2015 ANNUAL REPORT
COMPANY PROFILE
GANNETT IS A LEADING
INTERNATIONAL, MULTI-PLATFORM
NEWS AND INFORMATION COMPANY
that delivers high-quality, trusted
content where and when consumers
want to engage with it on virtually
any device or digital platform. The
company’s operations comprise USA
TODAY, 92 local media organizations
in the U.S. and Guam, and in the U.K.,
Newsquest (the company’s wholly
owned subsidiary).
Gannett’s vast USA TODAY NETWORK
is powered by its award-winning
U.S. media organizations, with deep
roots across the country, and has a
combined reach of more than 100
million unique visitors monthly.
USA TODAY’s national content, which
has been a cornerstone of the national
news and information landscape for
more than three decades, is included
in 36 local daily Gannett publications
and in 23 non-Gannett markets.
USA TODAY is currently the
nation’s number one publication
in consolidated print and digital
circulation, according to the Alliance
for Audited Media’s December 2015
Publisher’s Statement, with total
daily circulation of 4.0 million and
Sunday circulation of 3.9 million, which
includes daily print, digital replica,
digital non-replica and branded
editions. There have been more than
22 million downloads of USA TODAY’s
award-winning app on mobile devices
and 3.7 million downloads of apps
associated with Gannett’s local
publications and digital platforms.
Newsquest has more than 150
local news brands online, mobile
and in print, and attracts nearly 24
million unique visitors to its digital
platforms monthly.
Photo: Desair Brown,
reader advocacy editor
at USA TODAY, records a video segment
for usatoday.com.
TABLE OF CONTENTS
BY THE NUMBERS
1 By the Numbers
3 Letter to Shareholders
7 Board of Directors
Form 10-K
Annual Report 1
WE MAKE A DIFFERENCE
Photo: On USA TODAY Make A Difference Day, millions of people across
the nation unite with a common mission: to improve the lives of others.
DEAR FELLOW
SHAREHOLDERS:
2015 was a milestone year for us, marking a new beginning and the start of
many exciting changes. Gannett spun off in late June 2015 from its former
parent, and when we did, we came out strong — the largest local to national
media network in the U.S. and one of the U.K.’s leading regional media groups.
Powered by integrated and award-winning news organizations with deep
roots in 92 local communities, plus USA TODAY, our domestic multi-platform
news network informs and engages more than 100 million unique visitors every
month through our diverse portfolio of digital, mobile, print and experiential
products. Overseas, Newsquest — with its more than 150 local news brands —
reaches half of all mainland households in the U.K., nearly 24 million visitors
a month online and approximately 6 million readers a week in print.
“2015 WAS A MILESTONE YEAR FOR US,
MARKING A NEW BEGINNING AND THE
START OF MANY EXCITING CHANGES.”
Since the time of the spin-off, we have continued to execute on our strategy
to further strengthen our financial profile, improve operating efficiencies and
launch initiatives to increase sales. We are combining all of our strengths to
build a very resilient organization for today and the future.
These improvements in our financial profile are demonstrated in our financial
statements. As of December 27, 2015, the company had zero funded debt,
nearly $200 million in cash, strong operating cash flows, a dividend yield of
about 4 percent and a $150 million board-authorized share buyback program.
Importantly, shareholders have been rewarded for our improving financial
profile as our shares have outperformed both our peer group and the
broader markets since the time of the spin-off through the end of 2015.
Annual Report 3
“WE CONTINUE TO INNOVATE
AND LEAD THE INDUSTRY
IN EXPERIMENTING WITH
NEW PLATFORMS.”
Early Successes
A mong our many accomplishments
this past year, Gannett has built an
impressive and diversified management
team. This team brings the necessary
experience across many different
industries and skill sets to provide
leadership and insight as we continue
our transformation. Other notable
actions include the implementation
of a $67 million cost reduction program
and the planned acquisition of Journal
Media Group (JMG), which is expected to
add 15 daily newspapers, 18 weeklies and
their affiliated digital properties to our
portfolio of trusted media brands.
At the time of this writing, we expect that
the acquisition of Journal Media Group
will be completed in the next few weeks.
JMG, which includes key markets such
as Milwaukee, WI, and Memphis and
Knoxville, TN, further expands our local
footprint and enables us to drive more
marketplace synergies. We believe it
is a great cultural fit as we merge the
best of each of our organizations. We
will continue to build on our strengths
as an industry leader with great local
to national scale, dedicated to the local
communities we serve and committed
to generating value for shareholders.
Just prior to our spin-off, Gannett
acquired the remaining 59.4 percent
interest in the Texas-New Mexico
Newspapers Partnership as well as the
Romanes Group in the U.K. Since then,
we have successfully integrated these
publications and their affiliated digital
products into the operating structure of
Gannett. With the JMG acquisition,
LETTER TO SHAREHOLDERS
the three transactions will contribute
well over $500 million in annual revenues
to Gannett’s top line. Because growing
our footprint is a core strategy, as well
as good business, we will continue to
assess both print and digital acquisition
opportunities as we focus on expanding
our reach as the best next-generation
media company for consumers
and businesses.
One Integrated Organization
Meanwhile, we have continued building
one integrated organization and have
unified our local and national media
brands under the USA TODAY NETWORK.
With the help of our more than 3,100
journalists, the USA TODAY NETWORK
is positioned to deliver high-quality
content and outstanding journalism to
more consumers than any other media
organization in the country.
“WE NOW RECEIVE MORE THAN
100 MILLION UNIQUE DIGITAL
VISITORS EVERY MONTH.”
By working together to share data and
information, we have had an exceptional
positive impact on the communities
we serve. For example, our Stingray
investigation about secretive cell-phone
tracking devices featured investigative
work in 60 markets and prompted a
review of more than 100 prosecutions
in Baltimore and other new rules across
the country. In addition, our Rape Kit
investigation included work from 85 local
markets and led to the release of about
$125 million in combined grants from
the Manhattan DA and the U.S. Justice
Department to test more than 100,000
rape evidence kits.
Digital-First Focus
We continue to lead with a digital-first
mindset and integrate digital products
within every part of the business.
As a result, we are seeing significant
growth in the number of digital unique
visitors and revenue, led by our flagship
brand, USA TODAY. Over the last four
quarters, we generated $677 million in
digital revenues. Overall, we now receive
more than 100 million unique digital
visitors every month across our powerful
local and national digital media brands,
reaching 39 percent of the total domestic
digital population (according to comScore
Media Metrix), which places us ahead of
Huffington Post and Buzzfeed. This digital
reach also ranks us among a select group
of digital publishers that can provide
premium scale to national advertisers.
It’s worth noting that our national digital
advertising revenue has been increasing
throughout the year and was up 32
percent in the fourth quarter (U.S.).
As part of our digital focus, we continue to
build our programmatic, audience-specific
digital advertising business.
Emerging Trends
and Innovation
We continue to innovate and lead the
industry in experimenting with new
platforms like mobile video. We also
sponsor an internal Innovation Challenge
program to harness the talent and great
ideas of our employees. In 2015, the
National Press Foundation honored
The Des Moines Register and the Gannett
product team as the first-ever recipients of
the ‘Best Use of Technology in Journalism’
award for their ‘Harvest of Change’ and
‘Iowa State Fair Soapbox’ projects.
With ‘Harvest of Change,’ The Des
Moines Register worked closely with
the Gannett product team to produce
a groundbreaking virtual reality (VR)
experience on Iowa agriculture.
The 3-D immersive tour of a southwest
Iowa family farm was the first of nine
VR experiences produced by journalists
and digital product experts within the
USA TODAY NETWORK. In addition to
‘Harvest of Change,’ The Des Moines
Register and the Gannett product
team provided live 360-degree coverage
of the speeches from the Iowa State
Fair Presidential Soapbox, giving at-
home viewers a first-of-its-kind, fully
immersive experience of this
Iowa State Fair tradition.
Beyond these award-winning projects,
we have received industry and consumer
accolades for our innovative efforts and
growing library of VR content.
Expanding Beyond Content
We are ramping up how we engage
with consumers by expanding beyond
content and developing experiential
events at the local and national levels,
ranging from coffee talks with reporters
and secret dinners at new restaurants
to food and wine events in key markets.
In addition, we expect to host high
school sports awards ceremonies with
professional athletes in 24 Gannett
markets this year.
We also are deepening engagement
with our consumers by curating and
developing additional products and
other content delivery models, such
as podcasts and specific themed
memberships around food and drink,
things to do, sports, and health and
wellness. For example, The Coloradoan
recently launched its EAT + DRINK
membership, which has created great
buzz with its unique events, community
outreach and engaging content. And
The Indianapolis Star’s ‘Things to Do’
app is the fastest-downloaded niche
app that The Star has ever launched.
Positive Trends
On the revenue side, about 75 percent of
our advertising revenues are from local
customers. We believe this mix provides
a more stable revenue base and is
less susceptible to secular headwinds
impacting the broader media market.
We also expect our local sales expertise,
national sales team, sales training
programs and research will provide
value to newly acquired local media
organizations as we continue to develop
a best-in-class sales force across Gannett
at all levels.
In addition, we are seeing positive trends
in digital-only subscriptions, with a year-
over-year increase of 39 percent.
We are proud that USA TODAY continues
to be the number one daily newspaper in
the U.S. in consolidated print and digital
circulation, according to the Alliance for
Audited Media’s December Publisher’s
Statement. Our total daily circulation of
4.0 million and Sunday circulation of 3.9
million include daily print, digital replica,
digital non-replica and branded editions.
Our branded editions include the USA
TODAY Local sections that are inserted
into 36 of our own local markets.
360-DEGREE VIDEO,
BLUE ANGELS STYLE.
With virtual reality and 360-degree
video, we are seeing the beginning
of a new medium that will likely
have a significant impact on news
and information delivery.
Today, people are truly amazed
by the experiences and new story
formats we are pioneering. Case
in point: USA TODAY’s 360-degree
video piece on the Blue Angels, the
Navy’s legendary flight squadron,
let consumers experience an
incredibly realistic aerial display.
It was so popular that Facebook
CEO Mark Zuckerberg posted
it on his Facebook page and
Business Insider named it the
number one 360-degree
video of 2015.
To see more, go to usatoday.com
for a 360-degree view of jets flying
inches from each other as they
execute breathtaking maneuvers.
Annual Report 5
“WE BELIEVE THAT WE
HAVE THE GREATEST TEAM
IN THE INDUSTRY.”
Photo: IndyStar headquarters in Indianapolis, IN.
Looking Ahead
Finally, I want to thank you for investing
in Gannett. I appreciate your continued
trust and confidence in our business.
Our Board of Directors, management
team and employees are committed
to enriching the lives of our consumers
while growing this company and
delivering value for our employees,
our readers and most importantly, our
shareholders. We remain focused on
producing exceptional journalism and
quality content, further expanding and
leveraging our combined scale and
operating efficiencies, and maintaining
our position of financial strength. I look
forward to sharing our achievements
with you going forward.
As we enter 2016, I am confident that
we have the right strategies and right
people in place to drive success and
deliver shareholder value in the
years to come.
Robert J. Dickey
President and CEO
Gannett Co., Inc.
our digital presence while returning
capital to shareholders. We expect
to continue to develop, organically
or through acquisition, digital platforms
and applications that will attract and
excite consumers as their consumption
habits continue to evolve. We’ve
already made great headway
in expanding our mobile, data
analytics and virtual reality
products and capabilities.
Our strategy continues to evolve
as market conditions change and
consumer behavior leads us in new
directions. Gannett has the right
strategy, the necessary resources
and the expertise to lead the
industry today and in the future.
The Gannett Family
Of course, at our foundation are
Gannett’s people, a family of forward-
thinking employees who nourish a
rich journalistic heritage and improve
the communities they serve — while
continually aligning our products with
the rapidly changing needs of our
readers and our advertisers. We believe
that we have the greatest team in the
industry. Together we will continue
to innovate, build our brands and
launch new products. Our customers —
consumers and advertisers — want to
be a part of that quality environment
we create, and they rely on our trusted
media brands. That is at the heart of
who we are and what we do, and is
what matters most to our success.
In February 2015, USA TODAY announced
partnership deals to include the USA
TODAY Local Edition in non-Gannett
markets. As of the end of 2015, the
local edition is included in 23
non-Gannett markets.
Gannett Is Leading the
Industry Transformation
We all know the print media business
is in the midst of a never-before-seen
transformation — a rapid movement in
consumption of news and information
by consumers from print to digital
platforms. This transformation, in turn,
presents a significant opportunity
for Gannett as advertisers shift their
spending patterns primarily toward
digital content. Today, Gannett’s
advertising revenue mix is 77 percent
print and 23 percent digital. In the
future, we believe this mix will look
much different. We don’t know exactly
when that future state will be upon
us, but it’s approaching rapidly
and Gannett is leading the
industry transformation.
Our strategy is to continue
consolidating local markets. Gannett
is in a unique position to do so, with
its fortress balance sheet, strong cash
flows and industry-leading efficiency,
scale and expertise. We believe there
is a significant opportunity to reduce
the overall cost of delivery in acquired
markets by consolidating printing and
distribution, design and back-office
operations. This strategy will provide
revenue, earnings and cash flow
growth, which provides the resources
for the investments necessary to grow
LETTER TO SHAREHOLDERS
BOARD OF DIRECTORS
JOHN JEFFRY LOUIS
ROBERT DICKEY
JOHN E. CODY
STEPHEN W. COLL
DONALD FELSINGER
Chairman, Gannett Co.,
Inc. Co-founder and
Former Chairman, Parson
Capital Corporation
Other directorships and
trusteeships: The Olayan
Group; S. C. Johnson &
Son, Inc.; and chairman
of the U.S./ U.K. Fulbright
Commission.
Age 52.
(a,b)
President and CEO.
Formerly President,
Gannett U.S. Community
Publishing Division;
formerly Newspaper
Division, Senior Group
President, Gannett’s Pacific
Group and Chairman of
Phoenix Newspapers Inc.
Other directorships:
Newspaper Association of
America; Community Anti-
Drug Coalitions of America
(CADCA)
Age 58.
(d)
Former Executive Vice
President and Chief
Operating Officer of
Broadcast Music, Inc.
Dean of the Graduate
School of Journalism for
Columbia University in
New York
Other directorships:
Tennessee Performing Arts
Center.
Age 56.
(a,c)
Age 68.
(a,b)
Former Executive
Chairman, Sempra Energy
Other directorships: Archer-
Daniels-Midland (ADM) and
Northrop Grumman Corp.
Age 67.
(b,c)
LILA IBRAHIM
LARRY KRAMER
TONY PROPHET
DEBRA A. SANDLER
CHLOE SLADDEN
Chief Business Officer,
Coursera
Former President and
Publisher of USA TODAY
Other directorships:
Team4Tech.
Age 45.
(a,d)
Other directorships and
trusteeships: Harvard
Business Publishing,
Syracuse University
Age 65.
(d)
Corporate Vice President,
Education Marketing,
Microsoft Corporation
Age 56.
(c,d)
President and CEO,
La Grenade Group, LLC
Other directorships and
trusteeships: Hofstra
University, The Ad Council,
LEAD, Executive Leadership
Council.
Age 55.
(b,c)
Co-founder and Principal
of #angels and former
Vice President, Media,
Twitter, Inc.
Age 40.
(c,d)
Board Committees:
(a) Member of Audit Committee
(b) Member of Executive Compensation Committee
(c) Member of Nominating and Public Responsibly Committee
(d) Member of Transformation Committee
Annual Report 7
“USA TODAY IS THE NATION’S NUMBER
ONE PUBLICATION IN CONSOLIDATED
PRINT AND DIGITAL CIRCULATION.”
Source: The Alliance for Audited Media’s December 2015 Publisher’s Statement.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 27, 2015
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-36874
GANNETT CO., INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or Other Jurisdiction of Incorporation or Organization)
7950 Jones Branch Drive, McLean, Virginia
(Address of principal executive offices)
47-2390983
(I.R.S. Employer Identification No.)
22107-0910
(Zip Code)
Registrant’s telephone number, including area code: (703) 854-6000
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Common Stock, par value $0.01 per share
Name of Each Exchange on Which Registered
The New York Stock Exchange
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
No
Securities registered pursuant to Section 12(g) of the Act: None
Yes
No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes
No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12
months (or for such shorter period that the registrant was required to submit and post such files).
Yes
No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K (Check box if no delinquent filers).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting
company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange
Act:
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
No
As of June 26, 2015 the last business day of the registrant’s second fiscal quarter of 2015, the registrant’s common stock was not held by
any non-affiliates.
As of January 29, 2016, 116,082,033 shares of the registrant’s Common Stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The definitive proxy statement relating to the registrant’s Annual Meeting of Shareholders to be held on May 10, 2016, is incorporated
by reference in Part III to the extent described therein.
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INDEX TO GANNETT CO., INC.
2015 FORM 10-K
Part I
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Part II
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities . . . . . . .
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . .
Item No.
1
1A.
1B.
2
3
4
5
6
7
7A.
Quantitative and Qualitative Disclosures about Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8
9
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . . . . . . . . . . . . . . . . . . . . .
9A.
Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10
11
12
13
14
15
Part III
Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters . . . . . . . . . . . . . . . .
Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Part IV
Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
68
2
PART I
We are digitally focused and have a significant digital presence.
Every month, approximately 100 million unique visitors access the
USA TODAY NETWORK content through desktops, smartphones
and tablets. There have been more than 22 million downloads of
USA TODAY’s award-winning app on mobile devices and
3.7 million downloads of apps associated with our local publications.
Newsquest is a digital leader in the U.K. where its network of web
sites attracts nearly 24 million unique visitors monthly.
Our comprehensive operations also include commercial printing,
marketing and data services. Certain of our businesses have strategic
relationships with online businesses of our former parent, including
CareerBuilder, Cars.com, and G/O Digital, a digital marketing
services business.
We generate revenue primarily through both print and digital
advertising and subscriptions to our publications. In addition to USA
TODAY, our local publications and affiliated products operate
through fully integrated shared support, sales and service platforms.
Our diversified set of revenue streams ensures that the value of our
financial, creative and human resources is maximized.
Our domestic local publishing circulation revenue is driven
through our All Access Content Subscription Model. All
subscriptions include access to content via multiple platforms,
including websites, smartphones and tablet applications, e-
newspapers and print editions with subscription prices that vary
according to the frequency of delivery of the print edition. In
addition to the subscription model, single-copy print editions
continue to be sold at retail outlets and account for approximately
15% of daily and 23% of Sunday net paid and verified circulation
volume.
In recent years, our operating results have been negatively
impacted by declining revenues that reflect general trends in the
print newspaper industry. As our core business continues to be
impacted by declining print revenue trends, we are effectively
managing our cost structure in relation to those trends.
We employ a multi-platform approach to advertising, which can
be specifically tailored to the individual needs of many levels of
advertisers, from small, locally-owned merchants to large, complex
businesses. We offer our advertising clients multiple platforms and
products including display advertising, desktop, mobile, tablet and
other specialty publications.
We have a national advertising sales force focused on the largest
national advertisers and accounts, and we have relationships with
outside agencies that specialize in the sale of national ads. Our
diverse sales force, unique industry scale and broad portfolio of print
and digital products positions us to attract and serve a wide array of
advertising partners.
ITEM 1. BUSINESS
Overview
Gannett is a leading international, multi-platform news and
information company that delivers high-quality, trusted content
where and when consumers want to engage with it on virtually any
device or platform. We are one of the largest, most geographically
diverse local content providers in the U.S., operating in 33 states and
Guam. We operate and report in a single segment.
On June 29, 2015, the separation of Gannett from our former
parent was completed when our former parent distributed 98.5% of
the outstanding shares of Gannett common stock (also referred to
herein as the “spin-off” or “separation”) to its stockholders on a pro
rata basis. Following the distribution, our former parent owns 1.5%
of Gannett’s outstanding common stock and our former parent will
continue to own our shares for a period of time not to exceed five
years after the distribution.
Our operations comprise USA TODAY, 92 daily local
publications in the U.S. and Guam, more than 400 non-daily
publications in the U.S., and, through our Newsquest subsidiary,
more than 150 local news brands online, mobile and in print in the
U.K. USA TODAY’s national content, which has been a cornerstone
of the national news landscape for more than three decades, is
included in 36 of our local daily publications. USA TODAY is
currently the nation’s No. 1 newspaper in consolidated print and
digital circulation, according to the Alliance for Audited Media’s
December 2015 Publisher’s Statement, with total daily circulation of
4.0 million and Sunday circulation of 3.9 million, which includes
daily print, digital replica, digital non-replica, and branded editions.
Since its introduction in 1982, USA TODAY has developed a
recognizable and respected brand that we leverage across various
businesses. For example, USA TODAY Sports Media Group has
used the USA TODAY brand name to successfully launch “For the
Win” (ftw.usatoday.com) as a unique digital property that provides
sports fans with social news and curated analysis. The USA TODAY
brand immediately boosts the credibility of any affiliated property,
enabling even the most tailored, niche content platforms to increase
their audience. Recently, we combined our local media brands with
USA TODAY under the USA TODAY NETWORK, to create the
largest local to national media network in the country. The network
is powered by an integrated and award-winning news organization
with deep roots in all of our communities, USA TODAY, with more
than 3,100 journalists has a combined reach of more than 100
million unique visitors monthly. USA TODAY print content is
produced at facilities in McLean, VA, and transmitted digitally to
printing facilities around the country.
In the U.K., our wholly-owned subsidiary, Newsquest, has a
total average readership of approximately 6 million every week. The
availability of our award-winning content to audiences whenever,
wherever and however they choose makes it a go-to information
source for consumers and preferred platform for advertisers in all
industries, sizes and locations. Newsquest’s digital audience
increased substantially during 2015, with audited average daily
unique users rising by 24%. Newsquest contributed 14% of our total
operating revenues for 2015, a decrease of less than 1% from 2014.
3
Expand the integration of national and local content. In 2015,
we continued our transformation into one, integrated organization as
we united our local and national media brands under the USA
TODAY NETWORK, to create the largest local to national media
network in the country. The network is powered by an integrated and
award-winning news organization with deep roots in 92 local
communities, plus USA TODAY, more than 3,100 journalists and a
combined reach of more than 100 million unique browsers monthly.
The network provides the opportunity for advertisers to scale their
messages from hyper-local to national while reaching millions of
consumers through a variety of platforms. Gannett will continue to
invest in growing the USA TODAY NETWORK to include more
local markets and new and engaging platforms. In 2014, we
launched a pioneering project to enhance our local market coverage
by leveraging our unique ability to generate and distribute national
content. In 36 local publications, we now include a local edition of
USA TODAY inside the print and e-Editions of our local
publications. The USA TODAY local edition includes national
News, Money and Lifestyle content, while USA TODAY’s sports
coverage is integrated into local sports sections. In addition, we have
syndicated the local edition of USA TODAY into non-Gannett
publications in several states, and have expanded the offerings in the
local edition to include weekend Personal Finance and Sunday Life
sections.
Focus on operational excellence. While maintaining a
commitment to quality journalism, we will continue to maximize the
efficiency of our print, sales, administrative, and distribution
functions to increase profitability. In 2015, in addition to ongoing
cost reductions related to declines in volumes, we initiated a $67
million cost reduction program focused on efficiency of back office
operations production and distribution costs. We will continue to
leverage our economies of scale to reduce supply chain costs,
provide significant shared editorial content, and streamline our
creative and design interactions with advertisers in print and online.
We believe that these efforts will enable us to drive profitability and
strengthen customer relationship.
Strategy
We are committed to a business strategy that drives returns for
shareholders, delights audiences through a robust user experience
and engages with consumers to strengthen the brands of advertising
partners and drive revenue. Key elements of our strategy to achieve
these objectives are as follows:
Supplement organic growth with selective acquisitions. We are
well-positioned to pursue value-enhancing investments and
acquisitions — and will be both opportunistic and disciplined in our
acquisition strategy. We were virtually debt-free upon completion of
the separation, and our balance sheet and cash flow generation are
strong in comparison to peers, providing us with the financial
flexibility to pursue opportunities arising in a consolidating industry.
We are a strong operator, and our strengths in information gathering
and reporting, coupled with our valuable integrated content sharing,
advertising, sales and administrative platforms, will help drive
innovative approaches to revenue generation as well as efficiency
gains in acquired properties.
Maintain a strong, flexible balance sheet. Through proactive
cost management and appropriate financial policies, we remain
committed to maintaining financial flexibility in order to execute our
organic growth strategies and be in position to make accretive
acquisitions.
Capital Allocation. Our approach to capital allocation is a key
source of financial strength in support of current initiatives and also
provides flexibility for future opportunities. In July 2015, our Board
of Directors authorized a three-year, $150 million share repurchase
program. As of Dec. 27, 2015, no shares have been repurchased
under this program.
In addition, our Board of Directors declared a cash dividend of
$0.16 in each of the third and fourth quarters of 2015, an annualized
dividend of $0.64, allowing us to maximize the allocation of capital
to provide strong return to shareholders during our growth and
expansion efforts.
Continue to enhance digital platforms. As the publishing
industry has evolved and readers increasingly consume content on
digital platforms, we have made and will continue to make
significant investments in online and mobile offerings across both
local and national markets. We will continue to develop compelling
content and ensure that readers can access their trusted local and
national news and information sources on every platform. The
unparalleled credibility and trust of our news brands carries over to
digital platforms, and differentiates our online products from digital
competitors. We also will focus on continuing to develop a
compelling mobile experience, including video content, across our
network.
4
Strategic Acquisitions
In June 2015, we completed the acquisition of the remaining 59.4%
interest in the Texas-New Mexico Newspapers Partnership (“TNP”)
that we did not own. The deal was completed through the
assignment of our interest in the California Newspapers Partnership
(“CNP”) and additional cash consideration, resulting in a pretax gain
on our equity investment of $22 million. As a result, we own 100%
of TNP and no longer have any ownership interest in CNP. The
acquisition added one news organization in Texas, six in New
Mexico, and four in Pennsylvania. Also, in late May 2015, we
acquired the Romanes Media Group (“RMG”), located in the U.K.
Romanes includes one daily and 28 weekly publications and their
associated digital platforms. The transaction was completed by our
subsidiary, Newsquest.
On Oct. 7, 2015 we entered into a merger agreement for the
acquisition of Journal Media Group, Inc. (“JMG”) for approximately
$280 million. JMG is a media company with print and digital
publishing operations serving 14 U.S. markets in nine states,
including the Milwaukee Journal Sentinel, the Knoxville News
Sentinel, and The Commercial Appeal in Memphis.
Our pending acquisition of JMG will create a portfolio of 106
local markets in the U.S., accelerating the growth of our unique
digital domestic visitors each month. We also believe the acquisition
will enable the combined company to realize significant operating
efficiencies as the properties in JMG’s markets benefit from the
consolidated functions we have established over the last several
years, and the regional proximity of some of the JMG markets
enables us to further utilize joint printing and distribution assets.
General Company Information
We and our predecessor companies were founded by Frank E.
Gannett and associates in 1906 and incorporated in 1923. We were
separated from our former parent, TEGNA Inc., on June 29, 2015
through the issuance of 115 million common shares. We are listed on
the New York Stock Exchange under the symbol GCI. We are
headquartered in McLean, VA, near Washington, DC.
Operations
Audience reach: As we pursue our mission to meet consumers’
news and information needs anytime, anywhere and in any form, we
remain focused on an audience aggregation strategy. We consider the
reach and coverage of our products across multiple platforms and
measure the frequency with which consumers interact with each to
ensure audiences remain highly engaged.
We gather and analyze aggregated audience data which allows
advertising sales staff to provide detailed information to advertisers
about how best to reach their potential customers through the most
effective product combination and frequency. Our significant reach
across the country results in the ability to deliver key demographic
segments at scale to drive effectiveness for our advertising
customers. Our ability to provide effective targeting for our clients to
reach their best customers is enhanced with insights derived from
first- and third-party data.
In addition to the audience-based initiative, we continue to
measure customer attitudes, behaviors and opinions to better
understand customers’ digital use patterns and use qualitative
research with audiences and advertisers to better determine their
needs.
Advertising: We have experienced advertising departments that
sell retail, classified and national advertising across multiple
platforms including print, online, mobile and tablet, as well as niche
publications. We have a national advertising sales force focused on
the largest national advertisers and a separate sales organization to
support classified employment sales - the Digital Employment Sales
Center. We also have relationships with outside agencies that
specialize in the sale of national ads.
We sell and track our advertising sales in three primary
categories:
• Retail display advertising is associated with local merchants or
locally owned businesses. Retail includes regional and national
chains - such as department and grocery stores - that sell in the
local market.
• National advertising is display advertising principally from
advertisers who are promoting national products or brands.
Examples are pharmaceuticals, travel, airlines, or packaged
goods. Both retail and national ads also include preprints,
typically stand-alone multiple page fliers that are inserted in the
daily and Sunday print product.
• Classified advertising includes the major categories of
automotive, employment, legal and real estate/rentals.
Advertising for classified segments is published in the classified
sections or other sections within the publication, on affiliated
digital platforms, and in niche magazines that specialize in the
segment.
5
Local and national advertisers find it challenging to manage the
complexity of their marketing investments, particularly digital
solutions. They are seeking to reach an increasingly elusive audience
and are struggling to influence attitudes and behavior at each stage
of the purchase path. To help advertisers solve this problem, we
created a refined approach to media planning to present advertisers
with targeted, integrated solutions. The planning process leverages
our considerable strength in data analysis and secondary research.
The result is a tailored media/marketing plan where the individual
elements work in concert to amplify and reinforce the advertiser’s
message.
Our consultative multi-media sales approach can be tailored to
all levels of advertisers, from small, locally owned merchants to
large, complex businesses. Along with this sales approach, we have
intense sales and management training programs. Digital product
integration, sales pipeline management and a five-step consultative
sales process continue to be focus areas, with formal training being
delivered in all company markets. Front-line sales managers in all
markets participate in intensive training to help them coach their
sales executives for top performance.
Online Operations: We continue to invest in a significant
expansion of mobile offerings across local markets, including native
applications for iPhone and Android smartphones and iPads and
tablet-optimized web sites. The mobile audience at our U.S markets
continued to grow in 2015, ultimately making up approximately
55% of total page views, with mobile web sites and the native phone
applications leading the way.
We have made a clear commitment to provide consumers with
the content they most want on the devices they use to access news
and information about their local communities. Mobile page views
increased 22% and mobile visitors increased 56% in 2015 on a year-
over-year basis.
Social media continues to be an important element in our
audience growth strategy. We implemented a social media content
management software tool to allow our journalists and marketing
and customer service teams to more effectively manage multiple
social media profiles and significantly increase their responsiveness
and engagement with consumers.
We continue to enjoy a long-standing relationship of trust in our
local business communities. Our advertising sales staff delivers
solutions for our customers. Our digital marketing services provide
localized marketing solutions to national and small- to medium-sized
businesses, helping them navigate the increasingly complex and
diverse world of digital marketing.
The overriding objective of our digital strategy is to provide
compelling content that best serves our customers. A key reason
customers turn to a company digital platform is to find local news
and information. The credibility of the local media organization, a
known and trusted information source, includes its digital platforms
(tablet, mobile applications and its web site) and differentiates these
digital sources from competing digital products. This allows our
local media organizations to compete successfully as information
providers.
A second objective in our digital strategy is to leverage the
natural synergies between the local media organizations and local
digital platforms. The local content, customer relationships, news
and advertising sales staff, and promotional capabilities are all
competitive strengths for us. Our strategy is to use these strengths to
create strong and timely content, sell packaged advertising products
that meet the needs of advertisers, operate efficiently and leverage
the known and trusted brand of the local media organization.
Circulation: We deliver content in print and online, via mobile
devices and tablets. For local publications, our All Access Content
Subscription Model has more than 1.5 million digitally activated
subscribers, enabling them easy access to content-rich products. In a
trend generally consistent with the domestic publishing industry,
print circulation volume declined in 2015.
EZ Pay, a payment system which automatically deducts
subscription payments from customers’ credit cards or bank
accounts, enhances the subscriber retention rate. At the end of 2015,
EZ Pay was used by 63.7% of all subscribers at Gannett sites. For
our local U.S. publications, single-copy sales to non-subscribers
represent approximately 15% of daily and 23% of Sunday net paid
circulation volume.
The single copy price of USA TODAY at newsstands and
vending machines was $2.00 in 2015. Mail subscriptions are
available nationwide and abroad, and home, hotel and office delivery
is available in many markets. Approximately 81% of USA
TODAY’S net paid circulation results are from single-copy sales at
newsstands, vending machines or to hotels who provide them to their
guests. The remainder is from home and office delivery, mail,
educational and other sales.
Production and Distribution: Gannett Publishing Services
(GPS) was formed to improve the efficiency and reduce the cost
associated with the production and distribution of the Gannett
printed products across all divisions in the U.S. GPS manages the
production and circulation operations for all of our community
newspapers and USA TODAY.
GPS leverages our existing assets, including employee talent
and experience, physical plants and equipment, and our vast national
and local distribution networks. GPS is responsible for imaging,
advertising production, internal and external printing and packaging,
and internal and external distribution.
Almost all U.S. local publications and USA TODAY employees
utilize a common content management system. The common content
management system enables the communication and collaboration
needed to share content and to build strong design remotely. Our five
design studios provide design services to all our local publications,
enhancing operating efficiencies and the design quality of our
publications.
Newsquest operates its publishing activities around regional
centers to maximize the use of management, finance, printing and
personnel resources. This enables the group to offer readers and
advertisers a range of attractive products across the market. The
clustering of titles and, usually, the publication of a free print
product alongside a paid-for print product, allows cross-selling of
advertising serving the same or contiguous markets, satisfying the
needs of its advertisers and audiences.
Newsquest produces free and paid-for print products with quality
local editorial content. Newsquest also distributes advertising
leaflets in the communities it serves. Most of Newsquest’s paid-for
distribution is outsourced to wholesalers, although direct delivery is
employed as well to maximize circulation sales opportunities.
6
Competition: Our publishing operations and affiliated digital
We are focused on energy efficiency. We have relocated many
employees from older facilities to newer, more energy efficient
offices. We have also installed more energy efficient systems and
appliances in many of our buildings. For 2016, we have identified
new projects to reduce power consumption further.
Raw Materials: Newsprint, which is the basic raw material used
in print publication, has been and may continue to be subject to
significant price changes from time to time. We purchase newsprint
primarily from 13 domestic and global suppliers. During 2015, our
total newsprint consumption was 316,168 metric tons, including
consumption by USA TODAY, tonnage at non-Gannett print sites
and Newsquest. Newsprint consumption was 16% less than in 2014.
We continue to moderate newsprint consumption and expense
through the use of lighter basis weight paper. We believe that
available sources of newsprint, together with present inventories,
will continue to be adequate to supply the needs of our publishing
operations.
Joint Operating Agencies: Our publishing subsidiary in Detroit
participates in a joint operating agency (“JOA”). The JOA performs
the production, sales and distribution functions for the subsidiary
and another publishing company under a joint operating agreement.
Operating results for the Detroit JOA are fully consolidated along
with a charge for the minority partner’s share of profits.
Employees
We employed approximately 18,700 persons as of Dec. 27, 2015.
Approximately 13% of those employed by us and our subsidiaries in
the U.S. are represented by labor unions. They are represented by 42
local bargaining units, most of which are affiliated with one of seven
international unions under collective bargaining agreements. These
agreements conform generally with the pattern of labor agreements
in the publishing industry. We do not engage in industry-wide or
company-wide bargaining. Our U.K. subsidiaries bargain with two
unions over working practices, wages and health and safety issues
only.
