The tables below present the componentsprincipal categories of reported newspaper advertising revenues for the first quarter of 2007 and 2006.advertising.

Advertising revenues, in thousands of dollars

The company’s growth over the years has been partly through the acquisition of new businesses and strategic partnership investments. To facilitate an analysis of operating results, certain information discussed below is on a pro forma basis, which means that results are presented as if all properties owned at the end of the firstsecond quarter of 2007 were owned on the same basis throughout the periods discussed. 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 comparable 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.

In the tables that follow, newspaper advertising linage and related revenues are presented on a pro forma basis. Advertising revenues for Newsquest and all non-daily publications are reflected in the amounts below, however, advertising linage and preprint distribution statistics for these businesses are not included.

The tables below present the components of pro forma newspaper advertising revenues for the second quarter and first quartersix months of 2007 and 2006.

3

Advertising revenues, in thousands of dollars (pro forma)

3

The tables below reconcile advertising revenues on a pro forma basis to advertising revenues on a GAAP basis, in thousands of dollars.

4

The trends discussed below for the newspaper segment are for both reported and pro forma results.

Newspaper advertising revenues decreased 5% from $1.4 billion to $1.3 billion for the first quarter 2007 decreased 2% over the first quarter of 2006. UK results were stronger than U.S. results assecond quarter. UK newspaper advertising increased 13% and6% reflecting a stronger currency exchange rate, while US domestic newspaper advertising decreased 5%8%. For the year-to-date period, pro forma newspaper advertising revenues declined 4%. On a constant currency basis UK advertisingnewspaper ad revenues increased 1%.decreased 7% for the quarter and 5% year-to-date.

For the firstsecond quarter of 2007 local advertising revenues were 0.6% higher.4% lower and year-to-date declined 2%. On a pro forma constant currency basis, local advertising decreased 0.5%.5% for the quarter and 3% year-to-date. Local advertising in the U.S. was down 5% for the quarter was down 0.6%.and 3% year-to-date. These results reflect lower department store advertising, and declines in furniture and home improvement categories as the cyclical slowdown in real estate and housing impacted these retailers.

National advertising revenues for the firstsecond quarter of 2007 were down 4.8%.3% due primarily to softness in entertainment, telecommunications and automotive categories. USA TODAY advertising revenues decreased 8%,1% for the quarter, however ad revenue rose 7% in part due to the absence of Olympics related advertising.June. Year-to-date national advertising revenues were down 4% including a 4% decline at USA TODAY. Paid advertising pages at USA TODAY were 9041,034 for the firstsecond quarter compared with 1,012to 1,098 for the same period last year and 1,937 year-to-date compared to 2,110 last year.

For the first quarter of 2007, classifiedClassified advertising revenues decreased 3%.8% for the quarter and 5% year-to-date due primarily to lower ad demand as a result of the softening domestic real estate market in the west and southeast, specifically Florida, Arizona, California and Nevada. Classified real estate revenues were down 10% for the quarter and 6% year-to-date, employment revenues were down 7% for the quarter and 5% year-to-date, and auto revenues decreased 14% for the quarter and year-to-date. On a constant currency basis, classified advertising revenues were down 6%. Classified real estate revenues were down 2%, employment revenues were down 2% and auto revenues decreased 14%10% for the first quarter.quarter and 8% year-to-date. Classified results in our UK newspapers, which were stronger than in the U.S,U.S., decreased 2% for the quarter and increased 2%slightly year-to-date on a constant currency basis. While the real estate category was the weakest domestically, on a constant currency basis this category increased 3% for the quarter and 6% year-to-date in the UK.

Total domestic newspaper online revenues were strong during the firstsecond quarter ofand year-to-date 2007, increasing 12% over 2006.and 11% respectively. UK online revenues increased 55%49% and 52% on a constant currency basis.basis for the quarter and year-to-date, respectively.

Circulation revenues decreased less than 1% for the second quarter and remained unchanged for the first quartersix months of 2007. Net paid daily circulation for the company’s newspapers, excluding USA TODAY, declined 2%3% in the second quarter and the first quartersix months of 2007 and2007. Sunday net paid circulation was down 3%.4% from the comparable quarter and year-to-date periods of last year. USA TODAY circulation increased 2%1% in the second quarter and the first quartersix months of 2007. In the March Publishers Statement submitted to ABC, circulation for USA TODAY for the previous six months increased 0.2% from 2,272,815 in 2006 to 2,278,022 in 2007, or 0.2% higher.2007.

Commercial printing and other revenue increased 11%6% for the firstsecond quarter of 2007and 8% year-to-date primarily due to an increase in commercial printing business and revenues associated with PointRoll.

