2016
ANNUAL
REPORT
TABLE OF CONTENTS
02
| Company Profile
04
| Letter to Shareholders
08
| Board of Directors
Form 10-K
GANNETT PROPERTIES
02
| COMPANY PROFILE
COMPANY PROFILE
“
GANNETT IS A NEXT-GENERATION MEDIA COMPANY THAT
EMPOWERS COMMUNITIES TO CONNECT, ACT, AND THRIVE.
Gannett owns the USA TODAY NETWORK
(comprising 109 local media organizations
in 34 states in the U.S. and Guam and
USA TODAY), Newsquest (a wholly
owned subsidiary with more than 160
local media brands) and ReachLocal
(a digital marketing solutions company).
The company delivers high-quality,
trusted content where and when
consumers want to engage with it on
virtually any device or platform and
reaches more people digitally than
Netflix, CBSnews.com, New York Times
Digital, BuzzFeed.com, Huffington Post,
or WashingtonPost.com.
The USA TODAY NETWORK, with more
than 3,500 journalists, averages
approximately 110 million monthly
unique visitors who access content
through desktops, smartphones, and
tablets. There have been more than
23.3 million downloads of USA TODAY’s
award-winning app on mobile devices
and 4.4 million downloads of apps
associated with our local publications.
Of the total U.S. digital millennial
audience (18-34), 50% access content
of the USA TODAY NETWORK.
USA TODAY has been a cornerstone of
the national news landscape for more
than three decades. The USA TODAY
local edition is included as an insert
each day in 36 of the company’s local
daily publications and includes News,
Money and Life content, while sports
coverage is integrated into local sports
sections. USA TODAY is the nation’s No.1
newspaper in consolidated print and
digital circulation, according to the
Alliance for Audited Media’s September
2016 Publisher’s Statement, with total
daily circulation of 3.6 million and
Sunday circulation of 3.4 million, which
includes daily print, digital replica,
digital non-replica, and branded editions.
In the U.K., Newsquest is a publishing
and digital leader where its network of
web sites attracts over 25 million unique
visitors monthly, reaching approximately
70% of adults through its online products
in the markets it serves.
ReachLocal is a global digital marketing
solutions company focused on helping
local businesses get more leads and turn
those leads into customers. ReachLocal’s
focus on local small and medium-sized
businesses aligns well with Gannett’s
local-to-national strategy and extends
the company’s reach into new local
markets. Clients increasingly seek
sophisticated digital marketing solutions,
and this 2016 acquisition enables the
company to offer premier digital
marketing services to our customers.
Annual Report |
Annual Report | 03
LETTER TO SHAREHOLDERS
DEAR SHAREHOLDERS:
Growing all aspects of our digital business
2016 was an extraordinary year for Gannett. We built upon
the quality and strength of our strong news and information
business as we continued to transform the company for a
terrific digitally focused future.
2016 financial highlights
• Achieved revenues of $3.0 billion, an increase of 5.6%.
• National digital advertising was up 19.1%, up 16.4%
excluding acquisitions.
• Acquired businesses with approximately $800 million
of total revenues in the last 12 months.
• Returned a total of approximately $125.1 million to
shareholders through dividends and share buybacks.
Meanwhile, the power of the USA TODAY NETWORK continues
to accelerate. All news – including national news – begins at
the local level. The national scale of the USA TODAY NETWORK,
which comprises 109 strong local media organizations and
USA TODAY, enables us to leverage important local information
nationally – and national news locally – unlike any other
new-generation media company.
Gannett continues to make great progress in expanding its
digital capabilities. In fact, the company ended 2016 with a
total digital revenue run-rate of nearly $1 billion. As we look to
2017, growing our mobile and social footprint will be key areas
of focus, leveraging the successes we have achieved from 2016.
• Approximately 41% of U.S. internet users access content
on USA TODAY NETWORK platforms, while approximately
50% of the total domestic digital millennial audience
(ages 18-34) access content on the USA TODAY NETWORK
(comScore Media Metrix).
• The number of people who seek our content online averaged
110 million unique visitors a month, a year-over-year increase
of 10% (comScore Media Metrix).
• Overall, Gannett reaches more people digitally than Netflix,
CBSnews.com, New York Times Digital, Buzzfeed.com,
Huffington Post, or WashingtonPost.com (comScore Media
Metrix).
• The redesigned USA TODAY app released in April 2016
increased user engagement 6% on mobile and 20% on tablet
devices. Mobile averages eight views per session, with tablet
devices averaging 14 views per session (Adobe).
We are taking a strategic approach to digital acquisitions,
looking at complementary capabilities that enhance our
ability to serve clients and drive future organic growth. Case
in point: We completed the acquisition of ReachLocal, a
global online marketing company focused on helping local
businesses get more leads and turn those leads into customers.
ReachLocal marks an important milestone in the company’s
transformation and leadership in digital media and is
expected to significantly add to the company’s annual digital
revenue. ReachLocal’s focus on local small and medium-
sized businesses aligns well with Gannett’s local-to-national
strategy and extends our reach into new local markets.
Clients increasingly seek sophisticated digital marketing
solutions, and this acquisition enables us to offer premier
digital marketing services to our customers.
“
WE SEE MANY EXCITING OPPORTUNITIES
IN A CHANGING WORLD AND REMAIN
FOCUSED ON CREATING VALUE
FOR OUR SHAREHOLDERS OVER THE
LONG TERM.
04
| LETTER TO SHAREHOLDERS
LEADING INDUSTRY WITH
VR AND 360-DEGREE VIDEO
At Gannett, we continue to lead the
industry in experimenting with 360-degree
video and virtual reality. With the launch
of our first weekly virtual reality (VR) news
show, called VRtually There, people have
a front-row seat to such experiences as
a roller-coaster thrill ride, a swim with
sharks or canyoneering in the Arizona
desert. These are just some of the latest
innovative and pioneering efforts that
enable the NETWORK’s journalists to use
VR and 360-degree video to deliver original
content. The executive producer of the
show is multi-Emmy-winning producer and
director David Hamlin, who joined us from
National Geographic. Already, VRtually
There has reached more than five million
views on multiple platforms.
“
APPROXIMATELY 41% OF U.S. INTERNET
USERS ACCESS CONTENT ON USA TODAY
NETWORK PLATFORMS.
A leader in innovation
We continue to innovate and lead the industry in experimenting
with 360-degree video and virtual reality (VR). In 2016, we
launched our first weekly news show, called VRtually There.
VRtually There enables the USA TODAY NETWORK’s journalists
to use VR to deliver original content.
We hosted our second annual StoryNEXT summit in partnership
with the New York Television Festival. The summit, sponsored by
Google, Facebook and others, brought together more than 300
people in the journalism, technology and advertising community
interested in how virtual reality is impacting storytelling.
Using our VRtually There YouTube channel, the USA TODAY
NETWORK was among the first media organizations to
livestream the presidential inauguration in virtual reality.
To provide our readers with the opportunity to experience
this event, we placed VR-capable cameras at the Capitol
Building, along the parade route and at the National Mall
in Washington, D.C., during the event, with the livestream
available to both desktop and mobile viewers.
Additionally, the USA TODAY NETWORK was the first publisher
partner to launch Facebook Instant Articles with 360-degree
video and photos for branded content. Since 2014, the
USA TODAY NETWORK has been at the forefront of 360-degree
content production for the news industry. The addition of
360-degree video and photos in Facebook Instant Articles marks
another major milestone in being able to provide a new level
of interactivity and engagement with USA TODAY NETWORK
content for our consumers.
Building compelling new options for clients and
consumers
VRtually There provides new advertising opportunities for
brand partners with the introduction of the cubemercial.
The cubemercial is a NETWORK innovation that showcases
our industry-leading VR advertising seamlessly within the
program. The show’s premiere sponsor, Toyota, was featured
in the first cubemercial, promoting the 2017 Toyota Camry.
What makes the cubemercial especially impressive is that these
virtual ads are built by our own creative studio, GET Creative.
We are doubling down on our commitment to digital video
production to leverage growing consumer interest in video
and the uptick in video ad spending. We currently publish
an average of 125 original videos daily across channels and
platforms, which is competitive with Buzzfeed, The Wall Street
Journal and The New York Times. In fact, we achieved 1.2
billion video views across all of our platforms in 2016.
Annual Report | 05
“
AUGUST 2016 WAS THE BEST
SINGLE MONTH FOR TRAFFIC IN THE
HISTORY OF USA TODAY SPORTS, WITH
OLYMPICS COVERAGE GENERATING
114 MILLION VIEWS OVER 17 DAYS.
We continue to further leverage our expanding geographic
footprint. In August, we launched a new national version of
the Insider program, a subscriber loyalty program, at 70 sites
and now have a version of Insider – whether national and/or
local – in 105 markets. The markets participating in this new
Insider National program share the same offers – national
discount deals, digital events, sweepstakes, and national
content from around the USA TODAY NETWORK. And, as with
the current Insider program, while anyone can view the
offers, only logged-in subscribers can take advantage of them
– providing our readers with even greater added value.
Social media strategy growing our fan base
As more consumers migrate to social platforms to find and
consume their news, Gannett’s social publishing strategy
has led to an increased fan base. For instance, as part
of the elections, USA TODAY NETWORK launched a national
outreach campaign — #VotingBecause — to engage readers
in this year’s election in a positive way and to underscore
the importance of voting to our democratic process.
Through promoted content posts and social media shares,
#VotingBecause content delivered 102 million impressions.
Expanding our footprint
The company continues to see tremendous value in the
consolidation of publications in the U.S., which adds scale to
the USA TODAY NETWORK as well as synergy and margin
expansion opportunities. As part of this strategy, we completed
the acquisition of Journal Media Group, including its 15 daily
newspapers and affiliated digital assets. We quickly followed
with the acquisition of certain assets of the North Jersey Media
Group Inc., including The Record (Bergen County), the Herald
News, and their affiliated digital properties.
A couple of weeks after the North Jersey Media Group
acquisition, we acquired Golfweek, which is a terrific addition
for our sports business. Golfweek has been the leading producer
of event programs for some of golf’s largest tournaments.
With the acquisition of Golfweek’s events business, Golfweek
Custom Media, and its outstanding editorial team, we’ve
added significant value to our suite of audience-focused,
content-driven sports businesses, as well as an unmatched
relationship with golf’s core demographic community.
06
| LETTER TO SHAREHOLDERS
Journalism at our core
At our core is our commitment to providing top-notch journalism
and fully leveraging the reach of the USA TODAY NETWORK. For
example, the USA TODAY NETWORK’s outstanding Olympics and
election coverage demonstrates the power of the NETWORK.
• Our Rio journalists covered 350 U.S. athletes from 42 local
markets, as well as 40 British athletes for our Newsquest
properties.
• USA TODAY’s traffic from the Rio Games exploded:
Olympics-related page views more than doubled to 214
million vs. 99 million in 2012.
• August 2016 was the best single month for traffic in the history
of USA TODAY Sports, with Olympics coverage generating 114
million views over 17 days.
• More than 300 Olympics-related videos across USA TODAY
drove more than 51 million video views in August. Our sports
digital properties continue to be a significant contributor
to our growth in video views.
• On the day following the November elections, the NETWORK’s
coverage generated a total of 112 million page views across
web and mobile sites and apps, a one-day record. Election
night coverage included real-time results and analysis from
various NETWORK media organizations (particularly in swing
state markets) that were live-streamed across the NETWORK,
the USA TODAY app, and 100+ NETWORK Facebook pages.
HELPING COMMUNITIES
IN TIMES OF NEED
Our teams did outstanding jobs responding
In Lafayette, La., our employees went
to the catastrophic Louisiana flooding at
a step further by converting the Daily
the end of the summer, and later, Hurricane
Advertiser’s community room into a
Matthew, the first Category 5 Atlantic
disaster supply center, where they
hurricane since 2007. Our teams were there
collected and distributed supplies such
when their communities needed them most
as water, toiletries, food, clothing and
– providing excellent coverage and life-
cleaning supplies days before established
saving information, often reporting from
relief agencies and the National Guard
the hardest-hit areas.
People trust us because we were, and
were able to help. More than 700
desperate families were aided.
always will be, THE information source for
This was incredible work from top to
people in need, providing readers with
bottom and demonstrates how we help
up-to-the-minute and real-time dispatches
and strengthen the communities of
online and through social media as well
which we are a part.
as moving, evocative storytelling on all
platforms – mobile, online and print.
Council on Innovation and Entrepreneurship to help promote
American innovation.
We see many exciting opportunities in a changing world and
remain focused on creating value for our shareholders over
the long term. Thank you for supporting Gannett as we further
position ourselves to grow our business and enhance the
ways we serve our readers, clients and communities across the
nation and beyond.
John Jeffry Louis
Chairman, Gannett Co., Inc.
Robert J. Dickey
President and CEO, Gannett Co., Inc.
Talented team and looking ahead
We feel very fortunate to be working with such a talented
management team and exceptional employees who continue
to strengthen one of the world’s most respected media
organizations and shape the future of our industry.
Among those recognized externally for their work was
USA TODAY’s Washington Bureau Chief Susan Page, who was
selected as the recipient of the American News Women’s
Club’s 2017 Excellence in Journalism Award. This award is a
well-deserved honor. Over the course of her career, Susan
has interviewed the past eight presidents and covered nine
presidential campaigns. She founded and cohosts USA TODAY’s
Capital Download, a weekly video newsmaker series that has
been honored by the Alliance for Women in Media Foundation.
Kelly Andresen, who leads USA TODAY NETWORK’s full-service
creative agency GET Creative, was honored on Business
Insider’s “30 Most Powerful Women in Mobile Advertising”
list for the second year. Kelly has been instrumental in GET
Creative’s branded virtual reality content campaigns for
clients such as Honda and Toyota and worked closely with the
product team to develop the first advertising unit native to VR.
Also, ReachLocal CEO Sharon Rowlands was named winner
of a Gold Stevie Award in the Female Executive of the Year
category in the annual Stevie Awards for Women in Business.
In addition, Gannett Chief Transformation Officer Maribel
Perez Wadsworth’s expertise was tapped by the Department
of Commerce, as she was appointed to the National Advisory
Annual Report |
07
BOARD OF DIRECTORS
JOHN JEFFRY LOUIS | Age 54
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
(a,b)
JOHN E. CODY | Age 70
Former Executive Vice President and Chief
Operating Officer of Broadcast Music, Inc.
Other directorships: Creative & Dreams Music
Network, LLC
(a,b)
ROBERT J. DICKEY | Age 59
President and CEO. Formerly President,
Gannett U.S. Community Publishing Division,
formerly Newspaper Division; formerly Senior
Group President, Gannett’s Pacific Group and
Chairman of Phoenix Newspapers Inc.
Other directorships: The Associated Press
(d)
STEPHEN W. COLL | Age 58
Dean of the Graduate School of Journalism
for Columbia University in New York
(a,c)
DONALD FELSINGER | Age 69
Former Executive Chairman, Sempra Energy
Other directorships: Archer-Daniels-Midland
and Northrop Grumman Corp.
(b,c)
LILA IBRAHIM | Age 47
Chief Operations Officer, Coursera
Other directorships: Team4Tech
(a,d)
LAWRENCE S. KRAMER | Age 66
Chairman of The Street, Inc.; Former President
of USA TODAY
Other directorships and trusteeships: Harvard
Business Publishing, Syracuse University
(d)
DEBRA A. SANDLER | Age 57
President and CEO, La Grenade Group, LLC
Other directorships and trusteeships: Archer-
Daniels-Midland, Hofstra University, The Ad
Council, LEAD, Executive Leadership Council
(b,c)
TONY A. PROPHET | Age 58
Chief Equality Officer, Salesforce
(c,d)
CHLOE R. SLADDEN | Age 42
Co-founder and Principal of #angels and
former Vice President, Media, Twitter, Inc.
(c,d)
Board Committees:
(a) Member of Audit Committee
(b) Member of Executive Compensation Committee
(c) Member of Nominating and Public Responsibility Committee
(d) Member of Transformation Committee
08
| BOARD OF DIRECTORS
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 25, 2016
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
The aggregate market value of the voting common equity held by non-affiliates of the registrant based on the closing sales price of the
registrant's Common Stock as reported on The New York Stock Exchange on June 26, 2016 was $1,650,180,963. The registrant has no non-
voting common equity.
As of February 13, 2017, 113,584,069 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, 2017 is incorporated by
reference in Part III to the extent described therein.
INDEX TO GANNETT CO., INC.
2016 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
9A.
10
11
12
13
14
15
16
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . . . . . . . . . .
Controls and Procedures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Form 10-K Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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ITEM 1. BUSINESS
Overview
PART I
Gannett Co., Inc. (Gannett, we, us, our, or the company) is a next-generation media company that empowers communities to
connect, act, and thrive. Gannett owns ReachLocal, Inc. (ReachLocal), a digital marketing solutions company, the USA
TODAY NETWORK (made up of USA TODAY including digital sites and affiliates (USAT) and 109 local media organizations
in 34 states in the U.S. and Guam), and Newsquest (a wholly owned subsidiary operating in the United Kingdom (U.K.) with
more than 160 local media brands). Through the USA TODAY NETWORK and Newsquest, Gannett delivers high-quality,
trusted content where and when consumers want to engage with it on virtually any device or platform. Our content reaches
more people digitally than Netflix, CBSnews.com, New York Times Digital, BuzzFeed.com, Huffington Post, or
WashingtonPost.com according to comScore Media Metrics. The company reports in two operating segments, Publishing and
ReachLocal, and a Corporate and Other category.
The company is the leading newspaper publisher in the U.S. in terms of circulation. Our comprehensive publishing
operations also include commercial printing and distribution, marketing, and data services. Certain of our businesses have
strategic relationships with online businesses currently controlled by our former parent, including CareerBuilder and cars.com.
The company also reaches small and medium sized businesses with digital marketing solutions principally through
ReachLocal, and to a lesser extent, a strategic relationship with a business unit of the company's former parent.
The company has made both internal and external digital investments to address consumers' changing habits towards
consumption of news and information on digital devices and platforms and advertisers' changing spending habits towards
digital products. In 2016, total digital revenues across the company were $778.9 million, of which 86% were derived from our
publishing segment and 14% were derived from our ReachLocal segment. In 2016, the USA TODAY NETWORK, with more
than 3,500 journalists, averaged approximately 110 million(a) (see "References" section below) monthly unique visitors who
access content through desktops, smartphones and tablets. In November 2016, the company achieved a record of 122 million(a)
unique digital visitors in the U.S. To date, there have been more than 23.3 million(b) downloads of USA TODAY's award-
winning app on mobile devices and 4.4 million(b) downloads of apps associated with our local publications. Of the total U.S.
digital millennial audience (18-34), 50%(a) access USA TODAY NETWORK content. In the U.K., Newsquest is a publishing
and digital leader where its network of web sites attracts over 25 million(c) unique visitors monthly.
Publishing Segment
Our publishing segment (a description of our segments is included in Note 14 — Segment reporting of the notes to the
consolidated and combined financial statements) comprises the USA TODAY NETWORK (as described above) and
Newsquest. USA TODAY has been a cornerstone of the national news landscape for more than three decades. 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), a unique digital property that provides sports fans with social news and curated analysis. We
believe the USA TODAY brand boosts the credibility of affiliated properties, enabling tailored content platforms to increase
their audience. As a result, we include as an insert each day in 36 of our local daily publications the USA TODAY local edition,
which includes News, Money and Life content, while sports coverage is integrated into local sports sections. USA TODAY is
currently the nation's No. 1 newspaper in consolidated print and digital circulation according to the Alliance for Audited
Media's September 2016 Publisher's Statement, with total daily circulation of 3.6 million and Sunday circulation of 3.4 million,
which includes daily print, digital replica, digital non-replica, and branded editions.
In the U.K., our wholly-owned subsidiary Newsquest has a total average readership of over 5.5 million every week. We
believe that the availability of our award-winning content to audiences whenever, wherever, and however they choose makes
Newsquest 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 2016, with audited average daily unique users rising by
20%(c) year over year.
We generate revenue primarily through both print and digital advertising and subscriptions to our publications. USA
TODAY and our local publications have developed an efficient operating model utilizing integrated shared support for back-
office operations such as financial services and accounting, design and layout services, and certain sales and service platforms.
This model also serves as a point of leverage and synergy opportunity with respect to businesses acquired by the company. (See
Strategy section.)
3
Our U.S. local publishing circulation revenue is driven through our All Access Content Subscription Model. All
subscriptions include access to content via multiple platforms including websites, smartphone and tablet applications, and e-
newspapers, with subscription prices that vary according to the frequency of delivery of the print edition. Also available to
subscribers are digital only or digital plus Sunday subscriptions. In addition to the subscription model, single-copy print
editions continue to be sold at retail outlets and account for approximately 12% of daily and 21% of Sunday net paid and
verified circulation volume. The majority of net paid circulation results of USA TODAY are generated by single-copy sales at
newsstands, vending machines, or hotels that provide copies to their guests. The remainder is generated by home and office
delivery, mail, educational, and other sales. At Newsquest, revenues from circulation and advertising are generated from 94
daily or weekly paid-for publications as well as 77 free publications, whereas circulation revenues are from paid subscriptions.
Advertising: In 2016, publishing segment advertising revenues of $1.6 billion comprised 55% of total publishing segment
revenues. 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.
Our revenues are subject to moderate seasonality due primarily to fluctuations in advertising volumes. Our advertising
revenues for publishing are typically highest in the company's fourth quarter due to holiday and seasonal advertising and lowest
in the first quarter following the holiday season. The volume of advertising sales in any period is also impacted by other
external factors such as competitors' pricing, advertisers' decisions to increase or decrease their advertising expenditures in
response to anticipated consumer demand, and general economic conditions.
The company employs a multi-platform approach to advertising sales, which can be specifically tailored to the individual
needs of many levels of advertisers from small, locally-owned merchants to large, complex businesses. In addition to print, we
offer our advertising clients multiple platforms and products including display advertising, desktop, mobile, tablet, and other
specialty publications. Our diverse sales force, unique industry scale, and broad portfolio of print and digital products position
us to attract and serve a wide array of advertising partners. 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.
Social media, mobile and video are all important contributors to the success of our digital advertising revenue growth. In the
U.S., mobile page views increased 25%(c) and mobile visitors increased 7%(c) in 2016 on a year-over-year basis. In December,
the USA TODAY NETWORK ranked #1 in mobile web unique digital visitors in the news and information category. The USA
TODAY NETWORK, with 1.7 billion(c) page views, ranked #3(c) in page views led by our 25%(c) growth in mobile web page
views year over year. Gannett continues to build an innovative video network, with best-in-class video content to attract new
audiences and drive revenue growth through enhancing existing revenue streams and creating new innovative products. In
December 2016, we generated 113 million(d) cross-platform video plays, an increase of 53%(d) year over year. The company
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. Recently, the USA TODAY NETWORK ranked #3(a) in the news and information category with
respect to Facebook fans.
In 2016, Gannett introduced VRtually There, an extension of the USA TODAY NETWORK's innovative and pioneering
work in virtual reality (VR) that enables the NETWORK's journalists to tell the nation's stories and deliver immersive and
original content in VR to our 110(a) million unique monthly users. VRtually There provides new advertising opportunities for
brand partners with the introduction of the "cubemercial." The "cubemercial" is a NETWORK VR advertising innovation that
showcases our industry-leading VR advertising that works seamlessly within the program, which we believe, has set the
advertising standard for VR.
We sell and track our advertising sales in three primary categories:
• Retail 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 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.
4
• 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 certain magazines.
We believe 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 advertisers' messages and solve their business needs.
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.
Circulation: In 2016, publishing segment circulation revenues of $1.1 billion comprised 39% of total publishing segment
revenues. We deliver content in print and online via desktops, mobile devices and tablets. For local U.S. publications, our All
Access Content Subscription Model has more than 1.6 million digitally activated subscribers, providing easy access to content-
rich products. In a trend generally consistent within the domestic publishing industry, print circulation volume declined in
2016. At Newsquest, we publish 19 daily paid-for titles and 75 weekly paid-for titles as well as 77 free publications.
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 2016, EZ Pay was used by 63% of all subscribers at local U.S.
Gannett sites (not including USA TODAY). Mail subscriptions are available nationwide and abroad, and home, hotel, and
office delivery is available in many markets. Approximately 81% of USA TODAY net paid circulation results are generated by
single-copy sales at newsstands, vending machines, or to hotels that provide them to their guests. The remainder is generated by
home and office delivery, mail, educational, and other sales. In the U.S local markets, approximately 80% of circulation
revenue is derived from full-access including digital-only subscriptions, while 20% is derived from single copy and other
sources. Newsquest employs a regional model, generally involving the clustering of the publication of a free print product
alongside a paid-for print product, which allows for this cross-selling of advertising serving the same or contiguous markets,
satisfying the needs of its advertisers and audiences.
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 local daily and non-daily 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,
packaging, and distribution. Over the last several years, GPS has actively outsourced printing activities to competitive local
market or regional printing businesses in situations where the cost to outsource would benefit Gannett. Alternatively, in certain
cases, GPS will utilize excess printing capacity to print competitor and other publications.
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
page layout and design remotely. Our five design studios provide design services to all our local publications by enhancing
operating efficiencies and the page 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 regional approach allows the business to leverage a variety of back-office and administrative
activities to optimize financial results and enables the group to offer readers and advertisers a range of attractive products
across the market.
Competition: Our U.S. publishing operations and affiliated digital platforms compete with other media and digital
companies for advertising and marketing spend. Publishing operations also compete for circulation and readership against other
news and information outlets and amateur content creators. While very few of our publishing operations have similar daily
print competitors that are published in the same city, our print products compete with smaller suburban area newspapers, free or
5
paid publications, 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 focused on hyper-
local markets. Their principal competitors include other regional and national newspaper and magazine publishers, other
advertising media such as broadcast and billboard, Internet-based news, radio, television and other information and
communication businesses.
Development of opportunities in, and competition from, digital media, including web sites, tablet, and mobile products
continues to increase. As such, there is very little barrier to entry and limited capital requirements for new companies to enter
the market with competitive digital products. The company will continue to expand its reach through internal development,
content distribution programs, acquisitions and partnerships, in the news, information and communications business, and
through audience generation, in an effort to protect its market share.
Environmental Regulation: The company is committed to protecting the environment. Our goal is to ensure our facilities
comply with federal, state, local, and foreign environmental laws and to incorporate appropriate environmental practices and
standards in its operations. We are one of the industry leaders in the use of recycled newsprint. During 2016, 19% of our
domestic newsprint purchases contained recycled content, with an average recycled content of 32%.
Our operations use inks, solvents, and fuels. The use, management and disposal of these substances are sometimes 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 although
we do not currently anticipate these designations will have a material impact on our results of operations or cash flows.
Raw Materials: Newsprint, which is the basic raw material used in our print publications, has been and may continue to be
subject to significant price changes from time to time. We purchase newsprint primarily from 12 domestic and global suppliers.
During 2016, our total newsprint consumption was approximately 294,000 metric tons, including consumption by USA
TODAY NETWORK, tonnage at non-Gannett print sites, and Newsquest. Newsprint consumption in 2016 was 7% less than in
2015. On a pro-forma basis without tonnage from businesses acquired during 2016, newsprint consumption was 21% lower
compared to 2015. We continue to moderate newsprint consumption and expense through the use of lighter basis weight paper.
We believe 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.
ReachLocal Segment
ReachLocal's mission is to provide more customers to local businesses. ReachLocal, which began in 2004 and was acquired
by Gannett in 2016, helps local businesses advertise online. ReachLocal's focus is on local businesses and believes local
businesses want a single, unified solution to their marketing needs. As such, ReachLocal's goal is to provide a total digital
marketing solution that will address local business's online marketing needs. ReachLocal's total digital marketing solution
consists of products and solutions in three categories: digital advertising (including ReachSearch™, ReachDisplay™,
ReachSocial Ads™, and ReachRetargeting™), web presence (including ReachSite+ReachEdge™, ReachSEO™, ReachCast™,
ReachListings™, and TotalLiveChat™), and software-as-a-service (ReachEdge™ and Kickserv™).