Gannett Foundation
The Gannett Foundation supports non-profit activities in
communities where we do business and contributes to a variety of
charitable causes through its Community Grant Program. One of the
Gannett Foundation’s community action grant priorities is
environmental conservation.
platforms compete with other media and digital ventures for
advertising. Publishing operations also compete for circulation and
readership against other professional news and information
operations and amateur content creators. Very few of our publishing
operations have daily print competitors that are published in the
same city. Most of our print products compete with other print
products published in suburban areas, nearby cities and towns, free-
distribution and paid-advertising publications (such as weeklies),
and other media, including magazines, television, direct mail, cable
television, radio, outdoor advertising, directories, e-mail marketing,
web sites and mobile-device platforms. Newsquest’s publishing
operations are in competitive markets. Their principal competitors
include other regional and national newspaper and magazine
publishers, other advertising media such as broadcast and billboard,
Internet-based news and other information and communication
businesses.
Development of opportunities in, and competition from, digital
media, including web site, tablet and mobile products, continues to
increase. Through internal development, content distribution
programs, acquisitions and partnerships, our efforts to explore new
opportunities in the news, information and communications business
and in audience generation will keep expanding.
We continue to seek more effective ways to engage with our
local communities using all available media platforms and tools.
Environmental Regulation and Sustainability: We are
committed to protecting the environment. Our goal is to ensure our
facilities comply with federal, state, local and foreign environmental
laws and incorporate appropriate environmental practices and
standards in our operations. We are one of the industry leaders in the
use of recycled newsprint. In 2015, we purchased 90,250 metric tons
of newsprint containing recycled content. During 2015, 23% of our
newsprint purchases contained recycled content, with an average
recycled content of 48%.
Our operations use inks, solvents and fuels. The use,
management and disposal of these substances are regulated by
environmental agencies. We retain a corporate environmental
consultant who, along with internal and outside counsel, oversees
regulatory compliance and preventive measures. Some of our
subsidiaries have been included among the potentially responsible
parties in connection with sites that have been identified as possibly
requiring environmental remediation.
We are committed to making smart decisions to protect the
environment and manage our environmental impact responsibly. We
have taken a number of steps to reduce our environmental impact
and underscore our commitment to sustainability.
We have been an industry pioneer in switching to
environmentally-friendly press products, such as low-VOC (Volatile
Organic Compound) washes and fountain solutions and citrus-based
press cleaners. All colored inks we use are soy-based rather than
petroleum-based, and delivered in reusable containers. Our waste ink
is recycled, either on-site or at the manufacturer’s facility. We
continue to minimize landfill usage by collecting used paper, plastics
and other materials for recycling and have substantially reduced
water usage by switching to dry methods of photo processing and
plate processing.
We have reduced greenhouse emissions by using newsprint
vendors who practice sustainability, switching to light-weight
newsprint, and reducing the web width of the newspapers printed.
7
MARKETS WE SERVE
DAILY LOCAL MEDIA ORGANIZATIONS AND AFFILIATED DIGITAL PLATFORMS
Average 2015 Circulation - Print and
Digital Replica and Non-Replica
Afternoon
Morning
Sunday
28,476
Founded
1829
State
Territory
Alabama
City
Montgomery
Arizona
Phoenix
Arkansas
Mountain Home
California
Palm Springs
Salinas
Visalia
Colorado
Fort Collins
Delaware
Wilmington
Florida
Brevard County
Guam
Indiana
Fort Myers
Pensacola
Tallahassee
Hagatna
Indianapolis
Lafayette
Muncie
Richmond
Iowa
Des Moines
Iowa City
Kentucky
Louisville
Louisiana
Alexandria
Lafayette
Monroe
Opelousas
Shreveport
Maryland
Salisbury
Local media organization/web site
Montgomery Advertiser
www.montgomeryadvertiser.com
The Arizona Republic
www.azcentral.com
The Baxter Bulletin
www.baxterbulletin.com
The Desert Sun
www.mydesert.com
The Salinas Californian
www.thecalifornian.com
Visalia Times-Delta/Tulare
Advance-Register
www.visaliatimesdelta.com
www.tulareadvanceregister.com
Fort Collins Coloradoan
www.coloradoan.com
The News Journal
www.delawareonline.com
FLORIDA TODAY
www.floridatoday.com
The News-Press
www.news-press.com
Pensacola News Journal
www.pnj.com
Tallahassee Democrat
www.tallahassee.com
Pacific Daily News
www.guampdn.com
The Indianapolis Star
www.indystar.com
Journal and Courier
www.jconline.com
The Star Press
www.thestarpress.com
Palladium-Item
www.pal-item.com
The Des Moines Register
www.desmoinesregister.com
Iowa City Press-Citizen
www.press-citizen.com
The Courier-Journal
www.courier-journal.com
Alexandria Daily Town Talk
www.thetowntalk.com
The Daily Advertiser
www.theadvertiser.com
The News-Star
www.thenewsstar.com
Daily World
www.dailyworld.com
The Times
www.shreveporttimes.com
The Daily Times
www.delmarvanow.com
8
22,330
211,414
7,939
30,555
6,207
16,890
20,131
65,066
42,634
47,565
29,981
29,317
11,954
496,390
1890
1901
34,114
1927
1871
1859
24,857
1873
104,570
1871
80,656
1966
67,185
1884
47,892
1889
43,587
1905
10,392
1944
127,064
259,341
1903
20,649
19,489
9,279
84,305
9,939
27,277
1829
24,134
1899
13,299
1831
174,208
1849
1860
106,871
202,164
1868
14,042
20,111
17,306
3,778
28,971
12,338
18,391
1883
27,243
1865
20,988
1890
4,813
1939
42,478
1871
16,008
1900
DAILY LOCAL MEDIA ORGANIZATIONS AND AFFILIATED DIGITAL PLATFORMS
Average 2015 Circulation - Print and
Digital Replica and Non-Replica
Afternoon
Morning
Sunday
15,171
Founded
1900
State
Territory
Michigan
City
Battle Creek
Detroit
Lansing
Livingston County
Port Huron
Minnesota
St. Cloud
Mississippi
Hattiesburg
Jackson
Missouri
Springfield
Montana
Great Falls
Nevada
Reno
New Jersey
Asbury Park
Bridgewater
Cherry Hill
East Brunswick
Morristown
Vineland
New Mexico
Alamogordo
Carlsbad
Deming
Farmington
Las Cruces
Silver City
New York
Binghamton
Elmira
Ithaca
Poughkeepsie
Rochester
Westchester County
North Carolina
Asheville
Local media organization/web site
Battle Creek Enquirer
www.battlecreekenquirer.com
Detroit Free Press
www.freep.com
Lansing State Journal
www.lansingstatejournal.com
Daily Press & Argus
www.livingstondaily.com
Times Herald
www.thetimesherald.com
St. Cloud Times
www.sctimes.com
Hattiesburg American
www.hattiesburgamerican.com
The Clarion-Ledger
www.clarionledger.com
Springfield News-Leader
www.news-leader.com
Great Falls Tribune
www.greatfallstribune.com
Reno Gazette-Journal
www.rgj.com
Asbury Park Press
www.app.com
Courier News
www.mycentraljersey.com
Courier-Post
www.courierpostonline.com
Home News Tribune
www.mycentraljersey.com
Daily Record
www.dailyrecord.com
The Daily Journal
www.thedailyjournal.com
Alamogordo Daily News
www.alamogordonews.com
Current-Argus
www.currentargus.com
Deming Headlight
www.demingheadlight.com
Farmington Daily Times
www.daily-times.com
Las Cruces Sun-News
www.lcsun-news.com
Silver City Sun News
www.scsun-news.com
Press & Sun-Bulletin
www.pressconnects.com
Star-Gazette
www.stargazette.com
The Ithaca Journal
www.theithacajournal.com
Poughkeepsie Journal
www.poughkeepsiejournal.com
Rochester Democrat and Chronicle
www.democratandchronicle.com
The Journal News
www.lohud.com
Asheville Citizen-Times
www.citizen-times.com
9
10,647
160,213
33,588
8,163
14,095
19,684
43,373
27,905
21,684
30,506
73,363
8,938
32,259
17,803
12,582
9,983
3,811
3,597
1,492
9,012
13,770
144
26,493
11,917
8,934
20,409
88,815
53,446
28,269
886,376
1832
44,819
1855
11,572
1843
20,843
1900
24,179
1861
7,202
9,675
1897
49,981
1837
49,889
1893
23,104
1885
52,989
1870
109,060
1879
11,610
1884
43,096
1875
21,195
1879
14,952
1900
1864
3,977
1898
3,863
1889
1880
9,532
1901
15,980
1881
1896
35,181
1904
18,375
1828
1815
26,984
1785
131,456
1833
67,893
1829
43,096
1870
DAILY LOCAL MEDIA ORGANIZATIONS AND AFFILIATED DIGITAL PLATFORMS
State
Territory
Ohio
City
Bucyrus
Chillicothe
Cincinnati
Coshocton
Fremont
Lancaster
Mansfield
Marion
Newark
Port Clinton
Zanesville
Oregon
Salem
Pennsylvania
Chambersburg
Hanover
Lebanon
York
South Carolina
Greenville
South Dakota
Sioux Falls
Tennessee
Clarksville
Jackson
Murfreesboro
Nashville
St. George
El Paso
Burlington
McLean
Staunton
Utah
Texas
Vermont
Virginia
Wisconsin
Appleton
Fond du Lac
Green Bay
Manitowoc
Marshfield
Oshkosh
Sheboygan
Local media organization/web site
Telegraph-Forum
www.bucyrustelegraphforum.com
Chillicothe Gazette
www.chillicothegazette.com
The Cincinnati Enquirer
www.cincinnati.com
Coshocton Tribune
www.coshoctontribune.com
The News-Messenger
www.thenews-messenger.com
Lancaster Eagle-Gazette
www.lancastereaglegazette.com
News Journal
www.mansfieldnewsjournal.com
The Marion Star
www.marionstar.com
The Advocate
www.newarkadvocate.com
News Herald
www.portclintonnewsherald.com
Times Recorder
www.zanesvilletimesrecorder.com
Statesman Journal
www.statesmanjournal.com
Public Opinion
www.publicopiniononline.com
The Evening Sun
www.eveningsun.com
Lebanon Daily News
www.ldnews.com
York Daily Record
www.ydr.com
The Greenville News
www.greenvilleonline.com
Argus Leader
www.argusleader.com
The Leaf-Chronicle
www.theleafchronicle.com
The Jackson Sun
www.jacksonsun.com
The Daily News Journal
www.dnj.com
The Tennessean
www.tennessean.com
The Spectrum
www.thespectrum.com
El Paso Times
www.elpasotimes.com
The Burlington Free Press
www.burlingtonfreepress.com
USA TODAY*
www.usatoday.com
The Daily News Leader
www.newsleader.com
The Post-Crescent
www.postcrescent.com
The Reporter
www.fdlreporter.com
Green Bay Press-Gazette
www.greenbaypressgazette.com
Herald Times Reporter
www.htrnews.com
Marshfield News-Herald
www.marshfieldnewsherald.com
Oshkosh Northwestern
www.thenorthwestern.com
The Sheboygan Press
www.sheboyganpress.com
10
Average 2015 Circulation - Print and
Digital Replica and Non-Replica
Afternoon
Morning
Sunday
3,328
Founded
1923
7,300
8,656
1800
109,687
207,968
1841
3,199
4,872
7,091
3,909
1842
1856
8,503
1807
20,471
1885
6,522
1880
11,249
12,663
1820
1,995
1864
11,087
1852
35,343
1851
15,409
1869
12,253
1915
14,935
1872
71,315
1915
96,559
1874
55,082
1881
19,410
1808
19,424
1848
12,739
1848
198,214
1812
14,545
1963
42,855
1881
25,848
1827
15,258
5,519
10,017
28,858
11,817
9,375
12,004
31,316
42,905
28,161
9,805
12,837
9,033
86,189
12,505
34,213
22,523
4,010,437
3,866,618
1982
11,449
33,039
8,613
37,537
8,469
10,968
12,590
13,784
1904
49,302
1853
11,114
1870
58,460
1915
10,008
1898
6,630
1927
15,192
1868
15,483
1907
DAILY LOCAL MEDIA ORGANIZATIONS AND AFFILIATED DIGITAL PLATFORMS
State
Territory
City
Stevens Point
Wausau
Wisconsin Rapids
Local media organization/web site
Stevens Point Journal
www.stevenspointjournal.com
Central Wisconsin Sunday
Wausau Daily Herald
www.wausaudailyherald.com
The Daily Tribune
www.wisconsinrapidstribune.com
Average 2015 Circulation - Print and
Digital Replica and Non-Replica
Afternoon
6,468
Morning
Sunday
13,756
16,947
12,675
6,920
Founded
1873
1903
1914
* USA TODAY morning and Sunday figure is the average print, digital replica, digital non-replica and branded editions according to the
Alliance for Audited Media’s December 2015 Quarterly Publisher’s Statement.
DAILY PAID-FOR LOCAL MEDIA ORGANIZATIONS AND AFFILIATED DIGITAL PLATFORMS/NEWSQUEST PLC
Local media organization/web site
City
Echo**: www.echo-news.co.uk
Basildon
Lancashire Telegraph: www.lancashiretelegraph.co.uk
Blackburn
The Bolton News: www.theboltonnews.co.uk
Bolton
Daily Echo: www.bournemouthecho.co.uk
Bournemouth
Telegraph & Argus: www.thetelegraphandargus.co.uk
Bradford
The Argus: www.theargus.co.uk
Brighton
The Gazette**: www.gazette-news.co.uk
Colchester
The Northern Echo: www.thenorthernecho.co.uk
Darlington
Evening Times: www.eveningtimes.co.uk
Glasgow
The Herald: www.heraldscotland.com
Glasgow
The National: www.thenational.scot
Glasgow
Greenock Telegraph****: www.greenocktelegraph.co.uk
Greenock
South Wales Argus: www.southwalesargus.co.uk
Newport
Oxford Mail: www.oxfordmail.co.uk
Oxford
Southern Daily Echo: www.dailyecho.co.uk
Southampton
Swindon Advertiser: www.swindonadvertiser.co.uk
Swindon
Dorset Echo: www.dorsetecho.co.uk
Weymouth
Worcester News: www.worcesternews.co.uk
Worcester
The Press: www.yorkpress.co.uk
York
* Circulation figures are according to ABC results for the period January - June 2015
** Publishes Monday-Friday
*** Founded in 2014. No certified circulation reported to date
**** Certificate per December 2014 whilst not owned by Newsquest
Circulation*
Monday-Saturday
21,352
13,304
11,157
16,395
16,737
12,736
11,058
27,819
29,951
34,379
***
11,264
12,110
11,770
20,211
11,056
12,131
8,113
17,342
Founded
1969
1886
1867
1900
1868
1880
1970
1870
1876
1783
2014
1857
1892
1928
1888
1854
1921
1937
1882
Non-daily publications: Essex, London, Midlands, North East, North West, Northern Ireland, Scotland, South Coast, South East, South
and East Wales, South West, Yorkshire.
Mobile and Tablet: We power more than 500 mobile and tablet products and partner with service providers to deliver news alerts and
mobile marketing campaigns. We have also developed and deployed leading applications for iPad, iPhone, Kindle, Android, Windows
and BlackBerry.
11
USA TODAY/USATODAY.com
Headquarters and editorial offices: McLean, VA
Print sites: Albuquerque, NM; Boston, MA; Cleveland, OH; Columbia, SC; Columbus, OH; Dallas, TX; Denver, CO; Des Moines, IA;
Detroit, MI; Fort Lauderdale, FL; Houston, TX; Indianapolis, IN; Kansas City, MO; Las Vegas, NV; Los Angeles, CA; Louisville, KY;
Milwaukee, WI; Minneapolis, MN; Mobile, AL; Nashville, TN; Oklahoma City, OK; Orlando, FL; Phoenix, AZ; Rochester, NY; Rockaway,
NJ; St. Louis, MO; St. Petersburg, FL; Salt Lake City, UT; San Jose, CA; Seattle, WA; Springfield, MO; Springfield, VA; Wilmington, DE;
Winston-Salem, NC
Advertising offices: Atlanta, GA; Chicago, IL; Dallas, TX; Detroit, MI; Los Angeles, CA; McLean, VA; New York, NY; San Francisco, CA
USA TODAY Sports Media Group: http://ftw.usatoday.com; www.thebiglead.com; www.spanningthesec.com; http://
fantasy.usatoday.com/; www.hoopshype.com; http://usatodayhss.com; www.bnqt.com; www.thehuddle.com; www.baseballhq.com; http://
sportswire.usatoday.com/; www.mmajunkie.com; http://boxingjunkie.com/; http://trainingjunkie.com/; www.thedraftwire.com;
www.steelerswire.com; www.bearswire.com; www.broncoswire.com; www.thefieldsofgreen.com
Headquarters: Los Angeles
Advertising offices: Los Angeles, CA; McLean, VA; New York, NY
Reviewed.com: www.reviewed.com
Headquarters: Cambridge, MA
Gannett Media Technologies International: www.gmti.com
Headquarters: Chesapeake, VA
Regional office: Cincinnati, OH
Non-daily publications: Weekly, semi-weekly, monthly or bimonthly publications in Alabama, Arizona, Arkansas, California, Colorado,
Delaware, Florida, Guam, Indiana, Iowa, Kentucky, Louisiana, Maryland, Michigan, Minnesota, Mississippi, Missouri, Montana, Nevada,
New Jersey, New Mexico, New York, North Carolina, Ohio, Oregon, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Utah,
Vermont, Virginia, Wisconsin
Gannett Publishing Services: www.gannettpublishingservices.com
Headquarters: McLean, VA
Gannett Satellite Information Network: McLean, VA
GANNETT ON THE NET: News and information about us is available on our web site, www.gannett.com. In addition to news and other information about
us, we provide access through this site to our annual report on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K and all
amendments to those reports as soon as reasonably practicable after we file or furnish them electronically to the Securities and Exchange Commission
(SEC). Certifications by our Chief Executive Officer and Chief Financial Officer are included as exhibits to our SEC reports (including to this Form 10-K).
We also provide access on this web site to the charters of our Audit, Transformation, Executive Compensation and Nominating and Public Responsibility
Committees and other important governance documents and policies, including our Ethics Policy, Principles of Corporate Governance and Related Person
Transaction Policy. Copies of all of these corporate governance documents are available to any shareholder upon written request made to our Secretary at
the headquarters address. We will disclose on this web site changes to, or waivers of, our corporate Ethics Policy.
12
ITEM 1A. RISK FACTORS
In addition to the other information contained or incorporated by
reference into this Form 10-K, prospective investors should consider
carefully the following risk factors before investing in our securities.
The risks described below may not be the only risks we face.
Additional risks that we do not yet perceive or that we currently
believe are immaterial may adversely affect our business and the
trading price of our securities.
Risks Relating to Our Business
Changes in economic conditions are expected to continue to affect
advertising demand.
Our operating results depend on the relative strength of the economy
as well as the strength or weakness of regional and national
economic factors. Our operating revenues are sensitive to
discretionary spending available to advertisers and subscribers in the
markets we serve, as well as advertiser and subscriber perceptions of
economic trends and uncertainty. Total advertising revenues have
declined in recent years, reflecting general trends in the newspaper
industry and soft economic conditions affecting advertising demand,
particularly in the retail sector. A decline in the economic prospects
of advertisers, subscribers or the economy in general could alter
current or prospective advertisers’ and subscribers’ spending
priorities. All of these factors may further materially and adversely
impact our ability to grow or maintain our operating revenue.
Increasing popularity of digital media and the shift in newspaper
readership demographics, consumer habits and advertising
expenditures from traditional print to digital media have adversely
affected and may continue to adversely affect our operating
revenues and may require significant capital investments due to
changes in technology.
Technology in the media industry continues to evolve rapidly.
Advances in technology have led to an increasing number of
methods for delivery of news and other content and have resulted in
a wide variety of consumer demands and expectations, which are
also rapidly evolving. If we are unable to exploit new and existing
technologies to distinguish our products and services from those of
our competitors or adapt to new distribution methods that provide
optimal user experiences, our business and financial results may be
adversely affected.
The increasing number of digital media options available online,
through social networking tools and through mobile and other
devices that distribute news and other content, is expanding
consumer choice significantly. Faced with a multitude of media
choices and a dramatic increase in accessible information,
consumers may place greater value on when, where, how and at
what price they consume content than they do on the source or
reliability of such content. Further, as existing newspaper readers get
older, younger generations may not develop similar readership
habits. News aggregation websites and customized news feeds (often
free to users) may reduce our traffic levels by creating a disincentive
for the audience to visit our websites or use our digital applications.
If traffic levels stagnate or decline, we may not be able to create
sufficient advertiser interest in our digital businesses or to maintain
or increase the advertising rates of the inventory on our digital
platforms.
In addition, the range of advertising choices across digital
products and platforms and the large inventory of available digital
advertising space have historically resulted in significantly lower
rates for digital advertising than for print advertising. Consequently,
our digital advertising revenue may not be able to replace print
advertising revenue lost as a result of the shift to digital
consumption. Reduced demand for our offerings or a surplus of
advertising inventory could lead to a reduction in pricing and
advertising spending, which could have an adverse effect on our
businesses and assets. Our ability to maintain and improve the
performance of our customers’ advertising on our digital properties
may impact rates we achieve in the marketplace for our advertising
inventory.
Stagnation or a decline in website traffic levels due to subscription
models or other factors may materially and adversely affect our
advertiser base and advertising rates and result in a decline in
digital revenue.
Subscription models require users to pay for content after accessing
a limited number of pages or news articles for free on our websites
each month. Our ability to build a subscriber base on our digital
platforms through subscription offers depends on market acceptance,
consumer habits, pricing, an adequate online infrastructure and other
factors. If our subscribers opt out of the subscription offers in greater
numbers than anticipated, we may not generate expected revenue. In
addition, the subscription model may result in fewer page views or
unique visitors to our websites if digital viewers are unwilling to pay
to gain access to our content. Stagnation or a decline in website
traffic levels may materially and adversely affect our advertiser base
and advertising rates and result in a decline in digital revenue.
Our business operates in highly competitive markets with constant
technological developments, and our ability to maintain market
share and generate operating revenues depends on how effectively
we compete with existing and new competition and on how
technological developments affect our business.
Our business operates in highly competitive markets. Our brands
compete for audiences and advertising revenue with newspapers and
other media such as the Internet, magazines, broadcast, cable and
satellite television, radio, direct mail, outdoor billboards and yellow
pages. Some of our current and potential competitors have greater
financial and other resources than we do.
Our publications generate significant percentages of their
advertising revenue from a few categories, including automotive,
employment and real estate classified advertising, and retail
advertising. Websites dedicated to classified advertising have
become significant competitors of our print editions and digital
platforms. As a result, even in the absence of a recession or
economic downturn, technological, industry or other changes
specifically affecting these advertising sources could reduce
advertising revenues and materially and adversely affect our
financial condition and results of operations.
13
We rely on revenue from the printing and distribution of
publications for third parties that may be subject to many of the
same business and industry risks facing us.
We generate a portion of our revenue from printing and distributing
third-party publications, and our relationships with these third parties
are generally pursuant to short-term contracts. As a result, if
macroeconomic and industry trends, such as the sensitivity to
perceived economic weakness of discretionary spending available to
advertisers and subscribers, circulation declines, shifts in consumer
habits and the increasing popularity of digital media affect those
third parties, we may lose, in whole or in part, this source of
revenue.
Newsprint prices may continue to be volatile.
Newsprint was one of our largest expenses during the year ended
Dec. 27, 2015. The price of newsprint has historically been volatile,
and may increase as a result of various factors, including declining
newsprint supply as a result of paper mill closures and conversions
to other grades of paper; and other factors that adversely impact
supplier profitability, including increases in operating expenses
caused by raw material and energy costs, and currency volatility. In
addition, the consolidation of newsprint mills in the U.S. and Canada
over the years has reduced the number of suppliers, which has led to
increases in newsprint prices. Decreases in our current consumption
levels, further supplier consolidation or the inability to maintain our
existing relationships with our newsprint suppliers may materially
and adversely impact newsprint prices in the future. In addition, we
rely on suppliers for deliveries of newsprint. The availability of our
newsprint supply may be affected by various factors, including labor
unrest, transportation issues and other disruptions that may affect
deliveries of newsprint. If newsprint prices increase significantly or
we experience significant disruptions in the availability of our
newsprint supply in the future, our operating results could be
adversely affected.
Our success depends on our ability to respond and adapt to
changes in technology and consumer behavior.
Technology in the media industry continues to evolve rapidly.
Advances in technology have led to an increasing number of
methods for the delivery and consumption of news and other
content. These developments are driving changes in consumer
behavior as consumers seek more control over the ways in which
they consume content. Unless we are able to use new and existing
technologies to distinguish our products and services from those of
our competitors and develop in a timely manner compelling new
products and services that engage users across platforms, our
business, financial condition and prospects may be adversely
affected.
Changes in technology and consumer behavior pose a number of
challenges that could adversely affect our revenues and competitive
position. For example, among others:
• we may be unable to develop products for mobile devices or
other digital platforms that consumers find engaging, that work
with a variety of operating systems and networks or that achieve
a high level of market acceptance;
•
there may be changes in user sentiment about the quality or
usefulness of our existing products;
• news aggregation websites and customized news feeds may
reduce our traffic levels by creating a disincentive for users to
visit our websites or use our digital products;
•
•
failure to successfully manage changes in search engine
optimization and social media traffic to increase our digital
presence and visibility may reduce our traffic levels;
technical or other problems could prevent us from delivering our
products in a rapid and reliable manner or otherwise affect the
user experience;
• new delivery platforms may lead to pricing restrictions, the loss
of distribution control and the loss of a direct relationship with
consumers;
• mobile devices, including smartphones and tablets, may present
challenges for traditional display advertising; and
•
technology developed to block the display of advertising on
websites could proliferate.
Responding to these changes may require significant investment.
We may be limited in our ability to invest funds and resources in
digital products, services or opportunities, and we may incur
research and development costs in building, maintaining and
evolving our technology infrastructure.
14
The value of our assets or operations may be diminished if our
information technology systems fail to perform adequately or if we
are the subject of a significant data breach or cyber-attack.
Our information technology systems are critically important to
operating our business efficiently and effectively. We rely on our
information technology systems to manage our business data,
communications, news and advertising content, digital products,
order entry, fulfillment and other business processes. The failure of
our information technology systems to perform as anticipated could
disrupt our business and could result in transaction errors, processing
inefficiencies, late or missed publications, and loss of sales and
customers, causing our business and results of operations to be
impacted.
Furthermore, attempts to compromise information technology
systems occur regularly across many industries and sectors, and we
may be vulnerable to security breaches beyond our control. We
invest in security resources and technology to protect our data and
business processes against risk of data security breaches and cyber-
attack, but the techniques used to attempt attacks are constantly
changing. A significant breach or successful attack could have a
negative impact on our operations or business reputation. We
maintain cyber risk insurance, but this insurance may not be
sufficient to cover all losses from any future breaches of our
systems.
Security breaches and other network and information systems
disruptions could affect our ability to conduct our business
effectively.
Our online systems store and process confidential subscriber,
employee and other sensitive personal data, and therefore
maintaining our network security is of critical importance. The
security of these network and information systems and other
technologies is important to our business activities. We use third-
party technology and systems for a variety of operations, including
encryption and authentication technology, employee email, domain
name registration, content delivery to customers, back-office support
and other functions. Our systems, and those of third parties upon
which our business relies, may be vulnerable to interruption or
damage that can result from natural disasters, fires, power outages,
acts of terrorism or other similar events, or from deliberate attacks
such as computer hacking, computer viruses, worms or other
destructive or disruptive software, process breakdowns, denial of
service attacks, malicious social engineering or other malicious
activities, or any combination of the foregoing.
Despite the security measures we and our third-party service
providers have taken, our computer systems, and those of our
vendors, have been, and will likely continue to be, subject to attack.
We have implemented controls and taken other preventative
measures designed to strengthen our systems against attacks,
including measures designed to reduce the impact of a security
breach at our third-party vendors. Although the costs of the controls
and other measures we have taken to date have not had a material
effect on our financial condition, results of operations or liquidity,
there can be no assurance as to the cost of additional controls and
measures that we may conclude are necessary in the future.
There can also be no assurance that the actions, measures and
controls we have implemented will be effective against future
attacks or be sufficient to prevent a future security breach or other
disruption to our network or information systems, or those of our
third-party providers. Such an event could result in a disruption of
our services or improper disclosure of personal data or confidential
information, which could harm our reputation, require us to expend
resources to remedy such a security breach or defend against further
attacks, divert management’s attention and resources or subject us to
liability under laws that protect personal data, resulting in increased
operating costs or loss of revenue.
Foreign exchange variability could materially and adversely affect
our consolidated operating results.
Newsquest operates in the U.K. and its operations are conducted in
foreign currency, primarily the British pound sterling. Our financial
statements are denominated in U.S. dollars. Newsquest results for
2015 were translated to U.S. dollars at the average rate of 1.53.
Weakening of the British pound sterling to the U.S. dollar exchange
rate could diminish Newsquest’s earnings contribution to our
consolidated results of operations.
Changes in the regulatory environment could encumber or impede
our efforts to improve operating results or the value of assets.
Our publishing operations are subject to government regulation in
the jurisdictions in which we operate and our websites, which are
accessible worldwide, may be subject to laws regarding the Internet
even in jurisdictions where we do not do business. Changing
regulations, the introduction of new laws and regulations, and
penalties for any failure to comply may result in increased costs,
reduced valuations or other impacts, all of which may adversely
impact our future profitability.
Future strategic acquisitions, investments and partnerships could
pose various risks, increase our leverage and significantly impact
our ability to expand our overall profitability.
Acquisitions, including our pending acquisition of JMG for cash
consideration of approximately $280 million, involve inherent risks,
such as potentially increasing leverage and debt service requirements
and combining company cultures and facilities, which could have a
material adverse effect on our results of operations or cash flow and
could strain our human resources. We may be unable to successfully
implement effective cost controls, achieve expected synergies or
increase revenues as a result of any future acquisition. Acquisitions
may result in our assumption of unexpected liabilities and may result
in the diversion of management’s attention from the operation of our
business. Strategic investments and partnerships with other
companies expose us to the risk that we may not be able to control
the operations of our investee or partnership, which could decrease
the amount of benefits we realize from a particular relationship. We
are also exposed to the risk that our partners in strategic investments
and infrastructure may encounter financial difficulties which could
lead to disruption of investee or partnership activities, or impairment
of assets acquired, which would adversely affect future reported
results of operations and stockholders’ equity. In addition, we may
be unable to obtain financing necessary to complete acquisitions on
attractive terms or at all. The failure to obtain regulatory approvals
may prevent us from completing or realizing the anticipated benefits
of acquisitions. Furthermore, acquisitions may subject us to new or
different regulations which could have an adverse effect on our
operations.
15
The value of our existing intangible assets may become impaired,
depending upon future operating results.
Goodwill and other intangible assets were approximately $576
million as of Dec. 27, 2015, representing approximately 24% of our
total assets. We periodically evaluate our goodwill and other
intangible assets to determine whether all or a portion of their
carrying values may no longer be recoverable, in which case a
charge to earnings may be necessary. Any future evaluations
requiring an asset impairment charge for goodwill or other intangible
assets would adversely affect future reported results of operations
and stockholders’ equity, although such charges would not affect our
cash flow.
Adverse results from litigation or governmental investigations
could impact our business practices and operating results.
From time to time, we are a party to litigation and regulatory,
environmental and other proceedings with governmental authorities
and administrative agencies. Adverse outcomes in lawsuits or
investigations could result in significant monetary damages or
injunctive relief that could adversely affect our operating results or
financial condition as well as our ability to conduct our businesses as
they are presently being conducted.
We may be unable to adequately protect our intellectual property
and other proprietary rights that are material to our business, or to
defend successfully against intellectual property infringement
claims by third parties.
Our ability to compete effectively depends in part upon our
intellectual property rights, including our trademarks, copyrights and
proprietary technology. Our use of contractual provisions,
confidentiality procedures and agreements, and trademark,
copyright, patent, unfair competition, trade secret and other laws to
protect our intellectual property rights and proprietary technology
and the use of the rights and technology of others may not be
adequate. Advancements in technology have made the unauthorized
duplication and wide dissemination of content easier, making
enforcement of intellectual property rights more challenging.
Litigation may be necessary to enforce our intellectual property
rights and to protect our proprietary technology, or to defend against
claims by third parties that the conduct of our businesses or our use
of intellectual property infringes upon such third party’s intellectual
property rights, including trademark, copyright and patent
infringement. If we are unable to protect and enforce our intellectual
property rights, we may not realize the full value of our intellectual
property assets and our business and profitability may suffer.
Furthermore, any intellectual property litigation or claims brought
against us, whether or not meritorious, could result in substantial
costs and diversion of our resources, and there can be no assurances
that favorable final outcomes will be obtained in all cases. The terms
of any settlement or judgment may require us to pay substantial
amounts to the other party or cease exercising our rights in such
intellectual property. In addition, we may have to seek a license to
continue practices found to be in violation of a third party’s rights,
which may not be available on reasonable terms, or at all. Our
business, financial condition or results of operations may be
materially and adversely affected as a result.
Our ability to operate effectively could be impaired if we fail to
attract and retain our senior management team.
Our success depends, in part, upon the continuing contributions of
our senior management team. The loss of the services of any
members of our senior management team or the failure to attract
qualified persons to our senior management team may have a
material adverse effect on our business or our business prospects.
Labor strikes, lockouts and protracted negotiations could lead to
business interruptions and increased operating costs.
As of Dec. 27, 2015, union employees comprised approximately
13% of our workforce. We are required to negotiate collective
bargaining agreements on an ongoing basis. Complications in labor
negotiations can lead to work slowdowns or other business
interruptions and greater overall employee costs. If we or our
suppliers are unable to renew expiring collective bargaining
agreements, it is possible that the affected unions or others could
take action in the form of strikes or work stoppages. Such actions,
higher costs in connection with these agreements or a significant
labor dispute could materially and adversely affect our business by
disrupting our ability to provide customers with our products or
services. Depending on its duration, any lockout, strike or work
stoppage may have an adverse effect on our operating revenues, cash
flows or operating income, or the timing thereof.
Volatility in global financial markets directly affects the value of
our pension plan assets and liabilities.
Our two largest retirement plans, which account for more than 95%
of total pension plan assets, were underfunded as of Dec. 27, 2015
by $492 million on a U.S. GAAP basis. Various factors, including
future investment returns, discount rates and potential pension
legislative changes, impact the timing and amount of pension
contributions we may be required to make in the future.
Risks Related to the Separation
We have limited operating history as a separate public company
and may be unable to operate profitably as a stand-alone company.
We have limited operating history as a separate, stand-alone public
company. We cannot be certain that, as a separate public company,
operating results will continue at historical levels, or that we will be
profitable. Additionally, prior to the separation, we relied on our
former parent for various financial, administrative and managerial
services in conducting our operations. Following the separation, we
maintain our own credit and banking relationships and perform our
own financial and investor relations functions. Prior to the
separation, we shared economies of scope and scale in costs,
employees, vendor relationships and customer relationships. We
could experience some increased costs as a result of the absence of
such economies of scale. Any such additional or increased costs may
have a material adverse effect on our business, financial condition,
or results of operations.
16
Our historical financial information may not be indicative of our
future results as a separate public company.
The historical financial information we have included in this report
for the period prior to the separation may not reflect what our results
of operations, financial position and cash flows would have been had
we been a separate public company during the periods presented or
be indicative of what our results of operations, financial position and
cash flows may be in the future as a separate public company. The
historical financial information for the periods prior to the
distribution does not reflect the increased costs associated with being
a separate public company, including changes in our cost structure,
personnel needs, financing, and operations of our business as a result
of the distribution. Our historical financial information for the
periods prior to the distribution reflects allocations for services
historically provided by our former parent, and we expect these
allocated costs to be different from the actual costs we will incur for
these services in the future as a separate public company. In some
instances, the costs incurred for these services as a separate public
company may be higher than the share of expenses allocated to our
business historically.
We may incur increased costs after or as a result of the separation
from our former parent that may cause our profitability to decline.
