• Create new business opportunities in the digital space through internal innovation, acquisitions or affiliations. The company established a new Digital segment in 2008.

• Maintain strong financial discipline throughout our operations.

• Maximize existing resources through efforts to enhance revenues and control or reduce costs. For businesses that do not fit with our long-term strategic goals, a reallocation of resources will be undertaken.

• Strengthen the foundation of the company by finding, developing and retaining the best and brightest employees through a robust Leadership and Diversity program.

We implement our strategy and manage our operations through three business segments: publishing, digital and broadcasting (television). The publishing segment includes the operations of 102 daily newspapers in the U.S. and U.K., nearly 850 non-daily local publications in the United States and Guam and more than 200 such titles in the U.K. Our 85 U.S. daily newspapers, including USA TODAY, the nation's largest-selling daily newspaper, with an average circulation of approximately 2.3 million, have a combined

daily average paid circulation of 6.6 million, which is the nation's largest newspaper group in terms of circulation. Together with the 17 daily paid-for newspapers our Newsquest division publishes in the U.K., the total average daily circulation of our 102 domestic and U.K. daily newspapers was approximately 7.2 million for 2008. All of our daily newspapers also operate Web sites which are tightly integrated with publishing operations. Our newspapers also have strategic business relationships with online affiliates including CareerBuilder, Classified Ventures, ShopLocal.com, Topix and Metromix LLC.
The publishing segment also includes commercial printing; newswire; marketing and data services operations.
Beginning with the third quarter of 2008, the company reported a new "Digital" business segment, which includes CareerBuilder and ShopLocal results from the dates of their full consolidation (Sept. 3 and June 30, respectively), as well as PointRoll, Planet Discover, Schedule Star and Ripple6 (from the date of its acquisition on Nov. 13, 2008). Prior period results for PointRoll, Planet Discover and Schedule Star have been reclassified from the publishing segment to the new Digital segment.
Operating results from Web sites that are associated with publishing operations and broadcast stations continue to be reported in the publishing and broadcast segments.
Through our broadcasting segment, we own and operate 23 television stations with affiliated Web sites covering 18% of the U.S. population in markets with a total of more than 20.8 million households. We also include in this segment the results of Captivate Network, a national news and entertainment network that delivers programming and full-motion video advertising through video screens located in elevators of office towers and select hotel lobbies across North America.
Fiscal year: The company's fiscal year ends on the last Sunday of the calendar year. The company's 2008 fiscal year ended on Dec. 28, 2008, and encompassed a 52-week period. The company's 2007 and 2006 fiscal years encompassed 52-week and 53-week periods, respectively.
Discontinued operations: Unless stated otherwise, as in the section titled "Discontinued Operations," all of the information contained in Management's Discussion and Analysis of Financial Condition and Results of Operations relates to continuing operations. Therefore, the results of the Norwich (Conn.) Bulletin, the Rockford (Ill.) Register Star, the Observer-Dispatch in Utica, N.Y., and The Herald-Dispatch in Huntington, W.Va., which were sold to Gatehouse Media, Inc. in May 2007, and the Chronicle-Tribune in Marion, Ind., which was contributed to the Gannett Foundation in May 2007, are excluded for all periods covered by this report. These transactions are discussed in more detail on page 27 in the business acquisitions, investments, exchanges, dispositions and discontinued operations section of this report.
Presentation of certain pro forma information: The discussion below is focused mainly on changes in historical financial results, however certain operating information for the newly formed Digital Segment is also presented on a pro forma basis, which assumes that all properties owned at the end of 2008 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.
Operating results and non-cash impairment charges: The company reported a net loss from continuing operations for 2008 of $6.65 billion or $29.11 per share. The net loss included second- and fourth-quarter non-cash impairment charges for intangible assets, property, plant and equipment, investments and certain other assets, totaling $8.35 billion on a pre-tax basis ($7.39 billion after-tax, or $32.38 per share). These charges are discussed in detail on page 28 and in the financial statements in Note 3.
The impairment charges were driven by soft business trends in the early part of the year, which worsened rapidly toward the end of the year as recessions in the U.S. and U.K. economies deepened. Concurrent with the decline in business conditions, there was broad-based downward pressure on equity share values and the company's stock price declined significantly. These factors led to the reassessment of asset carrying values and the determination that non-cash impairment write downs to underlying estimated fair value were required. The impairment charges principally involved the company's U.S. Community Publishing Division, its U.K. publishing business, Newsquest, certain other U.S. publishing businesses and minority investments in U.S. newspaper publishing partnerships. Absent these non-cash impairment charges in 2008 and 2007 ($72.0 million pre-tax or $50.8 million after-tax and $.22 per share), net income from continuing operations would have declined 27%.
Operating revenues declined 9% to $6.8 billion for 2008.
Publishing revenues were $5.7 billion or 13% below 2007 levels. Reflecting recessions in the U.S. and U.K. and the real estate crisis through the first nine months of the year, publishing revenue declined 11%. Fourth quarter publishing revenue declined by 19% as the economic crisis deepened and the British pound weakened against the U.S. dollar.
Digital segment revenues totaled $281 million for 2008, compared to $70 million in 2007, reflecting the initial consolidation of CareerBuilder and ShopLocal. On a pro forma basis, operating revenues for the Digital segment rose 13% reflecting solid gains by CareerBuilder and PointRoll.
Broadcast revenues for 2008 were $773 million or 2% below year ago levels. The company's television stations reported increased political and Olympic related revenue of $94 million and $24 million, respectively. However, these gains were mostly offset by losses in certain core revenue categories, primarily automotive and retail reflecting the recession in the U.S.
Operating costs excluding the non-cash impairment charges discussed above declined 3%.
Newsprint expenses for publishing declined 9% as a 16% reduction in consumption was partially offset by a 9% increase in average usage prices. Newsprint prices rose throughout most of 2008, peaked early in the fourth quarter and then started to decline. The company expects further price declines in 2009, but expense comparisons with 2008 will be unfavorable for at least the early part of the year.
For the full year, the company recorded severance and related benefits costs totaling $119 million, thereby reducing headcount across the company by 7,200 positions.