Reported newspaper operating expenses were down slightly2% for the firstsecond quarter of 2007, reflectingand 1% year-to-date. This reflects strong cost controls and a decline in newsprint expense which more than offset approximately $9.0 million of second quarter severance and other business consolidation costs. Newsprint expense decreased 8% for the quarter with a 9% decline in usage offset by a slight1% increase in price. Year-to-date, newsprint expense.expense declined 4% on an 8% decline in usage offset by a 4% increase in price. On a pro forma constant currency basis, excluding depreciation and amortization, operating expenses decreased 2%. Newsprint expense increased less than 1% on a 7% usage decline offset by a 7% increase in price.4% for the quarter and 3% year-to-date 2007. For the remainder of 2007, newsprint prices are expected to decline.be below prior year levels and consumption is also expected to be lower.

Newspaper operating income decreased $40.6 million or 9% for the quarter decreased $9.9and $50.4 million or 3%,6% for the year-to-date, reflecting the softer ad revenue resultschallenging advertising environment discussed above.

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Broadcasting Results

The company completed the acquisitions of KTVD-TV in Denver in late June 2006 and WATL-TV in Atlanta in early August 2006, which created the company’s second and third duopolies.

Broadcasting includes results from the company’s 23 television stations and Captivate Network, Inc. Reported broadcasting revenues increased slightlywere $204.7 million in the firstsecond quarter compared to $183.1$205.4 million from $182.6in 2006. Year-to-date revenues remained even at approximately $388.0 million, reflecting primarilythe absence of politically related advertising offset by the addition of KTVD-TV and WATL-TV.WATL-TV and increased revenue at Captivate. On a pro forma basis, broadcasting revenues would have decreased 7% from $195.3$219.0 million to $183.1$204.7 million orfor the second quarter. The year-to-date pro forma decline in revenues was 6%. from $414.3 million to $387.7 million. The reportedsecond quarter results reflect the absencea decrease of approximately $22$8.0 million in political advertising revenue, related to the Winter Olympic Games on the company’s NBC affiliatesand lower automotive advertising, partially offset by an increase in online revenues and strong revenue growth at Captivate.

Reported television revenues, which excludeexcluding Captivate, were even withdown slightly in the firstsecond quarter, 2006, with local revenues up 3%2% and national revenues down 9%8%. On a pro forma basis, television revenues decreased 7% for the quarter with local revenues down 5%7% and national revenues down 12%. For the first six months of 2007, reported television revenues decreased 1% with local revenues up 3% and national revenues down 8%. For the first six months of 2007, on a pro forma basis, television revenues decreased 7% with local revenues down 6% and national revenues down 13%.

Reported broadcasting operating expenses increased 7%5% for the second quarter and 6% for the first quartersix months of 2007, to $119$117.3 million and $236.2 million, respectively, primarily due to the acquisition of the two broadcast stations. Assuming the company had owned the same properties as of AprilJuly 1, 2007 for all periods presented, broadcasting operating expenses would have increased less thandecreased 2% for the second quarter and 1%. for the first six months of 2007.

Reported operating income from broadcasting was down $7.6$5.9 million or 11%6% in the first quarter.second quarter and $13.5 million or 8% year-to-date.

4

Corporate Expense

Corporate expenses in the second quarter were $23.1$18.7 million for the quarter as compared with $20.1 last year, primarilyto $20.3 million due to lower stock compensation expense, reflecting fewer options granted at a lower fair value. Year-to-date corporate expenses were $41.8 million as compared to $40.8 million due to the timing of certain stock based compensation awards.awards in the first quarter. The company anticipates total stock based compensation expense for the full year will be below the annual 2006 amount.

Non-Operating Income and Expense

The company’s interest expense increased $8.2decreased $1.0 million or 13%1% for the quarter primarily due to lower outstanding debt levels, but increased $7.3 million or 6% year-to-date, reflecting higher short-term interest rates. The daily average outstanding balance of commercial paper was $2.12$2.36 billion during the second quarter of 2007 and $2.95 billion during the second quarter of 2006. The daily average outstanding balance of commercial paper was $2.24 billion during the first quartersix months of 2007 and $3.55$3.25 billion during the first quartersix months of 2006. The weighted average interest rate on commercial paper was 5.38%5.4% and 4.44%4.9% for the first quarterssecond quarter of 2007 and 2006, respectively. For the year-to-date periods of 2007 and 2006, the weighted average interest rate on commercial paper was 5.4% and 4.6%, respectively. For average outstanding total debt, the weighted average interest rate was 5.4% for the quarter as compared to 5.1% last year and 5.4% year-to-date as compared to 4.9% last year.

Because the company has $2.47$1.25 billion in commercial paper obligations at April 1, 2007 that have relatively short-term maturity dates, and the company has $750 million of floating-rate term debt, and $1.00 billion of floating rate convertible notes at July 1, 2007, the company is subject to changes in the amount of interest expense it might incur. Assuming the current level of commercial paper borrowings of $2.47$1.25 billion and $750 million$1.75 billion of floating rate notes, a 1/2% increase or decrease in the average interest rate for commercial paper and floating rate notes would result in an increase or decrease in annual interest expense of $16.1$15.0 million.

