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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

(Mark One)
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 28, 2003
o 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.

Registrant’s telephone number, including area code: (703) 854-6000

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: None

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [X]  No [  ]

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated 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 an accelerated filer (as defined in Exchange Act Rule 12b-2).
Yes [X]  No [  ]

     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 reported on The New York Stock Exchange on June 27, 2003, was $20,590,444,571. The registrant has no non-voting common equity.

     As of February 20, 2004, 272,876,460 shares of the registrant’s Common Stock were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

     The definitive proxy statement relating to the registrant’s Annual Meeting of Shareholders to be held on May 4, 2004, is incorporated by reference in Part III to the extent described therein.

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INDEX TO GANNETT CO., INC.
2003 FORM 10-K

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PART I

ITEM 1. BUSINESS

Company Profile

Gannett Co., Inc. is a diversified news and information company that publishes newspapers, operates broadcasting stations, operates Web sites in connection with its newspaper and broadcast operations, and is engaged in marketing, commercial printing, a newswire service, data services and news programming. Gannett is an international company operating primarily in the U.S. and the United Kingdom (U.K.). Approximately 85% of its revenues are from domestic operations in 43 states, the District of Columbia, and Guam. It has foreign operations in the United Kingdom and in certain European and Asian markets. Its headquarters are in McLean, Va., near Washington, D.C., and is home to approximately 600 corporate employees.

     Gannett was founded by Frank E. Gannett and associates in 1906 and incorporated in 1923. The company went public in 1967. It reincorporated in Delaware in 1974. Its more than 272 million outstanding shares of common stock are held by approximately 12,800 shareholders of record in all 50 states and several foreign countries. The company has approximately 53,000 employees.

     The company has two principal business segments: newspaper publishing and broadcasting (television). Financial information for each of the company’s reportable segments can be found in our financial statements, as discussed under Item 7 “Management’s Discussion and Analysis” beginning on page 17, and as presented under Item 8 “Financial Statements and Supplementary Data” beginning on page 28 of this Form 10-K.

     Gannett is the USA’s largest newspaper group in terms of circulation. The company’s 100 U.S. daily newspapers have a combined daily paid circulation of 7.6 million. They include USA TODAY, the nation’s largest-selling daily newspaper, with a circulation of approximately 2.2 million. In addition, Gannett owns USA WEEKEND, a weekend newspaper magazine, and more than 500 non-daily publications in the United States.

     Newsquest plc, a wholly owned Gannett subsidiary acquired in mid-1999 and expanded through further acquisitions since (including Scottish Media Group plc acquired in 2003), is the second largest regional newspaper publisher in the U.K. with a portfolio of more than 300 titles. Its publications include 17 daily newspapers with a combined circulation of approximately 725,000. Newsquest also publishes a variety of non-daily publications, including Berrow’s Worcester Journal, the oldest continuously published newspaper in the world.

     Total average daily circulation of the company’s domestic and U.K. daily newspapers was approximately 8.3 million at the end of 2003.

     The newspaper segment also includes: Nursing Spectrum, publisher of biweekly periodicals specializing in advertising for nursing employment; Army Times Publishing Co., which publishes military and defense newspapers; Clipper Magazine, a direct mail advertising magazine that publishes more than 325 individual editions in 24 states; a 19.49% interest in California Newspapers Partnership, a partnership that includes 28 daily California newspapers; a 66.2% interest in Texas-New Mexico Newspapers Partnership, a partnership that includes 6 daily newspapers in Texas and New Mexico; and a 13.5% interest in Ponderay Newsprint Company in California.

     Certain of the company’s newspaper subsidiaries are participants in joint operating agencies. Each joint operating agency performs the production, sales and distribution functions for the subsidiary and another newspaper publishing company under a joint operating agreement. The company’s operating results in the Detroit and Tucson joint operating agencies are accounted for under the equity method, and are reported as a net amount in other operating revenues.

     In addition to publishing, the newspaper segment includes the following: Gannett News Service, which provides news services for its newspaper operations; Gannett Retail Advertising Group, which represents the company’s local newspapers in the sale of advertising to national and regional retailers, service providers and franchise businesses; and Gannett Offset, which is composed of the Gannett Offset print group and Gannett Marketing Services Group. The Gannett Offset print group currently includes five non-heatset printing plants and one heatset printing facility. Gannett Offset’s dedicated commercial printing plants are located in Atlanta, Ga.; Minneapolis, Minn.; Miramar, Fla.; Norwood, Mass.; St. Louis, Mo.; and Springfield, Va. Gannett Marketing Services Group coordinates the sale of direct-marketing services through: Telematch, a database management and data enhancement company; and Gannett Direct Marketing Services, a direct-marketing company with operations in Louisville, Ky. The company also owns USATODAY.com and other Internet services at most of its local newspapers and television stations; and Gannett Media Technologies International, which develops and markets software and other products for the publishing industry.

     The company also owns a one-third equity interest in CareerBuilder, LLC, an online service providing recruitment resources.

     The company owns and operates 22 television stations covering 17.8 percent of the USA in markets with more than 19.3 million households.

Newspaper Publishing/United States

On Dec. 28, 2003, the company operated 100 U.S. daily newspapers, including USA TODAY, and more than 500 non-daily local publications in 41 states and Guam. The Newspaper Division is headquartered in McLean, Va., and on Dec. 28, 2003, it had approximately 40,000 full- and part-time employees.

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

     USA TODAY is produced at facilities in McLean, Va., and is transmitted via satellite to offset printing plants around the country. It is printed at Gannett plants in 20 U.S. markets and under contract at offset plants in 15 other U.S. markets. It is sold at newsstands and vending machines generally at 50 cents per copy. Mail subscriptions are available nationwide and abroad, and home, hotel and office delivery is offered in many markets. Approximately 65% of its net paid circulation results from single-copy sales at newsstands, vending machines or to hotel guests, and the remainder is from home and office delivery, mail, educational and other sales.

     USA TODAY International is printed from satellite transmission under contract in London, Frankfurt, Hong Kong and Belgium, and is distributed in Europe, the Middle East, Africa and Asia. It is available in more than 50 foreign countries.

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     For domestic editions, USA TODAY is party to a contract with one satellite transmission service which runs through the end of 2004 and provides for the satellite transmissions of USA TODAY from the McLean, Va., office (or Silver Spring, Md., its back-up facility) to 35 domestic print sites across the USA.

     For international editions, USA TODAY is party to a contract with a second satellite transmission provider which extends indefinitely (but is cancelable by either party with 60 days’ notice) and provides for satellite transmissions to three contract print sites in Europe and one contract print site in Asia.

     The company has adequate back-up for these transmission processes.

     USATODAY.com, one of the most popular newspaper sites on the Web, had more than 35 million visits per month at the end of 2003.