During the second quarter of 2008, the company made changes to its domestic benefit plans by improving its 401(k) plan while freezing benefits under certain company sponsored defined benefit pension plans. As a result, the company recognized a pre-tax curtailment gain from its domestic pension plans of approximately $46.5 million ($28.9 million after-tax or $.13 per share). Costs under the company's 401(k) match increased from the date of the change, Aug. 1, 2008, reflecting an increase in the company match from 50% of the first 6% of qualified payroll to 100% of the first 5%. The company also provided further 401(k) plan enhancements to certain long-service employees. While total operating costs increased substantially in 2008 due to the non-cash impairment charges, and to the incremental costs from the consolidation of CareerBuilder and ShopLocal beginning in the third quarter, pro forma operating expenses, excluding severance and impairment charges, declined 6%, reflecting aggressive, companywide cost control efforts.
The company reported an operating loss for 2008 of $6.76 billion, reflecting the non-cash impairment charges of $7.98 billion. Absent the impairment charges from 2008 and 2007 results, the company would have reported a 29% decline in operating income from 2007.
The company reported a loss of $374.9 million from its equity share of results from unconsolidated investees for 2008, primarily because of the impairment of the carrying values of its interest in newspaper publishing partnerships and certain other investees. The publishing businesses in these partnerships have also been adversely affected by the U.S. economic crisis and other challenging market factors, and their earnings declined significantly in 2008. Interest expense was lower for the year - down $69 million or 27%, reflecting lower average debt levels and lower borrowing rates.
Other non operating items reflect higher asset sale and other gains for 2008, up slightly from last year. For 2008, these gains were partially offset by the CareerBuilder minority interest charge recorded since its consolidation in the third quarter.
The company reported a net loss of $6.65 billion or $29.11 per share for 2008 compared with net income of $1.06 billion for 2007, or $4.52 per diluted share. Absent the non-cash impairment charges in both years, the company would have reported a decline in net income of 32% and net income per share of 31%. Challenges for 2009: Looking forward to 2009, the company faces several important challenges, including:
• Effectively manage in a global economic recession which will continue to adversely affect all revenue streams for our publishing, digital and broadcasting businesses;

