Excluding severance costs, payroll expenses were down 2% for the quarter and 3% for the first nine months, reflecting headcount reductions across the Company. Newsprint expenses were down 3% for the third quarter of 2008 and 12% for the first nine months. Newsprint usage prices for the third quarter rose 16% but consumption was down 17%. For the nine month period, prices were 4% higher and consumption was 16% lower.
During the second quarter of 2008, the Company made changes to its domestic benefit plans, improving its 401(k) plan employer matching contribution while freezing benefits under certain Company sponsored defined benefit pension plans. As a result, the Company recognized a pre-tax curtailment gain for its domestic pension plans of approximately $46.5 million ($28.9 million after-tax or $0.13 per share).
The Company's continued aggressive cost control efforts at nearly all business properties throughout 2008 mitigated to a significant degree the effects of lower revenue results. The Company has plans to implement further cost control measures in the fourth quarter, including additional headcount reductions. The Company has increased strategic spending for online/digital operations, including costs for new personnel and technology. Publishing Results
Publishing revenues declined 14% to $1.4 billion from $1.6 billion in the third quarter and 11% to $4.4 billion from $4.9 billion year-to-date. Publishing operating revenues are derived principally from advertising and circulation sales, which accounted for 72% and 22% of total publishing revenues for the third quarter and 73% and 21% of total publishing revenues for the year-to-date period. Advertising revenues include amounts derived from advertising placed with print products as well as publishing internet web sites. "All other" publishing revenues are mainly from commercial printing operations. The table below presents the components of publishing revenues. Publishing revenues, in thousands of dollars

                Third Quarter      2008            2007          % Change

                Advertising     $   977,111     $ 1,187,744          (17.7 )
                Circulation         298,978         309,143           (3.3 )
                All other            86,627          95,085           (8.9 )

                Total           $ 1,362,716     $ 1,591,972          (14.4 )




                Year-to-date      2008            2007          % Change

                Advertising    $ 3,182,194     $ 3,690,926          (13.8 )
                Circulation        914,150         939,184           (2.7 )
                All other          264,581         288,553           (8.3 )

                Total          $ 4,360,925     $ 4,918,663          (11.3 )

The table below presents the principal categories of advertising revenues for the publishing segment.
Advertising revenues, in thousands of dollars

     Third Quarter                            2008           2007          % Change

     Retail                                 $ 457,789     $   509,746          (10.2 )
     National                                 155,528         168,830           (7.9 )
     Classified                               363,794         509,168          (28.6 )

     Total publishing advertising revenue   $ 977,111     $ 1,187,744          (17.7 )




    Year-to-date                              2008            2007          % Change

    Retail                                 $ 1,444,600     $ 1,581,974           (8.7 )
    National                                   499,959         540,196           (7.4 )
    Classified                               1,237,635       1,568,756          (21.1 )

    Total publishing advertising revenue   $ 3,182,194     $ 3,690,926          (13.8 )

Publishing advertising revenues decreased 18% to $977 million from $1.2 billion for the third quarter as the Company experienced significant declines in all three revenue categories. For U.S. publishing, advertising decreased 15%, while in the UK, advertising revenues fell 28%. In British pounds, advertising revenues in the UK declined 24% for the third quarter and 14% for the first nine months. The average exchange rate used to translate UK publishing results from the British pound to U.S. dollars decreased 6% to 1.90 from 2.02 for the third quarter and decreased slightly less than 2% to 1.95 from 1.99 for the year-to-date period. On a constant currency basis total publishing advertising revenue would have been 17% lower for the third quarter and 13% lower for the year-to-date period.
For the third quarter and year-to-date periods, retail advertising revenues declined 10% and 9%, respectively. Retail advertising in the U.S. was down 10% for the quarter and 9% year-to-date. In the UK retail revenues were down 14% for the quarter and 8% year-to-date. Revenues were lower in most principal retail categories, with the most significant declines in the furniture, department store, and telecommunications categories. Certain of these category losses are tied to the troubled real estate sector in the U.S. and the UK. National advertising revenues declined 8% for the third quarter and 7% year-to-date. National ad revenue results reflect soft advertising demand at USA TODAY, down 7% for the third quarter and 8% year-to-date. Paid ad pages at USA TODAY were 713 for the third quarter compared to 803 for the same period last year and were 2,370 year-to-date compared to 2,741 last year. Growth in the advocacy, financial, and home and building categories was more than offset by losses in the entertainment, travel, automotive and technology categories. Classified advertising revenues declined 29% for the quarter and 21% year-to-date. Domestically, classified revenues were 27% lower for the third quarter and 23% lower year-to-date. For the quarter, employment was down 36%, real estate was 33% lower and automotive was 19% below last year. On a year-to-date basis employment was down 30%, real estate was down 31% and automotive was 14% lower. Increasingly, classified results in all principal categories were adversely affected by the troubled real estate sector and a deterioration in general economic conditions. The Company's properties in the states of Arizona, California, Nevada and Florida have been most adversely affected by these economic developments.
UK classified revenues were 33% lower for the quarter and 19% lower for the year-to-date. On a constant currency basis, UK classified revenues were down 29% for the quarter and 17% year-to-date. General economic conditions in the UK have also significantly worsened since the beginning of the year. Home mortgage lending is down substantially and the unemployment rate has risen. Real estate revenues were 54% lower for the quarter and were down 32% for the year-to-date. Employment revenue declined 30% for the quarter and 14% year-to-date, and automotive was off 30% for the quarter and 23% year-to-date.