     Gannett News Service (GNS) is headquartered in McLean, Va., and operates bureaus in six other states and Washington, D.C. (see page 12 for more information). GNS provides national and regional news coverage and sports, features, photo and graphic services to Gannett newspapers. GNS is also syndicated to several non-Gannett newspapers.

     The newspaper publishing segment also includes USA WEEKEND, which is distributed as a weekend newspaper magazine in 598 newspapers throughout the country, with a total circulation of 23.7 million as of January 2004, the second-largest weekly magazine in circulation in the nation.

     Nursing Spectrum is a communications company that promotes the recognition and support of the nursing community by providing timely, relevant, and compelling information through its award-winning magazines, annual career guides and Web sites. On Feb. 2, 2004, the company acquired NurseWeek, an industry leader with print publications and an award-winning Web site focused on the nursing industry. Altogether, Nursing Spectrum will now publish 12 regional magazines and have a combined circulation of more than one million registered nurses in the top 50 metropolitan markets each month, or almost half of the registered nurses in the U.S. Nursing Spectrum’s and NurseWeek’s award-winning Web sites average more than 1.8 million page views per month.

     At the end of 2003, 73 of the company’s domestic daily newspapers, including USA TODAY, were published in the morning and 27 were published in the evening.

     For local U.S. newspapers, excluding USA TODAY, morning circulation accounts for approximately 87% of total daily volume, while evening circulation accounts for 13%.

     Individually, Gannett newspapers are the leading news and information source with strong brand recognition in their markets. Their durability lies in the quality of their management, their flexibility, their focus on such customer-directed programs as Complete Community Coverage in News, cross-branding of the daily newspaper, online, and weekly products, ADQ (described further below) continuous focus on customer service and quality, and their capacity to invest in new technology. Collectively, they form a powerful network to distribute news and advertising information across the nation.

     In 2003, news departments across Gannett continued to emphasize coverage of local news as the key to successful news reporting. Under the Complete Community Coverage model developed in 2000, newsrooms expanded the amount of local news on their Web sites. Continued emphasis was placed on reaching younger readers, especially those in the 25- to 34-year-old age group, through stronger Web sites and more focused news and features coverage.

     In 2003, the Gannett Newspaper Division (News Department) worked with Gannett’s community newspapers to launch a new effort to reach more readers. A program called “Real Life, Real News: Connecting with Readers’ Lives” was developed and introduced to Gannett editors at a meeting in September. Each Gannett newspaper developed a plan for rollout of the approach in its community. The program focuses on making news more relevant to readers and capturing “Moments of Life” that are important in the lives of readers. The “Real Life, Real News” approach is being integrated into both print and online content.

     For example, Gannett newspapers in Cincinnati, Indianapolis and Louisville launched free weekly publications aimed at reaching more young adults in their communities. The new publications joined weeklies already in place in Boise, Idaho, and Lansing, Mich. The publications feature information on entertainment opportunities in the communities.

     All of the company’s domestic daily newspapers receive Gannett News Service. In addition, all newspapers subscribe to The Associated Press, and some receive various supplemental news and syndicated features.

     Gannett News Service provided strong coverage of topics of high interest to individual newspapers through its regional reporting. It also coordinated the work of local newspapers, the Army Times Publishing Co., USA TODAY, USATODAY.com, Gannett online operations and its own Washington bureau staff in providing extensive, converged coverage of the war in Iraq and related developments.

     In 2003, the company continued to emphasize increasing its revenue from medium and smaller advertisers in each market it serves. These efforts will continue in 2004. Initiatives have focused on sales and rate management and the construction of pre-packaged programs scalable to the company’s largest and smallest markets. Sales management initiatives increased the number and quality of sales calls, improved sales compensation and enhanced consistent sales training. Rate management programs focused on selling multiple advertising insertions and reviewing rates and rate structures to ensure that they match the opportunities in the market. The company operates an intranet site to provide its advertising management with up-to-date information and sales programs 24 hours a day, seven days a week. The company regularly calculates market potential and adjusts its local strategic plans accordingly. The company will continue in 2004 to make its personnel competitive and effective in their leadership, strategic thinking and marketing skills through such programs.

     The Newspaper Division’s advertising quality initiative, known as ADQ, produced its ninth consecutive year of improved ad quality. ADQ efforts are focused on accuracy and customer service in ad placement and billing functions. ADQ has reduced credit costs significantly since its 1995 launch.

     Three principles guide online strategy at Gannett’s local newspapers. First, spending for the online business must be justified by additional revenues, additional customers and additional profits. Second, emphasis needs to be on serving our local markets. A key reason customers turn to a Gannett newspaper’s online site is to find local news and information. The credibility of the local newspaper, the known and trusted information source, extends to the company’s Web sites and thus differentiates Gannett from other

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Internet sites. This is a major factor that allows Gannett newspapers to compete successfully as Internet information providers. Third, the natural synergies between the local newspaper and local Web site should be utilized. The local content already available, the customer relationships, the news and advertising sales forces, and the promotional vehicle are all advantages for the newspaper. The company’s strategy is to use these advantages to create strong and timely content, sell packaged advertising products that serve the advertisers, hold down costs, and leverage the known and trusted brand of the newspaper.

     This strategy has served Gannett well in the development of our newspaper Internet efforts. The aggressive local focus, including advertising sales efforts, combined with effective use of national economies of scale and standardized technology, resulted in solid results in 2003.

     Online revenue for local newspaper Web sites increased by 45% in 2003, which followed a 25% increase in 2002 and a 35% increase in 2001. Recent traffic on our sites reached more than 21 million visitors and over 275 million page views per month.

     The Advertising Matrix sales program was implemented at 24 Gannett newspapers in 2003 and more newspapers will follow in 2004. The Matrix is a program for selling multiple ads across multiple product lines and packaging them into one buy for the customer. A typical Matrix package might include a retail display ad, a classified help wanted ad, a print-and-deliver insert targeted to specific zones, an online directory listing and an online coupon. The Bundle Wizard, which performs some of the functions of the Matrix on a more limited scale, is available to markets not using the Matrix.

     The company also developed and implemented proprietary customer contact and relationship management software in some of its markets. The system is used to reach potential employment advertisers, and will be expanded to reach retailers and real estate agents.

     Gannett has online classified ad order entry software installed in 13 locations. The software allows customers to place their classified ad via the newspaper’s Web site. It permits customers to build both their print and online ad using templates provided by the newspaper or to customize the ad to meet their specific requirements. It also facilitates upsell opportunities such as bolding, attention-getters, photos and e-mail hyperlinks. When customers complete the design of their ads and select a product schedule, they receive a real-time price quote. Customers can then book their ads without further newspaper involvement. Gannett expects to expand these programs to 42 newspapers by the end of 2004.

