2009       2008
    Impact of noted items:
    Workforce restructuring                                     $ 0.01     $ 0.07
    Facility consolidation and asset impairment charges           0.10          -
    Impairment of equity method investment                        0.02          -

    Unfavorable impact on reported diluted earnings per share   $ 0.13     $ 0.07

Excluding the special items noted above, diluted earnings per share declined 42% reflecting the adverse economic conditions in the U.S. and UK. However, each of the Company's three business segments reported significant levels of operating income for the quarter as the economy-driven revenue declines were offset to a significant degree by cost savings initiatives.
For the year-to-date periods, the 2009 net income attributable to Gannett Co., Inc. was $222 million or $0.94 per diluted share compared to a loss in 2008 of $1.9 billion or $8.49 per diluted share. Special charges and credits affecting these reported results are more fully discussed in the following sections of this report, including Note 3, Note 6 and Note 7 to the Condensed Consolidated Financial Statements.
To facilitate analysis and comparisons of the Company's operating results for the 2009 and 2008 year to date periods, the table below illustrates the impact on a per share basis of the special charges and credits reflected therein:

                                                               2009             2008
Impact of noted items:
Workforce restructuring                                      $    0.07        $    0.18
Facility consolidation and asset impairment charges               0.23            10.36
Impairment of newspaper publishing partnerships and other
equity method investments                                         0.02             0.71
Debt exchange gain                                               (0.11 )              -
Pension settlement/curtailment gains                             (0.11 )          (0.13 )
Impairment of publishing assets to be sold                        0.10                -
Tysons land sale gain                                                -            (0.07 )

Unfavorable impact on reported diluted earnings
(loss) per share                                             $    0.21 (a)    $   11.05

(a) Total does not sum due to rounding

Excluding the special items noted above, diluted earnings per share declined 55% on a year to date basis.

Liquidity Matters
In March 2009, the Company borrowed under its revolving credit agreements funds sufficient to retire the then outstanding $563 million of floating rate notes that were due in May 2009. The floating rate notes were repaid as scheduled. 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% fixed rate 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 Company reported a non-cash gain of $43 million on this exchange, which is reflected as a non-operating item in the Condensed Consolidated Statements of Income.
For the first nine months of 2009, the Company's long-term debt was reduced by $504 million reflecting repayments of $462 million from operating cash flow and the gain from the private exchange offer of $43 million. At the end of the third quarter, the Company's debt was $3.3 billion. The Company's senior leverage ratio was 3.03 as of September 27, 2009. The Company believes its senior leverage ratio will be lower at the end of 2009.
On October 2, 2009, after quarter end, the Company completed a private placement offering of $250 million in aggregate principal amount of 8.750% senior notes due 2014 and $250 million in aggregate principal amount of 9.375% senior notes due 2017. The 2014 notes were priced at 98.465% of face value and the 2017 notes were priced at 98.582% of face value. The Company used the net proceeds from the offering to partially repay borrowings outstanding under its revolving credit facilities and term loan. The Company now has almost 25 percent of its debt maturing in the fourth quarter of 2014 or beyond, and the Company has no further debt repayment requirements until June of 2011.
Further information regarding liquidity matters can be found in "Liquidity, Capital Resources, Financial Position, and Statements of Cash Flows" beginning on page 9.
Operating Revenue and Expense Discussion The narrative which follows provides background on key revenue and expense areas and principal factors affecting comparisons and amounts. The narrative is focused mainly on changes in historical financial results. However, certain comparisons identified as "pro forma" below reflect adjustments to historical financial results. To compute pro forma numbers, historical financial results are adjusted to assume that all companies presently consolidated as of the most recent balance sheet date were consolidated throughout all periods covered by the narrative. Historical financial results are also adjusted to remove the impact of disposed businesses. The pro forma amounts include adjustments for
(1) CareerBuilder, which the Company began consolidating in September 2008;
(2) ShopLocal, which the company began consolidating at the beginning of its third quarter of 2008; and (3) the exit of a commercial printing business in the third quarter of 2009. 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 Revenues
Operating revenues declined 18% to $1.3 billion for the third quarter of 2009 and 18% to $4.1 billion for the first nine months of the year. The revenue declines reflect primarily the impact on advertising demand of the ongoing recessions in the U.S. and UK economies as well as the near absence of approximately $50 million in Olympic and political broadcast revenue that the Company recognized in the third quarter of 2008. Digital segment revenues increased significantly due to the consolidation of CareerBuilder since September of 2008. On a pro forma basis, operating revenues decreased 22% for the quarter and 24% for the year-to-date periods (21% for the quarter and year-to-date periods on a constant currency basis). A more detailed discussion of revenues by business segment is included in following sections of this report.
Operating Expenses
Operating expenses declined 14% to $1.2 billion for the third quarter of 2009 as a result of continuing cost containment efforts including workforce restructuring, facility consolidations and salary adjustments as well as lower newsprint expense. Operating expenses declined 44% to $3.7 billion for the first nine months as a result of the same factors affecting the third quarter comparison, expense declines due to employee furloughs in the first six months of 2009 and the significant non-cash impairment charges in 2008. The consolidation of CareerBuilder since September of 2008 had the effect of increasing reported expenses. Excluding the workforce restructuring expenses, facility consolidation and asset impairment charges, and pension gains in both years, pro forma operating expenses were 20% lower for the quarter and 19% lower year-to-date.

