Operating expenses adjusted to remove the effect of special items noted above are as follows:

Operating income adjusted to remove the effect of special items is as follows:

Net income attributable to Gannett Co., Inc. adjusted to remove the effect of certain special items is as follows:

For the first threesix months of 2010, the Company’s long-term debt was reduced by $260$432 million, reflecting repayments of borrowings under the revolving credit agreements using cash flow from operations. At the end of the firstsecond quarter, the Company’s total long term debt was $2.8$2.6 billion. The Company’s senior leverage ratio was 2.30x2.10x as of March 28,June 27, 2010, which is substantially below the senior leverage capratio of 3.50x.3.5x the Company is required to maintain under its revolving credit agreements and term loan agreement.

Further information regarding liquidity matters can be found in “Liquidity, Capital Resources, Financial Position, and Statements of Cash Flows” beginning on page 8.10.

Operating revenues declined 4%2% to $1.3$1.4 billion for the second quarter of 2010 and 3% to $2.7 billion for the first six months of the year. The Company exited a UK-based commercial printing business in the second quarter of 2010. Although operating revenues have declined,2009 that generated revenue trend comparisons improvedof $13 million in that quarter and $24 million for the quarter reflecting the positive impact healthier economies in the U.S. and UK had on advertising demand. Television advertising revenues also benefited due to increased core revenues and ad spending relating to the Winter Olympic Games.year-to-date period. On a pro forma basis, operating revenues decreased 3%0.7% for the quarter. March operating revenuesquarter and 2% for the year-to-date period. The exchange rate also had an impact on year-over-year comparisons. On a pro forma basis, wereadjusted for currency, total operating revenue in the second quarter was just 0.4% lower than athe second quarter last year ago by less than one percent.and 2% lower for the year-to-date period. A more detailed discussion of revenues by business segment is included in the following sections of this report.

Circulation revenues declined 5%6% for the quarter.second quarter and first six months of 2010. Revenue comparisons reflect lower circulation volumes. Net paid daily circulation for publishing operations, excluding USA TODAY, declined 9%6% for the quarter and 8% for the year-to-date period, while Sunday net paid circulation was down 5%3% for the quarter.quarter and 4% year-to-date. The Company continues to focus on improving Sunday home delivery circulation by focusing on its larger U.S Community Publishing properties. As these efforts have begun to take hold, Sunday net paid circulation has reversed trend andsequentially improved as the second quarter comparison was down just 4% in March.2 percentage points better than first quarter comparison. In the March Publishers Statement submitted to ABC, circulation for USA TODAY for the previous six months decreased 14% from 2,113,725 in 2009 to 1,826,622 in 2010, reflecting reduced circulation sales from lower business and leisure travel.

The decrease in “All other” revenues for the firstsecond quarter and year-to-date period is primarily due to the exit of a UK commercial printing business in the thirdsecond quarter of 2009.

Publishing operating expenses were down 11%16% in the quarter to $849$847 million from $955 million$1.0 billion in the firstsecond quarter of 2009. Operating expenses, excluding the pension settlement gainfacility consolidation and asset impairment charges and workforce restructuring costs in the firstsecond quarter of 2009, were down 14%10%. The substantial expense decline reflects the impact of cost efficiencycontinued efforts in this quarterto create efficiencies and previous quartersconsolidate operations as well as significantly lower newsprint expense, partially offset by the reducedrelative absence of approximately $20 million in furlough savingssavings. Year-to-date publishing operating expenses declined 13% to $1.7 billion compared to $1.9 billion a year ago. Excluding facility consolidation and asset impairment charges, workforce restructuring costs and the pension gain in 2009, year-to-date operating expenses declined 12%.

Newsprint expense declined 34% in the firstsecond quarter, of 2010 compared to the first quarter of 2009. Newsprint expense was 43% lower for the first quarter of 2010 reflecting a 16%12% decline in usageconsumption and a 32%24% decline in usage prices. On a pro forma basis, newsprint expense was 41% lower.declined 31%. Year-to-date newsprint expense declined 38% on a 14% decline in consumption and a 28% decline in usage price. The Company expects favorable newsprint expense savings for the third quarter of 2010. However, the favorable comparisons through at leastwill be narrower than what was realized in the second quarter.first half of 2010 due to rising prices.

Publishing segment operating income was $166$180 million in the quarter, an increase of 21%106% compared to $137$88 million last year. Excluding the pension settlement gainfacility consolidation and asset impairment charges and workforce restructuring costs in the firstsecond quarter of 2009, first quarter operating income increased $62$31 million, or 59%21%. The increase reflects significantly lower operating expenses partially offset by moderating declines in operating revenues. Year-to-date publishing operating income was $345 million, compared to $227 million last year. Excluding facility consolidation and asset impairment charges, workforce restructuring costs and the pension gain last year, operating income increased by 35%.

Corporate expensesexpense in the firstsecond quarter of 2010 decreased 5% to $13.6 million from $14.3 million in the second quarter of 2009. Year-to-date corporate expense increased 38% to $19$33 million from $28 million a year ago due primarily to increased stock compensation expense, reflecting a substantially higher Companycompany stock price used in 2010 for the calculation of stock-based award values. Excluding stock compensation, corporate expenses on a year-to-date basis would have been 5% lower.