     Franchise XPress, a sales program operated by the Gannett Retail Advertising Group, sold 106 million newspaper-distributed single sheet inserts to hundreds of franchise retailers in Gannett markets during 2003. These inserts are typically distributed in areas close to the retailer’s store. Insert Xpress, another newspaper-distributed single sheet sales program, sold more than 200 million inserts to local retail advertisers in 2003.

     In 2003, Gannett continued to update its legacy software to provide additional advertising functionality. This latest release contains a new pricing engine that will permit the packaging and selling of multiple products across multiple mediums and support advertising initiatives such as the Matrix sales program. At the end of 2003, the release had been implemented at 15 newspapers with more implementations planned for 2004.

     Advancements were also made in circulation technologies. A total of 58 newspapers now offer their customers seamless online services on their Web sites to start new subscriptions, make payments, schedule vacation stops and restarts or deliver complaints.

     In addition, all newspapers offer the EZ-Pay system to subscribers so they can have their payments automatically charged to their credit card or deducted from their checking account. Use of the EZ-Pay system reduces billing and customer account administration costs and facilitates customer retention. At year end, 12% of all subscribers were using EZ-Pay.

     Gannett Media Technologies International (GMTI) provides important technological support and products for the company’s domestic newspapers in a number of big areas, including ad software and database management, editorial production and archiving, and Web site hosting. In addition, GMTI provides similar services to other newspaper companies. GMTI continued to increase its installed base of Internet-based Celebro advertising systems. Celebro facilitates increased revenue opportunities through the creation of new advertising products and by making it easier for the advertisers to choose newspaper publications over the competition. Real estate companies and auto dealerships are linked directly to GMTI’s database servers where Celebro’s HomesPlus and AutoChooser software allows them to send complete, digitized ad files to newspapers for pagination and printing. Newspapers are freed from most production requirements and advertisers replace time-consuming manual tasks with labor saving technology.

     At year-end, GMTI maintained 65 HomesPlus databases, 33 of which are Gannett newspapers, and 32 are non-Gannett customers. AutoChooser is in production at 20 Gannett newspapers and 36 non-Gannett newspapers. Additionally, AutoChooser hosts auto dealer Web sites on behalf of some newspaper customers.

     GMTI increased its Digital Collections customer base to 113 system installations. Of these, 30 are non-Gannett installations. Each of these systems serves a multi-purpose role for pre-press photo production, the capture and management of wire photos, archiving photos, stories, graphics and pages, and for news library research.

     In 2003, Gannett acquired sole ownership of InfiNet, which previously had been a partnership with Knight Ridder, Inc., and Landmark Communications, Inc. InfiNet was an application service provider (ASP) where the main line of business was hosting Web services, including those of the partners. InfiNet was merged into GMTI and expanded the GMTI line of business into ASP services including Web hosting. GMTI now manages hosting for most Gannett newspaper Web sites, and continues to manage systems for Landmark, Knight Ridder and numerous other publishers.

     With respect to newspaper production, 68 domestic daily newspaper plants print by the offset process, and 11 newspapers print using various letterpress processes. There are 84 newspapers that have converted to the 50-inch web-width format. Readers have found this size to be easier to handle and use. The 50-inch format change can result in more than a 7% savings in newsprint consumption. Two more of the company’s newspapers are scheduled for web-width reduction in 2004.

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     During the past few years, the company has consolidated certain functions of its newspaper operations in a number of geographic areas in order to achieve greater marketing, administrative and production effectiveness and efficiencies. The company will continue to assess and consolidate certain functions where there are expected benefits.

     In recent years, improved technology for all of the newspapers has resulted in greater speed and accuracy and in a reduction in the number of production hours worked. The company expects this trend to continue in 2004.

     The principal sources of newspaper revenues are circulation and advertising.

     Circulation: Detailed information about the circulation of the company’s newspapers may be found on pages 10-13 and 20-21 of this Form 10-K. The 2% decline in the company’s daily circulation is, in part, a result of the decision to raise home-delivery prices early in 2003 at 15 of the larger newspapers, including Phoenix, Detroit and Indianapolis. The 1% decline in Sunday circulation is consistent with the national pattern the industry has experienced for several years. Twenty-seven of the company’s local newspapers reported gains in daily circulation in 2003, and 22 increased Sunday circulation. Home-delivery prices for the company’s newspapers are established individually for each newspaper and range from $1.62 to $3.11 per week for daily newspapers and from $0.71 to $2.75 per copy for Sunday newspapers. Price increases for certain elements of local circulation volume were initiated at 10 newspapers in 2003.

     Advertising: The newspapers have advertising departments that sell retail, classified and national advertising. The Gannett Retail Advertising Group also sells advertising on behalf of the company’s local newspapers to national and regional retailers and service providers. The company also contracts with outside representative firms that specialize in the sale of national advertising. Analyses of newspaper advertising revenues are presented on pages 19-20 of this Form 10-K.

     Retail advertising is display advertising associated with local merchants, such as department and grocery stores. Classified advertising includes ads listed together in sequence by the nature of the ads, such as automobile sales, real estate sales and help wanted. National advertising is display advertising principally from advertisers who are promoting products or brand names nationally. Retail and national advertising may appear in the newspaper itself or in preprinted sections. Ad revenues from newspaper Internet affiliates are reported along with revenue from publishing. Generally there are different rates for each category of advertising, and the rates for each newspaper are set independently, varying from city to city.

     The newspapers have made continuing efforts to serve their readers and advertisers by introducing complete market coverage programs and by targeting specific market segments desired by many advertisers through the use of specially zoned editions and other specialty publications.

     Continuing and comprehensive efforts are also underway to leverage Web site and newspaper marketing and advertising sales opportunities.

     Competition: The company’s newspapers compete with other media for advertising principally on the basis of their advertising rates and their performance in helping to sell the advertisers’ products or services. They compete for circulation principally on the basis of their content and price. While most of the company’s newspapers do not have daily newspaper competitors that are published in the same city, in certain of the company’s larger markets, there is such direct competition. Most of the company’s newspapers compete with other newspapers published in nearby cities and towns and with free-distribution and paid-advertising weeklies, as well as other print and non-print media.

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

     At the end of 2003, The Cincinnati Enquirer, The Detroit News and the Tucson (Ariz.) Citizen were published under joint operating agreements with non-Gannett newspapers located in the same cities. All of these agreements provide for joint business, advertising, production and circulation operations and a contractual division of profits. The editorial and reporting staffs of the company’s newspapers, however, are separate and autonomous from those of the non-Gannett newspapers. In January 2004, the company provided notice to The E.W. Scripps Company, as required under the terms of the Joint Operating Agreement (JOA) involving The Cincinnati Enquirer, The Cincinnati Post and The Kentucky Post, that the JOA would not be renewed when it expires on Dec. 31, 2007.