The Company's publishing operations, including its U.S. Community Publishing Group, the USA TODAY Group and the Newsquest Group, generate a portion of advertising revenues from the operation of web sites that are associated with their traditional print businesses. These revenues are reflected within the retail, national and classified categories presented and discussed above, and they are separate and distinct from revenue generated by businesses included in the Company's new digital segment. These online/digital advertising revenues declined 4% and rose 1% for the quarter and year-to-date periods, respectively. Circulation revenues declined 3% for the third quarter and the first nine months of 2008. Net paid daily circulation for publishing operations, excluding USA TODAY, declined 6% for the third quarter and the year-to-date periods, while Sunday net paid circulation was down 5% for the third quarter and year-to-date periods. In the September Publishers Statement submitted to ABC, circulation for USA TODAY for the previous six months increased .01% from 2,293,137 in 2007 to 2,293,310 in 2008.
The decrease in "All other" revenues for the third quarter and year-to-date periods is primarily due to lower commercial printing activity.
Publishing operating expenses were down 7% for the third quarter. However, these expenses included approximately $20.4 million of severance costs related to reductions in force and efficiency efforts. These severance costs were more than offset by savings related to employee benefit programs, reduced newsprint consumption and the effect of other aggressive costs controls. Excluding the 2008 severance expenses, publishing expenses were 8% lower for the quarter. Newsprint expense was 3% lower for the quarter, reflecting a 17% decline in usage, including savings from web width reductions and greater use of light weight newsprint, partially offset by a 16% increase in price. Year-to-date, newsprint expense declined 12% on a 16% decline in usage and a 4% increase in price. For the remainder of 2008, newsprint prices are expected to be above prior year levels, while consumption will continue to be significantly below last year.
Publishing expense comparisons for the year to date periods are affected by the second quarter non-cash impairment charges (refer to Note 3 to the Condensed Consolidated Financial Statements in this report for more information regarding these charges) totaling approximately $2.5 billion. Cost comparisons for the year-to-date are also affected by an allocation to the publishing segment of a portion of the pension plan curtailment gain recognized in the second quarter of 2008. The curtailment gain, however, was more than offset by year to date severance expenses of $59.3 million related to reductions in force and efficiency efforts for domestic and UK publishing.
Excluding the impact of the non-cash charges, newsprint costs, the pension curtailment gain and severance costs, publishing expenses declined 6% for the year-to-date period. This reflects aggressive cost controls at most properties, partially offset by increased spending for the Company's online/digital operations at its publishing sites, including costs for personnel additions and technology to support new revenue initiatives.
Publishing segment operating income declined $145.9 million or 44% for the quarter, reflecting the challenging advertising environment, partially mitigated by cost savings throughout the group. Excluding the 2008 severance expenses, segment operating income would have declined $125.5 million or 38%. The weakening of the British pound also contributed to the decline in operating income by approximately $5 million. The publishing segment reported a loss of $1.7 billion for the year-to-date period of 2008, reflecting the non-cash impairment charges discussed in Note 3 to the Condensed Consolidated Financial Statements in this report. Absent non-cash impairment charges and the 2008 severance expenses, publishing operating income would have declined $242.4 million or 23% for the year-to-date period. Broadcasting Results
Broadcasting includes results from the Company's 23 television stations and Captivate. Reported broadcasting revenues were $197.0 million in the third quarter, a 4% increase compared to $189.5 million in 2007. The increase reflects nearly $24 million in ad spending related to the Olympics on the Company's NBC affiliates and approximately $26 million in politically related advertising. However, the weakening economy had a negative impact on certain core advertising categories, including auto, which partially offset the incremental Olympic and political revenues. Year-to-date revenues were $559.7 million compared to $577.3 million in 2007, a decline of $17.6 million or 3%. The year-to-date decline reflects reduced core category ad demand amid the soft economic environment and the absence in 2008 of Super Bowl ad spending on the Company's CBS affiliates. These factors were partially offset by the incremental Olympic and political ad revenues.