Products: ReachLocal's search engine marketing (SEM) solution, ReachSearch™, combines search engine marketing
optimized across multiple publishers, call tracking and call recording services, and industry leading campaign performance
transparency. ReachSearch™ remains a leading SEM offering for local businesses and has won numerous awards since its
rollout, including most recently winning Google's Quality Score Champion Award in North America. ReachSearch™ is
optimized for local markets in each of ReachLocal's territories. ReachSearch™ accounted for 83% of ReachLocal's segment
revenue for the year ended December 25, 2016.
ReachLocal also offers online advertising products focused on maximizing local businesses exposure by displaying their ads
on websites that, in the aggregate, reach an estimated 90% of the U.S. online audience. ReachLocal's display products include a
retargeting solution to target consumers who have previously visited a specific client's website, either through a ReachSearch™
campaign or a ReachDisplay™ campaign, or who have previously searched for a client's keywords (ReachRetargeting™) and a
6
Facebook advertising solution (ReachSocial Ads™), among other products. These products are generally available in North
America and selectively available in ReachLocal's international markets.
ReachLocal offers a number of web presence solutions. These solutions include websites (ReachSite™), search engine
optimization (ReachSEO™), social (ReachCast™), chat (TotalLiveChat™), listings (ReachListings™), and other products and
solutions, all focused on expanding and leveraging clients' web presence. Often, these products are designed to work in concert
with ReachLocal's digital advertising products with a goal of enhancing client's return on investment. These products are
generally available in North America and selectively available in ReachLocal's international markets.
ReachLocal also offers software products designed to enable its clients to both easily assess the efficacy of their marketing
efforts and to facilitate their interactions with their customers. ReachLocal's ReachEdge™ solution is a marketing automation
platform that includes tools for capturing web traffic information and converting leads into new customers for clients.
ReachEdge™ provides clients with tools designed to significantly improve their conversion of leads to customers and also
helps the client stay top-of-mind during the prospect's decision-making process by using integrated marketing automation to
send new prospects targeted e-mails and alerts to the client's staff reminding them to follow up on each lead. ReachEdge™ also
provides reports to show clients how many leads they are getting from each marketing source and other important business
insights. ReachEdge™ is available in most of ReachLocal's markets. ReachLocal's Kickserv™ solution is a cloud-based
business management software for service businesses. Kickserv™ allows ReachLocal to provide an end-to-end solution to
clients that starts with lead generation (e.g., ReachSearch™, ReachDisplay™, and ReachSEO™), includes lead conversion
(ReachEdge™), and then closes and manages the business relationship (Kickserv™). Kickserv™ is available in North
America.
Distribution: ReachLocal delivers its suite of products and solutions to local businesses through a combination of its
proprietary technology platform, its sales force, and select third-party agencies and resellers. ReachLocal has sales operations
in the United States, Canada, Australia, New Zealand, Japan, Germany, the Netherlands, Austria, Brazil, and Mexico.
Approximately 73% of revenues are derived in North America and the remaining 27% from other international markets. All
(100%) of ReachLocal revenues are digital revenues.
Competition: The market for local online advertising solutions is intensely competitive and rapidly changing. The market is
highly fragmented as there are a number of smaller companies which provide internet marketing services at highly competitive
prices and, increasingly, ReachLocal competes with vertical-specific SMB marketing providers who offer solutions tailored for
specific verticals. In addition, the online publishers that ReachLocal utilizes for its clients, such as Google, Yahoo!, and
Microsoft, generally offer their products and services through self-service platforms. Many traditional, offline media companies
also offer online advertising solutions and have large, direct sales forces and digital publishing properties. With the introduction
of new technologies and market entrants, ReachLocal expects competition to intensify in the future.
Strategy
We are committed to a business strategy that generates returns for shareholders, delights audiences through a robust user
experience, and engages with consumers to strengthen the brands of advertising partners and drive company revenue. Key
elements of our strategy to achieve these objectives are as follows:
Supplement organic growth with selective acquisitions. We believe we are well-positioned to pursue value-enhancing
investments and acquisitions and intend to be both opportunistic and disciplined in our acquisition strategy. We believe our
balance sheet and cash flow generation remain strong in comparison to peers, providing us with the financial flexibility to
pursue opportunities arising in a consolidating industry. We are an efficient operator, and our strengths in information gathering
and reporting, coupled with our valuable integrated content sharing, advertising, sales, and administrative platforms, will yield
innovative approaches to revenue generation as well as efficiency gains in acquired properties. By leveraging these efficiencies
and operational expertise to those publishing assets acquired, the company is able to achieve greater synergies, particularly
through the consolidation of printing and distribution activities.
Within the digital space, local small to medium-sized business relationships developed over the years in the company's local
markets is a valuable asset. As an example, the challenge faced by ReachLocal in recent years was scaling up the number of
new local business leads it generated. The cost of acquisition was simply too high as a standalone company. Now as a
subsidiary of Gannett that will change. Through its portfolio of news sites across the USA TODAY NETWORK and the U.K.,
Gannett has trusted relationships with hundreds of thousands of local advertising customers. ReachLocal will be able to
leverage that customer base to scale ReachLocal's digital marketing services portfolio and provide Gannett customers with
complete advertising and marketing solution.
7
Maintain a strong, flexible balance sheet. Through proactive cost management and disciplined 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.
Focus on capital allocation. Our approach to capital allocation is a key source of financial strength in support of current
initiatives and also provides flexibility to return cash to shareholders. In July 2015, our Board of Directors authorized a three-
year, $150 million share repurchase program. As of December 25, 2016, 3.75 million shares have been repurchased under this
program at an average cost of $8.71 per share.
In addition, our Board of Directors declared a cash dividend of $0.16 in each quarter of 2016, allowing us to provide strong
return to shareholders concurrently with our growth and expansion efforts.
Continue to enhance digital platforms. As the news and information 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 intend to continue to develop compelling content and ensure readers can
access their trusted local and national news and information sources on every platform. The credibility and trust of our news
brands carries over to digital platforms and differentiates our online products from digital competitors. We also plan to focus on
continuing to develop a compelling mobile experience, including video and VR content, across our network.
Expand the integration of national and local content. In 2016, 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 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.
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. This efficiency has been
accomplished through the consolidation of certain back-office, administrative and operating activities into centers of excellence
related primarily to financial services and accounting, layout and design and printing and distribution. 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 these efforts will enable us to increase
profitability and strengthen customer relationships.
Strategic Acquisitions
ReachLocal, Inc. (ReachLocal): In August 2016, we completed the acquisition of 100% of the outstanding common stock of
ReachLocal, Inc. for approximately $162.5 million in cash, net of cash acquired. We financed the transaction by borrowing
$175.0 million under our credit facility as well as with available cash.
North Jersey Media Group, Inc. (NJMG): In July 2016, we completed the acquisition of certain assets of North Jersey
Media Group, Inc. for approximately $39.3 million. NJMG is a media company with print and digital publishing operations
serving primarily the northern New Jersey market. Its brands include such established names as The Record (Bergen County)
and The Herald. We financed the transaction with available cash.
Journal Media Group, Inc. (JMG): In April 2016, we completed the acquisition of 100% of the outstanding common stock
of Journal Media Group, Inc. for approximately $260.6 million in cash, net of cash acquired. We financed the transaction by
borrowing $250.0 million under our credit facility as well as with available cash. JMG is a media company with print and
digital publishing operations serving 15 U.S. markets in nine states, including the Milwaukee Journal Sentinel, the Knoxville
News Sentinel, and The Commercial Appeal in Memphis. The acquisition expanded our print and digital publishing operations
domestically.
Texas-New Mexico Newspapers Partnership (TNP): In June 2015, we completed the acquisition of the remaining 59.4%
interest in the Texas-New Mexico Newspapers Partnership 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 $21.8 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.
8
Romanes Media Group (RMG): In May 2015, we acquired the Romanes Media Group 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.
History
Our newspaper business was founded by Frank E. Gannett and associates in 1906 and incorporated in 1923. We were
separated from our former parent on June 29, 2015 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 will continue to own our shares for a
period of time not to exceed five years after the distribution. We are listed on the New York Stock Exchange under the symbol
GCI and are headquartered in McLean, VA near Washington, DC.
Employees
We employed approximately 17,100 persons at our subsidiaries in the U.S. as of December 25, 2016. Approximately 13% of
those employed by us and our subsidiaries in the U.S. are represented by labor unions, most of which are affiliated with of one
of seven international unions. These represented employees are covered by approximately 60 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. Approximately 3,200 persons are employed by Newsquest in the U.K, and there are a total of
approximately 3,900 employees outside of the U.S.
Internet Access
Our reports on Forms 10-K, 10-Q, and 8-K and all amendments to those reports are available without change through the
company's website on the internet as soon as reasonably practicable after they are electronically filed with or furnished to the
U.S. Securities and Exchange Commission (SEC). Our reports may be accessed at www.gannett.com. We will disclose on this
website changes to, or waivers of, our corporate Ethics Policy. Information on our website does not constitute part of this Form
10-K.
References
(a) comScore Media Metrics
(b) App Annie
(c) Adobe Analytics
(d) Adobe, YouTube, Google
9
Major Publications and Markets We Serve
We reach a large, diverse audience through our print and digital daily and non-daily publications throughout the U.S. Our
local and national media brands are united under the USA TODAY NETWORK, the largest local to national media network in
the U.S. The network is powered by an integrated and award-winning news organization comprising more than 3,500
journalists with deep roots in 109 local communities, plus USA TODAY, and a combined reach of more than 110 million
visitors monthly.
The following table lists information for our major publications and their affiliated digital platforms in the U.S. as of
December 25, 2016:
Title
Related Website(s)
Location
USA TODAY
Detroit Free Press
The Record
www.usatoday.com
www.freep.com
McLean, Virginia
Detroit, Michigan
www.therecord.northjersey.com
Bergen Co., New Jersey
The Arizona Republic
www.azcentral.com
Phoenix, Arizona
Milwaukee Journal Sentinel
www.jsonline.com
Indianapolis Star
Cincinnati Enquirer
Courier-Journal
www.indystar.com
www.cincinnati.com
Des Moines Register
www.desmoinesregister.com
Des Moines, Iowa
www.courier-journal.com
Louisville, Kentucky
Milwaukee, Wisconsin
Indianapolis, Indiana
Cincinnati, Ohio
Daily(a)
3,601,833
240,510
235,681
184,881
146,450
115,785
107,576
100,741
81,055
Sunday(a)
3,375,646
925,051
147,609
464,714
229,137
234,915
179,857
190,191
160,839
Democrat and Chronicle
(a) Daily and Sunday combined average circulation is print, digital replica, digital non-replica, and affiliated publications according to the Alliance for Audited
www.democratandchronicle.com Rochester, New York
124,324
79,771
Media's December 2016 Quarterly Publisher's Statement.
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The following table presents information for our local media organizations and affiliates digital platforms within the USA
TODAY NETWORK on a state-by-state basis, excluding the major publications listed in the table above, as of December 25,
2016:
USA TODAY NETWORK MEDIA ORGANIZATIONS AND AFFILIATED DIGITAL PLATFORMS
State / Territory
Alabama . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Number of Local
Media
Organizations
1
1
5
1
1
6
1
4
1
1
5
1
4
1
2
1
1
1
7
6
5
1
Ohio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10
Oregon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pennsylvania. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
South Carolina . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
South Dakota . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tennessee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Utah . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Texas. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vermont . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Virginia. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Washington. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1
4
2
1
6
1
5
1
1
1
Daily(a)
19,248
6,961
101,490
19,746
55,383
244,175
10,819
82,173
9,084
5,874
73,791
10,621
62,513
14,016
45,730
25,494
21,354
30,017
143,395
34,426
112,009
26,344
64,208
25,894
62,044
55,765
27,447
229,346
11,584
101,493
22,642
10,850
23,210
Sunday(a)
25,231
176
99,794
23,404
93,645
348,166
8,882
107,473
800
7,089
92,188
13,734
181,027
19,044
53,429
46,690
21,372
49,987
183,725
42,381
134,487
45,330
64,530
32,740
85,405
115,653
53,890
401,427
13,917
193,339
24,207
12,588
18,213
Wisconsin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(a) Daily and Sunday combined average circulation is print, digital replica, digital non-replica, and affiliated publications according to the Alliance for Audited
141,186
171,014
10
Media's December 2016 Quarterly Publisher's Statement.
11
Newsquest has a portfolio of over 165 news brands and more than 55 magazines, published in print and online in the U.K.
With a digital audience of more than 25 million users a month and more than 5.5 million readers in print, Newsquest's content
is read by a substantial portion of the U.K. population. In addition to local news brands, Newsquest owns the digital businesses
s1 and Exchange & Mart and a specialist magazine business.
The following table presents information for our major local media organizations and affiliated digital platforms operated by
Newsquest in the U.K. as of December 25, 2016. All circulation figures are according to ABC results for the period January to
June 2016 unless otherwise noted:
DAILY PAID-FOR LOCAL MEDIA ORGANIZATIONS AND AFFILIATED DIGITAL PLATFORMS / NEWSQUEST
Publication
City
Local Media
Organization / Web Site
Circulation
Monday - Saturday
Basildon & Southend Echo
Basildon, Southend on Sea
www.echo-news.co.uk
Bolton News
Bolton
www.theboltonnews.co.uk
Bournemouth - The Daily Echo
Bournemouth
www.bournemouthecho.co.uk
Bradford Telegraph & Argus
Colchester Daily Gazette
Dorset Echo
Glasgow - Evening Times
Greenock Telegraph
Lancashire Telegraph
Oxford Mail
South Wales Argus - Newport
Bradford
Colchester
Dorset
Glasgow
Greenock
www.thetelegraphandargus.co.uk
www.gazette-news.co.uk
www.dorsetecho.co.uk
www.eveningtimes.co.uk
www.greenocktelegraph.co.uk
Blackburn, Burnley
www.lancashiretelegraph.co.uk
Oxford
Newport
www.oxfordmail.co.uk
www.southwalesargus.co.uk
Southampton - Southern Daily Echo
Southampton
www.dailyecho.co.uk
Swindon Advertiser
The Argus Brighton
The Herald, Scotland
The National, Scotland
The Northern Echo
The Press - York
Swindon
Brighton
www.swindonadvertiser.co.uk
www.theargus.co.uk
Glasgow, Edinburgh
www.heraldscotland.co.uk
Glasgow, Edinburgh
www.thenational.scot
Darlington
York
www.thisisthenortheast.co.uk
www.yorkpress.co.uk
Worcester News
(a) Circulation figures are according to ABC results for the period January to December 2015 as 2016 results are not available.
www.worcesternews.co.uk
Worcester
18,996
10,172
13,987
14,813
9,866
10,944
25,679
10,511(a)
11,807
10,777
11,344
17,521
10,056
11,424
30,402
12,124(a)
25,290
15,428
7,422
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 Publishing Segment
Weak economic conditions may adversely affect demand for print and digital advertising or the ability of our subscribers
to pay for our products, which could lead to further revenue declines in our publishing segment.
Our advertising revenues depend substantially on the strength of the economy. Our revenues are sensitive to economic
trends and uncertainties, as well as discretionary spending by advertisers and subscribers both at the national level and in the
markets we serve. A decline in the financial or economic prospects of current or periodic advertisers or subscribers could alter
their spending priorities. Certain aspects of the economy have been challenging in recent years, particularly in the brick and
mortar retail sector, and total advertising revenues have declined as a result. If economic conditions fail to improve or if they
worsen, our revenues could be further adversely affected, particularly if advertisers reduce their budgets, shift their spending
priorities, are forced to consolidate or cease operations. If the earning power of our current or prospective subscribers declines
due to stagnating or worsening economic conditions, they may cancel their subscriptions or decline to subscribe.
12
Our publishing segment's operating results may be materially adversely affected if we do not respond successfully to the
shift in newspaper readership consumer behavior, demographics and advertising expenditures away from traditional print
and towards digital media. Significant capital investments may be needed to respond to this shift.
The media industry has experienced rapid evolution in consumer demands and expectations due to advances in technology,
which have led to a proliferation of delivery methods for news and information. The number of consumers who access online
services through devices other than personal computers, such as smartphones, handheld tablets and mobile devices, has
increased dramatically in recent years and likely will continue to increase. Presented with a multitude of media choices and
sources of free information, consumers generally appear to be focusing more on when, where, how and at what price they
consume content and less on the source, representation, quality or reliability of the content. The media industry also continues
to be affected by demographic shifts, with traditional print newspaper readers getting older and younger generations developing
the habit of consuming news through digital media. In addition, the revenues generated by media companies have been affected
significantly by the shift in advertising expenditures towards digital media. Media companies generally charge much lower
rates for digital advertising than for print advertising due to the range of advertising choices across digital products and
platforms and the large inventory of available digital advertising space, and mobile advertising rates typically are even lower
than desktop digital rates.
Our success therefore depends on our ability to develop and manage our digital businesses in response to the shift in
consumer behavior, demographics, and adverting expenditures described above. In particular, we must:
•
•
•
•
•
continue to increase digital audiences;
attract advertisers to our digital products;
tailor our products for mobile devices;
structure our sales force to focus more effort on sales of digital rather than print;
attract and retain employees with the skills and knowledge needed to successfully operate digital businesses;
• manage the transition to a digital business from historical print businesses, including by reducing the physical and
distribution infrastructure and related fixed costs associated with those businesses; and
•
invest funds and resources in digital opportunities.
If we are unable to exploit new and existing technologies to distinguish our publishing segment's products and services from
those of our competitors and develop in a timely manner compelling new products and services that engage users across
multiple platforms, our business, financial condition, and results of operations may be adversely affected. Responding to the
changes described above may require us to make significant capital investments and incur significant research and development
costs related to building, maintaining, and evolving our technology infrastructure, and our ability to make the level of
investments required may be limited.
As digital revenues increase as a proportion of our total revenues, we will become increasingly subject to risks associated
with digital media operations.
A significant component of our business strategy involves transitioning from traditional print businesses to digital
businesses and, accordingly, we expect our digital revenues to increase as a percentage of our total revenues in future
periods. We therefore expect to face increasing risks related to our digital operations, including:
•
rates we achieve in the marketplace for the advertising inventory on our digital platforms may be adversely affected
by:
news aggregation websites and customized news feeds (often free to users), which may reduce our traffic
levels by creating a disincentive for users to visit our websites or use our digital products;
our inability to successfully manage changes in search engine optimization and social media traffic to
increase our digital presence and visibility, which also may reduce our traffic levels; or
our inability to maintain and improve the performance of our customers' advertising on our digital properties;
•
•
our use of subscription models (which may require users to pay for content after accessing a limited number of pages
or news articles for free on our websites each month) may cause consumers to opt out of subscription offers in greater
numbers than anticipated or result in fewer page views or unique visitors to our websites than projected;
technical or other problems could prevent us from delivering our products in a rapid and reliable manner or otherwise
affect the user experience, and users could develop negative views about the quality or usefulness of our products;
13
•
new delivery platforms may lead to pricing restrictions, loss of distribution control, or loss of direct relationships 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, impairing our ability to
generate digital revenues.
Our inability to respond successfully to these or similar challenges could materially adversely impact our ability to maintain
and grow our digital revenues.
Our media businesses operate in highly competitive markets, and our ability to maintain market share and generate
operating revenues depends on how effectively we compete with existing and new competition.
Our media businesses 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. If we fail to compete effectively with
competing newspapers and other media, our results of operations may be materially adversely affected. In addition, our
publications generate a significant portion of their advertising revenues from a few categories, including automotive,
employment, and real estate classified advertising, and retail advertising. 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 results of operations. Further, our print editions and digital
platforms compete directly with well-established websites dedicated to classified advertising, particularly in the automotive,
employment, real estate, and legal verticals. Our results may be negatively affected if we do not compete effectively online in
the classified advertising market.
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. Those third parties may be negatively affected by the same
macroeconomic and industry trends affecting our media business, such as the sensitivity to perceived economic weakness of
discretionary spending by advertisers and subscribers, circulation declines, shifts in consumer habits, and the increasing
popularity of digital media. If the third-party publications are negatively affected these trends, they may reduce the volume of
publications they print or distribute through us, and as a result we may lose some or all of the associated revenue.
Newsprint prices historically have been volatile and may increase in the future.
Newsprint was one of our largest expenses for the year ended December 25, 2016. Newsprint prices historically have been
volatile, and the price we pay for newsprint may increase in the future due to, among other factors:
•
•
•
•
•
declines in overall newsprint supply due to paper mill closures or conversions to other grades of paper;
increases in supplier operating expenses due to rising raw material or energy costs or other factors;
reduction in the number of suppliers due to continuing consolidation of newsprint mills in the U.S. and Canada;
decreases in our current consumption levels; and
our inability to maintain existing relationships with our newsprint suppliers.
In addition, the ability of suppliers to deliver newsprint to us may be disrupted due to labor unrest, transportation issues, or
similar events. If newsprint prices increase significantly or we experience significant disruptions in the availability of newsprint
in the future, our operating results may be adversely affected.
Our business or results of operations could suffer if we fail to protect our publishing segment's intellectual property and
other proprietary rights.
Our publishing segment's ability to compete depends in part upon our intellectual property, including our trademarks (e.g.,
mastheads), copyrights (e.g., content) and proprietary technology (e.g., digital platforms). If we are unable to protect this
intellectual property, we may not realize the full value of our intellectual property assets, and our business and results of
operations may suffer. We rely on a combination of intellectual property rights, including contractual provisions, confidentiality
14
procedures and agreements, and trademark, copyright, patent, unfair competition, trade secret, and other laws to protect our
intellectual property. However, these methods afford only limited protection and may not be adequate. For example,
technological advancements have facilitated the unauthorized duplication and wide dissemination of content, making
enforcement of our intellectual property rights in content more challenging. Litigation or proceedings before the U.S. Patent
and Trademark Office or other governmental authorities and administrative bodies may be necessary to enforce our intellectual
property rights. Our efforts to enforce or protect our rights may be ineffective and could result in substantial costs and diversion
of resources.
In addition, third parties might claim that the conduct of our businesses or use of intellectual property infringes upon their
intellectual property rights. Any intellectual property litigation or claims brought against us, whether or not meritorious, could
result in substantial costs and diversion of our resources, and we may not achieve favorable outcomes 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 the
intellectual property. We might 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.
Labor strikes, lockouts and protracted negotiations could lead to business interruptions and increased operating costs,
either for our businesses or for our suppliers.
As of December 25, 2016, union employees comprised approximately 13% of our workforce. We are required to negotiate
collective bargaining agreements on an ongoing basis. If we or our suppliers are unable to renew expiring collective bargaining
agreements, affected unions or others could implement strikes, lockouts, work stoppages, or other business interruptions. A
significant labor dispute could materially adversely affect our operating revenues, cash flows, or operating income by, among
other matters, disrupting our ability to provide customers with our products or services. In addition, even if labor negotiations
are resolved successfully, they may lead to greater overall employee costs.
Risks Relating to Our ReachLocal Segment
Weak economic conditions may adversely affect demand for our digital marketing solutions, which may adversely affect
business and operating results of our ReachLocal segment.
The revenues generated by our ReachLocal segment also are sensitive to economic fluctuations. Many small and medium-
sized businesses (SMBs) have modest advertising budgets. To the extent that economic conditions worsen or remain
challenging, our existing and potential clients may no longer consider investment in our online marketing solutions a necessity,
or may elect to reduce advertising budgets. Historically, economic downturns have resulted in overall reductions in advertising
spending. In particular, online marketing advertising solutions may be viewed by some of our existing and potential clients as a
lower priority and may be among the first expenditures reduced as a result of unfavorable economic conditions. These
developments could cause us to respond by temporarily reducing hiring or taking other measures and could have an adverse
effect on our business, operating results and financial condition.
Our ReachLocal segment's future revenues depend substantially on our ability to successfully develop and launch new
products and services, as well as our ability to integrate its legacy products and services with those we offer in our local
markets.
ReachLocal's ability to stay competitive and generate future revenue depends substantially on its successful development
and launch of new products and services on a timely basis. ReachLocal may be unable to develop new solutions due to
employee turnover, failure to sustain the required level of investment in product and technology development, or difficulties of
designing complex software products, achieving desired functionality and integrating the new products with its existing
technology. Even after developing new solutions, ReachLocal may be unable to launch them successfully. The sale of new or
additional features, products and services, the value of which may be different from ReachLocal's current solutions or less
easily understood by clients, may require increasingly sophisticated sales efforts, as well as additional salesforce training and
client education, any of which could increase operating expenses. In addition, ReachLocal's future revenues depend
substantially on Gannett's ability to market the ReachLocal digital marketing solutions product suite in our local markets. If we
are unsuccessful in integrating ReachLocal's products and services with those we offer in our local markets, ReachLocal's
results of operations may be adversely affected.
15
The market in which ReachLocal operates is intensely competitive, which may adversely impact our margins. If we do
not compete effectively, ReachLocal's operating results could be adversely affected.
Our ReachLocal segment operates in a highly competitive market. The market for online marketing solutions is rapidly
changing and with the emergence of new technologies and market entrants, we expect competition to intensify in the future.
Some of ReachLocal's competitors offer products similar to ours at a lower price, putting pressure on us to lower our prices
(thereby reducing margins) or lose clients. ReachLocal's competitors include online publishers, traditional media companies,
local SMB marketing providers, SMB marketing technology providers, and new competitors that ReachLocal may face as it
launches new products or enters new markets. Many of ReachLocal's current and potential competitors enjoy substantial
competitive advantages such as greater name recognition, longer operating histories, and substantially greater financial,
technical, and other resources. If ReachLocal fails to compete successfully against its current and potential competitors, its
operating results could be adversely affected.
Our ReachLocal segment purchases most of its media from Google, and its business could be adversely affected if
Google takes actions that are adverse to our interests or if we fail to meet advertiser or spend targets necessary for receiving
rebates from Google. Similar actions from Yahoo!, Microsoft, and other media providers also could adversely affect the
segment's business.
Most of ReachLocal's cost of revenue relates to the purchase of media, and a substantial majority of the media it purchases
is from Google. Google accounts for a large majority of all U.S. searches, and Google's share in foreign markets is often even
greater. As a result, we expect our ReachLocal segment will depend upon media purchases from Google for the foreseeable
future. This dependence makes that business vulnerable to actions Google may take to change the manner in which it sells
AdWords or conducts its business. In addition, any new developments or rumors of developments regarding Google's business
practices that affect the local online advertising industry may adversely affect our ReachLocal products or create perceptions
with clients that our ability to compete in the online marketing industry has been impaired. These risks also apply to other
publishers from whom we purchase media, including Yahoo! and Microsoft, though to a lesser degree.
Our business or results of operations could suffer if we fail to protect ReachLocal's intellectual property and other
proprietary rights.
Our ReachLocal segment's business is heavily dependent on intellectual property, including proprietary technology. As with
our publishing segment, we rely on a combination of intellectual property rights, including contractual provisions,
confidentiality procedures and agreements, and trademark, copyright, patent, unfair competition, trade secret, and other laws to
protect our intellectual property. However, these methods afford only limited protection and may not be adequate. In addition,
because ReachLocal sells its solutions internationally, we may need to enforce our rights under the laws of countries that do not
protect proprietary rights to as great an extent as do the laws of the United States. As a result, despite our efforts to protect our
proprietary rights, unauthorized parties may attempt to copy aspects of our online marketing and reporting solutions,
technology, software and functionality or obtain and use information that we consider proprietary. Litigation or proceedings
before the U.S. Patent and Trademark Office or other governmental authorities and administrative bodies may be necessary to
enforce our intellectual property rights. Our efforts to enforce or protect our rights may be ineffective and could result in
substantial costs and diversion of resources. In addition, as with our publishing segment, third parties might claim that the
conduct of our businesses or use of intellectual property infringes upon their intellectual property rights. Any such claims could
result in substantial costs or diversion of resources, and could adversely affect our business and operating results.