Historically, prior to the separation our business operated as one of
our former parent’s segments, and our former parent performed
many corporate functions for our operations, including managing
financial and human resources systems, internal auditing, investor
relations, treasury services, select accounting functions, finance and
tax administration, benefits administration, legal, governmental
relations and regulatory functions. Following the separation, our
former parent has provided transitional support to us with respect to
certain of these functions. We have been replicating certain systems,
infrastructure and personnel to which we no longer have access from
our former parent. However, we may misjudge our requirements for
these services and systems on a stand-alone basis, and may incur
greater than expected capital and other costs associated with
developing and implementing our own support functions in these
areas. These costs may exceed the costs we pay to our former parent
during the transition period. In addition, there may be an adverse
operational effect on our business as a result of the significant time
our management and other employees and internal resources will
need to dedicate to building these capabilities during the first few
years following the separation that otherwise would be available for
other business initiatives and opportunities. As we operate these
functions independently, if we have not developed adequate systems
and business functions, or obtained them from other providers, we
may not be able to operate the company effectively and our
profitability may decline.
We or our former parent may fail to perform under various
transition services agreements and other agreements that were
executed as part of the separation or we may fail to have necessary
systems and services in place when certain of the transition
services agreements expire.
In connection with the separation, we and our former parent entered
into a separation agreement and various other agreements, including
a transition services agreement, a tax matters agreement and an
employee matters agreement. These agreements include any
necessary indemnifications related to liabilities and obligations. The
transition services agreement provided for the performance of
certain services by each company for the benefit of the other for a
limited period of time after the separation. If our former parent is
unable to satisfy its obligations under these agreements, including its
indemnification obligations, we could incur operational difficulties
or losses. If we do not have agreements with other providers of these
services once these agreements expire or terminate, we may not be
able to operate our business effectively and our profitability may
decline.
There could be significant liability if the distribution were
determined to be a taxable transaction.
In connection with the distribution, our former parent received an
opinion from outside tax counsel to the effect that the requirements
for tax-free treatment under Section 355 of the Code would be
satisfied. The opinion relied on certain facts, assumptions,
representations and undertakings from our former parent and us
regarding the past and future conduct of the companies’ respective
businesses and other matters. If any of these facts, assumptions,
representations or undertakings were incorrect or not satisfied, we
and our stockholders may not be able to rely on the opinion of tax
counsel and could be subject to significant tax liabilities.
Notwithstanding the opinion of tax counsel, the IRS could
determine upon audit that the separation is taxable if it determines
that any of these facts, assumptions, representations or undertakings
were incorrect or violated or if it disagrees with the conclusions in
the opinion, or for other reasons, including as a result of certain
significant changes in the share ownership of our company or our
former parent after the separation. If the separation were determined
to be taxable for U.S. federal income tax purposes, our former parent
and its stockholders that are subject to U.S. federal income tax could
incur significant U.S. federal income tax liabilities, and we could
incur significant liabilities.
We may be unable to engage in certain corporate transactions
because such transactions could jeopardize the tax-free status of
the distribution.
Under the tax matters agreement that we entered into with our
former parent, we are restricted from taking any action that prevents
the distribution and related transactions from being tax-free for U.S.
federal income tax purposes. Under the tax matters agreement, for
the two-year period following the distribution, we are prohibited,
except in certain circumstances, from:
•
entering into any transaction resulting in the acquisition of 40%
or more of our stock or substantially all of our assets, whether by
merger or otherwise;
• merging, consolidating or liquidating;
issuing equity securities beyond certain thresholds;
repurchasing our capital stock beyond certain thresholds; and
ceasing to actively conduct our business.
•
•
•
17
These restrictions may limit our ability to pursue certain strategic
transactions or other transactions that we may believe to be in the
best interests of our stockholders or that might increase the value of
our business. In addition, under the tax matters agreement, we are
required to indemnify our former parent against any such tax
liabilities as a result of the acquisition of our stock or assets, even if
we did not participate in or otherwise facilitate the acquisition.
We may not achieve some or all of the expected benefits of the
separation, and the separation may materially and adversely affect
our business.
We may be unable to achieve the full strategic and financial benefits
expected to result from the separation, or such benefits may be
delayed or not occur at all. The separation was expected to provide
the following benefits, among others:
•
a distinct investment identity allowing investors to evaluate the
merits, strategy, performance and future prospects of our
business separately from our former parent;
• more efficient allocation of capital for both our former parent
and us;
• direct access by us to the capital markets;
•
•
ability to pursue value-enhancing acquisitions with fewer
regulatory obstacles in two consolidating industries; and
facilitating incentive compensation arrangements for employees
that are more directly tied to the performance of the relevant
company’s business, and enhancing employee hiring and
retention by, among other things, improving the alignment of
management and employee incentives with performance and
growth objectives, while at the same time creating an
independent equity structure that facilitates our ability to affect
future acquisitions utilizing our common stock.
We may not achieve these and other anticipated benefits for a
variety of reasons, including, among others: (a) following the
separation, we may be more susceptible to market fluctuations and
other adverse events than if we were still a part of our former parent;
and (b) following the separation, our business will be less diversified
than our former parent’s business prior to the separation. If we fail to
achieve some or all of the benefits expected to result from the
separation, or if such benefits are delayed, our business, financial
conditions and results of operations could be materially and
adversely affected.
A portion of our advertising revenues is earned under affiliation
agreements which may be terminated or amended to provide for
less favorable terms following the separation.
In connection with the separation, we entered into a modified
affiliation agreement with CareerBuilder, which is majority owned
by our former parent, and Cars.com, which is wholly owned by our
former parent. These modified affiliation agreements are intended to
permit our publications to continue to earn advertising revenues
from CareerBuilder and Cars.com for up to five years following the
separation, although each may be terminated earlier in certain
circumstances including, in the case of Cars.com, if we fail to
achieve specified performance standards. We expect that the terms of
the modified affiliate agreements will result in lower advertising
revenue than was the case prior to the distribution. There can also be
no assurance that our publications will be able to renew these new
affiliation agreements at the end of the five-year term on similar
terms, or at all, or continue to earn the same level of advertising
revenues under such affiliation agreements.
If we cease to earn advertising revenues under the modified
affiliation agreements with CareerBuilder and Cars.com or the
amount of such revenues is materially reduced, our operating
revenues, financial condition and results of operations could be
materially and adversely affected.
Fulfilling our obligations incidental to being a public company,
including with respect to the requirements of and related rules
under the Sarbanes-Oxley Act of 2002, will place significant
demands on our management, administrative and operational
resources, including accounting and information technology
resources.
Our financial results previously were included in the consolidated
results of our former parent, and our reporting and control systems
were appropriate for those of subsidiaries of a public company. Prior
to the distribution, we were not directly subject to reporting and
other requirements of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), and Section 404 of the Sarbanes-
Oxley Act of 2002. As a result of the separation, we are now subject
to such reporting and other requirements, which will require, among
other things, annual management assessments of the effectiveness of
our internal controls over financial reporting and a report by our
independent registered public accounting firm addressing these
assessments. These and other obligations will place significant
demands on our management, administrative and operational
resources, including accounting and information technology
resources.
Risks Relating to our Debt Agreements
We have only a limited independent history of obtaining financing
from banks or through public markets to satisfy capital
requirements in operating our business.
Historically, our working capital requirements and capital for our
general corporate purposes, including acquisitions and capital
expenditures, were satisfied as part of the corporate-wide cash
management policies of our former parent. We may need to obtain
additional financing from banks, through public offerings or private
placements of debt or equity securities, strategic relationships or
other arrangements, which may or may not be available and may be
more costly. In addition, the cost of capital for our business may be
higher than our former parent’s cost of capital prior to the separation.
Our debt agreements contain restrictions that may limit our
flexibility in operating our business.
Our debt agreements contain various covenants that limit our
flexibility in operating our businesses, including our ability to
engage in specified types of transactions. Subject to certain
exceptions, these covenants restrict our ability and the ability of our
subsidiaries to, among other things:
• permit certain liens on current or future assets;
•
•
enter into certain corporate transactions;
incur additional indebtedness;
• make certain payments or declare certain dividends or
distributions;
• dispose of certain property;
• prepay or amend the terms of other indebtedness; and
•
enter into certain transactions with affiliates.
18
Risks Relating to our Stock
We cannot guarantee the timing, amount or payment of dividends
on our common stock.
The timing, declaration, amount and payment of future dividends to
stockholders will fall within the discretion of our board of directors.
The board’s decisions regarding the payment of dividends will
depend on many factors, such as our financial condition, earnings,
capital requirements, any future debt service obligations, covenants
associated with any of our future debt service obligations, industry
practice, legal requirements, regulatory constraints and other factors
that the board deems relevant. Our ability to pay dividends will
depend on our ongoing ability to generate cash from operations and
on our access to the capital markets.
Certain provisions of our certificate of incorporation, by-laws, tax
matters agreement, separation and distribution agreement,
employee matters agreement, transition services agreement, and
Delaware law may discourage takeovers and limit our ability to
use, acquire, or develop certain competing businesses.
Our amended and restated certificate of incorporation and amended
and restated by-laws contain certain provisions that may discourage,
delay or prevent a change in our management or control over us. For
example, our amended and restated certificate of incorporation and
amended and restated by-laws, collectively:
•
authorize the issuance of preferred stock that could be issued by
our Board of Directors to thwart a takeover attempt;
• provide that vacancies on our Board of Directors, including
vacancies resulting from an enlargement of our Board of
Directors, may be filled only by a majority vote of directors then
in office;
• place limits on which stockholders may call special meetings of
stockholders, and limit the actions that may be taken at such
stockholder-called special meetings;
• prohibit stockholder action by written consent; and
•
establish advance notice requirements for nominations of
candidates for elections as directors or to bring other business
before an annual meeting of our stockholders.
These provisions could discourage potential acquisition
proposals and could delay or prevent a change in control, even
though a majority of stockholders may consider such proposal, if
effected, desirable. Such provisions could also make it more difficult
for third parties to remove and replace the members of the Board of
Directors. Moreover, these provisions may inhibit increases in the
trading price of our common stock that may result from takeover
attempts or speculation.
Under the tax matters agreement entered into at the time of the
separation, we agreed to indemnify our former parent for certain tax
related matters, and we may be unable to take certain actions as a
result. We are unable to take certain actions because such actions
could jeopardize the tax-free status of the distribution. Such
restrictions could be significant, in addition, the separation and
distribution agreement, the tax matters agreement, the employee
matters agreement and the transition services agreement cover
specified indemnification and other matters that may arise after the
distribution. The separation and distribution agreement, the tax
matters agreement, the employee matters agreement and the
transition services agreement may have the effect of discouraging or
preventing an acquisition of us or a disposition of our business. In
addition, to the extent these agreements contain exclusivity or non-
compete provisions, they may restrict our ability to use a competing
service or to compete with our counterparty, which could have the
effect of restricting our ability to maximize our performance in the
provision of services, such as digital marketing services, online
career services or online automobile sales services,.
Our amended and restated certificate of incorporation designates
the state courts of the State of Delaware, or, if no state court
located in the State of Delaware has jurisdiction, the federal court
for the District of Delaware, as the sole and exclusive forum for
certain types of actions and proceedings that may be initiated by
our stockholders, which could discourage lawsuits against us and
our directors and officers.
Our amended and restated certificate of incorporation provides that
unless the board of directors otherwise determines, the state courts of
the State of Delaware, or, if no state court located in the state of
Delaware has jurisdiction, the federal court for the District of
Delaware will be the sole and exclusive forum for any derivative
action or proceeding brought on behalf of us, any action asserting a
claim of breach of a fiduciary duty owed by any of our directors or
officers to us or our stockholders, creditors or other constituents, any
action asserting a claim against us or any of our directors or officers
arising pursuant to any provision of the Delaware General
Corporation Law, or the DGCL, or our amended and restated
certificate of incorporation or bylaws, or any action asserting a claim
against us or any our directors or officers governed by the internal
affairs doctrine. This exclusive forum provision may limit the ability
of our stockholders to bring a claim in a judicial forum that such
stockholders find favorable for disputes with us or our directors or
officers, which may discourage such lawsuits against us and our
directors and officers. Alternatively, if a court outside of Delaware
were to find this exclusive forum provision inapplicable to, or
unenforceable in respect of, one or more of the specified types of
actions or proceedings described above, we may incur additional
costs associated with resolving such matters in other jurisdictions,
which could adversely affect our business, financial condition or
results of operations.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
19
Other Matters
On Jan. 2, 2014, a class action lawsuit was filed against Gannett in
the U.S. District Court for the District of New Jersey (Casagrand et
al v. Gannett Co., Inc., et al). The suit claims various violations of
the Telephone Consumer Protection Act (“TCPA”) arising from
allegedly improper telemarketing calls made to consumers by one of
our vendors. The plaintiffs seek to certify a class that would include
all telemarketing calls made by the vendor or us. The TCPA
provides for statutory damages of $500 per violation ($1,500 for
willful violations). The ultimate outcome of this proceeding is
uncertain, but may be material to our results of operations and cash
flows. We are vigorously defending the case and have asserted cross-
claims against the vendor.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 2. PROPERTIES
Our facilities occupy approximately 11.3 million square feet in the
aggregate, of which approximately 3.5 million square feet is leased
from third parties. Our corporate headquarters are in McLean, VA,
where we lease approximately 190,000 square feet. The lease
provides for an initial term of 15 years with two five-year renewal
options. Many of our local media organizations have outside news
bureaus, sales offices and distribution centers that are leased from
third parties.
A listing of publishing centers and key properties may be found
in the “Markets We Serve” section of Item 1. Business. We own
many of the plants that house most aspects of the publication process
but in certain locations have outsourced printing or combined the
printing of multiple publications. We also own a data and network
operations center in Silver Spring, MD. During 2015, we continued
our efforts to consolidate certain of our U.S. publishing facilities to
achieve ongoing savings and greater efficiencies.
Newsquest, our subsidiary headquartered in London, owns
several plants in the U.K. where its publications are produced
(including five printing facilities that print for both Newsquest and
other third-party publishers) and also leases other facilities.
We believe that our current facilities, including the terms and
conditions of the relevant lease agreements, are adequate to operate
our businesses as currently conducted.
ITEM 3. LEGAL PROCEEDINGS
Information regarding legal proceedings may be found in Note 12 of
the notes to consolidated and combined financial statements.
Environmental
From time to time, some of our current and former subsidiaries have
been included among potentially responsible parties in connection
with sites that have been identified as possibly requiring
environmental remediation. These environmental proceedings are
highly complex, and require a variety of issues to be resolved,
including the extent of contamination, the nature and extent of
investigation and remedial action that may ultimately be required,
and the number of parties that will be required to contribute to such
investigation and remediation costs, before our liability for them, if
any, will be known.
In March 2011, the Advertiser Company, a subsidiary that
publishes the Montgomery Advertiser, was notified by the U.S. EPA
that it had been identified as a potentially responsible party (“PRP”)
for the investigation and remediation of groundwater contamination
in downtown Montgomery, Alabama. The Advertiser is a member of
the Downtown Environmental Alliance, which has agreed to jointly
fund and conduct all required investigation and remediation. The
U.S. EPA has approved the work plan for the investigation and
remediation, and has transferred responsibility for oversight of this
work to the Alabama Department of Environmental Management.
The investigation and remediation are underway. In the third quarter
of 2015, the Advertiser and other members of the Downtown
Environmental Alliance also reached a settlement with the U.S. EPA
regarding the costs that U.S. EPA spent to investigate the site. The
Advertiser’s final costs cannot be determined until the cleanup work
is completed and contributions from other PRPs are finalized.
20
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
Our shares are traded on the New York Stock Exchange with the symbol GCI.
Information regarding outstanding shares, shareholders and dividends may be found in Item 1. Business and Item 7. Management’s
Discussion and Analysis of Financial Condition and Results of Operations of this Form 10-K.
Gannett common stock prices
“When issued” trading of our common stock commenced on the NYSE on June 23, 2015. “Regular-way” trading began on June 29, 2015, the
day of the separation. The following table sets forth the high and low intra-day trading prices of our common stock as reported on the NYSE
each quarter since our separation from our former parent.
Year
2015
2016
Low
Quarter
Second . . . . . . . . . . . . . . . . . . . $ 13.35
Third . . . . . . . . . . . . . . . . . . . . . $ 10.75
Fourth . . . . . . . . . . . . . . . . . . . . $ 13.76
First*. . . . . . . . . . . . . . . . . . . . . $ 13.27
High
$ 15.05
$ 14.75
$ 17.91
$ 16.77
*Through Feb. 22, 2016.
Purchases of Equity Securities
In July 2015, we announced that our Board of Directors approved a share repurchase program authorizing us to repurchase shares with an
aggregate value of up to $150 million over a three-year period. Shares may be repurchased at management’s discretion, either in the open
market or in privately negotiated block transactions. Management’s decision to repurchase shares will depend on share price and other
corporate liquidity requirements. We expect that share repurchases may occur from time to time over the three years. As of Dec. 27,
2015, no shares have been repurchased under this program.
21
Comparison of shareholder return – 2015
The following graph compares the performance of our common
stock from the date of our separation from our former parent
company on June 29, 2015 to Dec. 27, 2015 compared to the S&P
500 Index and an index made up of peer companies.
Our peer group includes A.H. Belo Corporation, Lee Enterprises,
Inc., The McClatchy Company, Meredith Corporation, New Media
Investment Group, Inc., The New York Times Company, News
Corporation, Time, Inc., Tribune Publishing Company, Angie’s List,
Inc., Constant Contact, Inc., ReachLocal, Inc., Yelp Inc., and Harte-
Hanks, Inc. (collectively, the “Peer Group”).
The S&P 500 Index includes 500 U.S. companies in the
industrial, utilities and financial sectors and is weighted by market
capitalization. The total returns of the Peer Group also are weighted
by market capitalization.
The graph depicts representative results of investing $100 in our
common stock, the S&P 500 Index and Peer Group index at closing
on June 29, 2015. It assumes that dividends were reinvested monthly
with respect to our common stock, daily with respect to the S&P 500
Index and monthly with respect to each Peer Group company.
June 2015
Sept. 2015 Dec. 2015
Gannett Co., Inc. . . . . . . . . . . . . . . $
100.00 $
105.51 $
117.16
S&P 500 Index . . . . . . . . . . . . . . . $
100.00 $
93.82 $
101.23
Peer Group . . . . . . . . . . . . . . . . . . $
100.00 $
80.51 $
88.43
ITEM 6. SELECTED FINANCIAL DATA
Selected financial data for the years 2011 through 2015 is contained
under the heading “Selected Financial Data” after the notes to our
consolidated and combined financial statements and is derived from
our audited financial statements for those years.
The information contained in the “Selected Financial Data” is
not necessarily indicative of the results of operations to be expected
for future years, and should be read in conjunction with
“Management’s Discussion and Analysis of Financial Condition and
Results of Operations” included in Item 7 and the consolidated and
combined financial statements and related notes thereto included in
Item 8 of this Form 10-K.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Certain factors affecting forward-looking statements
Certain statements in this Annual Report on Form 10-K contain
certain forward-looking statements regarding business strategies,
market potential, future financial performance and other matters. The
words “believe,” “expect,” “estimate,” “could,” “should,” “intend,”
“may,” “plan,” “seek,” “anticipate,” “project” and similar
expressions, among others, generally identify “forward-looking
statements,” which speak only as of the date the statements were
made. 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.
We are 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 our
results include, without limitation, the following factors:
•
•
competitive pressures in the markets in which we operate;
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;
• macroeconomic trends and conditions;
•
economic downturns leading to a continuing or accelerated
decrease in circulation or local, national or classified advertising;
• potential disruption or interruption of our operations due to
accidents, extraordinary weather events, civil unrest, political
events, terrorism or cyber security attacks;
an accelerated decline in general print readership and/or
advertiser patterns as a result of competitive alternative media or
other factors;
an inability to adapt to technological changes or grow our online
business;
an increase in newsprint costs over the levels anticipated;
labor relations, including, but not limited to, labor disputes
which may cause revenue declines or increased labor costs;
risks and uncertainties related to the proposed merger with JMG,
including uncertainty of regulatory approvals, our and JMG’s
ability to satisfy the merger agreement conditions and
consummate the transaction on a timely basis, and our ability to
successfully integrate JMG’s operations and employees with our
existing business;
•
•
•
•
•
22
Separation from Parent
On June 29, 2015, the separation of Gannett from our former parent
was completed when our former parent distributed 98.5% of the
outstanding shares of Gannett common stock (also referred to herein
as the “spin-off” or “separation”) to its stockholders on a pro rata
basis. Our former parent structured the distribution to be tax free to
its U.S. shareholders for U.S. federal income tax purposes.
Following the distribution, our former parent owns 1.5% of
Gannett’s outstanding common stock, and our former parent will
continue to own our shares for a period of time not to exceed five
years after the distribution.
Prior to the spin-off, we did not prepare separate financial
statements. The accompanying consolidated and combined financial
statements for periods prior to the spin-off were derived from the
consolidated and combined financial statements and accounting
records of our former parent, and present our combined financial
position, results of operations and cash flows as of and for the
periods presented as if we were a separate entity.
Through the date of the spin-off, in preparing these consolidated
and combined financial statements, management has made certain
assumptions or implemented methodologies to allocate various
expenses from our former parent to us and from us back to our
former parent in the form of cost recoveries. These allocations
represent services provided between the two entities and are more
fully detailed in Note 14 — Relationship with our former parent. We
believe the assumptions and methodologies used in these allocations
are reasonable; however, such allocated costs, net of cost recoveries,
may not be indicative of the actual level of expense that would have
been incurred had we been operating on a stand-alone basis, and,
accordingly, may not necessarily reflect our combined financial
position, results of operations and cash flows had we operated as a
stand-alone entity during the periods presented.
We intend for the discussion of financial condition and results of
operations for periods prior to the separation to provide information
that will assist in understanding our 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 our
financial statements.
Basis of reporting
Following is a discussion of the key factors that have affected our
accounting for or reporting on the business over the last three fiscal
years. This commentary should be read in conjunction with our
financial statements, selected financial data and the remainder of this
Form 10-K.
Fiscal year: Our fiscal year ends on the last Sunday of the
calendar year. Our 2015 fiscal year ended on Dec. 27, 2015, and
encompassed a 52-week period. Our 2014 and 2013 fiscal years
encompassed 52-week periods.
Foreign currency translation impacts: The average exchange
rate used to translate U.K. results was 1.53 for 2015, 1.65 for 2014,
and 1.56 for 2013. Translation fluctuations impact our U.K. revenue,
expense and operating income results.
•
an inability to realize benefits or synergies from acquisitions of
new businesses or dispositions of existing businesses or to
operate businesses effectively following acquisitions or
divestitures;
• our ability to attract and retain employees;
•
•
•
rapid technological changes and frequent new product
introductions prevalent in electronic publishing and digital
businesses;
an increase in interest rates;
a weakening in the British pound to U.S. dollar exchange rate;
• volatility in financial and credit markets which could affect the
value of retirement plan assets and our ability to raise funds
through debt or equity issuances and otherwise affect our ability
to access the credit and capital markets at the times and in the
amounts needed and on acceptable terms;
•
•
•
•
changes in the regulatory environment which could encumber or
impede our efforts to improve operating results or the value of
assets;
credit rating downgrades, which could affect the availability and
cost of future financing;
adverse outcomes in litigation proceedings with governmental
authorities or administrative agencies;
an other than temporary decline in operating results and
enterprise value that could lead to non-cash goodwill, other
intangible asset, investment or property, plant and equipment
impairment charges;
• our dependence on our former parent and other third parties to
perform important services for us following the separation;
• our inability to engage in certain corporate transactions
following the separation;
•
any failure to realize expected benefits from, or the possibility
that we may be required to incur unexpected costs as a result of,
the separation; and
• other uncertainties relating to general economic, political,
business, industry, regulatory and market conditions.
We continue to monitor the uneven economic recovery in the
U.S. and U.K., as well as new and developing competition and
technological change, to evaluate whether any indicators of
impairment exist, particularly for those reporting units where fair
value is closer to carrying value.
Executive Summary
Our operations comprise 112 daily publications and digital platforms
in the U.S. and the U.K., more than 400 non-daily publications in the
U.S., and more than 150 such titles in the U.K. Our 93 U.S. daily
publications include USA TODAY, which is currently the nation’s
number one newspaper in consolidated print and digital circulation.
Together with 19 daily paid-for publications our Newsquest division
operates in the U.K., the total average daily print and digital
circulation of our 112 domestic and U.K. daily publications was
approximately 7 million for 2015. In the markets we serve, we also
operate desktop, smartphone and tablet products which are tightly
integrated with publishing operations. Our operations also include
commercial printing, marketing and data services operations.
23
Certain Matters Affecting Current and Future Operating
Results
The following developments during 2015 affect period-over-period
comparisons from 2014 and will affect period-over-period
comparisons for future results:
• Acquisition of Texas-New Mexico Newspaper Partnership
(“TNP”) and Romanes Media Group (“RMG”) – During 2015,
we acquired two businesses which we expect to be accretive to
earnings in future periods, contributing approximately $100
million in revenues in fiscal 2016.
On June 1, 2015, we completed the acquisition of the
remaining 59.4% interest in the TNP that we did not own from
Digital First Media. We completed the acquisition through the
assignment of our 19.5% interest in the California Newspapers
Partnership (“CNP”) and additional cash consideration. As a
result, we own 100% of TNP and no longer have any ownership
interest in CNP. Our results reflect an increase in total revenues
of $47 million as a result of consolidating TNP and a decrease in
“Equity income in unconsolidated investees, net” of $7 million
in 2015.
On May 26, 2015, Newsquest acquired RMG, one of the
leading regional media groups in the U.K. RMG publishes local
newspapers in Scotland, Berkshire and Northern Ireland and its
portfolio comprises one daily newspaper and 28 weekly
newspapers and their associated websites. Our results reflect an
increase in total revenues of $16 million in 2015 as a result of the
acquisition.
• Facility Consolidation and Asset Impairment Charges - We
evaluated the carrying values of property, plant and equipment at
certain sites because of facility consolidation efforts. We revised
the useful lives of certain assets to reflect the use of those assets
over a shortened period as a result. We recorded pre-tax charges
for facility consolidations and asset impairments of $34 million
and $35 million in 2015 and 2014, respectively.
• Severance-related Expenses – We initiated various cost reducing
actions that are severance-related.
In March 2015, we announced an Early Retirement
Opportunity Program (“EROP”) for our USA TODAY
employees. We recorded severance-related expenses of $8
million in 2015.
In August 2015, we announced an EROP for employees in
certain corporate departments and publishing sites. We recorded
severance-related expenses of $34 million in 2015.
We also had other employee termination actions associated
with our facility consolidation and other cost reduction efforts.
We recorded severance-related expenses of $30 million and $20
million for 2015 and 2014, respectively.
• New Digital Agreements – Beginning in the third quarter of 2015
and in conjunction with the execution of new agreements with
businesses owned by our former parent following the separation
(principally Cars.com and CareerBuilder), we began reporting
wholesale fees associated with sales of certain third party digital
advertising products and services on a net basis, as a reduction of
the associated digital advertising revenues, rather than in
operating expenses, in our Consolidated and Combined
Statements of Income. There is no impact on operating income,
operating cash flows, net income or earnings per share. For the
second half of 2015 revenue comparisons to the same period in
the prior year were negatively impacted by $33 million.
• Shutdown of USA Weekend – USA Weekend ceased operating in
December 2014. For 2015, revenue comparisons to prior year
were negatively impacted by $36 million.
• Foreign Currency – Our U.K. publishing operations are
conducted through our Newsquest subsidiary. Our U.K. earnings
are translated at the average British pound-to-U.S. dollar
exchange rate. Therefore, a strengthening in that exchange rate
will improve our U.K. revenue and earnings contributions to
consolidated results. A weakening of that exchange rate (i.e., a
stronger U.S. dollar) will have a negative impact. Results for
2015 were translated from the British pound to U.S. dollars at an
average rate of 1.53 compared to 1.65 last year. This 7% decline
in the exchange rate unfavorably impacted 2015 revenue
comparisons by approximately $33 million.
Operating results summary: Operating revenues were $2.9
billion in 2015, a decrease of 9% from $3.2 billion in 2014,
reflecting a 12% decline in advertising revenues and 5% decline in
circulation revenue.
Total operating expenses decreased by 7% to $2.7 billion for
2015. In 2015, there were severance-related charges of $72 million,
facility consolidation and asset impairment charges of $34 million
and other transformation costs of $8 million. In 2014, there were
severance -related charges of $20 million, facility consolidation and
asset impairment charges of $35 million and other transformation
costs of $44 million. Operating expenses decreased primarily due to
lower volume-related expenses and continued cost efficiency efforts
company-wide. Newsprint expense was 28% lower than in 2014 due
to a decline in consumption and prices.
We reported operating income for 2015 of $169 million
compared to $262 million in 2014, a 35% decrease.
Our net equity income in unconsolidated investees for 2015 was
$12 million, a decrease of $4 million over 2014, reflecting primarily
our acquisition in June 2015 of the remaining interest in TNP and the
assignment of our interest in CNP.
Other non-operating items totaled $13 million in 2015, an
increase of $12 million over 2014, primarily reflecting the $21.8
million gain recognized upon completing the acquisition of our
remaining interest in TNP and the assignment of our interest in CNP.
During 2015, we paid out $18 million in dividends. There were
no share repurchases in 2015.
Outlook for 2016: We intend to drive growth opportunities by
capitalizing on our national brand equity to increase the integration
of local and national content, enhance our position as a trusted
provider of local news and information through expanded digital
offerings and leverage our expertise to provide integrated solutions
to advertisers. While we expect traditional advertising and
circulation revenues to remain challenged due to market pressures,
some of that decline will be offset by growth in digital marketing
services and other digital revenues. We will continue to focus on
operational excellence by maximizing the efficiency of our print,
sales, administrative and distribution functions to reduce costs and
increase profitability.
Total operating expenses are expected to decrease in comparison
to 2015 reflecting lower spending due to cost reductions and
efficiency gains on initiatives as well as lower newsprint expense, as
consumption continues to decline.
Selective acquisitions or dispositions, leveraging our revenue
innovations, digital opportunities and expense discipline, will
supplement our organic growth and leverage our economies of scale
to drive strong operating results. On Oct. 7, 2015 we entered into a
merger agreement for the acquisition of Journal Media Group, Inc.
(“JMG”) for approximately $280 million. We will finance the
transaction through a combination of cash on hand and borrowings
under our $500 million credit facility.
24
RESULTS OF OPERATIONS
Consolidated summary
Consolidated results, in millions of dollars except per share amounts
2015(a) Change 2014(a) Change 2013(a)
Operating revenues:
Advertising . . . . . . . . . $ 1,611
1,060
Circulation . . . . . . . . .
213
Other. . . . . . . . . . . . . .
Total operating revenues. .
2,885
Operating expenses:
Operating expenses. . .
Depreciation . . . . . . . .
Amortization. . . . . . . .
Facility consolidation
and asset impairment
charges . . . . . . . . . . . .
Total operating expenses .
Operating income . . . . . . .
Non-operating income
(expense), net . . . . . . . . . .
Provision for income
taxes . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . $
2,574
96
12
34
2,716
169
25
48
146
Per share - basic . . . . . $ 1.27
Per share - diluted. . . . $ 1.25
(a) Numbers do not sum due to rounding.
(12%) $ 1,840
1,110
(5%)
222
(4%)
3,172
(9%)
(7%) $ 1,971
1,117
(1%)
236
(6%)
3,325
(5%)
(7%)
(1%)
(14%)
2,763
97
14
(3%)
1%
—%
2,863
96
14
(3%)
(7%)
(35%)
54%
(30%)
35
2,910
262
16
68
(31%) $
211
(31%) $ 1.83
(32%) $ 1.83
30%
(3%)
(19%)
(24%)
(4%)
27
3,000
325
21
71
(23%) $
274
(23%) $ 2.39
(23%) $ 2.39
Operating revenues
Operating revenues are derived principally from advertising sales
which accounted for 56% of total revenues in 2015, and circulation
sales which accounted for 37% of total revenues in 2015.
Advertising revenues include those derived from advertising
placed with print products as well as digital-related Internet desktop,
smartphone and tablet applications. These include revenue in the
classified, retail and national advertising categories.
Circulation revenues include those derived from distributing our
publications on our digital platforms, from home delivery and from
single copy sales of our publications.
Other revenues are mainly from commercial printing.
Revenue comparisons 2015-2014:
Net operating revenues: Net operating revenues for 2015
declined by $287 million or 9.0% from 2014 with decreases
primarily focused in advertising revenues.
The table below presents the principal components of advertising
revenues for the last three years. These amounts include advertising
revenue from printed publications as well as digital advertising
revenue from desktop, smartphone and tablets affiliated with the
publications.
Advertising revenues, in millions of dollars
2015 Change
2014 Change
2013
Retail . . . . . . . . . . . . . . . . . $
National . . . . . . . . . . . . . . .
Classified . . . . . . . . . . . . . .
811
226
574
(9%)
$
(21%)
(14%)
891
286
663
Total advertising revenue . $ 1,611
(12%)
$ 1,840
(6%)
$
(16%)
(3%)
(7%)
947
339
685
Advertising Revenue: Advertising revenues for 2015 decreased
$229 million or 12.4%. This decrease reflects lower advertising
demand due to general trends in the publishing industry and the
absence of $35 million of revenues primarily associated with USA
Weekend, as well as a year-over-year decline in the U.K. exchange
rate, which represented $22 million of the decline, partially offset by
the revenues associated with the acquisitions of TNP and RMG of
$42 million.
Digital advertising revenues, which comprise retail, national and
classified advertising, were $424 million in 2015 and $447 million in
2014, a 5% decrease on the prior year. The decrease in digital
advertising revenues was driven by the reporting of sales of certain
third party (principally Cars.com and CareerBuilder) digital
advertising products on a net basis and unfavorable post-spin
changes to the affiliate agreement with CareerBuilder. Beginning in
the third quarter of 2015 and in conjunction with the execution of
new agreements (principally Cars.com and CareerBuilder), we began
reporting wholesale fees associated with sales of certain third party
digital advertising products and services on a net basis, as a
reduction of the associated digital advertising revenues, rather than
in operating expenses, in our Consolidated and Combined
Statements of Income. There is no impact on operating income,
operating cash flows, net income or earnings per share. 2015
revenue comparisons to 2014 were negatively impacted by $33
million.
The table below presents the percentage change for the retail,
national, and classified categories for 2015 compared to 2014.
Advertising Revenue Year-Over-Year Comparisons
U.S. Publishing
Newsquest
(in pounds)
Retail . . . . . . . . . .
National . . . . . . . .
Classified . . . . . . .
Total . . . . . . . . . . .
(9%)
(23%)
(13%)
(13%)
1%
4%
(7%)
(3%)
Total
(9%)
(21%)
(14%)
(12%)
Retail advertising revenues were down $80 million or 9% in
2015. In the U.S., revenues were down in all major categories. Retail
advertising revenues, in local currency, increased 1% in the U.K. but
were adversely impacted by foreign currency rates that resulted in a
6% decline.
National advertising revenues were down $60 million or 21% in
2015, primarily due to soft advertising demand and the absence of
revenues associated with USA Weekend.
The table below presents the percentage change in classified
categories for 2015 compared to 2014.
Classified Revenue Year-Over-Year Comparisons
U.S. Publishing
Newsquest
(in pounds)
Automotive . . . . .
Employment. . . . .
Real Estate . . . . . .
Other . . . . . . . . . .
Total . . . . . . . . . . .
(20%)
(17%)
(13%)
(6%)
(13%)
(8%)
(10%)
(13%)
1%
(7%)
Total
(19%)
(17%)
(16%)
(6%)
(14%)
$ 1,971
Classified advertising revenues declined 13% in the U.S. and 7%
in the U.K in 2015. Domestically and in the U.K., all classified
advertising categories decreased as a result of general trends in the
publishing industry.