• Continue transforming our cost structure to align expenses with revenue levels;

• Respond to the changing media landscape and consumers' increasing desire to access content across multiple platforms; and

• Drive innovation throughout the company with important efforts such as our ContentOne initiative and the product distribution and online changes we are making at the Detroit Free Press.

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. Similarly the company evaluated the recoverability of the carrying value of its property, plant and equipment and its investments in minority-owned unconsolidated investees, including its newspaper publishing partnerships and certain online/new technology business investments. The company employed consulting valuation specialists to assist in these important accounting determinations.
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 accounting rules regarding the repatriation of earnings from foreign sources. The company must also exercise significant judgment in assessing the recoverability of its deferred tax assets.
Refer to Note 1 to the Consolidated Financial Statements for a more complete discussion of all of the company's significant accounting policies.
Reclassifications of certain items within the Consolidated Statements of Income:
In the third quarter of 2008, the company began reporting a new digital segment and a separate digital revenues line in its Statements of Income (Loss). This revenue line includes only revenue from the businesses that comprise the new digital segment. It therefore includes all revenues from CareerBuilder and ShopLocal beginning with the full consolidation of these businesses in the third quarter of 2008, and revenues from PointRoll, Schedule Star, Planet Discover and Ripple6 (from the date of its acquisition on Nov. 13, 2008). Revenues from PointRoll, Schedule Star and Planet Discover had previously been reported within the publishing segment and were included in the "All other" revenue line in the Statement of Income. "All other" revenue is now comprised principally of commercial printing revenues. All periods presented reflect these reclassifications.
Neither the Digital revenue line nor the Digital Segment include online revenue from the Web sites operated together with our publishing or broadcasting businesses.