Broadcasting revenues include ad revenues generated from the operation of web sites that are associated with its television stations. These revenues are separate and distinct from revenue generated by businesses included in the Company's new digital segment. The broadcasting online/digital revenues rose 15% for the quarter and year-to-date period.
Broadcasting operating expenses for the third quarter totaled $113.0 million, down 4% from $118.1 million a year ago, reflecting continued cost controls, offset in part by severance expense. On a year-to-date basis, operating costs were down 4%.
Reported operating income from broadcasting rose $12.5 million or 17% in the third quarter but was $2.1 million or 1% lower for the year-to-date period. Based on current pacings, television revenues for the fourth quarter of 2008 will be slightly higher than last year's fourth quarter in the low single digits due to political spending this year.
Digital Results
On September 3, 2008, the Company increased its ownership in CareerBuilder to 50.8% from 40.8%, obtaining a controlling interest, and therefore, the results of CareerBuilder beginning in September are now fully consolidated. On June 30, 2008, the Company increased its ownership in ShopLocal to 100% from 42.5%, and from that date the results of ShopLocal are now fully consolidated. Prior to these acquisitions, the Company's equity share of CareerBuilder and ShopLocal results were reported as equity earnings. Subsequent to the CareerBuilder acquisition, the Company reflects a minority interest charge on its Statements of Income (Expense) related to the other partners' ownership interest. Beginning with the third quarter, a new digital business segment is being reported, which includes CareerBuilder and ShopLocal from the dates of their full consolidation, as well as PointRoll, Planet Discover and Schedule Star. Prior period results for PointRoll, Planet Discover and Schedule Star have been reclassified from the publishing segment to the new digital segment. The principal reason for the significant increase in the quarter and, to a lesser extent, year-to-date digital revenues and expenses is the consolidation of CareerBuilder and ShopLocal. Digital revenues increased from $17.2 million to $77.6 million for the third quarter and increased from $46.6 million to $111.5 million year-to-date. Digital expenses increased similarly, from $11.1 million to $71.5 million for the third quarter, and from $34.6 million to $101.7 million for the year-to-date period.
Operating income for the digital segment reflects positive results in the quarter and year-to-date periods for CareerBuilder, PointRoll and ShopLocal, which are partially offset by continued investment in Schedule Star and expenses associated with the development of our digital infrastructure. Corporate Expense
Corporate expenses in the third quarter were $14.3 million compared to $17.8 million a year ago. Year-to-date corporate expenses were $40.0 million compared to $59.5 million a year ago. The decline reflects tight cost controls, including lower compensation and benefit costs for the quarter and year-to-date periods. The year-to-date period decline also reflects an allocation of part of the pension curtailment gain recorded in the second quarter. Consolidated Operating Expenses
For the third quarter, operating expenses declined by $31.4 million or 2%. Costs for the quarter include $23 million of severance expense, and the inclusion of operating costs from the initial consolidation of CareerBuilder and ShopLocal. However, these incremental costs were more than offset by newsprint savings (higher prices more than offset by lower consumption), lower payroll and benefit expenses due to headcount reductions and benefit plan changes, a lower currency exchange rate for Newsquest expenses and aggressive cost controls throughout publishing, broadcast and corporate operations. On a pro forma basis and excluding severance expenses, consolidated operating expenses for the quarter declined 5%.
On a year-to-date basis, total consolidated operating expenses increased substantially due to the inclusion of the non-cash charges related to goodwill, other intangible assets and property, plant and equipment discussed in Note 3 to the Condensed Consolidated Financial Statements in this report. Year-to-date costs include $63 million in severance, and costs from the initial consolidation of CareerBuilder and ShopLocal. However, these incremental costs were more than offset by the pension plan curtailment gain ($46.5 million) recorded in the second quarter, newsprint expense savings, lower compensation and benefit costs and generally strong cost controls. On a pro forma basis and excluding the non-cash impairment charges, the severance expenses and the pension plan curtailment gain, consolidated operating expenses declined 4% for the year-to-date period.