Risks Related to Our Business Generally
Our business, reputation and results of operations could be negatively affected if our information technology systems fail
to perform adequately or if we become subject to significant data security breaches or other security threats or disruptions.
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. We also use third-party technology and systems for many
operations including encryption and authentication, employee e-mail, domain name registration, content delivery to customers,
and back-office support. Our information technology systems and any third-party systems on which we rely could fail to
perform as anticipated or could be disrupted or damaged by natural disasters, fires, power outages, acts of terrorism, or other
similar events. Any such failures or disruptions could result in transaction errors, processing inefficiencies, late or missed
publications, and loss of sales and customers, any of which could negatively affect our business or results of operations.
16
In addition, attempts to compromise information technology systems occur regularly across many industries and sectors,
and the techniques used to perpetrate such compromises (e.g., viruses, worms, or other malware, denial of service attacks,
malicious social engineering, and employee malfeasance) are constantly changing. Maintaining the security of our systems is
critically important both due to our reliance on those systems and because they store and process confidential subscriber,
employee, and other sensitive personal data. Although we and our third-party service providers have implemented security
measures and other controls designed to prevent breaches, these precautions might fail to defend against future cyber-attacks or
prevent breaches or other disruptions to our systems or those of our third-party providers. Because cyber-attacks evolve quickly
and often are not recognized until after they are launched, we may be unable to anticipate them or implement adequate
measures to prevent a breach. A significant breach could result in, among other things:
•
•
•
•
improper disclosures of personal data or confidential information;
expenditures of significant resources to remedy the breach and defend against further attacks;
diversion of management's attention and resources; and
liability under laws that protect personal data.
The foregoing consequences could result in increased operating costs, loss of revenue, and harm to our reputation. Though
we maintain cyber risk insurance, this insurance may not be sufficient to cover all losses from any future breaches of our
systems.
Recent and future strategic acquisitions, investments, and partnerships may expose us to a variety of risks that might
disrupt our business and adversely affect our results of operations.
Our strategic plan involves targeted acquisitions of high-quality publishing businesses that we believe offer strong synergies
with our existing portfolio (such as our recent acquisitions of JMG and NJMG), as well as strategic acquisitions of digital
businesses (such as our recent acquisition of ReachLocal). Any such acquisitions may involve significant new risks that could
adversely affect our results of operations or cash flows, such as:
•
•
•
•
•
•
•
•
•
distraction of management attention from our current business operations;
strain on our human resources;
insufficient new revenue to offset expenses;
integration challenges arising from combining company cultures and facilities;
failure to achieve expected synergies or implement effective cost controls;
inability to integrate acquired digital products, services or technologies into our existing business's offerings;
inability to retain key employees of acquired businesses;
applicability of new regulatory or foreign law requirements; and
liabilities and other exposures not discovered in our due diligence process.
We could fail to execute effectively our acquisition strategy if we cannot identify suitable acquisition targets or obtain
regulatory approvals required to complete or realize the anticipated benefits of potential acquisitions. In addition, in order to
consummate acquisitions or other strategic transactions, we may need to obtain additional financing from banks or through
public or private offerings of debt or equity securities, which financing might not be available on attractive terms or at all.
Our strategic plan also involves investments in or partnerships with other companies, which may involve risks such as:
•
•
•
our inability to control the operations of our investee or partner;
our investee or partner's failure to achieve its business or financial goals or otherwise successfully implement its
business plan; or
our inability to monetize an investment due to transfer restrictions and our lack of control over the timing or process
for any potential disposition of our equity interest.
Each of the foregoing risks could decrease the benefits we realize from an investment or partnership. We may receive little
or no return on these investments, and we may be required to record charges to earnings if the companies in which we have
invested decrease in value.
17
We may be unsuccessful in managing or growing our international operations.
Newsquest operates in the U.K., and ReachLocal has international sales operations in Australia, Canada, Germany, the
Netherlands, Japan, Brazil, Austria, and Mexico, and campaign support services in India. Revenue from Newsquest accounted
for 12% of our publishing segment's total revenue for the year ended December 25, 2016. Revenue from international
operations outside North America accounted for 27% of ReachLocal's total revenue since our acquisition of the business in
August 2016. Our ability to operate these international operations successfully is subject to numerous risks inherent in foreign
operations, including:
•
•
•
•
•
•
•
•
•
•
•
challenges or uncertainties arising from unexpected legal, political, or systemic events such as Brexit;
difficulties or delays in developing a network of clients in international markets;
restrictions on the ability of U.S. companies to do business in foreign countries;
different legal or regulatory requirements, including with respect to internet services, privacy and data protection,
censorship, banking and money transmitting, and selling, which may limit or prevent the offering of our products in
some jurisdictions or otherwise harm our business;
international intellectual property laws that may be insufficient to protect our intellectual property or permit us to
successfully defend our intellectual property in international lawsuits;
different employee/employer relationships and the existence of workers' councils and labor unions, which could make
it more difficult to terminate underperforming salespeople;
difficulties in staffing and managing foreign operations;
difficulties in accounts receivable collection;
currency fluctuations and price controls or other restrictions on foreign currency;
potential adverse tax consequences including difficulties in repatriating earnings generated abroad; and
lack of infrastructure to adequately conduct electronic commerce transactions.
Any of the foregoing factors could adversely impact our international operations, which could harm our overall business,
operating results, and financial condition.
Foreign exchange variability could materially and adversely affect our consolidated operating results.
Our financial statements are denominated in U.S. dollars. Newsquest operates in the U.K., and its operations are conducted
in foreign currency, primarily the British pound sterling. Newsquest's 2016 results were translated to U.S. dollars at the average
rate of 1.36. In June 2016, a referendum in the U.K. that resulted in favor of leaving the European Union (commonly referred to
as Brexit) triggered an immediate weakening of the British pound sterling against the U.S. dollar and the British pound sterling
weakened further throughout the remainder of 2016. Continued weakness or further weakening in the British pound sterling to
U.S. dollar exchange rate could further diminish Newsquest's contributions to our results of operations. In addition, our
ReachLocal segment conducts operations in several foreign jurisdictions. If the value of currency in any of those jurisdictions
weakens as compared with the U.S. dollar, ReachLocal's operations in those jurisdictions similarly will contribute less to our
results. Though the contributions of ReachLocal's foreign operations to our results of operations have not been material to date,
they may increase in the future. If so, we will be subject to greater risk from fluctuations in the exchange rates for currencies in
the foreign jurisdictions where ReachLocal operates.
The value of our existing goodwill and intangible assets may become impaired, depending upon future operating results.
Goodwill and other intangible assets were approximately $852.9 million as of December 25, 2016, representing
approximately 30% of our total assets. As required under U.S. GAAP, 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. Erosion of general
economic, market, or business conditions could negatively affect our business and stock price, which may require us to record
impairment charges to goodwill or other intangible assets when we perform such evaluations. Any such charges would
adversely affect future reported results of operations and stockholders' equity but would not affect our cash flow.
Our ability to operate effectively could be impaired if we fail to attract and retain key personnel.
Our success depends substantially upon the continuing contributions of our senior management team and other key
employees. Qualified individuals are in high demand, and our senior management and other key employees possess knowledge
of our business and industry that may be difficult to replace. Our loss of members of senior management or key employees, or
18
our failure to attract and retain highly-skilled personnel for key positions, could materially adversely affect our business. We
therefore may incur significant costs to retain our key employees and to recruit new employees in the future.
Our pension plans are underfunded, and we must use a portion of our cash flows to make required contributions.
We, along with our subsidiaries, sponsor various defined benefit retirement plans, including plans established under
collective bargaining agreements. Our retirement plans include the Gannett Retirement Plan (GRP), the Gannett 2015
Supplemental Retirement Plan, the Newsquest Pension Scheme in the U.K., the Newspaper Guild of Detroit Pension Plan and a
supplemental retirement plan we assumed pursuant to our acquisition of JMG. Our retirement plans were underfunded as of
December 25, 2016 by $750.6 million on a U.S. GAAP basis. The excess of pension benefit obligations over assets is expected
to give rise to required pension contributions over the next several years. Various factors, including future investment returns,
interest rates, and potential pension legislative changes, may impact the timing and amount of future pension contributions. We
have committed to make a contribution of $25.0 million to the GRP in each fiscal year from 2017 through 2020, as well as a
$15.0 million contribution in 2021. We expect to make a contribution of approximately $18.9 million to the Newsquest Pension
Scheme and aggregate contributions of $12.2 million to our other underfunded plans in fiscal year 2017 and expect to make
additional contributions thereafter. Our ability to make contribution payments will depend on our future cash flows, which are
subject to general economic, financial, competitive, business, legislative, regulatory, and other factors beyond our control.
Adverse results from litigation or governmental investigations or changes in the regulatory environment could force us
to change our business practices, impede our efforts to transform our business, or negatively affect our 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 presently are conducted. In addition, new laws or regulations or changes in existing laws or
regulations could result in penalties for non-compliance or reduction in revenues and could limit our ability to transform our
businesses in accordance with our strategic plan.
Risks Related to the Separation
Our historical financial information for periods prior to our separation from our former parent may not be indicative of
our future results.
The historical financial information included in this report for periods prior to our separation from our former parent may
not reflect what our results of operations, financial position, and cash flows would have been had we been a separate public
company during those periods or indicate what our results of operations, financial position, and cash flows may be in the future.
The historical financial information for the periods prior to the separation 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 separation. Our historical financial information for the periods prior to the separation reflects
allocations for services historically provided by our former parent, and those allocated costs are different from the actual costs
we have incurred since the separation. In some instances, such costs have been higher than the costs allocated to our business
prior to the separation, and we expect such costs to remain higher in future periods.
We could incur 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. Further, 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, 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.
19
We may be unable to engage in certain corporate transactions due to provisions of agreements we entered into with our
former parent in connection with the separation.
Under the tax matters agreement 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. For instance, until June 29, 2017,
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.
These restrictions may limit our ability to pursue certain strategic transactions or other transactions that we believe are in the
best interests of our stockholders or that might increase the value of our business. Under the tax matters agreement, we also 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. These provisions could have the effect of discouraging or
preventing an acquisition of us or a disposition of our business.
The separation and distribution agreement, employee matters agreement, and transition services agreement with our former
parent also contain indemnification or other provisions that could inhibit certain corporate transactions. Further, to the extent
that any of these agreements or the modified affiliation agreements described below contain exclusivity or non-compete
provisions, including any that restrict our ability to use a competing service or to compete with our counterparty, they could
limit our ability to maximize our performance in the provision of services such as digital marketing services, online career
services, or online automobile sales services.
A portion of our revenues is earned under agreements with our former parent or its affiliates that may be terminated or
amended to provide for less favorable terms in the future.
In connection with our separation from our former parent, we entered into a modified affiliation agreement with
CareerBuilder, which is majority owned by our former parent, and cars.com, which currently is wholly owned by our former
parent. These agreements were intended to permit our local markets to continue to earn advertising revenues from
CareerBuilder and cars.com for up to five years after 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. At the end of the five-
year term of each agreement, we may be unable to renew the agreement on similar terms or at all, continue to earn the same
level of advertising revenues under the agreement, or find a suitable substitute. We also receive digital marketing services from
G/O Digital under a transition services agreement with our former parent which expires on the second anniversary of the
separation. If we cease to earn revenues under these arrangements with our former parent (or the amount of such revenues is
materially reduced) and we fail to find suitable substitutes, or if the wholesale price we are charged under these arrangements is
materially increased, our financial condition, and results of operations could be materially and adversely affected.
Risks Relating to our Stock and our Debt Arrangements
We cannot guarantee the timing, declaration, amount, or payment of dividends on our common stock.
The timing, declaration, amount, and payment of future dividends to stockholders falls 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 under our existing or future debt
agreements, industry practice, legal requirements, regulatory constraints, and other factors the board deems relevant. Our ability
to pay dividends will depend on our ongoing ability to generate cash from operations.
20
Our debt agreements contain restrictions that 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.
Certain provisions of our certificate of incorporation and by-laws and Delaware law may discourage a takeover of our
company.
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,
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 our 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.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
Our corporate headquarters are in McLean, VA, where we lease approximately 196,116 square feet. The lease provides for
an initial term of 15 years with two five-year renewal options.
Our publishing domestic facilities occupy approximately 14.1 million square feet in the aggregate, of which approximately
3.4 million square feet is leased from third parties. 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 locations 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.
21
Newsquest, our subsidiary headquartered in London, occupies approximately 1.1 million square feet in the U.K. spread over
86 locations. Of this, 0.3 million square feet (or 52 locations) are leased from third parties. Newsquest's owned premises
include its four printing facilities.
ReachLocal, our subsidiary headquartered in Woodland Hills, CA, has sales and other offices in 23 locations in 15 states -
Arizona, California, Colorado, Florida, Georgia, Illinois, Louisiana, Massachusetts, Maryland, Minnesota, North Carolina, New
York, Pennsylvania, Texas, and Virginia. In addition, ReachLocal has 30 locations in ten additional countries - Australia, Brazil,
Canada, Germany, Netherlands, India, Japan, Mexico, New Zealand, and Singapore. These properties, which total
approximately 326,000 square feet, include leased buildings and data centers.
All of our owned material real properties in the U.S. are mortgaged as collateral for our revolving credit facility.
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 — Commitments, contingencies and other matters 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.
Environmental Protection Agency (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 the 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 Matters
On January 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) alleging various violations of the TCPA arising from allegedly improper
telemarketing calls made to consumers by one of our vendors. The plaintiffs sought 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). In April 2016, we agreed to settle all of the claims raised. The settlements are reflected, net of insurance
recoveries, in our financial statements as of December 25, 2016 and were not material to our results of operations, financial
position, or cash flows.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
22
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 under 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
Quarter
Second. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Third . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Fourth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
First . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Second. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Third . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Fourth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
First (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Low
High
13.35
10.75
13.76
13.27
14.10
11.25
7.30
8.24
$
$
$
$
$
$
$
$
15.05
14.75
17.91
16.77
17.72
14.42
12.39
10.22
2017
(a) Through February 17, 2017.
Purchases of equity securities
In July 2015, 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 share repurchases may occur from time to time over the three years.
The following table sets forth information regarding our repurchases of common stock pursuant to our $150 million share
repurchase program during 2016:
Period
Repurchases from October, 31
2016 through November 27, 2016
Number of
Shares
Repurchased
Weighted
Average Cost
per Share
Total Number of
Shares Purchased as
Part of Publicly
Announced Program
Approximate Dollar Value
of Shares that May Yet
Be Repurchased
Under the Program
3,750,000
$
8.71
3,750,000
$
117,332,871
Comparison of shareholder return – 2016
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 December 25, 2016 compared to the S&P 500 Index and an index made up of peer
companies. Our peer group includes the following entities:
• 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.
•
tronc, Inc.
• Angie's List, Inc.
• Yelp Inc.
• Harte-Hanks, Inc.
These entities are collectively known as the "Peer Group." ReachLocal, Inc. and Constant Contact, Inc. were included in the
Peer Group until we acquired 100% of the outstanding common stock of ReachLocal, Inc. in August 2016 and Endurance
23
International Group acquired 100% of the outstanding common stock of Constant Contact, Inc. Refer to Note 3 — Acquisitions
to the accompanying combined and consolidated financial statements for additional details on the acquisition of ReachLocal,
Inc. 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 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.
Jun. 2015
Sept. 2015
Dec. 2015
Mar. 2016
Jun. 2016
Sept. 2016
Dec. 2016
Gannett Co., Inc.. . . . . . . . . . . . . $
S&P 500 Index . . . . . . . . . . . . . . $
Peer Group . . . . . . . . . . . . . . . . . $
100.00
100.00
100.00
$
$
$
105.51
93.82
81.03
$
$
$
117.16
101.23
88.00
$
$
$
112.38
100.57
80.17
$
$
$
104.76
101.19
81.36
$
$
$
87.86
108.07
96.22
$
$
$
75.08
113.66
91.76
24
ITEM 6. SELECTED FINANCIAL DATA
Selected financial data for the years 2012 through 2016 is contained in the table below and is derived from our audited
financial statements for those years unless otherwise noted. The information in this section 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" and the consolidated and combined financial statements and related
notes thereto included elsewhere in this annual report on Form 10-K. The financial information included herein for years prior
to the separation date from our former parent of June 29, 2015 may not necessarily reflect what our financial position, results of
operations and cash flows would have been had we been an independent publicly-traded company during the period presented
as such historical financial information prior the separation date includes allocations of certain expenses from our former
parent. We believe the assumptions and methodologies underlying the allocation of these expenses are reasonable. However,
such expenses may not be indicative of the actual level of expense that we would have incurred if we had operated as an
independent publicly-traded company.
In thousands, except per share amounts
2016
2015
2014
2013
Total operating revenue. . . . . . . . . . . . . . . . . . $
Operating income . . . . . . . . . . . . . . . . . . . . . . $
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . $
3,047,474
79,088
52,710
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:
0.45
0.44
0.64
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
116,018
118,625
Financial position and cash flow
Cash and cash equivalents. . . . . . . . . . . . . . . . $
Long-term debt, excluding current maturities. $
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . $
114,324
400,000
2,844,681
$
$
$
$
$
$
$
$
$
NOTES TO SELECTED FINANCIAL DATA (Unaudited)
2,885,012
169,431
146,091
1.27
1.25
0.32
$
$
$
$
$
$
3,171,878
262,331
210,705
1.83
1.83
$
$
$
$
$
3,324,939
325,073
274,461
2.39
2.39
$
$
$
$
$
— $
— $
2012
(Unaudited)
3,470,007
331,413
277,230
2.41
2.41
—
115,165
116,695
114,959
114,959
114,959
114,959
114,959
114,959
196,696
$
71,947
$
78,596
$
134,096
— $
— $
— $
—
2,427,799
$
2,384,460
$
2,494,736
$
2,839,691
We, along with our subsidiaries, made the significant acquisitions listed below during the period. There were no significant
dispositions. The results of operations of these acquired businesses are included in the accompanying selected financial
information from the date of acquisition.
Acquisitions 2012 - 2016
Year
2015
Name
Texas-New Mexico
Newspapers Partnership
Romanes Media Group
2016
Journal Media Group
North Jersey Media Group
ReachLocal
Location
Description
Texas, New Mexico, Pennsylvania
Media company with print and digital publishing
operations
Scotland, Berkshire, Northern Ireland Media company with print and digital publishing
operations
Media company with print and digital publishing
operations
Media company with print and digital publishing
operations
Digital marketing solutions firm
Woodland Park, New Jersey
Woodland Hills, California
Milwaukee, Wisconsin
25
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:
• Macroeconomic trends and conditions;
• 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 digital businesses;
• Risks associated with the operation of an increasingly digital business, such as rapid technological changes, frequent
new product introductions, declines in web traffic levels, technical failures and proliferation of ad blocking
technologies;
• Competitive pressures in the markets in which we operate;
• An increase in newsprint costs over the levels anticipated;
•
Potential disruption or interruption of our IT systems due to accidents, extraordinary weather events, civil unrest,
political events, terrorism or cyber security attacks;
• Variability in the exchange rate relative to the U.S. dollar of currencies in foreign jurisdictions in which we operate;
• Risks and uncertainties related to strategic acquisitions or investments, including distraction of management attention,
incurrence of additional debt, integration challenges, and failure to realize expected benefits or synergies or to operate
businesses effectively following acquisitions;
• Risks and uncertainties associated with our ReachLocal segment, including its significant reliance on Google for
media purchases, its international operations and its ability to develop and gain market acceptance for new products or
services;
• Our ability to protect our intellectual property or defend successfully against infringement claims;
• Our ability to attract and retain employees;
• Labor relations, including, but not limited to, labor disputes which may cause business interruptions, revenue declines
or increased labor costs;
• Risks associated with our underfunded pension plans;
• Adverse outcomes in litigation or proceedings with governmental authorities or administrative agencies, or changes in
the regulatory environment, any of which could encumber or impede our efforts to improve operating results or the
value of assets;
• Our inability to engage in certain corporate transactions following the separation;
• 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; and
• Other uncertainties relating to general economic, political, business, industry, regulatory and market conditions.
26
Executive summary
Our operations comprise 129 daily publications and digital platforms in the U.S. and the U.K., more than 490 non-daily
publications in the U.S., and more than 150 such titles in the U.K. Our 110 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 129
domestic and U.K. daily publications was approximately 7.5 million for 2016. 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.
With our acquisition of ReachLocal in the third quarter of 2016, Gannett is also now a leader in offering products and
solutions in the online marketing, digital advertising, software-as-a-service, and web presence spaces to small and medium
sized businesses. We believe Gannett is well-positioned to deliver a suite of products and solutions to local businesses through
a combination of a proprietary technology platform, its sales force, and select third-party agencies and resellers.
Separation from parent
On June 29, 2015, our former parent completed the separation through a pro rata distribution to our former parent's
stockholders of 98.5% of the outstanding shares of our common stock. Each holder of our former parent's common stock
received one share of our common stock for every two shares of former parent common stock held on June 22, 2015, the record
date for the distribution. Immediately following the distribution, our former parent owned 1.5% of our outstanding common
stock. 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.
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 and 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 15 — 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.
Basis of reporting
The 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 fiscal year 2016 ended on December 25, 2016,
fiscal year 2015 ended on December 27, 2015, and fiscal year 2014 ended on December 28, 2014, each 52-week years.
Foreign currency translation impacts: Our U.K. publishing operations are conducted through our Newsquest subsidiary. In
addition, ReachLocal has foreign operations in regions such as Europe, Asia-Pacific, and South America. Our earnings from
operations in foreign regions are translated into U.S. dollars at average exchange rates prevailing during the period, and assets
and liabilities are translated at exchange rates in effect at the balance sheet date.
The average exchange rate used to translate U.K. results was 1.36 for 2016, 1.53 for 2015, and 1.65 for 2014. Translation
fluctuations impact our U.K. revenue, expense, and operating income results. Impacts stemming from foreign currency
translation gains and losses for ReachLocal are immaterial to date.
27
Certain matters affecting current and future operating results
The following developments during 2016 affect period-over-period comparisons from 2015 and will affect period-over-
period comparisons for future results:
• Acquisition of ReachLocal, Inc. (ReachLocal) – In August 2016, we completed the acquisition of 100% of the outstanding
common stock of ReachLocal, which offers online marketing, digital advertising, software-as-a-service, and web presence
products and solutions to small and medium sized businesses. Our year-to-date 2016 results reflect revenues of $110.1
million since the acquisition. In connection with the ReachLocal acquisition, we established a separate reportable segment
that reflects its results since the acquisition date.
• Acquisition of Certain Assets of North Jersey Media Group (NJMG) – In July 2016, we completed the acquisition of
certain assets of NJMG, a media company with print and digital publishing operations serving primarily the northern New
Jersey market. Our year-to-date 2016 results reflect revenues of $40.5 million since the acquisition.
• Acquisition of Journal Media Group (JMG) – In April 2016, we completed the acquisition of 100% of the outstanding
common stock of JMG, a media company with print and digital publishing operations serving 15 U.S. markets in nine
states. Our year-to-date 2016 results reflect revenues of $299.8 million since the acquisition.
• Acquisition of Texas-New Mexico Newspaper Partnership (TNP) and Romanes Media Group (RMG) – In June 2015, we
completed the acquisition of the remaining 59.4% interest in 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. Our year-to-date 2016 results reflect TNP revenues of $70.8 million and $46.3 million in
2016 and 2015, respectively. In May 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 is comprised of one
daily newspaper and 28 weekly newspapers and their associated websites. Our year-to-date 2016 results reflect RMG
revenues of $21.2 million and $15.9 million in 2016 and 2015, respectively.
In the Results of Operations discussion below within the publishing segment, JMG and NJMG are considered 2016
publishing acquisitions, and TNP and RMG are considered 2015 publishing acquisitions.
• Facility Consolidation and Asset Impairment Charges – We evaluated the carrying values of property, plant, and
equipment at certain sites because of facility consolidation efforts, and we revised the useful lives of certain assets to
reflect the use of those assets over a shortened period as a result. In addition, we had asset impairment charges related to
our intangible assets. We recorded pre-tax charges for facility consolidations and asset impairments of $58.2 million in
2016, $34.3 million in 2015, and $35.2 million in 2014. We also recorded accelerated depreciation of $3.2 million in 2016
as well as non-operating impairments of $3.1 million in 2016 and $0.7 million in 2015. No accelerated depreciation was
recorded in 2015 and 2014, and no non-operating impairments were recorded in 2014.
•
Severance-related Expenses – We have initiated various cost reduction and severance-related actions.
In 2015, we had Early Retirement Opportunity Programs (EROP) for our USA TODAY employees and employees in
certain corporate departments and publishing sites. We recorded severance-related expenses related to these actions of $0.8
million in 2016 and $42.1 million in 2015. No such expenses were incurred in 2014.
We also had other employee termination actions associated with our facility consolidation and other cost efficiency efforts,
including various one-time termination actions and terminations related to an ongoing severance plan. We recorded
severance-related expenses of $42.7 million in 2016, $30.2 million in 2015, and $19.8 million in 2014 related to these
other actions.
• 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. In 2016, from the beginning of the year through the anniversary date of the new agreements, there was $30.1
million of revenue negatively impacted by the new agreements. In 2015, from the date of the new agreements through the
end of the year, there was $33.0 million of revenue negatively impacted by the new agreements.
28
• Foreign Currency – In 2016, there was a weakening in the British pound sterling to the U.S. dollar. With respect to
Newsquest, results for the year ended December 25, 2016 were translated from the British pound sterling to U.S. dollars at
an average rate of 1.36 compared to 1.53 for the year ended December 27, 2015. This 11% decline in the exchange rate
unfavorably impacted 2016 revenue comparisons by approximately $42 million.
Outlook for 2017: We intend to continue to drive growth by capitalizing on our national brand equity to increase the
integration of local and national content, enhancing our position as a trusted provider of local news and information through
expanded digital offerings, and leveraging our expertise to provide integrated solutions to advertisers. While we expect
traditional advertising and circulation revenues to remain challenged due to market pressures, we anticipate that 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 working to maximize the efficiency of our print, sales, administrative, and distribution functions to
reduce costs and increase profitability and through the continued integration of our recent acquisitions. We also intend to
continue to pursue our strategy of growing our business through selective acquisitions and investments in new technology
initiatives.
Total operating expenses excluding acquisitions are expected to decrease in comparison to 2016 as a result of lower
spending due to cost reductions and efficiency gains on initiatives as well as lower newsprint expenses as consumption
continues to decline.
RESULTS OF OPERATIONS
Consolidated summary
A summary of our segment results is presented below:
In thousands, except per share amounts
Operating revenues:
2016
2015
Change
2014
Change
Publishing . . . . . . . . . . . . . . . . . . . . . . . . . . $
2,933,095
$
2,881,218
ReachLocal . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate and other. . . . . . . . . . . . . . . . . . .
110,144
4,235
—
3,794
Total operating revenues . . . . . . . . . . . . . . . . .
3,047,474
2,885,012
Operating expenses:
Publishing . . . . . . . . . . . . . . . . . . . . . . . . . .
2,692,036
2,624,626
ReachLocal . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate and other. . . . . . . . . . . . . . . . . . .
128,872
147,478
—
90,955
Total operating expenses. . . . . . . . . . . . . . . . .
