. ShopLocal col- laborates with PointRoll to create ads that dynamicall y connect retail advertisers and consumers, online and in the store. ShopLocal’s operations turned profitable in the third quar ter of 2008. In July 2008, the company purchased a minority stake in Livestream, a company that provides Internet broadcasting servic- es. Also in July 2008, the company increased its investment in 4INFO, maintaining its approximate ownership interest. online nursing certification and continuing education review site, which is operated with Gannett Healthcare Group. In September 2008, the company acquired an additional 10% stake in CareerBuilder from Tribune Company increasing its investment to 50.8% so that it became the majority and controlling owner. The total cash paid in 2008 for business acquisitions w as $168.6 million and for investments was $46.8 million. NOTE 3 Facility consolidation and asset impairment charges Difficult business conditions required the company to perform impairment tests on certain assets including goodwill, other intangi- ble assets, other long-lived assets and investments accounted for under the equity method during 2010, 2009 and 2008. As a result, the company recorded non-cash impairment charges to reduce the book value of certain of those assets. In addition, an impair ment charge was taken to reduce the value of certain publishing assets sold in 2009 to fair value less costs to sell. 58 In millions except per share amounts Asset impairment and other charges Pre-Tax Amount (a) 2008 After-Tax Per Share Amount (a) Amount (a) Goodwill: $7,448 Publishing . . . . . . . . . . . . . . . . . . . . 10 Digital . . . . . . . . . . . . . . . . . . . . . . Total goodwill . . . . . . . . . . . . . . . . . . 7,458 Other intangible assets - principally mastheads: 232 Publishing . . . . . . . . . . . . . . . . . . . . 2 Digital . . . . . . . . . . . . . . . . . . . . . . Total other intangible assets . . . . . . . 233 Property, plant and equipment: Publishing . . . . . . . . . . . . . . . . . . . . Broadcasting . . . . . . . . . . . . . . . . . . Corporate . . . . . . . . . . . . . . . . . . . . Total property, plant and equipment Other: Publishing . . . . . . . . . . . . . . . . . . . . Digital . . . . . . . . . . . . . . . . . . . . . . Broadcasting . . . . . . . . . . . . . . . . . Total other . . . . . . . . . . . . . . . . . . . . . 218 2 1 221 17 3 7 27 $6,812 6 6,818 $29.83 0.03 29.86 150 1 151 137 1 1 138 11 2 4 17 0.66 — 0.66 0.60 — — 0.61 0.05 0.01 0.02 0.08 Total asset impairment and other charges-operations . . . . . . . . . . . . . . . . Non-operating charges: $7,940 $7,124 $31.20 Newspaper publishing partnerships and other equity method investments Noncontrolling interests reduction . Total charges . . . . . . . . . . . . . . . . . . . . . (a) Total amounts may not sum due to rounding. 382 (4) 251 (3) $ 7,372 1.10 (0.01) $32.29 $ 8,317 2010: The goodwill impairment charge results from the applica- tion of the impairment testing provisions included within the good- will subtopic of ASC Topic 350. Because of difficult business con- ditions, testing for one reporting unit was updated during the third quarter of 2010 and for all reporting units on Dec. 26, 2010, in connection with the required annual impair ment test of goodwill and indefinite lived intangibles. For one of the stand-alone b usi- nesses in the digital segment, a potential impairment was indicated. The fair value of the reporting unit was determined based on a dis- counted cash flow technique. The company then undertook the next step in the impairment testing process by determining the fair value of assets and liabilities within the repor ting unit. The implied value of goodwill was less than the car rying value by $11 million and therefore an impairment charge in this amount was taken. There was no tax benef it recognized related to the impair ment charge since the recorded goodwill was non-deductible as it arose from a stock purchase transaction. Therefore, the after-tax effect of the goodwill impairment was $11 million or $.04 per share. The impairment charge of $19 million for other intangib le assets, principally a masthead, was required because revenue results from the underlying business have softened from what was expect- ed at the time these assets w ere last valued. Fair value was deter- mined using a relief-from-royalty method. Carrying values were reduced to fair value for an indef inite lived asset and for cer tain definite-lived assets in accordance with ASC Topic 350. Defer red tax benefits have been recognized for these intangible assets impairment charges and therefore the total after -tax impact was $13 million or $.06 per share. The carrying values of property, plant and equipment at cer tain publishing and broadcasting businesses were evaluated in 2010 due to facility consolidation efforts and changes in expected useful lives. The company revised the useful lives of certain assets, which were taken out of service or for which management has committed to a plan to discontinue use in the near future, in order to reflect the use of those assets over a shortened useful life. As a result of the evaluation, the company recorded pre-tax charges of $19 million in 2010. Deferred tax benef its were recognized for these charges and the after-tax impact was $12 million or $.05 per share. The $8 million of charges in the “Other” category include shut down costs as well as the impairment of certain broadcast program- ming assets. Deferred tax benef its were recognized for these charges and therefore the after-tax impact was $5 million or $.02 per share. In 2010, the car rying value of an investment for which the com- pany owns a noncontrolling interest was written down to fair value because the business underlying the investment had experienced significant and sustained operating losses, leading the compan y to conclude that it was other than temporarily impaired. The invest- ment carrying value adjustment totaled $3 million pre-tax and $2 million on an after-tax basis, or $.01 per share . 2009: The goodwill impairment charges result from the applica- tion of the impairment testing provisions included within the good- will subtopic of ASC Topic 350. Because of difficult business con- ditions due to the economy, testing for certain reporting units was updated during the second quar ter of 2009 and for all repor ting units on Dec. 27, 2009, in connection with the required annual impairment test of goodwill and indef inite-lived intangibles. For one of the stand-alone business repor ting units in the publishing segment and one in the digital se gment, a potential impairment was indicated. The fair value of the reporting units was determined based on a multiple of ear nings technique and/or a discounted cash flow technique. The company then undertook the next step in the impairment testing process by determining the fair value of assets and liabilities within these repor ting units. The implied value of goodwill for these reporting units was less than the car rying amount by $33 million and therefore impair ment charges in this total amount were taken. Deferred tax benef its were recognized for the publishing charge only and therefore the after-tax effect of the total goodwill impairment charge was $26 million or $.11 per share. The impairment charge of $9 million for other intangib le assets, principally customer relationships and a trade name, w as required because revenue results from the underlying business have softened from what was expected at the time these assets were last valued. Carrying values were reduced to fair value for an indefinite lived asset and for cer tain definite-lived assets in accor- dance with ASC Topic 350. Deferred tax benef its have been recog- nized for these intangible asset impairment charges and therefore the total after-tax impact was $5 million or $.02 per share. The carrying values of property, plant and equipment at cer tain publishing and broadcasting businesses were evaluated in 2009 due to facility consolidation efforts, changes in expected useful lives and softening business conditions. The recoverability of these assets was measured in accordance with the requirements included within ASC Topic 360. This process indicated that the car rying 59 values of certain assets were not recoverable, as the expected undiscounted future cash flows to be generated by them were less than their carrying values. The related impairment loss was meas- ured based on the amount b y which the asset car rying value exceeded fair value. Asset group fair values were determined using the discounted cash flow technique. Certain asset fair values were based on estimates of prices for similar assets. In addition, as required by ASC Topic 360, the company revised the useful lives of certain assets, which were taken out of service during the year or for which management has committed to a plan to discontinue use in the near future, in order to reflect the use of those assets over their shortened useful life. As a result of the application of the requirements of ASC Topic 360, the company recorded charges of $79 million in 2009. Defer red tax benef its were recognized for these charges and the 2009 after-tax impact was $50 million or $.21 per share. The $12 million of charges in the “Other” category include shut down costs as well as the impairment of certain broadcast programming assets. Deferred tax benef its were recognized for these charges and therefore the after-tax impact was $7 million or $.03 per share. In the second quarter of 2009, in accordance with ASC Topic 360, the company recorded an impairment charge to reduce the value of certain publishing assets sold to fair value less costs to sell. Fair value was determined using a discounted cash flow tech- nique that included the cash flows associated with the disposition. This impairment charge was $28 million pre-tax and $24 million after-tax, or $.10 per share. The charge is reflected in “Other non- operating items” in the Consolidated Statements of Income. In 2009, for certain investments in which the company owns noncontrolling interests, carrying values were written down to fair value because the businesses underlying the investments had expe- rienced significant and sustained operating losses, leading the company to conclude that they were other than temporarily impaired. These investment carrying value adjustments totaled $9 million pre-tax and $7 million on an after -tax basis, or $.03 per share. 2008: Very difficult business conditions, the economic crisis, recessionary conditions in the U.S. and U.K. and a decline in the company’s stock price required the company to perform impairment tests on goodwill, intangible assets, and other long-lived assets as of March 31, 2008, the f irst day of its f iscal second quarter, as well as on Dec. 28, 2008, in connection with the required annual impair ment test of goodwill and indef inite-lived intangibles. As a result, the company recorded non-cash impairment charges to reduce the book value of goodwill, other intangible assets including mastheads, and certain property, plant and equipment assets. The carrying value of certain of the company’s investments in newspaper publishing part- nerships and other businesses, which are accounted for under the equity method, were also written down due to other than temporar y impairments. The company also recorded accelerated depreciation expense associated with certain facility consolidation and cost reduc- tion initiatives. The goodwill impairment charges resulted from the application of the impairment testing provisions included within the goodwill subtopic ASC Topic 350. Impairment testing is customarily per- formed annually. Because of softening business conditions within the company’s publishing segment and the decline in the compan y’s stock price and market capitalization, this testing was updated as of 60 the beginning of the second quar ter of 2008 and as required the testing was performed again as of Dec. 28, 2008. F or certain pub- lishing and digital reporting units, an impairment was indicated. The fair values of the reporting units were determined using dis- counted cash flow and multiple of ear nings techniques. The compa- ny then undertook the next step in the impair ment testing process by determining the fair value of assets and liabilities for these reporting units. The implied value of goodwill determined by the valuation for these reporting units was less than the car rying amount by $7.46 billion, and therefore an impair ment charge in this amount was taken. There was minimal tax benef it recognized related to the impairment charges since much of the recorded goodwill w as non- deductible as it arose from stock purchase transactions. Therefore the after-tax effect of the goodwill impair ment was $6.82 billion or $29.86 per share. The goodwill impairment charge recorded in the second quar- ter, in the amount of $2.14 billion, w as related to Newsquest, the company’s U.K. publishing operations that had been acquired rela- tively recently in several transactions from 1999-2005. Following the second quarter impairment testing, Newsquest’s fourth quarter operating results and projections indicated a signif icant decline from the amounts estimated in the second quar ter and as a result a further goodwill impairment charge of approximately $507 million was recorded. In the fourth quarter of 2008, the company also recognized an impairment charge for its U.S. Community Publishing reporting unit of approximately $4.4 billion. This reporting unit was then comprised of 82 individual publishing operations which had been acquired at various times over the past several decades. The goodwill impairment charges for other stand-alone busi- ness reporting units totaled $408 million in the four th quarter. The impairment charge of $233 million for other intangib le assets was required because revenue results from the underlying businesses had softened from what was expected at the time they were purchased and the assets initially valued. In accordance with the requirements included within ASC Topic 350, the car rying val- ues of impaired indef inite-lived intangible assets, principally mast- heads, were reduced to fair value. Fair value was determined using a relief-from-royalty method. The carrying values of certain defi- nite-lived intangible assets, principally customer relationships, were reduced to fair value in accordance with the requirements included within ASC Topic 350. Deferred tax benef its have been recognized for these intangible asset impairment charges and therefore the after-tax impact was $151 million or $.66 per share. The carrying value of property, plant and equipment at cer tain publishing businesses was also evaluated due to softening business conditions and, in some cases, changes in e xpected useful lives. The recoverability of these assets was measured in accordance with the requirements included within ASC Topic 360. This process indicat- ed that the car rying values of certain assets were not recoverable, as the expected undiscounted future cash flows to be generated by them would be less than their car rying values. The related impairment loss was measured based on the amount by which asset carrying value exceeded fair value. Asset fair values were determined using discounted cash flow or multiple of ear nings techniques. Certain asset fair values were based on estimates of prices for similar assets. In addition, as required b y ASC Topic 360, the company revised the useful lives of certain assets, which were taken out of service during the year or for which management has committed to a plan to discontinue use in the near future, in order to reflect the use of those assets o ver their shortened useful life. As a result of the application of the requirements within ASC Topic 360, the company recorded charges of $221 million. Defer red tax benefits were recognized for these charges and therefore the after- tax impact was $138 million or $.61 per diluted share. The charges of $27 million included in the “Other” cate gory include an amount to increase the le vel of the company’s allowance for doubtful accounts reflecting higher collection risk from the recession-driven increase in delinquency of receivable agings and bankruptcy filings toward the end of 2008. Char ges also include amounts for future lease payments for facilities abandoned in con- nection with consolidation efforts and amounts for the impair ment of certain broadcast programming assets. Deferred tax benef its were recognized for these charges and therefore the after-tax impact was $17 million or $.08 per share. For certain of the company’s newspaper publishing partnership investments, and for certain other investments in which the compa- ny owns a minority equity interest, car rying values were written down to fair value because the businesses underlying the invest- ments had experienced significant and sustained declines in operat- ing performance, leading the company to conclude that they were other than temporarily impaired. The adjustment of newspaper pub- lishing partnership carrying values comprise the majority of these investment charges, and these were driven by many of the same factors affecting the company’s wholly owned publishing business- es. Fair values were determined using a multiple of ear nings or a multiple of revenues technique. These investment carrying value adjustments were $382 million pre-tax and $251 million on an after-tax basis, or $1.10 per diluted share. The pre-tax impairment charges for these investments are reflected as “Equity income (loss- es) in unconsolidated investees, net” in the Statement of Income (Loss). NOTE 4 Goodwill and other intangible assets ASC Topic 350 requires that goodwill and indef inite-lived intangible assets be tested for impair ment at least annually. Recognized intangi- ble assets that have finite useful lives are amortized over their useful lives and are subject to tests for impair ment in accordance with the requirements included within ASC Topic 350. As discussed in Note 3, the company performed interim and year-end impairment tests on its goodwill and other intangib le assets during 2010 and, as a result, recorded non-cash impair ment charges totaling $30 million. The charges in 2010 included goodwill and other intangibles for the Digital segment of $11 million and $2 mil- lion, respectively, and $17 million for other intangib les for the Publishing segment (for a publication masthead in the U.K.). During 2009, the company recorded non-cash impairment charges totaling $42 million. The charges in 2009 included goodwill and other intangibles for the Digital segment of $16 million and $9 million, respectively, and $17 million for goodwill for the Pub lishing segment. The following table displays goodwill, indef inite-lived intangible assets, and amortizable intangible assets at Dec. 26, 2010, and Dec. 27, 2009. In thousands of dollars Dec. 26, 2010 Goodwill . . . . . . . . . . . . . . . . . . . Indefinite-lived intangibles: Mastheads and trade names . . . Television station FCC licenses Amortizable intangible assets: Customer relationships . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . Dec. 27, 2009 Goodwill . . . . . . . . . . . . . . . . . . . Indefinite-lived intangibles: Mastheads and trade names . . . Television station FCC licenses Amortizable intangible assets: Gross Accumulated Amortization Net $ 2,836,960 $ — $ 2,836,960 92,673 255,304 — — 92,673 255,304 311,646 56,628 $ 3,553,211 $ 2,854,247 110,319 255,304 166,068 31,386 197,454 145,578 25,242 $ 3,355,757 — $ 2,854,247 — — 110,319 255,304 141,902 28,280 170,182 169,938 30,049 $ 3,419,857 $ $ $ Customer relationships . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . 311,840 58,329 $ 3,590,039 Amortization expense was approximately $31.4 million in 2010 and $33.0 million in 2009. Customer relationships, w hich include subscriber lists and advertiser relationships, are amortized on a straight-line basis over three to 25 years. Other intangibles primarily include internally developed technology, patents and amortizable trade names and were assigned lives of between three and 21 years and are amortized on a straight-line basis. Annual amortization expense relating to the amor tizable intan- gibles is expected to be approximately $31 million in 2011 and gradually decline to $19 million in 2015 assuming no acquisitions or dispositions. 61 The following table shows the changes in the car rying amount NOTE 6 of goodwill during 2010 and 2009. In thousands of dollars Goodwill Gross balance at Dec. 28, 2008 . . . . . . . . . Accumulated impairment losses . . . . . . Net balance at Dec. 28, 2008 . . . . . . . . . Acquisitions & adjustments . . . . . . . . . . . Impairment . . . . . . . . . . . Dispositions . . . . . . . . . . Foreign currency exchange rate changes . . Balance at Dec. 27, 2009 Gross balance at Dec. 27, 2009 . . . . . . . . . Accumulated impairment losses . . . . . . Net balance at Dec. 27, 2009 . . . . . . . . . Acquisitions & adjustments . . . . . . . . . . . Impairment . . . . . . . . . . . Dispositions . . . . . . . . . . Foreign currency exchange rate changes . . Balance at Dec. 26, 2010 Gross balance at Dec. 26, 2010 . . . . . . . . . Accumulated impairment losses . . . . . . Net balance at Dec. 26, 2010 . . . . . . . . . NOTE 5 Publishing Digital Broadcasting Total $7,473,542 $670,593 $1,617,967 $ 9,762,102 (6,879,214) (10,000) — (6,889,214) $ 594,328 $660,593 $1,617,967 $ 2,872,888 1,534 (17,000) (6,039) (1,735) (16,000) — — — — (201) (33,000) (6,039) 18,019 $ 590,842 2,118 $644,976 462 $1,618,429 20,599 $ 2,854,247 7,692,437 670,976 1,618,429 9,981,842 (7,101,595) (26,000) — (7,127,595) $ 590,842 $644,976 $1,618,429 $ 2,854,247 1,476 — (5,927) 10,072 (10,603) — — — — 11,548 (10,603) (5,927) (6,918) $ 579,473 (5,521) $638,924 134 $1,618,563 (12,305) $ 2,836,960 7,599,030 675,527 1,618,563 9,893,120 (7,019,557) (36,603) — (7,056,160) $ 579,473 $638,924 $1,618,563 $ 2,836,960 Consolidated statements of cash flows Cash paid in 2010, 2009 and 2008 for income tax es and for interest (net of amounts capitalized) was as follows: In thousands of dollars Income taxes . . . . . . . . . . . . . . . Interest . . . . . . . . . . . . . . . . . . . 