Excluding workforce restructuring, payroll expenses were down 19% for the quarter and 17% for the first nine months, reflecting headcount reductions across the Company as well as the impact of salary adjustments, offset partially by the consolidation of CareerBuilder. On a pro forma basis, payroll expense, excluding workforce restructuring, were down 23% for the quarter and year-to-date. The year-to-date comparison was favorably impacted by approximately $45 million in savings resulting from the employee furlough program occurring in the first six months of 2009.
Newsprint expense was 43% lower for the third quarter of 2009 reflecting a 35% decline in usage, including savings from web width reductions and greater use of light weight newsprint, as well as a substantial drop in usage prices. Year-to-date newsprint expense declined 27% on a 32% decline in usage, partially offset by an increase in usage 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. The Company expects newsprint expense comparisons to prior year will be significantly better in the fourth quarter of the year than in the first nine months.
Publishing Results
Publishing revenues declined almost 24% to $1.0 billion from $1.4 billion in the third quarter and decreased over 25% to $3.3 billion from $4.4 billion year-to-date. On a constant currency basis, publishing revenues declined 22% for the third quarter and year-to-date period. In the third quarter of 2009, the Company exited a commercial printing business in the UK, which accounted for approximately $21 million of the total publishing revenue decline for the quarter and year to date. The average exchange rate used to translate UK publishing results from the British pound to U.S. dollars decreased 13% to 1.64 for the third quarter of 2009 from 1.90 last year and for the year-to-date period decreased 21% to 1.54 from 1.95.
Publishing operating revenues are derived principally from advertising and circulation sales, which accounted for 67% and 27%, respectively, of total publishing revenues for the third quarter and year-to-date periods. Advertising revenues include amounts derived from advertising placed with print products as well as publishing related 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      2009            2008         % Change

                Advertising     $   699,644     $   977,111           (28 )
                Circulation         284,259         298,978            (5 )
                All other            58,267          86,627           (33 )

                Total           $ 1,042,170     $ 1,362,716           (24 )




                 Year-to-date      2009            2008         % Change

                 Advertising    $ 2,175,478     $ 3,182,194           (32 )
                 Circulation        876,699         914,150            (4 )
                 All other          199,094         264,581           (25 )

                 Total          $ 3,251,271     $ 4,360,925           (25 )

The table below presents the principal categories of advertising revenues for the publishing segment.

Advertising revenues, in thousands of dollars

       Third Quarter                            2009          2008        % Change

       Retail                                 $ 355,450     $ 458,010           (22 )
       National                                 116,395       155,246           (25 )
       Classified                               227,799       363,855           (37 )

       Total publishing advertising revenue   $ 699,644     $ 977,111           (28 )

     Year-to-date                              2009            2008         % Change

     Retail                                 $ 1,110,035     $ 1,445,699           (23 )
     National                                   369,133         499,445           (26 )
     Classified                                 696,310       1,237,050           (44 )

     Total publishing advertising revenue   $ 2,175,478     $ 3,182,194           (32 )