2,968,386
2,715,581
Operating income . . . . . . . . . . . . . . . . . . . . . .
Non-operating income (expense), net . . . . . . .
Income before income taxes . . . . . . . . . . . . . .
Provision for income taxes . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Diluted earnings per share. . . . . . . . . . . . . . . . $
79,088
(12,660)
66,428
13,718
52,710
0.44
$
$
169,431
24,544
193,975
47,884
146,091
1.25
*** Indicates an absolute value percentage change greater than 100.
2%
***
12%
6%
3%
***
62%
9%
(53%)
***
(66%)
(71%)
(64%)
(65%)
$
3,171,878
—
—
3,171,878
2,877,380
—
32,167
2,909,547
262,331
15,934
278,265
67,560
210,705
1.83
$
$
(9%)
***
***
(9%)
(9%)
***
***
(7%)
(35%)
54%
(30%)
(29%)
(31%)
(32%)
29
To facilitate a comparison of our publishing results without the impact of acquisitions or foreign currency translation
fluctuations, we are also providing explanations for 2016 revenues and expenses for our publishing segment on a "same store"
basis which are calculated as follows:
• Reported revenues or expenses
• Less: revenues or expenses for our 2016 publishing acquisitions from the date of the acquisition through the end of the
year
• Less: revenues or expenses for our 2015 publishing acquisitions from the beginning of fiscal year 2016 through the
first year anniversary of their applicable acquisition date
• Less: operations exited in 2015
• Add (less): decreases (increases) in foreign currency translation impacts based on a constant currency calculation
Similarly, 2015 same store revenues and expenses for purposes of comparison to 2014 are calculated as follows:
• Reported revenues or expenses
• Less: revenues or expenses for our 2015 publishing acquisitions from the date of the acquisition through the end of the
year
• Less: revenues or expenses for our 2014 publishing acquisitions from the beginning of fiscal year 2015 through the
first year anniversary of their applicable acquisition date
• Less: operations exited in 2014
• Add (less): decreases (increases) in foreign currency translation impacts based on a constant currency calculation
In the comparisons of the publishing operating revenues and expenses for the year ended December 25, 2016 versus for the
year ended December 27, 2015 that follow, amounts specifically attributed to our 2015 publishing acquisitions reflect only
those revenues or expenses from the beginning of fiscal year 2016 through the first year anniversary of their applicable
acquisition date. All of these amounts are excluded from our calculations of "same store" publishing results for the comparable
fiscal years.
Operating revenues: Our publishing segment generates revenue primarily through advertising and subscriptions to our
print and digital publications. Our advertising teams sell retail, classified, and national advertising across multiple platforms
including print, online, mobile, and tablet as well as niche publications. Circulation revenues are derived principally from
distributing our publications on our digital platforms and from home delivery and single copy sales of our publications. Other
revenues are derived mainly from commercial printing and distribution arrangements.
Our ReachLocal segment generates advertising revenue through search and display services and services ranging from
search optimization to social media to website development. Other revenues are attributable to web presence and software-as-a-
service solutions.
Total operating revenues were $3.0 billion in 2016, an increase of 6% from 2015. Publishing revenues increased 2%, which
was attributable to revenues from our 2016 publishing acquisitions of $341.8 million and to revenues from our 2015 publishing
acquisitions of $40.0 million. Partially offsetting the impact of the acquisitions were decreases related to the continued softness
in same store advertising revenues of $206.8 million, which is primarily related to print advertising, and in same store
circulation revenues of $44.9 million. Additionally, foreign currency rate fluctuations negatively affected publishing revenues
by $41.8 million. ReachLocal revenues were $110.1 million since its acquisition in August 2016.
Total operating revenues were $2.9 billion in 2015, a decrease of 9% from 2014. This decrease was primarily attributable to
a decline in advertising revenues, primarily related to print, of $248.8 million and circulation revenues of $60.4 million, as well
as foreign currency rate fluctuations that negatively impacted publishing revenues by $32.5 million. This decrease was slightly
offset by revenues from our 2015 publishing acquisitions of $62.2 million.
Operating expenses: Payroll and benefits are the largest components of our operating expenses. Other significant operating
expenses include production and distribution costs.
During 2016, total operating expenses increased 9% compared to 2015 to $3.0 billion. Publishing operating expenses
increased 3%. Contributing to the increase were operating expenses associated with our 2016 publishing acquisitions of $350.8
million and our 2015 acquisitions of $36.3 million. These additional expenses were partially offset by the continued company-
30
wide cost efficiency efforts, lower newsprint expenses, and the reporting of sales of certain third party (principally cars.com
and CareerBuilder) digital advertising products on a net basis as described above. Foreign currency rate fluctuations also
reduced expenses by $33.5 million. ReachLocal operating expenses were $128.9 million since the acquisition date of August 9,
2016. Also impacting 2016 were severance-related charges (including the early retirement program) of $43.5 million,
acquisition costs of $31.9 million, and facility consolidation and asset impairment charges of $58.2 million. Impacting 2015
were severance-related charges (including the early retirement program) of $72.3 million, acquisition-related items of $3.8
million, and facility consolidation and asset impairment charges of $34.3 million.
During 2015, total operating expenses decreased 7% compared to 2014 to $2.7 billion. Publishing operating expenses
decreased 9% as a result of continued company-wide cost efficiency efforts, lower newsprint expenses, and the reporting of
sales of certain third party (principally cars.com and CareerBuilder) digital advertising products on a net basis as described
above. Foreign currency rate fluctuations also reduced expenses by $25.3 million. These reductions in expenses were offset by
additional expenses from our 2015 publishing acquisitions of $52.4 million. Also impacting 2015 were severance-related
charges (including the early retirement program) of $72.3 million, acquisition costs of $3.8 million, and facility consolidation
and asset impairment charges of $34.3 million. Impacting 2014 were severance-related charges (including the early retirement
program) of $19.8 million and facility consolidation and asset impairment charges of $35.2 million.
Publishing segment
A summary of our publishing segment results is presented below:
In thousands
Operating revenues:
2016
2015
Change
2014
Change
Advertising. . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1,603,515
$
1,611,445
Circulation . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total operating revenues. . . . . . . . . . . . . . . . . . .
Operating expenses:
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general, and administrative expenses .
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization . . . . . . . . . . . . . . . . . . . . . . . . . .
Facility consolidation and asset impairment
charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,133,676
195,904
2,933,095
1,896,679
632,084
99,004
6,098
58,171
Total operating expenses. . . . . . . . . . . . . . . . . . .
2,692,036
1,060,118
209,655
2,881,218
1,864,940
622,224
91,548
11,636
34,278
2,624,626
Operating income . . . . . . . . . . . . . . . . . . . . . . . . $
241,059
$
256,592
—%
7%
(7%)
2%
2%
2%
8%
(48%)
70%
3%
(6%)
$
1,840,067
(12%)
1,109,729
222,082
3,171,878
1,997,364
739,855
91,060
13,885
35,216
2,877,380
$
294,498
(4%)
(6%)
(9%)
(7%)
(16%)
1%
(16%)
(3%)
(9%)
(13%)
Operating revenues
Revenue comparisons 2016-2015
Advertising revenues for 2016 were $1.6 billion, which were relatively flat compared to 2015. Advertising revenues
associated with our 2016 publishing acquisitions were $200.0 million and with our 2015 publishing acquisitions were $26.0
million. Foreign currency exchange rates negatively affected advertising revenues by $27.2 million. Advertising revenues on a
same store basis decreased 13%, primarily due to lower print advertising demand consistent with general trends adversely
impacting the publishing industry.
Digital advertising revenues were $395.9 million in 2016, a decrease of 2% compared to 2015. Digital advertising revenues
on a same store basis decreased 7%, primarily due to unfavorable post-spin changes to the CareerBuilder affiliate agreement
and the reporting of third-party digital revenues in conjunction with the execution of new agreements (as discussed above) of
$58.1 million. Without the impact of these changes, digital advertising revenue on a same store basis would have increased 7%
year over year, primarily as a result of increases in video and mobile display revenues. Additionally, positively impacting
digital advertising revenues were revenues associated with our 2016 publishing acquisitions of $22.4 million and our 2015
publishing acquisitions of $4.2 million whereas foreign currency exchange rates negatively affected digital advertising
revenues by $6.4 million.
31
Retail, national, and classified advertising revenues consist of both print and digital advertising.
Retail advertising revenues totaled $869.4 million for the year ended December 25, 2016, an increase of 7% when compared
to 2015. The increase was attributable to retail advertising revenues associated with our 2016 publishing acquisitions of $141.0
million and our 2015 publishing acquisitions of $14.0 million. Foreign currency exchange rates negatively affected retail
advertising revenues by $11.2 million. Retail advertising revenues on a same store basis decreased 11% due to lower
advertising demand in print publications.
National advertising revenues of $220.2 million for the year ended December 25, 2016 decreased by 2% compared to 2015.
National advertising revenues on a same store basis decreased 4% due to lower advertising demand in print publications. In
addition, foreign currency exchange rates negatively affected national advertising revenues by $2.8 million. The decrease was
partially offset by national advertising revenues associated with our 2016 publishing acquisitions of $4.7 million and our 2015
publishing acquisitions of $1.2 million as well as continued growth in national digital advertising revenues.
Classified advertising revenues for the year ended December 25, 2016 of $513.9 million decreased 10% compared to 2015.
Classified advertising revenues on a same store basis decreased 20% attributable primarily to declines in automotive and
employment advertising revenues of $37.7 million and $53.1 million, respectively, and general trends in the newspaper
industry. In addition, foreign currency exchange rates negatively affected classified advertising revenues by $13.2 million. The
decrease was partially offset by classified advertising revenues associated with our 2016 publishing acquisitions of $54.3
million and our 2015 publishing acquisitions of $10.8 million.
Circulation revenues were $1.1 billion in 2016, an increase of 7% compared to 2015. This increase was primarily
attributable to circulation revenues associated with our 2016 publishing acquisitions of $116.7 million and our 2015 publishing
acquisitions of $12.8 million. Foreign currency exchange rates negatively affected circulation revenues by $11.0 million.
Circulation revenues on a same store basis decreased 4% attributable to a reduction in volume, reflecting general industry
trends. Print circulation revenues on a same store basis were $797.5 million in 2016, relatively flat year over year. Additionally,
digital circulation revenues on a same store basis were $217.7 million in 2016, a 14% decrease year over year, due primarily to
changes in digital circulation pricing structures.
Commercial printing and other revenues for 2016 were $195.9 million, a decrease of 7% compared to the prior year. Other
revenues accounted for approximately 7% of total publishing revenues for the year.
Revenue comparisons 2015-2014:
Advertising revenues were $1.6 billion for 2015, a decrease of 12% compared to 2014. Advertising revenues on a same
store basis decreased 14%, which reflects lower print advertising demand consistent with general trends adversely impacting
the publishing industry as well as a decrease due to unfavorable post-spin changes to the CareerBuilder affiliate agreement and
the reporting of third party digital revenues in conjunction with the execution of new agreements. In addition, foreign currency
exchange rates negatively affected advertising revenues by $21.6 million. Advertising revenues associated with our 2015
publishing acquisitions were $41.8 million.
Digital advertising revenues were $405.2 million for 2015, a 6% decrease compared to 2014. Digital advertising revenues
on a same store basis decreased 7%, primarily due to unfavorable post-spin changes to the CareerBuilder affiliate agreement
and the reporting of third-party digital revenues in conjunction with the execution of new agreements (as discussed above) of
$43.0 million. Without the impact of these changes, digital advertising revenue on a same store basis would have increased 3%
year over year, primarily as a result of increases in video and mobile display revenues. Additionally, positively impacting
digital advertising revenues were revenues associated with our 2015 publishing acquisitions of $7.9 million whereas foreign
currency exchange rates negatively affected digital advertising revenues by $4.6 million.
Retail, national, and classified advertising revenues consist of both print and digital advertising.
Retail advertising revenues of $811.6 million for 2015 were down 9% compared to 2014. Retail advertising revenues on a
same store basis decreased 11% due to lower advertising demand in print publications. In addition, foreign currency exchange
rates negatively affected retail advertising revenues by $8.4 million. The decrease was partially offset by retail advertising
revenues associated with our 2015 publishing acquisitions of $23.2 million.
National advertising revenues of $225.7 million for 2015 decreased 21% compared to 2014 due to soft advertising demand.
National advertising revenues on a same store basis decreased 21% due to lower advertising demand in print publications. In
32
addition, foreign currency exchange rates negatively affected national advertising revenues by $2.0 million. The decrease was
partially offset by national advertising revenues included revenues associated with our 2015 publishing acquisitions of $2.2
million.
Classified advertising revenues of $574.2 million for 2015 declined 13% compared to 2014. Classified advertising revenues
on a same store basis decreased 14% primarily due to unfavorable post-spin changes to the CareerBuilder affiliate agreement
and the reporting of third-party digital revenues in conjunction with the execution of new agreements (as discussed above).
Automotive and employment advertising on a same store basis decreased $36.6 million and $29.5 million, respectively, and
reflect general trends in the newspaper industry. In addition, foreign currency exchange rates negatively affected classified
advertising revenues by $11.2 million. Impacting our classified advertising revenues were our 2015 publishing acquisitions of
$16.3 million.
Circulation revenues were $1.1 billion for 2015, a decrease of 4% compared to 2014. Circulation revenues on a same store
basis decreased 5% attributable to a reduction in volume, reflecting general industry trends. Print circulation revenues on a
same store basis were $797.3 million for 2015, a 7% decrease year over year. Additionally, digital circulation revenues on a
same store basis were $252.0 million for 2015, a 1% decrease year over year, due primarily to changes in digital circulation
pricing structures. In addition, foreign currency exchange rates negatively affected circulation revenues by $8.2 million. This
decrease was partially offset by circulation revenues associated with our 2015 publishing acquisitions of $19.0 million.
Commercial printing and other revenues of $209.7 million for 2015 declined 6% compared to 2014. Other revenues
accounted for 7% of total publishing revenues for 2015.
Operating expenses:
Operating expense comparisons 2016-2015:
Cost of sales for 2016 increased 2% to $1.9 billion from 2015. Cost of sales associated with our 2016 publishing
acquisitions were $247.4 million and our 2015 publishing acquisitions were $24.8 million. Foreign currency exchange rate
fluctuations partially offset the increase in cost of sales by $20.6 million. Cost of sales on a same store basis decreased 11%,
which was driven by the decrease in newsprint costs, an overall decline in circulation volumes and fewer severance-related
expenses. Newsprint costs on a same store basis of $127.5 million decreased 25% primarily due to lower consumption.
Total selling, general, and administrative expenses for 2016 increased by 2% to $632.1 million from 2015. Selling, general,
and administrative expenses associated with our 2016 publishing acquisitions were $79.2 million and our 2015 publishing
acquisitions were $8.9 million. Foreign currency exchange rate fluctuations partially offset the increase in selling, general, and
administrative expenses by $11.6 million. Selling, general, and administrative expenses on a same store basis decreased 10%,
primarily attributable to continued company-wide cost efficiency efforts.
Severance-related expenses for 2016 totaled $42.8 million compared to $67.0 million from 2015. Of total severance-related
expenses reported in 2016, $35.3 million is reported as a component of cost of sales while $7.5 million is reported as a
component of selling, general, and administrative expenses. Of total severance-related expenses in 2015, $54.8 million is
reported in cost of sales and $12.2 million is reported in selling, general, and administrative expenses.
Depreciation and amortization expense for 2016 was 2% higher compared to 2015. Depreciation and amortization expenses
associated with our 2016 publishing acquisitions were $18.7 million and our 2015 publishing acquisitions were $2.6 million.
Foreign currency exchange fluctuations reduced depreciation expense by $1.3 million. Depreciation and amortization expense
on a same store basis decreased 15% primarily due to a decrease in amortization as a result of impairment charges from the
fourth quarter of 2015 that reduced the amount of future amortization recognized as well as older intangible assets that became
fully amortized during 2016.
Our space consolidation initiative continued in 2016, including the disposition of older, underutilized buildings, relocations
to more efficient, flexible, digitally-oriented office spaces, efforts to reconfigure spaces to take advantage of leasing and
subleasing opportunities, and the combination of operations where possible. As a result, we recognized facility consolidation
charges during all periods presented. These charges are discussed in Note 4 — Restructuring activities and asset impairment
charges to the consolidated and combined financial statements.
33
Operating expense comparisons 2015-2014:
Cost of sales were $1.9 billion in 2015, which decreased by 7% or $132.4 million compared to 2014. Cost of sales
associated with our 2015 publishing acquisitions were $35.2 million. Foreign currency exchange rate fluctuations reduced cost
of sales by $19.0 million. Cost of sales on a same store basis decreased 4% which was driven by the implementation of
resource optimization efforts to improve the overall cost structure while achieving greater efficiencies. Newsprint costs on a
same store basis of $166.4 million decreased 28% due primarily to lower consumption.
Total selling, general, and administrative expenses for 2015 decreased by 16% or $117.6 million compared to 2014. Selling,
general, and administrative expenses associated with our 2015 publishing acquisitions were $13.5 million. Foreign currency
exchange rate fluctuations reduced selling, general, and administrative expenses by $5.4 million. Selling, general, and
administrative expenses on a same store basis decreased 16%, primarily attributable to continued company-wide cost efficiency
efforts.
Severance-related expenses for 2015 totaled $67.0 million compared to $19.8 million for 2014. Of total severance-related
expenses reported in 2015, $54.8 million is reported as a component of cost of sales while $12.2 million is reported as a
component of selling, general, and administrative expenses. Of total severance-related expenses in 2014, $15.4 million is
reported in cost of sales and $4.4 million is reported in selling, general, and administrative expenses.
Depreciation and amortization expense was 2% lower in 2015 compared to 2014. Depreciation and amortization expenses
associated with our 2015 publishing acquisitions were $3.8 million. Foreign currency exchange rates negatively affected
depreciation expense by $1.0 million. Depreciation and amortization expense on a same store basis decreased 4% primarily due
to a decrease in amortization as result of impairment charges from the fourth quarter of 2015 as well as older intangible assets
that became fully amortized during 2015.
Our space consolidation initiative continued throughout 2015, including the disposition of older, underutilized buildings,
relocations to more efficient, flexible, digitally-oriented office spaces, efforts to reconfigure spaces to take advantage of leasing
and subleasing opportunities, and the combination of operations where possible. As a result, we recognized facility
consolidation charges during all periods presented. In addition, we had asset impairment charges related to intangible assets.
These charges are discussed in Note 4 — Restructuring activities and asset impairment charges to the consolidated and
combined financial statements.
ReachLocal segment
In connection with the ReachLocal acquisition in August 2016, we established our ReachLocal reportable segment.
ReachLocal derives revenue principally from the provision and sale of online marketing products and services to clients.
ReachLocal distributes its products and solutions directly through its outside and inside sales force. ReachLocal typically enters
into multi-month agreements for the delivery of its products and services. Under its agreements, clients typically pay, in
advance, a fixed fee on a monthly basis, which includes all charges for the included technology and any media services,
management, third-party content, and other costs and fees. These prepayments are recorded as deferred revenue, and revenue is
only recorded for income statement purposes as ReachLocal purchases media and performs other services. Certain clients are
extended credit privileges with payment generally due in 30 to 60 days.
34
Because ReachLocal is a new operating segment for us, there is no comparison to the prior year in the discussions below.
The following table is a summary of ReachLocal's segment results for the year ended December 25, 2016, commencing with
the August 9, 2016 acquisition date.
In thousands
Operating revenues:
Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total operating revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating expenses:
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general, and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2016
100,280
9,864
110,144
67,958
48,678
12,236
128,872
(18,728)
Active Clients (a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Active Product Units (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
27,900
(a) Active Clients is a number calculated to approximate the number of clients served. Active Clients is calculated by adjusting the number of Active Product
Units to combine clients with more than one Active Product Unit as a single Active Client. Clients with more than one location are generally reflected as
multiple Active Clients. Because this number includes clients served through the National Brands, Agencies, and Resellers channel, Active Clients includes
entities with which ReachLocal does not have a direct client relationship. Our National Brands, Agencies and Resellers channel is our separate sales
channel targeting national brands, franchise and strategic accounts with operations in multiple local markets, as well as select third-party agencies and
resellers. Numbers are rounded to the nearest hundred.
15,300
(b) Active Product Units is a number we calculate to approximate the number of individual products, licenses, or services we are providing under contract for
Active Clients. For example, if we were performing both ReachSearch and ReachDisplay campaigns for a client that also licenses ReachEdge, we consider
that three Active Product Units. Similarly, if a client purchases ReachSearch campaigns for two different products or purposes, we consider that two Active
Product Units. Numbers are rounded to the nearest hundred.
Operating revenues:
ReachLocal advertising revenues were $100.3 million since the acquisition date of which $30.6 million were from
international entities. ReachLocal advertising revenues exclude $8.9 million from the revaluation of deferred revenue attributed
to the purchase price accounting applied at the acquisition date.
ReachLocal other revenues were $9.9 million for 2016 and primarily consisted of the sale of web presence and software-as-
a-service products.
Operating expenses:
ReachLocal cost of sales was $68.0 million and 62% of its total revenues since the acquisition date. Cost of sales consists
primarily of the costs of online media acquired from third-party publishers of $66.3 million. Cost of sales also includes third-
party direct costs as well as costs to manage and operate ReachLocal's various solutions and technology infrastructure.
ReachLocal selling, general and administrative expenses were $48.7 million since the acquisition date. Selling, general, and
administrative expenses consist primarily of personnel and related expenses for selling and marketing staff, product
development and engineering professionals, finance, human resources, legal, and executive functions. Selling and marketing
expenses consisted of salaries, benefits, and other costs of $16.5 million and commission expense of $10.0 million. Product and
technology expenses were $3.0 million while general and administrative expenses were $8.7 million.
ReachLocal depreciation and amortization were $12.2 million since the acquisition date and consisted primarily of the
amortization of developed technology intangible assets of $6.6 million.
35
Corporate and other
Corporate operating revenues were $4.2 million in 2016 and $3.8 million in 2015. There were nominal corporate revenues
in 2014. Corporate operating expenses were $147.5 million in 2016, an increase of 62% from $91.0 million in 2015. The
increase was primarily driven by acquisition-related expenses of $31.9 million in 2016 along with higher corporate expenses
associated with our being a public company since the spin-off in 2015. Prior to the spin off, corporate costs were primarily an
allocation from our former parent in 2015 and 2014.
Non-operating income (expense)
Equity income in unconsolidated investees, net: Equity income in unconsolidated investees, net, for 2016 was $1.5
million compared to $12.0 million in 2015. The decline was due to the elimination of equity income from TNP after Gannett
acquired the remaining interests in June 2015. Equity income in unconsolidated investees, net, for 2015 was $12.0 million
compared to $15.9 million in 2014. The decrease reflected our acquisition in June 2015 of the remaining interest in TNP and
the assignment of our interest in CNP.
Interest expense: Interest expense for the year ended December 25, 2016 was $12.8 million compared to expense of $4.6
million in 2015. The increase in interest expense was primarily attributable to borrowing under the Credit Facility (defined
below) to fund our 2016 acquisitions.
Other non-operating items, net: Our non-operating items, net, are driven by certain items that fall outside of our normal
business operations. Our non-operating items, net, consisted of $1.4 million in expenses for 2016, $17.1 million in income for
2015, and $0.7 million in income for 2014. In 2015, there was a $21.8 million gain recognized upon completing the acquisition
of our remaining interest in TNP and the assignment of our interest in CNP.
Income tax expense
Our reported effective income tax rate on pre-tax income was 20.7% for 2016, compared to 24.7% on pre-tax income for
2015. The tax rate for 2016 was lower than the comparable rate for 2015 due to the adoption of ASU 2016-09, which yielded a
tax rate benefit of 13.5% and was offset by non-deductible transaction costs, interest expense disallowance, and a tax rate
change in the U.K. In addition, during 2015 the effective tax rate was impacted by a one-time tax benefit from a change in
accounting method to amortize previously non-deductible intangible assets and interest expense disallowance in the U.K.
Our reported effective income tax rate on pre-tax income was 24.7% for 2015, compared to 24.3% for 2014. 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 $4.0 million or 2.0% of the deferred tax assets related to the U.K.
Net income and earnings per share
Net income: Net income was $52.7 million for 2016, compared to $146.1 million for 2015. The decrease in net income is
primarily attributable to the decline in operating income of $90.3 million, the decline in equity income in unconsolidated
investees, net of $10.5 million, and the increase in interest expense of $8.2 million.
Net income was $146.1 million for 2015, compared to $210.7 million for 2014. The decrease in net income resulted from
the decline in operating income of $92.9 million, partially offset by a $21.8 million gain recognized upon completing the
acquisition of the remaining interests in TNP and the assignment of our interest in CNP.
Diluted earnings per share: Diluted earnings per share were $0.44 for 2016, compared to $1.25 per share for 2015. The
decrease in diluted earnings per share for 2016 compared to 2015 was primarily attributable to the decline in net income
discussed above along with the increase in the weighted average diluted shares to 118.6 million in 2016 from 116.7 million in
2015.
Diluted earnings per share were $1.25 for 2015, compared to $1.83 for 2014. The decrease in diluted earnings per share for
2015 compared to 2014 was primarily attributable to the decrease in net income discussed above along with the increase in the
weighted average diluted shares to 116.7 million in 2015 from 115.0 million in 2014.
36
FINANCIAL POSITION
Liquidity and capital resources
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, pension
contributions, expected dividends, and expected share repurchases. We may need to obtain additional financing for future
strategic acquisitions.
Details of our cash flows are included in the table below:
In thousands
Net cash flow from operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Net cash flow used for investing activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash flow from (used for) financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of currency exchange rate change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
165,555
$
231,020
$
(519,073)
271,418
(272)
(43,312)
(62,766)
(193)
Net increase (decrease) in cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(82,372) $
124,749
$
346,138
(31,772)
(320,735)
(280)
(6,649)
2016
2015
2014
Net cash flow from operating activities
Our net cash flow from operating activities was $165.6 million for 2016 compared to $231.0 million of net cash flow from
operating activities for 2015. The decrease in net cash flow from operating activities was primarily the result of the year-over-
year decrease in net income of $93.4 million attributable to the softening environment for print advertising and circulation
revenues, offset by the decreased pension and other postretirement contributions of $40.7 million.
Our net cash flow from operating activities was $231.0 million in 2015 compared to $346.1 million of net cash flow from
operating activities in 2014. This decrease 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
$50.6 million.
In addition to any other contributions that may be required, we will make additional contributions of $25.0 million in each
of the next four fiscal years ending in 2020 and $15.0 million in 2021 for the GRP. In 2017, we also expect contributions to be
made to the Newsquest Plan of $18.9 million, to Gannett's SERP of $11.9 million, and to JMG's SERP of $0.3 million.
Net cash flow used for investing activities
Cash flows used by investing activities totaled $519.1 million for 2016 primarily driven by payments of $260.5 million for
the JMG acquisition, $162.5 million for the ReachLocal acquisition, $39.3 million for the NJMG acquisition, capital
expenditures of $60.0 million, and investments of $12.4 million, partially offset by proceeds from sales of certain assets of
$17.4 million.
Cash flows used by investing activities totaled $43.3 million for 2015 primarily due to the acquisitions of TNP and RMG
for $28.7 million and $54.0 million of capital expenditures, offset by proceeds from sales of certain assets of $29.7 million and
other investments of $12.4 million.
Cash flows used by investing activities totaled $31.8 million for 2014 primarily due to $72.3 million of capital expenditures,
offset by proceeds from sales of certain assets of $24.5 million and other investments of $18.6 million.