25
Circulation Revenue: Circulation revenues decreased by $50
million or 4.5%. This change was driven by a reduction in volume,
reflecting general industry trends, partially offset by the impact of
price increases in the prior year. Price increases contributed
positively to circulation revenues by approximately $44 million in
2015, while foreign currency negatively affected circulation
revenues by $8 million. Circulation revenues for our domestic
publishing business decreased 4% in 2015. Circulation revenues at
USA TODAY were 11% lower in 2015 due to anticipated volume
losses. In the U.K., circulation revenues were 9% lower in 2015,
reflecting the impact of foreign currency rates and lower sales.
For local publishing operations in the U.S. and U.K., morning
circulation accounted for approximately 96% of total daily volume,
while evening circulation accounted for 4%.
Local publishing circulation volume is summarized in the table
below.
Total average circulation volume, print and digital, replica and non-replica
in thousands
2015 Change
2014 Change
2013
Local Publications
Morning. . . . . . . . . . . . .
2,704 —%
Evening . . . . . . . . . . . . .
Total daily . . . . . . . . . . .
Sunday. . . . . . . . . . . . . .
104
2,808
4,658
(28%)
(2%)
2%
2,715
144
2,859
4,569
(8%)
(11%)
(9%)
(3%)
2,967
161
3,128
4,729
Other Revenue: Commercial printing and other publishing
revenues decreased 4% to $213 million in 2015, reflecting the sale
of a print business. Commercial printing revenues accounted for
nearly 7% of total other revenues in 2015. Commercial delivery
services also contribute to total other revenues.
Revenue comparisons 2014-2013:
Operating Revenues: Net operating revenues declined by
$153 million or 5% from 2013 with decreases primarily focused in
advertising and other revenues.
Advertising Revenue: Advertising revenues for 2014 decreased
$131 million or 7% from 2013. The decrease reflects generally soft
advertising demand due to ongoing pressures relating to general
industry trends, including, among others, a shift from print to digital
consumption with a reduced average rate. Digital advertising
revenues which are included in the categories below were
$359 million in 2014 and $332 million in 2013.
In March 2014, Classified Ventures, an entity in which Parent
owned a noncontrolling interest, agreed to sell Apartments.com. This
transaction closed on April 1, 2014. Prior to the sale, our former
parent was party to an affiliation agreement in which our newspapers
earned advertising revenue of approximately $4 million in 2014,
through the date of sale, and approximately $15 million in 2013.
Retail advertising revenues were down $56 million or 6% in
2014. The total decline in retail advertising revenue was 7% on a
constant currency basis. Revenues were down in all major categories
in the U.S. Retail advertising revenues, in local currency, were down
2% in the U.K.
National advertising revenues were down $48 million or 14% in
2014, primarily due to lower advertising sales within entertainment,
technology and telecommunications categories.
Classified advertising revenues declined 4% in the U.S. and 3%
in the U.K. Domestically, automotive advertising was down 2% for
the year while employment declined 3%. In the U.K., while most
classified advertising categories were lower, employment advertising
improved 7% in local currency, reflecting the recovery in the U.K.
economy.
Circulation Revenue: Total circulation revenues in 2014
decreased by $7 million, or 1%, from 2013. These revenues were
driven by a $131 million reduction in volume that was a result of
general industry trends as well as unfavorable comparisons related to
prior year price increases. Price increases contributed positively to
circulation revenues by $117 million in the current year with foreign
currency also positively affecting circulation revenues by $6 million.
Circulation revenues decreased 1% in 2014 at USCP reflecting an
increase in home delivery revenue offset by a decrease in single
copy revenue. Home delivery revenue was boosted by the pricing
impact of placing the USA TODAY local editions in 35 of our local
domestic publishing units and the strength of our All Access Content
Subscription Model, adding engaging content which allowed us to
deploy strategic pricing initiatives. This pricing impact resulted in
revenue increases of approximately $75 million offset by declines in
circulation volumes at USCP of $81 million. Circulation revenues
were 1% lower in local currency in the U.K., due to declines in print
circulation volumes, partially offset by cover price increases
implemented in 2013. Circulation revenues were 4% lower at USA
TODAY.
Revenue comparisons reflect generally lower circulation
volumes more than offset by price increases. Daily average print and
digital, replica and non-replica circulation, excluding USA TODAY,
declined 9%, while Sunday circulation declined 3%.
Other Revenue: Commercial printing and other publishing
revenues were down 6% in 2014 and totaled $222 million, reflecting
the sale of a print business in the second quarter of 2014 and
declines in commercial printing volumes which is consistent with
industry trends. Commercial printing revenues accounted for
approximately 62% of total other revenues. Commercial delivery
services also contribute to total other revenues.
Consolidated operating expenses
Total reported operating expenses decreased 7% to $2.7 billion in
2015, primarily due to continued cost efficiency efforts company-
wide as well as lower newsprint expense. The decrease was also
driven by the reporting of sales of certain third party (principally
Cars.com and CareerBuilder) digital advertising products on a net
basis. Beginning in the third quarter of 2015 and in conjunction with
the execution of new agreements (principally Cars.com and
CareerBuilder), we began reporting wholesale fees associated with
sales of certain third party digital advertising products and services
on a net basis, as a reduction of the associated digital advertising
revenues, rather than in operating expenses, in our Consolidated and
Combined Statements of Income.
Overall cost of sales decreased $131 million, or 7%, from 2014.
Included in cost of sales in 2015 were payroll and employee benefits
expenses of approximately $689 million, compared with
approximately $744 million in 2014, or a 7% decrease from 2014.
Resource optimization efforts to improve the overall cost structure
while achieving greater efficiencies drove the decrease from 2014.
Also included in cost of sales in 2015 were newsprint costs of
approximately $170 million compared with approximately $230
million in 2014, or a 26% decrease from 2014. The decrease
represents lower prices for newsprint as well as lower volume. The
remaining decrease in cost of sales reflects the overall decline in
circulation volumes and other revenues.
26
Total selling, general and administrative costs decreased by $58
million year over year. Included in sales, general and administrative
expenses were payroll and employee benefit costs of approximately
$515 million compared with approximately $526 million in 2014, or
a 2% decrease from 2014. Other costs decreased by approximately
$47 million, primarily due to lower information technology costs
and the absence of future promotional payments associated with
USA Weekend.
Non-operating income and expense
Equity earnings: This income statement category reflects results
from unconsolidated investments in which we hold noncontrolling
interests, representing our equity share of operating results from our
publishing partnerships, including the Tucson joint operating agency,
the California Newspapers Partnership and the Texas-New Mexico
Newspapers Partnership, as well as from our investment in
Homefinder.com.
Included in cost of sales and selling, general and administrative
Our net equity income in unconsolidated investees for 2015 was
$12 million, a decrease of $4 million over 2014. This decrease
reflects our acquisition in June 2015 of the remaining interest in TNP
and the assignment of our interest in CNP.
Our net equity income in unconsolidated investees for 2014 was
$16 million, a decrease of $7 million from 2013. This decrease
reflects lower earnings from CNP and the TNP with the prior year.
Other non-operating items: We reported a net gain of $13
million for other non-operating items in 2015, primarily reflecting
the $22 million gain recognized upon completing the acquisition of
our remaining interest in TNP and the assignment of our interest in
CNP.
Other non-operating items totaled a net loss of less than $1
million in 2014. We reported a net loss of $2 million in 2013.
Provision for income taxes
We reported pre-tax income of $194 million and $278 million, and
the effective tax rate on pre-tax income is 24.7% and 24.3% for 2015
and 2014, respectively.
The tax rate for 2015 was slightly higher compared to 2014 due
to the U.K. tax authorities announcing a reduction in the statutory
tax rates for future years resulting in the company immediately
recognizing a reduction in the value of certain U.K. deferred tax
assets of approximately $4 million or 2.0%
As described in our basis of reporting section above, prior to the
spin our operations were included in Parent’s state and federal
income tax returns. For purposes of the 2014, consolidated and
combined financial statements, we computed our income taxes as if
we were filing separate returns. Current income taxes payable are
settled with Parent through “Former parent’s investment, net.” The
effective tax rate on pre-tax income was 24.3% compared with
20.6% in 2013. The higher effective tax rate for 2014 compared to
2013 is primarily due to a decrease in the release of certain tax
reserves in 2014 as compared to 2013 which we deemed no longer
necessary due to statute of limitations expirations.
Further information concerning income tax matters is contained
in Note 10 to the consolidated and combined financial statements.
expense were severance-related charges of $72 million and $20
million in 2015 and 2014, respectively. In addition, there were other
transformation costs of $8 million and $44 million in 2015 and 2014,
respectively. Severance-related charges and transformation expenses
primarily relate to incremental expenses we have incurred to
consolidate or outsource production processes and centralize other
functions. Severance-related charges include payroll and related
benefit costs. The severance-related charges for all years are more
fully discussed in Note 4 to the consolidated and combined financial
statements. Transformation costs primarily include incremental
expenses associated with optimizing our real estate portfolio as well
as charges related to our partial withdrawal from certain multi-
employer pension plans.
Depreciation expense was 1% lower in 2015. Amortization
expense decreased by 14% as a result of older intangible assets that
became fully amortized in 2015, partially offset by the effect of 2015
acquisitions.
Our space consolidation initiative continued during 2015,
resulting in sales of older, underutilized buildings; relocating to more
efficient, flexible, digitally-oriented office space; reconfiguring
spaces to take advantage of leasing and subleasing opportunities and
combining operations where possible. There were facility
consolidation and asset impairment charges of $34 million and $35
million in 2015 and 2014, respectively. The non-cash facility
consolidation and asset impairment charges for all years are more
fully discussed in Note 4 to the consolidated and combined financial
statements.
Payroll and benefits and newsprint costs (along with certain
other production material costs), the largest elements of our normal
operating expenses, are presented below, expressed as a percentage
of total pre-tax operating expenses.
Payroll and employee benefits . . . . . . . . . .
46.8% 43.6% 45.0%
Newsprint and other production material . .
6.6%
7.9%
8.4%
2015
2014
2013
Operating expense comparisons 2014-2013: Total reported
operating expense decreased 3% to $2.9 billion in 2014, due to
continued cost reductions and efficiency efforts, lower print
volumes, and decreases in pension and other postretirement benefit
costs for our current and former production employees. These were
partially offset by $20 million in severance related charges and $75
million of strategic initiative investments made throughout the year.
Depreciation charges increased by approximately $1 million, or
1%, from 2013, primarily reflecting the impact of foreign currency
on depreciation expense recorded at Newsquest. Amortization
expense remained relatively flat year over year.
27
FINANCIAL POSITION
Liquidity and capital resources
Details of our cash flows are included in the table below:
In millions of dollars
Net cash flow from operating activities . $
Net cash flow used for investing
activities . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash flow used for financing
activities . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of currency exchange rate change
Net increase (decrease) in cash . . . . . . . $
(a) Numbers do not sum due to rounding.
2015
2014
2013 (a)
231 $
346 $
255
(43)
(63)
—
125 $
(32)
(321)
—
(7) $
(8)
(302)
—
(56)
Fiscal 2015 versus Fiscal 2014
Our net cash flow from operating activities was $231 million for
2015, compared to $346 million of net cash flow from operating
activities for 2014. The decrease in net cash flow from operating
activities was primarily the result of a decrease in net income from
2014 to 2015 as well as pension and other postretirement
contributions in 2015 exceeding pension and other postretirement
contributions in 2014 by $51 million. In addition, other receivables
increased due to the establishment of receivables from our former
parent related to the tax matters agreement.
Cash flows used by investing activities totaled $43 million for
2015 primarily driven by the acquisitions of TNP and RMG for $29
million, as well as capital expenditures of $54 million, offset by
proceeds from sales of certain assets of $30 million and other
investments of $12 million. Cash flows used by investing activities
totaled $32 million for 2014 primarily due to $72 million of capital
expenditures, offset by proceeds from sales of certain assets of $25
million and other investments of $19 million.
Cash flows used for financing activities totaled $63 million for
the 2015, compared to $321 million for 2014. Prior to the separation,
cash used for financing activities was primarily due to transactions
with our former parent with nominal impact from cash outflows
relating to contingent consideration arrangements. Our former parent
historically utilized a centralized approach to cash management and
the financing of its operations. Under this centralized cash
management program, we provided funds to our former parent and
vice versa. Accordingly, the net cash flow between us and our former
parent is presented as a financing activity. Subsequent to the spin-
off, there are borrowings and repayments under our revolving credit
facility. However, there was no outstanding balance on our revolving
credit facility as of Dec. 27, 2015.
Fiscal 2014 versus Fiscal 2013
Cash flow generated by operating activities is our primary source of
liquidity. Net cash flow from operating activities was $346 million
in 2014, versus $255 million in 2013. This increase is primarily the
result of pension contributions in 2013 which exceeded pension
contributions in 2014 by approximately $25 million and additional
cash generated in 2014 by changes in working capital. Late in 2014,
we exited one of our publishing businesses and incurred shutdown
costs associated with future contractual obligations. These costs
were accrued on our balance sheet at the end of 2014 and increased
our accounts payable and other noncurrent liabilities as they will be
paid in 2015 and beyond. On the Combined Statement of Cash
Flows, these costs were sources of cash in both the accounts payable
and other assets and liabilities line items. Declining revenues
resulted in lower trade receivable balances. Cash collections
outpaced revenues recorded during the period resulting in net inflow
from trade receivables. The change in the net outflow relating to
taxes payable is a result of the increase in current tax expense over
the prior year due to the reversal of certain unrecognized tax benefits
in the prior year. The reversal of certain unrecognized tax benefits is
described in Note 10 of the Combined Financial Statements.
Net cash used for investing activities totaled $32 million in 2014
compared with $8 million in 2013. This reflects increased capital
spending in 2014 for digital development and platform expansion as
well as nearly $27 million on real estate optimization efforts.
Net cash used in financing activities totaled $321 million in 2014
and $302 million in 2013. Prior to the separation, cash used for
financing activities was primarily due to transactions with our
former parent with nominal impact from cash outflows relating to
contingent consideration arrangements. Our former parent
historically utilized a centralized approach to cash management and
the financing of its operations. Under this centralized cash
management program, we provided funds to our former parent and
vice versa. Accordingly, the net cash flow between us and our former
parent is presented as a financing activity
Revolving credit facility
On June 29, 2015, we entered into a new five-year secured revolving
credit facility in an aggregate principal amount of $500 million
(“Credit Facility”). Under the Credit Facility, we may borrow at an
applicable margin above the Eurodollar base rate (“LIBOR loan”) or
the higher of the Prime Rate, the Federal Funds Effective Rate plus
0.50% or the one month LIBOR rate plus 1.00% (“ABR loan”). The
applicable margin is determined based on our total leverage ratio but
differs between LIBOR loans and ABR loans. For LIBOR-based
borrowing, the margin varies from 2.00% to 2.50%. For ABR-based
borrowing, the margin will vary from 1.00% to 1.50%.
Customary fees are payable related to the Credit Facility,
including commitment fees on the undrawn commitments of
between 0.30% and 0.40% per annum, payable quarterly in arrears,
based on our total leverage ratio. Borrowings under the Credit
Facility are guaranteed by a majority of our wholly-owned material
domestic subsidiaries. All obligations of Gannett and each subsidiary
guarantor under the Credit Facility are or will be secured by first
priority security interests in our equipment, inventory, accounts
receivable, fixtures, general intangibles and other personal property,
mortgages on certain material real property and pledges of the
capital stock of each subsidiary guarantor.
Pursuant to the Credit Facility, we are obligated, on or after
Sept. 30, 2015, to not permit our consolidated interest coverage ratio
to be less than 3.00:1.00 and our total leverage ratio to exceed
3.00:1.00, in each case as of the last day of the test period consisting
of four consecutive fiscal quarters.
The Credit Facility also contains a number of covenants that,
among other things, limit or restrict our ability, subject to certain
exceptions described in the Credit Facility, to (i) permit certain liens
on current or future assets; (ii) enter into certain corporate
transactions; (iii) incur additional indebtedness; (iv) make certain
payments or declare certain dividends or distributions; (v) dispose of
certain property; (vi) make certain investments; (vii) prepay or
amend the terms of other indebtedness; or (viii) enter into certain
transactions with our affiliates. We were in compliance with all of
these covenants as of Dec. 27, 2015.
As of Dec. 27, 2015, we had no outstanding borrowings under
the Credit Facility. Up to $50 million of the Credit Facility is
available for issuance of letters of credit. As of Dec. 27, 2015, we
had $16 million of letters of credit outstanding and $484 million of
availability remaining.
28
Our operations have historically generated strong positive cash
flow which, along with our program of maintaining bank revolving
credit availability, has provided adequate liquidity to meet our
requirements, including those for investments, strategic acquisitions,
expected dividends, and expected share repurchases.
Operating results non-GAAP information
Presentation of non-GAAP information: We use non-GAAP
financial performance and liquidity measures to supplement the
financial information presented on a GAAP basis. These non-GAAP
financial measures should not be considered in isolation from or as a
substitute for the related GAAP measures, and should be read
together with financial information presented on a GAAP basis.
We discuss in this report non-GAAP financial performance
measures that exclude from our reported GAAP results the impact of
special items consisting of:
• Severance-related charges;
• Transformation costs; and
• Non-cash asset impairment charges.
We believe that such expenses, charges and credits are not
indicative of normal, ongoing operations and their inclusion in
results makes for more difficult comparisons between years and with
peer group companies. We discuss adjusted EBITDA, a non-GAAP
financial performance measure that we believe offers a useful view
of the overall operation of our businesses. Adjusted EBITDA is
defined as net income before (1) income taxes, (2) interest expense,
(3) equity income, (4) other non-operating items, (5) severance-
related charges, (6) facility consolidation costs, (7) asset impairment
charges, (8) depreciation and (9) amortization. When adjusted
EBITDA is discussed, the most directly comparable GAAP financial
measure is Net income.
Adjusted diluted earnings per share (“EPS”) is a non-GAAP
financial performance measure that we believe offers a useful view
of the overall operation of our business. We consider adjusted EPS,
which may not be comparable to a similarly titled measure reported
by other companies, to be defined as EPS before tax-affected
(1) severance-related charges, (2) other transformation items,
(3) asset impairment charges and (4) acquisition-related expenses.
The tax impact on these non-GAAP tax deductible adjustments is
based on the estimated statutory tax rates for the U.K. of 20.0% and
the U.S. of 38.7%. When adjusted EPS is discussed, the most
directly comparable GAAP financial measure is diluted EPS.
We also discuss in this report free cash flow, a non-GAAP
liquidity measure that adjusts our reported GAAP results for items
that we believe are critical to the ongoing success of our business,
which results in a free cash flow figure available for use in
operations, additional investment and return to shareholders. We
define free cash flow as cash flow from operating activities less
capital expenditures.
We use non-GAAP financial performance measures for purposes
of evaluating our performance. Therefore, we believe that each of
the non-GAAP measures presented provides useful information to
investors by allowing them to view our businesses through the eyes
of our management and Board of Directors, facilitating comparison
of results across historical periods, and providing a focus on the
underlying ongoing operating performance of our businesses. Many
of our peer group companies present similar non-GAAP measures to
better facilitate industry comparisons.
Discussion of special charges and credits affecting reported
results: We recorded severance related charges, including early
retirement programs, totaling $72 million ($46 million after-tax) in
2015, $20 million ($13 million after-tax) in 2014 and $34 million
($21 million after-tax) in 2013. These charges were taken in
connection with workforce reductions related to facility
consolidation and outsourcing efforts and as part of a general
program to fundamentally change our cost structure.
Company-wide transformation plans led us to recognize charges
in all interim and annual periods presented associated with revising
the useful lives of certain assets over a shortened period, as well as
shutdown costs and charges to reduce the carrying value of assets
held for sale to fair value less costs to sell. Total charges for these
matters were $42 million ($27 million after-tax) in 2015, $79 million
($49 million after-tax) in 2014 and $34 million ($21 million after-
tax) in 2013.
We performed impairment tests on certain assets including
intangible assets and investments accounted for under the equity
method that resulted in the recognition of impairment charges as
well as recognizing accelerated depreciation on certain assets to be
disposed of. These non-cash charges are detailed in Note 4 to the
consolidated and combined financial statements.
Consolidated and Combined Summary - Non-GAAP
The following is a discussion of our as adjusted non-GAAP financial
results. All as adjusted (non-GAAP basis) measures are labeled as
such or “adjusted.”
Reconciliations of adjusted EBITDA from net income presented
in accordance with GAAP on our Consolidated and Combined
Statements of Income are presented below:
In millions of dollars
2015(a) Change 2014(a) Change 2013(a)
Net income (GAAP basis). . $ 146
(31%)
$ 211
(23%)
$ 274
Provision for income taxes .
48
(29%)
68
(4%)
71
Equity income in
unconsolidated investees,
net . . . . . . . . . . . . . . . . . . . .
(12)
(25%)
(16)
(30%)
Other non-operating items .
(13)
***
— ***
(23)
2
Operating income
(GAAP basis) . . . . . . . . . . . $ 169
(35%)
$ 262
(19%)
$ 325
Early retirement program . .
Severance related charges . .
Other transformation items .
Asset impairment charges . .
42
30
13
29
***
50%
(83%)
***
— (100%)
20
75
4
(5%)
***
100%
13
21
31
2
Adjusted operating income
(non-GAAP basis). . . . . . . . $ 283
(22%)
$ 361
(8%)
$ 392
Depreciation . . . . . . . . . . . .
Amortization . . . . . . . . . . . .
96
12
(1%)
(14%)
97
1%
14 —%
96
14
Adjusted EBITDA
(non-GAAP basis). . . . . . . . $ 392
(a) Numbers do not sum due to rounding.
(17%)
$ 472
(6%)
$ 502
Adjusted EBITDA decreased 17% from 2014 to 2015 and
decreased 6% from 2013 to 2014 as a result of lower successive
adjusted (non-GAAP basis) operating income in each period.
29
Reconciliations of Adjusted diluted earnings per share from net
income presented in accordance with GAAP on our Combined
Statements of Income are presented below:
In millions of dollars, except share and per share data
Reconciliations of Free Cash Flow from net cash flow from
operating activities presented in accordance with GAAP on our
Consolidated and Combined Statements of Cash Flow are presented
below:
2015(a) Change
2014(a) Change
2013
In millions, except share data
Early retirement
program . . . . . . . . . . . . $
Severance-related
charges . . . . . . . . . . . . .
Other transformation
items . . . . . . . . . . . . . . .
Asset impairment
charges . . . . . . . . . . . . .
Acquisition related
expenses . . . . . . . . . . . .
Pretax impact . . . . . . . .
Income tax impact of
above items. . . . . . . . . .
Impact of items
affecting comparability
on net income . . . . . . . . $
Net income . . . . . . . . . . $
Impact of items
affecting comparability
on net income . . . . . . . .
Adjusted net income. . . $
Earnings per share -
diluted. . . . . . . . . . . . . . $
Impact of items
affecting comparability
on net income . . . . . . . .
Adjusted earnings per
share - diluted . . . . . . . . $
43
***
$ — (100%) $
30
50%
20
(5%)
12
(84%)
75
***
30
***
4
100%
(18)
***
98
(1%)
— —%
99
46%
13
21
32
2
—
68
(35)
(3%)
(36)
38%
(26)
63 —% $
63
50% $
146
(31%)
$
211
(23%)
$
63 —%
63
50%
209
(23%)
1.25
(32%)
$
$
273
(14%)
1.83
(23%)
$
$
42
274
42
316
2.39
0.54
(2%)
0.55
53%
0.36
1.79
(25%)
$
2.38
(13%)
$
2.75
Diluted weighted
average number of
common shares
outstanding . . . . . . . . . . 116,695
2%
114,959 —%
114,959
(a) Numbers do not sum due to rounding.
Earnings per share for 2015, on a fully diluted basis, were $1.25
which includes $97 million of pre-tax severance, acquisition related
and other charges. Before the impact of these charges and adjusted
for taxes, adjusted earnings per share on a fully diluted basis would
have been $1.79 for 2015 compared to $2.38 in 2014 and $2.75 in
2013. The decline in 2015 adjusted earnings per share on a fully
diluted basis was primarily due to reduced contributions resulting
from the new Cars.com and CareerBuilder affiliate agreements,
unfavorable foreign exchange rate changes as well as ongoing
reductions in print advertising revenues partially offset by cost
reductions and efficiency gains in operating expenses as well as
increases in digital revenues and two full quarters of operating
results from businesses acquired during the second quarter of 2015.
Fully diluted earnings per share reflect a diluted share count of
116.7 million shares, approximately 1.7 million higher than the prior
years due to the addition of the dilutive effect of stock based
compensation, principally resulting from compensatory awards made
by our former parent that were converted into Gannett awards as a
result of the separation.
Net cash flow from operating activities . . . . . . . $ 231 $ 346 $
(115)
Capital expenditures. . . . . . . . . . . . . . . . . . . . . .
(54)
(72)
Free cash flow . . . . . . . . . . . . . . . . . . . . . . . . . . $ 177 $ 274 $
18
(97)
2015
2014 Change
Net cash flow from operating activities was $231 million in 2015
down $115 million compared to prior year primarily due to
significantly higher pension and other postretirement contributions
in 2015. Offsetting this decrease in operating cash flows are lower
cash outflows for capital expenditures of $18 million during 2015
compared to the prior year. The net decrease to free cash flow was
$97 million in 2015.
During 2014, we invested significantly in digital development
and platform expansion as well as investing in real estate
optimization efforts. While we continue to invest in our digital
assets, we slowed our optimization efforts in real estate during 2015
compared with 2014. Free cash flow generated in the current year
provides us with the opportunity for additional investment as well as
return to shareholders via quarterly dividends. Refer to the
“Liquidity and Capital Resources” section of this Item for additional
details.
Contractual obligations and commitments
The following table summarizes the expected cash outflows
resulting from financial contracts and commitments as of the end of
2015:
Payments due by period
66
48
64 $
79 $
In millions of dollars Total 2016 2017-2018 2019-2020 Thereafter
Operating leases (1) . . $ 381 $ 45 $
193
Purchase
obligations (2) . . . . . .
Other noncurrent
liabilities (3). . . . . . . .
Gannett Retirement
Plan contributions (4)
Total . . . . . . . . . . . . . $ 782 $161 $
(1) See Note 12 to the consolidated and combined financial statements.
(2)
152 $
185 $
195
140
284
16
25
43
50
40
36
50
15
76
—
2
Includes purchase obligations related to wire services, interactive marketing
agreements, professional services, paper distribution agreements, printing contracts,
and other legally binding commitments. Amounts which we are liable for under
purchase orders outstanding at Dec. 27, 2015, are reflected in the Consolidated and
Combined Balance Sheets as accounts payable and accrued liabilities and are
excluded from the table above.
(3) Other noncurrent liabilities primarily consist of unfunded and under-funded
postretirement benefit plans excluding the Gannett Retirement Plan. Unfunded
plans include the Gannett 2015 Supplemental Retirement Plan and the Gannett
Retiree Welfare Plan. Required employer contributions equal the future expected
benefit payments and are reflected in the table over the next ten-year period. Our
under-funded plans include the Newsquest Pension Scheme, and the Detroit Free
Press, Inc. Newspaper Guild of Detroit Pension Plan. Expected employer
contributions for these plans are included for the following fiscal year only,
including $17 million for the Newsquest Pension Scheme. Contributions beyond
the next fiscal year are excluded due to uncertainties regarding significant
assumptions involved in estimating these contributions, such as interest rate levels
as well as the amount and timing of invested asset returns.
(4) Expected employer contributions for the Gannett Retirement Plan are included
through 2021. Contributions beyond 2021 are excluded due to uncertainties
regarding significant assumptions involved in estimating these contributions, such
as interest rate levels as well as the amount and timing of invested asset returns.
30
Due to uncertainty with respect to the timing of future cash flows
associated with unrecognized tax benefits at Dec. 27, 2015, we are
unable to make reasonably reliable estimates of the period of cash
settlement. Therefore, $17 million of unrecognized tax benefits have
been excluded from the contractual obligations table above. See
Note 9 to the consolidated and combined financial statements for a
further discussion of income taxes.
In 2014, we shut down one of our businesses and incurred $21
million of shutdown costs associated with future contractual
promotional payments. These costs were recorded on our
Consolidated and Combined Balance Sheet, and approximately $4
million remain as of Dec. 27, 2015, the majority of which will be
paid in 2016. They have been excluded from the contractual
obligations above.
Capital stock
In July 2015, we announced that our Board of Directors approved a
share repurchase program authorizing us to repurchase shares with
an aggregate value of up to $150 million over a three-year period.
Shares may be repurchased at management’s discretion, either in the
open market or in privately negotiated block transactions.
Management’s decision to repurchase shares will depend on share
price and other corporate liquidity requirements. We expect that
share repurchases may occur from time to time over the three years.
As of Dec. 27, 2015 no shares have been repurchased under this
program.
The Gannett Co., Inc. 401(k) Savings Plan, our principal defined
contribution plan, includes a company matching contribution in the
form of our stock. We fund the match by buying our stock in the
open market and depositing it in the participant’s account.
Our common stock outstanding at Dec. 27, 2015, totaled 115.7
million shares, compared with 115.0 million shares at June 29, 2015.
As of Feb. 16, 2016, our shares were held by 6,636 holders of
record.
Dividends
Dividends declared on common stock amounted to $37 million in
2015.
Cash dividends
Payment date
Per share
2015
4th Quarter . . . . . . . . . . . . . . . . . .
Jan. 4, 2016
3rd Quarter . . . . . . . . . . . . . . . . . .
Oct. 1, 2015
$
$
0.16
0.16
On Feb. 23, 2016, the Board of Directors declared a dividend of
$0.16 per share, payable on April 1, 2016, to shareholders of record
as of the close of business March 11, 2016.
We expect to continue to pay regular quarterly cash dividends on
our common stock. Future cash dividends will be at the discretion of
our Board of Directors, and the amount of cash dividends per share
will depend upon, among other things, our future earnings, financial
condition, results of operations, level of indebtedness, capital
requirements and surplus, contractual restrictions, the number of
shares of common stock outstanding, as well as the legal
requirements, regulatory constraints and other factors that our Board
of Directors deems relevant. Our ability to pay cash dividends on our
common stock is subject to our continued compliance with the terms
of our Credit Facility, including compliance with all financial and
other covenants.
Critical accounting policies and the use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make
estimates and assumptions about future events that affect the
amounts reported in the financial statements and accompanying
notes. Actual results could differ significantly from those estimates.
We believe the following discussion addresses our most critical
accounting policies, which are those that are important to the
presentation of our financial condition and results of operations and
require management’s most subjective and complex judgments.
Business Combinations: We allocate the fair value of purchase
consideration to the tangible assets acquired, liabilities assumed and
intangible assets acquired, based on their estimated fair values. The
excess of the fair value of purchase consideration over the values of
these identifiable assets and liabilities is recorded as goodwill. When
determining the fair value of assets acquired and liabilities assumed,
management makes significant estimates and assumptions,
especially with respect to intangible assets.
Critical estimates in valuing certain identifiable assets include
but are not limited to expected long-term market growth; future
expected operating expenses; cost of capital; and appropriate
discount rates. Management’s estimates of fair value are based upon
assumptions believed to be reasonable, but which are inherently
uncertain and unpredictable and, as a result, actual results may differ
from estimates.
Goodwill: As of Dec. 27, 2015, we had $576 million of goodwill,
which represented approximately 24% of our total assets. Goodwill
represents the excess of acquisition cost over the fair value of assets
acquired, including identifiable intangible assets, net of liabilities
assumed. Goodwill is tested for impairment on an annual basis (first
day of fourth quarter) or between annual tests if events occur or
circumstances change that would more likely than not reduce the fair
value of a reporting unit below its carrying amount.
Before performing the annual two-step goodwill impairment test,
we are first permitted to perform a qualitative assessment to
determine if the two-step quantitative test must be completed. The
qualitative assessment considers events and circumstances such as
macroeconomic conditions, industry and market conditions, cost
factors and overall financial performance, as well as company and
specific reporting unit specifications. If after performing this
assessment, we conclude it is more likely than not that the fair value
of a reporting unit is less than its carrying amount, then we are
required to perform a two-step quantitative test. Otherwise, the two-
step test is not required. In the first step of the quantitative test, we
are required to determine the fair value of each reporting unit and
compare it to the carrying amount of the reporting unit. Fair value of
the reporting unit is determined using various techniques, including
multiple of earnings and discounted cash flow valuation.
Determining the fair value of the reporting units is judgmental in
nature and involves the use of significant estimates and assumptions.
These estimates and assumptions include changes in revenue and
operating margins used to project future cash flows, discount rates,
valuation multiples of entities engaged in the same or similar lines of
business and future economic and market conditions. If the carrying
amount of the reporting unit exceeds the fair value of the reporting
unit, we perform the second step of the impairment test, as this is an
indication that the reporting unit goodwill may be impaired. In the
second step of the impairment test, we determine the implied fair
value of the reporting unit’s goodwill. If the carrying value of a
reporting unit’s goodwill exceeds its implied fair value, then an
impairment of goodwill has occurred and we must recognize an
impairment loss for the difference between the carrying amount and
the implied fair value of goodwill.
31
There are three major reporting units that comprise our goodwill
balance. These consist of Domestic Publishing (including Gannett
Publishing Services), Newsquest and USA TODAY group (which
includes USA TODAY brand properties). For Domestic Publishing,
USA TODAY group and Newsquest, the estimated fair value of each
of these reporting units exceeded the carrying value at the most
recent test.
Fair value of the reporting units depends on several factors,
including the future strength of the economy in our principal
markets. Generally uneven recoveries in the U.S. and U.K. markets
have had an adverse effect on most of our reporting units in recent
years. The differences between fair value and carrying value have
narrowed. New and developing competition as well as technological
change could also adversely affect future fair value estimates. Any
one or a combination of these factors could lead to declines in
reporting unit fair values and result in goodwill impairment charges.
In order for the reporting unit with the least amount of headroom to
fail step one of the quantitative goodwill impairment test, the
estimated value of the reporting unit would have to decline by
amounts ranging from approximately 20% to 140%.
Indefinite Lived Intangibles: This asset grouping consists of
mastheads and trade names.
Local mastheads (publishing periodical titles and web site
domain names) and other trade names are not subject to amortization
and as a result they are tested for impairment annually (first day of
the fourth quarter), or more frequently if events or changes in
circumstances suggest that the asset might be impaired. The
quantitative impairment test consists of a comparison of the fair
value of each masthead/domain name or trade name with its carrying
amount. We use a “relief from royalty” approach which utilizes a
discounted cash flow model to determine the fair value of each
masthead/domain name or trade name. Management’s judgments
and estimates of future operating results in determining the reporting
unit fair values are consistently applied to each underlying business
in determining the fair value of each intangible asset. In 2015,
following this testing, we recognized impairment charges of $0.9
million. These charges were to bring the recorded indefinite lived
intangibles equal to implied fair value based on future projections.
Other Long-Lived Assets (Property, Plant and Equipment and
Amortizable Intangible Assets): Property, plant and equipment are
recorded at cost and depreciated on a straight-line method over the
estimated useful lives of such assets. Changes in circumstances, such
as technological advances or changes to our business model or
capital strategy, could result in actual useful lives differing from our
estimates. In cases where we determine the useful life of buildings
and equipment should be shortened, we would, after evaluating for
impairment, depreciate the asset over its revised remaining useful
life thereby increasing depreciation expense.
Accelerated depreciation was recorded in all periods presented
for certain property, plant and equipment, reflecting specific
decisions to consolidate production and other business services.
We review our property, plant and equipment assets for potential
impairment at the asset group level (generally at the local business
level) by comparing the carrying value of such assets with the
expected undiscounted cash flows to be generated by those asset
groups/local business units. In 2015, we recognized $4 million of
impairment charges following such reviews. Additionally, we
recognized $2 million of impairment charges related to assets held
for sale as the fair value of these assets did not exceed the carrying
value.