Non-Operating Income and Expense
Equity Earnings
At the end of 2007, the Company's equity share of operating results from its newspaper partnerships, including Tucson, which participates in a joint operating agency, the California Newspapers Partnership and Texas-New Mexico Newspapers Partnership, were reclassified from "All other" revenue and reflected as "Equity income (losses) in unconsolidated investees, net" in the non-operating section of the Consolidated Statements of Income. These amounts include the Company's equity share of results from CareerBuilder and ShopLocal for periods prior to when the Company began consolidating their results of operations.
The Company's net equity loss in unconsolidated investees for the year-to-date period of 2008 includes $261 million of second quarter impairment charges related to equity investments in newspaper partnerships and certain other businesses (discussed in Note 3 to the Condensed Consolidated Financial Statements in this report). The company's net equity income in unconsolidated investees declined $9.6 million for the third quarter reflecting lower operating results from newspaper partnership investments, continuing investment in digital assets including Metromix, and the absence of the Company's share of CareerBuilder's September 2008 results (now consolidated). Interest Expense
The Company's interest expense decreased $16.2 million or 25.7% for the quarter and $63.0 million or 31.2% year-to-date, reflecting lower interest rates and lower average borrowings.
The daily average outstanding balance of commercial paper was $1.81 billion during the third quarter of 2008 and $1.14 billion during the third quarter of 2007. The daily average outstanding balance of commercial paper was $1.13 billion during the first nine months of 2008 and $1.87 billion during the first nine months of 2007. The weighted average interest rate on commercial paper was 3.4% and 5.7% for the third quarter of 2008 and 2007, respectively. For the year-to-date periods of 2008 and 2007, the weighted average interest rate on commercial paper was 3.4% and 5.4%, respectively.
Total average outstanding debt for the third quarter was $4.11 billion in 2008 and $4.45 billion in 2007. For the year-to-date periods of 2008 and 2007, total average outstanding debt was $4.04 billion and $4.77 billion, respectively. The weighted average interest rate for total outstanding debt was 4.4% for the quarter compared to 5.5% last year and 4.4% year-to-date compared to 5.4% last year.
At the end of the third quarter of 2008, the Company had approximately $2.2 billion in floating rate obligations outstanding. A 1/2% increase or decrease in the average interest rate for these obligations would result in an increase or decrease in annual interest expense of $10.8 million. Other Non-Operating Items
The decrease in "Other non-operating items" for the third quarter reflects the inclusion of minority interest expense related to CareerBuilder, beginning in September of 2008, a reduced level of investment income and foreign currency charges associated with UK pound-denominated transactions. For the year-to-date periods, "Other non-operating items" is above last year due principally to the first quarter 2008 gain of $25.5 million on the sale of excess land adjacent to the Company's headquarters in McLean, VA. Provision (Benefit) for Income Taxes
The Company's effective income tax rate for continuing operations was 26.4% for the third quarter compared to 32.3% for the comparable period of 2007. The lower tax rate for the third quarter 2008 reflects incremental benefits from the release of prior years U.S. state tax reserves upon the favorable settlement of contested issues. In addition, the tax rate reflects a benefit from a lower statutory rate on UK earnings beginning in 2008.
The Company reported a pre-tax loss of $1,918.7 million for the first nine months of 2008. These pre-tax losses include impairment charges taken in the second quarter, the majority of which are not deductible for income tax purposes. Therefore, the effective tax benefit rate on these pre-tax losses, including the impairment charges, are at the very low levels of (1.2)% for the year-to-date period. Excluding the pre-tax and tax effects of all impairment charges recorded in the second quarter, the Company's effective tax rate on such earnings would have been 30.1% for the year-to-date period. This rate reflects the third quarter factors discussed above plus the benefits from favorable renegotiation of prior year tax positions with UK tax authorities. The Company expects further release of U.S. state tax reserves in the fourth quarter of 2008.

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 the period presented. Taxes provided on the earnings from discontinued operations totaled $4.1 million for 2007. This includes U.S. federal and state income taxes and represents an effective rate of approximately 39%. The excess of this effective rate over the U.S. statutory rate of 35% is due principally to state income taxes. 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 $0.03 for 2007. Earnings per diluted share for the gain on the disposition of these properties were $0.32.
Net Income/Loss
The Company's net income was $158.1 million or $0.69 per diluted share for the third quarter compared to net income of $234.0 million or $1.01 per diluted share for 2007. For the year-to-date period of 2008, the Company's net loss was . . .