Net cash flow from (used for) financing activities
Cash flows from financing activities totaled $271.4 million for the 2016 as a result of proceeds from borrowings under our
Credit Facility of $480.0 million to purchase JMG, ReachLocal, and NJMG, and proceeds from the issuance of common stock
upon the settlement of stock awards of $0.6 million, partially offset by the payment of dividends to our shareholders of $92.5
million, the repayment of borrowings under our Credit Facility of $80.0 million, and the repurchase of treasury stock for $32.7
million.
37
Cash flows used by financing activities were $62.8 million for 2015 driven by $49.7 million in transactions with our former
parent and $18.5 million in dividends paid.
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 December 27, 2015.
Revolving credit facility
We maintain a five-year secured revolving credit facility pursuant to which we may borrow from time to time up to 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 varies from 1.00% to 1.50%. Up to $50 million of the Credit Facility is available for issuance of
letters of credit. The Credit Facility matures on June 29, 2020.
Customary fees related to the Credit Facility, including commitment fees on the undrawn commitments of between 0.30%
and 0.40% per annum, are payable quarterly in arrears and are based on our total leverage ratio. Borrowings under the Credit
Facility are guaranteed by 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.
Under the Credit Facility, our consolidated interest coverage ratio cannot be less than 3.00:1.00, and our total leverage ratio
cannot exceed 3.00:1.00 as of the last day of the test period consisting of the last four fiscal quarters. We were in compliance
with these financial covenants as of December 25, 2016.
The Credit Facility also contains a number of covenants that, among other things, limit or restrict our ability, subject to
certain exceptions, 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 these covenants as of December 25, 2016.
During 2016, we borrowed $425 million under our Credit Facility to complete the acquisitions of JMG and ReachLocal.
Refer to Note 3 — Acquisitions for further details on these acquisitions. As of December 25, 2016, we had $400 million in
outstanding borrowings under the Credit Facility and $9.3 million of letters of credit outstanding, leaving $90.7 million of
availability remaining.
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.
In this report, we present adjusted EBITDA, adjusted net income, and adjusted diluted earnings per share (EPS), which are
non-GAAP financial performance measures that exclude from our reported GAAP results the impact of certain items consisting
primarily of workforce restructuring charges, facility consolidation costs, and non-cash asset impairment charges. We believe
such expenses, charges, and gains are not indicative of normal, ongoing operations, and their inclusion in results makes for
more difficult comparisons between years and with peer group companies. In the future, however, we are likely to incur
expenses, charges, and gains similar to the items for which the applicable GAAP financial measures have been adjusted and to
report non-GAAP financial measures excluding such items. Accordingly, exclusion of those or similar items in our non-GAAP
presentations should not be interpreted as implying the items are non-recurring, infrequent, or unusual.
38
Adjusted EBITDA is a non-GAAP financial performance measure 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 (including early retirement programs), (6) acquisition-related
expenses (gains) (7) facility consolidation and asset impairment charges, (8) other items (including certain litigation expenses
and multi-employer pension withdrawals) (9) depreciation and (10) amortization. When adjusted EBITDA is discussed in this
report, the most directly comparable GAAP financial measure is net income.
Adjusted net income is a non-GAAP financial performance measure we use for the purpose of calculating adjusted EPS.
Adjusted net income is defined as net income before the adjustments we apply in calculating adjusted EPS as described below.
We believe presenting adjusted net income is useful to enable investors to understand how we calculate adjusted EPS, which
provides a useful view of the overall operation of our business.
Adjusted EPS is a non-GAAP financial performance measure we believe offers a useful view of the overall operation of our
business. We define adjusted EPS, which may not be comparable to a similarly titled measure reported by other companies, as
EPS before tax-affected (1) severance-related charges (including early retirement programs), (2) facility consolidation and asset
impairment charges (3) acquisition-related expenses (gains), and (4) other items (including certain litigation expenses and
multi-employer pension withdrawals). 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%. In addition, tax is adjusted for the impact of non-deductible
acquisition costs. When adjusted EPS is discussed in this report, the most directly comparable GAAP financial measure is
diluted EPS.
Free cash flow is a non-GAAP liquidity measure that adjusts our reported GAAP results for items we believe are critical to
the ongoing success of our business. We define free cash flow, which may not be comparable to a similarly titled measure
reported by other companies, as cash flow from operating activities less capital expenditures, which results in a figure
representing free cash flow available for use in operations, additional investments, debt obligations and returns to shareholders.
The most directly comparable GAAP financial measure is net cash from operating activities.
We use non-GAAP financial measures for purposes of evaluating our performance and liquidity. Therefore, we believe 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 business. 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 $43.5 million ($27.6 million after-tax) in 2016, $72.3 million ($46.3 million after-tax) in
2015 and $19.8 million ($13.2 million after-tax) in 2014. 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.
We recorded acquisition-related expenses totaling $32.7 million in 2016. In 2015, acquisition-related expenses totaling $3.8
million were included in non-operating items. No acquisition-related expenses were incurred in 2014.
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, shutdown costs and charges to reduce the carrying value of
assets held for sale to fair value less costs to sell. In addition, 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. Total charges for all such matters were $61.4
million ($37.5 million after-tax) in 2016, $42.3 million ($27.1 million after-tax) in 2015 and $79.0 million ($49.4 million after-
tax) in 2014. These non-cash charges are detailed in Note 4 — Restructuring activities and asset impairment charges to the
consolidated and combined financial statements.
Discussion of non-GAAP measures: 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."
39
Adjusted EBITDA
Reconciliations of adjusted EBITDA from net income presented in accordance with GAAP on our Consolidated and
Combined Statements of Income are presented below:
In thousands
Net income (GAAP basis) . . . . . . . . . . . . . . . . $
Provision for income taxes . . . . . . . . . . . . . . .
Equity income in unconsolidated
investees, net . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . .
Other non-operating items . . . . . . . . . . . . . . . .
Operating income
(GAAP basis). . . . . . . . . . . . . . . . . . . . . . . . . . $
Early retirement program. . . . . . . . . . . . . . . . .
Severance-related charges . . . . . . . . . . . . . . . .
Acquisition-related items. . . . . . . . . . . . . . . . .
Facility consolidation and asset
impairment charges . . . . . . . . . . . . . . . . . . . . .
Other items. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjusted EBITDA
(non-GAAP basis) . . . . . . . . . . . . . . . . . . . . . . $
2016
52,710
13,718
(1,519)
12,791
1,388
79,088
837
42,689
32,683
58,171
3,181
118,092
14,872
(87%)
***
***
(53%)
(98%)
41%
***
70%
(60%)
23%
28%
Change
(64%)
(71%)
$
2015
Change
2014
146,091
47,884
(11,981)
4,562
(17,125)
$
(31%)
(29%)
(24%)
***
***
210,705
67,560
(15,857)
576
(653)
$
169,431
(35%)
$
262,331
42,081
30,185
—
34,278
7,988
95,916
11,636
***
52%
***
(3%)
(82%)
(1%)
(16%)
—
19,797
—
35,216
43,804
97,178
13,885
349,613
(11%)
$
391,515
(17%)
$
472,211
Adjusted EBITDA decreased 11% from 2015 to 2016 and decreased 17% from 2014 to 2015. These decreases were
primarily a result of declines in same store publishing revenues due to the continued softness in print advertising revenues and
declining circulation trends. In addition, in 2016 and 2015 there were higher corporate costs related to being a stand-alone
public company. There was also an unfavorable foreign exchange rate impact of $9.2 million in 2016 compared to 2015.
Partially offsetting these decreases were the contributions from our 2016 and 2015 acquisitions.
Publishing segment
In thousands
2016
Change
2015
Operating income (GAAP basis) . . . . . . . . . . . $
241,059
Early retirement program. . . . . . . . . . . . . . . . .
Severance-related charges . . . . . . . . . . . . . . . .
Acquisition-related items. . . . . . . . . . . . . . . . .
Facility consolidation and asset
impairment charges . . . . . . . . . . . . . . . . . . . . .
Other items. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization . . . . . . . . . . . . . . . . . . . . . . . . . .
837
41,963
777
58,171
1,860
99,004
6,098
Adjusted EBITDA (non-GAAP basis). . . . . . . $
449,769
(6%)
(98%)
39%
***
70%
(77%)
8%
(48%)
(4%)
$
256,592
36,772
30,185
—
34,278
7,988
91,548
11,636
$
468,999
Change
(13%)
2014
$
294,498
***
52%
***
(3%)
(82%)
1%
(16%)
(6%)
—
19,797
—
35,216
43,804
91,060
13,885
$
498,260
Adjusted EBITDA for our publishing segment decreased 4% from 2015 to 2016 and decreased 6% from 2014 to 2015.
These decreases were primarily attributed to declines in same store publishing revenues due to the continued softness in print
advertising revenues and declining circulation trends. In addition, there was an unfavorable foreign exchange rate impact of
$9.2 million in 2016 compared to 2015. Partially offsetting these decreases were the contributions from our 2016 and 2015
acquisitions.
40
ReachLocal segment
In thousands
Operating loss (GAAP basis). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(18,728)
Severance-related charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
640
3,462
8,774
Adjusted EBITDA (non-GAAP basis). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(5,852)
2016
Adjusted EBITDA for our ReachLocal segment was a $5.9 million loss in 2016, which can be partially attributed to the
exclusion of $8.9 million in revenue due to the purchase price accounting revaluation of deferred revenue applied at the
acquisition date.
Adjusted diluted EPS
Reconciliations of adjusted diluted earnings per share from net income presented in accordance with GAAP on our
Consolidated and Combined Statements of Income are presented below:
In thousands, except per share amounts
Early retirement program. . . . . . . . . . . . . . . . . $
Severance-related charges . . . . . . . . . . . . . . . .
Facility consolidation and asset
impairment charges . . . . . . . . . . . . . . . . . . . . .
Other items. . . . . . . . . . . . . . . . . . . . . . . . . . . .
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 . . . . . . . $
Diluted weighted average number of
common shares outstanding. . . . . . . . . . . . . . .
2016
837
42,689
64,504
1,860
32,683
142,573
(50,609)
91,964
52,710
91,964
144,674
0.44
0.78
1.22
Change
(98%)
41%
89%
(77%)
***
46%
46%
46%
(64%)
46%
(31%)
(65%)
44%
(32%)
2015
Change
2014
$
$
$
$
$
$
43,181
30,185
34,186
7,988
(17,971)
97,569
(34,573)
62,996
146,091
62,996
209,087
1.25
0.54
1.79
***
52%
(3%)
(82%)
***
(1%)
(4%)
1%
(31%)
1%
(24%)
(32%)
(2%)
(25%)
$
$
$
$
$
$
—
19,797
35,216
43,804
—
98,817
(36,200)
62,617
210,705
62,617
273,322
1.83
0.55
2.38
118,625
2%
116,695
2%
114,959
Earnings per share for 2016, on a fully diluted basis, were $0.44 which includes $142.6 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 $1.22 for 2016 compared to $1.79 in 2015 and $2.38 in 2014. The decline in adjusted
diluted EPS was attributable to the same factors discussed above for adjusted EBITDA.
41
Free cash flow
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:
In thousands
Net cash flow from operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Free cash flow. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2016
2015
Change
165,555
(60,048)
105,507
$
$
231,020
(53,979)
177,041
$
$
(65,465)
(6,069)
(71,534)
The net decrease in free cash flow was $71.5 million from 2015 to 2016. This decrease was attributable to net cash flow
from operating activities of $165.6 million in 2016, down $65.5 million compared to the prior year primarily attributable to
softening environment for advertising and circulation revenues offset by the decrease in pension and other postretirement
contributions of $40.7 million. There was an increase of $6.1 million in cash outflows for capital expenditures during 2016
compared to the prior year, which was primarily attributable to the build out of the corporate leased facilities.
Contractual obligations and commitments
The following table summarizes the expected cash outflows resulting from financial contracts and commitments as of the
year ended December 25, 2016:
In thousands
Total
2017
2018 - 2019
2020 - 2021
Thereafter
Payments Due by Period
395,251
Operating leases (a) . . . . . . . . . . . . . . . . . . . . . $
Purchase obligations (b) . . . . . . . . . . . . . . . . . .
Other noncurrent liabilities (c) . . . . . . . . . . . . .
Gannett Retirement Plan contributions (d) . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(a) See Note 12 — Commitments, contingencies and other matters to the consolidated and combined financial statements.
(b)
1,308,823
751,661
115,000
341,293
279,223
159,202
193,596
46,911
97,168
53,071
41,950
25,000
50,000
529
$
$
$
$
$
$
78,016
$
137,491
232
40,000
166,996
261,372
4,200
—
255,739
$
432,568
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 December 25, 2016, are reflected
in the Consolidated Balance Sheets as accounts payable and accrued liabilities and are excluded from the table above.
(c) 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, the Gannett Retiree Welfare Plan, and a SERP plan which was assumed pursuant to our
acquisition of JMG. 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 Newspaper Guild of Detroit Plan. Expected employer contributions for
these plans are included for the following fiscal year only, including $19 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.
(d) Consists of amounts we are contractually obligated to contribute to the GRP. This total does not include additional contributions which may be required to
meet IRS minimum funding standards as these contributions are subject to uncertainties regarding significant assumptions involved in their estimation,
such as interest rate levels as well as the amount and timing of invested asset returns.
Due to uncertainty with respect to the timing of future cash flows associated with unrecognized tax benefits at
December 25, 2016, we are unable to make reasonably reliable estimates of the period of cash settlement. Therefore, $23.9
million of unrecognized tax benefits have been excluded from the contractual obligations table above. See Note 10 — Income
taxes to the consolidated and combined financial statements for a further discussion of income taxes.
Off-balance sheet arrangements
As of December 25, 2016, we had no material off-balance sheet arrangements as defined in the rules of the Securities and
Exchange Commission.
42
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 December 25, 2016, 3.8 million shares have been repurchased under this program at a total cost
of $32.7 million.
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, net treasury stock, at December 25, 2016, totaled 112.9 million shares, compared with
115.7 million shares at December 27, 2015 and 115.0 million shares at June 29, 2015. As of February 13, 2017, our shares were
held by 6,335 holders of record.
Dividends
Dividends declared on common stock amounted to $74.0 million in 2016.
Cash dividends
Payment Date
Per Share
2016
4th Quarter. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dec. 19, 2016
3rd Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sept. 19, 2016
2nd Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Jun. 20, 2016
1st Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Apr. 1, 2016
2015
4th Quarter. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Jan. 4, 2016
3rd Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Oct. 1, 2015
$
$
$
$
$
$
0.16
0.16
0.16
0.16
0.16
0.16
On February 22, 2017, the Board of Directors declared a dividend of $0.16 per share, payable on March 24, 2017, to
shareholders of record as of the close of business March 10, 2017.
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.
Seasonality
Our revenues are subject to moderate seasonality due primarily to fluctuations in advertising volumes. Our advertising
revenues for publishing are typically highest in the company's fourth quarter due to holiday and seasonal advertising and lowest
in the first quarter following the holiday season. The volume of advertising sales in any period is also impacted by other
external factors such as competitors' pricing, advertisers' decisions to increase or decrease their advertising expenditures in
response to anticipated consumer demand, and general economic conditions.
43
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. As a result, actual
results may differ from estimates.
Goodwill: As of December 25, 2016, we had $698.3 million of goodwill, which represented approximately 25% 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 annually on the first day of our 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. For 2016, a qualitative assessment was not used.
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 defined as the price that would be received to sell
the unit as a whole in an orderly transaction between market participants at the measurement date and 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.
After considering the above factors, if the carrying amount of the reporting unit exceeds its fair value, we perform the
second step of the impairment test. In the second step of the impairment test, we determine the implied fair value of the
reporting unit's goodwill. Implied fair value is calculated by assigning the fair value of a reporting unit to all of the assets and
liabilities of that unit (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business
combination or an acquisition by a not-for-profit entity. If, after this assignment, 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.
Fair value of the reporting units depends on several factors, including the future strength of the economy in our principal
markets. 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.
All three of our reporting units (Domestic Publishing, the U.K. Group, and ReachLocal) have goodwill balances. The
estimated fair value of each of these reporting units exceeded the carrying value at the most recent measurement date. The
estimated fair value of our ReachLocal reporting unit, which was acquired in August 2016, exceeded its carrying value by
approximately 10%. The other reporting units' fair values were substantially in excess of their carrying values. Accordingly, no
goodwill impairment charges were recorded.
44
Intangible assets (indefinite-lived and amortizable): Intangible assets consist of mastheads, trade names, developed
technology, and customer relationships.
Local mastheads (e.g., publishing periodical titles and web site domain names) and certain trade names are not subject to
amortization. As a result, they are tested for impairment annually on the first day of the fourth quarter or more frequently if
events or changes in circumstances suggest 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 intangibles fair values are
consistently applied to each underlying business in determining the fair value of each intangible asset. In 2016, following this
testing, we recognized impairment charges of $14.5 million. These charges were to bring the recorded indefinite lived
intangibles equal to their implied fair values based on future projections.
Our amortizable intangible assets consist mainly of developed technology, customer relationships, and certain trade names.
Developed technology is comprised of digital marketing solutions and other technology acquired as part of the ReachLocal
transaction. Customer relationships include subscriber lists and advertiser relationships. These asset values are amortized
systematically over their estimated useful lives. When triggering events are identified, an impairment assessment of our definite
lived intangibles is 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 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 trade name. In 2016, following this
testing, we recognized impairment charges of $9.9 million. These charges were to bring the recorded definite lived intangibles
equal to their implied fair values based on future projections.
Property, plant and equipment: 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 and local business units. In 2016, we recognized $33.3 million of impairment charges following such
reviews.
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
45
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 20 years for our principal retirement plan.
For 2016, the assumption used for the discount rate was 4.1% 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 2016 would have increased plan obligations by approximately $97.0 million. A 50 basis point change in the discount rate
used to calculate 2016 expense would have changed total pension plan expense for 2016 by approximately $1.2 million. We
assumed a rate of 7.75% 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 2016 by approximately $8.4
million.
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 in the application of tax laws
and regulations.
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
consolidated and 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
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 2016 would have resulted in a change of $0.7 million in the provision
for income taxes and net income.
46
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
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 primarily due to our operations in the U.K., for which the British pound
sterling 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 $300 million at December 25,
2016, $385 million at December 27, 2015 and $404 million at December 28, 2014. Newsquest's assets and liabilities were
translated from British pounds sterling to U.S. dollars at the December 25, 2016 exchange rate of 1.23, at the December 27,
2015 exchange rate of 1.49 and at the December 28, 2014 exchange rate of 1.56. Newsquest's financial results were translated
at an average rate of 1.36 for 2016, 1.53 for 2015 and 1.65 for 2014.
If the price of the British pound sterling against the U.S. dollar had been 10% more or less than the actual price, operating
income would have increased or decreased approximately 9% in 2016. A 10% fluctuation in the price of local currency in any
of ReachLocal's foreign jurisdictions relative to the U.S. dollar would not have had a material effect on our operating income
for the year ended December 25, 2016.
While we are exposed to fluctuations in interest rates on borrowings outstanding under our Credit Facility, the interest
expense on such borrowings and interest-bearing assets and liabilities on which we recognize imputed interest are not material.
Therefore, we were not, nor would we have been, significantly impacted by changes in interest rates.
47
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheets at Dec. 25, 2016 and Dec. 27, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated and Combined Statements of Income for each of the three fiscal years in the period ended Dec. 25, 2016 .
Consolidated and Combined Statements of Comprehensive Income (Loss) for each of the three fiscal years in the
period ended Dec. 25, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated and Combined Statements of Cash Flows for each of the three fiscal years in the period ended Dec. 25,
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated and Combined Statements of Equity for each of the three fiscal years in the period ended Dec. 25, 2016 .
Notes to Consolidated and Combined Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page
49
50
51
52
53
54
55
48
Report of Independent Registered Public Accounting Firm
Board of Directors and Shareholders of Gannett Co., Inc.:
We have audited the accompanying consolidated balance sheets of Gannett Co., Inc. as of December 25, 2016 and
December 27, 2015, and the related consolidated and combined statements of income, comprehensive income (loss), equity and
cash flows for each of the three fiscal years in the period ended December 25, 2016. 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 financial
position of Gannett Co., Inc. at December 25, 2016 and December 27, 2015, 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 25, 2016, in conformity with U.S.
generally accepted accounting principles.
As discussed in Note 1 to the consolidated and combined financial statements, Gannett Co., Inc. changed its method of
accounting for certain aspects of share-based payments to employees as a result of the adoption of the FASB Accounting
Standards Update No. 2016-09, "Improvements to Employee Share-Based Payment Accounting," effective December 28, 2015.
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 25, 2016, 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 22, 2017, included in Item 9A, expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
McLean, Virginia
February 22, 2017
49
GANNETT CO., INC.
CONSOLIDATED BALANCE SHEETS
In thousands, except share data
Assets
Current assets
Dec. 25, 2016
Dec. 27, 2015
Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
114,324
$
Accounts receivable, less allowance for doubtful accounts of $10,317 and $8,836, respectively . . . . . . .
358,041
Other receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assets held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes (see Notes 1 and 10). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
25,863
40,426
4,522
30,009
30,321
603,506
1,087,701
698,288
154,644
218,232
82,310
196,696
330,473
36,114
25,777
12,288
935
27,253
629,536
896,585
575,685
59,713
201,991
64,289
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2,844,681
$
2,427,799
Liabilities and equity
Current liabilities
Accounts payable and accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
438,724
$
393,026
Dividends payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Postretirement medical and life insurance liabilities (see Note 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension liabilities (see Note 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term portion of revolving credit facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other noncurrent liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total noncurrent liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commitments and contingent liabilities (see Note 12)
—
133,263
571,987
25,467
90,134
739,262
400,000
161,070
1,415,933
1,987,920
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,
116,624,726 issued as of Dec. 25, 2016 and 115,668,957 issued as of Dec. 27, 2015 . . . . . . . . . . . . . . . .
Treasury stock at cost, 3,750,000 shares and none, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
1,166
(32,667)
Additional paid-in capital (see Note 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,769,905
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss (see Note 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,269
(882,912)
856,761
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
Total liabilities and equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2,844,681
$
2,427,799
The accompanying notes are an integral part of these consolidated and combined financial statements.
50
GANNETT CO., INC.
CONSOLIDATED AND COMBINED STATEMENTS OF INCOME
In thousands, except per share amounts
Fiscal year ended
Operating revenues:
Dec. 25, 2016
Dec. 27, 2015
Dec. 28, 2014
Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1,703,795
$
1,611,445
$
1,840,067
Circulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total operating revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,133,676
210,003
3,047,474
Operating expenses:
Cost of sales and operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,969,853
Selling, general and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Facility consolidation and asset impairment charges . . . . . . . . . . . . . . . . . . . . . . . . . .
807,398
118,092
14,872
58,171
Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,968,386
Operating income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
79,088
1,060,118
213,449
2,885,012
1,866,729
707,022
95,916
11,636
34,278
2,715,581
169,431
Non-operating income (expense):
Equity income in unconsolidated investees, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other non-operating items, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total non-operating income (expense) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Net income per share—basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Net income per share—diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
The accompanying notes are an integral part of these consolidated and combined financial statements.
1,519
(12,791)
(1,388)
(12,660)
66,428
13,718
52,710
0.45
0.44
$
$
$
11,981
(4,562)
17,125
24,544
193,975
47,884
146,091
1.27
1.25
$
$
$
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
(576)
653
15,934
278,265
67,560
210,705
1.83
1.83
51
GANNETT CO., INC.
CONSOLIDATED AND COMBINED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
In thousands
Fiscal year ended
Dec. 25, 2016
Dec. 27, 2015
Dec. 28, 2014
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
52,710
$
146,091
$
210,705
Other comprehensive income (loss), before tax:
Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(84,526)
(19,390)
(27,414)
Pension and other postretirement benefit items:
Actuarial loss:
Actuarial loss arising during the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of actuarial loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prior service credit (cost):
Change in prior service credit (cost). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of prior service cost (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 income (loss). . . . .
Other comprehensive income (loss), net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(334,653)
62,155
(1,002)
1,883
(49)
—
67,959
(203,707)
(288,233)
78,745
(209,488)
(54,142)
58,148
—
(2,722)
1,254
24,180
15,544
42,262
22,872
(18,184)
4,688
Comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(156,778) $
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)
52
GANNETT CO., INC.
CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
In thousands
Fiscal year ended
Cash flows from operating activities
Dec. 25, 2016
Dec. 27, 2015
Dec. 28, 2014
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
52,710
$
146,091
$
210,705
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decrease (increase) in other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decrease (increase) in inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase (decrease) in accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase (decrease) in interest and taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase (decrease) in accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase (decrease) in deferred income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash flows from operating activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash flows used for 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in other investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
118,092
14,872
58,171
20,576
15,734
(84,600)
(1,519)
28,132
6,836
(7,504)
(22,485)
3,246
(25,517)
2,700
(13,889)
165,555
(60,048)
(464,065)
(12,419)
13
17,405
41
(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
—
—
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
—
Net cash used for investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(519,073)
(43,312)
(31,772)
Cash flows from (used for) financing activities
Proceeds from borrowings under revolving credit facilities . . . . . . . . . . . . . . . . . . . .
Repayments of borrowings under revolving credit facilities . . . . . . . . . . . . . . . . . . . .
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of common shares repurchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from issuance of common stock upon settlement of stock awards . . . . . . . .
Payments for employee taxes withheld from stock awards . . . . . . . . . . . . . . . . . . . . .
Transactions with former parent, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred payments for acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in other financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash from (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 . . . . . . . . . . . . . . . . . . . . .
480,000
(80,000)
(92,495)
(32,667)
562
(3,667)
—
—
(315)
271,418
(272)
(82,372)
196,696
—
—
(18,462)
—
6,615
—
(49,701)
(1,218)
—
(62,766)
(193)
124,749
71,947
Balance of cash and cash equivalents at end of year . . . . . . . . . . . . . . . . . . . . . . . . $
114,324
$
196,696
$
The accompanying notes are an integral part of these consolidated and combined financial statements.
—
—
—
—
—
—
(319,422)
(1,313)
—
(320,735)
(280)
(6,649)
78,596
71,947
53
GANNETT CO., INC.
CONSOLIDATED AND COMBINED STATEMENTS OF EQUITY
In thousands, except per share amounts
Common
Stock
$0.01 Par
Value
Treasury
Stock
Additional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Former
parent's
investment,
net
Total
Balance: Dec. 29, 2013 . . . . . . . . . . . . . . $
— $
— $
— $
— $
(441,981) $ 1,707,202
$ 1,265,221
Net income, 2014 . . . . . . . . . . . . . . . . . . .
Other comprehensive loss, net of tax . . . .
Total comprehensive loss . . . . . . . . . . . . .
Transactions with our former parent, net .
—
—
—
—
—
—
—
—
—
—
—
—
—
210,705
210,705
(236,131)
—
(236,131)
—
(302,323)
(302,323)
(25,426)
Balance: Dec. 28, 2014 . . . . . . . . . . . . . . $
— $
— $
— $
— $
(678,112) $ 1,615,584
$
937,472
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 . . . . . . . . . . . . . . . . . . . . . .
—
—
—
1,150
6
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(1,150)
4,987
(293)
21,742
1,622
55,402
1,625,878
103
59,517
—
(36,964)
—
—
—
—
—
—
—
—
—
4,688
—
—
—
—
—
—
—
—
—
86,574
146,091
—
—
—
—
—
—
—
4,688
150,779
(36,964)
—
4,993
(293)
21,742
1,622
(68,646)
(13,244)
(1,633,512)
—
(7,634)
103
Balance: Dec. 27, 2015 . . . . . . . . . . . . . . $
1,156
$
— $ 1,708,291
$
22,553
$
(673,424) $
— $ 1,058,576
Net income, 2016 . . . . . . . . . . . . . . . . . . .