Non-operating income and expense includes a gain from the sale of real estate, investment income and gains, as well as costsand equity income or losses associated with certain minority interest investments in online/new technology businesses. These expenses are higherNet non-operating income in 2007 primarily due toresults from the absence of theland sale gain on the sale of the company’s 10.5% interest in the Cincinnati Reds baseball team in the firstsecond quarter, of 2006.improved performance from our internet investments, and higher investment income.

6

Provision for Income Taxes

The company’s effective income tax rate for continuing operations was 33.0%32.5% for the second quarter and 32.6% for the first quartersix months of 2007 compared to 33.6%33.5% for the same periodperiods last year. The lower tax rate for the quarter2007 is primarily due to the increasedsettlement of certain state tax issues and additional benefit from the American Jobs Creation Act for certain domestic production activities.

Income from Continuing Operations

The company’s income from continuing operations was $289.9 million for the second quarter 2007 and $496.2 million for the year-to-date 2007 compared to $304.5 million for the second quarter 2006 and $535.4 million for the year-to-date 2006. Earnings from continuing operations per diluted share for the second quarter of 2007 were $1.24 versus $1.28 for the second quarter 2006, and were $2.11 for the first six months of 2007 versus $2.25 for the first six months of 2006.

Discontinued Operations

Earnings from discontinued operations represent the combined operating results (net of income taxes) of the Norwich (CT) Bulletin, the Rockford (IL) Register Star, the Observer-Dispatch in Utica, NY and The Herald-Dispatch in Huntington, WV that were sold to GateHouse Media, Inc. on May 7, 2007 and the Chronicle-Tribune in Marion, IN that was contributed to the Gannett Foundation on May 21, 2007. The revenues and expenses from each of these properties have, along with associated income taxes, been removed from continuing operations and netted into a single amount on the Statement of Income titled “Income from the operation of discontinued operations, net of tax” for each period presented.

Taxes provided on the earnings from discontinued operations totaled $1.3 million and $3.8 million for the second quarters of 2007 and 2006, respectively, and $4.1 million and $6.6 million for year-to-date 2007 and 2006, respectively. This includes U.S. manufacturing deduction.federal and state income taxes and represents an effective rate of approximately 39%. Also included in discontinued operations is the $73.8 million net after tax gain recognized in the second quarter of 2007 on the disposal of these properties. Taxes provided on the gain totaled approximately $139.8 million, covering U.S. federal and state income taxes and represent an effective rate of 65%. The excess of this effective rate over the U.S. statutory rate of 35% is due principally to the non-deductibility of goodwill associated with the properties disposed.

Earnings from discontinued operations, excluding the gain, per diluted share were $0.01 and $0.03 for the second quarters of 2007 and 2006, respectively. On a year-to-date basis earnings were $0.03 and $0.04 for 2007 and 2006, respectively. Second quarter earnings per diluted share for the gain on the disposition of these properties were $0.31.

Net Income

The company’s net income was $210.6$365.7 million for the firstsecond quarter of 2007and $576.3 million for the year-to-date compared to $235.3$310.5 million and $545.8 million for the same periods in 2006. Net income per diluted share was $0.90$1.56 versus $0.99$1.31 for the firstsecond quarter 2006. Lowerand for the year-to-date it was $2.45 versus $2.29. Higher results for 2007 reflect the absence of Olympics related advertising, softer domestic newspaper advertising demand, higher interest rates, and the impact of the gain on the saledisposal of the Cincinnati Reds in the first quarter 2006.newspaper businesses.

The weighted average number of diluted shares outstanding for the firstsecond quarter of 2007 totaled 235,005,000234,605,000 compared to 238,375,000237,767,000 for the firstsecond quarter of 2006. For the first six months of 2007 and 2006, the weighted average number of diluted shares outstanding totaled 234,814,000 and 238,084,000, respectively. The decline in outstanding shares is the result of the company’s share repurchase program under which approximately 4.0 million shares were repurchased during 2006 as well as 129,0001.6 million shares repurchased during the first quarteryear-to-date 2007. See Part II, Item 2 for information on share repurchases.

Liquidity, Capital Resources, Financial Position, and Statements of Cash Flows

The company’s cash flow from operating activities was $386.4$648.9 million for the first threesix months of 2007, up from $333.5lower than the $680.1 million in the first threesix months of 2006. The increase is primarily due to changes in accounts receivabledecrease reflects lower newspaper and accounts payable positions in the first quarter of 2007 as compared to the first quarter of 2006.broadcast earnings and cash flow from continuing operations.