2010 $ 195,253 $ 171,537 2009 $ 78,856 $ 177,899 2008 $306,074 $188,385 Interest in the amount of $477,000, $216,000 and $458,000 was capitalized in 2010, 2009 and 2008, respecti vely. Investments The company’s investments include several that are accounted for under the equity method. Principal among these are the follo wing: Ponderay Newsprint Company . . . . . . . . . . . . . . . . . . California Newspapers Partnership . . . . . . . . . . . . . . . ShermansTravel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cozi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Classified Ventures . . . . . . . . . . . . . . . . . . . . . . . . . . . QuadrantONE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4INFO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Livestream . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fantasy Sports Ventures . . . . . . . . . . . . . . . . . . . . . . . . Homefinder.com . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Topix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Texas-New Mexico Newspapers Partnership . . . . . . . Detroit Weekend Direct . . . . . . . . . . . . . . . . . . . . . . . . Tucson Newspaper Partnership . . . . . . . . . . . . . . . . . . % Owned 13.50% 19.49% 19.67% 19.90% 23.60% 25.00% 27.51% 28.15% 31.35% 33.33% 33.71% 40.64% 50.00% 50.00% The aggregate carrying value of equity investments at Dec. 26, 2010, was $161 million. Certain differences exist between the com- pany’s investment carrying value and the underlying equity of the investee companies principally due to fair value measurement at the date of investment acquisition and due to impair ment charges recorded by the company for certain of the investments. The aggre- gate amount of pretax ear nings (losses) recorded by the company for its investments accounted for under the equity method w as $19.1 million, $3.9 million, and $(374.9) million for 2010, 2009, and 2008, respectively. The company’s net equity income in unconsolidated in vestees for 2010 and 2009 included $3 million and $9 million, respecti vely, of impairment charges related to certain digital business invest- ments. The 2008 equity loss amount is inclusi ve of non-cash impair- ment charges of $382 million primarily related to the car rying value of California Newspapers Partnership and Texas-New Mexico Newspapers Partnership. The company also recorded revenue related to CareerBuilder (fully consolidated since Sept. 1, 2008) and Classif ied Ventures products for online advertisements placed on its newspaper publish- ing affiliated web sites. Such amounts totaled approximately $142 million for 2010, $135 million for 2009 and $186 million for 2008. These revenues are recorded within Publishing segment advertising revenue. 62 NOTE 7 Long-term debt The long-term debt of the company is summarized below: In thousands of dollars Dec. 26, 2010 Dec. 27, 2009 Unsecured notes bearing f ixed rate interest at 5.75% due June 2011 . . . . . . . $ 433,196 $ 432,648 Unsecured floating rate term loan due July 2011 . . . . . . . . . . . . . . . . . . . . . . . . . 180,000 230,000 Unsecured notes bearing f ixed rate interest at 6.375% due April 2012 . . . . . . 306,397 306,260 Borrowings under revolving credit agreements expiring September 2014 . . . 221,000 1,381,000 Unsecured notes bearing f ixed rate interest at 8.75% due November 2014 . . . 246,924 246,304 Unsecured notes bearing f ixed rate interest at 10% due June 2015 . . . . . . . . . 58,007 56,684 Unsecured notes bearing f ixed rate interest at 6.375% due September 2015 . 247,535 — Unsecured notes bearing f ixed rate interest at 10% due April 2016 . . . . . . . . 165,950 162,531 Unsecured notes bearing f ixed rate interest at 9.375% due November 2017 . . 246,830 246,524 Unsecured notes bearing f ixed rate interest at 7.125% due September 2018 . Total long-term debt . . . . . . . . . . . . . . . . . . $ 246,403 2,352,242 — 3,061,951 $ Total average debt outstanding in 2010 and 2009 w as $2.7 billion and $3.6 billion, respectively. The weighted average interest rate on all debt was 6.0% for 2010 and 4.5% for 2009. During 2010 and 2009, the compan y completed a series of financing transactions which significantly improved its debt matu- rity profile. In September 2010, the company completed a private place- ment offering of unsecured senior notes totaling $500 million in two tranches: $250 million with a coupon of 6.375% due 2015 and $250 million with a coupon of 7.125% due 2018. The 2015 notes were priced at 98.970% of f ace value, resulting in a yield to matu- rity of 6.625%. The 2018 notes were priced at 98.527% of f ace value, resulting in a yield to maturity of 7.375%. On or after Sept. 1, 2014, the 2018 notes may be redeemed or purchased b y the company at the applicable redemption price (expressed as a percentage of the principal amount of the 2018 notes) plus accr ued but unpaid interest thereon to the redemption date, if redeemed during the 12-month period commencing on Sept. 1 of the follow- ing years: 2014 – 103.563%, 2015 – 101.781% and 2016 and thereafter 100.000%. The company used the net proceeds of the offering to partially repay borrowings outstanding under its revolv- ing credit facilities and term loan. In September 2010, the company amended its revolving credit agreements and extended the maturity date with the majority of its lenders from March 15, 2012 to Sept. 30, 2014. Total commit- ments under the amended revolving credit agreements are $1.63 billion through March 15, 2012 and total e xtended commitments from March 15, 2012 to Sept. 30, 2014 will be $1.14 billion. In October 2009, the company completed a private placement offering of $250 million in agg regate principal amount of 8.750% senior notes due 2014 and $250 million in agg regate principal amount of 9.375% senior notes due 2017. The 2014 notes were priced at 98.465% of f ace value, resulting in a yield to maturity of 9.l25%. The 2017 notes were priced at 98.582% of f ace value, resulting in a yield to maturity of 9.625%. On or after No vember 15, 2013, the 2017 notes may be redeemed or purchased b y the company at the applicable redemption price (expressed as a per- centage of the principal amount of the 2017 notes) plus accr ued but unpaid interest thereon to the redemption date, if redeemed during the 12-month period commencing on No vember 15 of the following years: 2013 – 104.688%, 2014 – 102.344% and 2015 and thereafter 100.000%. The company used the net proceeds from the offering to partially repay borrowings outstanding under its revolving credit facilities and term loan. In May 2009, the company completed a private exchange offer related to its 5.75% f ixed rate notes due June 2011 and its 6.375% fixed rate notes due April 2012. The company exchanged approxi- mately $67 million in principal amount of its 2011 notes for approximately $67 million principal amount of ne w 10% senior notes due 2015, and approximately $193 million in principal amount of its 2012 notes for appro ximately $193 million principal amount of new 10% senior notes due 2016. In connection with the May 2009 exchange transactions and in accordance with the modif ications and extinguishments require- ments of ASC Topic 470, “Debt,” the company recorded a gain of approximately $42.7 million which was classified in “Other non- operating items” in the Statement of Income (Loss) for the second quarter of 2009. This gain resulted from recording the notes at fair value as of the time of the e xchange and extinguishing the old notes at their historical book v alues. Fair value of the notes was based on their trading prices on and shor tly after the exchange date. The discount created by recording the notes at fair value instead of face value is being amortized over the term of the notes to interest expense. The notes issued during 2010 and 2009 with maturity dates in 2014 and thereafter were made available in private offerings that were exempt from the registration requirements of the Securities Act of 1933 (Securities Act). These notes are guaranteed on a sen- ior basis by the subsidiaries of the compan y that guarantee its revolving credit and term loan agreements discussed more fully below. The company’s three revolving credit agreements and its term loan agreement require the company to maintain a senior leverage ratio of less than 3.5x. The agreements also require the company to maintain a total leverage ratio of less than 4.0x. The total leverage ratio would also include any subordinated debt the company may issue in the future. Cur rently, all of the company’s debt is senior and unsecured. At Dec. 26, 2010, the senior le verage ratio was 1.97x. Until March 15, 2012, commitment fees for the re volving cred- it facilities may range from 0.125% to 0.25% depending on credit ratings for the company’s senior unsecured debt from Moody’s Investor Services (Moody’s) and Standard & Poor’s (S&P). The rate currently in effect is 0.25%. After March 15, 2012, commit- ment fees will equal 0.50% of the undrawn commitments. In addition, the company pays a fee to the lenders that ag reed in September 2010 to extend their commitments from 2012 to 2014 based on the leverage ratio that ranges from 0 to 75 basis points for drawn amounts and 25 basis points for undra wn amounts. At the current leverage ratio, the additional fee is 25 basis points for both the drawn and undrawn amounts. No extension fees are payable after March 15, 2012. 63 Under each of the ag reements, the company may borrow at an applicable margin above the Eurodollar base rate or the higher of the Prime Rate or the Federal Funds Effective Rate plus 0.50%. Until March 15, 2012, the applicab le margin for such bor rowings ranges from 1.00% to 2.25% depending on credit ratings. Under the term loan agreement, the applicable margin varies from 1.25% to 2.25%. At its current ratings the company will pay an applicable margin of 2.25% under each of the re volving credit agreements and the term loan agreement. After March 15, 2012, the applica- ble margin will be determined based on the company’s leverage ratio. In connection with each of its three re volving credit agree- ments and its term loan agreement, the company agreed to provide guarantees from a majority of its domestic w holly-owned sub- sidiaries in the event that the company’s credit ratings from either Moody’s or S&P fell below investment grade. In the f irst quarter of 2009, the company’s credit rating was downgraded below investment grade by both S&P and Moody’s. Accordingly, the guarantees were triggered and the existing notes due 2011 and 2012 and other unsecured debt of the compan y became structurally subordinated to the revolving credit agreements and the term loan. In September 2009, the company further amended the terms of its three revolving credit agreements and its term loan agreement to provide for the issuance of up to $500 million of additional long-term debt carrying the same guarantees put in place for the revolving credit agreements and term loan. In addition, the compa- ny also amended one of the credit ag reements to permit it to obtain up to $100 million of letters of credit from the lenders, w hich would count toward their commitments. On Aug. 21, 2009, Moody’s confirmed the company’s Ba1 cor- porate family rating and its Ba2 senior unsecured note rating. In addition, Moody’s rated the company’s bank debt, which includes its revolving credit agreements and term loan, Baa3. The Baa3 rat- ing also applies to most of the company’s long-term debt which has the same subsidiary guarantees as the bank debt. The compa- ny’s debt is rated BB b y Standard and Poor’s. In August 2010, the company further amended the terms of its three revolving credit agreements and its term loan agreement to allow for the issuance of up to $750 million of additional long- term debt carrying the same guarantees put in place for the re volv- ing credit agreements and term loan. As of Dec. 26, 2010, the compan y had $221 million of bor row- ings under its revolving credit facilities. The maximum amount outstanding at the end of an y period during 2010 and 2009 w as $1.3 billion and $2.5 billion, respectively. The daily average out- standing balance of the revolving credit facilities during 2010 and 2009 was $852 million and $2.0 billion, respecti vely. The weighted average interest rate for 2010 and 2009 w as 2.6% and 3.1%, respectively. During the f irst quarter of 2009, the company repurchased $68.8 million in principal amount of its floating rate notes in pri- vately negotiated transactions at a discount. In connection with these transactions, the company recorded a gain of appro ximately $1.1 million which is classif ied in “Other non-operating items” in the Statement of Income. This gain is net of $0.6 million reclassi- fied from accumulated other comprehensive loss for related inter- est rate swap agreements. In December 2008, the company launched a tender offer to purchase any and all of its outstanding floating rate notes due in May 2009 at a purchase price of $950 per $1,000 in principal 64 amount plus accrued and unpaid interest. In response to the of fer, $98.4 million in aggregate principal amount of notes, representing approximately 13.5 percent of the then outstanding notes, w ere purchased at this price in December 2008. Prior to the tender of fer, the company had repurchased $19.4 million in principal amount of the floating rate notes in a pri vately negotiated transaction. In con- nection with these transactions, the compan y recorded a gain of approximately $4 million which was classified in “Other non-oper- ating items” in the Statement of Income (Loss). This gain was net of $1.7 million in losses reclassif ied from accumulated other com- prehensive income (loss) related to the interest rate s wap agree- ments. In July 2008, the company received proceeds of $280 million from borrowings under a new term loan agreement with certain bank lenders. The term loan is payable in full on July 14, 2011. The loan carries interest at a floating rate and ma y be prepaid at any time without penalty. The company prepaid $50 million of this loan in each of October 2010 and October 2009 reducing the bal- ance to $180 million. During part of 2008, the company utilized commercial paper as a source of f inancing. The maximum amount of such commercial paper outstanding at the end of an y period during 2008 was $2.0 billion. The daily average outstanding balance of promissor y notes was $883 million during 2008. The weighted average interest rate on such notes was 3.5% for 2008. In June 2008, the compan y repaid $500 million in unsecured notes bearing interest at 4.125% with proceeds from bor rowings in the commercial paper mark et. Beginning September 2008, liquidity in the commercial paper mar- ket was highly constrained and the company elected to borrow under its revolving credit agreements to repay commercial paper outstand- ing as it matured. In August 2007, the company entered into three interest rate swap agreements totaling a notional amount of $750 million in order to mitigate the volatility of interest rates. These agreements, which expired in May 2009, effectively fixed the interest rate on the $750 million in floating rate notes due Ma y 2009 at 5.0125%. These instruments were designated as cash flow hedges in accor- dance with ASC Topic 815, “Derivatives and Hedging,” and changes in fair value were recorded through accumulated other comprehensive income with a cor responding adjustment to other long-term liabilities. As a result of the tender of fer and other repur- chases discussed above, the cash flow hedging treatment was dis- continued for interest rate swaps associated with approximately $118 million of notional value on the retired floating rate notes. Amounts recorded in accumulated other comprehensive income (loss) related to the discontinued cash flo w hedges were reclassi- fied into earnings and subsequent changes to the f air value of these interest rate swaps were being recorded through ear nings. In June 2007, the company issued $1.0 billion agg regate prin- cipal amount of unsecured senior convertible notes in an under- written public offering. Proceeds from the notes were used to repay commercial paper obligations. The convertible notes bore interest at a floating rate equal to one month LIBOR, reset monthl y, minus twenty-three basis points. As anticipated, on July 15, 2008, the holders of the convertible notes required the company to repur- chase the convertible notes for cash at a price equal to 100% of the principal amount of the notes submitted for repurchase, plus accrued and unpaid interest. Industrial revenue bonds with a principal amount of appro xi- mately $17 million were repaid in full in 2008. Prior to repa yment, the bonds bore interest at v ariable interest rates based on a munici- pal bond index. In May 2006, the company issued $500 million agg regate prin- cipal amount of 5.75% notes due 2011 and $750 million agg regate principal amount of floating rate notes due 2009 in an underwrit- ten public offering. The net proceeds of the offering were used to pay down commercial paper bor rowings. The unsecured f ixed rate notes bearing interest at 6.375% w ere issued in March 2002 and mature in 2012 . The company has an effective universal shelf registration state- ment under which an unspecif ied amount of securities may be issued, subject to a $7 billion limit estab lished by the Board of Directors. Proceeds from the sale of such securities ma y be used for general corporate purposes, including capital expenditures, working capital, securities repurchase programs, repayment of debt and f inancing of acquisitions. The company may also invest borrowed funds that are not required for other pur poses in short-term marketable securities. The following schedule of annual maturities of long-ter m debt assumes the company uses available capacity under its revolving credit agreements to ref inance the unsecured floating rate notes and term loan due in 2011. Based on this ref inancing assumption, all of the obligations are reflected as maturities for 2012 and be yond. $ In thousands of dollars 2011 (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2014 (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1) Notes and term loan due of $613 million are assumed to be repaid with — 306,397 — 1,081,120 305,542 165,950 246,830 246,403 $ 2,352,242 funds from revolving credit agreements. (2) Notes due of $247 million plus $834 million as deemed as due under the revolving credit agreements. Notwithstanding the assumptions used in the tab le above, the company’s debt maturities might be repaid with cash flo w from operating activities and with the possible benefit of a further extension of the company’s revolving credit agreements or a com- bination of both. The fair value of the company’s total long-term debt, determined based on the bid and ask quotes for the related debt, totaled $2.5 billion and $2.9 billion at Dec. 26, 2010 and Dec. 27, 2009, respec- tively. NOTE 8 Retirement plans The company and its subsidiaries have various retirement plans, including plans established under collective bargaining agree- ments. The company’s principal retirement plan is the Gannett Retirement Plan (GRP). As described more fully below, substan- tially all participants had their benef its under this plan frozen effective Aug. 1, 2008. Prior to this, benef its under the GRP were generally based on years of service and f inal average pay. The disclosure tables below also include the assets and ob liga- tions of the Newsquest Pension Plan in the U.K., certain collective- ly bargained plans, the Gannett Supplemental Retirement Plan (SERP) and a frozen plan for the compan y’s Board of Directors. The company uses a Dec. 31 measurement date for its retirement plans. In June 2008, the Board of Directors approved amendments to each of (i) the GRP; (ii) the SERP; (iii) the Gannett 401(k) Savings Plan (401(k) Plan); and (iv) the Gannett Defer red Compensation Plan (DCP). The amendments were designed to improve the 401(k) Plan while reducing the amount and v olatility of future pension expense. As a result of the amendments to the GRP and SERP, most participants in these plans had their benef its frozen as of Aug. 1, 2008. Participants whose GRP and, if applica- ble, SERP benef its were frozen will have their frozen benef its periodically increased by a cost of living adjustment until benef its commence. Effective Aug. 1, 2008, most par ticipants whose benefits were frozen under the GRP and, if applicable, the SERP receive higher matching contributions under the 401(k) Plan. Under the ne w for- mula, the matching contribution rate generally increased from 50% of the f irst 6% of compensation that an emplo yee elects to con- tribute to the plan to 100% of the f irst 5% of contributed compen- sation. The company also makes additional employer contributions to the 401(k) Plan on behalf of cer tain long-service employees. The DCP was amended to provide for Gannett contributions on behalf of certain employees whose benefits under the 401(k) Plan are capped by IRS rules. As a result of the amendments to freeze most benef it accruals in the GRP and the SERP, the company recognized a net pre-tax pension curtailment gain of $46.5 million in 2008 in accordance with the Def ined Benefit Plans-Pension subtopic of ASC Topic 715, “Compensation-Retirement Benef its.” In 2009, the company reached an agreement with one of its unions for a complete withdrawal from the union’s underfunded pension plan and release from an y future obligations with respect thereto. Under the agreement, the company made settlement pay- ments of $7.3 million in May 2009 and $7.7 million in May 2010. As a result of this ag reement, the company recognized a pre-tax settlement gain of $39.8 million in 2009. In October 2010, after discussion with its pension plan tr ustees and employees, the decision was made to close its Newsquest defined benefit plan to future accr ual, effective March 31, 2011. The plan closure was made to reduce pension e xpense and funding volatility and was part of a package of measures to address the plan’s deficit. The company recognized a pre-tax curtailment gain of $3.3 million in connection with this closure. The company’s pension costs, which include costs for its quali- fied, non-qualified and union plans, are presented in the following table: In thousands of dollars Service cost - benef its earned during the period . . . . . . . . . . Interest cost on benef it obligation . . Expected return on plan assets . . . . . Amortization of prior service costs/(credit) . . . . . . . . . . . . . . . . . . . Amortization of actuarial loss . . . . . Pension expense (benefit) for company-sponsored retirement plans Curtailment gains . . . . . . . . . . . . . . . Settlement and special termination benefit charge/(credit) . . . . . . . . . . . Union and other pension cost . . . . . . Total pension cost (benefit) . . . . . . . 