Twelve Months Ended December 31,
                                                       Percentage                            Percentage
                                       2008              Change              2007              Change              2006

The Dallas Morning News              $ 404,214               (11.6 )%      $ 457,418                (8.1 )%      $ 497,887
The Providence Journal                 131,469               (13.3 )%        151,575                (6.8 )%        162,661
The Press-Enterprise                   101,631               (21.6 )%        129,675               (17.5 )%        157,185

Total net operating revenues         $ 637,314               (13.7 )%      $ 738,668                (9.7 )%      $ 817,733

Total revenues decreased approximately 13.7 percent in 2008 when compared to 2007 and 9.7 percent in 2007 when compared to 2006. Total newspaper advertising revenues were down approximately 19.3 percent in 2008 when compared to 2007 and 10.9 percent in 2007 when compared to 2006. Advertising revenues associated with the Company's Web sites decreased approximately 12.0 percent in 2008 when compared to 2007 and increased 19.5 percent in 2007 when compared to 2006. The Company expects newspaper advertising revenues to continue to decrease in 2009.
The Company is required to assess goodwill impairment annually at the reporting unit level using the methodology prescribed by Statement of Financial Accounting Standards (SFAS) 142, "Goodwill and Other Intangible Assets." The goodwill impairment test initially consists of the comparison of the implied fair value of a reporting unit with its carrying value. For the Company, a reporting unit consists of the newspaper operations in each geographic area. The Company performed its annual goodwill impairment testing as of December 31, 2008 and based on the results, recognized impairment charges to write off the remaining goodwill attributable to The Press-Enterprise by $14,145. In 2007, the Company recognized impairment charges to goodwill attributable to The Providence Journal by $242,794 and The Press-Enterprise by $101,630. The impairment charges resulted primarily from a decline in the estimated fair value of the individual businesses due to lower than estimated market growth rates and margins versus prior year estimates. Goodwill impairment is a non-cash charge to earnings and, as such, does not affect the Company's liquidity, cash flows from operating activities or debt covenants, or have any impact on future operations.
A. H. Belo intends for the discussion of its financial condition and results of operations that follows to provide information that will assist in understanding its financial statements, the changes in certain key items in those statements from period to period, and the primary factors that accounted for those changes, as well as how certain accounting principles, policies, and estimates affect its financial statements. Basis of Presentation
The consolidated financial statements in this Annual Report on Form 10-K include the accounts of A. H. Belo comprising its newspaper businesses and related assets. Operating expenses in the income statements prior to February 8, 2008, reflect all of the direct expenses of the business together with allocations of certain Belo Corp. corporate expenses that have been charged to the Company based on use or other methodologies which the Company believes were appropriate for such expenses. See Consolidated Financial Statements, Note 1-Summary of Significant Accounting Policies. In our opinion, these assumptions and allocations have been made on a reasonable and appropriate basis under the circumstances. Certain A. H. Belo and Belo operating units currently share news and information content at no cost.
The financial information for the periods prior to February 8, 2008 included in this Annual Report may not reflect what A. H. Belo's results of operations, financial position, and cash flows would have been had it been a separate public company during the periods presented or be indicative of what its results of operations, financial position, and cash flows may be in the future as a separate public company. A. H. Belo's financial information for the periods prior to February 8, 2008 reflects allocations for services historically provided by Belo, and the Company expects these allocated costs to be different from the actual costs A. H. Belo will incur for these services in the future as a separate public company, including with respect to actual services. Subsequent to February 8, 2008, these services are being provided by Belo under a services agreement and other inter-company agreements. In some instances, the costs incurred for these services as a separate public company may be higher than the share of total Belo expenses allocated to A. H. Belo prior to February 8, 2008. In addition, the financial information for the periods prior to February 8, 2008, does not reflect the increased costs associated with being a separate public company, including expected changes in our cost structure, personnel needs, financing, and operations of our business as a result of the Distribution.