Other comprehensive loss, net of tax . . . .
Total comprehensive loss . . . . . . . . . . . . .
Dividends declared, 2016: $0.64 per
share . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase of treasury stock . . . . . . . . . . . .
Stock options exercised . . . . . . . . . . . . . .
Restricted stock awards settled. . . . . . . . .
Performance share units settled . . . . . . . .
Stock-based compensation
(see Notes 1 and 10) . . . . . . . . . . . . . . . . .
Other activity (see Notes 1 and 10) . . . . .
—
—
—
—
1
5
4
—
—
—
—
—
(32,667)
—
—
—
—
—
—
—
—
—
561
(5,822)
(3,002)
20,576
49,301
52,710
—
—
(209,488)
(73,994)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
52,710
(209,488)
(156,778)
(73,994)
(32,667)
562
(5,817)
(2,998)
20,576
49,301
Balance: Dec. 25, 2016 . . . . . . . . . . . . . . $
1,166
$
(32,667) $ 1,769,905
$
1,269
$
(882,912) $
— $
856,761
The accompanying notes are an integral part of these consolidated and combined financial statements.
54
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
NOTE 1 — Basis of presentation
Description of business: Gannett Co., Inc. (Gannett, we, us, our, or the company) is a next-generation media company that
empowers communities to connect, act, and thrive. Gannett owns ReachLocal, Inc. (ReachLocal, a digital marketing solutions
company), the USA TODAY NETWORK (made up of USA TODAY and 109 local media organizations in 34 states in the U.S.
and Guam), and Newsquest (a wholly owned subsidiary with more than 160 local media brands in the U.K.). Gannett delivers
high-quality, trusted content where and when consumers want to engage with it on virtually any device or platform.
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 June 29,
2015, our former parent completed the pro rata distribution of 98.5% of the outstanding shares of Gannett common stock to its
stockholders (also referred to herein as the spin-off or "separation"), 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.
Immediately following the distribution, our former parent owned 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 15 — 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 consolidated and combined financial position, results of operations, and cash flows had we operated as a
stand-alone entity during the periods presented.
In fiscal year 2016, we identified an error relating to certain participant data that had resulted in an overstatement of the
postretirement benefits liabilities transferred from our former parent at separation. Based on our assessments of qualitative and
quantitative factors, the error and the related impacts were not considered material to the consolidated financial statements for
the year ended December 25, 2016 or the prior periods. The error was corrected in 2016 by decreasing postretirement medical
and life insurance liabilities by $2.8 million and pension liabilities by $23.6 million, increasing former parent investment, net,
which is now reflected in additional paid-in capital, by $16.3 million, increasing accumulated other comprehensive loss, net by
$0.4 million, decreasing deferred tax assets by $10.0 million, and decreasing expenses by $0.5 million.
NOTE 2 — Summary of significant accounting policies
Fiscal year: Our fiscal year ends on the last Sunday of the calendar year. Our fiscal year 2016 ended on December 25, 2016,
fiscal year 2015 ended on December 27, 2015, and fiscal year 2014 ended on December 28, 2014, each 52-week years.
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: We classify our operations into two reportable segments: publishing and ReachLocal. In addition to
these reportable segments, we have a corporate and other category that includes activities not directly attributable or allocable
55
to a specific segment. The publishing reportable segment is an aggregation of two operating segments: Domestic Publishing
and the U.K. Group. For further details, see Note 14 — Segment reporting.
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.
Revenue recognition: Our circulation revenues include revenues for newspapers (both print and digital) purchased by
readers or distributors. Circulation revenues are recognized when purchased newspapers are distributed, net of provisions for
related returns. Subscriptions are recognized over the subscription period.
Our advertising revenues include amounts charged to advertisers for space purchased in our newspapers, digital ads placed
on our digital platforms, advertising and marketing services, other advertising products such as preprints and direct mail, and
the provision and sale of online marketing services and products through our ReachLocal subsidiary.
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.
For our online marketing products provided by our ReachLocal subsidiary, we typically enter into multi-month agreements
for the delivery of our products. Under our agreements, our clients typically pay, in advance, a fixed fee on a monthly basis,
which includes all charges for the included technology and any media services, management, third-party content and other
costs and fees. We record these prepayments as deferred revenue and then revenue is recognized as we purchase media and
perform other services.
Our other revenues primarily include commercial printing and distribution. Commercial printing and distribution revenues
are recognized when the product is delivered to the customer.
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.
Cash and cash equivalents: Cash equivalents consist of investments with original maturities of three months or less.
Accounts receivable and allowance for doubtful accounts: Accounts receivable 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.
Credit is extended based upon an evaluation of the customer's financial position, and generally collateral is not required.
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: We classify assets to be sold as held for sale in the period in which all of the following criteria are met:
management commits to a plan to sell the disposal group, the disposal group is available for immediate sale in its present
condition, an active program to locate a buyer has been initiated, and the sale is expected to qualify for recognition as a
completed sale within one year, except if events or circumstances beyond our control extend the period of time required to sell.
The assets held for sale are measured at the lower of carrying value or fair value less any costs to sell.
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
56
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
Land. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Buildings and Improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Machinery, equipment and fixtures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dec. 25, 2016
Dec. 27, 2015
132,438
$
875,313
1,552,030
9,817
2,569,598
84,059
752,849
1,687,875
17,786
2,542,569
Accumulated depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,481,897)
(1,645,984)
Net property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1,087,701
$
896,585
Software development costs: Our subsidiary ReachLocal incurs certain costs to develop software for internal use. These
costs are capitalized when it is determined the development efforts will result in new or additional functionality or new
products. Costs incurred prior to meeting these criteria and costs associated with ongoing maintenance are expensed as incurred
and included in costs of sales and operating expenses, in addition to amortization of capitalized software development costs, in
the accompanying Consolidated and Combined Statements of Income. We monitor our existing capitalized software costs and
reduce their carrying value as a result of releases rendering previous features or functions obsolete. Software development costs
are evaluated for impairment in accordance with our policy for finite-lived intangible assets and other long lived assets. Costs
capitalized as internal use software are amortized on a straight-line basis over an estimated useful life of three years.
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.
Valuation of long-lived assets: 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 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.
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. 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. 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 of Domestic Publishing, the U.K. Group, and ReachLocal.
57
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 as
described above. We recognized impairment charges each year from 2014 through 2016. See Note 4 — Restructuring activities
and asset impairment charges and Note 5 — Goodwill and other intangible assets and other intangibles for additional
information.
Investments and other assets: Investments in entities for which 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 — Investments for additional information.
Accounts payable and accrued expenses: A breakout of accounts payable and accrued expenses by type is presented below:
In thousands
Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dec. 25, 2016
Dec. 27, 2015
105,402
$
115,602
Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total accrued liabilities and accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
438,724
$
22,995
36,114
90,943
255,454
183,270
23,644
38,811
69,964
248,021
145,005
393,026
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.
Equity-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 —
Supplemental equity information for further discussion.
Income taxes: Income taxes are accounted for under the asset 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 basis 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 — Income taxes for further discussion.
We also evaluate any uncertain tax positions and recognize 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.
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.
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
58
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.
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. Our foreign revenues, principally from businesses in the U.K. and
ReachLocal operations, totaled approximately $369.2 million in 2016, $417.4 million in 2015, and $461.3 million in 2014. Our
long-lived assets in foreign countries, principally ReachLocal operations and in the U.K., totaled approximately $354.4 million
at December 25, 2016, $330.3 million at December 27, 2015, and $337.0 million at December 28, 2014.
Supplementary cash flow information: Supplementary cash flow information, including non-cash investing and financing
activities, are as follows:
In thousands
Cash paid for taxes, net of refunds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Cash paid for interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Dec. 25, 2016
Dec. 27, 2015
25,719
10,081
5,639
$
$
$
— $
— $
— $
— $
38,707
2,995
3,251
18,501
31,762
60,954
39,155
Supplementary non-cash information for the year ended December 28, 2014 is immaterial.
New accounting pronouncements adopted: The following are new accounting pronouncements which we have adopted in
fiscal year 2016:
Fair Value Measurement - Disclosures for Investments in Certain Entities That Calculate Net Asset Value (NAV) per Share:
In fiscal year 2015, we implemented the Financial Accounting Standards Board (FASB) guidance that 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 Fair Value Measurement guidance. This guidance impacted our disclosures only.
Income Taxes- Balance Sheet Classification of Deferred Taxes: In fiscal year 2015, we early adopted the FASB guidance
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.
Business Combinations - Measurement-Period Adjustments: In fiscal year 2016, we applied the FASB guidance that
simplifies the accounting for measurement-period adjustments. This guidance eliminates the requirement for an acquirer in a
business combination to account for measurement-period adjustments retrospectively and requires that acquirers 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. The impact
was not material to our consolidated financial results.
Presentation of Financial Statements - Going Concern: We have adopted the FASB guidance related to interim and annual
assessments by management to evaluate the entity’s ability to continue as a going concern within one year after the date that the
financial statements are issued, or available to be issued, when applicable. Disclosures are required if management concludes
that substantial doubt exists or that its plans alleviate substantial doubt that was raised. Our assessments did not indicate
substantial doubt regarding our ability to continue as a going concern.
Measurement Date for Retirement Plans: We have implemented the FASB guidance that gives an employer whose fiscal
year-end does not coincide with a calendar month-end the ability, as a practical expedient, to measure defined benefit
retirement obligations and related plan assets as of the month-end that is closest to its fiscal year-end. As a result, our retirement
plans are measured at December 31, 2016, rather than our fiscal year end, December 25, 2016.
Stock-based Compensation: In fiscal year 2016, we early adopted new guidance surrounding stock-based compensation
which simplified certain aspects of the accounting for share-based payment transactions, including income taxes, classification
59
of awards, and classification of share-based payment activity in the statement of cash flows. The adoption of this new guidance
decreased income tax expense by $8.9 million for the year ended December 25, 2016. Refer to Note 10 — Income taxes, Note
11 — Supplemental equity information, and Note 16 — Quarterly statements of income (unaudited) for further discussion.
Cash and Cash Equivalents, including Statement of Cash Flows and Restricted Cash: We early adopted new guidance in
fiscal year 2016 related to the classification of certain cash flow activity such as debt prepayment, debt extinguishment costs,
contingent consideration payments made after a business combination, and distributions received from equity method
investees. The adoption of this guidance did not have a material impact on the designations of operating, investing, and
financing activities within our statements of cash flows.
New accounting pronouncements not yet adopted: The following are new accounting pronouncements which are being
evaluated by the company for future impacts on our financial position:
Revenue from Contracts with Customers: In August 2014, the FASB issued a new revenue standard, "Revenue from
Contracts with Customer," which prescribes a single comprehensive model for entities to use in the accounting of revenue
arising from contracts with customers. The new guidance will supersede virtually all existing revenue guidance under U.S.
GAAP and is effective for fiscal years beginning after December 31, 2017. The core principle contemplated by this new
standard is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an
amount reflecting the consideration 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. In April and May 2016, the FASB also issued clarifying updates to the new standard specifically to address certain
core principles including the identification of performance obligations, licensing guidance, the assessment of the collectability
criterion, the presentation of taxes collected from customers, noncash considerations, contract modifications, and completed
contracts at transition.
We currently anticipate adopting the new revenue recognition standard using the modified retrospective approach in the
fiscal year beginning January 1, 2018. This approach consists of recognizing the cumulative effect of initially applying the
standard as an adjustment to opening retained earnings. As part of the modified retrospective approach, we will also amend our
disclosures to reflect results under "legacy GAAP" for the initial year of adoption. We are currently evaluating the impact that
the updated guidance will have on our financial statements and related disclosures. As part of the implementation process, we
are holding regular meetings with key stakeholders from across the organization to discuss the impact of the standard on our
existing contracts. We are utilizing a bottoms-up approach to analyze the impact of the standard on our portfolio of contracts by
reviewing our current accounting policies and practices to identify potential differences that would result from applying the
requirements of the new standard to our existing revenue contracts. We expect to complete this evaluation prior to the fourth
quarter of 2017.
Inventory: In July 2015, the FASB issued new guidance which requires entities using the first-in, first-out inventory costing
method to subsequently value inventory at the lower of cost or net realizable value. Net realizable value is defined as the
estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and
transportation. The guidance is effective for fiscal years and interim periods within those years beginning after December 15,
2016, with early adoption permitted. We are currently evaluating the impact of this guidance and assessing the impact on our
consolidated financial statements.
Leases: In February 2016, the FASB issued updated guidance modifying lease accounting for both lessees and lessors to
increase transparency and comparability by recognizing lease assets and lease liabilities by lessees for those leases classified as
operating leases under previous accounting standards and disclosing key information about leasing arrangements. This
guidance is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. We are currently
evaluating the provisions of the updated guidance and assessing the impact on our consolidated financial statements.
Cash and Cash Equivalents, including Statement of Cash Flows and Restricted Cash: In November 2016, the FASB issued
updated guidance requiring entities to explain, in their statements of cash flows, the change during the period in the total of
cash, cash equivalents, and amounts generally described as "restricted cash" or "restricted cash equivalents". As a result,
restricted cash and restricted cash equivalents must now be included within the total of cash and cash equivalents when
reconciling the beginning and end of period totals show on the statement of cash flows. This guidance is effective for fiscal
years and interim periods within those years beginning after December 15, 2017, with early adoption permitted. We are
currently evaluating the provisions of this update and assessing the impact on our consolidated financial statements.
60
NOTE 3 — Acquisitions
2016 Acquisitions
ReachLocal: In August 2016, we completed the acquisition of 100% of the outstanding common stock of ReachLocal, Inc.
(ReachLocal) for approximately $162.5 million in cash, net of cash acquired. We financed the transaction by borrowing $175.0
million under our credit facility as well as with available cash, and we incurred acquisition-related expenses of $12.8 million
for the year ended December 25, 2016. Such costs were reflected in selling, general, and administrative expenses in the
Consolidated and Combined Statements of Income.
ReachLocal offers online marketing, digital advertising, software-as-a-service, and web presence products and solutions to
small and medium sized businesses. It delivers its suite of products and solutions to local businesses through a combination of
its proprietary technology platform, its sales force, and select third-party agencies and resellers.
The purchase price, based on management's preliminary estimates, was allocated to the tangible assets and identified
intangible assets acquired and liabilities assumed based on their estimated fair values. The allocation of the purchase price is
preliminary pending the finalization of the fair value of the acquired net assets and liabilities assumed as well as the acquired
deferred income tax assets and liabilities and assumed income and non-income based tax liabilities. As of the acquisition date,
the purchase price assigned to the acquired assets and assumed liabilities is summarized as follows:
In thousands
Cash acquired. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Developed technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer relationships. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other noncurrent assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncurrent liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities assumed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13,195
15,058
13,486
54,000
22,500
12,000
119,481
9,852
259,572
63,005
20,824
83,829
Net assets acquired. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
175,743
Acquired property, plant, and equipment are being 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. Goodwill associated with the acquisition of ReachLocal is allocated entirely to the ReachLocal
segment. We expect that the purchase price allocated to goodwill and intangible assets will not be deductible for tax purposes.
Since the acquisition date, revenues for ReachLocal were $110.1 million and net loss before taxes, excluding acquisition
costs, was $19.9 million.
Assets of North Jersey Media Group: In July 2016, we completed the acquisition of certain assets of North Jersey Media
Group, Inc. (NJMG) for approximately $39.3 million. NJMG is a media company with print and digital publishing operations
serving primarily the northern New Jersey market. Its brands include such established names as The Record (Bergen County)
and The Herald. We financed the transaction with available cash on hand.
The purchase price, based on management's preliminary estimates, was allocated to the tangible assets and identified
intangible assets acquired and liabilities assumed based on their estimated fair values. As of the acquisition date, the purchase
price assigned to the acquired assets and assumed liabilities were as follows: property, plant, and equipment of $26.0 million,
goodwill of $8.3 million, intangible assets of $7.2 million, noncurrent assets of $1.0 million noncurrent liabilities of $0.3
million, and net negative working capital of $2.9 million. Goodwill related to the acquisition of NJMG is allocated to the
publishing segment.
61
Journal Media Group: In April 2016, we completed the acquisition of 100% of the outstanding common stock of Journal
Media Group, Inc. (JMG) for approximately $260.6 million in cash, net of cash acquired. Further, approximately $2.3 million
of the purchase price paid was treated as post-acquisition expense for accounting purposes. We financed the transaction by
borrowing $250.0 million under our credit facility as well as with available cash, and we incurred acquisition-related costs of
$10.8 million for the year ended December 25, 2016. Such costs were reflected in selling, general, and administrative expenses
in the Consolidated and Combined Statements of Income.
JMG is a media company with print and digital publishing operations serving 15 U.S. markets in nine states, including the
Milwaukee Journal Sentinel, the Knoxville News Sentinel, and The Commercial Appeal in Memphis. The acquisition expanded
our print and digital publishing operations domestically.
The purchase price, based on management's preliminary estimates, was allocated to the tangible assets and identified
intangible assets acquired based on their estimated fair values. The allocation of the purchase price is preliminary pending the
finalization of the acquired deferred income tax assets and liabilities and assumed income and non-income based tax liabilities.
As of the acquisition date, the purchase price assigned to the acquired assets and assumed liabilities is summarized as follows:
In thousands
Cash acquired. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mastheads . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer relationships. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other noncurrent assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncurrent liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities assumed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net assets acquired. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
36,825
54,571
264,357
30,440
12,440
24,347
3,825
426,805
71,519
60,240
131,759
295,046
Acquired property, plant, and equipment are being 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. Goodwill related to the acquisition of JMG is allocated to the publishing segment. We expect that
the purchase price allocated to goodwill and intangibles will not be deductible for tax purposes.
Since the acquisition date, revenues for JMG were $299.8 million and net loss before taxes, excluding acquisition costs, was
$5.4 million.
Pro forma information: The following table sets forth unaudited pro forma results of operations assuming the ReachLocal,
NJMG and JMG acquisitions, along with transactions necessary to finance the acquisitions, occurred at the beginning of 2015:
In thousands, except per share amounts
2016
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
3,409,111
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Earnings per share - diluted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
47,485
0.40
2015
3,800,074
65,038
0.56
$
$
$
Unaudited
This pro forma financial information is based on historical results of operations, adjusted for the allocation of the purchase
price and other acquisition accounting adjustments, and is not necessarily indicative of what our results would have been had
we operated the businesses since the beginning of the periods presented. The pro forma adjustments reflect depreciation
expense and amortization of intangibles related to the fair value adjustments of the assets acquired, additional interest expense
related to the financing of the transactions, the elimination of acquisition-related costs, and the related tax effects of the
adjustments.
62
2015 Acquisitions
Texas-New Mexico Partnership: In June 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, additional cash
consideration, net of cash acquired, of $5.2 million, and $1.9 million in deferred consideration. 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 print
and digital publishing operations serving 11 U.S. markets in Texas, New Mexico and Pennsylvania.
The purchase price was allocated to the tangible assets and identified intangible assets acquired based on their estimated fair
values. As of the acquisition date, the purchase price assigned to the acquired assets and assumed liabilities is summarized as
follows:
In thousands
Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncurrent liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities assumed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net assets acquired. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
12,310
20,672
28,440
30,703
92,125
10,860
14,211
25,071
67,054
On the acquisition date, the fair value of our 40.6% interest in TNP was $26.6 million, and the fair value of our 19.5%
interest in CNP was $34.4 million. The pre-acquisition carrying value of TNP and CNP was $39.2 million. We recognized
a $21.8 million pre-tax non-cash gain on the transaction in the second quarter of 2015.
Acquired property, plant, and equipment are being 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. Goodwill related to the acquisition of TNP is allocated to the publishing segment.
Romanes Media Group: In May 2015, our U.K. subsidiary, Newsquest Media Group Ltd. (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. Goodwill related to the acquisition of RMG is allocated to the publishing segment.
NOTE 4 — Restructuring activities and asset impairment charges
Severance-related expenses
We have initiated various cost reducing actions that are severance-related.
In 2015, we initiated Early Retirement Opportunity Programs (EROP) for our USA TODAY employees and for employees
in certain corporate departments and publishing sites. We recorded severance-related expenses of $0.8 million in 2016 and
$42.1 million in 2015 for these programs.
We also had other employee termination actions associated with our facility consolidation and other cost efficiency efforts.
We recorded severance-related expenses of $42.7 million in 2016, $30.2 million in 2015, and $19.8 million in 2014.
In 2016, we recorded $35.9 million in costs of sales and operating expenses and $7.6 million in selling, general, and
administrative expenses of severance-related expenses. In 2015, we recorded $59.3 million in costs of sales and operating
expenses and $13.0 million in selling, general, and administrative expenses of severance-related expenses. In 2014, we
63
recorded $15.6 million in costs of sales and operating expenses and $4.2 million in selling, general, and administrative
expenses of severance-related expenses.
A summary of our liabilities related to employee termination actions by year is as follows:
In thousands
EROPs
Other
Severance
Activities
Total
Balance at December 29, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
— $
20,710
$
Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
—
(28,985)
19,797
—
Balance at December 28, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
— $
11,522
$
Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(10,591)
42,081
240
(29,657)
30,185
—
Balance at December 27, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
31,730
$
12,050
$
Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(32,419)
Expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
837
(68)
(36,003)
42,689
(165)
Balance at December 25, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
80
$
18,571
$
20,710
(28,985)
19,797
—
11,522
(40,248)
72,266
240
43,780
(68,422)
43,526
(233)
18,651
A summary of our severance-related expenses by segment is as follows:
In thousands
2016
Publishing
ReachLocal
Corporate and
Other
Total
EROPs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Other Severance Activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2015
EROPs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Other Severance Activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
837
41,963
42,800
36,772
30,185
66,957
$
$
$
$
2014
EROPs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
— $
Other Severance Activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
19,797
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
19,797
$
— $
640
640
$
— $
—
— $
— $
—
— $
— $
86
86
5,309
—
5,309
$
$
$
— $
—
— $
837
42,689
43,526
42,081
30,185
72,266
—
19,797
19,797
Facility consolidation and asset impairment charges
For each year presented, we recognized charges related to facility consolidation 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 and cost methods of accounting. All impairment charges captured in 2016 were related to the
publishing segment.
64
A summary of these charges by year is presented below:
In thousands, except per share amounts
2016
Facility consolidation and asset impairment charges:
Pre-Tax
Amount
After-Tax
Amount
Per Share
Amount
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
24,398
$
15,120
$
Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
33,518
255
20,312
157
Total facility consolidation and asset impairment charges against operations. . . . . . . $
58,171
$
35,589
$
Accelerated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-operating charges:
Equity method investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other non-operating items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,218
1,018
2,097
1,973
624
1,286
Total charges. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
64,504
$
39,472
$
0.13
0.17
—
0.30
0.02
0.01
0.01
0.34
In thousands, except per share amounts
2015
Facility consolidation and asset impairment charges:
Pre-Tax
Amount
After-Tax
Amount
Per Share
Amount
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. . . . . . . $
34,278
$
22,228
$
Non-operating charges:
Equity method investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
658
404
Total charges. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
34,936
$
22,632
$
0.11
0.05
0.03
0.19
—
0.19
In thousands, except per share amounts
2014
Facility consolidation and asset impairment charges:
Pre-Tax
Amount
After-Tax
Amount
Per Share
Amount
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
All indefinite-lived intangibles were tested for impairment as of the first day of our fourth quarter. The definite-lived
intangible assets were first evaluated based on a qualitative assessment considering changes in circumstances to determine
whether the assets are recoverable. Then, we prepared quantitative assessments for the assets which indicated that certain
carrying values were less than their respective fair values. Fair values were determined using a relief-from-royalty method or
excess earning method. As a result, pre-tax non-cash impairment charges for indefinite lived intangibles totaled $14.5 million in
2016, $0.9 million in 2015, and $1.7 million in 2014. Pre-tax non-cash impairment charges for finite lived intangibles totaled
$9.9 million in 2016 and $18.5 million in 2015. There were no pre-tax impairment charges for finite lived other intangibles in
2014. The impairments, all of which were recorded to the publishing segment, 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. Certain assets classified as held-for-sale 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 2016 and 2015, the carrying values of certain investments in which we own a noncontrolling interest were written
down to fair value because the business underlying the investments had experienced sustained operating losses, leading us to
conclude the investments were impaired. These charges are recorded in "Equity income in unconsolidated investees, net" and
"Other non-operating items, net."
65
NOTE 5 — Goodwill and other intangible assets
Goodwill, indefinite-lived intangible assets, and amortizable intangible assets consist of the following:
In thousands
Dec. 25, 2016
Gross
Accumulated
Amortization
Net
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Indefinite-lived intangibles:
698,288
$
— $
698,288
Mastheads and trade names . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
47,410
—
47,410
Amortizable intangible assets:
Developed technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer relationships. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Dec. 27, 2015
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Indefinite-lived intangibles:
Mastheads and trade names . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortizable intangible assets:
Developed technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer relationships. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
54,000
89,785
12,800
902,283
575,685
31,521
—
68,005
11,478
(6,621)
(41,495)
(1,235)
47,379
48,290
11,565
(49,351) $
852,932
— $
575,685
—
—
(39,813)
(11,478)
31,521
—
28,192
—
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
686,689
$
(51,291) $
635,398
Intangible amortization expense was $14.9 million in 2016 and $11.6 million in 2015. The increase is due to the intangibles
acquired as a result of our 2016 acquisitions as well as a full year of amortization of the intangibles we acquired as a result of
our 2015 acquisitions. Customer relationships, which include subscriber lists and advertiser relationships, are amortized on a
straight-line basis over their useful lives. Developed technology consists of digital marketing solutions and other technology
acquired as part of the ReachLocal transaction and is 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 periods for customer relationships, acquired technology and other amortizable intangibles are
approximately 8.4, 2.7 and 3.7 years, respectively.
The projected annual amortization expense related to amortizable intangibles as of December 25, 2016 is as follows:
In thousands
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
28,183
28,134
20,918
8,021
5,312
66
The balances and changes in the carrying amount of goodwill by segment are as follows:
In thousands
Balance at Dec. 28, 2014:
Publishing
ReachLocal
Consolidated
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Accumulated impairment losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net balance at Dec. 28, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Activity during the year:
Acquisitions & adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency exchange rate changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Balance at Dec. 27, 2015:
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated impairment losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net balance at Dec. 27, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Activity during the year:
Acquisitions & adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency exchange rate changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Balance at Dec. 25, 2016:
7,358,420
(6,814,075)
544,345
39,484
(8,144)
31,340
7,297,752
(6,722,067)
575,685
36,532
(33,410)
3,122
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated impairment losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net balance at Dec. 25, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
6,925,236
(6,346,429)
578,807
$
$
$
$
$
$
— $
—
— $
—
—
— $
—
—
— $
119,481
—
119,481
119,481
—
119,481
$
$
7,358,420
(6,814,075)
544,345
39,484
(8,144)
31,340
7,297,752
(6,722,067)
575,685
156,013
(33,410)
122,603
7,044,717
(6,346,429)
698,288
In fiscal years 2016, 2015 and 2014, we performed a quantitative step one analysis of each 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, a step two analysis was not required and there were no goodwill impairments.
NOTE 6 — Investments
We have a number of investments accounted for under the equity method. Principal among these are the following:
TNI Partners. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Albuquerque Publishing Company (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Spirited Media, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
NextGen Solutions, LLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Digg, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ponderay Newsprint Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Time Razor, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(a) Per the terms of our contract, the ownership percentage fluctuates marginally from month to month.
% Owned at
Dec. 25, 2016
50.00%
40.00%
31.58%
25.00%
15.00%
13.50%
7.06%
The aggregate carrying value of investments recorded under the equity method was $7.5 million at December 25, 2016 and
$7.9 million at December 27, 2015. 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.