2010 2009 2008 $ 14,829 176,738 (191,614) $ 14,439 178,646 (171,472) $ 64,563 207,758 (266,079) 6,731 46,870 1,641 48,541 (9,682) 23,465 53,554 (3,840) 71,795 20,025 — (46,463) — 3,990 $ 53,704 (39,159) 5,146 4,168 5,002 $ 37,782 $ (17,268) 65 The following table provides a reconciliation of pension bene- fit obligations (on a projected benefit obligation measurement basis), plan assets and funded status of compan y-sponsored retire- ment plans, along with the related amounts that are reco gnized in the Consolidated Balance Sheets. In thousands of dollars Dec. 26, 2010 Dec. 27, 2009 $ $ 3,088,364 14,829 176,738 7,595 189,382 (24,259) (218,362) (16,410) — 3,217,877 Change in benefit obligations Benefit obligations at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . Service cost . . . . . . . . . . . . . . . . . . . . Interest cost . . . . . . . . . . . . . . . . . . . . Plan participants’ contributions . . . . . Actuarial loss . . . . . . . . . . . . . . . . . . . Foreign currency translation . . . . . . . Gross benefits paid . . . . . . . . . . . . . . Curtailments . . . . . . . . . . . . . . . . . . . Settlement . . . . . . . . . . . . . . . . . . . . . Benefit obligations at end of year . . . Change in plan assets Fair value of plan assets at beginning of year . . . . . . . . . . . . . . . . Actual return on plan assets . . . . . . . Plan participants’ contributions . . . . . Employer contributions . . . . . . . . . . . Gross benefits paid . . . . . . . . . . . . . . Settlements . . . . . . . . . . . . . . . . . . . . Foreign currency translation . . . . . . . Fair value of plan assets at end of year . . . . . . . . . . . . . . . . . . . . . Funded status at end of year . . . . . . . Amounts recognized in Consolidated Balance Sheets 4,140 Long-term other assets . . . . . . . . . . . (13,949) Accrued benefit cost - current . . . . . (619,340) Accrued benefit cost - long-term . . . 2,375,767 269,263 7,595 174,578 (218,362) — (20,113) 2,588,728 (629,149) $ $ $ $ $ $ $ $ $ $ $ $ $ $ 3,060,287 14,439 178,646 11,497 172,717 51,823 (275,575) — (125,470) 3,088,364 2,168,559 427,299 11,497 45,199 (275,575) (46,968) 45,756 2,375,767 (712,597) 7,682 (12,146) (708,133) The actuarial loss and prior ser vice cost amounts expected to be amortized from accumulated other comprehensive loss into net periodic benefit cost in 2011 are $36.5 million and $7.5 million, respectively. Other changes in plan assets and benef it obligations recognized in other comprehensive income for 2010 consist of the following: In thousands of dollars Current year actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . Current year actuarial gain due to curtailment . . . . . . . . . . . . . Prior service credit recognized in curtailment . . . . . . . . . . . . . Amortization of actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . Amortization of prior service costs . . . . . . . . . . . . . . . . . . . . Currency gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (111,732) 16,410 (583) 46,870 6,731 5,531 $ (36,773) Pension costs: The following assumptions were used to deter- mine net pension costs: Discount rate . . . . . . . . . . . . . . . . . . . . . Expected return on plan assets . . . . . . . Rate of compensation increase . . . . . . . 2010 5.88% 8.75% 2.88% 2009 6.26% 8.75% 2.54% 2008 6.23% 8.75% 4.00% The expected return on asset assumption was determined based on plan asset allocations, a review of historic capital market per- formance, historical plan asset perfor mance and a forecast of expected future asset returns. Benefit obligations and funded status: The following assump- tions were used to determine the year-end benefit obligations: Discount rate . . . . . . . . . . . . . . . . . . . . . . Rate of compensation increase . . . . . . . . 5.49% 2.95% 5.90% 2.69% Dec. 26, 2010 Dec. 27, 2009 The funded status (on a projected benef it obligation basis) of retirement plans for which accumulated benef its exceed assets: The following table presents information for those company the company’s principal retirement plans at Dec. 26, 2010, is as follows: In thousands of dollars In thousands of dollars GRP . . . . . . . . . . . . . . . . . . . SERP . . . . . . . . . . . . . . . . . . Newsquest . . . . . . . . . . . . . . All other . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . Fair Value of Plan Assets $ 1,926,834 — 588,105 73,789 $ 2,588,728 Benefit Obligation $ 2,272,349 195,326 679,284 70,918 $ 3,217,877 Funded Status $ (345,515) (195,326) (91,179) 2,871 $ (629,149) The accumulated benef it obligation for all def ined benefit pen- sion plans was $3.19 billion and $3.07 billion at Dec. 26, 2010 and Dec. 27, 2009, respectively. Net actuarial losses recognized in accumulated other compre- hensive loss were $1.17 billion in 2010 and $1.13 billion in 2009. Prior service cost recognized in accumulated other comprehensive loss was $75.3 million in 2010 and $78.1 million in 2009. 66 Accumulated benefit obligation . . . . . . . Fair value of plan assets . . . . . . . . . . . . . $3,123,535 $2,514,939 $3,017,124 $2,307,328 Dec. 26, 2010 Dec. 27, 2009 The following table presents information for those company retirement plans for which the projected benef it obligation exceeds assets: In thousands of dollars Projected benefit obligation . . . . . . . . . . Fair value of plan assets . . . . . . . . . . . . . $3,148,228 $2,514,939 $3,027,606 $2,307,328 Dec. 26, 2010 Dec. 27, 2009 During 2010, the company made voluntary contributions of $130 million to the GRP. The company contributed $26.6 million to the U.K. retirement plan in 2010 and $21.2 million in 2009. For 2011, the company expects to contribute less than $45 million to the GRP, depending on f inal actuarial valuation results, and $18.5 million to the U.K. retirement plan. Plan assets: The fair value of plan assets was approximately NOTE 9 $2.6 billion and $2.4 billion at the end of 2010 and 2009, respectively. The expected long-term rate of return on these assets was 8.75% for 2010, 2009 and 2008. The asset allocation for com- pany-sponsored pension plans at the end of 2010 and 2009, and target allocations for 2011, by asset category, are presented in the table below: Target Allocation Allocation of Plan Assets Equity securities . . . . . . . . . Debt securities . . . . . . . . . . Other . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . 2011 59 % 30 11 100 % 2010 47 % 47 6 100 % 2009 43 % 50 7 100 % The primary objective of company-sponsored retirement plans is to provide eligible employees with scheduled pension benef its: the “prudent man” guideline is followed with regard to the investment management of retirement plan assets. Consistent with pr udent stan- dards for preservation of capital and maintenance of liquidity, the goal is to earn the highest possible total rate of retur n while minimiz- ing risk. The principal means of reducing volatility and exercising prudent investment judgment is diversification by asset class and by investment manager; consequently, portfolios are constructed to attain prudent diversification in the total por tfolio, each asset class, and within each individual investment manager’s portfolio. Investment diversification is consistent with the intent to minimize the risk of large losses. All objectives are based upon an investment horizon spanning f ive years so that interim market fluctuations can be viewed with the appropriate perspective. The target asset alloca- tion represents the long-term perspective. Retirement plan assets will be rebalanced periodically to align them with the target asset alloca- tions. Risk characteristics are measured and compared with an appro- priate benchmark quarterly; periodic reviews are made of the invest- ment objectives and the investment managers. The company’s actual investment return (loss) on its Gannett Retirement Plan assets w as 14.0% for 2010, 25.6% for 2009 and (25.6)% for 2008. The negative return for 2008 reflects the global economic crisis and shar p decline in equity share values. Retirement plan assets include approximately 1.2 million shares of the company’s common stock valued at approximately $19 million and $18 million at the end of 2010 and 2009, respec- tively. The plan received dividends of approximately $199,000 on these shares in 2010. Cash flows: The company estimates it will make the following benefit payments (from either retirement plan assets or directl y from company funds), which reflect expected future service, as appropriate: In thousands of dollars 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2016-2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 204,879 $ 208,472 $ 210,861 $ 215,144 $ $ 217,409 $ 1,106,088 Postretirement benefits other than pensions The company provides health care and life insurance benef its to certain retired employees who meet age and ser vice requirements. Most of the company’s retirees contribute to the cost of these benefits and retiree contributions are increased as actual benef it costs increase. The cost of providing retiree health care and life insurance benefits is actuarially determined and accrued over the service period of the active employee group. The company’s policy is to fund benef its as claims and premiums are paid. The company uses a Dec. 31 measurement date for these plans. Postretirement benefit cost for health care and life insurance included the following components: In thousands of dollars 2010 2009 2008 Service cost - benef its earned during the period . . . . . . . . . . . . . . . . . . $ Interest cost on net benef it obligation . . Amortization of prior service credit . . . Amortization of actuarial loss . . . . . . . . Net periodic postretirement (benefit) cost . . . . . . . . . . . . . . . . . . . . . $ (3,109) $ 3,750 Special termination benefit charge . . . . $ — $ 713 $ 1,405 13,339 (15,689) 4,695 10,606 (19,377) 4,949 $ 1,634 14,013 (15,560) 4,752 $ 4,839 — $ 1,307 The table below provides a reconciliation of benef it obligations and funded status of the compan y’s postretirement benef it plans: In thousands of dollars Change in benefit obligations Net benefit obligations at beginning of year . . . . . . . . . . . . . . . . Service cost . . . . . . . . . . . . . . . . . . . . Interest cost . . . . . . . . . . . . . . . . . . . . Plan participants’ contributions . . . . . Plan amendments . . . . . . . . . . . . . . . . Actuarial gain . . . . . . . . . . . . . . . . . . . Gross benefits paid . . . . . . . . . . . . . . Federal subsidy on benef its paid . . . . Net benefit obligations at end of year . . . . . . . . . . . . . . . . . . . . . Change in plan assets Fair value of plan assets at beginning of year . . . . . . . . . . . . . . . . Employer contributions . . . . . . . . . . . Plan participants’ contributions . . . . . Gross benefits paid . . . . . . . . . . . . . . Fair value of plan assets at end of year . . . . . . . . . . . . . . . . . . . . . Benefit obligation at end of year . . . . Accrued postretirement benef it cost: Current . . . . . . . . . . . . . . . . . . . . . . . Noncurrent . . . . . . . . . . . . . . . . . . . . Dec. 26, 2010 Dec. 27, 2009 $ 208,213 713 10,606 11,708 (677) (6,121) (35,658) 2,498 $ 191,282 $ $ $ $ $ — 23,950 11,708 (35,658) — 191,282 22,960 168,322 $ $ $ $ $ $ $ 244,190 1,405 13,339 10,429 (19,853) (7,799) (35,856) 2,358 208,213 — 25,427 10,429 (35,856) — 208,213 22,780 185,433 Net actuarial losses recognized in accumulated other compre- hensive loss were $33.7 million in 2010 and $44.3 million in 2009. Prior service credits recognized in accumulated other comprehen- sive loss were $63.6 million in 2010 and $82.3 million in 2009. 67 The actuarial loss and prior ser vice credit estimated to be amortized from accumulated other comprehensive loss into net periodic benefit cost in 2011 are $4.5 million and $(19.5) million, respectively. Other changes in plan assets and benef it obligations recognized in other comprehensive (loss) income for 2010 consist of the fol- lowing: In thousands of dollars Current year actuarial gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prior service credit change . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amortization of actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . Amortization of prior service credit . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ $ 5,637 677 4,949 (19,377) (8,114) Postretirement benefit costs: The following assumptions were used to determine postretirement benef it cost: Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . Health care cost trend on coverage . . . . . . . . . . Ultimate trend rate . . . . . . . . . . . . . . . . . . . . . . . Year that ultimate trend rate is reached . . . . . . . 2008 2009 2010 5.80% 6.15% 6.13% 6.50% 7.00% 8.00% 5.00% 5.00% 5.00% 2014 2014 2014 Benefit obligations and funded status: The following assump- tions were used to determine the year-end benefit obligation: NOTE 10 Income taxes The provision (benefit) for income taxes on income from continu- ing operations consists of the following: In thousands of dollars 2010 Federal . . . . . . . . . . . . . . . . . . State and other . . . . . . . . . . . . Foreign . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . In thousands of dollars 2009 Federal . . . . . . . . . . . . . . . . . . State and other . . . . . . . . . . . . Foreign . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . In thousands of dollars 2008 Federal . . . . . . . . . . . . . . . . . . State and other . . . . . . . . . . . . Foreign . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . Current $135,442 (51,252) 9,460 $ 93,650 Deferred $ 129,829 19,150 1,384 $ 150,363 Total $ 265,271 (32,102) 10,844 $ 244,013 Current $ 90,374 23,846 22,895 $137,115 Deferred $ 53,153 9,920 (8,860) $ 54,213 Total $ 143,527 33,766 14,035 $ 191,328 Current $195,827 (25,519) (13,593) $156,715 Deferred $(624,379) (150,798) (26,811) $(801,988) Total $(428,552) (176,317) (40,404) $(645,273) Dec. 26, 2010 Dec. 27, 2009 5.30% 5.80% The components of income (loss) from continuing operations attributable to Gannett Co., Inc. before income tax es consist of the following: Discount rate . . . . . . . . . . . . . . . . . . . . . . Health care cost trend rate assumed for next year . . . . . . . . . . . . . . . . . . . . . . . . . Ultimate trend rate . . . . . . . . . . . . . . . . . Year that ultimate trend rate is reached . . 6.50% 5.00% 2014 7.00% 5.00% 2014 A 6.50% annual rate of increase in the per capita cost of co v- ered health care benef its was assumed for 2011. Assumed health care cost trend rates have an effect on the amounts repor ted for the health care plans. The effect of a 1% change in the health care cost trend rate would result in a change of appro ximately $8 million in the 2010 postretirement benef it obligation and a $0.5 million change in the aggregate service and interest components of the 2010 expense. Cash flows: The company expects to make the following bene- fit payments, which reflect expected future service, and to receive the following federal subsidy benef its as appropriate: In thousands of dollars 2011 . . . . . . . . . . . . . . . . . . . . 2012 . . . . . . . . . . . . . . . . . . . . 2013 . . . . . . . . . . . . . . . . . . . . 2014 . . . . . . . . . . . . . . . . . . . . 2015 . . . . . . . . . . . . . . . . . . . . 2016-2020 . . . . . . . . . . . . . . . . Benefit Payments $ 22,959 $ 20,967 $ 20,158 $ 19,825 $ 19,032 $ 80,032 Subsidy Benefits $ 2,508 $ 2,398 $ 2,359 $ 2,299 $ 2,217 $ 9,639 In thousands of dollars Domestic . . . . . . . . . . . . . . . Foreign . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . 2010 $ 729,485 81,856 $ 811,341 2009 $ 484,316 58,492 $ 542,808 2008 $ (4,718,428) (2,553,784) $ (7,272,212) The provision for income taxes on continuing operations varies from the U.S. federal statutory tax rate as a result of the follo wing differences: Fiscal year U.S. statutory tax rate . . . . . . . . . . . . . . . . . Increase (decrease) in taxes resulting from: Asset impairments . . . . . . . . . . . . . . . . . State/other income taxes net of federal income tax . . . . . . . . . . . . . . . . . Statutory rate differential and permanent differences in earnings in foreign jurisdictions . . . . . . . . . . . . . . Lapse of state statutes of limitations net of federal income tax . . . . . . . . . . . Other, net . . . . . . . . . . . . . . . . . . . . . . . . Effective tax rate . . . . . . . . . . . . . . . . . . . . 2010 2008 2009 35.0% 35.0% 35.0% 0.6 3.5 1.4 3.5 (28.0) 3.1 (2.7) (3.3) (2.0) (7.2) 0.9 (0.7) (0.7) 30.1% 35.2% 0.5 0.3 8.9% The amounts above exclude the participants’ share of the benefit cost. The company’s policy is to fund benef its as claims and premiums are paid. The benefit from the lapse of state statutes of limitations in 2010 is primarily the release of tax reser ves and interest related to the sale of a b usiness in a prior year. 68 Absent the effect of facility consolidation and asset impair ment charges and workforce restructuring charges in 2010 and 2009, cer- tain gains in 2009 and the special net tax benef it from the release of certain tax reserves due to the lapse of statutes of limitations for 2010, the company’s effective tax rate would have been 33.1% for 2010, 33.6% for 2009 and 28.7% for 2008. In addition to the income tax pro vision presented above for con- tinuing operations, the company also recorded federal and state income taxes payable on discontinued operations in 2010. Taxes provided on the earnings from discontinued operations include amounts reclassif ied from previously reported income tax provisions and totaled $11.7 million for 2010, co vering U.S. federal and state income taxes and representing an effective rate of 36%. Also included in discontinued operations for 2010 is a reco gnized gain of $21.2 million, which is net of tax. Taxes provided on the gains from the disposals totaled appro ximately $12.2 million for 2010, covering U.S. federal and state income taxes and represent an effective rate of 36.4%. Deferred income taxes reflect temporary differences in the recognition of revenue and expense for tax reporting and f inancial statement purposes. Amortization of intangibles represents the largest component of the defer red provision. Deferred tax liabili- ties and assets are adjusted for enacted changes in tax la ws or tax rates of the various tax jurisdictions. The amounts of such adjust- ments for 2008, 2009 and 2010 are not signif icant. Deferred tax liabilities and assets were composed of the following at the end of 2010 and 2009: In thousands of dollars Liabilities Accelerated depreciation . . . . . . . . . . Accelerated amortization of deductible intangibles . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . Total deferred tax liabilities . . . . . . . Assets Accrued compensation costs . . . . . . . Pension . . . . . . . . . . . . . . . . . . . . . . . Postretirement medical and life . . . . . Federal tax benef its of uncertain state tax positions . . . . . . . . . . . . . . . . . . . Partnership investments including impairments . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . Total deferred tax assets . . . . . . . . . . Total net deferred tax assets . . . . . . . . Net current deferred tax assets . . . . . Net long-term deferred tax assets . . . Dec. 26, 2010 Dec. 27, 2009 $ 309,477 $ 317,547 59,709 27,600 396,786 98,005 239,120 75,607 6,547 36,143 360,237 112,339 270,403 83,859 46,856 73,736 65,874 62,963 588,425 191,639 21,254 170,385 $ 79,471 62,366 682,174 321,937 19,577 302,360 $ Included in total defer red tax assets are valuation allowances of approximately $44 million and $38 million in 2010 and 2009, respectively, primarily related to foreign tax credits a vailable for carry forward to future years and to certain foreign losses. Realization of deferred tax assets for which valuation allowances have not been established is dependent upon generating sufficient future taxable income. The company expects to realize the benefit of these deferred tax assets through future reversals of its deferred tax liabilities, through the reco gnition of taxable income in the allowable carryback and carryforward periods, and through implementation of future tax planning strate gies. Although realization is not assured, the company believes it is more likely than not that all deferred tax assets for which valuation allowances have not been established will be realized. The company’s legal and tax structure reflects acquisitions that have occurred over the years as well as the multi-jurisdictional nature of the company’s businesses. The following table summarizes the activity related to unrecog- nized tax benef its, excluding the federal tax benef it of state tax deductions: In thousands of dollars Change in unrecognized tax benefits Balance at beginning of year . . . . . . . . . . . . Additions based on tax positions related to the current year . . . . . . . . . . . . . . . . . . . . Additions for tax positions of prior y ears . . Reductions for tax positions of prior y ears . Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . Reductions due to lapse of statutes of limitations . . . . . . . . . . . . . . . . . . . . . . . . . Balance at end of year . . . . . . . . . . . . . . . Dec. 26, 2010 Dec. 27, 2009 $ 191,715 $182,025 20,234 24,015 (37,869) (3,307) 19,455 14,462 (16,959) (3,140) (41,257) $ 153,531 (4,128) $191,715 The total amount of unrecognized tax benef its that, if recog- nized, would impact the effective tax rate was $109 million as of Dec. 26, 2010, and $126 million as of Dec. 27, 2009. This amount includes the federal tax benef it of state tax deductions. Included in the $154 million unrecognized tax benef it balance at Dec. 26, 2010, are $11 million of tax positions for w hich the ulti- mate deductibility is highly certain but for which there is uncertain- ty about the timing of such deductibility. The company recognizes interest and penalties related to unrecognized tax benef its as a component of income tax e xpense. The company also recognizes interest income attributable to over- payment of income taxes as a component of income tax e xpense, and it recognizes interest credits for the reversal of interest expense previously recorded for uncertain tax positions which are subse- quently released. During 2010, the company recognized income from interest and the release of penalty reser ves of $40 million. During 2009, the company recognized interest expense of $3 mil- lion. During 2008, the company recognized income from interest and the release of penalty reser ves of $13 million. The amount of accrued interest and penalties payable related to unrecognized tax benefits was $37 million and $74 million as of Dec. 26, 2010, and Dec. 27, 2009, respectively. The 2005 through 2009 tax years remain subject to examina- tion by the IRS. The IRS is examining the 2005 through 2008 U.S. income tax returns and the company believes it is likely that the examination of these returns will be completed in 2011. The 2005 through 2009 tax years generally remain subject to examination by state authorities, and the years 2003 through 2009 are subject to examination in the U.K. In addition, tax years prior to 2005 remain subject to examination by certain states primarily due to the f iling of amended tax returns as a result of the settlement of the IRS examination for these years and due to ongoing audits. 69 It is reasonably possible that the amount of unreco gnized bene- fit with respect to cer tain of the company’s unrecognized tax posi- tions will signif icantly increase or decrease within the ne xt 12 months. These changes may be the result of settlement of ongoing audits, lapses of statutes of limitations or other re gulatory develop- ments. At this time, the company estimates that the amount of its gross unrecognized tax positions may decrease by up to approxi- mately $50 million within the ne xt 12 months primarily due to lapses of statutes of limitations and settlement of ongoing audits in various jurisdictions. NOTE 11 – SHAREHOLDERS’ EQUITY Capital stock and earnings per share The company’s earnings (loss) per share (basic and diluted) for 2010, 2009 and 2008 are presented belo w: In thousands, except per share amounts Net income (loss) attributable to Gannett Co., Inc. . . . . . . . . . . Weighted average number of common shares outstanding (basic) . . . . . . . . . . . . . . . . . . . . . Effect of dilutive securities Stock options . . . . . . . . . . . . . . . Restricted stock . . . . . . . . . . . . . 401(k) employer match . . . . . . . Weighted average number of common shares outstanding (diluted) . . . . . . . . . . . . . . . . . . . Earnings (loss) per share (basic) Earnings (loss) per share (diluted) 2010 2009 2008 $ 588,201 $ 355,270 $(6,647,565) 238,230 233,683 228,345 1,354 1,720 301 723 1,117 504 — — — 241,605 $2.47 $2.43 236,027 $1.52 $1.51 228,345 $(29.11) $(29.11) The diluted earnings per share amounts exclude the effects of approximately 19.6 million stock options outstanding for 2010, 22.3 million for 2009 and 27.1 million for 2008, as their inclusion would be antidilutive. The diluted earnings per share amount for 2008 also excludes 2.2 million restricted stock units. Share repurchase program In February 2004, the company announced the reactivation of its existing share repurchase program that was last utilized in February 2000. On July 25, 2006, the authorization to repurchase shares w as increased by $1 billion. During 2008, 2.3 million shares w ere pur- chased under the program for $72.8 million. There were no shares purchased under the program in 2010 or 2009. The shares may be repurchased at management’s discretion, either in the open market or in privately negotiated block transac- tions. Management’s decision to repurchase shares will depend on price, availability and other cor porate developments. Purchases may occur from time to time and no maximum purchase price has been set. While there is no expiration date for the repurchase pro- gram, the company’s Board of Directors reviews the share repur- chase authorization annually, the last such review having occurred in October 2010. Certain of the shares previously acquired by the company have been reissued in settlement of emplo yee stock awards. At this time, the company does not anticipate repurchasing its shares for the near term. 70 Equity-based awards In May 2001, the company’s shareholders approved the adoption of the Omnibus Incentive Compensation Plan (the Plan). The Plan is administered by the Executive Compensation Committee of the Board of Directors and was amended and restated as of Ma y 4, 2010 to increase the number of shares reser ved for issuance to up to 60.0 million shares of company common stock for awards granted on or after the amendment date. The Plan provides for the granting of stock options, stock appreciation rights, restricted stock, restricted stock units and other equity-based and cash-based awards. Awards may be granted to employees of the company and members of the Board of Directors. The Plan provides that shares of common stock subject to awards granted become available again for issuance if such awards are canceled or forfeited. Stock options may be granted as either non-qualif ied stock options or incentive stock options. Options are g ranted to purchase common stock of the company at not less than 100% of the f air mar- ket value on the day of grant. Options are exercisable at such times and subject to such ter ms and conditions as the Executive Compensation Committee determines. The Plan restricts the g ranting of options to any participant in any fiscal year to no more than 1,000,000 shares. Options issued from 1996 through No vember 2004 have a 10-year exercise period, and options issued in December 2004 and thereafter have an eight-year exercise period. Options generally become exercisable at 25% per year. In addition to stock options, the compan y issues stock-based compensation to employees in the form of restricted stock units (RSUs). These awards generally entitle employees to receive at the end of a four-year incentive period one share of common stock for each RSU granted, conditioned on continued employment for the full incentive period. Compensation expense for RSUs is recog- nized for the awards that are expected to vest. The expense is based on the fair value of the awards on the date of g rant recog- nized on a straight-line basis over the requisite service period, which is generally the four-year incentive period. Under the plan, no more than 500,000 RSUs may be granted to any participant in any fiscal year. The Plan also permits the company to issue restricted stock. Restricted Stock is an award of common stock that is subject to restrictions and such other ter ms and conditions as the Executive Compensation Committee determines. Under the Plan, no more than 500,000 restricted shares may be granted to any participant in any fiscal year. The company issued stock options to cer tain members of its Board of Directors as compensation for meeting fees and retainer fees, as well as long-term awards. Meeting fees paid as stock options fully vest upon grant. Retainers paid in the for m of stock options vest in equal quarterly installments over one year. Long- term stock option awards vest in equal annual installments over four years. Expense is recognized on a straight-line basis over the vesting period based on the g rant date fair value. During 2010, 2009 and 2008, members of the Board of Directors w ere awarded 72,681, 144,667 and 28,683 shares, respectively, of stock options as part of their compensation plan. The company also issued restricted stock to cer tain members Risk-free interest rate – The company bases the risk-free inter- of its Board of Directors as compensation for meeting fees and retainer fees, as well as annual long-term awards. Meeting fees paid as restricted stock fully vest upon grant. Retainers paid in the form of restricted shares vest in equal quarterly installments over one year. Long-term awards vest in equal monthly installments over three years. Expense is recognized on a straight-line basis over the vesting period based on the g rant date fair value. During 2010, 2009 and 2008, members of the Board of Directors w ere awarded 21,062 shares, 95,543 shares and 15,872 shares, respec- tively, of restricted stock as par t of their compensation plan. All vested shares will be issued to directors w hen retiring from the Board. The Executive Compensation Committee may grant other types of awards that are valued in whole or in part by reference to or that are otherwise based on f air market value of the company’s com- mon stock or other criteria estab lished by the Executive Compensation Committee including the achievement of perform- ance goals. The maximum aggregate grant of performance shares that may be awarded to any participant in any fiscal year shall not exceed 500,000 shares of common stock. The maximum aggregate amount of performance units or cash-based awards that may be awarded to any participant in any fiscal year shall not exceed $10,000,000. In the event of a change in control as def ined in the Plan, (1) all outstanding options will become immediately exercisable in full; (2) all restricted periods and restrictions imposed on non-perfor mance based restricted stock awards will lapse; (3) all non-perfor mance based restricted stock units will fully vest; and (4) target payment opportunities attainable under all outstanding awards of perform- ance-based restricted stock, performance units and performance shares will be paid as specified in the Plan. Determining fair value Valuation and amortization method – The company determines the fair value of stock options using the Black-Scholes option-pric- ing formula. Key inputs into this for mula include expected term, expected volatility, expected dividend yield and the risk-free rate. Each assumption is discussed below. This fair value is amortized on a straight-line basis over the requisite service periods of the awards, which is generally the four-year vesting period. Expected term – The expected term represents the period that the company’s stock-based awards are expected to be outstanding, and is determined based on historical experience of similar awards, giving consideration to contractual ter ms of the awards, vesting schedules and expectations of future employee behavior. Expected volatility – The fair value of stock-based awards reflects a volatility factor calculated using historical market data for the company’s common stock. The time frame used is equal to the expected term. Expected dividend – The dividend assumption is based on the company’s expectations about its dividend policy on the date of grant. est rate on the yield to maturity at the time of the stock option grant on zero-coupon U.S. government bonds having a remaining life equal to the option’s expected life. Estimated forfeitures – When estimating forfeitures, the com- pany considers voluntary termination behavior as well as analysis of actual option forfeitures. The following assumptions were used to estimate the f air value of option awards: 2010 4.5 yrs. 2009 4.5 yrs. 2008 4.5 yrs. Average expected term . . . Expected volatility . . . . . . 59.41 - 62.24% 38.67 - 59.18% 17.51 - 34.63% Weighted average volatility Risk-free interest rates . . . Expected dividend yield . . Weighted average expected dividend . . . . . . . . . . . . . . . 48.73% 28.60% 1.55 - 3.25% 1.97 - 2.63% 1.00 - 2.20% 4.20 - 13.30% 61.01% 1.51 - 2.65% 1.00% 1.20% 9.91% 1.00% The following table shows the stock-based compensation relat- ed amounts recognized in the Consolidated Statements of Income (Loss) for equity awards: In thousands, except per share amounts Stock options . . . . . . . . . . . . . . . . . . . . Restricted stock and RSUs . . . . . . . . . Total stock-based compensation . . . . . Income tax benefit . . . . . . . . . . . . . . . . Stock-based compensation, net of tax . . . . . . . . . . . . . . . . . . . . . . . Per diluted share impact . . . . . . . . . . . . . 2010 $18,810 13,897 32,707 12,429 2009 $ 12,578 12,795 25,373 9,641 2008 $ 13,097 9,549 22,646 8,605 $20,278 $.08 $ 15,732 $.07 $ 14,041 $.06 As of Dec. 26, 2010, there was $13.6 million of unrecognized compensation cost related to non-vested share-based compensation for options. Such amount will be adjusted for future changes in esti- mated forfeitures. Unrecognized compensation cost for options will be recognized on a straight-line basis over a weighted average peri- od of 3.5 years. During 2010, options for 332,060 shares of common stock were exercised from which the company received $2.0 million of cash. The intrinsic value of the options exercised was approximate- ly $3.1 million. The actual tax benef it realized from the option exercises was $1.2 million. During 2009, options for 44,250 shares of common stock w ere exercised from which the company received $0.3 million of cash. The intrinsic value of the options exercised was approximately $0.4 million. The actual tax benef it realized from the option e xer- cises was $0.1 million. During 2008, no options were exercised. Option exercises are satisf ied through the issuance of shares from treasury stock. 71 A summary of the company’s stock-option awards is presented A summary of restricted stock and RSU a wards is presented below: below: Weighted average Weighted remaining average contractual Aggregate intrinsic term exercise value (in years) price Shares 25,243,251 3,451,481 (332,060) (4,713,382) 23,649,290 $58.68 $15.23 $ 6.00 $63.70 $52.08 4.1 $33,560,103 3.9 $28,819,223 17,075,622 $66.48 2.8 $ 8,698,148 $7.22 Weighted average Weighted remaining average contractual Aggregate intrinsic term exercise value (in years) price Shares 27,106,695 3,171,867 (44,250) (4,991,061) 25,243,251 $66.58 $ 8.00 $ 7.53 $69.83 $58.68 4.3 $ 68,360 4.1 $33,560,103 19,788,317 $69.76 3.3 $ 3,662,795 $3.41 Weighted average Weighted remaining average contractual Aggregate intrinsic term exercise value (in years) price Shares $70.88 27,933,353 $16.62 2,181,083 — — (3,007,741) $70.31 $66.58 27,106,695 4.8 $ 1,406,344 4.3 $ 68,360 23,201,201 $71.74 3.9 — $1.33 2010 Stock Option Activity Outstanding at beginning of year . . . . . . . . Granted . . . . . . . . . . . . . . . Exercised . . . . . . . . . . . . . . Canceled/Expired . . . . . . . . Outstanding at end of year . Options exercisable at year end . . . . . . . . . . . . . Weighted average grant date fair value of options granted during the year . . . . . . . . . . 2009 Stock Option Activity Outstanding at beginning of year . . . . . . . . Granted . . . . . . . . . . . . . . . Exercised . . . . . . . . . . . . . . Canceled/Expired . . . . . . . . Outstanding at end of year . Options exercisable at year end . . . . . . . . . . . . . Weighted average grant date fair value of options granted during the year . . . . . . . . . . 2008 Stock Option Activity Outstanding at beginning of year . . . . . . . . Granted . . . . . . . . . . . . . . . Exercised . . . . . . . . . . . . . . Canceled/Expired . . . . . . . . Outstanding at end of year . Options exercisable at year end . . . . . . . . . . . . . Weighted average grant date fair value of options granted during the year . . . . . . . . . . As of Dec. 26, 2010, there w as $33.6 million of unrecognized compensation cost related to non-vested restricted stock and RSUs. This amount will be adjusted for future changes in estimated for- feitures and recognized on a straight-line basis over a weighted average period of 3.3 years. 2010 Restricted Stock and RSU Activity Outstanding and unvested at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . Settled . . . . . . . . . . . . . . . . . . . . . . . . . . . Canceled . . . . . . . . . . . . . . . . . . . . . . . . . . Outstanding and unvested at end of year 2009 Restricted Stock and RSU Activity Outstanding and unvested at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . Settled . . . . . . . . . . . . . . . . . . . . . . . . . . . Canceled . . . . . . . . . . . . . . . . . . . . . . . . . . Outstanding and unvested at end of year 2008 Restricted Stock and RSU Activity Outstanding and unvested at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . Settled . . . . . . . . . . . . . . . . . . . . . . . . . . . Canceled . . . . . . . . . . . . . . . . . . . . . . . . . . Outstanding and unvested at end of year Shares 3,293,293 1,934,351 (490,716) (315,491) 4,421,437 Shares 2,241,190 1,714,633 (445,084) (217,446) 3,293,293 Shares 1,041,222 1,479,277 (194,048) (85,261) 2,241,190 Weighted average fair value $13.62 $14.91 $31.94 $12.97 $12.19 Weighted average fair value $19.47 $11.63 $30.67 $23.35 $13.62 Weighted average fair value $47.89 $ 2.26 $11.36 $44.33 $19.47 401(k) savings plan Substantially all employees of the company (other than those cov- ered by a collective bargaining agreement) who are scheduled to work at least 1,000 hours during each y ear of employment are eligi- ble to participate in the 401(k) Savings Plan (the Plan). Employees can elect to save up to 50% of compensation on a pre-tax basis sub- ject to certain limits. On Aug. 1, 2008, the company approved amendments to its principal domestic retirement plans and to its 401(k) plan. For most participants, the 401(k) plan matching formula was changed to 100% of the f irst 5% of employee contributions. Prior to this change, the company generally matched 50% of the f irst 6% of employee contributions. The company also now makes additional 401(k) employer contributions on behalf of cer tain long-term employees. Compensation expense related to 401(k) contributions was $46.0 million in 2010, $59.8 million in 2009 and $46.6 million in 2008. In 2010 and 2009, the company’s 401(k) match was settled with a combination of cash and treasur y shares. Cash was used to settle 401(k) contributions in 2008. In 2002, the Board authorized 3,000,000 shares of common stock to be registered in connection with savings-related share option plans available to eligible employees of Newsquest. In July 2004, options covering 143,000 shares were subscribed to by Newsquest employees. The plan had a maturity date of August 31, 2007, and options became exercisable in September 2007. No options w ere exercised during 2008 or 2009. The options expired unexercised in 2010. 