Newsprint expenses were down 16% for the first quarter of 2009. Newsprint usage prices for the first quarter rose 20% but were more than offset by a 30% decline in consumption. Newsprint prices have been declining since the end of 2008 and favorable price comparisons are expected for the remainder of 2009. Publishing Results
Publishing revenues declined 27% to $1.1 billion from $1.5 billion in the first quarter of 2009. On a constant currency basis, publishing revenues declined 23%. The average exchange rate used to translate UK publishing results from the British pound to U.S. dollars decreased 27% to 1.44 from 1.98 in the first quarter of 2008.
Publishing operating revenues are derived principally from advertising and circulation sales, which accounted for 66% and 27%, respectively, of total publishing revenues for the first quarter of 2009. 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

                First Quarter      2009            2008         % Change

                Advertising     $   722,755     $ 1,096,894           (34 )
                Circulation         299,683         309,178            (3 )
                All other            69,390          86,724           (20 )

                Total           $ 1,091,828     $ 1,492,796           (27 )

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

      First Quarter                            2009           2008         % Change

      Retail                                 $ 368,227     $   480,789           (23 )
      National                                 121,238         175,225           (31 )
      Classified                               233,290         440,880           (47 )

      Total publishing advertising revenue   $ 722,755     $ 1,096,894           (34 )

Publishing advertising revenues decreased 34% in the quarter to $723 million from $1.1 billion in the first quarter of 2008. On a constant currency basis, total publishing advertising revenue would have been 30% lower for the first quarter. For U.S. publishing, advertising decreased 29%, while in the UK, advertising revenues fell 55%. On a constant currency basis, advertising revenues in the UK declined 39% for the first quarter.
In all advertising categories in the U.S. and UK, revenues were adversely affected by the continuing recessionary economic conditions.
Retail advertising revenues in total declined 23%. In the U.S. retail was down 21%, while in the UK retail revenues fell 44% (23% in pounds). Revenues were lower in all principal retail categories, with the most significant declines in the furniture and department store categories.
National advertising revenues declined 31% for the first quarter. National ad revenue at USA TODAY was down 34% as paid ad pages were 527 compared to 826 for the same period last year. Revenue growth in the telecommunications, pharmaceutical and advocacy categories was more than offset by losses in the entertainment, travel and financial categories. National revenues were also lower for USA Weekend, Newsquest and the U.S. Community Publishing Group. Classified advertising revenues declined 47% for the quarter, reflecting declines of 63% in employment, 51% in real estate and 39% in automotive. Domestically, classified revenues were 40% lower. Employment was down 63%, real estate was 37% lower and automotive was 33% below last year.
UK classified revenues were 60% lower for the quarter. On a constant currency basis, UK classified revenues were down 45% for the quarter. On a constant currency basis, real estate revenues were 60% lower for the quarter, employment revenue declined 51% and automotive was off 43%.