and 2006

                                                                  Twelve Months Ended December 31,
                                                         Percentage                             Percentage
                                          2008             Change               2007              Change              2006

Total net operating revenues            $ 637,314              (13.7 )%      $   738,668               (9.7 )%      $ 817,733
Total operating costs and expenses        713,271              (32.5 )%        1,056,100               38.9 %         760,376

(Loss) earnings from operations           (75,957 )             76.1 %          (317,432 )           (653.4 )%         57,357
Total other (expense) and income           (3,420 )            (89.0 )%          (31,067 )              2.5 %         (30,310 )

(Loss) earnings from operations           (79,377 )             77.2 %          (348,499 )        (1,388.5) %          27,047
Income tax (benefit) expense              (17,074 )         (1,048.2 )%           (1,487 )           (112.5 )%         11,868

Net (loss) income                       $ (62,303 )             82.0 %       $  (347,012 )         (2,386.1 )%      $  15,179

Net Operating Revenues
   The table below presents the components of A. H. Belo's net operating
revenues for the last three years:

                                                               Twelve Months Ended December 31,
                                                       Percentage                            Percentage
                                       2008              Change              2007              Change              2006

Advertising                          $ 484,437               (19.3 )%      $ 600,335               (10.9 )%      $ 674,140
Circulation                            123,381                 9.5 %         112,635                (3.1 )%        116,265
Other                                   29,496                14.8 %          25,698                (6.0 )%         27,328

Total net operating revenues         $ 637,314               (13.7 )%      $ 738,668                (9.7 )%      $ 817,733

In 2008, advertising revenue accounted for 76.0 percent of the Company's total revenues compared to 81.3 percent in 2007 and 82.4 percent in 2006. In 2008, circulation revenue accounted for 19.4 percent of the Company's total revenues compared to 15.2 percent in 2007 and 14.2 percent in 2006. In all three years, commercial printing made up most of the remainder of the Company's revenues.
The Company's revenues were adversely affected by economic and operating pressures. Advertising expense budgets tend to be reduced more than other expenses in times of economic uncertainty or recession. The continued economic slowdown adversely affected advertising demand and the Company's business, financial condition and results of operations. Total advertising revenue, including print and Internet revenue, was down 19.3 percent for the year ended December 31, 2008 when compared to the year ended December 31, 2007. Retail advertising revenue was down 16.0 percent, general advertising revenue was down 17.9 percent, and classified advertising revenue (exclusive of Internet revenue) was down 36.2 percent in the year ended December 31, 2008 when compared to the year ended December 31, 2007.
The table below presents the components of The Dallas Morning News net operating revenues for the last three years:

                                                               Twelve Months Ended December 31,
                                                       Percentage                           Percentage
                                       2008              Change              2007             Change              2006

Advertising                          $ 300,099               (18.1 )%      $ 366,516               (9.8 )%      $ 406,515
Circulation                             80,097                14.0 %          70,244               (0.3 )%         70,445
Other                                   24,018                16.3 %          20,658               (1.3 )%         20,927

Total net operating revenues         $ 404,214               (11.6 )%      $ 457,418               (8.1 )%      $ 497,887

Net operating revenues for The Dallas Morning News decreased by $53,204, or 11.6 percent, in the year ended December 31, 2008, as compared to the year ended December 31, 2007. Advertising revenues decreased by $66,417, or 18.1 percent, in the year ended December 31, 2008, compared to the year ended December 31, 2007, due to declines in substantially all categories included in retail, general and classified. Retail advertising revenue decreased $11,831, or 14.5 percent, general advertising revenue decreased $8,630, or 18.5 percent, and classified advertising revenue decreased $37,394, or 31.8 percent. Circulation revenue increased $9,853, or 14.0 percent, for the year ended December 31, 2008, compared to the year ended December 31, 2007, primarily due to an increase in home delivery and single copy prices.
Net operating revenues for The Dallas Morning News decreased by $40,469, or 8.1 percent, in the year ended December 31, 2007, as compared to the year ended December 31, 2006. Advertising revenues decreased by $39,999, or 9.8 percent, in the year ended December 31, 2007, compared to the year ended December 31, 2006. Retail advertising revenue decreased $6,852, or 7.8 percent, in the year ended December 31, 2007, compared to the year ended December 31, 2006, primarily due to decreases in the furniture category. General advertising revenues decreased $17,196, or 27.0 percent, in the year ended December 31, 2007, compared to the year ended December 31, 2006, primarily due to decreases in the financial, telecommunications and travel categories. Classified advertising revenues decreased $14,739, or 11.2 percent, primarily due to decreases in the real estate, automotive and employment categories. Circulation revenue remained flat for the year ended December 31, 2007, compared to the year ended December 31, 2006.
The following table presents the components of The Providence Journal net operating revenues for the last three years:

                                                               Twelve Months Ended December 31,
                                                       Percentage                            Percentage
                                       2008              Change              2007              Change              2006

Advertising                          $ 102,704               (18.4 )%      $ 125,874                (6.9 )%      $ 135,189
Circulation                             27,765                10.7 %          25,072                (5.7 )%         26,601
Other                                    1,000                59.0 %             629               (27.8 )%            871

Total net operating revenues         $ 131,469               (13.3 )%      $ 151,575                (6.8 )%      $ 162,661

Net operating revenues for The Providence Journal decreased by $20,106, or 13.3 percent, in the year ended December 31, 2008, compared to the year ended December 31, 2007. Advertising revenues decreased $23,170, or 18.4 percent, for the year ended December 31, 2008, compared to the year ended December 31, 2007, due to declines in substantially all categories included in retail, general and classified. Retail advertising revenues decreased $6,693, or 16.6 percent, general advertising revenues decreased $658, or 40.2 percent, and classified advertising revenue decreased $10,094, or 26.2 percent. Circulation revenue increased $2,693, or 10.7 percent, in the year ended December 31, 2008, compared to the year ended December 31, 2007, due to rate increases in home delivery and single copy prices.
Net operating revenues for The Providence Journal decreased by $11,086, or 6.8 percent, in the year ended December 31, 2007, compared to the year ended December 31, 2006. Advertising revenues decreased $9,315, or 6.9 percent, for the year ended December 31, 2007, compared to the year ended December 31, 2006. Retail advertising revenues decreased $3,769, or 8.6 percent, due to decreases in the automotive, building and home improvement, furniture and home accessories, and gaming categories for the year ended December 31, 2007, compared to the year ended December 31, 2006. General advertising revenues decreased $1,299, or 44.2 percent, in the year ended December 31, 2007, compared to the year ended December 31, 2006, primarily due to decreases in the automotive and travel and transportation categories. Classified advertising revenue decreased $4,027, or 8.1 percent, in the year ended December 31, 2007, compared to the year ended December 31, 2006, primarily due to decreases in the automotive, employment and real estate categories. Circulation revenue declined $1,529, or 5.7 percent, in the year ended December 31, 2007, compared to the year ended December 31, 2006, primarily due to lower overall circulation.

The table below presents the components of The Press-Enterprise net operating revenues for the last three years:

                                                               Twelve Months Ended December 31,
                                                       Percentage                            Percentage
                                       2008              Change              2007              Change              2006

Advertising                          $  81,634               (24.4 )%      $ 107,945               (18.5 )%      $ 132,438
Circulation                             15,519               (10.4 )%         17,319                (9.9 )%         19,218
Other                                    4,478                 1.5 %           4,411               (20.2 )%          5,529

Total net operating revenues         $ 101,631               (21.6 )%      $ 129,675               (17.5 )%      $ 157,185