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

     The company is one of the industry leaders in the use of recycled newsprint and increased its purchases of newsprint containing some recycled content from 42,000 metric tons in 1989 to over 920,000 metric tons in 2003. During 2003, all of the company’s newspapers consumed some recycled newsprint. For the year, nearly 75% of the company’s newsprint purchases contained recycled content.

     The company’s newspapers use inks, photographic chemicals, solvents and fuels. The use, management, and disposal of these substances may be regulated by federal, state, local and foreign agencies. Some of the company’s newspaper subsidiaries have been included among the potentially responsible parties in connection with the alleged disposal of ink or other wastes at disposal sites that have been subsequently identified as requiring remediation. Additional information about these matters can be found on page 15 of this Form 10-K. The company does not believe that these matters will have a material impact on its financial position or results of operations.

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     Raw materials: Newsprint, which is the basic raw material used to publish newspapers, has been and may continue to be subject to significant price changes from time to time. During 2003, the company’s total newsprint consumption was 1,270,000 metric tons, including the company’s portion of newsprint consumed at joint operating agencies, consumption by USA WEEKEND, USA TODAY tonnage consumed at non-Gannett print sites and consumption by Newsquest. Newsprint consumption was slightly higher than in 2002, up 4%, primarily due to recent acquisitions and growth in commercial printing activities. The company purchases newsprint from 23 domestic and global suppliers under contracts that expire at various times through 2010.

     In 2003, newsprint supplies were adequate. The company believes that the available sources of newsprint, together with present inventories, will continue to be adequate to supply the needs of its newspapers.

     The average cost per ton of newsprint consumed in 2003 increased 5% compared to the 2002 average cost.

Newspaper Publishing/United Kingdom

In the second quarter of 2003, the company purchased the publishing business of Scottish Media Group plc (SMG), which consists of three Scottish regional newspapers; 11 specialty consumer and business-to-business magazine titles; and an online advertising and content business. Altogether, Newsquest now publishes more than 300 titles in the United Kingdom, including 17 daily newspapers.

     Newsquest operates its newspaper publishing activities around geographic clusters to maximize the use of management, finance, printing and personnel resources. This approach enables the group to offer readers and advertisers a range of attractive products across the market. The clustering of titles and, usually, the publication of a free newspaper alongside a paid-for newspaper, allows cross-selling of advertising among newspapers serving the same or contiguous markets, thus satisfying the needs of its advertisers and audiences. At the end of 2003, Newsquest had 17 such clusters in the United Kingdom. Newsquest’s policy is to produce free and paid-for newspapers with an attractive level of quality local editorial content. Newsquest also distributes a substantial volume of advertising leaflets in the communities it serves and it offers a travel/vacation booking service.

     At the end of 2003, Newsquest (including SMG) had nearly 9,300 full-time and part-time employees. Newsquest’s revenues for 2003 (including SMG, acquired in April 2003) were approximately $970 million. As with U.S. newspapers, advertising is the largest component of revenue, comprising approximately 78%. Circulation revenue represents 12% of revenues and printing activities account for much of the remainder.

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

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

Broadcasting

On Dec. 28, 2003, the company’s television division, headquartered in McLean, Va., included 22 television stations in markets with a total of more than 19.3 million households.

     At the end of 2003, the broadcasting division had approximately 3,000 full-time and part-time employees. Broadcasting revenues accounted for approximately 11% of the company’s reported operating revenues in 2003, 12% in 2002 and 11% in 2001.

     The principal sources of the company’s broadcasting revenues are: 1) local advertising focusing on the immediate geographic area of the stations; 2) national advertising; 3) compensation paid by the networks for carrying commercial network programs; 4) advertising on the stations’ Web sites; and 5) payments by advertisers to television stations for other services, such as the production of advertising material. The advertising revenues derived from a station’s local news programs make up a significant part of its total revenues.

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

     Generally, a network provides programs to its affiliated television stations, sells commercial advertising announcements within the network programs and compensates the local stations by paying an amount based on the television station’s network-affiliation agreement.

     For all of its stations, the company is party to network-affiliation agreements. The company’s three ABC affiliates have agreements which expire between 2005-2007. The agreements for its six CBS affiliates run through 2004-2005. The company’s 13 NBC-affiliated stations have agreements that will expire in December 2005.

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

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

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

     Pursuant to the Satellite Home Viewer Improvement Act of 1999, a number of the company’s television stations are currently being delivered by satellite carriers to subscribers within the stations’ markets. The company has entered into retransmission consent agreements with satellite carriers that authorize such delivery that expire in mid-2004. The company anticipates these agreements will be renewed when they expire. This law also permits satellite carriers to retransmit distant network television stations into areas served by local television stations if it is determined, using FCC-approved signal strength measurement standards, that local stations do not deliver an acceptable viewing signal.

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

     Television broadcast licenses are granted for periods of eight years. They are renewable by broadcasters upon application to the FCC and usually are renewed except in rare cases in which a conflicting application, a petition to deny, a complaint or an adverse finding as to the licensee’s qualifications results in loss of the license. The company believes it is in substantial compliance with all applicable provisions of the Communications Act and FCC Regulations.

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

     In 2003, the FCC substantially changed its ownership rules to allow greater media ownership opportunities, including 1) permitting common ownership of different properties in the same market (depending on market size) but retaining limitations in markets of three or fewer television stations where cross-ownership is prohibited; 2) permitting ownership of a number of television stations in a market (depending on market size); and 3) increasing the national TV ownership cap, covering the number of U.S. TV households one company is permitted to serve from 35% to 45%. In January, Congress passed legislation setting the national ownership cap figure at 39%. Presently the company’s 22 television stations reach an aggregate of 17.8% of U.S. TV households.

     Appeals of the 2003 FCC decision were filed and the new rules have not taken effect. Oral argument was held on Feb. 11, 2004, and a court decision is expected later in the year. If the 2003 FCC ruling is upheld, it could present opportunities for the company to acquire additional properties in markets it currently serves.

Employee relations

At the end of 2003, the company and its subsidiaries had approximately 53,000 full-time and part-time employees. Three of the company’s newspapers were published in 2003 together with non-company newspapers pursuant to joint operating agreements, and the employment total above includes the company’s pro-rata share of employees at those joint production and business operations.

     Approximately 13% of those employed by the company and its subsidiaries are represented by labor unions. They are represented by 96 local bargaining units affiliated with nine international unions under collective bargaining agreements. These agreements conform generally with the pattern of labor agreements in the newspaper and broadcasting industries. The company does not engage in industrywide or companywide bargaining. The company’s U.K. subsidiaries bargain with three unions over working practices, wages and health and safety issues only.

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

     In 1990, the company established a 401(k) Savings Plan, which is available to most of its domestic employees and a small number of unionized employees.