Business acquisitions, investments, exchanges, dispositions and discontinued operations
2008: On Dec. 31 2007, the first day of the company's 2008 fiscal year, the company purchased X.com, Inc. (BNQT.com), which operates an action sports digital network covering eight different action sports including surfing, snowboarding and skateboarding. X.com is affiliated with the USA TODAY Sports brand.
In February 2008, the company formed QuadrantONE, a new digital ad sales network, with three other large media companies.
In March 2008, the company purchased a minority stake in Fantasy Sports Ventures (FSV). FSV owns a set of fantasy sports content sites and manages advertising across a network of affiliated sites.
In May 2008, the company purchased a minority stake in Cozi Group Inc. (COZI). COZI is a free Web service that helps families manage busy schedules, track shopping and to-do lists, organize household chores, stay in communication and share memories - all in one place.
In July 2008, the company purchased a minority stake in Mogulus, LLC, a company that provides Internet broadcasting services. Also in July 2008, the company increased its investment in 4INFO maintaining its approximate ownership interest.
In August 2008, the company purchased 100% of the outstanding shares of Pearls Review, Inc., an online nursing certification and continuing education review site.
On June 30, 2008, the company acquired from Tribune Company and The McClatchy Company their minority ownership interests in ShopLocal LLC, a leading marketing and database services company for major retailers in the U.S. The company now owns 100% of ShopLocal and began consolidating its results in the digital segment at the beginning of the third quarter of 2008. ShopLocal collaborates with PointRoll to create ads that dynamically connect retail advertisers and consumers, online and in the store. ShopLocal's operations turned profitable in the third quarter.
On Sept. 3, 2008, the company acquired an additional 10% stake in CareerBuilder from Tribune Company increasing its investment to 50.8% so that it became the majority and controlling owner. Beginning in September 2008, the operations of CareerBuilder have been fully consolidated and are reported in the digital segment. The related minority interest charge for CareerBuilder is reflected in "Other non-operating items" in the Statements of Income (Loss). On Nov. 13, 2008, the company acquired Ripple6, Inc., a leading provider of social media services for publishers and other users. Ripple6 currently powers Gannett's MomsLikeMe.com site, which recently rolled out in 80 local markets across the country and has more than one million moms visiting each month. The total cash paid in 2008 for business acquisitions was $168.6 million and for investments was $46.8 million. The financial statements reflect an allocation of purchase price that is preliminary for the acquisitions.
2007: In May 2007, the company completed the sale of the Norwich (Conn.) Bulletin, the Rockford (Ill.) Register Star, the Observer-Dispatch in Utica, N.Y., and The Herald-Dispatch in Huntington, W.Va., to GateHouse Media, Inc. and contributed the Chronicle-Tribune in Marion, Ind., to the Gannett Foundation. In connection with these transactions, the company recorded a net after-tax gain of $73.8 million in discontinued operations. For all periods presented, results from these businesses have been reported as discontinued operations. In January 2007, the company acquired Central Florida Future, the independent student newspaper of the University of Central Florida.
In June 2007, the company acquired the Central Ohio Advertiser Network, a network of eight weekly shoppers with the Advertiser brand and a commercial print operation in Ohio.
In October 2007, the company acquired a controlling interest in Schedule Star LLC, which operates HighSchoolSports.net, a digital content site serving the high school sports audience, and the Schedule Star solution for local athletic directors.
At the end of October 2007, the company, in partnership with Tribune Company, announced a digital joint venture to expand a national network of local entertainment Web sites under the Metromix brand. The newly formed company, Metromix LLC, focuses on a common model for local online entertainment sites, and then scales the sites into a national platform under the Metromix brand. Metromix is owned equally by the two parent companies.
The total cash paid in 2007 for business acquisitions was $30.6 million and for investments was $40.0 million.
2006: In January 2006, the company acquired a minority equity interest in 4INFO, a leading mobile and media advertising company with the largest ad-supported text messaging content network in the U.S.
In April 2006, the company contributed the Muskogee (Okla.) Phoenix to the Gannett Foundation.
In connection with the acquisition of Clipper Magazine, Inc. in 2003 and PointRoll, Inc. in 2005, the company paid additional cash consideration totaling $41.2 million in 2006 as a result of certain performance metrics being achieved by these businesses.
In June 2006, the company completed the acquisition of KTVD-TV in Denver and in August the acquisition of WATL-TV in Atlanta, which created the company's second and third broadcast station duopolies.
In August 2006, the company made additional investments in CareerBuilder, ShopLocal.com and Topix totaling $155 million, which increased the ownership stake in each of those businesses.
In August 2006, the company invested an additional $145 million in the California Newspapers Partnership (CNP) in conjunction with the CNP's acquisition of the Contra Costa Times and the San Jose Mercury News and related publications and Web sites. The company's additional investment enabled it to maintain its 19.49% ownership in the CNP.
The company also purchased several small non-daily products in the U.S. as well as Planet Discover, a provider of local, integrated online search and advertising technology.
The total cash paid in 2006 for business acquisitions was $402.7 million and for investments was $338.3 million.