The $3$5 million increase in equity income in unconsolidated investees reflectsfor the quarter and the $8 million increase year-to-date reflect stronger results for certain newspaper partnerships and certain digital investments, particularly Classified Ventures, and certain newspaper partnerships.Ventures.

The Company’s interest expense for the firstsecond quarter was $43$42 million and $86 million year-to-date, down 11%.4% and 8% respectively. Total average outstanding debt for the firstsecond quarter was $3.0$2.8 billion in 2010 and $3.9$4.0 billion in 2009. For the year-to-date periods of 2010 and 2009, total average outstanding debt was $2.9 billion and $3.9 billion, respectively. The weighted average interest rate for total outstanding debt was 5.39%5.67% for the firstsecond quarter

The Company’s cash flow from operating activities was $292$441 million for the first threesix months of 2010, compared to $176$397 million for the first threesix months of 2009.

Cash flows used in the Company’sprovided by investing activities totaled $16$71 million for the threesix months of 2010, reflecting $9$20 million of capital spending, $15 million of payments for certain digital business acquisitions, and $3$4 million for investments. These cash outflows were partially offset by $5$97 million of proceeds from the sale of assets which includes proceeds from the sales of The Honolulu Advertiser and $6a small directory publishing operation in Michigan as well as proceeds of $28 million received in connection with the sale of auction rate securities held by CareerBuilder. The Company also received $13 million of proceeds from investments.

Cash flows used for financing activities totaled $271$453 million for the first threesix months of 2010 reflecting net debt payments of $262$435 million and payment of dividends totaling $9$19 million. The Company’s quarterly dividend of $0.04 per share, which was declared in the firstsecond quarter of 2010, totaled $9$10 million and was paid in AprilJuly 2010. Cash flows provided byused for financing activities totaled $389$365 million for the first threesix months of 2009. This reflects proceeds borrowed under the Company’s revolving credit agreements to pay down the then outstanding $563 million floating rate notes paid in May 2009. It also includes the payment of dividends totaling $91 million, which represents the Company’s fourth quarter 2008 dividend of $0.40 per share. During the first quarter of 2009, the Board of Directors reduced the quarterly dividend from $0.40 per share to $0.04 per share, a reduction of 90%.

The long-term debt of the Company is summarized below:

The Company’s foreign currency translation adjustment, included in accumulated other comprehensive loss and reported as part of shareholders’ equity, totaled $375$377 million at the end of the firstsecond quarter 2010 versus $416 million at the end of 2009. This change reflects a 7%6% decrease in the exchange rate for the British pound. Newsquest’s assets and liabilities at March 28,June 27, 2010 and December 27, 2009 were translated from the British pound to U.S. dollars at an exchange rate of 1.491.51 and 1.60, respectively. For the firstsecond quarter, Newsquest’s financial results were translated from the British pound to U.S. dollars at an average rate of 1.49 for 2010 compared to 1.54 for 2009. Year-to-date results were translated at an average rate of 1.57 for1.53 in 2010 compared to 1.441.49 for 2009.

The Company is exposed to foreign exchange rate risk primarily due to its operations in the United Kingdom, for which the British pound is the functional currency. If the price of the British pound against the U.S. dollar had been 10% more or less than the actual price, operating income for the firstsecond quarter and year-to-date period of 2010 would have increased or decreased approximately 2%1%.

Looking ahead, the Company expects to fund capital expenditures, interest, dividends and other operating requirements through cash flows from operations. The Company expects to fund debt maturities, acquisitions and investments through a combination of cash flows from operations, funds raised in the capital or credit markets, or through borrowing capacity under its credit facilities. The Company’s financial and operating performance and its ability to generate sufficient cash flow for these purposes and to maintain compliance with credit facility covenants are subject to certain risk factors as noted in the following section of this report.

Certain statements in this Quarterly Report on Form 10-Q contain forward-looking information. The words “expect,” “intend,” “believe,” “anticipate,” “likely,” “will” and similar expressions generally identify forward-looking statements. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results and events to differ materially from those anticipated in the forward-looking statements. The Company is not responsible for updating or revising any forward-looking statements, whether the result of new information, future events or otherwise, except as required by law.

Potential risks and uncertainties which could adversely affect the Company’s results include, without limitation, the following factors: (a) increased consolidation among major retailers or other events which may adversely affect business operations of major customers and depress the level of local and national advertising; (b) a continuance of the economic recessionary conditions in the U.S. and the UK or a further economic downturn leading to a continuing or accelerated decrease in circulation or local, national or classified advertising; (c) a decline in general newspaper readership and/or advertiser patterns as a result of competitive alternative media or other factors; (d) an increase in newsprint or syndication programming costs over the levels anticipated; (e) labor disputes which may cause revenue declines or increased labor costs; (f) acquisitions of new businesses or dispositions of existing businesses; (g) a decline in viewership of major networks and local news programming; (h) rapid technological changes and frequent new product introductions prevalent in electronic publishing; (i) an increase in interest rates; (j) a weakening in the British pound to U.S. dollar exchange rate; (k) volatility in financial and credit markets which could affect the value of retirement plan assets and the Company’s ability to raise funds through debt or equity issuances; (1) changes in the regulatory environment; (m) an other than temporary decline in operating results and enterprise value that could lead to further non-cash goodwill, or other intangible asset or property, plant and equipment impairment charges; (n) credit rating downgrades, which could affect the availability and cost of future financing; and (o) general economic, political and business conditions.