Net operating revenues for The Press-Enterprise decreased $28,044, or 21.6 percent, in the year ended December 31, 2008, compared to the year ended December 31, 2007. Advertising revenues decreased $26,311, or 24.4 percent, in the year ended December 31, 2008, compared to the year ended December 31, 2007, due to declines in substantially all categories included in retail, general and classified. Retail advertising revenues decreased $3,698, or 21.4 percent, general advertising revenues decreased $1,098, or 11.1 percent, and classified advertising revenues decreased $18,886, or 47.1 percent. Circulation revenue decreased $1,800, or 10.4 percent for the year ended December 31, 2008 when compared to the year ended December 31, 2007, primarily due to eliminating home delivery in certain geographic areas.
Net operating revenues for The Press-Enterprise decreased $27,510, or 17.5 percent, in the year ended December 31, 2007, compared to the year ended December 31, 2006. Total advertising revenues decreased $24,493, or 18.5 percent, in the year ended December 31, 2007, compared to the year ended December 31, 2006. Retail advertising revenues decreased $2,638, or 13.3 percent, primarily due to decreases in the department store, home improvement, home furnishings, grocery, and discount categories. General advertising revenues decreased $1,289, or 11.5 percent, in the year ended December 31, 2007, compared to the year ended December 31, 2006, primarily due to decreases in the financial and automotive categories. Classified advertising revenues decreased $18,122, or 28.8 percent, primarily due to decreases in the employment, real estate and automotive categories. Circulation revenue at The Press-Enterprise decreased $1,899, or 9.9 percent, when comparing the year ended December 31, 2007 to the year ended December 31, 2006. Operating Costs and Expenses
The Company's operating costs and expenses decreased $342,829, or 32.5 percent, in the year ended December 31, 2008, as compared to the prior year period, primarily due to goodwill impairment of $14,145 recorded in 2008 as compared to goodwill impairment of $344,424 recorded in 2007. The Company is required to test goodwill at least annually for impairment. See Consolidated Financial Statements, Note 3-Goodwill and Intangible Assets for more information. In 2008, the Company recorded an impairment charge of $4,535 on a 26-year-old printing press.
The Company experienced decreases in other production, distribution and operating costs and a decrease in newsprint, ink and other supplies. Other production, distribution and operating costs decreased $10,808, or 4.2 percent, for the year ended December 31, 2008, compared to the year ended December 31, 2007. This decrease was primarily due to lower expenses for outside services and lower advertising and promotion expenses. Newsprint, ink and other supplies decreased $7,893, or 7.7 percent, for the year ended December 31, 2008, compared to the year ended December 31, 2007, due to a decrease in newsprint consumption. During 2008, the Company's publishing operations consumed approximately 111,981 metric tons of newsprint at an average cost of $664 per metric ton. Consumption of newsprint in the previous year was approximately 136,546 metric tons at an average cost per metric ton of $586.
The Company's operating costs and expenses increased $295,724, or 38.9 percent, in the year ended December 31, 2007, as compared to the prior year period, primarily due to a non-cash charge for goodwill impairment, decreases in salaries, wages and employee benefits and a decrease in newsprint, ink and other supplies. Salaries, wages and employee benefits decreased $25,317, or 7.8 percent, for the year ended December 31, 2007, compared to the year ended December 31, 2006, primarily due to a voluntary severance program for newsroom employees at The Dallas Morning Newsinitiated in the third quarter 2006 which reduced headcount. In addition to the voluntary severance program, the Company recognized a reduction in estimated pension expense of approximately $8,488 primarily due to the Company's curtailment of its defined benefit pension plan effective March 31, 2007 and an increase in the discount rate applied to future pension obligations. These decreases were partially offset by an increase in workers' compensation expense. In the fourth quarter of 2007, the Company recorded a non-cash charge for goodwill impairment of $344,424, of which $242,794 related to The Providence Journal and $101,630 related to The Press-Enterprise based on assessments performed for the year ended December 31, 2007. The Company is required to test goodwill at least annually for impairment. See Consolidated Financial Statements, Note 3, for more information.