The company also has other investments recorded at cost. The aggregate carrying value of these investments, net of
impairment, were $6.7 million at December 25, 2016. There were no other investments as of December 27, 2015.
67
NOTE 7 — Revolving credit facility
We maintain a five-year secured revolving credit facility pursuant to which we may borrow from time to time up to 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 varies from 1.00% to 1.50%. Up to $50 million of the Credit Facility is available for issuance of
letters of credit. The Credit Facility matures on June 29, 2020.
Customary fees related to the Credit Facility, including commitment fees on the undrawn commitments of between 0.30%
and 0.40% per annum, are payable quarterly in arrears and are based on our total leverage ratio. Borrowings under the Credit
Facility are guaranteed by 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.
Under the Credit Facility, our consolidated interest coverage ratio cannot be less than 3.00:1.00, and our total leverage ratio
cannot exceed 3.00:1.00 as of the last day of the test period consisting of the last four fiscal quarters. We were in compliance
with these financial covenants as of December 25, 2016.
The Credit Facility also contains a number of covenants that, among other things, limit or restrict our ability, subject to
certain exceptions, 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 these covenants as of December 25, 2016.
During 2016, we borrowed $425 million under our Credit Facility to complete the acquisitions of JMG and ReachLocal.
Refer to Note 3 — Acquisitions for further details on these acquisitions. As of December 25, 2016, we had $400 million in
outstanding borrowings under the Credit Facility and $9.3 million of letters of credit outstanding, leaving $90.7 million of
availability remaining.
NOTE 8 — Retirement plans
Defined benefit retirement plans: We, along with our subsidiaries, have various defined benefit retirement plans, including
plans established under collective bargaining agreements. The disclosure tables below include the assets and obligations of the
Gannett Retirement Plan (GRP), the Newsquest and Romanes Pension Schemes in the U.K. (Newsquest Plans), the Newspaper
Guild of Detroit Pension Plan, the 2015 Supplemental Retirement Plan (SERP), and a supplemental non-qualified retirement
plan we assumed pursuant to our acquisition of JMG (JMG Plan). We use a December 31 measurement date convention for all
our retirement plans.
Our pension costs, which include costs for our qualified and non-qualified plans, are presented in the following table:
In thousands
2016
2015
2014
Service cost—benefits earned during the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
3,066
$
7,993
$
Interest cost on benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of prior service costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of actuarial loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension cost (benefit) for our plans and our allocated portions of former
parent-sponsored retirement plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Participant data corrections (a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlement charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
125,903
(183,697)
6,677
61,740
13,689
(145)
(49)
131,149
(196,774)
6,893
56,722
5,983
—
1,254
4,498
145,433
(206,164)
6,967
41,728
(7,538)
—
—
Expense (credit) for retirement plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(a) Refer to Note 1 — Basis of presentation for additional details regarding the impacts of the error in participant data identified.
13,495
$
7,237
$
(7,538)
68
The following table provides a reconciliation of pension benefit obligations (on a projected benefit obligation measurement
basis), plan assets and funded status, along with the related amounts that are recognized in the Consolidated Balance Sheets.
In thousands
Change in benefit obligations
Dec. 25, 2016
Dec. 27, 2015
3,184,795
$
3,433,581
Benefit obligations at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plan amendments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plan participants' contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Actuarial (gain) loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transfers out . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Participant data corrections (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employer contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transfers out . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transfer from separation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value of plan assets at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Funded status at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Amounts recognized in Consolidated Balance Sheets
3,066
125,903
500
4
266,925
(187,624)
(211,882)
4,736
(1,242)
—
(23,600)
—
3,161,581
2,558,627
—
117,162
4
88,340
(211,882)
—
(1,242)
—
(140,002)
—
2,411,007
750,574
$
$
$
$
$
7,993
131,149
—
8
(106,778)
(40,679)
(218,998)
26,308
—
(4,354)
—
(43,435)
3,184,795
2,654,889
1,006
38,853
8
128,179
(218,998)
26,179
—
(4,354)
(30,411)
(36,724)
2,558,627
626,168
2,166
(15,891)
(612,443)
Noncurrent assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Accrued benefit cost—current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Accrued benefit cost—noncurrent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(a) Refer to Note 1 — Basis of presentation for additional details regarding the impacts of the error in participant data identified.
919
(12,230) $
(739,263) $
The funded status (on a projected benefit obligation basis) of our plans at December 25, 2016, is as follows:
In thousands
GRP. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
SERP (a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Newsquest Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Newspaper Guild of Detroit Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
JMG Plan (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(a) The SERP and JMG Plans are unfunded, unsecured liabilities.
Fair Value of
Plan Assets
Benefit
Obligation
Funded
Status
1,601,312
$
1,975,816
$
—
717,623
92,072
—
109,952
970,988
101,065
3,760
(374,504)
(109,952)
(253,365)
(8,993)
(3,760)
2,411,007
$
3,161,581
$
(750,574)
69
The following table presents information for our retirement plans for which accumulated benefits exceed assets:
In thousands
Accumulated benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Fair value of plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
3,153,811
2,411,007
$
$
3,179,094
2,558,627
Dec. 25, 2016
Dec. 27, 2015
The following table presents information for our retirement plans for which projected benefit obligations exceed assets:
In thousands
Projected benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Fair value of plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Dec. 25, 2016
3,161,581
2,411,007
Dec. 27, 2015
3,184,795
$
2,558,627
$
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 as of the dates presented (pre-tax).
In thousands
Net actuarial losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Prior service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,825,167) $
(29,263)
(1,613,939)
(35,451)
Amounts in accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(1,854,430) $
(1,649,390)
Dec. 25, 2016
Dec. 27, 2015
The actuarial loss amounts expected to be amortized from "Accumulated other comprehensive loss" into net periodic benefit
cost in 2017 are $70.4 million. The prior service cost amounts expected to be amortized from "Accumulated other
comprehensive loss" into net periodic benefit cost in 2017 are $6.7 million.
Changes in plan assets and benefit obligations recognized in "Other comprehensive loss" consist of the following:
In thousands
Current year actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Change in prior service cost. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Actuarial gain due to settlement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of prior service costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Participant data corrections (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(a) Refer to Note 1 — Basis of presentation for additional details regarding the impacts of the error in participant data identified.
2016
333,460
500
49
(61,740)
(6,677)
(68,620)
8,070
205,042
Pension costs: The following assumptions were used to determine net pension costs:
Discount rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rate of compensation increase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016
4.24%
7.60%
2.95%
2015
4.17%
7.63%
2.95%
2014
4.74%
7.91%
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dec. 25, 2016
Dec. 27, 2015
3.63%
2.95%
4.24%
2.96%
70
During 2016, we made contributions of $49.9 million to the Newsquest Plans. In 2017, we expect to contribute
approximately $18.9 million to the Newsquest Plans. During 2016, we contributed $25.8 million to the GRP, $12.0 million to
the SERP and $0.7 million to the JMG Plan. In addition to any other contributions that may be required, we will make
additional contributions of $25.0 million in each of the next four fiscal years ending in 2020 and $15.0 million in 2021 for the
GRP. Our expected 2017 contributions for Gannett's SERP and JMG Plan are $11.9 million and $0.3 million, respectively.
Plan assets: The asset allocation of our plans at the end of 2016 and 2015, and target allocations for 2017, by asset category,
are presented in the table below:
Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Alternative investments (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(a) Alternative investments include real estate, private equity and hedge funds.
2017
47%
35%
18%
100%
2016
44%
38%
18%
100%
2015
53%
24%
23%
100%
Target Allocation
Allocation of Plan Assets
The primary objective of company-sponsored retirement plans is 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 0.4% for 2016, 1.9% for 2015 and 5.2% for 2014.
Retirement plan assets include approximately 0.6 million shares of our common stock valued at approximately $6.0 million
at the end of 2016. The plan received dividends of approximately $0.5 million on these shares in 2016.
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
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2022-2026 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
195,190
191,231
190,887
187,341
184,548
882,207
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 $28.8 million in 2016, $25.8 million in 2015, and $30.4 million in 2014. 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.
71
In connection with our acquisitions of JMG and ReachLocal, as discussed in Note 3 — Acquisitions, we assumed 401(k)
savings plans. JMG's 401(k) savings plan continues to cover former JMG employees. For most participants in this plan, the
matching formula is 50% of the first 7% of employee contributions, and the employer match obligation is settled in cash.
Additionally, ReachLocal's 401(k) savings plan continues to cover their former full-time U.S. employees and has no employer
match obligation.
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 (CBAs) 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.
• Amounts we contribute to the multi-employer plan 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 a withdrawal liability.
Our participation in these plans for the annual period ended December 25, 2016, is outlined in the table below. The "EIN/
Plan Number" column provides the Employee Identification Number (EIN) and the three-digit pension plan number. Unless
otherwise noted, the two most recent Pension Protection Act (PPA) zone statuses available are for the plan's year-end at
December 25, 2016 and December 27, 2015. 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. This calculation is based on the plan
financial statements issued at the end of December 31, 2015. At the date we issue our financial statements, Forms 5500 were
unavailable for the plan years ending after December 31, 2015.
We incurred expenses for multi-employer withdrawal liabilities of $2.0 million in 2016 and $6.1 million in 2015. Current
liabilities on the Consolidated Balance Sheets include $3.3 million and $2.0 million at December 25, 2016, and December 27,
2015, respectively, and other noncurrent liabilities on the Consolidated Balance Sheets include $40.2 million and $41.5 million
at December 25, 2016, and December 27, 2015, respectively, for such withdrawal liabilities.
Multi-employer Pension Plans
Pension Plan Name
CWA/ITU Negotiated Pension Plan
GCIU—Employer Retirement Benefit Plan
(a)
IAM National Pension Plan (a)
Teamsters Pension Trust Fund of
Philadelphia and Vicinity (a)
EIN Number/
Plan Number
13-6212879/001
Zone Status
Dec. 31,
2016
Red
2015
Red
FIP/RP Status
Pending/
Implemented
Implemented
Contributions
(in thousands)
2016
2014
2015
$ 478 $ 411 $ 433
91-6024903/001
Red
Red
Implemented
51-6031295/002
Green
Green
NA
30
278
43
352
71
403
Surcharge
Imposed
No
No
NA
Expiration
Dates of
CBAs
4/10/2019
4/30/2019
4/30/2019
23-1511735/001 Yellow
Yellow
Implemented
1,473
1,452
1,298
NA
12/21/2017
Central Pension Fund of the International
Union of Operating Engineers and
Participating Employers (a)
36-6052390/001
Green as
of Jan.
31, 2016
Green as
of Jan.
31, 2015
NA
86
99
153
NA
4/30/2019
Total
(a) This plan has elected to utilize special amortization provisions provided under the Preservation of Access to Care for Medicare Beneficiaries and Pension
$ 2,345 $2,357 $2,358
Relief Act of 2010.
72
NOTE 9 — Postretirement benefits other than pension
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.
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. We use a December 31 measurement date for these plans.
Postretirement benefit cost for health care and life insurance included the following components:
In thousands
2016
2015
2014
Service cost – benefits earned during the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
202
$
301
$
Interest cost on net benefit obligation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of prior service credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,038
(4,794)
Amortization of actuarial (gain) loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Participant data corrections (a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net periodic postretirement benefit credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(a) Refer to Note 1 — Basis of presentation for additional details regarding the impacts of the error in participant data identified.
(489) $
(350)
415
4,019
(9,615)
1,426
—
(3,869) $
(5,728)
The table below provides a reconciliation of benefit obligations and funded status of our postretirement benefit plans:
In thousands
Change in benefit obligations
Dec. 25, 2016
Dec. 27, 2015
Net benefit obligations at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
97,508
$
103,528
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plan participants' contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plan amendments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Actuarial loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
202
4,038
1,239
502
1,193
Gross benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(10,505)
Federal subsidy on benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transfer from separation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Participant data corrections (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net benefit obligations at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Change in plan assets
—
—
8,255
(2,771)
99,661
$
97,508
365
4,610
(11,421)
718
—
301
4,019
3,839
—
3,898
(13,935)
—
(4,142)
—
—
Fair value of plan assets at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
— $
Employer contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plan participants' contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9,266
1,239
Gross benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(10,505)
Fair value of plan assets at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
— $
Benefit obligation at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
99,661
$
Amounts recognized in Consolidated Balance Sheets
Accrued benefit cost—current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Accrued benefit cost—noncurrent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(a) Refer to Note 1 — Basis of presentation for additional details regarding the impacts of the error in participant data identified.
(9,527) $
(90,134) $
—
10,096
3,839
(13,935)
—
97,508
(9,914)
(87,594)
73
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
Net actuarial losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(4,472) $
(12,611)
Prior service credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
22,711
Amounts in accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
18,239
$
29,515
16,904
Dec. 25, 2016
Dec. 27, 2015
The actuarial loss and prior service credit estimated to be amortized from "Accumulated other comprehensive loss" into net
periodic benefit cost in 2017 are $0.6 million and $3.6 million, respectively.
Changes in plan assets and benefit obligations recognized in "Other comprehensive loss" consist of the following:
In thousands
Current year actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Change in prior service cost. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of prior service credit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Participant data corrections (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(a) Refer to Note 1 — Basis of presentation for additional details regarding the impacts of the error in participant data identified.
Postretirement benefit costs: The following assumptions were used to determine postretirement benefit cost:
2016
1,193
502
(415)
4,794
(7,409)
(1,335)
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Health care cost trend rate assumed for next year . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ultimate trend rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year that ultimate trend rate is reached . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016
2015
2014
4.27%
5.70%
4.77%
2019
4.11%
6.18%
5.00%
2018
4.50%
6.26%
5.00%
2018
Benefit obligations and funded status: The following assumptions were used to determine the year-end benefit obligation:
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Health care cost trend rate assumed for next year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ultimate trend rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year that ultimate trend rate is reached. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.01%
5.70%
4.77%
2019
4.35%
6.18%
5.00%
2018
Dec. 27, 2016
Dec. 27, 2015
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 $0.7 million in the 2016 postretirement
benefit obligation and no measurable change in the aggregate service and interest components of the 2016 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.
In thousands
Benefit
Payments
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
9,527
9,173
8,664
7,988
7,459
2022-2026 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
32,159
74
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 2017 and beyond.
NOTE 10 — Income taxes
The provision (benefit) for income taxes consists of the following:
In thousands
2016
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
State and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Current
Deferred
Total
(7,094) $
8,278
$
(528)
5,606
262
7,194
(2,016) $
15,734
$
1,184
(266)
12,800
13,718
In thousands
2015
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
State and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Current
Deferred
Total
(5,383) $
36,489
$
(560)
6,447
4,046
6,845
504
$
47,380
$
31,106
3,486
13,292
47,884
In thousands
2014
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
State and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Current
Deferred
Total
39,740
$
18,282
$
(21,123)
—
27,731
2,930
18,617
$
48,943
$
58,022
6,608
2,930
67,560
The components of net income before income taxes consist of the following:
In thousands
Domestic. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2016
2015
2014
19,349
47,079
66,428
$
$
128,316
65,659
193,975
$
$
192,741
85,524
278,265
75
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%
2016
2015
2014
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net of additional reserves and lapse of statutes of limitations . . . . . . . . . . . . . . . . . . .
Impact of accounting method change. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Domestic manufacturing deduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transaction costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effective tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3.8)
(10.7)
1.6
3.5
3.3
—
—
(12.3)
3.4
0.7
20.7%
2.4
(6.3)
1.9
—
(1.1)
(3.4)
(1.4)
—
—
(2.4)
24.7%
2.5
(13.4)
—
4.4
(0.9)
—
(1.9)
—
—
(1.4)
24.3%
(a) We adopted new accounting guidance related to employee stock-based compensation in the fourth quarter of 2016. The adoption reduced our full year
combined income tax provision for federal, state, and foreign by $8.9 million and the tax rate by approximately 13.5%.
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 2016 was $1.1 million compared to $3.8 million for 2015. The
adjustments for both 2016 and 2015 were due to reductions in U.K. statutory tax rates. The amount of such adjustments for
2014 was not significant.
Deferred tax liabilities and assets were composed of the following at the end of 2016 and 2015:
In thousands
Liabilities
Dec. 25, 2016
Dec. 27, 2015
Accelerated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Total deferred tax liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(152,551) $
(152,551)
(169,483)
(169,483)
Assets
Accrued compensation costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension and postretirement benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total net deferred tax assets (liabilities) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
29,670
302,565
95,653
7,015
21,670
55,335
53,789
565,697
(194,914)
218,232
Noncurrent deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
218,232
Basis differences relating to all partnership items are reflected in the partnership line item.
38,296
256,418
165,062
7,506
13,107
34,312
38,666
553,367
(181,893)
201,991
201,991
$
$
The deferred tax assets and liabilities previously transferred from our former parent were adjusted as of December 25, 2016
due to the annual procedure to true-up the 2015 tax provision estimates to the actual 2015 corporate income tax return filed
during the third quarter of 2016. These changes in estimates primarily relate to the deferred tax liability associated with
depreciable assets and other 2015 tax provision to tax return adjustments impacting the previously estimated deferred taxes.
The total impact was an increase to deferred tax assets and additional paid-in capital of approximately $31.0 million.
76
As of December 25, 2016, we had approximately $7.8 million of foreign tax credits, $5.4 million of state credits, $263.9
million of apportioned state net operating loss carryforwards, $159.2 million of foreign net operating loss carry forwards, and
$29.1 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 2017 through 2035. The countries where we have foreign net operating loss
carryovers allow for these losses to be carried forward indefinitely except for Japan and the Netherlands. Net operating loss
carryovers in Japan and the Netherlands expire in various amounts beginning in 2020 through 2025. Our foreign capital losses
can be carried forward indefinitely.
Included in total deferred tax assets are valuation allowances of approximately $194.9 million in 2016 and $181.9 million
in 2015, 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 2015 to 2016 is related to ReachLocal foreign losses. The
valuation allowance is based on an analysis of future sources of taxable income and other sources of positive and negative
evidence and whether 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 for the year ended
December 25, 2016:
In thousands
Balance at
Beginning of
Period
Additions/
(Reductions)
Charged to
Expenses
Additions/
(Reductions) for
Acquisitions/
Dispositions
Other (Deductions
from)/Additions to
Reserves
Foreign Currency
Translation
Balance at
End of Period
$
181,893
$
(4,786) $
27,251
$
(3,394) $
(6,050) $
194,914
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
Dec. 25, 2016
Dec. 27, 2015
Dec. 28, 2014
Change in unrecognized tax benefits
Balance at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
17,032
$
10,919
$
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
125
9,416
(792)
—
(1,891)
2,021
6,713
—
—
(2,621)
Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
23,890
$
17,032
$
13,875
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 $17.3 million as
of December 25, 2016, $11.3 million as of December 27, 2015, and $7.5 million as of December 28, 2014. Additions for tax
positions of prior years include $4.3 million of liabilities related to research and development credits which are recorded as a
reduction to deferred tax assets. Remaining amounts are recorded as an income tax liability and include 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 2016, $0.6 million in 2015, and $1.2 million in 2014.
The amount of accrued interest and payables related to unrecognized tax benefits was $3.8 million as of December 25, 2016,
$3.4 million as of December 27, 2015, and $1.1 million as of December 28, 2014.
77
We file income tax returns in the U.S. various state and foreign jurisdictions. The tax years 2013 through 2015 remain
subject to examination by the IRS. The tax years 2013 through 2015 generally remain subject to examination by state
authorities, and the tax years 2011 through 2015 are subject to examination by U.K. tax authorities.
It is reasonably possible 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 regulatory developments. At this time, we estimate the amount of our gross unrecognized tax
positions may decrease by up to approximately $2.2 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 regard 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.
NOTE 11 — Supplemental equity information
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 each fiscal year is presented below:
In thousands, except per share amounts
Net income (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Weighted average number of common shares outstanding (basic) . . . . . . . . . . . . . . .
2016
2015
2014
52,710
$
146,091
$
116,018
115,165
210,705
114,959
Effect of dilutive securities
Restricted stock units (RSUs). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Performance shares (PSUs) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,475
881
728
582
—
—
Stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted average number of common shares outstanding (diluted) (a) . . . . . . . . . . . .
Earnings per share (basic) (a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Earnings per share (diluted) (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1.83
(a) In 2016, we adopted new guidance around improvements to share-based payment accounting. See Note 16 — Quarterly statements of income (unaudited)
for further details on the impacts of this guidance on our fiscal year 2016 net income, number of shares outstanding, and earnings per share amounts.
116,695
114,959
118,625
1.25
1.83
0.44
0.45
1.27
251
220
—
$
$
$
$
The diluted earnings per share amounts exclude the effects of approximately 0.4 million and 0.1 million RSUs outstanding
for 2016 and 2015, respectively, 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. As of December 25, 2016, approximately 3.8 million
shares have been repurchased under this program at a total cost of $32.7 million.
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 non-qualified 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
78
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 January 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.
Determining fair value of performance shares
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.
79
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:
Expected term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016
3 yrs.
Expected volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
42.20%
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.31%
3.93%
2015
3 yrs.
32.00%
1.10%
2.51%
2014
3 yrs.
39.32%
0.78%
2.70%
Determining fair value of restricted stock units
For RSUs, the grant-date fair value is calculated at the share price on the date of grant less the present value of estimated
dividends which will be granted during the vesting period.
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
Restricted stock and RSUs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
12,889
$
12,235
$
Performance shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,687
—
9,478
29
9,150
7,333
616
Total stock-based compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
20,576
$
21,742
$
17,099
2016
2015
2014
Restricted stock and RSUs
As of December 25, 2016 there was $23.4 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. As of December 27, 2015, there was $20.2 million of unrecognized compensation cost
related to non-vested restricted stock and RSUs with a weighted average period remaining of 2.4 years.
A summary of restricted stock and RSU awards is presented below for the period after the date of separation from our
former parent:
Shares
Weighted
Average
Fair Value
Outstanding and unvested at June 29, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,885,994
$
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canceled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
203,061
(136,658)
(174,190)
Outstanding and unvested at Dec. 27, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,778,207
$
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canceled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,483,127
(1,066,056)
(376,442)
Outstanding and unvested at Dec. 25, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,818,836
$
10.86
11.31
10.35
10.98
10.91
13.36
10.06
11.81
12.40
80
Performance Shares: As of December 25, 2016, there was $4.9 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. As of December 27, 2015, there was $4.6 million of unrecognized compensation cost
related to non-vested Performance Shares with a weighted average period remaining 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:
Outstanding and unvested at June 29, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canceled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding and unvested at Dec. 27, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canceled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding and unvested at Dec. 25, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Target
Number of
Shares
Weighted
Average
Fair Value
926,138
$
(31,158)
(101,306)
793,674
$
373,658
(265,110)
(128,075)
774,147
$
15.48
15.51
15.21
15.52
19.30
13.83
16.34
17.82
Stock Options: As of December 25, 2016 and December 27, 2015, all stock options were fully vested. Options were
exercised with an intrinsic value of approximately $0.9 million and $4.7 million in 2016 and 2015, respectively.
A summary of our stock option awards is presented below:
Weighted
Average
Exercise
Price
Shares
Outstanding at June 29, 2015. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,078,289
$
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canceled. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(662,304)
(4,102)
Outstanding and exercisable at Dec. 27, 2015. . . . . . . . . . . . . . . .
411,883
$
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canceled. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(102,842)
(18,774)
Outstanding and exercisable at Dec. 25, 2016. . . . . . . . . . . . . . . .
290,267
$
6.80
7.53
12.61
5.58
5.46
9.40
5.37
Weighted
Average
Remaining
Contractual
Term
(in years)
Aggregate
Intrinsic
Value
2.5
$
7,901,831
2.6
$
4,378,900
1.9
$
1,304,798
81
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," net of tax:
In thousands
2016
Retirement
Plans
Foreign
Currency
Translation
Balance at beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(1,058,234) $
384,810
$
Other comprehensive loss before reclassifications . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amounts reclassified from accumulated other comprehensive loss . . . . . . . . . . . . . . .
(166,253)
41,291
(84,526)
—
Total
(673,424)
(250,779)
41,291
Balance at end of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(1,183,196) $
300,284
$
(882,912)
In thousands
2015
Retirement
Plans
Foreign
Currency
Translation
Total
Balance at beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(1,082,312) $
404,200
$
(678,112)
Other comprehensive loss before reclassifications . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amounts reclassified from accumulated other comprehensive loss . . . . . . . . . . . . . . .
(12,010)
36,088
(19,390)
—
(31,400)
36,088
Balance at end of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(1,058,234) $
384,810
$
(673,424)
In thousands
2014
Retirement
Plans
Foreign
Currency
Translation
Balance at beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(873,595) $
431,614
$
Other comprehensive income before reclassifications . . . . . . . . . . . . . . . . . . . . . . . . .
Amounts reclassified from accumulated other comprehensive loss . . . . . . . . . . . . . . .
(232,740)
24,023
(27,414)
—
Total
(441,981)
(260,154)
24,023
Balance at end of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(1,082,312) $
404,200
$
(678,112)
"Accumulated other comprehensive loss" components are included in the computation of net periodic postretirement costs
(see Note 8 — Retirement plans and Note 9 — Postretirement benefits other than pension for more detail). Reclassifications out
of "Accumulated other comprehensive loss" related to these postretirement plans include the following:
In thousands
Amortization of prior service credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1,883
$
Amortization of actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total reclassifications, before tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax effect. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
62,155
64,038
(22,747)
Total reclassifications, net of tax. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
41,291
$
(2,722)
58,148
55,426
(19,338)
36,088
2016
2015
NOTE 12 — Commitments, contingencies and other matters
Telephone Consumer Protection Act (TCPA) litigation: In January 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 sought 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). In April 2016, we
agreed to settle all of the claims raised. The settlements are reflected, net of insurance recoveries, in our financial statements as
of December 25, 2016 and were not material to our results of operations, financial position, or cash flows.
82
Environmental contingency: In 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 2015, the
Advertiser and other members of the Downtown Environmental Alliance also reached a settlement with the U.S. EPA regarding
the costs the 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. While the ultimate results of these proceedings cannot be predicted with certainty,
we expect the ultimate resolution of all pending or threatened claims and litigation will not have a material effect on our
consolidated results of operations, financial position, or cash flows.
Leases: Future minimum lease commitments for non-cancellable operating leases (primarily real-estate) are as follows:
In thousands
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Later years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
53,071
51,313
45,855
40,401
37,615
166,996
395,251
Expected future sublease income on these lease commitments are expected to be approximately $8.2 million. Total rent
expense was $48.7 million in 2016, $39.7 million in 2015, and $34.1 million in 2014.
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.
Purchase obligations: We have future expected purchase obligations of $751.7 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 December 25, 2016, are reflected in the
Consolidated Balance Sheets as "Accounts payable and accrued liabilities," and are excluded from the amount referred to
above.
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 $71.5 million as of December 25, 2016 and $75.5 million as of
December 27, 2015.
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 Balance Sheet and approximately
$0.4 million remain as of December 25, 2016. The majority of the costs will be paid in 2017. These costs are also included in
"Selling, general and administrative expenses, exclusive of depreciation" in the Consolidated and Combined Statements of
Income.
83
NOTE 13 — Fair value measurement
Fair value measurement
We measure and record certain assets and liabilities at fair value in the accompanying consolidated and combined financial
statements. Guidance surrounding the valuation of assets and liabilities establishes a hierarchy for those instruments measured
at fair value. This hierarchy distinguishes between assumptions based on market data (observable inputs) and our own
assumptions (unobservable inputs) and 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.
As of December 25, 2016 and December 27, 2015, assets and liabilities held at fair value and measured on a recurring
basis primarily consist of pension plan assets and our revolving credit facility. The carrying value of our revolving credit
facility approximates the fair value and is classified as Level 3.