RESULTS OF OPERATIONS
Consolidated summary - continuing operations In its press release of Jan. 30, 2009, and Form 8-K filed on the same day, the company reported that preliminary 2008 fourth quarter earnings per diluted share were $.69 compared with $1.06 per diluted share in the fourth quarter of 2007. Preliminary full year results reported were a net loss of $1.8 billion or $7.81 per share. These preliminary results, however, did not include fourth quarter non-cash charges, which had not been finalized at that time, for the impairment of goodwill, other intangible assets, property, plant and equipment and certain other assets. In its Jan. 30, 2009, press release, the company indicated that such charges were expected to total in the range of $5.1 billion to $5.9 billion on a pre-tax basis and $4.5 billion to $5.2 billion on an after-tax basis. The financial statements included in this Form 10-K reflect final fourth quarter adjustments for these matters, which totaled $5.59 billion on a pre-tax basis and $4.86 billion after-tax, or $21.34 per share. Final reported results from continuing operations The company reported a loss from continuing operations for 2008 of $6.65 billion or $29.11 per share. For 2007, income from continuing operations was $975.6 million or $4.17 per diluted share.
During the second and fourth quarters of 2008, the company recorded certain non-cash impairment charges totaling approximately $8.35 billion on a pre-tax basis and $7.39 billion on an after-tax basis or $32.38 per share. These second and fourth quarter charges are more fully described in the following section of this report.
Non-cash charges recorded in 2008
Very difficult business conditions, the ensuing economic crisis, recessionary conditions in the U.S. and U.K. and a decline in the company's stock price required the company to perform impairment tests on goodwill, intangible assets, and other long-lived assets as of March 31, 2008, the first day of its fiscal second quarter, as well as on Dec. 28, 2008, in connection with the required annual impairment test of goodwill and indefinite-lived intangibles. As a result, the company has recorded non-cash impairment charges to reduce the book value of goodwill, other intangible assets including mastheads, and certain property, plant and equipment assets. The carrying value of certain of the company's investments in newspaper publishing partnerships and other businesses, which are accounted for under the equity method, were also written down due to other than temporary impairments. The company also recorded accelerated depreciation expense associated with certain facility consolidation and cost reduction initiatives.
A summary of these charges is presented below:

In millions except per share amounts

                                                    Pre-Tax         After-Tax        Per Share
                                                   Amount(a)        Amount(a)        Amount(a)
Asset impairment and other charges
Goodwill:
Publishing                                        $     7,448      $     6,812      $     29.83
Digital                                                    10                6             0.03

Total goodwill                                          7,458            6,818            29.86

Other intangible assets - principally
mastheads:
Publishing                                                232              150             0.66
Digital                                                     2                1                -

Total other intangible assets                             233              151             0.66

Property, plant and equipment:
Publishing                                                255              159             0.70
Broadcasting                                                2                1                -
Corporate                                                   1                1                -

Total property, plant and equipment                       258              161             0.70

Other:
Publishing                                                 17               11             0.05
Digital                                                     3                2             0.01
Broadcasting                                                7                4             0.02

Total other                                                27               17             0.08

Total asset impairment and other charges          $     7,976      $     7,147      $     31.30

Newspaper publishing partnerships and other
equity method investments:
Publishing                                                377              248             1.09

Total charges                                     $     8,354      $     7,395      $     32.38

(a) Total amounts may not sum due to rounding.

The goodwill impairment charges result from the application of the impairment testing provisions of Statement of Financial Accounting Standards No. 142 "Goodwill and Other Intangible Assets" (SFAS No. 142). Impairment testing is customarily performed annually, and had been performed at the end of 2007, at which time no goodwill impairment charge was indicated. Because of softening business conditions within the company's publishing segment and the decline in the company's stock price and market capitalization, this testing was updated as of the beginning of the second quarter of 2008 and as required the annual testing was performed again as of Dec. 28, 2008. For certain publishing and digital reporting units, an impairment was indicated. The fair values of the reporting units were determined using discounted cash flow and multiple of earnings techniques. The company then undertook the next step in the impairment testing process by determining the fair value of assets and liabilities for these reporting units.
The implied value of goodwill determined by the valuation for these reporting units was less than the carrying amount by $7.46 billion, and therefore an impairment charge in this amount was taken. There was minimal tax benefit recognized related to the impairment charges since much of the recorded goodwill was non-deductible as it arose from stock purchase transactions. Therefore the after-tax effect of the goodwill impairment was $6.82 billion or $29.86 per share. . . .