72 Preferred share purchase rights In May 1990, the Board of Directors declared a di vidend distribu- tion of one Prefer red Share Purchase Right (Right) for each com- mon share held, payable to shareholders of record on June 8, 1990. The Rights become exercisable when a person or g roup of persons acquired or announced an intention to acquire ownership of 15% or more of the company’s common shares. Holders of the Rights could have acquired an interest in a new series of junior par ticipat- ing preferred stock, or they could have acquired an additional interest in the company’s common shares at 50% of the mark et value of the shares at the time the Rights were exercised. In May 2000, the company announced that its Board of Directors approved an amendment to its Shareholder Rights Plan to extend the expiration date of the Rights to Ma y 31, 2010, and increase the initial exercise price of each prefer red stock purchase right to $280. The Rights expired unexercised on May 31, 2010 and the company has not instituted a new Shareholder Rights Plan. Accumulated other comprehensive income (loss) The elements of the company’s Accumulated Other Comprehensive Loss consisted of the following items (net of tax): Pension, retiree medical and life insurance liabilities – a reduction of equity of $762 million at Dec. 26, 2010, and $735 million at Dec. 27, 2009; foreign currency translation gains – an increase of equity of $395 million at Dec. 26, 2010, and $416 million at Dec. 27, 2009; and all other – an increase of $2 million at Dec. 26, 2010. NOTE 12 Commitments, contingent liabilities and other matters Litigation: The company and a number of its subsidiaries are defen- dants in judicial and administrative proceedings involving matters inci- dental to their business. The company does not believe that any mate- rial liability will be imposed as a result of these matters. Leases: Approximate future minimum annual rentals payable under non-cancelable operating leases, primarily real-estate related, are as follows: In thousands of dollars 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Later years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ $ 55,015 45,319 36,055 30,243 24,777 75,562 266,971 Total minimum annual rentals have not been reduced for future minimum sublease rentals aggregating $1.8 million. Total rental costs reflected in continuing operations were $72 million in 2010, $66 million in 2009 and $72 million in 2008. Program broadcast contracts: The company has $112 million of commitments under programming contracts that include televi- sion station commitments to purchase pro gramming to be pro- duced in future years. Purchase obligations: The company has commitments under purchasing obligations totaling $390 million related to printing contracts, capital projects, interactive marketing agreements, wire services and other legally binding commitments. Amounts which the company is liable for under purchase orders outstanding at Dec. 26, 2010, are reflected in the Consolidated Balance Sheets as accounts payable and accrued liabilities and are excluded from the $390 million. Self insurance: The company is self-insured for most of its employee medical coverage and for its casualty, general liability and libel coverage (subject to a cap above which third party insur- ance is in place). The liabilities are established on an actuarial basis, with the advice of consulting actuaries, and totaled $142 mil- lion at the end of 2010 and $151 million at the end of 2009. Other matters: In December 1990, the company adopted a Transitional Compensation Plan (the Plan). The Plan provides ter- mination benefits to key executives whose employment is terminat- ed under certain circumstances within two years following a change in control of the company. Benefits under the Plan include a se ver- ance payment of up to three y ears’ compensation and continued life and medical insurance coverage. In connection with CareerBuilder’s acquisition of certain inter- national companies in 2007, it is contingentl y liable for earnout payments to previous owners, depending upon the achievement of certain performance metrics. The final maximum potential payment in 2011 related to these acquisitions is $1.6 million which has been accrued in the 2010 f inancial statements. NOTE 13 Fair value measurement The company measures and records in the accompan ying consoli- dated financial statements certain assets and liabilities at f air value. ASC Topic 820, “Fair Value Measurements and Disclosures,” estab- lishes a fair value hierarchy for those instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the company’s own assumptions (unobserv- able inputs). The hierarchy consists of three levels: Level 1 - Quoted market prices in active markets for identical assets or liabilities; Level 2 - Inputs other than Level 1 inputs that are either directl y or indirectly observable; and Level 3 - Unobservable inputs developed using estimates and assumptions developed by the company, which reflect those that a market participant would use. The financial instruments measured at fair value in the accom- panying consolidated balance sheets consist of the following: Company Owned Assets In thousands of dollars Fair value measurement as of Dec. 26, 2010 Level 2 Level 1 Level 3 Total Assets: Employee compensation related investments . . . . . . Sundry investments . . . . . . . $ 15,976 26,902 $ — $ — — $ 15,976 26,902 — 73 In thousands of dollars In thousands of dollars Level 3 Total Level 1 Level 2 Level 3 Total Fair value measurement as of Dec. 27, 2009(a) Fair value measurement as of Dec. 27, 2009 Level 2 Level 1 Assets: Employee compensation related investments . . . . . . Sundry investments . . . . . . . $ 21,757 24,800 $ — $ — — $ 21,757 52,002 27,202 During the second quarter of 2010, the company sold auction rate securities held by CareerBuilder, receiving proceeds of $28.4 million and recording a gain of $2.1 million. The level 3 sundry investments are f inancial instruments held by CareerBuilder. During 2009, the company sold some of these instruments receiving proceeds of $1.7 million and recording a gain of $0.2 million. In addition, an unrealized gain of $1.2 million related to these securities was recorded in the company’s Consolidated Balance Sheet. The company utilized a probability- weighted discounted cash flow technique to determine the fair value of these financial instruments. The main assumptions used in the fair value calculation were the estimated coupon rate associated with the securities and the discount rate (deter mined based on mar- ket yields of similar taxable obligations). The following tables set forth by level within the fair value hierarchy the fair values of the company’s pension plan assets: Pension Plan Assets/Liabilities In thousands of dollars Fair value measurement as of Dec. 26, 2010(a) Level 1 Level 2 Level 3 Total Assets: U.S. government-related securities . . . . . . . . . . . . . $ Other government bonds . Corporate bonds . . . . . . . . Corporate stock . . . . . . . . . Real estate . . . . . . . . . . . . . Interest in common/ collective trusts . . . . . . . . Interest in reg. invest. — $ 182,524 $ — — 676,777 — 30,841 169,410 1,338 1,526 5,896 — — 90,344 — $ 182,524 32,367 175,306 678,115 90,344 60,005 661,180 — — — 721,185 213,421 106,947 companies . . . . . . . . . . . . 208,023 5,398 Interest in 103-12 investments . . . . . . . . . . . Partnership/joint venture — 106,947 interests . . . . . . . . . . . . . . Hedge funds . . . . . . . . . . . Derivative contracts . . . . . 117,698 — 241,200 — 85,245 500 Total . . . . . . . . . . . . . . . . . . $ 945,305 $1,320,130 $378,917 $2,644,352 — 117,698 163,349 104 77,851 84,641 Liabilities: Level 1 Level 2 Level 3 Total Derivative liabilities . . . . . $ Total . . . . . . . . . . . . . . . . . . $ Cash and other . . . . . . . . . . Total net fair value of plan assets . . . . . . . . . . . . . . $ 955,669 $1,254,595 $378,464 $2,588,728 (a) The company uses a Dec. 31 measurement date for its retirement plans. (2,521) $ (87,260) $ (2,521) $ (87,260) $ 12,885 (453) $ (90,234) (453) $ (90,234) 34,610 21,725 — $ 74 Assets: U.S. government-related securities . . . . . . . . . . . . . $ Other government bonds . Corporate bonds . . . . . . . . Corporate stock . . . . . . . . . Real estate . . . . . . . . . . . . . Interest in common/ collective trusts . . . . . . . . Interest in reg. invest. — $ 235,863 $ — — 559,886 — — 31,314 15,191 178,475 — — — 91,765 3,437 $ 239,300 31,314 193,666 559,886 91,765 10,916 447,227 — — — 458,143 330,487 111,575 companies . . . . . . . . . . . . 328,404 2,083 Interest in 103-12 investments . . . . . . . . . . . Partnership/joint venture — 111,575 interests . . . . . . . . . . . . . . Hedge funds . . . . . . . . . . . Derivative contracts . . . . . 95,965 — 247,132 — 3,939 500 Total . . . . . . . . . . . . . . . . . . $ 899,706 $1,081,684 $381,782 $2,363,172 — 95,965 173,559 1,865 73,573 1,574 Liabilities: Level 1 Level 2 Level 3 Total (3) $ (8,718) (6,100) $ (2,615) $ Derivative liabilities . . . . . $ Liability to purchase U.S. government and other securities . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . $ Cash and other . . . . . . . . . . Total net fair value of plan assets . . . . . . . . . . . . . . $ 911,821 $1,082,167 $381,779 $2,375,767 (a) The company uses a Dec. 31 measurement date for its retirement plans. — (120,747) (2,615) $ (126,847) $ 14,730 — (120,747) (3) $ (129,465) — $ 142,060 127,330 Items included in “Cash and other” in the tab le above primarily consist of amounts categorized as cash and cash equivalents and pending purchases and sales of securities. Valuation methodologies used for assets and liabilities meas- ured at fair value are as follows: U.S. government-related securities are primarily mortgage- backed securities that are typically not actively quoted. Values are obtained from industry vendors who use various pricing models or use quotes for identical or similar securities. In vestments catego- rized in Level 3 are thinly traded with values derived using unob- servable inputs. Other government and corporate bonds are mainly valued based on institutional bid evaluations using proprietary models, using dis- counted cash flow models or models that derive prices based on similar securities. Corporate bonds categorized in Level 3 are pri- marily from distressed issuers for w hom the values represent an estimate of recovery in a potential or actual bankr uptcy situation. Corporate stock is valued at the closing price repor ted on the active market on which the individual securities are traded. Investments in direct real estate have been valued by an inde- pendent qualified valuer in the U.K. using a valuation approach that capitalizes any current or future income streams at an appro- priate multiplier. Investments in real estate funds are mainl y valued utilizing the net asset valuations provided by the underlying private investment companies. Interest in common/collective trusts and interest in 103-12 investments are valued using the net asset v alue as provided month- ly by the fund family or fund company. Shares in the com- mon/collective trusts are generally redeemable upon request. The investment classified in Level 1 is a money market fund with a constant net asset value. One of the investments is a f ixed income fund which uses indi- vidual subfunds to efficiently add a representative sample of securi- ties in individual market sectors to the por tfolio. These funds are generally redeemable with a short-term written or verbal notice. Also included is a fund that in vests in a select por tfolio of large cap domestic stocks perceived to have superior growth characteristics. Shares in this fund are generally redeemable on any business day, upon two-day notice. There are no unfunded commitments related to these types of funds. Interest in registered investment companies is valued using the published net asset values as quoted through publicly available pricing sources. The investments in Level 2 are proprietary funds of the individual fund managers and are not pub licly quoted. Investments in partnerships and joint venture interests are val- ued based on an assessment of each underl ying investment, consid- ering items such as expected cash flows, changes in market outlook and subsequent rounds of f inancing. These investments are includ- ed in Level 3 of the f air value hierarchy because exit prices tend to be unobservable and reliance is placed on the abo ve methods. Certain of the partnerships are general leveraged buyout funds and others are venture capital funds. Also included within the par tner- ship portfolio is a fund for med to invest in the leveraged loan mar- ket. Interest in partnership investments cannot be redeemed. Instead, distributions are received as the underlying assets of the funds are liquidated. It is estimated that the underl ying assets of the funds will be liquidated over approximately 5 to 15 years. There are future funding commitments of $54 million. Investments in hedge funds are valued at the net asset value as reported by the fund managers. Within this category is a fund of hedge funds whose strategy is to produce a retur n that is uncor relat- ed with market movements. Certain of the other funds cate gorized as hedge funds were formed to invest in mortgage and credit trading opportunities while others were formed to invest in the leveraged loan market. Shares in the hedge funds are generall y redeemable twice a year or on the last b usiness day of each quarter with at least 60 days written notice subject to potential 5% holdback. There are no unfunded commitments related to the hedge funds. Derivatives primarily consist of forward and swap contracts. Forward contracts are valued at the spot rate, plus or minus for- ward points between the valuation date and maturity date. Sw aps are valued at the mid-evaluation price using discounted cash flow models. Items in Level 3 are valued based on the market values of other securities for which they represent a synthetic combination. Liability to purchase U.S. government and other securities relates to buying and selling contracts in federal agenc y securities that have not yet been opened up for pub lic trading. In these instances the investment manager has sold the securities prior to owning them, resulting in a ne gative asset position. These securi- ties are valued in the same manner as those noted abo ve in U.S. government-related securities. The tables below sets forth a summary of changes in the f air value of the company’s pension plan assets and liabilities, cate go- rized as Level 3, for the f iscal year ended Dec. 26, 2010 and Dec. 27, 2009: Pension Plan Assets/Liabilities In thousands of dollars As of Dec. 26, 2010 Assets: U.S. government-related securities Other government bonds . . . . . . . . Corporate bonds . . . . . . . . . . . . . . . Real estate . . . . . . . . . . . . . . . . . . . Partnership/joint venture interests . Hedge funds . . . . . . . . . . . . . . . . . . Derivative contracts . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . Liabilities: Balance at beginning of year Actual Return on Plan Assets Relating to assets sold during the period Relating to assets still held at report date Purchases, sales, and settlements Transfers in and/or out of Level 3 (1) Balance at end of year $ 3,437 — 15,191 91,765 95,965 173,559 1,865 $381,782 $ — 9 466 670 22,273 17,032 (228) $ 40,222 $ $ (17) — 7 — — — (89) (99) $ (3,420) 1,517 (7,816) (2,091) (5,767) (27,242) (1,444) $ (46,263) Derivative liabilities . . . . . . . . . . . . $ (3) (1) The company’s policy is to recognize transfers in and transfers out as of the be ginning of the reporting period. (453) 11 $ $ $ (8) $ $ $ — — (1,952) — 5,227 — — 3,275 $ — 1,526 5,896 90,344 117,698 163,349 104 $378,917 — $ (453) 75 Pension Plan Assets/Liabilities (continued) In thousands of dollars As of Dec. 27, 2009 Balance at beginning of year Actual Return on Plan Assets Relating to assets sold during the period Relating to assets still held at report date Purchases, sales, and settlements Transfers in and/or out of Level 3 (1) Balance at end of year $ 2,974 15,715 283 94,723 134,222 141,801 17,529 $407,247 $ 486 5,469 — (9,073) 369 11,533 82 $ 8,866 $ — 2,023 — — 10,173 15,583 (2,008) $ 25,771 $ (23) (1,513) (283) 6,115 (48,799) 4,642 (11,763) $(51,624) $ — (6,503) — — — — (1,975) $ (8,478) $ 3,437 15,191 — 91,765 95,965 173,559 1,865 $381,782 Assets: U.S. government-related securities Corporate bonds . . . . . . . . . . . . . . . Corporate stock . . . . . . . . . . . . . . . Real estate . . . . . . . . . . . . . . . . . . . Partnership/joint venture interests . Hedge funds . . . . . . . . . . . . . . . . . . Derivative contracts . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . Liabilities: Derivative liabilities . . . . . . . . . . . . $ (34,332) $ 170 $ 8,954 $ 21,708 $ 3,497 $ (3) (1) The company’s policy is to recognize transfers in and transfers out as of the be ginning of the reporting period. In addition, the company holds investments in non-public busi- nesses in which the company does not have control and does not exert significant influence. Such investments are carried at cost and reduced for any impairment losses resulting from periodic evaluations of the car rying value of the investment. At Dec. 26, 2010, and Dec. 27, 2009, the agg regate carrying amount of such investments was $16 million. During the second quar ter of 2010, the company concluded that one of its in vestments had an other- than-temporary impairment. Therefore, the carrying value of this investment was written down to fair value. No events or changes in circumstances have occured since Dec. 27, 2009, that suggests a significant and adverse effect on the fair value of the remaining investments. Accordingly, the company did not evaluate such investments for impairment in 2010. The fair value of the company’s total long-term debt, deter- mined based on the bid and ask quotes for the related debt, totaled $2.5 billion and $2.9 billion at Dec. 26, 2010 and Dec. 27, 2009, respectively. As described in Note 7, the compan y recognized the debt resulting from the May 2009 private exchange offer at fair value in accordance with the modif ications and extinguishments requirements of ASC Topic 470, “Debt.” Certain assets are measured at f air value on a nonrecur ring basis; that is, the instr uments are not measured at f air value on an ongoing basis but are subject to f air value adjustments only in cer- tain circumstances (for example, when there is evidence of impair- ment). The following tables summarize the nonfinancial assets meas- ured at fair value on a nonrecur ring basis in the accompanying consolidated balance sheets as of Dec. 26, 2010 and Dec. 27, 2009: Non-Financial Assets In thousands of dollars Fair value measurement as of Dec. 26, 2010 Level 2 Level 1 Level 3 Total: Other intangible assets – Quarter 4 . . . . . . . . . . . . . . . . $ — $ — $ 9,266 $ 9,266 In thousands of dollars Fair value measurement as of Dec. 27, 2009 Level 2 Level 1 $ — $ Level 3 — $ 5,719 Total: $ 5,719 — — — — — — — — 12,495 12,495 36,929 36,929 8,481 8,481 29,974 29,974 Goodwill – Quarter 2 . . . . . . Goodwill and other intangibles – Quarter 4 . . . . Long-lived assets held and used – Quarter 2 . . . . . . . . . Long-lived assets held and used – Quarter 3 . . . . . . . . . Long-lived assets held and used – Quarter 4 . . . . . . . . . 76 NOTE 14 Business operations and segment information The company has determined that its reportable segments based on its management and internal reporting structure are publishing, which is the largest segment of its operations, digital and broad- casting. The publishing segment at the end of 2010 consisted of 82 U .S. daily newspapers with affiliated online sites in 30 states and one U.S. territory, including USA TODAY, a national, general-interest daily newspaper; USATODAY.com; USA WEEKEND, a magazine supplement for newspapers; Clipper; Gannett Healthcare Group; and Gannett Government Media (formerly Army Times). The pub- lishing segment also includes Newsquest, which is a regional news- paper publisher in the United Kingdom that includes 17 paid-for daily newspapers and more than 200 weekly newspapers, maga- zines and trade publications. The publishing segment in the U.S. also includes about 600 non-daily publications, a network of offset presses for commercial printing and several smaller businesses. In the third quarter of 2008, the company began reporting a new digital segment and a separate digital revenues line in its Statements of Income (Loss). This revenue line includes only revenue from the businesses that comprise the new digital segment. It therefore includes all revenues from CareerBuilder and ShopLocal be ginning with the full consolidation of these b usinesses in the third quar ter of 2008, and revenues from PointRoll, Schedule Star and Planet Discover. Revenues from PointRoll, Schedule Star and Planet Discover had previously been reported within the publishing segment and were included in the “All other” revenue line in the Statement of Income (Loss). “All other” revenue is now comprised principally of commercial printing revenues. All periods presented reflect these reclassifications. At the end of 2010, the compan y’s broadcasting division includ- ed 23 television stations and affiliated online sites in markets with more than 21 million households covering 18.2% of the U.S. Captivate Network is also part of the broadcasting division. The company’s foreign revenues, principally from publishing businesses in the United Kingdom and CareerBuilder subsidiaries in Europe, totaled approximately $564 million in 2010, $621 mil- lion in 2009 and $1.0 billion in 2008. The company’s long-lived assets in foreign countries, principally in the United Kingdom, totaled approximately $556 million at Dec. 26, 2010, $535 million at Dec. 27, 2009, and $628 million at Dec. 28, 2008. Separate financial data for each of the compan y’s business seg- ments is presented in the tab le that follows. The accounting poli- cies of the segments are those described in Note 1. The company evaluates the performance of its segments based on operating income. Operating income represents total revenue less operating expenses, including depreciation, amortization of intangibles and facility consolidation and asset impair ment charges. In determin- ing operating income by industry segment, general corporate expenses, interest expense, interest income, and other income and expense items of a non-operating nature are not considered , as such items are not allocated to the compan y’s segments. Corporate assets include cash and cash equi valents, property, plant and equipment used for cor porate purposes and certain other financial investments. In thousands of dollars Business segment financial information 2010 2009 2008 $ 5,585,771 281,378 772,533 $ 6,639,682 $(6,991,934) 18,934 306,354 (61,262) $(6,727,908) $ 8,107,435 31,950 42,520 17,128 $ 8,199,033 $ (365,371) (9,554) $ (374,925) $ 4,038,015 1,096,026 2,153,257 509,516 $ 7,796,814 $ $ $ 170,073 43,313 40,460 17,039 270,885 516,328 43,295 216,101 (56,806) 718,918 647,741 83,355 329,245 (60,646) 999,695 $ 4,292,344 586,174 631,085 $ 5,509,603 Operating revenues Publishing . . . . . . . . . . . . . $ 4,050,839 618,259 Digital . . . . . . . . . . . . . . . . Broadcasting . . . . . . . . . . . 