     Newsquest employees have local staff councils for consultation and communication with local Newsquest management. Newsquest provides the majority of its employees with 1) the option to participate in a stock option-linked savings plan; 2) the option to purchase Gannett shares through a share incentive plan; and 3) a retirement plan that incorporates life insurance.

     The company strives to maintain good relationships with its employees.

9

MARKETS WE SERVE

NEWSPAPERS AND NEWSPAPER DIVISION

(a)		Number in parentheses notes chronological order in which existing newspapers joined Gannett.
*		On Feb. 16, 2004, Gannett exchanged The Times in Gainesville, Ga., for two daily newspapers in Tennessee.

Non-daily publications: see listing of U.S. non-daily locations on page 12.

10

Daily newspapers
						Circulation
State																						Joined
Territory		City		Newspaper		Morning				Afternoon				Sunday				Founded				Gannett		(a)
New Mexico		Alamogordo		Alamogordo Daily News+							6,957				8,383				1898				2003	(95)
		Carlsbad		Carlsbad Current-Argus+			8,149								8,252				1889				2003	(96)
		Deming		The Deming Headlight+			*												1881				2003	(97)
		Farmington		The Daily Times+			17,860								19,504				1894				2003	(98)
		Las Cruces		Las Cruces Sun-News+			25,057								24,778				1881				2003	(99)
		Silver City		Silver City Sun-News+							*				*				1995				2003	(100)
New York		Binghamton		Press & Sun-Bulletin			55,534								70,376				1904				1943	(6)
		Elmira		Star-Gazette			28,949								40,071				1828				1906	(1)
		Ithaca		The Ithaca Journal			18,376												1815				1912	(2)
		Poughkeepsie		Poughkeepsie Journal			40,146								50,794				1785				1977	(33)
		Rochester		Rochester Democrat and Chronicle			170,850								231,643				1833				1918	(3)
		Utica		Observer-Dispatch			45,261								52,272				1817				1922	(4)
		Westchester County		The Journal News			142,511								168,868				1829				1964	(8)
North Carolina		Asheville		Asheville Citizen-Times			56,300								70,477				1870				1995	(64)
Ohio		Bucyrus		Telegraph-Forum							7,171								1923				2000	(73)
		Chillicothe		Chillicothe Gazette							15,937				15,987				1800				2000	(74)
		Cincinnati		The Cincinnati Enquirer			193,731								308,838				1841				1979	(44)
		Coshocton		Coshocton Tribune							6,967				7,349				1842				2000	(75)
		Fremont		The News-Messenger							13,483								1856				1975	(27)
		Lancaster		Lancaster Eagle-Gazette							14,858				14,916				1807				2000	(76)
		Mansfield		News Journal							33,044				41,765				1885				2000	(77)
		Marion		The Marion Star							14,228				14,281				1880				2000	(78)
		Newark		The Advocate							21,959				22,989				1820				2000	(79)
		Port Clinton		News Herald							5,833								1864				1975	(28)
		Zanesville		Times Recorder			21,126								20,676				1852				2000	(80)
Oklahoma		Muskogee		Muskogee Daily Phoenix
				and Times-Democrat			17,877								19,097				1888				1977	(39)
Oregon		Salem		Statesman Journal			56,521								62,937				1851				1974	(26)
Pennsylvania		Chambersburg		Public Opinion							18,342								1869				1971	(14)
South Carolina		Greenville		The Greenville News			89,772								117,943				1874				1995	(65)
South Dakota		Sioux Falls		Argus Leader			54,154								76,305				1881				1977	(32)
Tennessee		Clarksville		The Leaf-Chronicle			22,613								26,931				1808				1995	(66)
		Jackson		The Jackson Sun			35,359								40,997				1848				1985	(54)
		Nashville		The Tennessean			174,868								248,728				1812				1979	(45)
Texas		El Paso		El Paso Times+			73,196								90,322				1879				1972	(25)
Utah		St. George		The Spectrum			22,551								23,918				1963				2000	(81)
Vermont		Burlington		The Burlington Free Press			48,331								57,496				1827				1971	(13)
Virginia		McLean		USA TODAY			2,251,035												1982				1982	(52)
		Staunton		The Daily News Leader			18,050								21,141				1904				1995	(67)
Washington		Bellingham		The Bellingham Herald			24,415								31,079				1890				1971	(21)
		Olympia		The Olympian			35,513								43,263				1889				1971	(19)
West Virginia		Huntington		The Herald-Dispatch			32,126								38,347				1909				1971	(22)
Wisconsin		Appleton		The Post-Crescent							53,391				69,043				1853				2000	(82)
		Fond du Lac		The Reporter							19,840				19,731				1870				2000	(83)
		Green Bay		Green Bay Press-Gazette			56,689								83,399				1915				1980	(46)
		Manitowoc		Herald Times Reporter							15,544				16,023				1898				2000	(84)
		Marshfield		Marshfield News-Herald							13,815								1927				2000	(85)
		Oshkosh		Oshkosh Northwestern			21,528								25,393				1868				2000	(86)
		Sheboygan		The Sheboygan Press							23,724				25,748				1907				2000	(87)
		Stevens Point		Stevens Point Journal							12,931								1873				2000	(88)
				Central Wisconsin Sunday											18,926
		Wausau		Wausau Daily Herald							22,862				29,297				1903				1980	(47)
		Wisconsin Rapids		The Daily Tribune							13,436								1914				2000	(89)

NEWSPAPERS AND NEWSPAPER DIVISION (continued)

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GANNETT OFFSET MARKETING SERVICES GROUP
   Gannett Direct Marketing Services, Inc.: Louisville, Ky.
   Telematch: Springfield, Va.

GANNETT RETAIL ADVERTISING GROUP: Chicago, Ill. GANNETT SATELLITE INFORMATION NETWORK: McLean, Va.

GANNETT NEWS SERVICE
Headquarters: McLean, Va.
Bureau: Washington, D.C.
State bureaus: Albany, N.Y.; Baton Rouge, La.; Newark, N.J.; Sacramento, Calif.; Springfield, Ill.; Tallahassee, Fla.

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

USA TODAY SPORTS WEEKLY
Editorial offices: McLean, Va.
Advertising offices: Chicago, Ill.; McLean, Va.; New York, N.Y.

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

NEWSQUEST PLC

*

Monday-Saturday inclusive

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

BROADCASTING

(a)		Weekly audience is number of TV households reached, according to the November 2003 Nielsen book.
(b)		Audience numbers fall below minimum reporting standards.
*		Gannett has an agreement to sell KMOH-TV. The closing is expected in the first half of 2004.

13

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Gannett on the net

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

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

     Gannett properties also offer online services or informational sites on the Internet as follows:

Gannett Corporate

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Newspapers and Newspaper Division

---

Newsquest PLC

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Broadcasting

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*

On Feb. 16, 2004, Gannett exchanged The Times in Gainesville, Ga., for two daily newspapers in Tennessee.