Publishing advertising revenues decreased 28% in the quarter to $700 million from $977 million in the third quarter of 2008 and decreased 32% to $2.2 billion from $3.2 billion on a year-to-date basis. On a constant currency basis, total publishing advertising revenue would have been 27% lower for the third quarter and 29% lower for the year-to-date period. For U.S. publishing, advertising decreased 26% for the third quarter and 28% for the year-to-date period, while in the UK, advertising revenues fell 38% for the third quarter and 49% for the year-to-date period. On a constant currency basis, advertising revenues in the UK declined 29% for the third quarter and 35% for the year-to-date period. In all advertising categories in the U.S. and UK, revenues were adversely affected by continuing recessionary economic conditions. However, trends for some revenue categories improved over the course of the third quarter. Overall, third quarter advertising revenue declines were 4 percentage points better than second quarter comparisons and second quarter comparisons improved over the first quarter. September was the Company's best comparison month so far this year. For Newsquest, third quarter comparisons for advertising revenue in pounds were 8 percentage points better than the second quarter and 10 percentage points better than the first quarter.
Retail advertising revenues declined 22% and 23% for the quarter and year-to-date periods, respectively. In the U.S. retail was down 21% for the quarter and year-to-date period while in the UK retail revenues fell 30% (19% in pounds) for the quarter, and 37% (21% in pounds) for the year-to-date period. In the U.S., department store and furniture categories remain challenged although the third quarter comparisons for both categories were better than the two previous quarters.
National advertising revenues declined 25% and 26% for the quarter and year-to-date periods, respectively. Ad revenue at USA TODAY was down 37% for the quarter and 32% year-to-date as third quarter paid ad pages were 493 compared to 713 for the same period last year and were 1,621 year-to-date compared to 2,370 last year. Advertising demand at USA TODAY continues to be hampered by the continued lingering slowdown in the travel and lodging industries. National revenues were also lower for USA Weekend, Newsquest and the U.S. Community Publishing Group in the quarter and year-to-date periods.
Classified advertising revenues for the third quarter were down 37% reflecting declines of 35% in the U.S. and 44% at Newsquest. Automotive, employment and real estate declined 35%, 57% and 37%, respectively. On a constant currency basis, total classified revenues declined 35%. The percentage changes in the classified categories for domestic publishing, Newsquest and in total on a constant currency basis for the third quarter of 2009 compared to the third quarter in 2008 were as follows:

                     U.S.            Newsquest          Newsquest         Total Constant
                  Publishing        (in dollars)       (in pounds)           Currency
   Automotive             (32 %)              (46 %)            (37 %)                (33 %)
   Employment             (57 %)              (56 %)            (49 %)                (54 %)
   Real Estate            (35 %)              (40 %)            (31 %)                (34 %)
   Legal                    9 %                 -                 -                     9 %
   Other                  (21 %)              (28 %)            (17 %)                (20 %)

                          (35 %)              (44 %)            (35 %)                (35 %)

Year-to-date classified advertising revenues were down 44% reflecting declines of 38% in the U.S. and 55% at Newsquest. Automotive, employment and real estate declined 38%, 62% and 46%, respectively. On a constant currency basis, total classified revenues declined 39%. The percentage changes in the classified categories for domestic publishing, Newsquest and in total on a constant currency basis for year to date 2009 compared to year to date 2008 were as follows:

                     U.S.            Newsquest          Newsquest         Total Constant
                  Publishing        (in dollars)       (in pounds)           Currency
   Automotive             (33 %)              (54 %)            (42 %)                (35 %)
   Employment             (61 %)              (62 %)            (52 %)                (58 %)
   Real Estate            (37 %)              (61 %)            (51 %)                (42 %)
   Legal                    4 %                 -                 -                     4 %
   Other                  (25 %)              (36 %)            (19 %)                (23 %)

                          (38 %)              (55 %)            (42 %)                (39 %)