769,580 Total . . . . . . . . . . . . . . . . . . $ 5,438,678 Operating income (loss) Publishing (2) . . . . . . . . . . . $ Digital (2) . . . . . . . . . . . . . . Broadcasting (2) . . . . . . . . . Corporate (1) (2) . . . . . . . . Total . . . . . . . . . . . . . . . . . . $ Depreciation, amortization and facility consolidation and asset impairment charges Publishing (2) . . . . . . . . . . . $ Digital (2) . . . . . . . . . . . . . . Broadcasting (2) . . . . . . . . . Corporate (1) (2) . . . . . . . . Total . . . . . . . . . . . . . . . . . . $ Equity income (losses) in unconsolidated investees, net Publishing . . . . . . . . . . . . . $ Digital . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . $ Identifiable assets Publishing . . . . . . . . . . . . . $ 3,162,655 1,057,898 Digital . . . . . . . . . . . . . . . . 2,003,929 Broadcasting . . . . . . . . . . . Corporate (1) . . . . . . . . . . . 592,362 Total . . . . . . . . . . . . . . . . . . $ 6,816,844 Capital expenditures Publishing . . . . . . . . . . . . . $ Digital . . . . . . . . . . . . . . . . Broadcasting . . . . . . . . . . . Corporate (1) . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . $ (1) Corporate amounts represent those not directly related to the $ 3,417,026 1,139,266 2,058,415 533,725 $ 7,148,432 255,733 59,489 42,640 15,677 373,539 44,935 8,232 13,656 914 67,737 36,776 11,883 19,694 717 69,070 19,337 (197) 19,140 4,010 (83) 3,927 $ $ $ $ $ $ $ 104,804 5,445 52,706 2,045 165,000 company’s three business segments. (2) Results for 2010 include pre-tax facility consolidation and asset impairment charges of $36 million for publishing, $13 million for digi- tal and $8 million for broadcasting. Results for 2009 include pre-tax facility consolidation and asset impairment charges of $99 million for publishing, $25 million for digital and $9 million for broadcasting. Results for 2008 include pre-tax facility consolidation and asset impairment charges of $7.92 billion for publishing, $15 million for dig- ital, $8 million for broadcasting, and $1 million for corporate. The asset impairment charges did not affect the company’s operations or cash flow. Refer to Notes 3 and 4 of the Consolidated Financial Statements for more information. 77 SELECTED FINANCIAL DATA (Unaudited) (See notes a and b on page 79) In thousands of dollars, except per share amounts Net operating revenues Publishing advertising . . . . . . . . . . . . . . . . . . . . . . . . Publishing circulation . . . . . . . . . . . . . . . . . . . . . . . . . Digital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Broadcasting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . All other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating expenses Costs and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amortization of intangible assets . . . . . . . . . . . . . . . . Facility consolidation and asset impair ment charges . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating income (loss) . . . . . . . . . . . . . . . . . . . . . . Non-operating (expense) income Equity income (loss) in unconsolidated investees, net . Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other non-operating items . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income (loss) before income taxes . . . . . . . . . . . . . . Provision (benefit) for income taxes . . . . . . . . . . . . Income (loss) from continuing operations . . . . . . . Income from continuing operations attrib utable to noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . Income (loss) from continuing operations attributable to Gannett Co., Inc. . . . . . . . . . . . . . . . Income (loss) from continuing operations per share: basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other selected financial data Dividends declared per share . . . . . . . . . . . . . . . . . . . Weighted average number of common shares outstanding in thousands: basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Financial position and cash flow Long-term debt, excluding current maturities . . . . . . Redeemable noncontrolling interest . . . . . . . . . . . . . . Shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Free cash flow (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . Return on equity (2) . . . . . . . . . . . . . . . . . . . . . . . . . . Percentage increase (decrease) As reported, earnings from continuing operations, after-tax, per share: basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dividends declared per share . . . . . . . . . . . . . . . . . . . Credit ratios Senior leverage ratio (3) . . . . . . . . . . . . . . . . . . . . . . . Times interest expense earned (4) . . . . . . . . . . . . . . . 2010 2009 2008 2007 2006 $ 2,710,524 1,086,702 618,259 769,580 253,613 5,438,678 $ 2,888,034 1,144,539 586,174 631,085 259,771 5,509,603 $ 4,040,890 1,196,745 281,378 772,533 348,136 6,639,682 $ 4,813,785 1,232,835 70,347 789,297 387,131 7,293,395 $ 5,142,644 1,260,085 52,773 854,821 382,146 7,692,469 4,168,098 182,514 31,362 57,009 4,438,983 999,695 19,140 (172,986) 111 (153,735) 845,960 244,013 601,947 4,417,146 207,652 32,983 132,904 4,790,685 718,918 3,927 (175,745) 22,799 (149,019) 569,899 191,328 378,571 5,168,557 228,259 31,211 7,939,563 13,367,590 (6,727,908) (374,925) (190,839) 28,430 (537,334) (7,265,242) (645,273) (6,619,969) 5,303,163 241,991 36,086 72,030 5,653,270 1,640,125 40,693 (259,822) 18,648 (200,481) 1,439,644 469,084 970,560 5,540,713 233,168 33,989 — 5,807,870 1,884,599 38,044 (288,042) 29,636 (220,362) 1,664,237 536,435 1,127,802 (34,619) (27,091) (6,970) (1,535) (2,149) $ 567,328 $ 351,480 $ (6,626,939) $ 969,025 $ 1,125,653 $2.38 $2.35 $1.50 $1.49 $(29.02) $(29.02) $4.16 $4.15 $4.76 $4.75 $0.16 $0.16 $1.60 $1.42 $1.20 238,230 241,605 233,683 236,027 228,345 228,345 233,148 233,740 236,337 236,756 $ 2,352,242 $ 84,176 $ 2,163,754 $ 6,816,844 816,308 $ 30.1% $ 3,061,951 $ 78,304 $ 1,603,925 $ 7,148,432 809,630 $ 26.7% $ 3,816,942 $ 72,840 $ 1,055,882 $ 7,796,814 832,615 $ (132.0%) $ 4,098,338 $ — $ 9,017,159 $15,887,727 $ 1,174,476 11.3% $ 5,210,021 $ — $ 8,382,263 $16,223,804 $ 1,294,495 14.6% 58.7% 57.7% 0.0% 1.97X 6.2X (105.2%) (105.1%) (90.0%) 2.63X 4.8X (797.6%) (799.3%) 12.7% 2.56X 6.7X (12.6%) (12.6%) 18.3% (1.7%) (1.5%) 7.1% 6.8X 6.5X (1) See page 79 for a reconciliation of free cash flo w to net cash flow from operating activities, which the company believes is the most directly comparable measure calculated and presented in accordance with GAAP. (2) Calculated using income from continuing operations attributab le to Gannett Co., Inc. plus ear nings from discontinued operations (but excluding the gains in 2010 and 2007 on the disposals of discontinued operations). (3) The senior leverage ratio is calculated in accordance with the company’s revolving credit agreements and term loan agreement. Currently, the company is required to maintain a senior le verage ratio of less than 3.5X. Due to the absence of this f inancial covenant in 2006-2007, data for those years is not presented. These agreements are described more fully on page 44 in Management’s Discussion and Analysis of Financial Condition and Results of Operations. More information regarding the computation can be found in Exhibits 10.3, 10.4, and 10.5 to the F orm 10-Q for the quarterly period ended Sept. 28, 2008, f iled on Nov. 6, 2008. (4) Calculated using operating income adjusted to remo ve the effect of certain special items. These special items are described more fully on page 30 in Management’s Discussion and Analysis of Financial Condition and Results of Operations. 78 11-year summary NOTES TO SELECTED FINANCIAL DATA (Unaudited) (a) The company and its subsidiaries made the signif icant acquisitions listed below during the period. The results of operations of these acquired businesses are included in the accompan ying financial information from the date of acquisition. (b) During the period, the company sold or otherwise disposed of substantiall y all of the assets or capital stock of cer tain other significant subsidiaries and divisions of other subsidiaries, which are listed below. Note 2 of the consolidated f inancial statements contains further information concerning certain of these acquisitions and dispo sitions. Acquisitions and dispositions 2006-2010 Significant acquisitions since the beginning of 2006 are shown below. The company has disposed of several significant businesses during this period, which are presented below. Acquisitions 2006-2010 Year acquired Name 2006 KTVD-TV WATL-TV Planet Discover Marco Island Sun Times FS View & Florida Flambeau Central Florida Future Central Ohio Advertiser Network Schedule Star LLC X.com, Inc. (BNQT.com) ShopLocal CareerBuilder Pearls Review CareerSite.biz Limited 2007 2008 2010 Dispositions 2006-2010 Publication times or business TV station TV station Local, integrated online search and advertising technology Location Denver, CO Atlanta, GA Cedar Rapids, IA Fort Mitchell, KY Marco Island, FL Tallahassee, FL Orlando, FL Chillicothe, OH Wheeling, WV Pasadena, CA Chicago, IL Chicago, IL, Atlanta, GA Job search, employment and careersweb site St. Petersburg, FL U.K. Weekly newspaper Independent student newspaper of Florida State University Independent student newspaper of the University of Central Florida A network of eight weekly shoppers with the Advertiser brand Online high school sports network Action sports web site Marketing and database services company A nursing certification and education web site Online recruitment niche sites focusing on nursing and rail workers Year disposed Name 2006 2007 Muskogee Phoenix (1) Chronicle Tribune (1) Norwich Bulletin Rockford Register Star The Herald-Dispatch Observer-Dispatch Telematch Southernprint Limited The Honolulu Advertiser Michigan Directory Company Location Muskogee, OK Marion, IN Norwich, CT Rockford, IL Huntington, WV Utica, NY Springfield, VA U.K. Honolulu, HI Pigeon, MI Publication times or business Daily newspaper Daily newspaper Daily newspaper Daily newspaper Daily newspaper Daily newspaper Database marketing services company Commercial printing Daily newspaper Directory publishing operation 2008 2009 2010 (1) These properties were contributed to the Gannett Foundation, a not-for-profit, private foundation. Free cash flow reconciliation Free cash flow is a non-GAAP f inancial measure used in addition to and in conjunction with results presented in accordance with GAAP. Free cash flow should not be relied upon to the e xclusion of GAAP f inancial measures. Free cash flow, which the company reconciles to “Net cash flow from operating activities,” is cash flow from operations reduced by “Purchase of property, plant and equipment” as well as “Payments for investments” and increased by “Proceeds from investments” and vol- untary pension contributions, net of related tax benef it. The company uses free cash flow to conduct and evaluate its business because the company believes it presents an alter native and useful business metric. In thousands of dollars Net cash flow from operating activities . . . . . . . . . . . . . . . . Purchase of property, plant and equipment . . . . . . . . . . . . . Voluntary pension employer contributions . . . . . . . . . . . . . Tax benefit for voluntary pension employer contributions . Payments for investments . . . . . . . . . . . . . . . . . . . . . . . . . . . Proceeds from investments . . . . . . . . . . . . . . . . . . . . . . . . . Free cash flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2010 $ 772,884 (69,070) 130,000 (52,000) (10,984) 45,478 $ 816,308 2009 $ 866,580 (67,737) — — (9,674) 20,461 $ 809,630 2008 $ 1,015,345 (165,000) — — (46,779) 29,049 $ 832,615 2007 $ 1,342,463 (171,405) — — (39,963) 43,381 $ 1,174,476 2006 $ 1,479,865 (200,780) — — (38,341)(a) 53,751 $ 1,294,495 (a) For comparability, excludes $300 million of payments made in connection with additional investments in CareerBuilder, ShopLocal, Topix and the California Newspapers Partnership. 79 QUARTERLY STATEMENTS OF INCOME (Unaudited) In thousands of dollars, except per share amounts Fiscal year ended December 26, 2010 Net operating revenues Publishing advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Publishing circulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Digital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Broadcasting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . All other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating expenses Cost of sales and operating e xpenses, exclusive of depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Selling, general and administrative expenses, exclusive of depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amortization of intangible assets . . . . . . . . . . . . . . . . . . . . . . . Facility consolidation and asset impairment charges . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-operating (expense) income Equity income in unconsolidated investees, net . . . . . . . . . . . . Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other non-operating items . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income from continuing operations . . . . . . . . . . . . . . . . . . . Income (loss) from the operation of discontinued operations, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gain on disposal of publishing businesses, net of tax . . . . . . . Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net income attributable to noncontrolling interests . . . . . . . . . Net income attributable to Gannett Co., Inc. . . . . . . . . . . . 1st Quarter(2) 2nd Quarter(3) 3rd Quarter(4) 4th Quarter(5) Total $ 649,335 279,000 140,638 167,488 63,124 1,299,585 $ 692,172 270,086 154,104 184,016 64,765 1,365,143 $ 646,720 264,627 157,669 185,297 58,022 1,312,335 $ 722,297 272,989 165,848 232,779 67,702 1,461,615 $ 2,710,524 1,086,702 618,259 769,580 253,613 5,438,678 732,109 745,489 747,416 755,451 2,980,465 295,133 47,351 7,962 — 1,082,555 217,030 533 (43,473) (523) (43,463) 173,567 54,813 $ 118,754 560 — $ 119,314 (2,135) $ 117,179 292,691 46,274 8,080 — 1,092,534 272,609 7,503 (42,190) (2,934) (37,621) 234,988 49,400 185,588 (882) 21,195 205,901 (10,423) 195,478 $ $ $ 289,443 44,479 7,664 23,045 1,112,047 200,288 7,041 (41,015) 2,374 (31,600) 168,688 55,000 $ 113,688 — — $ 113,688 (12,279) $ 101,409 310,366 44,410 7,656 33,964 1,151,847 309,768 1,187,633 182,514 31,362 57,009 4,438,983 999,695 4,063 (46,308) 1,194 (41,051) 268,717 84,800 183,917 — — 183,917 (9,782) 174,135 $ $ $ 19,140 (172,986) 111 (153,735) 845,960 244,013 601,947 (322) 21,195 622,820 (34,619) 588,201 $ $ $ $0.49 $0.74 Per share computations(1) Earnings from continuing operations per share - basic . . . . . . Earnings from discontinued operations Discontinued operations per share - basic . . . . . . . . . . . . . . . . Gain on disposal of newspaper businesses per share - basic . . Net income per share - basic . . . . . . . . . . . . . . . . . . . . . . . . . Earnings from continuing operations per share - diluted . . . . . Earnings from discontinued operations Discontinued operations per share - diluted . . . . . . . . . . . . . . . Gain on disposal of newspaper businesses per share - diluted Net income per share - diluted . . . . . . . . . . . . . . . . . . . . . . . Dividends per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1) As a result of rounding and the required method of computing shares in interim periods, the total of the quar terly earnings per share amounts may not (0.01) 0.09 $0.82 $0.73 (0.01) 0.09 $0.81 $0.04 — — $0.73 $0.72 — — $0.43 $0.42 — — $0.49 $0.48 — — $0.42 $0.04 — — $0.72 $0.04 0.01 — $0.49 $0.04 — 0.09 $2.47 $2.35 — 0.08 $2.43 $0.16 $0.43 $0.73 $2.38 equal the earnings per share amount of the y ear. (2) Results for the f irst quarter of 2010 include the following special items: $2.2 million ($0.01 per share) tax char ge related to healthcare reform legisla- tion. Refer to page 30 and Notes 3 and 4 to the Consolidated Financial Statements for more infor mation on special items. (3) Results for the second quar ter of 2010 include the following special items: $28.7 million ($0.12 per share) net tax benef it due primarily to the expira- tion of the statutes of limitations and the release of cer tain reserves related to the sale of a b usiness in a prior year. Refer to page 30 and Notes 3 and 4 to the Consolidated Financial Statements for more infor mation on special items. (4) Results for the third quar ter of 2010 include the following special items: $23.0 million of non-cash char ges associated with facility consolidations and intangible asset impairments ($18.2 million after-tax or $0.08 per share) and $8.1 million in costs due to w orkforce restructuring ($5.1 million after-tax or $0.02 per share). Refer to page 30 and Notes 3 and 4 to the Consolidated F inancial Statements for more infor mation on special items. (5) Results for the fourth quarter 2010 include the following special items: $36.7 million of non-cash char ges associated with facility consolidations and asset impairments ($24.4 million after-tax or $0.10 per share) and $3.6 million in costs due to w orkforce restructuring ($1.9 million after-tax or $0.01 per share). Refer to page 30 and Notes 3 and 4 to the Consolidated F inancial Statements for more infor mation on special items. 80 QUARTERLY STATEMENTS OF INCOME (Unaudited) In thousands of dollars, except per share amounts Fiscal year ended December 27, 2009 Net operating revenues Publishing advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Publishing circulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Digital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Broadcasting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . All other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating expenses Cost of sales and operating e xpenses, exclusive of depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Selling, general and administrative expenses, exclusive of depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amortization of intangible assets . . . . . . . . . . . . . . . . . . . . . . . Facility consolidation and asset impairment charges . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-operating (expense) income Equity income (losses) in unconsolidated investees, net . . . . . Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other non-operating items . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income from continuing operations . . . . . . . . . . . . . . . . . . . (Loss) income from the operation of discontinued operations, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net income attributable to noncontrolling interests . . . . . . . . . Net income attributable to Gannett Co., Inc. . . . . . . . . . . . 1st Quarter(1) 2nd Quarter(2) 3rd Quarter(3) 4th Quarter(4) Total $ 704,818 294,132 143,160 143,490 68,794 1,354,394 $ 734,241 287,058 142,354 152,966 70,716 1,387,335 $ 681,415 278,701 142,955 151,458 57,607 1,312,136 $ 767,560 284,648 157,705 183,171 62,654 1,455,738 $ 2,888,034 1,144,539 586,174 631,085 259,771 5,509,603 819,154 848,257 779,250 783,515 3,230,176 303,868 55,146 8,165 — 1,186,333 168,061 (2,689) (48,911) 2,457 (49,143) 118,918 40,014 78,904 (1,155) 77,749 (314) 77,435 $ $ $ 288,200 53,208 8,232 47,391 1,245,288 142,047 2,839 (43,971) 16,582 (24,550) 117,497 39,614 77,883 424 78,307 (7,826) 70,481 $ $ $ 279,177 50,382 8,378 39,248 1,156,435 155,701 (373) (38,064) 3,570 (34,867) 120,834 36,407 84,427 766 85,193 (11,441) 73,752 $ $ $ 315,725 48,916 8,208 46,265 1,202,629 253,109 1,186,970 207,652 32,983 132,904 4,790,685 718,918 4,150 (44,799) 190 (40,459) 212,650 75,293 137,357 3,755 141,112 (7,510) 133,602 $ $ $ 3,927 (175,745) 22,799 (149,019) 569,899 191,328 378,571 3,790 382,361 (27,091) 355,270 $ $ $ $0.31 $0.30 $0.34 Per share computations Earnings from continuing operations per share - basic . . . . . . Earnings from discontinued operations Discontinued operations per share - basic . . . . . . . . . . . . . . . . Gain on disposal of newspaper businesses per share - basic . . Net income per share - basic . . . . . . . . . . . . . . . . . . . . . . . . . Earnings from continuing operations per share - diluted . . . . . Earnings from discontinued operations 0.02 Discontinued operations per share - diluted . . . . . . . . . . . . . . . — Gain on disposal of newspaper businesses per share - diluted $1.51 Net income per share - diluted . . . . . . . . . . . . . . . . . . . . . . . Dividends per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $0.16 (1) Results for the f irst quarter of 2009 include the following special items: workforce restructuring and related expenses of $6 million pre-tax ($4 million after-tax or $0.02 per share) and a pension gain of $40 million pre-tax ($25 million after -tax or $0.11 per share). Refer to pag e 30 and Notes 3 and 4 to the Consolidated Financial Statements for more infor mation on special items. — — $0.30 $0.04 0.02 — $1.52 $1.49 — — $0.34 $0.34 — — $0.31 $0.31 0.02 — $0.57 $0.54 — — $0.30 $0.30 — — $0.31 $0.04 0.02 — $0.56 $0.04 — — $0.34 $0.04 $0.55 $1.50 (2) Results for the second quar ter of 2009 include the following special items: facility consolidation and asset impair ment charges of $47 million pre-tax ($30 million after-tax or $0.13 per share), workforce restructuring and related expenses of $16 million pre-tax ($10 million after -tax or $0.04 per share), debt exchange gain of $43 million pre-tax ($26 million after -tax or $0.11 per share) and an impair ment of publishing assets sold charge of $28 million pre-tax ($24 million after-tax or $0.10 per share). Refer to page 30 and Notes 3 and 4 to the Consolidated F inancial Statements for more infor mation on special items. (3) Results for the third quar ter of 2009 include the following special items: facility consolidation and asset impair ment charges of $39 million pre-tax ($24 million after-tax or $0.10 per share), workforce restructuring and related expenses of $2 million pre-tax ($1 million after -tax or $0.01 per share) and an impairment of equity method investment charge of $5 million pre-tax ($4 million after -tax or $0.02 per share). Refer to page 30 and Notes 3 and 4 to the Consolidated Financial Statements for more infor mation on special items. (4) Results for the fourth quarter of 2009 include the following special items: facility consolidation and asset impair ment charges of $46 million pre-tax ($34 million after-tax or $0.14 per share), workforce restructuring and related expenses of $3 million pre-tax ($2 million afte r-tax or $0.01 per share), and impairment of equity method investments charge of $4 million pre-tax ($2 million after -tax or $0.01 per share). Refer to pa ge 30 and Notes 3 and 4 to the Consolidated Financial Statements for more infor mation on special items. 