14

ITEM 2. PROPERTIES

Newspaper Publishing/United States

Generally, the company owns the plants that house all aspects of the newspaper publication process. In the case of USA TODAY, at Dec. 28, 2003, 15 non-Gannett printers were used to print the newspaper in U.S. markets where there are no company newspapers with appropriate facilities. Four non-Gannett printers in foreign countries are used to print USA TODAY International. USA WEEKEND, Clipper Magazine and Nursing Spectrum are also printed under contracts with commercial printing companies. Many of the company’s newspapers have outside news bureaus and sales offices, which generally are leased. In a few markets, two or more of the company’s newspapers share combined facilities; and in certain locations, facilities are shared with other newspaper properties. The company’s newspaper properties have rail siding facilities or access to main roads for newsprint delivery purposes and are conveniently located for distribution purposes.

     During the past five years, new or substantial additions or remodeling of existing facilities have been completed or are at some stage of construction at 37 of the company’s newspaper operations. Gannett continues to make significant investments in renovations of new facilities, where the investment improves the products for its readers and advertisers as well as productivity and operating efficiency. The company’s facilities are adequate for present operations. A listing of newspaper publishing centers and key properties may be found on pages 10-12.

Newspaper Publishing/United Kingdom

Newsquest owns certain of the plants where its newspapers are produced and leases other facilities. Its new headquarters is in Weybridge, Surrey. Substantial additions to Newsquest’s printing capacity and color capabilities have been made since Gannett acquired Newsquest in 1999. All of Newsquest’s properties are adequate for present purposes. A listing of Newsquest publishing centers and key properties may be found on page 13.

Broadcasting

The company’s broadcasting facilities are adequately equipped with the necessary television broadcasting equipment. The company owns transmitter sites in 26 locations and leases one site.

     During the past five years, new broadcasting facilities or substantial improvements to existing facilities were completed in Jacksonville, Knoxville, Columbia, Cleveland and Tampa. Technical facility expansion to accommodate DTV was completed at 22 sites between 1998 and 2003. The company’s broadcast facilities are adequate for present purposes. A listing of broadcasting stations may be found on page 13.

Corporate facilities

The company’s headquarters and USA TODAY are located in McLean, Va. The company also owns a data and network operations center in nearby Maryland. Headquarters facilities are adequate for present operations.

ITEM 3. LEGAL PROCEEDINGS

Information regarding legal proceedings may be found on page 48 in Note 10 of the Notes to Consolidated Financial Statements.

Environmental

Some of the company’s newspaper subsidiaries have been identified as potentially responsible parties for cleanup of contaminated sites as a result of their alleged disposal of ink or other wastes at disposal sites that have been subsequently identified as requiring remediation. In three such matters, the company’s liability could exceed $100,000.

     In September 2003, the USEPA notified Multimedia, Inc., a wholly owned Gannett subsidiary, that the company is considered a de minimis potentially responsible party for costs associated with the Operating Industries, Inc. Superfund Site in Monterey, Calif. The settlement offer amount is not yet known.

     In July 2000, the state of New Jersey notified the Courier-Post in Cherry Hill that it was seeking to recover from the newspaper and other parties cleanup costs totaling approximately $1.9 million. These costs were allegedly expended by the New Jersey Department of Environmental Protection to clean up discharges of hazardous substances at the Noble Oil Company site at 30 Cramer Road, Tabernacle, Burlington County, N.J. To date, the Courier-Post has not made any payments to New Jersey in connection with this matter, and no estimate of the newspaper’s liability at the site is available.

     In September 1995, The Greenville (S.C.) News, along with other parties, entered into Administrative Order on Consent Number 95-26-C with the USEPA, which obligated the signatories to fund a Remedial Investigation/Feasibility Study at the Aqua-Tech Environmental, Inc. Superfund Site five miles east of Greer, S.C. The Greenville News expects to be responsible for less than 1% of future cleanup costs; however, no estimate of such costs is available.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.

15

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Gannett Co., Inc. shares are traded on the New York Stock Exchange with the symbol GCI.

     Information regarding outstanding shares, shareholders and dividends may be found on pages 1, 4 and 26 of this Form 10-K.

Gannett Common stock prices

High-low range by fiscal quarters based on NYSE-composite closing prices.

*

Through February 24, 2004

16

ITEM 6. SELECTED FINANCIAL DATA

Selected financial data for the years 1999 through 2003 is contained under the heading “Selected Financial Data” on pages 51-53 and is derived from financial statements for those years which were audited by PricewaterhouseCoopers LLP, independent auditors. The information contained in the “Selected Financial Data” is not necessarily indicative of the results of operations to be expected 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

Basis of reporting

Following is a discussion of the key factors that have affected the company’s 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 financial statements in accordance with generally accepted accounting principles (GAAP) 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 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 assessment of the recoverability of its long-lived assets, including goodwill and other intangible assets, which are based on such factors as estimated future cash flows and current fair value estimates of businesses. The company’s accounting for pension and retiree medical benefits 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 interpretation of various laws and regulations therein, and to company policy and expectations as to the repatriation of earnings from foreign sources.

     Please refer to page 35 of this Form 10-K for a more complete discussion of all of the company’s significant accounting policies.

     The company’s fiscal year ends on the last Sunday of the calendar year. The company’s 2003 fiscal year ended on Dec. 28, 2003, and encompassed a 52-week period. The company’s 2002 and 2001 fiscal years also encompassed 52-week periods.

Business acquisitions, exchanges, dispositions and investments

2003: In March 2003, the company completed a non-monetary transaction under which it contributed its newspaper in El Paso to a newly formed partnership, Texas-New Mexico Newspapers Partnership. The partnership includes the El Paso newspaper and five other daily newspapers in nearby New Mexico that were contributed by MediaNews Group. The company recorded this non-monetary transaction as two simultaneous but separate events; that is, a sale of 33.8% of its interest in the El Paso Times for which a non-operating gain was recognized, and the acquisition of a 66.2% interest in the partnership. The non-monetary gain from the partnership transaction is reflected in non-operating income.

     In April 2003, the company completed the acquisition of the publishing business of Scottish Media Group plc (SMG). The SMG publishing business consists of three Scottish regional newspapers; 11 specialty consumer and business-to-business magazine titles; and an online advertising and content business. The company purchased 100% of the stock of the Scotland businesses.

     In late August 2003, the company acquired the majority interest in The Ashland Media Group in Phoenix, Ariz. Ashland Media publishes TV y Mas, La Voz and TV Shopper, which are weekly publications. Ashland Media also has a direct marketing business, AZ Mail.