The Company's publishing operations, including its U.S. Community Publishing Group, the USA TODAY Group and the Newsquest Group, generate 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 23% for the quarter, due principally to reduced employment advertising. Absent the impact of lower employment advertising, online advertising for U.S. community publishing rose in the low single digits.
Circulation revenues declined 3% for the first quarter of 2009. Domestic circulation revenue increased 1% reflecting recent single copy and home delivery price increases in several markets and at USA TODAY. Circulation revenues were higher at USA TODAY, reflecting in part the December 2008 increase in price of the newspaper at newsstands and vending machines from $0.75 to $1.00. Net paid daily circulation for publishing operations, excluding USA TODAY, declined 10%, while Sunday net paid circulation was down 6%. Volumes were affected, in part, by single copy and home delivery price increases initiated at most U.S. newspapers in 2008 and by selective culling of distribution in certain areas. In the March Publishers Statement submitted to ABC, circulation for USA TODAY for the previous six months decreased 7% from 2,284,219 in 2008 to 2,113,725 in 2009.
The decrease in "All other" revenues for the first quarter is primarily due to lower commercial printing activity and a decline in the British pound to U.S. dollar exchange rate.
Publishing operating expenses were down 21% in the quarter to $955 million from $1.2 billion in the first quarter of 2008. The decline was driven by continued cost containment efforts including the impact of headcount reductions in previous periods, furloughs in the quarter, lower newsprint expense and the pension settlement gain of $39.8 million. These savings were offset, in part, by $6.6 million in severance and facility-related consolidation costs in the quarter. Publishing operating expenses, excluding severance expenses and facility consolidation costs as well as the pension settlement gain, were 18% lower.
Newsprint expense was 16% lower for the quarter, reflecting a 30% decline in usage, including savings from web width reductions and greater use of light weight newsprint, partially offset by a 20% increase in price. For the remainder of 2009, newsprint prices are expected to be below prior year levels and consumption will continue to be significantly below last year. Publishing segment operating income declined $149 million or 52% for the quarter, reflecting the challenging advertising environment, partially mitigated by cost savings throughout the group and the pension settlement gain. Excluding the pension settlement gain and restructuring costs, segment operating income would have declined $183 million or 64%. The weakening of the British pound also contributed to the decline in operating income. Digital Results
Beginning with the third quarter of 2008, a new "Digital" business segment has been reported, which includes results for CareerBuilder, PointRoll, ShopLocal, Planet Discover, Schedule Star and Ripple6. Results for CareerBuilder and ShopLocal were initially consolidated in the third quarter of 2008 when the Company acquired a controlling interest in CareerBuilder and increased its ownership in ShopLocal to 100% from 42.5%. Ripple6 was acquired in November 2008. Results for PointRoll, Planet Discover and Schedule Star, which had been previously included in the publishing segment, have been reclassified to the digital segment for the prior period. Operating results from the operation of Web sites that are associated with publishing operations and broadcast stations continue to be reported in the publishing and broadcast segments.
Digital segment operating revenues totaled $143 million in the quarter compared with $14 million in 2008. Digital operating expenses totaled $144 million in the quarter compared with $15 million in 2008. Digital operating revenue and expense increases reflect primarily the consolidation of CareerBuilder and ShopLocal. On a pro forma basis, assuming CareerBuilder and ShopLocal had been fully consolidated for 2008, operating revenues would have been down 13% and expenses would have been down 22% reflecting significant cost savings from CareerBuilder. The operating loss for the digital segment of $1 million reflects positive results in the quarter for CareerBuilder, PointRoll and ShopLocal, which were offset by continued investment in other digital properties. Pro forma operating results improved by over $18 million, reflecting significantly better results for CareerBuilder and ShopLocal.

Broadcasting Results
Broadcasting includes results from the Company's 23 television stations and Captivate. Reported broadcasting revenues were $143 million in the first quarter, a 16% decrease compared to $170 million in 2008. The decline was due to softer advertising demand, particularly in the automotive and retail categories, and the near absence of politically related advertising which totaled approximately $5 million in the first quarter of 2008. These lower results were partially offset by a significant increase in retransmission revenues, Super Bowl related advertising that benefited the Company's NBC affiliates, and higher online revenue.
Broadcasting operating expenses for the first quarter totaled $99 million, down 12% from $112 million a year ago, reflecting ongoing efficiency efforts. Reported operating income from broadcasting declined $14 million or 24% in the first quarter.
Television revenues were 15% lower. Based on current trends, the Company expects television revenues to be down in the high teens for the second quarter of 2009 compared to the second quarter of 2008.
Corporate Expense
Corporate expenses in the first quarter were $14 million compared to $16 million a year ago. The decline reflects cost containment efforts, including headcount reductions in the previous periods and furloughs in the quarter. Consolidated Operating Expenses
For the first quarter, operating expenses declined by $137 million or 10%. Costs for the quarter include $6.6 million of severance and consolidation expenses and operating costs from the consolidation of CareerBuilder and ShopLocal. In addition, pension expenses were $9 million higher excluding the pension settlement gain. 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, savings from furloughs (approximately $20 million), a lower currency exchange rate for Newsquest expenses, the pension settlement gain and generally aggressive cost controls throughout publishing, broadcast, digital and corporate operations. On a pro forma basis and excluding severance and consolidation expenses and the pension settlement gain, consolidated operating expenses for the quarter declined 18%.
Non-Operating Income and Expense
Equity Earnings
The equity loss in unconsolidated investees for the first quarter of 2009 was $2.7 million compared to $11.8 million for the first quarter of 2008. This change reflects primarily the absence of the Company's equity share of losses related to CareerBuilder and ShopLocal which are now consolidated, partially offset by lower results from the Company's newspaper publishing partnerships. Interest Expense
The Company's interest expense increased $0.4 million or 0.7% for the quarter, reflecting lower average debt balances offset by slightly higher interest rates. Total average outstanding debt for the first quarter was $3.88 billion in 2009 and $3.99 billion in 2008. The weighted average interest rate for total outstanding debt was 4.70% for the first quarter of 2009 compared to 4.62% last year.
As described more fully on page 8 and subsequent to the end of the first quarter of 2009, the Company completed a private exchange offer relating to its 5.75% fixed rate notes due June 2011 and its 6.375% unsecured notes due April 2012 for new 10% senior notes. As a result of this exchange, interest expense associated with the tendered debt will increase for the remainder of 2009 reflecting the higher coupon rate and discount amortization.
At the end of the first quarter of 2009, the Company had approximately $2.7 billion in long-term 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 annualized interest expense of $13.7 million. Other Non-Operating Items
The $21.7 million decline in other non-operating items to $2.5 million in the first quarter of 2009 was due primarily to the absence of the $25.5 million pre-tax gain on the sale of land reported in the first quarter of 2008.