81 SCHEDULE II – Valuation and qualifying accounts and reserves In thousands of dollars Allowance for doubtful receivables Balance at beginning of period Additions charged to cost and expenses Additions/(reductions) for acquisitions/ dispositions (2) Deductions from reserves (1) Balance at end of period Fiscal year ended Dec. 26, 2010 . . . . . . . Fiscal year ended Dec. 27, 2009 . . . . . . . Fiscal year ended Dec. 28, 2008 . . . . . . . (1) Consists of write-offs, net of recoveries in each year. (2) Also includes foreign cur rency translation adjustments in each y ear. $ 46,255 $ 59,008 $ 36,772 $ 18,241 $ 34,492 $ 57,671 $ (3,643) $ 213 $ 4,080 $(21,434) $(47,458) $(39,515) $ 39,419 $ 46,255 $ 59,008 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. ITEM 9A. CONTROLS AND PROCEDURES Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures Under the supervision and with the par ticipation of our manage- ment, including our principal executive officer and principal f inan- cial officer, we conducted an evaluation of our disclosure controls and procedures, as such ter m is def ined under Rule 13a-15(e) prom- ulgated under the Securities Exchange Act of 1934, as amended (the Exchange Act). Based on this evaluation, our principal execu- tive officer and our principal f inancial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this annual report. Management’s Report on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the super vision and with the participation of our management, including our principal executive officer and principal f inancial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in “Internal Control – Integrated Framework” issued by the Committee of Sponsoring Or ganizations of the Treadway Commission. Based on our e valuation under the framework in “Internal Control – Integrated Framework,” our man- agement concluded that our inter nal control over financial reporting was effective as of Dec. 26, 2010. The effectiveness of our internal control over financial reporting as of Dec. 26, 2010, has been audited b y Ernst & Young LLP, an independent registered public accounting f irm, as stated in its repor t which is included elsewhere in this item. Changes in Internal Control Over Financial Reporting There has been no change in the compan y’s internal control over financial reporting that occurred during the company’s fiscal quarter ended Dec. 26, 2010, that has materiall y affected, or is reasonably likely to materially affect, the company’s internal control over finan- cial reporting. 82 Because of its inherent limitations, inter nal control over finan- cial reporting may not prevent or detect misstatements. Also, projec- tions of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the de gree of compliance with the policies or procedures may deteriorate. In our opinion, Gannett Co., Inc. maintained, in all material respects, effective internal control over financial reporting as of December 26, 2010, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the 2010 consolidated f inancial statements of Gannett Co., Inc. and our report dated February 23, 2011 expressed an unqualif ied opinion thereon. McLean, Virginia February 23, 2011 Report of Ernst & Young LLP, Independent Registered Public Accounting Firm, on Internal Control Over Financial Reporting Board of Directors and Shareholders of Gannett Co., Inc.: We have audited Gannett Co., Inc.’s internal control over finan- cial reporting as of December 26, 2010, based on criteria estab lished in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Gannett’s management is responsible for maintain- ing effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the compan y’s internal control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain rea- sonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of inter nal control over finan- cial reporting, assessing the risk that a material w eakness exists, test- ing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and perfor ming such other proce- dures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reli- ability of f inancial reporting and the preparation of f inancial state- ments for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) per tain to the maintenance of records that, in reasonab le detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of f inancial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding pre- vention or timely detection of unauthorized acquisition, use, or dis- position of the company’s assets that could have a material effect on the financial statements. 83 PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Below is a listing of the e xecutive officers of the company. Executive officers serve for a term of one year and may be re-elected. A list of directors is incorporated by reference to the company’s Proxy Statement pursuant to general instr uction G(3) to Form 10-K. William A. Behan Senior Vice President, Labor Relations, Gannett (2010-present). Formerly: Vice President, Labor Relations (2007-2010); Director, Labor Relations and Labor Counsel (1994-2007). Age 52. Paul Davidson Chairman and Chief Executive Officer, Newsquest (2003-present). Age 56. U.K. citizen. Robert J. Dickey President, U.S. Community Publishing, formerly Newspaper Division (February 2008-present). Formerly: Senior Group President, Gannett’s Pacific Group and Chairman of Phoenix Newspapers Inc. (2005-2008); President and Pub lisher of The Desert Sun, Palm Springs, CA, (1993-2005) and Group Vice President of the Pacific Group (1997-2005). Age 53. Craig A. Dubow Chairman and Chief Executive Officer (February 2010-present) Formerly: Chairman, President and CEO (2006-2010); President and CEO (2005-2006); and President and CEO , Gannett Broadcasting (2001-2005). Age 56. Paul N. Saleh Senior Vice President and Chief Financial Officer (2010-present). Formerly: Managing Partner, Menza Partners LLC, a private investment firm (2008-2010); Chief Financial Officer, Sprint Nextel (2005-2008); Executive Vice President and CFO, Nextel (2001-2005). Age 54. John A. Williams President, Gannett Digital Ventures (January 2008-present). Formerly: President, Gannett Digital (Januar y 2006-December 2007); Senior Vice President, Diversified Business and Development, Newspaper Division (2003-2005). Age 60. ITEM 11. EXECUTIVE COMPENSATION Incorporated by reference to the company’s Proxy Statement pursuant to General Instruction G(3) to Form 10-K. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS Incorporated by reference to the company’s Proxy Statement pursuant to General Instruction G(3) to Form 10-K. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE Incorporated by reference to the company’s Proxy Statement pursuant to General Instruction G(3) to Form 10-K. Daniel S. Ehrman, Jr. Vice President, Planning & Development (1997-present). Age 64. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES George R. Gavagan Vice President and Controller (1997-present). Age 64. Incorporated by reference to the company’s Proxy Statement pursuant to General Instruction G(3) to Form 10-K. Roxanne V. Horning Senior Vice President, Human Resources (July 2006-present). Formerly: Vice President, Human Resources (2005-2006); and Vice President, Compensation and Benef its (2003-2005). Age 61. David L. Hunke President and Publisher, USA TODAY (April 2009-present). Formerly: CEO, Detroit Media Partnership and Publisher of Detroit Free Press (2005-2009); and President and Pub lisher of Rochester Democrat and Chronicle (1999-2005). Age 58. David T. Lougee President, Gannett Broadcasting (July 2007-present). Formerly: Executive Vice President, Media Relations, Belo (2006-2007); Senior Vice President, Belo (2005-2006); General Manager, Belo TV and Cable Operations, Seattle/Tacoma (2000-2005). Age 52. Gracia C. Martore President and Chief Operating Officer (February 2010-present). Formerly: Executive Vice President and CFO (2006-2010); Senior Vice President and CFO (2003-2006). Age 59. Todd A. Mayman Senior Vice President, General Counsel and Secretar y (April 2009- present). Formerly: Vice President, Associate General Counsel, Secretary and Chief Governance Officer (2007-2009); and Vice President, Associate General Counsel and Secretar y (2003-2007). Age 51. 84 PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) Financial Statements, Financial Statement Schedules and Exhibits. (1) Financial Statements. As listed in the Index to Financial Statements and Supplementary Data on page 48. (2) Financial Statement Schedules. As listed in the Index to Financial Statements and Supplementary Data on page 48. Note: All other schedules are omitted as the required infor ma- tion is not applicable or the information is presented in the consolidated financial statements or related notes. (3) Exhibits. See Exhibit Index on pages 86-90 for list of exhibits filed with this Form 10-K. Management contracts and compensator y plans or arrangements are identif ied with asterisks on the Exhibit Inde x. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf b y the undersigned thereunto duly authorized. Dated: February 23, 2011 Dated: February 23, 2011 GANNETT CO., INC. (Registrant) Dated: February 23, 2011 /s/Douglas H. McCorkindale ——————————————— Craig A. Dubow, Director, Chairman /s/Meredith A. Brokaw ——————————————— Howard D. Elias, Director By:/s/Gracia C. Martore ——————————————— Paul N. Saleh, Senior Vice President and Chief Financial Officer (principal financial officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indi- cated. Dated: February 23, 2011 Dated: February 23, 2011 Dated: February 23, 2011 /s/Craig A. Dubow ——————————————— Craig A. Dubow, Chairman and Chief Executive Officer (principal executive officer) /s/Paul N. Saleh ——————————————— Paul N. Saleh, Senior Vice President and Chief Financial Officer (principal financial officer) /s/George R. Gavagan ——————————————— George R. Gavagan, Vice President and Controller (principal accounting officer) Dated: February 23, 2011 /s/Douglas H. McCorkindale ——————————————— Arthur H. Harper, Director Dated: February 23, 2011 /s/James A. Johnson ——————————————— John Jeffry Louis, Director Dated: February 23, 2011 /s/H. Jesse Arnelle ——————————————— Marjorie Magner, Director Dated: February 23, 2011 /s/H. Jesse Arnelle ——————————————— Scott K. McCune, Director Dated: February 23, 2011 /s/H. Jesse Arnelle ——————————————— Duncan M. McFarland, Director Dated: February 23, 2011 /s/Donna E. Shalala ——————————————— Donna E. Shalala, Director Dated: February 23, 2011 /s/Meredith A. Brokaw ——————————————— Neal Shapiro, Director Dated: February 23, 2011 /s/Karen Hastie Williams ——————————————— Karen Hastie Williams, Director 85 EXHIBIT INDEX Exhibit Number Exhibit Location 3-1 3-2 4-1 4-2 4-3 4-4 4-5 4-6 4-7 4-8 Third Restated Certificate of Incorporation of Gannett Co., Inc. Incorporated by reference to Exhibit 3-1 to Gannett Co., Inc. ’s Form 10-Q for the f iscal quarter ended April 1, 2007. Amended by-laws of Gannett Co., Inc. Incorporated by reference to Exhibit 3-2 to Gannett Co., Inc. ’s Form 10-Q for the f iscal quarter ended June 27, 2010. Indenture dated as of March 1, 1983, betw een Gannett Co., Inc. and Citibank, N .A., as Trustee. Incorporated by reference to Exhibit 4-2 to Gannett Co., Inc. ’s Form 10-K for the f iscal year ended December 29, 1985. First Supplemental Indenture dated as of No vember 5, 1986, among Gannett Co., Inc., Citibank, N .A., as Trustee, and Sovran Bank, N.A., as Successor Trustee. Second Supplemental Indenture dated as of June 1, 1995, among Gannett Co., Inc., NationsBank, N .A., as Trustee, and Crestar Bank, as Trustee. Third Supplemental Indenture, dated as of March 14, 2002, between Gannett Co., Inc. and Wells Fargo Bank Minnesota, N.A., as Trustee. Fourth Supplemental Indenture, dated as of June 16, 2005, between Gannett Co., Inc. and Wells Fargo Bank Minnesota, N.A., as Trustee. Fifth Supplemental Indenture, dated as of Ma y 26, 2006, between Gannett Co., Inc. and Wells Fargo Bank, N.A., as Trustee. Sixth Supplemental Indenture, dated as of June 29, 2007, between Gannett Co., Inc. and Wells Fargo Bank, N.A., as Successor Trustee. Incorporated by reference to Exhibit 4 to Gannett Co., Inc. ’s Form 8-K f iled on November 9, 1986. Incorporated by reference to Exhibit 4 to Gannett Co., Inc. ’s Form 8-K f iled on June 15, 1995. Incorporated by reference to Exhibit 4.16 to Gannett Co., Inc. ’s Form 8-K f iled on March 14, 2002. Incorporated by reference to same numbered e xhibit to Gannett Co., Inc.’s Form 10-Q for the f iscal quarter ended June 26, 2005. Incorporated by reference to Exhibit 4-5 to Gannett Co. Inc. ’s Form 10-Q for the f iscal quarter ended June 25, 2006. Incorporated by reference to Exhibit 4.5 to Gannett Co., Inc. ’s Form 10-Q for the f iscal quarter ended July 1, 2007. Specimen Certificate for Gannett Co., Inc.’s common stock, par value $1.00 per share. Incorporated by reference to Exhibit 2 to Gannett Co., Inc. ’s Form 8-B f iled on June 14, 1972. 10-1 Gannett Co., Inc. 1978 Executive Long-Term Incentive Plan.* 86 Incorporated by reference to Exhibit 10-3 to Gannett Co., Inc. ’s Form 10-K for the f iscal year ended December 28, 1980. Amendment No. 1 incor porated by reference to Exhibit 20-1 to Gannett Co., Inc.’s Form 10-K for the f iscal year ended December 27, 1981. Amendment No. 2 incor porated by reference to Exhibit 10-2 to Gannett Co., Inc.’s Form 10-K for the f iscal year ended December 25, 1983. Amendments Nos. 3 and 4 incor porated by reference to Exhibit 4-6 to Gannett Co., Inc. ’s Form S-8 Registration Statement No. 33-28413 f iled on May 1, 1989. Amendments Nos. 5 and 6 incor porated by reference to Exhibit 10-8 to Gannett Co., Inc.’s Form 10-K for the f iscal year ended December 31, 1989. Amendment No. 7 incor porated by reference to Gannett Co., Inc.’s Form S-8 Registration Statement No. 333- 04459 filed on May 24, 1996. Amendment No. 8 incor porated by reference to Exhibit 10-3 to Gannett Co., Inc. ’s Form 10-Q for the fiscal quarter ended September 28, 1997. Amendment dated December 9, 1997, incor porated by reference to Gannett Co., Inc.’s 1997 Form 10-K. Amendment No. 9 incor porated by reference to Exhibit 10-3 to Gannett Co., Inc.’s Form 10-Q for the f iscal quarter ended June 27, 1999. Amendment No. 10 incor porated by reference to Exhibit 10-3 to Gannett Co., Inc. ’s Form 10-Q for the fiscal quarter ended June 25, 2000. Amendment No. 11 incorporated by reference to Exhibit 10-3 to Gannett Co., Inc. ’s Form 10-K for the f iscal year ended December 31, 2000. 10-3-1 10-3-2 10-4 10-4-4 10-4-5 10-5 10-5-1 10-5-2 10-2 10-2-1 Supplemental Executive Medical Plan Amended and Restated as of January 1, 2011.* Supplemental Executive Medical Plan for Retired Executives dated December 22, 2010 and effective January 1, 2011.* 10-3 Gannett Supplemental Retirement Plan Restatement.* Amendment No. 1 to the Gannett Co., Inc. Supplemental Retirement Plan dated July 31, 2008 and effective August 1, 2008.* Attached. Attached. Incorporated by reference to Exhibit 10-2 to Gannett Co., Inc. ’s Form 10-Q for the f iscal quarter ended September 30, 2007. Incorporated by reference to Exhibit 10-1 to Gannett Co., Inc. ’s Form 10-Q for the f iscal quarter ended September 28, 2008. Amendment No. 2 to the Gannett Co., Inc. Supplemental Retirement Plan dated December 22, 2010.* Attached. Gannett Co., Inc. Defer red Compensation Plan Restatement dated February 1, 2003 (reflects all amendments through July 25, 2006).* Incorporated by reference to the same-numbered Exhibit to Gannett Co., Inc.’s Form 10-K for the f iscal year ended December 31, 2006. 10-4-1 Gannett Co., Inc. Defer red Compensation Plan Rules for Post-2004 Deferrals.* Incorporated by reference to Exhibit 10-3 to Gannett Co., Inc. ’s Form 10-Q for the f iscal quarter ended July 1, 2007. 10-4-2 Amendment No. 1 to the Gannett Co., Inc. Defer red Compensation Plan Rules for Post-2004 Deferrals dated July 31, 2008 and effective August 1, 2008.* 10-4-3 Amendment No. 2 to the Gannett Co., Inc. Defer red Compensation Plan Rules for Post-2004 Deferrals dated December 9, 2008.* Amendment No. 3 to the Gannett Co., Inc. Defer red Compensation Plan Rules for Post-2004 Deferrals dated October 27, 2009.* Amendment No. 4 to the Gannett Co., Inc. Defer red Compensation Plan Rules for Post-2004 Deferrals dated December 22, 2010.* Incorporated by reference to Exhibit 10-2 to Gannett Co., Inc. ’s Form 10-Q for the f iscal quarter ended September 28, 2008. Incorporated by reference to Exhibit 10-4-3 to Gannett Co., Inc.’s Form 10-K for the f iscal year ended December 28, 2008. Incorporated by reference to Exhibit 10-4-4 to Gannett Co., Inc. ’s Form 10-K for the f iscal year ended December 27, 2009. Attached. Gannett Co., Inc. Transitional Compensation Plan Restatement.* Incorporated by reference to Exhibit 10-1 to Gannett Co., Inc. ’s Form 10-Q for the f iscal quarter ended September 30, 2007. Amendment No. 1 to Gannett Co., Inc. Transitional Compensation Plan Restatement dated as of Ma y 4, 2010.* Incorporated by reference to Exhibit 10-3 to Gannett Co., Inc. ’s Form 10-Q for the f iscal quarter ended March 28, 2010. Amendment No. 2 to Gannett Co., Inc. Transitional Compensation Plan Restatement dated as of December 22, 2010.* Attached. 10-6 Gannett Co., Inc. Omnibus Incentive Compensation Plan, as amended and restated as of Ma y 4, 2010.* Incorporated by reference to Exhibit 10-2 to Gannett Co., Inc. ’s Form 10-Q for the f iscal quarter ended March 28, 2010. 10-6-1 Gannett Co., Inc. 2001 Inland Revenue Approved Sub-Plan for the United Kingdom.* Incorporated by reference to Exhibit 10-1 to Gannett Co., Inc. ’s Form 10-Q for the f iscal quarter ended September 26, 2004. 10-6-2 Form of Director Stock Option Award Agreement.* 10-6-3 Form of Director Restricted Stock Award Agreement.* Incorporated by reference to Exhibit 10-7-3 to Gannett Co., Inc. ’s Form 10-K for the f iscal year ended December 30, 2007. Incorporated by reference to Exhibit 10-6-4 to Gannett Co., Inc.’s Form 10-K for the f iscal year ended December 28, 2008. 10-6-4 Form of Executive Officer Stock Option Award Agreement.* Incorporated by reference to Exhibit 10-6-5 to Gannett Co., Inc.’s Form 10-K for the f iscal year ended December 28, 2008. 10-6-5 10-7 Form of Executive Officer Restricted Stock Unit Award Agreement.* Incorporated by reference to Exhibit 10-6-6 to Gannett Co., Inc.’s Form 10-K for the f iscal year ended December 28, 2008. Gannett U.K. Limited Share Incentive Plan, as amended effective June 25, 2004.* Incorporated by reference to Exhibit 10-2 to Gannett Co., Inc. ’s Form 10-Q for the f iscal quarter ended June 27, 2004. 87 Incorporated by reference to Exhibit 10-2 to Gannett Co., Inc. ’s Form 10-Q for the f iscal quarter ended March 28, 2004. Incorporated by reference to Exhibit 10-5 to Gannett Co., Inc. ’s Form 10-Q for the f iscal quarter ended April 1, 2007. Incorporated by reference to Exhibit 10-3 to Gannett Co., Inc. ’s Form 10-Q for the f iscal quarter ended September 28, 2008. Incorporated by reference to Exhibit 10-2 to Gannett Co., Inc. ’s Form 10-Q for the f iscal quarter ended September 27, 2009. Incorporated by reference to Exhibit 10-3 to Gannett Co., Inc. ’s Form 10-Q for the f iscal quarter ended September 26, 2010. Attached. Incorporated by reference to Exhibit 10-16 to Gannett Co., Inc. ’s Form 10-K for the f iscal year ended December 26, 2004. Incorporated by reference to Exhibit 10-3 to Gannett Co., Inc. ’s Form 10-Q for the f iscal quarter ended April 1, 2007. Incorporated by reference to Exhibit 10-4 to Gannett Co., Inc. ’s Form 10-Q for the f iscal quarter ended September 28, 2008. Incorporated by reference to Exhibit 10-1 to Gannett Co., Inc. ’s Form 10-Q for the f iscal quarter ended September 27, 2009. Incorporated by reference to Exhibit 10-4 to Gannett Co., Inc. ’s Form 10-Q for the f iscal quarter ended September 26, 2010. Attached. Incorporated by reference to Exhibit 10-17 to Gannett Co., Inc. ’s Form 10-K for the f iscal year ended December 26, 2004. Competitive Advance and Revolving Credit Agreement among Gannett Co., Inc., the Several Lenders from Time to Time Parties Thereto, Bank of America, N.A., as Administrative Agent and JPMorgan Chase Bank, as Syndication Agent, dated as of February 27, 2004, and Effective as of March 15, 2004. First Amendment, dated as of February 28, 2007, and Effective as of March 15, 2007, to Competiti ve Advance and Revolving Credit Agreement. Second Amendment, dated as of October 23, 2008, and Effective as of October 31, 2008, to Competiti ve Advance and Revolving Credit Agreement. Third Amendment, dated as of September 28, 2009, to Competitive Advance and Revolving Credit Agreement, dated as of February 27, 2004 and effective as of March 15, 2004. Fourth Amendment, dated as of August 25, 2010 to Competitive Advance and Revolving Credit Agreement, dated as of February 27, 2004 and effective as of March 15, 2004. Fifth Amendment, dated as of September 30, 2010 to Competitive Advance and Revolving Credit Agreement, dated as of February 27, 2004 and effective as of March 15, 2004. Competitive Advance and Revolving Credit Agreement among Gannett Co., Inc., the Several Lenders from Time to Time Parties Thereto, Bank of America, N.A., as Administrative Agent, JPMorgan Chase Bank, N.A., as Syndication Agent, and Barclays Bank PLC, as Documentation Agent, dated as of December 13, 2004, and Effective as of January 5, 2005. First Amendment, dated as of February 28, 2007, and Effective as of March 15, 2007, to Competiti ve Advance and Revolving Credit Agreement. Second Amendment, dated as of October 23, 2008, and Effective as of October 31, 2008, to Competiti ve Advance and Revolving Credit Agreement. Third Amendment, dated as of September 28, 2009, to Competitive Advance and Revolving Credit Agreement, dated as of December 13, 2004 and effective as of January 5, 2005. Fourth Amendment, dated as of August 25, 2010, to Competitive Advance and Revolving Credit Agreement, dated as of December 13, 2004, and ef fective as of January 5, 2005. Fifth Amendment, dated as of September 30, 2010, to Competitive Advance and Revolving Credit Agreement, dated as of December 13, 2004, and ef fective as of January 5, 2005. Amended and Restated Competitive Advance and Revolving Credit Agreement among Gannett Co., Inc., the Several Lenders from Time to Time Parties Thereto, Bank of America, N.A., as Administrative Agent, JPMorgan Chase Bank, N.A., as Syndication Agent, and Barclays Bank PLC, as Documentation Agent, dated as of March 11, 2002, and Effective as of March 18, 2002, as Amended and Restated as of December 13, 2004, and Effective as of January 5, 2005. 