Our amortizable intangible assets consist mainly of customer
relationships. These asset values are amortized systematically over
their estimated useful lives. An assessment of our definite lived
intangibles was performed using the “excess earnings method” as
well as the “relief from royalty” method for our amortizable
masthead. The “excess earnings method” approach utilizes the
present value of projected cash flows that are expected to be
generated by the intangibles, less charges representing the
contribution of other assets to those cash flows. The “relief from
royalty” approach utilizes a discounted cash flow model to
determine the fair value of each masthead/domain name or trade
name. In 2015, following this testing, we recognized impairment
charges of $19 million. These charges were to bring the recorded
definite lived intangibles equal to implied fair value based on future
projections.
Pension Accounting: We, along with our subsidiaries, have
various defined benefit retirement plans, under which substantially
all of the benefits have been frozen in previous years.
We account for our pension plans in accordance with the
applicable accounting guidance, which requires us to include the
funded status of our pension plans in our balance sheets, and to
recognize, as a component of other comprehensive income (loss), the
gains or losses that arise during the period, but are not recognized in
pension expense. Pension expense is reported on the Consolidated
and Combined Statements of Income as “Cost of sales and operating
expenses,” or “Selling, general and administrative expenses”.
The determination of pension plan obligations and expense is
dependent upon a number of assumptions regarding future events,
the most important of which are the discount rate applied to pension
plan obligations and the expected long-term rate of return on plan
assets. The discount rate assumption is based on investment yields
available at year-end on corporate bonds rated AA and above with a
maturity to match the expected benefit payment stream. A decrease
in discount rates would increase pension obligations.
We establish the expected long-term rate of return by developing
a forward-looking, long-term return assumption for each pension
fund asset class, taking into account factors such as the expected real
return for the specific asset class and inflation. A single, long-term
rate of return is then calculated as the weighted average of the target
asset allocation percentages and the long-term return assumption for
each asset class. We apply the expected long-term rate of return to
the fair value of the pension assets in determining the dollar amount
of the expected return. Changes in the expected long-term return on
plan assets would increase or decrease pension plan expense. The
effects of actual results differing from these assumptions are
accumulated as unamortized gains and losses. A corridor approach is
used in the amortization of these gains and losses, by amortizing the
balance exceeding the greater of 10% of the beginning balances of
the projected benefit obligation or the fair value of the plan assets.
The amortization period is based on the average life expectancy of
plan participants, which is currently estimated to be approximately
21 years for our principal retirement plan.
For 2015, the assumption used for the discount rate was 4.45%
for our principal retirement plan obligations. As an indication of the
sensitivity of pension liabilities to the discount rate assumption, a 50
basis point reduction in the discount rate at the end of 2015 would
have increased plan obligations by approximately $99 million. A 50
basis point change in the discount rate used to calculate 2015
expense would have changed total pension plan expense for 2015 by
approximately $1 million. We assumed a rate of 8.00% for our long-
term expected return on pension assets used for our principal
retirement plan. As an indication of the sensitivity of pension
expense to the long-term rate of return assumption, a 50 basis point
decrease in the expected rate of return on pension assets would have
increased estimated pension plan expense for 2015 by approximately
$9 million.
32
ITEM 7A. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
We believe that our market risk from financial instruments, such as
accounts receivable, accounts payable and debt, is not material. We
are exposed to foreign exchange rate risk on a limited basis primarily
due to our operations in the U.K., for which the British pound is the
functional currency. Translation gains or losses affecting the
Consolidated and Combined Statements of Income have not been
significant in the past.
Our cumulative foreign currency translation adjustment reported
as part of our equity totaled $385 million at Dec. 27, 2015, $404
million at Dec. 28, 2014 and $432 million at Dec. 29, 2013.
Newsquest’s assets and liabilities were translated from British
pounds to U.S. dollars at the Dec. 27, 2015 exchange rate of 1.49, at
the Dec. 28, 2014 exchange rate of 1.56 and at the Dec. 29, 2013
exchange rate of 1.65. Newsquest’s financial results were translated
at an average rate of 1.53 for 2015, 1.65 for 2014 and 1.56 for 2013.
If the price of the British pound against the U.S. dollar had been
10% more or less than the actual price, operating income would have
increased or decreased approximately 5% in 2015.
Income Taxes: We are subject to income taxes in the U.S. and
various foreign jurisdictions in which we operate and record our tax
provision for the anticipated tax consequences in our reported results
of operations. Tax laws are complex and subject to different
interpretations by the taxpayer and respective government taxing
authorities. Significant judgment is required in determining our tax
expense and in evaluating our tax positions including evaluating
uncertainties as promulgated under ASC 740 Income Taxes.
Our annual tax rate is based on our income, statutory tax
regulations and rates, and tax planning opportunities available in the
various jurisdictions in which we operate. Significant management
judgment is required in determining our provision for income taxes,
deferred tax assets and liabilities and the valuation allowance
recorded against our net deferred tax assets, if any. In assessing the
likelihood of realization of deferred tax assets, management
considers estimates of the amount and character of future taxable
income.
Our actual effective tax rate and income tax expense could vary
from estimated amounts due to the future impacts of various items,
including changes in income tax laws, tax planning and our
forecasted financial condition, and results of operations in future
periods. Although we believe current estimates are reasonable, actual
results could differ from these estimates.
In connection with the spin-off, we entered into a tax matters
agreement with our former parent which states each company’s
rights and responsibilities with respect to payment of taxes, tax
return filings, and control of tax examinations. We are generally
responsible for taxes allocable to periods (or portions of periods)
beginning after the spin-off. Although we may be entitled to seek
indemnification from our former parent under the tax matters
agreement for additional income tax liabilities which related to
periods prior to the spin-off, these items may impact our effective
tax rate in the future.
Prior to the spin-off our operations were included in our parent’s
state and federal income tax returns. For purposes of the Combined
Financial Statements in periods prior to the spin-off we computed
our income taxes as if we were filing separate returns. Current
income taxes payable for these periods were settled with our former
parent through “Former parent’s investment, net.”
We recognize tax benefits from uncertain tax positions only if it
is more likely than not that the tax position will be sustained on
examination by the taxing authorities, based on the technical merits
of the position. The tax benefits recognized in the Financial
Statements from such positions are then measured based on the
largest benefit that has a greater than 50% likelihood of being
realized upon ultimate settlement. Significant management judgment
is required to determine whether the recognition threshold has been
met and, if so, the appropriate amount of unrecognized tax benefits
to be recorded in the consolidated and combined financial
statements. Management re-evaluates tax positions each period in
which new information about recognition or measurement becomes
available. Our policy is to recognize, when applicable, interest and
penalties on unrecognized income tax benefits as part of “Provision
for income taxes”.
The effect of a 1% change in the effective tax rate for 2015
would have resulted in a change of $2 million in the provision for
income taxes and net income.
33
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated and Combined Balance Sheets at Dec. 27, 2015 and Dec. 28, 2014. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated and Combined Statements of Income for each of the three fiscal years in the period ended Dec. 27, 2015 . . . . . . . . . . .
Consolidated and Combined Statements of Comprehensive Income (Loss) for each of the three fiscal years in the period ended Dec.
27, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated and Combined Statements of Cash Flows for each of the three fiscal years in the period ended Dec. 27, 2015 . . . . . . . .
Consolidated and Combined Statements of Equity for each of the three fiscal years in the period ended Dec. 27, 2015 . . . . . . . . . . . .
Notes to Consolidated and Combined Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Quarterly Statements of Income (Unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SUPPLEMENTARY DATA
OTHER INFORMATION
Page
35
36
37
38
39
40
41
63
64
34
Report of Independent Registered Public Accounting Firm
Board of Directors and Shareholders of Gannett Co., Inc.:
We have audited the accompanying consolidated and combined
balance sheets of Gannett Co., Inc. as of December 27, 2015 and
December 28, 2014, and the related consolidated and combined
statements of income, comprehensive income (loss), shareholders'
equity and cash flows for each of the three fiscal years in the period
ended December 27, 2015. These financial statements are the
responsibility of the Company’s management. Our responsibility is
to express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated and combined
financial position of Gannett Co., Inc. at December 27, 2015 and
December 28, 2014, and the consolidated and combined results of its
operations and its cash flows for each of the three fiscal years in the
period ended December 27, 2015, in conformity with U.S. generally
accepted accounting principles.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States),
Gannett Co., Inc.’s internal control over financial reporting as of
December 27, 2015, based on criteria established in Internal Control
– Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (2013 framework) and
our report dated February 25, 2016, included in Item 9A, expressed
an unqualified opinion thereon.
McLean, Virginia
February 25, 2016
35
Dec. 27, 2015
Dec. 28, 2014
196,696 $
330,473
36,114
25,777
12,288
28,188
629,536
896,585
575,685
59,713
201,991
64,289
2,427,799 $
393,026 $
18,501
—
78,967
490,494
22,221
87,594
612,443
156,471
878,729
1,369,223
—
1,156
1,708,291
22,553
—
(673,424)
1,058,576
2,427,799 $
71,947
357,523
16,339
38,944
18,434
27,883
531,070
934,483
544,345
50,115
261,322
63,125
2,384,460
318,785
—
13,675
77,123
409,583
11,991
93,474
770,041
161,899
1,037,405
1,446,988
—
—
—
—
1,615,584
(678,112)
937,472
2,384,460
GANNETT CO., INC.
CONSOLIDATED AND COMBINED BALANCE SHEETS
In thousands of dollars
Assets
Current assets
Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Accounts receivable, less allowance for doubtful accounts of $8,836 and $5,788, respectively . . . . . . . . .
Other receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assets held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Liabilities and equity
Current liabilities
Accounts payable and accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Dividends payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Postretirement medical and life insurance liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other noncurrent liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total noncurrent liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commitments and contingent liabilities (see Note 12)
Equity
Preferred stock of $0.01 par value per share, 5,000,000 shares authorized, none issued . . . . . . . . . . . . . . .
Common stock of $0.01 par value per share, 500,000,000 shares authorized, 115,668,957 shares issued .
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Former parent’s investment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities and equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
The accompanying notes are an integral part of these consolidated and combined financial statements.
36
GANNETT CO., INC.
CONSOLIDATED AND COMBINED STATEMENTS OF INCOME
In thousands, except per share amounts
Fiscal year ended
Operating revenues:
Dec. 27, 2015
Dec. 28, 2014
Dec. 29, 2013
Advertising. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1,611,445 $
1,840,067 $
1,971,046
Circulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total operating revenues. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating expenses:
Cost of sales and operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Facility consolidation and asset impairment charges. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-operating income (expense):
Equity income in unconsolidated investees, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other non-operating items, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total non-operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,060,118
213,449
2,885,012
1,866,729
707,022
95,916
11,636
34,278
2,715,581
169,431
11,981
12,563
24,544
193,975
47,884
1,109,729
222,082
3,171,878
1,997,803
765,465
97,178
13,885
35,216
2,909,547
262,331
15,857
77
15,934
278,265
67,560
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
146,091 $
210,705 $
Net income per share—basic. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Net income per share—diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1.27 $
1.25 $
1.83 $
1.83 $
The accompanying notes are an integral part of these consolidated and combined financial statements.
1,117,491
236,402
3,324,939
2,089,748
773,409
95,979
14,119
26,611
2,999,866
325,073
22,768
(2,078)
20,690
345,763
71,302
274,461
2.39
2.39
37
GANNETT CO., INC.
CONSOLIDATED AND COMBINED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
In thousands of dollars
Fiscal year ended
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Other comprehensive income (loss), before tax:
Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension and other postretirement benefit items:
Actuarial (loss) gain:
Dec. 27, 2015
Dec. 28, 2014
146,091 $
210,705 $
Dec. 29, 2013
274,461
(19,390)
(27,414)
7,516
Actuarial (loss) gain arising during the period. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(54,142)
58,148
Prior service credit:
Change in prior service credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of prior service credit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlement charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transfer from Separation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension and other postretirement benefit items . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (loss) before tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax effect related to components of other comprehensive (loss) income . . . . . .
Other comprehensive income (loss), net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
—
(2,722)
1,254
24,180
15,544
42,262
22,872
(18,184)
4,688
150,779 $
The accompanying notes are an integral part of these consolidated and combined financial statements.
(429,402)
42,446
36,873
(4,454)
—
—
23,634
(330,903)
(358,317)
122,186
(236,131)
(25,426) $
258,220
57,940
303
(2,039)
1,721
—
(9,448)
306,697
314,213
(131,121)
183,092
457,553
38
GANNETT CO., INC.
CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
In thousands of dollars
Fiscal year ended
Cash flows from operating activities
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Adjustments to reconcile net income to operating cash flows:
Gain on acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Facility consolidation and asset impairment charges (see Notes 4 and 5). . . . . . . . . . . . . . .
Stock-based compensation — equity awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension and other postretirement expense, net of contributions . . . . . . . . . . . . . . . . . . . . . .
Equity income in unconsolidated investees, net (see Notes 4 and 6) . . . . . . . . . . . . . . . . . .
Decrease in accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Increase) decrease in other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decrease (increase) in inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase (decrease) in accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decrease in interest and taxes payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase (decrease) in accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decrease in deferred income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash flows from operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash flows from investing activities
Purchase of property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments for acquisitions, net of cash acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments for investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sale of certain assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used for investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash flows from financing activities
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from issuance of common stock upon settlement of stock awards . . . . . . . . . . . .
Transactions with former parent, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred payments for acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used for financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of currency exchange rate change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance of cash and cash equivalents at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance of cash and cash equivalents at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Dec. 27, 2015 Dec. 28, 2014 Dec. 29, 2013
146,091 $
210,705 $
274,461
(21,799)
95,916
11,636
34,278
20,623
47,380
(134,907)
(11,981)
33,376
(24,961)
14,023
16,844
(9,349)
44,787
(2,894)
(28,043)
231,020
(53,979)
(28,668)
(2,750)
12,402
29,683
(43,312)
—
97,178
13,885
35,216
17,099
48,943
(100,984)
(15,857)
30,753
(4,988)
9,577
23,298
(30,871)
(21,544)
(1,471)
35,199
346,138
(72,307)
(113)
(2,500)
18,629
24,519
(31,772)
(18,462)
6,615
(49,701)
(1,218)
(62,766)
(193)
124,749
71,947
196,696 $
—
—
(319,422)
(1,313)
(320,735)
(280)
(6,649)
78,596
71,947 $
—
95,979
14,119
26,611
16,201
66,621
(99,683)
(22,768)
2,943
65
5,028
(25,086)
(48,120)
(34,473)
(3,783)
(13,580)
254,535
(53,619)
(922)
—
26,806
19,983
(7,752)
—
—
(300,805)
(1,314)
(302,119)
(164)
(55,500)
134,096
78,596
Supplemental cash flow information:
Cash paid for taxes, net of refunds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Cash paid for interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
38,707 $
2,995 $
— $
— $
—
—
The accompanying notes are an integral part of these consolidated and combined financial statements.
39
GANNETT CO., INC.
CONSOLIDATED AND COMBINED STATEMENTS OF EQUITY
In thousands of dollars
Balance: Dec. 30, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Net income, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income, net of tax . . . . . . . . . . . . . .
Total comprehensive income
Transactions with our former parent, net. . . . . . . . . . . . . .
Balance: Dec. 29, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Net income, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive loss, net of tax. . . . . . . . . . . . . . . . .
Total comprehensive loss. . . . . . . . . . . . . . . . . . . . . . . . . .
Transactions with our former parent, net. . . . . . . . . . . . . .
Balance: Dec. 28, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Net income, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income, net of tax . . . . . . . . . . . . . .
Total comprehensive income . . . . . . . . . . . . . . . . . . . . . . .
Dividends declared, 2015: $0.32 per share . . . . . . . . . . . .
Issuance of common shares . . . . . . . . . . . . . . . . . . . . . . . .
Stock options exercised . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted stock awards settled . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation. . . . . . . . . . . . . . . . . . . . . . . . .
Tax benefit derived from stock awards settled . . . . . . . . .
Transactions with former parent . . . . . . . . . . . . . . . . . . . .
Transfer of former parent's investment, net . . . . . . . . . . . .
Other activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance: Dec. 27, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Common
stock
$0.01 par
value
Additional
paid-in
capital
Retained
earnings
Accumulated
other
comprehensive
(loss) income
Former
parent’s
investment,
net
— $
—
—
—
— $
—
—
—
— $
—
—
— $
—
—
—
— $
—
—
—
— $
—
—
—
1,150
6
—
—
—
—
—
—
1,156 $
—
(1,150)
4,987
(293)
21,742
1,622
55,402
1,625,878
103
1,708,291 $
— $
—
—
—
— $
—
—
—
— $
59,517
—
(36,964)
—
—
—
—
—
—
—
—
22,553 $
(625,073) $
—
183,092
1,717,343 $
274,461
—
—
(441,981) $
—
(236,131)
(284,602)
1,707,202 $
210,705
—
—
(678,112) $
—
4,688
(302,323)
1,615,584 $
86,574
—
—
—
—
—
—
—
—
—
—
(673,424) $
—
—
—
—
—
—
(68,646)
(1,633,512)
—
— $
Total
1,092,270
274,461
183,092
457,553
(284,602)
1,265,221
210,705
(236,131)
(25,426)
(302,323)
937,472
146,091
4,688
150,779
(36,964)
—
4,993
(293)
21,742
1,622
(13,244)
(7,634)
103
1,058,576
The accompanying notes are an integral part of these consolidated and combined financial statements.
40
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
NOTE 1
Basis of presentation
Description of business: Gannett Co., Inc. (“Gannett,” “our,” “us”
and “we”) is a leading international, multi-platform news and
information company that delivers high-quality, trusted content
where and when consumers want to engage with it on virtually any
device. Our operations comprise 112 daily publications in the U.S.
and the U.K., more than 400 non-daily local publications in the U.S.
and more than 150 such titles in the U.K. Our 93 U.S. daily
publications include USA TODAY.
Separation from Former Parent: On June 29, 2015, the
separation of Gannett from our former parent, TEGNA Inc., was
completed pursuant to a Separation and Distribution Agreement (the
“Separation Agreement”) dated June 26, 2015. On the distribution
date of June 29, 2015, our former parent completed the pro rata
distribution to its stockholders of 98.5% of the outstanding shares of
Gannett common stock, and Gannett common stock began trading
“regular way” on the New York Stock Exchange. Each holder of our
former parent’s common stock received one share of Gannett
common stock for every two shares of our former parent’s common
stock held on June 22, 2015, the record date for the distribution.
Following the distribution, our former parent owns 1.5% of
Gannett’s outstanding common stock and our former parent will
continue to own our shares for a period of time not to exceed five
years after the distribution. Our former parent structured the
distribution to be tax free to its U.S. shareholders for U.S. federal
income tax purposes.
Basis of presentation: Prior to the spin-off, we did not prepare
separate financial statements. The accompanying audited
consolidated and combined financial statements for periods prior to
the spin-off were derived from the consolidated and combined
financial statements and accounting records of our former parent and
present our combined financial position, results of operations and
cash flows as of and for the periods presented as if we were a
separate entity.
Through the date of the spin-off, in preparing these consolidated
and combined financial statements, management has made certain
assumptions or implemented methodologies to allocate various
expenses from our former parent to us and from us back to our
former parent in the form of cost recoveries. These allocations
represent services provided between the two entities and are more
fully detailed in Note 14 — Relationship with our former parent. All
such costs and expenses are assumed to be settled with our former
parent through “Former parent’s investment, net” in the period in
which the costs were incurred. Current income taxes are also
assumed to be settled with our former parent through “Former
parent’s investment, net,” and settlement is deemed to occur in the
year following recognition in the current income tax provision. We
believe the assumptions and methodologies used in these allocations
are reasonable; however, such allocated costs, net of cost recoveries,
may not be indicative of the actual level of expense that would have
been incurred had we been operating on a stand-alone basis, and,
accordingly, may not necessarily reflect our consolidated and
combined financial position, results of operations and cash flows had
we operated as a stand-alone entity during the periods presented.
Subsequent to the spin-off, our financial statements are presented
on a consolidated basis as we became a separate consolidated entity.
All intercompany accounts have been eliminated in
consolidation. For periods prior to the spin-off, all significant
intercompany transactions between either (i) us and our former
parent or (ii) us and our former parent’s affiliates have been included
within the combined financial statements and are considered to be
effectively settled through equity contributions or distributions at the
time the transactions were recorded. The accumulated net effect of
intercompany transactions between either (i) us and our former
parent or (ii) us and our former parent affiliates are included in
“Former parent’s investment, net.” These intercompany transactions
are further described in Note 14 — Relationship with our former
parent.
NOTE 2
Summary of significant accounting policies
Fiscal year: Our fiscal year ends on the last Sunday of the calendar
year. Our 2015 fiscal year ended on Dec. 27, 2015, and encompassed
a 52-week period. Our 2014 and 2013 fiscal years encompassed 52-
week periods.
Consolidation: The consolidated and combined financial
statements include our accounts and those over which we have
control after elimination of all intercompany transactions and profits.
Use of estimates: The preparation of financial statements in
conformity with U.S. generally accepted accounting principles
(“U.S. GAAP”) requires management to make estimates, judgments
and assumptions that affect the amounts reported in the consolidated
and combined financial statements and footnotes thereto. Actual
results could differ from those estimates. Significant estimates
include amounts for income taxes, pension and other post-
employment benefits and valuation of long-lived and intangible
assets.
Segment presentation: All of our operating segments meet the
criteria under the Financial Accounting Standards Board Accounting
Standards Codification (“ASC”) Topic 280, Segment Reporting, to
be aggregated into one reportable segment.
Business combinations: We allocate the fair value of purchase
consideration to the tangible assets acquired, liabilities assumed and
intangible assets acquired based on their estimated fair values. The
excess of the fair value of purchase consideration over the values of
these identifiable assets and liabilities is recorded as goodwill. When
determining the fair value of assets acquired and liabilities assumed,
management makes significant estimates and assumptions,
especially with respect to intangible assets.
Critical estimates in valuing certain identifiable assets include
but are not limited to expected long-term revenues; future expected
operating expenses; cost of capital and appropriate discount rates.
Management’s estimates of fair value are based upon assumptions
believed to be reasonable, but which are inherently uncertain and
unpredictable and, as a result, actual results may differ from
estimates.
41
Cash and cash equivalents: Cash and cash equivalents consist of
cash and investments with maturities of three months or less.
Accounts receivables and allowances for doubtful accounts:
Accounts receivables are recorded at invoiced amounts and
generally do not bear interest. The allowance for doubtful accounts
reflects our estimate of credit exposure, determined principally on
the basis of our collection experience, aging of our receivables and
significant individual account credit risk.
Inventories: Inventories, consisting principally of newsprint,
printing ink and plate material for our publishing operations, are
valued at the lower of cost (first-in, first-out) or market.
Assets held for sale: In accordance with the guidance on the
disposal of long-lived assets under ASC Topic 360, “Property, Plant
and Equipment” (ASC Topic 360), we reported assets held for sale at
Dec. 27, 2015 of $12.3 million and at Dec. 28, 2014, of $18.4
million.
Valuation of long-lived assets: In accordance with the
requirements included within ASC Topic 350, “Intangibles—
Goodwill and Other” (ASC Topic 350) and ASC Topic 360, we
evaluate the carrying value of long-lived assets (mostly property,
plant and equipment and definite-lived intangible assets) to be held
and used whenever events or changes in circumstances indicate that
the carrying amount may not be recoverable. The carrying value of a
long-lived asset group is considered impaired when the projected
undiscounted future cash flows are less than their carrying value. We
measure impairment based on the amount by which the carrying
value exceeds the fair value. Fair value is determined primarily using
the projected future cash flows, discounted at a rate commensurate
with the risk involved. Losses on long-lived assets to be disposed of
are determined in a similar manner, except that fair values are
reduced for the cost to dispose.
Property and depreciation: Property, plant and equipment is
recorded at cost, and depreciation is provided generally on a straight-
line basis over the estimated useful lives of the assets. The principal
estimated useful lives are 10 to 40 years for buildings and
improvements, and 3 to 30 years for machinery, equipment and
fixtures. Changes in the estimated useful life of an asset, which, for
example, could happen as a result of facility consolidations, can
affect depreciation expense and net income. Major renewals and
improvements and interest incurred during the construction period of
major additions are capitalized. Expenditures for maintenance,
repairs and minor renewals are charged to expense as incurred.
A breakout of property, plant and equipment by type is presented
below:
In thousands of dollars
Dec. 27, 2015
Dec. 28, 2014
Land. . . . . . . . . . . . . . . . . . . . . . . . . . . . $
84,059 $
Buildings and Improvements. . . . . . . . .
Machinery, equipment and fixtures . . . .
Construction in progress . . . . . . . . . . . .
752,849
1,687,875
17,786
92,470
775,078
1,712,028
10,583
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,542,569
2,590,159
Accumulated depreciation. . . . . . . . . . .
(1,645,984)
(1,655,676)
Net property, plant and equipment . . . . $
896,585 $
934,483
Certain assets of our former parent and former parent affiliates
that were not owned by us but were otherwise specifically
identifiable or attributable to us and were necessary to present
combined financial statements on a stand-alone basis for prior years
have also been included in these financial statements.
Leases: Operating lease rentals are expensed on a straight-line
basis over the life of the lease. At lease inception, we determine the
lease term by excluding renewal options that are not reasonably
assured. The lease term is used to determine whether a lease is
capital or operating and is used to calculate straight-line rent
expense. Additionally, the depreciable life of leased assets and
leasehold improvements is limited by the expected lease term.
Accounts payable and accrued expenses: A breakout of
accounts payable and accrued expenses by type is presented below:
In thousands of dollars
Dec. 27, 2015
Dec. 28, 2014
Compensation . . . . . . . . . . . . . . . . . . . . $
115,602 $
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total accrued liabilities . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . .
Total accrued liabilities and accounts
payable. . . . . . . . . . . . . . . . . . . . . . . . . . $
23,644
108,775
248,021
145,005
393,026 $
318,785
77,606
26,195
89,096
192,897
125,888
Goodwill and other intangible assets: Goodwill represents the
excess of acquisition cost over the fair value of assets acquired,
including identifiable intangible assets, net of liabilities assumed. In
accordance with the impairment testing provisions included in ASC
Topic 350, goodwill is tested for impairment on an annual basis (first
day of fourth quarter) or between annual tests if events occur or
circumstances change that would more likely than not reduce the fair
value of a reporting unit below its carrying amount.
Before performing the annual two-step goodwill impairment test,
we are first permitted to perform a qualitative assessment to
determine if the two-step quantitative test must be completed. The
qualitative assessment considers events and circumstances such as
macroeconomic conditions, industry and market conditions, cost
factors and overall financial performance, as well as company and
specific reporting unit specifications. If after performing this
assessment, we conclude it is more likely than not that the fair value
of a reporting unit is less than its carrying amount, then we are
required to perform a two-step quantitative test. Otherwise, the two-
step test is not required. In the first step of the quantitative test, we
are required to determine the fair value of each reporting unit and
compare it to the carrying amount of the reporting unit. Fair value of
the reporting unit is determined using various techniques, including
multiple of earnings and discounted cash flow valuation techniques.
If the carrying amount of the reporting unit exceeds the fair value of
the reporting unit, we perform the second step of the impairment
test, as this is an indication that the reporting unit goodwill may be
impaired. In the second step of the impairment test, we determine the
implied fair value of the reporting unit’s goodwill. If the carrying
value of a reporting unit’s goodwill exceeds its implied fair value,
then an impairment of goodwill has occurred and we must recognize
an impairment loss for the difference between the carrying amount
and the implied fair value of goodwill.
In determining the reporting units, we consider the way we
manage our businesses and the nature of those businesses. These
reporting units therefore consist principally of U.S. Community
Publishing, the USA TODAY group, and the U.K. group.
We perform an impairment test annually, or more often if
circumstances dictate, of our indefinite-lived intangible assets.
Intangible assets that have finite useful lives are amortized over
those useful lives and are evaluated for impairment in accordance
with ASC Topic 350 as described above. We recognized impairment
charges each year from 2013 through 2015. See Note 5 for
additional information.
42
Investments and other assets: Investments in entities for which
Income taxes: Income taxes are accounted for under the asset
we do not have control, but we have the ability to exercise
significant influence over operating and financial policies, are
accounted for under the equity method. Our share of net earnings
and losses from these ventures is included in “Equity income in
unconsolidated investees, net” in the Consolidated and Combined
Statements of Income. See Note 6 for additional information.
Revenue recognition: Our revenues include amounts charged to
customers for space purchased in our newspapers, digital ads placed
on our digital platforms, advertising and marketing service fees,
online subscription advertising products and commercial printing.
• Publishing revenues also include circulation revenues for
newspapers, both print and digital, purchased by readers or
distributors, reduced by the amount of any discounts taken.
• Advertising revenues are recognized, net of agency
commissions, in the period when advertising is printed or placed
on digital platforms.
• Marketing services revenues are generally recognized when
advertisements or services are delivered.
• Online subscriptions are recognized over the subscription period.
• Commercial printing revenues are recognized when the product
is delivered to the customer.
• Circulation revenues are recognized when purchased newspapers
are distributed or made available on our digital platforms.
We have various advertising and circulation agreements which
have both print and digital deliverables. Revenue from sales
agreements that contain multiple deliverable elements is allocated to
each element based on the relative best estimate of selling price.
Elements are treated as separate units of accounting if there is
standalone value upon delivery.
Amounts received from customers in advance of revenue
recognition are deferred as liabilities.
Retirement plans: Pension and other postretirement benefit costs
under our defined benefit retirement plans are actuarially
determined. We recognize the cost of postretirement benefits
including pension, medical and life insurance benefits on an accrual
basis over the average life expectancy of employees expected to
receive such benefits for plans that have had their benefits frozen.
For active plans, costs are recognized over the estimated average
future service period.
Stock-based employee compensation: We grant restricted stock
units as well as performance shares to our employees as a form of
compensation. The expense for such awards is based on the grant
date fair value of the award and is recognized on a straight-line basis
over the requisite service period, which is generally the four-year
incentive period for restricted stock units and the three-year
incentive period for performance shares. Expense for performance
share awards for participants meeting certain retirement eligible
criteria as defined in the plan is recognized using the accelerated
attribution method. See Note 11 for further discussion.
and liability method. Deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases and operating loss and
tax credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets
and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date. See Note 10 for further
discussion.
We also evaluate any uncertain tax positions and recognizes a
liability for the tax benefit associated with an uncertain tax position
if it is more likely than not that the tax position will not be sustained
on examination by the taxing authorities, based on the technical
merits of the position. The tax benefits recognized in the financial
statements from such positions are measured based on the largest
benefit that has a greater than 50% likelihood of being realized upon
ultimate settlement. We record a liability for uncertain tax positions
taken or expected to be taken in a tax return. Any change in
judgment related to the expected ultimate resolution of uncertain tax
positions is recognized in earnings in the period in which such
change occurs. Interest and penalties, if any, related to unrecognized
tax benefits are recorded in interest expense.
Foreign currency translation: The statements of income of
foreign operations have been translated to U.S. dollars using the
average currency exchange rates in effect during the relevant period.
The balance sheets have been translated using the currency exchange
rate as of the end of the accounting period. The impact of currency
exchange rate changes on the translation of the balance sheets are
included in other comprehensive income (loss) in the Consolidated
and Combined Statements of Comprehensive Income and are
classified as accumulated other comprehensive income (loss) in the
Consolidated and Combined Balance Sheets and Statements of
Equity.
Loss contingencies: We are subject to various legal proceedings,
claims and regulatory matters, the outcomes of which are subject to
significant uncertainty. We determine whether to disclose or accrue
for loss contingencies based on an assessment of whether the risk of
loss is remote, reasonably possible or probable, and whether it can
be reasonably estimated. We accrue for loss contingencies when
such amounts are probable and reasonably estimable. If a contingent
liability is only reasonably possible, we will disclose the potential
range of the loss, if material and estimable.
Concentration of risk: Due to the distributed nature of our
operations, we are not subject to significant concentrations of risk
relating to customers, products, or geographic locations.
Generally, credit is extended based upon an evaluation of the
customer’s financial position, and advance payment is not required.
Credit losses are provided for in the financial statements and have
been within management’s expectations.
Our foreign revenues, principally from businesses in the U.K.,
totaled approximately $417.4 million in 2015, $461.3 million in
2014, and $452.0 million in 2013.
Our long-lived assets in foreign countries, principally in the
U.K., totaled approximately $330.0 million at Dec. 27, 2015, $336.7
million at Dec. 28, 2014, and $384.3 million at Dec. 29, 2013.
43
Supplementary Cash Flow Information: Supplementary cash
In September 2015, the FASB issued ASU 2015-16 Business
flow information, including non-cash investing and financing
activities, are as follows:
In thousands of dollars
Dec. 27, 2015
Accrued capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . $
Dividends payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Parent, net investment activity subsequent to separation . . . $
Fair value of noncontrolling equity interests in TNP and
CNP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Pre-acquisition carrying value of TNP. . . . . . . . . . . . . . . . . $
3,251
18,501
31,762
60,954
39,155
Supplementary non-cash information for fiscal years 2014 and
2013 is immaterial.
New accounting pronouncements: In May 2015, the Financial
Accounting Standards Board (“FASB”) issued Accounting Standards
Update (“ASU”) 2015-07 Fair Value Measurement (“Topic 820”):
Disclosures for Investments in Certain Entities That Calculate Net
Asset Value per Share (or Its Equivalent). ASU 2015-07 removes the
requirement to include investments in the fair value hierarchy for
which the fair value is measured at NAV using the practical
expedient under Topic 820. ASU 2015-07 is effective for annual
reporting periods beginning after Dec. 15, 2015, including interim
periods within that reporting period, and is required to be applied
retrospectively to all periods presented beginning in the year of
adoption. As ASU 2015-07 will impact our disclosures only,
adoption will not affect our financial condition, results of operations,
or cash flows.
In July 2015, the Financial Accounting Standards Board
(“FASB”) delayed the effective date for ASU 2014-09 Revenue from
Contracts with Customers (“Topic 606”). The core principle
contemplated by ASU 2014-09 is that an entity should recognize
revenue to depict the transfer of promised goods or services to
customers in an amount that reflects the consideration to which the
entity expects to be entitled in exchange for those goods or services.
New disclosures about the nature, amount, timing and uncertainty of
revenue and cash flows arising from contracts with customers are
also required. We are required to adopt the standard in the first
quarter of 2018 and retroactively apply it to our 2016 and 2017
financial results at the time of adoption. Under the new rules, we are
permitted to adopt the new standard in 2017. We can also choose to
apply the standard using either the full retrospective approach or a
modified retrospective approach, which recognizes a cumulative
catch up adjustment to the opening balance of retained earnings. We
are currently assessing the impact and timing of adopting this
pronouncement and the transition method we will use.
In July 2015, the FASB issued ASU 2015-11 Inventory (“Topic
330”): “Simplifying the Measurement of Inventory,” which requires
entities using the first-in, first-out (“FIFO”) inventory costing
method to subsequently value inventory at the lower of cost and net
realizable value. Topic 330 defines net realizable value as the
estimated selling prices in the ordinary course of business, less
reasonably predictable costs of completion, disposal, and
transportation. Topic 330 is effective for fiscal years and interim
periods within those years beginning after Dec. 15, 2016, with early
adoption permitted. We are currently evaluating the provisions of
Topic 330 and assessing the impact on our consolidated financial
results.
Combinations (“Topic 805”): “Simplifying the Accounting for
Measurement-Period Adjustments,” which eliminates the
requirement for an acquirer in a business combination to account for
measurement-period adjustments retrospectively. Under Topic 805,
acquirers must recognize measurement-period adjustments in the
period in which they determine the amounts, including the effect on
earnings of any amounts they would have recorded in previous
periods if the accounting had been completed at the acquisition date.
This guidance is effective for fiscal years beginning after Dec. 15,
2016, with early adoption permitted. We are currently evaluating the
provisions of Topic 805 and assessing the impact, if any, on our
consolidated financial results.