Cash flows used infrom the company’s investing activities totaled $560.0$252.5 million for the threesix months of 2007, reflecting $438.9 million of proceeds from the sale of assets and $20.3 million of proceeds from investments. These cash inflows were partially offset by a $524.8$58.5 million increase in marketable securities, $28.8$60.0 million of capital spending, $11.5$21.0 million of payments for acquisitions (discussed in Note 4 to the financial statements), and $12.5$67.1 million invested in existing equity holdings including the California Newspapers Partnership and ShopLocal.com. These cash outflows were partially offset by $9.6 million of proceeds from the sale of assets and $8.1 million of proceeds fromfor investments.

7

Cash flow fromflows used in financing activities totaled $198.4$879.0 million for the first threesix months of 2007 reflecting net borrowingsdebt repayments of $272.2$653.7 million, which were partially offset by the payment of dividends totaling $72.8$145.6 million and the repurchase of common stock of $7.2$90.4 million. The company’s regular quarterly dividend of $0.31 per share, which was declared in the firstsecond quarter of 2007, totaled $72.8$72.7 million and was paid in AprilJuly 2007. On July 24, 2007, the Board of Directors approved a 29% increase in the company’s quarterly dividend to $0.40 per share. The new quarterly dividend is payable October 1, 2007 to shareholders of record on September 14, 2007.

On July 25, 2006, the Board of Directors authorized the repurchase of an additional $1 billion of the company’s common stock. The shares will 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 corporate developments. Purchases will occur from time to time and no maximum purchase price has been set. As of AprilJuly 1, 2007, the company had remaining authority to repurchase up to $1,090 million$1 billion of the company’s common stock. For more information on the share repurchase program, refer to Item 2 of Part II of this Form 10-Q.

In June 2007, the company issued $1.0 billion aggregate principal amount of unsecured senior convertible notes due 2037 in an underwritten public offering. Proceeds from the notes were used to repay commercial paper obligations. The convertible notes bear interest at a floating rate equal to one month LIBOR, reset monthly, minus twenty-three basis points. At issuance, the conversion rate of these notes was 10.853 shares of Gannett common stock per $1,000 principal amount of the convertible notes, resulting in an initial conversion price per share of $92.14. The holder can convert these notes into cash and shares of the company’s common stock, if any, prior to maturity, subject to the company’s option to deliver cash in lieu of shares. The company may redeem all or some of the convertible notes for cash at any time on or after July 15, 2008 at 100% of their principal amount plus any accrued and unpaid interest. On July 15, 2008, 2009, 2012, 2017, 2022, 2027 and 2032, or upon the occurrence of a change in control, the holders of the convertible notes may require the company to repurchase the convertible notes for cash at a price equal to 100% of the principal amount of the notes submitted for repurchase, plus any accrued and unpaid interest.

5

On April 2, 2007, the first day of the second quarter, the company paid the $700 million aggregate principal amount of 5.50% notes and accrued interest that was due. This payment was funded by borrowings at the end of the first quarter in the commercial paper market and from investment of the proceeds of $525 million in marketable securities. On April 2, 2007, the company liquidated the marketable securities and made the $700 million debt payment, reducing total debt for the company to $5.0 billion.

Other receivables in the Condensed Consolidated Balance Sheets reflect refunds receivable from the Internal Revenue Service for tax years 1995 to 2003,2005, as well as refunds from various U.S. state tax jurisdictions.

The company adopted the provisions of FASB Interpretation No. 48 “Accounting for Uncertainty in Income Taxes” (FIN No. 48) on January 1, 2007. As a result of the implementation of FIN No. 48, the company reclassified $197 million of estimated income taxes payable from short-term to long-term. At this time, the timing of these future cash outflows is not certain.

The company’s operations have historically generated strong positive cash flow which, along with the company’s program of issuing commercial paper and maintaining bank revolving credit agreements, has provided adequate liquidity to meet the company’s requirements, including those for acquisitions.

The company regularly issues commercial paper for cash requirements and maintains revolving credit agreements equal to or in excess of any commercial paper outstanding. The company’s commercial paper has been rated A-2 and P-2 by Standard & Poor’s (S&P) and Moody’s Investors Service, respectively. The company’s senior unsecured long-term debt is rated A- by Standard & Poor’s and A3 by Moody’s Investors Service. Subsequent to the end of the quarter, S&P affirmed its A-2 short-term rating for the company but announced that the long-term debt rating was on CreditWatch with negative implications. S&P stated that a downgrade, if any, would be limited to one notch.

The company has an effective universal shelf registration statement with the Securities and Exchange Commission under which an unspecified amount of securities may be issued. Proceeds from any takedowns off the shelf will be used for general corporate purposes, including capital expenditures, working capital, securities repurchase programs, repayment of debt and the financing of acquisitions.