10-8 10-8-1 10-8-2 10-8-3 10-8-4 10-8-5 10-9 10-9-1 10-9-2 10-9-3 10-9-4 10-9-5 10-10 88 10-10-1 First Amendment, dated as of February 28, 2007, and Effective as of March 15, 2007, to Amended and Restated Competitive Advance and Revolving Credit Agreement. 10-10-2 Second Amendment, dated as of October 23, 2008, and Effective as of October 31, 2008, to Amended and Restated Competitive Advance and Revolving Credit Agreement. 10-10-3 Third Amendment, dated as of September 28, 2009, to Amended and Restated Competitive Advance and Revolving Credit Agreement, dated as of March 11, 2002 and effective as of March 18, 2002, as amended and restated as of December 13, 2004 and ef fective as of January 5, 2005. 10-10-4 Fourth Amendment, dated as of August 25, 2010, to Amended and Restated Competitive Advance and Revolving Credit Agreement, dated as of March 11, 2002 and effective as of March 18, 2002, as amended and restated as December 13, 2004 and ef fective as of January 5, 2005. Incorporated by reference to Exhibit 10-4 to Gannett Co., Inc. ’s Form 10-Q for the f iscal quarter ended April 1, 2007. Incorporated by reference to Exhibit 10-5 to Gannett Co., Inc. ’s Form 10-Q for the f iscal quarter ended September 28, 2008. Incorporated by reference to Exhibit 10-3 to Gannett Co., Inc. ’s Form 10-Q for the f iscal quarter ended September 27, 2009. Incorporated by reference to Exhibit 10-5 to Gannett Co., Inc. ’s Form 10-Q for the f iscal quarter ended September 26, 2010. 10-10-5 Fifth Amendment, dated as of September 30, 2010, Attached. 10-11 10-12 10-13 10-13-1 10-13-2 10-14 10-14-1 10-14-2 10-15 10-16 to Amended and Restated Competitive Advance and Revolving Credit Agreement, dated as of March 11, 2002 and effective as of March 18, 2002, as amended and restated as December 13, 2004 and ef fective as of January 5, 2005. Master Assignment and Assumption Agreement, dated September 30, 2010 to (i) the Amended and Restated Competitive Advance and Revolving Credit Agreement, dated as of March 11, 2002 and ef fective as of March 18, 2002, as amended and restated as of December 13, 2004 and effective as of January 5, 2005; (ii) the Competitive Advance and Revolving Credit Agreement, dated as of February 27, 2004 and effective as of March 15, 2004; and (iii) the Competitive Advance and Revolving Credit Agreement, dated as of December 13, 2004 and ef fective as of January 5, 2005. Attached. Description of Gannett Co., Inc.’s Non-Employee Director Compensation.* Incorporated by reference to Exhibit 10-1 to Gannett Co., Inc. ’s Form 10-Q for the f iscal quarter ended March 28, 2010. Employment Agreement dated February 27, 2007, between Gannett Co., Inc. and Craig A. Dubow.* Incorporated by reference to Exhibit 10-14 to Gannett Co., Inc.’s Form 10-K for the f iscal year ended December 31, 2006. Amendment, dated as of August 7, 2007, to Employment Agreement dated February 27, 2007.* Incorporated by reference to Exhibit 10-4 to Gannett Co., Inc. ’s Form 10-Q for the f iscal quarter ended July 1, 2007. Amendment, dated as of December 24, 2010, to Employment Agreement dated February 27, 2007.* Attached. Employment Agreement dated February 27, 2007, between Gannett Co., Inc. and Gracia C. Mar tore.* Incorporated by reference to Exhibit 10-15 to Gannett Co., Inc.’s Form 10-K for the f iscal year ended December 31, 2006. Amendment, dated as of August 7, 2007, to Employment Agreement dated February 27, 2007.* Incorporated by reference to Exhibit 10-5 to Gannett Co., Inc. ’s Form 10-Q for the f iscal quarter ended July 1, 2007. Amendment, dated as of December 24, 2010, to Employment Agreement dated February 27, 2007.* Attached. Amendment for section 409A Plans dated December 31, 2008.* Incorporated by reference to Exhibit 10-14 to Gannett Co., Inc.’s Form 10-K for the f iscal year ended December 28, 2008. Executive Life Insurance Plan document dated December 31, 2008.* Incorporated by reference to Exhibit 10-15 to Gannett Co., Inc.’s Form 10-K for the f iscal year ended December 28, 2008. 89 10-17 Termination Benefits Agreement dated as of November 15, 2010 between Gannett Co., Inc. and Paul N. Saleh.* Incorporated by reference to Exhibit 99-2 to Gannett Co., Inc. ’s Form 8-K f iled on November 17, 2010. 10-18 Key Executive Life Insurance Plan dated October 29, 2010.* Incorporated by reference to Exhibit 10-1 to Gannett Co., Inc.’s Form 10-Q for the f iscal quarter ended September 26, 2010. Form of Participation Agreement under Key Executive Life Insurance Plan.* Incorporated by reference to Exhibit 10-2 to Gannett Co., Inc. ’s Form 10-Q for the f iscal quarter ended September 26, 2010. Omnibus Amendment to Terms and Conditions of Restricted Stock Awards dated as of December 31, 2008.* Incorporated by reference to Exhibit 10-17 to Gannett Co., Inc.’s Form 10-K for the f iscal year ended December 28, 2008. Omnibus Amendment to Terms and Conditions of Stock Unit Awards dated as of December 31, 2008.* Incorporated by reference to Exhibit 10-18 to Gannett Co., Inc.’s Form 10-K for the f iscal year ended December 28, 2008. Omnibus Amendment to Terms and Conditions of Stock Option Awards dated as of December 31, 2008.* Incorporated by reference to Exhibit 10-19 to Gannett Co., Inc. ’s Form 10-K for the f iscal year ended December 28, 2008. 10-19 10-20 10-21 10-22 21 23 31-1 31-2 32-2 101 Subsidiaries of Gannett Co., Inc. Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm. Certification Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934. Certification Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934. 32-1 Section 1350 Certification. Section 1350 Certification. Attached. Attached. Attached. Attached. Attached. Attached. The following financial information from Gannett Co., Inc. Attached. Annual Report on Form 10-K for the year ended December 26, 2010, formatted in XBRL includes: (1) Consolidated Statements of Income (Loss) for the 2010, 2009 and 2008 f iscal years, (ii) Consolidated Balance Sheets at December 26, 2010 and December 27, 2009, (iii) Consolidated Cash Flow Statements for the 2010, 2009 and 2008 f iscal years; (iv) Consolidated Statements of Equity for the 2010, 2009 and 2008 f iscal years; and (v) the Notes to Consolidated Financial Statements, tagged as blocks of text. For purposes of the incor poration by reference of documents as Exhibits, all references to F orm 10-K, 10-Q and 8-K of Gannett C o., Inc. refer to Forms 10-K, 10-Q and 8-K f iled with the Commission under Commission f ile number 1-6961. The company agrees to furnish to the Commission, upon request, a cop y of each agreement with respect to long-ter m debt not f iled herewith in reliance upon the e xemption from f iling applicable to any series of debt which does not exceed 10% of the total con solidated assets of the company. * Asterisks identify management contracts and compensator y plans or ar rangements. 90 GLOSSARY OF FINANCIAL TERMS Presented below are def initions of certain key financial and opera- tional terms that Gannett hopes will enhance the reading and under- standing of Gannett’s 2010 Form 10-K. AMORTIZATION - A charge against the company’s earnings that represents the write off of intangible assets over the projected life of the assets. BALANCE SHEET - A summary statement that reflects the compa- ny’s assets, liabilities and equity at a particular point in time. BROADCASTING REVENUES - Primarily amounts charged to cus- tomers for commercial advertising aired on the company’s television stations. CIRCULATION - The number of newspapers sold to customers each day (“paid circulation”). The company keeps separate records of morning, evening and Sunday circulation. CIRCULATION REVENUES - Amounts charged to newspaper readers or distributors reduced by the amount of discounts. Char ges vary from city to city and depend on the type of sale (i.e., subscription or single copy) and distributor arrangements. COMPREHENSIVE INCOME - The change in equity (net assets) of the company from transactions and other events from non-owner sources. Comprehensive income comprises net income and other items reported directly in shareholders’ equity, principally the foreign cur ren- cy translation adjustment and funded status of postretirement plans. CURRENT ASSETS - Cash and other assets that are e xpected to be converted to cash within one y ear. CURRENT LIABILITIES - Amounts owed that will be paid within one year. DEFERRED INCOME - Revenue derived principally from advance subscription payments for newspapers. Revenue is recognized in the period in which it is earned (as newspapers are delivered). DEPRECIATION - A charge against the company’s earnings that allocates the cost of proper ty, plant and equipment over the estimated useful lives of the assets. DIGITAL/ONLINE REVENUES - These include revenue from advertising placed on web sites that are associated with the compan y publishing and broadcasting operations which are reflected as revenues of those business segments, and revenues from the businesses that comprise the Digital segment, principal of which are CareerBuilder (employment web site) and PointRoll (technology/marketing services revenue). DIGITAL SEGMENT - Beginning with 2008, a new digital business segment was reported, which includes CareerBuilder and ShopLocal from the dates of their full consolidation, as w ell as PointRoll, Planet Discover and Schedule Star. DISCONTINUED OPERATIONS - A term which refers to business- es which have been sold or disposed of b y the company. To achieve comparability in f inancial reporting for all remaining operations, the results from discontinued operations are reclassif ied from the normal operating section of the Statements of Income and presented in a separate section entitled “Discontinued Operations.” DIVIDEND - Payment by the company to its shareholders of a por tion of its earnings. EARNINGS PER SHARE (basic) - The company’s earnings divided by the average number of shares outstanding for the period. EARNINGS PER SHARE (diluted) - The company’s earnings divided by the average number of shares outstanding for the period , giving effect to assumed dilution from outstanding stock options and restricted stock units. EQUITY EARNINGS FROM INVESTMENTS - For those invest- ments which are 50% or less owned by the company, an income or loss entry is recorded in the Statements of Income representing the compa- ny’s ownership share of the operating results of the in vestee company. GAAP - Generally accepted accounting principles. FOREIGN CURRENCY TRANSLATION - The process of reflect- ing foreign currency accounts of subsidiaries in the repor ting currency of the parent company. FREE CASH FLOW - Net cash flow from operating activities reduced by purchase of property, plant and equipment as well as pay- ments for investments and increased by proceeds from investments and voluntary pension contributions, net of related tax benef it. GOODWILL - In a business purchase, this represents the e xcess of amounts paid over the fair value of tangible and other identif ied intangible assets acquired net of liabilities assumed. INVENTORIES - Raw materials, principally newsprint, used in the business. NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS - The portion of equity and net ear nings in consolidated subsidiaries that is owned by others. ADVERTISING REVENUES - Amounts charged to customers for space purchased in the company’s newspapers and/or the associated web site. There are three major types of adv ertising revenue: retail ads from local merchants, such as depar tment stores; classif ied ads, which include automotive, real estate and “help w anted”; and national ads, which promote products or brand names on a nationwide basis. PRO FORMA - A non-GAAP manner of presentation intended to provide improved comparability of f inancial results; it assumes b usi- ness purchases/dispositions were completed at the beginning of the earliest period discussed (i.e., results are compared for all periods b ut only for businesses presently owned). PURCHASE - A business acquisition. The acquiring company records at its cost the acquired assets less liabilities assumed. The reported income of an acquiring company includes the operations of the acquired company from the date of acquisition. RESTRICTED STOCK - An award that gives key employees the right to shares of the company’s stock, pursuant to a v esting schedule. RETAINED EARNINGS - The earnings of the company not paid out as dividends to shareholders. STATEMENT OF CASH FLOWS - A financial statement that reflects cash flows from operating, investing and f inancing activities, providing a comprehensive view of changes in the compan y’s cash and cash equivalents. STATEMENT OF EQUITY - A statement that reflects changes in the company’s common stock, retained ear nings and other equity accounts. STATEMENT OF INCOME (LOSS) - A financial statement that reflects the company’s profit by measuring revenues and expenses. STOCK-BASED COMPENSATION - The payment to employees for services received with equity instruments such as stock options and restricted stock. STOCK OPTION - An award that gives key employees the right to buy shares of the company’s stock, pursuant to a v esting schedule, at the market price of the stock on the date of the a ward. 91 TABLE OF CONTENTS SHAREHOLDER SERVICES 2010 Financial Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Letter to Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Company and Divisional Officers . . . . . . . . . . . . . . . . . . . . . . 1 2 7 8 Form 10-K COMPANY PROFILE: Gannett is a media and marketing solutions company with a diverse portfolio of broadcast, digital, mobile and publishing companies. Gannett provides consumers easy access to the things that matter most to them – any way and anywhere. Gannett’s portfolio of trusted brands helps business customers connect with these highly engaged audiences through its industry- leading marketing services, customized solutions and national-to-local-to-personal reach. As Gannett builds on its valuable local brands and strong journalism, it also is expanding its mobile and digital businesses. It is a digital leader with a portfolio that includes a network of hundreds of local and national media organization web sites that reach 52 million unique users monthly; CareerBuilder.com, the nation’s top employment site, which is expanding rapidly internationally and is already in 18 countries outside the U.S.; and Gannett Digital Media Network, which includes top brands such as USATODAY.com, 81 local MomsLikeMe.com sites; HighSchoolSports.net, a top digital sports brand; and action sports network BNQT. USA TODAY, too, continues to be a leader in the mobile space, with more than 7 million total App downloads, including its iPad, iPhone and Android Apps. Gannett Broadcasting is helping to lead the development of Digital Mobile TV. At the same time, the company’s digital marketing companies offer innovative marketing solutions for any audience. PointRoll, an industry leader in rich media advertising solutions and technology, powers more than 50 percent of all rich media campaigns online and serves more than 150 billion ad impressions each year. ShopLocal is a leading provider of online marketing solutions that connect retailers with shoppers through innovative and effective marketing, enabling more than 100 of the nation’s top retailers to deliver localized promotions directly to shoppers. The company’s 82 U.S. daily newspapers, including USA TODAY, reach 11.6 million readers every weekday and 12 million readers every Sunday, providing important news and information from their customers’ neighborhoods and around the globe. USA TODAY, the nation’s No. 1 newspaper in print circulation, and USATODAY.com reach a combined 5.9 million readers daily. The Broadcasting Division’s 23 TV stations reach 21 million households, covering 18.2 percent of the U.S. population. Through its Captivate subsidiary, the Broadcasting Division delivers news, information and advertising to a highly desirable audience demo- graphic on 9,500 video screens located in elevators of office towers and select hotel lobbies in 25 major cities across North America. Newsquest is one of the U.K.’s leading regional community news providers, and its digital portfolio of newspaper and online-only brands attracts nearly 7.5 million unique users each month. It has a portfolio of 17 daily paid-for newspapers and more than 200 weekly newspapers, magazines and trade publications. Newsquest owns a successful online publisher called s1, which is a leading recruitment site in Scotland. For more information, visit www.gannett.com. GANNETT STOCK Gannett Co., Inc. shares are traded on the New York Stock Exchange with the symbol GCI. The company’s transfer agent and registrar is Wells Fargo Bank, N.A. General inquiries and requests for enrollment materials for the programs described below should be directed to Wells Fargo Shareowner Services, P.O. Box 64854, St. Paul, MN 55164-0854 or by telephone at 1-800-778-3299 or at www.wellsfargo.com/contactshareownerservices. DIVIDEND REINVESTMENT PLAN The Dividend Reinvestment Plan (DRP) provides Gannett shareholders the opportunity to purchase additional shares of the company’s common stock free of brokerage fees or service charges through automatic reinvestment of dividends and optional cash payments. Cash payments may range from a minimum of $10 to a maximum of $5,000 per month. AUTOMATIC CASH INVESTMENT SERVICE FOR THE DRP This service provides a convenient, no-cost method of having money automatically withdrawn from your checking or savings account each month and invested in Gannett stock through your DRP account. DIRECT DEPOSIT SERVICE Gannett shareholders may have their quarterly dividends electronically credited to their checking or savings accounts on the payment date at no additional cost. ANNUAL MEETING The annual meeting of shareholders will be held at 10 a.m. (E.T.) Tuesday, May 3, 2011, at Gannett headquarters. CORPORATE GOVERNANCE We have posted on our Web site (www.gannett.com) our principles of corporate governance, ethics policy and the charters for the audit, digital technology, nominating and public responsibility and executive compensation committees of our board of directors, and we intend to post updates to these corporate governance materials promptly if any changes (including through any amendments or waivers of the ethics policy) are made. This site also provides access to our annual report on Form 10-K, quarterly reports on Form 10-Q and cur- rent reports on Form 8-K as filed with the SEC. Our Chairman and Chief Executive Officer, Craig A. Dubow, and our Senior Vice President and Chief Financial Officer, Paul N. Saleh, have delivered, and we have filed with our 2010 Form 10-K, all certifications required by the rules of the SEC. Complete copies of our corporate governance materials and our Form 10-K may be obtained by writing our Secretary at our corporate headquarters. In accordance with the rules of the New York Stock Exchange, our Chairman and Chief Executive Officer, Craig A. Dubow, has certified, without qualification, that he is not aware of any violation by Gannett of the NYSE’s corporate governance listing standards. THIS REPORT WAS WRITTEN AND PRODUCED BY EMPLOYEES OF GANNETT. Vice President and Controller George Gavagan Director of Consolidations and Financial Reporting Cam McClelland Vice President/Corporate Communications Robin Pence Senior Manager/Publications Laura Dalton Creative Director/Designer Michael Abernethy Printing Action Printing, Fond du Lac, Wis. PHOTO CREDITS: Page 2: Dubow by Stacey Wolf, Gannett. Pages 3-6: David Yellen. Page 7: Directors’ photos by Stacey Wolf, Gannett. FOR MORE INFORMATION News and information about Gannett is available on our Web site. Quarterly earnings infor- mation will be available around the middle of April, July and October 2011. Shareholders who wish to contact the company directly about their Gannett stock should call Shareholder Services at Gannett headquarters, 703-854-6960. Printed on recycled paper. This report was printed using soy-based inks. The entire report contains 10% total recovered fiber/all post-consumer waste. Gannett Headquarters 7950 Jones Branch Drive McLean, VA 22107 703-854-6000 GANNETT CO., INC. 7950 Jones Branch Dr. McLean, VA 22107 www.gannett.com 2 0 1 0 A N N U A L R E P O R T • G A N N E T T C O . , I N C . 20 10 A NNUAL REPORT 00075988 

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