Overall, classified advertising revenue trends improved throughout the third quarter and third quarter year-over-year comparisons were about 8 percentage points better than second quarter year-over-year comparisons. In addition, September was the best year-over-year comparison month of the year. Trends in employment and real estate improved over the course of the quarter. Third quarter year-over-year comparisons for U.S. classified advertising overall were about 5 percentage points better than the second quarter due to better comparisons for automotive, employment and real estate. Third quarter year-over-year comparisons for UK classified advertising overall were about 10 percentage points better than the second quarter on a constant currency basis. The relative improvement was driven primarily by results in the real estate category.
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 19% for the quarter and 22% for the year-to-date period, principally due to reduced employment advertising.
Circulation revenues declined 5% and 4% for the quarter and year-to-date periods, respectively. Revenue comparisons reflect lower circulation volumes partially offset by price increases. Net paid daily circulation for publishing operations, excluding USA TODAY, declined 13% for the quarter and 12% year-to-date, while Sunday net paid circulation was down 8% for the quarter and 7% year-to-date. Volumes were affected, in part, by single copy and home delivery price increases initiated at most U.S. newspapers and by selective culling of distribution in certain areas. Domestic circulation revenue declined 3% for the quarter and 1% for the year, reflecting lower volume and recent single copy and home delivery price increases in several markets and at USA TODAY. In the September Publishers Statement submitted to ABC, circulation for USA TODAY for the previous six months decreased 17% from 2,293,310 in 2008 to 1,900,116 in 2009 reflecting lower business and leisure travel. The decrease in "All other" revenues for the third quarter and year-to-date period is primarily due to lower commercial printing activity, the exit of a UK commercial printing business in the third quarter of 2009, and a decline in the British pound to U.S. dollar exchange rate.
Publishing operating expenses were down 20% in the quarter to $940 million from $1.2 billion in the third quarter of 2008, mainly due to efficiency efforts that resulted in workforce restructuring and facility consolidations. Excluding non-cash facility consolidation and asset impairment charges from the third quarter of 2009, and workforce restructuring costs taken in both years, third quarter operating expenses declined 22%. This decline was driven by cost containment efforts including the impact of headcount reductions in previous periods, lower newsprint expense and generally lower spending in nearly all other key cost categories. Year-to-date publishing operating expenses declined 52% to $2.9 billion compared to $6.1 billion a year ago. Excluding non-cash facility consolidation and asset impairment charges, pension gains, and workforce restructuring costs taken in both years, year-to-date operating expenses declined 20%.
Newsprint expense was 43% lower for the third quarter of 2009 reflecting a 35% decline in usage, including savings from web width reductions and greater use of light weight newsprint, as well as a substantial drop in usage prices. Year-to-date newsprint expense declined 27% on a 32% decline in usage, partially offset by an increase in usage 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. The Company expects newsprint expense comparisons to prior year will be significantly better in the fourth quarter of the year than in the first nine months.
The Company expects that publishing segment expenses for the last quarter of 2009 will continue to be significantly lower than prior year levels, reflecting continued payroll and newsprint savings.
Publishing segment operating income was $102 million in the quarter, compared to $183 million last year. Excluding non-cash facility consolidation and asset impairment charges from the third quarter of 2009, and workforce restructuring costs taken in both years, third quarter operating income declined 33%. The decline reflects the challenging advertising environment, partially mitigated by cost savings. The weakening of the British pound also contributed to the decline in operating income. Year-to-date publishing operating income was $328 million, compared to a loss of $1.7 billion last year. Excluding non-cash facility consolidation and asset impairment charges, pension gains, and workforce restructuring costs taken in both years, publishing operating income declined 50% for the year to date period.
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 prior periods. Operating results from Web sites that are associated with publishing businesses and broadcast stations continue to be reported in the publishing and broadcast segments.
Digital segment operating revenues were $143 million in the third quarter compared to $78 million in 2008, an increase of $65 million. Year-to-date operating revenues were $428 million compared to $111 million in 2008, an increase of $317 million. Digital operating expenses were $118 million in the third quarter compared to $71 million in 2008, an increase of $47 million. Year-to-date operating expenses were $387 million compared to $102 million in 2008, an increase of $285 million. Digital operating revenue and expense increases reflect primarily the consolidation of CareerBuilder for all of 2009 but for only part of 2008. On a pro forma basis, digital segment operating revenues were down 20% for the third quarter and 17% for the year-to-date period. These declines reflect the impact the weak economy has had on employment advertising. Pro forma expenses were down 28% for the third quarter and 25% for the year-to-date period. Although this decline was driven primarily by CareerBuilder's significant cost savings, almost all digital segment properties had expense savings that exceeded revenue declines.
Digital segment operating income of $25 million in the third quarter and $42 million in the year-to-date period reflects more favorable results for CareerBuilder, PointRoll, ShopLocal, Planet Discover, and Schedule Star. Pro forma operating results improved by over $10 million, or 71% in the third quarter and over $37 million in the year-to-date period, reflecting significantly better results for CareerBuilder, ShopLocal, PointRoll and Schedule Star.
Broadcasting Results
Broadcasting includes results from the Company's 23 television stations and Captivate. Reported broadcasting revenues were $151 million in the third quarter, a 23% decrease compared to $197 million in 2008, which included approximately $50 million in ad demand related to the Olympics and elections. A three-fold increase in retransmission revenues to $14 million and solid revenue growth from Captivate during the quarter partially offset the absence of Olympic and substantially lower election ad spending as well as continued weakness in the automobile category. Excluding Olympic and election revenues, the company's core television revenues would have been down in the high single digits making the third quarter the best quarter of the year. In September, several revenue categories such as packaged goods, medical/dental, and media reflected substantial double digit gains.
Broadcasting operating expenses for the third quarter totaled $108 million, down 4% from $113 million a year ago. The 4% decline was due primarily to efforts to control costs and create efficiencies. Operating expenses excluding special items in both quarters were 9% lower.
Reported operating income for the third quarter totaled $43 million, down 49% from $84 million last year. Year-to-date operating income was $137 million, down 38% from $221 million last year.
Television revenues were 25% lower for the quarter and 20% lower year to date. Based on current trends, the Company expects the percentage decline in television revenues to be in the low twenties for the fourth quarter of 2009 compared to the fourth quarter of 2008, reflecting the $58 million of political revenue achieved in the fourth quarter of 2008. Excluding the impact of political, the Company expects revenues to be up in the low single digits. Corporate Expense . . .