The company’s foreign currency translation adjustment, included in accumulated other comprehensive income and reported as part of shareholders’ equity, totaled $716.3$790.9 million at the end of the firstsecond quarter 2007 versus $698.9 million at December 31,the end of 2006. This reflects an increase in the exchange rate for British Pound Sterling. Newsquest’s assets and liabilities at AprilJuly 1, 2007 were translated from Sterling to U.S. dollars at an exchange rate of 1.972.01 versus 1.96 at the end of 2006. For the second quarter and first quartersix months of 2007, Newsquest’s financial results were translated at an average rate of 1.95,1.99 and 1.97, respectively, compared to 1.751.82 and 1.79 last year.

The company is exposed to foreign exchange rate risk primarily due to its operations in the United Kingdom, for which Sterling is the functional currency. Translation gains or losses affecting the Condensed Consolidated Statements of Income have not been significant in the past. If the price of Sterling against the U.S. dollar had been

8

10% more or less than the actual price, reported net income for 2007 would have increased or decreased approximately 3%4% for the second quarter and 2% for the first quarter of 2007.six months.

Certain Factors Affecting Forward-Looking Statements

Certain statements in this Quarterly Report on Form 10-Q contain forward-looking information. The words “expect”, “intend”, “believe”, “anticipate”, “likely”, “will” and similar expressions generally identify forward-looking statements. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results and events to differ materially from those anticipated in the forward-looking statements. The company is not responsible for updating or revising any forward-looking statements, whether the result of new information, future events or otherwise, except as required by law.

Potential risks and uncertainties which could adversely affect the company’s ability to obtain these results include, without limitation, the following factors: (a) increased consolidation among major retailers or other events which may adversely affect business operations of major customers and depress the level of local and national advertising; (b) an economic downturn in some or all of the company’s principal newspaper or broadcasting markets leading to decreased circulation or local, national or classified advertising; (c) a 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 businesses; (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 weakening in the Sterling to U.S. dollar exchange rate; and (k) general economic, political and business conditions.

69

CONDENSED CONSOLIDATED BALANCE SHEETS

Gannett Co., Inc. and Subsidiaries

Unaudited, in thousands of dollars

The accompanying notes are an integral part of these condensed consolidated financial statements.

710

CONDENSED CONSOLIDATED BALANCE SHEETS

Gannett Co., Inc. and Subsidiaries

Unaudited, in thousands of dollars

The accompanying notes are an integral part of these condensed consolidated financial statements.

811

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

Gannett Co., Inc. and Subsidiaries

Unaudited, in thousands of dollars (except per share amounts)

The accompanying notes are an integral part of these condensed consolidated financial statements.

912

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

Gannett Co., Inc. and Subsidiaries

Unaudited, in thousands of dollars (except per share amounts)

The accompanying notes are an integral part of these condensed consolidated financial statements.

13

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Gannett Co., Inc. and Subsidiaries

Unaudited, in thousands of dollars

The accompanying notes are an integral part of these condensed consolidated financial statements.

1014

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AprilJuly 1, 2007

NOTE 1 – Basis of presentation

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with the instructions for Form 10-Q and, therefore, do not include all information and footnotes, which are normally included in the Form 10-K and annual report to shareholders. The financial statements covering the thirteen week period and year-to-date ended AprilJuly 1, 2007, and the comparable periodperiods of 2006, reflect all adjustments which, in the opinion of the company, are necessary for a fair statement of results for the interim periods and reflect all normal and recurring adjustments which are necessary for a fair presentation of the company’s financial position, results of operations and cash flows as of the dates and for the periods presented.

In connection with the May 2007 the company sold four daily newspapers to GateHouse Media, Inc. for $410 million and will record a gain on the sale in the second quarter. The four include:of the Norwich (CT) Bulletin; the Rockford (IL) Register Star; the Observer-Dispatch in Utica, NY; and The Herald-Dispatch in Huntington, WV. BeginningWV to GateHouse Media, Inc. and the contribution of the Chronicle-Tribune in Marion, IN to the Gannett Foundation, the results for these newspaper businesses are presented in the second quarterCondensed Consolidated Statements of 2007, these businesses will be reportedIncome as discontinued operations. ReferAt July 1, 2007, there were no net assets related to Note 4 – Acquisitions, investmentsthese discontinued operations in the Condensed Consolidated Balance Sheets. Amounts applicable to the discontinued operations, which have been reclassified in the Statements of Income for the thirteen week and dispositions for additional information.twenty-six week periods ended July 1, 2007 and June 25, 2006, are as follows:

NOTE 2 – Recently issued accounting standards

In September 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 157 “Fair Value Measurements” (SFAS No. 157). SFAS No. 157 establishes a common definition for fair value, creates a framework for measuring fair value, and expands disclosure requirements about such fair value measurements. SFAS No. 157 is effective for the company’s first quarter of 2008. Management is in the process of studying the impact of this interpretationstandard on the company’s financial accounting and reporting.