     On Oct. 31, 2003, the company acquired the assets of Clipper Magazine, Inc., one of the nation’s largest direct-mail advertising magazine companies. The acquisition also includes several affiliated operations including a full-service advertising agency, an e-mail customer retention service, a direct-mail service to new movers and MyClipper.com, a companion Web site for the core direct-mail advertising offerings.

     The company also purchased several small non-daily publications in the U.S. and in the U.K.

     The acquisitions of SMG, Ashland Media, Clipper Magazine and non-daily publications, which had an aggregate purchase price of approximately $483 million, were recorded under the purchase method of accounting. The company is in the process of finalizing valuations of the businesses, thus the allocation of the purchase price is preliminary.

17

     2002: The company purchased several small non-daily publications in the U.S. and in the U.K., a commercial printing business in Wisconsin and a defense industry magazine in McLean, Va. These acquisitions, which had an aggregate purchase price of approximately $35 million, were accounted for under the purchase method of accounting. The company contributed its Vincennes (Ind.) Sun-Commercial newspaper to the Gannett Foundation in July 2002. The Gannett Foundation is a not-for-profit, private foundation that makes charitable awards in the communities in which Gannett operates its newspapers and television stations. These business acquisitions and dispositions did not materially affect the company’s financial position or results of operations.

     In October 2002, the company acquired a one-third equity interest in CareerBuilder, LLC, an online service providing recruitment resources, for approximately $98 million.

     2001: During 2001, the company purchased the remaining 36% interest in WKYC-TV, Cleveland, that it did not previously own. Additionally, the company purchased several small non-daily publications in the U.S. and in the U.K. These acquisitions, which had an aggregate purchase price of approximately $186 million, were accounted for under the purchase method of accounting. The company contributed its Marietta (Ohio) Times newspaper to the Gannett Foundation in May 2001. The company sold its daily newspaper in Lansdale, Pa., in September 2001. These business acquisitions and dispositions did not materially affect the company’s financial position or results of operations.

Results of operations

Consolidated summary

A consolidated summary of the company’s results is presented below.

In millions of dollars, except per share amounts

---

     A discussion of operating results of the company’s newspaper and broadcasting segments, along with other factors affecting net income, follows. All references to “operating cash flow” are to a non-GAAP financial measure. Management believes that use of this measure allows investors and management to measure, analyze and compare the cash resources generated from its business segments in a meaningful and consistent manner. The focus on operating cash flow is appropriate given the consistent and generally predictable strength of cash flow generation by newspaper and television operations, and the short period of time it takes to convert new orders to cash. A reconciliation of these non-GAAP amounts to the company’s operating income, which the company believes is the most directly comparable financial measure calculated and presented in accordance with GAAP in the company’s consolidated statements of income, is presented in Note 11 “Business Segment Information” of the consolidated financial statements.

     At the beginning of 2002, the company adopted Statement of Financial Accounting Standards No. 142 (SFAS No. 142 or the “Statement”) “Goodwill and Other Intangible Assets,” which has a material impact on comparisons of 2003 and 2002 reported results of operations with reported results for 2001. If the Statement had been adopted at the beginning of 2001, defined as “comparable basis,” net income and earnings per share amounts would have been as follows:

18

     In the following discussions of newspaper and broadcasting results for 2002 as compared to 2001, the effect of this accounting change has been analyzed further. Note 3 to the consolidated financial statements also provides information on the accounting principle change.

     The company’s growth over the years has been through, in part, the acquisition of businesses. Certain operating results information discussed below is on a pro forma basis, which means that results are presented as if all properties owned at the end of 2003 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 historical data. Likewise, the company uses this same pro forma data in its external reporting of key financial results and benchmarks.

Newspapers

In addition to its domestic local newspapers, the company’s newspaper publishing operations include USA TODAY, USA WEEKEND, Newsquest (including the SMG operations acquired in 2003), which publishes daily and non-daily newspapers in the United Kingdom, and Gannett Offset commercial printing. The newspaper segment in 2003 contributed 89% of the company’s revenues and 86% of its operating income.

     Record earnings were achieved by the newspaper segment in 2003, reflecting the results from the newly acquired SMG Publishing business, the newly formed Texas-New Mexico Newspapers Partnership and Clipper Magazine, Inc. and gains at most other U.S. and U.K. newspapers. In addition, a favorable currency exchange rate and growth in commercial printing activities positively impacted newspaper earnings. Newsquest’s financial results (including SMG) were translated from British pounds to U.S. dollars using a weighted average rate of $1.63 for 2003, as compared to $1.50 for 2002.

Newspaper operating results were as follows:

In millions of dollars

---

     Newspaper operating revenues: Newspaper operating revenues are derived principally from advertising and circulation sales, which accounted for 73% and 20%, respectively, of total newspaper revenues in 2003. Ad revenues also include those derived from advertising placed with newspaper Internet products. Other newspaper publishing revenues are mainly from commercial printing businesses, earnings from the company’s 50% owned joint operating agencies in Detroit and Tucson and earnings from its 19.49% equity interest in the California Newspapers Partnership. The table below presents these components of reported revenues for the last three years.

Newspaper operating revenues, in millions of dollars

---

     The table below presents the components of reported advertising revenues for the last three years.

Advertising revenues, in millions of dollars

---

     Reported advertising revenues for 2003 increased $274 million or 7%, while pro forma revenues presented in a separate table below reflect a 5% increase. Pro forma basis means that these results are presented as if all properties owned at the end of 2003 were owned throughout the periods presented. The variance between reported amounts and pro forma amounts relates principally to the full-year effect of the Clipper Magazine acquisition on Oct. 31, 2003, the SMG Publishing acquisition completed in April 2003 and the establishment of the Texas-New Mexico Newspapers Partnership in March 2003.

     In the tables that follow, newspaper advertising linage, circulation volume statistics and related revenue results are presented on a pro forma basis.

19

     For Newsquest, advertising and circulation revenues are fully reflected in the pro forma amounts below, as are daily paid circulation volumes. Advertising linage for Newsquest is not reflected, however.

Advertising revenues, in millions of dollars (pro forma)

---

Advertising linage, in millions of inches, and preprint distribution (pro forma)

---

The table below reconciles advertising revenues on a pro forma basis to advertising revenues on a GAAP basis.

In millions of dollars

---

     Reported local ad revenues were up $88 million or 5% in 2003. Pro forma local ad revenues were up 3%, with pro forma linage down 2%. Local ad revenues benefited from growth in preprint ad demand and revenues from non-daily publications. Ad spending by some of the larger retailers declined in 2003.

     Reported national ad revenues were up $54 million or 8% in 2003. Pro forma national ad revenues increased 6% on an 8% pro forma volume increase. This reflects improvement at certain of the company’s larger domestic newspapers, including USA TODAY, and the U.K. properties. National revenues at USA TODAY increased 4%, reflecting strong gains from automotive, telecommunications, retail and pharmaceutical-related advertising, which more than offset weakness in the technology and travel advertising categories.