In November 2015, the FASB issued ASU 2015-17 Income
Taxes (“Topic 740”): “Balance Sheet Classification of Deferred
Taxes,” which requires companies to classify all deferred tax assets
and liabilities as noncurrent on the balance sheet instead of
separating deferred taxes into current and noncurrent amounts. This
guidance is effective for fiscal years beginning after Dec. 15, 2016,
with early adoption permitted. We have early adopted and this
presentation is included in the Consolidated and Combined Balance
Sheets.
NOTE 3
Acquisitions and dispositions
Texas-New Mexico Partnership: On June 1, 2015, we completed the
acquisition of the remaining 59.4% interest in the Texas-New
Mexico Partnership (“TNP”) that we did not own from Digital First
Media. We completed the acquisition through the assignment of our
19.5% interest in the California Newspapers Partnership (“CNP”),
valued at $34.4 million, and additional cash consideration, net of
cash acquired, of $5.2 million. As a result, we own 100% of TNP
and no longer have any ownership interest or continuing
involvement in CNP. Through the transaction, we acquired news
organizations in Texas (El Paso Times), New Mexico (Alamogordo
Daily News; Carlsbad Current-Argus; The Daily Times in
Farmington; Deming Headlight; Las Cruces Sun-News; and Silver
City Sun-News) and Pennsylvania (Chambersburg Public Opinion;
Hanover Evening Sun; Lebanon Daily News; and The York Daily
Record).
The purchase price was allocated to the tangible assets and
identified intangible assets acquired based on their estimated fair
values. The allocation of the purchase price is based upon
management’s preliminary estimates. At the acquisition date, the
purchase price assigned to the acquired assets and assumed liabilities
is summarized as follows:
In thousands of dollars
Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Plant, property and equipment . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets acquired. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncurrent liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities assumed. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
12,310
20,792
28,440
28,250
89,792
10,860
11,878
22,738
67,054
44
The fair value of our 40.6% interest in TNP on the acquisition
date was $26.6 million. We recognized a $21.8 million pre-tax non-
cash gain on the transaction. This gain is included in “Other non-
operating items, net” on the Consolidated and Combined Statements
of Income. Acquisition-related costs for this transaction were $0.7
million. The impact to our Consolidated and Combined Statements
of Income, since the June 1, 2015, acquisition date,
was approximately $46.6 million of revenue.
Acquired property, plant and equipment will be depreciated on
a straight-line basis over the assets’ respective estimated remaining
useful lives. Goodwill is calculated as the excess of the consideration
transferred over the fair value of the identifiable net assets acquired
and represents the future economic benefits expected to arise from
other intangible assets acquired that do not qualify for separate
recognition, including assembled workforce and non-contractual
relationships, as well as expected future synergies. We expect the
purchase price allocated to goodwill and mastheads will be
deductible for tax purposes.
Romanes Media Group: On May 26, 2015, Newsquest paid
$23.4 million, net of cash acquired, to purchase 100% of the shares
of Romanes Media Group (“RMG”). RMG publishes local
newspapers in Scotland, Berkshire and Northern Ireland and its
portfolio comprises one daily newspaper, 28 weekly newspapers and
their associated websites. We incurred $0.5 million of acquisition-
related costs for this transaction. The impact to our Consolidated and
Combined Statements of Income since the acquisition date
was $15.9 million of revenue.
Journal Media Group: On Oct. 7, 2015 we entered into a
merger agreement for the acquisition of Journal Media Group, Inc.
(“JMG”) for approximately $280 million. We will finance the
transaction through a combination of cash on hand and borrowings
under our $500 million Credit Facility. The pending acquisition is
expected to close in the first quarter of 2016.
NOTE 4
Severance-related expenses
We have initiated various cost reducing actions that are severance-
related.
In March 2015, we announced an Early Retirement Opportunity
Program (“EROP”) for our USA TODAY employees. In accordance
with Accounting Standards Codification (“ASC”) Topic 712, we
recorded severance-related expenses of $7.8 million for the year
ended Dec. 27, 2015.
In August 2015, we announced an EROP for employees in
certain corporate departments and publishing sites. We recorded
severance-related expenses of approximately $34.3 million for the
year ended Dec. 27, 2015.
We recorded $59.3 million in costs of sales and operating
expenses and $12.9 million in selling, general and administrative
expenses during the year ended Dec. 27, 2015 related to our EROP
and employee termination actions. We recorded $15.5 million in
costs of sales and operating expenses and $4.2 million in selling,
general and administrative expenses during the year ended Dec. 28,
2014 related to employee termination actions.
We also had other employee termination actions associated with
our facility consolidation and other cost efficiency efforts. We
recorded severance-related expenses of $30.2 million and $19.8
million for the years ended Dec. 27, 2015 and Dec. 28, 2014,
respectively.
A summary of our USA TODAY 2015 EROP is as follows:
In thousands of dollars
Balance at Dec. 28, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
—
Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4,464)
Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at Dec. 27, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
7,801
3,337
A summary of our August 2015 EROP is as follows:
In thousands of dollars
Balance at Dec. 28, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
—
Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(6,127)
34,280
240
Balance at Dec. 27, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
28,393
A summary of the related severance liability for our various
other one-time actions is as follows:
In thousands of dollars
Balance at Dec. 29, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
14,886
Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(21,289)
Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at Dec. 28, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
13,074
6,671
Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(19,679)
Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at Dec. 27, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
22,826
9,818
45
During 2015, 2014 and 2013, we recorded non-cash impairment
charges for mastheads, after the qualitative assessments indicated it
was more likely than not that the carrying values exceeded the
respective fair values. Accordingly, we prepared quantitative
assessments for the assets which indicated that certain carrying
values were less than its respective fair values, and as a result pre-tax
impairment charges totaled $0.9 million in 2015, $1.7 million in
2014 and $2.4 million in 2013. Fair values were determined using a
relief-from-royalty method. The impairments recorded were
principally a result of revenue projections which were lower than
expected.
During 2015, we recorded non-cash impairment charges for
definite lived other intangibles, after qualitative assessments
indicated it was more likely than not that the carrying values
exceeded the respective fair values. Accordingly, we prepared
quantitative assessments for the years which also indicated that
impairments existed. As a results of these assessments, we recorded
non-cash impairment charges to reduce the carrying value of each
asset to its respective fair value. Fair values were determined using a
relief-from-royalty method as well as the excess earnings method.
The pre-tax impairment charges totaled $18.5 million in 2015. The
impairments recorded were principally a result of revenue
projections which were lower than expected.
Facility consolidation plans led us to recognize charges
associated with revising the useful lives of certain assets over a
shortened period as well as shutdown costs. Charges were
recognized in each year presented. Certain assets classified as held-
for-sale in accordance with ASC Topic 360 resulted in charges also
being recognized as the carrying values were reduced to equal the
fair value less cost to dispose. These fair values were based on
estimates of prices for similar assets. During 2015, the carrying
value of a certain investment in which we own noncontrolling
interest was written down to fair value because the business
underlying the investments had experienced sustained operating
losses, leading us to conclude the investment was impaired. These
charges of $0.7 million are recorded in “Equity income in
unconsolidated investees, net.” We also recorded non-operating
charges to write off certain assets that were donated during 2013.
We also have an ongoing severance plan to terminated
employees in the normal course of business. A summary of the
related liability is as follows:
In thousands of dollars
Balance at Dec. 29, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at Dec. 28, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
5,824
(7,696)
6,723
4,851
Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(8,175)
Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at Dec. 27, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
7,359
4,035
Facility consolidation and asset impairment charges
For each year presented, we recognized charges related to facility
consolidations efforts and in certain of these periods, we also
recorded non-cash impairment charges to assets and certain
investments in which we hold a noncontrolling interest which are
accounted for under the equity method.
A summary of these charges by year is presented below:
In thousands of dollars, except per share amounts
2015
Pre-Tax
Amount
After-Tax
Amount
Per Share
Amount
Facility consolidation and asset impairment charges:
Intangible assets . . . . . . . . . . . . . . . . . . $ 19,437 $ 13,131 $
Property, plant and equipment . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . .
10,061
4,780
6,167
2,930
Total facility consolidation and asset
impairment charges against operations . . .
Non-operating charges:
34,278
22,228
Equity method investments
658
404
Total charges . . . . . . . . . . . . . . . . . . . . . . . $ 34,936 $ 22,632 $
0.11
0.05
0.03
0.19
—
0.19
In thousands of dollars, except per share amounts
2014
Pre-Tax
Amount
After-Tax
Amount
Per Share
Amount
Facility consolidation and asset impairment charges:
Intangible assets . . . . . . . . . . . . . . . . . . $
1,701 $
1,000 $
Property, plant and equipment . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . .
19,467
14,048
13,467
8,449
Total facility consolidation and asset
impairment charges against operations . . . $ 35,216 $ 22,916 $
0.01
0.12
0.07
0.20
In thousands of dollars, except per share amounts
2013
Pre-Tax
Amount
After-Tax
Amount
Per Share
Amount
Facility consolidation and asset impairment charges:
Intangible assets . . . . . . . . . . . . . . . . . . $
2,401 $
1,500 $
Property, plant and equipment . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . .
14,756
9,454
9,156
5,854
0.01
0.08
0.05
Total facility consolidation and asset
impairment charges against operations . . .
Non-operating charges:
26,611
16,510
0.14
Other non-operating items . . . . . . . . . .
2,693
1,593
Total charges . . . . . . . . . . . . . . . . . . . . . . . $ 29,304 $ 18,103 $
0.01
0.15
46
NOTE 5
Goodwill and other intangible assets
The following table displays goodwill, indefinite-lived intangible
assets, and amortizable intangible assets at Dec. 27, 2015, and Dec.
28, 2014.
In thousands of dollars
Dec. 27, 2015
Gross
Accumulated
Amortization
Net
Goodwill . . . . . . . . . . . . . . . . . . $
575,685 $
— $
575,685
Indefinite-lived intangibles:
Mastheads and trade names . .
31,521
—
31,521
Amortizable intangible assets:
The following table shows the changes in the carrying amount of
goodwill during 2015 and 2014.
In thousands of dollars
Balance at Dec. 29, 2013:
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
7,501,584
Accumulated impairment losses . . . . . . . . . . . . . . . . . . . . .
(6,946,105)
Net balance at Dec. 29, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . $
555,479
Activity during the year:
Acquisitions & adjustments. . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency exchange rate changes. . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2
(11,136)
(11,134)
Balance at Dec. 28, 2014:
Customer relationships . . . . . .
Other. . . . . . . . . . . . . . . . . . . .
68,005
11,478
(39,813)
(11,478)
28,192
—
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,358,420
Accumulated impairment losses . . . . . . . . . . . . . . . . . . . . .
(6,814,075)
686,689 $
(51,291) $
635,398
Net balance at Dec. 28, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . $
544,345
Total. . . . . . . . . . . . . . . . . . . . . . $
Dec. 28, 2014
Goodwill . . . . . . . . . . . . . . . . . . $
544,345 $
— $
544,345
Indefinite-lived intangibles:
Mastheads and trade names . .
13,469
—
13,469
Amortizable intangible assets:
Customer relationships . . . . . .
Other. . . . . . . . . . . . . . . . . . . .
173,822
14,279
(140,720)
(10,735)
33,102
3,544
Total. . . . . . . . . . . . . . . . . . . . . . $
745,915 $
(151,455) $
594,460
Amortization expense was $11.6 million in 2015 and $13.9
million in 2014. The decrease primarily reflects the full amortization
of 4 assets partially offset by the impact of the TNP and RMG
acquisitions in 2015. Customer relationships, which include
subscriber lists and advertiser relationships, are amortized on a
straight-line basis over their useful lives. Other intangibles are
primarily amortizable trade names and are amortized on a straight-
line basis over their useful lives. The weighted average remaining
amortization period for customer relationships is approximately 6
years. The other intangibles were fully amortized as of Dec. 27,
2015.
The following table shows the projected annual amortization
expense, as of Dec. 27, 2015, related to amortizable intangibles
assuming no acquisitions or dispositions:
In thousands of dollars
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
5,081
4,980
4,930
4,340
3,948
Activity during the year:
Acquisitions & adjustments. . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency exchange rate changes. . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
39,484
(8,144)
31,340
Balance at Dec. 27, 2015:
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,297,752
Accumulated impairment losses . . . . . . . . . . . . . . . . . . . . .
(6,722,067)
Net balance at Dec. 27, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . $
575,685
In fiscal 2015, 2014 and 2013, we performed a quantitative step
one analysis of our reporting units as part of the annual goodwill
impairment evaluation and determined that the fair values were in
excess of the individual reporting units carrying values, and,
accordingly, there were no goodwill impairments.
NOTE 6
Investments
Our investments include several that are accounted for under the
equity method. Principal among these are the following:
% Owned
Dec. 27, 2015
Ponderay Newsprint Company . . . . . . . . . . . . . . . . . . . . . .
Homefinder.com . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Timerazor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TNI Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13.50%
33.33%
7.09%
50.00%
The aggregate carrying value of equity investments at Dec. 27,
2015, was $7.9 million and $54.5 million at Dec. 28, 2014. Certain
differences exist between our investment carrying value and the
underlying equity of the investee companies principally due to fair
value measurement at the date of investment acquisition and due to
impairment charges we recorded for certain of the investments.
47
NOTE 7
NOTE 8
Revolving Credit Facility
On June 29, 2015, we entered into a new five-year secured revolving
credit facility in an aggregate principal amount of $500 million
(“Credit Facility”). Under the Credit Facility, we may borrow at an
applicable margin above the Eurodollar base rate (“LIBOR loan”) or
the higher of the Prime Rate, the Federal Funds Effective Rate plus
0.50%, or the one month LIBOR rate plus 1.00% (“ABR loan”). The
applicable margin is determined based on our total leverage ratio but
differs between LIBOR loans and ABR loans. For LIBOR-based
borrowing, the margin varies from 2.00% to 2.50%. For ABR-based
borrowing, the margin will vary from 1.00% to 1.50%.
Customary fees are payable related to the Credit Facility,
including commitment fees on the undrawn commitments of
between 0.30% and 0.40% per annum, payable quarterly in arrears,
based on our total leverage ratio. Borrowings under the Credit
Facility are guaranteed by a majority of our wholly-owned material
domestic subsidiaries. All obligations of Gannett and each subsidiary
guarantor under the Credit Facility are or will be secured by first
priority security interests in our equipment, inventory, accounts
receivable, fixtures, general intangibles and other personal property,
mortgages on certain material real property and pledges of the
capital stock of each subsidiary guarantor.
Pursuant to the Credit Facility, on or after Sept. 30, 2015 we are
obligated to not permit our consolidated interest coverage ratio to be
less than 3.00:1.00 and our total leverage ratio to exceed 3.00:1.00,
in each case as of the last day of the test period consisting of four
consecutive fiscal quarters. We were in compliance with these
financial covenants as of Dec. 27, 2015.
The Credit Facility also contains a number of covenants that,
among other things, limit or restrict our ability, subject to certain
exceptions described in the Credit Facility, to (i) permit certain liens
on current or future assets; (ii) enter into certain corporate
transactions; (iii) incur additional indebtedness; (iv) make certain
payments or declare certain dividends or distributions; (v) dispose of
certain property; (vi) make certain investments; (vii) prepay or
amend the terms of other indebtedness; or (viii) enter into certain
transactions with our affiliates.
As of Dec. 27, 2015, we had no outstanding borrowings under
the Credit Facility. Up to $50 million of the Credit Facility is
available for issuance of letters of credit. As of Dec. 27, 2015, we
had $16.4 million of letters of credit outstanding and $483.6 million
of availability remaining.
Retirement plans
We, along with our subsidiaries, have various defined benefit
retirement plans, including plans established under collective
bargaining agreements. A number of our current and former
employees also participated in pension plans sponsored by our
former parent. Retirement benefits obligations pursuant to the former
parent-sponsored retirement plans related to our current and former
employees were transferred to us at the separation date and,
accordingly, were allocated to us in our consolidated and combined
financial statements for all periods prior to the spin-off. This
allocation was done by estimating the projected benefit obligation of
participants for which the liability was transferred to us at the
separation. Subsequent to the spin-off, no further costs were
allocated to us.
Our principal retirement plan is the Gannett Retirement Plan
(GRP). The disclosure tables below include the assets and
obligations of the GRP, the Gannett 2015 Supplemental Retirement
Plan (SERP), the Newsquest Pension Scheme in the U.K.
(Newsquest Plan), and the Newspaper Guild of Detroit Pension Plan.
We use a Dec. 31 measurement date convention for our retirement
plans.
Our pension costs, which include costs for our qualified and non-
qualified plans, are presented in the following table:
In thousands of dollars
2015
2014
2013
Service cost—benefits earned during
the period . . . . . . . . . . . . . . . . . . . . . . . . $
Interest cost on benefit obligation . . . . .
7,993 $
4,498 $
6,487
131,149
145,433
131,270
Expected return on plan assets . . . . . . . .
(196,774)
(206,164)
(188,462)
Amortization of prior service costs . . . .
Amortization of actuarial loss . . . . . . . .
6,893
56,722
6,967
41,728
6,967
56,813
Pension cost (benefit) for our plans and
our allocated portions of former parent-
sponsored retirement plans. . . . . . . . . . .
Settlement charge . . . . . . . . . . . . . . . . . .
5,983
1,254
(7,538)
13,075
—
1,721
Expense (credit) for retirement plans . . . $
7,237 $ (7,538) $ 14,796
48
The following table provides a reconciliation of pension benefit
The funded status (on a projected benefit obligation basis) of our
obligations (on a projected benefit obligation measurement basis),
plan assets and funded status of former parent-sponsored retirement
plans, along with the related amounts that are recognized in the
Consolidated and Combined Balance Sheets.
plans and our allocated portions of former parent-sponsored
retirement plans at Dec. 27, 2015, is as follows:
In thousands of dollars
In thousands of dollars
Change in benefit obligations
Dec. 27, 2015 Dec. 28, 2014
Benefit obligations at beginning of year . . . $
3,433,581 $
3,170,182
Service cost . . . . . . . . . . . . . . . . . . . . . . . . .
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . .
Plan participants’ contributions. . . . . . . . . .
Actuarial (gain) loss . . . . . . . . . . . . . . . . . .
Foreign currency translation . . . . . . . . . . . .
Gross benefits paid . . . . . . . . . . . . . . . . . . .
Acquisitions. . . . . . . . . . . . . . . . . . . . . . . . .
Settlements . . . . . . . . . . . . . . . . . . . . . . . . .
Transfer from separation . . . . . . . . . . . . . . .
Benefit obligations at end of year . . . . . . . . $
Change in plan assets
Fair value of plan assets at beginning of
year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . .
Actual return on plan assets. . . . . . . . . . . . .
Plan participants’ contributions. . . . . . . . . .
7,993
131,149
8
(106,778)
(40,679)
(218,998)
26,308
(4,354)
(43,435)
4,498
145,433
4
370,700
(57,779)
(199,457)
—
—
—
3,184,795 $
3,433,581
2,654,889 $
2,668,093
1,006
38,853
8
—
154,462
4
74,442
Employer contributions . . . . . . . . . . . . . . . .
128,179
Gross benefits paid . . . . . . . . . . . . . . . . . . .
(218,998)
(199,457)
Acquisitions. . . . . . . . . . . . . . . . . . . . . . . . .
Settlements . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation . . . . . . . . . . . .
Transfer from separation . . . . . . . . . . . . . . .
26,179
(4,354)
(30,411)
(36,724)
—
—
(42,655)
—
Fair value of plan assets at end of year . . . . $
2,558,627 $
2,654,889
Funded status at end of year . . . . . . . . . . . . $
Amounts recognized in Consolidated and Combined Balance Sheets
(626,168) $
(778,692)
Noncurrent assets . . . . . . . . . . . . . . . . . . . . $
2,166 $
—
Accrued benefit cost—current. . . . . . . . . . . $
(15,891) $
(8,651)
Accrued benefit cost—noncurrent. . . . . . . . $
(612,443) $
(770,041)
Fair Value of
Plan Assets
Benefit
Obligation
Funded
Status
1,755,432 $ 2,015,000 $
(259,568)
GRP . . . . . . . . . . . . . . . . . . . . $
SERP (a) . . . . . . . . . . . . . . . . .
Newsquest . . . . . . . . . . . . . . .
Newspaper Guild of Detroit .
—
714,010
89,185
123,624
946,329
99,842
Total. . . . . . . . . . . . . . . . . . . . $
(a) The SERP is an unfunded, unsecured liability
2,558,627 $ 3,184,795 $
(123,624)
(232,319)
(10,657)
(626,168)
The following table presents information for our retirement plans
and our allocated portions of former parent-sponsored retirement
plans for which accumulated benefits exceed assets:
In thousands of dollars
Accumulated benefit obligation . . . . . . . . . . $
3,179,094 $
3,420,669
Fair value of plan assets . . . . . . . . . . . . . . . . $
2,558,627 $
2,654,889
Dec. 27, 2015 Dec. 28, 2014
The following table presents information for our retirement plans
and our allocated portions of former parent-sponsored retirement
plans for which projected benefit obligations exceed assets:
In thousands of dollars
Projected benefit obligation . . . . . . . . . . . . . $
3,184,795 $
3,433,581
Fair value of plan assets . . . . . . . . . . . . . . . . $
2,558,627 $
2,654,889
Dec. 27, 2015 Dec. 28, 2014
The following table summarizes the amounts recorded in
“Accumulated other comprehensive loss” that are currently
unrecognized as a component of pension expense for our retirement
plans and our allocated portions of former parent-sponsored
retirement plans as of the dates presented (pre-tax). Amounts
included in “Accumulated other comprehensive loss” related to
former parent-sponsored plans have been allocated to us in
proportion to the projected benefit obligation allocated to us.
In thousands of dollars
Dec. 27, 2015 Dec. 28, 2014
Net actuarial losses. . . . . . . . . . . . . . . . . . . . $ (1,613,939) $ (1,663,647)
Prior service cost . . . . . . . . . . . . . . . . . . . . .
(35,451)
(43,257)
Amounts in accumulated other
comprehensive loss. . . . . . . . . . . . . . . . . . . . $ (1,649,390) $ (1,706,904)
The actuarial loss amounts expected to be amortized from
“Accumulated other comprehensive loss” into net periodic benefit
cost in 2016 are $60.1 million. The prior service cost amounts
expected to be amortized from “Accumulated other comprehensive
loss” into net periodic benefit cost in 2016 are $6.7 million.
49
The increased reduction to accumulated other comprehensive
The primary objective of company-sponsored retirement plans is
income was driven by lower rates used to discount our pension
obligations as well as updates to assumed life expectancies of the
plan’s participants.
Other changes in plan assets and benefit obligations recognized
in “Other comprehensive loss” consist of the following:
In thousands of dollars
Current year actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . $
Actuarial gain due to settlement. . . . . . . . . . . . . . . . . . . . . .
Amortization of actuarial loss . . . . . . . . . . . . . . . . . . . . . . .
Amortization of prior service costs . . . . . . . . . . . . . . . . . . .
Foreign currency gain. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transfer from separation . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2015
(50,137)
1,254
56,722
6,893
18,598
24,180
57,510
Pension costs: The following assumptions were used to
determine net pension costs:
Discount rate. . . . . . . . . . . . . . . . . . . . . . . . .
4.17%
Expected return on plan assets . . . . . . . . . . .
7.63%
Rate of compensation increase . . . . . . . . . . .
2.95%
2015
2014
4.74%
7.91%
2.96%
2013
4.10%
7.93%
2.96%
The expected return on plan assets assumption was determined
based on plan asset allocations, a review of historic capital market
performance, historical plan asset performance and a forecast of
expected future plan asset returns.
Benefit obligations and funded status: The following
assumptions were used to determine the year-end benefit obligations:
Discount rate . . . . . . . . . . . . . . . . . . . . . . . .
Rate of compensation increase. . . . . . . . . . .
4.24%
2.96%
3.94%
2.96%
Dec. 27, 2015 Dec. 28, 2014
During 2015, we made contributions of $11.6 million to the
Newsquest Plan. In 2016, we expect to contribute $17.5 million to
the Newsquest Plan. During 2015, former parent made contributions
of $104.7 million to the GRP and $3.0 million to the SERP. After our
separation from our former parent, we contributed $0.6 million to
the GRP and $7.4 million to the SERP. Beginning in 2016, in
addition to any other contributions that may be required, we will
make additional contributions of $25.0 million in each of the next
five fiscal years ending in 2020 and $15.0 million in 2021 for the
GRP. Our expected 2016 contribution for the SERP is $15.9 million.
Plan assets: The asset allocation of our plans at the end of 2015
and 2014, and target allocations for 2016, by asset category, are
presented in the table below:
Equity securities . . . . . . .
Debt securities. . . . . . . . .
Alternative investments*
Total . . . . . . . . . . . . . . . .
Target Allocation Allocation of Plan Assets
2016
59%
19
22
100%
2015
53%
24
23
2014
60%
17
23
100%
100%
* Alternative investments include real estate, private equity and
hedge funds.
to provide eligible employees with scheduled pension benefits; the
“prudent man” guideline is followed with regard to the investment
management of retirement plan assets. Consistent with prudent
standards for preservation of capital and maintenance of liquidity,
the goal is to earn the highest possible total rate of return while
minimizing risk. The principal means of reducing volatility and
exercising prudent investment judgment is diversification by asset
class and by investment manager; consequently, portfolios are
constructed to attain prudent diversification in the total portfolio,
each asset class, and within each individual investment manager’s
portfolio. Investment diversification is consistent with the intent to
minimize the risk of large losses. All objectives are based upon an
investment horizon spanning five years so that interim market
fluctuations can be viewed with the appropriate perspective. The
target asset allocation represents the long-term perspective.
Retirement plan assets will be rebalanced periodically to align them
with the target asset allocations. Risk characteristics are measured
and compared with an appropriate benchmark quarterly; periodic
reviews are made of the investment objectives and the investment
managers. Our actual investment return on our Gannett Retirement
Plan assets was 1.9% for 2015, 5.2% for 2014 and 16.4% for 2013.
Retirement plan assets include approximately 0.6 million shares
of our common stock valued at approximately $10.1 million at the
end of 2015. The plan received dividends of approximately $1.0
million on these shares in 2015.
Cash flows: We estimate the following benefit payments will be
made from retirement plan assets, which reflect expected future
service, as appropriate. The amounts below represent the benefit
payments for our plans.
In thousands of dollars
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2021-2025. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
228,979
201,919
200,073
199,106
197,063
942,375
401(k) savings plan
Substantially all our employees (other than those covered by a
collective bargaining agreement) who are scheduled to work at least
1,000 hours during each year of employment are eligible to
participate in our principal defined contribution plan, The Gannett
Co., Inc. 401(k) Savings Plan. Employees can elect to save up to
50% of compensation on a pre-tax basis subject to certain limits.
For most participants, the plan’s matching formula is 100% of
the first 5% of employee contributions. We also make additional
employer contributions on behalf of certain long-term employees.
Compensation expense related to 401(k) contributions was $25.8
million in 2015, $30.4 million in 2014, and $34.0 million in 2013.
We settled the 401(k) employee match obligation payable in
company stock by buying our stock in the open market and
depositing it in the participants’ accounts.
50
Multi-employer plans that provide pension benefits: We
contribute to a number of multi-employer defined benefit pension
plans under the terms of collective-bargaining agreements (CBA)
that cover our union-represented employees. The risks of
participating in these multi-employer plans are different from single-
employer plans in the following aspects:
• We play no part in the management of plan investments or any
other aspect of plan administration.
• Assets contributed to the multi-employer plan by one employer
may be used to provide benefits to employees of other
participating employers.
•
•
If a participating employer stops contributing to the plan, the
unfunded obligations of the plan may be borne by the remaining
participating employers.
If we choose to stop participating in some of our multi-employer
plans, we may be required to pay those plans an amount based on
the unfunded status of the plan, referred to as withdrawal
liability.
Our participation in these plans for the annual period ended
Dec. 27, 2015, is outlined in the table below. The “EIN/Pension Plan
Number” column provides the Employee Identification Number
(EIN) and the three-digit plan number. Unless otherwise noted, the
two most recent Pension Protection Act (PPA) zone statuses
available are for the plan’s year-end at Dec. 27, 2015 and Dec. 28,
2014. The zone status is based on information that we received from
the plan and is certified by the plan’s actuary. Among other factors,
plans in the red zone are generally less than 65% funded; plans in the
orange zone are both a) less than 80% funded and b) have an
accumulated/expected funding deficiency in any of the next six plan
years, net of any amortization extensions; plans in the yellow zone
meet either one of the criteria mentioned in the orange zone; and
plans in the green zone are at least 80% funded. The “FIP/RP Status
Pending/Implemented” column indicates plans for which a financial
improvement plan (FIP) or a rehabilitation plan (RP) is either
pending or has been implemented. The last column lists the
expiration date(s) of the collective-bargaining agreement(s) to which
the plans are subject.
We make all required contributions to these plans as determined
under the respective CBAs. For each of the plans listed below, our
contribution represented less than 5% of total contributions to the
plan except for one plan where we contributed approximately 7% of
the total contributions to the Newspaper Guild International Pension
Plan. This calculation is based on the plan financial statements
issued at the end of Dec. 31, 2014. At the date we issue our financial
statements, Forms 5500 were unavailable for the plan years ending
after Dec. 31, 2014.
We incurred expenses for multi-employer withdrawal liabilities
of $6.1 million in 2015 and $8.2 million in 2014. Other noncurrent
liabilities on the Consolidated and Combined Balance Sheet include
$43.5 million as of Dec. 27, 2015, and $41.2 million as of Dec. 28,
2014, for such withdrawal liabilities.
Multi-employer Pension Plans
Pension Plan Name
Plan Number
2015
2014
EIN Number/
Zone Status
Dec. 31,
FIP/RP Status
Pending/
Implemented
Contributions
(in thousands)
2014
2015
2013
CWA/ITU Negotiated Pension Plan
13-6212879/001
Red
91-6024903/001
Red
Red
Red
Implemented
$ 411 $ 433 $ 242
Implemented
43
71
216
GCIU—Employer Retirement Benefit Plan
(a), (b)
The Newspaper Guild International
Pension Plan (a)
IAM National Pension Plan (a)
Teamsters Pension Trust Fund of
Philadelphia and Vicinity (a)
Central Pension Fund of the International
Union of Operating Engineers and
Participating Employers (a)
Central States Southeast and Southwest
Areas Pension Fund (b)
Total
52-1082662/001
Red
51-6031295/002
Green
Red
Green
Implemented
NA
226
352
244
403
279
736
23-1511735/001 Yellow
Yellow
Implemented
1,452
1,298
1,355
Green
as of
Jan.
31,
2015
Green
as of
Jan.
31,
2014
NA
36-6052390/001
36-6044243/001
Red
Red
Implemented
99
—
153
160
—
40
$ 2,583 $2,602 $3,028
Surcharge
Imposed
No
No
No
NA
NA
NA
No
Expiration
Dates of
CBAs
2/2/2017
2/23/2016
N/A
2/23/2016
4/30/2016
N/A
4/30/2016
N/A
(a) This plan has elected to utilize special amortization provisions provided under the Preservation of Access to Care for Medicare Beneficiaries and Pension
Relief Act of 2010.
(b) We have no ongoing participation in these plans.
51
NOTE 9
Postretirement benefits other than pensions
We provide health care and life insurance benefits to certain retired
employees who meet age and service requirements. Most of our
retirees contribute to the cost of these benefits and retiree
contributions are increased as actual benefit costs increase.
Certain of our employees also participated in postretirement
benefit plans sponsored by our former parent. Health care and life
insurance benefit obligations pursuant to the former parent-
sponsored postretirement plans related to our current and former
employees were transferred to us at the separation date and,
accordingly, have been allocated to us in our consolidated and
combined financial statements for periods prior to the separation
date by determining the projected benefit obligation of participants
for which the liability was transferred to us at the separation.
Subsequent to the separation, no further costs were allocated to us.
The cost of providing retiree health care and life insurance
benefits is actuarially determined. Our policy is to fund benefits as
claims and premiums are paid. In March 2014, our former parent
adopted changes to the retiree medical plan that were effective July
1, 2014. Beginning on that date, a stipend is paid to certain
Medicare-eligible Gannett retirees. As a result of this change, our
former parent remeasured the related postretirement benefit
obligation during the first quarter of 2014 and recorded a reduction
to the liability of $33.9 million, of which our allocated portion was
$32.9 million (with a corresponding adjustment to “Accumulated
other comprehensive loss”). We use a Dec. 31 measurement date for
these plans.
Postretirement benefit cost for health care and life insurance
included the following components:
In thousands of dollars
2015
2014
2013
Service cost – benefits earned during the
period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Interest cost on net benefit obligation. . . . .
301 $
365 $
523
4,019
4,610
5,526
Amortization of prior service credit . . . . . .
(9,615)
(11,421)
(9,006)
Amortization of actuarial loss. . . . . . . . . . .
1,426
718
1,127
Net periodic postretirement benefit credit . $ (3,869) $ (5,728) $ (1,830)
The table below provides a reconciliation of benefit obligations
and funded status of our postretirement benefit plans and our
allocated portions of former parent-sponsored postretirement plans:
In thousands of dollars
Change in benefit obligations
Dec. 27, 2015 Dec. 28, 2014
Net benefit obligations at beginning of year $
103,528 $
141,447
Service cost. . . . . . . . . . . . . . . . . . . . . . . . . .
Interest cost. . . . . . . . . . . . . . . . . . . . . . . . . .
Plan participants’ contributions . . . . . . . . . .
Plan amendments . . . . . . . . . . . . . . . . . . . . .
Actuarial loss . . . . . . . . . . . . . . . . . . . . . . . .
301
4,019
3,839
—
3,898
Gross benefits paid . . . . . . . . . . . . . . . . . . . .
(13,935)
Federal subsidy on benefits paid . . . . . . . . .
Transfer from separation . . . . . . . . . . . . . . .
—
(4,142)
365
4,610
5,018
(36,873)
6,590
(18,294)
665
—
Net benefit obligations at end of year . . . . . $
Change in plan assets
97,508 $
103,528
Fair value of plan assets at beginning of year $
— $
—
Employer contributions . . . . . . . . . . . . . . . .
Plan participants’ contributions . . . . . . . . . .
Gross benefits paid . . . . . . . . . . . . . . . . . . . .
10,096
3,839
(13,935)
Fair value of plan assets at end of year . . . . $
— $
13,276
5,018
(18,294)
—
Benefit obligation at end of year . . . . . . . . . $
Amounts recognized in Consolidated and Combined Balance Sheets
(97,508) $
(103,528)
Accrued benefit cost—current . . . . . . . . . . . $
(9,914) $
Accrued benefit cost—noncurrent . . . . . . . . $
(87,594) $
(10,054)
(93,474)
The following table summarizes the amounts recorded in
“Accumulated other comprehensive loss” that are currently
unrecognized as a component of net periodic postretirement benefit
credit as of the dates presented (pre-tax):
In thousands of dollars
Dec. 27, 2015 Dec. 28, 2014
Net actuarial losses. . . . . . . . . . . . . . . . . . . . $
(12,611) $
(12,044)
Prior service credit . . . . . . . . . . . . . . . . . . . .
29,515
41,454
Amounts in accumulated other
comprehensive loss. . . . . . . . . . . . . . . . . . . . $
16,904 $
29,410
The actuarial loss and prior service credit estimated to be
amortized from “Accumulated other comprehensive loss” into net
periodic benefit cost in 2016 are $0.9 million and $5.0 million,
respectively.
Other changes in plan assets and benefit obligations recognized
in “Other comprehensive loss” consist of the following:
In thousands of dollars
Current year actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Amortization of actuarial loss . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of prior service credit. . . . . . . . . . . . . . . . . . . .