In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159 “The Fair Value Option for Financial Assets and Financial Liabilities” (SFAS No. 159). This statement is effective for the company at the beginning of fiscal year 2008. SFAS No. 159 provides companies with an option to report selected financial assets and liabilities at fair value. Additionally, SFAS No. 159 also established presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities. Management is currently evaluating this standard and the impact on its financial accounting and reporting.

The company adopted the provisions of FASB Interpretation No. 48 “Accounting for Uncertainty in Income Taxes” (FIN No. 48) on January 1, 2007. Refer to Note 9 – Income taxes for additional information.

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NOTE 3 – Equity based awards

Stock-based compensation

For the quarter ended AprilJuly 1, 2007 and March 26,June 25, 2006, options were granted for 773,10032,625 and 32,50092,832 shares, respectively. The following assumptions were used to estimate the fair value of those options.

For the firstsecond quarter 2007, the company recorded stock-based compensation expense of $13.6$6.9 million, comprising $9.9consisting of $4.0 million for nonqualified stock options and $3.7$2.9 million for restricted shares including(including shares issuable under the company’s long-term incentive program (see Note 10 “Long-termprogram). For the year-to-date 2007, the company recorded stock-based compensation expense of $20.5 million, consisting of $13.9 million for nonqualified stock options and $6.6 million for restricted shares (including shares issuable under the long-term incentive program”)program). The related tax benefit for stock compensation was $5.2 million.$2.6 million for the second quarter and $7.8 million for the year-to-date period. On an after tax basis, total non-cash stock compensation expense was $8.4$4.3 million or $0.04$0.02 per share.share for the second quarter and $12.7 million or $0.05 per share year-to-date.

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For the firstsecond quarter of 2006, the company recorded stock-based compensation expense of $11.7$12.4 million, consisting of $10.3 million for nonqualified stock options and $1.4$2.1 million for restricted shares including(including shares issuable under the long-term incentive program.program). For the year-to-date 2006, the company recorded stock based compensation expense of $24.1 million, consisting of $20.6 million for nonqualified stock options and $3.5 million for restricted shares (including shares issuable under the long-term incentive program). The related tax benefit for stock compensation expense was $4.5 million.$4.7 million for the second quarter and $9.1 million for the year-to-date period. On an after tax basis, total non-cash stock compensation expense was $7.2$7.7 million or $0.03 per share.share for the second quarter and $14.9 million or $0.06 per share year-to-date.

During the quarter and year-to-date ended AprilJuly 1, 2007, options for 125,32691,538 and 216,864 shares, respectively, of common stock were exercised. The company received $7$5.1 million and $12.1 million of cash, respectively, from the exercise of thethese options. The intrinsic value of the options exercised was approximately $0.8 million.$0.3 million for the quarter and $1.1 million for the year-to-date. The actual tax benefit realized from the tax deductions from the option exercises was $0.1 million for the quarter and $0.4 million for the year-to-date.

During the quarter and year-to-date ended June 25, 2006, options for 160,583 and 210,398 shares, respectively, of common stock were exercised. The company received $6.6 million and $9.2 million of cash, respectively, from the exercise of these options. The intrinsic value of the options exercised was approximately $2.5 million for the second quarter and $3.0 million for year-to-date. The actual tax benefit realized from the tax deductions from the options exercised was $0.3 million.

During$1.0 million for the second quarter ended March 26, 2006, optionsand $1.1 million for 49,815 shares of common stock were exercised. The company received $2.6 million of cash from the exercise of the options. The intrinsic value of the options exercised was approximately $0.5 million. The actual tax benefit realized from the tax deductions from the option exercised was $0.2 million.year-to-date.

Option exercises are satisfied through the issuance of shares from treasury stock.

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A summary of the status of the company’s stock option awards as of AprilJuly 1, 2007 and changes thereto during the quarter then endedyear is presented below:

Restricted Stock

In addition to stock options, the company issues stock-based compensation in the form of restricted stock. Restricted stock is an award of common stock that is subject to restrictions and such other terms and conditions as the Executive Compensation Committee determines. These awards entitle an employee to receive shares of common stock at the end of a four-year incentive period conditioned on continued employment. Compensation expense for restricted stock is recognized for the awards that are expected to vest. The expense is based on the fair value of the awards on the date of grant (equal to the market value of the company’s common stock on the date of grant)and is generally recognized on a straight-line basis over the four-year incentive period.

The company has also issued restricted stock to its Board of Directors. TheseUpon each annual meeting of shareholders, each director receives a long-term award of 1,250 shares of restricted stock or options to purchase 5,000 shares of stock. The restricted stock awards primarilygenerally vest over three years and expense is recognized on a straight-line basis over the three-year vesting period based on the fair value of the restricted stock on the date of grant. The options generally vest at 25% per quarter after the grant (equaldate and expense is recognized over that period.