Provision for Income Taxes
The Company's effective income tax rate for continuing operations was 33.6% for the first quarter compared to 34.2% for the comparable period of 2008. The lower tax rate for the first quarter 2009 reflects incremental benefits from the release of tax reserves from prior years upon the favorable settlement of issues under examination. In addition, the tax rate reflects a benefit from a lower statutory rate on UK earnings.
Net Income Attributable to Gannett Co., Inc. The net income attributable to Gannett Co., Inc. was $77 million or $0.34 per diluted share for the first quarter of 2009 compared to $192 million or $0.84 per diluted share for the first quarter of 2008.
The weighted average number of diluted shares outstanding for the first quarter of 2009 totaled 230,951,000 compared to 229,661,000 for the first quarter of 2008. There were no shares repurchased in the first quarter of 2009. See Part II, Item 2 for information on share repurchases. Certain Matters Affecting Future Operating Results The Company's results to be reported for the second quarter of 2009 will continue to be adversely affected by the recessionary conditions in the U.S. and UK economies.
Advertising revenues are likely to be adversely affected in all key categories and revenue comparisons will continue to be challenged. Operating results comparisons for the UK are also likely to continue to be adversely affected by the lower exchange rate of the British pound.
Newsprint market prices weakened throughout the first quarter because of a global decline in demand. Despite production cuts by producers, this downward price pressure will likely continue for the remainder of the year. The Company expects favorable newsprint price and expense comparisons for the balance of 2009.
The Company may further reduce Company wide expense levels in the face of these different economic factors and the competitive pressures facing its businesses. For the second quarter of 2009, the Company has instituted a one-week furlough program applicable to substantially all employees of its domestic divisions. In addition, certain higher-paid employees will take either a temporary reduction in pay equivalent to an additional week of pay or a second one-week furlough. Newsquest, the Company's UK operation, has also implemented a voluntary furlough program.

Liquidity, Capital Resources, Financial Position, and Statements of Cash Flows The Company's cash flow from operating activities was $176.0 million for the first quarter of 2009, compared to $337.2 million in 2008. The decrease reflects lower publishing and broadcast earnings and related cash flow from those operations.
Cash flows used in the Company's investing activities totaled $14.7 million for the three months of 2009, reflecting $18.9 million of capital spending, $5.1 million of payments for acquisitions, and $2.8 million for investments. These cash outflows were partially offset by $5.3 million of proceeds from the sale of assets and $6.9 million of proceeds from investments.
Cash flows provided by financing activities totaled $388.9 million for the first three months of 2009 reflecting net debt borrowings of $480.1 million and the payment of dividends totaling $91.2 million. The Company's quarterly dividend of $0.04 per share, which was declared in the first quarter of 2009, totaled $9.2 million and was paid in April 2009.
The long-term debt of the Company is summarized below:

In thousands of dollars                                  Mar. 29, 2009        Dec. 28, 2008

Unsecured floating rate notes due May 2009              $       563,390      $       632,205

Unsecured notes bearing fixed rate interest at 5.75%
due June 2011                                                   498,622              498,464

Unsecured floating rate term loan due July 2011                 280,000              280,000

Borrowings under revolving credit agreements
expiring March 2012                                           2,454,000            1,907,000

Unsecured notes bearing fixed rate interest at
6.375% due April 2012                                           499,325              499,269

Other indebtedness                                                    4                    4


                                                        $     4,295,341      $     3,816,942

Less: current portion of long-term debt                         563,390                    -


Long-term debt                                          $     3,731,951      $     3,816,942