As permitted by U.S. generally accepted accounting principles, the plans use net asset values as a practical expedient to
determine the fair value of certain investments. These investments measured at net asset value have not been classified in the
fair value hierarchy. The amounts presented in the table below are intended to permit reconciliation to the amounts presented in
the Consolidated Balance Sheets.
84
The following tables set forth, by level within the fair value hierarchy, the fair values of our pension plans assets relating to
the GRP, the Newsquest Plans and the Newspaper Guild of Detroit Pension Plan:
Pension Plan Assets/Liabilities
In thousands
Fair value measurement as of Dec. 25, 2016(a)
Assets:
Level 1
Level 2
Level 3
Total
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
42,439
$
4,499
$
— $
Corporate stock - Gannett Co., Inc. . . . . . . . . . . . . . . . . . . . . . . .
Corporate stock - other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6,031
577,120
Real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest in common/collective trusts:
Equities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
—
Interest in reg. invest. companies. . . . . . . . . . . . . . . . . . . . . . . . .
102,412
Partnership/joint venture interests . . . . . . . . . . . . . . . . . . . . . . . .
Hedge funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Derivative contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets at fair value excluding those measured
at net asset value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Instruments measured at net asset value using the practical expedient:
Real estate funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest in common/collective trusts:
Equities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest in reg. invest. companies. . . . . . . . . . . . . . . . . . . . . . . . .
Partnership/joint venture interests . . . . . . . . . . . . . . . . . . . . . . . .
Hedge funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets at fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liabilities:
Derivative liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Total liabilities at fair value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(a) We use a Dec. 31 measurement date for our retirement plans.
—
—
—
235,384
253,959
—
—
—
2
—
—
83,522
—
—
—
75,967
173,937
33
—
—
—
46,938
6,031
577,120
83,522
235,384
253,959
102,412
75,967
173,937
35
728,002
$
493,844
$
333,459
$
1,555,305
15,730
204,822
515,313
32,066
4,821
85,456
$
2,413,513
— $
— $
(498) $
(498) $
(2,008) $
(2,008) $
(2,506)
(2,506)
85
In thousands
Fair value measurement as of Dec. 27, 2015(a)
Assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Fixed income:
Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate stock - Gannett Co., Inc. . . . . . . . . . . . . . . . . . . . . . . .
Corporate stock - other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest in common/collective trusts:
Equities
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest in reg. invest. companies. . . . . . . . . . . . . . . . . . . . . . . . .
Partnership/joint venture interests . . . . . . . . . . . . . . . . . . . . . . . .
Hedge funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Derivative contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets at fair value excluding those measured
at net asset value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Instruments measured at net asset value using the practical expedient:
Real estate funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest in common/collective trusts:
Equities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest in reg. invest. companies. . . . . . . . . . . . . . . . . . . . . . . . .
Partnership/joint venture interests . . . . . . . . . . . . . . . . . . . . . . . .
Hedge funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets at fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liabilities:
Derivative liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Total liabilities at fair value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(a) We use a Dec. 31 measurement date for our retirement plans.
Level 1
Level 2
Level 3
Total
14,938
$
4,916
$
— $
19,854
—
10,118
759,479
—
—
—
100,711
—
—
—
1,275
—
—
—
267,667
111,724
—
—
—
117
—
—
—
103,746
—
—
—
99,449
168,209
40
1,275
10,118
759,479
103,746
267,667
111,724
100,711
99,449
168,209
157
885,246
$
385,699
$
371,444
$
1,642,389
22,303
281,492
381,937
38,082
32,217
162,830
2,561,250
$
— $
— $
(615) $
(615) $
(2,008) $
(2,008) $
(2,623)
(2,623)
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:
• 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 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 or through proprietary models with varying degrees of complexity.
Interests in common/collective trusts and interests in 103-12 investments are primarily equity and fixed income
investments valued either through the use of a net asset value as provided monthly by the fund family or fund
company or through proprietary models with varying degrees of complexity. Shares in the common/collective trusts
are generally redeemable upon request.
Interests in registered investment companies are primarily valued using the published net asset values as quoted
through publicly available pricing sources or through proprietary models with varying degrees of complexity.
Additionally, the interests are redeemable on request.
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
86
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 $10.4
million in unfunded commitments related to partnership/joint venture interests. One of the Plan's investments in
partnerships and joint venture interests represents a limited partnership commingled fund valued using the net asset
value as reported by the fund manager.
•
Investments in hedge funds consist of investments that were formed to invest in mortgage and trading opportunities
and are valued at the net asset value as reported by the fund managers. Additionally, there is an investment that that
consists of a fund of hedge funds whose strategy is to produce a return uncorrelated with market movements. This
fund is classified as a Level 3 because its valuation is derived from unobservable inputs and a proprietary assessment
of the underlying investments. 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.
• 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 following tables set forth a summary of changes in the fair value of our
pension plan assets and liabilities that are categorized as Level 3:
Pension Plan Assets/Liabilities
In thousands
For the year ended Dec. 25, 2016
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
Settlements
Transfers
In and/or
Out of
Level 3 (a)
Balance at
End of
Year
Assets:
Real estate . . . . . . . . $ 103,746
Partnership/joint
venture interests. . . .
99,449
Hedge funds. . . . . . .
168,209
Derivative contracts.
40
Total. . . . . . . . . . . . . . $ 371,444
Liabilities:
$
(19,027) $
— $
1,697
$
(2,894) $
— $
— $
83,522
(9,075)
5,728
(7)
—
—
—
4,257
—
—
—
—
—
(18,664)
—
—
—
—
—
75,967
173,937
33
$
(22,381) $
— $
5,954
$
(2,894) $
(18,664) $
— $
333,459
Derivative liabilities $
(2,008) $
— $
— $
— $
— $
— $
— $
(2,008)
(a) Our policy is to recognize transfers in and transfers out as of the beginning of the reporting period.
87
In thousands
For the year ended Dec. 27, 2015
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
Assets:
Fixed
income:
Purchases
Sales
Settlements
Transfer
from
parent
Transfers
In and/or
Out of
Level 3(a)
Balance at
End of
Year
95
382
94,902
Mortgage
backed
securities. . $
Corporate
bonds . . . .
Real estate. . .
Partnership/
joint venture
interests. . . . .
Hedge funds .
Derivative
124
contracts . . . .
Total . . . . . . . . $ 408,708
Liabilities:
136,501
176,704
$
— $
— $
— $
(95) $
— $
— $
— $
(8)
3,626
(10,184)
5,896
(84)
—
—
—
—
—
—
5,218
5,858
—
—
—
—
—
—
—
(374)
—
—
—
(20,128)
(12,598)
—
—
(14,391)
—
—
—
—
—
—
—
—
103,746
99,449
168,209
40
$
(754) $
— $
11,076
$
(95) $
(20,502) $ (26,989) $
— $
371,444
Derivative
liabilities . . . . $
(2,008) $
— $
— $
— $
— $
— $
— $
— $
(2,008)
(a) Our policy is to recognize transfers in and transfers out as of the beginning of the reporting period.
There were $2.5 million in transfers between Levels 1 and 2 for the year ended December 25, 2016. No such transfers
occurred in fiscal year 2015.
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 table summarize the non-financial assets measured at fair value on nonrecurring basis in the accompanying
Consolidated Balance Sheet:
Non-Financial Assets
In thousands
Fair value measurement as of Dec. 25, 2016
Asset held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
— $
— $
4,522
Fair value measurement as of Dec. 27, 2015
Asset held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
— $
— $
12,288
$
$
4,522
12,288
Level 1
Level 2
Level 3
Total
88
NOTE 14 — Segment reporting
We define our reportable segments based on the way the chief operating decision maker (CODM), currently the Chief
Executive Officer, manages the operations for purposes of allocating resources and assessing performance. In the third quarter
of 2016, we reorganized our reportable segments as a result of the ReachLocal acquisition to include the following:
•
Publishing, which consists of our portfolio of regional, national, and international newspaper publishers. The results of
this segment include retail, classified, and national advertising revenues, circulation revenues from the distribution of
our publications on our digital platforms, home delivery of our publications, and single copy sales, and other revenues
from commercial printing and distribution arrangements.
• ReachLocal, which consists exclusively of our ReachLocal digital marketing solutions subsidiary. The results of this
segment include advertising revenues from our search and display services as well as and other revenues related to
web presence and software solutions provided by ReachLocal.
In addition to the above operating segments, we have a corporate category that includes activities not directly attributable to
a specific segment. This category primarily consists of broad corporate functions and includes legal, human resources,
accounting, analytics, finance, and marketing as well as activities and costs not directly attributable to a particular segment such
as tax settlements and other general business costs.
The CODM uses Adjusted EBITDA to evaluate the performance of the segments and allocate resources. Adjusted EBITDA
is a financial performance measure defined as net income (loss) before (1) income taxes, (2) interest expense, (3) equity
income, (4) other non-operating items, (5) severance-related charges (including early retirement programs), (6) facility
consolidation costs, (7) asset impairment charges, (8) depreciation, and (9) amortization.
Management considers Adjusted EBITDA to be the appropriate metric to evaluate and compare the ongoing operating
performance of our segments on a consistent basis across reporting periods as it eliminates the effect of items which we do not
believe are indicative of each segment's core operating performance. Adjusted EBITDA is considered to be a non-GAAP
measure and may be different than similarly-titled non-GAAP financial measures used by other companies.
The following presents our segment information by year:
In thousands
2016
Publishing
ReachLocal
Corporate and
Other
Consolidated
Advertising. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1,603,515
$
100,280
$
— $
1,703,795
Circulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,133,676
195,904
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2,933,095
Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
449,769
2015
Advertising. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1,611,445
Circulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,060,118
209,655
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2,881,218
Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
468,999
2014
Advertising. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1,840,067
Circulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,109,729
222,082
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
3,171,878
Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
498,260
$
$
$
$
$
$
$
$
—
9,864
—
4,235
1,133,676
210,003
110,144
$
4,235
$
3,047,474
(5,852) $
(94,304) $
349,613
— $
— $
1,611,445
—
—
— $
— $
—
3,794
1,060,118
213,449
3,794
$
2,885,012
(77,484) $
391,515
— $
— $
1,840,067
—
—
— $
— $
—
—
1,109,729
222,082
— $
3,171,878
(26,049) $
472,211
89
The following table presents our reconciliation of Adjusted EBITDA to net income:
In thousands
2016
2015
2014
Net income (GAAP basis) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
52,710
$
146,091
$
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity income in unconsolidated investees, net. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other non-operating items, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income (GAAP basis) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Early retirement program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Severance-related charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition-related expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Facility consolidation and asset impairment charges . . . . . . . . . . . . . . . . . . . . . . . .
Other items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13,718
(1,519)
12,791
1,388
79,088
837
42,689
32,683
58,171
3,181
118,092
14,872
47,884
(11,981)
4,562
(17,125)
169,431
42,081
30,185
—
34,278
7,988
95,916
11,636
210,705
67,560
(15,857)
576
(653)
262,331
—
19,797
—
35,216
43,804
97,178
13,885
Adjusted EBITDA (non-GAAP basis) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
349,613
$
391,515
$
472,211
Asset information by segment is not a key measure of performance used by the CODM. Accordingly, we have not disclosed
asset information by segment. Additionally, equity income in unconsolidated investees, interest expense, other non-operating
items, net, and provision for income taxes, as reported in the consolidated and combined financial statements, are not part of
operating income and are primarily recorded at the corporate level.
NOTE 15 — Relationship with our former parent
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. 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. Subsequent to separation, we provided certain IT, payroll and other
services to our former parent in the amount of $6.3 million in 2016 and $5.9 million in 2015. Our former parent provided
certain services to us in the amount of $5.7 million in 2016 and $3.7 million in 2015.
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.
Intercompany transactions: 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.
90
Equity: Prior to the spin-off, the Combined Statements of Equity 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 and were reflected in the Combined Statement of Cash Flows. Accordingly, none of
our former parent's cash and cash equivalents were assigned to us in the combined financial statements. Cash and cash
equivalents prior to the spin-off represent cash held by us.
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 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.
Pension and other post retirement employee benefit plans with our former parent and former parent's affiliates: A
number of our current and former employees also participated in pension plans and postretirement benefit plans sponsored by
our former parent. Retirement benefits obligations, health care and life insurance benefits pursuant to the former parent-
sponsored retirement and postretirement 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.
These allocated costs, net of cost recoveries, are summarized in the following table:
In thousands
Corporate allocations (b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Occupancy (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation (d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other support costs (e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost recoveries (f). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2015(a)
2014
25,832
2,884
4,067
6,249
(6,055)
32,977
$
$
60,628
5,642
7,960
15,743
(9,501)
80,472
(a) Costs were allocated from our former parent to us up to the spin-off 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 assets primarily relate to facilities and IT equipment that are utilized by former
parent and us to operate our businesses. 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.
91
NOTE 16 — Quarterly statements of income (unaudited)
Selected unaudited financial data for each quarter of the last two fiscal years is presented as follows:
In thousands, except per share amounts
Fiscal year ended Dec. 25, 2016
Operating revenues . . . . . . . . . . . . . . . . . . . . . . . . $
Operating income. . . . . . . . . . . . . . . . . . . . . . . . . . $
Net income (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Per share computations
Net income per share—basic (a) . . . . . . . . . . . . . . . $
Net income per share—diluted (a) . . . . . . . . . . . . . $
Dividends per share . . . . . . . . . . . . . . . . . . . . . . . . $
Weighted average number of shares outstanding
Basic. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
Total
659,368
47,459
39,596
0.34
0.33
0.16
$
$
$
$
$
$
748,791
24,033
12,481
0.11
0.10
0.16
$
$
$
$
$
$
772,321
$
866,994
(28,590) $
(23,961) $
36,186
24,594
(0.21) $
(0.21) $
0.16
$
0.21
0.21
0.16
$
$
$
$
$
$
3,047,474
79,088
52,710
0.45
0.44
0.64
116,311
119,059
116,516
119,377
116,556
116,556
114,688
117,053
116,018
118,625
(a)
In fiscal year 2016, we elected to early adopt guidance around improvements to share-based payment accounting. This guidance amends the calculation of
earnings per share by requiring entities to exclude from assumed proceeds excess tax benefits and tax deficiencies that previously would have been
recorded in additional paid-in capital. Such benefits and deficiencies are now captured as part of the calculation of the provision for income taxes. For
entities who elect to early adopt, the standard requires the reflection of any adjustments to earnings per share be shown as of the beginning of the fiscal
year of adoption. As a result, to capture the effect of adopting the standard, we have retrospectively adjusted our net income for Quarter 1 by $8.3 million,
Quarter 2 by $0.2 million, and Quarter 3 2016 by $0.3 million. Additionally, we adjusted our diluted weighted average number of shares outstanding for
Quarter 1 by approximately 403 and Quarter 2 by 422. Our Quarter 3 diluted weighted average number of shares was unchanged due to the reporting of a
net loss for the quarter.
In thousands, 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
NOTE 17 — Subsequent events
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
Total
717,360
29,811
33,247
0.29
$
$
$
$
0.29
$
— $
727,072
48,994
53,327
0.46
0.46
$
$
$
$
$
— $
701,236
52,113
39,166
0.34
0.33
0.16
$
$
$
$
$
$
739,344
38,513
20,351
0.18
0.17
0.16
$
$
$
$
$
$
2,885,012
169,431
146,091
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
On February 22, 2017, the Board of Directors declared a dividend of $0.16 per share, payable on March 24, 2017, to
shareholders of record as of the close of business March 10, 2017.
92
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 December 25, 2016.
Management's assessment of and conclusion on the effectiveness of internal control over financial reporting did not include
the internal controls of Journal Media Group, North Jersey Media Group, and ReachLocal which are included in the 2016
consolidated financial statements of Gannett Co., Inc. In April, July, and August, 2016, we completed our acquisitions of
Journal Media Group, North Jersey Media Group, and ReachLocal, respectively. In connection with these acquisitions, we
began consolidating results of these entities, which represented approximately 18% of our total assets at December 25, 2016,
and 15% of total revenue for the year ended December 25, 2016. Due to the timing of these acquisitions and as permitted by
SEC guidance, management excluded Journal Media Group, North Jersey Media Group, and ReachLocal from its
December 25, 2016 assessment of internal control over financial reporting.
The effectiveness of our internal control over financial reporting as of December 25, 2016, 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
December 25, 2016 that has materially affected, or is reasonably likely to materially affect, our internal control over financial
reporting.
93
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 25, 2016, 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 Journal Media Group, North Jersey Media Group and ReachLocal, which are included in the 2016 consolidated and combined
financial statements of Gannett Co., Inc. and constituted 18% of total assets as of December 25, 2016 and 15% 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 Journal Media Group, North Jersey Media Group and ReachLocal.
In our opinion, Gannett Co., Inc. maintained, in all material respects, effective internal control over financial reporting as of
December 25, 2016, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
the consolidated balance sheets of Gannett Co., Inc. as of December 25, 2016 and December 27, 2015, and the related consolidated
and combined statements of income, comprehensive income (loss), equity and cash flows for each of the three fiscal years in the
period ended December 25, 2016 and our report dated February 22, 2017 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
McLean, Virginia
February 22, 2017
94
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 2017 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 48.
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 59.
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 46.
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 49.
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 54.
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); Deputy Managing Editor of The Wall Street Journal
(1983-2005). Age 55.
Sharon Rowlands
Chief Executive Officer of ReachLocal (April 2014-present). Formerly: Chief Executive Officer of Altegrity (2011-2014); Chief
Executive Officer of Penton Media (2008-2011); Chief Executive Officer and President of Thomson Financial (2005-2008). Age 58.
Maribel Perez Wadsworth
Senior Vice President and Chief Transformation 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 44.
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 44.
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 62.
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 51.
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 62.
95
ITEM 11. EXECUTIVE COMPENSATION
The information under the headings "EXECUTIVE COMPENSATION," "DIRECTOR COMPENSATION,"
"OUTSTANDING DIRECTOR EQUITY AWARDS AT FISCAL YEAR-END," "COMPENSATION COMMITTEE
INTERLOCKS AND INSIDER PARTICIPATION" and "RELATED TRANSACTIONS" in our 2017 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 2017 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 heading "COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION"
and "RELATED TRANSACTIONS" in our 2017 proxy statement is incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information under the heading "PROPOSAL 2 - RATIFICATION OF APPOINTMENT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM" in our 2017 proxy statement is incorporated herein by reference.
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 48.
(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 98-100 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.
ITEM 16. FORM 10-K SUMMARY
None.
96
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 22, 2017 GANNETT CO., INC. (Registrant)
By:
/s/ Alison K. Engel
Alison K. Engel
Senior Vice President, Chief
Financial Officer and Treasurer
(principal financial officer)
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 22, 2017
Dated: February 22, 2017
Dated: February 22, 2017
/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
Vice President and Controller
(principal accounting officer)
Dated: February 22, 2017
/s/ John E. Cody
John E. Cody, Director
Dated: February 22, 2017
/s/ Stephen W. Coll
Stephen W. Coll, Director
Dated: February 22, 2017
/s/ Robert J. Dickey
Robert J. Dickey, Director
Dated: February 22, 2017
/s/ Donald E. Felsinger
Donald E. Felsinger, Director
Dated: February 22, 2017
/s/ Lila Ibrahim
Lila Ibrahim, Director
Dated: February 22, 2017
/s/ Lawrence S. Kramer
Lawrence S. Kramer, Director
Dated: February 22, 2017
/s/ John Jeffry Louis
John Jeffry Louis
Director, Chairman
Dated: February 22, 2017
/s/ Tony A. Prophet
Tony A. Prophet, Director
Dated: February 22, 2017
/s/ Debra A. Sandler
Debra A. Sandler, Director
Dated: February 22, 2017
/s/ Chloe R. Sladden
Chloe R. Sladden, Director
97
EXHIBIT INDEX
Exhibit
Number
Exhibit
Location
2-1
2-2
2-3
3-1
3-2
10-1
10-2
10-3
10-4
10-5
10-6
10-7
10-8
10-9
10-10
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.
Agreement and Plan of Merger among Gannett Co., Inc.,
Raptor Merger Sub, Inc. and ReachLocal, Inc. dated as of
June 27, 2016.
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 June 27, 2016.
Amended and Restated Certificate of Incorporation of the
Company.
Amended and Restated Bylaws of the Company, effective
February 23, 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.*
Master Transaction Agreement, dated as of July 30, 2014, by
and among The E. W. Scripps Company, Scripps Media, Inc.,
Desk Spinco, Inc., Scripps NP Operating, LLC (f/k/a Desk
NP Operating, LLC), Desk NP Merger Co., Desk BC
Merger, LLC, Journal Communications, Inc., Boat Spinco,
Inc., Boat NP Merger Co., and Journal Media Group, Inc. (f/
k/a Boat NP Newco, Inc.)
Incorporated herein by reference to Exhibit 3-1 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended June 26, 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.
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 June 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 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 Exhibit 2-1 to the Registration
Statement on Form S-4, SEC File No. 333-200388, filed by
The E.W. Scripps Company on November 20, 2014.
Scripps Tax Matters Agreement, dated July 30, 2014, by and
among The E. W. Scripps Company, Desk Spinco, Inc. and
Journal Media Group, Inc. (f/k/a Boat NP Newco, Inc.)
Incorporated by reference to Exhibit 10-2 to the Current
Report on Form 8-K filed by Journal Communications, Inc.
on July 30, 2014.
Journal Tax Matters Agreement, dated July 30, 2014, by and
among Desk BC Merger, LLC, Journal Communications,
Inc., Boat Spinco, Inc. and Journal Media Group, Inc. (f/k/a
Boat NP Newco, Inc.)
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 Exhibit 10-3 to the Current
Report on Form 8-K filed by Journal Communications, Inc.
on July 30, 2014.
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 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 Exhibit 10-5 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 Exhibit 10-6 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.
Incorporated by reference to Exhibit 10-7 to the Company's
Current Report on Form 8-K, filed by the Company with the
SEC on June 30, 2015.
10-11
Form of Mortgage.
10-12
Form of Deed of Trust.
10-13
Schedule of Mortgages or Deeds of Trust Granted by
Gannett Subsidiaries.
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 10-1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended
September 25, 2016.
98
10-14
First Amendment to the Credit Agreement.
10-15
10-16
10-17
2015 Deferred Compensation Plan Rules for Pre-2005
Deferrals.*
Amendment No. 1 to 2015 Deferred Compensation Plan
Rules for Post-2004 Deferrals.*
2015 Deferred Compensation Plan Rules for Post-2004
Deferrals.*
10-18
2015 Supplemental Retirement Plan.*
10-19
Supplemental Executive Medical Plan.*
10-20
Gannett Co., Inc. Supplemental Executive Medical Plan.*
Incorporated by reference to Exhibit 10-27 to the Company's
Quarterly Report on Form 10-Q for the quarter ended
September 25, 2016.
Incorporated by reference to Exhibit 10-8 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 Exhibit 10-1 to the Company's
Current Report on Form 8-K filed by the Company with the
SEC on December 2, 2016.
Incorporated by reference to Exhibit 10-9 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 Exhibit 10-10 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 Exhibit 10-11 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 Exhibit 10-12 to the Company's
Current Report on Form 8-K, filed by the Company with the
SEC on June 30, 2015.
10-21
Amendment No. 1 to Supplemental Executive Medical Plan
for Retired Executives.*
Attached.
10-22
2015 Key Executive Life Insurance Plan.*
10-23
2015 Key Executive Life Insurance Plan Participation
Agreement.*
10-24
2015 Omnibus Incentive Compensation Plan.*
10-25
Letter Agreement with Robert J. Dickey.*
10-26
Letter Agreement with Alison K. Engel.*
10-27
Letter Agreement with John M. Zidich.*
Incorporated by reference to Exhibit 10-13 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 Exhibit 10-14 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.
Letter Agreement with Joanne Lipman.*
Letter Agreement with Sharon T. Rowlands.*
Attached.
Attached.
Employment Letter between ReachLocal, Inc. and Sharon T.
Rowlands, dated March 31, 2014.*
Amendment to Employment Letter between ReachLocal,
Inc. and Sharon T. Rowlands, dated November 1, 2015.*
Incorporated by reference to Exhibit 10-1 of the Current
Report on Form 8-K filed by ReachLocal, Inc. with the SEC
on April 2, 2014.
Incorporated by reference to Exhibit 10-1 of the Quarterly
Report on Form 10-Q for the quarter ended September 30,
2015 filed by ReachLocal, Inc. with the SEC on November
9, 2015.
Amendment to Employment Letter between ReachLocal,
Inc. and Sharon T. Rowlands, effective August 9, 2016.*
Attached.
10-28
10-29
10-30
10-31
10-32
10-33
Employment Contract between Newsquest Media Group
Limited and Henry Faure Walker.*
10-34
Termination Benefits Agreement with Lawrence S. Kramer.*
10-35
Agreement and Release with Lawrence S. Kramer.*
99
Incorporated by reference to Exhibit 10-36 to the Company's
Annual Report on Form 10-K for the fiscal year ended
December 27, 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.
10-36
Form of Director RSU Award Agreement.*
10-37
Form of Executive Officer RSU Award Agreement.*
10-38
10-39
Form of Executive Officer Restricted Stock Unit Award
Agreement.*
Form of Executive Officer Performance Share Unit Award
Agreement.*
10-40
Form of RSU Award Agreement for U.K. Employees.*
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 December 14, 2015.
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.
Incorporated by reference to Exhibit 10-38 to the Company's
Annual Report on Form 10-K for the fiscal year ended
December 27, 2015.
10-41
Form of TSR Award Agreement for U.K. Employees.*
Attached.
10-42
10-43
Form of Retention RSU Award Agreement with Sharon T.
Rowlands.*
Attached.
Form of Retention Cash Award Agreement with Sharon T.
Rowlands.*
Attached.
10-44
2015 Change in Control Severance Plan.
10-45
Executive Severance Plan.
10-46
Form of Indemnification Agreement.
10-47
Gannett Co., Inc. Clawback Policy, effective December 9,
2015.
10-48
Summary of Non-Employee Director Compensation.*
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 10-37 to the Company's
Annual Report on Form 10-K for the fiscal year ended
December 27, 2015.
21-1
23
31-1
31-2
32-1
32-2
101
List of subsidiaries.
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
25, 2016, formatted in XBRL includes: (i) Consolidated
Balance Sheets at December 25, 2016 and December 27,
2015; (ii) Consolidated and Combined Statements of Income
for the 2016, 2015 and 2014 fiscal years; (iii) Consolidated
and Combined Statements of Comprehensive Income (Loss)
for the 2016, 2015 and 2014 fiscal years; (iv) Consolidated
and Combined Cash Flow Statements for the 2016, 2015 and
2014 fiscal years; (v) Consolidated and Combined
Statements of Equity for the 2016, 2015 and 2014 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.
100
MEDIA RELATIONS
Amber Allman
Vice President, Corporate Events
and Communications
aallman@gannett.com
703-854-5358
THIS REPORT WAS WRITTEN
AND PRODUCED BY
EMPLOYEES OF GANNETT.
Printing
Action Printing, Fond du Lac, WI
Printed on recycled paper.
This report was printed using
soy-based inks. The entire report
contains 10 percent total recovered
fiber/all post-consumer waste.
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), Wednesday, May 10,
2017, 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 2016 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.
FOR MORE INFORMATION
News and information about Gannett is available at www.gannett.com. Quarterly
earnings information will be available around the end of April, July and October
2017. 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 and Real Estate
mdickerson@gannett.com
703-854-6185
Gannett Co., Inc.
7950 Jones Branch Dr.
McLean, VA 22107
gannett.com