     Reported classified ad revenues increased $132 million or 8%. On a pro forma basis, classified ad revenues increased 5%, with pro forma linage up 3%. Classified ad revenue gains were driven by strength in the automotive and real estate categories and online advertising at our local domestic and U.K. newspapers. Employment ad revenues continued to be adversely impacted by the weak U.S. labor market, however this category strengthened in the fourth quarter. Overall, on a reported and pro forma basis, the company’s classified results from Newsquest were stronger than its domestic results.

     Looking to 2004, modest ad revenue and volume growth are anticipated in most categories and in most newspaper markets. New products are being developed throughout the newspaper group and added resources are planned for sales and marketing initiatives. Revenue results for 2004 will, of course, be affected by the general economic performance in the U.S. and the U.K., consumer confidence, the strength of the job market, weakening or strengthening in the British pound-to-U.S. dollar exchange rate and the geopolitical environment.

     Reported 2003 newspaper circulation revenues increased $31 million or 3% in 2003 primarily as a result of the SMG and Texas-New Mexico transactions.

     For local newspapers, morning circulation accounts for approximately 79% of total daily volume, while evening circulation accounts for 21%. On a pro forma basis, local morning and Sunday circulation volumes declined about 1% and evening circulation declined 3% from 2002. Selected circulation price increases were implemented in 2003 at certain newspapers.

     USA TODAY’s average daily circulation for 2003 increased 1% to 2,251,035. USA TODAY reported an average daily paid circulation of 2,243,142 in the ABC Publisher’s Statement for the 26 weeks ended Sept. 28, 2003, a slight increase over the comparable period a year earlier.

     Pro forma circulation volume for the company’s local newspapers is summarized in the table below and includes data for the company’s newspapers participating in joint operating agencies.

Average net paid circulation volume, in thousands (pro forma)

---

20

     The actual number of people reading newspapers, in addition to net-paid circulation, is becoming increasingly important to advertisers as they decide where to place their advertising.

     Readership numbers indicate that a typical newspaper’s reach is greater than its paid circulation. That’s attributed in part to “pass-along” readership, or those reading newspapers that they didn’t subscribe to or purchase such as multiple adults reading the newspaper in a household, those reading restaurant copies or newspapers at work, in libraries, etc.

     According to the Audit Bureau of Circulations (ABC), the independent auditing firm, there has been increased emphasis on readership as a meaningful circulation measurement tool within the U.S. newspaper industry.

     The ABC Reader Profiles include the number of readers reading each newspaper sold, a “readers per copy” measure, for both weekday and Sunday editions. Based on data from ABC Reader Profiles reported for certain of the company’s newspapers, an average of 2.39 adults read a typical copy of a weekday Gannett newspaper; on Sunday the average is 2.34.

     For 2002, reported advertising revenues were even with year-earlier amounts, reflecting a continued soft advertising environment. A higher foreign exchange rate for Newsquest operations favorably impacted revenue comparisons.

     Reported and pro forma local ad revenues were up 1% in 2002 with pro forma linage down 2%. Ad spending by some of the largest retailers continued to be soft in 2002, reflecting closings and consolidations in an uncertain U.S. economy. Local revenue benefited however, from revenue gains from small- and medium-sized advertisers and new product developments.

     Reported and pro forma national ad revenues for 2002 were down 1% with pro forma linage up 6%. National revenues at USA TODAY were down 6%, adversely affected by diminished demand for financial-, technology- and travel-related advertising.

     Reported and pro forma classified revenues in 2002 increased slightly and pro forma linage increased by 7%. This reflects higher automotive and real estate advertising partially offset by lower revenues from classified employment advertising.

     Reported 2002 newspaper circulation revenues decreased $6 million or less than 1%. On a pro forma basis, local morning circulation volume was even with 2001. Evening and Sunday circulation volumes declined 3% and 1%, respectively, from 2001. Selected circulation price increases were implemented in 2002 at certain newspapers.

     USA TODAY’s average daily circulation for 2002 declined less than 1% to 2,238,174. USA TODAY reported an average daily paid circulation of 2,227,839 in the ABC Publisher’s Statement for the six months ended Sept. 30, 2002, a 1% decrease over the comparable period in 2001.

     Newspaper operating expense: Newspaper operating costs rose $243 million, or 6%, in 2003 primarily as a result of the SMG, Clipper Magazine and Texas-New Mexico transactions, increased commercial printing volume, higher newsprint expense and higher insurance, pension and other employee benefit costs. Newspaper operating costs, excluding the SMG, Clipper Magazine and Texas-New Mexico transactions, increased $131 million or 3%. Benefit cost increases in 2003 were tempered by modifications to certain retiree and employee benefit programs. The higher foreign exchange rate in 2003 for Newsquest operations also adversely impacted expense comparisons. Newsprint expense increased 10% reflecting higher year-over-year prices and increased consumption due primarily to the aforementioned transactions and increased commercial printing activity. Newsprint expense, excluding the 2003 transactions mentioned above, increased 7%. Newsprint consumption increased 4%. Newspaper payroll costs were up 7% for the year again reflecting added costs from the 2003 acquisitions and the unfavorable impact of currency on expense comparisons.

     For 2004, newsprint consumption for presently owned properties is expected to increase modestly, and average prices are also expected to increase.

     The following table details the impact of SFAS No. 142 on newspaper operating cost comparisons of 2003, 2002 and 2001.

Newspaper operating costs, in millions of dollars

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     Newspaper operating costs declined $201 million, or 5%, in 2002 mainly due to the decrease in goodwill amortization (see discussion of accounting change in Note 3 on page 38) and lower newsprint expense. On a comparable accounting basis for goodwill, newspaper operating costs declined $10 million, or less than 1%. This reflects lower newsprint expense and cost controls, partially offset by increased pension and other employee benefit expenses, increased commercial printing volume and expense, and an increase in the average exchange rate for Sterling. Newsprint expense decreased 19%, due to significantly lower prices. Newsprint consumption increased about 1% for the year. Consumption in 2002 was tempered by the impact of web-width reductions implemented in 2001 and in 2002. Newspaper payroll costs were up 1% for the year.

     Newspaper operating income: Operating income increased $97 million or 6% over 2002. The operating income improvement was largely due to the positive impact of earnings from the SMG and Texas-New Mexico transactions, favorable foreign exchange rates and gains in advertising revenues. Earnings gains were tempered by overall increased employee benefit costs and newsprint expense.

     Newsquest’s financial results were translated from British pounds to U.S. dollars using a weighted average rate of $1.63 for 2003, as compared to $1.50 for 2002.

     For 2004, newspaper operating income is expected to show continued growth, reflecting full-year results for the 2003 acquisitions and modest revenue gains, partially offset by higher newsprint, payroll and benefit costs.

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