Newsprint, ink and other supplies decreased $30,274, or 22.8 percent, for the year ended December 31, 2007 compared to the year ended December 31, 2006, with decreases in newsprint consumption and average cost per metric ton. During 2007, the Company's publishing operations consumed approximately 136,546 metric tons of newsprint at an average cost of $586 per metric ton. Consumption of newsprint in the previous year was approximately 166,756 metric tons at an average cost per metric ton of $631.
Interest expense decreased $30,806, or 88.4 percent, for the year ended December 31, 2008, compared to the year ended December 31, 2007. As of February 8, 2008, in connection with the Distribution of the Company, Belo Corp. contributed to the capital of A. H. Belo and its subsidiaries the net intercompany indebtedness owed to Belo Corp. by A. H. Belo and its subsidiaries or assigned indebtedness to the Company. This effectively settled A. H. Belo's notes payable balances owed to Belo Corp. As a result, no interest expense for these notes was accrued beyond the Distribution Date, as compared to the interest expense that accrued for the entire twelve months ended December 31, 2007. This decrease in interest paid to Belo Corp. was partially offset by interest expense or approximately $121 related to the Company's credit facility entered into subsequent to February 8, 2008.
Interest expense increased $3,020, or 9.5 percent, in 2007 compared to 2006. This is primarily due to year-over-year increases in the balances on notes payable to Belo Corp. Certain subsidiaries had entered into notes payable arrangements with Belo Corp. The notes accrued interest at prime plus one percent and had various payments terms. In conjunction with the Distribution, Belo Corp. contributed to the capital of A. H. Belo all inter-company indebtedness owed by A. H. Belo to Belo Corp. or assigned the notes to A. H. Belo on or prior to the Distribution Date. The contribution or assignment effectively extinguished all liabilities of A. H. Belo to Belo Corp. under such notes.
Other (expense) income, net, decreased $3,159, or 83.9 percent, in 2008 when compared to 2007. This is primarily due to a gain recognized on the disposal of land and a building in Dallas, Texas in 2007 that was not used in the ordinary course of business.
Other (expense) income, net, increased $2,263, or 150.5 percent in 2007 when compared to 2006. This is primarily due to a gain recognized on the disposal of fixed assets of $2,250.
Income tax benefit increased $15,587 in 2008 when compared to 2007. This increase in tax benefit was primarily attributable to lower taxable income and adjustments made for goodwill impairment and valuation allowance. The effective tax rates for 2008, 2007, and 2006 were 21.5 percent, 0.4 percent, and 43.9 percent, respectively.
Income tax expense decreased $13,355, or 112.5 percent, for the year ended December 31, 2007 when compared with the year ended December 31, 2006, primarily due to lower taxable income. In May 2006, the State of Texas enacted legislation replacing its franchise tax with a new margin tax. Despite an effective date of January 1, 2008, the enactment of the Tax Reform Bill represents a change in tax law, and SFAS 109, "Accounting for Income Taxes," requires that effects of the change must be reflected in the financial statements in the quarter in which the new tax is enacted.
As of December 31, 2008, the Company expects to incur federal and state net operating losses of $24,206. These net operating losses can be carried forward to offset future taxable income, and will begin to expire in the years 2029 and 2030 if not utilized. SFAS 109, places a threshold for recognition of deferred tax assets based on whether it is more likely than not that these assets will be realized. In making this determination, the Company considers all positive and negative evidence, including future reversals of existing taxable temporary differences, projected taxable income, tax planning strategies and recent financial results. Based on the criteria established by SFAS 109, the Company established a valuation allowance of $4,086 against the deferred tax assets, as it is possible that a portion of the benefit resulting from these net operating loss carry forwards will not be realized.
Deferred tax assets and liabilities are recognized for the expected future tax consequences of events that have been recognized in the Company's financial statements or tax returns. At December 31, 2008, the Company had deferred tax assets of $29,015, which were partially offset by a valuation allowance of $4,086 and further reduced by deferred tax liabilities of $26,134. As previously discussed, the valuation allowance reduces certain deferred tax assets to . . .