Additionally, Directors may elect to receive their annual fees in restricted stock or options in lieu of cash. These shares or options generally vest at 25% per quarter after the marketgrant date. Expense is recognized on a straight-line basis over the twelve- month board year for which the fees are paid based on the fair value of the company’s common stock award on the date of grant). grant.

Directors may also elect to receive their meeting fees in restricted stock in lieu of cash. Restricted stock issued as compensation for meeting fees is issued at the end of the board year during which the fees were earned and fully vests on the date of grant. Expense is recognized on a straight-line basis over the course of the board year.

All shares of restricted stock in which the Directors vest are held by the company for the benefit of the Directors until their retirement, at which time vested shares will be issuedare delivered to the directors when they leave the board.Directors.

For the firstsecond quarter and year-to-date 2007, the company recorded compensation expense for restricted stock of $2.8$2.0 million excludingand $4.8 million, respectively (excluding shares issuable under the company’s long-term incentive program (see Note 10- see “Long-term incentive program”) below). The related tax benefit for the quarter and year-do-date was $1.1 million.$0.8 million and $1.8 million, respectively. For the firstsecond quarter and year-to-date 2006, the company recorded compensation expense for restricted stock of $1.1 million.$1.2 million and $2.3 million, respectively (excluding shares issuable under the company’s long-term incentive program). The related tax benefit for the quarter and year-to-date was $0.4 million.million and $0.9 million respectively.

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A summary of the status of the restricted stock awards as of AprilJuly 1, 2007 and changes during the period then endedyear is presented below:

Long-term incentive program

In February 2006, the company adopted a three-year strategic long-term incentive program, or LTIP. Through the use of the LTIP, the company desires to motivate its key executives to drive success in new businesses while continuing to achieve success in our core businesses. Approximately 23 senior executives have been designated to participate in the LTIP. The company recorded expense of $0.9 million for equity awards and $0.9 million cash compensation in the second quarters of 2007 and 2006 based upon its expectations of program target achievement. The company recorded expense of $1.8 million and $1.2 million year-to-date 2007 and 2006, respectively, for equity awards and equal amounts for cash compensation based upon its expectations of program target achievement.

NOTE 4 – Acquisitions, investments and dispositions

In February 2007, the company completed the acquisition of Central Florida Future, the independent student newspaper of the University of Central Florida. This acquisition was not material to operations or financial position.

On April 12,In June 2007, the company announced an agreementacquired the Central Ohio Advertiser Network, a network of eight weekly shoppers with the Advertiser brand and a commercial print operation in Ohio. This acquisition was not material to sell four daily newspapers to GateHouse Media, Inc. for $410 million. The four include:operations or financial position.

On May 8, 2007 the Norwich (CT) Bulletin;company’s percentage equity stake in CareerBuilder was lowered slightly, as were the Rockford (IL) Register Star; the Observer-Dispatch in Utica, NY;equity interests of Tribune Company and The Herald-Dispatch in Huntington, WV. McClatchy Company, upon the sale by CareerBuilder of a minority interest to Microsoft Corp.

In connectionApril 2007, the company disposed of a parcel of real estate located adjacent to its corporate headquarters. In accordance with the sale,installment method of accounting under SFAS No. 66,Accounting for Sales of Real Estate, a portion of the company will record a gain that will be presented as a gain on sale of discontinued operationswas recognized in other non-operating income during the second quarter. Long-term assets associated with these businesses include goodwillThe remaining gain has been deferred pending completion of approximately $135 millionthe transaction, which is expected to occur within one year.

The financial statements reflect an allocation of purchase price that is preliminary for acquisitions subsequent to June 25, 2006. See Note 1 for additional discussion on acquisitions, investments and net fixed assets of $48 million. The sale closed in early May 2007.dispositions.

NOTE 5 – Goodwill and other intangible assets

The company performed an impairment test of its goodwill and indefinite-lived intangible assets and determined that no impairment of either goodwill or indefinite-lived intangible assets existed at December 31, 2006. Intangible assets that have finite useful lives are amortized over their useful lives and are also subject to tests for impairment and no impairment existed at December 31, 2006.

The following table displays goodwill, indefinite-lived intangible assets, and amortized intangible assets at AprilJuly 1, 2007 and December 31, 2006. Indefinite-lived intangible assets include mastheads, television station FCC licenses and trade names. Amortized intangible assets primarily include customer relationships, and real estate access rights and patents.

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Goodwill increased as a resultdecreased primarily due to the disposition of five newspapers (see Note 1 for additional discussion). This decrease was partially offset by the impact of an increase in the UK foreign exchange rate at AprilJuly 1, 2007 as compared to December 31, 2006 and an additional payment made to the former owners of PointRoll, Inc. under terms of the acquisition agreement.2006.