In March 2009, the Company borrowed under its revolving credit agreements funds sufficient to pay down the $563.4 million of floating rate notes due in May 2009. On the Company's Condensed Consolidated Balance Sheet, those funds are reflected in cash and cash equivalents and the floating rate notes are reflected as current portion of long-term debt. The Company anticipates reducing the level of borrowings under its revolving credit facilities over time with cash flow from operations and will look to strategically refinance amounts borrowed with the issuance of longer-term debt or through other means.
On February 25, 2009, the Board of Directors declared a dividend of $0.04 per share, payable on April 1, 2009, to shareholders of record as of the close of business March 6, 2009. This represents a 90% reduction from the prior quarter's dividend rate of $0.40 cents per share. The Board's action in setting the new quarterly dividend rate, a response to the full-fledged recessions in the U.S. and UK and the continuing difficulties in the credit markets, strengthens the Company's balance sheet and allows the Company greater financial flexibility to reallocate more than $325 million of free cash flow annually toward debt repayment.
On October 31, 2008, the Company amended each of its three revolving credit agreements and its term loan agreement. Under each of the amendments, the existing financial covenant requiring that the Company maintain shareholder's equity in excess of $3.5 billion was replaced with a new covenant that requires that the Company maintain a senior leverage ratio of less than 3.5x. The new covenant also requires the Company to maintain a total leverage ratio of less than 4.0x. The total leverage ratio would also include any subordinated debt the Company may issue in the future. Currently, all of the Company's debt is senior and unsecured. At March 29, 2009, the senior leverage ratio was 2.92x. The Company believes its senior leverage ratio will remain below 3.5x during 2009.

In addition, the aggregate size of the revolving credit facilities was reduced to $3.1 billion from $3.9 billion. There is a further provision that the aggregate size of the three revolving credit agreements will be reduced on a dollar-for-dollar basis for the first $397 million that the Company raises in the capital markets prior to December 31, 2009. Irrespective of any such interim reductions, the aggregate size of the three revolving credit agreements will be reduced to $2.75 billion on December 31, 2009. The amendments also provide for certain changes to the pricing of the facilities. For the revolving credit facilities, the commitment fees may range from 0.125% to 0.25% depending on credit ratings for the Company's senior unsecured debt from Moody's Investor Services (Moody's) and Standard & Poor's (S&P). The rate currently in effect is 0.25%.
Under each of the agreements, the Company may borrow at an applicable margin above the Eurodollar base rate or the higher of the Prime Rate or the Federal Funds Effective Rate plus 0.50%. Under the amended revolving credit agreements, the applicable margin for such borrowings ranges from 1.00% to 2.25% depending on credit ratings. Under the term loan agreement, the applicable margin varies from 1.25% to 2.25%. At its current ratings the Company will pay an applicable margin of 2.25% under each of the revolving credit agreements and the term loan agreement.
In connection with each of its three revolving credit agreements and its term loan agreement, the Company agreed to provide guarantees from a majority of its domestic wholly-owned subsidiaries in the event that the Company's credit ratings from either Moody's or S&P fall below investment grade. In the first quarter of 2009, the Company's credit rating was downgraded below investment grade by both S&P and Moody's. Accordingly, the guarantees were triggered and the existing notes and other unsecured debt of the Company became structurally subordinated to the revolving credit agreements and the term loan. In April 2009, Moody's placed on review for possible downgrade the Company's "Ba1" corporate family rating, "Ba1" probability of default rating and "Ba2" senior unsecured note ratings. Such credit rating downgrades can affect the availability and cost of future financing.
During the first quarter of 2009, the Company repurchased $68.8 million in principal amount of its floating rate notes in privately negotiated transactions at a discount. In connection with these transactions, the Company recorded a gain of approximately $1.1 million which is classified in "Other non-operating items" in the Statement of Income. This gain is net of $0.6 million reclassified from accumulated other comprehensive loss for related interest swap agreements. On May 5, 2009, the Company completed a private exchange offer relating to its 5.75% fixed rate notes due June 2011 and its 6.375% unsecured notes due April 2012. The Company exchanged approximately $67 million in principal amount of new 10% senior notes due 2015 for approximately $67 million principal amount of the 2011 notes, and approximately $193 million in principal amount of new 10% senior notes due 2016 for approximately $193 million principal amount of the 2012 notes.
The new 2015 notes and the new 2016 notes (together, the New Notes) are senior unsecured obligations and are guaranteed by those Company subsidiaries providing guarantees under the revolving credit agreements and the term loan agreement. The New Notes and the subsidiary guarantees have not been and will not be . . .