Other adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2015
(4,005)
1,426
(9,615)
(311)
(12,505)
52
Postretirement benefit costs: The following assumptions were
NOTE 10
used to determine postretirement benefit cost:
2015
2014
2013
Income taxes
The provision (benefit) for income taxes consists of the following:
Discount rate . . . . . . . . . . . . . . . . . . . . . . . .
4.11%
4.50%
3.80%
Health care cost trend rate assumed for
next year . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ultimate trend rate . . . . . . . . . . . . . . . . . . .
Year that ultimate trend rate is reached. . . .
6.18%
5.00%
2018
6.26%
5.00%
2018
7.17%
5.00%
2017
Benefit obligations and funded status: The following
assumptions were used to determine the year-end benefit obligation:
Dec. 27, 2015 Dec. 28, 2014
Discount rate. . . . . . . . . . . . . . . . . . . . . . . . .
Health care cost trend rate assumed for
next year . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ultimate trend rate . . . . . . . . . . . . . . . . . . . .
Year that ultimate trend rate is reached . . . .
4.35%
6.18%
5.00%
2018
4.00%
6.26%
5.00%
2018
Assumed health care cost trend rates have an effect on the
amounts reported for the health care plans. The effect of a 1%
change in the health care cost trend rate would result in a change of
approximately $0.2 million in the 2015 postretirement benefit
obligation and no measurable change in the aggregate service and
interest components of the 2015 expense.
Cash flows: We expect to make the following benefit payments,
which reflect expected future service. The amounts below represent
the benefit payments for our plans and our allocated portions of
former parent-sponsored retirement plans.
In thousands of dollars
Benefit
Payments
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
9,914
8,877
8,720
8,136
7,415
2021-2025. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
31,302
The amounts above exclude the participants’ share of the benefit
cost. Our policy is to fund benefits as claims, stipends and premiums
are paid. We expect no subsidy benefits for 2016 and beyond.
In thousands of dollars
2015
Current
Deferred
Total
Federal . . . . . . . . . . . . . . . . . . . . . . . $
(5,383) $
36,489 $
31,106
State and other . . . . . . . . . . . . . . . . .
Foreign. . . . . . . . . . . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . . . $
(560)
6,447
4,046
6,845
3,486
13,292
504 $
47,380 $
47,884
In thousands of dollars
2014
Current
Deferred
Total
Federal . . . . . . . . . . . . . . . . . . . . . . . $
39,740 $
18,282 $
58,022
State and other . . . . . . . . . . . . . . . . .
(21,123)
Foreign. . . . . . . . . . . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . . . $
27,731
2,930
6,608
2,930
—
18,617 $
48,943 $
67,560
In thousands of dollars
2013
Current
Deferred
Total
Federal . . . . . . . . . . . . . . . . . . . . . . . $
21,933 $
64,317 $
86,250
State and other . . . . . . . . . . . . . . . . .
(17,252)
(2,944)
(20,196)
Foreign. . . . . . . . . . . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . . . $
—
5,248
5,248
4,681 $
66,621 $
71,302
The components of net income before income taxes consist of
the following:
In thousands of dollars
2015
2014
2013
Domestic . . . . . . . . . . . . . . . . . . . . . $ 128,316 $
192,741 $ 260,937
Foreign . . . . . . . . . . . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . . . $ 193,975 $
65,659
85,524
84,826
278,265 $ 345,763
The provision for income taxes varies from the U.S. federal
statutory tax rate as a result of the following differences:
U.S. statutory tax rate . . . . . . . . . . . . . . . . . . . . .
35.0% 35.0% 35.0%
2015
2014
2013
Increase (decrease) in taxes resulting from:
State/other income taxes net of federal income
tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Statutory rate differential and permanent
differences in earnings in foreign jurisdictions .
Impact of rate change in foreign tax
jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation allowance . . . . . . . . . . . . . . . . . . . . . .
Lapse of statutes of limitations net of federal
income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impact of accounting method change. . . . . . . . .
Domestic manufacturing deduction . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effective tax rate . . . . . . . . . . . . . . . . . . . . . . . .
2.4
2.5
2.6
(6.3)
(13.4)
(11.0)
1.9
—
(1.1)
(3.4)
(1.4)
(2.4)
—
4.4
—
2.9
(0.9)
(8.6)
—
(1.9)
(1.4)
—
(1.1)
0.8
24.7% 24.3% 20.6%
53
Deferred income taxes reflect temporary differences in the
recognition of revenue and expense for tax reporting and financial
statement purposes. Deferred tax liabilities and assets are adjusted
for enacted changes in tax laws or tax rates of the various tax
jurisdictions. The amount of such adjustments for 2015 was $3.8
million due to reductions in U.K. tax rates. The amount of such
adjustments for 2014 and 2013 were not significant.
Deferred tax liabilities and assets were composed of the
following at the end of 2015 and 2014:
In thousands of dollars
Liabilities
Dec. 27, 2015 Dec. 28, 2014
Accelerated depreciation . . . . . . . . . . . . . . . $
(165,457) $
(186,222)
Total deferred tax liabilities. . . . . . . . . . . . .
(165,457)
(186,222)
Assets
Accrued compensation costs . . . . . . . . . . . .
Pension and postretirement benefits . . . . . .
41,321
257,764
20,587
346,792
Basis difference and amortization of
intangibles . . . . . . . . . . . . . . . . . . . . . . . . . .
Federal tax benefits of uncertain state tax
positions. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Partnership investments including
impairments . . . . . . . . . . . . . . . . . . . . . . . . .
Loss carryforwards . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred tax assets . . . . . . . . . . . . . . .
Valuation allowance . . . . . . . . . . . . . . . . . .
164,485
56,082
7,506
3,846
5,353
34,312
38,600
549,341
(181,893)
9,894
52,759
18,773
508,733
(59,392)
Total net deferred tax assets (liabilities) . . . $
Amounts recognized in Consolidated and Combined Balance Sheets
201,991 $
263,119
Current deferred tax assets . . . . . . . . . . . . . $
— $
1,797
Noncurrent deferred tax assets . . . . . . . . . . $
201,991 $
261,322
As of Dec. 27, 2015 we had approximately $15.2 million of
foreign tax credits, $1.8 million of state credits, $93.8 million of
apportioned state net operating loss carryforwards, $127.8 million of
foreign net operating loss carry forwards and $34.3 million of
foreign capital loss carryforwards. The foreign tax credits, the state
tax credits, and the state net operating loss carryovers expire in
various amounts beginning in 2016 through 2034. The foreign net
operating loss carryovers and the foreign capital losses can be
carried forward indefinitely.
Included in total deferred tax assets are valuation allowances of
approximately $181.9 million in 2015 and $59.4 million in 2014,
primarily related to unamortizable intangible assets, foreign tax
credits and foreign losses available for carry forward to future years.
The increase in the valuation allowance from 2014 to 2015 is related
to unamortizable intangible assets that arose from the spin-off. The
valuation allowance is based on an analysis of future sources of
taxable income and other sources of positive and negative evidence,
it is more likely than not that the foreign credits and losses will not
be utilized before their expiration. The following table summarizes
the activity related to our valuation allowance for deferred tax assets:
In thousands of dollars
Balance at
beginning
of period
Additions/
(reductions)
charged to cost
and expenses
Additions/
(reductions) for
acquisitions/
dispositions
(Deductions
from)/
additions to
reserves
Balance
at end of
period
$
59,392 $
(2,316) $
— $
124,817 $ 181,893
Realization of deferred tax assets for which valuation allowances
have not been established is dependent upon generating sufficient
future taxable income. We expect to realize the benefit of these
deferred tax assets through future reversals of our deferred tax
liabilities, through the recognition of taxable income in the allowable
carryback and carryforward periods, and through implementation of
future tax planning strategies. Although realization is not assured, we
believe it is more likely than not that all deferred tax assets for which
valuation allowances have not been established will be realized.
The following table summarizes the activity related to
unrecognized tax benefits, excluding the federal tax benefit of state
tax deductions:
In thousands of dollars
Change in unrecognized tax benefits
Balance at beginning of year . . . . . . . . . . . . $
10,919 $
13,875
Dec. 27, 2015 Dec. 28, 2014
Additions based on tax positions related to
the current year. . . . . . . . . . . . . . . . . . . . . . .
Additions for tax positions of prior years. . .
Reductions for tax positions of prior years .
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . .
Reductions due to lapse of statutes of
limitations. . . . . . . . . . . . . . . . . . . . . . . . . . .
2,021
6,713
—
—
(2,621)
Balance at end of year . . . . . . . . . . . . . . . . . $
17,032 $
1,768
545
(2,398)
(36)
(2,835)
10,919
The total amount of unrecognized tax benefits that, if recognized,
would impact the effective tax rate was $11.3 million as of Dec. 27,
2015, $7.5 million as of Dec. 28, 2014, and $9.2 million as of Dec.
29, 2013. This amount includes the federal tax benefit of state tax
deductions.
We recognize interest and penalties related to unrecognized tax
benefits as a component of income tax expense. We also recognize
interest income attributable to overpayment of income taxes and
from the reversal of interest expense previously recorded for
uncertain tax positions which are subsequently released as a
component of income tax expense. We recognized income from
interest and the release of penalty reserves of $0.6 million in 2015,
$1.2 million in 2014, and $12.2 million in 2013. The amount of
accrued interest and payables related to unrecognized tax benefits
was $3.4 million as of Dec. 27, 2015, $1.1 million as of Dec. 28,
2014 and $2.3 million as of Dec. 29, 2013.
It is reasonably possible that the amount of unrecognized benefit
with respect to certain of our unrecognized tax positions will
significantly increase or decrease within the next 12 months. These
changes may be the result of settlement of ongoing audits, lapses of
statutes of limitations or other regulatory developments. At this time,
we estimate the amount of our gross unrecognized tax positions may
decrease by up to approximately $2.0 million within the next 12
months primarily due to lapses of statutes of limitations and
settlement of ongoing audits in various jurisdictions.
In connection with the spin-off, we entered into a tax matters
agreement with our former parent which states each company’s
rights and responsibilities with respect to payment of taxes, tax
return filings and control of tax examinations. We are generally
responsible for taxes allocable to periods (or portions of periods)
beginning after the spin-off. Although any changes with regards to
additional income tax liabilities which relate to periods prior to the
spin-off may impact our effective tax rate in the future, we may be
entitled to seek indemnification for these items from our former
parent under the tax matters agreement.
54
NOTE 11
Shareholders’ equity
Capital stock and earnings per share
On June 29, 2015, our former parent distributed 98.5% of our total
shares and retained the remaining 1.5%. The total shares outstanding
at that date was approximately 115 million. The total number of
shares outstanding at that date was used for the calculation of both
basic and diluted earnings per share for years prior to 2015.
Our earnings per share (basic and diluted) for 2015, 2014 and
2013 are presented below:
2015
2014
2013
Net income . . . . . . . . . . . . . . . . . . . . . . . $ 146,091 $ 210,705 $ 274,461
Weighted average number of common
shares outstanding (basic) . . . . . . . . . . .
115,165
114,959
114,959
Effect of dilutive securities
Restricted stock units . . . . . . . . . . . . . . .
Performance shares. . . . . . . . . . . . . . . . .
Stock options . . . . . . . . . . . . . . . . . . . . .
Weighted average number of common
shares outstanding (diluted) . . . . . . . . . .
728
582
220
—
—
—
—
—
—
116,695
114,959
114,959
Earnings per share (basic) . . . . . . . . . . . $
Earnings per share (diluted) . . . . . . . . . . $
1.27 $
1.83 $
1.25 $
1.83 $
2.39
2.39
The diluted earnings per share amounts exclude the effects of
approximately 0.1 million RSUs outstanding for 2015 as their
inclusion would be antidilutive.
Share repurchase program
In July 2015, we announced that our Board of Directors approved a
share repurchase program authorizing us to repurchase shares with
an aggregate value of up to $150 million over a three-year period.
Shares may be repurchased at management’s discretion, either in the
open market or in privately negotiated block transactions.
Management’s decision to repurchase shares will depend on share
price and other corporate liquidity requirements. We expect that
share repurchases may occur from time to time over the three years.
As of Dec. 27, 2015, no shares have been repurchased under this
program.
Equity-based awards
We established the Gannett Co. Inc. 2015 Omnibus Incentive
Compensation Plan (the “Plan”) for the purpose of granting equity-
based and cash-based awards to Gannett employees and directors.
The Plan permits the grant of nonqualified stock options, incentive
stock options, stock appreciation rights, restricted stock, stock
awards, restricted stock units (“RSUs”), performance shares,
performance units, and cash-based awards. Awards may be granted
to our employees and members of the Board of Directors. The
Executive Compensation Committee of the Board of Directors
administers the plan and initially reserved 11.0 million shares of our
common stock for issuance. The Plan provides that shares of
common stock subject to awards granted become available again for
issuance if such awards are canceled or forfeited. We currently issue
stock-based compensation to employees in the form of performance
shares and RSUs. We currently issue stock-based compensation to
members of our Board of Directors in the form of RSUs. Award
grants to our employees are generally made on Jan. 1 and grants to
members of our Board of Directors generally will be made in
connection with the date of our annual meetings or commencement
of service for a new member.
Prior to the spin-off, Gannett employees were eligible to
participate in our former parent’s 2001 Omnibus Incentive
Compensation Plan (the “former parent plan”). In connection with
the spin-off, 4.4 million former parent options, 8.3 million former
parent RSUs and 3.0 million former parent performance shares were
converted to 1.1 million Gannett options, 3.0 million Gannett RSUs
and 1.0 million Gannett performance shares, respectively, with terms
that were substantially similar to the terms of the awards under the
former parent plan. These awards were modified under the
mandatory anti-dilution provision of the grants and an incremental
cost of $3.1 million will be recorded over the remaining vesting
periods of these awards.
Performance share awards generally have a three-year vesting
period with the number of shares earned (0% to 200% of the target
award) determined based upon how our total shareholder return
(TSR) compares to the TSR of a peer group of media companies
during the three-year period. Performance shares generally vest on a
pro rata basis if an employee terminates before the end of the
performance period due to death, disability or retirement. Non-
vested performance shares are generally forfeited upon termination
for any other reason. The fair value and compensation expense of
each performance share is determined on date of grant by using a
Monte Carlo valuation model. Each performance share is equal to
and paid in one share of our common stock, but carries no voting or
dividend rights.
RSU awards generally have a four-year incentive period and
grant one share of common stock for each RSU granted. Subject to
special vesting rules that apply to terminations due to death,
disability or retirement, RSUs vest at the end of the incentive period;
provided that commencing for awards made after 2014, RSUs
generally vest 25% per year over the four-year incentive period.
Expense is recognized on a straight-line basis over the incentive
period based on the grant date fair value.
Members of our Board of Directors receive grants of RSUs as
well as cash compensation. Director RSUs generally vest in
quarterly installments over one year. Expense is recognized on a
straight-line basis over the vesting period based on the grant date fair
value.
The Executive Compensation Committee may grant other types
of awards that are valued in whole or in part by reference to or that
are otherwise based on fair market value of our common stock or
other criteria established by the Executive Compensation Committee
including the achievement of performance goals. The maximum
aggregate grant of performance shares and RSU awards that may be
awarded to any participant in any fiscal year shall not exceed
500,000 shares of common stock. The maximum aggregate amount
of cash-based awards that may be awarded to any participant in any
fiscal year shall not exceed $10 million.
55
Determining fair value
Valuation and amortization method – We determined the fair value
of performance shares using the Monte Carlo valuation model. This
model projects probable future stock prices for us and our peer group
companies subject to certain price caps at the conclusion of the
three-year incentive period. Key inputs into the Monte Carlo
valuation model include expected term, expected volatility, expected
dividend yield and the risk-free rate. Each assumption is discussed
below.
Expected term – The expected term represents the period that our
stock-based awards are expected to be outstanding. The expected
term for performance share awards is based on the incentive period
of three years.
Expected volatility – The fair value of stock-based awards
reflects volatility factors calculated using historical market data for
our common stock and the common stock of our peer group when
the Monte Carlo method is used. The time frame used is equal to the
expected term.
Expected dividend – The dividend assumption is based on our
expectations about our dividend policy on the date of grant.
Risk-free interest rate – The risk-free interest rate is based on the
yield to maturity at the time of the award grant on zero-coupon U.S.
government bonds having a remaining life equal to the award’s
expected term.
Estimated forfeitures – When estimating forfeitures, voluntary
termination behavior as well as analysis of actual forfeitures was
considered.
The following assumptions were used to estimate the fair value
of performance share awards that were granted prior to the
separation date:
Performance Shares Granted
During
Expected term . . . . . . . . . . . . . . . . . . .
Expected volatility. . . . . . . . . . . . . . . .
Risk-free interest rate . . . . . . . . . . . . .
2015
3 yrs.
32%
1.1%
Expected dividend yield . . . . . . . . . . .
2.51%
2014
3 yrs.
39.32%
0.78%
2.70%
2013
3 yrs.
40.8%
0.36%
4.44%
Stock-based Compensation Expense: Stock-based compensation
expense for Gannett employee participants in both plans have been
included within selling, general, and administrative expense within
the Consolidated and Combined Statements of Income. Prior to the
distribution date, stock-based compensation expense for Gannett
participants in the former parent plan was allocated to us. The
following table shows the stock-based compensation related amounts
recognized in the Consolidated and Combined Statements of Income
for equity awards:
In thousands
2015
2014
2013
Restricted stock and RSUs . . . . . . . . . $
12,235 $
9,150 $
10,040
Performance shares . . . . . . . . . . . . . . .
Stock options . . . . . . . . . . . . . . . . . . . .
9,478
29
7,333
616
4,931
1,230
Total stock-based compensation . . . . . $
21,742 $ 17,099 $
16,201
Restricted Stock and RSUs: As of Dec. 27, 2015, there was
$20.2 million of unrecognized compensation cost related to non-
vested restricted stock and RSUs. This amount will be adjusted for
future changes in estimated forfeitures and recognized on a straight-
line basis over a weighted average period of 2.4 years. The tax
benefit realized in 2015 was $8.0 million.
A summary of restricted stock and RSU awards is presented
below for the period after the date of separation from our former
parent:
2015 Restricted Stock and RSU Activity
Shares
Weighted
average
fair value
Outstanding and unvested at June 29, 2015 . . . .
2,885,994 $
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
203,061
Settled. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canceled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(136,658)
(174,190)
Outstanding and unvested at Dec. 27, 2015 . . . .
2,778,207 $
10.86
11.31
10.35
10.98
10.91
Performance Shares: As of Dec. 27, 2015, there was $4.6
million of unrecognized compensation cost related to non-vested
Performance Shares. This amount will be adjusted for future changes
in estimated forfeitures and recognized over a weighted average
period of 1.7 years.
A summary of the performance shares awards is presented below
for the period after the date of separation from our former parent:
2015 Performance Shares Activity
Target
number of
shares
Weighted
average
fair value
Outstanding and unvested at June 29, 2015 . . . .
926,138 $
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(31,158)
Canceled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(101,306)
Outstanding and unvested at Dec. 27, 2015 . . . .
793,674 $
15.48
15.51
15.21
15.52
Stock Options: As of Dec. 27, 2015, all stock options were fully
vested. Options were exercised with an intrinsic value of
approximately $4.7 million in 2015.
A summary of our stock option awards is presented below:
2015 Stock Option
Activity
Shares
Weighted
average
remaining
contractual
term
(in years)
Weighted
average
exercise
price
Aggregate
intrinsic
value
Outstanding at
June 29, 2015 . . . . . . . 1,078,289 $
Exercised . . . . . . . . . .
(662,304)
Canceled . . . . . . . . . . .
(4,102)
6.80
7.53
12.61
2.5 $ 7,901,831
Outstanding and
exercisable at
Dec. 27, 2015 . . . . . . .
411,883 $
5.58
2.6 $ 4,378,900
56
Accumulated other comprehensive loss
The elements of our “Accumulated other comprehensive loss”
consisted of pension, retiree medical and life insurance liabilities and
foreign currency translation. The following tables summarize the
components of, and changes in, “Accumulated other comprehensive
loss”:
In thousands of dollars
2015
Retirement
Plans
Foreign
Currency
Translation
Total
Balance at beginning of year . . . $ (1,082,312) $
404,200 $ (678,112)
Other comprehensive loss
before reclassifications. . . . . . . .
(12,010)
(19,390)
(31,400)
Amounts reclassified from
accumulated other
comprehensive loss . . . . . . . . . .
Balance at end of year . . . . . . . . $ (1,058,234) $
36,088
—
36,088
384,810 $ (673,424)
In thousands of dollars
2014
Retirement
Plans
Foreign
Currency
Translation
Total
Balance at beginning of year . . . $ (873,595) $
431,614 $ (441,981)
Other comprehensive loss
before reclassifications. . . . . . . .
(232,740)
(27,414)
(260,154)
Amounts reclassified from
accumulated other
comprehensive loss . . . . . . . . . .
Balance at end of year . . . . . . . . $ (1,082,312) $
24,023
—
24,023
404,200 $ (678,112)
In thousands of dollars
2013
Retirement
Plans
Foreign
Currency
Translation
Total
Balance at beginning of year . . . $ (1,049,171) $
424,098 $ (625,073)
Other comprehensive income
before reclassifications. . . . . . . .
139,670
7,516
147,186
Amounts reclassified from
accumulated other
comprehensive loss . . . . . . . . . .
Balance at end of year . . . . . . . . $ (873,595) $
35,906
—
35,906
431,614 $ (441,981)
“Accumulated other comprehensive loss” components are
included in the computation of net periodic postretirement costs (see
Notes 8 and 9 for more detail). Reclassifications out of
“Accumulated other comprehensive loss” related to these
postretirement plans include the following:
In thousands of dollars
2015
2014
Amortization of prior service credit . . . . . . . . . . . . . $ (2,722) $ (4,454)
Amortization of actuarial loss . . . . . . . . . . . . . . . . . .
Total reclassifications, before tax . . . . . . . . . . . . . . .
58,148
55,426
42,446
37,992
Income tax effect . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(19,338)
(13,969)
Total reclassifications, net of tax. . . . . . . . . . . . . . . . $ 36,088 $ 24,023
NOTE 12
Commitments, contingent liabilities and other matters
Telephone Consumer Protection Act (“TCPA”) litigation:
On Jan. 2, 2014, a class action lawsuit was filed against Gannett in
the U.S. District Court for the District of New Jersey (Casagrand et
al v. Gannett Co., Inc., et al). The suit claims various violations of
the Telephone Consumer Protection Act (“TCPA”) arising from
allegedly improper telemarketing calls made to consumers by one of
our vendors. The plaintiffs seek to certify a class that would include
all telemarketing calls made by the vendor or us. The TCPA provides
for statutory damages of $500 per violation ($1,500 for willful
violations). The ultimate outcome of this proceeding is uncertain, but
may be material to our results of operations and cash flows. We are
vigorously defending the case and have asserted cross-claims against
the vendor.
Environmental contingency: In March 2011, the Advertiser
Company, a subsidiary that publishes the Montgomery Advertiser,
was notified by the U.S. EPA that it had been identified as a
potentially responsible party (“PRP”) for the investigation and
remediation of groundwater contamination in downtown
Montgomery, AL. The Advertiser is a member of the Downtown
Environmental Alliance, which has agreed to jointly fund and
conduct all required investigation and remediation. The U.S. EPA
has approved the work plan for the investigation and remediation,
and has transferred responsibility for oversight of this work to the
Alabama Department of Environmental Management. The
investigation and remediation are underway. In the third quarter of
2015, the Advertiser and other members of the Downtown
Environmental Alliance also reached a settlement with the U.S. EPA
regarding the costs that U.S. EPA spent to investigate the site. The
Advertiser’s final costs cannot be determined until the cleanup work
is completed and contributions from other PRPs are finalized.
Other litigation: We, along with a number of our subsidiaries,
are defendants in judicial and administrative proceedings involving
matters incidental to our business. We believe that any liability that
exists as a result of these matters is immaterial.
Leases: Future minimum lease commitments for non-cancelable
operating leases (primarily real-estate) are as follows:
In thousands of dollars
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Later years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
44,995
41,090
38,259
34,442
29,304
193,159
381,249
Expected future sublease income on these lease commitments
are expected to be approximately $2.5 million. Total rent expense
was $39.7 million in 2015, $34.1 million in 2014 and $34.7 million
in 2013.
The lease for our corporate headquarters in McLean, VA
provides for an initial term of 15 years with two five-year renewal
options. Lease payments will begin at approximately $6.6 million
per year with an additional $2.2 million in lease payments beginning
in 2018. The lease agreement is subject to 2.5% annual rent
escalations. Rent expense is recorded on a straight-line basis over the
initial lease term.
57
Purchase obligations: We have future expected purchase
obligations of $65.5 million related to wire services, interactive
marketing agreements, professional services, paper distribution
agreements, printing contracts and other legally binding
commitments. Amounts which we are liable for under purchase
orders outstanding at Dec. 27, 2015, are reflected in the
Consolidated and Combined Balance Sheets as “Trade accounts
payable” and “Accrued liabilities” and are excluded from the $65.5
million.
Self-insurance: We are self-insured for most of our employee
medical coverage and for our casualty, general liability and libel
coverage (subject to a cap above which third party insurance was in
place). The liabilities are established on an actuarial basis, with the
advice of consulting actuaries, and totaled $75.5 million at the end of
2015 and $69.1 million at the end of 2014.
Other matters: In 2014, we shut down one of our businesses
and incurred $21.0 million of shutdown costs associated with future
contractual promotional payments. These costs were recorded on our
Consolidated and Combined Balance Sheet and approximately $4.1
million remain as of Dec. 27, 2015, the majority of which will be
paid in 2016. These costs are also included in “Selling, general and
administrative expenses, exclusive of depreciation” in the
Consolidated and Combined Statements of Income.
NOTE 13
Fair value measurement
We measure and record certain assets and liabilities at fair value in
the accompanying consolidated and combined financial statements.
ASC Topic 820, “Fair Value Measurement,” establishes a fair value
hierarchy for those instruments measured at fair value that
distinguishes between assumptions based on market data (observable
inputs) and our own assumptions (unobservable inputs). The
hierarchy consists of three levels:
Level 1 – Quoted market prices in active markets for identical
assets or liabilities;
Level 2 – Inputs other than Level 1 inputs that are either directly
or indirectly observable; and
Level 3 – Unobservable inputs developed using our own
estimates and assumptions, which reflect those that a market
participant would use.
The financial instruments measured at fair value in the
accompanying Consolidated and Combined Balance Sheets consist
of the following:
The following tables set forth by level within the fair value
hierarchy the fair values of our pension plans assets relating to the
Newsquest Plan and the Detroit Free Press, Inc. Newspaper Guild of
Detroit Pension Plan as well as the fair values of the pension plan
assets related to the GRP:
Pension Plan Assets/Liabilities
In thousands of dollars
Fair value measurement as of Dec. 27, 2015(a)
Level 1
Level 2
Level 3
Total
Assets:
Fixed income:
Corporate bonds . . . . $
— $
1,275 $
— $
1,275
Corporate stock. . . . . . .
769,597
Real estate. . . . . . . . . . .
—
—
—
— 126,049
769,597
126,049
Interest in common/
collective trusts:
Equities. . . . . . . . . . .
— 549,159
— 549,159
Fixed income . . . . . .
2,478
491,183
100,711
38,080
—
—
493,661
138,791
Interest in reg. invest.
companies . . . . . . . . . . .
Partnership/joint
venture interests . . . . . .
Hedge funds . . . . . . . . .
Derivative contracts . . .
—
—
27,412
104,251
131,663
20,454
310,590
331,044
157
Total . . . . . . . . . . . . . . . . $ 872,786 $1,127,680 $ 540,930 $2,541,396
Liabilities:
117
40
—
Derivative liabilities . . . $
Total
$
— $
— $
(615) $
(2,008) $
(2,623)
(615) $
(2,008) $
(2,623)
Cash and other. . . . . . . . .
Total net fair value of
plan assets . . . . . . . . . . . $ 887,724 $1,131,981 $ 538,922 $2,558,627
(a) We use a Dec. 31 measurement date for our retirement plans.
19,854
14,938
4,916
—
58
In thousands of dollars
Fair value measurement as of Dec. 28, 2014(a)
Level 1
Level 2
Level 3
Total
Assets:
Fixed income:
U.S. government-
related securities. . $
Mortgage backed
securities. . . . . . . .
Other government
bonds . . . . . . . . . .
Corporate bonds . .
Corporate stock. . . . .
Real estate(b) . . . . . . .
Interest in common/
collective trusts:
Equities. . . . . . . . .
Fixed income . . . .
Interest in reg.
invest. companies . . .
Interest in 103-12
investments . . . . . . . .
Partnership/joint
venture interests(b). . .
Hedge funds . . . . . . .
— $
3,744 $
— $
3,744
—
—
—
866,418
—
3,735
4,266
23,027
—
89
—
357
—
— 118,936
—
6,593
693,277
216,728
144,160
44,406
—
—
—
—
—
—
—
22,776
34,144
128,314
20,166
314,084
3,824
4,266
23,384
866,418
118,936
693,277
223,321
188,566
22,776
162,458
334,250
Derivative contracts .
2,947
Total . . . . . . . . . . . . . . $1,017,171 $ 1,069,100 $ 561,896 $ 2,648,167
Liabilities:
2,831
116
—
—
(4) $
(4) $
2,444
8,546
(4,268)
(4,268)
(2,387) $ (1,877) $
(2,387) $ (1,877) $
Derivative liabilities . $
Total . . . . . . . . . . . . . . $
Cash and other. . . . . . .
Total net fair
value of plan assets . . $1,025,713 $ 1,069,157 $ 560,019 $ 2,654,889
(a) We use a Dec. 31 measurement date for our retirement plans.
(b) We corrected a classification of $9.8 million dollars of real estate that
had previously been classified as a partnership/joint venture. This
reclassification is not material as the changes do not impact the 2014
financial statements nor the total plan assets previously reported, rather
just the presentation of the components of the total plan assets in the
table above.
10,990
Items included in “Cash and other” in the table above primarily
consist of amounts categorized as cash and cash equivalents and
pending purchases and sales of securities.
Valuation methodologies used for assets and liabilities measured
at fair value are as follows:
U.S. government-related securities are treasury bonds, bills and
notes that are primarily obligations to the U.S. Treasury. Values are
obtained from industry vendors who use various pricing models or
quotes for identical or similar securities. Mortgage-backed securities
are typically not actively quoted. Values are obtained from industry
vendors who use various pricing models or use quotes for identical
or similar securities.
Other government and corporate bonds are mainly valued based
on institutional bid evaluations using proprietary models, using
discounted cash flow models or models that derive prices based on
similar securities. Corporate bonds categorized in Level 3 are
primarily from distressed issuers for whom the values represent an
estimate of recovery in a potential or actual bankruptcy situation.
Corporate stock is valued primarily at the closing price reported
on the active market on which the individual securities are traded.
Investments in direct real estate have been valued by an
independent qualified valuation professional in the U.K. using a
valuation approach that capitalizes any current or future income
streams at an appropriate multiplier. Investments in real estate funds
are mainly valued utilizing the net asset valuations provided by the
underlying private investment companies.
Interest in common/collective trusts and interest in 103-12
investments are equity and fixed income investments categorized as
Level 2 and are valued using the net asset value as provided monthly
by the fund family or fund company. Shares in the common/
collective trusts are generally redeemable upon request.
Interest in registered investment companies is valued using the
published net asset values as quoted through publicly available
pricing sources. The investments in Level 2 are proprietary funds of
the individual fund managers and are not publicly quoted.
Investments in partnerships and joint venture interests classified
in Level 3 are valued based on an assessment of each underlying
investment, considering items such as expected cash flows, changes
in market outlook and subsequent rounds of financing. These
investments are included in Level 3 of the fair value hierarchy
because exit prices tend to be unobservable and reliance is placed on
the above methods. Most of the partnerships are general leveraged
buyout funds, others include a venture capital fund, a fund formed to
invest in special credit opportunities, an infrastructure fund and a
real estate fund. Interest in partnership investments could be sold on
the secondary market but cannot be redeemed. Instead, distributions
are received as the underlying assets of the funds are liquidated.
There are $12.2 million in unfunded commitments related to
partnership/joint venture interests. Investments in partnerships and
joint venture interests classified as Level 2 represents a limited
partnership commingled fund valued using the net asset value as
reported by the fund manager.
Investments in hedge funds are valued at the net asset value as
reported by the fund managers. Within this category is a fund of
hedge funds whose objective is to produce a return that is
uncorrelated with market movements. Other funds categorized as
hedge funds were formed to invest in mortgage and credit trading
opportunities. Shares in the hedge funds are generally redeemable
twice a year or on the last business day of each quarter with at least
60 days written notice subject to potential 5% holdback. As of Dec.
27, 2015, the Newsquest Pension Scheme plan assets included a
hedge fund with a fair value of $41.8 million, classified as a Level 3
investment. This hedge fund began returning liquidation proceeds to
investors as of Jan. 4, 2016. The fair value of the fund as of Dec. 27,
2015 is the value of the proceeds to be received by the plan. To date,
the Newsquest Pension Scheme has received $31.7 million which
represents 75.9% of the fair value as of Dec. 27, 2015. Final cash
payments are expected to be received in the second quarter of 2016.
Derivatives primarily consist of forward and swap contracts.
Forward contracts are valued at the spot rate, plus or minus forward
points between the valuation date and maturity date. Swaps are
valued at the mid-evaluation price using discounted cash flow
models. Items in Level 3 are valued based on the market values of
other securities for which they represent a synthetic combination.
We review appraised valued, audited financial statements and
additional information to evaluate fair value estimates from our
investment managers or fund administrator. The tables below set
forth a summary of changes in the fair value of our pension plan
assets and liabilities, categorized as Level 3, for the fiscal year ended
Dec. 27, 2015, and Dec. 28, 2014:
59
Pension Plan Assets/Liabilities
In thousands of dollars
For the year ended Dec. 27, 2015
Assets:
Fixed income:
Mortgage-backed securities . . . . . . . . $
Corporate bonds . . . . . . . . . . . . . . . . .
Real estate. . . . . . . . . . . . . . . . . . . . . . . .
Partnership/joint venture interests . . . . .
Hedge funds . . . . . . . . . . . . . . . . . . . . . .
Derivative contracts . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Liabilities:
Actual Return on Plan Assets
Relating to
assets still
held at report
date
Relating to
assets sold
during the
period
Balance at
beginning
of year
Purchases,
sales, and
settlements
Transfer from
parent
Transfers in
and/or out
of Level 3 (1)
Balance at
end of year
89 $
357
118,936
128,314
314,084
116
— $
—
4,346
(4,937)
2,028
(79)
1 $
(90) $
— $
— $
(8)
—
17,213
565
—
(349)
2,765
(30,947)
(2,788)
—
2
(5,392)
(3,299)
3
—
—
—
—
—
—
—
126,049
104,251
310,590
40
561,896 $
1,358 $
17,771 $
(31,409) $
(8,686) $
— $
540,930
Derivative liabilities . . . . . . . . . . . . . . . . $
(1,877) $
— $
— $
— $
(131) $
— $
(2,008)
(1) Our policy is to recognize transfers in and transfers out as of the beginning of the reporting period.
Pension Plan Assets/Liabilities (continued)
In thousands of dollars
For the year ended Dec. 28, 2014
Assets:
Fixed income: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mortgage backed securities. . . . . . . . . . . . . . . . . . . $
Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Partnership/joint venture interests . . . . . . . . . . . . . . . .
Hedge funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Derivative contracts . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Liabilities:
Actual Return on Plan Assets
Relating to
assets still
held at report
date
Relating to
assets sold
during the
period
Balance at
beginning
of year
Purchases,
sales, and
settlements
Transfers in
and/or out
of Level 3(1)
Balance at
end of year
372 $
800
105,875
131,868
239,004
153
— $
1 $
(284) $
— $
109
3,148
(401)
9,787
—
(117)
—
20,368
840
15
(435)
9,913
(23,521)
64,453
(52)
—
—
—
—
—
89
357
118,936
128,314
314,084
116
478,072 $
12,643 $
21,107 $
50,074 $
— $
561,896
Derivative liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . $
(1,877) $
— $
— $
— $
— $
(1,877)
(1) Our policy is to recognize transfers in and transfers out as of the beginning of the reporting period.
(2) As stated above, we corrected a classification of $9.8 million dollars of real estate that had previously been classified as a partnership/joint venture. This
resulted in an increase of $1.1 million dollars in return on plan assets still held at report date for real estate and a decrease of the same amount for
partnerships/joint ventures. This reclassification is not material as the changes do not impact the 2014 financial statements nor the total plan assets
previously reported, rather just the presentation of the components of the total plan assets in the table above.
Certain assets are measured at fair value on a nonrecurring basis;
that is, the instruments are not measured at fair value on an ongoing
basis but are subject to fair value adjustments only in certain
circumstances (for example, when there is evidence of impairment).
Our assets that are measured on a nonrecurring basis are assets held
for sale (Level 3), which are evaluated by using executed purchase
agreements or third party valuation experts when certain
circumstances arise.
The following tables summarize the non-financial assets
measured at fair value on nonrecurring basis in the accompanying
Consolidated and Combined Balance Sheet as of Dec. 27, 2015, and
Dec. 28, 2014:
Non-Financial Assets
In thousands of dollars
Fair value measurement as of Dec. 27, 2015
Asset held for sale - Quarter 4 . . . $ — $ — $ 12,288 $ 12,288
Level 1 Level 2 Level 3
Total
Non-Financial Assets
In thousands of dollars
Fair value measurement as of Dec. 28, 2014
Asset held for sale - Quarter 4 . . . $ — $ — $ 18,434 $ 18,434
Level 1 Level 2 Level 3
Total
60
NOTE 14
Relationship with our former parent subsequent to the spin-off
Transition services agreement: In connection with the spin-off,
we entered into a transition services agreement with our former
parent, pursuant to which we and our former parent will provide to
each other certain specified services on a transitional basis, including
various information technology, financial and administrative
services. The charges for the transition services generally are
expected to allow the providing entity to fully recover all out-of-
pocket costs and expenses it actually incurs in connection with
providing the service plus, in some cases, the allocated indirect costs
of providing the services, generally without profit. Subsequent to
separation, we provided certain IT, payroll and other services to our
former parent in the amount of $5.9 million for the year ended Dec.
27, 2015. Our former parent provided certain services to us in the
amount of $3.7 million for the year ended Dec. 27, 2015.
The transition services agreement will terminate on the
expiration of the term of the last service provided under it, not later
than 24 months following the distribution date. The recipient for a
particular service generally can terminate that service prior to the
scheduled expiration date, subject generally to a minimum service
period of 90 days and minimum notice period of 30 days. Due to the
interdependencies between some services, certain services may be
extended or terminated early only if other services are coterminous.
Employee matters agreement: In connection with the spin-off,
we entered into an employee matters agreement with our former
parent prior to the separation to allocate liabilities and
responsibilities relating to employment matters, employee
compensation and benefit plans and programs and other related
matters. The employee matters agreement governs certain
compensation and employee benefit obligations with respect to the
current and former employees and non-employee directors of each
company. See Note 8 — Retirement plans and Note 9 —
Postretirement benefits other than pension for more detail.
Revenue and other transactions entered into in the ordinary
course of business: Certain of our revenue arrangements relate to
contracts entered into in the ordinary course of business with our
former parent and its affiliates, principally Cars.com, G/O Digital
and CareerBuilder.
Relationship with our former parent prior to the spin-off
The following is a discussion of our relationship with our former
parent prior to the spin-off, including the services provided by both
parties and how transactions with our former parent and its affiliates
through June 28, 2015 were accounted for in the combined financial
statements.
Equity: Equity in the Combined Balance Sheets includes the
accumulated balance of transactions between us and our former
parent, our paid-in-capital and our former parent’s interest in our
cumulative retained earnings, which are presented within “Former
parent’s investment, net” and combined with “Accumulated other
comprehensive loss” as the two components of equity. The amounts
comprising the accumulated balance of transactions between us, our
former parent and its affiliates include (i) the cumulative net assets
attributed to us by our former parent and its affiliates, (ii) the
cumulative net advances to former parent representing our
cumulative funds swept (net of funding provided by our former
parent and its affiliates to us) as part of the centralized cash
management program described further below and (iii) the
cumulative charges (net of credits) allocated by our former parent
and its affiliates to us for certain support services received by us.
Centralized cash management: Prior to the spin-off, our former
parent utilized a centralized approach to cash management and the
financing of its operations, providing funds to its entities as needed.
These transactions were recorded in “Former parent’s investment,
net” when advanced. Accordingly, none of our former parent’s cash
and cash equivalents were assigned to us in the combined financial
statements. “Cash and cash equivalents” in our Combined Balance
Sheet represent cash held by us. Included in “Cash and cash
equivalents” as of Dec. 28, 2014 were investments in commercial
paper of former parent totaling $63.9 million. These investments
matured prior to the spin-off and are now cash held by us as of
Dec. 27, 2015. Interest income recorded on these investments,
recorded within “Other non-operating items, net,” was $0.4 million
and $1.8 million for the years ended Dec. 27, 2015 and Dec. 28,
2014, respectively.
Support services provided and other amounts with our former
parent and former parent’s affiliates: Prior to the spin-off, we
received allocated charges from our former parent and its affiliates
for certain corporate support services, which are recorded within
“Selling, general and administrative expense” in our Combined
Statements of Income, net of cost recoveries reflecting services
provided by us and allocated to our former parent. Management
believes that the bases used for the allocations are reasonable and
reflect the portion of such costs, net of cost recoveries, attributable to
our operations; however, the amounts may not be representative of
the costs necessary for us to operate as a separate stand-alone
company.
61
These allocated costs, net of cost recoveries, are summarized in
the following table:
In thousands of dollars
Corporate allocations (b) . . . . . . . . .
Occupancy (c) . . . . . . . . . . . . . . . . .
Depreciation (d). . . . . . . . . . . . . . . .
Other support costs (e) . . . . . . . . . .
Cost recoveries (f) . . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . .
2015(a)
2014
2013
$
25,832
$
60,628
$
65,718
2,884
4,067
6,249
(6,055)
5,642
7,960
15,743
(9,501)
6,678
9,275
19,019
(4,643)
$
32,977
$
80,472
$
96,047
(a) Costs were allocated from our former parent to us up to the spin date. No costs
were allocated to us by our former parent after the spin-off.
(b) The corporate allocations related to support we received from our former parent
and its affiliates for certain corporate activities include: (i) corporate general and
administrative expenses, (ii) marketing services, (iii) investor relations, (iv) legal,
(v) human resources, (vi) internal audit, (vii) financial reporting, (viii) tax,
(ix) treasury, (x) information technology, (xi) production services, (xii) travel
services and (xiii) other former parent corporate and infrastructure costs. For these
services, we recorded an allocation of a management fee based on actual costs
incurred by our former parent and its affiliates. This was allocated to us based upon
our revenue as a percentage of total former parent revenue in each fiscal period.
(c) Occupancy costs relate to certain facilities owned and/or leased by our former
parent and its affiliates that were utilized by our employees and principally relate to
shared corporate office space. These costs were charged to us primarily based on
actual square footage utilized or our revenue as a percentage of total former parent
revenue in each fiscal period. Occupancy costs include facility rent, repairs and
maintenance, security and other occupancy related costs incurred to manage the
properties.
(d) Depreciation expense was allocated by former parent and its affiliates for certain
assets. These assets primarily relate to facilities and IT equipment that are utilized
by former parent and us to operate our businesses. These assets have not been
included in our Combined Balance Sheets. Depreciation expense was allocated
primarily based on our revenue as a percentage of total former parent revenue or
our utilization of these assets.
(e) Other support costs related to charges to us from former parent and its affiliates
include certain insurance costs and our allocated portions of share-based
compensation costs and net periodic pension costs relating to the Gannett
Supplemental Retirement Plan for employees of our former parent. Such costs were
allocated based on actual costs incurred or our revenue as a percentage of total
former parent revenue.
(f) Cost recoveries reflect costs recovered from our former parent and our former
parent’s affiliates for functions provided by us such as functions that serve our
former parent’s digital and broadcasting platforms for content optimization and
financial transaction processing at shared service centers. Such costs were
primarily allocated based on our revenue as a percentage of total former parent
revenue or based upon transactional volume in each fiscal year.
62
SELECTED FINANCIAL DATA
In thousands of dollars, except per share amounts
Total operating revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Net income per share - basic. . . . . . . . . . . . . . . . . . . . . . . . $
Net income per share - diluted . . . . . . . . . . . . . . . . . . . . . . $
Other selected financial data
Dividends declared per share . . . . . . . . . . . . . . . . . . . . . . . . . $
Weighted average number of common shares outstanding
in thousands:
2015
2014
2013
2012
2011
(Unaudited)
2,885,012 $
169,431 $
146,091 $
1.27 $
1.25 $
3,171,878 $
262,331 $
210,705 $
1.83 $
1.83 $
3,324,939 $
325,073 $
274,461 $
2.39 $
2.39 $
3,470,007 $
331,413 $
277,230 $
2.41 $
2.41 $
3,569,312
437,998
333,506
2.90
2.90
0.32 $
— $
— $
— $
—
basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
115,165
116,695
114,959
114,959
114,959
114,959
114,959
114,959
114,959
114,959
Financial position and cash flow
Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
196,696 $
2,427,799 $
71,947 $
2,384,460 $
78,596 $
2,494,736 $
134,096 $
2,839,691 $
106,753
2,910,041
NOTES TO SELECTED FINANCIAL DATA (Unaudited)
(a) We, along with our subsidiaries, made the significant acquisitions listed below during the period. The results of operations of these
acquired businesses are included in the accompanying financial information from the date of acquisition.
Note 3 to the consolidated and combined financial statements contains further information concerning certain of these acquisitions.
Acquisitions 2011-2015
Year
2011 Reviewed.com
Name
US PRESSWIRE
MMA Junkie
2012 Fantasy Sports Ventures/Big Lead Sports
Quickish
2013 10Best, Inc.
Tripology
Location
Publication times or business
Cambridge, MA
Atlanta, GA
St. Petersburg, FL
New York, NY
Bethesda, MD
Greenville, SC
McLean, VA
A technology product review web site
A digital sports photography business
Independent sports information web site
Independent digital sports property
Aggregator that offers a summary and a link for sports
stories
Travel advice services for travelers in the U.S. and
internationally
Offers an interactive travel referral service
2015 Texas-New Mexico Newspapers Partnership Texas, New Mexico, Pennsylvania Media company publishing daily and weekly newspapers
Scotland, Berkshire, Northern Ireland Media company publishing daily and weekly newspapers
Romanes Media Group
Dispositions 2011-2015
Year
2014 Schedule Star
Name
Location
Wheeling, WY
Publication times or business
High school athletic management and scheduling software
63
QUARTERLY STATEMENTS OF INCOME (Unaudited)
In thousands of dollars, except per share amounts
Fiscal year ended Dec. 27, 2015
Operating revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Per share computations
Net income per share—basic . . . . . . . . . . . . . . . . . . . . $
Net income per share—diluted . . . . . . . . . . . . . . . . . . . $
Dividends per share. . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Weighted average number of shares outstanding
basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiscal year ended Dec. 28, 2014
Operating revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Per share computations
Net income per share—basic . . . . . . . . . . . . . . . . . . . . $
Net income per share—diluted . . . . . . . . . . . . . . . . . . . $
Dividends per share. . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Weighted average number of shares outstanding
basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
717,360 $
29,811 $
33,247 $
727,072 $
48,994 $
53,327 $
701,236 $
52,113 $
39,166 $
739,344 $
38,513 $
20,351 $
Total
2,885,012
169,431
146,091
0.29 $
0.29 $
— $
0.46 $
0.46 $
— $
0.34 $
0.33 $
0.16 $
0.18
0.17
0.16 $
1.27
1.25
0.32
114,959
114,959
114,959
114,959
115,186
118,168
115,555
118,694
115,165
116,695
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
789,133 $
48,805 $
41,179 $
796,522 $
67,318 $
52,109 $
767,291 $
66,195 $
50,557 $
818,932 $
80,013 $
66,860 $
Total
3,171,878
262,331
210,705
0.36 $
0.36 $
— $
0.45 $
0.45 $
— $
0.44 $
0.44 $
— $
0.58 $
0.58 $
— $
1.83
1.83
—
114,959
114,959
114,959
114,959
114,959
114,959
114,959
114,959
114,959
114,959
64
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Conclusion Regarding the Effectiveness of Disclosure Controls
and Procedures
Under the supervision and with the participation of our management,
including our principal executive officer and principal financial
officer, we conducted an evaluation of our disclosure controls and
procedures, as such term is defined under Rule 13a-15(e)
promulgated under the Securities Exchange Act of 1934, as amended
(the Exchange Act). Based on this evaluation, our principal
executive officer and our principal financial officer concluded that
our disclosure controls and procedures were effective as of the end
of the period covered by this annual report.
Management’s Report on Internal Control Over Financial
Reporting
Our management is responsible for establishing and maintaining
adequate internal control over financial reporting, as such term is
defined in Exchange Act Rule 13a-15(f). Under the supervision and
with the participation of our management, including our principal
executive officer and principal financial officer, we conducted an
evaluation of the effectiveness of our internal control over financial
reporting based on the framework in Internal Control - Integrated
Framework (2013 framework) issued by the Committee of
Sponsoring Organizations of the Treadway Commission. Based on
our evaluation, our management concluded that our internal control
over financial reporting was effective as of Dec. 27, 2015.
Management’s assessment of and conclusion on the effectiveness
of internal controls over financial reporting did not include the
internal controls of RMG and TNP, which are included in the 2015
consolidated financial statements of Gannett Co., Inc. On May 26,
2015 and June 1, 2015, we completed our acquisitions of RMG and
TNP, respectively. In connection with these, we began consolidating
results of RMG and TNP, which represented approximately 1% of
our total assets at Dec. 27, 2015, and 2% of total revenue for the year
ended Dec. 27, 2015. Due to the timing of these acquisitions and as
permitted by SEC guidance, management excluded RMG and TNP
from its Dec. 27, 2015 assessment of internal control over financial
reporting.
The effectiveness of our internal control over financial reporting
as of Dec. 27, 2015, has been audited by Ernst & Young LLP, an
independent registered public accounting firm, as stated in its report
which is included elsewhere in this item.
Changes in Internal Control Over Financial Reporting
There has been no change in our internal control over financial
reporting that occurred during our fiscal quarter ended Dec. 27,
2015, that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.
65
In our opinion, Gannett Co., Inc. maintained, in all material
respects, effective internal control over financial reporting as of
December 27, 2015, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public
Company Accounting Oversight Board
the
consolidated and combined balance sheets of Gannett Co., Inc. as of
December 27, 2015 and December 28, 2014, and the related
consolidated and combined statements of income, comprehensive
income (loss), shareholders’ equity and cash flows for each of the three
fiscal years in the period ended December 27, 2015 and our report dated
February 25, 2016 expressed an unqualified opinion thereon.
(United States),
McLean, Virginia
February 25, 2016
Report of Independent Registered Public Accounting Firm
Board of Directors and Shareholders of Gannett Co., Inc.:
We have audited Gannett Co., Inc.’s internal control over
financial reporting as of December 27, 2015, based on criteria
established in Internal Control-Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway
Commission (2013 framework) (the COSO criteria). Gannett Co.,
Inc.’s management is responsible for maintaining effective internal
control over financial reporting, and for its assessment of the
effectiveness of internal control over financial reporting included in
the accompanying Management’s Report on Internal Control Over
Financial Reporting. Our responsibility is to express an opinion on
the company’s internal control over financial reporting based on our
audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over
financial reporting was maintained in all material respects. Our audit
included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists,
testing and evaluating the design and operating effectiveness of
internal control based on the assessed risk, and performing such
other procedures as we considered necessary in the circumstances.
We believe that our audit provides a reasonable basis for our
opinion.
A company’s internal control over financial reporting is a process
designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements
in accordance with generally accepted accounting principles, and
that receipts and expenditures of the company are being made only
in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect
on the financial statements.
Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the
risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
As indicated in the accompanying Management’s Report on
Internal Control Over Financial Reporting, management’s assessment
of and conclusion on the effectiveness of internal control over financial
reporting did not include the internal controls of Texas-New Mexico
Partnership and Romanes Media Group, which are included in the 2015
consolidated and combined financial statements of Gannett Co., Inc.
and constituted 1% of total assets as of December 27, 2015 and 2% of
revenues for the year then ended. Our audit of internal control over
financial reporting of Gannett Co., Inc. also did not include an
evaluation of the internal control over financial reporting of Texas-
New Mexico Partnership and Romanes Media Group.
66
Joanne Lipman
Senior Vice President and Chief Content Officer (December 2015-
present). Formerly: Principal of Surrey Lane Media (2010-2015);
Founding Editor-in-Chief of Conde Nast Portfolio Magazine
(2005-2009). Age 54.
Maribel Perez Wadsworth
Senior Vice President and Chief Strategy Officer (June 2015-present).
Formerly, prior to the separation: Vice President, Strategic Initiatives,
U.S. Community Publishing (2014-2015); Vice President, Audience
Development and Engagement, U.S. Community Publishing
(2012-2014). Age 43.
Henry Faure Walker
Chief Executive Officer of Newsquest Media Group (April 2014-
present). Formerly: Digital Director of Johnston Press plc (2010-2014);
General Manager of Scotsman Publications Ltd. (2006-2010). Age 43.
Barbara Wall
Senior Vice President and Chief Legal Officer (June 2015-present).
Formerly, prior to the separation: Vice President, Senior Associate
General Counsel and Chief Ethics Officer (2009-2015). Age 61.
Andy Yost
Chief Marketing Officer (June 2015-present). Formerly, prior to the
separation: Senior Vice President, Consumer Marketing (2014-2015);
Senior Vice President, Marketing and Customer Relationship
Management of Viacom Media Networks (2010-2014). Age 50.
John Zidich
President of Domestic Publishing (June 2015-present). Formerly, prior to
the separation: Chief Executive of Republic Media and Publisher of The
Arizona Republic (2010-2015); President and Publisher of Reno (Nev.)
Gazette-Journal (2000-2001). Age 61.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND
CORPORATE GOVERNANCE
The information captioned “The Nominees,” “Audit Committee,” and
“Nominating and Public Responsibility Committee” under the heading
“PROPOSAL 1 –ELECTION OF DIRECTORS” and the information
under the headings “ETHICS POLICY” and “SECTION 16(A)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE” in our
2016 proxy statement is incorporated herein by reference.
The following sets forth information regarding our executive officers as
of the date of this Form 10-K.
Daniel Bernard
Senior Vice President and Chief Product Officer (December 2015-
present). Formerly: Head of Product of Time, Inc. (2013-2015); Chief
Product Officer of The Wall Street Journal Digital Network (2008-2013).
Age 47.
Robert J. Dickey
President and Chief Executive Officer (June 2015-present). Formerly,
prior to the separation: President, U.S. Community Publishing (February
2008-2015); Senior Group President, Gannett’s Pacific Group and
Chairman of Phoenix Newspapers Inc. (2005-2008). Age 58
Alison K. Engel
Senior Vice President, Chief Financial Officer and Treasurer (June 2015-
present). Formerly: Senior Vice President, Chief Financial Officer and
Treasurer of A.H. Belo Corporation (2008-2014). Age 45.
David Harmon
Chief People Officer (July 2015-present). Formerly: Deputy Director
and Chief Human Capital Officer of Federal Reserve Board
(2012-2015); and Executive Vice President, Human Resources of AOL
Inc. (2007-2011). Age 48.
Jamshid Khazenie
Chief Technology Officer (July 2015-present). Formerly, prior to the
separation: Vice President, Digital Technology and Operations
(2014-2015); Vice President, Digital Media Technologies of Turner
Broadcasting Systems (2011-2014). Age 53.
67
ITEM 11. EXECUTIVE COMPENSATION
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT
SCHEDULES
(a) Financial Statements, Financial Statement Schedules and
Exhibits.
(1) Financial Statements.
As listed in the Index to Financial Statements and
Supplementary Data on page 34.
(2) Financial Statement Schedules.
All schedules are omitted as the required information is not
applicable or the information is presented in the consolidated and
combined financial statements or related notes.
(3) Exhibits.
See Exhibit Index on pages 70-72 for list of exhibits filed with
this Form 10-K. Management contracts and compensatory plans or
arrangements are identified with asterisks on the Exhibit Index.
The information under the headings “EXECUTIVE
COMPENSATION,” “DIRECTOR COMPENSATION,”
“OUTSTANDING DIRECTOR EQUITY AWARDS AT FISCAL
YEAR-END” AND “COMPENSATION COMMITTEE
INTERLOCKS AND INSIDER PARTICIPATION; RELATED
TRANSACTIONS” in our 2016 proxy statement is incorporated
herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The information captioned “EQUITY COMPENSATION PLAN
INFORMATION” and “SECURITIES BENEFICIALLY OWNED
BY DIRECTORS, EXECUTIVE OFFICERS AND PRINCIPAL
SHAREHOLDERS” in our 2016 proxy statement is incorporated
herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information captioned “Director Independence” under the
heading “PROPOSAL 1 – ELECTION OF DIRECTORS” and the
information under the headings “SEPARATION OF THE
COMPANY FROM TEGNA INC.” and “COMPENSATION
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION;
RELATED TRANSACTIONS” in our 2016 proxy statement is
incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information under the heading “REPORT OF THE AUDIT
COMMITTEE” in our 2016 proxy statement is incorporated herein
by reference.
68
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly authorized.
Dated: February 25, 2016
/s/ John E. Cody
John E. Cody, Director
Dated: February 25, 2016 GANNETT CO., INC. (Registrant)
By:
/s/ Alison K. Engel
Alison K. Engel,
Senior Vice President, Chief
Financial Officer and Treasurer
(principal financial officer)
Dated: February 25, 2016
/s/ Stephen W. Coll
Stephen W. Coll, Director
Dated: February 25, 2016
/s/ Robert J. Dickey
Robert J. Dickey, Director
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant in the capacities and on the dates indicated.
Dated: February 25, 2016
/s/ Donald E. Felsinger
Donald E. Felsinger, Director
Dated: February 25, 2016
Dated: February 25, 2016
Dated: February 25, 2016
/s/ Robert J. Dickey
Robert J. Dickey
President and Chief Executive
Officer (principal executive
officer)
/s/ Alison K. Engel
Alison K. Engel,
Senior Vice President, Chief
Financial Officer and Treasurer
(principal financial officer)
/s/ Lori C. Locke
Lori C. Locke
Controller
(principal accounting officer)
Dated: February 25, 2016
/s/ Lila Ibrahim
Lila Ibrahim, Director
Dated: February 25, 2016
/s/ Lawrence S. Kramer
Lawrence S. Kramer, Director
Dated: February 25, 2016
/s/ John Jeffry Louis
John Jeffry Louis
Director, Chairman
Dated: February 25, 2016
/s/ Tony A. Prophet
Tony A. Prophet, Director
Dated: February 25, 2016
/s/ Debra A. Sandler
Debra A. Sandler, Director
Dated: February 25, 2016
/s/ Chloe R. Sladden
Chloe R. Sladden, Director
69
EXHIBIT INDEX
Exhibit
Number
Exhibit
Location
2-1
2-2
3-1
3-2
10-1
10-2
10-3
10-4
10-5
10-6
10-7
10-8
10-9
Separation and Distribution Agreement, dated as of June 26,
2015, by and between Parent and the Company.
Incorporated herein by reference to Exhibit 2.1 to the
Company’s Registration Statement on Form S-3, filed by the
Company with the SEC on June 29, 2015.
Agreement and Plan of Merger among Gannett Co., Inc.,
Jupiter Merger Sub, Inc. and Journal Media Group, Inc. dated
as of October 7, 2015.
Incorporated by reference to Exhibit 2.1 to the Company’s
Current Report on Form 8-K filed by the Company with the
SEC on October 8, 2015.
Amended and Restated Certificate of Incorporation of the
Company.
Incorporated herein by reference to Exhibit 3.1 to the
Company’s Registration Statement on Form S-3, filed by the
Company with the SEC on June 29, 2015.
Amended and Restated Bylaws of the Company, effective
February 23, 2016.
Incorporated herein by reference to Exhibit 3.1 to the
Company’s Current Report on Form 8-K, filed by the
Company with the SEC on February 24, 2016.
Transition Services Agreement, dated as of June 26, 2015, by
and between Parent and the Company.
Tax Matters Agreement, dated as of June 26, 2015, by and
between Parent and the Company.
Employee Matters Agreement, dated as of June 26, 2015, by
and between Parent and the Company.*
Credit Agreement among the Company, the several lenders
from time to time party thereto, JPMorgan Chase Bank, N.A.,
as Administrative Agent, PNC Bank, N.A. and U.S. Bank,
National Association, as Co-Syndication Agents, dated as of
June 29, 2015.
Incorporated by reference to the same-numbered exhibit to the
Company’s Current Report on Form 8-K, filed by the
Company with the SEC on June 30, 2015.
Incorporated by reference to the same-numbered exhibit to the
Company’s Current Report on Form 8-K, filed by the
Company with the SEC on June 30, 2015.
Incorporated herein by reference to Exhibit 10.1 to the
Company’s Registration Statement on Form S-3, filed by the
Company with the SEC on June 29, 2015.
Incorporated by reference to the same-numbered exhibit to the
Company’s Current Report on Form 8-K, filed by the
Company with the SEC on June 30, 2015.
Security Agreement, made by the Company and certain of its
Subsidiaries, in favor of JPMorgan Chase Bank, N.A., as
Administrative Agent, dated as of June 29, 2015.
Incorporated by reference to the same-numbered exhibit to the
Company’s Current Report on Form 8-K, filed by the
Company with the SEC on June 30, 2015.
Trademark Security Agreement, dated as of June 29, 2015, by
the Company and certain of its Subsidiaries, in favor of
JPMorgan Chase Bank, N.A., as Administrative Agent.
Incorporated by reference to the same-numbered exhibit to the
Company’s Current Report on Form 8-K, filed by the
Company with the SEC on June 30, 2015.
Guarantee Agreement made by the Subsidiary Guarantors
listed on the signature page thereto in favor of JPMorgan
Chase Bank, N.A., as Administrative Agent, dated as of June
29, 2015.
2015 Deferred Compensation Plan Rules for Pre-2005
Deferrals.*
2015 Deferred Compensation Plan Rules for Post-2004
Deferrals.*
10-10
2015 Supplemental Retirement Plan.*
10-11
Supplemental Executive Medical Plan.*
10-12
Supplemental Executive Medical Plan for Retired
Executives.*
10-13
2015 Key Executive Life Insurance Plan.*
10-14
2015 Key Executive Life Insurance Plan Participation
Agreement.*
70
Incorporated by reference to the same-numbered exhibit to the
Company’s Current Report on Form 8-K, filed by the
Company with the SEC on June 30, 2015.
Incorporated by reference to the same-numbered exhibit to the
Company’s Current Report on Form 8-K, filed by the
Company with the SEC on June 30, 2015.
Incorporated by reference to the same-numbered exhibit to the
Company’s Current Report on Form 8-K, filed by the
Company with the SEC on June 30, 2015.
Incorporated by reference to the same-numbered exhibit to the
Company’s Current Report on Form 8-K, filed by the
Company with the SEC on June 30, 2015.
Incorporated by reference to the same-numbered exhibit to the
Company’s Current Report on Form 8-K, filed by the
Company with the SEC on June 30, 2015.
Incorporated by reference to the same-numbered exhibit to the
Company’s Current Report on Form 8-K, filed by the
Company with the SEC on June 30, 2015.
Incorporated by reference to the same-numbered exhibit to the
Company’s Current Report on Form 8-K, filed by the
Company with the SEC on June 30, 2015.
Incorporated by reference to the same-numbered exhibit to the
Company’s Current Report on Form 8-K, filed by the
Company with the SEC on June 30, 2015.
10-15
2015 Transitional Compensation Plan.*
10-16
Gannett Leadership Team Transition Severance Plan.*
10-17
2015 Omnibus Incentive Compensation Plan.*
10-18
Letter Agreement with Robert J. Dickey.*
10-19
Letter Agreement with Alison K. Engel.*
10-20
Letter Agreement with John M. Zidich.*
10-21
Employment and Separation Agreement with David A.
Payne.*
10-22
Termination Benefits Agreement with Lawrence S. Kramer.*
10-23
Agreement and Release with Lawrence S. Kramer.*
10-24
Form of Mortgage.
10-25
Form of Deed of Trust.
10-26
10-27
10-28
Schedule of Mortgages or Deeds of Trust Granted by Gannett
Subsidiaries.
First Amendment to the Credit Agreement.
Attached.
Form of Director RSU Award Agreement.
10-29
Form of Executive Officer RSU Award Agreement.
10-30
2015 Change in Control Severance Plan.
10-31
Executive Severance Plan.
10-32
Form of Indemnification Agreement.
10-33
10-34
Gannett Co., Inc. Clawback Policy, effective December 9,
2015.
Form of Executive Officer Restricted Stock Unit Award
Agreement.
71
Incorporated by reference to the same-numbered exhibit to the
Company’s Current Report on Form 8-K, filed by the
Company with the SEC on June 30, 2015.
Incorporated by reference to the same-numbered exhibit to the
Company’s Current Report on Form 8-K, filed by the
Company with the SEC on June 30, 2015.
Incorporated herein by reference to Exhibit 4.1 to the
Company’s Registration Statement on Form S-3, filed by the
Company with the SEC on June 29, 2015.
Incorporated by reference to Exhibit 10.15 to the Company’s
Registration Statement on Form 10, filed by the Company
with the SEC on June 9, 2015.
Incorporated by reference to Exhibit 10.16 to the Company’s
Registration Statement on Form 10, filed by the Company
with the SEC on June 9, 2015.
Incorporated by reference to Exhibit 10.17 to the Company’s
Registration Statement on Form 10, filed by the Company
with the SEC on June 9, 2015.
Incorporated by reference to Exhibit 10.18 to the Company’s
Registration Statement on Form 10, filed by the Company
with the SEC on June 9, 2015.
Incorporated by reference to Exhibit 10.19 to the Company’s
Registration Statement on Form 10, filed by the Company
with the SEC on June 9, 2015.
Incorporated by reference to Exhibit 10.20 to the Company’s
Registration Statement on Form 10, filed by the Company
with the SEC on June 9, 2015.
Incorporated by reference to Exhibit 10.24 to the Company’s
Quarterly Report on Form 10-Q for the quarter ended
September 27, 2015.
Incorporated by reference to Exhibit 10.25 to the Company’s
Quarterly Report on Form 10-Q for the quarter ended
September 27, 2015.
Incorporated by reference to Exhibit 10.26 to the Company’s
Quarterly Report on Form 10-Q for the quarter ended
September 27, 2015.
Incorporated by reference to Exhibit 10.1 to the Company’s
Current Report on Form 8-K filed by the Company with the
SEC on July 30, 2015.
Incorporated by reference to Exhibit 10.2 to the Company’s
Current Report on Form 8-K filed by the Company with the
SEC on July 30, 2015.
Incorporated by reference to Exhibit 10.3 to the Company’s
Current Report on Form 8-K filed by the Company with the
SEC on July 30, 2015.
Incorporated by reference to Exhibit 10.3 to the Company’s
Current Report on Form 8-K filed by the Company with the
SEC on July 30, 2015.
Incorporated by reference to Exhibit 10.1 to the Company’s
Current Report on Form 8-K filed by the Company with the
SEC on December 14, 2015.
Incorporated by reference to Exhibit 10.2 to the Company’s
Current Report on Form 8-K filed by the Company with the
SEC on December 14, 2015.
Incorporated by reference to Exhibit 10.3 to the Company’s
Current Report on Form 8-K filed by the Company with the
SEC on December 14, 2015.
10-35
10-36
10-37
10-38
10-39
21.1
23
31-1
31-2
32-1
32-2
101
Form of Executive Officer Performance Share Unit Award
Agreement.
Incorporated by reference to Exhibit 10.4 to the Company’s
Current Report on Form 8-K filed by the Company with the
SEC on December 14, 2015.
Employment Contract between Newsquest Media Group
Limited and Henry Faure Walker.*
Summary of Non-employee Director Compensation.*
Form of RSU Award Agreement for U.K. Employees.
Notification of the Termination of the TCP Effective
December 2016.
List of subsidiaries.
Attached.
Attached.
Attached.
Attached.
Attached.
Consent of Independent Registered Public Accounting Firm.
Attached.
Attached.
Attached.
Attached.
Attached.
Attached.
Rule 13a-14(a) Certification of CEO.
Rule 13a-14(a) Certification of CFO.
Section 1350 Certification of CEO.
Section 1350 Certification of CFO.
The following financial information from Gannett Co., Inc.
Annual Report on Form 10-K for the year ended December 27,
2015, formatted in XBRL includes: (i) Consolidated and
Combined Balance Sheets at December 27, 2015 and
December 28, 2014, (ii) Consolidated and Combined
Statements of Income for the 2015, 2014 and 2013 fiscal
years, (iii) Consolidated and Combined Statements of
Comprehensive Income for the 2015, 2014 and 2013 fiscal
years, (iv) Consolidated and Combined Cash Flow Statements
for the 2015, 2014 and 2013 fiscal years; (v) Consolidated and
Combined Statements of Equity for the 2015, 2014 and 2013
fiscal years; and (vi) the
Notes to Consolidated and Combined Financial Statements.
We agree to furnish to the Commission, upon request, a copy of each agreement with respect to long-term debt not filed herewith in reliance upon the
exemption from filing applicable to any series of debt which does not exceed 10% of our total consolidated assets.
* Asterisks identify management contracts and compensatory plans or arrangements.
72
SHAREHOLDER SERVICES
GANNETT STOCK
Gannett Co., Inc. shares are traded on the New York Stock Exchange with the symbol
GCI. The company’s transfer agent and registrar is Wells Fargo Bank, N.A. General
inquiries and requests for enrollment materials for the programs described below
should be directed to Wells Fargo Shareowners Services, P.O. Box 64854, St. Paul, MN
55164-0854, by telephone at 800-778-3299 or at shareownersonline.com.
ANNUAL MEETING
The annual meeting of shareholders will be held at 10 a.m. (ET), Tuesday, May 10, 2016,
at Gannett headquarters.
CORPORATE GOVERNANCE
We have posted on our web site (www.gannett.com) our principles of corporate
governance, ethics policy and the charters for the audit, transformation, nominating
and public responsibility, and executive compensation committees of our board of
directors, and we intend to post updates to these corporate governance materials
promptly if any changes (including through any amendments or waivers of the ethics
policy) are made. This site also provides access to our annual report on Form 10-K,
quarterly reports on Form 10-Q and current reports on Form 8-K as filed with the SEC.
Our chief executive officer and our chief financial officer have delivered, and we
have filed with our 2015 Form 10-K, all certifications required by the rules of the SEC.
Complete copies of our corporate governance materials and our Form 10-K may be
obtained by writing our Secretary at our corporate headquarters.
In accordance with the rules of the New York Stock Exchange, our Chief Executive
Officer has certified, without qualification, that such officer is not aware of any
violation by Gannett of the NYSE’s corporate governance listing standards.
FOR MORE INFORMATION
News and information about Gannett is available on our web site. Quarterly
earnings information will be available around the end of April, July and October 2016.
Shareholders who wish to contact the company directly about their Gannett stock
should call Shareholder Services at Gannett headquarters, 703-854-6960.
Gannett Headquarters
7950 Jones Branch Drive
McLean, VA 22107
703-854-6000
Investor Relations
Michael P. Dickerson
Vice President, Investor Relations
mdickerson@gannett.com
703-854-6185
Media Relations
Amber Allman
Vice President, Corporate
Communications
aallman@gannett.com
703-854-5358
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