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Amortization expense was $8.9 million in the quarter ended AprilJuly 1, 2007.2007 and $17.7 million year-to-date. For the firstsecond quarter and year-to-date of 2006, amortization expense was $7.8 million.million $15.5 million respectively. The increase in amortization expense is primarily related to the acquisition of the broadcast stations in the thirdsecond quarter of 2006 and the finalization of purchase accounting for prior acquisitions. Customer relationships, which include subscriber and advertiser relationships, are amortized on a straight-line basis over three to twenty-five years. Other intangibles, which are amortized on a straight-line basis over three to tentwenty years, include advertiser archives, continuing education training modules, real estate access rights and patents, and commercial printing relationships.

NOTE 6 – Long-term debt

In June 2007, the company issued $1.0 billion aggregate principal amount of unsecured senior convertible notes due 2037 in an underwritten public offering. Proceeds from the notes were used to repay commercial paper obligations. The convertible notes bear interest at a floating rate equal to one month LIBOR, reset monthly, minus twenty-three basis points. At issuance, the conversion rate of these notes was 10.853 shares of Gannett common stock per $1,000 principal amount of the convertible notes, resulting in an initial conversion price per share of $92.14. The holder can convert these notes into cash and shares of the company’s common stock, if any, prior to maturity, subject to the company’s option to deliver cash in lieu of shares. The company may redeem all or some of the convertible notes for cash at any time on or after July 15, 2008 at 100% of their principal amount plus any accrued and unpaid interest. On July 15, 2008, 2009, 2012, 2017, 2022, 2027 and 2032, or upon the occurrence of a change in control, the holders of the convertible notes may require the company to repurchase the convertible notes for cash at a price equal to 100% of the principal amount of the notes submitted for repurchase, plus any accrued and unpaid interest.

On April 2, 2007, the first day of the second quarter, the company paid $700 million aggregate principal amount of 5.50% notes and accrued interest that were due. This payment was funded by borrowings at the end of the first quarter in the commercial paper market and from investment proceeds of $525 million in marketable securities.

In February 2007, the company amended its existing three multi-year credit agreements. The amended facilities mature in March 2012 and total $3.934 billion. These revolving credit agreements provide back-up for commercial

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paper and for general corporate purposes. As a result, commercial paper is carried on the balance sheet as long-term debt.

Approximate annual maturities of long-term debt, assuming that the company used the $3.934$3.9 billion credit available under the revolving credit agreements to refinance, on a long-term basis, existing unsecured promissory notes, unsecured global notes, the loan notes issued in the UK to the former shareholders of Newsquest, the unsecured senior convertible notes and two industrial revenue bonds, and assuming the company’s other indebtedness was paid on its scheduled pay dates, are as follows:

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The fair value of the company’s total long-term debt, determined based on quoted market prices for similar issues of debt with the same remaining maturities and similar terms, totaled $5.51$4.56 billion at AprilJuly 1, 2007.

On April 2, 2007, the first day of the second quarter, the company paid the $700 million aggregate principal amount of 5.50% notes and accrued interest that were due. This payment was funded by borrowings at the end of the first quarter in the commercial paper market and investment of the proceeds of $525 million in marketable securities. On April 2, 2007, the company liquidated the marketable securities and made the $700 million debt payment, reducing total debt for the company to $5.0 billion.

NOTE 7 – Retirement plans

The company and its subsidiaries have various retirement plans, including plans established under collective bargaining agreements, under which most full-time employees are covered. The Gannett Retirement Plan is the company’s principal retirement plan and covers most U.S. employees of the company and its subsidiaries.

On Dec. 31, 2006, the company adopted the recognition and disclosure provisions of SFAS No. 158. This statement required the company to recognize the funded status (i.e., the difference between the fair value of plan assets and the projected benefit obligations) of its retirement plans in the Dec. 31, 2006, balance sheet, with a corresponding adjustment to accumulated other comprehensive income, net of tax. The adjustment to accumulated other comprehensive income at adoption represents the net unrecognized actuarial losses and unrecognized prior service costs, all of which were previously netted against the retirement plans’ funded status in the company’s balance sheet pursuant to the provisions of SFAS No. 87. These amounts continue to be recognized as net periodic pension costs pursuant to the company’s historical accounting policy for amortizing such amounts.

The company’s pension costs, which include costs for qualified, nonqualified and union plans, for the second quarter and first quartersix months of 2007 and 2006, are presented in the following table:

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NOTE 8 – Postretirement benefits other than pension

The company provides health care and life insurance benefits to certain retired employees who meet age and service requirements. Most of the company’s retirees contribute to the cost of these benefits and retiree contributions are increased as actual benefit costs increase. The company’s policy is to fund benefits as claims and premiums are paid. Postretirement benefit costs for health care and life insurance for the second quarter and first quartersix months of 2007 and 2006 are presented in the following table: